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FSP Annual Report 2021

Jun 29, 2022

52249_rns_2022-06-29_7b33247d-3384-4aa0-8083-c73290286acf.pdf

Annual Report

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Stock Code: 3015

==> picture [119 x 50] intentionally omitted <==

全漢企業股份有限公司

FSP Technology Inc.

2021

Annual Report

Date of Publication: May 8, 2022

Annual Report URL: http://mops.twse.com.tw - http://www.fsp group.com/tw

  • I. (1) Spokesperson:

Name: Yao, Wen-Chun Title: Manager Tel: 03-3759888 E-mail: [email protected]

  • (2) Acting Spokesperson:

Name: Li, Fu-Jung Title: Financial Supervisor Tel: 03-3759888 E-mail: [email protected]

I. Contact Information of Headquarters, Branches, and Factories: Headquarters: No. 22, Jianguo E. Rd., Taoyuan Dist., Taoyuan City Tel: 03-3759888

Branch: No. 2-3, E. 3rd St., Nanzi Dist., Kaohsiung City Tel: 07-3625611

Factory: No. 6, Xinglong Rd., Taoyuan Dist., Taoyuan City Tel: 03-3757798

  • II. Contact Information of Stock Transfer Agency:

Name: Stock Transfer Agency Department, Mega Securities

Address: 1F, No. 95, Sec. 2, Zhongxiao E. Rd., Zhongzheng Dist., Taipei City Tel: 02-33930898

Website: https://www.emega.com.tw

  • III. Contact Information of the CPAs for the Latest Financial Statements

Name of CPA: Chang, Chun-I, CPA and Chao, Min-Ju, CPA Accounting Firm: KPMG Taiwan

Address: 68F, No. 7, Sec. 5, Xinyi Rd., Xinyi Dist., Taipei City (Taipei 101) Tel: 02- 81016666

Website: https://home.kpmg/tw

  • IV. Overseas Securities Exchange Where Securities are Listed and Method of Inquiry: None.

  • V. Corporate Website: http://www.fsp-group.com/tw

Table of Contents

Table of Contents Table of Contents
Chapter 1. Letter to Shareholders 1
Chapter 2. Company Profile 5
Chapter 3. Corporate Governance Report 12
I. Organizational System 12
II. Information on the Company's Directors, President, Vice President, 14
Associate Managers, and the Supervisors of All the Company's Divisions
and Branch Units
III. Remuneration Paid During the Most Recent Fiscal Year to Directors, 27
President, and Vice President
IV. Implementation of Corporate Governance 37
V. Information on CPA Professional Fees 102
VI. Information on Replacement of CPAs 102
VII. The Chairman, President, or Any Managerial Officer in Charge of 103
Finance or Accounting Matters in the Most Recent Fiscal Year Holding a
Position at the CPAs' Accounting Firm or an Affiliate of the Accounting
Firm
VIII. Any Transfer of Equity Interests and/or Pledge of or Change in Equity 103
Interests by a Director, Managerial Officer, or Shareholder with a Stake
of More than 10%
IX. Relationship among the Company's 10 Largest Shareholders who are 104
Related to, Spouse of, or a Relative Within the Second Degree of
Kinship of Another
X. Total Number of Shares and Total Equity Stake Held in any Single 105
Enterprise by the Company, Its Directors, Managers, and Any
Companies Controlled Either Directly or Indirectly by the Company
Chapter 4. Capital Overview 106
I. Capital and Shares 106
II. Corporate Bonds 114
III. Preferred Shares 114
IV. Global Depository Shares 114
V. Employee Stock Options 114
VI. New Restricted Employee Shares 114
VII. Issuance of New Shares in Connection with Mergers or Acquisitions or 114
with Acquisitions of Shares of Other Companies
VIII. Implementation of the Company’s Capital Allocation Plans 114
Chapter 5. Operational Highlights 115
I. Business Activities 115
II. Analysis of the Market as well as Production and Marketing Situation 129
III. Information on Employees for the Two Most Recent Fiscal Years and 137
during the Current Fiscal Year Up to the Date of Publication of the
Annual Report
IV. Disbursements for Environmental Protection 137
V. Labor Relations 137
VI. Information Security Management 141
VII. Important Contracts 143
Chapter 6. Financial Information 144
I. Condensed Balance Sheets and Statements of Comprehensive Income for 144
the Past Five Fiscal Years
II. Financial Analyses for the Past Five Fiscal Years 149
III. Audit Committee Report for the Most Recent Fiscal Year's Financial 153
Statement
IV. Financial Statements for the Most Recent Fiscal Year 154
V. Consolidated Financial Statements for the Most Recent Fiscal Year, 230
Audited by CPAs
VI. Effect on the Financial Position of Any Financial Difficulties 309
Experienced by the Company and Its Affiliates in the Most Recent Fiscal
Year and during the Current Fiscal Year Up to the Date of Publication of
the Annual Report
Chapter 7. Review and Analysis of the Company's Financial Position and Financial 310
Performance, and Listing of Risks
I. Financial Position 310
II. Financial Performance 311
III. Cash Flow 312
IV. Effect Upon Financial Operations of Any Major Capital Expenditures 313
During the Most Recent Fiscal Year
V. Company Reinvestment Policy for the Most Recent Fiscal Year, Main 313
Reasons for Profits/Losses Generated Thereby, Plan for Improving Re-
investment Profitability, and Investment Plans for Coming Year
VI. Risk Analysis and Assessment for the Most Recent Fiscal Year and 313
during the Current Fiscal Year Up to the Date of Publication of the
Annual Report
VII. Other Important Matters 319
Chapter 8. Special Disclosure 320
I. Information on the Company Affiliates 320
II. Private Placement of Securities During the Most Recent Fiscal Year or 325
During the Current Fiscal Year up to the Date of Publication of the
Annual Report
III. Holding or Disposal of Shares in the Company by the Company's 325
Subsidiaries During the Most Recent Fiscal Year or During the Current
Fiscal Year up to the Date of Publication of the Annual Report
IV. Other Supplementary Information 325
V. Situations Listed in Subparagraph 2, Paragraph 3, Article 36 of the 325
Securities and Exchange Act, which Might Materially Affect
Shareholders' Equity or the Price of the Securities, Occurring during the
Most Recent Fiscal Year and during the Current Fiscal Year Up to the
Date of Publication of the Annual Report

Chapter 1. Letter to Shareholders

Dear Shareholders,

In 2021, the global pandemic persisted amid geopolitical conflicts and disruptions in the semiconductor supply chain that caused shortages and price hikes of certain materials. The demand for powering CPU and GPU in cloud and networking devices has led to an increase in the volume and gross margin of power supply products. FSP followed trends and adjusted its material preparation policy and product portfolio to achieve a 13% growth in overall revenue compared to the previous year, totaling approximately NT$16.7 billion. Telecom cloud and industrial products accounted for over 60% of the total revenue, and the overall number of power supplies sold totaled nearly 21.2 million units, exceeding the target of 20.9 million units. The results of operations in 2021 and the business outlook for 2022 are explained below:

  • I. Results of Operations in 2021

  • (I) Business Plan Implementation Results

FSP's consolidated revenue for 2021 was NT$16,650,252 thousand, an increase of 13% compared to consolidated revenue of NT$14,796,460 thousand for 2020; the net income before tax for 2021 was NT$960,600 thousand, an increase of 3% compared to net income before tax of NT$934,044 thousand for 2020; net income after tax for 2021 was NT$801,279 thousand, an increase of 16% compared to net income after tax of NT$692,075 thousand for 2020; basic earnings per share before and after tax for 2021 were NT$4.67 and NT$4.03, respectively.

Unit: NT$thousands; % Unit: NT$thousands; % Unit: NT$thousands; % Unit: NT$thousands; %
Change, by Change, by
Item 2021 2020
Amount Percentage
Operating Revenue 16,650,252
14,796,460
1,853,792
12.53%
Gross Profit 2,424,205
2,063,548
360,657
17.48%
Operating Income 671,909
462,337
209,572
45.33%
Non-Operating Income and
Expenditures		 288,691
471,707
(183,016)
(38.80%)
Net Income Before Tax 960,600
934,044
26,556
2.84%
Net income After Tax 801,279
692,075
109,204
15.78%
  • (II) Budget Implementation Status

The Company did not formulate a financial forecast for 2021.

1

(III) Analysis of Financial Gains and Losses and Profitability

Unit: NT$ thousands; %

Unit: NT$ thousands; %
Item Year
2021		 2020 Percentage of
Increase
(Decrease)
Financial
Revenue and
Expenditures		 Operating Revenue 16,650,252
14,796,460
12.53%

Gross Profit		 2,424,205
2,063,548
17.48%

Net Profit After Tax		 801,279
692,075
15.78%
Profitability
Analysis		 Return on total assets (%) 4.00
4.11
(2.68%)
Return on equity (%) 6.30
6.72
(6.25%)
Ratio of income before tax to
paid-in capital (%)		 51.30
49.88
2.85%
Net profit margin (%) 4.81
4.68
2.78%
Earnings Per Share (NT$) 4.03
3.55
13.52%

(IV) Research and Development

The results of R&D in 2021 were as follows:

  • Increased ATX power density.

  • Continuous development of highly automated products to reduce the cost of labor and increase production capacity.

  • Development of power supply to support the 12Vo platform developed by Intel: SFX 650/750W.

  • Conducted research and assessment of new component materials and plan the introduction of suitable products.

  • High-wattage SFX power supply with multiple output rated for 750W/850W.

  • GaN USB PD 65W products.

  • 90W/120/135/150W/180W U3 series compact models.

  • 50/65W products with wide temperature adaptation.

  • Development of 300W 5V, 12V, and 24V power supply for industrial computer products with touch screens or motors.

  • CRPS 2400W and 3000W high-power density devices.

  • Completed CRPS modularized back panel and entry-level housing to meet the highmix low-volume demand for edge computing: FC210E.

  • 80W and 150W @2" x 4" power supply for telecom applications.

  • 30W, 50W, and 75W power supply for industrial applications.

  • 250W @ 2" x 4" series.

  • 260W @ 3" x 5" series.

  • 450W @ 3" x 5" series.

  • 120W IP54.

  • 250W ATX.

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  • 500W Class II substrate medical application power supply.

  • 600/700W ATX.

  • 600W/1100W 50.4V-58.8V On Board/Off Board Charger.

  • 1800W 60V/30V On Board Charger.

  • 300W CANBUS Charger.

  • 700W aluminum-cast high-end water, dust, and shock-proof product development.

  • AMR application charger development (1100W).

  • II. Summary of 2022 Business Plan

In 2022, the Company shall develop high-power digital power supply products with wide temperature adaptation for IOT networking products to meet the high-mix low-volume demand for such products. For USB PD products, the Company shall develop 240W USB PD products to meet the demand of most devices to respond the increase in USB 3.1 power needs. For gaming and Intel's new specifications, we shall develop Titanium-grade products with higher power and high efficiency. For the energy storage and battery market, we shall develop chargers and home energy storage systems targeting light-weight vehicles. The current target for total sales of power supply units is 20.9 million units.

The commissioning of the Company's new Taoyuan 3rd Plant constructed in 2021 is progressing smoothly and we shall make full use of the plant to support purchase orders for products that must be produced in Taiwan.

  • III. Future Development Strategy

FSP is committed to its corporate mission of "maximizing value for customers, employees, and shareholders with innovative services and high-quality products". We shall continue to develop advanced technologies and innovative power supplies for the industry to provide high value-added power supply products. We shall develop more efficient and durable power supply products for sustainability. They can be used in all kinds of telecom devices and open platform devices to reduce waste and inefficient manufacturing of products. We shall develop battery and charging systems for electric vehicles to reduce the use of vehicles with internal combustion engines and prevent air pollution. We shall also develop products for home energy storage to maintain partial supply of electricity for homes and protect the grid. The Company endeavors to develop and build business models that meet the urgent needs of people based on sustainability ideals.

  • IV. Impact of the External Competitive Environment, Regulatory Environment, and Overall Business Environment

FSP has set up the Sustainable Development Committee under the jurisdiction of the Board of Directors. With regard to current domestic and foreign laws and regulations that govern our operations, and our management team will continue to pay close attention to policies and laws on corporate governance issues that may affect the Company's financial and business. We shall provide guidance and review environmental issues related to the environment between operations and production, and social issues related to coexistence and mutual prosperity with society and stakeholders on all levels.

3

FSP is committed to protecting the environment with green energy, respecting customers, and creating a high-quality work environment. We seek to become the most reliable partner for customers, consumers, suppliers, and employees and maximize value for customers, shareholders, and employees.

I wish you good health and prosperity

Chairman: Cheng, Ya-Jen

4

Chapter 2. Company Profile

I. Company Profile

  • (I) Date of Incorporation

Date of incorporation and registration: April 15, 1993

  • (II) Company History
1993: The Company was established in April with a capital of NT$5,000
thousand. It initially focused on OEM and trading of power supplies.
1994: The Company's capital increased from NT$5,000 thousand to
NT$10,000 thousand.
1997: The Company's capital increased from NT$10,000 thousand to
NT$38,000 thousand.
1998: The Company launched power supplies that meet Micro ATX
specifications in response to the launch of low-price computers.
In December, the Company increased its capital to NT$188,000
1998: thousand to support business expansion and purchased land in
Guishan Industrial Zone, Taoyuan to build its own factory.
1999: In July, the Company filed an application for public offering of
shares and increased the capital to NT$325,000 thousand.
In September, the Company increased its capital through
2000: capitalization of profits of NT$65,000 thousand and capital increase
by cash of NT$30,000 thousand to increase the capital to
NT$420,000 thousand.
2000: The Guishan Factory was inaugurated in October.
The Company invested in the wholly-owned subsidiary FSP
2000: International Inc. in the British Virgin Islands and used the company
to invest in Shenzhen HuiLi Electronics Co., Ltd. in China.
2001: The ERP system was officially launched in July and was connected
to the factories in China to facilitate instantaneous communication.
In September, the Company received ISO 9001 Quality
2001: Management System and ISO 14001 Environmental Management
System certification.
In September, the Company increased its capital through
capitalization of profits of NT$121,800 thousand, capitalization of
2001: capital surplus of NT$4,200 thousand, employee bonus converted to
capital increase of NT$5,000 thousand, and capital increase by cash
of NT$49,000 thousand to increase the Company's paid-in capital to
NT$600,000 thousand.

5

To expand the production capacity, the Company increased the
capital of its subsidiary company FSP International Inc. by
2001: US$1,000 thousand and used it to invest in Power Electronics Co.,
Ltd. in the British Virgin Islands. The Company then used Power
Electronics Co., Ltd. to invest in Zhonghan Electronics Shenzhen
Co., Ltd. in China.
In August, The Company increased its capital through capitalization
of profits of NT$30,000 thousand, capitalization of capital surplus of
2002: NT$60,000 thousand, and employee bonus converted to capital
increase of NT$10,000 thousand to increase the paid-capital to
NT$700,000 thousand.
2002: The Company's shares are traded on Taiwan Stock Exchange on
October 16.
To increase its proximity to the market and provide services to
customers, the Company increased the capital of the subsidiary FSP
2003: International Inc. by US$2,000 thousand and used it to set up
Famous Holding Ltd. in Samoa. The Company then used Famous
Holding Ltd. to invest in Wuxi SPI Technology Co., Ltd. in China.
In June, the Company increased its capital through capitalization of
2003: profits of NT$87,500 thousand and employee bonus converted to
capital increase of NT$9,730 thousand to increase the Company's
paid-in capital to NT$797,230 thousand.
To increase its proximity to the market and provide services to
customers, the Company increased the capital of the subsidiary FSP
2003: International Inc. by US$950 thousand and used it to increase the
capital in Famous Holding Ltd. in Samoa. The Company then used it
to invest in Wuxi Zhonghan Technology Co., Ltd. in China.
In September, the Company increased its capital by cash of
2003: NT$63,910 thousand and increased the Company's paid-in capital to
NT$861,140 thousand.
2004: In March, the Company raised US$30,000 thousand to issue
overseas convertible bonds.
To actively expand business and serve customers in the European
market, the Company invested in the wholly-owned subsidiary
2004: Amacrox Technology Co., Ltd. in the British Virgin Islands and used
it to invest in the wholly-owned Amacrox GMBH I.G. in Germany
with an equity of EUR 500 thousand.
2004: To actively expand business and serve customers in the American
market, the Company invested in the wholly-owned subsidiary

6

Amacrox Technology Co., Ltd. and used it to invest in a 45% stake in FSP Group USA Corp. in the United States.

To actively expand the domestic sales market in China and provide
services to customers, the Company used the subsidiary FSP
International Inc. to increase the capital of Famous Holding Ltd. in
2004: Samoa. The Company then used it to increase the capital of Wuxi
Zhonghan Technology Co., Ltd. which was used to invest RMB
9,900 thousand for the equity of Shenzhen Zhong Han Science &
Tech. Co., Ltd.
In May, the Board of Directors resolved to repurchase treasury
2004: stocks of 3,000,000 shares and the repurchase was completed in
July.
In July, the Company increased its capital through capitalization of
2004: profits of NT$129,171 thousand and employee bonus converted to
capital increase of NT$15,000 thousand to increase the Company's
paid-in capital to NT$1,005,311 thousand.
To increase the technical capabilities of high-end products and
switching power supply market share in Europe and the Americas,
2005: the Company invested NT$270,469 thousand in 3Y Power
Technology (Taiwan) Inc. for a 70% stake. It also used it to invest
US$7,350 thousand in 3Y Power Technology, Inc. in the United
States with a 100% stake.
In response to business requirements, the Company filed an
application to the Investment Commission and obtained approval for
capital increase of US$2,000 thousand for FSP International Inc.
2005: (BVI). It also used Famous Holding Ltd. in Samoa and Power
Electronics Co., Ltd. (BVI) to indirectly invest in Wuxi SPI
Technology Co., Ltd. and Zhonghan Electronics Shenzhen Co., Ltd.
in China.
In August, the Company increased its capital through capitalization
2005: of profits of NT$243,828 thousand and employee bonus converted
to capital increase of NT$24,100 thousand to increase the
Company's paid-in capital to NT$1,273,239 thousand.
In May, the Company converted overseas convertible corporate
2006: bonds into 923,658 common stocks and increased the Company's
paid-in capital to NT$1,282,476 thousand.
In July, the Company converted overseas convertible corporate
2006: bonds into 167,939 common stocks and increased the Company's
paid-in capital to NT$1,284,155 thousand.

7

In August, the Company increased its capital through capitalization
2006: of profits of NT$160,519 thousand and employee bonus converted
to capital increase of NT$18,030 thousand to increase the
Company's paid-in capital to NT$1,462,704 thousand.
In January, the Company converted overseas convertible corporate
2007: bonds into 4,490,905 common stocks and increased the Company's
paid-in capital to NT$1,507,613 thousand.
In April, the Company converted overseas convertible corporate
2007: bonds into 286,654 common stocks and increased the Company's
paid-in capital to NT$1,510,480 thousand.
In August, the Company increased its capital through capitalization
2007: of profits of NT$188,810 thousand and employee bonus converted
to capital increase of NT$40,730 thousand to increase the
Company's paid-in capital to NT$1,740,020 thousand.
In September, the Company increased its capital by cash of
2007: NT$160,000 thousand and increased the Company's paid-in capital
to NT$1,900,020 thousand.
In December, the Company merged Protek Electronics Corp.
2007: through capital increase with the issuance of new shares. The
Company increased its capital by NT$70,000 thousand and
increased the Company's paid-in capital to NT$1,970,020 thousand.
In July, the Company increased its capital through capitalization of
2008: profits of NT$197,002 thousand and employee bonus converted to
capital increase of NT$22,135 thousand to increase the Company's
paid-in capital to NT$2,189,157 thousand.
In December, the Company canceled treasury stock totaling
2008: NT$62,270 thousand and changed the Company's paid-in capital to
NT$2,126,887 thousand.
In August, the Company increased its capital through capitalization
2009: of profits of NT$53,172 thousand and employee bonus converted to
capital increase of NT$2,470 thousand to increase the Company's
paid-in capital to NT$2,182,529 thousand.
In April, employee stock option plans were converted into common
2010: stocks totaling NT$4,660 thousand and it increased the Company's
paid-in capital to NT$2,187,189 thousand.
In May, employee stock option plans were converted into common
2010: stocks totaling NT$8,380 thousand and it increased the Company's
paid-in capital to NT$2,195,569 thousand.
2010: The subsidiary 3Y Power Technology (Taiwan) Inc. merged Jui Po
Technology Co., Ltd. through capital increase with the issuance of

8

new shares in May and increased the capital by NT$9,000 thousand
with a stake of 67.17%.
In August, employee stock option plans were converted into
common stocks totaling NT$3,940 thousand and the Company
2010: increased its capital through capitalization of profits of NT$43,911
thousand and employee bonus converted to capital increase of
NT$1,392 thousand to increase the Company's paid-in capital to
NT$2,244,812 thousand.
2010: In October, the Company obtained the OHSAS 18001 Occupational
Safety and Health Management System certification.
In November, employee stock option plans were converted into
2010: common stocks totaling NT$710 thousand and it increased the
Company's paid-in capital to NT$2,245,522 thousand.
In April, employee stock option plans were converted into common
2011: stocks totaling NT$3,570 thousand and it increased the Company's
paid-in capital to NT$2,249,092 thousand.
In May, employee stock option plans were converted into common
2011: stocks totaling NT$7,200 thousand and it increased the Company's
paid-in capital to NT$2,256,292 thousand.
In August, the Company increased its capital through capitalization
2011: of profits of NT$24,256 thousand and employee stock option plans
converted into common stocks totaling NT$5,890 thousand to
increase the Company's paid-in capital to NT$2,286,438 thousand.
In November, employee stock option plans were converted into
2011: common stocks totaling NT$1,080 thousand and increased the
Company's paid-in capital to NT$2,287,518 thousand.
2011: In October, the Company obtained the ISO 14064-1 Greenhouse Gas
Inventory Statement.
In April, employee stock option plans were converted into common
2012: stocks totaling NT$100 thousand and it increased the Company's
paid-in capital to NT$2,287,618 thousand.
In May, employee stock option plans were converted into common
2012: stocks totaling NT$5,130 thousand and it increased the Company's
paid-in capital to NT$2,292,748 thousand.
In September, employee stock option plans were converted into
2012: common stocks totaling NT$780 thousand and it increased the
Company's paid-in capital to NT$2,293,528 thousand.
In November, employee stock option plans were converted into
2012: common stocks totaling NT$2,310 thousand and it increased the
Company's paid-in capital to NT$2,295,838 thousand.

9

2012: In December, the Company obtained IECQ QC 080000 Hazardous
Substance Process Management certification.
In March, employee stock option plans were converted into common
2013: stocks totaling NT$2,930 thousand and it increased the Company's
paid-in capital to NT$2,298,768 thousand.
In May, employee stock option plans were converted into common
2013: stocks totaling NT$8,840 thousand and it increased the Company's
paid-in capital to NT$2,307,608 thousand.
In September, employee stock option plans were converted into
2013: common stocks totaling NT$1,790 thousand and it increased the
Company's paid-in capital to NT$2,309,398 thousand.
In December, employee stock option plans were converted into
2013: common stocks totaling NT$7,830 thousand and it increased the
Company's paid-in capital to NT$2,317,228 thousand.
In February, employee stock option plans were converted into
2014: common stocks totaling NT$27,430 thousand and it increased the
Company's paid-in capital to NT$2,344,658 thousand.
2014: The Company produced the world's first 400W power Supply that
passed the 80 Plus Titanium certification.
2015: In March, the Company built the Research and Development
Building in Guishan Industrial Zone, Taoyuan.
In September, the Company reduced capital totaling NT$422,038
2015: thousand and decreased the Company's paid-in capital to
NT$1,922,620 thousand.
2016: In January, FSP EMERGY 1000/3000 environmentally friendly
energy storage system wins the 2016 Taiwan Excellence Award.
In response to business requirements, the Company filed an
application to the Investment Commission and obtained approval for
2016: the subsidiary FSP International Inc. (BVI) to use the earnings of
US$4,000 thousand from Shenzhen HuiLi Electronics Co., Ltd. in
China and Power Electronics Co., Ltd. to indirectly increase the
capital of Zhonghan Electronics Shenzhen Co., Ltd.
2016: In November, the Company obtained ISO 13485 Medical Device
Quality System certification.
2017: The Research and Development Building was inaugurated in
January.
In response to business requirements, the Company filed an
2018: application to the Investment Commission and obtained approval for
the subsidiary FSP International Inc. (BVI) to use its own funds

10

USD3,500 thousand to indirectly invest in Shenzhen HuiLi Electronics Co., Ltd.

In response to business requirements, the Company filed an application to the Investment Commission and obtained approval for the subsidiary Famous Holding Ltd. in Samoa to use the earnings of 2019: US$6,000 thousand from Wuxi Zhonghan Technology Co., Ltd. in China to indirectly invest in Wuxi SPI Technology Co., Ltd. in China.

In October, the Company obtained the ISO 45001 Occupational 2019: Safety and Health Management System certification. In response to business requirements, the subsidiary 3Y Power 2019: Technology (Taiwan) Inc. increased capital by cash totaling NT$25,000 thousand with a 65.87% stake. In January, the Company built the production site in Guishan 2020: Industrial Zone, Taoyuan. In March, the Board of Directors resolved to repurchase treasury 2020: stocks of 5,000,000 shares and the repurchase was completed in May. In July, the Company canceled treasury stock totaling NT$50,000 2020: thousand and changed the Company's paid-in capital to NT$1,872,620 thousand. 2021: The Production Building was inaugurated in July. To actively expand business and serve customers in the European 2021: and Asian market, the Company invested in FSP Turkey Dis Ticaret Limited Sirketi with a 91.41% stake. In December, the Company received the "Excellent Enterprise 2021: Award in Taoyuan City".

11

Chapter 3. Corporate Governance Report

==> picture [562 x 650] intentionally omitted <==

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

I. Organizational System
(I) Organizational Structure
Shareholders' Meeting
Audit Committee
Board of Directors
Remuneration
Committee Members
Audit Office
Nominating Committee
Sustainable Development
Committee
Chairman
President
President Office
Administration Division Pan-Asia Business Unit Global Business Unit Product & Marketing Division Global Retail Business Unit New Energy Division Material Division Quality Assurance Division R&D Division R&D1-3 Division Production Division R&D Engineering Support Division
----- End of picture text -----

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(II) Major Corporate Functions

Divisions Business Activities
Audit Office (1) Review and evaluate the Company's internal control system.
(2) Establish and revise the internal audit system and ensure early warning functions.
(3) Perform regular audits of the operation of management systems in the Company.
President
Office		 (1) Document Control Dept.: Management of procedures for internal documents.
(2) Information Technology Dept.: Maintenance and management of the software and hardware of the
information system.
(3) Technique Development Dept.: Develop technologies and conduct basic research.
(4) ESH Dept.: Compliance with environmental safety and health regulations and preparation of the
Corporate Social Responsibility Report.
(5) Labor Safety Dept.: Occupational safety and health management.
(6) Legal Affairs and Intellectual Property Dept.: Management of legal affairs and related matters.
Administration
Division		 (1) Human resource management and general affairs.
(2) Accounting and financial affairs and establishment of the accounting system.
Pan-Asia
Business Unit
Global
Business Unit		 (1) Preparation of sales forecasts, marketing plans, and product price implementation plans.
(2) Provide product introduction, business contact, and quotation to customers.
(3) Coordinate with technical units to produce and send samples based on customer requirements.
(4) Responsible for providing quotations and issuance of internal purchase orders to procurement and
production units for the samples approved by customers.
(5) Responsible for marketing and sales for project customers.
Product &
Marketing
Division		 (1) Standard product lifecycle management.
(2) Development of strategic markets and strategic customers.
(3) Integrated marketing planning.
(4) Brand promotion.
(5) Media and PR plans.
Global Retail
Business Unit		 (1) Development, marketing, and sales of retail products of the Company's brand.
New Energy
Division		 (1) Development, production, and sales of high-power energy storage system with lithium-ion
batteries.
(2) Development and production plans for lithium-ion battery management systems, chargers, and
inverters.
(3) Development of modular standard battery packs and mobile backup power systems for integrated
applications.
(4) New product planning and development.
Material
Division		 (1) Development, investigation, management, and contracting of suppliers of materials.
(2) Planning and implementation of price negotiations for materials, analysis of machine costs, and
procurement of production and non-production materials.
(3) Execution and control of material requirement plans and management of warehousing operations.
(4) Process Import/export affairs for all units of the Company.
Quality
Assurance
Division		 (1) Inspections of incoming materials, process quality control, and sampling inspections of finished
goods.
(2) Process customer complaints, propose countermeasures, and conduct customer satisfaction
surveys.
(3) Integrate quality issues between factories and customers. Reduce defective rates and improve the
Company's quality and image through immediate feedback and comprehensive follow-up.
(4) RMA data analysis, tracking improvements, and quality management of after-sales services.
R&D Division
R&D1-3
Divisions		 (1) Preparation, execution, and management of annual development plans.
(2) Development and design of related products, original sample production/tests/review, transfer of
technical documents, design review, and confirmation of design changes.
(3) Review and resolve issues in sample production, trial production, and validation for related
products.
(4) Propose matters of note for production operations and implementation of pilot run production.
Production
Division		 (1) Organization of regular production and sales meetings to achieve the optimal balance for
production and sales.
(2) Responsible for the preparation and processing of products.
R&D
Engineering
Support
Division		 (1) Assist R&D units in improving design quality and standard.
(2) Implementation of verification tests and support for tests on customer requirements.
(3) Anomaly analysis tests and sample shipment tests.
(4) Factory-wideinstrumentationand equipmentmanagement, calibration, andmaintenance.

13

  • II. Information on the Company's Directors, President, Vice President, Associate Managers, and the Supervisors of All the Company's Divisions and Branch Units:

(I) Directors:

1. Information on Directors and Independent Directors:

April 11, 2022

Title Nationality/Place
of Incorporation
Name		 Gender
Age		 Date
Elected		 Term
(Years)		 Date First
Elected		 Shareholding
When Elected		 Shareholding
When Elected		 Current
Shareholding		 Current
Shareholding		 Spouse & Minor
Shareholding		 Spouse & Minor
Shareholding		 Shareholding
by Nominee
Arrangement		 Shareholding
by Nominee
Arrangement		 Experience (Education) Other Position
Concurrently Held at the
Company Or Other
Companies		 Executives or Direct
are Spouses or Wit
SecondDegree of		 Executives or Direct
are Spouses or Wit
SecondDegree of		 ors Who
hin the
Kinship		 Remark
Shares % Shares % Shares % Shares % Title Name Relation
Chairman R.O.C. Cheng, Ya-Jen Male
61-70		 2020.06.16 3 years 1993.04.08 12,167,477 6.33%
12,167,477		 6.50% 1,019,992 0.54%
－		 － College of Engineering,
Tatung University
Chairman, FSP
TechnologyInc.		 Note 1 Executive
Assistant
to the
President
Cheng,
Ming-
Hsiang		 Father-
son		 Note 5
Vice
Chairman		 R.O.C. Wang, Chung-
Shun		 Male
71-80		 2020.06.16 3 years 1999.06.15 11,265,794 5.86%
11,605,794		 6.20%
618,892		 0.33%
－		 － Feng Chia University
Chairman, FSP
TechnologyInc.		 Note 2 － － － －
Director R.O.C. Yang, Fu-An Male
61-70		 2020.06.16 3 years 1993.04.08 11,792,834 6.13%
11,792,834		 6.30%
249,022		 0.13%
－		 － Feng Chia University
Vice President, FSP
TechnologyInc.		 Note 3 － － － －
Director British Virgin
Islands		 2K Industries
Inc. (BVI)		 － 2020.06.16 3 years 2005.06.10 6,793,162 3.53%
5,193,162		 2.77%
－		 － － － － － － － － －
R.O.C. Representative:
Wang, Po-Wen
Male
51-60		 2020.06.16 3 years 2005.06.10
－		 － － － － － － － Bachelor of Arts
(Economics) U.C.
Berkeley		 Other position
concurrently held at the
Company: None
Operations Manager,
Fortron/Source Group Ltd
Director, Fu Chuang Yuan
Corporation		 － － － －
Director Belize Datazone
Limited		 － 2020.06.16 3 years 2002.06.22
390,839		 0.20%
390,839		 0.21%
－		 － － － － － － － － －
R.O.C. Representative:
Chu, Hsiu-Yin
Female
61-70		 2020.06.16 3 years 2002.06.22
－		 － 2,660,070
(Note 4)
1.42%
－		 － － － Department of Life-and-
Death Studies, Nanhua
University		 Other position
concurrently held at the
Company: None
Chairman, Unitel Pty Ltd.
Director, Dehuang
Biomedical Technology
Inc.		 － － － －
Director R.O.C. Chen, Kuang-
Chun		 Male
51-60		 2020.06.16 3 years 1999.06.15
(Note 6)
3,007,913		 1.56%
2,989,913		 1.59%
－		 － － － LeeMing Institute of
Technology		 － － － － －
Director R.O.C. Huang, Jr-Wen Male
51-60		 2020.06.16 3 years 2005.06.10
－		 － － － － － － － Master's degree, Saint
Louis University
Touch Cloud Inc.
Supervisor		 Other position
concurrently held at the
Company: None
Senior Vice President,
Investment Department,
IBF Venture Capital Co.,
Ltd.
Independent Director,		 － － － －

14

Title Nationality/Place
of Incorporation
Name		 Gender
Age		 Date
Elected		 Term
(Years)		 Date First
Elected		 Shareholding
When Elected		 Shareholding
When Elected		 Current
Shareholding		 Current
Shareholding		 Spouse & Minor
Shareholding		 Spouse & Minor
Shareholding		 Shareholding
by Nominee
Arrangement		 Shareholding
by Nominee
Arrangement		 Experience (Education) Other Position
Concurrently Held at the
Company Or Other
Companies		 Executives or Direc
are Spouses or Wi
SecondDegree of		 Executives or Direc
are Spouses or Wi
SecondDegree of		 tors Who
thin the
Kinship
Remark
Shares % Shares % Shares % Shares % Title Name Relation
Bizlink Holding Inc.
Supervisor, Genepharm
Biotech Corp.
Supervisor,Ttbio Corp.
Independent
Director
R.O.C.		 Liu, Shou-
Hsiang		 Male
71-80		 2020.06.16 3 years 2002.06.22
－		 － － － － － － － PhD in Economics,
National Taiwan
University
Associate Professor,
Ming Chuan University
Research Fellow,
Chung-Hua Institution
for Economic Research
Chairman and
President, Ta Hua
Investment Trust
Independent Director,
Hwatai BankCo.,Ltd.		 Other position
concurrently held at the
Company: None
Advisory Board Member,
Chung-Hua Institution for
Economic Research		 － － － －
Independent
Director
R.O.C.		 Cheng, Chia-
Jiun		 Male
61-70		 2020.06.16 3 years 2011.06.15
－		 － － － － － － － Master of Business
Administration,
National Chengchi
University
President, Digital
United Telecom Co.,
Ltd.		 Other position
concurrently held at the
Company: None
Azion Corporation
Independent Director
Independent Director,
Bizlink HoldingInc.		 － － － －
Independent
Director
R.O.C.		 Hsu, Cheng-
Hung		 Male
61-70		 2020.06.16 3 years 2015.06.08
－		 － － － 1,227 0.00%
－		 － Department of Physics,
Tamkang University
Unitech Printed Circuit
Board Corp.
President		 Other position
concurrently held at the
Company: None
Shanghai Zhanhua
Electronic Co., Ltd.
Director		 － － － －

＊ The shareholding ratio is rounded to the second decimal place.

Note 1. The Company's Chairman serves concurrently as the President of the Company, Chairman of Chuan Han Investment Co., Ltd., Chairman of 3Y Power Technology (Taiwan) Inc., Director of FSP International Inc., Director of Power Electronics Co., Ltd., Director of Famous Holding Ltd., Director of FSP Group Inc., Director of Amacrox Technology Co., Ltd., Director of Wuxi SPI Technology Co., Ltd., Director of Wuxi Zhonghan Technology Co., Ltd., Director of Shenzhen Zhong Han Science & Tech. Co., Ltd., Director of FSP Technology Inc., Director of Jiangsu FSP Power Technology R&D Co., Ltd., Supervisor of Yung Han Co., Ltd., Chairman of 3Y Power Technology Inc., Director of FSP International (HK) Limited, Director of Nanjing FSP-Powerland Technology Inc., Chairman of Amacrox GmbH, Director of Harmony Trading (HK) Limited, Director of Protek Electronics (Samoa) Corp., Director of Luckyield Co., Ltd., Director of FSP Group USA Corp., Chairman of FSP Technology USA Inc., Director of Haohan Electronic Technology (Ji'an) Co., Ltd., Representative of Corporate Director of Voltronic Power Technology Corp., Director of Fu Chuang Yuan Corporation, Supervisor of Hsiang Tsan Investment Co., Ltd., and Chairman of An Wen Investment Co., Ltd.

Note 2. The Company's Vice Chairman serves concurrently as the Vice President of the Company, Representative of Shenzhen HuiLi Electronics Co., Ltd., Representative of

15

Zhonghan Electronics Shenzhen Co., Ltd., Director of FSP International Inc., Director of Chuan Han Investment Co., Ltd., Director of Wuxi SPI Technology Co., Ltd., Director of Wuxi Zhonghan Technology Co., Ltd., Director of Shenzhen Zhong Han Science & Tech. Co., Ltd., Director of 3Y Power Technology (Taiwan) Inc., Representative of Jiangsu FSP Power Technology R&D Co., Ltd., and Supervisor of Fu Chuang Yuan Corporation.

  • Note 3. The Company's Director serves concurrently as the Company's Vice President, Director of Shenzhen HuiLi Electronics Co., Ltd., Director of Zhonghan Electronics Shenzhen Co., Ltd., Director of FSP International Inc., Director of Chuan Han Investment Co., Ltd., Director of Wuxi SPI Technology Co., Ltd., Director of Wuxi Zhonghan Technology Co., Ltd., Director of Shenzhen Zhong Han Science & Tech. Co., Ltd., Director of 3Y Power Technology (Taiwan) Inc., Director of Jiangsu FSP Power Technology R&D Co., Ltd., Director of Fu Chuang Yuan Corporation, Chairman of Yang Chi Investment Co., Ltd., Supervisor of Chin Yu Investment Co., Ltd., Supervisor of An Wen Investment Co., Ltd., and Supervisor of Baichuang Investment Co., Ltd.

  • Note 4.

  • Chu, Hsiu-Yin's trust account under the custody of Yuanta Commercial Bank

  • Note 5. Where the Chairman of the Board of Directors, President, or individual with equivalent roles (highest-ranking managerial officer) are the same individual, spouses, or relatives within the first degree of kinship, specify related information regarding the reason, reasonableness, necessity, and response measures:

The Chairman of the Board of Directors serves concurrently as the President to strengthen execution in decision making and improve business efficiency. It is a temporary measure and the Company has actively sought suitable candidates within its ranks. In addition, the Chairman has maintained close communication with the Directors regarding the Company's operations and plans to ensure corporate governance. In the future, the Company intends to increase the number of Independent Directors to enhance the functions of the Board of Directors and strengthen supervisory functions. The Company has implemented the following measures:

  • (1) The current three Independent Directors have extensive experience and expertise in finance, business, and management and perform their supervisory functions effectively.

  • (2) Every year, we arrange professional director courses offered by external organizations such as the Securities & Futures Institute for all Directors to enhance the operations of the Board of Directors.

  • (3) The Independent Directors discuss necessary matters and propose recommendations to the Board of Directors in each functional committee to implement corporate governance.

  • (4) More than half of the members of the Board of Directors are not employees or managers.

  • Note 6. The Company organized an election in the shareholders' meeting on June 8, 2017 to replace all Supervisors. The Company also elected (appointed) Directors on June 16, 2020.

16

2. Major Shareholders

April 11, 2022

April 11,2022
Name of Institutional Shareholder
Major Shareholders		 Shareholding
2K Industries Inc. (BVI) ALTOS INTERNATIONAL CORPORATION 65.30%
ETERNAL WELTH HOLDINGS LIMITED 34.70%
Datazone Limited ERNEST KAO 50.00%
SOFIA KAO 50.00%
  1. Major Shareholders of Institutional Shareholders

April 11, 2022

April 11,2022
Name of Institutional Shareholder Major Shareholders Shareholding
ALTOS INTERNATIONAL CORPORATION WANG,CHUNG-YIN 100%
ETERNAL WELTH HOLDINGS LIMITED WANG,SHU-MEI 100%
  1. Disclosure of Information on the Professional Qualifications of Directors and Independence of Independent Directors
April 11,2022 April 11,2022 April 11,2022 April 11,2022 April 11,2022 April 11,2022 April 11,2022 April 11,2022 April 11,2022 April 11,2022 April 11,2022 April 11,2022 April 11,2022
Criteria
Name
Professional Qualifications and
Experience		 Independence Criteria (Note1) Number of
Other Public
Companies
where the
Individual
Concurrently
Serves as an
Independent
Director
1 2 3 4 5 6 7 8 9 10 11 12
Cheng, Ya-Jen Extensive experience and expertise in
finance, business, and management and
business administration skills
Chairman,FSP TechnologyInc.		 ✓ ✓ ✓ ✓ ✓ ✓ None
Wang, Chung-
Shun		 Extensive experience and expertise in
finance, business, and management
Chairman,FSP TechnologyInc.		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ None
Yang, Fu-An Extensive experience and expertise in
finance, business, and management
Vice President, FSP Technology Inc.		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ None
2K Industries
Inc. (BVI)
Representative:
Wang, Po-Wen

Extensive experience and expertise in
economics and management
Operations Manager, Fortron/Source
Group Ltd
Director, Fu Chuang Yuan Corporation		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ None
Datazone
Limited
Representative:
Chu, Hsiu-Yin
Extensive experience and expertise in
finance, business, and management
Chairman, Unitel Pty Ltd.
Director, Dehuang Biomedical
Technology Inc.		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ None
Chen, Kuang-
Chun		 Extensive experience and expertise in
R&D and management		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ None
Huang, Jr-Wen Extensive experience and expertise in ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 1

17

Criteria
Name
Professional Qualifications and
Experience		 Independence Criteria (Note 1) Independence Criteria (Note 1) Independence Criteria (Note 1) Independence Criteria (Note 1) Independence Criteria (Note 1) Independence Criteria (Note 1) Independence Criteria (Note 1) Independence Criteria (Note 1) Independence Criteria (Note 1) Independence Criteria (Note 1) Independence Criteria (Note 1) Independence Criteria (Note 1) Number of
Other Public
Companies
where the
Individual
Concurrently
Serves as an
Independent
Director
1 2 3 4 5 6 7 8 9 10 11 12
finance, business, and management
Supervisor, Touch Cloud Inc.
Senior Vice President, Investment
Department, IBF Venture Capital Co.,
Ltd.
Independent Director, Bizlink Holding
Inc.
Supervisor, Genepharm Biotech Corp.
Supervisor, Ttbio Corp.
Liu, Shou-
Hsiang		 Extensive experience and expertise in
finance, business, and management
Associate Professor, Ming Chuan
University
Research Fellow, Chung-Hua Institution
for Economic Research
Chairman and President, Ta Hua
Investment Trust
Independent Director, Hwatai Bank Co.,
Ltd.
Advisory Board Member, Chung-Hua
Institution for Economic Research
None of the circumstances in the
subparagraphs of Article 30 of the
Company Act apply		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ None
Cheng, Chia-
Jiun		 Extensive experience and expertise in
finance, business, and management
President, Digital United Telecom Co.,
Ltd.
Independent Director, Azion Corporation
Independent Director, Bizlink Holding
Inc.
None of the circumstances in the
subparagraphs of Article 30 of the
CompanyAct apply		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 2
Hsu, Cheng-
Hung		 Extensive experience and expertise in
finance, business, and management
President, Unitech Printed Circuit Board
Corp.
Director, Shanghai Zhanhua Electronic
Co., Ltd.
None of the circumstances in the
subparagraphs of Article 30 of the
Company Act apply		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ None

Note 1. Please place ”√” in the corresponding boxes if the directors meet the following conditions during the two years prior to the election and during the term of office.

(1) Not an employee of the Company or any of its affiliates.

(2) Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.

  • (3) Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the

18

total number of outstanding shares of the Company or is ranked in the top 10 in shareholdings.

  • (4) Not the manager listed in (1) or the spouse, relative within the second degree of kinship, or direct blood relatives within the third degree of kinship of the person listed in (2) and (3).

  • (5) Not a director, supervisor, or employee of an institutional shareholder who directly holds more than 5% of the Company's total outstanding shares, who is among the top five shareholders, or who designates its representative to serve as a director or supervisor of the Company in accordance with Paragraph 1 or 2, Article 27 of the Company Act (except for an independent director engaged concurrently by the Company, its parent company, and its subsidiary or a subsidiary under the same parent company in accordance with the Act or local laws and regulations).

  • (6) Not a director, supervisor, or employee of another company where a majority of the Company's director seats or voting shares and those of another company are controlled by the same person (except for an independent director engaged concurrently by the Company, its parent company, and its subsidiary or a subsidiary under the same parent company in accordance with the Act or local laws and regulations).

  • (7) Not a director (managing director), supervisor, or employee of another company or institution where the Chairman, the President, or person holding an equivalent position of the Company and a person in an equivalent position at another company or institution are the same person or are spouses (except for an independent director engaged concurrently by the Company, its parent company, and its subsidiary or a subsidiary under the same parent company in accordance with the Act or local laws and regulations).

  • (8) Not a director (managing director), supervisor, manager, or shareholder holding 5% or more of the shares of a specific company or institution which has a financial or business relationship with the Company (except for a specific company or institution holding more than 20% and no more than 50% of the total issued shares of the Company and for an independent director engaged concurrently by the Company, its parent company, and its subsidiary or a subsidiary under the same parent company in accordance with the Act or local laws and regulations).

  • (9) Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides auditing services to the Company or any affiliate of the Company, or that provides commercial, legal, financial, accounting or related services to the Company or any affiliate of the Company for which the provider in the past two years has received cumulative compensation exceeding NT$500,000, or a spouse thereof; provided, this restriction does not apply to a member of the Remuneration Committee, public tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to the Security and Exchange Act or to the Business Mergers and Acquisitions Act or relevant laws or regulations.

  • (10) Does not have a marital relationship with, or a relative within the second degree of kinship with, any other director of the Company.

  • (11) None of the circumstances in the subparagraphs of Article 30 of the Company Act apply.

  • (12) Not a governmental, juridical person or representative as defined in Article 27 of the Company Act.

19

  1. Diversity and Independence of the Board Directors

  2. (I) Diversity of the Board Directors:

The election of Directors (including Independent Directors) of the Company shall be based on the "Procedures for Election of Directors" and the candidate nomination system stipulated in Article 192-1 of the Company Act. The Company shall announce the period for accepting nominations for Directors (including Independent Directors) and the number of candidates for election before the book closure date prior to the shareholders' meeting in accordance with the law. The period of acceptance shall be no less than 10 days. After the Board of Directors reviews the list of candidates for Directors (including Independent Directors) and deems that they meet the requirements for Directors (including Independent Directors), the list shall be submitted to the shareholders' meeting for election.

The Company shall carefully consider the setup and diversity standards for the Board of Directors. It shall select Directors with the necessary knowledge, skills, and education to perform their duties based on their professional background, field, and practical experience. The Company shall also ensure that the number of Directors who are also managers of the Company does not exceed one third of the number of Directors as specified in the management targets.

The Company's Board of Directors is diverse and has different core competencies for effectively carrying out its responsibilities, which include establishing a good governance system for the Board of Directors, supervising, appointing, and directing the Company's management, strengthening management functions, and taking responsibility for the overall operations of the Company's economic, social, and environmental development to maximize stakeholders' interests.

The Company's current Board of Directors consists of 10 Directors, including 4 non-executive Directors (including 1 female Director), 3 Independent Directors, and 3 Executive Directors. The members have extensive experience and expertise in finance, business, economics, R&D, and management.

The Company attaches great importance to professional skills and gender equality in the composition of the Board. We aim to appoint an additional Director with legal expertise or a female Director in the 11th Board of Directors to meet our target.

20

The overall capabilities of the Board of Directors are specified in Article 20 of the Company's "Corporate Governance Best-Practice Principles". All members of the Board of Directors shall have the knowledge, skills, and experience necessary to perform their duties. To achieve the ideal goals of corporate governance, the Board of Directors shall possess the following abilities:

  • I. Ability to make operational judgments.

  • II. Ability to perform accounting and financial analysis.

  • III. Ability to conduct management administration.

  • IV. Ability to conduct crisis management.

  • V. Knowledge of the industry.

  • VI. An international market perspective.

  • VII. Ability to lead.

VIII. Ability to make policy decisions.

The implementation status is listed in the table below:

Diversified Core
Competences
Name of Director		 Basic Composition Basic Composition Basic Composition Basic Composition Basic Composition Industry Experience Industry Experience Industry Experience Industry Experience Professional Skills Professional Skills Professional Skills Professional Skills Professional Skills

Nationality		 Gender Age
 A Concurrent Employee
of the Company		 Seniority of
Independent
Director		 Production management Sales and marketing Innovation and R&D Asset management Accounting Finance Law Risk management International market
perspective

41-50		 51-60
61-75		 Less than 3 years 3 to 9 years More than 9 years
Cheng,Ya-Jen R.O.C. Male ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
Wang, Chung-
Shun		 R.O.C. Male ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
Yang, Fu-An R.O.C. Male ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
2K Industries Inc.
(BVI)
Representative:
Wang, Po-Wen
R.O.C.		 Male ✓ ✓ ✓
Datazone Limited
Representative:
Chu, Hsiu-Yin
R.O.C.		 Female ✓ ✓ ✓ ✓ ✓
Chen, Kuang-
Chun		 R.O.C. Male ✓ ✓ ✓ ✓ ✓
Huang, Jr-Wen R.O.C. Male ✓ ✓ ✓ ✓ ✓ ✓
Liu, Shou-Hsiang
R.O.C.		 Male ✓ ✓ ✓ ✓ ✓ ✓ ✓
Cheng, Chia-Jiun R.O.C. Male ✓ ✓ ✓ ✓ ✓ ✓ ✓
Hsu, Cheng-
Hung		 R.O.C. Male ✓ ✓ ✓ ✓ ✓ ✓ ✓

21

Diversified
Competences
Name of Director

Ability to
make
operational
judgments
Ability to
perform
accounting
and
financial
analysis		 Ability to
conduct
management
administration
Ability to
conduct
crisis
management
Industrial
Knowledge
International
market
perspective
Ability
to lead		 Ability to
make
policy
decisions
Cheng, Ya-Jen ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
Wang, Chung-Shun ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
Yang, Fu-An ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
2K Industries Inc.
(BVI)
Representative:
Wang, Po-Wen		 ✓ * ✓ ✓ ✓ ✓ * ✓
Datazone Limited
Representative:
Chu, Hsiu-Yin		 ✓ * ✓ ✓ ✓ ✓ ✓ ✓
Chen, Kuang-Chun ✓ * ✓ ✓ ✓ ✓ ✓ ✓
Huang, Jr-Wen ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
Liu, Shou-Hsiang ✓ ✓ ✓ ✓ * ✓ ✓ ✓
Cheng, Chia-Jiun ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
Hsu, Cheng-Hung ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

Note: *The Director has certain skills in this category

  • (II) Independence of the Board Directors:

The current Board of Directors consists of ten members, who were all elected by shareholders. The Board of Directors consists of five natural-person Directors, two representatives of Corporate Directors, and three Independent Directors.

More than half of the members of the Board of Directors are not employees or managers. They are also not a spouse or a relative within the second degree of kinship.

As required by the rules for public listing, the Company has obtained a written statement from each Independent Non-Executive Director for confirming the independence of the Director or his or her immediate family members with respect to the Company.

Opinions of the Company on Independence

The Board of Directors is committed to performing a continuous assessment of the independence of its Directors and it will consider all relevant factors including whether the Director continuously proposes constructive questions of the management and other Directors, whether the Director expresses views independent of the management or other Directors, and whether the Director acts appropriately inside the Board of Directors and in interactions with external entities. The conduct of the Company's Independent Non-Executive

22

Directors is consistent with expectations under applicable conditions and demonstrates these requirements.

After considering all conditions specified in this section, the Company considers that all Independent Non-Executive Directors to be individuals independent of the Company.

23

  • (II) Information on the Company's President, Vice President, Associate Managers, and the Supervisors of All the Company's Divisions and Branch Units

April 11, 2022

Title Nationality Name Gender Date Elected Shareholding Shareholding Spouse & Minor
Shareholding		 Spouse & Minor
Shareholding		 Shareholding by
Nominee
Arrangement		 Shareholding by
Nominee
Arrangement		 Experience (Education) Other
Positions		 Managers Who are
Spouses or Within the
Second Degree of
Kinship		 Managers Who are
Spouses or Within the
Second Degree of
Kinship		 Managers Who are
Spouses or Within the
Second Degree of
Kinship		 Remark
Shares % Shares % Shares % Title Name Relation
President R.O.C. Cheng, Ya-Jen Male 1993.05.01 12,167,477
6.50%		 1,019,992
0.54%
－		 － College of Engineering, Tatung University/
Chairman, FSP Technology Inc.		 Note 1 － － － Note 4
Vice
President		 R.O.C. Wang, Chung-
Shun		 Male 1993.10.23 11,605,794
6.20%
618,892
0.33%
－		 － Feng Chia University/
Chairman, FSP Technology Inc.		 Note 2 － － － －
Vice
President		 R.O.C. Yang, Fu-An Male 1993.10.23 11,792,834
6.30%
249,022
0.13%
－		 － Feng Chia University/
Vice President, FSP Technology Inc.		 Note 3 － － － －
President,
Kaohsiung
Branch		 R.O.C. Chen, Kuo-
Ruey		 Male 2007.12.01 644,345
0.34%
33,333
0.02%
－		 － Master of Electrical Engineering, National
Cheng Kung University/
President, Kaohsiung Branch, FSP
Technology Inc.		 None － － － －
Assistant
Vice
President,
Material
Division		 R.O.C. Wang, Ya-
Chen		 Female 1998.05.01 285,883
0.15%
93,502
0.05%
－		 － Feng Chia University/
Assistant Vice President, Material Division.,
FSP Technology Inc.		 None － － － －
Vice
President,
Kaohsiung
Branch		 R.O.C. Hsu, Pei-
Ching		 Male 2007.12.01 130,067
0.07%
－		 － － － Feng Chia University/
Vice President, Kaohsiung Branch, FSP
Technology Inc.		 None － － － －
Vice
President,
New Energy
Division		 R.O.C. Tsai, Fu-
Sheng		 Male 2012.04.23 － － － － － － PhD, Virginia Polytechnic Institute and State
University/
Vice President, New Energy Division, FSP
Technology Inc.		 None － － － －
Corporate
Governance
Officer		 R.O.C. Yao, Wen-
Chun		 Male 2019.01.08 － － － － － － Master's degree, National Yang-Ming
University/
Manager, Legal Affairs and Intellectual
Property Dept., FSP Technology Inc.		 Note 5 － － － －
Financial
Supervisor		 R.O.C. Li, Fu-Jung Female 2005.04.01 104,740
0.06%
8,281
0.00%
－		 － Fu-Jen Catholic University/
Manager, Finance Dept., FSP Technology
Inc.		 None － － － －
Chief
Accounting
Officer		 R.O.C. Sang, Hsi-Yun Female 2005.04.01 84,045
0.04%
－		 － － － Master's degree, National Central University/
Manager, Accounting Dept., FSP Technology
Inc.		 None － － － －

*The shareholding ratio is rounded to the second decimal place.

24

  • Note 1. The Company's Chairman serves concurrently as the President of the Company, Chairman of Chuan Han Investment Co., Ltd., Chairman of 3Y Power Technology (Taiwan) Inc., Director of FSP International Inc., Director of Power Electronics Co., Ltd., Director of Famous Holding Ltd., Director of FSP Group Inc., Director of Amacrox Technology Co., Ltd., Director of Wuxi SPI Technology Co., Ltd., Director of Wuxi Zhonghan Technology Co., Ltd., Director of Shenzhen Zhong Han Science & Tech. Co., Ltd., Director of FSP Technology Inc., Director of Jiangsu FSP Power Technology R&D Co., Ltd., and Supervisor of Yung Han Co., Ltd., Chairman of 3Y Power Technology Inc., Director of FSP International (HK) Limited, Director of Nanjing FSP-Powerland Technology Inc., Chairman of Amacrox GmbH, Director of Harmony Trading (HK) Limited, Director of Protek Electronics (Samoa) Corp., Director of Luckyield Co., Ltd., Director of FSP Group USA Corp., Chairman of FSP Technology USA Inc., Director of Haohan Electronic Technology (Ji'an) Co., Ltd., Representative of Corporate Director of Voltronic Power Technology Corp., Director of Fu Chuang Yuan Corporation, Supervisor of Hsiang Tsan Investment Co., Ltd., and Chairman of An Wen Investment Co., Ltd.

  • Note 2. The Company's Vice Chairman serves concurrently as the Vice President of the Company, Representative of Shenzhen HuiLi Electronics Co., Ltd., Representative of Zhonghan Electronics Shenzhen Co., Ltd., Director of FSP International Inc., Director of Chuan Han Investment Co., Ltd., Director of Wuxi SPI Technology Co., Ltd., Director of Wuxi Zhonghan Technology Co., Ltd., Director of Shenzhen Zhong Han Science & Tech. Co., Ltd., Director of 3Y Power Technology (Taiwan) Inc., Representative of Jiangsu FSP Power Technology R&D Co., Ltd., and Supervisor of Fu Chuang Yuan Corporation.

  • Note 3. The Company's Director serves concurrently as the Company's Vice President, Director of Shenzhen HuiLi Electronics Co., Ltd., Director of Zhonghan Electronics Shenzhen Co., Ltd., Director of FSP International Inc., Director of Chuan Han Investment Co., Ltd., Director of Wuxi SPI Technology Co., Ltd., Director of Wuxi Zhonghan Technology Co., Ltd., Director of Shenzhen Zhong Han Science & Tech. Co., Ltd., Director of 3Y Power Technology (Taiwan) Inc., Director of Jiangsu FSP Power Technology R&D Co., Ltd., Director of Fu Chuang Yuan Corporation, Chairman of Yang Chi Investment Co., Ltd., Supervisor of Chin Yu Investment Co., Ltd., Supervisor of An Wen Investment Co., Ltd., and Supervisor of Baichuang Investment Co., Ltd.

  • Note 4. Where the President or individual with equivalent roles (highest-ranking managerial officer) and the Chairman of the Board of Directors are the same individual, spouses, or relatives within the first degree of kinship, specify related information regarding the reason, reasonableness, necessity, and response measures:

The Chairman of the Board of Directors serves concurrently as the President to strengthen execution in decision making and improve business efficiency. It is a temporary measure and the Company has actively sought suitable candidates within its ranks. In addition, the Chairman has maintained close communication with the Directors regarding the Company's operations and plans to ensure corporate governance. In the future, the Company intends to increase the number of Independent Directors to enhance the functions of the Board of Directors and strengthen supervisory functions. The Company has implemented the following measures:

25

  • (1) The current three Independent Directors are experts in finance, accounting, economics, and their own fields in the industry and perform their supervisory functions effectively.

  • (2) Every year, we arrange professional director courses offered by external organizations such as the Securities & Futures Institute for all Directors to enhance the operations of the Board of Directors.

  • (3) The Independent Directors discuss necessary matters and propose recommendations to the Board of Directors in each functional committee to implement corporate governance.

  • (4) More than half of the members of the Board of Directors are not employees or managers.

Note 5. Supervisor, Neurobit Technologies Co., Ltd.

26

III. Remuneration Paid During the Most Recent Fiscal Year to Directors, President, and Vice President

(I) Remuneration to Directors and Independent Directors

Unit: NT$ thousands

Title Name
(Note 1)		 Remun Remun eration eration Ratio of Total
Remuneration
(A+B+C+D) to Net
Income (%)
(Note 10)		 Ratio of Total
Remuneration
(A+B+C+D) to Net
Income (%)
(Note 10)		 Relevant Remuner Relevant Remuner ation Received By Direc
Employees		 ation Received By Direc
Employees		 tors Who are Also tors Who are Also tors Who are Also tors Who are Also Ratio of Total
Compensation
(A+B+C+D+E+F+G)
to Net Income
(Note 10)		 Ratio of Total
Compensation
(A+B+C+D+E+F+G)
to Net Income
(Note 10)		 Compensatio
n from
Ventures
Other Than
Subsidiaries
or from the
Parent
Company
(Note 11)
Base Compensation
(A)
(Note2)		 Severance Pay and
Pension (B)		 Director Remuneration
(C)
(Note 3)
Business Execution
Expenses (D) (Note4)		 Salary, Bonuses, and
Allowances (E)
(Note 5)		 Severan
Pens		 ce Pay and
ion (F)		 Employee
Compensation (G)
(Note 6)
The
Company
Companies
in the
Consolidate
d Financial
Statements
(Note 7)		 The
Company
Companies
in the
Consolidate
d Financial
Statements
(Note 7)		 The
Company		 Companies
in the
Consolidate
d Financial
Statements
(Note 7)		 The
Company
Companies
in the
Consolidate
d Financial
Statements
(Note 7)		 The
Company		 Companies
in the
Consolidate
d Financial
Statements
(Note 7)		 The
Company
Companies
in the
Consolidate
d Financial
Statements
(Note 7)		 The
Company
Companies
in the
Consolidate
d Financial
Statements
(Note 7)		 The
Company
Companies
in the
Consolidate
d Financial
Statements
(Note 7)		 The
Company
Companies
in the
Consolidate
d Financial
Statements
(Note 7)
Cash Stock Cash Stock
Chairman
and
President		 Cheng, Ya-
Jen		 0 0 0 0 7,000 7,600 245 257 7,245
0.96%		 7,857
1.04%		 15,206 15,206 0 0 12,350 0 12,350 0 34,801
4.62%		 35,413
4.70%		 3,600
Vice
Chairman
and Vice
President		 Wang,
Chung-Shun
Director
and Vice
President		 Yang, Fu-An
Director 2K Industries
Inc. (BVI)
Representativ
e: Wang, Po-
Wen
Director Datazone
Limited
Representativ
e: Chu, Hsiu-
Yin
Director Chen, Kuang-
Chun
Director Huang, Jr-
Wen
Independe
nt Director		 Liu, Shou-
Hsiang		 1,800 1,800 0 0 0 0 105 105 1,905
0.25%		 1,905
0.25%		 0 0 0 0 0 0 0 0 1,905
0.25%		 1,905
0.25%		 0
Independe
nt Director		 Cheng, Chia-
Jiun
Independe
nt Director		 Hsu, Cheng-
Hung

27

  1. Please specify the independent director remuneration policy, system, standard, and structure, and the connection between the amount of remuneration and the factors, such as their job responsibilities, risks, and time contributed.

The remuneration of the Independent Directors of the Company shall be processed in accordance with Paragraph 3, Article 3 of the "Regulations Governing the Remuneration of Directors and Members of Functional Committees" approved by the Board of Directors on April 30, 2018. Independent Directors are not eligible for the remuneration for Directors specified in Article 20 of the Company's "Articles of Incorporation". However, the Company shall pay each Independent Director a fixed amount of remuneration each quarter regardless of whether the Company turns a profit. If an Independent Director resigns during the quarter, his or her remuneration shall be calculated proportionally based on the period of services in the quarter.

  1. Other than disclosures in the above table, remuneration paid to Directors for providing services (e.g., providing consulting services as a non-employee for the parent company/all companies in consolidated financial statements) in the most recent fiscal year: NT$ 0.

28

Range of Remuneration

Range of
Remuneration Paid to
Directors		 Name of Director Name of Director
Total of (A+B+C+D) Total of (A+B+C+D+E+F+G)

The Company
(Note 8)		 Companies in the
Consolidated
Financial
Statements (Note9)
H		 The Company (Note 8) The parent company
and all investees (Note 9)
I
Less than
NT$1,000,000		 Independent
Director:
Liu, Shou-
Hsiang
Cheng, Chia-
Jiun
Hsu, Cheng-
Hung		 Independent
Director:
Liu, Shou-Hsiang
Cheng, Chia-Jiun
Hsu, Cheng-Hung		 Independent Director:
Liu, Shou-Hsiang
Cheng, Chia-Jiun
Hsu, Cheng-Hung		 Independent Director:
Liu, Shou-Hsiang
Cheng, Chia-Jiun
Hsu, Cheng-Hung
NT$1,000,000
(incl.)-
NT$2,000,000(not
incl.)		 General
Directors:
Cheng, Ya-Jen
Wang, Chung-
Shun
Yang, Fu-An
2K
INDUSTRIES
DATAZONE
LIMITED
Chen, Kuang-
Chun
Huang, Jr-Wen		 General Directors:
Cheng, Ya-Jen
Wang, Chung-Shun
Yang, Fu-An
2K INDUSTRIES
DATAZONE
LIMITED
Chen, Kuang-Chun
Huang, Jr-Wen		 General Directors:
2K INDUSTRIES
DATAZONE LIMITED
Chen, Kuang-Chun
Huang, Jr-Wen		 General Directors:
2K INDUSTRIES
DATAZONE LIMITED
Chen, Kuang-Chun
Huang, Jr-Wen
NT$2,000,000 (incl.)
- NT$3,500,000(not
incl.)
－		 － － －
NT$3,500,000 (incl.)
- NT$5,000,000(not
incl.)
－		 － － －
NT$5,000,000 (incl.)
-
NT$10,000,000(not
incl.)
－		 － General Directors:
Wang, Chung-Shun
Yang, Fu-An		 General Directors:
Wang, Chung-Shun
Yang, Fu-An
NT$10,000,000
(incl.) -
NT$15,000,000(not
incl.)		 － － General Directors:
Cheng, Ya-Jen		 General Directors:
Cheng, Ya-Jen
NT$15,000,000(incl.
) -
NT$30,000,000(not
incl.)		 － － － －
NT$30,000,000(incl.
) -
NT$50,000,000(not
incl.)		 － － － －
NT$50,000,000(incl.
) -
NT$100,000,000(not
incl.)
－		 － － －
Greater Than or
Equal to
NT$100,000,000		 － － － －
Total 10 persons 10 persons 10 persons 10 persons

29

  • Note 1. The names of the Directors must be listed separately (for institutional shareholders, the names of institutional shareholders and representatives should be listed respectively) and the various payment amounts using the summary disclosure method for general Directors and Independent Directors. If a Director serves concurrently as the President or Vice President, fill out this table and Table 3(2) below.

  • Note 2. Remuneration to Directors in the most recent fiscal year (including the Directors' salary, additional duty payments, severance pay, various bonuses, or incentive payments).

  • Note 3. The amount is the proposed remuneration to Directors approved by the Board of Directors for the most recent fiscal year.

  • Note 4. This refers to the business execution expenses of Directors in the most recent fiscal year (including transportation expenses, special allowance, stipends, dormitory, and car). If housing, cars, and transportation vehicles or personal expenses are provided, the nature and cost of the assets provided, the rental fees and fuel cost calculated based on the actual amount or fair market value, and other payments shall be disclosed. Where a driver is also provided, the compensation paid by the Company to the driver shall be specified in the notes but the amount shall not be included in the remuneration.

  • Note 5. All payments to Directors who are also employees of the Company (including the position of President, Vice President, other managerial officer and staff), including salary, additional pay, severance pay, bonuses, rewards, transportation allowance, special allowance, stipends, dormitory, and car. If housing, cars, and transportation vehicles or personal expenses are provided, the nature and cost of the assets provided, the rental fees and fuel cost calculated based on the actual amount or fair market value, and other payments shall be disclosed. Where a driver is also provided, the compensation paid by the Company to the driver shall be specified in the notes but the amount shall not be included in the remuneration. Furthermore, any compensation recognized in the IFRS 2 "Share-Based Payment" section, including issuance of employee stock options, new restricted employee shares, and capital increase by stock subscription, shall be included in the calculation of the remuneration.

  • Note 6. For Directors concurrently serving as employees (including the President, Vice Presidents, other managers and employees) who receive employee compensation (including shares and cash), the amount of employee compensation that have been approved by the Board of Directors and are distributed to them in the most recent fiscal year shall be disclosed. If the amount of compensation cannot be estimated, the amount of compensation in the current fiscal year shall be calculated based on the ratio of the amount of compensation distributed in the previous fiscal year, and this amount shall also be specified in Table 3(3) below.

  • Note 7. Total pay to Directors from all companies in the consolidated statements (including the Company) shall be disclosed.

  • Note 8. The name of each Director shall be disclosed in the range of remuneration corresponding to the amount of all the remuneration paid to the Director by the Company.

  • Note 9. The total amount of all the remuneration paid to each Director of the Company by all the companies (including the Company) listed in its consolidated financial statements shall be disclosed. The name of each Director shall

30

be disclosed in the range of remuneration.

  • Note 10. The net income refers to the net income in the parent company only or individual financial report in the most recent fiscal year.

Note 11.

  • a. The amount of remuneration received from subsidiaries other than investees or the parent company by the Company's Directors shall be stated clearly in this column (please specify "none" if there is no remuneration).

  • b. If a Director of the Company receives remuneration from investees other than subsidiaries or the parent company, the amount of remuneration received by the Director from investees other than subsidiaries or the parent company shall be combined into Column I of the table for ranges of remuneration, and this column shall be renamed as "Parent Company and All Investees".

  • c. Remuneration refers to pay, compensation (including compensation of employees, directors and supervisors) and remuneration for conducting business received by a Director of the Company serving as a director, supervisor or managerial officer of an investee of the Company other than subsidiaries or the parent company.

  • A different concept is used for the content of remuneration disclosed in this table compared to that in the Income Tax Act. This table is used for information disclosure, but not for taxation.

31

(II) Remuneration to the President and Vice President

Unit: NT$ thousands

Title Name Salary (A)
(Note 2)		 Salary (A)
(Note 2)		 Severance Pay and
Pension (B)		 Severance Pay and
Pension (B)		 Bonuses and
Allowances, etc. (C)
(Note 3)		 Bonuses and
Allowances, etc. (C)
(Note 3)		 Employee Compensation (D)
(Note 4)		 Employee Compensation (D)
(Note 4)		 Employee Compensation (D)
(Note 4)		 Employee Compensation (D)
(Note 4)		 Ratio of Total
Remuneration
(A+B+C+D) to Net
Income (%)
(Note 8)		 Ratio of Total
Remuneration
(A+B+C+D) to Net
Income (%)
(Note 8)		 Compensation
from Ventures
Other Than
Subsidiaries or
from the Parent
Company
(Note 9)
The Company Companies
in the
Consolidated
Financial
Statements
(Note 5)
The Company		 Companies
in the
Consolidated
Financial
Statements
(Note 5)
The Company		 Companies
in the
Consolidated
Financial
Statements
(Note 5)
The Company		 Companies in the
Consolidated
Financial Statements
(Note 5)
The
Company		 Companies in
the
Consolidated
Financial
Statements
(Note 5)
Cash Stock Cash Stock
Chairman
andPresident		 Cheng,
Ya-Jen		 12,922 12,922 203
Note		 203
Note		 9,467 9,467 13,100 0 13,100 0 35,692
4.73%

35,692
4.73%

3,600
Vice
Chairman
and Vice
President		 Wang,
Chung-
Shun
Director and
Vice
President		 Yang, Fu-
An
Kaohsiung
Branch
President		 Chen,
Kuo-
Ruey
Vice
President,
New Energy
Division		 Tsai, Fu-
Sheng
Vice
President,
Kaohsiung
Branch		 Hsu, Pei-
Ching

Note: All items are recognized as severance pay and pension

  • ＊ Regardless of titles, remunerations of employees with positions equivalent to the President or Vice President (such as president, CEO, and director) shall be disclosed.

32

Range of Remuneration

Range of Remuneration Paid to the President and Vice
President		 Name of the President and Vice President Name of the President and Vice President

The Company
(Note 6)		 Parent Company and
all Investees
(Note 7) E
Less than NT$1,000,000 － －
NT$1,000,000(incl.)- NT$2,000,000(not incl.) － －
NT$2,000,000 (incl.) - NT$3,500,000 (not incl.) Hsu, Pei-Ching
Chen, Kuo-Ruey
Tsai, Fu-Sheng		 Hsu, Pei-Ching
Chen, Kuo-Ruey
Tsai, Fu-Sheng
NT$3,500,000(incl.)- NT$5,000,000(not incl.) － －
NT$5,000,000 (incl.) - NT$10,000,000 (not incl.) Wang, Chung-Shun
Yang, Fu-An		 Wang, Chung-Shun
Yang, Fu-An
NT$10,000,000 (incl.)-NT$15,000,000 (not incl.) Cheng,Ya-Jen Cheng,Ya-Jen
NT$15,000,000(incl.)- NT$30,000,000(not incl.) － －
NT$30,000,000(incl.)- NT$50,000,000(not incl.) － －
NT$50,000,000(incl.)- NT$100,000,000(not incl.) － －
Greater Than or Equal to NT$100,000,000 － －
Total 6 persons 6 persons

  • Note 1. The names of President and Vice Presidents shall be listed separately and the amounts paid shall be disclosed in a summary. If a Director serves concurrently as the President or Vice President, fill out this table and Table 3(1) above.

  • Note 2. Salary, additional duty payments, and severance pay received by the President and Vice Presidents in the past year.

  • Note 3. Bonus, incentive payments, transportation expenses, special allowance, stipends, dormitory, car, and other payments received by the President or Vice President in the past year. If housing, cars, and transportation vehicles or personal expenses are provided, the nature and cost of the assets provided, the rental fees and fuel cost calculated based on the actual amount or fair market value, and other payments shall be disclosed. Where a driver is also provided, the compensation paid by the Company to the driver shall be specified in the notes but the amount shall not be included in the remuneration.

Furthermore, any compensation recognized in the IFRS 2 "Share-Based Payment" section, including issuance of employee stock options, new restricted employee shares, and capital increase by stock subscription, shall be included in the calculation of the remuneration.

  • Note 4. The amount of employee compensation (including shares and cash) that have been approved by the Board of Directors and distributed to the President and Vice Presidents in the most recent fiscal year. If the amount of remuneration cannot be estimated, the amount of remuneration in the current fiscal year shall be calculated based on the ratio of the amount of remuneration distributed in the previous fiscal year, and this amount shall also be filled in Table 3(3) below.

  • Note 5. Total pay to the Company's President and Vice Presidents from all companies in the consolidated statements (including the Company) shall be disclosed.

  • Note 6. The names and remuneration of President and Vice Presidents paid by the Company shall be disclosed in their

33

respective range of remuneration.

Note 7. The total amount of all the remuneration paid to each President and Vice President of the Company by all the companies (including the Company) listed in its consolidated financial statements shall be disclosed. The name of each President and Vice President shall be disclosed in the range of remuneration.

Note 8. The net income refers to the net income in the parent company only or individual financial report in the most recent fiscal year.

Note 9.

  • a. The amount of remuneration received from subsidiaries other than investees or the parent company by the Company's President and Vice Presidents shall be stated clearly in this column (please specify "none" if there is no remuneration).

  • b. If a President or Vice President of the Company receives remuneration from investees other than subsidiaries or the parent company, the amount of remuneration received by the President or Vice President from investees other than subsidiaries or the parent company shall be combined into Column E of the table for ranges of remuneration, and this column shall be renamed as "Parent Company and All Investees".

    • Remuneration refers to pay, compensation (including compensation of employees, directors and supervisors) and remuneration for conducting business received by the President and Vice President of the Company serving as a director, supervisor or managerial officer of an investee of the Company other than subsidiaries or the parent company.

  • ＊ A different concept is used for the content of remuneration disclosed in this table compared to that in the Income Tax Act. This table is used for information disclosure, but not for taxation.

(III) Employee Compensation Paid to Managerial Officers

December 31, 2021; Unit ： NT$ thousands

Title Name Stock Cash Total Ratio of Total
Amount to Net
Income (%)
Managerial Officer President Cheng, Ya-Jen 0
 15,918 15,918 2.11%
Vice President Yang, Fu-An
Vice President Wang, Chung-Shun
President, Kaohsiung Branch Chen, Kuo-Ruey
Associate Managers Wang, Ya-Chen
Vice President, Kaohsiung
Branch		 Hsu, Pei-Ching
Vice President, New Energy
Division		 Tsai, Fu-Sheng
Corporate Governance
Officer		 Yao, Wen-Chun
Financial Supervisor Li, Fu-Jung
Chief Accounting Officer Sang, Hsi-Yun

Note 1. The names and titles of the individuals must be disclosed, but the distribution of profits may be disclosed in a

34

summary.

  • Note 2. The amount of employee compensation (including shares and cash) that have been approved by the Board of Directors and distributed to the managerial officers in the most recent fiscal year. If the amount of remuneration cannot be estimated, the amount of remuneration in the current fiscal year shall be calculated based on the ratio of the amount of remuneration distributed in the previous fiscal year. The net income refers to the net income for the most recent fiscal year; for those that have already adopted the IFRS principles, net income refers to the after-tax net income in individual or consolidated financial reports for the most recent fiscal year.

  • Note 3. The scope of application for the term "managerial officer" shall be pursuant to the FSC's Tai-Cai-Zheng-3 No. 0920001301 Order dated March 27, 2003. Its scope of application shall be as follows:

    • (1) President and those with equivalent powers

    • (2) Vice Presidents and those with equivalent powers

    • (3) Assistant Vice Presidents and those with equivalent powers

    • (4) Manager of the Finance Dept.

    • (5) Manager of the Accounting Dept.

    • (6) Other individuals with the authority for managing company affairs and signatory rights

  • Note 4. Directors, Presidents, and Vice Presidents who receive employee compensation (including shares and cash) must be listed in Table 3(1) and this table.

  • (IV) Comparison and Explanation of Total Remuneration, as a Percentage of Net Income Stated in the Parent Company Only or Individual Financial Statements, Paid by the Company and All Companies in Consolidated Financial Statements during the Past 2 Fiscal Years to the Directors, President, and Vice Presidents, Along with Description of Remuneration Policies, Standards, and Packages, Procedure for Determining Remuneration, and Linkage Thereof to Operating Performance and Future Risk Exposure: 

     1. Analysis of total remuneration, as a percentage of net income stated in the parent company only or individual financial statements, paid by the Company and all companies in the consolidated financial statements to the Directors, President, and Vice Presidents during the past 2 fiscal years

Unit: NT$ thousands

Item
Title
The Company
The Company
The Company
The Company		 Companies in the Consolidated Financial
Statements		 Companies in the Consolidated Financial
Statements		 Companies in the Consolidated Financial
Statements		 Companies in the Consolidated Financial
Statements
2020 2021 2020 2021
Total
remuneration
Ratio to
Net
Income
(%)		 Total
remuneration
Ratio to
Net
Income
(%)		 Total
remuneration
Ratio to
Net
Income
(%)		 Total
remuneration
Ratio to
Net
Income
(%)
Directors 32,006 4.78% 36,706 4.87% 32,468 4.85% 37,318 4.95%
President and
Vice Presidents		 32,972 4.93% 35,692 4.73% 32,972 4.93% 35,692 4.73%
Net income 669,314 － 754,082 － 669,314 － 754,082 －

The increase in total compensation of Directors in 2021 compared to 2020 was due to the increase in net income in 2021, and the increase in total compensation of the President and Vice Presidents compared to 2020 was due to the increase in employee compensation.

35

  1. The policies, standards, and portfolios for the payment of remuneration, the procedures for determining remuneration, and the correlation with risks and business performance:

  2. (1) Remuneration

The remuneration of the Company's Directors is processed in accordance with Article 20 of the Company's Articles of Incorporation, which stipulates that no more than 3% of the annual profit shall be set aside for the remuneration of the Directors. The Company also evaluates the remuneration of the Directors in accordance with the items in the Company's "Regulations Governing the Evaluation of the Board of Directors": They include alignment of the goals and missions of the Company, awareness of the duties of a Director, participation in the operation of the Company, management of internal relationship and communication, the Director's professionalism and continuing education, and internal control, which are included in the performance evaluation and factors for determining the distribution of remuneration. The payment standards for transportation expenses are based on the payment standards set forth in the Regulations Governing the Remuneration of Directors and Members of Functional Committees and each member receives transportation expenses of NT$5,000 for each meeting. If a Director is also an employee, remuneration shall also be paid in accordance with the terms in (3) and (4).

  • (2) Remuneration of Independent Directors

Independent Directors of the Company are not eligible for the remuneration for Directors specified in Article 20 of the Company's "Articles of Incorporation". However, the Company shall pay each Independent Director a fixed amount of remuneration each quarter regardless of whether the Company turns a profit in accordance with the "Regulations Governing the Remuneration of Directors and Members of Functional Committees". If an Independent Director resigns during the quarter, his or her remuneration shall be calculated proportionally based on the period of services in the quarter.

  • (3) Remuneration of Managerial Officers

The remuneration paid to the managerial officers of the Company is determined based on the Company's "Managerial Officer Salary and Compensation Management Regulations" and the salary standards of the position in the industry. The Company also considers the scope of duties of the position in the Company, contributions to the attainment of the Company's operating targets, and profitability before proposing a reasonable remuneration, which shall be reviewed and approved by the Remuneration Committee and passed by the

36

Board of Directors before implementation.

  • (4) Procedures for determining remuneration, and the correlation with risks and business performance

The Company shall establish procedures for determining the remuneration which shall be assessed based on the Company's "Regulations Governing the Evaluation of the Board of Directors" and the "Managerial Officer Salary and Compensation Management Regulations". In addition to the Company's overall performance, future risks in the industry, and development trends, the Company shall also consider the extent of personal performance and contributions to the Company for providing reasonable remuneration. Related performance evaluation and the reasonableness of salary and remuneration shall be reviewed by the Remuneration Committee and the Board of Directors. They shall review the remuneration system based on actual business operations and related laws to maintain a balance between sustainable management and risk management.

  • IV. Implementation of Corporate Governance:

  • (I) Information on the Operations of the Board of Directors

A total of 10 (A) meetings of the Board of Directors was held in 2021 and 2022 as of the publication date of the Annual Report. The attendance of Directors was as follows:

Title Name Attendance in
Person (B)		 By Proxy Attendance Rate
(B/A)
Remark
Chairman Cheng,Ya-Jen 10 0 100% －
Vice Chairman Wang, Chung-Shun 10 0 100% －
Director Yang,Fu-An 10 0 100% －
Director 2K Industries Inc.
(BVI)
Representative: Wang,
Po-Wen		 10 0 100% －
Director Datazone Limited
Representative: Chu,
Hsiu-YinChu, Hsiu-
Yin		 10 0 100% －
Director Chen,Kuang-Chun 10 0 100% －
Director Huang, Jr-Wen 10 0 100% －
Independent
Director		 Liu, Shou-Hsiang 10 0 100% －
Independent
Director		 Cheng, Chia-Jiun 10 0 100% －
Independent
Director		 Hsu, Cheng-Hung 10 0 100% －

37

Other matters:

  1. With regard to the operations of the Board of Directors, if any of the following circumstances occur, the dates, terms of the meetings, contents of motions, all independent directors’ opinions, and the Company’s response shall be specified:

  2. (1) Matters referred to in Article 14-3 of the Securities and Exchange Act: The Company has established the Audit Committee and the requirements in Article 14-3 of the Securities and Exchange Act do not apply. Please refer to the Operations of the Audit Committee in the Annual Report for detailed information.

  3. (2) Any recorded or written Board resolutions to which independent directors have dissenting or qualified opinions to be noted in addition to the above: None.

  4. Regarding recusals of directors due to conflicts of interests, the names of the directors, contents of motions, reasons for recusal, and results of voting shall be specified:

  5. (1) 5th meeting of the 10th Board of Directors on January 14, 2021

    • Contents of Motions: Passed the proposal for the year-end bonus for the Company's managerial officers for 2020 proposed by the Remuneration Committee.

Directors who recused themselves due to conflict of interest: Cheng, Ya-Jen, Wang, Chung-Shun, Yang, Fu-An.

Reasons for recusal and participation in voting: According to Article 206 of the Company Act, the Directors Cheng, Ya-Jen, Wang, Chung-Shun, and Yang, FuAn may not participate in the vote. The other Directors and Independent Director in attendance passed the proposal unanimously.

  • (2) 6th meeting of the 10th Board of Directors on March 18, 2021

Contents of Motions: Passed the proposal for the remuneration of the managerial officers for 2020 proposed by the Remuneration Committee.

Directors who recused themselves due to conflict of interest: Cheng, Ya-Jen, Wang, Chung-Shun, Yang, Fu-An.

Reasons for recusal and participation in voting: According to Article 206 of the Company Act, the Directors Cheng, Ya-Jen, Wang, Chung-Shun, and Yang, FuAn may not participate in the vote. The other Directors and Independent Director in attendance passed the proposal unanimously.

  • (3) 6th meeting of the 10th Board of Directors on March 18, 2021

38

Contents of Motions: Passed the amendment of the "Regulations Governing the Remuneration of Directors and Members of Functional Committees".

Directors who recused themselves due to conflict of interest: Liu, Shou-Hsiang, Cheng, Chia-Jiun, Hsu, Cheng-Hung.

Reasons for recusal and participation in voting: According to Article 206 of the Company Act, the Independent Directors Liu, Shou-Hsiang, Cheng, Chia-Jiun, and Hsu, Cheng-Hung may not participate in the vote. The other Directors in attendance passed the proposal unanimously.

  • (4) 12th meeting of the 10th Board of Directors on January 13, 2022

Contents of Motions: Passed the proposal for the year-end bonus for the Company's managerial officers for 2021 proposed by the Remuneration Committee.

Directors who recused themselves due to conflict of interest: Cheng, Ya-Jen, Wang, Chung-Shun, Yang, Fu-An.

Reasons for recusal and participation in voting: According to Article 206 of the Company Act, the Directors Cheng, Ya-Jen, Wang, Chung-Shun, and Yang, FuAn may not participate in the vote. The other Directors and Independent Director in attendance passed the proposal unanimously.

  • (5) 13th meeting of the 10th Board of Directors on March 18, 2022

Contents of Motions: Passed the proposal for the remuneration of the managerial officers for 2021 proposed by the Remuneration Committee.

Directors who recused themselves due to conflict of interest: Cheng, Ya-Jen, Wang, Chung-Shun, Yang, Fu-An.

Reasons for recusal and participation in voting: According to Article 206 of the Company Act, the Directors Cheng, Ya-Jen, Wang, Chung-Shun, and Yang, FuAn may not participate in the vote. The other Directors and Independent Director in attendance passed the proposal unanimously.

39

  1. Evaluation cycle and duration, scope of evaluation, methodology, and evaluation contents of the self-evaluation of the Board of Directors:

Evaluation of the Board

Frequency Period Scope Method Content
1. The Board of Directors
shall execute at least
one internal
performance evaluation
each year
2021/1/1~2021/12/31		 Performance
evaluation of the
Board of Directors
and individual
Directors		 1. Self-evaluation of
the Board of
Directors and self-
evaluation of the
Directors		 Note 1
2. The Board of Directors
shall appoint an
external professional
independent agency or
a team of external
experts and scholars to
conduct an external
performance evaluation
at least once every
three years.
2020/1/1~2020/12/31		 Performance
evaluation of the
Board of
Directors		 2. Appoint an external
professional
independent agency
or a team of external
experts and scholars
to conduct an
external
performance
evaluation.
Note 2

Note 1. The evaluation contents include the following items according to the scope of evaluation:

  • (1) Performance evaluation of the Board of Directors: Including participation in the operation of the company, improvement of the quality of the Board of Directors' decision making, composition and structure of the Board of Directors, election and continuing education of the Directors, and internal control.

  • (2) Performance evaluation of individual Directors Including alignment of the goals and missions of the company, awareness of the duties of a director, participation in the operation of the company, management of internal relationship and communication, the director's professionalism and continuing education, and internal control.

The evaluation results of the Board of Directors have been reported to the Board of Directors on January 13, 2022 as reference for continuous strengthening of the functions of the Board of Directors and disclosed on the company website for reference by investors.

Note 2. The Company's Board of Directors passed a resolution on January 14, 2021 to amend the "Regulations Governing the Evaluation of the Board of Directors". The performance evaluation of the Board of Directors shall be conducted at least once every three years by an external professional independent agency or a team of external experts and scholars. In December 2020, the Company appointed the Taiwan Institute of Ethical Business and Forensics to conduct the external board performance evaluation for 2020 (January to December 2020). The agency and the executive members are independent as they meet the requirements in the Independence Statement of the Board of Directors Performance Evaluation Report. They used questionnaires and on-site visits to evaluate the Board of Directors' professional functions (board composition and structure, election, and continuing education of Directors), the effectiveness of its decision-making (participation in the Company's operations and improvement of the quality of the decisions of the Board of Directors), the commitment of the Board of Directors to internal control and its supervision, and the attitude of the Board of Directors in regards to corporate social responsibility. Taiwan Institute of Ethical Business and Forensics issued the Board of Directors Performance

40

Evaluation Report on January 6, 2021. The conclusions, recommendations, and measures to be taken by the Company are as follows:

Item Recommendations in the Evaluation Report Measures to be Taken by the Company
Enhance the diversity in the
composition of the Board of
Directors		 1. Board member are encouraged to propose
diverse opinions.
2. The Company may consider establishing
a Nominating Committee to seek
candidates with different professional
qualifications, enrich the composition of
the Board of Directors, and incorporate
different ideas and perspectives into the
Board of Directors.
1. The Company plans to appoint an
additional Director with legal
expertise or a female Director in the
11th Board of Directors.
2. The Company has set up the
"Nominating Committee" based on a
resolution passed by the Board of
Directors on November 4, 2021.
Issue of the Chairman's
concurrent role as the
President		 1. The Company may increase the ratio of
the number of Independent Directors at
the present stage to meet requirements
for supervising business management.
2. In the future, the Company shall evaluate
whether it is possible to meet the best-
practice principles of not having the
Chairman serve concurrently as the
President based on the scale of company
operations and the principles for
corporate governance.		 The Company plans to increase the
number of Independent Directors in the
11th Board of Directors.
Adjustment of the
whistleblowing regulations
and establishment of external
whistleblowing channels		 The Company is advised to consider the
following measures:
1. The Company may consider
strengthening the independence of the
processing unit by designating the
Auditing Staff Office or Audit
Committee as the processing unit.
2. The Company may consider the
feasibility of accepting anonymous
reports to encourage internal
whistleblowers to report misconduct.
3. The Company may consider appointing
an independent external agency to
provide a dedicated email address or
hotline for whistleblowing.		 The Company amended the "Regulations
Governing the Operating Procedures of
Whistleblower Channels and Protection
System", which was approved by the
Audit Committee and submitted to the
Board of Directors for resolution on
March 18, 2021. The Company changed
the processing unit to the Auditing Staff
Office to strengthen its independence.
Creation of a professional
talent pool for succession		 The Company is advised to first identify and
confirm the required rank of each manager,
conduct an inventory of the Company's
relevant talents, and set up a talent pool.
Executives at each level should identify
several potential successors and set up
different short, medium, and long-term
development plans for talents of each level
for implementation. We shall regularly review
the effectiveness of talent development and
adjust the Company's talent development plan
accordingly to formulate strategies for
preventing talent gaps.

The Company has established succession
plans for members of the Board of
Directors and important managers.
Intensification of CSR
strategies and plans		 The Company is advised to consider
appointing external consultants to provide the
CSR Work Group with more diverse
recommendations to support innovative
thinking.		 The Company has set up the "Sustainable
Development Committee" based on a
resolution passed by the Board of
Directors on March 18, 2021, and
appointed KPMG Taiwan as an external
consultant to conduct necessary audits or
provide consulting services.

41

Measures taken to strengthen the function of the Board （ including establishing the Audit Committee and enhancing information transparency ） and results thereof:

  • (1) Measures taken to strengthen the function of the Board:

The functional committees under the jurisdiction of the Board of Directors, including the Audit Committee and Remuneration Committee, assist the Board of Directors in the performance of their supervisory duties. The members of the Audit Committee and Remuneration Committee consist of the three Independent Directors.

To meet requirements for sustainability and governance in the current international community, the Company's Board of Directors passed a resolution in March 2021 to establish the "Sustainable Development Committee" to take charge of the establishment of sustainability policies, decision making, and supervision of sustainability operations. An "Executive Office" was set up under its jurisdiction.

It promotes and implements operations related to corporate governance, responsible supply chain, green operations, green products, happy workplace, and social engagement based on its duties for ensuring sustainability.

The members of the Committee include the Chairman and the three Independent Directors who report to the Board of Directors on a regular basis.

To meet corporate governance requirements and to strengthen the operations of the Board of Directors, the Company established the "Nominating Committee Charter" in November 2021 and approved the establishment of the "Nominating Committee" to set the qualifications of the Directors and senior managerial officers and the criteria for independence. We also follow the standards to identify, review, and nominate candidates for Directors and managerial officers, set up and develop the organizational structure of the Board and committees, conduct performance evaluations of the Board, committees, Directors and managerial officers, and evaluate the independence of Independent Directors. We establish and regularly review Directors' continuing education programs and succession plans for Directors and senior managerial officers. We also review amendments of the Company's Corporate Governance Best-Practice Principles.

  • (2) Evaluation of the Implementation Status:

The Company established the "Regulations Governing the Evaluation of the Board of Directors" in accordance with Article 37 of the "Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies". It

42

shall conduct the performance evaluation of the Board of Directors each year. In addition, an external independent professional agency or a team of external experts and scholars shall be appointed to conduct an evaluation at least once every three years. The Company has completed the internal evaluation and an evaluation by an external professional agency in early 2021. Related evaluation results have been published on the Company's website. Refer to the explanation provided in the "Implementation of Corporate Governance" in this Annual Report.

The Company's "Regulations Governing the Evaluation of the Board of Directors" and the results of the performance evaluation of the Board of Directors are disclosed in the corporate governance section on the company website. (https://www.fsp-group.com/tw/CorporateGovernance.html)

  • (II) Key work items and implementation status of the Audit Committee for the year:

This Company's Audit Committee is composed of the 3 Independent Directors. The Audit Committee is created to assist the Board of Directors in its supervision of the Company's execution of related accounting, auditing, and financial report procedures and the quality and integrity of its financial control.

1. Professional qualifications and experience of the members of the Audit Committee

Criteria
Title Name Professional Qualifications and Experience Remark
Independent Director
Convener
Liu, Shou-
Hsiang		 Extensive experience and expertise in finance, business, and
management
Associate Professor, Ming Chuan University
Research Fellow, Chung-Hua Institution for Economic Research
Chairman and President, Ta Hua Investment Trust
Independent Director, Hwatai Bank Co., Ltd.
Advisory Board Member, Chung-Hua Institution for Economic
Research		 －
Independent Director Cheng, Chia-
Jiun		 Extensive experience and expertise in finance, business, and
management
President, Digital United Telecom Co., Ltd.
Independent Director, Azion Corporation
IndependentDirector,Bizlink HoldingInc.		 －
Independent Director Hsu, Cheng-
Hung		 Extensive experience and expertise in finance, business, and
management
President, Unitech Printed Circuit Board Corp.
Director, Shanghai Zhanhua Electronic Co., Ltd.		 －

  1. The main items reviewed by the Audit Committee in 2021 and 2022 as of the publication date of the Annual Report mainly included:

  2. (1) Establishment or amendments to the internal control system according to Article 14-1 of the Securities and Exchange Act.

  3. (2) Evaluation of the effectiveness of the internal control system.

43

  • (3) Amendment of procedures for major financial or operational activities such as the acquisition or disposal of assets, extension of monetary loans to others, and endorsements or guarantees for others in accordance with Article 36-1 of the Securities and Exchange Act.

  • (4) Annual audit plan.

  • (5) Matters involving Directors' personal interests.

  • (6) Material asset transactions.

  • (7) Appointment, dismissal, or compensation of the CPAs.

  • (8) Review of financial reports.

  • (9) Earnings distribution proposals.

  • (10) Other material items required by the Company or the competent authority.

  • A total of 9 (A) meetings of the Audit Committee was held in 2021 and 2022 as of the publication date of the Annual Report. The attendance of Independent Directors was as follows:

Title Name Attendance in
Person (B)		 By Proxy Attendance rate
(B/A)		 Remark
Independent
Director		 Liu, Shou-
Hsiang		 9 0 100% －
Independent
Director		 Cheng, Chia-
Jiun		 9 0 100% －
Independent
Director		 Hsu, Cheng-
Hung		 9 0 100% －

Other matters:

  1. With regard to the implementation of the Audit Committee, if any of the following circumstances occurs, the dates, terms of the meetings, contents of motions, objections of Independent Directors, qualified opinions, important recommendations, resolutions of the Audit Committee, and the Company’s handling of such resolutions shall be specified:
shall be specified:
Audit
Committee		 Content of Motion and Follow-up Matters
referred to in
Article 14-5 of
the Securities
and Exchange
Act		 Other resolutions
not approved by the
Audit Committee
but passed by two
thirds of all
Directors
The 5th
meeting of
the 2nd
term
2021.01.14		 1. The Company’s audit plan. ✓
2. Amendment of the Company's "Corporate Governance
Best-PracticePrinciples".		 ✓
Results of resolution: (January 14, 2021): Passed by all members of the Committee in
attendance.
The Company's handling of the opinions of the Audit Committee: Passed by all members in
attendance and submitted to theBoard of Directors.

44

Audit
Committee		 Content of Motion and Follow-up Matters
referred to in
Article 14-5 of
the Securities
and Exchange
Act		 Other resolutions
not approved by the
Audit Committee
but passed by two
thirds of all
Directors
The 6th
meeting of
the 2nd
term
2021.03.18		 1. The Company’s audit plan. ✓
2. Proposal for the Company's replacement of the CPAs
due tointernaladjustment of KPMGTaiwan.		 ✓
3. Proposal for the Company's appointment of the CAP
firm for 2021anditsremuneration.		 ✓
4. Proposal for the compensation for employees and
Directorsfor 2020.		 ✓
5. The Company's 2020 Business Report and Financial
Statements.		 ✓
6. The Company's 2020 Statement on Internal Control. ✓
7. The Company's distributionofearningsfor 2020. ✓
8. Amendment of the Company's "Articles of
Incorporation".		 ✓
9. Amendment of the Company's "Regulations Governing
the Operating Procedures of Whistleblower Channels
and Protection System".		 ✓
Results of resolution: (March 18, 2021): Passed by all members of the Committee in
attendance.
The Company's handling of the opinions of the Audit Committee: Passed by all members in
attendance and submitted to the Board of Directors.
The 7th
meeting of
the 2nd
term
2021.04.29		 1. The Company’s audit plan. ✓
2. The Company's consolidated financial statements for
thefirst quarterof 2021.		 ✓
Results of resolution: (April 29, 2021): Passed by all members of the Committee in attendance.
The Company's handling of the opinions of the Audit Committee: Passed by all members in
attendance and submitted to the Board of Directors.
The 9th
meeting of
the 2nd
term
2021.08.05		 1. The Company’s audit plan. ✓
2. The Company's Consolidated Financial Statements for
thefirsthalfof 2021.		 ✓
Results of resolution: (August 5, 2021): Passed by all members of the Committee in
attendance.
The Company's handling of the opinions of the Audit Committee: Passed by all members in
attendance and submitted to theBoard of Directors.
The 10th
meeting of
the 2nd
term
2021.11.04		 1. The Company’s audit plan. ✓
2. The Company's consolidated financial statements for
the third quarter of 2021.		 ✓
3. The Company'sAuditPlan for 2022. ✓
Results of resolution: (November 4, 2021): Passed by all members of the Committee in
attendance.
The Company's handling of the opinions of the Audit Committee: Passed by all members in
attendance and submitted to theBoard of Directors.
The 11th
meeting of
the 2nd
term
2022.01.13		 1. Proposal for the Company's disposal of securities. ✓
2. Proposal for the Company's appointment of the CAP
firm for 2022 and its remuneration.		 ✓
3. Amendment of certain articles of the Company's
"Corporate Social Responsibility Best-Practice
Principles".		 ✓
Results of resolution: (January 13, 2022): Passed by all members of the Committee in
attendance.
The Company's handling of the opinions of the Audit Committee: Passed by all members in

45

Audit
Committee		 Content of Motion and Follow-up Matters
referred to in
Article 14-5 of
the Securities
and Exchange
Act		 Other resolutions
not approved by the
Audit Committee
but passed by two
thirds of all
Directors
attendance and submitted to theBoard of Directors.
The 12th
meeting of
the 2nd
term
2022.03.18		 1. The Company’s audit plan. ✓
2. Proposal for the compensation for employees and
Directors for 2021.		 ✓
3. The Company's 2021 Business Report and Financial
Statements.		 ✓
4. The Company's2021Statement on InternalControl. ✓
5. The Company's distribution of earnings for 2021. ✓
6. Amendment of the Company's "Articles of
Incorporation".		 ✓
7. Amendment of the Company's "Corporate Governance
Best-Practice Principles".		 ✓
8. Amendment of the Company's "Procedures for
Acquisition or Disposal of Assets".		 ✓
Results of resolution: (March 18, 2022): Passed by all members of the Committee in
attendance.
The Company's handling of the opinions of the Audit Committee: Passed by all members in
attendance and submitted to the Board of Directors.
The 13th
meeting of
the 2nd
term
2022.04.28		 1. The Company’s audit plan. ✓
2. The Company's consolidated financial statements for
thefirst quarterof 2022.		 ✓
3. Amendment of the Company's "Procedures for
Acquisition or Disposal of Assets".		 ✓
Results of resolution: (April 28, 2022): Passed by all members of the Committee in attendance.
The Company's handling of the opinions of the Audit Committee: Passed by all members in
attendance and submitted to the Board of Directors.

  1. Regarding recusals of independent directors due to conflicts of interests, the names of the independent directors, contents of motions, reasons for recusal, and results of voting shall be specified: None.

  2. Communications between the independent directors, the Company's chief internal auditor, and CPAs (shall include the material items, methods and results of audits of corporate finance or operations, etc.):

46

  • (1) The Chief Internal Auditor shall provide an audit report to the Independent Directors at least once every quarter in the Audit Committee meeting. The Chief Internal Auditor must communicate the results of the audit report and followup procedures with the members. The communication between Independent Directors and the Chief Internal Auditor is shown in the table below:
Date Attendees Location Main Points of Communication Results
2021/01/14
Audit Committee		 Independent Director
Liu, Shou-Hsiang
Independent Director
Cheng, Chia-Jiun
Independent Director
Hsu, Cheng-Hung
Hsieh, Chieh-Cheng,
Chief Auditor		 Headquarters
7F Conference Room		 1. Audit report Passed
unanimously by all
attendees
2021/03/18
Audit Committee		 Independent Director
Liu, Shou-Hsiang
Independent Director
Cheng, Chia-Jiun
Independent Director
Hsu, Cheng-Hung
Hsieh, Chieh-Cheng,
Chief Auditor		 Headquarters
7F Conference Room		 1. 2020 Statement on Internal
Control
2. Audit report		 Passed
unanimously by all
attendees
2021/04/29
Audit Committee		 Independent Director
Liu, Shou-Hsiang
Independent Director
Cheng, Chia-Jiun
Independent Director
Hsu, Cheng-Hung
Hsieh, Chieh-Cheng,
Chief Auditor		 Headquarters 7F
Conference Room		 1. Audit report Passed
unanimously by all
attendees
2021/08/05
Audit Committee		 Independent Director
Liu, Shou-Hsiang
Independent Director
Cheng, Chia-Jiun
Independent Director
Hsu, Cheng-Hung
Hsieh, Chieh-Cheng,
Chief Auditor		 Headquarters
7F Conference Room		 1. Audit report Passed
unanimously by all
attendees
2021/11/04
Audit Committee		 Independent Director
Liu, Shou-Hsiang
Independent Director
Cheng, Chia-Jiun
Independent Director
Hsu, Cheng-Hung
Hsieh, Chieh-Cheng,
Chief Auditor		 Headquarters
7F Conference Room		 1. 2022 annual audit plan
2. Audit report		 Passed
unanimously by all
attendees
2022/03/18
Audit Committee		 Independent Director
Liu, Shou-Hsiang
Independent Director
Cheng, Chia-Jiun
Independent Director
Hsu, Cheng-Hung
Hsieh, Chieh-Cheng,
Chief Auditor		 Headquarters
7F Conference Room		 1. 2021 Statement on Internal
Control
2. Audit report		 Passed
unanimously by all
attendees
2022/04/28
Audit Committee		 Independent Director
Liu, Shou-Hsiang
Independent Director
Cheng, Chia-Jiun
Independent Director
Hsu, Cheng-Hung		 Headquarters
7F Conference Room		 1. Audit report Passed
unanimously by all
attendees

47

Date Attendees Location Main Points of Communication
Results
Hsieh, Chieh-Cheng,
Chief Auditor
  • (2) The CPA and Independent Directors convene a meeting at least once every year. The CPA files a report on the financial operations and audits on internal control to the Independent Directors. In the event of material irregularities, the Company may convene a meeting whenever necessary.

The communication between Independent Directors and the CPA are shown in the table below:

Date Attendees Location Main Points of Communication Results
2021/03/18
Audit Committee
Independent Director
Liu, Shou-Hsiang
Independent Director
Cheng, Chia-Jiun
Independent Director
Hsu, Cheng-Hung
Chang, Chun-I, CPA		 Headquarters
7F Conference Room		 1. Independence
2. Responsibilities of the
Auditors in Auditing the
Financial Statements
3. Audit scope
4. Audit findings
5. Items of concern to the
competent authority
6. Updates of important
accounting standards,
interpretation letters,
securities laws, and tax laws		 The CPA discussed
and explained
issues raised by the
attendees
2022/01/13
Audit Committee
Independent Director
Liu, Shou-Hsiang
Independent Director
Cheng, Chia-Jiun
Independent Director
Hsu, Cheng-Hung
Chang, Chun-I, CPA		 Headquarters 7F
Conference Room		 1. Independence
2. Annual audit plans
3. Updates of important
accounting standards,
interpretation letters,
securities laws, and tax laws		 The CPA discussed
and explained
issues raised by the
attendees
2022/03/18
Audit Committee
Independent Director
Liu, Shou-Hsiang
Independent Director
Cheng, Chia-Jiun
Independent Director
Hsu, Cheng-Hung
Chang, Chun-I, CPA		 Headquarters 7F
Conference Room		 1. Independence
2. Responsibilities of the
Auditors in Auditing the
Financial Statements
3. Audit scope
4. Audit findings
5. Material impacts of
Statement of Auditing
Standard No. 75
6. Updates of important
accounting standards,
interpretation letters,
securities laws,and tax laws
The CPA discussed
and explained
issues raised by the
attendees

(III) Corporate Governance Implementation Status and Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons Thereof

48

Evaluation Item Implementation Status Implementation Status Implementation Status Deviations
from the
Corporate
Governance
Best-Practice
Principles for
TWSE/TPEx
Listed
Companies and
Reasons
Yes No
Description
I.
Does the Company establish
and disclose its Corporate
Governance Best-Practice
Principles based on the
Corporate Governance Best-
Practice Principles for
TWSE/TPEx Listed
Companies?		 V The Company has established its Corporate
Governance Best-Practice Principles based on
the Corporate Governance Best-Practice
Principles for TWSE/TPEx Listed Companies,
and placed it in the corporate governance
section on the website for stakeholders to
download and read.
The Company's corporate governance strategy
complies with laws and the Articles of
Associations and it also focuses on the
establishment of an effective company
governance structure, protection of shareholder
interests, strengthening of the roles and powers
of the Board of Directors, respecting the rights
of stakeholders, and increasing information
transparency.		 No significant
difference.
II. Shareholding structure &
shareholders' rights
(I)
Does the Company establish
internal operating
procedures to deal with
shareholders’ suggestions,
doubts, disputes, and
litigations, and implement
based on the procedures?
(II) Does the Company possess a
list of its major shareholders
with controlling power as
well as the ultimate owners
of those major shareholders?
(III) Has the Company
established, and does it
execute, a risk management
and firewall system within
its affiliated companies?
(IV) Has the Company
establishedinternal rules
V
V
V
V		 (I)
The Company has established
management regulations for stock
transfer agency and implemented
procedures accordingly. The Company
also appointed a spokesperson and an
acting spokesperson and disclosed their
contact method on the Company's web
page. Shareholders may voice their
opinions by telephone or e-mail, and the
Company shall process them in
accordance with related operating
procedures.
(II)
The Company's major shareholders
report the changes in their shareholding
to the Company each month in
accordance with regulations. We also
announce the list of top ten shareholders
in our Annual Report and official website
every year and report required
information in accordance with
regulations.
(III) The Company has established the
"Procedures for Transactions with
Specific Companies, Related Parties, and
Companies of the Group" to ensure
compliance in transactions with related
companies.
(IV) The Company established the "Ethical
CorporateManagement Best-Practice		 No significant
difference.
No significant
difference.
No significant
difference.
No significant
difference.

49

Evaluation Item Implementation Status Implementation Status Implementation Status Deviations
from the
Corporate
Governance
Best-Practice
Principles for
TWSE/TPEx
Listed
Companies and
Reasons
Yes No
Description
against insiders trading with
undisclosed information?		 Principles", "Codes of Ethical Conduct",
"Regulations Governing the Operating
Procedures of Whistleblower Channels
and Protection System", and "Operating
Procedures for the Prevention of Insider
Trading". We also require members to
recuse themselves in case of conflicts of
interest with their duties, and we set up a
whistleblower mailbox to prevent insider
trading.
III. Composition and
responsibilities of the Board
of Directors
(I)
Does the board develop and
implement a diversity policy
for the composition of its
members and specific
management targets?		 V (I)
To strengthen corporate governance and
ensure the sound development of the
composition and structure of the Board of
Directors, the Company specified the
following requirements in the "Corporate
Governance Best-Practice Principles" it
established in 2016: The composition of
the Board of Directors shall be
determined by taking diversity into
consideration. Furthermore, adequate
diversity guidelines shall be developed
based on the operations, mode of
operation, and development requirements
of the Board of Directors. The Company
shall continue to enhance and amend the
diversity policy based on the operations,
mode of operation, and development
requirements of the Board of Directors.
The policy should include, but should not
be limited to, the following two
categories of standards to ensure that
board members have the necessary
knowledge, skills, and qualifications for
their duties.
1.
Basic qualifications and values:
Gender, age, nationality, culture, etc.
2.
Professional knowledge and skills:
Professional background (e.g., law,
accounting, industry, finance,
marketing, or technology),
professional skills, industry
experience, etc.
The Company's current Board of
Directors consists of 10Directors,

No significant
difference.

50

Evaluation Item Implementation Status Implementation Status Implementation Status Deviations
from the
Corporate
Governance
Best-Practice
Principles for
TWSE/TPEx
Listed
Companies and
Reasons
Yes No
Description
(II) Does the Company
voluntarily establish other
functional committees in
addition to the Remuneration
Committee and the Audit
Committee?
V		 including 4 non-executive Directors
(40%; including 1 female Director
who accounted for 10%), 3
Independent Directors (30%), and 3
Executive Directors (30%). The
members have extensive experience
and expertise in finance, business,
and management. The Company
shall also ensure that the number of
Directors who are also managers of
the Company does not exceed one
third of the number of Directors as
specified in the management targets.
The Company has implemented
based on the professional skills and
gender equality in the composition
of the Board to ensure the diversity
of board members in its Corporate
Governance Policy. We aim to
appoint an additional Director with
legal expertise or a female Director
in the 11th Board of Directors to
meet our target.
(II)
The Company has set up the
Remuneration Committee and Audit
Committee in accordance with laws and
has set up
1.
the Sustainable Development
Committee (established based on the
approval of the Board of Directors
on March 18, 2021) to take charge of
the establishment of sustainability
policies, decision making, and
supervision of sustainability
operations. An "Executive Office"
was set up under its jurisdiction to
ensure the implementation of
sustainable development tasks.
2.
The "Nominating Committee
Charter" (established on November
4, 2021) is responsible for setting the
qualifications of the Directors and
senior managerial officers and the
criteria for independence. We also
follow the standards to identify,
review, and nominate candidates for
Directors andmanagerialofficers,

No significant
difference.

51

Evaluation Item Implementation Status Implementation Status Implementation Status Deviations
from the
Corporate
Governance
Best-Practice
Principles for
TWSE/TPEx
Listed
Companies and
Reasons
Yes No
Description
(III) Has the Company
established standards to
measure the performance of
the Board, and does the
Company implement such
annually, and report the
results of evaluations to the
Board, and use them as a
reference for individual
directors' remuneration and
nomination and renewal?		 V set up and develop the organizational
structure of the Board and
committees, conduct performance
evaluations of the Board,
committees, Directors and
managerial officers, and evaluate the
independence of Independent
Directors. We establish and regularly
review Directors' continuing
education programs and succession
plans for Directors and senior
managerial officers. We also review
amendments of the Company's
Corporate Governance Best-Practice
Principles.
(III) The Company has established a
performance evaluation system for the
Board of Directors. The Board of
Directors passed the "Regulations
Governing the Evaluation of the Board of
Directors" on August 2, 2018 and
amended it on January 14, 2021 to
require the appointment of an external
independent professional agency or a
team of external experts and scholars to
conduct an evaluation of the performance
of the Board of Directors at least once
every three years, which must be
completed before the end of the first
quarter of the following year.
The Company shall conduct a
performance evaluation of the previous
year in the first quarter every year. The
evaluation shall include (1) participation
in the operation of the company; (2)
improvement of the quality of the Board
of Directors' decision making; (3)
composition and structure of the Board of
Directors; (4) election and continuing
education of the Directors; (5) internal
control. The results shall be compiled and
reported to the Board of Directors.
The Company completed internal
evaluations in early 2022. The results of
related evaluations were presented to the
Board of Directors on January 13, 2022.
Theyhave beenused as the basisfor





No significant
difference.

52

Evaluation Item Implementation Status Implementation Status Implementation Status Deviations
from the
Corporate
Governance
Best-Practice
Principles for
TWSE/TPEx
Listed
Companies and
Reasons
Yes No
Description
(IV) Does the Company regularly
evaluate the independence of
the CPAs?
V		 determining the salary, remuneration, and
nomination for continuous appointment
of individual Directors and used as
reference for continuous improvement of
the functions of the Board of Directors.
The results of the performance evaluation
of the Board of Directors are disclosed in
the corporate governance section on the
company website.https://www.fsp-
group.com/tw/CorporateGovernance.html
(IV) The Company's Audit Committee
conducts a regular review of the
independence and competence of the
CPA every year. In addition to requesting
the CPA to provide a "Statement of
Independence", the Audit Committee also
conducts evaluations in accordance with
standards in Note 2. The Company
verified that with the exception of
expenses for auditing and taxation cases,
the CPAs and the Company have no other
financial interests or business relations
and the family members of the CPA have
also not violated requirements for
independence. The results of the
evaluation for the most recent year were
passed by the Audit Committee on
January 13, 2022 and the independence
evaluation of the CPA was passed in a
resolution of the Board of Directors on
January13,2022.




No significant
difference.
IV. Does the Company appoint a
suitable number of competent
personnel and a supervisor
responsible for corporate
governance matters (including
but not limited to providing
information for directors and
to perform their functions,
assisting directors with
compliance, handling work
related to meetings of the
Board of Directors and the
shareholders' meetings, and
producing minutes of Board
meetings and shareholders'
meetings)?		 V The Company appointed the Manager Yao,
Wen-Chun to serve as the Corporate
Governance Officer to strengthening the
functions of the Board of Directors based on
the resolution passed by the Board of Directors
on January 8, 2019. The Manager Yao, Wen-
Chun has accumulated more than three years of
work experience in legal affairs in a public
company.
(I)
The main duties for the Corporate
Governance Officer are as follows:
1.
Assist Independent Directors and
general Directors in performing
their duties by providing the
necessary information and
arranging continuing education.		 No significant
difference.

53

Evaluation Item Implementation Status Implementation Status Implementation Status Deviations
from the
Corporate
Governance
Best-Practice
Principles for
TWSE/TPEx
Listed
Companies and
Reasons
Yes No
Description
2.
Assist in matters related to the
proceedings of Board of Directors'
meetings and shareholders'
meetings as well as legal
compliance of resolutions.
3.
Maintain relations with investors:
Arrange for Directors to interact
and communicate with major
shareholders, institutional
investors, or general shareholders
so that investors can obtain
sufficient information to evaluate
and determine the Company's
reasonable market value, and
ensure adequate protection of
shareholders' interests.
4.
Draw up agendas for meetings of
the Board of Directors and notify
Directors of the agendas seven
days before the meeting, convene
meetings and provide information
about the meetings, send out
reminders regarding agendas that
require recusal of Directors and
complete the minutes of the Board
of Directors' meeting within 20
days after the meeting.
5.
Handle prior registration for
shareholders meetings, prepare
meeting notices, agenda handbook,
meeting minutes within the
statutory period, as well as handle
registration of changes due to
amendment of regulations and
election of Directors.
(II)
Continuing education of the Corporate
Governance Officer:
The Company's Corporate Governance
Officer completed 12 hours of continuing
education in 2021 in accordance with the
"Taiwan Stock Exchange Corporation
Operation Directions for Compliance
with the Establishment of Board of
Directors by TWSE Listed Companies
and the Board's Exercise of Powers".
Refer to Note 3 for details of the
continuing education in 2021.

54

Evaluation Item Implementation Status Deviations
from the
Corporate
Governance
Best-Practice
Principles for
TWSE/TPEx
Listed
Companies and
Reasons
Yes No Description
V. Has the Company established
communication channels and
built a dedicated section on its
website for stakeholders
(including but not limited to
shareholders, employees,
customers, and suppliers) to
respond to material corporate
social responsibility issues in
a proper manner?		 V (I)
(II)
(III)		 The Company has always paid close to
the issues of concern of stakeholders
including employees, customers,
investors, and suppliers. To maintain a
smooth communication channels and
respect and uphold their legal rights and
interests, the Company provides an email
for communication:cqe@fsp-
group.com.twfor stakeholders to provide
feedback. The Company compiles the
records of communication with
stakeholders in the Corporate Social
Responsibility Report and submits it to
the Board of Directors.
Stakeholders can obtain information on
the Company on the Market Observation
Post System (MOPS) and the
"stakeholders section" on the Company's
website. Refer to the CSR Report on the
Company's website for more information
on the CSR issues of concern to
stakeholders:
https://www.fspgroup.com/tw/CSR.html.
The Company has appointed a
spokesperson and an acting spokesperson
to serve as the Company's
communication channel with external
entities. The Company has set up the
stakeholder communication mailbox and
the whistleblower mailbox
[email protected]
provide stakeholders with smooth
communicationchannels.		 No significant
difference.
VI. Has the Company appointed a
professional shareholder
service agency to deal with
shareholder affairs?		 V The Company has appointed Stock Transfer
Agency Department of Mega Securities Co.,
Ltd., a professional stock transfer agency, to
process stock transfer affairs of the Company.
We also established management regulations
for stock transfer agency and implemented
proceduresaccordingly.		 No significant
difference.
VII. Information disclosure
(I)
Does the Company have a
corporate website to disclose
both the Company’s
financial standings and
corporate governance status?
(II) Doesthe Companyhave

V
V		 (I)
The Company has set up an investor
service section on the company website
to disclose financial, business, and
corporate governance information.
(II)
The Companyhas setupan English		 No significant
difference.
No significant

55

Evaluation Item Evaluation Item Implementation Status Implementation Status Implementation Status Deviations
from the
Corporate
Governance
Best-Practice
Principles for
TWSE/TPEx
Listed
Companies and
Reasons
Yes No
Description
other information disclosure
channels (e.g., setting up an
English website, appointing
designated people to handle
information collection and
disclosure, creating a
spokesman system, and
webcasting investor
conferences)?
(III) Does the Company
announce and report annual
financial statements within
two months after the end of
each fiscal year, and
announce and report the
financial statements of the
first three quarters, as well
as monthly operation results,
before the prescribed time
limit?
V		 website and assigned designated
personnel to take charge of the collection
and disclosure of company information.
The Company also appointed a
spokesperson to answer questions on
behalf of the Company. The presentations
used for investor conferences are also
disclosed on the company website as
reference for shareholders and
stakeholders.
(III) The Company publicly announce and file
financial reports and the operation of
each month ahead of the required
deadline in accordance with the
regulations for the publication of
financial reports and deadlines for
reporting specified in Article 36 of the
Securities and Exchange Act.
difference.
No significant
difference.
VIII. Is there any other important
information to facilitate a
better understanding of the
Company’s corporate
governance practices
(including but not limited to
employee rights, employee
wellness, investor relations,
supplier relations, stakeholder
rights, directors’ training
records, implementation of
risk management policies and
risk evaluation measures,
implementation of customer
policies, and participation in
liability insurance by directors
and supervisors)?		 V Please refer to the explanation in Note 1. No significant
difference.
IX. Please explain the improvements made in accordance with the Corporate Governance Evaluation
results released by the Taiwan Stock Exchange’s Corporate Governance Center, and provide the
priorities and plans for improvement with items yet to be improved.
The Company was ranked among the top 21% to 35% segment in the 8th "Corporate Governance
Evaluation" in 2021. The items in which the Company failed to score are described below:
Completed improvements
(I)
Is financial report passed by the Board of Directors or submitted to the Board of Directors 7 days
before the prescribed deadlineforpublicationand published within 1day afterthe date of

The Company was ranked among the top 21% to 35% segment in the 8th "Corporate Governance Evaluation" in 2021. The items in which the Company failed to score are described below: Completed improvements

56

Evaluation Item Evaluation Item Implementation Status Implementation Status Implementation Status Deviations
from the
Corporate
Governance
Best-Practice
Principles for
TWSE/TPEx
Listed
Companies and
Reasons
Yes No
Description
(II) passage or submission?
In 2021, all financial reports of the Company were passed by the Board of Directors or submitted
to the Board of Directors 7 days before the prescribed deadline for publication and published
within 1 day after the date of passage or submission.
Does the company upload the English version of the notification for the shareholders’ meeting 30
days prior to the date of the meeting along with the Chinese version?
The Company uploaded the meeting notice for the 2021 general shareholders' meeting in English
30 days prior to the shareholders' meeting along with the Chinese version.
Items prioritized for future improvement
(I)
Does the company upload the English version of the meeting agenda and supplementary
information for the shareholders’ meeting 30 days prior to the date of the meeting along
with the Chinese version?
The Company has implemented plans to upload the English version of the meeting agenda
and supplementary information for the shareholders’ meeting 30 days prior to the date of
the meeting along with the Chinese version.
(II)
Does the company upload the English version of the annual report 7 days prior to the
shareholders' meeting?
The Company has implemented plans to upload the English version of the annual report 7
days prior to the shareholders' meeting.
(III) Does the Company upload the English version of the financial report 7 days prior to the
shareholders' meeting?
The Company has implemented plans to upload the English version of the annual financial
report 7 days before the shareholders' meeting.

Note 1.

  1. Employee rights, interests, and wellness:

  2. (1) As a principle, the Company shall recruit new employees based on the principle of equal employment and hire people with disabilities. The Company shall also comply with the Labor Standards Act and set up work rules to protect and ensure the rights and interests of employees.

  3. (2) The Company provides a high-quality benefits system, a safe and healthy work environment, and systematic training and development to help employees enjoy a healthy and balanced work life.

  4. (3) High-quality work environment and employee wellness

    • (A) The Company provides a high-quality work environment with an employee café, an indoor parking lot for cars and motorcycles, and an employee gym. We also appoint professional doctors to provide regular onsite services and we have a gallery for art exhibitions.

57

  • (B) We have established a health management operation model and we are committed to creating a healthy workplace environment by organizing activities such as routine health examinations, promotion of a tobacco-free environment, health promotion activities, and supply of health education information.

  • (C) We have appointed health professionals to provide medical consultation services and we organize disease screenings and seminars on healthy life from time to time to maintain the balance of employees' physical and mental health and meet the requirements for health of employees and their family members.

  • Investor relations:

The Company attaches great importance to the opinions of its stakeholders, especially shareholders, institutional shareholders, and foreign investors who are concerned about FSP's operations. The spokesperson responds to all inquiries by phone or email through our website or spokesperson contact window. We also arrange company visits for the spokesperson to explain the operation status and future development direction of the Company to help shareholders, institutional shareholders, and foreign investors understand the Company's ethical corporate management. The management team strives to create better value for shareholders and employees, and focuses on innovative research and development of green energy to increase energy efficiency and improve the environment.

  1. Supplier relationship:

The Company has always maintained good relationships with suppliers. We work together to increase the added value and create a stable green supply chain. We comply with the Code of Conduct of the Electronic Industry Citizenship Coalition (EICC) and prohibit the use of conflict minerals to provide products in compliance with ethical standards.

  1. Stakeholder rights:

The Company establishes channels for communicating with stakeholders and sets up a stakeholders section for stakeholders to communicate with the Company and offer suggestions to protect their legal rights. We also respond to material corporate social responsibility issues of concern to stakeholders in a proper manner.

  1. Directors' continuing education: Shown in Appendix 1.

  2. The implementation of the risk management policy and assessment standards:

The Company upholds the principle of prudence and focuses on operations in its main

58

business. We formulate all business strategies based on the premises that all risks must be controlled and tolerable. Internal auditors perform regular audits according to the audit plan to reduce risks in operations. We also purchase related insurance policies such as property insurance and product liability insurance to mitigate risks.

  1. Implementation of the customer policy: The Company maintains stable and good relations with customers to generate profits.

  2. Purchase of liability insurance for Directors: Shown in Appendix 2.

  3. Succession plans for members of the Board of Directors and important managers:

  4. (1) Succession plans for members of the Board of Directors and implementation:

The Company has implemented the diversity policy of the Board of Directors in accordance with the "Corporate Governance Best-Practice Principles". The Company currently has 10 Directors (including 3 Independent Directors) with diversified and complementary industry experience and management expertise in finance, business, finance, and accounting or the Company's operations. Three of Directors serve concurrently as senior managers of the Company. The composition of the Company's Board of Directors and the background of its members will continue to be the same in the future. The results of the performance evaluation of the Board of Directors each year shall be used as a reference for the nomination and re-appointment of the Directors.

The Group currently has several senior management personnel and the Company therefore has a large talent pool to draw from to fill future vacancies of Directors. Independent Directors are required to have work experience in the areas of commerce, law, finance, or accounting, or otherwise necessary for the business. There is an abundant supply of such professionals in Taiwan. Therefore, the succession plans for Directors may be achieved by appointing professionals from different fields to implement corporate governance functions.

With regard to the succession plans for members of the Board of Directors, the Company shall train senior managers by including them in the Board of Directors to familiarize themselves with the operations of the Board and each unit of the Group. We also enhance their experience in the industry with job rotations.

The Group currently has several senior management personnel and the Company therefore has a large talent pool to draw from and elect future Directors. In addition to diversity, the Directors who are also managers of the Company should not exceed one third of the number of Directors. The Company shall also focus on gender equality and ensure that Directors have the necessary knowledge, skills,

59

and qualifications for their duties.

(2) Succession plans for important managers and implementation:

Employees ranked deputy heads of divisions of the Group are considered important managers. The 15 managers are provided with training for their succession in actual company operations. The management is set up based on the hierarchy of the organization and each department has mid-level managers such as managers and deputy managers. We also have clear job descriptions, and provide training for mid-level managers to act as proxies for senior managers whenever necessary. The Company learns about items that require improvement and personal expectations through regular observation and performance evaluation interviews, which serve as a reference for determining future succession.

The successors of the Group must have excellent professional skills and leadership skills, and must share the Company's values and ideals so that they can lead the Company and generate more profits for shareholders.

In addition, we rotate key personnel in accordance with the Group's investment plans and the turnover status of employees. We aim to cultivate a wide range of talents to complete the talent succession plan in the next 10 years.

The Human Resources Dept. coordinates the establishment of talent development mechanisms. It defined the senior management functions in 2018 and provides training and development for strategic planning, accountability, leadership, and execution. It continues to develop the leadership skills of senior managers every year.

It organizes strategic consensus camps for senior managers (including the President) twice a year. It organizes thematic courses and discussions for future strategic planning. The course topics include systematic thinking, accounting and accountability, vision and core values, vision consensus and strategic planning, business operation simulation, management of changes, KT-method for problem analysis and decision logic, and the strategy map. The Company aims to effectively develop leadership skills and an international perspective to prepare high-quality talents for the long-term development of the Company.

60

Note 2. CPA independence evaluation criteria

Note 2.
CPA independence evaluation criteria
Evaluation Item Result Independence of
the CPAs
1. Direct or indirect material financial interests between the
CPA and the Company		 No Yes
2. Financing or guarantee activities with the Company or its
Directors and Supervisors		 No Yes
3. The CPA considers the possibility of losing the Company as
a client		 No Yes
4. The CPA has close business relations with the Company No Yes
5. The CPA has potential employment relations with the
Company		 No Yes
6. The CPA collects fees associated with or contingent on audit
cases		 No Yes
7. A member of the audit service team serves as the Company's
Director, Supervisor, managerial officer, or other positions
with significant influence on the audit work of the Company
atpresent or in thepast 2years		 No Yes
8. The CPA provides non-audit services that may directly affect
the audit work		 No Yes
9. The CPA is an advocate or intermediary of the shares or other
securities issued bythe Company
No		 Yes
10. The CPA serves as a defense counsel of the Company or
represents the Company in mediating conflicts with third
parties		 No Yes
11. The CPA is a family member or relative of a Director,
managerial officer, or person holding a position that has a
significant impact on the audit work of the Company		 No Yes
12. Another CPA in the same firm that has resigned within the
past year serves as the Company's Director, Supervisor,
managerial officer, or other positions with significant
influence on the audit work of the Company		 No Yes
13. The CPA has accepted valuable gifts or presents from the
Companyor its Director,Supervisor,or managerial officer		 No Yes
14. The Company requested the CPA to accept inappropriate
choices requested by the management or provide
inappropriate disclosure in financial statements		 No Yes
15. The Company exerted pressure on the CPA to inappropriately
reduce mandatoryauditingtasks to reduce audit fees
No		 Yes
Note 3.
Continuingeducation of the Corporate Governance Officer		 Note 3.
Continuingeducation of the Corporate Governance Officer		 Note 3.
Continuingeducation of the Corporate Governance Officer		 Note 3.
Continuingeducation of the Corporate Governance Officer		 Note 3.
Continuingeducation of the Corporate Governance Officer
Title Name Date Organizer Course Training
Hours
Corporate
Governance
Officer		 Yao,
Wen-
Chun		 2021/ Securities &
Futures Institute		 How Directors and Supervisors Supervise Company Risk
Management and Crisis Management		 3 hours
01/14
2021/ Taiwan Investor
Relations Institute		 Commercial Case Adjudication Act 3 hours
08/27
2021/ Financial
Supervisory		 13th Taipei Corporate Governance Forum 3 hours
09/01

61

Title Name Date Organizer Course Training
Hours
Commission
2021/ Securities &
Futures Institute		 The Roles of the Director in Corporate Governance 3.0 and
Compliance in Challenges for Management Rights
3 hours
11/04

Table 1: Directors' continuing education

The continuing education is implemented in accordance with the "Directions for the Implementation of Continuing Education for Directors and Supervisors of TWSE Listed and TPEx Listed Companies" of Taiwan Stock Exchange Corporation.

Title Name Date Organizer Course Training
Hours
Director Cheng, Ya-Jen Securities &
Futures Institute		 How Directors and Supervisors Supervise
Company Risk Management and Crisis
Management		 3 hours
2021/
01/14
Securities &
Futures Institute		 The Roles of the Director in Corporate
Governance 3.0 and Compliance in Challenges for
Management Rights
3 hours
2021/

11/04
Accounting
Research and
Development
Foundation		 Corporate Sustainability - Environment, Society,
and Governance Practices		 6 hours
2021/
11/04
Director Wang, Chung-
Shun		 Securities &
Futures Institute		 How Directors and Supervisors Supervise
Company Risk Management and Crisis
Management		 3 hours
2021/
01/14
Securities &
Futures Institute		 The Roles of the Director in Corporate
Governance 3.0 and Compliance in Challenges for
Management Rights
3 hours
2021/
11/04
Director Yang, Fu-An Securities &
Futures Institute		 How Directors and Supervisors Supervise
Company Risk Management and Crisis
Management		 3 hours
2021/
01/14
Securities &
Futures Institute		 The Roles of the Director in Corporate
Governance 3.0 and Compliance in Challenges for
Management Rights
3 hours
2021/
11/04
Representative
of Institutional
Director

Wang, Po-Wen		 Securities &
Futures Institute		 How Directors and Supervisors Supervise
Company Risk Management and Crisis
Management		 3 hours
2021/
01/14
Financial
Supervisory
Commission		 13th Taipei Corporate Governance Forum 3 hours

2021/

09/01
Securities &
Futures Institute		 The Roles of the Director in Corporate
Governance 3.0 and Compliance in Challenges for
Management Rights
3 hours
2021/
11/04
2021/ Securities &
Futures Institute		 How Directors and Supervisors Supervise
CompanyRisk Management and Crisis		 3 hours
01/14

62

Title Name Date Organizer Course Training
Hours
Representative
of Institutional
Director

Chu, Hsiu-
YinChu, Hsiu-
Yin		 Management
2021/ Securities & 2021 Seminar on Legal Compliance for Insider 3 hours
10/15 Futures Institute Stock Transactions
Securities &
Futures Institute		 The Roles of the Director in Corporate
Governance 3.0 and Compliance in Challenges for
Management Rights
3 hours
2021/
11/04
Director Chen, Kuang-
Chun		 Securities &
Futures Institute		 How Directors and Supervisors Supervise
Company Risk Management and Crisis
Management		 3 hours
2021/
01/14
Securities &
Futures Institute		 The Roles of the Director in Corporate
Governance 3.0 and Compliance in Challenges for
Management Rights
3 hours
2021/
11/04
Director Huang, Jr-Wen Securities &
Futures Institute		 How Directors and Supervisors Supervise
Company Risk Management and Crisis
Management		 3 hours
2021/
01/14
Financial
Supervisory
Commission		 13th Taipei Corporate Governance Forum 3 hours
2021/

09/01
2021/ Securities & 2021 Seminar on Legal Compliance for Insider 3 hours
10/22 Futures Institute Stock Transactions
Securities &
Futures Institute		 The Roles of the Director in Corporate
Governance 3.0 and Compliance in Challenges for
Management Rights
3 hours
2021/
11/04
Independent
Director		 Cheng, Chia-
Jiun		 Securities &
Futures Institute		 How Directors and Supervisors Supervise
Company Risk Management and Crisis
Management		 3 hours
2021/
01/14
Securities &
Futures Institute		 The Roles of the Director in Corporate
Governance 3.0 and Compliance in Challenges for
Management Rights
3 hours
2021/
11/04
Independent
Director		 Liu, Shou-
Hsiang		 Securities &
Futures Institute		 How Directors and Supervisors Supervise
Company Risk Management and Crisis
Management		 3 hours
2021/
01/14
Financial
Supervisory
Commission		 13th Taipei Corporate Governance Forum 3 hours
2021/
09/01
2021/ Securities & 2021 Seminar on Legal Compliance for Insider 3 hours
10/28 Futures Institute Stock Transactions
Securities &
Futures Institute		 The Roles of the Director in Corporate
Governance 3.0 and Compliance in Challenges for
Management Rights
3 hours
2021/
11/04
Independent
Director		 Hsu, Cheng-
Hung		 Securities &
Futures Institute		 How Directors and Supervisors Supervise
Company Risk Management and Crisis
Management		 3 hours
2021/
01/14

63

Title Name Date Organizer Course Training
Hours
Securities &
Futures Institute		 The Roles of the Director in Corporate
Governance 3.0 and Compliance in Challenges for
Management Rights
3 hours
2021/
11/04

Table 2: Purchase of liability insurance for directors:

The Company has purchased liability insurance for Directors since July 7, 2010. The liability insurance coverage of Directors in 2021 was as follows:

Insured
Individuals		 Insurance Company Insured Amount (NT$) Insured Period (start and
expiry)		 Date of Board
MeetingReport
Insurance Company From: July 7, 2021
All Directors 196,000,000 2021/06/11
of North America To: July7,2022

(IV) Composition and Operations of the Remuneration Committee:

1. Professional Qualifications and Independence Analysis of Remuneration Committee Members

Title Criteria
Name
Professional Qualifications and
Experience		 Independence Criteria (Note1) Independence Criteria (Note1) Independence Criteria (Note1) Independence Criteria (Note1) Independence Criteria (Note1) Independence Criteria (Note1) Independence Criteria (Note1) Independence Criteria (Note1) Independence Criteria (Note1) Independence Criteria (Note1) Number of
Other Public
Companies
Where the
Individual
Concurrently
Serves as a
Remuneration
Committee
Member
 Remark
1 2 3 4 5 6 7 8 9 10
Independe
nt Director
Convener
Liu,
Shou-
Hsiang		 Extensive experience and expertise in
finance, business, and management
Associate Professor, Ming Chuan
University
Research Fellow, Chung-Hua Institution
for Economic Research
Chairman and President, Ta Hua
Investment Trust
Independent Director, Hwatai Bank Co.,
Ltd.
Advisory Board Member, Chung-Hua
Institution for Economic Research		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ None －
Independe
nt Director
Cheng,
Chia-Jiun
Extensive experience and expertise in
finance, business, and management
President, Digital United Telecom Co.,
Ltd.
Independent Director, Azion Corporation
Independent Director, Bizlink Holding
Inc.		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 2 －
Independe
nt Director
Hsu,
Cheng-
Hung		 Extensive experience and expertise in
finance, business, and management
President, Unitech Printed Circuit Board
Corp.
Director, Shanghai Zhanhua Electronic
Co.,Ltd.		 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ None －

Note 1. Please check ”√” in the corresponding boxes if the Remuneration Committee members meet the following

64

conditions during the two years prior to the nomination and during the term of office.

  • (1) Not an employee of the Company or any of its affiliates.

  • (2) Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.

  • (3) Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or is ranked in the top 10 in shareholdings.

  • (4) Not the manager listed in (1) or the spouse, relative within the second degree of kinship, or direct blood relatives within the third degree of kinship of the person listed in (2) and (3).

  • (5) Not a director, supervisor, or employee of an institutional shareholder who directly holds more than 5% of the Company's total outstanding shares, who is among the top five shareholders, or who designates its representative to serve as a director or supervisor of the Company in accordance with Paragraph 1 or 2, Article 27 of the Company Act (except for an independent director engaged concurrently by the Company, its parent company, and its subsidiary or a subsidiary under the same parent company in accordance with the Act or local laws and regulations).

  • (6) Not a director, supervisor, or employee of another company where a majority of the Company's director seats or voting shares and those of another company are controlled by the same person (except for an independent director engaged concurrently by the Company, its parent company, and its subsidiary or a subsidiary under the same parent company in accordance with the Act or local laws and regulations).

  • (7) Not a director (managing director), supervisor, or employee of another company or institution where the Chairman, the President, or person holding an equivalent position of the Company and a person in an equivalent position at another company or institution are the same person or are spouses (except for an independent director engaged concurrently by the Company, its parent company, and its subsidiary or a subsidiary under the same parent company in accordance with the Act or local laws and regulations).

  • (8) Not a director (managing director), supervisor, manager, or shareholder holding 5% or more of the shares of a specific company or institution which has a financial or business relationship with the Company (except for a specific company or institution holding more than 20% and no more than 50% of the total issued shares of the Company and for an independent director engaged concurrently by the Company, its parent company, and its subsidiary or a subsidiary under the same parent company in accordance with the Act or local laws and regulations).

  • (9) Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides auditing services to the Company or any affiliate of the Company, or that provides commercial, legal, financial, accounting or related services to the Company or any affiliate of the Company for which the provider in the past two years has received cumulative compensation exceeding NT$500,000, or a spouse thereof; provided, this restriction does not

65

apply to a member of the Remuneration Committee, public tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to the Security and Exchange Act or to the Business Mergers and Acquisitions Act or relevant laws or regulations.

  • (10) None of the circumstances in the subparagraphs of Article 30 of the Company Act apply.

  • Operation Status of the Remuneration Committee

    • (1) There are a total of 3 members in the Remuneration Committee.

    • (2) The current term of office: June 24 2020 to June 15, 2023.

    • (3) A total of 5 (A) meetings of the Remuneration Committee was held in 2021 and 2022 as of the publication date of the Annual Report. The attendance of the members was as follows:

Title Name Attendance in
Person (B)		 By Proxy Attendance Rate
(%)
(B/A)		 Remark
Convener Liu, Shou-
Hsiang		 5 0 100% Independent
Director
Committee
Member		 Cheng, Chia-
Jiun		 5 0 100% Independent
Director
Committee
Member		 Hsu, Cheng-
Hung		 5 0 100% Independent
Director
  • (4) Regular review of the salary and remuneration:

The purpose of the Company's Remuneration Committee is to professionally and objectively evaluate the remuneration policy of the Company's Directors and managerial officers. It convenes at least two meetings each year and additional meetings whenever necessary. It provides recommendations to the Board of Directors for decision making.

Roles and responsibilities of the Remuneration Committee:

  • ⚫ Regularly review the Remuneration Committee Charter and propose recommendations for amendments.

  • ⚫ Establish and routinely review the annual and long-term performance objectives and policies, systems, standards, and structures of the remuneration of the Directors, Supervisors, and managerial officers.

  • ⚫ Routinely evaluate the effectiveness of Directors and managerial officers in achieving their performance objectives, and develop individual remuneration packages.

66

  • ⚫ The Remuneration Committee shall perform its duties in accordance with the following principles:

  • ⚫ Ensure that the Company's remuneration standards conform to the law and are sufficient to attract talented personnel.

  • ⚫ The performance evaluation and compensation of Directors and managerial officers should take prevailing industry standards into account and take into consideration the amount of personal time invested, responsibilities, personal target completion, performance in other roles and company compensation for other people in equivalent roles in recent years. The achievement of the Company's short-term and long-term business objectives as well as the Company's conditions are used to evaluate the correlation between personal performance, company business performance and future risks.

  • ⚫ There shall be no incentive for Directors or managerial officers to pursue remuneration by engaging in activities that exceed the risk appetite of the Company.

  • ⚫ The percentage of bonus to be distributed to Directors and senior managerial officers based on their short-term performance and the time for payment of variable remuneration shall be determined by the characteristics of the industry and the nature of the Company's business.

  • ⚫ No member of the Committee may participate in discussions and voting when the Committee decides the member's individual remuneration.

67

  1. The dates, terms of the meetings, contents of motions, and resolutions of the meetings of the Remuneration Committee in 2021 and 2022 as of the publication date of the Annual Report, and the Company’s handling of the opinions of the Remuneration Committee
Committee
Date of Meeting Content of Motion and Follow-up Resolution Results The Company's
handling of the
opinions of the
Remuneration
Committee
The 3rd meeting of the 4th term
2021.01.14
1. Proposal for the year-end bonus
for the Company's managerial
officers for 2020.
2. Amendment of the "Regulations
Governing the Evaluation of the
Board of Directors".


Passed unanimously by
all members of the
Committee in attendance
Submitted to the
Board of
Directors and
passed by all
Directors in
attendance.
The 4th meeting of the 4th term
2021.03.18
1. Proposal for the remuneration
of the managerial officers for
2020.
2. Proposal for the remuneration
for Directors for 2020.
3. Amendment of the "Regulations
Governing the Remuneration of
Directors and Members of
Functional Committees".

Passed unanimously by
all members of the
Committee in attendance
implemented in
accordance with the
resolution, and reported
to the competent
authority before the
deadline in accordance
with regulations.
Submitted to the
Board of
Directors and
passed by all
Directors in
attendance.
The 5th meeting of the 4th term
2022.01.13
1. Proposal for the year-end bonus
for the Company's managerial
officers for 2021.
Passed unanimously by
all members of the
Committee in attendance
Submitted to the
Board of
Directors and
passed by all
Directors in
attendance.
The 6th meeting of the 4th term
2022.03.18
1. Proposal for the remuneration
of the managerial officers for
2021.
2. Proposal for the remuneration
for Directors for 2021.		 Passed unanimously by
all members of the
Committee in attendance
implemented in
accordance with the
resolution, and reported
to the competent
authority before the
deadline in accordance
with regulations.
Submitted to the
Board of
Directors and
passed by all
Directors in
attendance.
The 7th meeting of the 5th term
2022.04.28
1. Amendment of the "Self-
Evaluation or Peer Evaluation o
the Board of Directors".		 f
Passed unanimously by
all members of the
Committee in attendance
Submitted to the
Board of
Directors and
passed by all
Directors in
attendance.

68

Other matters:

  1. If the Board of Directors refuses to adopt or amend a recommendation from the Remuneration Committee, the date of the meeting, session, contents of the motions, resolution by the Board of Directors, and the Company’s response to the Remuneration Committee’s opinion (e.g., the circumstances and cause for the difference if the remuneration passed by the Board of Directors exceeds the recommended amount by the Remuneration Committee) shall be specified: None.

  2. If there were resolutions by the Remuneration Committee to which members have dissenting or qualified opinions, and for which there is a record or declaration in writing, the date of the meeting, session, contents of the motions, all members’ opinions, and the response to members’ opinions shall be specified: None.

  3. (V) Information on Members of the Sustainable Development Committee and Operations:

The Committee aims to help the Board of Directors promote corporate social responsibility and improve corporate governance to ensure sustainable development. The Company's Board of Directors passed a resolution on March 18 2021 to establish the "Sustainable Development Committee" as the decision-making and supervisory unit for FSP's sustainable development tasks.

Members of the Sustainable Development Committee are appointed by the Board of Directors and shall consist of at least three board members. At least half of the members must be Independent Directors. The duties of the Committee shall include the following items:

  • I. Establish strategies and targets for corporate social responsibility and sustainable development, and formulate related management strategies and specific implementation plans.

  • II. Promotion and fulfillment of ethical corporate management and risk management tasks.

  • III. Implementation status of sustainable development and follow-up, review, and amendment of the effectiveness.

  • IV. Other matters to be conducted by the Committee based on resolutions of the Board of Directors.

69

  1. Information on the implementation of sustainable development

  2. (1) There are a total of 4 members (including 3 Independent Directors) in the Sustainable Development Committee.

  3. (2) The current term of office: March 18, 2021 - June 15, 2023.

  4. (3) A total of 1 (A) meeting of the Sustainable Development Committee was held in 2021 and 2022 as of the publication date of the Annual Report. The attendance of the members was as follows:

Title Name Attendance in
Person (B)		 By Proxy Attendance rate
(%) (B/A)
Remark
Convener Cheng, Ya-Jen 1 0 100% Director
Committee
Member		 Liu, Shou-Hsiang 1 0 100% Independent
Director
Committee
Member		 Cheng, Chia-Jiun 1 0 100% Independent
Director
Committee
Member		 Hsu, Cheng-Hung 1 0 100% Independent
Director
  1. Key points in the discussions in the meeting of the Sustainable Development Committee in the most recent fiscal year (2021 and up to the publication date of the Annual Report)
Date of Meeting Key points of discussions in
meetings		 Resolution Results The
Company's
handling of the
opinions of the
Sustainable
Development
Committee
The 1st meeting of the 1st term
2022.01.10
1. Submitted the amendment of
certain articles of the Company's
"Corporate Social Responsibility
Best-Practice Principles".
2. Submitted the work report of the
functional units of the
Sustainable Development
Committee.
Report and discussion
in the board meeting.		 Submitted to
the Board of
Directors and
passed by all
Directors in
attendance.
  • (VI) Information on Members of the Nominating Committee and Operations:

To meet corporate governance requirements and to strengthen the operations of the Board of Directors, the Company established the "Nominating Committee Charter" on November 4, 2021 and approved the establishment of the "Nominating Committee" to set the qualifications of the Directors and senior managerial officers and the criteria for independence. We also follow the standards to identify, review, and nominate candidates for Directors and managerial officers, set up and develop the organizational structure of

70

the Board and committees, conduct performance evaluations of the Board, committees, Directors and managerial officers, and evaluate the independence of Independent Directors. We establish and regularly review Directors' continuing education programs and succession plans for Directors and senior managerial officers. We also review amendments of the Company's Corporate Governance Best-Practice Principles.

According to the "Nominating Committee Charter", the Nominating Committee shall convene at least two meetings each year. A total of 4 meetings was convened in 2021 and up to the publication date of the Annual Report.

  1. Information on the Operations of the Nominating Committee

  2. (1) There are a total of 4 members (including 3 Independent Directors) in the Nominating Committee.

  3. (2) The current term of office: November 4, 2021 - June 15, 2023.

  4. (3) A total of 4 (A) meetings of the Nominating Committee was held in 2021 and 2022 as of the publication date of the Annual Report. The attendance of the members was as follows:

members was as follows:
il Professional Qualifications and Attendance
i
Attendance
k
Tte Name Experience n Person
(B)		 By Proxy Rate (%)
(B/A)		 Remar
Convener Cheng,
Chia-
Jiun		 Extensive experience and expertise in finance,
business, and management
President, Digital United Telecom Co., Ltd.
Independent Director, Azion Corporation
Independent Director, Bizlink Holding Inc.
None of the circumstances in the subparagraphs
of Article 30 of the Company Act apply		 4 0 100% Independent
Director
Committee
Member
Liu,
Shou-
Hsiang		 Extensive experience and expertise in finance,
business, and management
Associate Professor, Ming Chuan University
Research Fellow, Chung-Hua Institution for
Economic Research
Chairman and President, Ta Hua Investment
Trust
Independent Director, Hwatai Bank Co., Ltd.
Advisory Board Member, Chung-Hua
Institution for Economic Research
None of the circumstances in the subparagraphs
of Article 30 of the Company Act apply		 4 0 100% Independent
Director
Committee
Member
Hsu,
Cheng-
Hung		 Extensive experience and expertise in finance,
business, and management
President, Unitech Printed Circuit Board Corp.
Director, Shanghai Zhanhua Electronic Co.,
Ltd.
None of the circumstances in the subparagraphs
of Article 30 ofthe CompanyAct apply		 4 0 100% Independent
Director
Committee
Member
Cheng,
Ya-Jen		 Extensive experience and expertise in finance,
business, and management and business
administration skills
Chairman, FSP Technology Inc.		 4 0 100% Director

71

2. Key points in the discussions in the meeting of the Nominating Committee in the most recent fiscal year (2021 and up to the publication date of the Annual Report)

Date of Meeting Key points of discussions in meetings Resolution Results The
Company's
handling of
the opinions
of the
Nominating
Committee
The 1st meeting of the 1st term
2021.11.04		 1. Elected the convener of the
Nominating Committee and the
chair of the meeting.		 Passed unanimously
by all members of the
Committee in
attendance, who
elected the
Independent Director
Cheng, Chia-Jiun to
serve as the convener
of the 1st-term
Nominating
Committee and the
chair of the meeting.
The chair of
the
Nominating
Committee
Report
reported to the
Board of
Directors.
The 2nd meeting of the 1st term
2022.01.10
1. Amendment of certain articles of
the Company's "Corporate Social
Responsibility Best-Practice
Principles".		 Passed unanimously
by all members of the
Committee in
attendance.
Submitted to
the Board of
Directors and
passed by all
Directors in
attendance.
The 3rd meeting of the 1st term
2022.03.18
1. Amendment of certain articles of
the Company's "Corporate
Governance Best-Practice
Principles".		 Passed unanimously
by all members of the
Committee in
attendance.
Submitted to
the Board of
Directors and
passed by all
Directors in
attendance.
The 4rd meeting of the 1st term
2022.04.28
2. Amendment of "Self-Evaluation
or Peer Evaluation of the Board
of Directors".		 Passed unanimously
by all members of the
Committee in
attendance.
Submitted to
the
Remuneration
Committee
and the Board
of Directors
and passed by
all Directors
in attendance.

72

(V) Implementation status of sustainable development, deviations from the Sustainable Development Best-Practice Principles for TWSE/TPEx Listed Companies, and reasons thereof

thereof
Implementation Item Implementation Status Deviations from the
Sustainable
Development Best-
Practice Principles
for TWSE/TPEx
Listed Companies
and reasons thereof
Yes No Description
I.
Does the company set up a
governance structure for
sustainable development, establish
an exclusively (or concurrently)
dedicated unit to implement
sustainable development, and
have management appointed by
the Board of Directors to be in
charge of corporate social
responsibility and to report the
implementation status to the
Board of Directors?
V		 (I)
The Company's Board of Directors
passed a resolution on March 18 2021
to establish the "Sustainable
Development Committee" as the
decision-making and supervisory unit
for the Company's sustainable
development tasks. The Chairman
serves as the chair and an Executive
Office was set up under its
jurisdiction to jointly review the
Company's core business capabilities
with level 1 managers of the
Company and establish medium and
long-term sustainable development
plans.
(II)
The Sustainable Development
Committee convenes at least two
meetings each year. The Executive
Office includes six functional groups
which are responsible for corporate
governance, responsible supply
chain, green operations, green
products, happy workplace, and
social engagement, respectively (refer
to Note 1). It is responsible for
planning and formulating strategies
and work guidelines, preparing
budgets for each organization and
sustainable development,
implementing annual plans, and
tracking the effectiveness of the
implementation to ensure that
sustainable development strategies
are fully implemented in the
Company's operations.
(III) The Board of Directors receives
reports from the functional groups
(including the ESG report) and the
functional groups must propose
strategies to the Board of Directors,
which must evaluate the likelihood of
success of these strategies. It must
also constantly review the progress of
the strategies and ensure that
functionalgroupsmake adjustments



No significant
difference.

73

Implementation Item Implementation Status Implementation Status Implementation Status Deviations from the
Sustainable
Development Best-
Practice Principles
for TWSE/TPEx
Listed Companies
and reasons thereof
Yes No Description
whenever necessary.
II.
Does the Company assess ESG
risks associated with its operations
based on the principle of
materiality, and establish relevant
risk management policies or
strategies?
V		 (I)
The information disclosed herein
covers the sustainable development
performance of the Company in its
major sites of operations from
January to December 2021. The
boundaries of risk assessment consist
mainly of the Company's sites of
operations in Taiwan and Mainland
China.
(II)
The Sustainable Development
Committee analyzes and
communicates with internal and
external stakeholders based on the
materiality principle for the
sustainable development report. It
also evaluates critical ESG issues by
reviewing domestic and international
research reports, literature, and
integrated assessments of different
departments, and formulates
effective, measurable, and
supervisory risk policies and specific
action plans to reduce the impact of
related risks. It formulates risk
management policies or strategies
based on the assessed risk. They are
divided into four categories including
economic, financial, operational, and
environmental safety. All risk items
and major domestic and international
events are managed by the relevant
unit managers. They also discuss and
review issues in monthly
management meetings and propose
countermeasures to reduce the impact
of the risks on the Company. (Refer
to Other Significant Risks and
Countermeasures on page 318 of the
Annual Report)
No significant
difference.

74

Implementation Item Implementation Status Implementation Status Implementation Status Deviations from the
Sustainable
Development Best-
Practice Principles
for TWSE/TPEx
Listed Companies
and reasons thereof
Yes No Description
III.
Environmental issues
(I)
Has the Company established
environmental management
systems based on its industry’s
characteristics?
(II)
Does the company endeavor to
utilize energy more efficiently and
use renewable materials that have
low impact on the environment?
(III) Does the Company evaluate the
potential risks and opportunities in
climate change with regard to the
present and future of its business,
and take appropriate action to
counter climate change issues?
V
V
V		 (I) The Company has implemented and
passed the ISO 14001 environmental
management system in our major
factories of operations to fulfill our
environmental responsibility and
improve our performance in
environmental protection. We set
environmental safety and health
objectives and management plans
with the system every year, and use
the "PDCA cycle" to ensure the
implementation of environmental
safety and health management.
ISO14001:2015
Certification organization: TUV
Validity period:
2019/11/1~2022/10/31
Certification date: 2019/09/25
Certification number: 01 104 822
018638
(II) The Company is committed to the
development of energy-saving and
high-efficiency products and
technologies. We actively promote
various energy reduction measures to
reduce the energy consumption of the
Company and products. We also
expand the use of renewable energy
to optimize energy use efficiency.
(Please refer to Appendix 2 for
environmental project management
policies, targets, and performance.)
All raw materials used by the
Company comply with EU RoHS,
REACH, and halogen-free
regulations.
(III) The Company's Sustainable
Development Committee is the top
organization responsible for climate
change management.
The Corporate Governance and Risk
Management Groups assess the risks
and opportunities of climate change
for the Company. Detailed
description of climate change risks
and opportunitieshas beendisclosed		 No significant
difference.
No significant
difference.
No significant
difference.

75

Implementation Item Implementation Status Implementation Status Implementation Status Deviations from the
Sustainable
Development Best-
Practice Principles
for TWSE/TPEx
Listed Companies
and reasons thereof
Yes No Description
(IV) Does the Company take inventory
of its greenhouse gas emissions,
water consumption, and the total
weight of waste in the last two
years, and formulate policies on
greenhouse gas reduction, water
reduction, or waste management?		 V in the Company's CSR Report. (Refer
to Note 2 for risk assessment,
identification, and countermeasures
regarding climate change)
(IV) The Company continues to promote
economic development for
environmental sustainability based on
overall environmental management for
environmental protection, pollution
prevention, and green production as
well as fulfillment of corporate social
responsibility. We are also committed
to "low-carbon, low-waste, and low-
pollution" development actions with
the aim of creating more value for the
environment and products and
attaining balance in operations and
environmental sustainability.
Greenhouse gas management
In terms of greenhouse gas emissions
management, the Company has
obtained third-party assurance
statements for all factories in
accordance with ISO 14064-1
Greenhouse Gas Emissions
Management System Regulations.
Energy management
Most of the energy required for the
Company's operations is purchased
electricity. To ensure energy
efficiency, we have adopted major
energy saving measures such as the
gradual replacement of high-
efficiency lighting equipment and
energy recovery in old factory
buildings.
Water resource management
The Company does not consume any
water resources in the production
process, and our main water
consumption consists mainly of
employees' domestic water
consumption, which is supplied by
the government. To ensure the
reduction of water resources, we
encourage employeesto conserve

No significant
difference.

76

Implementation Item Implementation Status Implementation Status Implementation Status Deviations from the
Sustainable
Development Best-
Practice Principles
for TWSE/TPEx
Listed Companies
and reasons thereof
Yes No Description
water and we have set up rainwater
recycling facilities in the R&D
Building.Waste management
The Company is part of the
electronics and information industry
that produces low pollution. Our
targets for waste management consist
mainly of reduction of total waste and
recycling of waste.
Please refer to Appendix 1 and
Appendix 2 for information on the
environmental project management
policies, targets, and performance.
IV. Social Issues
(I)
Has the Company formulated
appropriate management policies
and procedures according to
relevant regulations and the
International Bill of Human
Rights?
(II)
Does the Company formulate and
implement reasonable employee
benefit measures (including
remuneration, leave, and other
benefits) and appropriately
employee compensation based on
operating performance or results?		 V
V		 (I) The Company abides by labor
regulations and established the
employee policy and related
management regulations in accordance
with the Code of Conduct of the
Responsible Business Alliance (RBA),
"Universal Declaration of Human
Rights", and other international labor
and human rights standards. We also
implement an equal employment
opportunity system.
The Company has established the
Human Rights Policy and procedures
and disclosed them in the CSR
section on the Company's website
https://www.fsp-
group.com.tw/tw/HumanRightsPolicy
.html.
(II)
The Company abides by the Labor
Standards Act and related laws and
regulations for setting up salary and
benefit measures for employees, and
provides competitive benefits to
motivate employees. We also
implement regular performance
evaluations and distribute
performance bonuses to share
earnings with employees. To retain
talented employees, the Company has
created an employee stock ownership
trust and makes fixed monthly
contributions to the Company's
incentivefundasrewardsfor
No significant
difference.
No significant
difference.

77

Implementation Item Implementation Status Implementation Status Implementation Status Deviations from the
Sustainable
Development Best-
Practice Principles
for TWSE/TPEx
Listed Companies
and reasons thereof
Yes No Description
(III) Does the Company provide a
healthy and safe work
environment, and does it organize
health and safety training for its
employees on a regular basis?
(IV) Has the Company established
effective career development and
training plans for its employees?		 V
V		 employees. Refer to page 137 and the
human resources section on the
Company's website for more
informationhttps://www.fsp-
group.com/tw/HumanResource.html.
Each year, the Company adjusts
salaries in accordance with changes
in market salary, economic trends,
and individual performance to ensure
that the overall compensation remains
competitive. In 2021, the average
annual salary adjustment for both
management and non-management
roles of the Company in Taiwan was
approximately 4%.
(III) The Company continued its effort and
obtained the ISO 45001 Occupational
Safety and Health Management
System certification.
Certification date: 2019/10/10
Validity period:
2019/10/25~2022/10/24
Of the 7 accidents that occurred in
2021 in the Company, 4 accidents
were traffic accidents during the
commute and no work-related
fatalities occurred. We therefore
organize traffic safety training and
safe driving education from time to
time with the aim of effectively
reducing employee absence caused
by traffic accidents.
Refer to page 139 of the Annual
Report for protective measures for
the work environment and the
personal safety of employees.
Refer to page 140 of the Annual
Report for more information on the
Company's occupational safety
training and occupational safety
inspections.
(IV) The Company has formulated
comprehensive training programs for
talent cultivation. We aim to use
training programs to help employees
understand the internal operations of
the Company and enhance the
necessaryknowledge, skills,and


No significant
difference.
No significant
difference.

78

Implementation Item Implementation Status Deviations from the
Sustainable
Development Best-
Practice Principles
for TWSE/TPEx
Listed Companies
and reasons thereof
Yes No Description
(V)
Does the Company comply with
relevant regulations and
international standards regarding
issues such as customer health and		 V professional know-how. The
Company has a comprehensive
employee training program that
encourages autonomous learning and
self-improvement by employees.
1.
Pre-job training program
We help new employees
understand the Company's
culture, management rules, and
regulations, and familiarize them
with their job duties through
mentoring and instructions by
managers or senior employees to
enhance work performance.
2.
The on-the-job training program
contains training courses
planned based on the Company's
operation strategies, annual
plans, and core competencies.
We also use team courses to
build consensus and achieve
organizational goals and
improve the professional know-
how of employees.
3.
Special training program
The Company plans training for
the necessary skills and
knowledge for employees' roles
based on the core competence
requirements to improve
employees' professional
competencies.
4.
Management skill training
program
We encourage autonomous
learning by managers to ensure
that managers have both soft and
hard powers.
5.
Trainingcourses in 2021:
Number of
Participants
Number
of Hours
Total
Participation
Hours
537
292
3,609
(V)
We provide warranty service for all
our products, and consumers can
report problems on the official
website or through adistributor.The


No significant
difference.

79

Implementation Item Implementation Status Implementation Status Deviations from the
Sustainable
Development Best-
Practice Principles
for TWSE/TPEx
Listed Companies
and reasons thereof
Yes No Description
safety, right to privacy, marketing
and labeling of its products and
services and set up relevant
consumer or customer protection
policies and complaint
procedures?
(VI) Does the Company formulate
supplier management policies that
require suppliers to follow relevant
regulations on issues, such as
environmental protection,
occupational safety and health, or
labor rights? If so, describe the
results.		 V Company responds to customer
complaints and feedback correctly
and promptly and provide total
solutions.
The Company has followed relevant
laws, regulations, and international
norms for the marketing and labeling
of products and services.
(VI) The Company requires suppliers to
comply with the RBA Code of
Conduct under the "General Rules for
Compliance Statements" in the
procurement contracts with supplier
in accordance with the "Supplier
Management Regulations". It covers
the requirements and expectations for
suppliers regarding environmental
safety and health risks, prohibition of
child labor, labor management, basic
labor rights for a hazard-free work
environment, ethical standards, and
ethical corporate management based
on the screening criteria for
environmental protection, human
rights, safety, health, and sustainable
development.
The Company set up the Supplier
Audit Team in the "Responsible
Supply Chain" Team in its sustainable
development roadmap. It carefully
selects, audits, and supports suppliers
to implement sustainability
requirements in daily management of
the supply chain on the basis of
cooperation.
The Company's suppliers in 2021
must comply with the following
requirements.
Supplier
evaluation
Supplier Code of Conduct,
ISO 9001 Quality
Management System
certification, ISO 45001
Occupational Safety and
Health Management System
certification., ISO 14001
Environmental Management
certification.

No significant
difference.
Supplier
evaluation		 Supplier Code of Conduct,
ISO 9001 Quality
Management System
certification, ISO 45001
Occupational Safety and
Health Management System
certification., ISO 14001
Environmental Management
certification.

80

Implementation Item Implementation Status Implementation Status Implementation Status Deviations from the
Sustainable
Development Best-
Practice Principles
for TWSE/TPEx
Listed Companies
and reasons thereof
Yes No Description
Supplier
audit		 The Company has set up an
audit team to follow up on
improvements for suppliers'
discrepancies, jointly
improve quality and
technologies, enhance
environmental protection
and health performance, and
introduce automation to
improve output.
V.
Does the company refer to
internationally-used standards or
guidelines for the preparation of
reports such as sustainability
reports to disclose non-financial
information? Are the reports
certified or assured by a third-
party accreditation body?		 V (I)
The framework for the preparation
of the Company's CSR report is
based on the Core Options in the
2016 Global Reporting Initiative
(GRI) Sustainability Reporting
Guidelines (GRI Guidelines). It also
complies with the "Corporate Social
Responsibility Best-Practice
Principles for TWSE/TPEx Listed
Companies" and the United Nations
Sustainable Development Goals
(SDGs) for collecting information
on issues of concern to stakeholders
through multiple channels. The
Executive Office of the Sustainable
Development Committee and the
Work Groups conduct assessments
and compile data for the Report.
(II)
The Company has set up the
Corporate Social Responsibility
section on its website and discloses
information on corporate social
responsibility in the Annual Report.
(III)
The Company has also voluntarily
published the Corporate Social
Responsibility Report each year
since 2014 and disclosed it on the
Company's website and the Market
Observation Post System for
stakeholders.
(IV)
Although the Company's CSR
Report has not yet been certified by
a third-party accreditation body, the
information on the quality of the
data cited in the Report can be
found in Appendix 3.
(V)
As the competent authority has
changed the title of the "Rules
Governing the Preparation and

No significant
difference.

81

Implementation Item Implementation Status Deviations from the
Sustainable
Development Best-
Practice Principles
for TWSE/TPEx
Listed Companies
and reasons thereof
Yes No Description
Filing of Corporate Social
Responsibility Reports by TWSE
Listed Companies" to the "Rules
Governing the Preparation and
Filing of Sustainability Reports by
TWSE Listed Companies", the
Company shall use the title
"Sustainability Report" when
preparing the2021 Reportin 2022.
VI. If the company has established sustainable development best-practice principles based on the "Sustainable
Development Best-Practice Principles for TWSE/TPEx Listed Companies," describe the implementation
and any deviations from such principles:
The Company has established the "Sustainable Development Best-Practice Principles". Refer to the
explanation in the "Implementation Status of Sustainable Development" in the Annual Report for
information on related operations. There is no significant difference between the implementation and the
"Sustainable Development Best-Practice Principles"established by the Company.
VII. Other important information to facilitate a better understanding of the company's sustainable development
practices:
(I)
Social engagement
1. The Company organizes charity events for environmental protection. In addition to mobilizing
employees, we also invite family members to join us and give back to the society with our gratitude for
"giving back to the society". The Company sponsors employees' purchase of environmentally friendly
detergents every quarter so that they can support environmental protection at an affordable price.
2. We have organized several charity sales, charity gifts, and charity donations to encourage employees to
take real actions to support charitable causes.
(1) When the inventory of the blood bank ran low, FSP invited a blood donation vehicle to set up
operations at the factory and encouraged blood donations from our employees and partner
companies. The Company donated NT$500 for every 250cc bag of blood donated. We collected 108
bags and donated NT$54,000.
(2) When the COVID-19 level 3 alert began, the Company continuously purchased fruits and vegetables
from small organic farms every month so that employees do not have to take risks when making
purchases in crowds. We also share healthy ingredients with employees to create a win-win for both
production and sales.
(3) The Company invited colleagues to buy charity coffee from the [Heart for Africa TAIWAN]
association in Changhua County to support relief measures for droughts, famines, and education in
Africa. We purchased coffee beans totaling NT$88,000.
3. On Family Charity Day, the Company provided employees and family members with coupons and
invited charity organizations to set up booths. We also invited a charity organization for the Power
Angel performance and organized massage services provided by the visually impaired so that
employees and their families could participate in the activities and support the charity organizations.
4. We continued to make donations and donated NT$1,000,000 to the Sharestart Educational Foundation.
The Company continued its sponsorship with an additional NT$500,000 for the eighth class for students
from underprivileged families in Hsing Fu Junior High School so that their continued education will not
be affected by the financial conditions of their families. We also donated NT$340,000 to St. Francis
Xavier Home for Girls, Halfway House, and Home for Children and Juvenile, and Yuli Catholic Church
in Hualien as funding for taking care of children and juvenile.
5. The Company spares no effort in supporting art and cultural organizations. The FSP Gallery hosts
exhibitions on different themes each quarter and provided a sponsorship of NT$1,030,000 for the Big
Bowlof Teain Taipeiperformance by [TaipeiQuyituan] and the WanderingHeroes performance by

82

[Contemporary Legend Theatre]. We also invited employees to enjoy the immersive theater experience. 6. Industry-academia collaboration The Group and the Department of Electrical Engineering of National Ilan University joined hands to enhance R&D technology development capabilities. We officially launched a three-year industryacademia collaboration program on September 1, 2021 titled "Next-Generation Key Technology Development for Efficient Green Energy". The Group plans to invest more than NT$10 million in three years and work in collaboration with the Higher Education SPROUT Project of the Ministry of Education to help students understand the current development and the problems of the industry during their studies, and assist companies in developing key technologies for next-generation green energy. Students can get a job as soon as they graduate to facilitate seamless connection between their studies and work. FSP Group provides students of the Department of Electrical Engineering of National Ilan University with "R&D Rookie Scholarship" so that students with excellent performance can concentrate and place all their efforts on academic research and technological innovation. The Company and the University work together to cultivate professional in power and electronics so that participating graduate students and university students can use the academic theories and practical skills they learned to maximize the benefits of industry-academia collaboration. (II) Environmental sustainability The Company continues to promote economic development for environmental sustainability based on overall environmental management for environmental protection, pollution prevention, and green production as well as fulfillment of corporate social responsibility. We are also committed to "low-carbon, low-waste, and low-pollution" development actions with the aim of creating more value for the environment and products and attaining balance in operations and environmental sustainability. The Company has implemented and passed the ISO 14001 environmental management system in our major factories of operations to fulfill our environmental responsibility and improve our performance in environmental protection. We set environmental safety and health objectives and management plans with the environmental management system every year, and use the "PDCA cycle" to ensure the implementation of environmental safety and health management. After evaluating the potential environmental impact in the production process based on environmental protection laws, we identified "climate change & greenhouse gas inventory", "energy management", "water resources", and "waste management" as core tasks for continuous improvement. Please refer to Appendix 1 and Appendix 2 for information on the environmental project management policies, targets, and performance.

83

Note 1

Note 1 Note 1 Note 1 Note 1

Establish strategies and
action plans to enhance
corporate governance

Improve board functions

Enhance internal control

Enhance identification and
risk management of
material issues

Improve information
security management

Enhance customer
relations
1.
Corporate Governance
2.
Responsible Supply
Ch i

Establish strategies and
action plans for
sustainable supply chain
management

Implement supplier
ESG risk management

Promote supply chain
ESG capabilities

Promote sustainability
initiatives for the supply
chain
3.
Green Operations

Establish strategies and
action plans for
environmental and energy
and resource management

Improve green production

Promote carbon
management and use of
renewable energy

Enhance recycling and
reuse

Enhance climate change
adaptation
4.
Green Products

Establish strategies and
action plans for
sustainable products and
services

Develop innovative
solutions and business
models

Promote low-carbon
technologies, products,
and services

Develop recyclable
innovative designs and
applications
5.
Happy Workplace

Establish strategies and
action plans for
employee development
and care

Enhance mechanisms for
talent cultivation and
retention

Enhance employee care
and human rights
management

Strengthen two-way
communication

Create a healthy
workplace
6.
Social Engagement

Establish strategies and
action plans for social
engagement

Encourage employees to
become volunteers

Develop social care
promotion mechanisms

Promote initiatives for
social engagement

Enhance external
stakeholder consultation
mechanisms
Executive Office
Board of Directors
Sustainable Development Committee
1.
Corporate Governance		 4.
Green Products		 5.
Happy Workplace		 6.
Social Engagement

Establish strategies and
action plans to enhance
corporate governance

Improve board functions

Enhance internal control

Enhance identification and
risk management of
material issues

Improve information
security management

Enhance customer
relations
Establish strategies and
action plans for
sustainable products and
services

Develop innovative
solutions and business
models

Promote low-carbon
technologies, products,
and services

Develop recyclable
innovative designs and
applications
Establish strategies and
action plans for
employee development
and care

Enhance mechanisms for
talent cultivation and
retention

Enhance employee care
and human rights
management

Strengthen two-way
communication

Create a healthy
workplace
Establish strategies and
action plans for social
engagement

Encourage employees to
become volunteers

Develop social care
promotion mechanisms

Promote initiatives for
social engagement

Enhance external
stakeholder consultation
mechanisms

84

Note 2 Climate change evaluation and response measures:

The deterioration of the global environment has caused climate change. We must pay more attention to energy use as we continue to consume the Earth's resources. In terms of the impact of climate change on the electronics industry from the perspective of disaster response, risk analysis and extreme events are the key issues.

Identification of climate change management risks and opportunities

FSP's corporate vision is to "become a leader in providing global green energy solutions and make contributions in individual lives", and integrate the values of sustainability and environmental protection. The impact of climate change on the global ecology and human survival has increased in recent years. Companies that rely on global trade must face the impact of climate change. In response, FSP's ESG management team has created plans and set medium and long-term goals based on the concept of sustainability. We actively promote carbon reduction and other management measures to mitigate climate change and improve the Company's adaptability.

Medium to long-term goals

Step 1 Climate change response strategies

We continue to include the potential impacts of climate change into our overall plans for operations through our ESG Work Group. We predict the probability of risks and their impact, and develop response and crisis management mechanisms.

Step 2 Climate change risk assessment and identification

We identified the 16 risk factors below for risk assessment based on the Task Force on the guidelines provided by the Task Force on Climate-Related Financial Disclosures (TCFD) in discussions with the CSR Work Group.

CSR Work Group.
a.
Carbon economy (carbon tax, carbon emission
trading, etc.)		 i.
High temperature or heat wave
b.
Energy tax		 j.
Haze
c.
Mandatory filing for carbon emissions		 k.
Winter storms
d.
Voluntary emission reduction agreements		 l.
Droughts
e.
Control and trading of total carbon emissions		 m.
Business reputation (brand recognition)
f.
Product efficiency regulations and standards		 n.
Changes in consumer behavior
g.
Typhoons or heavy rain		 o.
Supply chain management
h.
Earthquakes or tsunamis		 p.
Political and financial issues

85

Step 3 Identification of climate change management risks and response measures

As we adapt to climate change, we must also think about our competitiveness and grasp business opportunities. The identified risks and opportunities of climate change are specified on the following page:

page:
Risk Type Factor Risks Opportunities Description of Response
Measures
Description Level Description Level
Regulatory
requirements		 Carbon
economy
(carbon tax,
carbon
emission
trading, etc.)		 Increased
operating costs		 High-
low		 Facilitate the
development of the
green energy
industry and
enhance companies'
energy conservation
technologies		 Medium
We search for feasible
regulations through regulation
identification in the
management system. We
organize training on regulation
and revise internal standards to
reduce the possibility of
violations.
Energy tax Medium Low
Mandatory
filing for
carbon
emissions		 Medium-
low		 Accelerate
companies'
reduction of carbon
emissions and
obtain carbon
credits		 Low Communicate and propose
recommendations for
government policy
requirements to make the
system fair and reasonable.

Voluntary
emission
reduction
agreements		 Increased cost
of equipment
investment		 Medium-
low		 Low Organize annual greenhouse gas
inventories to meet reduction
targets of the organization.
Control and
trading of
total carbon
emissions		 Limited
production
capacity		 Low-
high		 Slow down
expansion in the
industry to improve
the health of the
industry		 Low Pay attention to the changes in
domestic and international laws
and regulations after the Paris
Climate Accords and evaluate
internal response measures.
Product
efficiency
regulations
and standards
Inefficient
products fail
meet customer
requirements
and affect
business
opportunities		 High-
low		 Increase the demand
for efficient energy-
saving products
Low		 Evaluate feasible technologies
and materials for product design
and reduce energy consumption
of products.
Extreme
weather		 Typhoons or
heavy rain		 Probability and
severity of
natural
disasters that
affect
production and
operations		 Low Maintain production
competitiveness and
increase customer
confidence		 Medium
Set up emergency response
procedures to reduce loss of
personnel and property.
Use commercial insurance
policies to reduce losses in the
event of natural disasters.
Earthquakes
or tsunamis		 Medium Medium
High
temperature
or heat wave
Low		 Increase the
protection of
production sites		 Low
Haze Low Low
Winter
storms		 Low Low
Droughts Low Low Conserve water, improve the
reuse of rainwater and
wastewater, and establish
emergency response measures
for water resources.
Economic
activities		 Business
reputation
(brand
recognition)		 Poor image
will lead to a
decline in sales
and stock
prices		 Medium-
low		 Provide high-
performance
products and active
carbon management
to meet customer
requirements and
increase brand value
Medium		 Economic activities

86

Risk Type Factor Risks Risks Opportunities Opportunities Description of Response
Measures
Description Level Description Level
Changes in
consumer
behavior		 Reduced
demand for
energy-saving
products		 Medium-
low		 Increase the demand
and support for
environmentally
friendly products in
the market
Medium
Supply chain
management		 Poor
mitigation and
adaptation
affect
operating costs		 Medium-
high		 Slow down
expansion in the
industry to improve
the health of the
industry		 Medium
Increase renewable energy usage
ratio.
Political and
financial
issues		 Changes in the
political or
economic
environment
affect
profitability		 Medium Pay attention to the
development of
climate change and
climate justice
movements in the
region, and
implement early
responses and
adjustments in
operations to reduce
the impact on
business		 Low

Table 1 Results of the inventory of greenhouse gas emissions

Item 2020 2021 Description
Scope 1
Direct energy (tons CO2e)		 1,154.81
1,371.42
Annual greenhouse gas emissions of each
organization have been verified by a third
party based on the greenhouse gas
inventory standards (ISO 14064-1).
Scope 2
Indirect energy (tons CO2e)		 15,647.22
16,739.25
Scope 1 and Scope 2
Direct and indirect greenhouse
gas emissions (tons CO2e)		 16,802.03
18,110.67
Scope 3
Business travel		 － 11.57
Global water consumption
(million liters)		 194.60
194.02
Waste (tons) 226.70 262.12

87

Table 2 Environmental project management policies, targets, and performance

Management Item Management Policy Management Target Target Achievement
Status		 Results
Hazardous substances 1.
Execution and
compliance with IECQ
QC 080000 Quality
Management System.
2.
Rigorous compliance
with customer
requirements and
regulatory requirements.
3.
Uphold HSF production
process and implement
continuous
improvements.		 Reduce the use of hazardous
substances		 We used the Green
Product Management
(GPM) platform to
manage hazardous
substances. In 2021, 5,918
new parts were
recognized, putting the
total number of
recognized parts at
52,165. We have
identified and managed 52
hazardous substances.
Achieved
GHG emissions FSP is committed to its
greenhouse gas inventory,
reduction, and control to help
the Company to monitor
actual greenhouse gas
emissions. We also use the
results of the inventory for
additional voluntary
greenhouse gas reduction
projects.		 We set 2010 as the baseline year for
greenhouse gas emissions
1.
We aim to reduce emissions by
4% from the baseline year each
year
2.
Reduce total GHG emissions by
50% by 2025		 1. The total greenhouse
gas emissions in 2021
fell by an average of
38% compared to the
baseline year.
2. The Company
obtained the ISO
14064-1 Certification
Statement.		 Achieved
Energy Improve energy management
efficiency and prioritize the
purchase of energy-efficient
equipment before equipment
replacement to meet
regulatory requirements.		 1.
Achieve 50% reduction in total
electricity consumption by 2025
2.
Set a target of 1% average
energy savings for each year
compared to the baseline year
starting from 2019 to meet
greenhouse gas emission
management targets		 6.89% increase -
Water resources Implement water management
measures, prioritize water-
saving equipment when
evaluating equipment
replacement, reduce water
waste, and increase employee
awareness with training.		 Reduce total water consumption by
1% compared to the previous year		 0.32% decrease -
Waste Incorporate product cycle
requirements to reduce the
amount of waste and improve
environmental performance
and select qualified vendors
for outsourced waste disposal
based on the location of the
factory.
Manage and maintain records
of waste production, sorting
and collection, recycling and
transportation in accordance
with the environmental
management system.		 Total waste was reduced by 1%
compared to the previous year		 15.62% induction -

88

Appendix 3 Data quality information for the Corporate Social Responsibility Report

Item Verification / certification / audit
Financial data (information from the Financial
Report)		 KPMG
ISO 9001 Quality Management, ISO 13485
Medical Device Quality Systems, ISO 17025
Laboratory Quality Accreditation		 TÜV Rheinland, SGS Taiwan
ISO 14001 Environmental Management System
ISO 45001 Occupational Safety and Health
Management System
ISO14064-1Greenhouse GasInventory
IECQ QC 080000 Hazardous Substance Process
Management

89

(VI) Implementation of Ethical Corporate Management and Deviations from the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies

Evaluation Item Implementation Status Implementation Status Implementation Status Deviations from the
Ethical Corporate
Management Best
Practice Principles
for TWSE/TPEx
Listed Companies
andReasons
Yes No
Description
I.
Establishment of ethical
corporate management
policies and programs
(I)
Does the Company have a
Board-approved ethical
corporate management
policy and stated in its
regulations and external
correspondence the ethical
corporate management
policy and practices, as well
as the active commitment of
the Board of Directors and
senior management towards
implementation of such
policy?
(II) Does the Company have
mechanisms in place to
assess the risk of unethical
conduct, and perform
regular analysis and
assessment of business
activities with higher risks
of unethical conduct within
the scope of business? Does
the Company implement
programs to prevent
unethical conduct
accordingly and ensure the
programs cover at least the
matters described in
Paragraph 2, Article 7 of the
Ethical Corporate
Management Best Practice
Principles for TWSE/TPEx
Listed Companies?
(III) Does the Company define
the operating procedures,		 V
V
V		 (I)
The Company established the "Ethical
Corporate Management Best-Practice
Principles" on January 28, 2016 to
establish an ethical-based policy. The
Principles were revised based on the
approval of the Board of Directors on
March 19, 2020. The Company
established a plan to prevent unethical
conduct in accordance with the
Company's core value of integrity. We
encourage and require members of the
Company, including the Board of
Directors and management, to actively
implement the policy of ethical
corporate management.
Please refer to the corporate
governance section on the company
website to view the Company's Ethical
Corporate Management Best-Practice
Principles.
(II) The Company has established the
"Code of Ethical Conduct" and the
"Ethical Corporate Management Best-
Practice Principles" to provide a code
of conduct for the Company's
personnel responsible for important
businesses. Internal auditors conduct
regular audits to strengthen the
implementation of the ethical
corporate management policy. The
Company has set up related
regulations for different compliance
requirements including Operating
Procedures for the Prevention of
Insider Trading, Regulations
Governing the Operating Procedures
of Whistleblower Channels and
Protection System, Personal
Information Management Regulations,
and information security management
to take preventive measures for ethical
corporate management.
(III) The Company has established sound
businessmanagementframeworkto		 No significant
difference.
No significant
difference.
No significant
difference.

90

Evaluation Item Implementation Status Implementation Status Implementation Status Deviations from the
Ethical Corporate
Management Best
Practice Principles
for TWSE/TPEx
Listed Companies
andReasons
Yes No
Description
code of conduct,
disciplinary actions, and
appeal procedures in the
programs against unethical
conduct? Does the Company
enforce the programs
effectively and perform
regular reviews and
amendments?		 create a corporate culture of ethical
management and improve
development. We also established the
"Ethical Corporate Management Best-
Practice Principles" to provide
guidance for all behavior. To
implement the "Ethical Corporate
Management Best-Practice Principles"
and "Codes of Ethical Conduct", the
Company established "Regulations
Governing the Operating Procedures
of Whistleblower Channels and
Protection System" to set up internal
and external reporting channels and
the reward and penalty system. The
Company shall continue to pay
attention to the development of ethical
corporate management regulations in
Taiwan and foreign countries. The
Company also encourages Directors,
managerial officers, and employees to
propose recommendations, which will
be used to review and improve the
ethical corporate management policies
and measures and thus achieve more
effective ethical corporate
management.
II. Fulfillment of ethical
corporate management
(I)
Does the Company evaluate
business partners’ ethical
records and include ethics-
related clauses in the
business contracts?
(II) Does the Company have a
unit responsible for ethical
corporate management on a
full-time basis under the
Board of Directors that
reports the ethical corporate
management policy and
programs against unethical
conduct regularly (at least
once a year) to the Board of		 V
V		 (I)
The Company has set up evaluation
mechanisms for customers and
suppliers. When entering into contracts
with others, the Company shall include
in the contracts terms requiring
compliance with ethical corporate
management policy and that in the
event the trading counterparties are
involved in unethical conduct, the
Company may terminate or rescind the
contracts at any time.
(II) The Company promotes ethical
corporate management under the direct
supervision of the Chairman. Meetings
are convened by the Corporate
Governance Officer and the President
Office provides services on a part-time
basis. The results are reported to the
Board of Directors at least once a year.
Implementation status in 2021: No
reports occurred.


No significant
difference.
No significant
difference

91

Evaluation Item Implementation Status Implementation Status Implementation Status Deviations from the
Ethical Corporate
Management Best
Practice Principles
for TWSE/TPEx
Listed Companies
andReasons
Yes No
Description
Directors while overseeing
such operations?
(III) Does the Company establish
policies to prevent conflicts
of interest, provide
appropriate communication
channels, and implement
them accordingly?
(IV) Does the Company have
effective accounting and
internal control systems in
place to implement ethical
corporate management?
Does the internal audit unit
devise audit plans based on
the results of unethical
conduct risk assessments
and audit the systems
accordingly to prevent
unethical conduct, or hire
external CPAs to perform
the audits?
V
V		 (III) Article 10 of the Company's "Rules of
Procedure for Board of Directors'
Meetings" specify the requirements for
the recusal of Directors due to conflict
of interest. If a Director or a corporate
entity that the Director represents is
considered an interested party in the
agenda, a full disclosure is required
during the current meeting session.
The Director shall recuse
himself/herself from all discussions
and voting if it is in conflict against the
Company's interests. Under such
circumstances, the Director shall not
exercise voting rights on behalf of
other Directors.
Article 17 of the "Corporate
Governance Best-Practice Principles"
expressly prohibits the transfer of
interest between the Company and
related parties or shareholders.
The Company also established the
"Regulations Governing the Operating
Procedures of Whistleblower Channels
and Protection System" to provide
whistleblowers with reporting
channels and protect the identity of
whistleblowers.
Reporting mailbox:https://www.fsp-
group. com/tw/Whistleblower.html.
(IV) The Company has established an
effective accounting system and
internal control system. Internal
auditors conduct various audits based
on the annual audit plan and report the
results of the audit and subsequent
improvements to the Board of
Directors and management to ensure
the effectiveness of ethical corporate
management.
The Company also conducts annual
self-assessments on internal controls of
the Company. The Company's
departments and subsidiaries are
required to review the design of the
internal control system and the
effectiveness of its implementation.



No significant
difference
No significant
difference.

92

Evaluation Item Implementation Status Implementation Status Implementation Status Deviations from the
Ethical Corporate
Management Best
Practice Principles
for TWSE/TPEx
Listed Companies
andReasons
Yes No
Description
(V) Does the Company regularly
hold internal and external
educational trainings on
ethical corporate
management
V		 (V) The Company plans corporate culture
training to incorporate the corporate
culture of integrity into the Company's
operations. We also organize supplier
conferences to promote the concept of
ethical corporate management.		 No significant
difference.
III. Operation of the whistle-
blowing system
(I)
Has the Company
established both a
reward/whistle-blowing
system and convenient
whistle-blowing channels?
Are appropriate personnel
assigned to the accused
party for the follow-up?
(II) Does the Company have in
place standard operating
procedures for investigating
accusation cases, as well as
follow-up actions and
relevant post-investigation
confidentiality measures?		 V
V		 (I)
The Company established the
"Regulations Governing the Operating
Procedures of Whistleblower Channels
and Protection System" to establish
reporting channels and systems for the
Company, implement the "Ethical
Corporate Management Best-Practice
Principles" and "Code of Ethical
Conduct" established by the Company,
and protect the legal rights of
whistleblowers and counterparties.
Reports are processed in a confidential
manner and verified by the Audit
Office to protect whistleblowers. The
identity of whistleblowers are the
contents of reports are always kept
confidential.
(II) The Company established the
"Regulations Governing the Operating
Procedures of Whistleblower Channels
and Protection System" to provide
legitimate reporting channels and
maintain the confidentiality of the
identity of whistleblowers and contents
of reports. When the processing unit
finds material misconduct or
likelihood of material impairment to
the Company, it shall immediately
prepare a report and notify the
Independent Directors in written
format.
Documentation of case acceptance,
investigation processes, and
investigation results shall be retained
in written format and digital files for at
least five years. In the event of a suit in
respect of the whistleblowing case
before the retention period expires, the
relevant information shall continue to
be retained for two years after the
conclusion of the litigation.




No significant
difference.
No significant
difference.

93

Evaluation Item Implementation Status Implementation Status Implementation Status Deviations from the
Ethical Corporate
Management Best
Practice Principles
for TWSE/TPEx
Listed Companies
andReasons
Yes No
Description
(III) Does the Company provide
proper whistleblower
protection?		 V (III) The Company established the
"Regulations Governing the Operating
Procedures of Whistleblower Channels
and Protection System" to take
appropriate confidentiality measures
and protect whistleblowers from
impropertreatment.
No significant
difference.
IV. Strengthening information
disclosure
(I)
Does the Company disclose
its ethical corporate
management policies and
the results of its
implementation on the
Company’s website and
MOPS?		 V The Company has uploaded the "Ethical
Corporate Management Best-Practice
Principles" to the Company's website and
the MOPS. It also disclosed the information
on the implementation of ethical corporate
management in the Annual Report for
reference byrelated personnel.		 No significant
difference.
V. If the Company has established its own ethical corporate management principles based on the Ethical
Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies, please describe the
implementation and any deviations from the Principles: None.
VI. Other important information to facilitate a better understanding of the Company’s ethical corporate
management (e.g., review of and amendments to ethical corporate management policies):
1. The Company's Ethical Corporate Management Best-Practice Principles were revised on March 19,
2020 and passed by the Board of Directors.
2. The Company complies with the Company Act, Securities and Exchange Act, Business Entity
Accounting Act, TWSE/TPEx listing rules, and other laws or regulations on business activities as the
basic premises for its ethical corporate management.
3. The Company's "Rules of Procedure for Board of Directors' Meetings" specify the requirements for
the recusal of Directors due to conflict of interest. If a Director or a corporate entity that the Director
represents is considered an interested party in the agenda, a full disclosure is required during the
current meeting session. The Director shall recuse himself/herself from all discussions and voting if
it is in conflict against the Company's interests. Under such circumstances, the Director shall not
exercise voting rights on behalf of other Directors.
4. The Company established the "Operating Procedures for the Prevention of Insider Trading" which
state that Directors, managerial officers, and employees may not disclose internal material
information to others, may not inquire about or collect any non-public material inside information of
the Company not related to their individual duties from a person with knowledge of such
information, or disclose to others any non-public material inside information of the Company of
whichthey become awarefor reasons otherthanthe performance oftheirduties.

(VII) Corporate Governance Guidelines and Regulations and the Inquiry Method:

Please refer to the MOPS (http://mops.twse.com.tw) or the Company's website (https://www.fsp-group.com.tw) for more information.

(VIII) Other Important Information Regarding Corporate Governance:

  1. The Board appointed a Corporate Governance Officer on January 8, 2019 to implement corporate governance, protect the interests of the shareholders, and strengthen the functions of the Board.

94

  1. The Company has set up a dedicated section on the official website to explain the corporate governance status and provide corporate governance regulations for download and reference.

95

  • (IX) Status of Internal Control System

  • Statement on Internal Control

FSP Technology Inc. Statement on Internal Control

Date: March 18, 2022

The Company hereby states the results of the self-evaluation of the internal control system for 2021 as follows:

  • I. The Company acknowledges that the establishment, implementation, and maintenance of an internal control system is the responsibility of the Board of Directors and managerial officers, and the Company has established an internal control system. The internal control system is designed to provide reasonable assurance for the effectiveness and efficiency of the operations (including profitability, performance, and protection of assets), reliability, timeliness, and transparency of reporting, and compliance with applicable laws and regulations.

  • II. The internal control system has innate limitations. No matter how robust and effective the internal control system is, it can only provide reasonable assurance of the achievement of the foregoing three goals; in addition, the effectiveness of the internal control system may vary due to changes in the environment and conditions. However, the internal control system of the Company has self-monitoring mechanisms in place, and the Company will take corrective action against any defects identified.

  • III. The Company uses the assessment items specified in the Regulations Governing Establishment of Internal Control Systems by Public Companies (hereinafter referred to as the "Regulations") to determine whether the design and implementation of the internal control system are effective. Based on the process of control, the assessment items specified in the Regulations divide the internal control system into five constituent elements: 1. control environment; 2. risk assessment; 3. control activities; 4. information and communication; and 5. monitoring. Each constituent element includes a certain number of items. For more information on such items, refer to the Regulations.

  • IV. The Company has adopted the aforesaid assessment items for the internal control system to determine whether the design and implementation of the internal control system are effective.

  • V. Based on the results of the determination in the preceding paragraph, the Company is of the opinion that, as of December 31, 2021, the internal control system (including the supervision and management of subsidiaries), including the design and implementation of the internal control system relating to the effectiveness and efficiency of the operations, reliability, timeliness, and transparency of reporting, and compliance with applicable laws and regulations, are effective and can reasonably assure the achievement of the foregoing goals.

  • VI. This statement will constitute the main content of the Company's annual report and the

96

prospectus and will be disclosed to the public. Any falsehood or concealment with regard to the above contents will entail legal liability under Articles 20, 32, 171, and 174 of the Securities and Exchange Act.

  • VII. This statement was approved by the Board of Directors on March 18, 2022, and out of the ten directors in attendance, none had dissenting opinions of it and all approved the content expressed in this statement.

FSP Technology Inc.

Chairman and President: Cheng, Ya-Jen

97

  1. If a CPA Has Been Hired to Carry Out a Special Audit of the Internal Control System, the CPA Audit Report Shall Be Disclosed: None.

  2. (X) For Penalties Imposed Upon the Company and Its Employees in Accordance with the Law or Penalties Imposed by the Company Upon Its Employees for the Violation of the Internal Control System Policy During the Most Recent Fiscal Year up to the Date of Publication of the Annual Report, if the Result of Such Penalties May Have a Significant Impact on the Shareholders’ Equity or the Price of Securities, the Contents of the Penalties, Principal Deficiencies, and Improvements Shall Be Specified: None.

  3. (XI) Major Resolutions of Shareholders’ Meeting and Board Meetings During the Most Recent Fiscal Year up to the Date of Publication of the Annual Report:

  4. Important resolutions from the 2021 general shareholders' meeting and implementation status:

    • (1) Acknowledgment of the Company's 2020 Business Report and Financial Statements.

    • (2) Acknowledgment of the Company's distribution of earnings for 2020.

Implementation status: The ex-dividend date was set as July 5, 2021 and the distribution date was set as July 19, 2021.

The Company distributed cash dividends of $3 per share.

  • (3) Passed the amendment of the Company's "Articles of Incorporation".

Implementation status: Announced on the Company's website on July 20, 2021 and processed in accordance with the amended procedures.

2. Major Resolutions of the Board Meetings:

Board of Directors Major Resolutions
The 5th meeting of the 10th
term
2021.01.14		 1. Acknowledgment of the proposal for the year-end bonus for the Company's managerial
officers for 2020.
2. Passed the Company's Business Plan for 2021.
3. Passed the amendment of the Company's "Corporate Governance Best-Practice
Principles".
4. Passed the amendment of the "Regulations Governing the Evaluation of the Board of
Directors".
5. Passed the proposal for the renewal of the Company's comprehensive credit limit in
banks.
The 6th meeting of the 10th
term
2021.03.18		 1. Passed the proposal for the Company's replacement of the CPAs due to internal adjustment
of KPMG Taiwan.
2. Passed the proposal for the Company's appointment of the CAP firm for 2021 and its
remuneration.
3. Passed the proposal for the compensation for employees and Directors for 2020.
4. Passed the Company's 2020 Business Report and Financial Statements.
5. Passed the proposal for the remuneration of the managerial officers for 2020.
6. Passed the Company's 2020 Statement on Internal Control.
7. Passed the Company's distribution of earnings for 2020.
8. Passed the amendment of the Company's "Articles of Incorporation".
9. Passed the amendment of the "Regulations Governing the Remuneration of Directors and
Members of Functional Committees".
10. Passed the amendment of the Company's "Regulations Governing the Operating
Procedures of Whistleblower Channels and Protection System".
11. Passed the proposal for the creation of the Company's "Sustainable Development
Committee"
12. Passed the date, location, and meeting agenda for the Company's 2021 general
shareholders' meeting.
13. Passed the proposal for shareholders' proposal rights for the 2021 general shareholders'
meeting.
The 7th meeting of the 10th
term		 1. Passed the Company's consolidated financial statements for the first quarter of 2021.

98

Board of Directors Major Resolutions
2021.04.29
The 8th meeting of the 10th
term
2021.06.11		 1. Passed the date and location for the Company's 2021 general shareholders' meeting.
2. Passed the proposal for the application (renewal) of the Company's comprehensive
credit limit in banks.
The 9th meeting of the 10th
term
2021.07.12		 1. Passed the proposal for changing the location for the Company's 2021 general
shareholders' meeting.
The 10th meeting of the 10th
term
2021.08.05		 1. Passed the Company's Consolidated Financial Statements for the first half of 2021.
The 11th meeting of the 10th
term
2021.11.04		 1. Passed the proposal for the creation of the Company's "Nominating Committee"
2. Passed the Company's consolidated financial statements for the third quarter of 2021.
3. Passed the Company's Audit Plan for 2022.
The 12th meeting of the 10th
term
2022.01.13		 1. Acknowledgment of the proposal for the year-end bonus for the Company's managerial
officers for 2021.
2. Passed the Company's Business Plan for 2022.
3. Passed the proposal for the Company's disposal of securities.
4. Passed the amendment of certain articles of the Company's "Corporate Social
Responsibility Best-Practice Principles".
5. Passed the proposal for the Company's appointment of the CAP firm for 2022 and its
remuneration.
The 13th meeting of the 10th
term
2022.03.18		 1. Passed the proposal for the compensation for employees and Directors for 2021.
2. Passed the Company's 2021 Business Report and Financial Statements.
3. Passed the proposal for the remuneration of the managerial officers for 2021.
4. Passed the Company's 2021 Statement on Internal Control.
5. Passed the Company's distribution of earnings for 2021.
6. Passed the amendment of the Company's "Articles of Incorporation".
7. Passed the amendment of the Company's "Corporate Governance Best-Practice
Principles".
8. Passed the amendment of the Company's "Procedures for Acquisition or Disposal of
Assets".
9. Passed the date, location, and meeting agenda for the Company's 2022 general
shareholders' meeting.
10. Passed the proposal for shareholders' proposal rights for the 2022 general shareholders'
meeting.
The 14th meeting of the 10th
term
2022.04.28		 1. Passed the Company's consolidated financial statements for the first quarter of 2022.
2. Passed the Company's amendments for the Procedures of Acquisition or Disposal of
Assets.
3. Passed the Company's amendments for the Performance Evaluation Method of Board of
Directors.
4. Passed the Company's dismissal of the Company's Manager.

  • (XII) Any Dissenting Opinion Expressed by a Director with Respect to a Major Resolution Passed by the Board of Directors During the Most Recent Fiscal Year and up to the Date of Publication of the Annual Report, Where Said Dissenting Opinion Has Been Recorded or Prepared as a Written Declaration, and Its Main Content: None.

  • (XIII) A Summary of Resignations and Dismissals of the Company’s Chairman, President, Chief Accounting Officer, Financial Supervisor, Chief Internal Auditor, Corporate Governance Officer, or Research and Development Officer During the Most Recent Fiscal Year and up to the Date of Publication of the Annual Report: Not Applicable.

  • (XIV) Intellectual Property Management

2021 Intellectual Property Management Plan

The Company has developed an intellectual property strategy that connects operational objectives to R&D resources to strengthen our leader in the industry and preserve hardearned technological advancements. We have established a business model that creates value for the Company with intellectual property rights, which protects the Company's freedom of operations and strengthens its competitive advantage. It can also be used to help the Company generate profits.

99

  1. Project Management

The Company focused on the growth in the number of patents and gradually developed its patent strategy in 2014 to focus on the quality of patents. We have progressed to the ultimate goal of using patents to create value so that we can create value and generate profits with patents.

To build a solid intellectual property portfolio, the Company has established the "Intellectual Property Management System" to ensure the quality of implementation and execution of operations. We also established the "Patent Incentive Management System" to continuously encourage employees to file applications for invention patents. We have incorporated the "patent management system" and "database search system" to manage patent applications and review patents in different countries. In interactions with external entities, we maintain close communication and technical exchange with local and foreign competent authorities of patents in major markets. We help patent examiners understand the Company's technologies to enhance examination efficiency and obtain high-quality patent protection.

  1. Trademark management

The Company's trademark management strategy consists mainly of the expansion and protection of trademarks. We regularly review overseas markets and evidence of trademark use based on the product line and market expansion. We also established a trademark monitoring mechanism and dispute handling mechanism to protect the Company's trademark rights.

  1. Possible intellectual property risks and response measures

If the Company's products infringe upon the intellectual property rights of others or if the Company's intellectual property rights are infringed by others and results in an infringement lawsuit, it may prevent the Company from producing specific products, weaken the Company's market competitiveness, and reduce the Company's revenue. Measures taken by the Company in response include: (1) supplier intellectual property rights assurance; (2) case search and risk aversion; (3) research on specific issues; (4) inventory of own intellectual property rights and insight on products of competitors; (5) standardization of response to lawsuits.

Implementation Status

  1. The Company has formulated plans to report intellectual property matters to the Board of Directors on a regular basis. The most recent reporting date was November 4, 2021 (11th meeting of the 10th Board of Directors).

  2. The Company has actively implemented the Intellectual Property Management Plan since 2012. The main implementation results in recent years are as follows:

  3. ⚫ Establishment of trademark management mechanisms in 2018

  4. ⚫ Enhancement of the Company's Intellectual Property Management Plan in 2019.

  5. ⚫ Establishment of the Intellectual Property Management Regulations in 2020.

  6. ⚫ Plans for passing the Taiwan Intellectual Property Management System (TIPS) certification in 2022.

100

  1. The current list of intellectual properties and results are as follows:

  2. ⚫ Patents: As of the end of 2021, the Company has obtained more than 560 patents worldwide, including 13 patents in Taiwan and foreign countries in 2021.

  3. ⚫ Trademarks: As of the end of 2021, the Company has obtained 94 trademarks. The Company's major brands and other trademarks have been registered in more than 20 countries/regions across the world, including Asia, the Americas, Europe, and other major regions for product sales.

101

V. Information on CPA Professional Fees:

Unit: NT$ thousands

Name of Name Non-audit Fees
CPA Firm of CPA Audit Period Audit Fees (Note) Total Remark
KPMG
Taiwan		 Chang,
Chun-I		 2021 4,850 570.88 5,420.88 －
Chao,
Min-Ju

Note: The services provided in exchange for non-audit fees included services for human resources, subsidiary annual fee and statutory fees, business tax certification fees based on the direct deduction method, and transfer pricing service fee.

  • (I) When the CPA firm is changed and the audit fees paid for the fiscal year of such fees are lower than those for the previous fiscal year, the amounts of audit fees before and after the change and the reasons thereof shall be disclosed: None.

  • (II) Where the audit fees paid for the year are at least 10% less than those paid for the previous year, the reduced amount, proportion, and reason of the reduction shall be disclosed: None.

  • VI. Information on Replacement of CPAs:

(I) Former CPAs

(I) Former CPAs
Date of Replacement Passed by the Board of Directors on March 18, 2021
Replacement Reasons and
Explanations		 The Company replaced the CPAs Kuan, Chun-Hsiu and Chao, Min-Ju with the
CPAs Chang, Chun-I and Chao, Min-Ju due to internal adjustment of KPMG
Taiwan.
Termination by the
Company or the CPAs		 Party
Condition
CPA		 Client
Terminationby the Company N/A N/A
Termination by the CPAs N/A N/A
Opinions (Other than
Unmodified Opinions) in the
Past2 Years andReasons
None
Deviation form the Issuer Yes Accounting principles or practices
Disclosure of financial statements
Audit scope orsteps
Others
None ˇ
Description
Additional Disclosures
(under Subparagraphs 1-4 to
1-7, Paragraph 6, Article 10
ofthe Guidelines)		 N/A

(II) Successive CPAs: N/A.

(III)Former CPAs' Reply to Disclosures under Items 1 and 2-3, Subparagraph 6, Article 10 of the Guidelines: N/A.

102

  • VII. If the Company's Chairman, President, or Financial or Accounting Managerial Officer has worked for the CPA firm or its affiliate in the most recent year, their names, titles, and period of service in the CPA firm or its affiliate shall be disclosed: None.

  • VIII.Any Transfer of Equity Interests and/or Pledge of or Change in Equity Interests by a Director, Managerial Officer, or Shareholder with a Stake of More than 10%

(I) Change in Equity Interests by Directors, Managerial Officers, and Major Shareholders

Title Name 2021 2021 Currentyear as of April 11 Currentyear as of April 11
Change in
Number of
Shares Held		 Change in
Number of
Shares
Pledged		 Change in
Number of
Shares Held		 Change in
Number of
Shares Pledged
Director andChairman Cheng,Ya-Jen － － － －
Director and Vice
Chairman		 Wang, Chung-Shun － － － －
Director and Vice
President		 Yang, Fu-An － － － －
Director 2K Industries Inc. (BVI)
Representative: Wang, Po-
Wen		 － － － －
Director Datazone Limited
Representative: Chu,
Hsiu-Yin		 － － － －
Director Chen,Kuang-Chun － － (18,000) －
Director Huang,Jr-Wen － － － －
Independent Director Liu, Shou-Hsiang － － － －
Independent Director Cheng, Chia-Jiun － － － －
Independent Director Hsu, Cheng-Hung － － － －
President, Kaohsiung
Branch		 Chen, Kuo-Ruey － － － －
Associate Managers Wang,Ya-Chen － － － －
Vice President,
KaohsiungBranch		 Hsu, Pei-Ching (10,000) － － －
Vice President Tsai,Fu-Sheng － － － －
Corporate Governance
Officer		 Yao, Wen-Chun － － － －
FinancialSupervisor Li,Fu-Jung － － － －
Chief Accounting Officer
Sang,Hsi-Yun		 － － － －

(II) Where the counterparty of stock transfer is a related party, the name of the counterparty, relationship between the counterparty and the Company, Directors, managerial officers, and shareholders with shareholding percentage exceeding 10%, and the shares obtained or pledged shall be disclosed: None.

  • (III)Where the counterparty of stock pledge is a related party, the name of the counterparty, relationship between the counterparty and the Company, Directors, managerial officers, and shareholders with shareholding percentage exceeding 10%, and the shares obtained or pledged shall be disclosed: None.

103

IX. Relationship among the Company's 10 Largest Shareholders who are Related to, Spouse of, or a Relative Within the Second Degree of Kinship of Another:

Baseline date: April 11, 2022; Baseline date: April 11, 2022; Unit: shares
Name
(Note 1)		 Current
Shareholding		 Spouse & Minor
Shareholding		 Shareholding
by Nominees		 Among 10 largest
shareholders, name and
relationship with anyone
who is a related party or a
relative within the second
degree of kinship.
(Note 3)		 Remark
Shares %
(Note 2)		 Shares %
(Note 2)		 Shares %
(Note 2)		 Title (or Name) Relationship
Chuan Han
Investment Co.,
Ltd.		 15,091,766 8.06% － － － － Cheng, Ya-Jen
Wang, Chung-
Shun
Yang,Fu-An		 Chairman
Director
Director
Cheng, Ya-Jen 12,167,477 6.50% 1,019,992 0.54% － － Chuan Han
Investment Co.,
Ltd.		 Chairman
Yang, Fu-An 11,792,834 6.30% 249,022 0.13% － － Chuan Han
Investment Co.,
Ltd.		 Director
Wang, Chung-
Shun		 11,605,794 6.20% 618,892 0.33% － － Chuan Han
Investment Co.,
Ltd.		 Director
Wang Kuang Tung
Investment Co.,
Ltd.		 6,551,886 3.50% － － － － － －
Hsiang Tsan
Investment Co.,
Ltd.		 5,200,276 2.78% － － － － Cheng, Ya-Jen Supervisor
2K Industries Inc.
(BVI)		 5,193,162 2.77% － － － － － －
Pai Chuang
Investment Co.,
Ltd.		 4,800,000 2.56% － － － － Yang, Fu-An Supervisor
Pi-Cheng
Investment Co.,
Ltd.		 3,143,880 1.68% － － － － － －
Chen, Kuang-
Chun		 2,989,913 1.60% － － － － － －

Note 1: All top ten shareholders must be listed. For institutional shareholders, their names and the name of their representatives must be listed separately.

Note 2: The shareholding percentage is calculated separately based on the number of shares held in the name of the person, his/her spouse and minors, and others. The shareholding ratio is rounded to the second decimal place. Note 3: Relationships between the aforementioned shareholders, including institutional and natural-person shareholders must be disclosed based on the financial reporting standards used by the issuer.

104

  • X. Total Number of Shares and Total Equity Stake Held in any Single Enterprise by the Company, Its Directors, Managers, and Any Companies Controlled Either Directly or Indirectly by the Company

Unit: Shares; %

Investee business
(Note 1)		 Ownership by the Company Ownership by the Company
Investment by
Directors/Managerial
Officers and Companies
Directly or Indirectly
Controlled bythe Company
Investment by
Directors/Managerial
Officers and Companies
Directly or Indirectly
Controlled bythe Company		 Total Ownership Total Ownership
Shares Shareholding Shares Shareholding Shares Shareholding
FSP International Inc. (BVI) 32,202,500
100%
－		 － 32,202,500
100%
FSP Group Inc. 50,000
100%
－		 － 50,000
100%
Amacrox Technology Co., Ltd. (BVI) 1,109,355
100%
－		 － 1,109,355
100%
3Y Power Technology (Taiwan) Inc. 16,309,484
65.87%
－		 － 16,309,484
65.87%
Harmony Trading (HK) Ltd. 10,000
100%
－		 － 10,000
100%
FSP Technology USA Inc. 100,000
100%
－		 － 100,000
100%
FSP Turkey Dis Tic.Ltd.Sti. 6,673,000
91.41%
－		 － 6,673,000
91.41%
Shenzhen HuiLi Electronics Co., Ltd. － － (註2)
100%
(Note 2)
100%
FSP Technology Inc. (BVI) － － 2,100,000
100%
2,100,000
100%
Proteck Electronics (Samoa) Corp. － － 1,100,000
100%
1,100,000
100%
Power Electronics Co., Ltd. (BVI) － － 7,000,000
100%
7,000,000
100%
Famous Holding Ltd. － － 27,000,000
100%
27,000,000
100%
FSP International (HK) Ltd. － － 4,770,000
100%
4,770,000
100%
Jiangsu FSP Power Technology R&D Co.,
Ltd.		 － － (Note 2)
100%
(Note 2)
100%
Dongguan Protek Electronics Corp. － － (Note 2)
100%
(Note 2)
100%
Zhonghan Electronics Shenzhen Co., Ltd. － － (Note 2)
100%
(Note 2)
100%
Wuxi SPI Technology Co., Ltd. － － (Note 2)
100%
(Note 2)
100%
Wuxi Zhonghan Technology Co., Ltd. － － (Note 2)
100%
(Note 2)
100%
Haohan Electronic Technology (Ji'an) Co.,
Ltd.		 － － (Note 2)
100%
(Note 2)
100%
Shenzhen Zhong Han Science & Tech.
Co.,Ltd.		 － － (Note 2)
100%
(Note 2)
100%
Amacrox GmbH － － 25,000
100%
25,000
100%
Proteck Power North America Inc. － － 1,000
100%
1,000
100%
FSP Group USA Corp. － － 247,500
45%
247,500
45%
3Y Power Technology, Inc. － － 600,000
65.87%
600,000
65.87%
Luckyield Co,. Ltd － － 150,000
65.87%
150,000
65.87%
Wuxi Xiangyuan Electronics Co., Ltd. － － (Note 2)
65.87%
(註2)
65.87%

Note 1: Long-term investment calculated by equity method as of December 31, 2021.

Note 2: The company is a limited liability company which has not issued stocks.

105

Chapter 4 Capital Overview

I. Capital and Shares

(I) Source of Capital

1. Capital formation

May 8, 2022 Unit: NT$ thousands / thousand shares

Year/Month Par
Value		 Authorized Capital Authorized Capital Paid-in Capital Paid-in Capital Remark Remark
Shares Amount Shares Amount Source of Capital Capital
Increase by
Assets Other
than Cash		 Others
1993/04 10 500
5,000
500
5,000		 Approved for establishment None -
1994/11 10 1,000
10,000
1,000
10,000
NT$5,000 thousand,
issuance of shares for cash
capital increase		 None -
1997/09 10 3,800
38,000
3,800
38,000
NT$28,000 thousand,
issuance of shares for cash
capital increase		 None -
1998/12 10 18,800
188,000
18,800
188,000
NT$150,000 thousand,
issuance of shares for cash
capital increase		 None -
1999/07 10 50,000
500,000
32,500
325,000
NT$113,500 thousand,
issuance of shares for cash
capital increase
NT$23,500 thousand,
capital increase from
earnings		 None Approved in accordance
with Tai-Cai-Zheng-(1)
No. 63092 Letter dated
July 16, 1999
2000/09 10 50,000
500,000
42,000
420,000
NT$30,000 thousand,
issuance of shares for cash
capital increase
NT$65,000 thousand,
capital increase from
earnings		 None Approved in accordance
with Tai-Cai-Zheng-(1)
No. 59465 Letter dated
July 10, 2000
2001/09 10 90,000
900,000
60,000
600,000
NT$49,000 thousand,
issuance of shares for cash
capital increase
NT$121,800 thousand,
capital increase from
earnings
NT$5,000 thousand, capital
increase from employee
bonus
NT$4,200 thousand, capital
increase from capital
surplus		 None Approved in accordance
with Tai-Cai-Zheng-(1)
No. 144523 Letter dated
July 12, 2001
2002/08 10 90,000
900,000
70,000
700,000
NT$30,000 thousand,
capital increase from
earnings
NT$10,000 thousand,
capital increase from
employee bonus
NT$60,000 thousand,
capital increase from capital
surplus
None		 Approved in accordance
with Tai-Cai-Zheng-(1)
No. 0910140251 Letter
dated July 18, 2002
2003/06 10 90,000
900,000
79,723
797,230
NT$87,500 thousand,
capital increase from
earnings
NT$9,730 thousand, capital
increase from employee
bonus		 None Approved in accordance
with Jing-Shou-Shang No.
092201185800 Letter
dated June 17, 2003

106

Year/Month Par
Value		 Authorized Capital Authorized Capital Paid-in Capital Paid-in Capital Remark
Shares Amount Shares Amount Source of Capital Capital
Increase by
Assets Other
than Cash		 Others
2003/09 10 90,000
900,000
86,114
861,140
NT$63,910 thousand,
issuance of shares for cash
capital increase		 None Approved in accordance
with Tai-Cai-Zheng-(1)
No. 0920133066 Letter
dated July17,2003
2004/07 10 130,000 1,300,000 100,531 1,005,311
NT$129,171 thousand,
capital increase from
earnings
NT$15,000 thousand,
capital increase from
employee bonus		 None Approved in accordance
with Tai-Cai-Zheng-(1)
No. 0930126571 Letter
dated June 15, 2004
2005/08 10 223,000 2,230,000 127,323 1,273,239
NT$243,828 thousand,
capital increase from
earnings
NT$24,100 thousand,
capital increase from
employee bonus		 None Approved in accordance
with Jin-Guan-Zheng-(1)
No. 0940125202 Letter
dated June 23, 2005
2006/05 10 223,000 2,230,000 128,247 1,282,476
Converted overseas
convertible corporate bonds
into common stocks
totalingNT$9,237 thousand
None		 Approved in accordance
with Tai-Zheng-Shang No.
0950010579 Letter dated
May22,2006
2006/07 10 223,000 2,230,000 128,415 1,284,155
Converted overseas
convertible corporate bonds
into common stocks
totalingNT$1,679 thousand
None		 Approved in accordance
with Tai-Zheng-Shang No.
0950019886 Letter dated
July28,2006
2006/08 10 223,000 2,230,000 146,270 1,462,704
NT$160,519 thousand,
capital increase from
earnings
NT$18,030 thousand,
capital increase from
employee bonus		 None Approved in accordance
with Jin-Guan-Zheng-(1)
No. 0950126385 Letter
dated June 26, 2006
2007/01 10 223,000 2,230,000 150,761 1,507,613
Converted overseas
convertible corporate bonds
into common stocks
totaling NT$44,909
thousand		 None Approved in accordance
with Tai-Zheng-Shang No.
09600026581 Letter dated
January 30, 2007
2007/04 10 223,000 2,230,000 151,047 1,510,480
Converted overseas
convertible corporate bonds
into common stocks
totalingNT$2,867 thousand
None		 Approved in accordance
with Tai-Zheng-Shang No.
09600026581 Letter dated
January30,2007
2007/08 10 223,000 2,230,000 174,002 1,740,020
NT$188,810 thousand,
capital increase from
earnings
NT$40,730 thousand,
capital increase from
employee bonus		 None Approved in accordance
with Jing-Shou-Shang No.
09601184890 Letter dated
August 1, 2007
2007/09 10 223,000 2,230,000 190,002 1,900,020
NT$160,000 thousand,
issuance of shares for cash
capital increase		 None Approved in accordance
with Tai-Zheng-Shang No.
0960042822 Letter dated
August 20,2007
2007/12 10 223,000 2,230,000 197,002 1,970,020
NT$70,000 thousand,
merger-related issuance of
shares for capital increase		 None Approved in accordance
with Jing-Shou-Shang No.
09601308080 Letter dated
December 21,2007
2008/07 10 360,000 3,600,000 218,915 2,189,157
NT$197,002 thousand,
capital increase from
earnings
NT$22,135 thousand,		 None Approved in accordance
with Jing-Shou-Shang No.
09701187690 Letter dated
July30,2008

107

Year/Month Par
Value		 Authorized Capital Authorized Capital Paid-in Capital Paid-in Capital Remark
Shares Amount Shares Amount Source of Capital Capital
Increase by
Assets Other
than Cash		 Others
capital increase from
employee bonus
2008/12 10 360,000 3,600,000 212,688 2,126,887
Canceled treasury stock
totaling NT$62,270
thousand		 None Approved in accordance
with Jing-Shou-Shang No.
09701315750 Letter dated
December 16,2008
2009/08 10 360,000 3,600,000 218,253 2,182,529
NT$53,172 thousand,
capital increase from
earnings
NT$2,470 thousand, capital
increase from employee
bonus		 None Approved in accordance
with Jing-Shou-Shang No.
09801178080 Letter dated
August 10, 2009
2010/04 10 360,000 3,600,000 218,719 2,187,189
NT$4,660 thousand, capital
increase from employee
stock subscription		 None Approved in accordance
with Jing-Shou-Shang No.
09901076370 Letter dated
April 27,2010
2010/05 10 360,000 3,600,000 219,557 2,195,569
NT$8,380 thousand, capital
increase from employee
stock subscription		 None Approved in accordance
with Jing-Shou-Shang No.
09901104550 Letter dated
May19,2010
2010/08 10 360,000 3,600,000 224,481 2,244,812
NT$43,911 thousand,
capital increase from
earnings
NT$3,940 thousand, capital
increase from employee
stock subscription
NT$1,392 thousand, capital
increase from employee
bonus		 None Approved in accordance
with Jing-Shou-Shang No.
09901180000 Letter dated
August 12, 2010
2010/11 10 360,000 3,600,000 224,552 2,245,522
NT$710 thousand, capital
increase from employee
stock subscription		 None Approved in accordance
with Jing-Shou-Shang No.
09901264340 Letter dated
November 25,2010
2011/04 10 360,000 3,600,000 224,909 2,249,092
NT$3,570 thousand, capital
increase from employee
stock subscription		 None Approved in accordance
with Jing-Shou-Shang No.
10001076390 Letter dated
April 18,2011
2011/05 10 360,000 3,600,000 225,629 2,256,292
NT$7,200 thousand, capital
increase from employee
stock subscription		 None Approved in accordance
with Jing-Shou-Shang No.
10001104830 Letter dated
May20,2011
2011/08 10 360,000 3,600,000 228,644 2,286,438
NT$24,256 thousand,
capital increase from
earnings
NT$5,890 thousand, capital
increase from employee
stock subscription		 None Approved in accordance
with Jing-Shou-Shang No.
10001188760 Letter dated
August 16, 2011
2011/11 10 360,000 3,600,000 228,752 2,287,518
NT$1,080 thousand, capital
increase from employee
stock subscription		 None Approved in accordance
with Jing-Shou-Shang No.
10001268520 Letter dated
November 24,2011
2012/04 10 360,000 3,600,000 228,762 2,287,618
NT$100 thousand, capital
increase from employee
stock subscription		 None Approved in accordance
with Jing-Shou-Shang No.
10101067390 Letter dated
April 19,2012
2012/05 10 360,000 3,600,000 229,275 2,292,748 NT$5,130 thousand, capital
increase from employee		 None Approved in accordance
with Jing-Shou-ShangNo.

108

Year/Month Par
Value		 Authorized Capital Authorized Capital Authorized Capital Paid-in Capital Paid-in Capital Paid-in Capital Paid-in Capital Remark
Shares Amount Shares Amount Source of Capital Capital
Increase by
Assets Other
than Cash		 Others
stock subscription 10101089840 Letter dated
May18,2012
2012/09 10 360,000 3,600,000 229,353 2,293,528
NT$780 thousand, capital
increase from employee
stock subscription		 None Approved in accordance
with Jing-Shou-Shang No.
10101195800 Letter dated
September 19,2012
2012/11 10 360,000 3,600,000 229,584 2,295,838
NT$2,310 thousand, capital
increase from employee
stock subscription		 None Approved in accordance
with Jing-Shou-Shang No.
10101243280 Letter dated
November 23,2012
2013/03 10 360,000 3,600,000 229,877 2,298,768
NT$2,930 thousand, capital
increase from employee
stock subscription		 None Approved in accordance
with Jing-Shou-Shang No.
10201038880 Letter dated
March 4,2013
2013/05 10 360,000 3,600,000 230,761 2,307,608
NT$8,840 thousand, capital
increase from employee
stock subscription		 None Approved in accordance
with Jing-Shou-Shang No.
10201100240 Letter dated
May31,2013
2013/09 10 360,000 3,600,000 230,940 2,309,398
NT$1,790 thousand, capital
increase from employee
stock subscription		 None Approved in accordance
with Jing-Shou-Shang No.
10201180990 Letter dated
September 3,2013
2013/12 10 360,000 3,600,000 231,723 2,317,228
NT$7,830 thousand, capital
increase from employee
stock subscription		 None Approved in accordance
with Jing-Shou-Shang No.
10201246480 Letter dated
December 4,2013
2014/02 10 360,000 3,600,000 234,466 2,344,658
NT$27,430 thousand,
capital increase from
employee stock
subscription		 None Approved in accordance
with Jing-Shou-Shang No.
10301033320 Letter dated
February26,2014
2015/09 10 360,000 3,600,000 192,262 1,922,620
NT$422,038 thousand,
issuance of shares for cash
capital decrease		 None Approved in accordance
with Jing-Shou-Shang No.
10401183830 Letter dated
September 1,2015
2020/07 10 360,000 3,600,000 187,262 1,872,620
Canceled treasury stock
totaling NT$50,000
thousand		 None Approved in accordance
with Jing-Shou-Shang No.
10901119980 Letter dated
July2,2020
May8, 2022; Unit: shares
Share Type Authorized Capital Remark
Issued Shares Unissued Shares Total
Registered com
shares		 mon 187,261,950 172,738,050 360,000,000 Stocks of listed
companies
(II) Structure April 11,2022
Structure
Item
Government
Agencies
Financial
Institutions		 Other
Institutional
Shareholders
Domestic
Natural
Persons		 Foreign
Institutions
and Natural
Persons		 Total
Number of
shareholders		 0
4
55
14,410
87
14,556
Shares Held 0
4,762,283
46,695,890
114,123,624		 21,680,153
187,261,950
Shareholding 0%
2. 54%
24.94%
60.94%
11.58%
100.00%

109

(III)Shareholding Distribution Status

NT$10per share;April 11,2022 NT$10per share;April 11,2022 NT$10per share;April 11,2022
Range of Shares Number of Shareholders Shares Held Shareholding
1~999 3,400
998,629
0.53%
1,000~5,000 7,007
14,756,569
7.88%
5,001~10,000 1,064
8,329,896
4.45%
10,001~15,000 307
3,883,870
2.07%
15,001~20,000 218 3,972,432
2.12%
20,001~30,000 168
4,255,968
2.27%
30,001~40,000 90
3,199,596
1.71%
40,001~50,000 65
2,990,626
1.60%
50,001~100,000 103
7,719,186
4.12%
100,001~200,000 47 6,226,919 3.33%
200,001~400,000 33
9,515,917
5.08%
400,001~600,000 12
5,663,638
3.02%
600,001~800,000 12
8,152,859
4.35%
800,001~1,000,000 4
3,720,045
1.99%
Over 1,000,001 26 103,875,800 55.48%
Total 12,556
187,261,950
100.00%

(IV) List of Major Shareholders

(IV) List of Major Shareholders (IV) List of Major Shareholders (IV) List of Major Shareholders
April 11, 2022
Shareholding
Name of Major Shareholders
Shares Held		 Shareholding

Chuan Han Investment Co.,Ltd.		 15,091,766
8.06%
Cheng, Ya-Jen 12,167,477
6.50%
Yang, Fu-An 11,792,834
6.30%
Wang, Chung-Shun 11,605,794
6.20%
WangKuangTungInvestment Co.,Ltd. 6,551,886
3.50%
Hsiang Tsan Investment Co., Ltd. 5,200,276
2.78%
2K Industries Inc.(BVI) 5,193,162
2.77%
Pai ChuangInvestment Co.,Ltd. 4,800,000
2.56%
Pi-ChengInvestment Co.,Ltd. 3,143,880
1.68%
Chen,Kuang-Chun 2,989,913 1.60%

Note: The shareholding ratio is rounded to the second decimal place.

110

(V) Share Price for the Past 2 Fiscal Years, with Net Worth per Share, Earnings per Share, Dividends per Share, and Related Information

Item Year Year
2020		 2021 March 31, 2022
(Note 8)
Market
Price Per
Share
(Note 1)		 Highest 44
57.9
45.2
Lowest 14.5
36.7
42
Average 27.58
43.59
43.66
Net Worth
per Share
(Note 2)		 Before distribution 59.73
70.54
69.87
After distribution 56.73
67.24
－
Earnings
per Share		 Weighted average number of
shares		 188,632 thousand
shares

187,262 thousand
shares

187,262 thousand
shares
Earnings per Share(Note 3) 3.55
4.03
0.71
Dividends
Per Share		 Cash(Note 9) 3
3.3
－
Stock
dividends		 Stock dividends
appropriated from
earnings		 － － －

Stock dividends
appropriated from
capital surplus		 － － －
Accumulated unpaid
dividends(Note 4)		 － － －
Return on
Investment		 Price-to-earnings ratio(Note 5) 7.77
10.82
－

Price-to-dividend ratio(Note 6)		 9.19
13.21
－

Cash dividend yield(Note 7)		 0.1088
0.0757
－

  • ＊ If retained earnings or capital surplus were used for capital increase and distribution of shares, market prices and cash dividends that were retroactively adjusted based on the number of shares after distribution shall be disclosed.

  • Note 1: List the highest and lowest market price of common shares for each fiscal year and calculate the average market price for each fiscal year based on trading value and volume in each fiscal year.

  • Note 2: Please fill these rows based on the number of shares that have been issued at the end of the fiscal year and the distribution plan approved by the Board of Directors or a resolution in the shareholders' meeting in the subsequent fiscal year.

  • Note 3: If retroactive adjustments are required due to stock dividends, the Company shall list the earnings per share before and after the adjustment.

  • Note 4: If there are any conditions in issuing equity securities that allow for unpaid out dividend for the year to be accumulated to subsequent years in which there is profit, the Company shall separately disclose the accumulated unpaid out dividend up to that year.

  • Note 5: Price-to-earnings ratio = Average closing price per share for the year/Earnings per share.

  • Note 6: Price-to-dividend ratio = Average closing price per share for the year/Cash dividends per share.

  • Note 7: Cash dividend yield = Cash dividends per share/Average closing price per share for the year.

  • Note 8: The net worth per share and earnings per share up to the quarter nearest to the date of publication of the Annual Report that has been audited by the CPAs shall be filled in; the remaining fields shall be filled with the annual data up to the date of publication of the Annual Report.

  • Note 9: Cash dividends determined in the resolution of the meeting of the Board of Directors dated March 18, 2022.

111

  • (I) Dividend Policy and Its Implementation

  • Dividend Policy established in the Articles of Incorporation

The Company’s Dividend Policy is based on the Company’s capital budgeting, plans for future capital demand, financial structure, and earnings. The Board of Directors shall formulate the earnings distribution proposal which shall be passed in a resolution of the shareholders' meeting.

As the Company is in a stable growth phase and the industry continues to centralize, the Company seeks to continue to expand its scale in order to achieve sustainable operations and stable growth. The Company's Dividend Policy is that when it has no accumulated losses for the previous period, the Company will distribute dividends to shareholders at a rate of not less than 50% of the Company's annual net income after tax. The distribution may be made in the form of stock dividends or cash dividends and the distribution of cash dividends shall be no less than 30% of the shareholders' bonus. Where the Company has no distributable earnings in the current year or has distributable earnings that are far lower than the earnings distributed by the Company in the previous year or where the Company makes a decision based on its finances, business, and operations, it may distribute all or parts of the surplus reserve in accordance with laws or regulations of the competent authority.

  1. Distribution of dividends proposed in the shareholders' meeting

The Board of Directors resolved on March 18, 2022 to distribute the earnings for 2021 as follows:

operations, it may distribute all or parts of the surplus reserve in accordance with laws or
regulations of the competent authority.
Distribution of dividends proposed in the shareholders' meeting
The Board of Directors resolved on March 18, 2022 to distribute the earnings for 2021
as follows:		 operations, it may distribute all or parts of the surplus reserve in accordance with laws or
regulations of the competent authority.
Distribution of dividends proposed in the shareholders' meeting
The Board of Directors resolved on March 18, 2022 to distribute the earnings for 2021
as follows:		 operations, it may distribute all or parts of the surplus reserve in accordance with laws or
regulations of the competent authority.
Distribution of dividends proposed in the shareholders' meeting
The Board of Directors resolved on March 18, 2022 to distribute the earnings for 2021
as follows:
Unit: NT$
Item Amount Subtotal
Opening undistributed earnings
Plus: Disposal of equity instruments in other
comprehensive income measured at fair value
through profit and loss
Changes in the current period of remeasurements
of defined benefit plans
Current net income		 1,791,414,490
658,164,599
5,533,703
754,082,423


Total distributable income for this period
3,209,195,215
Appropriation of 10% as statutory surplus reserve 141,778,073

Shareholder bonus (distributed entirely in cash) 617,964,435
Total distributable amount
759,742,508
Endingundistributed earnings
2,449,452,707

The shareholders' dividends and bonuses from the 2021 earnings distribution amounted to NT617,964,435 and it was approved by the Board of Directors on March 18, 2022. The Company proposes to distribute cash dividends of NT$3.3 per share to shareholders based on the list of shareholders on the baseline date for dividend distribution. The Board of Directors of the Company has authorized the Chairman of the Board to determine the ex-dividend date, distribution date, and other related matters. If the Company's shares in external circulation are subsequently changed due to the issuance of new shares for conversion of stock options, repurchase of the Company's shares, or the transfer and cancellation of treasury stock, which affect on the shareholder dividend ratio, the Chairman is authorized to process such adjustments.

112

  1. Explanation of any expected material changes to the dividend policy: None.

  2. (II) Effect on the Operating Performance and Earnings per Share of Distribution of Stock Dividends Proposed or Adopted in the Most Recent Shareholders' Meeting

  3. The general shareholders' meeting this year did not propose stock dividends and the Company did not publish its financial forecast for 2022. Therefore, there is no need to disclose the annual forecast information.

  4. (III) Remuneration of Employees and Directors

  5. Percentage or range of the remuneration of employees and directors as set forth in the Articles of Incorporation:

    • Article 20 of the Articles of Incorporation: In case the Company makes a profit in the current year (profits refer to the income before tax and before the distribution of remuneration to employees and Directors), no less than 6% shall be allocated as the employees' remuneration and no more than 3% as the Directors' remuneration. However, if the Company has accumulated losses (including adjustment on nondistributed earnings), the Company shall set aside a part of the surplus profit first for making up the losses.

    • The remuneration in the preceding paragraph to the employees may be distributed in stock or cash. The recipients of employee stock dividends or cash dividends include the employees of the companies controlled by or subordinate to the Company that meet certain criteria. The Board of Directors is authorized to determine the method of distribution. The director remuneration shall be distributed in cash. The procedures in the two preceding paragraphs must be approved by the Board of Directors and reported to the shareholders' meeting.

  6. The basis for estimating the amount of employee and director remunerations, for calculating the number of shares to be distributed as employee remuneration, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period:

    • If the shareholders meeting subsequently resolves to recognize a difference in the employee or director remunerations, the difference shall be processed as a change in accounting estimate and recorded as profit or loss in the following year.

  7. Proposed distribution of remuneration approved by the Board of Directors:

    • (1) Distribute employee remuneration totaling NT$65,000,000 and director remuneration totaling NT$7,000,000. All remuneration shall be distributed in cash. The Company has budgeted expenses totaling NT$72,000,000 and there is no difference from the expense amount recognized in 2021.

    • (2) The amount of any employee remuneration distributed in stocks, and the size of that amount as a percentage of the sum of the after-tax net income stated in the parent company only financial statements or individual financial statements for the current period and the total employee remuneration: N/A.

    • (3) Calculated earnings per share after the proposed distribution of employee and

113

director remunerations. N/A.

  1. Discrepancies, if any, between actual distribution of employee and Director remunerations (including the number of shares distributed, amount and stock price) in the previous year (2020) and the recognized employee and director remunerations and disclosure of the differences, reasons and responses:

  2. (1) The actual distribution of employee and director remunerations for 2020 was as follows:

    • The Company distributed employee remuneration totaling NT$50,000,000 and director remuneration totaling NT$5,600,000. All remuneration were distributed in cash.

  3. (2) Discrepancies, if any, between the aforementioned amount and the recognized employee and director remunerations and disclosure of the differences, reasons and responses:

The Board of Directors resolved to distribute employee, director, and supervisor remunerations totaling NT$55,600,000 and there is no difference from the expense amount recognized in 2020.

  • (IV) Share Repurchases: None.

  • II. Corporate Bonds: None.

  • III. Preferred Shares: None.

  • IV. Global Depository Shares: None.

  • V. Employee Stock Options: None.

  • VI. New Restricted Employee Shares: None.

  • VII. Issuance of New Shares in Connection with Mergers or Acquisitions or with Acquisitions of Shares of Other Companies: None.

  • VIII.Implementation of the Company’s Capital Allocation Plans: None.

114

Chapter 5 Operational Highlights

  • I. Business Activities

  • (I) Scope of Business

    1. Main Businesses

Manufacturing, processing, and trading of power supply.

Trading of the aforementioned products.

Quotation, tender submission, and distribution services for the aforementioned products of domestic and foreign companies.

Import and export business of the aforementioned products.

  1. Weight of lines of business:
Weight of lines of business: Weight of lines of business:
Unit: NT$ thousands; %
Year
Item
2021 Net Operating
Revenue		 Weight of lines of
business
Power Supply 11,243,728 67.53%
Adapter 3,207,687 19.27%
Open Frame 1,249,747 7.50%
Inverter 69,806 0.42%
Kaohsiung Branch 301,852 1.81%
Others 577,432 3.47%
Net sales 16,650,252 100.00%

Note: Consolidated information

  1. The Company's current products: Power Supply.

  2. New products under development:

  3. Compact 750/850/1KW ATX.

  4. Efficient Titanium 850/1KW ATX power supply.

  5. Development of power supply to support the ATX 12Vo platform developed by Intel and meet new energy efficiency requirements.

  6. Research on GaN materials and introduction into Titanium 1.3/1.6KW products.

  7. High-wattage SFX 1KW power supply for MP in 2022/Q3.

  8. Development of new PD Dock 100W products.

  9. Continuous development of products in the PD series to meet new specifications for USB PD 3.1 (28/36/48V).

  10. Continuous development of products with wide temperature adaptation for telecom applications.

  11. Development of high-wattage (>800W) Flex products to support systems with high-performance graphic cards.

  12. CRPS 2700W high-power density devices.

  13. Development of integrated CRPS back board to meet high-mix low-volume demand for Open Rack.

  14. Development of redundant products for small-scale edge computing demand.

  15. Iterative design for 150W @ 2" x 4" series.

115 

  - 100W and 150W power supply for industrial applications

  - PoE 550W power supply for telecom applications.

  - PoE 950W power supply for telecom applications.

  - 1000W power supply for industrial applications.

  - 45W C14 Desk Top Adapter products.

  - 60W C14 Desk Top Adapter products.

  - 90W C14 Desk Top Adapter products.

  - 260W Open Frame products.

  - 700W ATX PC Power.

  - 900W ATX PC Power.

  - IP67 600W/2000W On Board/off Board Charger.

  - Compact/light 1800W On Board/Off Board Charger.

  - 350W IP67 CANbus charger with metal shell.

  - UDS automobile communication software development.

  - 3300W On Board Charger for cooling module.

  - 3KW mobile energy storage.

  - Stationary energy storage system.

  - Lithium iron phosphate battery modules.

  • (II) Overview of the Industry

  • Current Status and Development of the Industry

The power supply is an indispensable part of all electronic products. Products can be classified as either linear or switching power supplies based on the principle of operations. They are divided into AC to DC, DC to DC, DC to AC, and AC to AC based on the characteristics of the current. The continued growth of the electronics and tech industries has led to the rapid growth of power supply products. In terms of power supply products, Taiwanese manufacturers have superior technical resources, excellent global management capabilities, and the capacity for ramping up mass production. They have occupied an irreplaceable position in the global supply chain, and Taiwan has become the largest producer of power supplies in the world.

The environmental issues regarding carbon emission reduction specified in the 2015 Paris Agreement will continue to encourage manufacturers to produce products with more pollution-free materials and higher energy efficiency. The requirement of energy efficiency is to reduce energy consumption in systems and improve conversion efficiency in power supplies. Due to the wide use of power supplies, the market has grown steadily but slowly in recent years. The COVID-19 pandemic in 2020 has changed the way people live and industrial development. The demand for working from home, remote learning, telemedicine, online shopping, and real-time monitoring has increased the demand for smart home devices. In 2020, the annual shipments for PC (desktop + notebook) totaled 297 million units, and the annual growth rate of the shipments was 11%. In 2021, the overall PC market followed the developments

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in 2020, and the demand for PCs and notebook computers will continue to be high as people continue to work from home and use remote learning before the pandemic is effectively controlled.

Cloud gaming and efficient computing computers will drive market growth in the next few years. The compound annual growth rate (CAGR) for CPUs and GPUs from 2019 to 2025 will be 29%, which drive the demand for unbranded servers including edge computing and the development of high-wattage and high-efficiency power supplies. FSP is fully committed to CRPS applications for server power supplies. We provide a comprehensive range of power supply products to resolve the demand for power supply of unbranded server producers. Blockchain technology has advanced and applications are booming. Virtual currencies have led to increased demand for high-efficiency and high-wattage power supplies as well as demand for various types of x86-based Ethereum mining machines. According to the MIC market research report, 10% of the world's GDP will be stored in blockchain by 2027.

However, the shortage of materials in the electronic components market due to the strong demand for automotive electronics, the inability to deliver materials due to restrictions imposed in response to the pandemic, and the shift to buying spot products and rising transportation costs have caused sales to fall short of expectations, and the shortage is expected to continue.

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2.
Correlation between
Upstream materials		 2.
Correlation between
Upstream materials		 Upstream, Midstream,
Midstream		 Upstream, Midstream,
Midstream		 and Downstream of the Industry:
Downstream applications
Active component
manufacturing

Controller IC

Semiconductors

Power transistors

Diodes		 Communication technology industry
(Router,Switch,Access Point)
Computer information industry
(PC, Edge Server, Storage, Monitor,
Printer, Scanner, POS, Blockchain,
Mining)
Passive component
manufacturing

Electrolytic
capacitors

Resistors
*
Protective parts		 Power Supply Consumer electronics
(LCD TV, Set Top Box, DVD Recorder &
Player,TV Game)
Medical industry
Aerospace industry
Magnetic component
manufacturing

Transformers

Inductors
*
Filters
Industrial applications and automation
industry
Others
(Surveillance systems, LED lighting)
Printed circuit boards
Iron materials, cables,
plastics

  1. Product Development Trends and Competition:

  2. (1) Product Development

    • Power products are used in a wide range of applications. They are used in information, communication, office equipment, smart manufacturing, home appliances, smart lighting, electric vehicles, e-sports, and other related electronic products, as well as in defense, aviation & space, medical, laboratory, and block chain applications. However, because the structure and electronic design of different electronic products are different, the requirements for power supply are also different. FSP has accumulated years of experience in developing a wide range of power supply products, and has developed product design and production standards based on customer specifications. We also develop environmentally friendly, energy-efficient, standardized, miniaturized, low-noise, modular, digital, and low-cost products to meet the requirements in energy efficiency regulations of different countries.

  3. (2) Competition

The technology of power supply products has matured. The slow growth of the PC industry in the past few years, rapid rise of tablet PCs, and the pressure from price competition have reduced the product growth and profitability of switching power supplies. Currently, Taiwan's power supply manufacturers are mainly engaged in the production of power supplies for consumer electronics. As the growth of switching power supplies for PCs

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and LCD TVs slows, the competitive markets have shifted to AIoT, 5G, and edge computing applications. Other areas for potential development include high value-added but slightly smaller niche markets such as gaming applications, professional gamers, servers, workstations, IA products, Internet applications, and 5G network devices with better prospects for growth. The Company merged Protek in 2007 and moved into the niche medical power market. In 2012, we established the New Energy Division to focus on the multi-kilowatt-hour and high-capacity energy storage market. In 2015, we invested in inverter manufacturers to develop integrated products and services such as UPS, disaster-proof energy storage applications and solar energy. However, as new energy sources gradually replace fossil fuels, we continue to develop next-generation charging products and services with the aim of using green energy products and services to drive future growth.

The technology and industry of power supply products have matured. Taiwan is known as a major producer of power supplies and the competition is fierce. Although COVID-19 has boosted demand for PCs, it has also caused continuous lockdowns in different countries and caused many companies to cut capital expenditures for IT. The competition in the industry has intensified as power supply manufacturers do their best to compete for orders in an environment with lower demand but more competitors. Fortunately, FSP has been fully committed to the PC industry for years and benefits from the growth in demand for working from home and remote learning. We continue to develop power supplies for commercial computers, education computers, and gaming computers, and we have also made achievements in IPC. With the rapid development of 5G, AIoT, and edge computing, FSP has created a comprehensive product line that meets customers' product development needs. We have become one of the few companies in the power supply industry that can provide a full range of products. The Group's brand Protek specializes in niche medical power and 3Y Power specializes in telecom applications. We have integrated the resources of the FSP Group with the aim of developing a new blue ocean strategy with innovative products and high-quality services in an environment of intense competition.

  • (III) Overview Technologies and R&D Work

The key to the design of power supply products lies in the rapid development of power supplies that are compatible with the systems. We have the advantage of an experienced R&D team and have established a safety laboratory, electromagnetic interference (EMI) measurement room, noise measurement room, and air pressure and flow measurement equipment in our R&D environment to speed up product development and verification. We have modularized and even integrated some of our circuit designs to speed up product design. We also plan to introduce the next-generation PLM system and 3D layout system to shorten our product development and design time by approximately 2 weeks. This allows us to quickly provide our customers with product samples and computer-aided 3D designs, which are beneficial for collaborative design with our customers. The

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Company's safety laboratory has obtained safety laboratory evaluation certification from UL, TUV, Nemko, and CSA. We can conduct product certification directly in the factory to shorten the time required for the launch of products.

Since 1998, we have closely collaborated with Intel and AMD, the industry leaders for setting standards, to develop standard power supplies for ATX specifications. In 2001, we launched power factor correction (PFC) products for the European market; in 2002, we developed environmentally friendly power supplies; in 2003, we began development on power supplies for IPC and LCD TV; in 2006, we launched 1,000W high-end models for professional gamers; in 2007, we launched a variety of high-efficiency (80PLUS, 85PLUS) energy-saving products; in 2008, we added Redundant and medical power supplies; in 2009, we added DC to DC module power supplies for telecommunication and ultra-thin Adapter series; in 2010, we added energy-saving, high-efficiency, and long-lasting power supply for LED lighting; in 2011, we launched a full series of power supply for LED lighting. We have a high penetration rate of commercial lighting in Japan, which has increased FSP's brand effectiveness in the country. We have worked hard on mobile power supply for many years and we have achieved great results in 2012. In 2013, we launched digital power supplies and DALI power supplies and modules for LED lighting; in 2014, we became the first company in the industry to launch the 80 PLUS Titanium efficiency 400W ATX computer power supply, and we launched the complete CRPS Redundant power supply series; in 2015, we launched the next-generation industrial adapters that comply with DOE VI to create more efficient products with lower standby power consumption; in 2016, we successively launched the latest products that comply with the next-generation "Hazard-Based Safety Engineering (HBSE) requirements based on the latest telecom technology application and safety standard UL/IEC 62368-1; in 2018, we completed the deployment of more than 80% of 62368compliant power supply products and establish the newest high-end redundant CRPS product platform to transform the Company into a mid-range and high-end power supply provider. In 2019, we collaborated with Intel to launch a series of Next Unit of Computing (NUC) products for high-end applications, which have received wide acclaim in the PC market. With the development of 5G, AIoT and edge computing industries in 2020, we completed the development of 2000W Titanium CRPS products, charger products for smart transportation, and 420W PoE system power products for telecom customers.

In 2021, we created the U3 series, the industry's most compact 90-180W external power supply for notebook computers, and the 2400W Platinum CRPS. We started mass production of DC power supply for 5G switches and high-stability customized power supply for gambling. Our compact, high-performance, digital, and mobile products have received wide acclaim from customers.

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  1. Research & development personnel and their academic records and experience
Year
Academic
background distribution		 Year
Academic
background distribution
2021
2021
2021
2021		 May 8,2022 May 8,2022 May 8,2022 May 8,2022
Number of
people		 Ratio (%) Number of
people		 Ratio (%)
PhD 3
0.86%
3		 0.87%
Master's 63
18.10%
61		 17.73%
Bachelor's 261
75.01%
258		 75%
High school 21
6.03%
22		 6.4%
Total 348
100%
344		 100%
Note: Consolidated information
R&D expenses invested in the past five fiscal years
Unit: NT$thousands
Item 2017 2018 2019 2020 2021 Q1 of 2022
R&D expenses 466,052
480,097		 451,480 451,578
455,887
118,358
Ratio of R&D
expenses to net
revenue		 3.23%
3.31%
3.17%		 3.05%
2.74%
3.18%

2. R&D expenses invested in the past five fiscal years

Note: Consolidated information

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3. Successfully developed technologies or products

Main R&D results in the past five fiscal years

Year R&D results
2017  Completed the compact high-voltage 350W TFX and increased our competitiveness in
compact systems and integrated devices.
 Completed the development of the power supply to support the existing products that meet
requirements for the Intel (Kaby Lake S & Coffee Lake S With Kaby Lake PCH) platform.
 Developed the 350W ATX bronze and passed Intel PSDG NDA v1.41 certification test. It
also met the most rigorous new energy consumption regulations for CEC phase 2 in 2021.
 Completed the fourth-generation 150W 12/19/24/48/54V to 270W 12/19/24/48/54V
product line.
 Completed the first-generation 330W products.
 Completed the 45W USB PD (Type C) products.
 Completed the wall-mount fixed adapter (12V/18W, 24W, 30W, 36W, 40W; 19V/40W &
45W).
 Completed the NO-Y CAP. fixed adapter (12V/18W and 24W).
 Completed the fourth-generation models for the 30W to 65W/12/19V series.
 320W fixed-current products for next-generation lighting adjustment standards.
 Second-generation 120W and 200W high-current product series for CC + CV standards.
 40W for DALI standard products.
 Completed ATX 300W to 700W power supply models, used mainly for industrial or tower
case applications, that comply with IEC 62368 requirements and Intel's next-generation
CPU specifications with 80 Plus Bronze efficiency.
 Completed ATX 300W to 500W direct cable connection and cable management power
supply models, used mainly for industrial or tower case applications, that comply with IEC
62368 requirements with 80 Plus Gold efficiency.
 Completed FLEX 350W to 460W Industrial Application Single Power Series power supply
that comply with IEC 62368 requirements and IEEE802.3at PoE Power Supply Standards.
 Completed the FLEX 500W Industrial Application Single Power Series power supply
models with 80 Plus Gold efficiency.
 Completed the FLEX 850W Industrial Application Single Power Series power supply
models with 80 Plus Platinum efficiency and PMBus functions.
 Completed the CRPS 1200W and 1600W models for high-end work stations with 80 Plus
Platinum efficiency and PMBus functions.
 Completed 400W and 500W redundant power supply models with a width of 106mm used
for standard industrial cabinet applications with 80 Plus Gold 1U efficiency.
 Completed FLEX 150W to 250W direct cable connection and cable management power
supply, used mainly for industrial applications, that comply with IEC 62368 requirements
with 80 Plus Bronze efficiency.
 Completed home-use medical-grade 15W DOE Level VI wall-mount adapters.
 Completed home-use medical-grade 30W DOE Level VI wall-mount adapters.
 Completed home-use medical-grade 65W DOE Level VI wall-mount adapters.
 Completed medical-grade 500W 4" x 7" Open Frame products.
 Completed medical-grade 500W ATX high-efficiency products.
 Completed 3" x 5" 150W Open Frame standard products.
 Completed 200W PoE Open Frame dual-output standard products.
 Completed 360W U enclosed standard products.
 Completed the next-generation 1 to 4 1400W micro inverter elfin series.
 Launched the HySpirit series (Hybrid PV inverter) dual-use grid-connection/off-grid solar
energy storage system with rack-mounted lithium iron phosphate battery cabinets.
 Completed the new ESS system platform with 750VA BATT MATE.
 Launched EssenSolar 5KW off-grid solar energy storage inverter that meet UL American
standards.

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Year R&D results
 Launched UPS and NanoFit with integrated offline UPS and surge protection extension
cord functions.
2018  Completed the compact high-wattage TFX and increased our competitiveness in compact
systems and integrated devices.
 Completed the development of the power supply to support the Intel (Coffee Lake)
platform.
 Completed the development of product series that meet the latest energy consumption
regulations for 2019 CEC to target developed countries in Europe and Americas.
 Completed the fourth-generation 150W 12/19/24/48/54V and the first-generation 330W
19/24V product line.
 Completed the 45W and 100W USB PD (Type C) products.
 Completed the wall-mount fixed adapter (12V/18W, 24W, 30W, 36W, 40W; 19V/40W,
45W).
 Completed the NO-Y CAP. fixed adapter (12W, 18W, and 24W).
 Completed the fourth-generation models for the 30W to 65W/12/19V series.
 Second-generation 320W DALI light adjustment series.
 10-50W low-voltage input CC power supply.
 60-180W fixed-voltage light strip power supply.
 80, 150, and 200W DALI outdoor power supply.
 Introduction of IEC/EN 62368 safety regulations for all Flex/ATX products.
 Modularized Flex/ATX products with enhanced flexibility for product applications.
 Flex/ATX high-wattage models.
 Introduction of IEC/EN 62368 safety regulations for all CPRS F products.
 Medical-grade 400W and 500W ATX high-efficiency products.
 Medical-grade 30W DOE Level VI wall-mount adapters.
 Medical grade 250W DOE Level VI adapters.
 Medical-grade 500W 4" x 7" Open Frame products.
 Medical-grade 650W 4" x 8" Open Frame products.
 Open Frame 65W 2" x 4" standard products.
 Open Frame 150W 2" x 4" standard products.
 Open Frame 200W 3"x 5" standard products.
 Launched outdoor UPS with 5G base station requirements in response to IoT-NB schedule.
 Developed energy storage applications such as medical AGV and robotic arms.
 American standard 600VA to 1.5kVA online interactive UPS.
 Off-grid solar energy storage inverter with capacity for battery-free operation FSP302PV-
230CFS-24 & FSP502PV-230CFS-4.
2019  Completed the fourth-generation 150W 12/19/24/54V and the first-generation 230W 54V
product line.
 Completed the 45W compact USB PD (Type C) products.
 Completed the wall-mount fixed adapter (12V/18W, 24W, 30W, 36W, 40W; 19V/40W,
45W).
 Completed the NO-Y CAP. fixed adapter (12V/18W and 24W).
 Completed the fourth-generation models for the 30W to 65W/12V and 19V series.
 Completed the 24V Peak models.
 New PS2/MINI/1U/2U Redundant models that meet IEC/EN 62368 safety regulations.
 CRPS 2.0 series. 25 models including 550W to 2000W AC, LVDC, HVDC, and reversed
fan.
 Medical-grade 30W DOE Level VI Desk Top Adapters.
 2"x 4" 80W standard products.
 3"x 5" 65W standard products.
 3"x 5" 350W standard products.
 PoE 250W.

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Year R&D results
 Launched outdoor UPS with 5G base station requirements in response to IoT-NB schedule.
 Developed energy storage applications such as medical AGV and robotic arms.
 American standard 600VA to 1.5kVA online interactive UPS.
 Off-grid solar energy storage inverter with capacity for battery-free operation FSP302PV-
230CFS-24 & FSP502PV-230CFS-48.
 42V/2A (7S-12S) products.
 42V/4A (7S-16S) products.
 42V/6A (7S-16S) products.
 Safety regulation application for hazardous voltage in excess of 42.4V (EN61558).
 Onboard Charger 500W(IP67).
2020  Completed the TFX 250W/300W models (Gold).
 Completed the Flex 200W/300W models (Bronze).
 High-wattage Twins Pro series ATX Redundant power supply to provide operators of
unbranded servers or workstations with more comprehensive solutions.
 Completed the 230W models.
 Completed the 330W models.
 Completed the wall-mount fixed adapter (12V/30W-40W).
 Completed slim models below 90W.
 Completed the first 54V model for the wide temperature adaptation series.
 Completed the new model for 1U/2U/SFX that meet IEC/EN 62368 safety regulations.
 CRPS 2000 and 2400W 80 Plus platinum models.
 Completed the Felx series products with 12V & 53V output developed for the PoE market.
 Completed CRPS modularized back panel and housing to meet the high-mix low-volume
demand for edge computing.
 Completed the development of 1U redundant entry-level products for small-scale edge
computing demand.
 18W Wall Mount Adapter products.
 30W C14 Desk Top Adapter products.
 120W C14 & C8 Desk Top Adapter products.
 150W C14 & C8 Desk Top Adapter products.
 100W @ 2”x 4” Class-I Open Frame products.
 500W @ 4.21” x 7.09” Class-II Open Frame products.
 80W @ 2”x4”, FSP080-P24 products.
 250W @ 2”x4”, FSP250-H24-A12.
 PoE 200W, FSP200-2H35-A54H.
 PoE 420W, FSP420-2F47-A54H.
 PoE 550W, FSP550-2F67-A54H.
 Continuous development of third-generation off-grid inverters to integrate UPS functions
and provide more comprehensive protection in electricity use.
 Development of 5kW Split-Phase off-grid inverters to support low voltage and support
220Vac appliances without the use of traditional isolation transformers.
 Launched the new iFP series online interactive model with a power range of 400VA to
2KVA, touch LCD panel, and USB communication functions.
 Developed rack-mount online interactive UPS.
 Launched high-end on-line UPS with an output power factor (PF) = 1.
 600W/1200W On Board/off Board Charger.
 1800W 30V/60A;60V/30A on Board/off Board.
 Completed the development of hazardous voltage models rated for more than 300W 12-
16S.
 Introduced IATF 16949 Production Part Approval Process (PPAP) into related departments.
 700W aluminum-cast high-end water,dust,and shock-proofproduct study.
2021  Increased ATX power density.

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Year R&D results
 Continuous development of highly automated products to reduce the cost of labor and
increase production capacity.
 Development of power supply to support the 12Vo platform developed by Intel: SFX
650/750W.
 Conducted research and assessment of new component materials and plan the introduction
of suitable products.
 High-wattage SFX power supply with multiple output rated for 750W/850W.
 GaN USB PD 65W products.
 90W/120/135/150W/180W U3 series compact models.
 50/65W products with wide temperature adaptation.
 Development of 300W 5V, 12V, and 24V power supply for industrial computer products
with touch screens or motors.
 CRPS 2400W and 3000W high-power density devices.
 Completed CRPS modularized back panel and entry-level housing to meet the high-mix
low-volume demand for edge computing: FC210E.
 80W and 150W @2" x 4" power supply for telecom applications.
 30W, 50W, and 75W power supply for industrial applications.
 250W @ 2" x 4" series.
 260W @ 3" x 5" series.
 450W @ 3" x 5" series.
 120W IP54.
 250W ATX.
 500W Class II substrate medical application power supply.
 600/700W ATX.
 600W/1100W 50.4V-58.8V On Board/Off Board Charger.
 1800W 60V/30V On Board Charger.
 300W CANBUS Charger.
 700W aluminum-cast high-end water, dust, and shock-proof product development.
 AMR application charger development(1100W).

(IV) Long-term and Short-term Business Development Plans

1. Short-term Development Plans

Marketing Strategy

  • (1) Due to the impact of the COVID-19 pandemic, exhibitions in various countries have been suspended or switched to online exhibitions, and business visits have also been restricted. As different countries adopt different inspection and quarantine policies, the Internet has become the most important means of communication and marketing to the outside world. FSP has updated the official website in recent years and added micro websites dedicated to industrial applications. We adopted a responsive web design with large images with summarized information in text. We have launched micro websites with diverse application contents for 5G power solutions, smart life applications, battery charger applications, uninterruptible power supply (UPS) applications, Internet of Things (IoT) applications, energy storage, and management applications for potential customers around the world to learn more about our products and contact us. The marketing team also actively plans digital marketing with videos and launched the FSP Global YouTube Channel to publish videos on company image and product application. It also

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promotes the digital contents on official social platforms such as FSP Technology Inc. LinkedIn and FSP Global Facebook pages. In 2021, we placed them on Digi-Key, a professional e-commerce platform, to establish new communication channels with customers, increase product exposure, and maintain customer relations.

  • (2) FSP has been committed to the development of the PC DIY industry for years under its own brand. The retail team has invested in regional media for a long time to operate its own brand. It works with famous KOLs in different countries to promote FSP brand and e-sports products. A total of 130 posts by KOLs across the world have been featured on YouTube channels, with over 6,800,000 cumulative views in 2021. According to Google Search Console data, the total number of FSP exposures in 2021 has increased by 4.5 times compared to 2020.

  • Our retail website ranking increased to the to 100,000 and the number of social media followers soared.

  • The Global and Indonesia IG accounts were both created last year. The number of followers of the Indonesia IG account rose from 0 to 2,200 while the number of followers of the Global IG increased from 0 to 5,000.

  • The number of followers of the FSP Europe IG account rose from 2,000 to over 12,000.

  • The number of Twitter followers in Japan increased from 2,000 to 13,700.

The result was a 21% growth rate in own brand performance in 2021 compared to 2020. Products with Gold efficiency accounted for 33.5% (exceeding the target of 25%).

Production Policy

  • (1) Improve the production and sales process and production line setup, and add automatic production equipment to enhance production capacity and efficiency.

  • (2) Expand production facilities and production lines in accordance with the growth of operation.

  • (3) Disperse the production sites and plan to build a new factory in Taiwan, which was inaugurated in 2021.

Product Development Strategy

We continue to increase output power, improve efficiency, and develop more standard products for existing products such as PC power, LCD TV PSU, monitor PSU, adapters, open Frame, and industrial PSU, and redundant products based on the development trends for terminal products, and develop more applications. Examples: They include industrial UPS, industrial, home-use, medical-use, telecommunications, solar inverter, and e-Bike/e-Motor chargers. We also focus on products for IoT, 5G/edge computing applications, digital

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communications, industrial charging applications, wireless charging, battery backup systems, and energy storage subsystems In addition to the general electric vehicle market, we also started a partnership for developing environmentally friendly compressors for new charging applications of electric vehicles in 2021. The project is expected to generate revenue in the following year.

Financial Plans

  • (1) We outline our short-term financial plans based on medium and long-term capital requirements and the principle of secure and healthy development.

  • (2) We build trust and mutual interests with banks to monitor the financial market and improve financial performance.

  • Long-term Development Plans

Marketing Strategy

  • (1) We shall establish a global management and division of labor system, particularly in regards to strengthening the establishment of sales offices in developing countries as the main expansion strategies for existing products, including the search for CKD/SKD partners in South America/India. We shall also strengthen the establishment of sales networks in third-world regions such as ASEAN, Middle East, and South Africa to leverage the demand in emerging markets and establish a solid international marketing network for long-term development.

  • (2) We shall increase the types and share of products shipped to emerging markets such as key DVR, telecommunication, data center, and 5G applications in Mainland China. In the Indian market, we will strengthen our promotion of industrial applications and continue to develop and improve the quality of products in R&D units to increase our market share, sales and profits.

  • (3) We shall reorganize our marketing resources in China, restructure the organization, and increase our support to customers in China with AE/FAE and local R&D personnel. We shall reorganize the marketing organization for the Chinese market and strengthen management. We shall also continue to increase R&D resources and create a core strategy with China as an individual market. We aim to provide integrated technical services in the 5G network industry on the basis of existing industrial, medical, computer, cloud, and surveillance markets.

  • (4) We shall continue to strengthen and intensify brand awareness. For both retail and industrial brands, we will build strong foundations for the brand and strong sales channels with more strategic partnerships, such as participation in the Intel & AMD forums and activities and connecting with mainstream media and marketing channels in each region.

  • (5) Establishment of online marketing and other sales channels.

Production Policy

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  • (1) Enhance communication with upstream/downstream businesses and government research institutions to ensure the stable supply of key components and materials while using production, sales and purchase collaboration projects to integrate cross-departmental functions and improve both operational efficiency and customer satisfaction.

  • (2) Enhance the functions and efficiency of R&D departments and establish a knowledge management platform for communication between different departments.

  • (3) Recruit high-level technical and R&D personnel, and actively participate in major seminars at home and abroad. Continue to improve production quality, technical capability, yield, and cost reduction.

  • (4) Continue to disperse the production sites. Due to the growing trade conflict between the U.S. and China, we will disperse production sites which are mostly in China to other regions to reduce tariff pressure. In 2021, we opened a new manufacturing factory in Taoyuan, Taiwan, and continued to optimize our factory in Kaohsiung, Taiwan.

Product Development Strategy

FSP has developed advanced AC to DC power supply technologies. We will focus on the aforementioned short to medium-term product development to satisfy the need for more applications, and develop more comprehensive LED lighting driver & medical PSU. For long-term plans, we will gradually create comprehensive DC to DC, AC to AC (UPS) & DC to AC (inverter) product lines. They include high-voltage three-phase conversion power supplies, DC to DC modules for communication systems, power supplies for industrial applications for battery charging, and sub-systems for energy storage power supplies for new energy needs. We will also begin to build subsystems for power conversion products, which are now planned and developed by the Group's R&D and marketing units. In addition to the sub-systems for power supply, we also focus on the industrial design of our products, particularly with regard to power supply products for the consumer market. We shall also strengthen the integration technology for the parts that require firmware and communication. In addition to focusing on our core competencies in power conversion, we will also increase the versatility and applications of our future products. Financial Plans

The Company uses its own capital and bank loans to meet its financial needs. Where necessary, the Company adopts more diverse fundraising tools for medium and long-term capitalization to meet its capital needs and strengthen its long-term development.

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  • II. Analysis of Market and Production and Marketing Situation

  • (I) Market Analysis

    1. Sales Territory of Main Products The consolidated product sales for each region in the past two years are shown in the table below:
Market and Production and Marketing Situation
et Analysis
Sales Territory of Main Products
The consolidated product sales for each region in the past two years are shown in
the table below:		 Market and Production and Marketing Situation
et Analysis
Sales Territory of Main Products
The consolidated product sales for each region in the past two years are shown in
the table below:		 Market and Production and Marketing Situation
et Analysis
Sales Territory of Main Products
The consolidated product sales for each region in the past two years are shown in
the table below:		 Market and Production and Marketing Situation
et Analysis
Sales Territory of Main Products
The consolidated product sales for each region in the past two years are shown in
the table below:		 Market and Production and Marketing Situation
et Analysis
Sales Territory of Main Products
The consolidated product sales for each region in the past two years are shown in
the table below:		 Market and Production and Marketing Situation
et Analysis
Sales Territory of Main Products
The consolidated product sales for each region in the past two years are shown in
the table below:
Unit: NT$ thousands;%
Year 2020 2021
Region Amount % Amount %
Domestic 2,868,035
19.38%
3,543,739
21.28%
Sales
Foreign Sales Asia 7,728,629
52.23%
8,363,395
50.23%
America 1,651,949
11.16%
2,174,313
13.06%
Europe 2,534,140
17.13%
2,537,478
15.24%
Others 13,707
0.10%
31,327
0.19%
Subtotal 11,928,425
80.62%
13,106,513
78.72%
Total 14,796,460
100.00%
16,650,252
100.00%

Note: Consolidated information

  1. Market Share

According to Canalys' statistics, the global sales volume of desktop computers in 2021 was approximately 64.4 million units. The Company shipped more than 4.1 million power supply units for desktop computers in 2021, and its estimated global market share was approximately 6.4%.

  1. Supply and Demand in the Market and Possible Future Growth According to Canalys' statistics, desktop computers will grow at a CAGR of 4.3% from 2020 to 2025, with demand for 76.1 million units in 2025. Shipments of notebook computers totaled 236 million units in 2020, with a CAGR of 4.0% by 2025. We remain optimistic about future market conditions.

  2. Competitive Niches Establishment of Capable R&D Teams for Individual Product Categories

The power supply is a mature product, but there are compatibility issues with systems in different applications. Due to cost consideration, a lower number of components used offers significant advantages, and we must also consider product reliability and stability. Therefore, we need advanced product design and R&D capabilities to improve our competitiveness and our R&D organization has created a technology development center to focus on new technology development. We also assigned R&D personnel to focus on new product design for products in different applications such as PC power, open frame, adapters, retail and industrial PC power, redundant power, medical applications, chargers, and other products. Each team has capable and experienced engineers. We have R&D centers in Taoyuan, Taipei, and Kaohsiung in Taiwan. We also set up R&D departments in Shanghai, Wuhan, Shenzhen, and Wuxi. As of today, FSP Group has more than 300 R&D personnel, and the main R&D personnel have more than 10 years of experience. Due to the growth of our businesses in recent years, we

129

have recruited experienced engineers to join our R&D team, and we have built a new R&D building next to the head office. Our strong R&D capabilities remain our strongest niche.

Market segmentation

The global PC industry is divided into two major markets — branded PC and assemblies (clones). The detailed specifications and standardization of computer components have significantly lowered the threshold for self-assembly, allowing branded PCs and clones to meet customer needs in different markets. Both markets are our target markets. With the development of the gaming industry in recent years, many assembly companies in the clone market have transformed themselves into Gaming SIs to provide high-quality gaming computers to consumers. These PC clone assembly companies are mostly FSP customers and they accelerate FSP's development in the gaming market to meet market demand. Global operation and management model

PC manufacturers have developed the global logistics business model with information systems to respond quickly to changes in market demand and reduce operating costs in an environment of cut-throat price competition. They exchange information instantly, completely, and accurately with production sites in China, distribution centers, or business locations in different countries (Germany, Russia, USA, UK, China, India, etc.). In response to inventory control implemented by downstream PC manufacturers, we also developed the BTO production mode for flexible production and fast delivery. We also set up warehouses in Europe and the United States to meet customers' requirements for delivery time, and gradually aim to win orders from international customers to increase the proportion of export sales and reduce operational risks. Stable sources of components

The Company actively maintains good relations with upstream suppliers to strengthen control over the supply of key components.

Professional talents and laboratories for electromagnetic compatibility and safety tests

The increase in safety requirements and the rise of environmental awareness have made electromagnetic compatibility and safety certification essential tests for all electronic and information products marketed in different countries. For this reason, the Company has set up a product certification department and became the first to set up a safety test center and a simple indoor 3m EMC laboratory. Our experienced engineers are familiar with regulatory requirements and they conduct tests during product development. It effectively reduces the time and cost of product certification and helps the Company grasp market opportunities and expand businesses.

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  1. Favorable and unfavorable factors for future development and response measures Favorable Factors

  2. (1) The use of key technologies is the key to maintaining a competitive edge in high-tech industries. The Company is fully committed to technology development and product function innovation as we seek to stabilize technology sources. Our R&D organization fosters both technology development and product development. We also use the development of new technologies to effectively reduce the cost of production and increase product competitiveness.

  3. (2) The design of all power supplies of the Company meets UL, CSA, VDE, TUV, DEMKO, NEMKO, SEMKO, FINKO, CCC, and CE safety standards, as well as US FCC and European CE requirements. We passed ISO 9001 and ISO 14001 certification in 2001 and obtained ISO 13485 Medical Device Quality Systems certification in 2016. In 2021, we hired a consultant to FSP to provide guidance on ISO 16949 Quality Management System for automotive applications to become a professional power supply manufacturer in compliance with international standards.

  4. (3) The Company's production volume has reached economies of scale and meet increasingly stringent product regulations (e.g., environmental protection and energy efficiency) around the world. We have superior cost-sharing and we have created entry barriers in items (1) and (2) above.

  5. (4) We maintain close communication with the industry leaders for setting standards (Intel and AMD) to gain first-hand information on changes in specifications.

  6. (5) We use the JIT model and ERP information management system. Our Product Life Management (PLM) system was also launched to reduce the operating time from R&D to production and cost of errors.

  7. (6) To strengthen the control of marketing channels, we have set up offices in Germany, UK, France, USA, Russia, and Shanghai, Beijing, and Shenzhen, China. In recent years, we also set up offices in Japan, Korea, India, Brazil, Finland to leverage proximity marketing, provide services, and monitor channels. In addition to expanding our marketing channels, we have also implemented a customer relationship management (CRM) system to effectively manage customer relations and enhance services.

  8. (7) The Company uses FSP®, ®, 全漢 ®, and 全汉 ® logos as the main trademarks in manufacturing, corporate identity, sales, promotions, marketing, and advertising of power supply products or services. We have accumulated a reputation over the years that has received the recognition and trust of consumers and customers. In the future, we will work hard to become a famous trademark and a well-known trademark in Greater China.

Unfavorable Factors

  • (1) Price war with competitors.

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  • (2) The computer information hardware industry has plateaued.

  • (3) Due to the impact of the pandemic, component suppliers have rushed to support the Internet of Vehicles (IoV) applications, resulting in higher demand of preliminary parts in the short to medium term than what could be supplied.

  • (4) Severe shortages of parts and components due to the pandemic resulted in longer delivery schedules.

  • (5) Rising transportation costs and delivery time are difficult to control.

Response

Expand overseas distribution to quickly grasp customer needs and market trends, and to serve customers in close proximity. Cooperate with upstream and downstream companies and work together to enhance the effectiveness of global logistics services. Reduce costs and improve R&D capabilities and market share to increase the market entry barriers for competitors.

  • (II) Usage and Manufacturing Processes for Main Products

  • Usage of Main Products

Main Products Main Functions Main Applications
PC Power Supply It provides a stable
operating voltage
source for electronic
products and is an
indispensable
component.		 DesktopComputer
OPEN FRAME It is used for IA network communication products,
industrial computers,LED lighting,etc.
ADAPTER Notebook computers, IA network communication
products,LCD monitors, printers,scanners,etc.
Display/ LED TV Power Supply LCD monitors,LCD TVs,etc.
IPC/Medical Power Supply Healthcare equipment, data storage systems, POS,
gamingdevices,AI/Edge servers,etc.

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2. Production process

==> picture [461 x 723] intentionally omitted <==

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

Supplier
delivers
materials
NG Warehouse
acceptance
NG IQC
Inspections of
incoming
materials Shipping inspections
OK
Special
inspection Inventory
s
Inventory
Material distribution
based on the PC form
OK
AI or SMD Component pre-
inventory processing inspections and OQC sampling NG REWORK
tests
IPQC
OK
Plug-in Inspection of
finished products
Discarded
PQC NG
Packaging
Wave soldering
IPQC
OK
Additional REPAIR PQC
welding
OK
PQC
Ultimate
NG
function test
ICT TEST
OK
ok
IPQC
NG
NG
Pre-Test HI-POT high- IPQC
voltage test
OK
ok
NG
Assembly
Open-short
protection test
PQC
OK
NG
NG
Vibration PIN TEST cable
protection test
OK
NG
NG
BRUN IN
Appearance
aging test inspections
OK
----- End of picture text -----

133

(III) Supply Situation for Major Raw Materials in 2021

Main
Products		 Main Material Main Suppliers in 2021 Supply
Situation
Power
Supply		 Transformers Fatek Automation,Yihong Normal
Capacitors Skytex International, Wu aWoo International,
Tairung,Faratronic		 Normal
Semiconductors Yosun Industrial, Lumax International, WT
Microelectronics, Avnet Asia (Singapore), World
Peace Industrial
Hongwei Electronics		 Normal
Cables E Ink Holdings, Carol Wiring Harness, Jet Data
System		 Normal
Coolingfins Yongqi,Hua Jie Normal

134

(IV) List of major suppliers and clients

  1. Suppliers and clients accounting for 10% or more of the total purchase (sales) amount and ratio in any of the most recent 2 years: List of Major Suppliers in Most Recent 2 Years

Unit: NT$ thousands

Major Suppliers in Most Recent 2 Years Major Suppliers in Most Recent 2 Years Major Suppliers in Most Recent 2 Years Major Suppliers in Most Recent 2 Years Unit: NT$thousands Unit: NT$thousands Unit: NT$thousands Unit: NT$thousands
Item 2020 2021 Q1 of 2022 (Note 2)
Name Amount Proportion
to Net
Purchase for
the Year (%)

Relationship
with the
Issuer
Name		 Amount Proportion to
Net Purchase
for the Year (%)		 Relationship
with the
Issuer
Name		 Amount Proportion to
Net Purchase for
the Year (%)
Relationship
with the
Issuer
1 None
(Note 1)		 - - - None
(Note 1)		 - - - None
(Note 1)		 - - -
Others 10,794,824 100% - Others 11,903,940
100%		 - Others 2,025,036 100% -
Net
purchase		 10,794,824 100% - Net
purchase		 11,903,940
100%		 - Net
purchase		 2,025,036 100% -

Note 1: There were no suppliers who accounted for more than 10% of the total purchases in any of the last two years or 2022 Q1.

Note 2: If there is any financial data of companies whose stocks are traded on TWSE or TPEx for the most recent period audited and certified by the CPA before the date of publication of the annual report, it shall also be disclosed.

  1. Suppliers and clients accounting for 10% or more of the total purchase (sales) amount and ratio in any of the most recent 2 years: List of Major Clients in Most Recent 2 Years

Unit: NT$ thousands

2.
Suppliers and clients accounting for 10%
Major Clients in Most Recent 2 Years		 2.
Suppliers and clients accounting for 10%
Major Clients in Most Recent 2 Years		 2.
Suppliers and clients accounting for 10%
Major Clients in Most Recent 2 Years		 2.
Suppliers and clients accounting for 10%
Major Clients in Most Recent 2 Years		 or more of the total purchase (sales) amount an or more of the total purchase (sales) amount an or more of the total purchase (sales) amount an or more of the total purchase (sales) amount an d ratio in any of the most recent 2 years: List of
Unit: NT$thousands		 d ratio in any of the most recent 2 years: List of
Unit: NT$thousands		 d ratio in any of the most recent 2 years: List of
Unit: NT$thousands		 d ratio in any of the most recent 2 years: List of
Unit: NT$thousands
Item 2020 2021 Q1 of 2022 (Note 2)
Name Amount Proportion
to Net Sales
for the Year
(%)		 Relationship
with the
Issuer
Name		 Amount Proportion to
Net Sales for
the Year (%)		 Relationship
with the
Issuer
Name		 Amount Proportion to
Net Sales for the
Year (%)
Relationship
with the
Issuer
1 None
(Note 1)		 - - - None
(Note 1)		 - - - None
(Note 1)		 - - -
Others 14,796,460 100% - Others 16,650,252 100% - Others 3,717,016 100% -
Net sales 14,796,460 100% - Net sales 16,650,252 100% - Net sales 3,717,016 100% -

Note 1: There were no customers who accounted for more than 10% of the total sales in any of the last two years or 2022 Q1. Note 2: If there is any financial data of companies whose stocks are traded on TWSE or TPEx for the most recent period audited and certified by the CPA before the date of publication of the annual report, it shall also be disclosed.

135

(V) Production Volume and Value for Most Recent 2 Years

(V) Production Volume and Value for Most Recent 2 Years (V) Production Volume and Value for Most Recent 2 Years (V) Production Volume and Value for Most Recent 2 Years (V) Production Volume and Value for Most Recent 2 Years (V) Production Volume and Value for Most Recent 2 Years (V) Production Volume and Value for Most Recent 2 Years (V) Production Volume and Value for Most Recent 2 Years (V) Production Volume and Value for Most Recent 2 Years
Unit: thousand units/NT$ thousands
Year
Production Volume
and Value
Main Products
2020		 2021
Production
Capacity		 Production
Volume		 Production
Value		 Production
Capacity		 Production
Volume		 Production
Value
Power Supply 250W (inclusive)
or below		 － 2,479
1,080,111
－		 2,587
1,242,373
More than 250W － 6,835
6,615,699
－		 6,526
6,994,877
Others(Note 1) － 552
248,813
－		 545
246,447
Others(Note 2) － 19,171
3,563,562
－		 20,021
3,868,015
Total － 29,037 11,508,185
－		 29,679 12,351,712

Note 1: Power supplies — other products were power supply products from Kaohsiung Branch. Note 2: Other products include inverters, adapters, and open frame, etc. Due to the wide variety of units with quantities measured, their production quantities are not shown.

(VI) Sales Volume and Value for Most Recent 2 Years

Unit: thousand units/NT$ thousands Unit: thousand units/NT$ thousands Unit: thousand units/NT$ thousands Unit: thousand units/NT$ thousands Unit: thousand units/NT$ thousands Unit: thousand units/NT$ thousands Unit: thousand units/NT$ thousands Unit: thousand units/NT$ thousands
Year
Sales Volume
and Value
Main Products		 2020 2021
Domestic Sales Foreign Sales Domestic Sales Foreign Sales
Volume Value Volume Value Volume Value Volume Value
Power
Supply		 250W
(inclusive) or
below		 165
144,520
2,756		 1,275,803
134
123,342
2,300
1,354,032
More than 250W
354
711,215
6,938		 7,234,660
678		 1,514,080
5,420
7,563,185
Others(Note) 9
3,986
304
303,052
14
6,530
295
288,482
Others 1,726
652,369
81,022		 4,470,855
2,389
870,581
99,854
4,930,020
Total 2,254 1,512,090
91,020		 13,284,370
3,215		 2,514,533 107,869 14,135,719

Note: Power supplies — other products were power supply products from Kaohsiung Branch.

136

III. Information on Employees for the Two Most Recent Fiscal Years and during the Current Fiscal Year Up to the Date of Publication of the Annual Report

Year 2020 2021 Current fiscal year as of
May 8,2022
Number of Employees Management
personnel		 367
376
378
General
employees		 1,135
1,124
1,118
Production
line
employees		 4,976
4,666
4,692
Total 6,478
6,166
6,188
Average Age 36.85
41.03
41.15
Average Service Year 6.72
7.05
7.21
Academic
Background
Distribution (%)		 PhD 0.05%
0.06%
0.06%
Master's 1.81%
1.93%
1.91%
Bachelor's 14.59%
14.63%
14.66%
High school 16.92%
18.93%
18.67%
Below high
school		 66.63%
64.45%
64.70%

Note: Consolidated information

  • IV. Disbursements for Environmental Protection

List the losses suffered by the Company due to pollution of the environment in the most recent two years up to the publication date of this annual report (including compensation and results of environmental protection audits that violated environmental protection laws and regulations; specify the date of the penalty, penalty number, violated articles in regulations, contents of violation, and the contents of penalties), and disclose the estimated amount arising both at present and in the future and the corresponding countermeasures. If the amount cannot be reasonably estimated, the reason for the inability to provide a reasonable estimation shall be explained: None

  • V. Labor Relations

  • (I) Labor-management agreements and implementation

    1. Employee benefits

      • (1) Benefits and subsidies: Childbirth subsidies, wedding and funeral subsidies, hospitalization subsidies, major emergency subsidies, and birthday gift are provided to take care of employees.

      • (2) Education subsidies: We organize seminars on exercise and health to encourage employees to take care of their physical and mental health. We also provide them with subsidies for on-the-job training and independent learning to encourage employees to always learn.

      • (3) Culture and fitness activities: We provide fitness equipment and club activities to promote healthier lifestyles for employees.

      • (4) Comprehensive insurance: We have a comprehensive labor insurance/health insurance system, paid group insurance for all employees and family members,

137

and overseas travel insurance for employees on business trips or overseas assignments.

  • (5) The Company established the Employee Welfare Committee dedicated to promoting employee benefits.

  • (6) Employee shareholding trust: To retain talented employees, the Company has created an employee stock ownership trust and makes fixed monthly contributions to the Company's incentive fund as rewards for employees.

  • Continuing education and training for employees Learning drives growth and we value talent development and the self-growth of our employees at FSP. We plan diverse training programs for different roles, rank systems, and practical needs to strengthen employees' professional knowledge and skills and to satisfy the needs of employees in different countries and regions. We start from strengthening employees' skills and core competencies and improve their management and leadership skills to enhance performance. Training courses include: We provide pre-job/on-the-job training, basic general knowledge training, training for core functions, management functions and professional functions, an on-the-job training system, and group training programs for new employees. We are committed to creating a free and diverse learning environment that allows employees to create their own learning plans. We encourage them to learn actively to pursue their goals and make a commitment to personal career development. They must learn more in work and life and continuously improve and enhance their skills.

  • Retirement system and implementation status The Company complied with the implementation of the Labor Pension Act and surveyed employees in 2005 on their intent for choosing the new system or the old system. For those who chose the old system, we contribute 2% of the total monthly salary to the pension fund and deposit it in a special account at the Bank of Taiwan in accordance with the Labor Standards Act. For those who chose the new system or those who joined the Company after July 1, 2005, the Company contributes 6% of the monthly wages of these employees to their pension accounts set up by the Bureau of Labor Insurance. All other matters shall be handled in accordance with laws and regulations. Pension payment: The pension for employees who meet the retirement requirements for whom the Labor Standards Act applies shall be paid in accordance with Article 55 of the Labor Standards Act; those for whom the Labor Pension Act applies may collect payment from their personal labor 。 pension account set up by the Bureau of Labor Insurance.

  • Labor-management agreements

The Company provides leave and several benefits to take good care of the

employees. The employees are thus loyal to the Company. Any problem between

138

the labor and management can be fully expressed and communicated in the quarterly labor-management meetings. We maintain a spirit of teamwork and cooperation and a harmonious relationship between employees and management.

  1. Measures for preserving employees' rights and interests

Talents are always crucial to business success and sustainability. FSP has always aimed to provide good labor conditions and work environment so that employees can be all they can be, make the most use of their skills, and become important partners for the Company's stable growth while maintaining balanced development of their work and quality of life.

  1. Protective measures for the work environment and the personal safety of employees

The Company has set up the Labor Safety Dept. and an Occupational Safety Committee in accordance with regulations. We have launched and obtained ISO 45001 certification and adopted the PDCA management cycle for the implementation of different projects. We also follow the Occupational Safety and Health Act and the Enforcement Rules, the Occupational Safety and Health Equipment/Facilities Rules, Labor Inspection Act and the Enforcement Rules, Regulation Governing Occupational Safety and Health, Guidelines for Strengthening Occupational Safety and Health Management, Labor Standards Act and the Enforcement Rules, Safety and Health Facilities Standards, and related regulations on work safety inspections to implement continuous improvements.

When the Company hires new employees, we provide pre-employment labor safety and health training, regularly organize safety and health training courses, implement fire safety inspections, organize fire drills and exercises, and implement workplace environment monitoring. We also arrange labor health promotion activities, such as blood donations, flu vaccination, workplace health certification, and physician consultation services, etc. We provide regular health examinations for employee in accordance with the law.

The Company attaches importance to environmental safety and health management and continuous improvements, and has established committees as required by law. We hold quarterly occupational safety and health meetings to discuss safety and health issues, including safety and health programs, training programs, contractor management, hazard prevention management, and health promotion. Representatives elected by workers account for at least one third of all members in accordance with regulations to provide a channel for managers to communicate safety and health issues with employees.

In terms of occupational accident management, the Company has always aimed to achieve "zero accident". The mechanisms for handling occupational accidents and traffic accidents require mandatory reports, comprehensive investigations,

139

and improvements to avoid the recurrence of the same hazards.

We produce training materials from time to time and disseminate them to all employees by e-mail to enhance employees' safety and health awareness.

Occupational injury statistics

Year
Item		 2020 2021
Number of
occupational
injuries		 11 (including traffic
accidents)		 7 (including traffic
accidents)
Total number of
employees		 659 657
Disabling
frequencyrate		 8.34 5.37
Occupational
injury category		 9 non-occupational injuries
(traffic accidents)
2 non-occupational injuries
(other)		 4 non-occupational injuries
(traffic accidents)
3 non-occupational injuries
(other)
Work-related
fatalities		 0 0

Description: The disabling frequency rate in 2021 was 5.37. Although it was an improvement from 8.34 in 2020, there were 7 cases of occupational accidents in 2021 and 3 people were injured. We have not yet achieved our goal of "zero accident".

This Company thoroughly reviewed the improvement measures and immediately enhanced employees' safe awareness and defensive driving. We strengthened workplace safety and reduced occupational accidents. We also encouraged managers to care about the physical and mental health of employees, and promote employee health and safety.

Occupational safety training and occupational safety inspections in 2021

Year Number of trainees Number of trainees Trainingman-hours
2021 127 444
2021 occupational safetyaudits and inspections
Occupational safetyaudit Monthly
Occupational safetyinspections Monthly
Occupational safety discrepancies Monthly
13 total discrepancies (improvements
completed in 2021)

140

  • (II) List the losses suffered by the Company due to labor-management disputes in the most recent two years up to the publication date of this annual report (including results of labor inspections that violate regulations in the Labor Standards Act; specify the date of the penalty, penalty number, violated articles in regulations, contents of violation, and the contents of penalties), and disclose the estimated amount arising both at present and in the future and the corresponding countermeasures. If the amount cannot be reasonably estimated, the reason for the inability to provide a reasonable estimation shall be explained:
explained:
Date ofpenalty 2021/11/02 2021/12/17
Penalty number Fu-Lao-Jian No. 1100270599 Fu-Lao-Jiu No. 1100323411
Violated articles
in regulations		 Paragraph 1, Article 23 of the
Labor Standards Act		 Paragraph 1, Article 33 of the
Employment Service Act
Contents of
violation		 Except as otherwise agreed to
by the parties to a labor
contract or when wages are
paid in advance on a monthly
basis, wages shall be paid on
a regular basis at least twice a
month; the details of wage
computation must also be
provided. This shall also
apply to wages computed on
the basis of piece by piece
work.		 In the event of layoff, the
employer shall report the
layoff at least ten days prior
to the layoff.
Contents of
penalties		 Failure to pay overtime pay
on a monthly basis		 Failure to report the layoff at
least ten days in advance
Response
measures		 The Company requested
employees to report and
apply for overtime pay on
schedule and complete
payment ona specified date.		 Report layoffs at least ten
days in advance
  • VI. Information security management:

The Company has established information security policies and management programs to ensure the confidentiality, security, and availability of corporate information.

  • (I) Information Security Risk Management Structure

  • ⚫ The Company's Information Technology Dept. is responsible for information security, the planning, implementation, and promotion of information security management, and promotion of information security awareness.

  • ⚫ The Auditing Staff Office of the Company is the audit unit for responsible for information security monitoring. If the audit reveals any deficiencies, it immediately requests the inspected unit to propose improvement plans and submit them to the Board of Directors. It also regularly tracks the effectiveness of the improvements to reduce internal information security risks.

  • ⚫ Our organization operation model is based on the PDCA (Plan-Do-Check-Act) cycle management to ensure that we achieve our reliability targets and continue to improve.

141

==> picture [532 x 329] intentionally omitted <==

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

Information security governance
● Establishment of the Company's
Information Security Policy
● Establishment of the internal information
security operating procedures
Information
Technology
Dept.
Implementation and execution Improvements for addressing risks
● Improvement of internal operating
● Information policy promotion and
procedures
training
● Introduction of external solutions
● Introduction and implementation of
Auditing
Internal
information security measures Staff
units
Office.
Risk assessment
● Information security risk assessment
mechanisms
----- End of picture text -----

Information Security Policy:

The Company has established the Information Security Policy in January 2021 as the highest guiding principles for information security management to ensure the normal operations of all information systems, confidentiality of important information systems, safe operations of information and network systems for sustainability.

Information Security Commitments:

Comply with the Information Security Policy, set up information security systems, and implementation of information security management.

Strengthen training, raise awareness of information security, and ensure sustainable development.

142

Information security management measures:

Information security management measures: Information security management measures:
Information security management measures
Category Description Related Operations
Access
control		 Control measures for personnel account
privileges, system access control, and
data transmission channels		 1. Account management and audit
2. Internal/external system access control measures
Protection
against threats		 Internal and external measures to
protect against potential vulnerabilities,
threats, and viruses		 1. Measures for server/computer vulnerability,
threats, virus detection, and update
2. Internal/external information security device
setup and management
System
availability		 System availability and backup support
measures		 1. System/network availability monitoring and
notification mechanisms
2. Anomaly handling and regular disaster recovery
exercises
3. Information backup copy measures and off-site
backup copy mechanisms
4. Information backup measures and off-site backup
mechanisms

Resources invested for information security management:

The Company's Information Technology Dept. organizes regular information security training for employees and send emails to enhance their information security awareness.

To improve information security management, the Company has appointed a consultant to provide guidance and we also plan to obtain ISO 27001 certification.

Implementation status in 2021:

The Company reviewed the implementation of the Information Security Policy by each unit in 2021 and found no incidents that jeopardized the Company's information security during the year.

In 2021, the Company conducted one off-site backup exercise and enhanced employees' responses and awareness of information security risks.

To strengthen employees' awareness of information security, the Company plans to increase the number of information security courses in 2022 and include them as mandatory courses for all employees to strengthen their information security awareness.

  • (II) List the losses, suffered by the Company due to critical information security incidents, potential impact, and response measures in the most recent two years up to the publication date of this annual report. If the amount cannot be reasonably estimated, the reason for the inability to provide a reasonable estimation shall be explained: None.

VII. Important Contracts:

Type of
Contract		 Party Contract
Duration		 Contract Content Restrictions
Construction
contract		 Ligao
Construction
Co., Ltd.		 2019/10~2021/2 FSP Taoyuan 3rd
Factory
Construction
Project		 -

143

Chapter 6 Financial Information

  • I. Condensed Balance Sheets and Statements of Comprehensive Income for the Past Five Fiscal Years

  • (I) Parent Company Only Condensed Balance Sheets - International Financial Reporting Standards

I. Condensed Balance Sheets and Statements of Comprehensive Income for the Past Five Fiscal
Years
(I) Parent Company Only Condensed Balance Sheets - International Financial Reporting
Standards		 I. Condensed Balance Sheets and Statements of Comprehensive Income for the Past Five Fiscal
Years
(I) Parent Company Only Condensed Balance Sheets - International Financial Reporting
Standards		 I. Condensed Balance Sheets and Statements of Comprehensive Income for the Past Five Fiscal
Years
(I) Parent Company Only Condensed Balance Sheets - International Financial Reporting
Standards		 I. Condensed Balance Sheets and Statements of Comprehensive Income for the Past Five Fiscal
Years
(I) Parent Company Only Condensed Balance Sheets - International Financial Reporting
Standards		 I. Condensed Balance Sheets and Statements of Comprehensive Income for the Past Five Fiscal
Years
(I) Parent Company Only Condensed Balance Sheets - International Financial Reporting
Standards		 I. Condensed Balance Sheets and Statements of Comprehensive Income for the Past Five Fiscal
Years
(I) Parent Company Only Condensed Balance Sheets - International Financial Reporting
Standards		 I. Condensed Balance Sheets and Statements of Comprehensive Income for the Past Five Fiscal
Years
(I) Parent Company Only Condensed Balance Sheets - International Financial Reporting
Standards		 I. Condensed Balance Sheets and Statements of Comprehensive Income for the Past Five Fiscal
Years
(I) Parent Company Only Condensed Balance Sheets - International Financial Reporting
Standards
Unit: NT$thousands
Year
Item
Financial Information for the Past Five Fiscal Years (Note 1)		 Financial
Information
as of March
31, 2022
(Note 2)
2017 2018 2019 2020 2021
Current Assets 6,177,400
5,774,860
6,183,356
6,963,595
7,658,353
N/A
Property, Plant, and
Equipment		 802,589
885,413
859,633
901,411
966,351
Intangible Assets 118,674
116,931
115,684
114,860
117,968
Other Assets 5,369,461
5,242,079
5,889,926
8,155,000
9,802,008
Total Assets 12,468,124
12,019,283
13,048,599
16,134,866
18,544,680
Current
Liabilities		 Before
distribution		 4,236,028
3,956,622
4,142,437
4,735,805
5,033,681
After
distribution		 4,524,421
4,196,949
4,430,830
5,297,591
5,651,645
Non-current Liabilities 74,577
68,613
121,466
214,245
302,038
Total
Liabilities		 Before
distribution		 4,310,605
4,025,235
4,263,903
4,950,050
5,335,719
After
distribution		 4,598,998
4,265,562
4,552,296
5,511,836
5,953,684
Equity Attributable to
Owners of the Parent		 8,157,519
7,994,048
8,784,696
11,184,816
13,208,961
Capital Stock 1,922,620
1,922,620
1,922,620
1,872,620
1,872,620
Capital Surplus 1,150,259
1,131,801
1,131,801
1,011,016
1,011,016
Retained
Earnings		 Before
distribution		 2,550,879
2,504,159
2,647,725
3,386,744
4,242,739
After
distribution		 2,262,486
2,263,832
2,455,464
2,824,959
3,624,775
Other Equity 2,533,761
2,435,468
3,082,550
4,914,436
6,082,586
Treasury Stock - - - - -
Non-controlling
Interests		 -
-
-
-		 -
Total
Equity		 Before
distribution		 8,157,519
7,994,048
8,784,696
11,184,816
13,208,961
After
distribution		 7,869,126
7,753,721
8,496,303
10,623,030
12,590,996

Note 1: The financial information for the past five fiscal years has been audited by the CPAs. Note 2: There is no parent company only financial information audited by the CPAs for 2022 as of March 31.

144

(II) Consolidated Condensed Balance Sheets - International Financial Reporting Standards

Unit: NT$ thousands

Year
Item		 Year
Item
Financial Information for the Past Five Fiscal Years (Note 1)
Financial Information for the Past Five Fiscal Years (Note 1)
Financial Information for the Past Five Fiscal Years (Note 1)
Financial Information for the Past Five Fiscal Years (Note 1)
Financial Information for the Past Five Fiscal Years (Note 1)		 Financial
Information
as of March
31, 2022
(Note 2)
2017 2018 2019 2020 2021
Current Assets 9,465,002
9,134,736
9,901,548
10,746,907
11,832,195
11,132,206
Property, Plant, and
Equipment		 1,445,820
1,602,933
1,458,838
1,523,809
1,544,427
1,550,223
Intangible Assets 222,947
221,193
223,416
221,038
223,496
224,325
Other Assets 2,829,852
2,801,918
4,164,565
5,956,725
7,577,424
7,223,309
Total Assets 13,963,621
13,760,780
15,748,367
18,448,479
21,177,542
20,130,063
Current
Liabilities		 Before
distribution		 5,470,202
5,418,694
6,073,860
6,412,365
6,904,113
6,013,869

After
distribution		 5,758,595
5,659,021
6,372,815
6,991,052
7,540,669
-
Non-current
Liabilities		 76,672
81,229
584,840
543,454
725,953
676,018
Total
Liabilities		 Before
distribution		 5,546,874
5,499,923
6,658,700
6,955,819
7,630,066
6,689,887

After
distribution		 5,835,267
5,740,250
6,957,656
7,534,506
8,266,622
-
Equity Attributable to
Owners of the Parent		 8,157,519
7,994,048
8,784,696
11,184,816
13,208,961
13,083,567
Capital Stock 1,922,620
1,922,620
1,922,620
1,872,620
1,872,620
1,872,620
Capital Surplus 1,150,259
1,131,801
1,131,801
1,011,016
1,011,016
1,011,016
Retained
Earnings		 Before
distribution		 2,550,879
2,504,159
2,647,725
3,386,744
4,242,739
4,470,100
After
distribution		 2,262,486
2,263,832
2,455,464
2,824,959
3.624.775
-
Other Equity 2,533,761
2,435,468
3,082,550
4,914,436
6,082,586
5,729,831
Treasury Stock - - - - - -
Non-controlling
Interests		 259,228
266,809
304,971
307,844
338,515
356,609
Total
Equity		 Before
distribution		 8,416,747
8,260,857
9,089,667
11,492,660
13,547,476
13,440,176
After
distribution		 8,128,354
8,020,530
8,790,711
10,913,973
12,910,920
-

Note 1: The financial information for the past five fiscal years has been audited by the CPAs. Note 2: The financial information for 2022 as of March 31 has been audited by the CPAs.

145

(III) Parent Company Only Condensed Statements of Comprehensive Income - International Financial Reporting Standards

Reporting Standards Reporting Standards Reporting Standards Reporting Standards Reporting Standards Reporting Standards Reporting Standards
Unit: NT$ thousands
Year
Item		 Financial Information for the Past Five Fiscal Years (Note 1) Financial
Information
as of March
31, 2022
(Note 2)
2017 2018 2019 2020 2021
Operating Revenue 10,868,019
10,665,589
10,222,162
10,873,018
12,319,833
N/A
Gross Profit 1,001,859
1,158,193
1,241,550
1,540,785
1,825,198
Operating Income (209,445)
(13,487)
156,814
382,372
525,526
Non-operating Income and
Expenses		 546,629
77,211
14,617
362,994
348,939
Income before Tax 337,184
63,724
171,431
745,366
874,465
Income from Continuing
Operations		 314,545
77,585
135,390
669,314
754,082
Loss from Discontinued
Operations		 - - -
-
-
Net Income (Loss) 314,545
77,585
135,390
669,314
754,082
Other Comprehensive
Income (Net Value After
Tax)		 11,973
89,523
956,652
2,115,422
1,831,849
Total Comprehensive
Income		 326,518
167,108
1,092,042
2,784,736
2,585,931
Net Income Attributable to
Shareholders of the Parent		 314,545
77,585
135,390
669,314
754,082
Net Income Attributable to
Non-controlling Interests		 -
-
-
-		 -
Comprehensive Income
Attributable to Owners of
the Parent		 326,518
167,108
1,092,042
2,784,736
2,585,931
Comprehensive Income
Attributable to Non-
controlling Interests		 -
-
-
-		 -
Earnings per Share 1.64
0.40
0.7
3.55
4.03

Note 1: The financial information for the past five fiscal years has been audited by the CPAs. Note 2: There is no parent company only financial information audited by the CPAs for 2022 as of March 31.

146

(IV) Consolidated Condensed Statements of Comprehensive Income - International Financial Reporting Standards

(IV) Consolidated Condensed Statements of Comprehensive Income - International Financial
Standards		 (IV) Consolidated Condensed Statements of Comprehensive Income - International Financial
Standards		 (IV) Consolidated Condensed Statements of Comprehensive Income - International Financial
Standards		 (IV) Consolidated Condensed Statements of Comprehensive Income - International Financial
Standards		 (IV) Consolidated Condensed Statements of Comprehensive Income - International Financial
Standards		 (IV) Consolidated Condensed Statements of Comprehensive Income - International Financial
Standards		 (IV) Consolidated Condensed Statements of Comprehensive Income - International Financial
Standards
Unit: NT$ thousand
Year
Item
Financial Information for the Past Five Fiscal Years (Note 1)		 Financial
Information
as of March
31, 2022
(Note2)
2017 2018 2019 2020 2021
OperatingRevenue 14,416,022
14,522,062
14,259,326		 14,796,460 16,650,252
3,717,016
GrossProfit 1,510,383 1,456,027 1,524,973 2,063,548 2,424,205 559,689
OperatingIncome (204,337) (246,117) (31,559) 462,337 671,909 134,944
Non-operating Income
andExpenses		 557,866
331,530
225,348
471,707
288,691
53,831
Income (Loss)BeforeTax
353,529		 85,413 193,789 934,044
960,600		 188,775
Income (Loss) from
Continuing Operations		 320,713
91,671
144,124
692,075
801,279
149,554
Loss from Discontinued
Operations		 -
-
-
-
-
-
NetIncome (Loss) 320,713 91,671
144,124
692,075		 801,279 149,554
Other Comprehensive
Income (Net Value After
Tax)		 8,712
93,116
967,986
2,106,097
1,829,860
(256,854)
Total Comprehensive
Income		 329,425
184,787
1,112,110
2,798,172
2,631,139
(107,300)
Net Income Attributable
to Shareholders of the
Parent		 314,545
77,585
135,390
669,314
754,082
132,968
Net Income Attributable
to Non-controlling
Interests		 6,168
14,086
8,734
22,761
47,197
16,586
Comprehensive Income
Attributable to Owners of
theParent		 326,518
167,108
1,092,042
2,784,736
2,585,931
(125,394)
Comprehensive Income
Attributable to Non-
controllingInterests		 2,907
17,679
20,068
13,436
45,208
18,094
Earnings per Share 1.64
0.40		 0.70 3.55 4.03
0.71

Note 1: The financial information for the past five fiscal years has been audited by the CPAs. Note 2: The financial information for 2022 as of March 31 has been audited by the CPAs.

147

(V) Name of CPAs report and Audit Opinions for the Last Five Years

Year Name of CPA Firm Name of CPA Opinions
2017 KPMG Taiwan Kuan, Chun-Hsiu, Lu, Li-Li Unmodified opinion and other
supplementary matters
2018 KPMG Taiwan Kuan, Chun-Hsiu, Lu, Li-Li Unmodified opinion and other
supplementary matters
2019 KPMG Taiwan Kuan, Chun-Hsiu, Chao, Min-Ju Unmodified opinion and other
supplementary matters
2020 KPMG Taiwan Kuan, Chun-Hsiu, Chao, Min-Ju Unmodified opinion and other
supplementary matters
2021 KPMG Taiwan Chang, Chun-I, Chao, Min-Ju Unmodified opinion and other
supplementarymatters

148

II. Financial Analyses for the Past Five Fiscal Years

(I) Parent Company Only Financial Analysis - International Financial Reporting Standards

Year
(Note 1)
Analysis Item
(Note 3)		 Year
(Note 1)
Analysis Item
(Note 3)
Financial Analyses for the Past Five Fiscal Years
Financial Analyses for the Past Five Fiscal Years
Financial Analyses for the Past Five Fiscal Years
Financial Analyses for the Past Five Fiscal Years
Financial Analyses for the Past Five Fiscal Years		 Financial
Information as
of March 31,
2022
(Note 2)

2017		 2018 2019 2020 2021
Financial
Structure (%)		 Debt ratio 34.57
33.49
32.68
30.68
28.77
N/A
Ratio of long-term capital to
property, plant,and equipment		 1,025.69
910.61		 1,036.05 1,264.58 1,398.15
Solvency (%) Current ratio 145.83
145.95
149.27
147.04
152.14
Quick ratio 114.94
115.60
119.21
112.38
108.97
Interest coverage ratio 2,263.98
749.62
120.61
332.27
227.14
Operating
ability		 Accounts receivable turnover
rate(times)		 3.08
3.68
3.42
3.64
3.89
Average days for cash receipts 118
99.21
106.79
100.29
93.78
Inventoryturnover rate(times) 7.03
7.63
7.40
6.50
5.53
Accounts payable turnover rate
(times)
2.78
2.94
2.75
2.59
2.77
Average days for sale ofgoods 51.91
47.81
49.34
56.15
65.97
Property, plant, and equipment
turnover rate(times)		 13.54
12.05
11.72
12.35
13.19
Total assets turnover rate
(times)		 0.87
0.89
0.82
0.75
0.71
Profitability Return on total assets(%) 2.49
0.63
1.09
4.60
4.33
Return on equity (%) 3.86
0.96
1.61
6.70
6.18
Ratio of income before tax to
paid-in capital(%)		 17.54
3.31
8.92
39.80
46.70
Netprofit margin(%) 2.89
0.73
1.32
6.16
6.12
Earnings PerShare(NT$) 1.64
0.4
0.70
3.55
4.03
Cash Flow Cash flow ratio(%) (1.79) (6.47) 6.83
9.68
(4.62)
Cash flow adequacyratio(%) 35.86
2.95
(5.68)		 19.84
5.71
Cash reinvestment ratio(%) (6.17) (9.40) 0.72
2.62
(11.10)
Leverage Operatingleverage 0.83
(3.11)		 1.41
1.24
1.15
Financial leverage 1
0.99
1.01
1.01
0.99
Note 1:
The financial information for the past five fiscal years has been audited by the CPAs.
Note 2:
There is no parent company only financial information audited by the CPAs for 2022 as of March 31.
Explanation for changes in financial ratios up to 20% in the past two years:
Interest coverage ratio: Although the net income before tax was higher in the current year than in the previous year, the
increase in interest expenses was higher than the increase in net income before tax.
Cash flow ratio, cash flow adequacy ratio, and cash reinvestment ratio: Caused by negative net cash inflow from
operatingactivities thisyear.

149

(II) Consolidated Financial Analysis - International Financial Reporting Standards

Year
(Note 1)
Analysis Item
(Note 3)		 Year
(Note 1)
Analysis Item
(Note 3)
Financial Analyses for the Past Five Fiscal Years
Financial Analyses for the Past Five Fiscal Years
Financial Analyses for the Past Five Fiscal Years
Financial Analyses for the Past Five Fiscal Years
Financial Analyses for the Past Five Fiscal Years		 Financial
Information
as of March
31, 2022
(Note 2)

2017		 2018 2019 2020 2021
Financial
Structure
(%)		 Debt ratio 39.72
39.97
42.28
37.70
36.03
33.23
Ratio of long-term capital to
property, plant,and equipment		 587.45
520.43
663.17
789.87
924.19
910.59
Solvency
(%)		 Current ratio 173.03
168.58
163.02
167.60
171.38
185.11
Quick ratio 132.72
128.67
127.99
125.81
119.10
130.73
Interest coverage ratio 100.03
19.15
11.64
71.07
85.66
37.98
Operating
ability		 Accounts receivable turnover
rate(times)		 3.48
3.48
3.29
3.41
3.68
3.30
Average days for cash receipts 104.88
104.88
110.90
107.03
99.06
110.60
Inventoryturnover rate(times) 5.76
6.03
5.98
5.34
4.56
3.69
Accounts payable turnover rate
(times)		 2.88
3.13
2.88
2.66
2.84
2.68
Average days for sale ofgoods 63.36
60.53
61.06
68.35
80.13
98.84
Property, plant, and equipment
turnover rate(times)		 9.97
9.06
9.31
9.92
10.85
9.61
Total assets turnover rate(times) 1.03
1.06
0.97
0.87
0.84
0.72
Profitability Return on total assets(%) 2.27
0.69
1.08
4.11
4.00
0.74
Return on equity (%) 3.82
1.10
1.66
6.72
6.40
1.11

Ratio of income before tax to
paid-in capital(%)		 18.39
4.44
10.08
49.88
51.30
10.08
Netprofit margin(%) 2.22
0.63
1.01
4.68
4.81
4.02
Earnings PerShare(NT$) 1.64
0.40
0.70
3.55
4.03
0.71
Cash Flow Cash flow ratio(%) (5.01) (4.59) 6.38
6.58
0.45
2.43
Cash flow adequacyratio(%) 28.57
4.56
0.02
13.59
7.55
16.07
Cash reinvestment ratio(%) (8.14) (7.85) 2.15
1.76
(6.4)		 1.71
Leverage Operatingleverage 0.74
0.33
(9.67)		 1.70
1.51
1.68
Financial leverage 0.98
0.98
0.63
1.03
0.98
1.04
Note 1:
The financial information for the past five fiscal years has been audited by the CPAs.
Note 2:
The financial information for 2022 as of March 31 has been audited by the CPAs.
Explanation for changes in financial ratios up to 20% in the past two years:
Interest coverage ratio: The net income before tax was higher in the current year than in the previous year and the
interest expenses were lower than that in the previous year.
Cash flow ratio, cash flow adequacy ratio, and cash reinvestment ratio: Caused by low net cash inflow from operating
activities thisyear compared to the sameperiod lastyear.

150

  • Note 3: The calculation formula for the items of financial analysis is stated below: 1. Financial structure (1) Debt ratio = Total liabilities/Total assets. (2) Ratio of long-term capital to property, plant, and equipment = (Total equity + Non-current liabilities)/Net value of property, plant, and equipment.

    1. Solvency (1) Current ratio = Current assets/Current liabilities. (2) Quick ratio = (Current assets - Inventories - Prepaid expenses)/Current liabilities. (3) Interest coverage ratio = Income before tax and interest expenses/Interest expenses.
    1. Operating ability (1) Accounts receivable (including accounts receivable and notes receivable generated from operations) turnover rate = Net sales/Average balance of accounts receivable (including accounts receivable and notes receivable generated from operations) for each period.

  • (2) Average days for cash receipts = 365/Accounts receivable turnover rate. (3) Inventory turnover rate = Cost of goods sold/Average inventories. (4) Accounts payable (including accounts payable and notes payable generated from operations) turnover rate = Cost of goods sold/Average balance of accounts payable (including accounts payable and notes payable generated from operations) for each period.

  • (5) Average days for sale of goods = 365/Inventory turnover rate. (6) Property, plant, and equipment turnover rate = Net sales/Average net property, plant, and equipment.

  • (7) Total assets turnover rate = Net sales/Average total assets.

    1. Profitability (1) Return on assets = [Income after tax + Interest expenses x (1 - Tax rate)]/Average total assets.

  • (2) Return on equity = Income after tax/Average total equity. (3) Net profit margin = Income after tax/Net sales. (4) Earnings per share = (Income attributable to owners of the parent - Preferred stock dividends)/Weighted average number of shares issued. (Note 4)

    1. Cash Flow (1) Cash flow ratio = Net cash flows generated from operating activities/Current liabilities. (2) Cash flow adequacy ratio = Five-year sum of net cash flows generated from operating activities/Five-year sum of capital expenditure, inventory additions and cash dividends).

  • (3) Cash reinvestment ratio = (Net cash flows from operating - cash dividends)/(Gross amount of property, plant, and equipment + Long term investment + Other non-current assets + Working capital). (Note 5)

    1. Leverage: (1) Operating leverage = (Net operating revenue - Variable operating costs & expenses)/Operating income. (Note 6)

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

Note 4: Special attention must be paid to the following items when using the aforementioned calculation formula for the earnings per share:

  1. The calculations shall be based on the average number of the weighted common shares rather than shares issued at the end of the year.

  2. The circulation period shall be considered for cash capital increase or treasury stock trading when calculating the weighted average number of shares.

  3. When calculating annual or semi-annual earnings per share for those with capitalization of retained earnings or capital reserves, the capital ratio shall be adjusted retrospectively and the replenishment period issues does not need to be considered.

  4. If the preferred stock is non-convertible cumulative preferred stock, the dividend of the current year (whether it is distributed) should be deducted from net income after tax or added to net loss. If the

151

preferred shares are non-cumulative in nature, where net income after tax is available, preferred share dividends should be deducted from it. No adjustment is required if the Company incurs a loss after tax.

  • Note 5: Special attention must be paid to the following items during cash flow analysis measurements:

  • Net cash flow from operating activities shall refer to the net cash inflow from operating activities listed in the cash flow statement.

  • Capital expenditure shall refer to the annual capital investment cash outflow.

  • If the inventory increase is calculated only if the closing is greater than that at the opening and the inventory decreased at the end of the year, it should be calculated as zero.

  • Cash dividends include common stock and preferred stock cash dividends.

  • Gross profit for property, plant, and equipment shall refer to the total amount for property, plant, and equipment before accumulated depreciation is deducted.

  • Note 6: The issuer shall divide the operating costs and expenses as fixed or changeable based on the nature. If such costs are subject to estimates or subjective judgments, the issuer shall ensure that the methods of deriving those costs are rational and consistent.

  • Note 7: For company shares with no face value or with face value per share not equaling NT$10, the aforementioned calculation for paid-in capital ratio should be changed to calculation for the equity ratio attributable to owners of parent in the balance sheet instead.

152

III. Audit Committee Report for the Most Recent Fiscal Year's Financial Statement

FSP Technology Inc.

Audit Committee's Review Report

The Company's 2021 Parent Company Only Financial Statements and Consolidated Financial Statements have been audited by Chang, Chun-I, CPA, and Chao, Min-Ju, CPA of KPMG Taiwan, and have been submitted, along with the 2021 Business Report and Earnings Distribution Proposal to the Audit Committee for review. The Audit Committee found them to be compliant with the Company Act and related regulations. It therefore prepares this Review Report in accordance with Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act and filed for approval for your review.

Sincerely,

FSP Technology Inc.

2022 shareholders’ meeting

Convener of the Audit Committee: Liu, Shou-Hsiang

March 18, 2022

153

IV. Financial Statements for the Most Recent Fiscal Year

Independent Auditors' Report

To the Board of Directors of FSP Technology Inc.:

Opinions

We have audited the Parent Company Only Financial Statements of FSP Technology Inc. (the “Company”), which comprise the Parent Company Only Balance Sheets as of December 31, 2021 and 2020, and the Parent Company Only Statements of Comprehensive Income, the Parent Company Only Statements of Changes in Equity, the Parent Company Only Statements of Cash Flows, and Notes to the Parent Company Only Financial Statements (including a summary of significant accounting policies) from January 1 to December 31, 2021 and 2020.

In our opinion, based on our audit results and the audit reports prepared by other independent auditors (please refer to Other Matters section), the accompanying Parent Company Only Financial Statements present fairly, in all material respects, the financial position of the Company as at December 31, 2021 and 2020, and its financial performance and cash flows for the periods from January 1 to December 31, 2021 and 2020, in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinions

We conducted our audits in accordance with the Regulations Governing the Auditing and Attestation of Financial Statements by Certified Public Accountants and Generally Accepted Auditing Standards (GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Parent Company Only Financial Statements section of our report. We are independent of the Company in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (the “Code”), and we have fulfilled other ethical responsibilities in accordance with the Code. Based on our audit results and the reports of other independent auditors, we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the Parent Company Only Financial Statements for the year ended December 31, 2021. These matters were addressed in the context of our audit of the Parent Company Only Financial Statements as a whole, and forming our opinion thereon, and we do not provide a separate opinion on these matters. In our judgment, revenue recognition is the key audit matter that should be communicated in the audit report.

Please refer to Note IV(XV) for the accounting policy of revenue recognition and Note VI((XXI) for the related disclosure of revenue.

Description of key audit matter:

The Sales revenue of the Company is a key indicator for investors and management to evaluate financial or business performance. As a listed company, there is a high inherent risk of misrepresentation for the Company. In addition, the timing of revenue recognition and transfer of control over goods is critical to the presentation of financial statements. Therefore, we have identified revenue recognition as a key audit matter in the audit of the Consolidated Financial Statements.

Audit procedure to address the matter:

154

We performed the following audit procedure in respect of the above key audit matter:

  • Tested the effectiveness of the design and implementation of the internal control mechanism in relation to revenue recognition.

  • Conducted trend analysis for the top ten customers, including comparison of customer lists and sales revenue between the current period and the most recent period as well as the same period last year, in order to assess whether there is any significant irregularity, and to identify and analyze the reasons for any material changes.

  • Performed random sample checking on the sales transactions of the year to evaluate the authenticity of these transactions, the correctness of the recognized amount of sales revenue and the reasonableness of the timing of recording.

  • Reviewed samples of sales transactions for a specified period before and after the end of the year to assess whether the timing of revenue recognition is appropriate.

Other Matters

We did not audit the financial statements of certain investee companies under long-term investment using the equity method for the years ended December 31, 2021 and 2020. Those financial statements were audited by other independent auditors. Our opinion expressed herein, insofar as it relates to the amounts included in the Parent Company Only Financial Statements relative to these investee companies was based solely on the reports of other independent auditors. Total investment amount in these investee companies amounted to NT$663,717 thousand and NT$610,088 thousand, accounting for 3.58% and 3.78% of the total assets as of December 31, 2021 and 2020, respectively. Total recognized gains on these investments amounted to NT$88,389 thousand and NT$50,138 thousand, representing 10.11% and 6.73% of the total income before taxes for the years ended December 31, 2021 and 2020.

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 conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and maintain internal controls which are necessary for the preparation of the Parent Company Only Financial Statements so as to avoid material misstatements due to fraud or errors therein.

In preparing the Parent Company Only Financial Statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing related matters and adopting the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditors’ 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 auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error Misstatements are considered material if misstated

155

individual or aggregate amounts could reasonably be expected to influence the economic decisions of users taken based on these Parent Company Only Financial Statements.

As part of an audit in accordance with the auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also perform the following tasks:

  1. 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, intentional omissions, misrepresentations, or the override of internal control.

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

  3. Assess the appropriateness of the accounting policies adopted by the management, as well as the reasonableness of their accounting estimates and relevant disclosures.

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

  5. Evaluate the overall presentation, structure and content of the 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.

  6. Obtain sufficient and appropriate audit evidence regarding the financial information of the investee companies under the equity method to express an opinion on the Parent Company Only Financial Statements. We are responsible for the direction, supervision, and performance of the Company 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.

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.

156

From the matters communicated with those charged with governance, we determine the key audit matters in the audit of the Company's Parent Company Only Financial Statements for the year ended December 31, 2021. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partners on the audit resulting in this independent auditors’ report are Chang, Chun-I and Chao, Min-Ju.

KPMG Taipei, Taiwan (Republic of China) March 18, 2022

Notice to Readers

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

For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated financial statements shall prevail.

157

FSP Technology Inc.

Parent Company Only Balance Sheets

December 31, 2021 and 2020

Unit: NT$ thousands

Assets
11xx
Current Assets:
1100
Cash and cash equivalents (Note VI(I))
1110
Financial assets at fair value through profit or loss - current (Note VI(II))
1136
Financial assets at amortized cost - current (Note VI(IV))
1150
Notes receivable, net (Note VI(V) and (XXI))
1170
Accounts receivable, net (Note VI(V) and (XXI))
1180
Accounts receivable - related parties, net (Notes VI(V) and (XXI), and VII)
1200
Other receivables (Note VI(VI))
1210
Other receivables - related parties (Notes VI(VI) and VII)
130x
Inventories (Note VI(VII))
1410
Prepayments (Note VII)
1470
Other current assets
Total current assets
15xx
Non-current Assets:
1517
Financial assets at fair value through other comprehensive income - non-
current (Note VI(III) and (XIX))
1550
Investments recognized through the equity method (Note VI(VIII) and (IX))
1600
Property, plant and equipment (Notes VI(X), (XIII), and (XIV), VIII and IX)
1755
Right-of-use assets (Notes VI(XI) and (XV), and VII)
1780
Intangible assets (Note VI(XII))
1840
Deferred income tax assets (Note VI(XVIII))
1900
Other non-current assets (Notes VI(X), VIII and IX)
Total non-current assets
1xxx
Total assets		 2021.12.31
Amount
％
$ 1,683,746
9
316,390
2
10,800 -
2,682 -
2,359,536
13
985,345
5
16,480 -
40,968 -
2,162,501
12
65,083 -
14,822
-		 2020.12.31
Amount
％

1,961,278
12

277,620
2
-
-
426 -

2,233,285
14

749,248
5
19,966 -
49,665 -

1,627,409
10
29,057 -
15,641
-

6,963,595
43

5,246,682
33

2,787,840
17

901,411
6
56,710 -

114,860
1
56,606 -
7,162
-

9,171,271
57

16,134,866
100
Liabilities and Equity
21xx
Current Liabilities:
2150
Notes payable
2170
Accounts payable
2180
Accounts payable - related parties (Note VII)
2200
Other payables (Note VI(XVII) and (XXII))
2220
Other payables - related parties (Note VII)
2230
Current income tax liabilities
2250
Provisions for liabilities - current (Note VI(XVI))
2280
Lease liabilities - current (Notes VI(XV) and VII)
2300
Other current liabilities (Notes VI(XIV) and (XXI), and VII)
2320
Current portion of long-term debt (Notes VI(X) and (XIV), and VIII)
Total current liabilities
25xx
Non-current Liabilities:
2540
Long-term borrowings (Notes VI(X) and (XIV), and VIII)
2570
Deferred income tax liabilities (Note VI(XVIII))
2580
Lease liabilities - non-current (Notes VI(XV) and VII)
2640
Net defined benefit liabilities - non-current (Note VI(XVII))
2670
Other non-current liabilities - others (Notes VI(XIV) and VII)
Total non-current liabilities
2xxx
Total liabilities
31xx
Equity (Note VI(III), (VIII), (XVII), (XVIII) and (XIX)):
3100
Capital Stock
3200
Capital surplus
3300
Retained earnings:
3310
Legal reserve
3350
Unappropriated earnings
Total retained earnings
34xx
Other Equity:
3410
Exchange differences on translation of financial statements of foreign
operations
3420
Unrealized gains (losses) on financial assets at fair value through other
comprehensive income
Total other equity
3xxx
Total equity
2-3xxxTotal liabilities and equity		 2021.12.31
Amount
％
$ 14,445 -
3,417,288
19
330,210
2
825,993
5
47,611 -
111,599
1
146,223
1
3,040 -
64,258 -
73,014
-		 2020.12.31
Amount
％
15,001 -

3,460,547
21

323,444
2

609,379
4
41,852 -

57,628
1

157,190
1
6,264 -
53,892 -
10,608
-

5,033,681
28

4,735,805
29
7,658,353
41
199,334
1
2,919 -
49,239 -
44,234 -
6,312
-

97,845
1
2,039 -
52,619 -
57,218
1
4,524
-

6,736,644
37
2,944,275
16
966,351
5
49,919 -
117,968
1
67,326 -
3,844
-

302,038
1

214,245
2

5,335,719
29

4,950,050
31

1,872,620
10

1,872,620
12
10,886,327
59
1,011,016
5

1,011,016
6

1,033,544
6
3,209,195
17

940,416
6

2,446,328
15

4,242,739
23

3,386,744
21

(117,703)
(1)
6,200,289
34

(89,678)
(1)

5,004,114
31

6,082,586
33

4,914,436
30
$
18,544,680
100

13,208,961
71

11,184,816
69

$
18,544,680
100

16,134,866
100

Chairman: Cheng, Ya-Jen

(Please see accompanying notes to the Parent Company Only Financial Statements) Managerial Officer: Cheng, Ya-Jen

Chief Accounting Officer: Sang, Hsi-Yun

158

FSP Technology Inc.

Parent Company Only Statements of Comprehensive Income

January 1 to December 31, 2021 and 2020

Unit: NT$ thousands

4000
Operating revenue (Notes VI(XXI) and VII)
5000
Operating costs (Notes VI(VII), (X), (XI), (XII), (XVI), and (XVII), VII and XII)
5910
Add: Unrealized sales gains (losses)
5900
Gross profit
6000
Operating expenses (Notes VI(V), (X), (XI), (XII), (XV), (XVII), and (XXII), VII
and XII):
6100
Selling and marketing expenses
6200
General and administrative expenses
6300
Research and development expenses
6450
Expected credit loss
Total operating expenses
6900
Net operating income
7000
Non-operating income and expenses (Notes VI(II), (III), (VIII), (IX), (XV) and
(XXIII), and VII):
7100
Interest income
7010
Other income
7020
Other gains and losses
7050
Finance costs
7070
Share of profits (losses) of subsidiaries, associates and joint ventures under equity
method
Total non-operating income and expenses
7900
Income before income tax from continuing operations
7950
Less: Income tax expense (Note VI(XVIII))
8200
Net Income
8300
Other comprehensive income:
8310
Items that will not be reclassified to profit or loss (Note VI(XVII), (XVIII) and
(XIX))
8311
Gains (losses) on re-measurements of defined benefit plans
8316
Unrealized gains (losses) on investments in equity instruments at fair value through
other comprehensive income
8330
Share of other comprehensive income (losses) of subsidiaries, associates and joint
ventures under equity method
8349
Less: Income tax related to components that will not be reclassified to profit or loss
Total items that will not be reclassified to profit or loss
8360
Items that may be reclassified subsequently to profit or loss (Note VI(VIII) and
(XIX))
8361
Exchange differences on translation of financial statements of foreign operations
8380
Share of other comprehensive income (losses) of subsidiaries, associates and joint
ventures under equity method
8399
Less: Income tax related to items that may be reclassified subsequently
Total items that may be reclassified subsequently to profit or loss
8300
Other Comprehensive Income
8500
Total Comprehensive Income
Earnings per share (unit: NT$) (Note VI(XX))
9750
Basic earnings per share
9850
Diluted earnings per share		 2021 ％
100
85
-		 2020 ％
100

86

-
Amount
$ 12,319,833
10,483,687
(10,948)		 Amount
10,873,018

9,306,280
(25,953)

1,825,198		 15

1,540,785

14

445,124
487,276
363,444
3,828		 4
4
3
-

385,878

417,538

350,383
4,614

4

4

3

-

1,299,672		 11

1,158,413

11

525,526		 4

382,372

3

2,375
148,325
(512)
(3,867)
202,618		 -
1
-
-
2
7,358

123,787
(50,588)
(2,250)

284,687

-

1

-

-

3

348,939		 3

362,994

4

874,465
120,383		 7
1

745,366

76,052

7

1

754,082		 6

669,314

6

6,610

1,854,340
246

1,322		 -
15
-
-
(7,821)

2,044,026
50,817
(1,564)

-

19

1

-


1,859,874		 15

2,088,586

20

(27,216)
(809)
-		 -
-
-
28,236
(1,400)
-

-

-
-
(28,025) - 26,836
-

1,831,849		 15

2,115,422

20

$ 2,585,931		 21

2,784,736
26

$		 4.03
3.55
$ 3.99 3.52

(Please see accompanying notes to the Parent Company Only Financial Statements)

Chairman: Cheng, Ya-Jen Managerial Officer: Cheng, Ya-Jen Chief Accounting Officer: Sang, Hsi-Yun

159

FSP Technology Inc.

Parent Company Only Statements of Changes in Equity

January 1 to December 31, 2021 and 2020

Unit: NT$ thousands

Balance as of January 1 2020
Appropriation and distribution of earnings:
Legal reserve
Cash dividends of common stock
Changes in other capital surplus:
Cash dividends appropriated from capital
surplus
Net Income
Other Comprehensive Income
Total Comprehensive Income
Purchase of treasury shares
Retirement of treasury shares
Changes in ownership interests in
subsidiaries
Disposal of equity instruments at fair value
through other comprehensive income
Balance as of December 31, 2020
Appropriation and distribution of earnings:
Legal reserve
Cash dividends of common stock
Net Income
Other Comprehensive Income
Total Comprehensive Income
Disposal of equity instruments at fair value
through other comprehensive income
Balance as of December 31, 2021		 Capital stock
- common
shares		 Capital
surplus		 Retained earnings Retained earnings Retained earnings Other equity items Other equity items Other equity items Treasury
shares		 Total Equity
8,784,696
-
(192,262)
(96,131)
669,314
2,115,422
2,784,736

(101,003)

-
4,780
-
11,184,816
-
(561,786)
754,082
1,831,849
2,585,931
-
13,208,961
Exchange
differences
on
translation of
financial
statements of
foreign
operations		 Unrealized
gains (losses) on
financial assets
at fair value
through other
comprehensive
income		 Total
Legal reserve Unappropria
ted earnings		 Total
$ 1,922,620

-
-

-
-
-
1,131,801
-
-
(96,131)
-
-
902,027
38,389
-

-
-
-
1,745,698

(38,389)
(192,262)
-
669,314
(6,241)
2,647,725

-

(192,262)
-

669,314

(6,241)
(116,514)
-

-
-

-

26,836
3,199,064
-
-
-
-

2,094,827
3,082,550
-
-
-
-

2,121,663
-
-
-
-
-

-
- - -
663,073


663,073


26,836


2,094,827


2,121,663

-
-
(50,000)
-

-		 -

(29,434)
4,780
-		 -

-

-
-
-
(21,569)
-
289,777

-

(21,569)
-

289,777

-

-
-

-

-
-
-
(289,777)

-
-
-

(289,777)
(101,003)
101,003
-

-
1,872,620

-
-
-
-
1,011,016
-
-
-
-
940,416
93,128
-
-
-

2,446,328

(93,128)
(561,786)
754,082
5,534


3,386,744

-

(561,786)

754,082

5,534

(89,678)
-

-

-

(28,025)

5,004,114
-
-
-

1,854,340


4,914,436
-
-
-

1,826,315

-
-
-
-

-
- - -
759,616


759,616


(28,025)


1,854,340


1,826,315

-

-		 - -
658,165


658,165


-

(658,165)


(658,165)

-
$
1,872,620
1,011,016
1,033,544

3,209,195


4,242,739

(117,703)

6,200,289


6,082,586

-

Chairman: Cheng, Ya-Jen

(Please see accompanying notes to the Parent Company Only Financial Statements) Managerial Officer: Cheng, Ya-Jen Chief Accounting Officer: Sang, Hsi-Yun

160

FSP Technology Inc.

Parent Company Only Statements of Cash Flows

January 1 to December 31, 2021 and 2020

Unit: NT$ thousands

Cash flows from operating activities:
Income before income tax
Adjustments for:
Adjustments to reconcile profit or loss
Depreciation expenses
Amortization expenses
Expected credit loss
Interest expenses
Interest income
Dividend income
Share of profits of subsidiaries, associates and joint ventures
Loss on disposal of property, plant, and equipment
Unrealized sales gains (losses)
Unrealized foreign currency exchange gain
Gains on lease modifications
Gains on bargain purchase
Total adjustments for profit or loss
Changes in operating assets and liabilities:
Changes in operating assets:
Financial assets at fair value through profit or loss
Notes receivable
Accounts receivable
Accounts receivable - related parties
Other receivables
Other receivables - related parties
Inventories
Prepayments
Other current assets
Total changes in operating assets
Changes in operating liabilities:
Notes payable
Accounts payable
Accounts payable - related parties
Other payables
Other payables - related parties
Provisions for liabilities
Other current liabilities
Net defined benefit liabilities
Other non-current liabilities
Total changes in operating liabilities
Total changes in operating assets and liabilities
Total adjustments
Cash provided by operations
Interest received
Interest paid
Income tax paid
Net cash provided by operating activities
Cash flows from investing activities:
Acquisition of financial assets at fair value through other comprehensive income
Disposal of financial assets at fair value through other comprehensive income
Acquisition of financial assets at amortized cost
Acquisition of investments accounted for using the equity method
Acquisition of property, plant, and equipment
Disposal of property, plant and equipment
Decrease (increase) in refundable deposits
Acquisition of intangible assets
Increase in prepayments for equipment
Dividends received
Net cash flows from investing activities
Cash flows from financing activities:
Proceeds from long-term loans
Repayments of long-term loans
Repayment of the principal of lease liabilities
Cash dividends paid
Purchase cost of treasury shares
Net cash flows used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year		 2021
$ 874,465		 2020

745,366

62,770

1,260

4,614

2,250

(7,358)

(107,452)

(284,687)

58

25,953

(13,831)

-

-

(316,423)

(123,224)

2,221

118,596

(84,784)

1,616

10,275

(391,394)

8,421

(2,948)

(461,221)

619

409,473

(22,799)

145,274

3,789

11,853

4,282

(8,942)

2,994

546,543

85,322

(231,101)

514,265

8,317

(1,873)

(62,339)

458,370

(118,419)

216,963

-

-

(103,155)

-

(300)

(436)
(335)

127,840

122,158

108,076

-

(6,469)

(288,393)
(101,003)

(287,789)

292,739

1,668,539

1,961,278

62,893
2,576
3,828
3,867
(2,375)
(122,933)
(202,618)
656
10,948
20,737
(80)
(2,523)

(225,024)

(38,770)
(2,256)
(89,006)
(236,097)
4,035
8,697
(535,092)
(35,691)
819
(923,361)

(556)
(101,854)
2,907
219,472
5,747
(10,967)
8,235
(6,374)
3,919

120,529

(802,832)

(1,027,856)

(153,391)
2,441
(3,867)
(77,574)

(232,391)

(296,047)
660,425
(10,959)
(22,640)
(124,320)
7
1,503
(5,684)
-
155,552

357,837

181,989
(18,094)
(5,087)
(561,786)
-
(402,978)

(277,532)
1,961,278

$
1,683,746

(Please see accompanying notes to the Parent Company Only Financial Statements) Chairman: Cheng, Ya-Jen Managerial Officer: Cheng, Ya-Jen

Chief Accounting Officer: Sang, Hsi-Yun

161

FSP Technology Inc.

Notes to Parent Company Only Financial Statements

2021 and 2020

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

I. Company History

FSP Technology Inc. (the “Company”) was incorporated on April 15, 1993, and registered under the Ministry of Economic Affairs, R.O.C. The Company is listed on the Taiwan Stock Exchange since October 16, 2002. The Company is primarily engaged in the manufacturing, processing and trading of power supplies and various electronic components.

II. Date of Authorization for Issuance of the Parent Company Only Financial Statements and

Procedures for Authorization

The Parent Company Only Financial Statements were authorized for issue by the Board of Directors on March 18, 2022.

III. Application of New and Amended Standards and Interpretations

  • (I) Impact of adoption of new or amended standards and interpretations endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”).

The Company has initially adopted the following new amendments to IFRS since January 1, 2021, and there was no significant impact on the Parent Company Only Financial Statements.

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

  • Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16 “Interest Rate Benchmark Reform - Phase 2”

The Company has adopted the following new amendments, which do not have a significant impact on the Parent Company Only Financial Statements, since April 1, 2021.

  • Amendment to IFRS 16 “COVID-19 Related Rent Concessions beyond 30 June 2021”

  • (II) The impact of IFRS endorsed by the FSC but not yet adopted by the Group

The Company assesses that the adoption of the following new amendments effective from January 1, 2022 will not have a significant impact on the Parent Company Only Financial Statements.

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

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

  • Annual Improvements to IFRS Standards 2018-2020

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

162

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  • (III) IFRSs issued by the International Accounting Standards Board (“IASB”) but not yet endorsed by the FSC

The following new and amended standards, which may be relevant to the Company, have been issued by the IASB, but not yet endorsed by the FSC:

New or Amended
Standards
Amendments to
IFRS 10 and IAS
28 “Sale or
Contribution of
Assets
Between an
Investor and Its
Associate or Joint
Venture”
Amendments to
IAS 1
“Classification of
liabilities as
current
or non-current”
Amendments to
IAS 1 “Disclosure
of Accounting
Policies”
Amendments to
IAS 8 “Definition
of Accounting
Estimates”		 Content of Amendment
When the investor sells or contributes its
subsidiary to an associate or a joint venture and
the asset sold or contributed constitutes a
business, full gain or loss should be recognized
on the loss of control of a business. If the asset
sold or contributed does not constitute a
business, unrealized gains and losses should be
calculated according to the shareholding
percentage and partial gain or loss should be
recognized.
The amendments are intended to improve
consistency in the application of the standard to
assist companies in determining whether debts
or other liabilities with uncertain maturity dates
should be classified as current (or to be due
within one year) or non-current on the balance
sheets.
The amendments also clarify the classification
requirements for debts that companies may
settle by conversion into equity.
Amendments to IAS 1 mainly include:

Requiring companies to disclose their
material accounting policies rather than
their significant accounting policies;

Accounting policy information in relation
to insignificant transactions, other matters
or conditions shall be deemed as
immaterial and the Group is not required to
disclose such information; and

Not all accounting policy information
relating to significant transactions, other
matters or conditions is considered material
for the financial statements of a company.
The amendments introduce a new definition of
accounting estimates, clarifying that accounting
estimates are monetary amounts in the financial
statements that are subject to the uncertainty of
measurement. The amendments also clarify the
relationship between accounting policies and
accounting estimates by stating that companies
are required to establish accounting estimates
for the purposes of the accounting policies they
apply.		 Effective Date
per
International
Accounting
Standards
Board
To be
determined by
International
Accounting
Standards
Board
January 1,
2023
January 1,
2023
January 1,
2023

163

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

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

The Company expects that the following new and amended standards, which have not been endorsed by the FSC, will not have a significant impact on the Parent Company Only Financial Statements.

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

  • ‧ Amendments to IAS 12 “Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction”

IV. Summary of Significant Accounting Policies

The significant accounting policies adopted in the Parent Company Only Financial Statements are summarized as follows. The following accounting policies have been applied consistently to all periods presented in the Parent Company Only Financial Statements.

  • (I) Compliance declaration

  • The Company's accompanying Parent Company Only Financial Statements have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”.

  • (II) Preparation basis

  • Measurement basis

The Parent Company Only Financial Statements have been prepared on a historical cost basis except for the following items:

  • (1) Financial assets measured at fair value through profit or loss;

  • (2) Financial assets measured at fair value through other comprehensive income;

  • (3) Defined benefit liability, which are measured based on pension fund assets plus unrecognized service costs in the previous period and unrecognized actuarial losses, less unrecognized actuarial gains, the present value of defined benefit obligations and effect of the asset ceiling as mentioned in Note IV(XVII).

  • Functional and presentation currency

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

164

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

(III) Foreign currencies

  1. Foreign currency transactions

  2. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. At the end of each reporting period (“the reporting date”), monetary items denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on that date.

Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currency based on the exchange rates at the date when the fair value is determined, whereas non-monetary items denominated in foreign currencies measured at historical costs are translated using the exchange rates at the dates of the transactions. The resulting exchange differences are generally recognized in profit or loss, except for the equity instruments designated to be measured at fair value through other comprehensive income, whose exchange differences are recognized in other comprehensive income.

  1. Foreign operations

The assets and liabilities of foreign operations are translated into the presentation currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into the presentation currency at the average exchange rates for the period and the resulting exchange differences are recognized in other comprehensive income.

  • (IV) Classification criteria for current and non-current assets and liabilities Assets are classified as current assets when one of the following criteria is met, and all other assets are classified as non-current assets:

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

  • Assets held mainly for trading purpose.

  • Assets that are expected to be realized within twelve months after the balance sheet date.

  • Cash or cash equivalents, excluding restricted cash or cash equivalents that are reserved for exchange, debt repayment or under other restrictions for more than twelve months after the balance sheet date.

Liabilities are classified as current liabilities when one of the following criteria is met, and all other liabilities are classified as non-current liabilities:

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

  2. Assets held mainly for trading purpose.

165

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  1. Liabilities that are expected to be settled upon maturity within twelve months after the balance sheet date.

  2. The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period.

  3. (V) Cash and cash equivalents

  4. Cash consists of cash on hand, checking account deposits and saving account deposits. Cash equivalents refer to short-term and highly liquid investments that are readily convertible to known amounts of cash with insignificant risk of changes in value. Time deposits that meet the criteria and are held for the purpose of fulfilling short-term cash commitment rather than other purposes are classified as cash equivalents.

  5. Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management are included as a component of cash and cash equivalents.

  6. (VI) Financial instruments Accounts receivables are initially recognized when they are incurred. All other financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the financial instrument. Financial assets (excluding accounts receivable without a significant financing component) and financial liabilities that are not measured at fair value through profit or loss, are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition or issue of these financial assets or financial liabilities. Accounts receivable without a significant financing component is initially measured at the transaction price.

  7. Financial assets

    • The Company applies trade date accounting to all regular way purchases or sales of financial assets that are classified in the same way.

    • At initial recognition, financial assets are classified into the following categories: Financial assets at amortized cost, investments in equity instruments at fair value through other comprehensive income and financial assets at fair value through profit or loss. When the Company changes its business model for managing financial assets, all affected financial assets are reclassified on the first day of the next reporting period.

    • (1) Financial assets at amortized cost

      • Financial assets are measured at amortized cost if all of the following conditions are met and the financial assets are not designated as measured at fair value through profit or loss:

      • Financial assets are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows.

166

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  • The contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

These assets are subsequently measured at amortized cost, using initial recognized amount plus or minus cumulative amortization calculated by adopting the effective interest method and taking into account the adjustment of allowance for impairment loss as well. Interest income, foreign exchange gains and losses, and impairment loss are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

  • (2) Financial assets at fair value through other comprehensive income At initial recognition of investments in equity instruments that are not held for trading, the Company may make an irrevocable election to present subsequent changes in fair value of the investments in other comprehensive income. This election is made on an instrument-by-instrument basis.

  • Investments in equity instruments are subsequently measured at fair value. Dividend income is recognized in profit or loss unless the dividend clearly represents the recovery of part of the investment cost. Other net gains or losses are recognized in other comprehensive income and will not be reclassified to profit or loss.

  • Dividend income from equity investments is recognized on the date that the Company is eligible to receive the dividends (usually the ex-dividend date).

  • (3) Financial assets at fair value through profit or loss Financial assets that are not classified as measured at amortized cost or at fair value through other comprehensive income as described above are measured at fair value through profit or loss. At initial recognition, the Company may irrevocably designate a financial asset, which meets the criteria to be measured at amortized cost or at fair value through other comprehensive income, to the category measured at fair value through profit or loss if doing so eliminates or significantly reduces the accounting mismatch that would otherwise arise.

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

  • (4) Impairment of financial assets The Company recognizes loss allowance for expected credit loss on financial assets at amortized cost, including cash and cash equivalents, financial assets at amortized cost, notes and accounts receivable, other receivables and refundable deposits.

167

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

The Group measures loss allowance for notes and accounts receivable at the amount equal to lifetime expected credit loss. Taking into account reasonable and supportable information available without undue cost or effort, including both quantitative and qualitative information and analysis based on the Company's historical experience, credit assessment, as well as forwardlooking information, the Company measures the impairment of financial assets at amortized cost according to 12-month expected credit loss when the credit risk of the financial assets has not increased significantly since initial recognition. If there has been a significant increase in credit risk since initial recognition, the impairment is measured based on lifetime expected credit loss. Lifetime expected credit loss refers to the expected credit loss resulting from all possible default events over the expected life of the financial instrument. 12-Month expected credit loss refers to the expected credit loss resulting from default events of the financial instrument that are likely to occur within the 12 months after the reporting date (or a shorter period if the expected life of the financial instrument is less than 12 months).

The maximum period considered when estimating expected credit loss is the maximum contractual period over which the Company is exposed to credit risk.

Expected credit loss is the probability-weighted estimate of credit loss over the expected life of financial instruments. Credit loss is measured at the present value of all cash shortfalls (i.e., the difference between the cash flows due to the Company in accordance with the contracts and the cash flows that the Company expects to receive). Expected credit loss is discounted at the effective interest rate of the financial assets.

Loss allowance for financial assets at amortized cost is deducted from the carrying amount of the assets. The amount of provision or reversal of loss allowance is recognized in profit or loss.

The carrying amount of the financial assets is written off when the Company has no reasonable expectation of recovering the entire or part of the financial assets. The Company individually makes the assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects there will be no significant reversal on the write-off amount. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company's procedure for collecting overdue amount.

168

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  • (5) Derecognition of financial assets

The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or the Company transfers the financial asset in which almost all of the risks and returns associated with the ownership of the financial asset are transferred to other companies or in which the Company neither transfers nor retains nearly all of the risks and returns of ownership and it does not hold control on the financial asset.

When the Company enters into transactions of financial asset transfer, if all or almost all of the risks and returns associated with the ownership of the transferred asset is retained, the transferred asset continues to be recognized in the balance sheet.

  1. Financial liabilities and equity instruments

  2. (1) Equity instruments

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

  • (2) Treasury shares

When the Group buys back its shares recognized as equity, the amount of consideration paid, including directly attributable costs, is recognized as a deduction from equity. Shares bought back are classified as treasury shares. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity and the resulting surplus or deficit on the transaction is recognized in capital surplus or retained earnings (if the capital surplus is not sufficient to offset).

When the treasury shares are retired, the capital surplus - premium on stock account and capital stock account should be debited proportionately according

to the shareholding. The carrying value of treasury shares in excess of the sum of the par value and premium on stock should first be offset against capital surplus from the same class of treasury share transactions, and the remainder, if any, debited to retained earnings. The sum of the par value and premium on treasury shares in excess of the carrying value should be credited to capital surplus from the same class of treasury share transactions.

169

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  • (3) Financial liabilities Financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gains or losses on derecognition is also recognized in profit or loss.

  • (4) Derecognition of financial liabilities

    • The Company derecognizes a financial liability when its contractual obligation has been fulfilled or canceled, or has expired. The Group also derecognizes a financial liability when its terms are amended and the cash flows of the amended liability are substantially different, in which case a new financial liability based on the amended terms is recognized at fair value. The difference between the carrying amount of a financial liability derecognized and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

  • (5) Offsetting of financial assets and liabilities Financial assets and financial liabilities are offset and presented on a net basis only when the Company has the legally enforceable right to offset and intends to settle on a net basis or to liquidate asset for settling the liabilities simultaneously.

  • (VII) Inventories

The cost of inventories comprises all costs incurred in bringing the inventories to their present location and condition ready for sale. The variable manufacturing expenses are allocated based on the actual production volume. Fixed manufacturing expenses are allocated to finished goods and work in process based on the normal capacity of the production equipment. Unallocated fixed manufacturing expenses resulting from lower production capacity or idle equipment shall be recognized as cost of goods sold in the period in which they are incurred. If actual production volume is higher than the normal production capacity, the difference is recognized as a reduction of cost of goods sold. The monthly weighted-average method is adopted for the calculation of the costs.

  • Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the normal course of business, less the estimated costs of completion and selling expenses at the end of the period. When the cost of inventories is higher than the net realizable value, inventories are written down to net realizable value, and the write-down amount is recognized in cost of goods sold. If net realizable value increases in the future, the cost of inventories is reversed within the original write-down amount, and such reversal is treated as a reduction of cost of goods sold for the period.

(VIII) Investments in associates

170

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

An associate is an entity in which the Company has significant influence, but not control over their financial and operating policies. The Company is deemed to have significant influence when it holds 20% to 50% of the voting rights of the investee company. Investments in associates are accounted for using the equity method. Under the equity method, investments in associates are recognized initially at cost. Subsequent adjustments are based on the changes in the Company's share of net assets. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition less any accumulated impairment losses.

Unrealized gains and losses resulting from transactions between the Company and an associate are recognized only to the extent of unrelated investors’ interests in the associate.

When the Company's share of losses of an associate equals or exceeds its interests in an associate, it discontinues recognizing its share of further losses. Additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. The Company discontinues the use of the equity method and measures the retained interest at fair value from the date when its investment ceases to be an associate. The difference between the fair value of retained interest and proceeds from disposing of a part of interest in the associate, and the carrying amount of the investment at the date the equity method was discontinued is recognized in profit or loss. The Group accounts for all the amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would have been required if the associates had directly disposed of the related assets or liabilities. If a gain or loss previously recognized in other comprehensive income would be reclassified to profit or loss or retained earnings on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss or retained earnings when the equity method is discontinued. If the Company's ownership interest in an associate is reduced while it continues to apply the equity method, the Company reclassifies the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to the reduction in ownership interest to profit or loss or retained earnings.

171

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  • (IX) Investments in subsidiaries

When preparing the Parent Company Only Financial Statements, investment in subsidiaries which are controlled by the Company is accounted for using the equity method. Under the equity method, profit or loss and other comprehensive income recognized in the Parent Company Only Financial Statements are in line with profit or loss and other comprehensive income attributable to owners of the Parent in the consolidated financial statements. In addition, shareholder's equity in the Parent Company Only Financial Statements is in line with the equity attributable to the shareholders of the parent in the consolidated financial statements.

Changes in a parent's ownership interest in a subsidiary that do not result in the loss of control are accounted for within equity.

(X) Property, Plant, and Equipment

  1. Recognition and measurement

  2. Property, plant and equipment are measured at cost, less accumulated depreciation and any accumulated impairment losses.

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

Any gains or losses on disposal of property, plant and equipment are recognized in profit or loss.

  1. Subsequent costs

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

  1. Depreciation

Depreciation is calculated on the cost of assets less their residual values and is recognized in profit or loss using the straight-line method over the estimated useful lives of each component of property, plant and equipment. Land is not depreciated.

lives of each component of property, plant and equipment.
Land is not depreciated.		 lives of each component of property, plant and equipment.
Land is not depreciated.
The estimated useful lives for the current and comparative periods are as follows:
Housing and Construction 2~50 years
Buildings and Building Improvements 5~10 years
Machinery 1~19 years
Transportation Equipment 4~11 years
Other Equipment 1~26 years

The Company reviews depreciation methods, useful lives and residual values on each reporting date and makes appropriate adjustments when necessary.

172

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  • (XI) Leases - Lessee

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

  • The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the Company periodically assesses whether the right-of-use asset is impaired and recognizes any impairment loss that has occurred. The right-of-use asset is adjusted when the remeasurement of the lease liabilities takes place.

The lease liability is initially measured at the present value of the lease payments that have not been paid on the commencement date. If the interest rate implied by the lease is easy to determine, it would be used as the discount rate. If the implied interest rate is not easy to determine, the Company's incremental borrowing rate is applied. Generally, the Company uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

  1. Fixed payments, including in-substance fixed payments;

  2. Variable lease payments that depend on an index or a rate, initially measured using the index or rate at the commencement date;

  3. Amounts expected to be payable under residual value guarantees; and

  4. The exercise price of a purchase option or payments of penalties for exercising the option to terminate the lease, if the lessee is reasonably certain to exercise that option.

The interests of lease liabilities are subsequently calculated using the effective interest method and lease liabilities are remeasured when:

  1. There is a change in future lease payments arising from the change in an index or rate;

  2. There is a change in the estimate of the amount expected to be payable under a residual value guarantee;

173

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  1. There is a change in the assessment on the purchase option of the underlying asset;

  2. There is a change in the lease term assessment resulting from a change in the estimate regarding whether the extension or termination option will be exercised;

  3. There is any modification in lease subject, scope of the lease or other clauses.

When the lease liability is remeasured under the above-mentioned circumstances other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset. If the carrying amount of the right-of-use asset is reduced to zero, the remaining remeasurement amount is recognized in profit or loss.

When the lease liability is remeasured due to lease modification that decreases the scope of the lease, the Group accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognizes the difference between the carrying amount of the right-of-use asset and the remeasurement amount of lease liability in profit or loss. The Company presents right-of-use assets that do not meet the definition of investment properties, and lease liabilities as a separate line item respectively in the Balance Sheets. The Company has elected not to recognize right-of-use assets and lease liabilities for certain short-term leases of buildings and construction, machinery and equipment, and transportation equipment leases and for leases of low-value assets. The Company recognizes the lease payments associated with these leases as an expense on a straightline basis over the lease term.

The Company applies the practical expedient to the rent concessions that meet all of the following criteria without assessing if they are lease modification.

  1. Rent concession is a direct consequence of the COVID-19 pandemic;

  2. As a result of the change in lease payments, revised consideration for the lease is almost the same as, or less than, the consideration for the lease prior to the change;

  3. Any reduction in lease payments affects only payments originally due on or before June 30, 2022; and

  4. There is no change in substance to the other terms and conditions of the lease.

With the application of practical expedient, the amount of changes in lease payments arising from rent concessions is recognized in profit or loss for the reporting period.

  • (XII) Intangible assets

  • Recognition and measurement

    • Goodwill of the Company occurred in the business combination prior to the date of IFRS adoption. Upon conversion to IFRS endorsed by the FSC, the Company elected to restate only those business combinations that occurred after January 1, 2012 (inclusive). For acquisitions made before January 1, 2012, the amount of goodwill was recognized in accordance with the Regulations Governing the

174

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

Preparation of Financial Reports by Securities Issuers issued by the FSC on January 10, 2009, and Accounting Standards and related interpretations (hereinafter referred to as "previously generally accepted accounting principles") issued by the Accounting Research and Development Foundation of the Republic of China. Company's other separately acquired intangible assets with finite useful lives, including software and patents, are carried at cost less accumulated amortization and accumulated impairment losses.

  1. Subsequent expenditures

Subsequent expenditures are capitalized only when they increase the future economic benefits of the specific asset to which they relate. All other expenditures are recognized in profit or loss as incurred, including internally developed goodwill and brands.

  1. Amortization

Except for goodwill, amortization is calculated based on the cost of the asset less the estimated residual value, and is recognized in profit or loss using the straightline method over the estimated useful life of the intangible asset when it becomes available for use.

The estimated useful lives for the current and comparative periods are as follows: Software cost 1~5 years Patent 91 months

The Company reviews the amortization method, useful life and residual value of the intangible assets on each reporting date and makes appropriate adjustments when necessary.

  • (XIII) Impairment of non-financial assets

The Company assesses on each reporting date whether there is any indication that the carrying amount of non-financial assets (excluding inventories, deferred income tax assets, employee benefit related assets) may be impaired. If any such indication exists, then the recoverable amount of the asset is estimated. Goodwill is tested for impairment on an annual basis.

For the purpose of impairment testing, assets are divided into the smallest group of identifiable assets that generates cash inflows largely independent of the cash inflows from other individual asset or groups of assets. Goodwill arising from a business combination is allocated to cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the combination.

175

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

The recoverable amount of an individual asset or cash-generating unit is the higher of its value in use and its fair value less costs to sell. An impairment loss is recognized if the carrying amount of an asset or cash-generating unit exceeds the recoverable amount. Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit, and then to reduce the carrying amount of the other assets in the cash-generating unit on a pro rata basis. An impairment loss in respect of goodwill is not reversed. For other non-financial assets, an impairment loss is reversed only to the extent that the asset's carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the assets in prior years.

  • (XIV) Provisions for liabilities

Provisions are recognized when the Company has a present obligation as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.

A provision for maintenance is recognized when the underlying products or services are sold. The provision is estimated based on historical maintenance rates and maintenance cost per unit.

  • (XV) Revenue recognition

Revenue is measured based on the consideration to which the Group expects to be entitled in exchange for transferring goods or services to a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of goods or services to a customer. Transfer of control of the product occurs when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer's acceptance of the products. Delivery occurs when the products are shipped to the specific location, the risks of obsolescence and loss are transferred to the customer, and either the customer accepts the products according to the sales contract with the acceptance provisions being invalid or the Company has objective evidence that all criteria for acceptance have been satisfied.

  • (XVI) Government grant

When the Company can receive the government grant relating to the operating activities, such grant with no conditions attached is recognized as non-operating income. The Company recognizes the grant relating to assets as deferred income at fair value when there is reasonable assurance that the Company will comply with the conditions attached to the grant and that the grant will be received. The above deferred income is recognized as non-operating income over the estimated useful lives of the related assets on a systematic basis. If the government grant is used to compensate the Company's expenses or losses, such government grant is recognized in profit or loss over the period necessary

176

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

to match it with the related expenses, for which it is intended to compensate, on a systematic basis.

(XVII) Employee benefits

  1. Defined contribution plans

Obligations for contributions to defined contribution pension plans are expensed during the period in which employees render services.

  1. Defined benefit plans

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

The defined benefit obligation is calculated annually by qualified actuaries using the projected unit credit method. When the calculation result may be beneficial to the Company, the recognized assets shall be limited to the present value of any economic benefits available in the form of refunding the contribution from the plan or reducing the future contribution to the plan. When calculating the present value of economic benefits, the minimum contribution requirements are considered. The remeasurements of the net defined benefit liability comprise actuarial gains and losses, return on plan assets (excluding interest), and any changes in the effect of the asset ceiling (excluding interest). The remeasurements of the net defined benefit liability are recognized in other comprehensive income and reflected in retained earnings. The net interest expense (income) of the net defined benefit liabilities (assets) is calculated based on the net defined benefit liabilities (assets) and the discount rate determined at the beginning of the annual reporting period. The net interest expense and other expenses of the defined benefit plan are recognized in profit or loss.

When the plan is revised or reduced, the amount of changes in benefits related to the past service costs or reduced benefits or losses is recognized in profit or loss. When the settlement occurs, the Company shall recognize the settlement gain or loss of the defined benefit plan.

  1. Short-term employee benefits

  2. Short-term employee benefit obligations are expensed during the period in which employees render services. If the Company has a present legal or constructive obligation to make such payments as a result of past service provided by the employees and the obligation can be estimated reliably, the amount of payments is recognized as a liability.

(XVIII) Income Tax

Income taxes comprise current taxes and deferred income taxes. Current and deferred

177

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

income taxes are recognized in profit or loss unless they relate to business combinations or items recognized directly in equity or other comprehensive income.

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

Deferred income taxes are recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred income taxes are not recognized for the following temporary differences:

  1. Temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

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

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

Deferred income taxes are measured at tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

Deferred income tax assets and deferred income tax liabilities are offset when the following criteria are met:

  1. The Group has a legally enforceable right to set off current income tax assets against current income tax liabilities; and

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

  3. (1) The same taxable entity; or

  4. (2) Different taxable entities which intend to settle current income tax assets and income tax liabilities on a net basis, or to realize the assets and settle the

178

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

liabilities simultaneously, in each future period in which significant amounts of deferred income tax assets are expected to be recovered or significant amounts of deferred income tax liabilities are expected to be settled.

(XIX) Business combinations

The Company accounts for business combinations using the acquisition method. The goodwill arising from an acquisition is measured as the excess of the acquisition-date fair value of consideration transferred, including the amount of non-controlling interest in the acquiree, over the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed (generally at fair value). If the amount calculated above is a deficit balance, the Company recognizes that amount as a gain on a bargain purchase in profit or loss immediately after reassessing whether it has correctly identified all of the assets acquired and all of the liabilities assumed.

Acquisition-related costs are expensed as incurred except for the costs related to issuance of debt or equity instruments.

On an transaction-by-transaction basis, the Company measures any non-controlling interests in the acquiree at the non-controlling interest's proportionate share of the acquiree's identifiable net assets, if the non-controlling interests are present ownership interests and entitle their holders to a proportionate share of the acquiree's net assets in the event of liquidation.

(XX) Earnings per Share

The basic and diluted EPS attributable to stockholders of the Company are disclosed in the Parent Company Only Financial Statements. Basic EPS of the Company is calculated by dividing net income attributable to stockholders of the Company by the weightedaverage number of common shares outstanding during the year. In calculating diluted EPS, the net income attributable to stockholders of the Company and weighted-average number of common shares outstanding during the year are adjusted for the effects of dilutive potential common shares. The Company's dilutive potential common shares include estimates of employee compensation.

(XXI) Segment Information

The Company discloses the operating segment information in the consolidated financial statements. Therefore, the Company does not disclose the operating segment information in the Parent Company Only Financial Statements.

179

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

V. Primary Sources of Uncertainties in Material Accounting Judgments, Estimates, and Assumptions

The preparation of the Parent Company Only Financial Statements in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from the estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in the future periods affected.

The Parent Company Only Financial Statements involve material judgment as to whether the Company has substantive control over the investee, FSP Group USA Corp. and it has a material impact on the amounts recognized in the Parent Company Only Financial Statements. The related information is as follows:

In the Parent Company Only Financial Statements, there is no accounting policy that involves significant estimates and assumptions, and the information on accounting policies does not have a material impact on the amounts recognized in the Parent Company Only Financial Statements.

VI. Details of Significant Accounts

(I) Cash and cash equivalents

Cash on hand
Cash equivalents - Repurchase agreements
Deposits in saving accounts
Deposits in checking accounts
Time deposits		 2021.12.31
$ 1,458
-
940,156
2,021
740,111		 2020.12.31
1,014
114,435
623,782
2,969
1,219,078
1,961,278

$
1,683,746

Please refer to Note VI(XXIV) for the disclosure of interest rate risk of the Company’s financial assets and liabilities.

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

Financial assets mandatorily measured at fair
value through profit or loss
Non-derivative financial assets
Beneficiary certificates
Private equity funds
Foreign unlisted stocks
Total		 2021.12.31
$ 232,758
12,000
71,632		 2020.12.31

210,388

-

67,232

277,620

$
316,390

The Company recognized dividend income of NT$420 thousand and NT$0 in 2021 and 2020 respectively from the above financial assets at fair value through profit or loss.

180

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

Please refer to Note VI(XXIII) for the amounts recognized in profit or loss arising from remeasurement at fair value.

Please refer to Note VI(XXIV) for the information of market risk.

  • (III) Financial assets at fair value through other comprehensive income
Equity instruments at fair value through other
comprehensive income
Domestic listed stock - Voltronic Power
Technology Corp.
Domestic listed stock - JESS-LINK Products
Co., Ltd.
Domestic listed stock - WT Microelectronics
Co., Ltd.
Domestic listed stock - Taiwan Cement
Corp.
Domestic listed stock - Taiwan
Semiconductor Manufacturing Co., Ltd.
Foreign listed stocks
Domestic unlisted stocks
Total		 2021.12.31
$ 6,213,715
351,144
48,950
2,400
6,150
18,118
96,167		 2020.12.31
5,040,921
109,200
48,550
-
-
19,344
28,667
5,246,682

$
6,736,644
  1. Investments in equity instruments at fair value through other comprehensive income

The Company holds these investments in equity instruments as long-term strategic investments and are not held for trading purposes, so these investments have been designated to be measured at fair value through other comprehensive income.

The Company recognized dividend income of NT$122,513 thousand and NT$107,452 thousand in 2021 and 2020 respectively from the above investments

in equity instruments designated as measured at fair value through other comprehensive income.

In order to meet the needs of funding plan, the Company divested the shares of Voltronic Power Technology Corp. designated at fair value through other comprehensive income in 2021 and 2020 and the fair value at the time of disposal was NT$660,425 thousand and NT$216,963 thousand with disposal gains of NT$658,165 thousand and NT$215,901 thousand, respectively.

  1. Please refer to Note VI(XXIV) for the information of market risk.

181

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  • (IV) Financial assets at amortized cost
Financial assets at amortized cost
Corporate bond - Novaland Group (NVL)
Less: Allowance for impairment loss
Total		 2021.12.31
$ 10,800
-		 2020.12.31
-
-
$
10,800		 -

The Company assesses that the asset is held to maturity to receive contractual cash flows. The asset is classified as financial assets at amortized cost because the cash flows from the financial asset are solely the payment of principal and interest on the outstanding principal amount.

  1. In June 2021, the Company purchased the corporate bond of Novaland Group (NVL) due in 18 months at a face value of NT$10,959 thousand with a coupon rate of 10.00%.

  2. Please refer to Note VI(XXIV) for the information of credit risk.

  3. (V) Notes receivable and accounts receivable

Notes receivable
Accounts receivable
Accounts receivable - related parties
Less: Allowance for impairment loss		 2021.12.31
$ 2,682
2,392,342
985,345
(32,806)		 2020.12.31

426

2,263,095

749,248
(29,810)

$
3,347,563
2,982,959

Company's notes receivable and accounts receivable were not discounted or provided as collaterals.

The Company applies the simplified approach to estimate expected credit loss for all notes receivable and accounts receivable, i.e. the use of lifetime expected credit loss for all receivables. For the measurement purpose, notes receivable and accounts receivable are grouped according to common credit risk characteristics that represent the customer's ability to pay all amounts due under the terms of the contract. Forwardlooking information, including macro economy and related industry information, is taken into consideration as well.

182

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

Analysis of expected credit loss on notes receivable and accounts receivable of the Company was as follows:

Not Past Due
Past due within 30 days
Past due 31-60 days
Past due 61-90 days
Past due 91-120 days
Past due over 121 days		 2021.12.31 2021.12.31 Allowance for
expected
credit loss

10,532

15,748

1,000

1,978

64
2,412
31,734
Carrying
amount of
notes
receivable and
accounts
receivable
$ 3,007,546
109,271
2,464
2,717
78
2,412		 Weighted-
average
expected
credit loss
rate (%)

0.35

14.41

40.57

72.80

82.48

100.00

$
3,124,488

The carrying amount of the above notes and accounts receivable did not include the account receivable due from subsidiaries and a specific customer, amounting to NT$250,520 thousand and NT$5,361 thousand, respectively. The above-mentioned accounts receivable was not overdue.

Due to poor recovery of the account receivable due from this customer, the Company has specifically recorded an allowance for loss of NT$1,072 thousand for this uncollected payment, net of insurance claims, and therefore the amount was excluded from the above calculation of allowance for expected credit loss.

Not Past Due
Past due within 30 days
Past due 31-60 days
Past due 61-90 days
Past due 91-120 days
Past due over 121 days		 2020.12.31 2020.12.31 Allowance for
expected
credit loss

5,385

2,241

2,294

2,982

677
12,272
25,851
Carrying
amount of
notes
receivable and
accounts
receivable
$ 2,755,699
18,100
6,053
4,068
823
12,272		 Weighted-
average
expected
credit loss
rate (%)

0.20

12.38

37.90

73.31

82.27

100.00

$
2,797,015

183

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

The carrying amount of the above notes and accounts receivable did not include the account receivable due from subsidiaries and a specific customer, amounting to NT$195,961 thousand and NT$19,793 thousand, respectively. The above-mentioned accounts receivable was not overdue.

Due to poor recovery of the account receivable due from this customer, the Company has specifically recorded an allowance for loss of NT$3,959 thousand for this uncollected payment, net of insurance claims, and therefore the amount was excluded from the above calculation of allowance for expected credit loss.

Changes in the allowance for notes receivable and accounts receivable were as follows:

Beginning balance
Impairment losses recognized
Write-off
Ending balance
(VI)
Other receivables
Other receivables
Other receivables - related parties
Less: Allowance for impairment loss		 2021
$ 29,810
3,828
(832)		 2020

29,149

4,614

(3,953)
29,810
2020.12.31

19,966

49,665
-
69,631

$
32,806

2021.12.31
$ 16,480
40,968
-
$
57,448

As of December 31, 2021 and 2020, there were no overdue for all other receivables (including related parties).

(VII) Inventories

Finished goods
Work in process
Raw materials		 2021.12.31
$ 1,039,194
491,915
631,392		 2020.12.31

851,759

371,510

404,140

1,627,409

$
2,162,501

Breakdown of cost of goods sold:

Breakdown of cost of goods sold:
Inventories sold
Inventory valuation loss (reversal gain)
Unallocated manufacturing expense
Loss on inventory obsolescence
Loss (gain) on inventory counts		 2021
$ 10,347,849
14,795
87,786
33,086
171		 2020
9,293,633
(32,975)
9,768
35,856
(2)

9,306,280
$
10,483,687

184

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

As of December 31, 2021 and 2020, the Company did not pledge any inventories as collateral.

(VIII) Investments Accounted for Using the Equity Method

A summary of the Company's investments accounted for using the equity method at

the reporting date is provided below:

he reporting date is provided below:
Subsidiary
Associate invested through subsidiary		 2021.12.31
$ 2,917,328
26,947		 2020.12.31

2,762,521

25,319

2,787,840

$
2,944,275

1. Subsidiary

Please refer to the consolidated financial statements for the year ended December 31, 2021.

2. Associate invested through subsidiary

The financial information of insignificant associates that are invested through subsidiary and the Company adopts the equity method for recognition is summarized below. The amount is included in the Parent Company Only Financial Statements.

The carrying amount of investments in
associates that were not individually
material to the Group at the end of the
period
Attributable to the Company:
Income from Continuing Operations
Other comprehensive income
Total comprehensive income		 2021.12.31
$
26,947		 2020.12.31
25,319
2020

3,049

(1,400)

1,649

2021
$ 3,284
(809)

$
2,475

3. Collateral

As of December 31, 2021 and 2020, the Company did not pledge any investments accounted for under the equity method as collateral.

(IX) Business combinations

In order to expand the business in Turkey, the Company acquired 91.41% of the shares of FSP Turkey Dis Tic. Ltd. Sti. for NT$22,640 thousand (US$800 thousand) on May 31, 2021, and gained control over the company.

185

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

For the seven-month period from the acquisition date to December 31, 2021, the revenue and net profit contributed by FSP Turkey amounted to NT$49,700 thousand and NT$4,951 thousand, respectively. If the acquisition had occurred on January 1, 2021, management estimates that the Company's net income in 2021 would have reached NT$755,328 thousand. When estimating these amounts, management has assumed that the fair value adjustments on the date of acquisition had been the same and the acquisition had occurred on January 1, 2021.

The fair values of the major categories of consideration transferred at the date of The fair values of the major categories of consideration transferred at the date of The fair values of the major categories of consideration transferred at the date of
acquisition were as follows:
Cash $ 22,640
As of May 31, 2021, the fair value of identifiable assets and liabilities was as follows:
Cash and cash equivalents $ 26,472
Net notes receivable 494
Net accounts receivable 11,899
Inventories 16,528
Prepayments 6,172
Other current assets 309
Property, Plant, and Equipment 736
Other Non-Current Assets 2
Accounts payable (8,796)
Other payables (19,665)
Other current liabilities (6,624)
$ 27,527
Gains on bargain purchase arising from acquisition:
Transfer Price $ 22,640
Add: Non-controlling interests (measured by non-controlling
interest's proportionate share of identifiable net assets) 2,364
Less: The fair value of identifiable net assets (27,527)
Gains on bargain purchase (recognized in other income) $ (2,523)

186

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

(X) Property, Plant, and Equipment

The changes in costs, depreciation and impairment loss of property, plant and equipment for the years ended December 31, 2021 and 2020 were as follows:

Cost or deemed cost:
Balance as of January 1, 2021
Addition
Disposal and obsolescence
Reclassification (Note 1)
Balance as of December 31,
2021
Balance as of January 1, 2020
Addition
Disposal and obsolescence
Reclassification
Balance as of December 31,
2020
Depreciation and impairment
loss:
Balance as of January 1, 2021
Recognition in current period
Disposal and obsolescence
Balance as of December 31,
2021
Balance as of January 1, 2020
Recognition in current period
Disposal and obsolescence
Balance as of December 31,
2020
Carrying amounts:
Balance as of December 31,
2021
Balance as of December 31,
2020		 Land
$ 264,211
-
-
-
$
264,211
$ 264,211
-
-
-
$
264,211
$ -
-
-
$
-
$ -
-
-
$
-
$
264,211
$
264,211		 Housing and
Construction
686,117
53,120
(2,295)
72,691		 Buildings and
Building
Improvements
3,725
351
-
-
4,076
3,143
582
-
-
3,725
1,127
447
-
1,574
702
425
-
1,127
2,502
2,598		 Buildings and
Building
Improvements
3,725
351
-
-
4,076
3,143
582
-
-
3,725
1,127
447
-
1,574
702
425
-
1,127
2,502
2,598		 Machinery

209,814

20,533
(1,274)
-		 Transportation
Equipment
1,908
1,585
-
-
3,493
1,908
-
-
-
1,908
1,908
159
-
2,067
1,908
-
-
1,908
1,426
-		 Transportation
Equipment
1,908
1,585
-
-
3,493
1,908
-
-
-
1,908
1,908
159
-
2,067
1,908
-
-
1,908
1,426
-		 Other
Equipment

222,081

21,917
(774)
1,665
244,889

217,391
4,706
(16)
-
222,081

186,989

18,152
(721)
204,420

167,614
19,381
(6)
186,989
40,469
35,092		 Construction
in progress
and
equipment
under
installation
76,595
24,156
-
(72,876)		 Total

1,464,451

121,662
(4,343)

1,480




809,633		 4,076 229,073 3,493
27,875

1,583,250

683,924
2,193
-
-
3,143
582
-
-

195,184

15,027
(415)
18
1,908
-
-
-
1,305
75,308
-
(18)

1,367,066

97,816
(431)

-
686,117 3,725 209,814 1,908
76,595
1,464,451

204,109
26,807
(1,790)
1,127
447
-

168,907

11,974
(1,169)
1,908
159
-
-
-
-
563,040
57,539
(3,680)

229,126		 1,574
179,712		 2,067 -
616,899

178,736
25,373
-
702
425
-

158,473

10,801
(367)
1,908
-
-		 -
-
-
507,433
55,980
(373)
204,109 1,127
168,907		 1,908 -
563,040

580,507
2,502
49,361
1,426		 27,875
966,351

482,008
2,598
40,907
-
76,595
901,411

Note 1. For the year ended December 31, 2021, the amount transferred from equipment prepayment was NT$1,480 thousand.

Please refer to Note VIII for the details of property, plant and equipment that have been pledged as collaterals for long-term and short-term borrowings and credit facilities as of December 31, 2021 and 2020.

187

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

(XI) Right-of-use assets

The changes in the costs and depreciation of land, buildings and construction, transportation equipment and office equipment leased by the Company were as follows:

Costs of right-of-use assets:
Balance as of January 1, 2021
Addition
Reduction (contract expired and
early termination of contract)
Balance as of December 31, 2021
Balance as of January 1, 2020
Addition
Reduction (contract modification
and contract expired)
Balance as of December 31, 2020
Depreciation of right-of-use assets:
Balance as of January 1, 2021
Depreciation in current period
Reduction (contract expired and
early termination of contract)
Balance as of December 31, 2021
Balance as of January 1, 2020
Depreciation in current period
Reduction (contract modification
and contract expired)
Balance as of December 31, 2020
Carrying amounts:
Balance as of December 31, 2021
Balance as of December 31, 2020		 Land Housing and
Construction		 Transportation
Equipment		 Office
Equipment		 Total
$ 11,375
-
-		 56,877
-
(10,496)
46,381
56,877
-
-
56,877
11,067
4,188
(8,343)
6,912
5,533
5,534
-
11,067
39,469
45,810		 1,452
716
(661)

1,507
1,559
394
(501)
1,452
829
622
(661)

790
676
654
(501)
829
717
623		 -
-
-		 69,704
716
(11,157)
59,263
70,237
394
(927)
69,704
12,994
5,354
(9,004)
9,344
6,934
6,790
(730)
12,994
49,919
56,710
$
11,375		 -

$ 11,572
-
(197)		 229
-
(229)

$
11,375
-

$ 1,098
544
-		 -
-
-
$
1,642		 -

$ 554
544
-		 171
58
(229)
$
1,098
-

$
9,733		 -

$
10,277		 -

(XII) Intangible assets

The changes in costs, amortization and impairment loss of intangible assets for the years ended December 31, 2021 and 2020 were as follows:

Software
Goodwill cost Patent Total
Costs:
Balance as of January 1, 2021 $
114,411		 5,821 15,863 136,095
Addition in current period - 5,684 - 5,684
Reduction in current period - (4,437) - (4,437)

188

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

Balance as of December 31, 2021
Balance as of January 1, 2020
Addition in current period
Reduction in current period
Balance as of December 31, 2020
Amortization and impairment loss:
Balance as of January 1, 2021
Amortization for the period
Reduction in current period
Balance as of December 31, 2021
Balance as of January 1, 2020
Amortization for the period
Reduction in current period
Balance as of December 31, 2020
Carrying amounts:
Balance as of December 31, 2021
Balance as of December 31, 2020		 Goodwill Patent
15,863		 Total
137,342

135,859
436
(200)
136,095

21,235
2,576
(4,437)
19,374

20,175
1,260
(200)
21,235
117,968
114,860



$ 114,411
5,585
-
436
-
(200)
15,863
-
-

$
114,411
5,821		 15,863




$ -
5,372
-
2,576
-
(4,437)
15,863
-
-

$
-
3,511		 15,863


$ -
4,312
-
1,260
-
(200)
15,863
-
-

$
-
5,372		 15,863


$
114,411
3,557
-



$
114,411
449		 -
  1. Amortization expenses

The amortization of intangible assets was included in the following items of the Statements of Comprehensive Income for the years ended December 31, 2021 and 2020:

Operating costs
Operating expenses		 2021
$ 348
2,228		 2020

290

970

  1. Impairment test for goodwill

  2. (1) In accordance with IAS 36, goodwill acquired through a business combination should be tested for impairment at least annually. Goodwill is tested for impairment by allocating goodwill to the cash-generating unit that is expected to benefit from the synergy of consolidation. Goodwill arising from the business combination is fully attributed to the Company's Kaohsiung Branch. Therefore, the impairment of goodwill is assessed by calculating the value in use and the carrying amount of net assets of the Company's Kaohsiung Branch to determine whether an impairment loss should be recorded.

189

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  • (2) The recoverable amount of the cash-generating unit is based on its value in use. Value in use is determined by discounting the future cash flows arising from the continuing use of the unit. The calculation of the value in use (including goodwill) is based on the following key assumptions:

    • A. The cash flow projections were based on historical figures, actual operating results and 5-year business plan. Cash flows beyond 5 years have been projected with zero growth rate.

    • B. The Company estimated the pre-tax discount rate based on the weighted-average cost of capital, which was 9.10% and 9.44% for the years ended December 31, 2021 and 2020, respectively.

  • (3) According to the asset impairment test conducted in 2021 and 2020, no impairment losses were recognized as the recoverable amount of cashgenerating unit was higher than the carrying amount.

  • (XIII) Short-term loans

The details of the Company's short-term borrowings are provided below:

Secured bank borrowings
Unused facility
Interest rate range		 2021.12.31
$
-		 2020.12.31
-
$
678,500		 808,750

-
0.98

Please refer to Note VIII for the details of the Company's assets pledged as collateral for bank borrowings.

  • (XIV) Long-term loans

The details of the Company's long-term borrowings are provided below:

Secured bank borrowings
Less: current portion of long-term debt
Total
Unused facility
Interest rate range		 2021.12.31
$ 272,348
73,014		 2020.12.31

108,453

10,608

$
199,334

97,845

$
-
259,930
1.58
1.58
  1. Collateral for bank borrowings

Please refer to Note VIII for the details of the Company's assets pledged as collateral for bank borrowings.

  1. Government-subsidized loan with preferential interest rate

In August 2020, the Company obtained a NT$371,000 thousand low-interest loan from Mega International Commercial Bank under the "Guidelines of Project Loans

for Returning Overseas Taiwanese Businesses". Drawdown period was until

190

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

December 31, 2021 and multiple drawdowns were allowed. For the periods from January 1, 2021 to December 31, 2021 and from August 3, 2020 to December 31, 2020, the amount of actual utilization was NT$185,580 thousand and NT$111,070 thousand respectively. Based on market interest rate of 1.58% to recognize and measure the loan, the difference between the actual repayment preferential interest rate of 0.65% and the market interest rate was NT$3,591 thousand and NT$2,994 thousand respectively, which were treated as government subsidies and recognized as deferred income under other current liabilities and other non-current liabilities.

(XV) Lease liabilities

The carrying amount of lease liabilities were as follows:

Current
Non-current
Total		 2021.12.31
$ 3,040
49,239		 2020.12.31

6,264

52,619

58,883

$
52,279

Please refer to Note VI(XXIV) Financial Instrument for the maturity analysis.

The amounts recognized in profit or loss were as follows:

2021 2020
Interest expense on lease liabilities $ 980 1,096
Variable lease payments not included in the
measurement of lease liabilities $ 149 419
Expenses of short-term leases $ 438 1,139
Rent concession arising from the COVID-19
pandemic (recognized in other income) $ - 66
Amount recognized in the Statements of Cash Flows was as follows:
2021 2020
Total cash outflow in operating activities $ 1,567 2,654
Total cash outflow in financing activities 5,087 6,469
Total cash flows on lease $ 6,654 9,123
  1. Lease of land, buildings and construction

The Company leases land, buildings and construction as factories, office premises, staff quarters and warehouses with lease terms ranging from 3 to 10 years for factories and 1 to 3 years for office premises and warehouses. Some of these leases include the option to extend the lease term for the same period as the original contract at the end of the lease term.

191

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

The lease payments for some of the warehouses are based on the actual floor area used each month.

For these lease contracts, the variable lease payments paid by the Company in 2021 were as follows:

Lease contracts with variable payment
calculated based on the actual floor area
used per month		 Variable
payment
$
149		 Estimated
impact on
lease payment
for each 1%
increase in the
actual floor
area used
1

2. Other leases

The Company leases machinery and transportation equipment with the lease terms ranging from three months to three years.

The lease terms of some of Company's leases of buildings, construction, machinery and transportation equipment are within 1 year. These leases are considered as short-term leases or leases of low-value assets and the Company elected to apply exemption and did not recognize related right-of-use assets and lease liabilities.

(XVI) Provisions for liabilities

Balance at January 1
Addition of provision during the year
Amount utilized during the year
Balance at December 31		 2021
$ 157,190
116,273
(127,240)		 2020

145,337

88,886

(77,033)
157,190

$
146,223

The provision of the Company is mainly for sales-related maintenance obligation. The provision is estimated based on historical maintenance rates and maintenance cost per unit of specific products.

(XVII) Employee benefits

1. Defined benefit plans

The reconciliation between the present value of defined benefit obligations and the fair value of plan assets was as follows:

fair value of plan assets was as follows:
Present value of defined benefit obligation
Fair value of plan assets
Net defined benefit liabilities		 2021.12.31
$ 198,693
(154,459)		 2020.12.31
201,796
(144,578)
57,218

$
44,234

192

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

The Company makes contribution of defined benefit plan to the labor pension reserve account at Bank of Taiwan. Under the Labor Standards Act, pension benefit of each eligible employee is calculated based on the number of units accrued from service years and the average monthly salaries of the last 6 months prior to retirement.

  • (1) Composition of plan assets

The pension fund contributed by the Company is managed and administered by the Bureau of Labor Funds of the Ministry of Labor (the “Bureau of Labor Funds”). According to the “Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund”, with regard to the utilization of the Fund, minimum returns per year shall not be lower than the earnings attainable from two-year time deposits with interest rates offered by local banks.

As of December 31, 2021, the balance of the labor pension reserve account at Bank of Taiwan was NT$153,741 thousand. For information on the labor pension fund assets, including yield of the fund and the asset portfolio, please refer to the website of the Bureau of Labor Funds.

  • (2) Changes in present value of the defined benefit obligations

Changes in present value of the defined benefit obligations in 2021 and 2020 were as follows:

were as follows:
Defined benefit obligations at
January 1
Service costs and interest in the year
Remeasurement on the net defined
benefit liabilities (assets)
- Actuarial loss arising from
experience adjustments
- Actuarial loss arising from changes
in demographic assumption
- Actuarial loss (gain) arising from
changes in financial assumption
Benefits paid by the plan
Effect of plan curtailment
Defined benefit obligations at
December 31		 2021
$ 201,796
3,405
2,911
420
(7,793)
(2,046)
-		 2020
193,824
2,569
3,003
294
8,967
(5,694)
(1,167)
201,796
$
198,693

193

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  • (3) Changes in fair value of plan assets

Changes in fair value of defined benefit plan assets for the years ended

December 31, 2021 and 2020 were as follows:

Fair value of plan assets on January 1
Interest income
Remeasurement on the net defined
benefit assets - Return on plan
assets (excluding interests)
Amount contributed to the plan
Benefits paid by the plan
Fair value of plan assets on
December 31		 2021
$ (144,578)
(426)
(2,148)
(9,353)
2,046		 2020
(135,485)
(997)
(4,443)
(8,818)
5,165
(144,578)

$
(154,459)
  • (4) Expenses recognized in profit or loss

Details of expenses (gains) recognized in profit or loss for the years ended December 31, 2021 and 2020:

Service benefit for the period
Net interest expense of net defined
benefit liabilities
Operating costs
Selling and marketing expenses
General and administrative expenses
Research and development expenses		 2021
$ 2,812
167		 2020
(20)
425
405
-
-
405
-
405
$
2,979

$ 280
394
1,025
1,280

$
2,979

(5) Actuarial assumptions

The major assumptions of the actuarial valuation to calculate the present value of the defined benefit obligation at the end of reporting period were as follows:

as follows:
Discount rate
Future salary increases		 2021.12.31
0.70%
2.00%		 2020.12.31

0.30%

2.00%

The Company estimates to make contribution of NT$3,711 thousand to the defined benefit plan in the year following December 31, 2021. The weighted-average duration of the defined benefit plan is 9 years.

194

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  • (6) Sensitivity analysis

The impact of a change in assumptions on the present value of the defined benefit obligation as of December 31, 2021 and 2020 is summarized below:

December 31, 2021
Discount rate (change by 0.25%)
Future salary adjustment rate (change
by 0.25%)
December 31, 2020
Discount rate (change by 0.25%)
Future salary adjustment rate (change
by 0.25%)		 Impact on the defined benefit
obligation
Increase by
0.25%
Decrease by
0.25%
(4,673)
4,864
4,739
(4,576)
(5,040)
5,246
5,087
(4,912)

The above sensitivity analysis considers the change in one assumption at a time, leaving other assumptions unchanged. In practical terms, many assumptions are interrelated and changing one individual assumption may trigger the changes in other assumptions. The method used to conduct the sensitivity analysis is consistent with the calculation of the net pension liabilities recognized in the balance sheets.

The method and assumptions used to conduct the sensitivity analysis are the same as those in the previous year.

  1. Defined contribution plans

Per Company's defined contribution plan, the Company contributes monthly an amount equal to 6% of each employee's monthly wages to the employee’s individual pension fund account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under this defined contribution plan, the Company has no legal or constructive obligation to pay additional amounts after contributing a fixed amount to the Bureau of Labor Insurance.

For the years ended December 31, 2021 and 2020, in relation to the defined contribution plan, the Company recognized pension expenses of NT$26,702 thousand and NT$26,950 thousand, respectively, which had been contributed to the Bureau of Labor Insurance.

195

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  1. Short-term employee benefits

For the years ended December 31, 2021 and 2020, the Company contributed NT$11,430 thousand and NT$0 respectively to a specific trust account for employee incentives, which were recognized as operating costs and operating expenses.

As of December 31, 2021 and 2020, the Company had accrued unused leave bonuses of NT$22,213 thousand and NT$20,433 thousand, respectively, which were recorded under other payables.

(XVIII) Income Tax

  1. Income tax expense

Details of income tax expense (benefit) for the years ended December 31, 2021 and 2020 were as follows:

and 2020 were as follows:
2021 2020
Income tax expense (benefit) for the period
Income tax expense incurred $ 125,927 81,479
Adjustment for prior year 5,618 (3,816)
131,545 77,663
Deferred income tax benefit
Origination and reversal of temporary
differences $ (11,162) (1,611)
Income tax expense $ 120,383 76,052
Details of income tax expense (benefit) recognized in other comprehensive income
for the years ended December 31, 2021 and 2020 were as follows:
2021 2020
Items that will not be reclassified to profit
or loss:
Gains (losses) on re-measurements of
defined benefit plans $ 1,322 (1,564)

Details of income tax expense (benefit) recognized in other comprehensive income for the years ended December 31, 2021 and 2020 were as follows:

Reconciliation between the expected income tax expense calculated based on the Company's statutory tax rate and the actual income tax expense reported in the Parent Company Only Statements of Comprehensive Income was as follows:

196

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

2021
Income before Tax
$
874,465
Income tax using the Company's statutory tax
rate
$ 174,893
Invest gain on long-term investment under
the equity method
(40,524)
Cash dividend income
(24,586)
Non-deductible expenses
7,540
Gains on securities transactions
131,633
Gains on exemption from securities
transaction tax
(133,335)
Adjustments in respect of prior years
5,618
Tax on undistributed earnings (5%)
10,428
Tax incentives
(12,006)
Basic income tax amount
722
Others
-
Total
$
120,383		 2021
$
874,465		 2020
745,366

149,073
(56,937)
(21,490)
9,716
43,180
(44,229)
(3,816)
4,645
(4,460)
-
370
$
120,383		 76,052
  1. Deferred income tax assets and liabilities

Changes in deferred income tax assets and liabilities in 2021 and 2020 were as follows:

Deferred income tax liabilities:
January 1, 2021
Debit income statement
December 31, 2021
January 1, 2020
Debit income statement
December 31, 2020		 Unrealized valuation
gains
$ (2,039)
(880)

$
(2,919)

$ (443)
(1,596)

$
(2,039)
Allowance
for inventory
valuation loss
Deferred income tax assets:
January 1, 2021
$ 13,202
(Debit)/Credit income
statement
2,959
Debit other
comprehensive income
-
December 31, 2021
$
16,161
January 1, 2020
$ 19,797
(Debit)/Credit income
statement
(6,595)
Credit other
comprehensive income
-
December 31, 2020
$
13,202		 Allowance
for inventory
valuation loss
Deferred income tax assets:
January 1, 2021
$ 13,202
(Debit)/Credit income
statement
2,959
Debit other
comprehensive income
-
December 31, 2021
$
16,161
January 1, 2020
$ 19,797
(Debit)/Credit income
statement
(6,595)
Credit other
comprehensive income
-
December 31, 2020
$
13,202		 Pension
provision
8,159
(1,275)
(1,322)		 Unrealized
foreign
exchange
gain or loss

22,828

7,949

-		 Others
12,417
2,409
-		 Total

56,606

12,042
(1,322)

5,562
30,777		 14,826
67,326

$ 19,797
(6,595)
-
8,277
(1,682)
1,564

17,325

5,503

-
6,436
5,981
-

51,835

3,207
1,564

8,159
22,828		 12,417
56,606

197

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

3. Income tax assessment

The tax returns for the years up to 2019 filed by the Company have been approved by the tax authority.

  • (XIX) Capital and other equity

  • Common stock issuance

As of December 31, 2021 and 2020, the Company’s authorized common stock was NT$3,600,000 thousand with the par value of NT$10 per share. 187,262 thousand

shares were issued.

The changes in outstanding shares of common stock in 2021 and 2020 were as follows:

follows:
Balance at January 1
Retirement of treasury shares
Balance at December 31		 Unit: Thousands of shares
2021
2020
187,262
192,262
-
(5,000)
187,262
187,262
187,262
  1. Capital surplus

The Company’s capital surplus was as follows:

Paid-in capital in excess of par value
Adjustments arising from changes in
percentage of ownership in subsidiaries		 2021.12.31
$ 1,006,236
4,780		 2020.12.31

1,006,236

4,780

1,011,016

$
1,011,016

Pursuant to the Company Act, any realized capital surplus is initially used to cover accumulated deficit, and the balance, if any, can be transferred to common stock as stock dividends or distributed by cash based on the original shareholding percentage. Realized capital surplus includes the premium derived from the issuance of shares of stock in excess of par value and donations received by the Company. In accordance with the “Regulations Governing the Offering and Issuance of Securities by Securities Issuers”, distribution of stock dividends from capital surplus in each year shall not exceed 10% of paid-in capital.

3. Retained earnings

The Company's Articles of Incorporation stipulate that at least 10% of annual net income, after deducting tax and accumulated deficit, if any, must be retained as legal reserve until such retention equals the amount of paid-in capital. In addition, a special reserve shall be set aside in accordance with applicable laws and regulations. The remaining balance, along with the unappropriated earnings from the previous years, can be distributed as dividends to stockholders after the shareholders’ meeting approves the distribution plan submitted by the Board of

198

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

Directors.

As per the dividend policy set forth in the Company's Articles of Incorporation, the Company's dividend policy is based on the assessment of the Company's future capital budget, planning of future capital requirements, financial structure and earnings, etc. The Board of Directors shall prepare a proposal for the distribution of earnings, which shall be approved by the shareholders' meeting. As the Company is in a stable growth stage in its business life cycle, under the trend of concentration in the industry, in order to continue to expand its scale for sustainable operation and stable growth, the residual dividend policy is adopted. Future earnings will be distributed in the form of stock dividends or cash dividends as appropriate depending on the Company's operating performance, and cash dividends distributed shall not be lower than 5% of the total dividend distribution.

  • (1) Legal reserve

If the Company has no accumulated deficit, it may, subject to a resolution approved by the shareholders’ meeting, distribute its legal reserve by issuing new shares or distributing cash for the portion of legal reserve which exceeds 25% of the paid-in capital.

  • (2) Special reserve

Pursuant to the Ruling issued by the FSC, a special reserve equal to the total amount of items that are accounted for as deductions from other stockholders’ equity shall be set aside from current and prior year earnings. If it is the deduction amount of other shareholders' equity accumulated in the previous period, the special reserve of the same amount shall not be distributed from the undistributed earnings of the previous period. When the amount of the deduction of shareholders' equity is reversed subsequently, the reversed amount can be included in the distributable earnings.

  • (3) Earning distribution

On July 20, 2021 and June 16, 2020, the Company's shareholders’ meeting resolved on the distribution of earnings for the years ended December 31, 2020 and 2019, and the amount of dividends distributed to shareholders was as follows:

Cash dividend distributed to the
shareholders of common stock		 2020

In addition, on June 16, 2020, the shareholders' meeting of the Company resolved to distribute the capital surplus of NT$96,131 thousand in cash, at NT$0.5 per share.

199

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

On March 18, 2022, the shareholders’ meeting resolved on the distribution of earnings for the year ended December 31, 2021, and the amount of dividends distributed to shareholders was as follows:

2021

Cash dividend distributed to the shareholders of common stock $ 617,964

Information related to earning distribution approved and resolved by the Company's Board of Directors and shareholders’ meeting is available on the Market Observation Post System website of the Taiwan Stock Exchange.

  1. Treasury stock

As resolved by the Board of Directors on March 19, 2020, the Company planed to purchase 5,000 thousand shares of its common stock from March 20, 2020 to May 19, 2020 in order to maintain the Company's credit and shareholders’ right at the price range between NT$15 to NT$25 per share. The Company purchased back 5,000 thousand shares of common stock from March 23, 2020 to May 5, 2020 at the average price of NT$20.20 per share with total amount of NT$101,003 thousand. The Company's Board of Directors resolved that June 25, 2020 was the capital reduction effective date and related statutory registration has been completed.

200

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

5. Other equity items (net after tax)

Balance as of January 1, 2021
Exchange differences on
translation of financial
statements of foreign
operations
Share of other comprehensive
income (losses) of associates
and joint ventures under equity
method
Unrealized gains (losses) on
investments in equity
instruments at fair value
through other comprehensive
income
Disposal of equity instruments at
fair value through other
comprehensive income
Balance as of December 31, 2021
Balance as of January 1, 2020
Exchange differences on
translation of financial
statements of foreign
operations
Share of other comprehensive
income (losses) of associates
and joint ventures under equity
method
Unrealized gains (losses) on
investments in equity
instruments at fair value
through other comprehensive
income
Share of other comprehensive
income (losses) of subsidiaries,
associates and joint ventures
under equity method
Disposal of equity instruments at
fair value through other
comprehensive income
Balance as of December 31, 2020		 Exchange
differences on
translation of
financial statements
of foreign operations
$ (89,678)
(27,216)
(809)
-
-		 Unrealized gains
(losses) on financial
assets at fair value
through other
comprehensive
income
5,004,114
-
-
1,854,340
(658,165)		 Total
4,914,436
(27,216)
(809)
1,854,340
(658,165)
$
(117,703)		 6,200,289 6,082,586

$ (116,514)
28,236
(1,400)
-
-
-
3,199,064
-
-
2,044,026
50,801
(289,777)
3,082,550
28,236
(1,400)
2,044,026
50,801
(289,777)
$
(89,678)		 5,004,114 4,914,436

201

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

(XX) Earnings per Share

Basic earnings per share:
Net income attributable to the ordinary
shareholders of the Company
Weight-average number of ordinary shares
outstanding
Basic earnings per share (Unit: In New Taiwan
Dollars)
Diluted earnings per share:
Net income attributable to the ordinary
shareholders of the Company
Weight-average number of ordinary shares
outstanding
Employee compensation
Weight-average number of ordinary shares
outstanding
Diluted earnings per share (Unit: In New
Taiwan Dollars)
(XXI)
Revenue from contracts with customers
1. Breakdown of revenue
Primary geographical markets:
Taiwan
China
U.S.A.
Germany
Other countries
Major product/service line:
Sales of power supply
2. Contract balance
2021.12.31
Notes and accounts
receivable (including
related parties)
$ 3,380,369
Less: Loss allowances
(32,806)
Total
$
3,347,563
Contract liabilities
(recognized in other
current liabilities)
$
41,625		 Basic earnings per share:
Net income attributable to the ordinary
shareholders of the Company
Weight-average number of ordinary shares
outstanding
Basic earnings per share (Unit: In New Taiwan
Dollars)
Diluted earnings per share:
Net income attributable to the ordinary
shareholders of the Company
Weight-average number of ordinary shares
outstanding
Employee compensation
Weight-average number of ordinary shares
outstanding
Diluted earnings per share (Unit: In New
Taiwan Dollars)
(XXI)
Revenue from contracts with customers
1. Breakdown of revenue
Primary geographical markets:
Taiwan
China
U.S.A.
Germany
Other countries
Major product/service line:
Sales of power supply
2. Contract balance
2021.12.31
Notes and accounts
receivable (including
related parties)
$ 3,380,369
Less: Loss allowances
(32,806)
Total
$
3,347,563
Contract liabilities
(recognized in other
current liabilities)
$
41,625		 Unit: Thousands of shares
2021
2020
$
754,082
669,314
187,262
188,632

$
4.03
3.55
$
754,082
669,314
187,262
188,632
1,627
1,373
188,889
190,005
$
3.99
3.52
2021
2020
$ 3,082,102
2,321,157
3,181,832
3,207,349
1,535,740
1,305,495
2,161,664
1,924,441
2,358,495
2,114,576
$
12,319,833
10,873,018
$
12,319,833
10,873,018
2020.12.31
2020.1.1

3,012,769
3,021,417

(29,810)
(29,149)

2,982,959
2,992,268

33,487
34,952

187,262


$
4.03
$
754,082

187,262
1,627

188,889

$
3.99
2021
$ 3,082,102
3,181,832
1,535,740
2,161,664
2,358,495

$
12,319,833

$
12,319,833

2020.12.31

3,012,769

(29,810)
$ 3,380,369
(32,806)

$
3,347,563


2,982,959

$
41,625


33,487

202

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

The amount of revenue recognized in 2021 and 2020 that was included in the contract liability balance at January 1, 2021 and 2020, was NT$9,217 thousand and NT$8,665 thousand, respectively.

Please refer to Note VI(V) for notes receivable, accounts receivable and related impairment.

(XXII) Remuneration of Employees and Directors

The Company's Articles of Incorporation stipulate that a minimum of 6% of annual profit, if any, shall be allocated to employee remuneration and a maximum of 3% of annual profit shall be allocated to Directors’ remuneration. However, if the Company has accumulated losses, the Company shall set aside a part of the surplus profit first for making up the losses. Employees who are entitled to receive the employee remuneration in shares or cash include the employees of subsidiaries of the Company who meet certain specific requirements.

For the years ended December 31, 2021 and 2020, the Company accrued its remuneration to employees amounting to NT$65,000 thousand and NT$50,000 thousand, respectively, and the remuneration for Directors of NT$7,000 thousand and NT$5,600 thousand, respectively. The said amounts, which were recognized as operating expenses in 2021 and 2020, were calculated based on pre-tax net profit for each year before deducting the amount of the remuneration to employees and Directors, multiplied by the distribution percentage specified in the Company's Articles of Incorporation. The difference between accrual and actual payment is treated as the change in accounting estimate and recognized in profit or loss in the following year. There was no difference between the amount of the remuneration to employees and Directors resolved by the Board of Directors and the accrual amount recognized in the Parent Company Only Financial Statements for the years ended December 31, 2021 and 2020. Information related to remuneration to employees and Directors resolved by the Board of Directors is available on the Market Observation Post System website of Taiwan Stock Exchange.

  • (XXIII) Non-operating income and expenses

  • Interest income

Bank deposits

2021
$
2,375		 2020

7,358

203

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

2. Other income
Gains on bargain purchase
Dividend income
Other income
Government grant
Rent concessions reclassified to revenue
Income of management fee / service fee
Others
3. Other gains and losses
Foreign currency exchange loss
Gain on financial assets measured at fair
value through profit or loss
Loss on disposal of property, plant and
equipment
Gains on lease modifications
4. Finance costs
Interest expense:
Bank borrowings
Lease liabilities
Others		 2021
$ 2,523
122,933
1,006
-
6,733
15,130		 2020
-
107,452
310
66
7,099
8,860
123,787
2020
(63,754)
13,224
(58)
-
(50,588)
2020

1,091

1,096

63

2,250

$
148,325

2021
$ (12,846)
12,910
(656)
80
$
(512)

2021
$ 2,626
980
261
$
3,867

(XXIV) Financial instruments

1. Credit risk

  • (1) Exposure to credit risk

The maximum exposure to credit risk is equal to the carrying amount of the financial assets.

  • (2) Concentration of credit risk

As of December 31, 2021 and 2020, top three customers accounted for 31%

of the Company's accounts receivable balance.

204

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  • (3) Credit risk from receivables and debt securities

Please refer to Note VI(V) for credit risk exposure of notes receivable and accounts receivable. For the details of other receivables, please refer to Note VI(VI). Other financial assets measured at amortized cost include other receivables and corporate bonds. Above-mentioned financial assets are considered low credit risk financial assets, and the loss allowance is measured using 12-month expected credit loss.

  1. Liquidity risk

The Company manages and maintains sufficient cash and cash equivalents to support the Company's operations and mitigate the impact of cash flow fluctuations. The management of the Company supervises the use of the credit line and ensures compliance with the terms of the loan contracts.

The table below shows the contractual maturity dates for financial liabilities, including the effect of estimated interest.

December 31, 2021
Non-derivative
financial liabilities
Long-term loans
Notes payable
Accounts payable
Accounts payable
related parties
Other payables
Other payables -
related parties
Lease liabilities
December 31, 2020
Non-derivative
financial liabilities
Long-term loans
Notes payable
Accounts payable
Accounts payable
related parties
Other payables
Other payables -
related parties
Lease liabilities		 Carrying
amount		 Contractu
al cash
flows		 Within 6
months		 6 to 12
months		 1-2 years 2-5 years Over 5
years

-
-
-
-
-
-

42,512
$ 272,348
14,445
3,417,288
-
330,210
825,993
47,611
52,279
280,391

14,445

3,417,288

330,210

825,993

47,611

60,556
37,791

14,445

3,417,288

330,210

825,993

47,611

1,989
38,953

-

-

-

-

-

1,943
77,529
-
-
-
-
-

3,706
126,118
-
-
-
-
-

10,406

$ 4,960,174


4,976,494


4,675,327


40,896


81,235


136,524


42,512

$ 108,453
15,001
3,460,547
-
323,444
609,379
41,852
58,883


112,956

15,001

3,460,547

323,444

609,379

41,852

68,136


360

15,001

3,460,547

323,444

609,379

41,852

3,640


11,909

-

-

-

-

-

3,607


28,332
-
-
-
-
-

4,530


72,355
-
-
-
-
-

10,385


-
-
-
-
-
-

45,974

$ 4,617,559


4,631,315


4,454,223


15,516


32,862


82,740


45,974

The Company does not expect that the cash flows included in the maturity analysis will occur significantly earlier or at significantly different amounts.

205

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

3. Foreign exchange risk

  • (1) Exposure to foreign exchange risk

The Company's financial assets and liabilities exposed to significant foreign

currency exchange risk were as follows:

F inancial assets
Monetary items
RMB
USD
Non-monetary
items
USD
USD
HKD
inancial liabilities
Monetary items
RMB
USD
HKD		 **2021.12.31 ** **2020.12.31 ** NTD

625,198

4,126,154

67,232

27,426

19,344

501,363

3,337,657

45,042
Foreign
currencies		 Exchange
Rate		 NTD Foreign
currencies		 Exchange
Rate
$ 148,772
142,279
2,534
1,080
5,104
104,427
119,810
12,417
4.344

27.680

28.268

27.680

3.549

4.344

27.680

3.549
646,266

3,938,283

71,632

29,894

18,118

453,631

3,316,341

44,068
142,837

144,879

2,361

963

5,271

114,545

117,193

12,263
4.377

28.480

28.476

28.480

3.670

4.377

28.480

3.673







F



  • (2) Sensitivity analysis

The Company's exposure to foreign exchange risk arises from cash and cash equivalents, accounts receivable (including related parties), other receivables, financial assets measured at amortized cost, financial assets measured at fair value through profit or loss, non-current financial assets measured at fair value through other comprehensive income, accounts payable (including related parties) and other payables that are denominated in foreign currencies and subject to foreign exchange loss in currency translation. As of December 31, 2021 and 2020, if the New Taiwan Dollar had depreciated or appreciated by 5% against the US Dollar, Renminbi, and Hong Kong Dollar with all other factors remaining unchanged, net income would have increased or decreased by NT$30,820 thousand and NT$34,692 thousand respectively in 2021 and 2020. The analysis of the two periods was conducted on the same basis.

  • (3) Foreign exchange gain (loss) on monetary items

The information regarding foreign exchange gain or loss (including realized and unrealized) on monetary items translated into the functional currencies is as follows:

NTD 2021
Foreign
exchange
gain (loss)
Average
exchange
rate
$ (12,846)
-		 2020 2020
Foreign
exchange
gain (loss)
$ (12,846)		 Foreign
exchange
gain (loss)
(63,754)		 Average
exchange
rate

-

206

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  1. Market risk

If the prices of equity securities with active market quotations at the reporting date had changed (using the same basis for both periods and assuming no change in other variables), the impact on the comprehensive income would have been as follows:

follows:
Security price
at the reporting
date
Increase by 5%
Decrease by 5%		 2021 Pre-tax
income

-		 2020 Pre-tax
income
-
Other
comprehensive
income (pre-
tax)
$
332,024		 Other
comprehensive
income (pre-
tax)
260,901
(260,901)

$
(332,024)

-		 -

Please refer to Note VI(IV) “Measurement of the fair value of Level 3, the sensitivity analysis of the fair value using reasonably possible alternative assumptions”for details of the price changes of the Level 3 equity securities.

  1. Interest rate analysis

The Company's demand deposits and time deposits are subject to floating interest rates. However, changes in market interest rates are not significant and thus changes in interest rates do not give rise to significant cash flow risk.

  1. Fair value information

  2. (1) Category of financial instruments and their fair value Company's financial instruments measured at fair value on a recurring basis include the financial assets at fair value through profit or loss and the financial assets at fair value through other comprehensive income. Carrying amount and fair value of various financial assets and financial liabilities (including fair value level information, except for financial instruments whose carrying amount is a reasonable approximation of fair value, and lease liabilities which are not required to disclose their fair value information) were as follows:

207

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

Financial assets at fair value
through profit or loss
Beneficiary certificates
Private equity funds
Non-publicly quoted equity
instruments measured at fair
value
Subtotal
Financial assets at fair value
through other comprehensive
income
Domestic listed stock
Foreign listed stock
Non-publicly quoted equity
instruments measured at fair
value
Subtotal
Financial assets at amortized cost
Corporate bond
Cash and cash equivalents
Notes receivable and accounts
receivable
Other receivables
Restricted bank deposits
(classified in other non-
current assets)
Refundable deposits (classified
in other non-current assets)
Subtotal
Total
Financial liabilities measured at
amortized cost
Bank borrowings
Notes payable and accounts
payable
Other payables
Lease liabilities
Total		 2021.12.31 2021.12.31 2021.12.31 Total
232,758
12,000
71,632
Carrying
amount
$ 232,758
12,000
71,632		 Fair value
Level 1
232,758
-
-		 Level 2
-
-
-		 Level 3
-
12,000
71,632






316,390		 232,758 -
83,632
316,390

$ 6,622,359
18,118
96,167
6,736,644
6,622,359
18,118
-		 -
-
-
-
-
96,167
96,167
6,622,359
18,118
96,167
6,640,477 -
6,736,644

10,800
1,683,746
3,347,563
57,448
100
3,284
-
-
-
-
-
-		 -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

5,102,941		 - - - -

$ 12,155,975		 6,873,235 - 179,799 7,053,034

$ 272,348
3,761,943
873,604
52,279
-
-
-
-		 -
-
-
-
-
-
-
-
-
-
-
-

$ 4,960,174		 - - - -

208

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

Financial assets at fair value
through profit or loss
Beneficiary certificates
Non-publicly quoted equity
instruments measured at fair
value
Subtotal
Financial assets at fair value
through other comprehensive
income
Domestic listed stock
Foreign listed stock
Non-publicly quoted equity
instruments measured at fair
value
Subtotal
Financial assets at amortized cost
Cash and cash equivalents
Notes receivable and accounts
receivable
Other receivables
Restricted bank deposits
(classified in other non-
current assets)
Refundable deposits (classified
in other non-current assets)
Subtotal
Total
Financial liabilities measured at
amortized cost
Bank borrowings
Notes payable and accounts
payable
Other payables
Lease liabilities
Total		 2020.12.31
Carrying
amount		 Fair value
Level 1 Level 2 Level 3 Total
$ 210,388
67,232
277,620
$ 5,198,671
19,344
28,667
5,246,682
1,961,278
2,982,959
69,631
100
4,787
5,018,755
$ 10,543,057
$ 108,453
3,798,992
651,231
58,883
$ 4,617,559		 210,388
-
210,388
5,198,671
19,344
-
5,218,015
-
-
-
-
-
-
5,428,403
-
-
-
-
-		 -
-

-
-
-
-

-
-
-
-
-
-

-
-
-
-
-
-
-		 -
67,232
67,232
-
-
28,667
28,667
-
-
-
-
-
-
95,899
-
-
-
-
-		 210,388
67,232
277,620
5,198,671
19,344
28,667
5,246,682
-
-
-
-
-
-
5,524,302
-
-
-
-
-

209

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  • (2) Valuation techniques for financial instruments measured at fair value - non-derivative financial instruments

If there is an active market for a financial instrument, the fair value is based on the quoted price in the active market. The market prices announced by major exchanges are the basis for the fair value of listed (over-the-counter) equity instruments and debt instruments that are publicly quoted in the active market.

A financial instrument has an active market for public quotations if public quotations can be obtained from an exchange, broker, underwriter, industry association, pricing service agencies or competent authority in a timely manner and on a regular basis, and if the price fairly represents actual and frequent market transactions. If the above conditions are not met, the market is deemed inactive. Generally speaking, a large bid-ask spread, a significant increase in the bid-ask spread, or a low volume of transactions are all indicators of an inactive market.

Among the financial instruments held by the Company, the listed stocks and beneficiary certificates are financial assets with standard terms and conditions that are traded in the active market, and their fair values are determined with reference to quoted market prices.

Except for the above-mentioned financial instruments with active markets, the fair values of the remaining financial instruments are obtained using valuation techniques or by referencing to quoted prices from counterparties. The fair value of financial instruments measured by using valuation techniques can refer 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 Balance Sheets date.

The fair value of financial instruments held by the Company that are not publicly quoted equity instruments with no active market is estimated using the market comparable company method. The key assumptions of the market comparable company method are based on the earnings or equity net worth multiplier derived from the quoted market prices of comparable listed companies. This estimate of the equity securities has been adjusted for the effect of lack of market liquidity.

210

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  • (3) Quantitative information of significant unobservable inputs (Level 3) relating to fair value measurement

The Level 3 of fair value measurements mainly includes financial assets measured at fair value through profit or loss - investments in equity securities, investments in private equity funds and financial assets measured at fair value through other comprehensive income.

The Company's equity instrument investment with no active market has multiple significant unobservable inputs. Significant unobservable inputs for investments in equity instruments with no active market are not correlated with each other because they are independent of each other.

Table of quantitative information of significant unobservable inputs is provided below:

Item
Financial assets measured
at fair value through profit
or loss - Investment in
equity instrument without
an active market
Financial assets measured
at fair value through profit
or loss - private equity
fund investment
Financial assets measured
at fair value through other
comprehensive income -
Investment in equity
instrument without an
active market		 Valuation
technique
Comparable
company
valuation method
Net assets value
method
Comparable
company
valuation method		 Significant
unobservable inputs

Net worth multiple
(2.59 and 1.94 for the
years ended
December 31, 2021
and 2020)

Discount for lack of
market liquidity
(29.39% as of
December 31, 2021
and 2020)

Net asset value

Net worth multiple
(2.40-5.42 and 6.81
for the years ended
December 31, 2021
and 2020)

P/E ratio multiple
(29.67 for the year
ended December 31,
2021)

Discount for lack of
market liquidity
(29.39% as of
December 31, 2021
and 2020)		 Relationship between
significant
unobservable inputs
and fair value


The higher the
multiple, the
higher the fair
value

The higher the
discount for lack
of market
liquidity, the
lower the fair
value

The higher the net
assets value, the
higher the fair
value

The higher the
multiple, the
higher the fair
value

The higher the
discount for lack
of market
liquidity, the
lower the fair
value

211

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  • (4) Fair value measurement in Level 3 - sensitivity analysis of reasonably possible alternative assumptions

The Company's measurement on the fair value of financial instruments is considered reasonable. However, the fair value may change if different valuation models or inputs are used. For financial instruments classified in Level 3, changing the valuation assumptions would have the following effects on other comprehensive income:

December 31, 2021
Financial assets at fair value
through profit or loss
Investment in equity
instrument without an
active market
Financial assets at fair value
through other comprehensive
income
Investment in equity
instrument without an
active market
Investment in equity
instrument without an
active market
Investment in equity
instrument without an
active market
December 31, 2020
Financial assets at fair value
through profit or loss
Investment in equity
instrument without an
active market
Financial assets at fair value
through other comprehensive
income
Investment in equity
instrument without an
active market		 Input Upward
or
downward
**change **		 Fair value change
reflected in current profit
or loss		 Fair value change
reflected in current profit
or loss		 Fair value change
reflected in other
comprehensive income		 Fair value change
reflected in other
comprehensive income
Favorable
change		 Unfavorable
change		 Favorable
change		 Unfavorable
change
Net worth
ratio
Net worth
ratio
Net worth
ratio
Price-to-
earnings
ratio
Net worth
ratio
Net worth
ratio		 5％
5%
5%
5%
5%
5%		 4,363
-
-
-
3,362
-		 (4,363)
-
-
-
(3,362)
-		 -
3,234
347
475
-
1,433		 -
(3,234)
(347)
(475)
-
(1,433)

The favorable and unfavorable effects represent the changes in fair value, which is based on a variety of unobservable inputs calculated using the valuation technique. If the fair value of a financial instrument is subject to more than one input, the analysis above reflects only the effect of the change in a single input and does not consider the interrelationship between inputs.

212

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  • (XXV) Financial risk management

  • Overview

The Company is exposed to the following risks arising from financial instruments:

  • (1) Credit risk

  • (2) Liquidity risk

  • (3) Market risk

In this Note, the Company has disclosed the information on exposure to the aforementioned risks, and the Company’s objectives, policies and procedures to measure and manage these risks.

  1. Risk management framework

The Board of Directors is responsible for developing and overseeing the Company's risk management framework.

The Company's risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, to monitor the risk and to manage the exposure within the risk limits. Risk management policies and systems are reviewed on a regular basis to reflect the changes in market conditions and the Company's operations. The Company develops a disciplined and constructive control environment through training, management guidelines and operating procedures so that all employees understand their roles and responsibilities.

  1. Credit risk

Credit risk refers to the risk of financial loss to the Company resulting from the failure of a customer or counterparty of a financial instrument to meet their contractual obligations, and arises primarily from the Company's accounts receivable and security investment.

  • (1) Accounts receivable and other receivables The Company's customers are concentrated in a wide range of power supply-related industries. To mitigate the credit risk of accounts receivable, the Company continuously evaluates the financial position of customers and purchases insurance for the accounts receivable of customers in highrisk areas or with special characteristics to reduce the Company's accounts receivable risk. The Company regularly evaluates the possibility of receivables collection and makes provision for bad debts accordingly; overall, management is able to effectively manage the risk of accounts receivable.

213

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

The Company has established the credit policy under which it is required to analyze the credit rating of each new customer individually before granting standard payment and delivery terms and conditions. Purchasing limits are established for each individual customer and limits are reviewed periodically. Customers who do not meet the requirement of credit rating can only trade with the Company on an prepayment basis.

  • (2) Investment

The credit risk of bank deposits, fixed income investments and other financial instruments is measured and monitored by the financial department of the Company. Since the counterparties of transactions and obligations of the Company are banks with good credit standing, and financial institutions, corporate and government with investment grade and above, default risk is limited and hence there is no significant credit risk.

(3) Guarantee

It is the policy of the Company to provide financial guarantees only to wholly owned subsidiaries. As of December 31, 2021 and 2020, the Company did not provide any guarantee.

  1. Liquidity risk

Liquidity risk is the risk that the Company encounters difficulty in settling its financial liabilities by delivering cash or other financial assets and fails to fulfill its related obligations. The Company manages its liquidity by ensuring that the Company has sufficient liquidity to meet its liabilities as they fall due under normal and stressful circumstances without incurring unacceptable losses or damaging the Company's reputation.

The Company ensures that it has sufficient cash to meet all contractual obligations. In addition, the Company had unused facilities in the amount of NT$678,500 thousand and NT$1,068,680 thousand as of December 31, 2021 and 2020, respectively.

  1. Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity prices, will affect the Company's income or the value of its financial instruments. The objective of market risk management is to manage and control market risk exposure within acceptable level, while optimizing the return of investment.

214

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  • (1) Foreign exchange risk

The Company is exposed to foreign exchange risk on sales, procurement and loans that are denominated in a currency other than the functional currencies of the Company. Company's functional currencies mainly include New Taiwan Dollar. The currencies used in these transactions are mainly New Taiwan Dollar, Hong Kong Dollar, US Dollar and Renminbi.

There is no significant difference or significant change in the receivables and payables of the Company, so the Company currently adopts natural hedge as the main exchange rate hedging policy to mitigate the risk.

  • (2) Interest rate risk

The Company’s financial assets exposed to the risk of fair value change arising from interest rate changes are bank deposits, but the impact of changes in interest rates on the fair value of the related financial assets is not significant.

  • (3) Other market price risk

Company's current financial assets at fair value through profit or loss and non-current financial assets at fair value through other comprehensive income mainly consist of investment in domestic funds, private equity funds, listed stocks, foreign listed stocks and foreign unlisted stocks. Because they are measured at fair value, the Company is exposed to the risk of changes in the market price of equity securities. In order to manage market risk, the Company selects investment targets carefully and controls its position in order to mitigate the market risk.

(XXVI) Capital management

It is the policy of the Board of Directors to maintain a sound capital base to sustain the confidence of investors, creditors and the market and to support the development of future operations. Capital consists of the Company's share capital, capital surplus, retained earnings, other equity. The Board of Directors is responsible for controlling the debt-to-equity ratio and the level of common stock dividends.

As of December 31, 2021 and 2020, debt-to-equity ratio was as follows:

Total Liabilities
Less: cash and cash equivalents
Net liability
Equity
Debt-to-equity ratio		 2021.12.31
$ 5,335,719
(1,683,746)		 2021.12.31
$ 5,335,719
(1,683,746)		 2020.12.31
4,950,050
(1,961,278)
2,988,772
11,184,816
26.72%

$
3,651,973

$
13,208,961

27.65%

As of December 31, 2021, there was no material change in the Company's capital

215

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

management.

(XXVII)Investing and financing activities not affecting cash flows

The reconciliation of liabilities arising from financing activities in 2021 and 2020 was as follows:

Long-term loans
Lease liabilities
Total liabilities from
financing activities
Long-term loans
Lease liabilities
Total liabilities from
financing activities		 2021.1.1 Cash flows
from:

163,895

(5,087)		 Non-cash changes
Addition
Disposal
and
obsolescence
Changes
in foreign
exchange
rate
Changes
in lease
payment

-
-
-
-

716
(2,233)
-
-

716
(2,233)
-
-
Non-cash changes
Addition
Disposal
and
obsolescence
Changes
in foreign
exchange
rate
Changes
in lease
payment

-
-
-
-

394
(197)
-
-

394
(197)
-
-		 Non-cash changes
Addition
Disposal
and
obsolescence
Changes
in foreign
exchange
rate
Changes
in lease
payment

-
-
-
-

716
(2,233)
-
-

716
(2,233)
-
-
Non-cash changes
Addition
Disposal
and
obsolescence
Changes
in foreign
exchange
rate
Changes
in lease
payment

-
-
-
-

394
(197)
-
-

394
(197)
-
-		 Non-cash changes
Addition
Disposal
and
obsolescence
Changes
in foreign
exchange
rate
Changes
in lease
payment

-
-
-
-

716
(2,233)
-
-

716
(2,233)
-
-
Non-cash changes
Addition
Disposal
and
obsolescence
Changes
in foreign
exchange
rate
Changes
in lease
payment

-
-
-
-

394
(197)
-
-

394
(197)
-
-		 Non-cash changes
Addition
Disposal
and
obsolescence
Changes
in foreign
exchange
rate
Changes
in lease
payment

-
-
-
-

716
(2,233)
-
-

716
(2,233)
-
-
Non-cash changes
Addition
Disposal
and
obsolescence
Changes
in foreign
exchange
rate
Changes
in lease
payment

-
-
-
-

394
(197)
-
-

394
(197)
-
-		 2021.12.31
272,348
52,279
Changes
in foreign
exchange
rate
-

-		 Changes
in lease
payment
-
-		 Others
-
-
$ 108,453
58,883		 -
(2,233)

$
167,336


158,808
(2,233)

-		 - -
324,627

2020.1.1

Cash flows
from:
108,076

(6,469)
Non-cash changes
2020.12.31

108,453
58,883
Changes
in foreign
exchange
rate
-

-		 Changes
in lease
payment
-
-		 Others
377
-
$ -
65,155		 -
(197)

$
65,155


101,607
(197)

-		 - 377

167,336

VII. Related Party Transactions

  • (I) Related party name and relationship

Related parties that had transactions with the Company during the reporting periods were listed below:

Related Party

FSP Group USA Corp. Sparkle Power Inc.

Amacrox Technology Inc. (“Amacrox”)

Voltronic Power Technology Corp. Fortron/Source (Europa) GmbH FSP(GB) Ltd. FSP North America FSP Power Solution GmbH 3Y Power Exchange FSP International Inc. (BVI) FSP Group Inc.

Amacrox Technology Co., Ltd. (BVI) Power Electronics Co., Ltd. (BVI) FSP Technology Inc. (BVI) Harmony Trading (HK) Ltd. FSP Technology USA Inc. FSP Turkey Dis Tic.Ltd.Sti. FSP International (HK) Ltd.

Relationship with the Company

Associate of the Company

The entity's Chairman is the second-degree relatives of the Chairman of the Company The entity's Chairman is the second-degree relatives of the Chairman of the Company Substantive related party Substantive related party Substantive related party Substantive related party Substantive related party Substantive related party Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company

216

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

Relationship with the Company

Related Party Proteck Electronics (Samoa) Corp. Subsidiary of the Company Luckyield Co., Ltd. Subsidiary of the Company Famous Holding Ltd. Subsidiary of the Company Amacrox GmbH Subsidiary of the Company Proteck Power North America, Inc. Subsidiary of the Company 3Y Power Technology Inc. Subsidiary of the Company 3Y Power Technology (TAIWAN) Subsidiary of the Company

3Y Power Technology (TAIWAN) Inc. (“3Y Power”)

FSP-C R&D Center (“FSP Jiangsu”) Subsidiary of the Company Shenzhen Huili Electronic Co., Ltd. Subsidiary of the Company (“Huili”)

Dongguan Protek Electronics Corp. Zhonghan Electronics Shenzhen Co., Ltd.

WUXI SPI Technology Co., Ltd. (“WUXI SPI”) Wuxi Zhonghan Technology Co., Ltd. Haohan Electronic Technology (Ji'an) Co., Ltd.

Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company

Shenzhen Zhong Han Science & Tech. Subsidiary of the Company Co., Ltd. Wuxi Xiangyuan Electronics Co., Ltd. Subsidiary of the Company Li, Hung-Neng Director of the Company

  • (II) Significant related party transactions

  • Operating revenue

Significant sales amount to related parties was as follows:

Subsidiary
Associate
Other related party		 2021
$ 584,271
57,170
2,133,125		 2020

463,680

67,381

1,818,841

2,349,902

$
2,774,566

The prices and credit terms of the Company's sales to the above related parties were not significantly different from those of its regular customers.

217

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  1. Purchases

The amounts of goods purchased from related parties, raw materials purchased by

related parties on behalf of the Company and processing of products were as follows:

Subsidiary
Other related party		 2021
$ 1,935,359
210,723		 2020

1,920,517

180,020

2,100,537

$
2,146,082

The Company did not purchase similar products from other manufacturers, so there was no transaction price from regular manufacturers for comparison. The payment terms were not significantly different from those of regular manufacturers except that the payment term for some subsidiaries was 5 days after the monthly settlement.

3. Receivables from related parties

The details of the receivables and prepayment of the Company arising from sales transactions and business needs were as follows:

Accounting Subject Related party
category/name		 2021.12.31
$ 250,520
15,710
719,115		 2020.12.31

195,961

32,561

520,726
Accounts receivable
Accounts receivable
Accounts receivable
Other receivables
Other receivables
Other receivables		 Subsidiary
Associate
Other related party
Subsidiary
Famous Holding
Ltd.
FSP Jiangsu
Others
Associate
Other related party
FSP Power Solution
GmbH
Others

985,345


749,248

8,307
258
10,756
680
7,297
13,670


8,312

10,028

7,468

447

11,960

11,450

40,968


49,665

$
1,026,313


798,913

As of December 31, 2021 and 2020, loss allowance for the above accounts receivable was recognized based on the expected credit loss rate. As of December 31, 2021 and 2020, there was no loss allowance recognized for other receivables.

218

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  1. Payable and prepayment to related parties

Accounts payable and prepayment arising from purchases of goods and raw materials and processing of products:

Accounting Subject Related party
category/name		 2021.12.31
$ 240,186
90,024		 2020.12.31

243,440

80,004
Accounts payable
Accounts payable
Other payables
Prepayments		 Subsidiary
Other related party
Subsidiary
WUXI SPI

330,210


323,444

14,829


13,382

$
345,039


336,826

$
7,383


-
  1. Service from related party

The Company entered into a billing management service contract with 3Y Power, a subsidiary of the Company, to provide management guidance on the establishment of related departments, application systems and professional information services to 3Y Power at an annual cost of US$240 thousand. The Company also provides machinery and equipment services to 3Y Power.

The breakdown of the above income from the provision of management and equipment services to 3Y Power is as follows:

equipment services to 3Y Power is as follows:
Income from management service
Income from machinery and equipment
service		 2021
$ 6,733
616		 2020
7,099
648
7,747
$
7,349

The details of technical service fees, labor costs and commissions paid by the Company to the related parties are as follows:

Subsidiary
FSP Technology USA Inc.
Others
Associate
FSP Group USA Corp.
Other related party
Amacrox
Sparkle Power Inc.
Others		 2021
$ 4,966
2,174
8,933
8,496
4,665
5,855		 2020

7,071

1,507

10,515

6,830

5,360

3,628

34,911

$
35,089

219

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

The Company recognized the following payables to related parties and advance receipts (recorded as other current liabilities and other non-current liabilities) as a result of the above transactions:

Accounting Subject Related party
category/name		 2021.12.31
$ 25,601
574
6,607		 2020.12.31

18,331

658

9,481
Other payables
Other payables
Other payables
Other current
liabilities
Other non-current
liabilities		 Subsidiary
Associate
Other related party
Subsidiary
3Y Power
Subsidiary
3Y Power

32,782


28,470

620
2,014


620

2,630

$
35,416


31,720

  1. Leases

    • In 2020, the Company leased an office building from the Director of the Company and entered into a three-year lease agreement with reference to the rental rate of offices in the neighboring areas, with a total contract amount of NT$2,800 thousand. The interest expense recognized in the year ended December 31, 2020 was NT$260 thousand and the balance of lease liabilities as of December 31, 2020 was NT$14,386 thousand.

  2. (III) Compensation for key management personnel

Compensation for key management personnel

thousand.
Compensation for key management personnel
Compensation for key management personnel
Short-term employee benefits
Post-employment benefits		 2021
$ 57,163
596		 2020

52,776

527

53,303
$
57,759

220

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

VIII. Pledged Assets

The carrying amount of pledged assets for custom duty performance guarantee, and borrowings was as follows:

was as follows:
Assets Pledged to secure 2021.12.31
$ 100
161,077
186,447		 2020.12.31
100
161,077
96,509
257,686
Restricted time deposits
(recognized in other non-
current assets)
Land
Housing and Construction
Total		 Custom duty
performance
guarantee
Long-term and short-
term loan facilities
Short-term loan
facilities

$
347,624

IX. Significant Contingent Liabilities and Unrecognized Contract Commitments

  • (I) As of December 31, 2021 and 2020, the guarantee facilities extended by banks for customs and excise duties were NT$200,000 thousand, and utilized facilities were NT$60,000 thousand and NT10,000 thousand, respectively.

  • (II) The Company purchased products of Beyond Innovation Technology Co., Ltd. (hereinafter referred to as Beyond Innovation) through a distributor in Taiwan. O2 Micro International Limited (hereinafter referred to as O2), a competitor of Beyond Innovation, states that such products infringe upon its patent rights in the United States, and therefore filed a civil lawsuit against three companies including the Company in the Marshall Division, United States District Court for the Eastern District of Texas (hereinafter referred to as the United States District Court).

  • O2 withdrew all claims for monetary compensation against all defendants in the preceding civil lawsuit on April 24, 2006. The United States District Court subsequently rendered a first-instance judgment and injunction prohibiting the sale of the products to the United States on March 21, 2007. It also ruled that the attorneys' fees and litigation costs incurred in this lawsuit, totaling US$2,268,402.22, should be borne jointly by the Company, Beyond Innovation, and Lien Chang Electronic Enterprise Co., Ltd. After the defendants filed an appeal to the United States Court of Appeals for the Federal Circuit, the Federal Circuit issued a decision on April 3, 2008. It found the lower court's ruling, in which the defendants were found to be in violation of patent rights, did not meet requirements for legal proceedings and therefore reversed and remanded to the original court for retrial. As for the ruling regarding the litigation expenses, although it was not reviewed by the court of appeals, the reversal of the first-instance judgment means that the ruling has lost its basis and is therefore nullified.

After the case was remanded to the United States District Court, the Court only reviewed the lawsuit between O2 and Beyond Innovation, and rendered a judgment on September

221

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

27, 2010, which found that although Beyond Innovation had infringed upon O2's patent rights, the infringement was not based on malicious intent. Beyond Innovation later filed an appeal and the United States Court of Appeals for the Federal Circuit (CAFC) rejected Beyond Innovation's appeal and affirmed the decision of the lower court on November 18,2011.

The litigation between the Company and O2 was separated from the aforementioned litigation between O2 and Beyond Innovation on July 21, 2009. However, the Company has not yet received a notice of hearing from the US Court.

The Company was implicated by the use of Beyond Innovation's products, and after learning that Beyond Innovation's products involved in such disputes, the Company has switched to alternative materials that do not involve infringement disputes. According to the intellectual property right guarantee signed by the Company and Beyond Innovation, Beyond Innovation shall bear all liabilities, losses, damages, costs, or other expenses incurred by the Company as a result of the use of its products. As a result, Beyond Innovation shall bear the adjudication costs borne by the Company. Therefore, the attorneys' fees and litigation costs incurred in the above patent litigation do not have a significant impact on the Company's financial statements. The Company recognized the aforementioned expenses in as expenses for the year in which they occurred based on fiscal conservatism.

  • (III) The Company believes that since a ruling was rendered in the litigation between O2 and Beyond Innovation in the United States, the Company filed a civil lawsuit against Beyond Innovation based on the intellectual property rights guarantee provided by Beyond Innovation. The Company first requested the partial payment of the litigation costs and related expenses incurred by the O2 lawsuit in the United States in connection with the use of Beyond Innovation's products. However, on December 26, 2008, the Taiwan Taipei District Court rejected the claim for damages, and the Company did not agree with the rejection. On January 16, 2019, the Company filed an appeal to Taiwan High Court and obtained a judgment in its favor on November 27, 2019. However, Beyond Innovation filed an appeal to the Supreme Court on December 30, 2019, and the Company is still waiting for the final decision of the Supreme Court before enforcing the decision.

  • (IV) As of December 31, 2021 and 2020, the Company had entered into purchase agreements for property, plant and equipment amounting to NT$47,218 thousand and NT$168,935 thousand, respectively, and had paid NT$26,798 thousand and NT$76,452 thousand, respectively, which were recorded as construction in progress of property, plant and equipment as well as other non-current assets.

X. Significant Disaster Loss: None.

XI. Significant Events after the Balance Sheet Date: None.

222

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

XII. Others

XII. Others XII. Others XII. Others XII. Others XII. Others XII. Others XII. Others
A summary of employee benefits, depreciation, and amortization by function is provided below:
By function
By nature
2021		 2020
Operation
Costs		 Operation
Expenses		 Total Operation
Costs		 Operation
Expenses		 Total
Employee benefits
Salary expense
Insurance expense
Pension expense
Remuneration Paid to
Directors
Other employee benefit
expense
Depreciation expenses
Amortization expenses		 62,610
6,103
2,264
-

3,802
5,417
348
709,559

50,158

27,417
9,150

24,756

57,476

2,228		 772,169
56,261
29,681
9,150
28,558
62,893
2,576		 56,164
5,430
2,092
-
3,166
4,606
290		 647,300
46,362
25,263
7,390
24,302
58,164
970		 703,464
51,792
27,355
7,390
27,468
62,770
1,260

Information regarding the number of employee and employee benefit expenses as of December 31, 2021 and 2020 is as follows:

Number of Employees
Directors not in concurrent employment
Average employee benefits expense
Average employee salary expense
Average adjustment of employee salary
Supervisor's remuneration		 2021
762		 2021
762		 2020

759
7
7
$
1,174
1,077

$
1,023


935

9.41%
$
-
9.41%
-

The Company's compensation policy, including Directors, Supervisors, managers and employees, is as follows:

  • (I) Remuneration Paid to Directors

According to the Article 20 of the Company's Articles of Incorporation, if there is any profit in the year, no more than 3% shall be allocated as the Director's remuneration. The payment standard of transportation fee is in accordance with the regulations on the payment of remuneration for Directors and functional members, and the transportation fee is NT$5 thousand per person each time. If Director is also an employee, remuneration shall be paid in accordance with the provision of (3).

  • (II) Remuneration of Independent Directors

The Company's independent directors do not participate in the distribution of Directors' remuneration under Article 20 of the Company's Articles of Incorporation. However, the Company is required to pay each independent director a fixed quarterly compensation regardless of profit or loss. If an Independent Director resigns during the quarter, his or her remuneration shall be calculated proportionally based on the period of services in the quarter.

223

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  • (III) Remuneration of Managerial Officers

  • The remuneration of the Company's managers is based on the Company's "Manager Salary and Remuneration Management Regulations", taking into account the salary level of the position in the market, the scope of roles and responsibilities of the position in the Company and the contribution to the Company's business goals. The remuneration of the managers is reviewed by the Remuneration Committee and implemented after the approval by the Board of Directors. When determining reasonable remuneration, the Company considers its overall operating performance, future business risks, development trends of the industry, individual performance achievement and contribution to the Company's financial results. Manager's performance and reasonableness of the remuneration are reviewed by the Remuneration Committee and the Board of Directors, who will also revise the remuneration policy if deemed appropriate according to the actual operating conditions and relevant laws and regulations.

  • (IV) Remuneration of Employees

  • Employee salaries are determined in accordance with the Company's "Salary Management Guidelines" and with reference to average salary in the market and organizational structure. Employee salaries are adjusted in a timely manner according to market salary trends and government regulations. According to the Article 20 of the Company's Articles of Incorporation, the Company should allocate a minimum of 6% of annual profit, if any, to employee remuneration. But if there is any accumulated deficit, the Company's profit should be reserved to cover the deficit in the first place. Remuneration of employees can be paid in stock or cash, and the distribution of stock or cash to employees may include subsidiary’s employees who meet certain criteria. The Board of Directors is authorized to determine the method of distribution. To retain talented employees, the Company has created an employee stock ownership trust and makes fixed monthly contributions to the Company's incentive fund as rewards for employees.

XIII. Supplementary Disclosures

  • (I) Information on Significant Transactions

  • In accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, information on significant transactions is disclosed as follows:

  • Financing provided to other parties: None.

  • Guarantees and endorsements provided to other parties: None.

224

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  1. Marketable securities held at the end of the period (excluding investments in subsidiaries, associates and joint ventures):
Securities
Holding
Company		 Type and Name of
Securities		 Relationship with Issuer of
Securities		 Ledger Account Ending Balance Ending Balance Ending Balance Remark
Shares/Units Carrying
amount		 Percentage
of
shareholding		 Fair value
The Company
The Company
WUXI
Zhonghan
FSP Jiangsu
The Company		 Stock:
Mekong Resort Development
Construction Co., Ltd.
Beneficiary certificates:
Fuh Hwa Ruei Neng Fund I
Fuh Hwa Ruei Neng Fund I
Fuh Hwa Guardian Fund
Fuh Hwa Ruei Hua Fund
Fuh Hwa Jhih Neng Fund I
Taiwan ESG
Private equity fund:
Mesh Cooperative Ventures
Fund
Stock:
Voltronic Power Technology
Corp.
JESS-LINK Products Co.,
Ltd.
WT Microelectronics Co.,
Ltd.
Taiwan Cement Corp.
Taiwan Semiconductor
Manufacturing Co., Ltd.
TOT BIOPHARM
International Co., Ltd.
Eastern Union Interactive
Corp.
Guoyu Global Co., Ltd.
Taiwan Truewin Technology
Co., Ltd.
Wuxi Lead Solar Energy Co.,
Ltd.
Powerland Technology Inc.
Bond:
Novaland Group (NYL)		 －
－
－
－
－
－
－
－
Other related party
－
－
－
－
－
－
－

－
－
－		 Financial assets at
fair value through
profit or loss
〃
〃
〃
〃
〃
〃
〃
Financial assets at
fair value through
other
comprehensive
income
〃
〃
〃
〃
〃
〃
〃
〃
〃
Financial assets at
amortized cost
1,905,750
5,000,000
4,000,000
3,504,199
1,961,169
3,000,000
400,000
12,000,000

4,021,822
8,492,000
1,000,000
50,000
10,000
1,195,200
880,000
500,000
500,000
-
-

9,000		 71,632
55,589
45,058
64,647
21,182
31,918
14,364
12,000
316,390
6,213,715
351,144
48,950
2,400
6,150
18,118
58,667
5,000
32,500
6,736,644
-
26,494
6,763,138
10,800		 8.25
-
-
-
-
-
-
2.46
4.60
6.96
0.74
-
-
0.19
4.43
16.67
2.85
12.04
3.54
-		 71,632
55,589
45,058
64,647
21,182
31,918
14,364
12,000
316,390
6,213,715
351,144
48,950
2,400
6,150
18,118
58,667
5,000
32,500
6,736,644
-
26,494
6,763,138
10,800
  1. Marketable securities for which the accumulated purchase or sale amounts for the

period exceed NT$300,000 thousand or 20% of the paid-in capital:

Unit: Shares Unit: Shares Unit: Shares Unit: Shares Unit: Shares Unit: Shares Unit: Shares Unit: Shares Unit: Shares Unit: Shares
Company
Name		 Type and
Name of
Securities		 Ledger
Account		 Counterparty Relationship Beginning of Period Purchase Sale Ending Balance

Shares		 Amount Shares Amount Shares Selling
Price		 Carrying
Cost		 Gains
(Losses) on
Disposal
Shares		 Amount
The
Company		 Stock:
Voltronic
Power
Technology
Corp.
Financial
assets at fair
value through
other
comprehensive
income		 4,500,822 5,040,921 - - 479,000
660,425		 2,260 658,165 4,021,822
6,213,715
(Note)

Note: The ending balance includes unrealized gain or loss on financial assets.

  1. Acquisition of real estate at costs which exceed NT$300,000 thousand or 20% of the paid-in capital: None.

  2. Disposal of real estate at prices which exceed NT$300,000 thousand or 20% of the

225

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

paid-in capital: None.

  1. Total purchases from and sales to related parties which exceed NT$100,000 thousand or 20% of the paid-in capital:
Company Related
Party		 Relationship Transaction Situation Transaction Situation Transaction Situation Transaction Situation Unusual Transaction
Terms and Reasons		 Unusual Transaction
Terms and Reasons		 Notes and Accounts
Receivable (Payable)		 Notes and Accounts
Receivable (Payable)		 Remark
Purchases
(Sales)		 Amount Percentage
of Total
Purchases
(Sales) (%)		 Credit
Period		 Unit
Price		 Credit Period Balance Percentage of
total notes and
accounts
receivable
(payable)
The Company
The Company
The Company
The Company
The Company
The Company
The Company
The Company
The Company
The Company
The Company
3Y Power
3Y Power		 Sparkle
Power Inc.
FSP North
America
FSP Power
Solution
GmbH
Fortron/
Source
(Europa)
GmbH
WUXI
Zhonghan
FSP
Technology
USA Inc.
Huili
Zhonghan
WUXI SPI
Voltronic
3Y Power
3Y Power
Technologh
Inc.
Huili		 The Chairman
of the Company
is the second-
degree relatives
of the entity's
Chairman
Substantive
related party of
the Company
Substantive
related party of
the Company
Substantive
related party of
the Company
100% owned
investment via
indirect
shareholding

100% owned
investment via
direct
shareholding
100% owned
investment via
indirect
shareholding
100% owned
investment via
indirect
shareholding
100% owned
investment via
indirect
shareholding
The Company is
the Director of
this company
65.87% owned
investment via
direct
shareholding

100% owned
investment via
direct
shareholding
Affiliate		 (Sales)
(Sales)
(Sales)
(Sales)
(Sales)
(Sales)
Purchases
(Note 2)
Purchases
(Note 2)
Purchases
(Note 2)

Purchases
Purchases
(Sales)
Purchases		 (497,301)
(586,236)
(589,751)
(418,581)
(328,551)
(131,045)
939,867
433,479
237,150
210,723
260,047
(315,435)
247,178		 (4.04)
(4.76)
(4.79)
(3.40)
(2.67)
(1.06)
10.80
4.98
2.72
2.42
2.99
(17.16)
17.99		 Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 4
Note 4
Note 4
Note 5
Note 1
Note 1
Note 4		 Note 4
Note 4
Note 4
Note 4		 176,243
147,782
305,772
75,109
138,416
56,617
(104,088)
(Note 3)
(42,251)
(Note 3)
(17,971)
(Note 3)
(90,024)
(81,547)
80,601
(22,094)		 5.21
4.37
9.05
2.22

4.09

1.67
(2.77)
(1.12)
(0.48)
(2.39)

(2.17)

12.03
(3.82)











Note 1. The Company's trading terms for this related party are not significantly different from those of other customers.

Note 2. Including purchases of products, purchases of raw materials and processing.

Note 3. Including accounts payable arising from purchases of products and raw materials and processing fee.

Note 4. The transaction price is not available for regular customers for comparison, and the credit term is 5 days after the monthly settlement.

Note 5. The Group does not purchase similar products from other manufacturers, so there is no transaction price from regular manufacturers for comparison. The payment terms were not significantly different from those of regular manufacturers.

226

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  1. Receivables from related parties which exceed NT$100,000 thousand or 20% of the paid-in capital:
paid-in capital:
Company with
accounts
receivable		 Related Party Relationship Balance of
receivables
from related
parties		 Turnover
rate		 Overdue receivables from
related parties		 Recovery from
overdue
receivables from
related parties
(Note)
Loss
allowance
Amount Action taken
The Company
The Company
The Company
The Company
Huili		 Sparkle Power Inc.
FSP Power
Solution GmbH
FSP North America
WUXI Zhonghan
The Company		 The Chairman of the Company is the
second-degree relatives of the entity's
Chairman
Substantive related party of the
Company
Substantive related party of the
Company
100% owned investment via indirect
shareholding
100% owned investment via indirect
shareholding		 176,243
305,772
147,782
138,416
104,088		 2.98
2.71
4.85
2.20
9.19		 -

-

-

-

-		 126,119
122,751
34,022
109,459
104,088		 -
-
-
-
-

Note: As of March 4, 2022.

  1. Derivative instruments transactions: None.

  2. (II) Information on Invested Companies:

Investment information in 2021 is as follows:

Name of
Investor		 Name of Investee Location Main Business
Activities		 Initial Investment Amount Initial Investment Amount Ending Balance Ending Balance Ending Balance Profit (Loss)
of Investee for
the Period
(Note)
Investment
gain (loss)
recognized for
the period
(Note)
Remark

Ending
Balance for
the Current
Period		 At the end of
last year		 Shares Shareholding
(%)
Carrying
amount
The Company
FSP
International
Inc. (BVI)
Amacrox
Technology
Co., Ltd.
(BVI)
3Y Power		 FSP International Inc. (BVI)
FSP Group Inc.
Amacrox Technology Co., Ltd.
(BVI)
3Y Power
Harmony Trading (HK) Ltd.
FSP Technology USA Inc.
FSP Turkey Dis Tic.Ltd.Sti.
FSP Technology Inc. (BVI)
Power Electronics Co., Ltd. (BVI)
Famous Holding Ltd.
Proteck Electronics (Samoa) Corp.
FSP International (HK) Ltd.
Amacrox GmbH
FSP Group USA Corp.
Proteck Power North America Inc.
3Y Power Technology Inc.
Luckyield Co., Ltd.		 British
Virgin
Islands
British
Cayman
Islands
British
Virgin
Islands
Taiwan
Hong Kong
U.S.A.
Turkey
British
Virgin
Islands
British
Virgin
Islands
Samoa
Samoa
Hong Kong
Germany
U.S.A.
U.S.A.
U.S.A.
Samoa		 Investment
holdings
Engaged in
safety
certification
Investment
holdings
Manufacturing
and trading of
power supply
Investment
holdings
Business
development
and product
technical
service
Business
development
and product
technical
service
Investment
holdings
Investment
holdings
Investment
holdings
Investment
holdings
Investment
holdings
Trading of
power supply
Trading of
power supply
Investment
holdings
Trading of
power supply
Investment
holdings		 1,241,751
1,752
40,925
304,406
45
3,143
22,640
62,883
217,707
807,483
32,984
141,042
18,181
14,903
3,279
233,850
4,500		 1,241,751
1,752
40,925
304,406
45
3,143
-
62,883
217,707
807,483
32,984
141,042
18,181
14,903
3,279
233,850
4,500		 32,202,500
50,000
1,109,355
16,309,484
10,000
100,000
6,673,000
2,100,000
7,000,000
27,000,000
1,100,000
4,770,000
25,000
247,500
1,000
600,000
45,000		 100.00
100.00
100.00
65.87
100.00
100.00
91.41
100.00
100.00
100.00
100.00
100.00
100.00
45.00
100.00
100.00
100.00		 2,199,388
372
60,168
663,717
1,788
1,853
16,989
121,029
217,707
1,358,711
16,069
72,009
2,871
26,947
14,778
220,428
3,768		 108,773
(110)
850
134,172
(86)
276
4,951
3,791
437
58,092
(7,993)
58,126
332
7,299
(2,469)
37,349
26		 108,773
(110)
850
88,389
(86)
276
4,526
-
-
-
-
-
-
3,284
-
-
-		 Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Sub-
subsidiary
Sub-
subsidiary
Sub-
subsidiary
Sub-
subsidiary
Sub-
subsidiary
Sub-
subsidiary
Associate
Sub-
subsidiary
Sub-
subsidiary
Sub-
subsidiary

Note: The investment gain or loss recognized by the company is based on the financial statements of the investees audited by the CPA of the parent company in Taiwan and accounted for under the equity method, except for the financial statements of 3Y Power, 3Y Power Technology Inc. and Luckyied Co. which are audited by other CPA.

227

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

(III) Information on investment in Mainland China:

  1. Information on the name of investee company in Mainland China and their main

businesses and products

Investee Company Main Business Activities Paid-in Capital Method of
Investments
(Note 1)		 Accumulated
Amount of
Investments
Remitted from
Taiwan at
Beginning of
Period		 Amount of
Investments Remitted
or Repatriated for the
Period		 Amount of
Investments Remitted
or Repatriated for the
Period

Accumulated
Amount of
Investments
Remitted
from Taiwan
at End of
Period		 Profit (Loss)
of Investee
for the Period
Percentage of
ownership of
direct or indirect
investment		 Share of
profits/losses
for the period
(Note 3)		 Carrying
amount of
investment at
the end of the
period
(Note 3)
Accumulated
Investment
Income
Repatriated
at End of
Period
Remitted Repatriated
Huili
Zhonghan
WUXI SPI
WUXI Zhonghan
Zhong Han
FSP Jiangsu
Protek Dongguan
Hao Han
WUXI 3Y		 Processing of power supply
Processing of power supply
Processing of power supply
Manufacturing and trading of power
supply
Manufacturing and trading of power
supply
Research & development and design of
various energy saving technology
Processing of power supply
Transformer processing
Design, manufacturing and trading of
power supplies		 145,090
224,107
(Note 2)
722,364
(Note 2)
416,099
130,320
69,009
(Note 2)
39,391
163,673
(Note 2)
4,122		 (II), 1
(II), 1
(II), 1
(II), 1
(II), 1
(II), 1
(II), 1
(II), 1
(II), 2		 176,873
104,342
508,326
380,595
20,196
13,380
38,038
-
-		 -
-
-
-
-
-
-
-
-		 -
-
-
-
-
-
-
-
-		 176,873
104,342
508,326
380,595
20,196
13,380
38,038
-
-		 (6,735)
465
(46,442)
104,499
86,745
3,791
(7,988)
58,126
26
100.00

100.00

100.00

100.00

100.00

100.00

100.00

100.00

65.87		 (6,735)
465
(46,442)
104,499
86,745
3,791
(7,988)
58,126
17		 334,217
210,110
124,058
1,240,577
747,135
122,715
15,892
72,009
3,768		 197,299
75,044
-
-
-
-
-
-
-

Note 1. Method of investment can be divided into the following 3 categories:

(I) Direct investment in mainland China.

(II) Indirect investment in mainland China through a holding company established in other countries

  1. Through FSP International Inc. to invest in mainland China.

  2. Through 3Y Power to invest in mainland China.

  3. (III) Others.

Note 2. This includes the amount of capital contributed by a foreign subsidiary from its earnings or dividends from an investee company in China.

Note 3. The investment profits and losses and the carrying amount of the investment at the end of the period recognized by the company are based on the financial statements of the investee company

audited by the CPA of Taiwan's parent company, except for WUXI 3Y, whose financial statements are audited by other CAP in Taiwan.

2. The limit of investment in mainland China:

Accumulated investment in
mainland China at the end of period
Investment amounts approved
by Investment Commission,
MOEA		 Limit of investment in mainland
China approved by Investment
Commission, MOEA
1,241,750
(Note 2)
(HK$12,500 thousand and US$35,640
thousand)
1,486,767
(Note 2)
(HK$12,500 thousand and
US$52,110 thousand)		 7,925,377
(Note 1)

Note 1. 60% of net worth.

Note 2. For the amounts of the above investment in mainland China, except that the accumulated investment amount remitted from Taiwan to the mainland China at the end of the current period is based on the historical exchange rate, the investment profit and loss recognized in the current period is based on the weighted average exchange rate (USD/TWD: 1:28.0088, CNY/TWD: 1:4.3413, HKD/TWD: 1:3.6031). Paid-in capital, investment amount approved by the Investment Commission of MOEA, and the carrying amount at the end of the period is based on the exchange rates on December 31 2021 (USD/TWD: 1:27.6800, CNY/TWD: 1:4.3440, HKD/TWD: 1:3.5490).

228

Notes to Parent Company Only Financial Statements of FSP Technology Inc. (Continued)

  1. Significant transactions with the investee company in mainland China:

    • For the direct or indirect significant transactions between the Group and its investee companies in mainland China in 2021, please refer to the description of "Information on Significant Transactions".

  2. (IV) Information on Major Shareholders:

on Significant Transactions".
ormation on Major Shareholders:
Shareholding
Name of Major Shareholders		 Shares Percentage of
Ownership
Chuan Han Investment Co., Ltd.
Cheng, Ya-Jen
Yang, Fu-An
Wang, Tsung-Shun		 15,091,766
12,167,477
11,792,834
11,605,794
8.05%

6.49%

6.29%

6.19%

  1. The information of major shareholders in this table was calculated by Taiwan Depository & Clearing Corporation on the last business day at the end of each quarter, and the shareholders who held more than 5% of the common shares and preferred shares of the Company that have been delivered (including treasury shares) were disclosed. The number of shares recorded in the Company's financial statements and the number of shares actually delivered by the Company without physical registration may differ due to different basis of preparation of the calculations.

  2. If a shareholder delivers its shareholding information to the trust, the aforesaid information shall be disclosed by the individual trustee who opened the trust account. As for the insider declaration for shareholding more than 10% of total shares in accordance with the Securities and Exchange Act, their shareholding shall include the shares held by themselves plus the shares that they have delivered to the trust and have the right to exercise decision-making power over the trust property. For more information, please refer to Market Observation Post System website.

  3. The percentage of shareholding is calculated by rounding to two decimal places.

XIV. Segment Information

Please refer to the consolidated financial statements for the year ended December 31, 2021.

229

  • V. Consolidated Financial Statements for the Most Recent Fiscal Year, Audited by CPAs

Independent Auditors' Report

To the Board of Directors of FSP Technology Inc.:

Opinions

We have audited the Consolidated Financial Statements of FSP Technology Inc. and its subsidiaries (the “Group”), which comprise the Consolidated Balance Sheets as of December 31, 2021 and 2020, and the Consolidated Statements of Comprehensive Income, the Consolidated Statements of Changes in Equity, the Consolidated Statements of Cash Flows, and Notes to the Consolidated Financial Statements (including a summary of significant accounting policies) from January 1 to December 31, 2021 and 2020.

In our opinion, based on our audit results and the audit reports prepared by other independent auditors (please refer to Other Matters section), the accompanying Consolidated Financial Statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2021 and 2020, and its consolidated financial performance and consolidated cash flows for the periods from January 1 to December 31, 2021 and 2020, in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (“IFRS”), International Accounting Standards (“IAS”), and interpretations from International Financial Reporting Interpretations Committee (“IFRIC”) and Standing Interpretations Committee (“SIC”) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinions

We conducted our audits in accordance with the Regulations Governing the Auditing and Attestation of Financial Statements by Certified Public Accountants and Generally Accepted Auditing Standards (GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (the “Code”), and we have fulfilled other ethical responsibilities in accordance with the Code. Based on our audit results and the reports of other independent auditors, we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the Consolidated Financial Statements for the year ended December 31, 2021. These matters were addressed in the context of our audit of the Consolidated Financial Statements as a whole, and forming our opinion thereon, and we do not provide a separate opinion on these matters. In our judgment, revenue recognition is the key audit matter that should be communicated in the audit report.

Please refer to Note IV(XVI) for the accounting policy of revenue recognition and Note VI((XXII) for the related disclosure of revenue.

Description of key audit matter:

The Sales revenue of the Group is a key indicator for investors and management to evaluate financial or business performance. As a listed company, there is a high inherent risk of misrepresentation for the Group. In addition, the timing of revenue recognition and transfer of control over goods is critical to the presentation of financial statements. Therefore, we have identified revenue recognition as a key audit matter in the audit of the Consolidated Financial Statements.

230

Audit procedure to address the matter:

We performed the following audit procedure in respect of the above key audit matter:

  • Tested the effectiveness of the design and implementation of the internal control mechanism in relation to revenue recognition.

  • Conducted trend analysis for the top ten customers, including comparison of customer lists and sales revenue between the current period and the most recent period as well as the same period last year, in order to assess whether there is any significant irregularity, and to identify and analyze the reasons for any material changes.

  • Performed random sample checking on the sales transactions of the year to evaluate the authenticity of these transactions, the correctness of the recognized amount of sales revenue and the reasonableness of the timing of recording.

  • Reviewed samples of sales transactions for a specified period before and after the end of the year to assess whether the timing of revenue recognition is appropriate.

Other Matters

We did not audit the financial statements of certain consolidated subsidiaries. Those financial statements were audited by other independent auditors. Our opinion expressed herein, insofar as it relates to the amounts included in the Consolidated Financial Statements relative to these consolidated subsidiaries was based solely on the reports of other independent auditors. Total assets of these consolidated subsidiaries amounted to NT$1,723,959 thousand and NT$1,489,303 thousand, accounting for 8.14% and 8.07% of the total consolidated assets as of December 31, 2021 and 2020, respectively. Total operating revenue of these consolidated subsidiaries amounted to NT$1,605,629 thousand and NT$1,534,865 thousand, representing 9.64% and 10.37% of the total consolidated operating revenue for the years ended December 31, 2021 and 2020.

FSP Technology Inc. has prepared its parent-company-only financial statements for the years ended December 31, 2021 and 2020, on which we have issued an unqualified opinion with the section of Other Matters in the audit report.

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

Management is responsible for the preparation and fair presentation of the Consolidated Financial Statements in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, as well as IFRS, IAS, IFRIC, and SIC endorsed and issued into effect by the Financial Supervisory Commission, and maintain internal controls which are necessary for the preparation of the Consolidated Financial Statements so as to avoid material misstatements due to fraud or errors therein.

In preparing the Consolidated Financial Statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing related matters and adopting the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

231

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the Consolidated Financial Statements, as a whole, are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error Misstatements are considered material if misstated individual or aggregate amounts could reasonably be expected to influence the economic decisions of users taken based on these Consolidated Financial Statements.

As part of an audit in accordance with the auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also perform the following tasks:

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

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

  3. Assess the appropriateness of the accounting policies adopted by the management, as well as the reasonableness of their accounting estimates and relevant disclosures.

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

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

  6. Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision, and performance of the Group 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

232

internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine the key audit matters in the audit of the Group's Consolidated Financial Statements for the year ended December 31, 2021. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partners on the audit resulting in this independent auditors’ report are Chang, Chun-I and Chao, Min-Ju.

KPMG Taipei, Taiwan (Republic of China) March 18, 2022

Notice to Readers

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

For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated financial statements shall prevail.

233

FSP Technology Inc. and Subsidiaries

Consolidated Balance Sheets

December 31, 2021 and 2020

Unit: NT$ thousands

Assets
11xx
Current Assets:
1100
Cash and cash equivalents (Note VI(I))
1110
Financial assets at fair value through profit or loss - current (Note VI(II))
1136
Financial assets at amortized cost - current (Note VI(IV))
1150
Notes receivable, net (Note VI(V) and (XXII))
1170
Accounts receivable, net (Note VI(V) and (XXII))
1180
Accounts receivable - related parties, net (Notes VI(V) and (XXII), and VII)
1200
Other receivables (Note VI(VI) & VII)
1220
Current income tax assets
130x
Inventories (Note VI(VII))
1410
Prepayments
1470
Other current assets
Total current assets
15xx
Non-current Assets:
1517
Financial assets at fair value through other comprehensive income - non-
current (Note VI(III) and (XX))
1550
Investments Recognized Through the Equity Method (Note VI(IX))
1600
Property, plant and equipment (Notes VI(XI), (XIII), (XIV) and (XV), VIII
and IX)
1755
Right-of-use assets (Notes VI(XII) and (XVI), and VII)
1780
Intangible assets (Note VI(XI) and (XIII))
1840
Deferred income tax assets (Note VI(XIX))
1900
Other non-current assets (Notes VI(XI) and (XVIII), VIII and IX)
Total non-current assets
1xxx
Total assets		 2021.12.31 ％

13

3
-
-

19

4
-
-

17
-
-		 2020.12.31
Amount
％

3,051,117
17

565,732
3
-
-
85,453 -

3,606,974
20

616,753
3
65,054 -
5,574 -

2,655,331
15
70,938 -
23,981
-

10,746,907
58

5,273,176
29
25,319 -

1,523,809
9

513,420
3

221,038
1
72,381 -
72,429
-

7,701,572
42

18,448,479
100
Liabilities and Equity
21xx
Current Liabilities:
2100
Short-term borrowings (Notes VI(XI) and (XIV), and VIII)
2150
Notes payable
2170
Accounts payable
2180
Accounts payable - related parties (Note VII)
2200
Other payables (Notes VI(XVIII) and (XXIII), and VII)
2230
Current income tax liabilities
2250
Provisions for liabilities - current (Note VI(XVII))
2280
Lease liabilities - current (Notes VI(XVI) and VII)
2300
Other current liabilities (Note VI(XV) & (XXII))
2320
Current portion of long-term debt (Notes VI(XI) and (XV), and VIII)
Total current liabilities
25xx
Non-current Liabilities:
2540
Long-term borrowings (Notes VI(XI) and (XV), and VIII)
2570
Deferred income tax liabilities (Note VI(XIX))
2580
Lease liabilities - non-current (Notes VI(XVI) and VII)
2640
Net defined benefit liabilities (Note VI(XVIII))
2645
Guarantee deposits received
2670
Other non-current liabilities (Note VI(XV))
Total non-current liabilities
2xxx
Total liabilities
31xx
Equity Attributable to Owners of the Parent (Note VI(III), (IX), (X),
(XVIII), (XIX) & (XX))
3100
Capital Stock
3200
Capital surplus
3300
Retained earnings:
3310
Legal reserve
3350
Unappropriated earnings
Total retained earnings
34xx
Other Equity:
3410
Exchange differences on translation of financial statements of foreign
operations
3420
Unrealized gains (losses) on financial assets at fair value through other
comprehensive income
Total other equity
Total equity attributable to shareholders of the parent
36xx
Non-controlling Interests
3xxx
Total equity
2-3xxxTotal liabilities and equity		 2021.12.31
Amount
％
$ 16,315 -
14,445 -
4,986,689
24
90,024 -
1,151,339
5
167,169
1
146,223
1
166,758
1
92,137
1
73,014
-		 2020.12.31
Amount
％
32,162 -
15,001 -

4,842,867
27
80,004 -

948,782
5

104,500
1

157,190
1

151,461
1

67,839 -
12,559
-
Amount
$ 2,794,253
516,074
10,800
62,112
3,864,730

801,748
73,406
5,779
3,590,546
77,899
34,848

6,904,113
33

6,412,365
35
11,832,195 56
199,334
1
2,919 -
474,996
2
44,234 -
500 -
3,970
-

110,684
1
2,039 -

371,116
2
57,218 -
503 -
1,894
-

6,763,138
26,947
1,544,427
635,433
223,496
82,240
69,666
32
-

8

3

1
-
-

725,953
3

543,454
3

7,630,066
36

6,955,819
38

1,872,620
9

1,872,620
10

9,345,347
44

1,011,016
5

1,011,016
5

1,033,544
5
3,209,195
15

940,416
5

2,446,328
13

4,242,739
20

3,386,744
18

(117,703)
(1)
6,200,289
29

(89,678) -

5,004,114
27

6,082,586
28

4,914,436
27

13,208,961
62

11,184,816
60

338,515
2

307,844
2
$
21,177,542
 100
13,547,476
64

11,492,660
62

$
21,177,542
100

18,448,479
100

Chairman: Cheng, Ya-Jen

(Please see accompanying notes to the Consolidated Financial Statements) Managerial Officer: Cheng, Ya-Jen

Chief Accounting Officer: Sang, Hsi-Yun

234

FSP Technology Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

January 1 to December 31, 2021 and 2020

Unit: NT$ thousands

4000
Operating revenue (Notes VI(XXII) and VII)
5000
Operating costs (Notes VI(VII), (XI), (XII), (XIII), (XVI), (XVII) and (XVIII),
VII and XII)
5920
Add: Unrealized sales gains (losses)
5900
Gross profit
6000
Operating expenses (Notes VI(V), (VI), (XI), (XII), (XIII), (XVI), (XVIII) and
(XXIII), VII and XII):
6100
Selling and marketing expenses
6200
General and administrative expenses
6300
Research and development expenses
6450
Expected credit impairment losses (gains)
Total operating expenses
6900
Net operating income
7000
Non-operating income and expenses (Notes VI(II), (III), (VIII), (IX), (X), (XVI)
and (XXIV), and VII):
7100
Interest income
7010
Other income
7020
Other gains and losses
7050
Finance costs
7060
Share of profits (losses) of associates and joint ventures under equity method
Total non-operating income and expenses
7900
Income before income tax from continuing operations
7950
Less: Income tax expense (Note VI(XIX))
8200
Net Income
8300
Other comprehensive income:
8310
Items that will not be reclassified subsequently to profit or loss (Note VI(XVIII),
(XIX) and (XX))
8311
Gains (losses) on re-measurements of defined benefit plans
8316
Unrealized gains (losses) on investments in equity instruments at fair value
through other comprehensive income
8349
Less: Income tax related to items that will not be reclassified subsequently
Total items that will not be reclassified to profit or loss
8360
Items that may be reclassified subsequently to profit or loss (Note VI(IX) and
(XX))
8361
Exchange differences on translation of financial statements of foreign operations
8370
Share of other comprehensive income (losses) of associates and joint ventures
under equity method
8399
Less: Income tax related to items that may be reclassified subsequently
Total items that may be reclassified subsequently to profit or loss
8300
Other Comprehensive Income
8500
Total Comprehensive Income
Net income (losses) attributable to:
8610
Shareholders of the parent
8620
Non-controlling Interests
Total comprehensive income (losses) attributable to:
8710
Shareholders of the parent
8720
Non-controlling Interests
Earnings per share (unit: NT$) (Note VI(XXI))
9750
Basic earnings per share
9850
Diluted earnings per share		 2021 ％
100
85
-		 2020
Amount
％
14,796,460 100
12,730,131
86
(2,781)
-

2,063,548
14

531,862
4

609,160
4

451,578
3
8,611
-

1,601,211
11

462,337
3
23,883
-

208,551
1

249,554
2
(13,330)
-
3,049
-

471,707
3

934,044
6

241,969
1

692,075
5
(7,791)
-

2,088,968
14
(1,558)
-

2,082,735
14
24,762
-
(1,400)
-
-
-
23,362
-

2,106,097
14

2,798,172
19

669,314
5
22,761
-

692,075
5

2,784,736
19
13,436
-

2,798,172
19

3.55

3.52
Amount
$ 16,650,252
14,225,200
(847)

2,424,205		 15

620,915
676,460
455,887
(966)		 4
4
3
-

1,752,296		 11

671,909		 4

23,348
198,340
75,065
(11,346)
3,284		 -
1
1
-
-

288,691		 2

960,600
159,321		 6
1

801,279		 5

7,076
1,854,340
1,415		 -
11
-

1,860,001		 11

(29,332)
(809)
-		 -
-
-
(30,141) -

1,829,860		 11

$ 2,631,139		 16

$ 754,082
47,197		 5
-

$
801,279		 5

$ 2,585,931
45,208		 16
-

$ 2,631,139		 16

$		 4.03
$ 3.99

(Please see accompanying notes to the Consolidated Financial Statements)

Chairman: Cheng, Ya-Jen Managerial Officer: Cheng, Ya-Jen Chief Accounting Officer: Sang, Hsi-Yun

235

FSP Technology Inc. and Subsidiaries

Consolidated Statements of Changes in Equity

January 1 to December 31, 2021 and 2020

Unit: NT$ thousands

Balance as of January 1 2020
Appropriation and distribution of earnings:
Legal reserve
Cash dividends of common stock
Changes in other capital surplus:
Cash dividends appropriated from capital
surplus
Net Income
Other Comprehensive Income
Total Comprehensive Income
Purchase of treasury shares
Retirement of treasury shares
Changes in ownership interests in subsidiaries
Disposal of investment in equity instruments
at fair value through other comprehensive
income
Balance as of December 31, 2020
Appropriation and distribution of earnings:
Legal reserve
Cash dividends of common stock
Net Income
Other Comprehensive Income
Total Comprehensive Income
Distribution of cash dividends to non-
controlling interests
Increase in non-controlling interests
Disposal of equity instruments at fair value
through other comprehensive income
Balance as of December 31, 2021		 Equity Attributable to Owners of the Parent Equity Attributable to Owners of the Parent Equity Attributable to Owners of the Parent Equity Attributable to Owners of the Parent Equity Attributable to Owners of the Parent Equity Attributable to Owners of the Parent Non-
controlling
Interests		 Total Equity
Capital stock
- common
shares		 Capital
surplus

1,131,801
-
-
(96,131)
-
-		 Retained earnings
Legal reserve
Unappropria
ted earnings
Total

902,027
1,745,698
2,647,725
38,389
(38,389)
-
-
(192,262)
(192,262)

-
-
-
-
669,314
669,314
-
(6,241)
(6,241)		 Other equity items Treasury
shares		 Total equity
attributable
to
shareholders
of theparent
Exchange
differences
on
translation of
financial
statements of
foreign
operations		 Unrealized
gains (losses) on
financial assets
at fair value
through other
comprehensive
income		 Total

Unappropria
ted earnings

1,745,698

(38,389)
(192,262)
-
669,314
(6,241)		 Total
$ 1,922,620
-
-
-
-
-
2,647,725

-

(192,262)
-

669,314

(6,241)
(116,514)
-

-
-

-

26,836
3,199,064
-
-
-
-

2,094,827
3,082,550
-
-
-
-

2,121,663
-
-
-
-
-

-		 8,784,696
-
(192,262)
(96,131)
669,314
2,115,422
304,971
-

(10,563)

-

22,761

(9,325)
9,089,667
-

(202,825)
(96,131)

692,075

2,106,097
- - -
663,073


663,073


26,836


2,094,827


2,121,663

-
2,784,736


13,436


2,798,172
-
(50,000)

-
-		 -

(29,434)
4,780
-		 -

-

-
-
-
(21,569)
-
289,777

-

(21,569)
-

289,777

-

-
-

-

-
-
-
(289,777)

-
-
-

(289,777)
(101,003)
101,003
-

-

(101,003)

-
4,780
-


-
-

-
-

(101,003)
-
4,780
-
1,872,620
-
-
-
-
1,011,016
-
-
-
-
940,416
93,128
-
-
-

2,446,328

(93,128)
(561,786)
754,082
5,534


3,386,744

-

(561,786)

754,082

5,534

(89,678)
-

-

-

(28,025)

5,004,114
-
-
-

1,854,340


4,914,436
-
-
-

1,826,315

-
-
-
-

-		 11,184,816
-
(561,786)
754,082
1,831,849
307,844
-

-

47,197

(1,989)
11,492,660
-
(561,786)

801,279

1,829,860
- - -
759,616


759,616


(28,025)


1,854,340


1,826,315

-
2,585,931


45,208


2,631,139
-
-
-		 -
-
-		 -
-
-
-
-
658,165

-
-

658,165

-
-

-

-
-
(658,165)

-
-

(658,165)
-
-

-
-
-
-

(16,901)
2,364
-


(16,901)

2,364
-
$
1,872,620		 1,011,016 1,033,544
3,209,195


4,242,739

(117,703)

6,200,289


6,082,586

-		 13,208,961
338,515
13,547,476

(Please see accompanying notes to the Consolidated Financial Statements) Managerial Officer: Cheng, Ya-Jen

Chief Accounting Officer: Sang, Hsi-Yun

Chairman: Cheng, Ya-Jen

236

FSP Technology Inc. and Subsidiaries Consolidated Statements of Cash Flows

January 1 to December 31, 2021 and 2020

Unit: NT$ thousands

Cash flows from operating activities:
Income before income tax
Adjustments for:
Adjustments to reconcile profit or loss
Depreciation expenses
Amortization expenses
Expected credit impairment losses (gains)
Interest expenses
Interest income
Dividend income
Share of profits (losses) of associates and joint ventures under equity method
Loss on disposal of property, plant, and equipment
Gains on disposal of non-current assets held for sale
Unrealized sales gains (losses)
Gains on lease modifications
Rent concessions reclassified to revenue
Gains on bargain purchase
Total adjustments for profit or loss
Changes in operating assets and liabilities:
Changes in operating assets:
Financial assets at fair value through profit or loss
Notes receivable
Accounts receivable
Accounts receivable - related parties
Other receivables
Inventories
Prepayments
Other current assets
Other Non-Current Assets
Total changes in operating assets
Changes in operating liabilities:
Notes payable
Accounts payable
Accounts payable - related parties
Other payables
Provisions for liabilities
Other current liabilities
Net defined benefit liabilities
Other non-current liabilities
Total changes in operating liabilities
Total changes in operating assets and liabilities
Total adjustments
Cash flows generated by operating activities
Interest received
Interest paid
Income tax paid
Net cash flows generated from operating activities
Cash flows from investing activities:
Acquisition of financial assets at fair value through other comprehensive income
Disposal of financial assets at fair value through other comprehensive income
Acquisition of financial assets at amortized cost
Acquisition of subsidiaries (deducting cash obtained)
Disposal of non-current assets held for sale
Acquisition of property, plant, and equipment
Disposal of property, plant and equipment
Acquisition of intangible assets
Decrease (increase) in refundable deposits
Increase in prepayments for equipment
Dividends received
Increase in restricted deposits
Net cash flows from investing activities
Cash flows from financing activities:
Decrease in short-term loans
Proceeds from long-term loans
Repayments of long-term loans
Repayment of the principal of lease liabilities
Cash dividends paid
Purchase cost of treasury shares
Cash dividends paid to non-controlling interests
Net cash flows used in financing activities
Effects of exchange rate changes on the balance of cash held in foreign currencies
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year		 2021
$ 960,600		 2020

934,044

316,857

3,891

8,611

13,330

(23,883)

(107,452)

(3,049)

2,495

(326,059)

2,781

(18)
(14,763)

-

(127,259)

(174,486)

(3,842)

146,410

(89,674)

(18,435)

(542,332)

(4,542)

655

6,762

(679,484)

619

312,715

(7,656)

172,211

11,853

5,183

(8,942)

2,994

488,977

(190,507)

(317,766)

616,278

25,001

(13,690)

(205,594)

421,995

(118,419)

301,443

-

-

291,414

(224,212)

973

(1,513)

(13,108)

(2,153)

107,452
(18,821)

323,056

(73,461)

108,076

(1,923)

(134,460)

(288,393)
(101,003)

(10,563)

(501,727)

23,864

267,188

2,783,929

3,051,117

339,849
4,732
(966)
11,346
(23,348)
(122,933)
(3,284)
530
(72,399)
847
(97)
-
(2,523)

131,754

49,658
23,835
(249,685)
(184,995)
(3,530)
(918,687)
(789)
(10,558)
(3,222)

(1,297,973)

(556)
135,026
10,020
185,539
(10,967)
16,159
(6,374)
3,591

332,438

(965,535)

(833,781)

126,819
23,320
(11,335)
(107,486)

31,318

(296,047)
660,425
(10,959)
3,832
87,067
(214,977)
450
(7,190)
2,464
(3,475)
122,933
-
344,523

(15,847)
181,989
(32,884)
(162,242)
(561,786)
-
(16,901)

(607,671)

(25,034)
(256,864)
3,051,117

$
2,794,253

(Please see accompanying notes to the Consolidated Financial Statements) Chairman: Cheng, Ya-Jen Managerial Officer: Cheng, Ya-Jen

Chief Accounting Officer: Sang, Hsi-Yun

237

FSP Technology Inc. and Subsidiaries Notes to Consolidated Financial Statements

2021 and 2020

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

I. Company History

FSP Technology Inc. (the “Company”) was incorporated on April 15, 1993, and registered under the Ministry of Economic Affairs, R.O.C. The Company is listed on the Taiwan Stock Exchange since October 16, 2002. The Company and its subsidiaries (the “Group”) are primarily engaged in the manufacturing, processing and trading of power supplies and various electronic components.

II. Date of Authorization for Issuance of the Parent Company Only Financial Statements and

Procedures for Authorization

These Consolidated Financial Statements were authorized for issue by the Board of Directors on March 18, 2022.

III. Application of New and Amended Standards and Interpretations

  • (I) Impact of adoption of new or amended standards and interpretations endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”).

The Group has initially adopted the following new amendments to IFRS since January 1, 2021, and there was no significant impact on its Consolidated Financial Statements.

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

  • Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16 “Interest Rate Benchmark Reform - Phase 2”

The Group has adopted the following new amendments, which do not have a significant impact on the Consolidated Financial Statements, since April 1, 2021.

  • Amendment to IFRS 16 “COVID-19 Related Rent Concessions beyond 30 June 2021”

  • (II) The impact of IFRS endorsed by the FSC but not yet adopted by the Group

The Group assesses that the adoption of the following new amendments effective from January 1, 2022 will not have a significant impact on the Consolidated Financial Statements.

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

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

  • Annual Improvements to IFRS Standards 2018-2020

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

238

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

  • (III) IFRSs issued by the International Accounting Standards Board (“IASB”) but not yet endorsed by the FSC

The following new and amended standards, which may be relevant to the Group, have been issued by the IASB, but not yet endorsed by the FSC:

Effective Date
per International
New or Amended Accounting
Standards Content of Amendment Standards Board
Amendments to IFRS When the investor sells or contributes its To be determined
10 and IAS 28 “Sale subsidiary to an associate or a joint venture and by International
or Contribution of the asset sold or contributed constitutes a Accounting
Assets Between an business, full gain or loss should be recognized Standards Board
Investor and Its on the loss of control of a business. If the asset
Associate or Joint sold or contributed does not constitute a
Venture” business, unrealized gains and losses should be
calculated according to the shareholding
percentage and partial gain or loss should be
recognized.
Amendments to IAS The amendments are intended to improve January 1, 2023
1 “Classification of consistency in the application of the standard to
liabilities as current assist companies in determining whether debts or
or non-current” other liabilities with uncertain maturity dates
should be classified as current (or to be due
within one year) or non-current on the balance
sheets.
The amendments also clarify the classification
requirements for debts that companies may settle
by conversion into equity.
Amendments to IAS Amendments to IAS 1 mainly include: January 1, 2023
1 “Disclosure of
Accounting Policies”
Requiring companies to disclose their
material accounting policies rather than
their significant accounting policies;

Accounting policy information in relation to
insignificant transactions, other matters or
conditions shall be deemed as immaterial
and the Group is not required to disclose
such information; and

Not all accounting policy information
relating to significant transactions, other
matters or conditions is considered material
for the financial statements of a company.
Amendments to IAS The amendments introduce a new definition of January 1, 2023
8 “Definition of accounting estimates, clarifying that accounting
Accounting estimates are monetary amounts in the financial
Estimates” statements that are subject to the uncertainty of
measurement. The amendments also clarify the
relationship between accounting policies and
accounting estimates by stating that companies
are required to establish accounting estimates for
the purposes of the accounting policies they
apply.

239

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

The Group is evaluating the impact of the initial adoption of the above-mentioned standards or interpretations on its financial position and operating performance. The results will be disclosed when the Group completes the evaluation.

The Group expects that the following new and amended standards, which have not been endorsed by the FSC, will not have a significant impact on the Consolidated Financial Statements.

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

  • Amendments to IAS 12 “Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction”

IV. Summary of Significant Accounting Policies

The significant accounting policies adopted in the Consolidated Financial Statements are summarized as follows. The following accounting policies have been applied consistently to all periods presented in the Consolidated Financial Statements.

  • (I) Compliance declaration

The Group's accompanying Consolidated Financial Statements have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, and International Financial Reporting Standards (“IFRS”), International Accounting Standards (“IAS”), and interpretations from International Financial Reporting Interpretations Committee (“IFRIC”) and Standing Interpretations Committee (“SIC”) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China (collectively as “IFRSs”).

(II) Preparation basis

  1. Measurement basis

The Consolidated Financial Statements have been prepared on a historical cost basis except for the following items:

  • (1) Financial assets measured at fair value through profit or loss;

  • (2) Financial assets measured at fair value through other comprehensive income;

  • (3) Defined benefit liability (assets), which are measured based on pension fund assets plus unrecognized service costs in the previous period and unrecognized actuarial losses, less unrecognized actuarial gains, the present value of defined benefit obligations and effect of the asset ceiling as mentioned in Note IV(XVIII).

  • Functional and presentation currency

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

240

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

  • (III) Basis of consolidation

  • Principles of preparation of the Consolidated Financial Statements

The entities in the Consolidated Financial Statements include the Company and its subsidiaries.

The financial statements of the subsidiaries are included in the Consolidated Financial Statements from the date that control commences until the date that control ceases. Profit or loss attributable to the non-controlling interests of the subsidiaries is attributed to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. If the Group loses control over a subsidiary, the Group derecognizes the assets and liabilities of the subsidiary, as well as any carrying amount of non-controlling interests at the date of loss of control. In addition, the Group recognizes the fair value of the retained investment in the former subsidiary at the date of loss of control, and also recognizes the resulting difference in profit or loss as income or loss attributable to the Company.

All inter-company transactions, balances and resulting unrealized income and loss are eliminated on consolidation.

Changes in the Group's ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

  1. Subsidiaries included in the Consolidated Financial Statements

Subsidiaries included in the Consolidated Financial Statements are as follows:

Name of Investor
Name of Subsidiary
Main Business
Activities		 Percentage of Ownership
Description
2021.12.31
2020.12.31
The Company
FSP International Inc. (BVI)
Investment
holdings
〃
FSP Group Inc.
Engaged in safety
certification
〃
Amacrox Technology Co., Ltd.
(BVI)
Investment
holdings
〃
3Y Power Technology (TAIWAN)
Inc. (“3Y Power”)
Trading and
manufacturing of
power supplies
and related
electronic
products
〃
Harmony Trading (HK) Ltd.
Trading of power
supplies and
related electronic
products
〃
FSP Technology USA Inc.
Business
development and
product technical
service
〃
FSP Turkey Dis Tic. Ltd.
Sti.(“FSP Turkey”)
Business
development and
product technical
service
FSP International
Inc. (BVI)
Shenzhen Huili Electronic Co.,
Ltd. (“Huili”)
Manufacturing of
power supplies
and related
electronic
products
〃
FSP Technology Inc. (BVI)
Investment
holdings
〃
Proteck Electronics (Samoa) Corp.
Investment		 100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
65.87%
65.87%
100.00%
100.00%
100.00%
100.00%
91.41%
-
%
Note 3
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%

241

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

Name of Investor
Name of Subsidiary
Main Business
Activities		 Percentage of Ownership
Description
2021.12.31
2020.12.31
holdings
〃
Power Electronics Co., Ltd. (BVI)
Investment
holdings
〃
Famous Holding Ltd.
Investment
holdings
〃
FSP International (HK) Ltd.
Investment
holdings
FSP Technology
Inc. (BVI)
FSP-C R&D Center (“FSP
Jiangsu”)
Research &
development and
design of various
energy saving
technology
Protek
Electronics
(Samoa) Corp.
Protek Electronics (China) Corp.
(“Protek Dongguan”)
Manufacturing of
power supplies
and related
electronic
products
Power
Electronics Co.,
Ltd. (BVI)
Zhonghan Electronics (Shenzhen)
Co., Ltd. (“Zhonghan”)
Manufacturing of
power supplies
and related
electronic
products
Famous Holding
Ltd.
WUXI SPI Technology Co., Ltd.
(“WUXI SPI”)
Manufacturing of
power supplies
and related
electronic
products
〃
WUXI Zhonghan Technology Co.,
Ltd. (“WUXI Zhonghan”)
Trading and
manufacturing of
power supplies
and related
electronic
products
FSP International
(HK) Ltd.
Hao Han Electronic Technology
(Jian) Co., Ltd. (“Hao Han”)
Trading and
manufacturing of
electronic
components
WUXI Zhonghan
Shenzhen Zhonghan Technology
Co., Ltd. (“Zhonghan Tech.”)
Trading and
manufacturing of
power supplies
and related
electronic
products
Amacrox
Technology Co.,
Ltd. (BVI)
Amacrox GmbH
Trading of power
supplies and
related electronic
products
〃
Proteck Power North America,
Inc.
Trading of power
supplies and
related electronic
products
3Y Power
3Y Power Technology (USA)
Inc.(“3Y Power USA”)
Trading of power
supplies and
related electronic
products
〃
Luckyield Co., Ltd.
Investment
holdings
Luckyield Co.,
Ltd.
WUXI 3Y Technology Co., Ltd.
(“WUXI 3Y”)
Design,
manufacturing
and trading of
power supplies		 100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Note 2
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
Note 1

242

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

Main Business Percentage of Ownership Name of Investor Name of Subsidiary Activities 2021.12.31 2020.12.31 Description

Note 1. The Company invested in WUXI 3Y through Luckyield Co., Ltd., and the shareholding percentage as of December 31, 2021 and 2020 was 65.87%.

Note 2. Famous Holding Ltd. invested additional capital of RMB25,000 thousand and RMB10,405 thousand in WUXI SPI in June 2020 and November 2020, respectively.

Note 3. The Company acquired a 91.41% stake in FSP Turkey for NT$22,640 thousand (US$800 thousand) on May 31, 2021 and it became a subsidiary of the Company since then.

  1. Subsidiaries which are not included in the Consolidated Financial Statements: None.

  2. (IV) Foreign currencies

1. Foreign currency transactions

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. At the end of each reporting period (“the reporting date”), monetary items denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on that date.

Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currency based on the exchange rates at the date when the fair value is determined, whereas non-monetary items denominated in foreign currencies measured at historical costs are translated using the exchange rates at the dates of the transactions. The resulting exchange differences are generally recognized in profit or loss, except for the equity instruments designated to be measured at fair value through other comprehensive income, whose exchange differences are recognized in other comprehensive income.

  1. Foreign operations

The assets and liabilities of foreign operations are translated into the presentation currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into the presentation currency at the average exchange rates for the period and the resulting exchange differences are recognized in other comprehensive income.

  • (V) Classification criteria for current and non-current assets and liabilities

Assets are classified as current assets when one of the following criteria is met, and all other assets are classified as non-current assets:

  1. Assets that are expected to be realized, or intended to be sold or consumed within the normal operating cycle.

  2. Assets held mainly for trading purpose.

  3. Assets that are expected to be realized within twelve months after the balance sheet date.

243

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

  1. Cash or cash equivalents, excluding restricted cash or cash equivalents that are reserved for exchange, debt repayment or under other restrictions for more than twelve months after the balance sheet date.

Liabilities are classified as current liabilities when one of the following criteria is met, and all other liabilities are classified as non-current liabilities:

  1. Liabilities that are expected to be settled within the normal operating cycle.

  2. Assets held mainly for trading purpose.

  3. Liabilities that are expected to be settled upon maturity within twelve months after the balance sheet date.

  4. The Group is unable to extend the repayment date unconditionally for at least twelve months after the balance sheet date.

  5. (VI) Cash and cash equivalents

Cash consists of cash on hand, checking account deposits and saving account deposits. Cash equivalents refer to short-term and highly liquid investments that are readily convertible to known amounts of cash with insignificant risk of changes in value. Time deposits that meet the criteria and are held for the purpose of fulfilling short-term cash commitment rather than other purposes are classified as cash equivalents.

Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents in the Consolidated Statements of Cash Flows.

(VII) Financial instruments

Accounts receivables are initially recognized when they are incurred. All other financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the financial instruments. Financial assets (excluding accounts receivable without a significant financing component) and financial liabilities that are not measured at fair value through profit or loss, are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition or issue of these financial assets or financial liabilities. Accounts receivable without a significant financing component is initially measured at the transaction price.

  1. Financial assets

The Group applies trade date accounting to all regular way purchases or sales of financial assets that are classified in the same way.

At initial recognition, financial assets are classified into the following categories: Financial assets at amortized cost, investments in equity instruments at fair value through other comprehensive income and financial assets at fair value through profit or loss. When the Group changes its business model for managing financial assets, all affected financial assets are reclassified on the first day of the next reporting period.

244

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

  • (1) Financial assets at amortized cost

Financial assets are measured at amortized cost if all of the following conditions are met and the financial assets are not designated as measured at fair value through profit or loss:

  • Financial assets are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows.

  • The contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

These assets are subsequently measured at amortized cost, using initial recognized amount plus or minus cumulative amortization calculated by adopting the effective interest method and taking into account the adjustment of allowance for impairment loss as well. Interest income, foreign exchange gains and losses, and impairment loss are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

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

At initial recognition of investments in equity instruments that are not held for trading, the Group may make an irrevocable election to present subsequent changes in fair value of the investments in other comprehensive income. This election is made on an instrument-by-instrument basis.

Investments in equity instruments are subsequently measured at fair value. Dividend income is recognized in profit or loss unless the dividend clearly represents the recovery of part of the investment cost. Other net gains or losses are recognized in other comprehensive income and will not be reclassified to profit or loss.

Dividend income from equity investments is recognized on the date that the Group is eligible to receive the dividends (usually the ex-dividend date).

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

Financial assets that are not classified as measured at amortized cost or at fair value through other comprehensive income as described above are measured at fair value through profit or loss. At initial recognition, the Group may irrevocably designate a financial asset, which meets the criteria to be measured at amortized cost or at fair value through other comprehensive income, to the category measured at fair value through profit or loss if doing so eliminates or significantly reduces the accounting mismatch that would otherwise arise.

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

  • (4) Impairment of financial assets

The Group recognizes loss allowance for expected credit loss on financial assets at amortized cost, including cash and cash equivalents, financial assets at amortized cost, notes and accounts receivable, other receivables and refundable deposits.

245

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

The Group measures loss allowance for notes and accounts receivable at the amount equal to lifetime expected credit loss. Taking into account reasonable and supportable information available without undue cost or effort, including both quantitative and qualitative information and analysis based on the Group's historical experience, credit assessment, as well as forward-looking information, the Group measures the impairment of financial assets at amortized cost according to 12-month expected credit loss when the credit risk of the financial assets has not increased significantly since initial recognition. If there has been a significant increase in credit risk since initial recognition, the impairment is measured based on lifetime expected credit loss.

Lifetime expected credit loss refers to the expected credit loss resulting from all possible default events over the expected life of the financial instrument.

12-Month expected credit loss refers to the expected credit loss resulting from default events of the financial instrument that are likely to occur within the 12 months after the reporting date (or a shorter period if the expected life of the financial instrument is less than 12 months).

The maximum period considered when estimating expected credit loss is the maximum contractual period over which the Group is exposed to credit risk.

Expected credit loss is the probability-weighted estimate of credit loss over the expected life of financial instruments. Credit loss is measured at the present value of all cash shortfalls (i.e., the difference between the cash flows due to the Group in accordance with the contracts and the cash flows that the Group expects to receive). Expected credit loss is discounted at the effective interest rate of the financial assets.

Loss allowance for financial assets at amortized cost is deducted from the carrying amount of the assets. The amount of provision or reversal of loss allowance is recognized in profit or loss.

The carrying amount of the financial assets is written off when the Group has no reasonable expectation of recovering the entire or part of the financial assets. The Group individually makes the assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects there will be no significant reversal on the write-off amount. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group's procedure for collecting overdue amount.

(5) Derecognition of financial assets

The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or the Group transfers the financial asset in which almost all of the risks and returns associated with the ownership of the financial asset are transferred to other companies or in which the Group neither transfers nor retains nearly all of the risks and returns of ownership and it does not hold control on the financial asset.

246

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

When the Group enters into transactions of financial asset transfer, if all or almost all of the risks and returns associated with the ownership of the transferred asset is retained, the transferred asset continues to be recognized in the balance sheet.

  1. Financial liabilities and equity instruments

  2. (1) Equity instruments

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

(2) Treasury shares

When the Group buys back its shares recognized as equity, the amount of consideration paid, including directly attributable costs, is recognized as a deduction from equity. Shares bought back are classified as treasury shares. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity and the resulting surplus or deficit on the transaction is recognized in capital surplus or retained earnings (if the capital surplus is not sufficient to offset).

When the treasury shares are retired, the capital surplus - premium on stock account and capital stock account should be debited proportionately according

to the shareholding. The carrying value of treasury shares in excess of the sum of the par value and premium on stock should first be offset against capital surplus from the same class of treasury share transactions, and the remainder, if any, debited to retained earnings. The sum of the par value and premium on treasury shares in excess of the carrying value should be credited to capital surplus from the same class of treasury share transactions.

(3) Financial liabilities

Financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gains or losses on derecognition is also recognized in profit or loss.

(4) Derecognition of financial liabilities

The Group derecognizes a financial liability when its contractual obligation has been fulfilled or cancelled, or has expired. The Group also derecognizes a financial liability when its terms are amended and the cash flows of the amended liability are substantially different, in which case a new financial liability based on the amended terms is recognized at fair value.

The difference between the carrying amount of a financial liability derecognized and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

247

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

  • (5) Offsetting of financial assets and liabilities

Financial assets and financial liabilities are offset and presented on a net basis only when the Group has the legally enforceable right to offset and intends to settle on a net basis or to liquidate asset for settling the liabilities simultaneously.

(VIII) Inventories

The cost of inventories comprises all costs incurred in bringing the inventories to their present location and condition ready for sale. The variable manufacturing expenses are allocated based on the actual production volume. Fixed manufacturing expenses are allocated to finished goods and work in process based on the normal capacity of the production equipment. Unallocated fixed manufacturing expenses resulting from lower production capacity or idle equipment shall be recognized as cost of goods sold in the period in which they are incurred. If actual production volume is higher than the normal production capacity, the difference is recognized as a reduction of cost of goods sold. The monthly weighted-average method is adopted for the calculation of the costs.

Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the normal course of business, less the estimated costs of completion and selling expenses at the end of the period. When the cost of inventories is higher than the net realizable value, inventories are written down to net realizable value, and the write-down amount is recognized in cost of goods sold. If net realizable value increases in the future, the cost of inventories is reversed within the original write-down amount, and such reversal is treated as a reduction of cost of goods sold for the period.

(IX) Non-current assets held for sale

When the Board of Directors resolves to sell part of the property, plant and equipment and right-of-use assets, the Group begins to apply the accounting policies related to noncurrent assets held for sale.

Non-current assets that are highly probable to be recovered primarily through a sale transaction, rather than through continuing use, are classified as non-current assets held for sale. Before the initial classification of the non-current assets held for sale, the carrying amount of the assets is measured in accordance with the Group's applicable accounting policies. Afterwards, the assets are measured at the lower of their carrying amount and fair value less costs to sell. Impairment losses for assets initially classified as held for sale and any subsequent gains or losses on remeasurement are recognized in profit or loss. Nevertheless, the reversal gains are not recognized in excess of any cumulative impairment loss.

Property, plant and equipment, and right-of-use assets are no longer amortized or depreciated when they are classified as held for sale.

(X) Investments in associates

An associate is an entity in which the Group has significant influence, but not control over their financial and operating policies. The Group is deemed to have significant influence when it holds 20% to 50% of the voting rights of the investee company.

248

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

Investments in associates are accounted for using the equity method. Under the equity method, investments in associates are recognized initially at cost. Subsequent adjustments are based on the changes in the Group's share of net assets. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition less any accumulated impairment losses.

Unrealized gains and losses resulting from transactions between the Group and an associate are recognized only to the extent of unrelated investors’ interests in the associate.

When the Group's share of losses of an associate equals or exceeds its interests in an associate, it discontinues recognizing its share of further losses. Additional losses are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

The Group discontinues the use of the equity method and measures the retained interest at fair value from the date when its investment ceases to be an associate. The difference between the fair value of retained interest and proceeds from disposing of a part of interest in the associate, and the carrying amount of the investment at the date the equity method was discontinued is recognized in profit or loss. The Group accounts for all the amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would have been required if the associates had directly disposed of the related assets or liabilities. If a gain or loss previously recognized in other comprehensive income would be reclassified to profit or loss or retained earnings on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss or retained earnings when the equity method is discontinued. If the Group's ownership interest in an associate is reduced while it continues to apply the equity method, the Group reclassifies the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to the reduction in ownership interest to profit or loss or retained earnings.

  • (XI) Property, Plant, and Equipment

  • Recognition and measurement

Property, plant and equipment are measured at cost, less accumulated depreciation and any accumulated impairment losses.

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

Any gains or losses on disposal of property, plant and equipment are recognized in profit or loss.

  1. Subsequent costs

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

  1. Depreciation

Depreciation is calculated on the cost of assets less their residual values and is recognized in profit or loss using the straight-line method over the estimated useful lives of each component of property, plant and equipment.

Land is not depreciated.

249

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

The estimated useful lives for the current and comparative periods are as follows:

Housing and Construction 1~50 years
Buildings and Building Improvements 5~15 years
Machinery 1~24 years
Transportation Equipment 4~19 years
Other Equipment 1~26 years
Leasehold Improvements 3~11 years

The Group reviews depreciation methods, useful lives and residual values on each reporting date and makes appropriate adjustments when necessary.

(XII) Leases - Lessee

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the Group periodically assesses whether the right-of-use asset is impaired and recognizes any impairment loss that has occurred. The right-of-use asset is adjusted when the remeasurement of the lease liabilities takes place.

The lease liability is initially measured at the present value of the lease payments that have not been paid on the commencement date. If the interest rate implied by the lease is easy to determine, it would be used as the discount rate. If the implied interest rate is not easy to determine, the Group's incremental borrowing rate is applied. Generally, the Group uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

  1. Fixed payments, including in-substance fixed payments;

  2. Variable lease payments that depend on an index or a rate, initially measured using the index or rate at the commencement date;

  3. Amounts expected to be payable under residual value guarantees; and

  4. The exercise price of a purchase option or payments of penalties for exercising the option to terminate the lease, if the lessee is reasonably certain to exercise that option.

250

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

The interests of lease liabilities are subsequently calculated using the effective interest method and lease liabilities are remeasured when:

  1. There is a change in future lease payments arising from the change in an index or rate;

  2. There is a change in the estimate of the amount expected to be payable under a residual value guarantee;

  3. There is a change in the assessment on the purchase option of the underlying asset;

  4. There is a change in the lease term assessment resulting from a change in the estimate regarding whether the extension or termination option will be exercised;

  5. There is any modification in lease subject, scope of the lease or other clauses.

When the lease liability is remeasured under the above-mentioned circumstances other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset. If the carrying amount of the right-of-use asset is reduced to zero, the remaining remeasurement amount is recognized in profit or loss.

When the lease liability is remeasured due to lease modification that decreases the scope of the lease, the Group accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognizes the difference between the carrying amount of the right-of-use asset and the remeasurement amount of lease liability in profit or loss.

The Group presents right-of-use assets that do not meet the definition of investment properties, and lease liabilities as a separate line item respectively in the Consolidated Balance Sheets.

The Group has elected not to recognize right-of-use assets and lease liabilities for certain short-term leases of buildings and construction, machinery and equipment, and transportation equipment leases and for leases of low-value assets. The Group recognizes the lease payments associated with these leases as an expense on a straightline basis over the lease term.

The Group applies the practical expedient to the rent concessions that meet all of the following criteria without assessing if they are lease modification.

  1. Rent concession is a direct consequence of the COVID-19 pandemic;

  2. As a result of the change in lease payments, revised consideration for the lease is almost the same as, or less than, the consideration for the lease prior to the change;

  3. Any reduction in lease payments affects only payments originally due on or before June 30, 2022; and

  4. There is no change in substance to the other terms and conditions of the lease.

With the application of practical expedient, the amount of changes in lease payments arising from rent concessions is recognized in profit or loss for the reporting period.

251

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

(XIII) Intangible assets

1. Recognition and measurement

Goodwill of the Group occurred in the business combination prior to the date of IFRS adoption. Upon conversion to IFRS endorsed by the FSC, the Group elected to restate only those business combinations that occurred after January 1, 2012 (inclusive). For acquisitions made before January 1, 2012, the amount of goodwill was recognized in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers issued by the FSC on January 10, 2009, and Accounting Standards and related interpretations (hereinafter referred to as "previously generally accepted accounting principles") issued by the Accounting Research and Development Foundation of the Republic of China.

Group's other separately acquired intangible assets with finite useful lives, including software and patents, are carried at cost less accumulated amortization and accumulated impairment losses.

  1. Subsequent expenditures

Subsequent expenditures are capitalized only when they increase the future economic benefits of the specific asset to which they relate. All other expenditures are recognized in profit or loss as incurred, including internally developed goodwill and brands.

3. Amortization

Except for goodwill, amortization is calculated based on the cost of the asset less the estimated residual value, and is recognized in profit or loss using the straightline method over the estimated useful life of the intangible asset when it becomes available for use.

The estimated useful lives for the current and comparative periods are as follows:

Software cost 1~5 years Patent 91 months

The Group reviews the amortization method, useful life and residual value of the intangible assets on each reporting date and makes appropriate adjustments when necessary.

(XIV) Impairment of non-financial assets

The Group assesses on each reporting date whether there is any indication that the carrying amount of non-financial assets (excluding inventories, deferred income tax assets, employee benefit related assets) may be impaired. If any such indication exists, then the recoverable amount of the asset is estimated. Goodwill is tested for impairment on an annual basis.

For the purpose of impairment testing, assets are divided into the smallest group of identifiable assets that generates cash inflows largely independent of the cash inflows from other individual asset or groups of assets. Goodwill arising from a business combination is allocated to cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the combination.

The recoverable amount of an individual asset or cash-generating unit is the higher of its value in use and its fair value less costs to sell. An impairment loss is recognized if

252

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

the carrying amount of an asset or cash-generating unit exceeds the recoverable amount.

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

An impairment loss in respect of goodwill is not reversed. For other non-financial assets, an impairment loss is reversed only to the extent that the asset's carrying amount that would have been determined (net of depreciation or amortization) had no impairment loss been recognized for the assets in prior years.

(XV) Provisions for liabilities

Provisions are recognized when the Group has a present obligation as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.

A provision for maintenance is recognized when the underlying products or services are sold. The provision is estimated based on historical maintenance rates and maintenance cost per unit.

(XVI) Revenue recognition

Revenue is measured based on the consideration to which the Group expects to be entitled in exchange for transferring goods or services to a customer. The Group recognizes revenue when it satisfies a performance obligation by transferring control of goods or services to a customer. Transfer of control of the product occurs when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer's acceptance of the products. Delivery occurs when the products are shipped to the specific location, the risks of obsolescence and loss are transferred to the customer, and either the customer accepts the products according to the sales contract with the acceptance provisions being invalid or the Group has objective evidence that all criteria for acceptance have been satisfied.

(XVII) Government grant

When the Group can receive the government grant relating to the operating activities, such grant with no conditions attached is recognized as non-operating income. The Group recognizes the grant relating to assets as deferred income at fair value when there is reasonable assurance that the Group will comply with the conditions attached to the grant and that the grant will be received. The above deferred income is recognized as non-operating income over the estimated useful lives of the related assets on a systematic basis. If the government grant is used to compensate the Group's expenses or losses, such government grant is recognized in profit or loss over the period necessary to match it with the related expenses, for which it is intended to compensate, on a systematic basis.

(XVIII) Employee benefits

1. Defined contribution plans

Obligations for contributions to defined contribution pension plans are expensed during the period in which employees render services.

  1. Defined benefit plans

253

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

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

The defined benefit obligation is calculated annually by qualified actuaries using the projected unit credit method. When the calculation result may be beneficial to the Group, the recognized assets shall be limited to the present value of any economic benefits available in the form of refunding the contribution from the plan or reducing the future contribution to the plan. When calculating the present value of economic benefits, the minimum contribution requirements are considered.

The remeasurements of the net defined benefit liability comprise actuarial gains and losses, return on plan assets (excluding interest), and any changes in the effect of the asset ceiling (excluding interest). The remeasurements of the net defined benefit liability are recognized in other comprehensive income and reflected in retained earnings. The net interest expense (income) of the net defined benefit liabilities (assets) is calculated based on the net defined benefit liabilities (assets) and the discount rate determined at the beginning of the annual reporting period. The net interest expense and other expenses of the defined benefit plan are recognized in profit or loss.

When the plan is revised or reduced, the amount of changes in benefits related to the past service costs or reduced benefits or losses is recognized in profit or loss. When the settlement occurs, the Group shall recognize the settlement gain or loss of the defined benefit plan.

3. Short-term employee benefits

Short-term employee benefit obligations are expensed during the period in which employees render services. If the Group has a present legal or constructive obligation to make such payments as a result of past service provided by the employees and the obligation can be estimated reliably, the amount of payments is recognized as a liability.

(XIX) Income Tax

Income taxes comprise current taxes and deferred income taxes. Current and deferred income taxes are recognized in profit or loss unless they relate to business combinations or items recognized directly in equity or other comprehensive income.

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

Deferred income taxes are recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred income taxes are not recognized for the following temporary differences:

254

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

  1. Temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

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

  3. Taxable temporary differences arising from the initial recognition of goodwill.

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

Deferred income taxes are measured at tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.

Deferred income tax assets and deferred income tax liabilities are offset when the following criteria are met:

  1. The Group has a legally enforceable right to set off current income tax assets against current income tax liabilities; and

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

  3. (1) The same taxable entity; or

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

(XX) Business combinations

The Group accounts for business combinations using the acquisition method. The goodwill arising from an acquisition is measured as the excess of the acquisition-date fair value of consideration transferred, including the amount of non-controlling interest in the acquiree, over the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed (generally at fair value). If the amount calculated above is a deficit balance, the Group recognizes that amount as a gain on a bargain purchase in profit or loss immediately after reassessing whether it has correctly identified all of the assets acquired and all of the liabilities assumed.

Acquisition-related costs are expensed as incurred except for the costs related to issuance of debt or equity instruments.

255

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

On an transaction-by-transaction basis, the Group measures any non-controlling interests in the acquiree at the non-controlling interest's proportionate share of the acquiree's identifiable net assets, if the non-controlling interests are present ownership interests and entitle their holders to a proportionate share of the acquiree's net assets in the event of liquidation.

(XXI) Earnings per Share

The basic and diluted EPS attributable to stockholders of the Company are disclosed in the Consolidated Financial Statements. Basic EPS of the Group is calculated by dividing net income attributable to stockholders of the Company by the weighted-average number of common shares outstanding during the year. In calculating diluted EPS, the net income attributable to stockholders of the Company and weighted-average number of common shares outstanding during the year are adjusted for the effects of dilutive potential common shares. The Group's dilutive potential common shares include estimates of employee compensation.

(XXII) Segment Information

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Group). Operating results of the operating segment are regularly reviewed by the Group's key operation decision maker, who determine the allocation of resources to the segment and assesses its performance.

V. Primary Sources of Uncertainties in Material Accounting Judgments, Estimates, and Assumptions

The preparation of the Consolidated Financial Statements in conformity with IFRS endorsed by the Financial Supervisory Commission requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from the estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in the future periods affected.

The Consolidated Financial Statements involve material judgment as to whether the Group has substantive control over the investee, FSP Group USA Corp. and it has a material impact on the amounts recognized in the Consolidated Financial Statements. The related information is as follows:

The Group holds 45% of the shares of FSP Group USA Corp., and the remaining 55% of the shares are held by the other three shareholders. In the past years, these three shareholders attended each shareholders’ meeting and hence the Group did not have more than half of the voting rights. These three shareholders may jointly exercise the right of consent at the shareholders’ meeting due to the same position. In addition, the Group did not assume the position of director, so it was determined that the Group only has significant influence over FSP Group USA Corp.

In the Consolidated Financial Statements, there is no accounting policy that involves significant estimates and assumptions, and the information on accounting policies does not have a material impact on the amounts recognized in the Consolidated Financial Statements.

256

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

VI. Details of Significant Accounts

(I)

Cash and cash equivalents
Cash on hand
Cash equivalents
Money market funds
Repurchase agreements
Deposits in saving accounts and checking
accounts
Time deposits		 2021.12.31
$ 10,346
21,651
-
1,772,124
990,132		 2020.12.31
7,111
21,763
114,435
1,368,659
1,539,149
3,051,117

$
2,794,253

Please refer to Note VI(XXV) for the disclosure of interest rate risk of the Group’s financial assets and liabilities.

(II)
Financial assets at fair value through profit or loss
2021.12.31
Financial assets mandatorily measured at fair
value through profit or loss
Non-derivative financial assets
Beneficiary certificates
$ 232,758
Private equity funds
12,000
Foreign unlisted stocks
71,632
Structured deposits
199,684
Total
$
516,074		 (II)
Financial assets at fair value through profit or loss
2021.12.31
Financial assets mandatorily measured at fair
value through profit or loss
Non-derivative financial assets
Beneficiary certificates
$ 232,758
Private equity funds
12,000
Foreign unlisted stocks
71,632
Structured deposits
199,684
Total
$
516,074		 2020.12.31
210,388
-
67,232
288,112
565,732

$
516,074

As of December 31, 2021 and 2020, the Group held structured deposits and expected yields ranged from 1.40% to 3.30% with maturity from January 2022 to March 2022, and 1.65% to 4.25% with maturity from January 2021 to February 2021, respectively.

The Group recognized dividend income of NT$420 thousand and NT$0 in 2021 and 2020 respectively from the above financial assets at fair value through profit or loss.

Please refer to Note VI(XXIV) for the amounts recognized in profit or loss arising from remeasurement at fair value.

Please refer to Note VI(XXV) for the information of market risk.

257

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

(III) Financial assets at fair value through other comprehensive income

Equity instruments at fair value through other
comprehensive income
Domestic listed stock - Voltronic Power
Technology Corp.
Domestic listed stock - JESS-LINK Products
Co., Ltd.
Domestic listed stock - WT Microelectronics
Co., Ltd.
Domestic listed stock - Taiwan Cement
Corp.
Domestic listed stock - Taiwan
Semiconductor Manufacturing Co., Ltd.
Foreign listed stocks
Foreign unlisted stocks
Domestic unlisted stocks
Total		 2021.12.31
$ 6,213,715
351,144
48,950
2,400
6,150
18,118
26,494
96,167		 2020.12.31
5,040,921
109,200
48,550
-
-
19,344
26,494
28,667

$
6,763,138
5,273,176
  1. Investments in equity instruments at fair value through other comprehensive income

The Group holds these investments in equity instruments as long-term strategic investments and are not held for trading purposes, so these investments have been designated to be measured at fair value through other comprehensive income.

The Group recognized dividend income of NT$122,513 thousand and NT$107,452 thousand in 2021 and 2020 respectively from the above investments in equity instruments designated as measured at fair value through other comprehensive income.

In order to meet the needs of funding plan, the Group divested the shares of Voltronic Power Technology Corp. designated at fair value through other comprehensive income in 2021 and 2020 and the fair value at the time of disposal was NT$660,425 thousand and NT$216,963 thousand with disposal gains of NT$658,165 thousand and NT$215,901 thousand, respectively. The Group also divested the shares of FSP-Powerland Technology Inc. in July 2020 and the fair value at the time of disposal was NT$84,480 thousand with disposal gains of NT$73,876 thousand.

  1. Please refer to Note VI(XXV) for the information of market risk.

(IV) Financial assets at amortized cost

Financial assets at amortized cost
Corporate bond - Novaland Group (NVL)
Less: Allowance for impairment loss
Total		 2021.12.31
$ 10,800
-
$
10,800		 2020.12.31

-
-

-

The Group assesses that the asset is held to maturity to receive contractual cash flows.

258

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

The asset is classified as financial assets at amortized cost because the cash flows from the financial asset are solely the payment of principal and interest on the outstanding principal amount.

  1. In June 2021, the Group purchased the corporate bond of Novaland Group (NVL) due in 18 months at a face value of NT$10,959 thousand with a coupon rate of 10.00%.

  2. Please refer to Note VI(XXV) for the information of credit risk.

(V)

Notes receivable and accounts receivable

Notes receivable
Accounts receivable
Accounts receivable - related parties
Less: Allowance for impairment loss		 2021.12.31
$ 62,112
3,904,501
801,748
(39,771)		 2020.12.31

85,453

3,649,003

616,753

(42,029)

$
4,728,590


4,309,180

Group's notes receivable and accounts receivable were not discounted or provided as collaterals.

The Group applies the simplified approach to estimate expected credit loss for all notes receivable and accounts receivable, i.e. the use of lifetime expected credit loss for all receivables. For the measurement purpose, notes receivable and accounts receivable are grouped according to common credit risk characteristics that represent the customer's ability to pay all amounts due under the terms of the contract. Forwardlooking information, including macro economy and related industry information, is taken into consideration as well.

Analysis of expected credit loss on notes receivable and accounts receivable of the Group's operating entity in Taiwan was as follows:

Not Past Due
Past due within 30 days
Past due 31-60 days
Past due 61-90 days
Past due 91-120 days
Past due over 121 days		 2021.12.31 Allowance for
expected
credit loss
10,532
15,748
1,000
1,978
64
2,412
31,734
Carrying
amount of
notes
receivable and
accounts
receivable		 Weighted-
average
expected
credit loss
rate (%)

0~0.35

14.41

40.57

72.80

82.48

100.00
$ 3,511,925
109,271
2,464
2,717
78
2,412

$
3,628,867

259

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

The carrying amount of the above notes and accounts receivable did not include the account receivable due from a specific customer, amounting to NT$5,361 thousand. Due to poor recovery of the account receivable due from this customer, the Group has specifically recorded an allowance for loss of NT$1,072 thousand for this uncollected payment, net of insurance claims, and therefore the amount was excluded from the above calculation of allowance for expected credit loss.

2020.12.31

Not Past Due
Past due within 30 days
Past due 31-60 days
Past due 61-90 days
Past due 91-120 days
Past due over 121 days		 Carrying
amount of
notes
receivable and
accounts
receivable
$ 3,135,248
18,100
6,053
4,068
823
12,272		 Weighted-
average
expected
credit loss
rate (%)

0~0.20

12.38

37.90

73.31

82.27

100.00
 Allowance for
expected
credit loss
5,385
2,241
2,294
2,982
677
12,272
25,851

$
3,176,564

The carrying amount of the above notes and accounts receivable did not include the account receivable due from a specific customer, amounting to NT$19,793 thousand. Due to poor recovery of the account receivable due from this customer, the Group has specifically recorded an allowance for loss of NT$3,959 thousand for this uncollected payment, net of insurance claims, and therefore the amount was excluded from the above calculation of allowance for expected credit loss.

The analysis of the expected credit loss on notes receivable and accounts receivable for the Group's operating entities in Mainland China is provided below:

2021.12.31

Not Past Due
Past due within 30 days
Past due 31-60 days
Past due 61-90 days
Past due 91-120 days
Past due over 121 days		 Carrying
amount of
notes
receivable and
accounts
receivable
$ 939,699
21,821
5,407
2,497
-
13		 Weighted-
average
expected
credit loss
rate (%)

0.04

0.04

0.04

0.04
0.04

0.04
 Allowance for
expected
credit loss

366

8

2

1

-
-
377
$
969,437

260

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

Not Past Due
Past due within 30 days
Past due 31-60 days
Past due 61-90 days
Past due 91-120 days
Past due over 121 days		 2020.12.31 2020.12.31 Allowance for
expected
credit loss

5,759

229

125

10

-
38
Carrying
amount of
notes
receivable and
accounts
receivable
$ 997,880
39,604
21,725
1,756
-
6,542		 Weighted-
average
expected
credit loss
rate (%)

0.58

0.58

0.58

0.58
0.58

0.58

$
1,067,507		 6,161

The analysis of the expected credit loss on notes receivable and accounts receivable for other operating entities of the Group is provided below:

Not Past Due
Past due within 30 days
Past due 31-60 days		 2021.12.31 Allowance for
expected
credit loss
-
-
-
Carrying
amount of
notes
receivable and
accounts
receivable
$ 139,257
17,666
1,185		 Weighted-
average
expected
credit loss
rate (%)

-

-

-

$
158,108		 -

The carrying amount of the above notes and accounts receivable did not include the accounts receivable due from certain customers, amounting to NT$6,588 thousand. As the accounts receivable due from these customers were unlikely to recover, the Group has recognized allowance for full losses, and therefore they were excluded from the above calculation of allowance for expected credit loss.

261

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

Not Past Due
Past due within 30 days
Past due 31-60 days
Past due 61-90 days		 2020.12.31 Allowance for
expected
credit loss
-
-
-
-
Carrying
amount of
notes
receivable and
accounts
receivable		 Weighted-
average
expected
credit loss
rate (%)

-

-

-

-
$ 63,485
11,455
5,809
538
$
81,287		 -

The carrying amount of the above notes and accounts receivable did not include part of account receivable due from a specific customer, amounting to NT$6,058 thousand. As the accounts receivable due from these customers were unlikely to recover, the Group has recognized allowance for full losses, and therefore they were excluded from the above calculation of allowance for expected credit loss.

Changes in the allowance for notes receivable and accounts receivable were as follows:

Beginning balance
Acquired through business combination
Impairment losses recognized
Write-off
Effect of exchange rate changes
Ending balance
(VI)
Other receivables
Other receivables
Less: Loss allowances
Changes in loss allowance for other receivables:
Beginning balance
Reversal of impairment loss
Effect of exchange rate changes
Ending balance		 2021
$ 42,029
1,073
3,828
(6,613)
(546)		 2020

37,515

-

8,611

(3,953)

(144)
42,029
2020.12.31

70,402

(5,348)
65,054
2020

5,629

-

(281)
5,348

$
39,771

2021.12.31
$ 73,866
(460)

$
73,406


2021
$ 5,348
(4,794)
(94)

$
460

262

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

(VII) Inventories

Inventories
Finished goods
Work in process
Raw materials
Breakdown of cost of goods sold:
Inventories sold
Inventory valuation loss (reversal gain)
Loss (gain) on inventory counts
Unallocated manufacturing expense
Loss on inventory obsolescence
Income from sales of scraps		 2021.12.31
$ 1,844,900
712,743
1,032,903		 2020.12.31

1,465,495

582,371

607,465

2,655,331
2020
12,689,669
(21,110)
(2)
12,515
49,312
(253)
12,730,131

$
3,590,546

2021
$ 14,070,012
9,910
171
87,495
57,613
(1)

$
14,225,200

As of December 31, 2021 and 2020, the Group did not pledge any inventories as collateral.

(VIII) Non-current assets held for sale

In line with the land acquisition reserve plan of Wuxi Xinwu District Land Reserve Center, on June 28, 2019, the Board of Directors of the Group resolved to sell the right-of-use assets - land, buildings and construction of its subsidiary, WUXI Zhonghan. In August 2019, the Group entered into a sale contract with Wuxi Xinwu District Land Reserve Center for NT$421,714 thousand for the above-mentioned

right-of-use, buildings and construction. In accordance with the contract, the first installment of NT$130,300 thousand was received in September 2019, and the second installment of NT$161,114 thousand was received in June 2020. The transfer registration was completed and disposal gain of NT$326,059 thousand was recognized. The final payment of NT$130,300 thousand has been received in November 2020.

To cooperate with the Jian National High-tech Industrial Development Zone Management Committee of Jian County in Jiangxi Province for its Land Acquisition and Reserve plan, the Group's Board of Directors resolved on August 7, 2021 to sell the right-of-use assets - land, buildings and construction of its subsidiary, Hao Han. In August 2021, the Group signed a sales contract with Asap Electronics (Jiangxi) Co., Ltd., and the disposal amount of above-mentioned right-of-use, buildings and construction was NT$87,067 thousand. In accordance with the contract, the first installment of NT$34,827 thousand was received in August 2021. The transfer registration was completed in December 2021 and disposal gain of NT$72,399 thousand was recognized. The final payment of NT$52,240 thousand was also received in December 2021.

263

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

(IX) Investments Accounted for Using the Equity Method

A summary of the Group's investments accounted for using the equity method at the reporting date is provided below:

Associate 2021.12.31
$
26,947		 2020.12.31
25,319

1. Associate

Aggregated financial information on associates that were accounted for using the equity method and were not individually material to the Group is summarized below. These financial information was included in the amount of the Consolidated Financial Statements.

below. These financial information was
Consolidated Financial Statements.		 included in the amount of the
The carrying amount of investments in
associates that were not individually
material to the Group at the end of the
period
Attributable to the Group:
Income from Continuing Operations
Other comprehensive income
Total comprehensive income		 2021.12.31
$
26,947		 2020.12.31
25,319

2021
$ 3,284
(809)
2020

3,049

(1,400)

$
2,475


1,649
  1. Collateral

As of December 31, 2021 and 2020, the Group did not pledge any investments accounted for under the equity method as collateral.

(X) Acquisition of subsidiaries and non-controlling interests

In order to expand the business in Turkey, the Group acquired 91.41% of the shares of FSP Turkey for NT$22,640 thousand (US$800 thousand) on May 31, 2021, and gained control over the company.

For the seven-month period from the acquisition date to December 31, 2021, the revenue and net profit contributed by FSP Turkey amounted to NT$49,700 thousand and NT$4,951 thousand, respectively. If the acquisition had occurred on January 1, 2021, management estimates that the Group's revenue in 2021 would have reached NT$16,694,312 thousand with a net income of NT$802,525 thousand. When estimating these amounts, management has assumed that the fair value adjustments on the date of acquisition had been the same and the acquisition had occurred on January 1, 2021.

The fair values of the major categories of consideration transferred at the date of acquisition were as follows: Cash $ 22,640

264

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

As of May 31, 2021, the fair value of identifiable assets and liabilities was as follows: As of May 31, 2021, the fair value of identifiable assets and liabilities was as follows: As of May 31, 2021, the fair value of identifiable assets and liabilities was as follows:
Cash and cash equivalents $ 26,472
Net notes receivable 494
Net accounts receivable 11,899
Inventories 16,528
Prepayments 6,172
Other current assets 309
Property, Plant, and Equipment 736
Other Non-Current Assets 2
Accounts payable (8,796)
Other payables (19,665)
Other current liabilities (6,624)
$ 27,527
Gains on bargain purchase arising from acquisition:
Transfer Price $ 22,640
Add: Non-controlling interests (measured by non-controlling
interest's proportionate share of identifiable net assets) 2,364
Less: The fair value of identifiable net assets (27,527)
Gains on bargain purchase (recognized in other income) $ (2,523)

(XI) Property, Plant, and Equipment

The changes in costs, depreciation and impairment loss of property, plant and equipment for the years ended December 31, 2021 and 2020 were as follows:

Cost or deemed cost:
Balance as of January 1,
2021
Acquired through business
combinations (Note VI (X))
Addition
Disposal and obsolescence
Reclassification (Note 1)
Effect of exchange rate
changes
Balance as of December 31,
2021
Balance as of January 1,
2020
Addition
Disposal and obsolescence
Reclassification (Note 1)
Effect of exchange rate
changes
Balance as of December 31,
2020
Depreciation and impairment
loss:
Balance as of January 1,
2021
Acquired through business
combinations (Note VI (X))
Recognition in current
period
Disposal and obsolescence
Reclassification (Note 1)		 Land
$ 310,476
-
-
-
-
-		 Housing and
Construction

1,098,471
-
56,261
(2,295)
5,685
(2,383)		 Buildings and
Building
Improvements
27,416
-
351
-
-
(178)
27,589
24,402
2,670
(85)
-
429
27,416
5,371
-
2,044
-
-		 Buildings and
Building
Improvements
27,416
-
351
-
-
(178)
27,589
24,402
2,670
(85)
-
429
27,416
5,371
-
2,044
-
-		 Machinery

1,110,067
222

80,919
(7,804)
2,279
(8,596)		 Transportation
Equipment
16,812
-
3,460
(1,111)
-
(130)
19,031
16,638
-
-
-
174
16,812
13,354
-
952
(1,102)
-		 Transportation
Equipment
16,812
-
3,460
(1,111)
-
(130)
19,031
16,638
-
-
-
174
16,812
13,354
-
952
(1,102)
-		 Other
Equipment

435,223
533

40,487

(5,872)
5,513
(1,582)		 Leasehold
Improvements
66,062
-
6,684
-
2,112
(651)
74,207
59,361
8,747
(3,517)
273
1,198
66,062
21,343
-
8,368
-
-		 Leasehold
Improvements
66,062
-
6,684
-
2,112
(651)
74,207
59,361
8,747
(3,517)
273
1,198
66,062
21,343
-
8,368
-
-		 Construction
in progress
and
equipment
under
installation

78,707
-

24,157
-

(74,989)
-		 Total

3,143,234
755

212,319
(17,082)

(59,400)
(13,520)
$
310,476
1,155,739
27,589
1,177,087
19,031
474,302
74,207		 27,875
3,266,306

$ 310,476
-
-
-
-

1,090,077
3,000
(233)
103
5,524
24,402
2,670
(85)
-
429

1,006,278

110,093

(28,661)
7,905
14,452
16,638
-
-
-
174

419,807
19,679
(6,544)
961
1,320
59,361
8,747
(3,517)
273
1,198

3,417

75,308

-

(18)
-

2,930,456

219,497
(39,040)

9,224
23,097
$
310,476
1,098,471		 27,416
1,110,067		 16,812
435,223
66,062		 78,707
3,143,234

$ -
-
-
-
-
479,797
-
46,470
(1,790)
(53,634)
5,371
-
2,044
-
-

751,234
-

86,989
(7,395)
-
13,354
-
952
(1,102)
-

348,326
19

37,011

(5,815)
-
21,343
-
8,368
-
-

-
-

-
-
-
1,619,425
19
181,834
(16,102)
(53,634)

265

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

Effect of exchange rate
changes
Balance as of December 31
2021
Balance as of January 1,
2020
Recognition in current
period
Disposal and obsolescence
Reclassification (Note 1)
Effect of exchange rate
changes
Balance as of December 31
2020
Carrying amounts:
Balance as of December 31
2021
Balance as of December 31
2020		 Land
-		 Housing and
Construction
(1,781)		 Buildings and
Building
Improvements
(28)
7,387
3,418
1,871
(16)
-
98
5,371
20,202
22,045		 Buildings and
Building
Improvements
(28)
7,387
3,418
1,871
(16)
-
98
5,371
20,202
22,045		 Machinery
(6,482)		 Transportation
Equipment
(119)
13,085
12,325
904
-
-
125
13,354
5,946
3,458		 Transportation
Equipment
(119)
13,085
12,325
904
-
-
125
13,354
5,946
3,458		 Other
Equipment
(877)		 Leasehold
Improvements
(376)
29,335
15,478
6,799
(1,437)
93
410
21,343
44,872
44,719		 Leasehold
Improvements
(376)
29,335
15,478
6,799
(1,437)
93
410
21,343
44,872
44,719		 Construction
in progress
and
equipment
under
installation
-		 Total
(9,663)
,
,
,
,
$
-
469,062
7,387
824,346
13,085
378,664
29,335		 -
1,721,879
$ -
-
-
-
-
428,775
47,077
(168)
-
4,113
3,418
1,871
(16)
-
98

692,475

77,459

(27,580)
84
8,796
12,325
904
-
-
125

319,147

35,591
(6,371)
(912)
871
15,478
6,799
(1,437)
93
410
-

-

-

-
-
1,471,618
169,701
(35,572)
(735)
14,413
$
-
479,797		 5,371
751,234		 13,354 348,326 21,343 -
1,619,425
$
310,476
686,677
20,202
352,741
5,946
95,638
44,872		 27,875
1,544,427

$
310,476
618,674
22,045
358,833
3,458
86,897
44,719
78,707
1,523,809

Note 1. For the years ended December 31, 2021 and 2020, the amount transferred from equipment prepayment was NT$7,606 thousand and NT$9,959 thousand, respectively.

Note 2. For the year ended December 31, 2021, the cost and accumulated depreciation transferred to non-current assets held for sale were NT$67,006 thousand and NT$53,634 thousand, respectively.

Note 3. For the year ended December 31, 2020, the cost and accumulated depreciation transferred to intangible assets were NT$735 thousand and NT$735 thousand, respectively.

Please refer to Note VIII for the details of property, plant and equipment that have been pledged as collaterals for long-term and short-term borrowings and credit facilities as of December 31, 2021 and 2020.

(XII) Right-of-use assets

The changes in the costs and depreciation of land, buildings and construction, transportation equipment and office equipment leased by the Group were as follows:

Costs of right-of-use assets:
Balance as of January 1,
2021
Addition
Reduction (contract expired
and early termination of
contract)
Reclassification to non-
current assets held for sale
Effect of exchange rate
changes
Balance as of December 31,
2021
Balance as of January 1,
2020
Addition
Reduction (contract
modification, contract
expired and early
termination of contract)
Effect of exchange rate
changes
Balance as of December 31,
2020
Depreciation of right-of-use
assets:
Balance as of January 1,		 Land
$ 29,112
-
-

(1,435)
(131)		 Housing and
Construction

783,629
299,435
(13,797)

-
(22,607)		 Transportation
Equipment

3,404

716

(661)
-

(8)
3,451

3,104

784

(501)

17
3,404

1,561		 Transportation
Equipment

3,404

716

(661)
-

(8)
3,451

3,104

784

(501)

17
3,404

1,561		 Office
Equipment

-

-

-
-

-		 Total
816,145
300,151
(14,458)
(1,435)
(22,746)









$
27,546
1,046,660
3,451
-
1,077,657

$ 29,018
-
(197)
291

769,019
12,727

(6,593)
8,476
3,104
784
(501)
17
229

-

(229)

-
801,370
13,511
(7,520)
8,784
$
29,112
783,629		 3,404 -
816,145

$ 2,154

299,010
1,561
-
302,725

266

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

2021
Depreciation in current
period
Reduction (contract expired
and early termination of
contract)
Reclassification to non-
current assets held for sale
Effect of exchange rate
changes
Balance as of December 31,
2021
Balance as of January 1,
2020
Depreciation in current
period
Reduction (contract expired
and early termination of
contract)
Effect of exchange rate
changes
Balance as of December 31,
2020
Carrying amounts:
Balance as of December 31,
2021
Balance as of December 31,
2020		 Land
1,055
-
(139)
(8)		 Housing and
Construction

155,932
(9,837)

-
(7,860)		 Transportation
Equipment

1,028

(661)
-

(11)
1,917

1,005

1,049

(501)

8
1,561
1,534
1,843		 Transportation
Equipment

1,028

(661)
-

(11)
1,917

1,005

1,049

(501)

8
1,561
1,534
1,843		 Office
Equipment

-

-
-

-		 Total
158,015
(10,498)
(139)
(7,879)







$
3,062
437,245
1,917
-
442,224

$ 1,073
1,066
-
15

150,443

144,983
(2,553)
6,137
1,005
1,049
(501)
8
171

58

(229)

-
152,692
147,156
(3,283)
6,160
$
2,154
299,010		 1,561 -
302,725

$
24,484
609,415
1,534		 -
635,433

$
26,958
484,619
1,843		 -
513,420

(XIII) Intangible assets

The changes in costs, amortization and impairment loss of intangible assets for the years ended December 31, 2021 and 2020 were as follows:

Costs:
Balance as of January 1, 2021
Addition in current period
Reduction in current period
Effect of exchange rate changes
Balance as of December 31,
2021
Balance as of January 1, 2020
Addition in current period
Reduction in current period
Reclassification (Note)
Effect of exchange rate changes
Balance as of December 31,
2020		 Goodwill Patent

15,863

-

-
-		 Total
247,386
7,190
(4,437)
(1)
250,138
245,336
1,513
(200)
735
2
247,386

$
218,672
15,603		 15,863


$ 218,672
10,801
-
1,513
-
(200)
-
735
-
2

15,863

-

-

-
-
$
218,672
12,851		 15,863

267

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

Amortization and impairment
loss:
Balance as of January 1, 2021
Amortization for the period
Reduction in current period
Effect of exchange rate changes
Balance as of December 31,
2021
Balance as of January 1, 2020
Amortization for the period
Reduction in current period
Reclassification (Note)
Effect of exchange rate changes
Balance as of December 31,
2020
Carrying amounts:
Balance as of December 31,
2021
Balance as of December 31,
2020		 Goodwill Software
cost
10,485
4,732
(4,437)
(1)		 Patent

15,863

-

-
-		 Total
26,348
4,732
(4,437)
(1)
26,642
21,920
3,891
(200)
735
2
26,348
223,496
221,038
$ -
-
-
-
$
-
10,779		 15,863
$ -
-
-
-
-
6,057
3,891
(200)
735
2

15,863

-

-

-
-
$
-		 10,485 15,863

$
218,672
4,824
-


$
218,672
2,366		 -

Note: Transferred from property, plant and equipment.

  1. Amortization expenses

The amortization of intangible assets was included in the following items of the Statements of Comprehensive Income for the years ended December 31, 2021 and 2020:

Operating costs
Operating expenses		 2021
$ 378
4,354		 2020

355

3,536

  1. Impairment test for goodwill

  2. (1) For the purpose of impairment test, goodwill is allocated to the Group's operating units, which are the smallest levels used by the Group to monitor goodwill for internal management purposes and shall not be larger than the operating departments of the Group. Allocation of the carrying amount of goodwill as of December 31, 2021 and 2020 was as follows:

FSP Technology Inc., Kaohsiung Branch
3Y Power		 2021.12.31
$ 114,411
104,261		 2020.12.31

114,411

104,261

218,672

$
218,672

268

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

  • (2) The recoverable amount of the cash-generating unit is based on its value in use. Value in use is determined by discounting the future cash flows arising from the continuing use of the unit. The calculation of the value in use (including goodwill) is based on the following key assumptions:

    • A. The cash flow projections were based on historical figures, actual operating results and 5-year business plan. Cash flows beyond 5 years have been projected with zero growth rate.

    • B. The Group estimated the pre-tax discount rate based on the weightedaverage cost of capital, which was 9.10% and 9.44% for the years ended December 31, 2021 and 2020, respectively.

  • (3) According to the asset impairment test conducted in 2021 and 2020, no impairment losses were recognized as the recoverable amount of cashgenerating unit was higher than the carrying amount.

  • (XIV) Short-term loans

The details of the Group's short-term borrowings are provided below:

Credit loans
Unused facility
Interest rate range		 2021.12.31
$
16,315		 2021.12.31
$
16,315		 2020.12.31

32,162
927,046
0.98~4.32

$
803,882

1.00~2.26

Please refer to Note VIII for the details of the Group's assets pledged as collateral for bank borrowings.

  • (XV) Long-term loans

The details of the Group's long-term borrowings are provided below:

Secured bank borrowings
Less: current portion of long-term debt
Total
Unused facility
Interest rate range		 2021.12.31
$ 272,348
73,014		 2021.12.31
$ 272,348
73,014		 2020.12.31

123,243

12,559
110,684
259,930
1.41~1.58

$
199,334

$
20,000

1.41~1.58

1. Collateral for bank borrowings

Please refer to Note VIII for the details of the Group's assets pledged as collateral for bank borrowings.

269

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

  1. Government-subsidized loan with preferential interest rate

In August 2020, the Group obtained a NT$371,000 thousand low-interest loan from Mega International Commercial Bank under the "Guidelines of Project Loans for Returning Overseas Taiwanese Businesses". Drawdown period was until December 31, 2021 and multiple drawdowns were allowed. For the periods from January 1, 2021 to December 31, 2021 and from August 3, 2020 to December 31, 2020, the amount of actual utilization was NT$185,580 thousand and NT$111,070 thousand respectively. Based on market interest rate of 1.58% to recognize and measure the loan, the difference between the actual repayment preferential interest rate of 0.65% and the market interest rate was NT$3,591 thousand and NT$2,994 thousand respectively, which were treated as government subsidies and recognized as deferred income under other current liabilities and other non-current liabilities.

  • (XVI) Lease liabilities

The carrying amount of lease liabilities were as follows:

Current
Non-current
Total		 2021.12.31
$ 166,758
474,996		 2020.12.31

151,461

371,116

522,577

$
641,754

Please refer to Note VI(XXV) Financial Instrument for the maturity analysis. The amounts recognized in profit or loss were as follows:

2021 2020
Interest expense on lease liabilities $ 7,933 10,041
Variable lease payments not included in the
measurement of lease liabilities $ 1,675 1,208
Expenses of short-term leases $ 10,821 5,938
Expenses relating to leases of low-value assets
(excluding short-term leases of low-value
assets) $ 102 63
Rent concession arising from the COVID-19
pandemic (recognized in other income) $ - 14,763
Amount recognized in the Statements of Cash Flows was as follows:
2021 2020
Total cash outflow in operating activities $ 20,531 17,250
Total cash outflow in financing activities 162,242 134,460
Total cash flows on lease $ 182,773 151,710

270

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

  1. Lease of land, buildings and construction

The Group leases land, buildings and construction as factories, office premises, staff quarters and warehouses with lease terms ranging from 1 to 10 years. Some of these leases include the option to extend the lease term for the same period as the original contract at the end of the lease term.

The lease payments for some of the warehouses are based on the actual floor area used each month.

For these lease contracts, the variable lease payments paid by the Group in 2021 were as follows:

Lease contracts with variable payment
calculated based on the actual floor area
used per month		 Variable
payment
$
1,675		 Estimated
impact on
lease payment
for each 1%
increase in the
actual floor
area used

17
  1. Other leases

The Group leases machinery and transportation equipment with the lease terms ranging from three months to eight years.

The lease terms of some of Group's leases of buildings, construction, machinery and transportation equipment are within 1 year. These leases are considered as short-term leases or leases of low-value assets and the Group elected to apply exemption and did not recognize related right-of-use assets and lease liabilities.

(XVII) Provisions for liabilities

Balance at January 1
Addition of provision during the year
Amount utilized during the year
Balance at December 31		 2021
$ 157,190
116,273
(127,240)		 2020
145,337
88,886
(77,033)
157,190

$
146,223

The provision of the Group is mainly for sales-related maintenance obligation. The provision is estimated based on historical maintenance rates and maintenance cost per unit of specific products.

(XVIII) Employee benefits

  1. Defined benefit plans

The reconciliation between the present value of defined benefit obligations and the fair value of plan assets was as follows:

271

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

Present value of defined benefit obligation
Fair value of plan assets
Net defined benefit liabilities
Recorded under other non-current assets
Recorded under net defined benefit
liabilities		 2021.12.31
$ 214,365
(176,113)		 2020.12.31

218,482

(165,115)

$
38,252

53,367

$
5,982
3,851

$
44,234
57,218

The Group makes contribution of defined benefit plan to the labor pension reserve account at Bank of Taiwan. Under the Labor Standards Act, pension benefit of each eligible employee is calculated based on the number of units accrued from service years and the average monthly salaries of the last 6 months prior to retirement.

(1) Composition of plan assets

The pension fund contributed by the Group is managed and administered by the Bureau of Labor Funds of the Ministry of Labor (the “Bureau of Labor Funds”). According to the “Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund”, with regard to the utilization of the Fund, minimum returns per year shall not be lower than the earnings attainable from two-year time deposits with interest rates offered by local banks.

As of December 31, 2021, the balance of the labor pension reserve account at Bank of Taiwan was NT$175,295 thousand. For information on the labor pension fund assets, including yield of the fund and the asset portfolio, please refer to the website of the Bureau of Labor Funds.

  • (2) Changes in present value of the defined benefit obligations

Changes in present value of the defined benefit obligations in 2021 and 2020 were as follows:

Defined benefit obligations at January 1
Service costs and interest in the year
Remeasurement on the net defined
benefit liabilities (assets)
- Actuarial loss arising from experience
adjustments
- Actuarial loss arising from changes in
demographic assumption
- Actuarial loss (gain) arising from
changes in financial assumption
Benefits paid by the plan
Effect of plan curtailment
Defined benefit obligations at
December 31		 2021
$ 218,482
3,452
3,327
459
(8,418)
(2,937)
-		 2020
209,840
2,680
2,900
294
9,629
(5,694)
(1,167)
$
214,365
218,482

272

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

  • (3) Changes in fair value of plan assets

Changes in fair value of defined benefit plan assets for the years ended December 31, 2021 and 2020 were as follows:

Fair value of plan assets on January
1
Interest income
Remeasurement on the net defined
benefit assets - Return on plan
assets (excluding interests)
Amount contributed to the plan
Benefits paid by the plan
Fair value of plan assets on
December 31		 2021
$ (165,115)
(486)
(2,444)
(11,005)
2,937		 2020
(153,663)
(1,125)
(5,032)
(10,460)
5,165

$
(176,113)
(165,115)
  • (4) Expenses recognized in profit or loss

Details of expenses (gains) recognized in profit or loss for the years ended December 31, 2021 and 2020:

Service costs for the current period
Net interest expense of net defined
benefit liabilities
Operating costs
Selling and marketing expenses
General and administrative expenses
Research and development expenses		 2021
$ 2,812
154		 2020
(20)
408
$
2,966		 388

$ 279
394

1,013
1,280		 (1)
-
389
-

$
2,966		 388
  • (5) Actuarial assumptions

The major assumptions of the actuarial valuation to calculate the present value of the defined benefit obligation at the end of reporting period were as follows:

Discount rate
Future salary increases		 2021.12.31
0.70%
2.00%		 2020.12.31

0.30%

2.00%

The Group estimates to make contribution of NT$4,084 thousand to the defined benefit plan in the year following December 31, 2021.

The weighted-average duration of the defined benefit plan is 9 years.

  • (6) Sensitivity analysis

The impact of a change in assumptions on the present value of the defined benefit obligation as of December 31, 2021 and 2020 is summarized below:

273

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

December 31, 2021
Discount rate (change by 0.25%)
Future salary adjustment rate (change
by 0.25%)
December 31, 2020
Discount rate (change by 0.25%)
Future salary adjustment rate (change
by 0.25%)		 Impact on the defined benefit
obligation
Increase by
0.25%
Decrease by
0.25%
(5,051)
5,256
5,125
(4,951)
(5,458)
5,680
5,513
(5,325)

The above sensitivity analysis considers the change in one assumption at a time, leaving other assumptions unchanged. In practical terms, many assumptions are interrelated and changing one individual assumption may trigger the changes in other assumptions. The method used to conduct the sensitivity analysis is consistent with the calculation of the net pension liabilities recognized in the balance sheets.

The method and assumptions used to conduct the sensitivity analysis are the same as those in the previous year.

2. Defined contribution plans

Per Group's defined contribution plan, the Group contributes monthly an amount equal to 6% of each employee's monthly wages to the employee’s individual pension fund account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under this defined contribution plan, the Group has no legal or constructive obligation to pay additional amounts after contributing a fixed amount to the Bureau of Labor Insurance.

For the years ended December 31, 2021 and 2020, in relation to the defined contribution plan, the Group recognized pension expenses of NT$31,582 thousand and NT$31,833 thousand, respectively, which had been contributed to the Bureau of Labor Insurance.

In accordance with local regulations, other consolidated subsidiaries recognized pension expenses of NT$95,554 thousand and NT$51,483 thousand, respectively, for the years ended December 31, 2021 and 2020.

For the years ended December 31, 2021 and 2020, the Group contributed NT$12,595 thousand and NT$0 respectively to a specific trust account for employee incentives, which were recognized as operating costs and operating expenses.

As of December 31, 2021 and 2020, the Group had accrued unused leave bonuses of NT$44,230 thousand and NT$42,250 thousand, respectively, which were recorded under other payables.

274

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

(XIX) Income Tax

  1. Details of income tax expense (benefit) for the years ended December 31, 2021 and 2020 were as follows:
and 2020 were as follows:
Income tax expense for the period
Income tax expense incurred
Adjustment for prior year
Deferred income tax benefit
Origination and reversal of temporary
differences
Income tax expense		 2021
$ 167,546
2,404		 2020
251,256
(6,740)

169,950
244,516

(10,629)
(2,547)

$
159,321
241,969

Details of income tax expense (benefit) recognized in other comprehensive income for the years ended December 31, 2021 and 2020 were as follows:

Items that will not be reclassified to profit
or loss:
Gains (losses) on re-measurements of
defined benefit plans		 2021
$
1,415		 2020
(1,558)

Reconciliation between the expected income tax expense calculated based on the Group's statutory tax rate and the actual income tax expense reported in the Consolidated Statements of Comprehensive Income was as follows:

Income before Tax
Income tax using the Company's statutory
tax rate
Effect of different tax rates in foreign
jurisdictions
Non-deductible expenses
Cash dividend income
Gains on securities transactions
Gains on exemption from securities
transaction tax
Adjustments in respect of prior years
Tax on undistributed earnings (5%)
Land value increment tax
Tax incentives
Basic income tax amount
Others
Total		 2021
$
960,600		 2020
934,044

$ 192,120
(16,676)
7,540
(24,586)
131,633
(133,335)
2,404
11,505
-
(12,006)
722
-
186,809
(12,765)
12,563
(21,490)
43,180
(44,229)
(6,740)
4,645
86,311
(4,460)
-
(1,855)
$
159,321
241,969

275

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

  1. Deferred income tax assets and liabilities

  2. (1) Unrecognized deferred income tax assets

Group's unrecognized deferred income tax assets:
2021.12.31
Tax loss
$
160,083		 2020.12.31
145,746

In accordance with the U.S. federal tax laws, losses approved by the tax authority may be deducted from the net income of the current year before income tax is assessed. Losses incurred in 2018 and subsequent years can be deducted indefinitely against the taxable income of future years, provided that the amount of offsetting in any profitable year is limited to 80% of the taxable income of that year. Losses incurred before 2018 can be deducted for 20 years, and there is no limit to the deductible amount in a single tax year. The above deferred income tax asset was not recognized as the Group believed that it is not probable that future taxable income will be available against which the Group can utilize the temporary differences.

As of December 31, 2021, the expiry years of unused tax losses were as follows:

Loss year Unused tax loss
$ 20,435
55,006
9,534
6,111
3,499
3,823
9,763
37,575
14,337		 Year of expiry
2009
2010
2013
2014
2015
2017
2018
2019
2020
Total		 2029
2030
2033
2034
2035
2037
No expiry date
No expiry date

No expiry date

$
160,083

(2) Recognized deferred income tax assets and liabilities

Changes in deferred income tax assets and liabilities in 2021 and 2020 were as follows:

Deferred income tax liabilities:
January 1, 2021
Debit income statement
December 31, 2021
January 1, 2020
Debit income statement
December 31, 2020		 Unrealized valuation
gains
$ (2,039)
(880)

$
(2,919)

$ (443)
(1,596)

$
(2,039)

276

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

Deferred income tax assets:
January 1, 2021
(Debit)/Credit income statement
Debit other comprehensive income
Foreign exchange differences
arising from translation of
foreign operations
Foreign exchange differences
arising from translation of
foreign operations
December 31, 2021
January 1, 2020
(Debit)/Credit income statement
Credit other comprehensive income
Foreign exchange differences
arising from translation of
foreign operations
Foreign exchange differences
arising from translation of
foreign operations
December 31, 2020		 Allowance for
inventory
valuation loss		 Pension
provision		 Unrealized
foreign
exchange gain
or loss		 Others
19,530
2,223
-
(136)

21,617
13,545
6,266
-
(281)

19,530		 Total
$ 21,138
2,776
-
(99)
$
23,815
$ 26,438
(5,103)

-
(197)
$
21,138		 9,858
(1,275)
(1,415)
-
7,168
9,982
(1,682)
1,558
-
9,858		 21,855
7,785
-
-
29,640
17,193
4,662
-
-
21,855		 72,381
11,509
(1,415)
(235)
82,240
67,158
4,143
1,558
(478)
72,381

3. Income tax assessment

The tax returns for the years up to 2019 filed by the Company have been approved by the tax authority.

(XX) Capital and other equity

1. Common stock issuance

As of December 31, 2021 and 2020, the Company’s authorized common stock was NT$3,600,000 thousand with the par value of NT$10 per share. 187,262 thousand shares were issued.

The changes in outstanding shares of common stock in 2021 and 2020 were as follows:

Balance at January 1
Retirement of treasury shares
Balance at December 31		 Unit: Thousands of shares
2021
2020
187,262
192,262
-
(5,000)
187,262
187,262
187,262

277

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

2. Capital surplus

Capital surplus Capital surplus
The Company’s capital surplus was as follows:
2021.12.31
Paid-in capital in excess of par value
$ 1,006,236
Adjustments arising from changes in
percentage of ownership in subsidiaries
4,780
$
1,011,016		 2020.12.31

1,006,236

4,780

1,011,016

$
1,011,016

Pursuant to the Company Act, any realized capital surplus is initially used to cover accumulated deficit, and the balance, if any, can be transferred to common stock as stock dividends or distributed by cash based on the original shareholding percentage. Realized capital surplus includes the premium derived from the issuance of shares of stock in excess of par value and donations received by the Company. In accordance with the “Regulations Governing the Offering and Issuance of Securities by Securities Issuers”, distribution of stock dividends from capital surplus in each year shall not exceed 10% of paid-in capital.

3. Retained earnings

The Company's Articles of Incorporation stipulate that at least 10% of annual net income, after deducting tax and accumulated deficit, if any, must be retained as legal reserve until such retention equals the amount of paid-in capital. In addition, a special reserve shall be set aside in accordance with applicable laws and regulations. The remaining balance, along with the unappropriated earnings from the previous years, can be distributed as dividends to stockholders after the shareholders’ meeting approves the distribution plan submitted by the Board of Directors.

As per the dividend policy set forth in the Company's Articles of Incorporation, the Company's dividend policy is based on the assessment of the Company's future capital budget, planning of future capital requirements, financial structure and earnings, etc. The Board of Directors shall prepare a proposal for the distribution of earnings, which shall be approved by the shareholders' meeting. As the Company is in a stable growth stage in its business life cycle, under the trend of concentration in the industry, in order to continue to expand its scale for sustainable operation and stable growth, the residual dividend policy is adopted. Future earnings will be distributed in the form of stock dividends or cash dividends as appropriate depending on the Company's operating performance, and cash dividends distributed shall not be lower than 5% of the total dividend distribution.

(1) Legal reserve

If the Company has no accumulated deficit, it may, subject to a resolution approved by the shareholders’ meeting, distribute its legal reserve by issuing new shares or distributing cash for the portion of legal reserve which exceeds 25% of the paid-in capital.

278

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

(2) Special reserve

Pursuant to the Ruling issued by the FSC, a special reserve equal to the total amount of items that are accounted for as deductions from other stockholders’ equity shall be set aside from current and prior year earnings. If it is the deduction amount of other shareholders' equity accumulated in the previous period, the special reserve of the same amount shall not be distributed from the undistributed earnings of the previous period. When the amount of the deduction of shareholders' equity is reversed subsequently, the reversed amount can be included in the distributable earnings.

(3) Earning distribution

On July 20, 2021 and June 16, 2020, the Company's shareholders’ meeting resolved on the distribution of earnings for the years ended December 31, 2020 and 2019, and the amount of dividends distributed to shareholders was as follows:

Cash dividend distributed to the
shareholders of common stock		 2020

In addition, on June 16, 2020, the shareholders' meeting of the Company resolved to distribute the capital surplus of NT$96,131 thousand in cash, at NT$0.5 per share.

On March 18, 2022, the shareholders’ meeting resolved on the distribution of earnings for the year ended December 31, 2021, and the amount of dividends distributed to shareholders was as follows:

Cash dividend distributed to the shareholders of
common stock		 2021
$
617,964

Information related to earning distribution approved and resolved by the Company's Board of Directors and shareholders’ meeting is available on the Market Observation Post System website of the Taiwan Stock Exchange.

4. Treasury stock

As resolved by the Board of Directors on March 19, 2020, the Company planed to purchase 5,000 thousand shares of its common stock from March 20, 2020 to May 19, 2020 in order to maintain the Company's credit and shareholders’ right at the price range between NT$15 to NT$25 per share. The Company purchased back 5,000 thousand shares of common stock from March 23, 2020 to May 5, 2020 at the average price of NT$20.20 per share with total amount of NT$101,003 thousand. The Company's Board of Directors resolved that June 25, 2020 was the capital reduction effective date and related statutory registration has been completed.

279

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

5. Other equity items (net after tax)

Balance as of January 1, 2021
Exchange differences on
translation of financial
statements of foreign
operations
Share of other comprehensive
income of associates and
joint-ventures under the equity
method
Unrealized gains (losses) on
investments in equity
instruments at fair value
through other comprehensive
income
Disposal of equity instruments at
fair value through other
comprehensive income
Balance as of December 31,
2021
Balance as of January 1, 2020
Exchange differences on
translation of financial
statements of foreign
operations
Share of other comprehensive
income of associates and
joint-ventures under the equity
method
Unrealized gains (losses) on
investments in equity
instruments at fair value
through other comprehensive
income
Disposal of equity instruments at
fair value through other
comprehensive income
Balance as of December 31,
2020		 Exchange
differences on
translation of
financial statements
of foreign operations
$ (89,678)
(27,216)
(809)
-
-		 Unrealized gains
(losses) on financial
assets at fair value
through other
comprehensive
income

5,004,114

-

-
1,854,340
(658,165)		 Total
4,914,436
(27,216)
(809)
1,854,340
(658,165)
$
(117,703)		 6,200,289 6,082,586

$ (116,514)
28,236
(1,400)
-
-

3,199,064

-

-
2,094,827
(289,777)
3,082,550
28,236
(1,400)
2,094,827
(289,777)
$
(89,678)		 5,004,114 4,914,436

280

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

  1. Non-controlling interests (net after tax)
Beginning balance
Net income for the year attributable to
non-controlling interests
Gains (losses) on re-measurements of
defined benefit plans
Unrealized gains (losses) on investments
in equity instruments at fair value
through other comprehensive income
Exchange differences on translation of
financial statements of foreign
operations
Distribution of cash dividends to non-
controlling interests
Increase in non-controlling interests
(XXI)
Earnings per Share
Basic earnings per share:
Net income attributable to the ordinary
shareholders of the Company
Weight-average number of ordinary shares
outstanding
Basic earnings per share (Unit: In New Taiwan
Dollars)
Diluted earnings per share:
Net income attributable to the ordinary
shareholders of the Company
Weight-average number of ordinary shares
outstanding
Employee compensation
Weight-average number of ordinary shares
outstanding
Diluted earnings per share (Unit: In New Taiwan
Dollars)		 2021
$ 307,844
47,197
127
-
(2,116)
(16,901)
2,364

$
338,515

187,262

$
4.03
$
754,082

187,262
1,627

188,889

$
3.99

281

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

(XXII) Revenue from contracts with customers

1. Breakdown of revenue

2021 2021 2021
3Y Power
484,470
520,649
19,767
73,655
57,716
1,156,257
1,156,257		 Zhong Han
-
2,352,506
-
-
-		 WUXI
Zhonghan
-

747,527
-
-
-		 Others
-
20,861
587,839
-
49,700

$ 11,735,562		 2,352,506 747,527
658,400

$ 11,735,562
2,352,506
747,527
658,400
The
Company and
its processing
subsidiaries		 3Y Power WUXI
Zhonghan
$ 4,768,361
(39,771)

$
4,728,590


4,309,180

$
52,856


40,188

The amount of revenue recognized in 2021 and 2020 that was included in the contract liability balance at January 1, 2021 and 2020, was NT$13,526 thousand and NT$15,044 thousand, respectively.

Please refer to Note VI(V) for notes receivable, accounts receivable and related impairment.

282

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

(XXIII) Remuneration of Employees and Directors

The Company's Articles of Incorporation stipulate that a minimum of 6% of annual profit, if any, shall be allocated to employee remuneration and a maximum of 3% of annual profit shall be allocated to Directors’ remuneration. However, if the Company has accumulated losses, the Company shall set aside a part of the surplus profit first for making up the losses. Employees who are entitled to receive the employee remuneration in shares or cash include the employees of subsidiaries of the Company who meet certain specific requirements.

For the years ended December 31, 2021 and 2020, the Company accrued its remuneration to employees amounting to NT$65,000 thousand and NT$50,000 thousand, respectively, and the remuneration for Directors of NT$7,000 thousand and NT$5,600 thousand, respectively. The said amounts, which were recognized as operating expenses in 2021 and 2020, were calculated based on pre-tax net profit for each year before deducting the amount of the remuneration to employees and Directors, multiplied by the distribution percentage specified in the Company's Articles of Incorporation. The difference between accrual and actual payment is treated as the change in accounting estimate and recognized in profit or loss in the following year. There was no difference between the amount of the remuneration to employees and Directors resolved by the Board of Directors and the accrual amount recognized in the Consolidated Financial Statements for the years ended December 31, 2021 and 2020. Information related to remuneration to employees and Directors resolved by the Board of Directors is available on the Market Observation Post System website of Taiwan Stock Exchange.

(XXIV) Non-operating income and expenses

Non-operating income and expenses
1. Interest income
Bank deposits
2. Other income
Gains on bargain purchase
Dividend income
Other income
Government grant
Rent concessions reclassified to
revenue
Tax refund
Others		 2021
$
23,348		 2020

23,883
2020
-
107,452
53,697
14,763
13,417
19,222
208,551

2021
$ 2,523
122,933
35,993
-
11,082
25,809

$
198,340

283

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

  1. Other gains and losses
3. Other gains and losses
Foreign currency exchange loss
Gain on financial assets measured at fair
value through profit or loss
Loss on disposal of property, plant and
equipment
Gains on disposal of non-current assets
held for sale
Gains on lease modifications
Others
4. Finance costs
Interest expense:
Bank borrowings
Lease liabilities
Others		 2021
$ (9,116)
12,910
(530)
72,399
97
(695)		 2020
(89,088)
13,224
(2,495)
326,059
18
1,836
249,554
2020

3,226

10,041

63

13,330

$
75,065

2021
$ 3,152
7,933
261
$
11,346

(XXV) Financial instruments

  1. Credit risk

  2. (1) Exposure to credit risk

The maximum exposure to credit risk is equal to the carrying amount of the financial assets.

  • (2) Concentration of credit risk

As of December 31, 2021 and 2020, top three customers accounted for 28% and 25% of the Group's accounts receivable balance.

  • (3) Credit risk from receivables and debt securities

Please refer to Note VI(V) for credit risk exposure of notes receivable and accounts receivable. For the details of other receivables, please refer to Note VI(VI). Other financial assets measured at amortized cost include other receivables and corporate bonds. Above-mentioned financial assets are considered low credit risk financial assets, and the loss allowance is measured using 12-month expected credit loss.

  1. Liquidity risk

The Group manages and maintains sufficient cash and cash equivalents to support the Group's operations and mitigate the impact of cash flow fluctuations. The management of the Group supervises the use of the credit line and ensures compliance with the terms of the loan contracts.

The table below shows the contractual maturity dates for financial liabilities,

284

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

including the effect of estimated interest.

December 31, 2021
Non-derivative financial
liabilities
Short-term loans
Long-term loans
Notes payable
Accounts payable
Accounts payable - related
parties
Other payables
Lease liabilities
December 31, 2020
Non-derivative financial
liabilities
Short-term loans
Long-term loans
Notes payable
Accounts payable
Accounts payable - related
parties
Other payables
Lease liabilities		 Carrying
amount		 Contractual
cash flows
23,332
280,391
14,445
4,986,689
90,024
1,151,339
670,148
7,216,368
32,291
128,523
15,001
4,842,867
80,004
948,782
550,873
6,598,341		 Within 6
months
16,406
37,791
14,445
4,986,689
90,024
1,151,339
88,163
6,384,857
32,262
1,434
15,001
4,842,867
80,004
948,782
82,766
6,003,116		 6 to 12
months
6,926
38,953
-
-
-
-
88,427
134,306
29
12,983
-
-
-
-
76,543
89,555		 1-2 years
-
77,529
-
-
-
-
182,148
259,677
-
30,479
-
-
-
-
93,834
124,313		 2-5 years
-
126,118
-
-
-
-
250,601
376,719
-
78,796
-
-
-
-
222,386
301,182		 Over 5 years
-
-
-
-
-
-
60,809
60,809
-
4,831
-
-
-
-
75,344
80,175
$ 16,315
272,348
14,445
4,986,689
90,024
1,151,339
641,754
$ 7,172,914
$ 32,162
123,243
15,001
4,842,867
80,004
948,782
522,577
$ 6,564,636

The Group does not expect that the cash flows included in the maturity analysis will occur significantly earlier or at significantly different amounts.

3. Foreign exchange risk

(1) Exposure to foreign exchange risk

The Group's financial assets and liabilities exposed to significant foreign currency exchange risk were as follows:

Financial assets
Monetary items
RMB
USD
HKD
EUR
Non-monetary items
USD
USD
RMB
HKD
Financial liabilities
Monetary items
RMB
USD
HKD		 2021.12.31 2020.12.31 NTD

896,392

4,564,632

41,777

9,841

67,232

27,426

26,494

19,344

513,895

3,603,888

45,240
Foreign
currencies		 Exchange
Rate		 NTD Foreign
currencies		 Exchange
Rate
$ 263,138
161,337
7,725
444
2,534
1,080
6,322
5,104
111,426
138,025
13,709
4.344

27.680

3.549

31.320

28.268

27.680

4.191

3.549

4.344

27.680

3.549
1,143,071

4,465,808

27,416

13,906

71,632

29,894

26,494

18,118

484,035

3,820,532

48,653
204,796

160,275

11,374

281

2,361

963

6,322

5,271

117,408

126,541

12,317
4.377

28.480

3.673

35.020

28.476

28.480

4.191

3.670

4.377

28.480

3.673



(2) Sensitivity analysis

The Group's exposure to foreign exchange risk arises from cash and cash

285

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

equivalents, accounts receivable (including related parties), other receivables, financial assets measured at amortized cost, financial assets measured at fair value through profit or loss, non-current financial assets measured at fair value through other comprehensive income, short-term borrowings, accounts payable (including related parties) and other payables that are denominated in foreign currencies and subject to foreign exchange loss in currency translation. As of December 31, 2021 and 2020, if the New Taiwan Dollar had depreciated or appreciated by 5% against the US Dollar, Renminbi, Hong Kong Dollar and Euro with all other factors remaining unchanged, net income would have increased or decreased by NT$51,879 thousand and NT$53,985 thousand respectively in 2021 and 2020. The analysis of the two periods was conducted on the same basis.

  • (3) Foreign exchange gain (loss) on monetary items

Due to various functional currencies within the Group, the Group disclosed the information on foreign exchange gain (loss) on monetary items on an aggregated basis. For the years ended December 31, 2021 and 2020, the foreign exchange loss (including realized and unrealized) was NT$9,116 thousand and NT$89,088 thousand, respectively.

4. Market risk

If the prices of equity securities with active market quotations at the reporting date had changed (using the same basis for both periods and assuming no change in other variables), the impact on the comprehensive income would have been as follows:

as follows:
Security price at the
reporting date		 2021 2020
Other
comprehens
ive income
(pre-tax)
Pre-tax
income
Other
comprehens
ive income
(pre-tax)		 Pre-tax
income		 Other
comprehens
ive income
(pre-tax)
Increase by 5%
Decrease by 5%		 $
332,024
-		 260,901
-

$
(332,024)

-
(260,901)

-

Please refer to Note VI(IV) “Measurement of the fair value of Level 3, the sensitivity analysis of the fair value using reasonably possible alternative assumptions”for details of the price changes of the Level 3 equity securities.

5. Interest rate analysis

The Group's demand deposits, time deposits and short-term liabilities are subject to floating interest rates. However, changes in market interest rates are not significant and thus changes in interest rates do not give rise to significant cash flow risk.

286

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

6. Fair value information

  • (1) Category of financial instruments and their fair value

Group's financial instruments measured at fair value on a recurring basis include the financial assets at fair value through profit or loss and the financial assets at fair value through other comprehensive income. Carrying amount and fair value of various financial assets and financial liabilities (including fair value level information, except for financial instruments whose carrying amount is a reasonable approximation of fair value, and lease liabilities which are not required to disclose their fair value information) were as follows:

Financial assets at fair value through
profit or loss
Beneficiary certificates
Private equity funds
Non-publicly quoted equity
instruments measured at fair
value
Structured deposits
Subtotal
Financial assets at fair value through
other comprehensive income
Domestic listed stock
Foreign listed stock
Non-publicly quoted equity
instruments measured at fair
value
Subtotal
Financial assets at amortized cost
Corporate bond
Cash and cash equivalents
Notes receivable and accounts
receivable
Other receivables
Restricted bank deposits (classified
in other non-current assets)
Refundable deposits (classified in
other non-current assets)
Subtotal
Total
Financial liabilities measured at
amortized cost
Bank borrowings
Notes payable and accounts payable
Other payables
Lease liabilities
Total		 2021.12.31 2021.12.31 2021.12.31 2021.12.31 Total
232,758
12,000
71,632
199,684
Carrying
amount
$ 232,758
12,000
71,632
199,684		 Fair value
Level 1
232,758
-
-
-		 Level 2
-
-
-
-		 Level 3
-
12,000
71,632
199,684

516,074		 232,758 -
283,316
516,074

6,622,359
18,118
122,661
6,622,359
18,118
-
6,640,477		 -
-
-
-
-
122,661
6,622,359
18,118
122,661
6,763,138 - 122,661 6,763,138

$ 10,800
2,794,253
4,728,590
73,406
18,779
39,290
-
-
-
-
-
-		 -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,665,118 - - - -

$
14,944,330		 6,873,235 - 405,977 7,279,212

$ 288,663
5,091,158
1,151,339
641,754
-
-
-
-		 -
-
-
-
-
-
-
-
-
-
-
-

$
7,172,914		 - - - -

287

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

Financial assets at fair value through
profit or loss
Beneficiary certificates
Non-publicly quoted equity
instruments measured at fair
value
Structured deposits
Subtotal
Financial assets at fair value through
other comprehensive income
Domestic listed stock
Foreign listed stock
Non-publicly quoted equity
instruments measured at fair
value
Subtotal
Financial assets at amortized cost
Cash and cash equivalents
Notes receivable and accounts
receivable
Other receivables
Restricted bank deposits (classified
in other non-current assets)
Refundable deposits (classified in
other non-current assets)
Subtotal
Total
Financial liabilities measured at
amortized cost
Bank borrowings
Notes payable and accounts payable
Other payables
Lease liabilities
Total		 2020.12.31 2020.12.31 2020.12.31 2020.12.31 2020.12.31
Carrying
amount
$ 210,388
67,232
288,112		 Fair value Total
210,388
67,232
288,112
Level 1
210,388
-
-




Level 2
-
-
-		 Level 3
-
67,232
288,112

565,732		 210,388 -
355,344
565,732

5,198,671
19,344
55,161
5,198,671
19,344
-		 -
-
-
-
-
55,161
5,198,671
19,344
55,161
5,273,176 5,218,015 - 55,161 5,273,176

$ 3,051,117
4,309,180
65,054
18,921
36,826
7,481,098
-
-
-
-
-		 -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- - - -

$
13,320,006		 5,428,403 - 410,505 5,838,908

$ 155,405
4,937,872
948,782
522,577
-
-
-
-		 -
-
-
-
-
-
-
-
-
-
-
-

$
6,564,636		 - - - -

(2) Valuation techniques for financial instruments measured at fair value - non-derivative financial instruments

If there is an active market for a financial instrument, the fair value is based on the quoted price in the active market. The market prices announced by major exchanges are the basis for the fair value of listed (over-the-counter) equity instruments and debt instruments that are publicly quoted in the active market.

A financial instrument has an active market for public quotations if public quotations can be obtained from an exchange, broker, underwriter, industry association, pricing service agencies or competent authority in a timely manner and on a regular basis, and if the price fairly represents actual and frequent market transactions. If the above conditions are not met, the market is deemed inactive. Generally speaking, a large bid-ask spread, a significant increase in the bid-ask spread, or a low volume of transactions are all indicators of an inactive market.

288

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

Among the financial instruments held by the Group, the listed stocks and beneficiary certificates are financial assets with standard terms and conditions that are traded in the active market, and their fair values are determined with reference to quoted market prices.

Except for the above-mentioned financial instruments with active markets, the fair values of the remaining financial instruments are obtained using valuation techniques or by referencing to quoted prices from counterparties. The fair value of financial instruments measured by using valuation techniques can refer 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 Sheets date.

The fair value of financial instruments held by the Group that are not publicly quoted equity instruments with no active market is estimated using the market comparable company method. The key assumptions of the market comparable company method are based on the earnings or equity net worth multiplier derived from the quoted market prices of comparable listed companies. This estimate of the equity securities has been adjusted for the effect of lack of market liquidity.

  • (3) Quantitative information of significant unobservable inputs (Level 3) relating to fair value measurement

The Level 3 of fair value measurements mainly includes financial assets measured at fair value through profit or loss - investments in equity securities, investments in private equity funds and financial assets measured at fair value through other comprehensive income.

The Group's equity instrument investment with no active market has multiple significant unobservable inputs. Significant unobservable inputs for investments in equity instruments with no active market are not correlated with each other because they are independent of each other.

Because the correlation between significant unobservable input value and fair value cannot be fully identified in practice, Group's structured deposits are not included in the disclosure of quantitative information of significant unobservable input values and the sensitivity analysis of fair value for reasonably possible alternative assumptions.

289

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

Table of quantitative information of significant unobservable inputs is provided below:

Item
Financial assets
measured at fair value
through profit or loss -
Investment in equity
instrument without an
active market
Financial assets
measured at fair value
through profit or loss -
private equity fund
investment
Financial assets
measured at fair value
through other
comprehensive
income - Investment
in equity instrument
without an active
market		 Valuation
technique
Comparable
company
valuation method
Net assets value
method
Comparable
company
valuation method		 Significant unobservable
inputs
‧
Net worth multiple (2.59 and
1.94 for the years ended
December 31, 2021 and
2020)
‧
Discount for lack of market
liquidity (29.39% as of
December 31, 2021 and
2020)
‧
Net asset value
‧
P/E ratio multiple (9.69-
29.67 and 10.15 for the years
ended December 31, 2021
and 2020)
‧
Net worth multiple (2.40-
5.42 and 6.81 for the years
ended December 31, 2021
and 2020)
‧
Discount for lack of market
liquidity (29.39% as of
December 31, 2021 and
2020)		 Relationship between
significant unobservable
inputs and fair value
‧
The higher the
multiple, the higher
the fair value
‧
The higher the
discount for lack of
market liquidity, the
lower the fair value
‧
The higher the net
assets value, the
higher the fair value
‧
The higher the
multiple, the higher
the fair value
‧
The higher the
discount for lack of
market liquidity, the
lower the fair value
  • (4) Fair value measurement in Level 3 - sensitivity analysis of reasonably possible alternative assumptions

The Group's measurement on the fair value of financial instruments is considered reasonable. However, the fair value may change if different valuation models or inputs are used. For financial instruments classified in Level 3, changing the valuation assumptions would have the following effects on other comprehensive income:

290

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

December 31, 2021
Financial assets at fair value
through profit or loss
Investment in equity
instrument without an
active market
Financial assets at fair value
through other comprehensive
income
Investment in equity
instrument without an
active market
Investment in equity
instrument without an
active market
Investment in equity
instrument without an
active market
Investment in equity
instrument without an
active market
December 31, 2020
Financial assets at fair value
through profit or loss
Investment in equity
instrument without an
active market
Financial assets at fair value
through other comprehensive
income
Investment in equity
instrument without an
active market
Investment in equity
instrument without an
active market		 Input Upward
or
downward
change		 Fair value change
reflected in current profit
or loss		 Fair value change
reflected in current profit
or loss		 Fair value change
reflected in other
comprehensive income		 Fair value change
reflected in other
comprehensive income
Favorable
change		 Unfavorable
change		 Favorable
change		 Unfavorable
change
Net worth
ratio
Price-to-
earnings
ratio
Price-to-
earnings
ratio
Net worth
ratio
Net worth
ratio
Net worth
ratio
Price-to-
earnings
ratio
Net worth
ratio		 5%
5%
5%
5%
5%
5%
5%
5%		 4,363
-
-
-
-
3,362
-
-		 (4,363)
-
-
-
-
(3,362)
-
-		 -
475
552
3,234
347
-
1,036
1,433		 -
(475)
(552)
(3,234)
(347)
-
(1,036)
(1,433)

The favorable and unfavorable effects represent the changes in fair value, which is based on a variety of unobservable inputs calculated using the valuation technique. If the fair value of a financial instrument is subject to more than one input, the analysis above reflects only the effect of the change in a single input and does not consider the interrelationship between inputs.

291

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

(XXVI) Financial risk management

  1. Overview

The Group is exposed to the following risks arising from financial instruments:

  • (1) Credit risk

  • (2) Liquidity risk

  • (3) Market risk

In this Note, the Group has disclosed the information on exposure to the aforementioned risks, and the Group’s objectives, policies and procedures to measure and manage these risks.

  1. Risk management framework

The Board of Directors is responsible for developing and overseeing the Group's risk management framework.

The Group's risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, to monitor the risk and to manage the exposure within the risk limits. Risk management policies and systems are reviewed on a regular basis to reflect the changes in market conditions and the Group's operations. The Group develops a disciplined and constructive control environment through training, management guidelines and operating procedures so that all employees understand their roles and responsibilities.

3. Credit risk

Credit risk refers to the risk of financial loss to the Group resulting from the failure of a customer or counterparty of a financial instrument to meet their contractual obligations, and arises primarily from the Group's accounts receivable and security investment.

  • (1) Accounts receivable and other receivables

The Group's customers are concentrated in a wide range of power supplyrelated industries. To mitigate the credit risk of accounts receivable, the Group continuously evaluates the financial position of customers and purchases insurance for the accounts receivable of customers in high-risk areas or with special characteristics to reduce the Group's accounts receivable risk. The Group regularly evaluates the possibility of receivables collection and makes provision for bad debts accordingly; overall, management is able to effectively manage the risk of accounts receivable.

The Group has established the credit policy under which it is required to analyze the credit rating of each new customer individually before granting standard payment and delivery terms and conditions. Purchasing limits are established for each individual customer and limits are reviewed periodically. Customers who do not meet the requirement of credit rating can only trade with the Group on an prepayment basis.

292

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

(2) Investment

The credit risk of bank deposits, fixed income investments and other financial instruments is measured and monitored by the financial department of the Group. Since the counterparties of transactions and obligations of the Group are banks with good credit standing, and financial institutions, corporate and government with investment grade and above, default risk is limited and hence there is no significant credit risk.

(3) Guarantee

It is the policy of the Group to provide financial guarantees only to wholly owned subsidiaries. As of December 31, 2021 and 2020, the Group did not provide any guarantee.

4. Liquidity risk

Liquidity risk is the risk that the Group encounters difficulty in settling its financial liabilities by delivering cash or other financial assets and fails to fulfill its related obligations. The Group manages its liquidity by ensuring that the Group has sufficient liquidity to meet its liabilities as they fall due under normal and stressful circumstances without incurring unacceptable losses or damaging the Group's reputation.

The Group ensures that it has sufficient cash to meet all contractual obligations. In addition, the Group had unused facilities in the amount of NT$823,882 thousand and NT$1,186,976 thousand as of December 31, 2021 and 2020, respectively.

5. Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity prices, will affect the Group's income or the value of its financial instruments. The objective of market risk management is to manage and control market risk exposure within acceptable level, while optimizing the return of investment.

(1) Foreign exchange risk

The Group is exposed to foreign exchange risk on sales, procurement and loans that are denominated in a currency other than the respective functional currencies of the Group's entities. Group's functional currencies mainly include New Taiwan Dollar, US Dollar and Renminbi. The currencies used in these transactions are mainly New Taiwan Dollar, Hong Kong Dollar, US Dollar and Renminbi.

There is no significant difference or significant change in the receivables and payables of the Group, so the Group currently adopts natural hedge as the main exchange rate hedging policy to mitigate the risk.

(2) Interest rate risk

The Group’s financial assets exposed to the risk of fair value change arising from interest rate changes are bank deposits; financial liabilities are bank borrowings, but the impact of changes in interest rates on the fair value of the related financial assets is not significant.

  • (3) Other market price risk

293

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

Group's current financial assets at fair value through profit or loss and noncurrent financial assets at fair value through other comprehensive income mainly consist of investment in domestic funds, private equity funds, listed stocks, unlisted stocks, foreign listed stocks and foreign unlisted stocks. Because they are measured at fair value, the Group is exposed to the risk of changes in the market price of equity securities. In order to manage market risk, the Group selects investment targets carefully and controls its position in order to mitigate the market risk.

(XXVII) Capital management

It is the policy of the Board of Directors to maintain a sound capital base to sustain the confidence of investors, creditors and the market and to support the development of future operations. Capital consists of the Group's share capital, capital surplus, retained earnings, other equity and non-controlling interests. The Board of Directors is responsible for controlling the debt-to-equity ratio and the level of common stock dividends.

As of December 31, 2021 and 2020, debt-to-equity ratio was as follows:

Total Liabilities
Less: cash and cash equivalents
Net liability
Equity
Debt-to-equity ratio		 2021.12.31
$ 7,630,066
(2,794,253)		 2021.12.31
$ 7,630,066
(2,794,253)		 2020.12.31
6,955,819
(3,051,117)
3,904,702
11,492,660
33.98%

$
4,835,813

$
13,547,476

35.70%

As of December 31, 2021, there was no material change in the Group's capital management.

(XXVIII) Investing and financing activities not affecting cash flows

The reconciliation of liabilities arising from financing activities in 2021 and 2020 was as follows:

Long-term loans
Short-term loans
Lease liabilities
Total liabilities from financing
activities		 2021.1.1
$ 123,243
32,162
522,577
$
677,982		 Cash flows
from:

149,105

(15,847)
(162,242)
(28,984)		 N on-cash changes on-cash changes Others
-
-
-
-		 2021.12.31
272,348
16,315
641,754
Addition

-

-
300,151
300,151		 Disposal
and
obsolescence
-
-
(4,057)
(4,057)		 Changes in
foreign
exchange
rate
-
-
(14,675)
(14,675)		 Changes in
lease
payment
-
-
-
-

930,417
Long-term loans
Short-term loans
Lease liabilities
Total liabilities from financing
activities		 2020.1.1
$ 16,713
105,623
659,923
$
782,259		 Cash flows
from:

106,153

(73,461)
(134,460)
(101,768)		 N on-cash changes on-cash changes Others
377
-
-
377		 2020.12.31

123,243
32,162
522,577
Addition

-

-
13,511
13,511		 Disposal
and
obsolescence
-
-
(4,255)
(4,255)		 Changes in
foreign
exchange
rate
-
-
2,621
2,621		 Changes in
lease
payment
-
-
(14,763)
(14,763)

677,982

294

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

VII. Related Party Transactions

  • (I) Related party name and relationship

Related parties that had transactions with the Group during the reporting periods were listed below:

Related Party Relationship with the Group FSP Group USA Corp. Group's associate Sparkle Power Inc. The entity's Chairman is the second-degree relatives of the Chairman of the Company Amacrox Technology Inc. The entity's Chairman is the second-degree (“Amacrox”) relatives of the Chairman of the Company Voltronic Power Technology Corp. Substantive related party (“Voltronic”) Fortron/Source (Europa) GmbH Substantive related party FSP(GB) Ltd. Substantive related party FSP North America Substantive related party FSP Power Solution GmbH Substantive related party 3Y Power Exchange Substantive related party Cheng, Ya-Jen Chairman of the Company Li, Hung-Neng Director of the Company

  • (II) Significant related party transactions

  • Operating revenue

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

Associate
Other related party		 2021
$ 57,170
2,288,464		 2020
67,749
1,949,311
2,017,060

$
2,345,634

The prices and credit terms of the Group's sales to the above related parties were not significantly different from those of its regular customers.

  1. Purchases

The amounts of purchases from related parties were as follows:

Other related party 2021
210,723		 2020

180,020

The Group purchased goods from the above-mentioned related parties, and did not purchase similar products from other manufacturers, so there was no transaction price from regular manufacturers for comparison. The payment terms were not significantly different from those of regular manufacturers.

295

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

3. Receivables from related parties

The details of the receivables of the Group arising from sales transactions, business needs and disbursement of dividend receivables were as follows:

Accounting

Subject Related party category/name 2021.12.31
$ 15,710
786,038
801,748
680
7,297
13,673
21,650
$
823,398		 2020.12.31

32,561

584,192
Accounts
receivable
Other
receivables		 Associate
Other related party
Associate
Other related party
FSP Power Solution GmbH
Others



616,753



474

12,463

16,806



29,743



646,496

For the details of the loss allowance for accounts receivable - related party for the years ended December 31, 2021 and 2020, please refer to Note VI(V). Please refer to Note VI(VI) for the details of the loss allowance for other receivables - other related party, 3Y Power Exchange.

4. Payables to related parties

The details of the payables arising from the purchase of goods and the purchase via related parties were as follows:

Accounting
Subject		 Related party
category/name		 2021.12.31
$
90,024		 2020.12.31
80,004
Accounts
payable		 Other related party
  1. Purchase of services from related parties

The details of the technical service fee, labor fee and commission paid by the Group to the related parties were as follows:

Associate
FSP Group USA Corp.
Other related party
Amacrox
Sparkle Power Inc.
Others		 2021
8,933
8,496
4,665
6,595		 2020
10,515
6,830
5,360
5,564
28,269

28,689

296

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

The details of the Group's recognized payable amounts due to related parties as a result of the above transactions and payments/collections on behalf of related parties were as follows:

Accounting
Subject		 Related party
category/name		 2021.12.31
$ 574
6,924		 2020.12.31
658
9,618
Other payables Associate
Other related party

$
7,498
10,276

6. Leases

In 2020, the Group leased an office building from the Director of the Company and entered into a three-year lease agreement with reference to the rental rate of offices in the neighboring areas, with a total contract amount of NT$2,800 thousand. The interest expense recognized in the year ended December 31, 2020 was NT$260 thousand and the balance of lease liabilities as of December 31, 2020 was NT$14,386 thousand.

In addition, the Group leased an office from the Chairman of the Company and entered into a one-year lease agreement in January 2019 at a price agreed by both parties. This lease transaction was recognized as a right-of-use asset and lease liability of NT$9,487 thousand on January 1, 2020, in accordance with IFRS 16. The recognized interest expense in 2021 and 2020 was NT$145 thousand and NT$147 thousand respectively.The balance of lease liabilities as of December 31, 2021 and 2020 were NT$7,710 thousand and NT$8,600 thousand, respectively.

(III) Compensation for key management personnel

Compensation for key management personnel
Short-term employee benefits
Post-employment benefits		 2021
$ 69,479
709		 2020

66,339

640
$
70,188
66,979

VIII. Pledged Assets

The carrying amount of pledged assets for custom duty performance guarantee, litigation guarantee and borrowings was as follows:

Assets Pledged to secure 2021.12.31
$ 100
18,679
161,077
186,447		 2020.12.31

100

18,821

173,844
114,755
Restricted time deposits
(recognized in other non-
current assets)
Restricted demand deposits
(recognized in other non-
current assets)
Land
Housing and Construction
Total
Custom duty
performance guarantee
Litigation guarantee
Long-term and short-term
borrowings
Long-term and short-term
borrowings

$
366,303
307,520

297

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

IX. Significant Contingent Liabilities and Unrecognized Contract Commitments

  • (I) As of December 31, 2021 and 2020, the guarantee facilities extended by banks for customs and excise duties were NT$215,000 thousand, and utilized facilities were NT$63,000 thousand and NT13,000 thousand, respectively.

  • (II) The consolidated company purchased products of Beyond Innovation Technology Co., Ltd. (hereinafter referred to as Beyond Innovation) through a distributor in Taiwan. O2 Micro International Limited (hereinafter referred to as O2), a competitor of Beyond Innovation, states that such products infringe upon its patent rights in the United States, and therefore filed a civil lawsuit against three companies including the merged company in the Marshall Division, United States District Court for the Eastern District of Texas (hereinafter referred to as the United States District Court).

O2 withdrew all claims for monetary compensation against all defendants in the preceding civil lawsuit on April 24, 2006. The United States District Court subsequently rendered a first-instance judgment and injunction prohibiting the sale of the products to the United States on March 21, 2007. It also ruled that the attorneys' fees and litigation costs incurred in this lawsuit, totaling US$2,268,402.22, should be borne jointly by the merged company, Beyond Innovation, and Lien Chang Electronic Enterprise Co., Ltd. After the defendants filed an appeal to the United States Court of Appeals for the Federal Circuit, the Federal Circuit issued a decision on April 3, 2008. It found the lower court's ruling, in which the defendants were found to be in violation of patent rights, did not meet requirements for legal proceedings and therefore reversed and remanded to the original court for retrial. As for the ruling regarding the litigation expenses, although it was not reviewed by the court of appeals, the reversal of the first-instance judgment means that the ruling has lost its basis and is therefore nullified.

After the case was remanded to the United States District Court, the Court only reviewed the lawsuit between O2 and Beyond Innovation, and rendered a judgment on September 27, 2010, which found that although Beyond Innovation had infringed upon O2's patent rights, the infringement was not based on malicious intent. Beyond Innovation later filed an appeal and the United States Court of Appeals for the Federal Circuit (CAFC) rejected Beyond Innovation's appeal and affirmed the decision of the lower court on November 18,2011.

The litigation between the merged company and O2 was separated from the aforementioned litigation between O2 and Beyond Innovation on July 21, 2009. However, the merged company has not yet received a notice of hearing from the US Court.

The consolidated company was implicated by the use of Beyond Innovation's products, and after learning that Beyond Innovation's products involved in such disputes, we have switched to alternative materials that do not involve infringement disputes. According to the intellectual property right guarantee signed by the merged company and Beyond Innovation, Beyond Innovation shall bear all liabilities, losses, damages, costs, or other expenses incurred by the merged company as a result of the use of its products. As a result, Beyond Innovation shall bear the adjudication costs borne by the merged company. Therefore, the attorneys' fees and litigation costs incurred in the above patent litigation do not have a significant impact on the merged company's financial statements. The merged company recognized the aforementioned expenses in as expenses for the year in which they occurred based on fiscal conservatism.

298

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

  • (III) The consolidated company believes that since a ruling was rendered in the litigation between O2 and Beyond Innovation in the United States, we filed a civil lawsuit against Beyond Innovation based on the intellectual property rights guarantee provided by Beyond Innovation. We first requested the partial payment of the litigation costs and related expenses incurred by the O2 lawsuit in the United States in connection with the use of Beyond Innovation's products. However, on December 26, 2008, the Taiwan Taipei District Court rejected the claim for damages, and merged company did not approve the rejection. On January 16, 2019, the merged company filed an appeal to Taiwan High Court and obtained a judgment in its favor on November 27, 2019. However, Beyond Innovation filed an appeal to the Supreme Court on December 30, 2019, and the merged company is still waiting for the final decision of the Supreme Court before enforcing the decision.

  • (IV) The merged company received a court notice on July 20, 2020 regarding a lawsuit filed by the merged company's customer Jiangsu Lemote Tech Co., Ltd. (hereinafter referred to as Lemote) for transaction contract disputes. Lemote claimed that there were anomalies in the merged company's products and requested the refund of payments already made and payment for related damages with a total amount of RMB 4,266,789.46. It also filed for a property preservation ruling with Changshu People's Court for freezing bank deposits equivalent to the aforementioned value totaling RMB 4,300,000 (listed under other non-current assets). The Court rendered a ruling on August 27, 2021 that required Lemote to return the products of the merged company and required the merged company to refund payments totaling RMB 2,822,600 paid by Lemote, pay a compensation of RMB 900,000, and pay RMB litigation expenses of 374,581, totaling more than RMB 4.09 million. The merged company rejected the product anomaly stated by Lemote and the court ruling and filed an appeal to the Suzhou Intermediate People's Court in September 2021.

  • (V) As of December 31, 2021 and 2020, the Group had entered into purchase agreements for property, plant and equipment amounting to NT$53,386 thousand and NT$176,364 thousand, respectively, and had paid NT$30,759 thousand and NT$83,158 thousand, respectively, which were recorded as construction in progress of property, plant and equipment as well as other non-current assets.

X. Significant Disaster Loss: None.

  • XI. Significant Events after the Balance Sheet Date: None.

299

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

XII. Others

A summary of employee benefits, depreciation, and amortization by function is provided below:

By function
By nature
2021
2021
2021		 2020 2020 2020
Operation
Costs		 Operation
Expenses		 Total Operation
Costs		 Operation
Expenses		 Total
Employee benefits
Salary expense
Insurance expense
Pension expense
Other employee
benefit expense
Depreciation expenses
Amortization expenses		 1,749,820
6,454
89,111
51,320
251,182
378		 951,198
65,571
40,991
37,001
88,667
4,354		 2,701,018
72,025
130,102
88,321
339,849
4,732		 1,592,340
5,789
49,132
37,783
228,503
355		 882,424
61,535
34,572
34,849
88,354
3,536		 2,474,764
67,324
83,704
72,632
316,857
3,891

300

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

XIII. Supplementary Disclosures

  • (I) Information on Significant Transactions

In accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, information on significant transactions is disclosed as follows:

  1. Financing provided to other parties: None.

  2. Guarantees and endorsements provided to other parties: None.

  3. Marketable securities held at the end of the period (excluding investments in

subsidiaries, associates and joint ventures):

Securities
Holding
Company		 Type and Name of
Securities		 Relationship
with Issuer of
Securities		 Ledger Account Ending Balance Ending Balance Ending Balance Maximum
shareholding
percentage
during the
period
Remark
Shares/Units Carrying
amount		 Percentage
of
shareholding
Fair value
The Company
The Company
WUXI
Zhonghan
FSP Jiangsu
The Company		 Stock:
Mekong Resort Development
Construction Co., Ltd.
Beneficiary certificates:
Fuh Hwa Ruei Neng Fund I
Fuh Hwa Ruei Neng Fund I
Fuh Hwa Guardian Fund
Fuh Hwa Ruei Hua Fund
Fuh Hwa Jhih Neng Fund I
Taiwan ESG
Private equity fund:
Mesh Cooperative Ventures
Fund
Stock:
Voltronic Power Technology
Corp.
JESS-LINK Products Co.,
Ltd.
WT Microelectronics Co.,
Ltd.
Taiwan Cement Corp.
Taiwan Semiconductor
Manufacturing Co., Ltd.
TOT BIOPHARM
International Co., Ltd.
Eastern Union Interactive
Corp.
Stock:
Guoyu Global Co., Ltd.
Taiwan Truewin Technology
Co., Ltd.
Wuxi Lead Solar Energy Co.,
Ltd.
Powerland Technology Inc.
Bond:
Novaland Group (NYL)
－
－
－
－
－
－
－
－
Other related
party
－
－
－
－
－
－
－
－

－
－
－
 Financial assets at
fair value through
profit or loss
〃
〃
〃
〃
〃
〃
〃
Financial assets at
fair value through
other
comprehensive
income
〃
〃
〃
〃
〃
〃
Financial assets at
fair value through
other
comprehensive
income
〃
〃
〃
Financial assets at
amortized cost		 1,905,750
5,000,000
4,000,000
3,504,199
1,961,169
3,000,000
400,000
12,000,000
4,021,822
8,492,000
1,000,000
50,000
10,000
1,195,200
880,000
50,000
50,000
-
-
9,000		 71,632
55,589
45,058
64,647
21,182
31,918
14,364
12,000
316,390
6,213,715
351,144
48,950
2,400
6,150
18,118
58,667
5,000
32,500
6,736,644
-
26,494
6,763,138
10,800		 8.25
-
-
-
-
-
-
2.46
4.60
6.96
0.74
-
-
0.19
4.43
16.67
2.85
12.04
3.54
-		 71,632
55,589
45,058
64,647
21,182
31,918
14,364
12,000
316,390
6,213,715
351,144
48,950
2,400
6,150
18,118
58,667
5,000
32,500
6,736,644
-
26,494

6,763,138
10,800		 8.25
-
-
-
-
-
-
2.46
-
5.15
6.96
0.74
-
-
0.20
4.43
16.67
2.85
12.04
4.22
-
-

301

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

  1. Marketable securities for which the accumulated purchase or sale amounts for the period exceed NT$300,000 thousand or 20% of the paid-in capital:
Unit: Shares Unit: Shares Unit: Shares Unit: Shares Unit: Shares Unit: Shares Unit: Shares Unit: Shares Unit: Shares Unit: Shares
Company
Name		 Marketable
Securities
Type and
Name		 Ledger
Account		 **Counterparty ** Relationshi p
Beginning of Period
Shares
Amount		 Purchase Sale Ending Balance
Amount Shares Amount Shares Selling
Price		 Carrying
Cost		 Gains
(Losses) on
Disposal
Shares		 Amount
The
Company		 Stock:
Voltronic
Power
Technology
Corp.		 Financial
assets at fair
value through
other
comprehensive
income		 4,500,822
5,040,921		 - - 479,000 660,425 2,260 658,165 4,021,822 6,213,715
(Note)

Note: Ending balance includes unrealized valuation gain (loss) of financial assets.

  1. Acquisition of real estate at costs which exceed NT$300,000 thousand or 20% of the

  2. paid-in capital: None.

  3. Disposal of real estate at prices which exceed NT$300,000 thousand or 20% of the paid-in capital: None.

  4. Total purchases from and sales to related parties which exceed NT$100,000 thousand

  5. or 20% of the paid-in capital:

Company Related Party Relationship Transaction S ituation ituation Unusua
Terms		 l Transaction
and Reasons		 Notes and
Receivabl		 Accounts
e (Payable)		 Remark

Purchases
(Sales)		 Amount Percentage
of Total
Purchases
(Sales)
(%)

Credit
Period		 Unit
Price		 Credit Period Balance Percentage of
total notes and
accounts
receivable
(payable)
The Company
The Company
The Company
The Company
The Company
The Company
The Company
The Company
The Company
The Company		 Sparkle Power
Inc.
FSP North
America
FSP Power
Solution
GmbH
Fortron/
Source
(Europa)
GmbH
WUXI
Zhonghan
FSP
Technology
USA Inc.
Huili
Zhonghan
WUXI SPI
Voltronic
The
Chairman of
the Company
is the
second-
degree
relatives of
the entity's
Chairman
Substantive
related party
of the
Company
Substantive
related party
of the
Company
Substantive
related party
of the
Company
100% owned
investment
via indirect
shareholding
100% owned
investment
via direct
shareholding
100% owned
investment
via indirect
shareholding
100% owned
investment
via indirect
shareholding
100% owned
investment
via indirect
shareholding
The
Company is
the Director
of this
company
(Sales)
(Sales)
(Sales)
(Sales)

(Sales)

(Sales)

Purchases
(Note 2)

Purchases
(Note 2)

Purchases
(Note 2)
Purchases		 (497,301)
(586,236)
(589,751)
(418,581)
(328,551)
(131,045)
939,867
433,479
237,150
210,723		 (4.04)
(4.76)
(4.79)
(3.40)
(2.67)
(1.06)
10.80
4.98
2.72
2.42		 Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 4
Note 4
Note 4
Note 5		 Note 4
Note 4
Note 4		 176,243
147,782
305,772
75,109
138,416
56,617
(104,088)
(Note 3)
(42,251)
(Note 3)
(17,971)
(Note 3)
(90,024)		 5.21
4.37
9.05
2.22

4.09

1.67
(2.77)
(1.12)
(0.48)
(2.39)




Note 6

Note 6

Note 6

Note 6

Note 6

302

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

(Continued) (Continued) (Continued) (Continued)
Company Related Party Relationship Transaction Situation Unusual Transaction
Terms and Reasons		 Notes and Accounts
Receivable (Payable)		 Remark

Purchases
(Sales)		 Amount Percentage
of Total
Purchases
(Sales)
(%)

Credit
Period		 Unit
Price		 Credit Period Balance Percentage of
total notes and
accounts
receivable
(payable)
The Company
3Y Power
3Y Power		 3Y Power
3Y Power
Technologh
Inc.
Huili		 65.87%
owned
investment
via direct
shareholding
100% owned
investment
via direct
shareholding
Affiliate
Purchases


(Sales)
Purchases
(Note 2)		 260,047
(315,435)
247,178		 2.99
(17.16)
17.99		 Note 1
Note 1
Note 4		 Note 4 (81,547)
80,601
(22,094)
(Note 3)
(2.17)

12.03
(3.82)
Note 6

Note 6

Note 6

Note 1. The Company's trading terms for this related party are not significantly different from those of other customers.

Note 2. Including purchases of products, purchases of raw materials and processing.

Note 3. Including accounts payable arising from purchases of products and raw materials and processing fee.

Note 4. The transaction price is not available for regular customers for comparison, and the credit term is 5 days after the monthly settlement.

Note 5. The Group does not purchase similar products from other manufacturers, so there is no transaction price from regular manufacturers for comparison. The payment terms were not significantly different from those of regular manufacturers.

Note 6. Eliminated under consolidation.

8. Receivables from related parties which exceed NT$100,000 thousand or 20% of the paid-in capital:

paid-in capital:
Company with
accounts
receivable		 Related Party Relationship Balance of
receivables
from related
parties		 Turnover
rate		 Overdue receivables from
related parties		 Recovery from
overdue
receivables from
related parties
(Note)
Loss
allowance
Amount Action taken
The Company
The Company
The Company
The Company
Huili		 Sparkle Power Inc.
FSP Power
Solution GmbH
FSP North
America
WUXI Zhonghan
The Company		 The Chairman of the Company is the
second-degree relatives of the entity's
Chairman
Substantive related party of the
Company
Substantive related party of the
Company
100% owned investment via indirect
shareholding
100% owned investment via indirect
shareholding		 176,243
305,772
147,782
138,416
104,088		 2.98
2.71
4.85
2.20
9.19		 -

-

-

-

-		 126,119
122,751
34,022
109,459
104,088		 -
-
-
-
-

Note: As of March 4, 2022.

  1. Derivative instruments transactions: None.

303

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

10. Business relationship and significant intercompany transactions:

Number
(Note 1)

Company		 Counterparty Nature of
Relationship
(Note 2)		 Description of Transactions Description of Transactions Description of Transactions Description of Transactions

Ledger
Account		 Amount Transaction Term Percentage of
Consolidated operating
income or total assets
(Note 3)
0

0

0

0

0

1

1
 The Company
The Company
The Company
The Company
The Company
3Y Power
3Y Power		 3Y Power
Huili
Zhonghan
WUXI SPI
WUXI Zhonghan
3Y Power
Tochnology Inc.
Huili		 1
1
1
1
1
3
3		 Cost of goods
sold
Cost of goods
sold
Cost of goods
sold
Cost of goods
sold
Operating
revenue
Operating
revenue
Cost of goods
sold		 260,047
939,867
433,479
237,150
328,551
315,435
247,178		 No significant difference from
other suppliers
No comparison is available
No comparison is available
No comparison is available
No significant difference from
other customers
No significant difference from
other customers
No comparison is available
1.56％
5.64％
2.60％
1.42％

1.97％

1.89％
1.48％

Note 1. Fill in the number per below:

  1. 0 represents the Company.

  2. Subsidiaries are sorted in a numerical order starting from 1.

Note 2. The relationships with counterparty are as follows:

  1. The parent company to subsidiaries.

  2. Subsidiaries to the parent company.

  3. Subsidiaries to subsidiaries.

Note 3. Information is disclosed only for the amounts that exceed 1% of total consolidated assets (balance sheet items) and 1% of total revenue (income statement items).

304

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

(II) Information on Invested Companies:

Investment information in 2021 is as follows:

Name of
Investor		 Name of Investee Location Main Business
Activities		 Initial Investment Amount Initial Investment Amount Ending Balance Ending Balance Ending Balance Maximum
shareholding
during the
period		 Profit (Loss)
of Investee for
the Period
(Note 1 & 2)
Investment
gain (loss)
recognized for
the period
(Note 1 & 2)
Remark

Ending
Balance for
the Current
Period		 At the end of
last year		 Shares Shareholding
(%)
Carrying
amount
The Company






FSP
International
Inc. (BVI)




Amacrox
Technology
Co., Ltd.
(BVI)


3Y Power
 FSP International
Inc. (BVI)
FSP Group Inc.
Amacrox
Technology Co.,
Ltd. (BVI)
3Y Power

Harmony Trading
(HK) Ltd.
FSP Technology
USA Inc.
FSP Turkey

FSP Technology
Inc. (BVI)
Power Electronics
Co., Ltd. (BVI)
Famous Holding
Ltd.
Proteck
Electronics
(Samoa) Corp.
FSP International
(HK) Ltd.
Amacrox GmbH
FSP Group USA
Corp.
Proteck Power
North America
Inc.
3Y Power
Technology Inc.
Luckyield Co.,
Ltd.		 British
Virgin
Islands
British
Cayman
Islands
British
Virgin
Islands
Taiwan
Hong Kong
U.S.A.
Turkey
British
Virgin
Islands
British
Virgin
Islands
Samoa
Samoa
Hong Kong
Germany
U.S.A.
U.S.A.
U.S.A.
Samoa		 Investment
holdings
Engaged in
safety
certification
Investment
holdings
Manufacturing
and trading of
power supply
Investment
holdings
Business
development
and product
technical
service
Business
development
and product
technical
service
Investment
holdings
Investment
holdings
Investment
holdings
Investment
holdings
Investment
holdings
Trading of
power supply
Trading of
power supply
Investment
holdings
Trading of
power supply
Investment
holdings		 1,241,751
1,752
40,925
304,406
45
3,143
22,640
62,883
217,707
807,483
32,984
141,042
18,181
14,903
3,279
233,850
4,500		 1,241,751
1,752
40,925
304,406
45
3,143
-
62,883
217,707
807,483
32,984
141,042
18,181
14,903
3,279
233,850
4,500		 32,202,500
50,000
1,109,355
16,309,484
10,000
100,000
6,673,000
2,100,000
7,000,000
27,000,000
1,100,000
4,770,000
25,000
247,500
1,000
600,000
45,000		 100.00
100.00
100.00
65.87
100.00
100.00
91.41
100.00
100.00
100.00
100.00
100.00
100.00
45.00
100.00
100.00
100.00		 2,199,388
372
60,168
663,717
1,788
1,853
16,989
121,029
217,707
1,358,711
16,069
72,009
2,871
26,947
14,778
220,428
3,768		 1,241,751
1,752
40,925
304,406
45
3,143
22,640
62,883
217,707
807,483
32,984
141,042
18,181
14,903
3,279
233,850
4,500		 108,773
(110)
850
134,172
(86)
276
4,951
3,791
437
58,092
(7,993)
58,126
332
7,299
(2,469)
37,349
26		 108,773
(110)
850
88,389
(86)
276
4,526
-
-
-
-
-
-
3,284
-
-
-		 Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Sub-
subsidiary
Sub-
subsidiary
Sub-
subsidiary
Sub-
subsidiary
Sub-
subsidiary
Sub-
subsidiary
Associate
Sub-
subsidiary
Sub-
subsidiary
Sub-
subsidiary

Note 1. The investment gain or loss recognized by the company is based on the financial statements of the investees audited by the CPA of the parent company in Taiwan and accounted for under the equity method, except for the financial statements of 3Y Power, 3Y Power Technology Inc. and Luckyied Co. which are audited by

other CPA.

Note 2. The profit and loss of the sub-subsidiary has been consolidated into the profit and loss of the subsidiary. The transactions between the Company and each subsidiary of the Group including sales transaction amount, accounts receivable and payable, carrying amount of long-term equity investment and investment profit and loss

recognized in the current period, have been eliminated in preparing the consolidated financial statements.

305

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

(III) Information on investment in Mainland China:

1. Information on the name of investee company in Mainland China and their main businesses and products

**Investee Company ** **Main Business Activities ** **Paid-inCapital ** Method of
Investments
(Note 1)		 Accumulated
Amount of
Investments
Remitted from
Taiwan at
Beginning of
Period		 Amount of
Investments Remitted
or Repatriated for the
Period		 Amount of
Investments Remitted
or Repatriated for the
Period

Accumulated
Amount of
Investments
Remitted
from Taiwan
at End of
Period
Maximum
shareholding
during the
period		 Profit (Loss)
of Investee
for the Period		 Percentage of
ownership of
direct or indirect
investment
Share of
profits/losses
for the period
(Note 3 & 4)
Carrying
amount of
investment at
the end of the
period
(Note 3 & 4)

Accumulated
Investment
Income
Repatriated
at End of
Period
**Remitted ** Repatriated
Huili
Zhonghan
WUXI SPI
WUXI Zhonghan
Zhong Han
FSP Jiangsu
Protek Dongguan
Hao Han
WUXI 3Y		 Processing of power
supply
Processing of power
supply
Processing of power
supply
Manufacturing and
trading of power supply
Manufacturing and
trading of power supply
Research & development
and design of various
energy saving technology
Processing of power
supply
Transformer processing
Design, manufacturing
and trading of power
supplies		 145,090
224,107
(註二)
722,364
(Note 2)
416,099
130,320
69,009
(Note 2)
39,391
163,673
(Note 2)
4,122		 (II), 1
(II), 1
(II), 1
(II), 1
(II), 1
(II), 1
(II), 1
(II), 1
(II), 2		 176,873
104,342
508,326
380,595
20,196
13,380
38,038
-
-		 -
-
-
-
-
-
-
-
-		 -
-
-
-
-
-
-
-
-		 176,873
104,342
508,326
380,595
20,196
13,380
38,038
-
-		 176,873
104,342
693,140
380,595
20,196
13,380
38,038
-
-		 (6,735)
465
(46,442)
104,499
86,745
3,791
(7,988)
58,126
26
100.00

100.00

100.00

100.00

100.00

100.00

100.00

100.00

65.87		 (6,735)
465
(46,442)
104,499
86,745
3,791
(7,988)
58,126
17		 334,217
210,110
124,058
1,240,577
747,135
122,715
15,892
72,009
3,768		 197,299
75,044
-
-
-
-
-
-
-

Note 1. Method of investment can be divided into the following 3 categories:

(I) Direct investment in mainland China.

(II) Indirect investment in mainland China through a holding company established in other countries

  1. Through FSP International Inc. to invest in mainland China.

  2. Through 3Y Power to invest in mainland China.

  3. (III) Others.

Note 2. This includes the amount of capital contributed by a foreign subsidiary from its earnings or dividends from an investee company in China.

Note 3. The investment profits and losses and the carrying amount of the investment at the end of the period recognized by the company are based on the financial statements of the investee company

audited by the CPA of Taiwan's parent company, except for WUXI 3Y, whose financial statements are audited by other CAP in Taiwan.

Note 4. Eliminated under consolidation.

2. The limit of investment in mainland China:

Accumulated investment in
mainland China at the end of
period		 Investment amounts approved
by Investment Commission,
MOEA		 Limit of investment in mainland
China approved by Investment
Commission, MOEA
1,241,750
(Note 2)
(HK$12,500 thousand and US$35,640
thousand)
1,486,767
(Note 2)
(HK$12,500 thousand and
US$52,110 thousand)		 7,925,377
(Note 1)

Note 1. 60% of net worth.

Note 2. For the amounts of the above investment in mainland China, except that the accumulated investment amount remitted from Taiwan to the mainland China at the end of the current period is based on the historical exchange rate, the investment profit and loss recognized in the current period is based on the weighted average exchange rate (USD/TWD:

306

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

1:28.0088, CNY/TWD: 1:4.3413, HKD/TWD: 1:3.6031). Paid-in capital, investment amount approved by the Investment Commission of MOEA, and the carrying amount at the end of the period is based on the exchange rates on December 31 2021 (USD/TWD: 1:27.6800, CNY/TWD: 1:4.3440, HKD/TWD: 1:3.5490).

  1. Significant transactions with the investee company in mainland China:

For the direct or indirect significant transactions between the Group and its investee companies in mainland China in 2021 (which were eliminated when preparing the consolidated report), please refer to the description of "Information on Significant Transactions".

  • (IV) Information on Major Shareholders:
Information on Major Shareholders:
Shareholding
Name of Major Shareholders		 Shares Percentage of
Ownership
Chuan Han Investment Co., Ltd.
Cheng, Ya-Jen
Yang, Fu-An
Wang, Tsung-Shun		 15,091,766
12,167,477
11,792,834
11,605,794
8.05%

6.49%

6.29%

6.19%

  1. The information of major shareholders in this table was calculated by Taiwan Depository & Clearing Corporation on the last business day at the end of each quarter, and the shareholders who held more than 5% of the common shares and preferred shares of the Company that have been delivered (including treasury shares) were disclosed. The number of shares recorded in the Company's financial statements and the number of shares actually delivered by the Company without physical registration may differ due to different basis of preparation of the calculations.

  2. If a shareholder delivers its shareholding information to the trust, the aforesaid information shall be disclosed by the individual trustee who opened the trust account. As for the insider declaration for shareholding more than 10% of total shares in accordance with the Securities and Exchange Act, their shareholding shall include the shares held by themselves plus the shares that they have delivered to the trust and have the right to exercise decision-making power over the trust property. For more information, please refer to Market Observation Post System website.

  3. The percentage of shareholding is calculated by rounding to two decimal places.

XIV. Segment Information

  • (I) General information

In 2020, because WUXI Zhonghan reached the quantification threshold, the Group's segment increased to four as follows: The Company and its processing subsidiaries (including Huili, Zhonghan, WUXI SPI and Protek Dongguan), Zhonghan Tech., WUXI Zhonghan and 3Y Power, manufacture and sell their own products separately. The reportable segment of the Group is a product-specific business unit, and provides different products according to the functional requirements of customers. Since each product-

307

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

specific business unit requires different technologies and marketing strategies, it has to be managed separately. The Group does not allocate income tax expenses to reportable segments. The reported amounts are consistent with the reports used by operation decision makers. The accounting policies of the operating segments are the same as the summary of significant accounting policies described in Note IV. Profit or loss of the operating segments of the Group is measured at net income before income taxes and are used as the basis for evaluating performance.

  • (II) Information on segment's profit or loss, assets, liabilities and reconciliation

The Group's operating segment information and reconciliation were as follows:

Revenue:
Revenue from external customers
Intersegment revenue
Total revenue
Segment profit (loss)
Revenue:
Revenue from external customers
Intersegment revenue
Total revenues
Segment profit (loss)		 2021
The Company
and its
processing
subsidiaries		 3Y Power Zhong Han WUXI
Zhonghan		 Others Adjustment
and
elimination		 Consolidation
$ 11,735,562
2,496,855		 1,156,257
662,467
1,818,724
117,881		 2,352,506
16,135		 747,527
27,740
775,267
23,641
2020		 658,400
78,539
736,939
110,461		 -
(3,281,736)
(3,281,736)
978		 16,650,252
-
16,650,252
960,600

$ 14,232,417
2,368,641

$
611,229
96,410
The Company
and its
processing
subsidiaries		 **3Y Power ** **Zhong Han ** WUXI
**Zhonghan **		 Others Adjustment
and
**elimination **		 **Consolidation **
$ 10,409,338
2,351,685		 1,229,401
632,293
1,861,694
110,428		 1,958,213
10,492		 822,759
14,785
837,544
351,769		 376,749
13,147
389,896
(73,883)		 -
(3,022,402)
(3,022,402)
(4,185)		 14,796,460
-
14,796,460
934,044

$ 12,761,023
1,968,705

$
525,302
24,613

Note: As the total assets of the segment are not provided to the operation decision makers, it is not intended to disclose the measured amounts of the assets.

  • (III) Export sales information

  • Product and service information

The Group is engaged in the single electronics business and does not operate in other industries. Its revenue from external customers is provided in the operating segment's financial information.

  1. Geographic information

Revenue from external customers:

Revenue from external customers:
Region
Taiwan
China
U.S.A.
Germany
Others (below 5%)
Total		 2021
$ 3,543,739
6,501,642
1,929,901
2,235,319
2,439,651		 2020

2,868,035

6,236,624

1,555,693

2,014,236

2,121,872

14,796,460

$
16,650,252

308

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

Non-current Assets:
Region
Taiwan
Mainland China
Other countries
Total		 2021.12.31
$ 1,376,605
1,001,599
30,767		 2020.12.31

1,324,324

910,647

36,127

2,271,098

$
2,408,971

Non-current assets include property, plant and equipment, right-of-use assets, intangible assets and other assets, but exclude financial instruments, deferred tax assets and retirement benefits assets.

(IV) Major customer information

In 2021 and 2020, there were no customers whose sales revenue accounted for more than 10% of the revenue on the income statement.

  • VI. Effect on the Financial Position of Any Financial Difficulties Experienced by the Company and Its Affiliates in the Most Recent Fiscal Year and during the Current Fiscal Year Up to the Date of Publication of the Annual Report: None.

309

Chapter 7 Review and Analysis of the Company's F i n a n c i a l P o s i t i o n a n d F i n a n c i a l Performance, and Listing of Assessed Risks

I. Financial Position

Unit: NT$ thousands

Year
Item		 2021 2020 Difference Difference
Amount %
Current Assets 11,832,195
10,746,907
1,085,288
10.10%
Financial Assets at Fair Value
Through Other Comprehensive
Income-Non-Current
6,763,138
5,273,176
1,489,962
28.26%
Investments Recognized
Through the Equity Method		 26,947
25,319
1,628
6.43%
Property, Plant, and Equipment
1,544,427
1,523,809
20,618
1.35%
Intangible Assets 223,496
221,038
2,458
1.11%
Other Non-Current Assets 787,339
658,230
129,109
19.61%
Total Assets 21,177,542
18,448,479
2,729,063
14.79%
Current Liabilities 6,904,113
6,412,365
491,748
7.67%
Non-current Liabilities 725,953
543,454
182,499
33.58%
Total Liabilities 7,630,066
6,955,819
674,247
9.69%
Capital Stock 1,872,620
1,872,620
0
0.00%
Capital Surplus 1,011,016
1,011,016
0
0.00%
Retained Earnings 4,242,739
3,386,744
855,995
25.27%
Other Equity 6,082,586
4,914,436
1,168,150
23.77%
Non-controlling Interests 338,515
307,844
30,671
9.96%
Total Equity 13,547,476
11,492,660
2,054,816
17.88%
1.
Reasons and impact of changes greater than 20% in the past two years:
(1)
Financial Assets at Fair Value Through Other Comprehensive Income - Non-Current: The change was caused
by the increase of investment targets and the increase of market value of original investments during the
year.
(2)
Non-current Liabilities: The change was caused by the increase in long-term loans and lease liabilities during
the year.
(3)
Retained Earnings: The change was caused by the issuance of dividends, transfer of net income to retained
earnings for the period, and disposal of equity instruments in other comprehensive income measured at fair
value through profit and loss.
(4)
Other Equity: The change was caused by the increase in unrealized valuation profit and loss of financial
assets at fair value through other comprehensive income compared to the previous year.
2.
Measures to be taken in response: N/A.

Note: Consolidated information

310

II. Financial Performance

II.
Financial Performance		 II.
Financial Performance		 II.
Financial Performance		 II.
Financial Performance		 II.
Financial Performance
Unit: NT$ thousands
Year
Item
2021		 2020 Change, by
Amount		 Change (%)
Net Operating Revenue
Operating Costs
Plus: Realized (Unrealized)
Profit on Sales
Gross Profit
Operating Expenses
Net Operating Margin (Loss)
Non-operating Income and
Expenses
Income before Tax
Income Tax Expenses
(Benefits)
Net Income
Other Comprehensive
Income
Total Comprehensive
Income		 16,650,252
14,225,200
(847)
2,424,205
1,752,296
671,909
288,691
960,600
159,321
801,279
1,829,860
2,631,139
14,796,460

12,730,131

(2,781)

2,063,548

1,601,211

462,337

471,707

934,044

241,969

692,075

2,106,097

2,798,172
1,853,792

1,495,069

1,934

360,657

151,085

209,572

(183,016)

26,556

(82,648)

109,204

(276,237)

(167,033)
12.53%

11.74%

(69.54%)

17.48%

9.44%

45.33%

(38.80%)

2.84%

(34.16%)

15.78%

(13.12%)

(5.97%)
1.
Reasons and impact of changes greater than 20% in the past two years:
(1)
Realized (Unrealized) Profit on Sales: The change was caused by a decrease in the inventories of
subsidiaries sold by the parent company but still held at the subsidiary as of the end of the year compared
to the previous year.
(2)
Net Operating Margin (Loss): The revenue increased compared to the previous year, and the gross profit
of products increased compared to the previous year. In addition, the Company's operating expenses were
well managed, resulting in an increase in net operating profit compared to the previous year.
(3)
Non-operating Income and Expenses: The change was mainly caused by the disposal of the interest in real
estate of the subsidiary in Mainland China in the previous year.
(4)
Income Tax Expenses (Benefits): The change was mainly caused by the land value increase tax and
income tax expenses derived from the disposal of the interest in real estate of the subsidiary in Mainland
China in the previous year.
2.
Sales volume forecast and the basis therefor, and the effect on the financial operations and measures to be taken
in response
(1)
Forecast sales volume in the following year and its basis:
The Company's forecast sales volume is based on changes in the macroeconomic conditions, business
dynamics, and future development of the Company as well as the business targets based on the Company's
recent operations. The annual sales target for power-related products for 2022 is set as 20.9 million units,
which will help increase the Company's future revenue and profits.
(2)
Effect on the financial operations and measures to be taken in response: None.

Note: Consolidated information

311

III. Cash Flow

  • (I) Cash Flow Analysis for the Most Recent Year

  • Parent Company Only Financial Statements

Year
Item
2021		 2020 Percentage of Increase
(Decrease) (%)
Cash flow ratio (%) (4.62)
9.68
(147.73%)
Cash flow adequacy ratio (%) 5.71
19.84
(71.22)
Cash reinvestment ratio (%) (11.10)
2.62
(523.66%)
Analysis and explanation for items with increase and decrease ratio:
The cash flow ratio, cash flow adequacy ratio, and cash reinvestment ratio in 2021 decreased from
levels in 2020 mainly due to the net cash outflow from operating activities in 2021 and an increase of
approximately NT$270 million in expenditures for cash dividends compared to 2020.

2. Consolidated Financial Statements

Year
Item
2021		 2020 Percentage of Increase
(Decrease) (%)
Cash flow ratio (%) 0.45
6.58
(93.16)
Cash flow adequacy ratio (%) 7.55
13.59
(44.44)
Cash reinvestment ratio (%) (6.40)
1.76
(463.64)
Analysis and explanation for items with increase and decrease ratio:
The cash flow ratio, cash flow adequacy ratio, and cash reinvestment ratio in 2021 decreased from
levels in 2020 mainly due to the significant decline in net cash flow in operating activities of 92% in
2021 compared to 2020 and the increase in cash dividends, inventory, and capital expenditures in
2021 compared to 2020. The changes caused the cash flow ratio, cash flow adequacy ratio, and cash
reinvestment ratio to fall from levels in 2020.

  • (II) Improvement plan for insufficient liquidity: N/A.

  • (III) Liquidity Analysis for the Coming Year

  • Parent Company Only Financial Statements

reinvestment ratio to fall from levels in 2020.
I) Improvement plan for insufficient liquidity: N/A.
II) Liquidity Analysis for the Coming Year
1.
Parent Company Only Financial Statements		 reinvestment ratio to fall from levels in 2020.
I) Improvement plan for insufficient liquidity: N/A.
II) Liquidity Analysis for the Coming Year
1.
Parent Company Only Financial Statements		 reinvestment ratio to fall from levels in 2020.
I) Improvement plan for insufficient liquidity: N/A.
II) Liquidity Analysis for the Coming Year
1.
Parent Company Only Financial Statements		 reinvestment ratio to fall from levels in 2020.
I) Improvement plan for insufficient liquidity: N/A.
II) Liquidity Analysis for the Coming Year
1.
Parent Company Only Financial Statements
Unit: NT$ thousands
Cash at
Beginning of
Year		 Net Cash Flows from
Operating Activities		 Cash Flows Used Cash Surplus
(Inadequacy)		 Remedial Measures for
Cash Inadequacy
Investment
Plan		 Financial
Plan
1,683,746
712,397
278,597
2,117,546
0		 0
(1) Operating activities: The Company expects to achieve growth in revenue and maintains a high level
of control over accounts receivable and inventories. The Company expects to generate cash inflows
of NT$712,397 thousand from operating activities in 2022.
(2) Investing activities: They mainly include the cash dividends received, acquisition and disposal of
financial assets at fair value through profit or loss, financial assets at fair value through other
comprehensive income, and capital expenditures such as expansion of plant and equipment in
response to business requirements.
(3) Financing activities: They mainly include the repayment of the principal of loan-term loans for
"Welcoming Returning Taiwanese Businesses Special Loans"and payment of cash dividends.

2. Consolidated Financial Statements

Unit: NT$ thousands

Cash at
Beginning of
Year		 Net Cash Flows from
Operating Activities		 Cash Flows Used Cash Surplus
(Inadequacy)		 Remedial Measures for
Cash Inadequacy		 Remedial Measures for
Cash Inadequacy
Investment
Plan		 Financial
Plan
2,794,253
666,110
312,532
3,147,831
0		 0
(1) Operating activities: The Company expects to achieve growth in revenue and maintains a high level
of control over accounts receivable and inventories. The Company expects to generate cash inflows
of NT$666,110 thousand from operating activities in 2022.
(2) Investing activities: They mainly include the cash dividends received, disposal of financial assets
available for sale, and capital expenditures such as expansion of equipment in response to business
requirements.
(3) Financing activities: They mainly include the repayment of the principal of loans for "Welcoming
Returning Taiwanese Businesses Special Loans"and payment of cash dividends.

312

  • IV. Effect Upon Financial Operations of Any Major Capital Expenditures During the Most Recent Fiscal Year: None.

  • V. Company Reinvestment Policy for the Most Recent Fiscal Year, Main Reasons for Profits/Losses Generated Thereby, Plan for Improving Re-investment Profitability, and Investment Plans for Coming Year: None.

  • VI. Risk Analysis and Assessment for the Most Recent Fiscal Year and during the Current Fiscal Year Up to the Date of Publication of the Annual Report

  • (I) Effect on the Profit (Loss) of Interest and Exchange Rate Fluctuations and Changes in the Inflation Rate, and Response Measures to Be Taken in the Future:

    1. Interest rate

      • With regard to future interest rate trends, the Company monitors changes in market interest rates at all times to reduce the impact of interest rate changes on the Company.

    2. Exchange rate

      • The Company has adopted natural hedging as a principle for maintaining balanced foreign-currency assets and liabilities in response to rapid changes in the international financial market. It reduces the Company's risk exposure and ensures natural hedging.

    3. Inflation Inflation does not have a significant impact on the Company's operations and profitability due to the nature of the industry. The Company shall continue to implement cost control, closely monitor the changes in the prices of raw materials, and adjust the inventory where appropriate.

  • (II) Policy regarding High-risk Investments, Highly Leveraged Investments, Loans to Other Parties, Endorsements/Guarantees, and Derivatives Transactions, Main Reasons for the Profit (Loss) Generated Thereby, and Response Measures to Be Taken in the Future:

The Company has always focused on its own business and has avoided engaging in high-risk and high-leverage investments unrelated to its business. In addition, the Company's loans to other parties, endorsements/guarantees, and derivatives transactions are processed in accordance with procedures specified by the competent authority. To mitigate exchange rate risks, the Company engages in forward exchange transactions and derivative transactions with financial institutions in accordance with the operating procedures in the Company's "Procedures for Acquisition or Disposal of Assets".

  • (III) R&D Work to Be Carried Out in the Future and Further Expenditures Expected for R&D Work:

  • R&D Work to Be Carried Out in the Future:

FSP has actively set up departments and expanded R&D personnel for each product category in recent years. We continue to develop new products and increase our R&D program by making necessary investments and increasing R&D and testing equipment to strictly control and track the progress. We leveraged our solid foundations for R&D for the development of power supplies compliant with USB PD 3.1 standards for consumer markets, digital power supplies, power supplies for artificial intelligence applications in the Internet of Things, power supplies for 5G base station applications, power supplies for 5G edge computing applications, power supplies for block chain and visual computing applications, power supplies for cloud computing servers, power supplies for medical applications, industrial chargers, and energy storage systems (ESS).

313

Products to be developed:

  • Compact 750/850/1KW ATX.

  • Efficient Titanium 850/1KW ATX power supply.

  • Development of power supply to support the ATX 12Vo platform developed by Intel and meet new energy efficiency requirements.

  • Research on GaN materials and introduction into Titanium 1.3/1.6KW products.

  • High-wattage SFX 1KW power supply for MP in 2022/Q3.

  • Development of new PD Dock 100W products.

  • Continuous development of products in the PD series to meet new specifications for USB PD 3.1 (28/36/48V).

  • Continuous development of products with wide temperature adaptation for telecom applications.

  • Development of high-wattage (>800W) Flex products to support systems with high-performance graphic cards.

  • CRPS 2700W high-power density devices.

  • Development of integrated CRPS back board to meet high-mix lowvolume demand for Open Rack.

  • Development of redundant products for small-scale edge computing demand.

  • Iterative design for 150W @ 2" x 4" series.

  • 100W and 150W power supply for industrial applications

  • PoE 550W power supply for telecom applications.

  • PoE 950W power supply for telecom applications.

  • 1000W power supply for industrial applications.

  • 45W C14 Desk Top Adapter products.

  • 60W C14 Desk Top Adapter products.

  • 90W C14 Desk Top Adapter products.

  • 260W Open Frame products.

  • 700W ATX PC Power.

  • 900W ATX PC Power.

  • IP67 600W/2000W On Board/off Board Charger.

  • Compact/light 1800W On Board/Off Board Charger.

  • 350W IP67 CANbus charger with metal shell.

  • UDS automobile communication software development.

  • 3300W On Board Charger for cooling module.

  • 3KW mobile energy storage.

  • Stationary energy storage system.

  • Lithium iron phosphate battery modules.

  • Further Expenditures Expected for R&D Work

The Company's future R&D investments are based on the progress of new product and new technology development. We will gradually increase our annual R&D expenses to support our future R&D plans based on the growth of our revenue. The actual R&D expenses for 2021 totaled NT$455,887 thousand and the R&D expenses for 2022 are expected to reach NT$559,983 thousand.

314

  • (IV) Effect on the Financial Operations of Important Policies Adopted and Changes in the Legal Environment at Home and Abroad, and Measures to Be Taken in Response:

The Company complies with domestic and foreign laws and regulations in its operations and management. The changes in the legal environment at home and abroad do not have significant impact on the Company's financial operations. The Company will continue to monitor important trends in domestic and international policies and changes in regulations related to its operations, and take appropriate countermeasures.

  • (V) Effect on the Financial Operations of Developments in Science and Technology and Industrial Change (Including Cybersecurity Risks), and Measures to Be Taken in Response

The Company shall follow and support global initiatives for environmental protection and uphold the vision of sustainable management to continue to develop green energy products. We shall focus more on the research and development of energy-saving, energy storage, and energy generation power supply products. Our goal is to place FSP products in every household, pursue cleanliness and efficiency, and become a global leader in the energy industry. The Company has established comprehensive information security measures for networks and computers, and ensures the appropriateness and effectiveness of its information security protocols and procedures through continuous reviews and evaluations.

The Company implements relevant improvement measures and continues to update these measures. For example, we strengthen the network firewall and network control to prevent the spread of computer viruses across the plants, and set up anti-virus measures for terminal devices based on the computer type. We implement advanced solutions to detect and handle malware, introduce new technologies to enhance data protection, and strengthen phishing email detection, etc. We also conduct regular employee education and training to increase employees' information security awareness.

(VI) Effect on the Crisis Management of Changes in the Corporate Image, and Measures to Be Taken in Response: None. (VII) Expected Benefits and Possible Risks Associated with Any Mergers and Acquisitions, and Measures to Be Taken in Response: None. (VIII) Expected Benefits and Possible Risks Associated with Any Plant Expansion, and Measures to Be Taken in Response: The Company has constructed Taoyuan Plant 3 at Dashulin Section, Taoyuan District, Taoyuan City to expand manufacturing capacity, disperse regional manufacturing risks, and optimize global production and marketing operations. In addition to company funds, FSP has applied for and obtained project financing under the government's "Action Plan for Welcoming Overseas Taiwanese Businesspeople to Return Investment in Taiwan" to finance the construction of plants and the purchase of equipment. We have sufficient capital for utilization and face no risks of capital shortages.

  • (IX) Risks Associated with Any Consolidation of Sales or Purchasing Operations, and Measures to Be Taken in Response: None.

  • (X) Effect on and Risk to the Company in the Event a Major Quantity of Shares Belonging to a Director or Shareholder Holding Greater than a 10% Stake in the Company Has Been Transferred or Has Otherwise Changed Hands, and Measures to Be Taken in Response: None.

315

  • (XI) Effect on and Risk to the Company Associated with Any Change in Governance Personnel or Top Management, and Measures to Be Taken in Response: None.

  • (XII) The Company and the Company's Directors, President, Actual Responsible Person, Shareholders Holding More than 10% of the Company Shares, and a Subsidiary Company Who Is Involved in a Major Lawsuit that Has Either Been Decided or Is Still Pending Whereby the Results of the Case May Have a Significant Impact to Shareholder Interests or Securities Prices, Must Be Specified. The Status of the Disputed Facts, Bid Amount, Litigation Commencement Date, and the Primary Parties Involved in Such Litigations up to the Publication Date of this Annual Report Shall Be Disclosed:

  • Confirmed Judgment, Ongoing Litigious, Non-litigious or Administrative Disputes of the Company That May Materially Affect the Shareholders' Equity or Prices of Securities Shall Be Disclosed. Disclosure Shall Include Disputed Facts, Monetary Amount Involved, Proceeding Starting Date, the Main Parties Involved, and Present Status:

    • (1) The Company purchased products of Beyond Innovation Technology Co., Ltd. (hereinafter referred to as Beyond Innovation) through a distributor in Taiwan. O2 Micro International Limited (hereinafter referred to as O2), a competitor of Beyond Innovation, states that such products infringe upon its patent rights in the United States, and therefore filed a civil lawsuit against three companies including the merged company in the Marshall Division, United States District Court for the Eastern District of Texas (hereinafter referred to as the United States District Court).

O2 withdrew all claims for monetary compensation against all defendants in the preceding civil lawsuit on April 24, 2006. The United States District Court subsequently rendered a first-instance judgment and injunction prohibiting the sale of the products to the United States on March 21, 2007. It also ruled that the attorneys' fees and litigation costs incurred in this lawsuit, totaling US$2,268,402.22, should be borne jointly by the merged company, Beyond Innovation, and Lien Chang Electronic Enterprise Co., Ltd. After the defendants filed an appeal to the United States Court of Appeals for the Federal Circuit, the Federal Circuit issued a decision on April 3, 2008. It found the lower court's ruling, in which the defendants were found to be in violation of patent rights, did not meet requirements for legal proceedings and therefore reversed and remanded to the original court for retrial. As for the ruling regarding the litigation expenses, although it was not reviewed by the court of appeals, the reversal of the first-instance judgment means that the ruling has lost its basis and is therefore nullified.

After the case was remanded to the United States District Court, the Court only reviewed the lawsuit between O2 and Beyond Innovation, and rendered a judgment on September 27, 2010, which found that although Beyond Innovation had infringed upon O2's patent rights, the infringement was not based on malicious intent. Beyond Innovation later filed an appeal and the United States Court of Appeals for the Federal Circuit (CAFC) rejected Beyond Innovation's appeal and affirmed the decision of the lower court.

The litigation between the merged company and O2 was separated from the aforementioned litigation between O2 and Beyond Innovation on July 21, 2009. However, the merged company has not yet received a notice of hearing from the US Court.

316

The Company was implicated by the use of Beyond Innovation's products, and after learning that Beyond Innovation's products involved in such disputes, we have switched to alternative materials that do not involve infringement disputes. According to the intellectual property right guarantee signed by the merged company and Beyond Innovation, Beyond Innovation shall bear all liabilities, losses, damages, costs, or other expenses incurred by the merged company as a result of the use of its products. As a result, Beyond Innovation shall bear the adjudication costs borne by the merged company. Therefore, the attorneys' fees and litigation costs incurred in the above patent litigation do not have a significant impact on the merged company's financial statements. The merged company recognized the aforementioned expenses in as expenses for the year in which they occurred based on fiscal conservatism.

The Company believes that since a ruling was rendered in the litigation between O2 and Beyond Innovation in the United States, we filed a civil lawsuit against Beyond Innovation based on the intellectual property rights guarantee provided by Beyond Innovation. We first requested the partial payment of the litigation costs and related expenses incurred by the O2 lawsuit in the United States in connection with the use of Beyond Innovation's products. However, on December 26, 2008, the Taiwan Taipei District Court rejected the claim for damages, and merged company did not approve the rejection. On January 16, 2019, the merged company filed an appeal to Taiwan High Court and obtained a judgment in its favor on November 27, 2019. However, Beyond Innovation filed an appeal to the Supreme Court on December 30, 2019, and the merged company is still waiting for the final decision of the Supreme Court before enforcing the decision.

  • (2) The merged company received a court notice on July 20, 2020 regarding a lawsuit filed by the merged company's customer Jiangsu Lemote Tech Co., Ltd. (hereinafter referred to as Lemote) for transaction contract disputes. Lemote claimed that there were anomalies in the merged company's products and requested the refund of payments already made and payment for related damages with a total amount of RMB 4,266,789.46. It also filed for a property preservation ruling with Changshu People's Court for freezing bank deposits equivalent to the aforementioned value totaling RMB 4,300,000 (listed under other non-current assets). The Court rendered a ruling on August 27, 2021 that required Lemote to return the products of the merged company and required the merged company to refund payments totaling RMB 2,822,600 paid by Lemote, pay a compensation of RMB 900,000, and pay RMB litigation expenses of 374,581, totaling more than RMB 4.09 million. The merged company rejected the product anomaly stated by Lemote and the court ruling and filed an appeal to the Suzhou Intermediate People's Court in September 2021.

  • The Company and the Company's Directors, President, Actual Responsible Person, Shareholders Holding More than 10% of the Company Shares, and a Subsidiary Company Who Is Involved in a Lawsuit that Has Either Been Decided or Is Still Pending as of the Publication Date of the Annual Report Whereby the Results of the Case May Have a Significant Impact to Shareholder Interests or Securities Prices, Must Be Specified: None..

317

(XIII) Other Significant Risks and Countermeasures:

Economy Finance Operations Environmental Safety
Risk
Type		 ⚫
Changes in policies and laws
⚫
Changes in technology and
the industry
⚫
Competition in R&D
technology
⚫
Plant and capacity expansion		 ⚫
Exchange rate and interest rate
risks
⚫
Customer credit risks
⚫
Tax risks
⚫
Mergers and acquisitions or
strategic investments		 ⚫
Supply chain disruptions
⚫
Inventory risks
⚫
Information security risks
⚫
Talent development
⚫
Legal or patent disputes and
litigation		 ⚫
Occupational safety and
compliance risks
⚫
Natural disasters and climate
change risks (electricity supply,
earthquakes, and typhoons)
⚫
Fire
⚫
Communicable diseases
Response
Method		 ⚫
We pay close attention to
important domestic and
international policies and
laws. We manage risks and
develop response measures
through our business units
and global operations. As of
the publication date of this
Report, no policy or legal
changes have caused
significant impact on FSP's
financial operations.
⚫
In terms of technology, power
supplies are becoming more
compact and their
performance and functionality
have improved. In terms of
the industry, manufacturing
capabilities have gradually
shifted from labor-intensive
to automation. FSP continues
to dedicate its effort into
enhancing the R&D of high
value-added products.
⚫
We control key technologies
and components and we are
committed to innovation in
technology development and
product functions to enhance
our competitiveness.
⚫
The Company has constructed
new plants in Taiwan City to		 ⚫
We strictly monitor changes in
exchange rates and interest rates
and regularly assess our capital
positions. We maintain net
foreign currency holdings within
certain limits to minimize the
impact of interest rate and
exchange rate fluctuations on the
Company.
⚫
We continue to reduce credit
risks by leveraging insurance
coverage for receivables.
⚫
We pay close attention to tax
laws and regulations in different
countries and continue to
maintain good communication
with tax professionals in all
regions of Group operations to
maintain an adequate financial
and tax structure and reduce tax
risks
⚫
Project teams make strategic
investments in upstream and
downstream industries to create
opportunities for additional
revenue.		 ⚫
The R&D unit establishes plans for
acquiring alternative materials and
creates a supplier management
system to reduce the risks of supply
chain disruption. We use real-time
information system to monitor
global operations, including
shipments, inventory, purchase
orders, and working capital, and set
alert indicators.
⚫
We implement remote backup
mechanisms for critical information
of the Company to reduce
information security risks.
⚫
We use both theories and practices
based on operational requirements to
inspire employees' potential and
cultivate high-quality talents. The
Human Resources Department
formulates and executes annual
plans for fostering the corporate
culture, professionalism,
functionality, internal talents, and
the e-leaning training system.
⚫
We carefully review contracts and
intellectual property rights
applications to reduce subsequent
legal risks.		 ⚫
The Company has set up the
Occupational Safety Dept. and
the Occupational Safety
Committee as required by law to
promote and obtain ISO 45001
certification. We identify risk
levels based on hazard
occurrence, frequency of
employee operations, and
severity of hazards. We also
require relevant departments in
plants to formulate preventive
and control measures based on
the risk level. We consider
regulatory requirements,
management status, internal and
external environmental impact,
and priorities for improvement,
and set management plans and
indicators, which are regularly
reviewed and evaluated.
⚫
In regards to financial risks
caused by climate change, FSP's
ESG management team has
created plans and set medium
and long-term goals based on the
concept of sustainability. We
actively promote carbon
reduction and other management
measures to mitigate climate
change and improve the
Company's adaptability.

318

expand manufacturing
capacity and disperse regional
manufacturing risks.		 ⚫
We organize fire drills twice a
year and regular equipment
inspections every year.
⚫
We have set up an epidemic
prevention team to respond to
infectious diseases as soon as
they occur.

VII. Other Important Matters: None.

319

Chapter 8 Special Disclosure

I. Information on the Company Affiliates

  • (I) Consolidated Business Report of Affiliates

  • Organizational Structure of Affiliates

FSP GROUP

==> picture [489 x 281] intentionally omitted <==

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

FSP Technology Inc.
(TAIWAN) Inc.Technology 3Y Power65.87% FSP group Inc.100% FSP International 100%Inc. Harmony Trading (HK) Ltd.100% Technology Co., Amacrox 100%Ltd. TECHNOLOGY USA INC100% FSP FSP Turkey Dis Ticaret Limited 91.41%Sirketi
Luckyield Co, Ltd.100% Technology.,Inc.3Y Power 100% FSP Technology 100%Inc. International(HK)Limited.100%FSP Electronics(Samoa)Corp.Protek 100% Shenzhen Huili Electronic Co., Ltd.100% Electronics Co., Power 100%Ltd. Famous Holding Ltd. 100% Amacrox Gmbh 100% FSP Group USA Corp. 45% North America, Protek Power 100%Inc.
3Y Technology Co., Ltd.WUXI 100% FSP-C R&D Center100% Technology(Jian) Electronic Hao Han Co., Ltd.100% (China)Corp.Electronics Protek 100% (Shenzhen) Electronics Zhonghan Co., Ltd.100% Technology Co., WUXI SPI 100%Ltd. WUXI Zhonghan Technology Co., 100%Ltd.
Shenzhen
Zhonghan
Technology
Co., Ltd.
100%
----- End of picture text -----

Note: Organizational structure of affiliates as of December 31, 2021

320

2. Basic Information of FSP Affiliates

Unit: Thousand NT$ (foreign currency)

Unit: Thousand NT$ (foreign currency)
Name of Company Date of
Incorporation
Address		 Paid-in Capital Major Lines of Business or Products
FSP TechnologyInc. 1993.04.15 Taoyuan NTD 1,872,620 Manufacturing and trading ofpowersupply
3Y Power Technology (Taiwan) Inc. 1996.12.31 Taoyuan NTD 247,600 Trading of power supply
3Y Power Technology, Inc. 1985.06.04 U.S.A. USD 600 Trading of power supply
FSP Technology USA Inc. 2015.01.07 U.S.A. USD 100 Trading of power supply
FSP International Inc. (BVI) 1999.04.26 Virgin
Islands		 NTD 1,241,751 Holding company
Power Electronics Co., Ltd. (BVI) 2001.01.16 Virgin
Islands		 NTD 217,707 Holding company
FSP Group Inc. 1997.09.26 Cayman
Islands		 NTD 1,752 Safety regulation application
Shenzhen HuiLi Electronics Co., Ltd. 1993.03.24 Guangdong NTD 146,192 Manufacturing of power supply
Zhonghan Electronics Shenzhen Co.,
Ltd.		 2001.05.17 Guangdong NTD 225,809 Manufacturing of power supply
Famous Holding Ltd.. 2001.04.18 Samoa NTD 807,483 Holding company
Wuxi SPI Technology Co., Ltd. 2003.04.03 Wuxi SPI
Technology
Co., Ltd.		 NTD 727,851 Manufacturing of power supply
Wuxi Zhonghan Technology Co., Ltd. 2003.10.21 Wuxi SPI
Technology
Co., Ltd.		 NTD 419,260 Manufacturing and trading of power supply
Amacrox GmbH 2004.03.09 Germany EUR 25 Trading of power supply
FSP Group USA Corp. 2003.04.01 U.S.A. USD 550 Trading of power supply
Amacrox Technology Co., Ltd. (BVI) 2003.11.05 Virgin
Islands		 NTD 40,925 Holding company
Shenzhen Zhong Han Science & Tech.
Co., Ltd.		 2001.06.18 Guangdong NTD 131,310 Manufacturing and trading of power supply
FSP Technology Inc. (BVI) 2006.12.27 Virgin
Islands		 NTD 62,883 Holding company
Jiangsu FSP Power Technology R&D
Co., Ltd.		 2007.04.29 Jiangsu NTD 69,009 Development, design, technology transfer,
and services for power supply
Protek Electronics (Samoa) Corp. 2002.12.24 Samoa NTD 32,984 Holding company
Harmony Trading ( HK) Ltd. 2007.03.17 Hong Kong NTD 45 Trading of power supply
Protek PowerNorth America ,Inc. 2007.10.01 U.S.A. USD 115 Trading ofpowersupply
Dongguan Protek Electronics Corp. 2003.02.28 Guangdong NTD 39,691 Manufacturing of power supply
Haohan Electronic Technology (Ji'an)
Co., Ltd.		 2006.09.01 Jiangxi NTD 164,917 Production and sales of electronic
components and products
FSP International (HK) Ltd. 2008.04.22 Hong Kong NTD 141,042 Holding company
Luckyield Co,.Ltd. 2011.06.30 Samoa NTD 4,500 Holding company
Wuxi Xiangyuan Electronics Co., Ltd. 2011.11.24 Suzhou NTD 4,154 Trading of power supply
FSP TurkeyDisTic.Ltd.Sti. 2016.03.16 Turkey TRY7,300 Trading ofpowersupply
  1. Where There Is Considered to Be a Controlled And Subordinate Relation, Information of the Same Shareholders: None.

321

4. Business of Affiliates andTheir Relationships Business of Affiliates andTheir Relationships
Industry Name of Affiliate Business Relationship with Other Affiliates
Holding
company		 FSP International Inc. (BVI) Investment in Power Electronics Co., Ltd. (BVI), Famous
Holding Ltd., Shenzhen HuiLi Electronics Co., Ltd., FSP
Technology Inc., FSP International (HK) Ltd., and Protek
Electronics (Samoa) Corp
Power Electronics Co., Ltd. (BVI) Investment in Zhonghan Electronics Shenzhen Co., Ltd.
Famous Holding Ltd. Investment in Wuxi SPI Technology Co., Ltd. and Wuxi
Zhonghan Technology Co., Ltd.
Amacrox Technology Co., Ltd. (BVI) Investment in Amacrox GmbH, FSP Group USA Corp.,
and Protek Power North America, Inc.
FSP Technology Inc. (BVI) Investment in Jiangsu FSP Power Technology R&D Co.,
Ltd.
Protek Electronics (Samoa) Corp. Investment in Dongguan Protek Electronics Corp.
FSP International (HK) Ltd. Investment in Haohan Electronic Technology (Ji'an) Co.,
Ltd.
Luckyield Co,.Ltd. Investment in Wuxi Xiangyuan Electronics Co., Ltd.
Manufacturing Shenzhen HuiLi Electronics Co., Ltd. Manufacturing of power supply
Zhonghan Electronics Shenzhen Co.,
Ltd.		 Manufacturing of power supply
Wuxi SPI Technology Co., Ltd. Manufacturing of power supply
Wuxi Zhonghan Technology Co., Ltd. Manufacturing and trading of power supply and
investment in Shenzhen Zhong Han Science & Tech. Co.,
Ltd.
Shenzhen Zhong Han Science & Tech.
Co., Ltd.		 Manufacturing and trading of power supply
Dongguan Protek Electronics Corp. Manufacturing of power supply
Haohan Electronic Technology (Ji'an)
Co., Ltd.		 Production and sales of electronic components and
products
Safety regulation
application
company
FSP Group Inc.		 Safety regulation application
R&D and
services		 Jiangsu FSP Power Technology R&D
Co., Ltd.		 Development, design, technology transfer, and services
Trading 3Y Power Technology (Taiwan) Inc. Trading of power supply and investment in FSP
Technology Inc.
3Y Power Technology, Inc. Trading of power supply and investment in Jiangsu FSP
Power Technology R&D Co., Ltd.
FSP Technology USA Inc. Trading of power supply
Amacrox GmbH Trading of power supply
FSP Turkey Dis Tic.Ltd.Sti. Trading of power supply
FSP Group USA Corp. Trading of power supply
Harmony Trading ( HK) Ltd. Trading of power supply
Proteck Power North America, Inc. Trading of power supply
Wuxi Xiangyuan Electronics Co., Ltd. Trading of power supply

322

5. Information on Directors, Supervisors, and Presidents of Affiliates

Unit: Shares; %

SharesHeld SharesHeld
Total
Name of Affiliate Title Name or Representative
Shares Shareholding
Percentage
FSP International Inc. (BVI) Director FSP Technology Inc.
(Representative: Cheng, Ya-Jen)		 32,202,500
100%
3Y Power Technology (Taiwan) Inc. Chairman FSP Technology Inc.
(Representative: Cheng, Ya-Jen)		 16,309,484
65.87%
3Y Power Technology, Inc. Chairman 3Y Power Technology (Taiwan) Inc.
(Representative: Cheng, Ya-Jen)		 600,000
65.87%
FSP Technology USA Inc. Chairman FSP Technology Inc.
(Representative: Cheng, Ya-Jen)		 100,000
100%
FSP Turkey Dis Tic.Ltd.Sti. Director FSP Technology Inc.
(Representative: Cheng, Ya-Jen)		 6,673,000
91.41%
Power Electronics Co., Ltd. (BVI) Director FSP International Inc.
(Representative: Cheng, Ya-Jen)		 7,000,000
100%
Shenzhen HuiLi Electronics Co.,
Ltd.		 Director FSP International Inc.
(Representative: Cheng, Ya-Jen)		 (Note)
100%
Zhonghan Electronics Shenzhen
Co., Ltd.		 Director Power Electronics Co., Ltd.
(Representative: Cheng, Ya-Jen)		 (Note)
100%
FSP Group Inc. Director FSP Technology Inc.
(Representative: Cheng, Ya-Jen)		 50,000
100%
Famous Holding Ltd. Director FSP International Inc.
(Representative: Cheng, Ya-Jen)		 27,000,000
100%
Wuxi SPI Technology Co., Ltd. Director Famous Holding Ltd.
(Representative: Cheng, Ya-Jen)		 (Note)
100%
Wuxi Zhonghan Technology Co.,
Ltd.		 Director Famous Holding Ltd.
(Representative: Cheng, Ya-Jen)		 (Note)
100%
Amacrox Technology Co., Ltd.
(BVI)		 Director FSP Technology Inc.
(Representative: Cheng, Ya-Jen)		 1,109,355
100%
Amacrox GmbH Chairman Amacrox Technology Co., Ltd.
(Representative: Cheng, Ya-Jen)		 25,000
100%
FSP Group USA Corp. Director Amacrox Technology Co., Ltd.
(Representative: Cheng, Ya-Jen)		 247,500
45%
Shenzhen Zhong Han Science &
Tech. Co., Ltd.		 Director Wuxi Zhonghan Technology Co., Ltd.
(Representative: Chao, Er-Chang)
(Note)
100%
FSP Technology INC. (BVI) Director FSP International Inc.
(Representative: Cheng, Ya-Jen)		 2,100,000
100%
FSP International (HK) Ltd. Director FSP International Inc.
(Representative: Cheng, Ya-Jen)		 4,770,000
100%
Haohan Electronic Technology
(Ji'an) Co., Ltd.		 Director FSP International (HK) Ltd
(Representative: Cheng, Ya-Jen)		 (Note)
100%
Jiangsu FSP Power Technology
R&D Co., Ltd.		 Director FSP Technology Inc.
(Representative: Cheng, Ya-Jen)		 (Note)
100%
Protek Electronics (Samoa) Corp Director FSP International Inc.
(Representative: Cheng, Ya-Jen)		 1,100,000
100%
Harmony Trading (HK) Ltd. Director FSP Technology Inc.
(Representative: Cheng, Ya-Jen)		 10,000
100%
Dongguan Protek Electronics Corp. Chairman Protek Electronics (Samoa) Corp
(Representative: Chen, Kuo-Ruey)		 (Note)
100%
Proteck Power North America, Inc. Chairman Amacrox Technology Co., Ltd.
(Representative: Cheng, Ya-Jen)		 1,000
100%
Luckyield Co,. Ltd Director 3Y Power Technology (Taiwan) Inc.
(Representative: Cheng, Ya-Jen)		 150,000
65.87%
Wuxi Xiangyuan Electronics Co.,
Ltd.		 Director Luckyield Co,. Ltd
(Representative: Lin, Kao-Chou)		 (Note)
65.87%

Note: Organized as a limited company.

323

6. Operating Status of Affiliates

6.
Operating Status of Affiliates		 6.
Operating Status of Affiliates		 6.
Operating Status of Affiliates		 6.
Operating Status of Affiliates		 6.
Operating Status of Affiliates		 6.
Operating Status of Affiliates		 6.
Operating Status of Affiliates		 6.
Operating Status of Affiliates		 6.
Operating Status of Affiliates
Unit: NT$ thousands
Earnings

Profit or
Paid-in Total Total Operating
Operating
Per Share
Name of Affiliate Net Worth
Loss (after
Capital Assets Liabilities
Revenue

Income		 (NT$)
tax)
(aftertax)
FSP International Inc. (BVI) 1,241,751
2,222,578
984		 2,221,594
0
(2)
108,773
3.38
Power Electronics Co.,Ltd. (BVI) 217,707 211,901
0		 211,901
0		 0 437 0.06
FSP Group Inc. 1,752
372
0
372
0
(101)
(110)
(2.20)
Shenzhen HuiLi Electronics Co.,
Ltd.		 145,090
795,785
461,569
334,216		 1,187,589 (31,289)
(6,735)
Note (1)
Zhonghan Electronics Shenzhen Co.,
Ltd.
224,107
326,271
116,161
210,110
433,672
(699)
465
Note (1)
FamousHoldingLtd. 807,483 1,368,984
10,273		 1,358,711
0		 (4) 58,092
2.15
Wuxi SPI Technology Co., Ltd. 722,364
161,827
37,769
124,058
237,223		 (50,449)
(46,442)
Note (1)
Wuxi Zhonghan Technology Co.,
Ltd.		 416,099
1,464,509
223,932		 1,240,577
775,312
18,091
104,499
Note (1)
Amacrox GmbH 18,181
5,009
2,138
2,871
0
(672)
332
13.28
FSPGroup USACorp. 14,903 75,934
9,499		 66,435 104,992
6,118		 7,299 29.49
FSP Turkey Dis Tic.Ltd.Sti. 22,640
50,683
29,383
21,300
59,549
8,324
4,951
Note (1)
Amacrox Technology Co., Ltd.
(BVI)		 40,925
66,075
0
66,075
0
(81)
850
0.77
Shenzhen Zhong Han Science &
Tech. Co., Ltd.		 130,320
1,803,788		 1,056,653
747,135		 2,370,373
89,226
86,745
註(1)
3Y Power Technology (Taiwan)Inc. 304,406 1,746,599 750,723 995,876 1,818,724
104,523		 134,172
5.42
3Y Power Technology, Inc. 233,850
301,179
163,190
137,989
449,286
4,789
37,349
62.25
FSP Technology Inc. (BVI) 62,883
121,029
0
121,029
0
0
3,791
1.81
Jiangsu FSP Power Technology
R&D Co., Ltd.		 69,009
150,338
27,623
122,715
69,172
2,515
3,791
Note (1)
Proteck Electronics (Samoa) Corp. 32,984
16,069		 0 16,069 0 0 (7,993) (7.27)
Harmony Trading (HK) Ltd. 45
2,032
244
1,788
1,835
1
(86)
(8.60)
Proteck Power North America Inc.. 3,279
14,786
9
14,777
0
(2,492)
(2,469)		 (2,469.00)
Dongguan Protek Electronics Corp. 39,391
27,650
11,758
15,892
54,998
(7,801)
(7,988)
Note (1)
FSP International (HK) Ltd. 141,042
72,017
9
72,008
0
0
58,126
12.19
Haohan Electronic Technology
(Ji'an) Co., Ltd.		 163,673
97,836
25,827
72,009
20,511		 (19,593)
58,126
Note (1)
Luckyield Co, Ltd 4,500
3,768
0
3,768
0
0
26
0.58
Wuxi Xiangyuan Electronics Co.,
Ltd.		 4,122
3,935
167
3,768
1,738
23
26
Note (1)
FSP Technology USA Inc. 3,143
66,924
65,071
1,853
142,792
276
276
2.76

Note 1: Organized as a limited company. Note 2: If the affiliated company is a foreign company, related statistics shall be disclosed in NTD based on the exchange rate on specified in IAS 21 "The Effects of Changes in Foreign Exchange Rates".

324

(II) Consolidated Financial Statements of Affiliates

Statement

In 2021 (from January 1 to December 31, 2021), pursuant to "Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises," the Company's entities that shall be included in preparing the Consolidated Financial Statements of Affiliates and the Parent-Subsidiary Consolidated Financial Statements for International Financial Reporting Standards (IFRS) 10 recognized by the Financial Supervisory Commission are the same. Moreover, the disclosure information required for the Consolidated Financial Statements of Affiliates has been fully disclosed in the aforementioned Parent-Subsidiary Consolidated Financial Statements; hence, the Consolidated Financial Statements of Affiliates will not be prepared.

Sincerely,

Name of Company: FSP Technology Inc. Chairman: Cheng, Ya-Jen Date: March 18, 2022

(III) Reports on Affiliations: N/A.

  • II. Private Placement of Securities During the Most Recent Fiscal Year or During the Current Fiscal Year up to the Date of Publication of the Annual Report: None

  • III. Holding or Disposal of Shares in the Company by the Company's Subsidiaries During the Most Recent Fiscal Year or During the Current Fiscal Year up to the Date of Publication of the Annual Report: None

  • IV. Other Supplementary Information: None

  • V. Situations Listed in Subparagraph 2, Paragraph 3, Article 36 of the Securities and Exchange Act, which Might Materially Affect Shareholders' Equity or the Price of the Securities, Occurring during the Most Recent Fiscal Year and during the Current Fiscal Year Up to the Date of Publication of the Annual Report: None.

325

Notes to Consolidated Financial Statements of FSP Technology Inc. and Subsidiaries (Continued)

FSP Technology Inc.

Chairman Cheng, Ya-Jen

326

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