Headway - Annual Report 2022 | FinancialReports.eu

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Code:1776

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HEADWAY

HEADWAY ADVANCED MATERIALS INC.

Annual Report 2022

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Printed on May 10, 2023 The Annual Report is available at: https://mops.twse.com.tw https://www.headway.com.tw

Note: The English version is the translation of the Chinese version and if there is any discrepancy between this English translation and the Chinese text of this document, the Chinese text shall prevail.

1. Letter To Shareholders

Ladies and gentlemen, dear shareholders:

Looking back at the past year, although the widespread vaccination at the beginning of the year has led to the relaxation of epidemic prevention measures in various countries and the revival of the economy, the pressure of global inflation has caused countries to adopt tightening monetary policies one after another, which has had a negative impact on consumption and investment activities. As a result, downstream manufacturers' inventories have piled up, and the Company's shipment volume has been affected, resulting in the revenue in 2022 not being able to surpass the previous year's level.

Looking ahead to the year 2023, inflationary pressures have not eased, and related operating costs continue to increase. In addition, the ongoing Russian-Ukrainian conflict and the US-China trade war have intensified trade uncertainties. The Company will continue to control costs, innovating its products, and expanding international markets to cope with these challenges.

1. 2022 Operating Result:

(1) Results of Operating Plan Implementation:

Unit: NTD in Thousand

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Year Increase
2022 2021 (Decrease)
Item %
Sales revenue 1,448,029 1,476,066 (1.90)
Gross profit 194,241 284,086 (31.63)
Gross profit ration 13% 19% (31.58)
Profit ( loss ) 20,996 157,832 (86.70)
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The Company's consolidated Sales revenue for 2022 was NTD 1,448,029 thousand, a slight decrease of 1.9% compared to 2021. Gross profit decreased by 31.63% from the previous year, mainly due to the impact of global inflation. The Company's consolidated net profit after tax for 2022 was NT$20,996 thousand, a significant decrease compared to the previous year, mainly due to the higher profit from the disposal of Headway Shanghai Company in 2021.

(2) Execution of budget: The Company has not released any financial forecast, therefore it
is not applicable.
(3) Financial solvency and profitability analysis: Unit: NTD in Thousand

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Year Increase
2022 2021 (Decrease)
Item %
Net sales revenue 1,448,029 1,476,066 (1.90)
Gross profit 194,241 284,086 (31.63)
Interest income 10,741 8,594 24.98
Interest expense 5,738 5,172 10.94
Profit ( loss ) 20,996 157,832 (86.70)
Return on assets (%) 1.41 8.7 (83.79)
Return on equity (%) 1.84 13.92 (86.78)
Net income margin (%) 1.45 10.69 (86.44)
EPS(NTD) 0.27 2.05 (86.83)
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(4) Research & Development:

1) The combined R&D expenses invested by the parent company and subsidiaries in 2021 were NT$26,874 thousand.
2) Research and development achievements in 2022 ：
A. PUR(solvent-free reactive hot melt adhesive PU), current application:
a) Bio-based polyol PUR for textile lamination
b) Recycled polyol PUR for textile lamination
- c) Environmentally friendly PUR for system furniture and kitchenware lamination
- d) Environmentally friendly PUR for wood board and wood flooring

lamination

     - B. Environmentally friendly ink for steam-resistant food packaging

a) Ink for OPP food packaging materials

 - C. Solvent-free coating adhesives

       - a) Production process of carbodiimide curing agents has improved color and stability

 - D. PU foam/ PU elastomer

    - a) Foam composite for medical rehabilitation equipment

    - b) PU encapsulants for hemodialysis filter

 - E. High flexibility and weather-resistant waterborne PU ink

Summary of the 2023 Operating Plan:
(1) Operating policy:
- A. Strengthen the promotion of high-value-added PU resin products.

B. Develop environmental protection and green materials.

(2) Expected Sales Quantity and Basis:
A. Expected Sales Quantity:

The Company expects to sell approximately 18,000 tons of PU resin and 3,000 tons of TPU pellets.

B. Basis:

The expected sales quantity is based on the sales situation in 2022 and an

estimation of the overall economic situation in 2023.

(3) Important Production and Sales Policies:

 - A. Actively develop PUR products for use in furniture and building materials as a driving force for sales growth.

 - B. Improve the production efficiency and capacity of water-based products to

    - enhance market competitiveness and supply capacity, and meet customer needs.

Future Development Strategies of the Company:
(1) Focus on the development of the urethanes industry.
(2) Continuously expand product applications and develop high value-added and
- diversified application materials, making the Company a leading manufacturer of urethanes applications.
(3) Strengthen investment in expanding emerging market countries in the Asia-Pacific region.
(4) Develop green and recyclable products.
(5) Deepen clean production and sustainable management.
Impact of External Competitive Environment, Regulatory Environment, and Macroeconomic Environment:

Affected by global inflation and geopolitical factors, raw material prices will fluctuate dramatically and the profitability will be easily affected.

The Company adopts a group procurement model to strengthen its bargaining power in procurement and maintains good long-term cooperation with suppliers to obtain more favorable transaction prices and conditions. At the same time, the Company communicates with its sales customers to adjust prices appropriately to reflect changes in raw material costs, and seeks to maintain a balance between fluctuating raw material prices and sales prices to maintain a certain level of profit. In addition, the Company strengthens product research and development, uses existing technology

basis to continuously seek transformational development, and focuses on developing new formulas or alternative materials to reduce costs based on technological advantages and continuously improve production efficiency. In terms of sales, the Company actively expands international markets to increase future revenue and profitability.

Chairman ： Manager ： Accountant in Charge ： Liou, Han-Yin Chao, Wei-Chun Liao, Pei-Hung

2. Company Profil

2.1 Date of Incorporation: April 24, 1976

2.2 Company History:

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Year Milestone
The Company, Headway Chemical Industry Co., Ltd., was founded in Hengshan Township,
1976 Hsinchu County. We specialize in the production of PU hardeners and leather treatment
agents, with a registered capital of NTD 1,1 million.
The Company has been renamed to Headway Advanced Materials Inc. and has expanded
1979 the product line to include the development and production of PU waterproof materials and
PU running track materials.
The Company expanded the product line to include the development and production of PU
1984
resins, adhesives, foams, and other related products.
The Company has entered the vacuum metallizing industry and produces various thin films
for hot stamping and heat transfer, including full or partial transfer films, packaging films,
1987
decorative films, as well as electronic insulating and conductive films for manufacturing and
processing.
In response to the trend of environmental protection, the Company has taken the lead in
1988
developing Environmentally friendly water-based PU resin products.
The Company purchased a factory site in the Hsinchu Industrial Park, and relocated there
1992
from Hengshan next year.
The Company established Shanghai Huiyu Fine Chemical Co., Ltd. in Pudong, Shanghai to
1993
produce PU hardeners, PU building materials, and other related products.
The Company established Shanghai Xinyu Resin Co., Ltd. in Songjiang, Shanghai, to enter
1993
the market with synthetic leather PU resin and processing agents.
2001 The Company has renamed to Headway Advanced Materials Inc.
2002 The Company became a public company under the permission of the competent authority.
1. The Company's stock has been listed on TPEx Emerging Stock Board.
2. The Company has established Headway Advanced Matereials(Vietnam) Co., Ltd. in Dong
2004 Nai Province, Vietnam, in response to the trend of furniture industry moving to Vietnam, as
well as to collaborate with local demand and support the development of Taiwanese
coating factories in Vietnam.
The Company established Headway Polyurethane Corporation Limited to develop various
2006 levels of TPU pellets products, including films, injection molding, calendering, inks, and
more.
1. The Company established Shanshui Lianmei Chemical Co., Ltd. in Foshan, Guangzhou, to
strengthen our market presence in South China and become an important production and
sales base for PU resins products of Headway in the region.
2010 2. The Company established Hung Yu Technology Materials Co., Ltd. to develop and promote
the application of Environmentally friendly water-based PU synthetic leather in the market.
3. The Company increased its capital by NTD 45.125 million from earnings, and the paid-in
capital was increased to NTD 476.37 million.
1. In order to integrate group resources and comply with the policies of the Shanghai
Municipal People’s Government, The Company established Headway Materials
2011 Technology (Shanghai) Co., Ltd. in the chemical production zone of Fengxian District,
Shanghai. In the same year, we also carried out relevant planning for the construction of a
new factory.
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Year Milestone
2. The Company established Yu Chen Materials Technology Co., Ltd. to develop and promote
environmental friendly solvent-free PU products.
2012 The Company has launched a low free TDI hardener.
1. The Company has successfully developed a process to produce environmental friendly
polyester polyols from recycled materials.
2013 2. The Company has successfully started production of polycarbonate polyols.
3. The Company has purchased a laboratory for our R&D center in southern Taiwan and is
currently in the process of building it.
1. The Company has launched a solvent-free reactive hot melt adhesive.
2014 2. After several rounds of capital increase form earnings, The Company’s paid-in capital was
increased to NTD 613.76 million.
The Company has invested in Zhan Hao Technology Materials Co., Ltd. to develop key
2015
materials for the production of recyclable PLA products.
1. The Company's stock has been listed on the Taiwan Stock Exchange since 9 May, 2016.
2016 2. In May of 2016, The Company increased its capital by NTD 81.84 million in cash, and the
paid-in capital was increased to NTD 695.60 million.
The subsidiary Shanghai Huiyu Fine Chemical Co., Ltd. has been renamed to "Shanghai
2017
Huiyu Construction Co., Ltd."
1. The business of Headway Materials Technology (Shanghai) Co., Ltd. has been transferred
to Shanshui Lianmei Chemical Co., Ltd.
2. Hung Yu Technology Materials Co., Ltd. has been officially dissolved after being approved
2018
by the Ministry of Economic Affairs.
3. Yu Chen Materials Technology Co., Ltd. has been officially dissolved after being approved
by the Ministry of Economic Affairs.
1. Shanghai Xinyu Resin Co., Ltd. has been officially dissolved.
2. Zhan Hao Technology Materials Co., Ltd. has been officially dissolved after being
2019 approved by the Ministry of Economic Affairs.
3. The Company has issued 426 thousand shares restricted stock units, and the paid-in capital
has increased to NTD 699.86 million after the capital increase.
1. The Company has issued 361 thousand shares restricted stock units, and the paid-in capital
has increased to NTD 703.47 million after the capital increase.
2020
2. The subsidiary Shanghai Huiyu Construction Co., Ltd. has invested in Anhui Huiyu
Materials Technology Co., Ltd.
1. The Company has cancelled 12 thousand shares of restricted stock units, and the paid-in
2021 capital has decreased to NTD 703.35 million after the reduction.
2. The Company sold Headway Materials Technology (Shanghai) Co., Ltd.
The Company has cancelled 31,970 shares of restricted stock units, and the paid-in capital
2022
has decreased to NTD 703.03 million after the reduction.
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3. Corporate Governance Report

3.1 Organization System
3.1.1 Corporate organization

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Shareholders’ Meeting
Board of Directors
Audit Committee
Internal Auditor Office
Remuneration Committee
Chairman
Manager
Sustainability Committee
ISO Committee
Technology & Production Section Finance & Administration Section
R & D
Center PU Sales Investment Management
Dept. Dept.
PU Production &
Plant Affairs Dept. Administration
PU Film
Dept.
Dept.
ESH Center Finance
Dept.
IT
Office
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3.1.2. Responsibilities of Each Unit:

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Unit Responsibilities
1. Responsible for auditing the internal control system and ensuring the continuous
Internal Auditor and effective implementation of internal control.
Office 2. Assist various units in problem-solving, process improvement, and enhancing
operational efficiency.
1. Responsible for exploring and developing the market for the Company's resin
PU Sales products and conducting market research and credit investigation.
Dept. 2. Matters related to product sales and after-sales services.
1. Coating, surface treatment, manufacturing, sales, and research and development of
PU Film various types of PU films.
Dept. 2. Marketing of consumables related to the electronics industry.
1. Responsible for the development and research of new products.
R & D
2. Research and improvement of production technology and related services.
Center
3. Matters related to incoming and outgoing product quality inspection.
1. Manufacturing and processing of resin products.
PU Production
2. Incoming material receiving and warehousing, and outgoing finished product
& Plant Affairs
shipment.
Dept.
3. Matters related to plant maintenance and engineering.
Responsible for matters related to environmental protection, safety, and health in the
ESH Center
Company.
1. Responsible for the maintenance, improvement, and recommendations of the
internal control system.
Investment 2. Operation of the board of directors and shareholders' meetings.
Management 3. Matters related to legal consultation.
Dept. 4. Management of investments in subsidiary businesses and tracking of their
operations, and supervision of improvement measures for any shortcomings
discovered through internal audits.
1. Responsible for the development and procurement of domestic and international
raw materials for the Company.
Administration 2. Procurement, management, physical inventory, and insurance of equipment and
Dept. assets.
3. General administration, human resources, and the establishment of management
systems, as well as the management of shareholder affairs.
1. Responsible for managing the Company's working capital.
Finance 2. Handling accounting matters related to production and sales costs.
Dept. 3. Prepare financial statements and manage taxation.
1. Information security planning, promotion, and implementation.
IT 2. Planning, implementation, and maintenance of information application system
Office environment.
3. Construction and maintenance of information infrastructure.
Sustainability Decision-making and supervision related to the Company's sustainable development
Committee efforts.
Responsible for establishing and maintaining ISO systems.
ISO Committee
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3.2 Directors, supervisors, general manager, deputy general manager, senior manager, department and branch managers' information.

3.2.1 Directors

3.2.1.1 Information of Directors:

April 2, 2023

							April 2, 2023	April 2, 2023	April 2, 2023	April 2, 2023	April 2, 2023	April 2, 2023	April 2, 2023	April 2, 2023	April 2, 2023	April 2, 2023	April 2, 2023	April 2, 2023	April 2, 2023	April 2, 2023
Job Title Nati onali ty or Rec ord of Birt h Name Gende r/Age Date of Assignm ent Ter m Date of First assignmen t							Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip
Chai rman R.O. C. Liou, Han-Yin Male 61-70 2021.7.30 3 Year s 1979.7.24							2,031,832 2.89% 2,031,832 2.89% 1,169,732 1.66% 1,976,131 2.81% Master's degree in Polymer Science from the University of Detroit Chairman of the Company General Manager of the Company R&D Dept. Manager of the Company Polyguard Products,Inc,R&D Chemist Note 1 Non e Non e Non e Note 2, N ot e 3
Dire ctor R.O. C. Chao, Wei-Ch un Male 51-60 2021.7.30 3 Year s 2009.6.29							478,074 0.68% 498,774 0.71% 83,771 0.12% 679,764 0.97% Bachelor’s degree in Electrical Engineering from China Junior College of Technology General Manager of the Company Sales Dept. Senior Manager of the Company Sales Dept. Manager of the Company Note 1 Non e Non e Non e Note 3
Dire ctor R.O. C. Chen, Yu-Ting Male 51-60 2021.7.30 3 Year s 2009.6.29							1,132,926 1.61% 1,182,926 1.68% 44,676 0.06% 0 0% Bachelor's degree in Business Administration from Japan Senshu University, Japan. General Manager of Isotech Products Incorporated Gereral Manager of Guangzhou Urasia Plastic Co., Ltd. Note 1 Non e Non e Non e Note 3
Dire ctor	R.O. C.	Chen, Tzu-Chi n	Male 51-60	2021.7.30	3 Year s	2009.6.29	64,285	0.09%	64,285	0.09%	30,724	0.04%	0	0%	Bachelor’s degree in Electrical Engineering from University of Missouri–Rolla General Manager of Isotech Products Incorporated General Manager of Dashinglong Corporation Chairman’s Assistant of Jochu Technology Co., Ltd.	Note 1	Non e	Non e	Non e	Note 3

Job Title Nati onali ty or Rec ord of Birt h Name Gende r/Age Date of Assignm ent Ter m Date of First assignmen t	Job Title Nati onali ty or Rec ord of Birt h Name Gende r/Age Date of Assignm ent Ter m Date of First assignmen t	Job Title Nati onali ty or Rec ord of Birt h Name Gende r/Age Date of Assignm ent Ter m Date of First assignmen t	Job Title Nati onali ty or Rec ord of Birt h Name Gende r/Age Date of Assignm ent Ter m Date of First assignmen t	Job Title Nati onali ty or Rec ord of Birt h Name Gende r/Age Date of Assignm ent Ter m Date of First assignmen t	Job Title Nati onali ty or Rec ord of Birt h Name Gende r/Age Date of Assignm ent Ter m Date of First assignmen t	Job Title Nati onali ty or Rec ord of Birt h Name Gende r/Age Date of Assignm ent Ter m Date of First assignmen t	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip
Dire ctor R.O. C. Lee, Hwang- Pao Male 61-70 2021.7.30 3 Year s 2006.6.30							1,410,336 2.01% 1,348,336 1.92% 1,017,920 1.45% 3,849,642 5.48% Bachelor’s degree in Chemical Engineering of Minghsin Junior College of Technology Chairman of the 11th and 12th Hsinchu County Industrial Association. President of Rotary Club Hsinchu South in 2006-2007 Note 1 Non e Non e Non e Note 3
Dire ctor R.O. C. Cheng, Chih-W en Male 51-60 2021.7.30 3 Year s 1998.6.30							1,037,268 1.48% 1,037,268 1.48% 6,139 0.01% 3,795,262 5.40% Bachelor’s degree in Economic from Chinese Culture University International Inetrnal Auditor General Manager of the Company Dupty General Manager of the Company Admin. Dept. Manager of the Company Note 1 Non e Non e Non e Note 3
Inde pend ent Dire ctor R.O. C. Chen, Chien-Y uan Male 61-70 2021.7.30 3 Year s 2014.12.26							0 0% 0 0% 0 0% 0 0% Bachelor’s degree in Chemical Engineering of National Central University National Chengchi University Graduate Institute of Business Administration (studying without graduation) Independent Director of YoungOptics Inc. Vice Chairman of Pinosus Corporation General ManagerofChinfonGlobalCorp. Note 1 Non e Non e Non e Note 3
Inde pend ent Dire ctor	R.O. C.	Lee, Lin-She ng	Male 61-70	2021.7.30	3 Year s	2014.12.26	0	0%	0	0%	0	0%	0	0%	Bachelor ‘s degree in Law from Fu Jen Catholic University Judge of the Hsinchu District Court in Taiwan President of the 26th Council of the Hsinchu Bar Association President of the Hsinchu Branch of the Legal Aid Foundation, Taiwan, 3rd and 4th term Managing Attorney of Lee Hsu & Wang Attorneys-at-Law	Note 1	Non e	Non e	Non e	Note 3

Job Title Nati onali ty or Rec ord of Birt h Name Gende r/Age Date of Assignm ent Ter m Date of First assignmen t	Job Title Nati onali ty or Rec ord of Birt h Name Gende r/Age Date of Assignm ent Ter m Date of First assignmen t	Job Title Nati onali ty or Rec ord of Birt h Name Gende r/Age Date of Assignm ent Ter m Date of First assignmen t	Job Title Nati onali ty or Rec ord of Birt h Name Gende r/Age Date of Assignm ent Ter m Date of First assignmen t	Job Title Nati onali ty or Rec ord of Birt h Name Gende r/Age Date of Assignm ent Ter m Date of First assignmen t	Job Title Nati onali ty or Rec ord of Birt h Name Gende r/Age Date of Assignm ent Ter m Date of First assignmen t	Job Title Nati onali ty or Rec ord of Birt h Name Gende r/Age Date of Assignm ent Ter m Date of First assignmen t	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip	Shares held when appointed Shares held currently Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Executives or Directors who are Spouses or within two degrees of kinship Note Number of Shares Ration Number of Shares Ration Number of Shares Ration Number of Shares Ration Title Nam e Rela tions hip
Inde pend ent Dire ctor	R.O. C.	Chang, Juei-Fan g	Femal e 51-60	2021.7.30	3 Year s	2018.6.30	0	0%	0	0%	0	0%	0	0%	Ph.D., Biotechnology, National Dong Hwa University, Hualien, Taiwan MS degree, Chemical Engineering, Auburn University, Auburn, AL, US Independent Director, Taiwan (2018 to present) Managed business P&L in Asia Pacific region Developed new businesses in China, India, ASEAN countries 18-year with global chemical companies *Worked overseas in USA, Shanghai, Hong Kong, Singapore	Note 1	Non e	Non e	Non e	Note 3

Note 1:Concurrent positions held in the Company and other companies currently:

Job Title	Name	Concurrent Positions Held in the Company and Other Companies Currently
Chariman	Liou, Han-Yin	Chairman:The Company; Urasia International Inc.;Cheng Yu Develop Co., Ltd.; Shanghai Huiyu Construction Co., Ltd.; Headway Advanced Matereials(Vietnam) Co., Ltd.; Shanshui Lianmei Chemical Co., LTD. General Manager:Headway Polyurethane Corporation Limited Director:Headway Polyurethane Corporation Limited
Director	Chao, Wei-Chun	Chairman:Hung Te Ming Investment Co., Ltd. General Manager: The Company Director: Urasia International Inc.;Cheng Yu Develop Co., Ltd.; Headway Polyurethane Corporation Limited; Shanghai Huiyu Construction Co., Ltd.; Shanshui Lianmei Chemical Co., LTD. Headway Advanced Matereials(Vietnam) Co., Ltd.

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Job Title Name Concurrent Positions Held in the Company and Other Companies Currently
Chairman: Zheng Long Investment Co., Ltd.; Zheng Chen Industrial Co., Ltd.
Director Cheng, Director: Urasia International Inc.; Cheng Yu Develop Co., Ltd.; Isotech Products Incorporated; Jing Yuan Construction and
Chih-Wen
Development Co., Ltd.
Lee, Chariman: Isotech Products Incorporated; Guangzhou Urasia Plastic Co., Ltd.
Director
Hwang-Pao Director: Yu Long Investment Corporation; Urasia International Inc.; Cheng Yu Develop Co., Ltd.
Chariman: HHS Consultancy Company Limited
Chen,
Director Director: Urasia International Inc.; Cheng Yu Develop Co., Ltd.; Jin Teng Investment Co., Ltd.
Yu-Ting
Surpervisor: Shanshui Lianmei Chemical Co., LTD.
Chen,
Director Chariman: Dashinglong Corporation
Tzu-Chin
Independent Chen, Director: Pinosus Corporation
Director Chien-Yuan Audit Committee Member & Remuneration Committee Member of the Company
Independent Lee, Managing Attorney of Lee Hsu & Wang Attorneys-at-Law
Director Lin-Sheng Audit Committee Member & Remuneration Committee Member of the Company
Independent Chang,
Audit Committee Member & Remuneration Committee Member of the Company
Director Juei-Fang
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Note 2: The Chairman and General Manager of the Company are not the same person, nor are they spouses or close relatives. Note 3: The directors of the Company are not legal person shareholders, nor do they represent legal person shareholders.

3.2.1.2 Major Shareholder of Corporate Shareholders: N/A

3.2.1.3 The Major Shareholders of the Corporate Shareholders are Legal Person: N/A

3.2.1.4 Professional Qualifications and Independence Disclosure of Directors, Supervisors and Independent Directors:

April 2,2023

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April 2,2023	April 2,2023	April 2,2023	April 2,2023
Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company
Liou, Han-Yin	1. Graduated with a Master's degree in Polymer Science from the University of Detroit in the United States. 2. Experience: Chairman, General Manager and R&D Manager of the Company; Polyguard Products,In.(Texas,USA) R&D Chemist. 3. Possesses work experience, professional knowledge, and skills required for business, finance, accounting, and corporate operations.	During the two years prior to appointment and during the term of office, all of the following independence evaluation criteria have been met: (1) Not directors, supervisors nor employees of a corporate shareholder who directly holds 5% or more of the total issued shares of the Company or who are in the top five of shareholders or appointed representatives under Article 27, Paragraph 1 or 2 of the Company Act (However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (2) Not a Director, supervisor, or employee of a corporate shareholder who holds the majority of the Board or shares voting rights(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (3) Not a Director, Supervisor, manager, or shareholder holding more than 5% of the outstanding shares of a specific company or institution in business or financial relationship with the Company(However, if a specific company or institution who holds 20% or more but less than 50% of the total issued shares of the Company, and independent directors of the company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (4) Not a professional, owner, partner, Director, Supervisor, manager of the proprietorship, partnership, company, or institution that provides business, legal, financial, and accounting services to the company or a spouse to the aforementioned persons rewarded remuneration not exceeding NTD 500 thousand within last two years. However, this does not apply to members of the remuneration committee, public tender offer review committee, or special committee for mergers and acquisitions who perform their duties in accordance with the Securities and Exchange Act or relevant laws. (5) Not a spouse of or kin at the second-degree relative under the Civil Code to any other director. (6) Not under any of the categories stated in Article 30 of the Company Act. (7) No government apparatus agency, legal person, or its representative is elected under Article 27 of the CompanyAct.	0

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Chao, Wei-Chun	1. Graduated with a Bachelor’s degree in Electrical Engineering from China Junior College of Technology. 2. Experience:General Manager, Chief Operating Officer, Salse Dept. Manager of the Company. 3. Possesses work experience, professional knowledge, and skills required for business, finance, accounting, and corporate operations.	During the two years prior to appointment and during the term of office, all of the following independence evaluation criteria have been met: (1) Not directors, supervisors nor employees of a corporate shareholder who directly holds 5% or more of the total issued shares of the company or who are in the top five of shareholders or appointed representatives under Article 27, Paragraph 1 or 2 of the Company Act (However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (2) Not a Director, supervisor, or employee of a corporate shareholder who holds the majority of the Board or shares voting rights(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (3) Not a Director, Supervisor, manager, or shareholder holding more than 5% of the outstanding shares of a specific company or institution in business or financial relationship with the Company(However, if a specific company or institution who holds 20% or more but less than 50% of the total issued shares of the Company, and independent directors of the company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (4) Not a professional, owner, partner, Director, Supervisor, manager of the proprietorship, partnership, company, or institution that provides business, legal, financial, and accounting services to the Company or a spouse to the aforementioned persons rewarded remuneration not exceeding NTD 500 thousand within last two years. However, this does not apply to members of the remuneration committee, public tender offer review committee, or special committee for mergers and acquisitions who perform their duties in accordance with the Securities and Exchange Act or relevant laws. (5) Not a spouse of or kin at the second-degree relative under the Civil Code to any other director. (6) Not under any of the categories stated in Article 30 of the Company Act. (7) No government apparatus agency, legal person, or its representative is elected under Article 27 of the CompanyAct.	0

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Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company

Cheng, Chin-Wen	1. Graduated with a Bachelor’s degree in Economic from Chinese Culture University; International Inetrnal Auditor. 2. Experience:General Manager, Dupty General Manager, Admin. Dept. Manager. 3. Possesses work experience, professional knowledge, and skills required for business, finance, accounting, and corporate operations.	During the two years prior to appointment and during the term of office, all of the following independence evaluation criteria have been met: (1) Not employed by the Company or any of the Company's affiliates. (2) Not a Director, supervisor, or employee of a corporate shareholder who holds the majority of the Board or shares voting rights(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (3) Not Chairman, President, or equivalent post of the company who himself/herself or Spouse holds the position as Director, Supervisor, or employee of another company or organization(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (4) Not a professional, owner, partner, Director, Supervisor, manager of the proprietorship, partnership, company, or institution that provides business, legal, financial, and accounting services to the Company or a spouse to the aforementioned persons rewarded remuneration not exceeding NTD 500 thousand within last two years. However, this does not apply to members of the remuneration committee, public tender offer review committee, or special committee for mergers and acquisitions who perform their duties in accordance with the Securities and Exchange Act or relevant laws. (5) Not a spouse of or kin at the second-degree relative under the Civil Code to any other director. (6) Not under any of the categories stated in Article 30 of the Company Act. (7) No government apparatus agency, legal person, or its representative is elected under Article 27 of the CompanyAct.	0

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Lee, Hwang- Pao	1. Graduated with a Bachelor’s degree in Chemical Engineering of Minghsin Junior College of Technology. 2. Experience: Chairman of Isotech Products Incorporated; Chairman of the 11th and 12th Hsinchu County Industrial Association.; President of Rotary Club Hsinchu South in 2006-2007 3. Possesses work experience, professional knowledge, and skills required for business, and corporate operations.	During the two years prior to appointment and during the term of office, all of the following independence evaluation criteria have been met: (1) Not employed by the Company or any of the Company's affiliates. (2) Not a Director, supervisor, or employee of a corporate shareholder who holds the majority of the Board or shares voting rights(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (3) Not Chairman, President, or equivalent post of the company who himself/herself or Spouse holds the position as Director, Supervisor, or employee of another company or organization(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (4) Not a professional, owner, partner, Director, Supervisor, manager of the proprietorship, partnership, company, or institution that provides business, legal, financial, and accounting services to the Company or a spouse to the aforementioned persons rewarded remuneration not exceeding NTD 500 thousand within last two years. However, this does not apply to members of the remuneration committee, public tender offer review committee, or special committee for mergers and acquisitions who perform their duties in accordance with the Securities and Exchange Act or relevant laws. (5) Not a spouse of or kin at the second-degree relative under the Civil Code to any other director. (6) Not under any of the categories stated in Article 30 of the Company Act. (7) No government apparatus agency, legal person, or its representative is elected under Article 27 of the CompanyAct.	0

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Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company

Chen, Yu-Ting	1. Graduated with a Bachelor’s degree in Business Administration from Japan Senshu University, Japan. 2. Experience: General Manager of Isotech Products Incorporated; Gereral Manager of Guangzhou Urasia Plastic Co., Ltd. 3. Possesses work experience, professional knowledge, and skills required for business, and corporate operations.	During the two years prior to appointment and during the term of office, all of the following independence evaluation criteria have been met: (1) Not employed by the Company or any of the Company's affiliates. (2) Not a Director, supervisor, or employee of a corporate shareholder who holds the majority of the Board or shares voting rights(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (3) Not Chairman, President, or equivalent post of the company who himself/herself or Spouse holds the position as Director, Supervisor, or employee of another company or organization(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (4) Not a professional, owner, partner, Director, Supervisor, manager of the proprietorship, partnership, company, or institution that provides business, legal, financial, and accounting services to the Company or a spouse to the aforementioned persons rewarded remuneration not exceeding NTD 500 thousand within last two years. However, this does not apply to members of the remuneration committee, public tender offer review committee, or special committee for mergers and acquisitions who perform their duties in accordance with the Securities and Exchange Act or relevant laws. (5) Not a spouse of or kin at the second-degree relative under the Civil Code to any other director. (6) Not under any of the categories stated in Article 30 of the Company Act. (7) No government apparatus agency, legal person, or its representative is elected under Article 27 of the CompanyAct.	0

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Concurrently
Require serving as an
ments Professional qualifications and Independent
Independence criteria
Name experiences Director of
another listed
company
During the two years prior to appointment and during the term of office, all of the following independence
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Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company
		During the two years prior to appointment and during the term of office, all of the following independence
Chen, Tzu-Chin	1. Graduated with a Bachelor’s degree in Electrical Engineering from University of Missouri–Rolla, USA 2. Experience: General Manager of Isotech Products Incorporated; General Manager of Dashinglong Corporation; Chairman’s Assistant of Jochu Technology Co., Ltd. 3. Possesses work experience, professional knowledge, and skills required for business, and corporate operations.	evaluation criteria have been met: (1) Not employed by the Company or any of the Company's affiliates. (2) Not directors or supervisors of the company or its affiliates(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (3) Not a natural person shareholder who owns 1% or more of the total issued shares of the Company or is among the top ten shareholders, nor their spouse, minor children, or holdings in the name of others. (4) Not spouses, relatives within the second degree, or direct blood relatives within the third degree of persons not listed in (2) and (3), or managers not listed in (1). (5) Not directors, supervisors nor employees of a corporate shareholder who directly holds 5% or more of the total issued shares of the Company or who are in the top five of shareholders or appointed representatives under Article 27, Paragraph 1 or 2 of the Company Act (However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (6) Not a Director, supervisor, or employee of a corporate shareholder who holds the majority of the Board or shares voting rights(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (7) Not Chairman, President, or equivalent post of the company who himself/herself or Spouse holds the position as Director, Supervisor, or employee of another company or organization(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (8) Not a Director, Supervisor, manager, or shareholder holding more than 5% of the outstanding shares of a specific company or institution in business or financial relationship with the Company(However, if a specific company or institution who holds 20% or more but less than 50% of the total issued shares of the Company, and independent directors of the company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (9) Not a professional, owner, partner, Director, Supervisor, manager of the proprietorship, partnership, company, or institution that provides business, legal, financial, and accounting services to the Company or a spouse to the aforementioned persons rewarded remuneration not exceeding NTD 500 thousand within last two years. However, this does not apply to members of the remuneration committee, public tender offer review committee, or special committee for mergers and acquisitions who perform their duties in accordance with the Securities and Exchange Act or relevant laws. (10) Not a spouse of or kin at the second-degree relative under the Civil Code to any other director. (11) Not under any of the categories stated in Article 30 of the Company Act. (12) No government apparatus agency, legal person, or its representative is elected under Article 27 of the CompanyAct.	0

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Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company
		During the two years prior to appointment and during the term of office, all of the following independence
Chen, Chien- Yuan	1. Graduated with a Bachelor’s degree in Chemical Engineering of National Central University; National Chengchi University Graduate Institute of Business Administration (studying without graduation) 2. Experience: Vice Chairman of Pinosus Corporation; Independent Director of YoungOptics Inc.; General Manager of Chinfon Global Corp. 3. Possesses work experience, professional knowledge, and skills required for business, and corporate operations.	evaluation criteria have been met: (1) Not employed by the Company or any of the Company's affiliates. (2) Not directors or supervisors of the company or its affiliates(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (3) Not a natural person shareholder who owns 1% or more of the total issued shares of the Company or is among the top ten shareholders, nor their spouse, minor children, or holdings in the name of others. (4) Not spouses, relatives within the second degree, or direct blood relatives within the third degree of persons not listed in (2) and (3), or managers not listed in (1). (5) Not directors, supervisors nor employees of a corporate shareholder who directly holds 5% or more of the total issued shares of the Company or who are in the top five of shareholders or appointed representatives under Article 27, Paragraph 1 or 2 of the Company Act (However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (6) Not a Director, supervisor, or employee of a corporate shareholder who holds the majority of the Board or shares voting rights(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (7) Not Chairman, President, or equivalent post of the company who himself/herself or Spouse holds the position as Director, Supervisor, or employee of another company or organization(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (8) Not a Director, Supervisor, manager, or shareholder holding more than 5% of the outstanding shares of a specific company or institution in business or financial relationship with the Company(However, if a specific company or institution who holds 20% or more but less than 50% of the total issued shares of the Company, and independent directors of the company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (9) Not a professional, owner, partner, Director, Supervisor, manager of the proprietorship, partnership, company, or institution that provides business, legal, financial, and accounting services to the Company or a spouse to the aforementioned persons rewarded remuneration not exceeding NTD 500 thousand within last two years. However, this does not apply to members of the remuneration committee, public tender offer review committee, or special committee for mergers and acquisitions who perform their duties in accordance with the Securities and Exchange Act or relevant laws. (10) Not a spouse of or kin at the second-degree relative under the Civil Code to any other director. (11) Not under any of the categories stated in Article 30 of the Company Act. (12) No government apparatus agency, legal person, or its representative is elected under Article 27 of the CompanyAct.	0

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Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company
		During the two years prior to appointment and during the term of office, all of the following independence
Lee, Lin- Sheng	1. Graduated with a Bachelor’s degree in Law from Fu Jen Catholic University; Completion of the 26th term of the Judicial Officers Training Course in Judges and Prosecutors Training Institute. 2. Experience: Judge of the Hsinchu District Court in Taiwan; President of the 26th Council of the Hsinchu Bar Association; President of the Hsinchu Branch of the Legal Aid Foundation, Taiwan, 3rd and 4th term; Managing Attorney of Lee Hsu & Wang Attorneys-at-Law 3. Possesses work experience, professional knowledge, and skills required for legal affairs, business, and corporate operations.	evaluation criteria have been met: (1) Not employed by the Company or any of the Company's affiliates. (2) Not directors or supervisors of the company or its affiliates(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (3) Not a natural person shareholder who owns 1% or more of the total issued shares of the Company or is among the top ten shareholders, nor their spouse, minor children, or holdings in the name of others. (4) Not spouses, relatives within the second degree, or direct blood relatives within the third degree of persons not listed in (2) and (3), or managers not listed in (1). (5) Not directors, supervisors nor employees of a corporate shareholder who directly holds 5% or more of the total issued shares of the Company or who are in the top five of shareholders or appointed representatives under Article 27, Paragraph 1 or 2 of the Company Act (However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (6) Not a Director, supervisor, or employee of a corporate shareholder who holds the majority of the Board or shares voting rights(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (7) Not Chairman, President, or equivalent post of the company who himself/herself or Spouse holds the position as Director, Supervisor, or employee of another company or organization(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (8) Not a Director, Supervisor, manager, or shareholder holding more than 5% of the outstanding shares of a specific company or institution in business or financial relationship with the Company(However, if a specific company or institution who holds 20% or more but less than 50% of the total issued shares of the Company, and independent directors of the company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (9) Not a professional, owner, partner, Director, Supervisor, manager of the proprietorship, partnership, company, or institution that provides business, legal, financial, and accounting services to the Company or a spouse to the aforementioned persons rewarded remuneration not exceeding NTD 500 thousand within last two years. However, this does not apply to members of the remuneration committee, public tender offer review committee, or special committee for mergers and acquisitions who perform their duties in accordance with the Securities and Exchange Act or relevant laws. (10) Not a spouse of or kin at the second-degree relative under the Civil Code to any other director. (11) Not under any of the categories stated in Article 30 of the Company Act. (12) No government apparatus agency, legal person, or its representative is elected under Article 27 of the CompanyAct.	0

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Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Require ments Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company
		During the two years prior to appointment and during the term of office, all of the following independence
Chang, Juei-Fang	1.Ph.D., Biotechnology,National Dong Hwa University, Hualien, Taiwan; MS degree, Chemical Engineering, Auburn University, Auburn, AL, USA. 2. Experience:Independent Director, Taiwan (2018 to present); Managed business P&L in Asia Pacific region; Developed new businesses in China, India, ASEAN countries ; 18-year with global chemical companies; Worked overseas in USA, Shanghai, Hong Kong, Singapore 3.Possesses work experience, professional knowledge, and skills required for business, and corporate operations.	evaluation criteria have been met: (1) Not employed by the Company or any of the Company's affiliates. (2) Not directors or supervisors of the company or its affiliates(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (3) Not a natural person shareholder who owns 1% or more of the total issued shares of the Company or is among the top ten shareholders, nor their spouse, minor children, or holdings in the name of others. (4) Not spouses, relatives within the second degree, or direct blood relatives within the third degree of persons not listed in (2) and (3), or managers not listed in (1). (5) Not directors, supervisors nor employees of a corporate shareholder who directly holds 5% or more of the total issued shares of the Company or who are in the top five of shareholders or appointed representatives under Article 27, Paragraph 1 or 2 of the Company Act (However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (6) Not a Director, supervisor, or employee of a corporate shareholder who holds the majority of the Board or shares voting rights(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (7) Not Chairman, President, or equivalent post of the company who himself/herself or Spouse holds the position as Director, Supervisor, or employee of another company or organization(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (8) Not a Director, Supervisor, manager, or shareholder holding more than 5% of the outstanding shares of a specific company or institution in business or financial relationship with the Company(However, if a specific company or institution who holds 20% or more but less than 50% of the total issued shares of the Company, and independent directors of the company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (9) Not a professional, owner, partner, Director, Supervisor, manager of the proprietorship, partnership, company, or institution that provides business, legal, financial, and accounting services to the Company or a spouse to the aforementioned persons rewarded remuneration not exceeding NTD 500 thousand within last two years. However, this does not apply to members of the remuneration committee, public tender offer review committee, or special committee for mergers and acquisitions who perform their duties in accordance with the Securities and Exchange Act or relevant laws. (10) Not a spouse of or kin at the second-degree relative under the Civil Code to any other director. (11) Not under any of the categories stated in Article 30 of the Company Act. (12) No government apparatus agency, legal person, or its representative is elected under Article 27 of the CompanyAct.	0

3.2.1.5 Diversity and independence of the board of directors.

3.2.1.5.1 Diversity
3.2.1.5.1.1 According to Article 20 of the "Corporate Governance Best Practice Principles" of the Company, the composition of the board of directors should take into account diversity. The number of the directors who also serve as company executives should not exceed one-third of the total number of directors. The board of directors should also develop appropriate diversity policies based on its own operation, business model, and development needs. The composition of the board of directors should also possess the necessary knowledge, skills, and expertise to carry out its duties. To achieve the ideal goal of corporate governance, the overall abilities that the board of directors should possess are as follows:
```
 - A. Operational judgment ability.

 - B. Accounting and financial analysis ability.

 - C. Management ability.

 - D. Crisis handling ability.

 - E. Industry knowledge.

 - F. International market perspective.

 - G. Leadership ability.

 - H. Decision-making ability.
```
3.2.1.5.1.2 To achieve the above-mentioned objectives and enhance the effectiveness of the board of directors, the Company has established a policy on board member diversity. The number of the directors who also serve as company executives should not exceed one-third of the total number of directors. The board of directors should also develop appropriate diversity policies based on its own operation, business model, and development needs. The diversity policy should include, but not limited to, the following two major aspects:
```
    - A. Basic conditions and values: gender, age, nationality, culture, etc.

    - B. Professional background and experience: professional background (such as law, accounting, industry, finance, marketing, or technology), professional skills, and industry experience, etc.
```
3.2.1.5.1.3 Board of Directors' Diversity Goals and Achievements:
- A. According to the Company's "Corporate Governance Best Practice Principles," the target for directors who also serve as company executives is to be below one-third of the total number of directors. Among the Company's board of directors, two directors, Han-Ying Liu and Wei-Chun Chao, also serve as executives of our parent, subsidiary, or brother companies, accounting for 22.22% of all directors, which is below one-third of the total number of directors.
- B. According to our diversity policy, the Company has set a goal of having at least one female director on the board. In this term, we have one female director, which has achieved the goal.
- C. Regarding generational turnover, the Company has set a decade as a generation, and the board of directors must span at least two generations. In this term, there are five directors between the ages of 51-60, accounting for 55% of all directors, and four directors between the ages of 61-70, accounting for 45% of all directors, which meets the requirement.

D. Regarding professional capabilities, our company has set a goal for the board of directors to possess operational judgment ability, accounting and financial analysis ability, management ability, crisis handling ability, industry knowledge, international market perspective, leadership ability, and decision-making ability. The overall professional capabilities of this term's board of directors have met the requirements, which are listed as follows:

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Independent director
Serving Age tenure or length of Operational Accounting Crisis International
Name Gender as an <3 service 3~9 >9 judgment ability and financial analysis Management ability handling ability knowledgeIndustry perspectivemarket Leadership Decision-making ability
employee 51~60 61~70 ability
Years Years Years
Liou,
M ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
Han Yin
Chao,
M ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
Wei Chun
Cheng, M ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
Chih Wen
Lee,
M ✓ ✓ ✓ ✓ ✓ ✓
Hwang Pao
Chen,
M ✓ ✓ ✓ ✓
Yu Ting
Chen,
M ✓ ✓ ✓
Tzu Chin
Chen,
M ✓ ✓ ✓ ✓ ✓ ✓
Chien Yuan
Lee,
M ✓ ✓ ✓ ✓
Lin Sheng
Chang, F ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
Juei Fang
----- End of picture text -----

3.2.1.5.2 Independence of the board of directors:

3.2.1.5.2.1 All nine directors of the Company do not have any familial relationships as defined in Article 26-3, paragraphs 3 and 4 of the Securities and Exchange Act.
3.2.1.5.2.2 The Company has a total of 9 directors, of which 3 are independent directors, which meets the requirement of one-third of the directors being independent as stipulated in Article 14-2 of the Securities and Exchange Act.

3.2.2 Information of General Manager, Deputy General Manager, General Manager, department and branch managers. `：`

April 2, 2023

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Managers who
Shares held by Shares held in are Spouses
Shares held Spouses and another person's or within two
Ntion Gend Date of Minor Children name Significant degrees of
Job Title ality Name er appointment Experience & Education Concurr ently Serving Position kinship Rel Note
Shares % Shares % Shares % Title [Na] atio
me nshi
p
Chairman: Hung Te Ming Investment
Co., Ltd.
Bachelor’s degree in Electrical Director: Urasia International Inc.;
Engineering from China Junior Cheng Yu Develop Co., Ltd.;
ManagerGeneral R.O.C. Wei ChunChao, [Male] 2014.10.01 498,774 0.71% 83,771 0.12% 679,764 0.97% General Manager of the Company College of Technology Headway Polyurethane Corporation Limited; Shanghai Huiyu - - - Note
Sales Dept. Senior Manager of the Construction Co., Ltd.; Shanshui
Company Lianmei Chemical Co., LTD.
Headway Advanced
Matereials(Vietnam) Co., Ltd.
Bachelor’s degree in Chemical
Director: Headway Polyurethane
Technology
& Engineering from Hwa Hsia Corporation Limited; Shanghai
Production Junior College of Technology
Section Deputy R.O.C. Jian MingChen, [Male] 103.04.23 345,519 0.49% - - - - R&D Dept. Manager of the Company Huiyu Construction Co., Ltd.; Shanshui Lianmei Chemical Co., - - - Note
R&D Specilaist of the Company
ManagerGeneral Technician of Nan Ya Plastics LTD. Headway Advanced
Corporation Matereials(Vietnam) Co., Ltd.
Bachelor’s degree in Accounting from
Finance & Supervisor: Headway Polyurethane
Tamkang University
Administra Corporation Limited; Shanghai
tion Investment Planning Dept. Specialist
Section Deputy R.O.C. Pei HungLiao, Male 91.06.28 78,517 0.11% - - - - of the Company Director: Shanshui Lianmei Chemical Huiyu Construction Co., Ltd - - - Note
Senior Accountant of AMP Corp.
General Co., LTD. Headway Advanced
Manager Audiotr of Horwath Chien Hsing
CPAs Matereials(Vietnam) Co., Ltd.
Bachelor’s degree in International
Head of Trade from Tamkang University
Administra R.O.C. Pei YuLan, Female 107.11.01 17,782 0.03% - - - - Sales Dept. Assistant of the - - - - Note
tion Dept.
Company
Purchase Specialist of the Company
----- End of picture text -----

Job Title Ntion ality Name Gend er Date of appointment	Job Title Ntion ality Name Gend er Date of appointment	Job Title Ntion ality Name Gend er Date of appointment	Job Title Ntion ality Name Gend er Date of appointment	Job Title Ntion ality Name Gend er Date of appointment	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p
PU Production & Plant Affairs Dept Manager R.O. C. Cheng, Su Hui Female 108.06.10					37,025 0.05% - - - - Bachelor’s degree in Chemical Engineering from Nanya Junior College of Technology R&D Senior Specialist of the Company R&D Deputy Manager of the Company - - - - Note
Finance Manager R.O. C. Chang, Kuei Mei Female 110.09.01					77,115 0.11% 1,858 0.00% - - Bachelor’s degree in International Trade from Takming Junior College of Business Senior Internal Auditor of the Company Finance Deputy Manager of the Company - - - - Note
Investment Manager R.O. C. Hsu, Chen Yu Male 110.09.01					77,537 0.11% 4,000 0.01% - - Bachelor’s degree in Chemical Engineering from Dahua Technology College R&D Specialist of the Company Investment Deputy Manager of the Company - - - - Note
Investment Manager R.O. C. Hsiao, Hsu Jung Male 110.09.01					6,757 0.01% 2,347 0.00% - - Bachelor’s degree in Economic from Chinese Culture University Investment Planning Dept. Deputy Manager of the Company Investment Dept. Deputy Manager of the Company - - - - Note
Head of Corporate Governanc e	R.O. C.	Cheng, Lin Feng	Male	111.04.01	5,650	0.01%	-	-	-	-	Bachelor’s degree in Industrial	-	-	-	-	Note
											Management from Vanung Junior
											College of Technology
											Executive Assistant to the General
											Manager of the Company
											Consultan of the Company
											Personal Consulatna
											Quality Management Group of
											ChinaProductivityGroup

Job Title Ntion ality Name Gend er Date of appointment	Job Title Ntion ality Name Gend er Date of appointment	Job Title Ntion ality Name Gend er Date of appointment	Job Title Ntion ality Name Gend er Date of appointment	Job Title Ntion ality Name Gend er Date of appointment	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p	Shares held Shares held by Spouses and Minor Children Shares held in another person's name Significant Experience & Education Concurr ently Serving Position Managers who are Spouses or within two degrees of kinship Note Shares % Shares % Shares % Title Na me Rel atio nshi p
											Quality Assurance of HON HAI
											PRECISION INDUSTRY CO.,
											LTD
											Production Management of UB
											OFFICE SYSTEMS
											INCORPORATION

Note: The General Manager or equivalent position (the highest executive officer) of the Company is not the same person as the Chairman of the Board, nor are they spouses or first-degree relatives.

3.3 The remuneration paid to directors, supervisors, general manager, and deputy general manager for the most recent fiscal year.

3.3.1 Remuneration of Directors (Independent Directors included):

Units: NTD in Thousand

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Remuneration of Directors Related Remuneration as an Employee The sum of A, B,
The Sum of A,
C, D, E, F, and G
Director Professional B, C, and D in Salaries, in
Remuneration Pension Proportion to Bonuses, and Pension Employee Compensation
Compensation practice Proportion to
(A) (B) Earnings Special Subsidies (F) G)
(C) (D) (E) Earnings
Job
Name
Title
Liou, 145 145 2,929 5,369
0 0 0 0 145 145 0 0 2,784 4,797 0 427 0 0 0 0 無
Han Yin 0.78% 0.69% 15.74% 25.57%
Chao, 145 145 2,897 4,021
0 0 0 0 145 145 0 0 2,602 3,399 0 327 150 0 150 0 無
Wei Chun 0.78% 0.69% 15.57% 19.15%
Cheng, 165 165 165 165
0 0 0 0 145 145 20 20 0 0 0 0 0 0 0 0 無
Chih Wen 0.89% 0.79% 0.89% 0.79%
Direct
Lee,
or 165 165 165 165
Hwang 0 0 0 0 145 145 20 20 0 0 0 0 0 0 0 0 無
0.89% 0.79% 0.89% 0.79%
Pao
Chen, 165 165 165 165
0 0 0 0 145 145 20 20 0 0 0 0 0 0 0 0 無
Yu Ting 0.89% 0.79% 0.89% 0.79%
Chen, 165 165 165 165
0 0 0 0 145 145 20 20 0 0 0 0 0 0 0 0 無
Tzu Chin 0.89% 0.79% 0.89% 0.79%
Chen,
905 905 905 905
Indepe Chien 720 720 0 0 145 145 40 40 0 0 0 0 0 0 0 0 無
4.86% 4.31% 4.86% 4.31%
nt Yuan
Lee, 905 905 905 905
Directo 720 720 0 0 145 145 40 40 0 0 0 0 0 0 0 0 無
Lin Sheng 4.86% 4.31% 4.86% 4.31%
Statements
The Company in the Financial
Companies inclouded
Statements Statements Statements Statements Statements Statements Statements
The Company The Company The Company The Company The Company The Company The Company The Company Whether remuneration from any reinvested
other than subsidiaries or the Company is received?
Companies inclouded in the Financial Statements Companies inclouded in the Financial Companies inclouded in the Financial Companies inclouded in the Financial Companies inclouded in the Financial Companies inclouded in the Financial Companies inclouded in the Financial Cash amount Stock amount Cash amount Stock amount Companies inclouded in the Financial
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r Chang, 732 732 0 0 145 145 40 40 917 917 0 0 0 0 0 0 0 0 917 917 無
Juei Fang 4.93% 4.37% 4.93% 4.37%
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Please describe the policy, system, standards, and structure of independent director remuneration, and explain the correlation between the responsibilities, risks, time commitment, and other factors that they undertake and the amount of remuneration they receive:
The remuneration for directors (including independent directors) of the Company is allocated in accordance with the "Policy
and System for Director and Manager Remuneration" and the "Articles of Incorporation" which have been reviewed by the Remuneration Committee and approved by the Board of Directors. In addition, transportation expenses are paid to directors (including independent directors) based on their attendance at Board meetings.
Apart from the disclosures mentioned above, the remuneration received by the directors of the Company for providing services (such as acting as consultants who are not employees) to all the companies included in the financial statements in the most recent fiscal year is as follows: None.
The remuneration information for individual directors of the Company is disclosed voluntarily.

3.3.2 Remuneration of the General Manager and Deputy General Manager

Units: NTD in Thousand

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Bonuses, and The Sum of A, B, C, and D in
Employee Compensation
Salary(A) Pension (B) Special Subsidies Proportion to
(D)
(C) Earnings (%)
Job Title Name
General Chao, 2,752 3,876
2,093 2,890 0 327 509 509 150 0 150 0 None
Manager Wei chun 14.79% 18.46%
Technology &
Production
Section Chen, 2,694 2,694
1,962 1,962 105 105 527 527 100 0 100 0 None
Deputy Jian Ming 14.48% 12.83%
General
Manager
Finance &
Administration
Section Liao, 2,208 2,208
1,611 1,611 88 88 409 409 100 0 100 0 None
Deputy Pei Hung 11.87% 10.52%
General
Manager
Note: There are three persons serving as the General Manager, Deputy General Manager, or other equivalent positions in the Company and the remuneration
information for individuals is disclosed voluntarily.
Companies Financial Statements
The Company The Company The Company The Company inclouded in the The Company than subsidiaries is received?
Financial Statements Financial Statements Financial Statements Financial Statements
Stock
Companies inclouded in the Companies inclouded in the Companies inclouded in the Amount Companies inclouded in the
Cash Amount Cash Amount Stock Amount Whether remuneration from any reinvested other
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3.3.3 Employee Compensation amount paid to Management personnel:

Units: NTD in Thousand

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Stock Cash Proportion to
Job Title Name Total Earnings After Tax
Amount Amount
(% ）
Chairman Liou, Han Yin
General Manager Chao, Wei Chun
Technology & Production
Man Section Deputy General Manager [Chen, Jian Ming ]
Finance & Administration
age
ment Section Deputy General Manager [Liao, Pei Hung ]
- 650 650 3.49%
pers Sales Manager Chen, Chi Hsin
onne PU Production & Plant Affairs
l Dept Manage Cheng, Su Hui
Finance Manager Chang, Kuei mei
Administration Detp. Deputy
Lan, Pei Yu
Manager
----- End of picture text -----

＊ This refers to the amount of employee compensation distributed by the management personnel in the most recent fiscal year, as approved by the Board of Directors (including stock and cash). If it is not possible to estimate, the proposed distribution amount is calculated based on the proportion of the actual distribution amount from the previous year. After-tax net profit refers to the after-tax net profit for the most recent fiscal year. For companies that have adopted IFRSs, after-tax net profit refers to the after-tax net profit in the parent company only or individual financial statements for the most recent fiscal year.
Note: The scope of application of management personnel is in accordance with the directive of the Securities and Futures Bureau (Taiwan) letter no. 0920001301 issued on March 27, 2003, which is as follows:
- (1) General Manager and equivalent positions.
- (2) Deputy General Manager and equivalent positions.
- (3) Assistant General Manager and equivalent positions.
- (4) Head of the Finance Department.
- (5) Head of the Accounting Department.
- (6) Others who are authorized to manage company affairs and sign documents.

3.3.4 Provide a comparative analysis of the total remuneration paid to the directors, supervisors, general manager, and deputy general manager of the Company and all consolidated subsidiaries in the past two years as a percentage of the parent company only or individual financial report's after-tax net income. Describe the policies, standards, and composition of the remuneration, the procedures for setting the remuneration, and the correlation between management performance, future risks, and remuneration:
(1) The comparative analysis of the total remuneration paid to the directors, supervisors, general manager, and deputy general manager of the Company and all consolidated subsidiaries in the past two years as a percentage of the parent company only or individual financial report's after-tax net income:

eport's after-tax net income:	eport's after-tax net income:	eport's after-tax net income:	eport's after-tax net income:	eport's after-tax net income:
2021 2022
Job Title The Company Companies inclouded in the Financial Statements The Company Companies inclouded in the Financial Statements
Directors 5.88% 5.31% 49.51% 60.85%
General Manager and Deputy General Manager	6.64%	6.64%	41.13%	41.81%

(2) The policies, standards, and composition of the remuneration, the procedures for setting the remuneration, and the correlation between management performance, future risks, and remuneration:

The remuneration for directors (including independent directors) of the Company is allocated in accordance with the "Policy and System for Director and Manager Remuneration" and the "Articles of Incorporation" which have been reviewed by the Remuneration Committee and approved by the Board of Directors. In addition, transportation expenses are paid to directors (including independent directors) based on their attendance at Board meetings. The remuneration of the Company's Management personnel is determined based on their position, responsibilities, and the correlation with business performance and future risks. We also refer to the industry standards for similar positions when setting the remuneration.

3.4 The state of Implementation of Corporate Governance

3.4.1 Operations of Board of Directors

In the latest fiscal year, the board of directors held four meetings (A), and the

attendance of directors was as follows:

attendance of directors was as follows:
Job Title Name Actual Attendance (B)	Attendance by proxy Actual Attendance rate (%) (B/A)		Note
Chairman Liou, Han Yin 4		0 100
Director Chao, Wei Chun 4		0 100
Director Cheng, Chih Wen 4		0 100
Director Lee, Hwang Pao 4		0 100
Director Chen, Yu Ting 4		0 100
Director Chen, Tzu Chin 4		0 100
Independent Director Chen, Chien Yuan 4		0 100
Independent Director Lee, Lin Sheng 4		0 100
Independent Director Chang, Juei Fang 4		0 100
Other items to be specified:
1. Should one of the following occur, the meeting	date, period, content of the		resolution,
opinions of all Independent Directors, and the Company’s handling of the opinions of the
Independent Directors shall be clearly stated:
(1) All the listed items in Article 14-3 of the Securities and Exchange Act:
The Company has established the Audit	Committee and is not subject to the
provisions of Article 14-3 of the Securities	and Exchange Act. For matters listed in
Article 14-5 of the Securities and Exchange		Act, please refer to other items to be
disclosed in the operation of the Audit Committee on pages 35-44 of this annual
report.
(2) In addition to the aforementioned, the items in board resolutions regarding which
Independent Directors have voiced opposing or		qualified opinions on the record or in
writing: None.
2. In instances where a Director’s circumvention due		to the conflict of interest, the minutes
shall clearly state the Director's name, contents of the motion and resolution thereof,
reason for such circumvention and the votingstatus:

(1) Discussion on "2021 Employee Compensation for Management Personnel Plan":	(1) Discussion on "2021 Employee Compensation for Management Personnel Plan":	(1) Discussion on "2021 Employee Compensation for Management Personnel Plan":	(1) Discussion on "2021 Employee Compensation for Management Personnel Plan":	(1) Discussion on "2021 Employee Compensation for Management Personnel Plan":	(1) Discussion on "2021 Employee Compensation for Management Personnel Plan":
	Director Liou, Han Yin and Chao, Wei Chun abstained from voting on the resolution
	due to a conflict of interest. The resolution was passed with the unanimous approval
	of	the	remaining directors present.
(2) Discussion on "2021 Performance-based Bonus for Management Personnel Plan":
	Director Chao, Wei Chun abstained from voting on the resolution due to a conflict of
	interest. The resolution was passed with the unanimous approval of the remaining
	directors present, as confirmed				by the chairperson.
3. TWSE/TPEx-Listed				Companies shall disclose the information of Self(or Peer) Evaluation
of the		Board of Directors, including evaluation cycle, period, scope and measure and
content of			evaluation:
	The Board of Directors' evaluation implementation:
	Evaluation	Cycle	Evaluation Period	Evaluation Scope	Evaluation Measure Evaluation Content
	Execute		2022/1/1~	The overall	Self-evaluatio 1. Overall evaluation of the Board of Directors:
	once a		2022/12/31	operation and	n of the Board participation in company operations,
	year			individual	of Directors, improvement of decision-making quality,
				members of	self-evaluation composition and structure of the Board, selection
				the Board of	of individual and ongoing education of directors, internal
				Directors,	directors, and controls, etc.
				Audit	self-evaluation
				Committee,	of functional 2. Evaluation of individual Board members:
				and	committee understanding of company goals and missions,
				Remuneration	members. recognition of director responsibilities,
				Committee.	participation in company operations,
					management of internal relationships and
					communication, professional expertise and
					ongoing education of directors, internal controls,
					etc.
					3. Overall evaluation of functional committees:
					participation in company operations, recognition
					of functional committee responsibilities,
					improvement of decision-making quality,
					composition and selection of functional
					committee members,internal controls,etc.

Measures undertaken during the current year and past year (including the establishment of the Audit Committee, improvement of info transparency, etc.) in order to strengthen the functions of the Board of Directors and evaluation of such implementation:
(1) The Company's board of directors operates in accordance with the laws, Articles of Incorporation, and resolutions of shareholders meeting. Additionally, the Company has elected three independent directors at the shareholders' meeting, who form the Compensation Committee to assist in evaluating and approving the compensation of directors and executives.
(2) The Company has established an Audit Committee consisting of three independent directors, which holds at least one meeting per quarter. The main purpose of the committee is to oversee the following matters: the appropriateness of the Company's financial statements, the selection (dismissal) and evaluation of independence and performance of the certifying accountant, the effective implementation of the Company's internal control system, the Company's compliance with relevant laws and regulations, and the management of existing or potential risks of the Company.
(3) The Company has been conducting performance evaluations for individual directors and the board of directors since the establishment of the "Director and Board Performance Evaluation Measures" in 2019.

3.4.2 The operating status of the Audit Committee or the participation of the Supervisor in the operation of the Board of Directors:

3.4.2.1 Audit Committee Members Information

Requirement Role Name	Requirement Role Name	Professional qualifications and experiences	Independence criteria	Concurrently serving as an Independent Director of another listed company
Independent Director (convener)	Chen, Chien- Yuan	1. Graduated with a Bachelor’s degree in Chemical Engineering of National Central University; National Chengchi University Graduate Institute of Business Administration (studying without graduation) 2. Experience: Vice Chairman of Pinosus Corporation; Independent Director of YoungOptics Inc.; General Manager of Chinfon Global Corp. 3. Possesses work experience, professional knowledge, and skills required for business, and corporate operations.	During the two years prior to appointment and during the term of office, all of the following independence evaluation criteria have been met: (1) Not employed by the Company or any of the Company's affiliates. (2) Not directors or supervisors of the company or its affiliates(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (3) Not a natural person shareholder who owns 1% or more of the total issued shares of the Company or is among the top ten shareholders, nor their spouse, minor children, or holdings in the name of others. (4) Not spouses, relatives within the second degree, or direct blood relatives within the third degree of persons not listed in (2) and (3), or managers not listed in (1). (5) Not directors, supervisors nor employees of a corporate shareholder who directly holds 5% or more of the total issued shares of the Company or who are in the top five of shareholders or appointed representatives under Article 27, Paragraph 1 or 2 of the Company Act (However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (6) Not a Director, supervisor, or employee of a corporate shareholder who holds the majority of the Board or shares voting rights(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (7) Not Chairman, President, or equivalent post of the company who himself/herself or Spouse holds the position as Director, Supervisor, or employee of another company or organization(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (8) Not a Director, Supervisor, manager, or shareholder holding more than 5% of the outstanding shares of a specific company or institution in business or financial relationship with the Company(However, if a specific company or institution who holds 20% or more but less than 50% of the total issued shares of the Company, and independent directors of the company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (9) Not a professional, owner, partner, Director, Supervisor, manager of the proprietorship, partnership, company, or institution that provides business, legal, financial, and accounting services to the Company or a spouse to the aforementioned persons rewarded remuneration not exceeding NTD 500 thousand within last two years. However, this does not apply to members of the remuneration committee, public tender offer review committee, or special committee for mergers and acquisitions who perform their duties in accordance with the Securities and Exchange Act or relevant laws. (10)Not under anyof the categories stated in Article 30 of the CompanyAct.	0

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Concurrently
Requirement serving as an
Professional qualifications and experiences Independence criteria Independent Director of
another listed
Role Name company
During the two years prior to appointment and during the term of office, all of the following independence evaluation criteria have
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Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company
			During the two years prior to appointment and during the term of office, all of the following independence evaluation criteria have
Independent Director (member)	Lee, Lin- Sheng	1. Graduated with a Bachelor’s degree in Law from Fu Jen Catholic University; Completion of the 26th term of the Judicial Officers Training Course in Judges and Prosecutors Training Institute. 2. Experience: Judge of the Hsinchu District Court in Taiwan; President of the 26th Council of the Hsinchu Bar Association; President of the Hsinchu Branch of the Legal Aid Foundation, Taiwan, 3rd and 4th term; Managing Attorney of Lee Hsu & Wang Attorneys-at-Law 3. Possesses work experience, professional knowledge, and skills required for legal affairs, business, and corporate operations.	been met: (1) Not employed by the Company or any of the Company's affiliates. (2) Not directors or supervisors of the company or its affiliates(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (3) Not a natural person shareholder who owns 1% or more of the total issued shares of the Company or is among the top ten shareholders, nor their spouse, minor children, or holdings in the name of others. (4) Not spouses, relatives within the second degree, or direct blood relatives within the third degree of persons not listed in (2) and (3), or managers not listed in (1). (5) Not directors, supervisors nor employees of a corporate shareholder who directly holds 5% or more of the total issued shares of the Company or who are in the top five of shareholders or appointed representatives under Article 27, Paragraph 1 or 2 of the Company Act (However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (6) Not a Director, supervisor, or employee of a corporate shareholder who holds the majority of the Board or shares voting rights(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (7) Not Chairman, President, or equivalent post of the company who himself/herself or Spouse holds the position as Director, Supervisor, or employee of another company or organization(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (8) Not a Director, Supervisor, manager, or shareholder holding more than 5% of the outstanding shares of a specific company or institution in business or financial relationship with the Company(However, if a specific company or institution who holds 20% or more but less than 50% of the total issued shares of the Company, and independent directors of the company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (9) Not a professional, owner, partner, Director, Supervisor, manager of the proprietorship, partnership, company, or institution that provides business, legal, financial, and accounting services to the Company or a spouse to the aforementioned persons rewarded remuneration not exceeding NTD 500 thousand within last two years. However, this does not apply to members of the remuneration committee, public tender offer review committee, or special committee for mergers and acquisitions who perform their duties in accordance with the Securities and Exchange Act or relevant laws. (10)Not under anyof the categories stated in Article 30 of the CompanyAct.	0

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Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company

Independent Director (member)	Chang, Juei-Fang	1. Ph.D., Biotechnology,National Dong Hwa University, Hualien, Taiwan; MS degree, Chemical Engineering, Auburn University, Auburn, AL, USA. 2. Experience: Independent Director, Taiwan (2018 to present); Managed business P&L in Asia Pacific region; Developed new businesses in China, India, ASEAN countries ; 18-year with global chemical companies; Worked overseas in USA, Shanghai, Hong Kong, Singapore 3. Possesses work experience, professional knowledge, and skills required for business, and corporate operations.	During the two years prior to appointment and during the term of office, all of the following independence evaluation criteria have been met: (1) Not employed by the Company or any of the Company's affiliates. (2) Not directors or supervisors of the company or its affiliates(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (3) Not a natural person shareholder who owns 1% or more of the total issued shares of the Company or is among the top ten shareholders, nor their spouse, minor children, or holdings in the name of others. (4) Not spouses, relatives within the second degree, or direct blood relatives within the third degree of persons not listed in (2) and (3), or managers not listed in (1). (5) Not directors, supervisors nor employees of a corporate shareholder who directly holds 5% or more of the total issued shares of the Company or who are in the top five of shareholders or appointed representatives under Article 27, Paragraph 1 or 2 of the Company Act (However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (6) Not a Director, supervisor, or employee of a corporate shareholder who holds the majority of the Board or shares voting rights(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (7) Not Chairman, President, or equivalent post of the company who himself/herself or Spouse holds the position as Director, Supervisor, or employee of another company or organization(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (8) Not a Director, Supervisor, manager, or shareholder holding more than 5% of the outstanding shares of a specific company or institution in business or financial relationship with the Company(However, if a specific company or institution who holds 20% or more but less than 50% of the total issued shares of the Company, and independent directors of the company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (9) Not a professional, owner, partner, Director, Supervisor, manager of the proprietorship, partnership, company, or institution that provides business, legal, financial, and accounting services to the Company or a spouse to the aforementioned persons rewarded remuneration not exceeding NTD 500 thousand within last two years. However, this does not apply to members of the remuneration committee, public tender offer review committee, or special committee for mergers and acquisitions who perform their duties in accordance with the Securities and Exchange Act or relevant laws. (10) Not under any of the categories stated in Article 30 of the Compan y Act.	0

Note: Please refer to page 9 for information on directors.

3.4.2.2. Responsibilities of the Audit Committee:
(1) The Company has established the Organizational Regulations of the Audit Committee which is primarily aimed at overseeing the following matters:
- A. The appropriateness of the Company's financial statements.
- B. The selection (dismissal) and evaluation of independence and performance of the certifying accountant.
- C. The effective implementation of the Company's internal control system.
- D. The Company's compliance with relevant laws and regulations.
- E. The management of existing or potential risks of the Company.
(2) The annual work focus of the Audit Committee is as follows:
- A. Convene meetings at least once per quarter, and hold additional meetings as needed.
- B. Review and submit to the Board of Directors for consideration on the following matters:
  - a. Establishment or amendment of internal control systems in accordance with Article 14-1 of the Securities and Exchange Act.
  - b. Assessment of the effectiveness of internal control systems.
  - c. Processing procedures for significant financial business transactions, such as Acquiring or Disposing of Assets, Engaging in Derivative Trading, Lending Funds to Others, Endorsing or Guaranteeing for Others in accordance with Article 36-1 of the Securities and Exchange Act.
  - d. Matters involving self-interest of directors.
  - e. Significant asset or derivative trading.
  - f. Significant lending, endorsing or guaranteeing of funds.
  - g. Offering, issuance, or private placement of equity securities.
  - h. Appointment, dismissal or compensation of the certifying accountant.
  - i. Appointment or dismissal of the financial, accounting, or internal audit officer.
  - j. Annual financial reports and semi-annual financial reports.
  - k. Other significant matters required by the Company or regulatory authorities.
(3) Regular communication with the certifying accountant and internal audit of the Company on the financial and business status of the Company.

3.4.2.3 In the latest fiscal year, the Audit Commitee held four meetings (A), and the attendance of members was as follows:

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Actual Actual
Attendance
Job Title Name Attendance Attendance Note
by proxy
(B) rate (%) (B/A)
Independent
4 0 100
Director [Chen, Chien Yuan]
Independent
Lee, Lin Sheng 4 0 100
Director
Independent
Cheng, Juei Fang 4 0 100
Director
Other items to be specified:
1. Should clearly specify the date and period of the meeting, the content of the agenda, the
opinions of independent directors who oppose, reserve or propose major suggestions, the
results of the Audit Committee's decision and the Company's response to the opinions of the
Audit Committee which has any of the following circumstances:
(1) Matters specified in Article 14-5 of the Securities and Exchange Act:
Independent
Director
Dates and
Sessions of the Proposals
Meetings
Implement
1. 2021 business report and
None None None Pass according to
financial statements proposal. the resolution
Implement
2. 2022 earnings distribution
None None None Pass according to
proposal. the resolution
Implement
3. Internal control system statement
None None None Pass according to
for the year 2021. the resolution
Session 3 of Implement
4. Approval of fund lending to third
the 2nd Term None None None Pass according to
/2022.03.09 parties by subsidiary URASIA. the resolution
5. Revision of the endorsement and
Implement
guarantee for others by the None None None Pass according to
Company. the resolution
Implement
6. Amendment of the "Articles of
None None None Pass according to
Incorporation" of the Company. the resolution
Implement
7. Appointment of CPA firm for the
None None None Pass according to
year 2022. the resolution
Dissenting Opinion Qualified Opinion Significant Suggestion Resolution Handling of the Company's Response to the Opinions ofthe Audit Committee.
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Implement
8. Replacement of independent
None None None Pass according to
auditor.
the resolution
1. Amendment of related measures
Implement
about the " Ethical Corporate
None None None Pass according to
Management Principles" of the the resolution
Company.
Implement
2. Establishment of "Human Rights
None None None Pass according to
Policy" of the Company. the resolution
3. Establishment of "Assessment
Measures for Independence and Implement
Session 4 of
the 2nd Term Qualification of Independeit None None None Pass according to
/2022.05.12 Auditors" of the Company. the resolution
4. Amendment of the " Corporate
Implement
Governance Best Practice None None None Pass according to
Principles " of the Company. the resolution
5. Approval of the Company's Implement
endorsement and guarantee for None None None Pass according to
others. the resolution
6. Earnings distribution Plan of Implement
None None None Pass
subsidiary URASIA according to
h l i
1. Review of the consolidated
financial statements for the Implement
second quarter of fiscal year None None None Pass according to
2022 for the Company and its the resolution
subsidiaries.
2. Amendment of the "Risk Implement
Management Policy" of the None None None Pass according to
Session 5 of Company. 。 the resolution
the 2nd Term 3. Amendment of the " Corporate Implement
/2022.08.09 Governance Best Practice None None None Pass according to
Principles " of the Company. the resolution
4. Establishment of the "
Implement
Sustainable Development Best
None None None Pass according to
Practice Principles" of the
the resolution
Company.
5. Decision on the ex-dividend Implement
record date for earnings None None None Pass according to
distribution of the Company. the resolution
1. Review of the consolidated
financial statements for the third Implement
quarter of fiscal year 2022 for None None None Pass according to
the Company and its the resolution
Session 6 of
subsidiaries.
the 2nd Term
Implement
/2022.11.10 2. Approval of the Cancellation of
None None None Pass according to
Restricted Stock Units.
the resolution
Implement
3. 2023 internal audit plan. None None None Pass
according to
h l i
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4. Amendment of "Assessment
Implement
Measures for Independence and
None None None Pass according to
Qualification of Independeit
the resolution
Auditors".
5. Establishment of the Implement
"Organizational Regulations for None None None Pass according to
the Sustainability Committee". the resolution
Implement
6. 2023 Operational Objectives. None None None Pass
according to
h l i
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(2) Except for the above-mentioned, is there any matter that has not been approved by the Audit Committee, but has been adopted with the approval of two-thirds or more of all board directors without having been passed by the audit committee: None. 2. For any of the proposals that any of the independent directors are required to make avoidance due to conflict of interests, please clearly specify the names of the directors, the content of the proposals, the reasons for avoidance due to conflict of interests, and the results of voting for such proposals: No such situation. 3. The status of communication between independent directors and the head of internal audit and independent auditors (please include the major matters, methods, and results of the communication on the Company’s financial and business operation status, etc.) (1) Communication between independent directors and the head of internal audit: 1. The head of internal audit shall send the audit report, audit follow-up report, and electronic files of accounts receivable and overdue payments tracking to the independent directors for review by the end of the following month after completing each audit project. If the independent directors need further information about the audit and tracking results, they can contact the head of internal auditat any time. 2. The head of internal audit reports on the Company's internal audit execution status at every Audit Committee Meeting, including the audit cycle scope from the previous meeting to the current meeting, findings during the period, follow-up on deficiencies, tracking of accounts receivable and overdue payments, reporting of legal and regulatory audit matters, and internal control operations. The

communication between the independent directors and the head of internal audit is	communication between the independent directors and the head of internal audit is	communication between the independent directors and the head of internal audit is
bidirectional, and the head of internal audit answers the independent	directors'
questions. The communication is good.
3. The independent directors and the head of internal audit hold regular meetings		at
least once a year. If there are special circumstances, they will also report to the
independent directors in a timely manner. The independent directors	and the head
of internal audit held a meeting on November 10, 2022, at 11:30 am at the
Company, discussing the following issues:
(1) Recent audit work content and experience sharing.
(2) Discussion of the current situation and audit status of the subsidiaries in
Mainland China.
4. Summary of communication between independent directors and the head of
internal audit :
Date Attendees Key Points of Communication	Sugge stion
2022.03.09 Audit Committee Meeting Chairman/Liou, Han Yin General Manager /Chao, Wei Chun Deputy General Manager/Liao,Pei Hung Independent Director/Chen, Chien Yuan Independent Director/Chang, Juei Fang Independent Director/Lee, Lin Sheng Head of Internal Audit/Cheng,Lin Feng Report on the Execution of Internal Audit from October 2021 to February 2022.	None
2022.05.12 Audit Committee Meeting Chairman/Liou, Han Yin General Manager /Chao, Wei Chun Deputy General Manager/Liao,Pei Hung Independent Director/Chen, Chien Yuan Independent Director/Chang, Juei Fang Independent Director/Lee, Lin Sheng Head of Internal Audit/Lian, Da Shun Report on the Execution of Internal Audit from March 2022 to April 2022.	None
2022.08.09 Audit Committee Meeting Chairman/Liou, Han Yin General Manager /Chao, Wei Chun Deputy General Manager/Liao,Pei Hung Independent Director/Chen, Chien Yuan Independent Director/Chang, Juei Fang Independent Director/Lee, Lin Sheng Head of Internal Audit/Lian, Da Shun Report on the Execution of Internal Audit from May 2022 to June 2022.	None
2022.11.10 Audit Committee Meeting Chairman/Liou, Han Yin General Manager /Chao, Wei Chun Deputy General Manager/Liao,Pei Hung Independent Director/Chen, 1. Report on the Execution of Internal Audit from July 2022 to October 2022.	None

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Chien Yuan 2. Reporting the 2023
Independent Director/Chang,
Juei Fang Internal Audit Plan.
Independent Director/Lee,
Lin Sheng
Head of Internal Audit/Lian,
Da Shun
Independent Director/Chen, 1. Recent audit work content
Chien Yuan
Independent Director/Chang, and experience sharing.
2022.11.10
Juei Fang 2. Discussion of the current
Roundtable Independent Director/Lee, None
Lin Sheng situation and audit status
Discussion
Head of Internal Audit/Lian, of the subsidiaries in
Da Shun
Mainland China.
(2) Communication between independent directors and the Independent auditor:
1. The independent auditor attends the Audit Committee after completing the audit or
review of the financial report every quarter, and explains the audit or review
opinions, key audit matters, and the application of new or revised accounting
standards or interpretations to the independent directors.
2. The independent directors hold at least one regular meeting with the independent
auditor annually to discuss the Company's financial status, the financial and overall
operations of domestic and overseas subsidiaries, financial report auditing or
review, and the results of internal control audits. The independent auditor report to
the independent directors on any significant adjustments to entries, any changes to
relevant laws and regulations, and any impact on the Company's accounting. They
engage in thorough communication and may call a meeting at any time if
significant issues arise.
3. Summary of communication between independent directors and the independent
auditor:
Key Points of Sugge
Date Attendees
Communication stion
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	2022.11.10 Roundtable Discussion	Independent Director/Chen, Chien Yuan Independent Director/Chang, Juei Fang Independent Director/Lee, Lin Sheng Independent Audit/ Kent C. Chang	1. Explanation of the scope and procedures of the audit by the independent auditor. 2. Discussion of the audit of overseas subsidiaries and related-party transactions. 3. Explanation of the auditor's qualified opinion in the review report. 4. Discussion of Headway's financial and funding status. 5. Discussion of the cooperation of company personnel during the audit. 6. Discussion of audit fees and the scope of work. 7. Discussion of the cooperation between independent directors and the independent auditor. 8. Discussion of inventory auditing and valuation issues.	None

3.4.3 Difference between the practices of the Company and Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies and the reasons:

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Difference between the
Implementation practices of the
Company and Corporate
Evaluation Items Governance Best
Practice Principles for
Y N Summary TWSE/TPEx Listed
Companies and the
reasons
1. Does the Company stipulate and disclose its guidelines Ｖ The Company has established the " Corporate Compliant with
for corporate governance in accordance with the Governance Best Practice Principles " in accordance with “Corporate
Corporate Governance Best Practice Principles for the " Corporate Governance Best Practice Principles for Governance Best
TWSE/TPEx Listed Companies? TWSE/TPEx Listed Companies " and has disclosed the Practice Principles
relevant content on the Company's website and on the for TWSE/TPEx
Taiwan Stock Exchange’s Market Observation Post Listed Companies”.
System.
2. The Ownership Structure and Shareholders’ Equity
(1) Does the Company stipulate internal operating V (1) Suggestions, queries, disputes, and lawsuits from (1) No significant
procedures to handle shareholders’ suggestions, shareholders are handled by the spokesperson and differences.
doubts, disputes, and litigation, and implement the proxy spokesperson, as well as by the contact
relevant process in accordance with the prodedures? information and email provided on the investor
relations page of the Company’s website, in addition
to being assisted by the shareholder services agent.
(2) Does the Company establish a list indicating the major V (2) The actual control list is monitored in real-time using (2) No significant
shareholders who actually control the Company and the shareholder roster provided by the shareholder differences.
the final controllers of such major shareholders? services agent, and any changes are reported in
accordance with the regulations governing
information reporting by listed companies.
(3) Does the Company establish and implement risk V (3) Business and financial transactions between the (3) No significant
control and firewall mechanisms between the Company and related parties are subject to fair and differences.
affiliates? reasonable pricing conditions and payment methods.
The Company has established the "Regulations for
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Difference between the
Implementation practices of the
Company and Corporate
Evaluation Items Governance Best
Practice Principles for
Y N Summary TWSE/TPEx Listed
Companies and the
reasons
Supervision and Management of Subsidiaries" and
written guidelines in accordance with the relevant
regulations of the regulatory authority.
(4) Does the Company stipulate internal regulations to V (4) The Company has established the "Corporate (4) No significant
prohibit the insiders from using undisclosed Governance Best Practice Principles" and the differences.
information to purchase and sell securities? "Guidelines for Preventing Insider Trading." All
directors, managers, and employees, as well as
others who become privy to material non-public
information of the Company by virtue of their status,
profession or control relationship, are required to
comply with the relevant regulations.
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Difference between the
Implementation practices of the
Company and Corporate
Evaluation Items Governance Best
Practice Principles for
Y N Summary TWSE/TPEx Listed
Companies and the
reasons
3. The Composition and Responsibilities of the Board of
Directors
(1) Does the board of directors form and implement a V (1) The Company has nine directors(including three (1) No significant
diversified policy and specific management goals on independent directors) and seven of them are not differences.
the composition of its members? executives of the Company. Each director has diverse
professional backgrounds, including business, law,
accounting, management, technical skills, and
industry experience. The policy on board diversity is
disclosed on the Company's website and the Taiwan
Stock Exchange’s Market Observation Post System.
The board of directors is responsible for developing
policies on board diversity, specific management
objectives, and implementing them. For more
information on the implementation of these policies,
please refer to page 22 of the current annual report.
(2) In addition to the Remuneration Committee and the V (2) In addition to the Remuneration Committee and Audit (2) No significant
Audit Committee established in accordance with the Committee established by law, the Company differences.
laws and regulations, does the Company voluntarily established a "Sustainability Committee" on April 20,
establish other various functional committees? 2022, which is composed of three general members
led by the general manager and deputy general
manager and three supervisory members led by
independent directors. The committee is responsible
for effectively promoting ESG development
direction, corporate social responsibility, and actively
responding to risk assessments and countermeasures
in all aspects of stakeholder interests to achieve
sustainable governance-related sustainable
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Difference between the
Implementation practices of the
Company and Corporate
Evaluation Items Governance Best
Practice Principles for
Y N Summary TWSE/TPEx Listed
Companies and the
reasons
operations.
(3) Does the Company stipulate the guidelines for V (3) The Company has established “Director and Board (3) No significant
evaluating the performance of the board, conduct Performance Evaluation Measures” and its evaluation differences.
annual and regular performance evaluations, and method. The performance evaluation of the board of
report the results of performance evaluations to the directors for 2022 was conducted in the first quarter
board of directors, and use such results as a and the evaluation results were reported to the board
reference for individual director’s remuneration and a of directors in the second quarter. The results of the
nomination for re-election? annual evaluation of the directors' performance are
also used as a reference for individual director
compensation and nomination.
(4) Does the Company regularly assess the independence V (4) The Company evaluates the independence of the (4) No significant
of certified public accountants (CPA)? independent auditor every year (Note 1). In addition differences.
to confirming that the independent auditor does not
hold any shares in the Company or hold any positions
in the Company, we also confirm that he/she meets
the standards for independent and qualified
assessments of the Company, and we have submitted
it for review by the board of directors on November
10, 2022. We will complete the evaluation of the
independence and qualifications of the independent
auditor according to the Audit Quality Indicators
(AQIs) in 2023.
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Difference between the
Implementation practices of the
Company and Corporate
Evaluation Items Governance Best
Practice Principles for
Y N Summary TWSE/TPEx Listed
Companies and the
reasons
4. Does the listed company have a suitable and V The Company has established a dedicated unit for No significant
appropriate number of corporate governance staff and corporate governance and designated a corporate differences.
designates a corporate governance leader to be governance officer to handle related affairs, including
responsible for corporate governance related matters providing necessary information for the board of directors
(including but not limited to providing information and independent directors, arranging board of directors
required by directors and supervisors to perform and shareholders' meetings in compliance with the law,
business, assisting directors and supervisors to comply handling company registration and changes, and
with relevant laws and regulations, handle matters preparing minutes of board of directors and shareholders'
related to meetings of the board of directors and meetings. The Company also engages the shareholder
shareholders in accordance with the laws and services agent to assist in handling these matters.
regulations, prepare minutes of the meetings of the
board of directors and shareholders, etc.)?
5. Does the Company establish communication channels V The Company maintains open communication channels No significant
with stakeholders (including but not limited to with banks, creditors, and employees, and respects and differences.
shareholders, employees, customers, and suppliers, safeguards their legitimate rights and interests. The
etc.), provide a specific area for stakeholders on its Company has established contact telephone numbers or
official site, and appropriately respond to the CSR email boxes for business consultation and investor
issues of stakeholders’ concerns? relations on its website, and stakeholders can
communicate through email or other means when
necessary.
6. Does the Company appoint a professional stock agency V The Company has appointed a professional shareholder No significant
to handle the affairs of the shareholders meeting? services agency, Mega Securities' shareholder services differences.
department, to handle shareholder meeting affairs.
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Difference between the
Implementation practices of the
Company and Corporate
Evaluation Items Governance Best
Practice Principles for
Y N Summary TWSE/TPEx Listed
Companies and the
reasons
7. Information Disclosure
(1) Does the Company set up a website to disclose V (1) The Company website is www.headway.com.tw, and (1) No significant
financial business operation and corporate we have dedicated personnel responsible for differences.
governance information? collecting and disclosing company information to
facilitate shareholders and stakeholders' reference.
(2) Does the company adopt other information disclosure V (2) The Company regularly and irregularly discloses (2) No significant
methods (such as setting up an English version relevant information on the Market Observation Post differences.
website, appointing a designated staff to be System and our website. We also have a
responsible for the collection and disclosure of spokesperson and proxy spokesperson and an
company information, implementing the investor relations section, providing comprehensive
spokesperson system, disclosing the process of the disclosure of financial business, corporate
institutional investor conference on the company’s governance, and investor-related information for
official site, etc.)? shareholders and the general public's reference.
(3) Does the Company disclose and submit its annual V (3) The Company complies with relevant laws and (3) To be discussed.
financial report within two months after the end of regulations of the Securities and Exchange Act, and
each fiscal year, and disclose and submit the financial announces and reports its annual financial statements
reports for the first, second, and third quarters and the within three months after the end of the fiscal year.
business operating conditions of each month prior to The Company also discloses its financial statements
the prescribed deadline? for the first, second, and third quarters, as well as
monthly operating results within the prescribed time
limit.
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Difference between the
Implementation practices of the
Company and Corporate
Evaluation Items Governance Best
Practice Principles for
Y N Summary TWSE/TPEx Listed
Companies and the
reasons
8. Does the Company have other supporting information V Note 2 No significant
that allows further understanding to the corporate differences.
governance operation (including but not limited to
employee rights, employee care, investor relations,
supplier relations, the rights of stakeholders, the
education and training for directors and supervisors,
implementation status of risk management policies and
risk measurement standards, implementation status of
customer policies, the casualty insurance provided by
the company for directors and supervisors, etc.)?
9. Please specify the improvement to the results of the corporate governance evaluation conducted by the Corporate Governance Center of TWSE
in the most recent fiscal year and the priorities and measures for matters that have not yet been improved: None
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Note 1:

(1) Independence Assessment Form for Independent Auditor:

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Assessement
Item Specific Indicators Result
Y N
The independent auditor has no direct or significant indirect financial interest in the
1 V
Company. (Yes, there is no conflict of interest).
The independent auditor has no financing or guarantee arrangements with the Company
2 V
or its directors. (Yes, there is no inappropriate conflict of interest).
The independent auditor and the audit engagement team members have not held any
3 positions with the company's directors, supervisors, or managers, or had significant V
influence on audit matters in the past two years. (Yes, there is no conflict of interest).
The auditor has not acted as the company's defender or representative in resolving
4 V
conflicts with third parties. (Yes, there is no conflict of interest).
The term of office of the lead and concurring independent auditors has not exceeded
5 V
seven years. (Yes, they are within the limit).
The independent auditor has no close business relationships with the company. (Yes,
6 V
there is no conflict of interest).
The independent auditor has no potential employment relationships with the company.
7 V
(Yes, there is no conflict of interest).
The independent auditor has no financial interest in the audit. (Yes, there is no conflict of
8 V
interest).
The audit engagement team members, other practicing certified public accountants or
9 legal entities, firms, related enterprises, and alliance firms have maintained their V
independence from the company. (Yes, there is no conflict of interest).
The non-audit services provided by the independent auditor to the company have no
10 direct impact on the important matters of the audit engagement. (Yes, there is no conflict V
of interest).
The independent auditor has not promoted or brokered the company's issuance of stocks
11 V
or other securities. (Yes, there is no conflict of interest).
The independent auditor has not represented the company in any legal or other disputes.
12 V
(Yes, there is no conflict of interest).
The independent auditor and the audit engagement team members have no relatives who
13 hold significant positions with the company's directors, supervisors, or managers, or have V
significant influence on audit matters. (Yes, there is no conflict of interest).
The independent auditor has not assumed the position of director, supervisor, manager or
14 any position with significant influence on audit engagement within one year after V
resigning from the engagement. (Yes, there is no conflict of interest)
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(2) Qualification Assessment Form for Independent Auditor:

Item	Specific Indicators	Assessement	Assessement
		~~l~~ Y N
1	Did the independent auditor complete the company's financial reports and audit (review) reports for each period as scheduled? (Whether timely provide ausit or review reports)	V

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Was the accuracy of each period's report audit and compilation (excluding company data
changes) confirmed? (Four major reports) (Whether the certified financial report issued
2 V
complies with the latest financial report preparation guidelines, accounting bulletins, and
relevant regulations of the regulatory authority)
Did the independent auditor interact frequently with company management personnel
3 (internal auditors, etc.) and leave records? (Whether frequent interaction and smooth V
coordination)
Did the independent auditor has appropriate interaction and leave records with the Audit
4 Committee before planning the audit and issuing audit opinions? (Whether V
communication was carried out for key audit matters and after the audit was completed)
Did the independent auditor provide positive suggestions and leave records for the
5 company's system and internal control audits? (Whether communicated the findings and V
suggestions to internal auditors and relevant units)
Were the annual tax returns and reports completed before the deadline of the following
6 V
year? (Whether timely provide tax certification reports and tax returns)
Did the independent auditor assist in communication and coordination with the
regulatory authority? (Whether timely and appropriately respond to the questions asked
by the regulatory authority)
Did the independent auditor assist the company in tax planning? (Assist the company in
7 V
reviewing tax planning and provide suggestions)
Did the independent auditor provide solutions for tax certification issues? (Assist the
8 V
company in responding to tax-related inquiries from the tax authorities)
Did the independent auditor regularly update the company on tax and certificate-related
9 regulations and updated and revised IFRS accounting standards? (Provided suitable V
training courses, including accounting bulletins for new applications of IFRS)
Did the independent auditor communicate and respond to inquiries promptly? (Whether
10 V
quickly respond to questions)
Did the independent auditor assist in communication and coordination with the
11 regulatory authority? (Whether timely and appropriately respond to the questions asked V
by the regulatory authority)
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(3) Assessment Result: After evaluation, the appointed auditors of our company did not have any of the situations mentioned in the above independence evaluation items, which comply with the regulations on independence and meet the evaluation criteria for suitability. It can be confirmed that the financial reports issued are reliable.

Note 2:Does the Company have any other important information that helps to understand the operation of corporate governance?

(1) Employee rights and welfare: In addition to establishing the Employee Welfare Committee, providing group insurance for employees, arranging regular health checkups, and implementing a retirement fund system, the Company also provides diverse channels for continuing education, values labor-management relations and equal employment opportunities, and continuously improves the work environment and safety and health management system to prevent injury accidents and occupational diseases.
(2) Investor relations: The Company's Investment Management Department and Administration Department serve as a communication bridge between the Company and investors. In addition to regularly and irregularly holding corporate briefings, the Company also sets up an investor relations section on its website to publicly disclose company information in accordance with legal regulations to allow investors to fully understand the Company's operating results and long-term management direction.
(3) Stakeholder rights: Stakeholders have the right to communicate and offer suggestions to the Company to protect their legitimate interests.
(4) Implementation of risk management policies and risk measurement standards: The Company follows relevant laws and regulations to promote various policies and establishes standard operating procedures to reduce and avoid possible risks.
(5) Implementation of customer policies: The Company has obtained ISO 9001 quality certification and ISO 14001 environmental certification. A dedicated department ensures the implementation of the Company's customer policies through overall operations.
(6) Supplier relations: The Company establishes good relationships with its suppliers, shares information with each other, and increases mutual trust, satisfaction, and loyalty, bringing positive impacts on both parties' work efficiency.
(7) The status of the Company's purchase of director's liability insurance: The Company has purchased liability insurance for all directors and managers.
(8) Directors attend or participate in board meetings normally and follow the Board of Directors Meeting Rules.
(9) Director training: The Company's directors (including independent directors) completed relevant training courses and complied with the required hours in 2022. The Company also discloses relevant information on the Market Observation Post System.

The directors' training status for the year 2022 is as follows (all training meets the requirements):

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Elected Training Training
Job Title Name Training Institute Course
Date Date Hours
Liou, 2022/09/20 Taiwan Corporate Governace Association Ten Lessons in Corporate Governance 3
Director Han 2021.07.30
Yin Exploring the Core Competencies of the Next Generation
2022/06/28 Taiwan Institute of Directors 3
in an Era of Radical Change
Taiwan Corporate Governace Practical Approaches to Protecting Trade Secrets and
Chao, 2022/11/11 Association Preventing Fraud 3
Director Wei 2021.07.30
Chun 2022/09/30 Taiwan Corporate Governace Adapting to Changes in the International Order: Corporate 3
Association Governance Strategies
Cheng, 18th (2022) Corporate Governance Summit - Enhancing
2022/10/19 Taiwan Corporate Governace
Director Chih 2021.07.30 Director Functions and Implementing Sustainable 6
Association
Wen Corporate Governance
Taiwan Corporate Governace Effective Ways for Enterprises to Protect Brand Value
Lee, 2022/04/12 Association Through Recent Famous Trademark Cases 3
Director Hwang 2021.07.30
Pao 2022/01/14 Taiwan Corporate Governace Competitiveness vs. Survival: ESG Trends and Strategies 3
Association
Taiwan Corporate Governace Trends and Strategies for Achieving Net-Zero Carbon
2022/07/19 3
Association Emissions
Taiwan Corporate Governace
2022/07/07 Net-Zero Carbon Pathways for Listed Companies 1
Association
Chen, Taiwan Corporate Governace Building Sustainable Business Competitiveness in
Director 2021.07.30 2022/05/27 3
Yu Ting Association Response to Climate Change
Taiwan Corporate Governace Net-Zero Emissions, Carbon Neutrality, and Compliance
2022/04/22 3
Association with Corporate Regulations
Taiwan Corporate Governace Development Trends in Green Industries - Low-Carbon
2022/03/22 3
Association Investment Outlook and Business Strategies
Taiwan Corporate Governace Adapting to Changes in the International Order and
2022/09/30 3
Chen, Association Corporate Governance Strategies
Director Tzu 2021.07.30
Corporate Operating and
Chin Strategies and Management for Corporate Upgrading and
2022/08/24 Sustainable Development 3
Transformation
Associatin
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Elected Training Training
Job Title Name Training Institute Course
Date Date Hours
Taiwan Corporate Governace How Audit Committees Interpret and Use Audit Quality
Independent Chen, 2022/09/27 Association Indicators (AQIs) 3
chien 2021.07.30
Director
Yuan 2022/08/30 Taiwan Corporate Governace Legal Perspectives on Evaluating and Executing Mergers 3
Association and Acquisitions
Taiwan Corporate Governace Practical Approaches to Protecting Trade Secrets and
2022/11/11 3
Independent Lee, Association Preventing Fraud
Lin 2021.07.30
Director Independent Director In-Depth Analysis of the Impact of Financial Statements
Sheng 2022/09/28 3
Association Taiwan on Corporate Management from the Perspective of Group
CFO
Taiwan Corporate Governace Trends and Strategies for Managing Carbon in the Journey
2022/07/19 3
Chang, Association to Net-Zero Emissions in 2022
Independent
Juei 2021.07.30
Director
Fang Taiwan Corporate Governace Global Trends and Business Opportunities in Low-Carbon
2022/06/22 3
Association Economics and Corporate Low-Carbon Innovation.
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(10) Job responsibilities and training situation of corporate governance officer:

On March 9th, 2022, in the fourth board meeting of the 17th term, it was resolved and resolved to appoint Cheng, Lin Feng as the full-time Corporate Governance Officer, effective April 1st, 2022. The Corporate Governance Officer is primarily responsible for handling matters related to the board of directors and shareholders' meetings in accordance with the law, preparing minutes of board of directors and shareholders' meetings, assisting directors in their duties and continuing education, providing necessary information for the directors to execute their duties, and assisting the directors in complying with laws and regulations.

*The responsibilities of the Company's corporate governance officer include:
A. Providing the information necessary for directors to carry out their duties.
B. Handling matters related to board of directors and shareholders' meetings in accordance with the law.
C. Preparing minutes of board of directors and shareholders' meetings.
D. Assisting directors in complying with laws and regulations.
E. Assisting directors in their appointment and continuing education.
F. Safeguarding shareholder rights and strengthening the functions of the board of directors.
G. Reporting on the execution of corporate governance business in the current year.
H. Disclosing important corporate governance information.

I. Supervising and improving the implementation of corporate governance in the Company. J. Other matters specified in the Company's Articles of Incorporation or contracts.

The corporate governance officer's training status:

Job Title	Name	Appointed Date	Training Date	Training Institute	Course	Training Hours
Corporate Governance Officer	Cheng, Lin Feng	2022.04.01	2022/4/26~27	Securities and Futures Institute	Orientation course for new directors, supervisors (including independent ones) and corporate governance officers, with 12 hours of practical training.	12
			2022/10/5	Securities and Futures Institute	Global net-zero emissions response and corporate ESG actions.	3
			2022/10/27	Securities and Futures Institute	TCFD disclosure practices and the role that directors should play.	3

3.4.4 If the Company has established a remuneration committee, it shall disclose composition, responsibilities, and operating status of the Remuneration Committee:

3.4.4.1 Remuneration Committee Members Information

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Concurrently
Requirement serving as an
Professional qualifications Independent
and experiences Independence criteria Director of
another listed
Role Name company
During the two years prior to appointment and during the term of office, all of the following independence evaluation criteria have
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3.4.4 If the Company has established a remuneration committee, it shall disclose composition, responsibilities, and operating status of the Remuneration Committee: 3.4.4.1 Remuneration Committee Members Information	3.4.4 If the Company has established a remuneration committee, it shall disclose composition, responsibilities, and operating status of the Remuneration Committee: 3.4.4.1 Remuneration Committee Members Information	3.4.4 If the Company has established a remuneration committee, it shall disclose composition, responsibilities, and operating status of the Remuneration Committee: 3.4.4.1 Remuneration Committee Members Information	3.4.4 If the Company has established a remuneration committee, it shall disclose composition, responsibilities, and operating status of the Remuneration Committee: 3.4.4.1 Remuneration Committee Members Information	3.4.4 If the Company has established a remuneration committee, it shall disclose composition, responsibilities, and operating status of the Remuneration Committee: 3.4.4.1 Remuneration Committee Members Information
Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company
			During the two years prior to appointment and during the term of office, all of the following independence evaluation criteria have
Independent Director (convener )	Lee, Lin- Sheng	1. Graduated with a Bachelor’s degree in Law from Fu Jen Catholic University; Completion of the 26th term of the Judicial Officers Training Course in Judges and Prosecutors Training Institute. 2. Experience: Judge of the Hsinchu District Court in Taiwan; President of the 26th Council of the Hsinchu Bar Association; President of the Hsinchu Branch of the Legal Aid Foundation, Taiwan, 3rd and 4th term; Managing Attorney of Lee Hsu & Wang Attorneys-at-Law 3. Possesses work experience, professional knowledge, and skills required for legal affairs, business, and corporate operations.	been met: (1) Not employed by the Company or any of the Company's affiliates. (2) Not directors or supervisors of the company or its affiliates(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (3) Not a natural person shareholder who owns 1% or more of the total issued shares of the Company or is among the top ten shareholders, nor their spouse, minor children, or holdings in the name of others. (4) Not spouses, relatives within the second degree, or direct blood relatives within the third degree of persons not listed in (2) and (3), or managers not listed in (1). (5) Not directors, supervisors nor employees of a corporate shareholder who directly holds 5% or more of the total issued shares of the Company or who are in the top five of shareholders or appointed representatives under Article 27, Paragraph 1 or 2 of the Company Act (However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (6) Not a Director, supervisor, or employee of a corporate shareholder who holds the majority of the Board or shares voting rights(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (7) Not Chairman, President, or equivalent post of the company who himself/herself or Spouse holds the position as Director, Supervisor, or employee of another company or organization(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (8) Not a Director, Supervisor, manager, or shareholder holding more than 5% of the outstanding shares of a specific company or institution in business or financial relationship with the Company(However, if a specific company or institution who holds 20% or more but less than 50% of the total issued shares of the Company, and independent directors of the company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (9) Not a professional, owner, partner, Director, Supervisor, manager of the proprietorship, partnership, company, or institution that provides business, legal, financial, and accounting services to the Company or a spouse to the aforementioned persons rewarded remuneration not exceeding NTD 500 thousand within last two years. However, this does not apply to members of the remuneration committee, public tender offer review committee, or special committee for mergers and acquisitions who perform their duties in accordance with the Securities and Exchange Act or relevant laws. (10)Not under anyof the categories stated in Article 30 of the CompanyAct.	0

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Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company
			During the two years prior to appointment and during the term of office, all of the following independence evaluation criteria have
Independent Director (member)	Chen, Chien- Yuan	1. Graduated with a Bachelor’s degree in Chemical Engineering of National Central University; National Chengchi University Graduate Institute of Business Administration (studying without graduation) 2. Experience: Vice Chairman of Pinosus Corporation; Independent Director of YoungOptics Inc.; General Manager of Chinfon Global Corp. 3. Possesses work experience, professional knowledge, and skills required for business, and corporate operations.	been met: (1) Not employed by the Company or any of the Company's affiliates. (2) Not directors or supervisors of the company or its affiliates(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (3) Not a natural person shareholder who owns 1% or more of the total issued shares of the Company or is among the top ten shareholders, nor their spouse, minor children, or holdings in the name of others. (4) Not spouses, relatives within the second degree, or direct blood relatives within the third degree of persons not listed in (2) and (3), or managers not listed in (1). (5) Not directors, supervisors nor employees of a corporate shareholder who directly holds 5% or more of the total issued shares of the Company or who are in the top five of shareholders or appointed representatives under Article 27, Paragraph 1 or 2 of the Company Act (However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (6) Not a Director, supervisor, or employee of a corporate shareholder who holds the majority of the Board or shares voting rights(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (7) Not Chairman, President, or equivalent post of the company who himself/herself or Spouse holds the position as Director, Supervisor, or employee of another company or organization(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (8) Not a Director, Supervisor, manager, or shareholder holding more than 5% of the outstanding shares of a specific company or institution in business or financial relationship with the Company(However, if a specific company or institution who holds 20% or more but less than 50% of the total issued shares of the Company, and independent directors of the company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (9) Not a professional, owner, partner, Director, Supervisor, manager of the proprietorship, partnership, company, or institution that provides business, legal, financial, and accounting services to the Company or a spouse to the aforementioned persons rewarded remuneration not exceeding NTD 500 thousand within last two years. However, this does not apply to members of the remuneration committee, public tender offer review committee, or special committee for mergers and acquisitions who perform their duties in accordance with the Securities and Exchange Act or relevant laws. (10)Not under anyof the categories stated in Article 30 of the CompanyAct.	0

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Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company	Requirement Role Name Professional qualifications and experiences Independence criteria Concurrently serving as an Independent Director of another listed company

Independent Director (member)	Chang, Juei-Fang	1. Ph.D., Biotechnology,National Dong Hwa University, Hualien, Taiwan; MS degree, Chemical Engineering, Auburn University, Auburn, AL, USA. 2. Experience: Independent Director, Taiwan (2018 to present); Managed business P&L in Asia Pacific region; Developed new businesses in China, India, ASEAN countries ; 18-year with global chemical companies; Worked overseas in USA, Shanghai, Hong Kong, Singapore 3. Possesses work experience, professional knowledge, and skills required for business, and corporate operations.	During the two years prior to appointment and during the term of office, all of the following independence evaluation criteria have been met: (1) Not employed by the Company or any of the Company's affiliates. (2) Not directors or supervisors of the company or its affiliates(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (3) Not a natural person shareholder who owns 1% or more of the total issued shares of the Company or is among the top ten shareholders, nor their spouse, minor children, or holdings in the name of others. (4) Not spouses, relatives within the second degree, or direct blood relatives within the third degree of persons not listed in (2) and (3), or managers not listed in (1). (5) Not directors, supervisors nor employees of a corporate shareholder who directly holds 5% or more of the total issued shares of the Company or who are in the top five of shareholders or appointed representatives under Article 27, Paragraph 1 or 2 of the Company Act (However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (6) Not a Director, supervisor, or employee of a corporate shareholder who holds the majority of the Board or shares voting rights(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (7) Not Chairman, President, or equivalent post of the company who himself/herself or Spouse holds the position as Director, Supervisor, or employee of another company or organization(However, if independent directors of a company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (8) Not a Director, Supervisor, manager, or shareholder holding more than 5% of the outstanding shares of a specific company or institution in business or financial relationship with the Company(However, if a specific company or institution who holds 20% or more but less than 50% of the total issued shares of the Company, and independent directors of the company and its parent company, subsidiary, or a subsidiary of the same parent company set up in accordance with this Act or local laws and regulations mutually serve as independent directors, they are not subject to this restriction). (9) Not a professional, owner, partner, Director, Supervisor, manager of the proprietorship, partnership, company, or institution that provides business, legal, financial, and accounting services to the Company or a spouse to the aforementioned persons rewarded remuneration not exceeding NTD 500 thousand within last two years. However, this does not apply to members of the remuneration committee, public tender offer review committee, or special committee for mergers and acquisitions who perform their duties in accordance with the Securities and Exchange Act or relevant laws. (10) Not under any of the categories stated in Article 30 of the Compan y Act.	0

Note: Please refer to page 9 for information on directors.

3.4.4.2. Responsibilities of the Remuneration Committee:

(1) Develop and annually review policies, systems, standards, and structures for the evaluation of the performance and compensation of directors and executives.
(2) Evaluate and establish the compensation of directors and executives annually.
3.4.4.3. Information on the operation of the Remuneration committee:
(1) The Remuneration Committee of the Company consists of three members.
(2) The term of office for the current committee members is from July 30, 2021 to July 29, 2024. In the latest fiscal year, the Remuneration Commitee held three meetings (A), and the attendance of members was as follows:

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Actual
Actual
Attendanc Attendanc
Job Title Name Attendance Note
e e by proxy
rate (%) (B/A)
(B)
Lee,
Convener 3 0 100
Lin Sheng
Chen,
Member 3 0 100
Chien Yuan
Chang,
Member 3 0 100
Juei Fang
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Other items to be specified:
1. If the board of directors does not adopt the recommendations of the Remuneration
Committee, they should provide the following information: the date of the board
meeting, the session number, the content of the motion, the result of the board's
resolution, and the Company's handling of the Remuneration Committee's
opinions (e.g., if the remuneration approved by the board is better than the
recommendations of the Remuneration Committee, the differences and reasons
should be explained): None.
2. If there are any dissenting or reserved opinions among the members of the
Remuneration Committee regarding the resolutions, and if there are records or
written statements, the following information should be provided: the date of the
Remuneration Committee meeting, the session number, the content of the
proposal, the opinions of all members, and the handling of the members' opinions:
No such situation exists in the Company. The convening and resolutions of the
Remuneration Committee for 2022 are listed as follows:
Dates and Sessions of the Meetings Proposals Resolution
1. Proposal for the allocation and distribution of director and employee compensation for the 2021 fiscalyear. The chairman sought the unanimous consent of all attending members to pass the proposal and submit it to the board of directors for review.
Session 2 of the 5th Term 2022.03.09 2. Proposal for the distribution of management performance bonuses for the 2021 fiscal year. The chairman sought the unanimous consent of all attending members to pass the proposal and submit it to the board of directors for review. 3. Proposal for the distribution of manager from the employee compensation for the 2021 fiscalyear. The chairman sought the unanimous consent of all attending members to pass the proposal and submit it to the board of directors for review.
4. Proposal for the implementation of the Restricted stock Units plan in the 2022 fiscalyear. The chairman sought the unanimous consent of all attending members to pass the proposal and submit it to the board of directors for review.
Session 3 of the 5th Term 2022.05.12 1.Proposal for the overall salary adjustment plan for the 2022 fiscal year. The chairman sought the unanimous consent of all attending members to pass the proposal and submit it to the board of directors for review.
Session 4 of 1. Regular review of the "Remuneration Committee Organizational Regulations." The chairman sought the unanimous consent of all attending members to approve without modification.
the 5th Term 2022.11.10 2. Regular review of the "Director and Manager Remuneration Policy and System." The chairman sought the unanimous consent of all attending members to approve without modification.

3.4.5 Difference between the practices of the Company and Sustainable Development Best Practice Principles for TWSE/TPEx Listed Companies and the reasons:

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			and the reasons
1. Does the Company establish a full-time (or concurrent) unit to promote sustainable development? Does the board of directors authorize the senior management level to handle relevant tasks and report related situations to the board?	V	1. The Company established the "Corporate Social Responsibility Committee" on March 4, 2016, and issued the "Corporate	No significant
		Social Responsibility Code" as an important basis for practicing corporate social responsibility. To effectively promote	differences.
		ESG development and corporate social responsibility, as well as actively respond to stakeholder risk assessments and
		coping strategies, the Company established the "Sustainability Committee" on April 20, 2021, replacing the "Corporate
		Social Responsibility Committee" and revising the "Corporate Social Responsibility Code" which was renamed as the "
		Sustainable Development Best Practice Principles".
		2. The Sustainability Committee is composed of senior company managers and groups formed according to the annual project
		needs. The Committee is chaired by the General Manager, with all Independent Directors as the guiding member, and
		deputy general managers serving as members. The Executive Secretary is the company's corporate governance officer, who
		is assisted by a secretary in handling related affairs. Different task groups are established based on the projects required for
		the current year, including: Operational Performance, Environmental Improvement, Social Responsibility, Risk
		Management, etc., with each team leader appointed by the General Manager.

		Implementation Status:
		1. To effectively promote sustainable business goals, the Sustainability Committee develops "Operational Performance,"
		"Environmental Improvement," and "Social Responsibility" as the three core themes for each year, which serve as the main
		axis for the Company's vision and strategic planning, as well as the annual goal-setting guidelines. These themes also serve
		as the basis for setting departmental annual goals and performance indicators.
		2. The Executive Secretary is responsible for overseeing the committee's affairs, compiling annual ESG-related goals and
		plans from various departments, and coordinating and tracking the implementation of these goals every month. The results
		are used as the basis for the ESG sustainability report for the following year.
		x3. The operation status of the Sustainability Committee should be reported to the board of directors each year. The
		resolutions and implementation status of the 2022 Sustainability Committee were reported to the board of directors on
		March 14, 2023. The board agreed to set a 5-year overall reduction target of more than 3% (based on 2022) for greenhouse
		gas emissions, water usage, and waste generation, and requested that the Sustainability Committee report the achievement
		status of the reduction targets annually.

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Implementation Difference
between the
practices of the
Company and
Sustainable
Items
Y N Summary Development Best
Practice Principles
for TWSE/TPEx
Listed Companies
and the reasons
2. Does the Company V 1. In order to strengthen corporate governance, reduce potential operational risks, and ensure the Company's stable operation No significant
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			and the reasons
2. Does the Company	V	1. In order to strengthen corporate governance, reduce potential operational risks, and ensure the Company's stable operation	No significant
perform risk assessments on environmental, social, and corporate governance issues related to its business operations in accordance with the principles of materiality, and stipulate relevant risk management policies or strategies?		and sustainable development, the Company referred to the "ISO 31000 2018 Risk Management Principles and Guidelines" and established the "Risk Management Policy" on December 24, 2020, approved by the Audit Committee and the Board of Directors. On August 9, 2022, the Board of Directors approved the revision and adjustment of the risk management organizational structure. 2. The company effectively identifies, assesses, monitors, and handles risks through institutionalized process thinking management models, controlling the potential harm or loss caused by various risks within an acceptable capacity to maintain stable operations and achieve sustainable development. 3. The Company's risk management scope focuses on the three major issues of Environment (E), Social (S), and Corporate Governance (G). Based on the Company's "Risk and Opportunity Management Procedure Manual", it covers raw material price and supply chain risks, operational hazard risks, business risks, strategic risks, market risks, financial and investment risks, legal compliance/contract risks, climate change risks, information security risks, and human resource risks. The Company evaluates the risks of each issue based on the materiality principle and formulates relevant risk management strategies accordingly. Each unit carries out risk management according to the issues under its jurisdiction and continuously pays attention to the development of international and domestic risk management to identify emerging risks. 4. The Company established the Sustainability Committee on April 20, 2022, and convened a sustainability meeting which is attended by the Chairman, General Manager, senior managers, and department heads at the same time. One of the topics discussed in the meeting is risk management, where they assess various risk topics based on the materiality principle, addressing raw material price and supply chain risks, climate change risks, information security risks, and human resource risks, and assigning relevant departments to identify, assess, implement, and track these risks. 5. Regularly report the operation status of risk management to the Board of Directors: The risk management operation status for 2022 was reported to the Board of Directors on November 10, 2022.	differences.

						Implementation		Difference
								between the
Y	N					Summary
								practices of the
								Company and
								Sustainable
								Development Best
								Practice Principles
								for TWSE/TPEx
								Listed Companies
								and the reasons
		Typ e	Risk/ Opportunity	Term	Degree	Potential Impact	Risk Management Policy or Strategy
		Transition	Market Volatility: Rising raw material costs or material shortage risk	Mid	Mid	1.Risk of increased costs for raw materials required for production due to climate change (e.g., material shortages, price increases, and increased transportation costs). 2 When the raw material costs of suppliers increase, it will be reflected in the increased procurement costs, leading to product price adjustments, which may impact revenue and sales volume.	1. Identify suppliers vulnerable to high climate risks, implement climate adaptation production and sales models, deepen cooperation with each other, and promote the formation of a sustainable value chain. 2. Establish annual pre-purchase volume procurement intention contracts. 3. Research and develop alternative raw materials for selection.
		Transition	Energy Policy: Leading to a larger electricity gap and increased risk of power outages	Short	High	To cope with the impact of power shortages and outages on factory production, additional expenditure will be required for the installation of renewable energy devices and the purchase of renewable energy certificates as auxiliary systems.	1. Improve equipment efficiency and replace high-energy-consuming old equipment. 2. Search for suitable renewable energy, green energy, or energy storage system planning options.

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Resource Efficiency	Immediate Extreme Climate: Facing the dilemma of water shortage or no water available during drought periods	Short	Mid	The increasing length of drought seasons and the prolonged duration of extreme high temperatures due to climate change worldwide will cause the following impacts: 1. Facing the dilemma of water shortage or no water available. 2 The annual water consumption of more than 13,500 tons leads to increased capital expenditure and operating costs.	1. Improve operations for efficient steam usage and reduction in process equipment. 2. Plan for investment in wastewater and exhaust gas recycling and reuse schemes. 3. Continuously develop various plans to reduce water consumption and usage. 4. Strengthen measures for frequency control changes in cooling water towers, and insulation and cooling of pipelines and equipment.

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Implementation Difference
between the
practices of the
Company and
Sustainable
Items
Y N Summary Development Best
Practice Principles
for TWSE/TPEx
Listed Companies
and the reasons
3. Environmental issues V 1. The Company has established environmental policies and strictly adheres to domestic environmental safety and health No significant
(1) Does the Company regulations (appropriate control and reporting for air, waste, and toxins), effectively implementing environmental safety and differences.
establish an health management systems.
appropriate (1) Comply with environmental protection regulations and customer product environmental management requirements.
environmental (2) Continuously improve and strengthen pollution prevention and effective use of resources.
management (3) Implement the requirements of the environmental management system to enhance environmental performance.
system based on its (4) Strengthen employee education and training to have appropriate work capabilities.
industrial (5) Provide stakeholders with required documented information.
characteristics? 2. Environmental management system: The Company started obtaining ISO 14001 certification in 2016 to establish an
environmental management system. Since then, it has obtained certification qualifications for every three years, and the
most recent certification validity period is from October 2, 2022 to October 2, 2025.
(2) Is the Company V The Company continuously invests in research and development resources, focusing on innovation and application within the No significant
committed to PU industry value chain. We actively participate in green and sustainable initiatives and environmentally beneficial projects to differences.
improving the reduce our impact on the environment. Throughout the manufacturing stages, we aim to reduce energy consumption and
utilization demand.
efficiency of
various resources Energy intensity (GJ/million sales revenue)
and using recycled Year 2020 2021 2022
materials that have Sales Revenue(Million) 716 758 784
a low impact on
Energy intensity 33.72 34.64 31.27
the environment?
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			Implementation	Difference
				btn th
Items	Y	N	Summary	ewee e
				practices of the
				Company and
				Sustainable
				Development Best
				Practice Principles
				for TWSE/TPEx
				Listed Companies
				and the reasons
(3) Does the Company evaluate the potential current and future risks and opportunities of climate change to itself, and take measures to respond to climate-related issues?	V		1. The Company recognizes that the drastic changes in climate and the increased probability of extreme weather events caused by climate change have a significant impact on our operations. In recent years, the Headway Group has been actively working to reduce the total greenhouse gas emissions generated during the production process, as well as researching and implementing energy-saving and carbon reduction improvements. We actively assess and select various renewable energy solutions. 2. To adapt to the financial impacts and other risks and opportunities arising from climate change, we identify risks and opportunities based on the recommendations of the Financial Stability Board (FSB) Task Force on Climate-related Financial Disclosures (TCFD). This issue has been identified as a major topic for the Company in 2023: Financial impacts and other risks and opportunities arising from climate change (GRI 201). We evaluate the potential financial impacts and set related management objectives based on the identification results. 3. The related assessment results and response measures are as follows: Impact Analysis Risk/ Opportunity Term Degree Current Risk or Opportunity Analysis Response Measures 1. Transition Risks Regulation /Policy: Increased cost of greenhouse gas emissions due to high carbon emission prices Mid Low 1. Carbon emission-related regulations are passed, and if greenhouse gas emissions exceed (1) The allocated quota will require payment. (2) Related fines may increase significantly. 2. A large amount of cost expenditure is needed to invest in carbon emission reduction efforts. 1. Introduce low-carbon operation methods or related production technologies, such as paperless services and energy-saving equipment. 2. Improve and enhance energy efficiency and diversification, and optimize resource management processes. 3.Establish an energy management system. 4. Invest in green energy and energy-saving carbon reduction equipment, increasing costs.	No significant differences.

			Implementation	Implementation	Implementation	Implementation		Difference
								between the
Y	N		Summary
								practices of the
								Company and
								Sustainable
								Development Best
								Practice Principles
								for TWSE/TPEx
								Listed Companies
								and the reasons
		2. Transition Risks	Market: Rising raw material costs Mid MId 1. Risks of increased raw material costs for production due to climate change (e.g., raw material shortages, price increases, and increased transportation costs). 2.When suppliers' raw material costs increase, it will be reflected in increased procurement costs, leading to product price adjustments, which may impact revenue and sales volume.				1. Identify suppliers vulnerable to high climate risks and implement climate-adaptive production and sales models, deepening cooperation and promoting the formation of sustainable value chains. 2. Establish annual pre-purchase volume procurement intent contracts. 3. Develop alternative raw materials for selection.
		3. Transition Risks	Regulations /policies: Increased risk of power shortages and blackouts Short High To cope with power shortages and blackouts affecting plant production mechanisms, additional expenditures will be needed for the installation of renewable energy devices and the purchase of renewable energy certificates as auxiliary systems.				1. Invest in green energy equipment and use green products. 2. Find suitable renewable energy and energy storage system planning for use.
		4. Transition Risks	Technology : Cost expenditure s for low-carbon technology transformat ion in operations	Mid	Mid	To reduce the carbon emissions of each plant's operations or to increase production efficiency to meet the low-carbon product consumption demand, costs are incurred for purchasing high-energy-efficiency production equipment and expenses required for transitioning to low-carbon operations.	1. Promote ISO 14064-1 category 1-3 inventory and third-party verification. 2. Actively seek new suppliers with high energy efficiency production equipment.

						Implementation		Difference
								between the
Y	N					Summary
								practices of the
								Company and
								Sustainable
								Development Best
								Practice Principles
								for TWSE/TPEx
								Listed Companies
								and the reasons
		5. Transition Risks	Technology : Low-carbo n alternatives to existing products Long Low			The emergence of low-carbon products or processing technologies replacing current market offerings will have a significant impact on the Company's current product sales and revenues.	Develop and invest in low-carbon products and processing technologies, and begin market deployment.
		6. Transition Risks	Reputation policy: Increased negative evaluations from stakeholder s	Mid	Low	Failure to effectively implement climate change mitigation measures will result in stakeholders losing confidence and support for the Company, generating many negative reviews and causing potential intangible losses.	Through institutionalized management models, raise internal managers and employees' attention to climate change-related issues, disclose relevant information actively, and enhance the Company's image.

			Implementation	Implementation	Implementation	Implementation		Difference
								between the
Y	N		Summary
								practices of the
								Company and
								Sustainable
								Development Best
								Practice Principles
								for TWSE/TPEx
								Listed Companies
								and the reasons
		7. Physical Risks	Immediate extreme climate: Increased occurrences of heavy rain events Short High Increased occurrences of heavy rain and increased rainfall may cause: 1. Factory flooding, raw material or product damage, resulting in asset losses and increased re-manufacturing costs. 2.Supply chain disruptions due to extreme heavy rainfall, leading to raw material supply chain interruptions and delayed deliveries. 3. Heavy rain may obstruct employees' commute, causing staff shortages and work stoppage losses.				1. Establish an AI water information system and develop production response measures based on reservoir rainfall. 2. Promote ISO 46001 water resource efficiency management system. 3. Improve the wastewater recycling system and strengthen operation management to increase the amount of recycled water. 4. Assess the risks associated with production sites, storage modes, and suppliers prone to flooding or typhoon damage, and carefully analyze related insurance planning and diversified procurement strategies to reduce the impact of disasters.
		8. Physical Risks	Immediate extreme climate: Increased frequency and severity of strong typhoons	Short	High	Increased frequency and severity of strong typhoons will result in the following impacts: 1. Factories may face strong winds, causing damage to buildings, raw materials, products, and production equipment, resulting in asset losses and increased maintenance costs. 2. Strong typhoons may damage power systems, causing regional blackouts and disrupting production operations. 3. Strong typhoons may disrupt the supply chain, leading to raw material delivery interruptions orqualitydeclines.	1. Increase flood control and drainage facilities. 2. Assess the risks associated with production sites, storage modes, and suppliers prone to flooding or typhoon damage, and carefully analyze related insurance planning and diversified procurement strategies to reduce the impact of disasters. 3. Assess and analyze the addition of power backup storage systems or other power supply models.

						Implementation		Difference
								between the
Y	N					Summary
								practices of the
								Company and
								Sustainable
								Development Best
								Practice Principles
								for TWSE/TPEx
								Listed Companies
								and the reasons
		9. Physical Risks	Immediate extreme climate: Increased occurrences of extremely low-temper ature anomalies Mid Low			Sudden temperature drops due to cold air being brought into mid-latitude regions by polar vortexes may cause: 1. Supply chain operation disruptions or inefficiencies. 2. Raw materials or products deteriorating or being damaged due to extreme temperature changes, leading to increased loss costs and additional maintenance expenses. 3. A significant increase in the time and cost of thermal energysupply.	Systematically monitor the production conditions, supplier delivery status, and shipping logistics routes that may be affected by polar vortex-induced low temperatures for quick response and preparation.
		10. Physical Risks	Long-term climate change: Sea level rise	Long	Low	Financial losses caused by increased flooding potential due to sea-level rise affecting factory locations or supplier operating areas.	1. Assess and adjust inventory storage locations or relocate premises based on sea-level rise risk in operational areas. 2. In the future, when selecting operational or storage locations, conduct sea-level rise risk assessments to minimize the possibility of submersion. 3. Elevate equipment foundations. 4. Increase flood control and drainage facilities.

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Implementation Difference
between the
practices of the
Company and
Sustainable
Items
Y N Summary Development Best
Practice Principles
for TWSE/TPEx
Listed Companies
and the reasons
1. Evaluate the purchase of energy-saving
Global climate change-induced increases in the
equipment and plan energy-saving programs
duration of drought seasons and the persistence
in the production and office areas to
Long-term of extreme high temperatures will have the
effectively increase energy use efficiency
climate following impacts: and reduce unnecessary electricity
1. Continuous extreme high temperatures will
change: consumption.
lead to increased electricity consumption and
Rising 2. Use environmentally friendly insulation
higher failure rates due to heat dissipation
average issues, resulting in higher electricity and coatings to reduce VA gas emissions and
save on air conditioning.
temperature maintenance costs.
3. Change the frequency control of cooling
s 2. Frequent use of air conditioning equipment
water towers and strengthen insulation and
consumes more electricity, leading to
cooling measures for pipelines and
increased electricity costs.
equipment.
Resources: 1. Facing a shortage of water or no water 1. Improve the efficient use and reduction of
Reducing available. steam in process equipment.
2. Plan investment in wastewater recycling
water 2. Annual water consumption reaching over
and reuse projects.
consumptio 13,500 tons, causing increased capital
3. Continuously develop various water
n and usage expenditures and operating costs.
reduction plans.
1. Recycle and reuse organic solvents such as
1. Recycling and reusing raw materials to reduce
Resources: acetone.
operating costs.
Recycling 2. Plan improvements for the recycling of
2. Recycling and reusing packaging materials to
and reusing packaging materials used in upstream and
reduce operating costs.
downstream supply chains.
Market:
Understand
Continuously track relevant regulations and
ing carbon Increased sales and operating costs
seek trading platforms and methods.
trading
market
Long Mid
11. Physical Risks
Short Mid
Efficiency
12. Resource
Short Mid
Efficiency
13. Resource
Md Mid
Source
14. Energy
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						Implementation		Difference
								between the
Y	N					Summary
								practices of the
								Company and
								Sustainable
								Development Best
								Practice Principles
								for TWSE/TPEx
								Listed Companies
								and the reasons
		15. Energy Source	Energy sources: Using low-carbon energy Mid Mid			Under the requirements of international and national carbon-related regulations and policies, low carbon will become a future issue for enterprises and derive related tax laws and penalties.	Develop alternative low-carbon energy and renewable energy plans within 3-5 years.
		16. Energy Source	Technology : Adopting new process technologie s Long Mid			Investing in operational cost improvements for existing production technology and process equipment, increasing production efficiency, and adding product value.	1. Actively improve process efficiency to reduce carbon emission rates. 2. Evaluate investments in high-efficiency production equipment. 3. Green procurement related to obtaining green energy label equipment.
		17. Energy Source	Energy sources: Adopting incentive policies Mid Mid			Choosing renewable energy is a government policy to cope with the future domestic electricity shortage, leading to a regular state of electricity rationing or stopping.	Comply with government-issued renewable energy incentive regulations and plan corresponding measures.
		18. Products/Services	Products: Research and innovation in developing new products	Long	Mid	In addition to price and quality competition for future products, low-energy consumption and green products will also be one of the customers' options.	Expand into new markets and transform industries to develop low-energy consumption products.

						Implementation		Difference
								between the
Y	N					Summary
								practices of the
								Company and
								Sustainable
								Development Best
								Practice Principles
								for TWSE/TPEx
								Listed Companies
								and the reasons
		19. Products/Services	Market: Shifts in consumer preferences Long Mid			Green and eco-friendly products will be the main consideration for consumers when making purchases in the future.	Develop green and environmentally friendly new materials.
		20. Resilience	Energy sources: Adopting energy-savi ng measures Long Mid			From product research and development, factors such as low-energy and low-carbon production processes, storage, transportation, usage, and disposal must be considered.	1. Implement localization in procurement and green procurement assessment criteria. 2. Develop key green process operations.
		21. Resilience	Energy sources: Energy substitution and diversificati on	Loing	Mid	Various green energy investment plans and evaluation criteria are being developed within the factory.	Actively seek suitable sites for investing in green energy development projects.

Items			Implementation	Difference
				between the
	Y	N	Summary
				practices of the
				Company and
				Sustainable
				Development Best
				Practice Principles
				for TWSE/TPEx
				Listed Companies
				and the reasons
(4) Does the Company take statistics on greenhouse gas emissions, water consumption, and total waste weight in the past two fiscal years, and stipulate policies for energy conservation and carbon reduction, greenhouse gas reduction, water conservation, or other waste management?	V		The Company believes that the drastic climate changes and the increased probability of extreme weather events caused by climate change have a significant impact on its operations. In recent years, the Headway Group has actively reduced the total amount of greenhouse gases generated during the production process, developed related energy-saving and carbon reduction improvements, and actively evaluated and selected various renewable energy schemes. 1. To adapt to the financial impacts and other risks and opportunities arising from climate change, we identify risks and opportunities based on the recommendations of the Financial Stability Board (FSB) Task Force on Climate-related Financial Disclosures (TCFD). This issue has been identified as a major topic for the Company in 2022: Financial impacts and other risks and opportunities arising from climate change (GRI 201). We evaluate the potential financial impacts and set related management objectives based on the identification results. The statistics of greenhouse gas emissions, water consumption, and total waste weight in the last two years, as well as the intensity and policies for greenhouse gas reduction, water reduction, or other waste management, are disclosed in the annual sustainability report. The data covers the scope of the Company's Plant 1 and Plant 2. (1) greenhouse gas Greenhouse Gas InventoryData Unit: Metric Tons CO2e/Year 2020 (Unverified) 2021 (Unverified) 2022 (Expected external verification in May2023) Category1 1,056.739 1,023.924 878.9214 Category2 1,746.153 1,531.865 1,351.4459 Total 2,802.892 2,555.789 2,230.3673 Revenue(NTD in Million) 716 758 784 Emission Intensity (Metric Tons CO2e/ million) 3.91 3.37 2.84	No significant differences.

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Implementation Difference
between the
practices of the
Company and
Sustainable
Items
Y N Summary Development Best
Practice Principles
for TWSE/TPEx
Listed Companies
and the reasons
(2) Water Usage Unit: Million Liters
Water
Year Water Intake Water Discharge
Consumption
2020 11.596 9.277 2.319
Plant 1 2021 11.739 9.391 2.348
2022 10.505 8.404 2.101
2020 1.455 1.164 0.291
Plant 2 2021 1.607 1.285 0.322
2022 1.582 1.266 0.316
2020 13.051 10.441 2.610
Total 2021 13.346 10.676 2.670
2022 12.087 9.67 2.417
(3) Waste: Unit: metric ton
Category\Year 2020 2021 2022
Hazardous waste 6.68 13.07 86.69
Plant 1
Non-hazardous waste 340.94 388.51 480.23
Hazardous waste 0 0 0
Plant 2
Non-hazardous waste 11.75 13.91 12.73
Hazardous waste 6.68 13.07 86.69
Total
Non-hazardous waste 347.62 401.58 492.96
The relevant evaluation results and corresponding measures are all disclosed in the sustainability report of the corresponding
year.
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Items			Implementation Difference between the practices of the Company and Sustainable Development Best Practice Principles for TWSE/TPEx Listed Companies and the reasons Summary	Implementation Difference between the practices of the Company and Sustainable Development Best Practice Principles for TWSE/TPEx Listed Companies and the reasons Summary
	Y	N
4. Social issues (1) Does the Company stipulate relevant management policies and procedures in accordance with relevant laws and the International Bill of Human Rights?	V		1. The Company upholds corporate social responsibility to safeguard the basic human rights of employees and stakeholders, supports and voluntarily complies with the Universal Declaration of Human Rights, and formulates the Company's human rights policy based on the guiding principles of the aforementioned norms. The human rights policy that the Company is concerned with and the policy was approved by the board of directors on May 12, 2022, according to the Company's operating projects and characteristics. 2. In order to implement the human rights policy, the Company regularly and irregularly conducts human rights training. Through various types of company meetings, websites, and training courses, the Company provides human rights policy promotion and human rights education training to all employees. In 2022, the Company conducted relevant human rights policy video promotion for all employees. 3. Information regarding relevant human rights concerns and practices can be found on the Company's website. No significant differences.
(2) Does the Company stipulate and implement reasonable employee welfare measures (including remuneration, vacation and leave, and other relevant benefits, etc.), and appropriately share the results of operating performance in the form of employee remuneration and wage?	V		1. The Company has established work rules and related personnel management regulations, which cover the basic wages, working hours, leave, retirement pension benefits, labor insurance and occupational accident compensation for the Company's hired workers, all of which comply with the relevant provisions of the Labor Standards Act. The Company also has a welfare committee for employees to handle various welfare matters. Please refer to the Company's sustainability report for more information. 2. According to the Company's Articles of Incorporation, if the Company makes a profit in the fiscal year, it shall allocate 5% to 8% of the annual profit as employee compensation, appropriately reflecting the Company's operating performance on employee salaries.	No significant differences.

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Implementation Difference
between the
practices of the
Company and
Sustainable
Items
Y N Summary Development Best
Practice Principles
for TWSE/TPEx
Listed Companies
and the reasons
(3) Does the Company V 1. The measures taken by our company to protect employees' working environment and personal safety, as well as their No significant
provide employees implementation status, are as follows: differences.
with a safe and
healthy working
In order to implement safety and health management and comply with legal requirements, the Company has
environment, and established the "Occupational Safety and Health Management Procedures" and dispatched personnel from
regular safety and Safety the ESH Center to conduct inspections at various units. We also require each unit to establish internal safety
health education and management procedures and educate personnel at all levels on safety behavior and observation procedures.
programs? Health We are fully committed to promoting a safety culture and providing a continuous improvement mechanism
Check to enhance safety and health performance. In addition, to control accidents, we have established regulations
System such as the "Disaster Response Management Procedures" and "Safety and Health Work Guidelines" and
conduct regular drills to familiarize ourselves with emergency procedures to reduce the spread of disasters
and minimize personnel and equipment losses in the event of an accident.
Safety
The Company places great emphasis on the safety and health of both employees and contractors. We have
manag established the "Contracting Operation Code" and other regulations to ensure that the safety management of
ement
for contractors' workers is subject to the same standards as our employees. We strictly enforce these standards
and treat incidents of harm to contractors' workers the same as those to our employees, including
contrac
investigating, implementing improvement measures, recording, and tracking.
tors
Equip To ensure the integrity of the equipment and its operation, the Company has established equipment
ment management regulations to implement source management of the equipment. Based on the content and
Safety operating conditions of the equipment, maintenance and repair systems are planned for the factory. For more
Manag dangerous equipment, more detailed inspections are conducted to ensure safe operation. During use,
ement operators are required to conduct self-inspections, focus inspections, and operation checkpoints.
The Company has established a "Disaster Response Management Procedures " and organized various
Emerge emergency drills to enhance its accident response and disaster prevention capabilities. In 2022, one disaster
ncy prevention and rescue exercise was conducted, and two disaster prevention and rescue exercises were
Respon conducted in coordination with the fire department.
se and In addition to complying with fire regulations and implementing regular inspections and declaration
Safety procedures for various fire safety equipment, the Company has also established related regulations such as
Drills the "Equipment Management Guidelines" and "Annual Automatic Inspection Plan" to ensure that all fire
equipment is in a ready-to-use state through regular inspections.
Other
Other safety management measures include the management of equipment components and the
safety
implementation of safety and health management for the use of chemicals.
manag
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Implementation Difference
between the
practices of the
Company and
Sustainable
Items
Y N Summary Development Best
Practice Principles
for TWSE/TPEx
Listed Companies
and the reasons
ement
2. In view of the importance of workplace safety and health to business operations, the Company established the ESH Center
in 2015 to be responsible for the Company's safety and environmental work. The Center supervises the improvement of the
operating environment, equipment, and process safety of the Company, and ensures that all safety management systems are
implemented in the work, eliminating unsafe working conditions and becoming the foundation of the Company's future
safety management system. In addition to occupational safety and health, the Company also attaches great importance to
employee health management and conducts regular physical health checks in accordance with legal requirements.
3. To reduce risks in the plant, the Company not only imposes self-requirements but also includes suppliers and contractors in
its management.
4. The ESH Center conducts a monthly 6S inspection, tracks and manages the list of deficiencies and suggestions found
during inspections, and conducts an annual environmental audit, reporting the results to senior management at the monthly
production and sales meetings.
5. The Company has established safety and health work guidelines, placed them on the cloud for employees to follow, and
conducted risk assessments before process operations to ensure that equipment and processes comply with safety
regulations. The Company has also established a disaster response management procedure to regulate the processing flow
and post-incident analysis and improvement. Regular drills are conducted each year to prevent disasters and create a safe
and healthy workplace.
6. Occupational safety and health education and training in the past three years:
Number of
Courses Date
participants
Toxic chemical leakage rescue drill 2020/06/18 67
Hazard general education training 2020/06/20 54
Firefighting training 2020/06/20 62
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Implementation Difference
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practices of the
Company and
Sustainable
Items
Y N Summary Development Best
Practice Principles
for TWSE/TPEx
Listed Companies
and the reasons
Toxic chemical leakage rescue drill 2020/12/25 54
Firefighting training 2020/12/26 54
General safety education training 2020/06/18 71
Introduction of labeling and general rules for
2021/10/23 27
hazardous chemicals
Toxic chemical and air pollution leakage rescue drill 2021/12/24 59
General safety education training 2021/10/23 27
Firefighting training 2021/12/25 54
Introduction of labeling and general rules for
2022/06/23 58
hazardous chemicals
General occupational health and safety education 2022/06/23 77
Firefighting training 2022/06/24 65
Introduction of toxic and concerning chemicals 2022/06/24 51
Explanation and drill on toxic substance and air 2022/12/23 50
Firefighting training 2022/12/24 61
7. The Company regularly arranges health checkups for all employees and manages them based on the classification of health
check reports.
Results of Inspection Number of Number of Number of Number of Number of
Inspected Level 1 Level 2 Level 3 Level 4
Inspection Item Personnel Management Management Management Management
DMF 77 59 17 1 0
Special Operation Inspection
TDI 77 70 7 0 0
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Implementation Difference
between the
practices of the
Company and
Sustainable
Items
Y N Summary Development Best
Practice Principles
for TWSE/TPEx
Listed Companies
and the reasons
8. The Company cooperates with health checks and health lectures, and sets up blood pressure machines in each factory. In
addition, to prevent sudden events in the factory, an AED automatic external defibrillator is installed in the guard room, and
CPR and first aid training courses are regularly held.
9. Number, headcount, and ratio of work-related injuries among employees:
Item 2020 2021 2022
Absenteeism rate (AR) 1.27% 1.94% 1.43%
Occupational injury death rate 0 0 0
Occupational disease rate (ODR) 0 0 0
Severe occupational injury incidence 0 0 0
ecordable occupational injury 2.17 3.06 0.82
Lost-day rate (LDR) 7.61 15.68 1.64
(4) Does the Company V 1. The Company's training system can be divided into three categories, including training for new hires, on-the-job training, No significant
establish effective and management training. By categorizing the training in this way, we aim to systematically provide training on the differences.
career professional skills and expertise required for various positions and job levels. In addition, we offer diverse learning channels
development and development resources based on individual job requirements, performance evaluations, and career development needs.
training programs 2. Performance of Education and Training in 2022:
for employees? Total number of participants (people) 636 Training categories Hours Number of participants
Total training budget (NTD) 381,064 Professional on-the-job training 428 139
Average training cost per person (NTD) 3,123 Management skills training 12 4
Total training hours (hours) 2,049 Legal environmental and safety training 1,609 493
Average training hours per person (hours) 16.8
(5) With regard to V 1. Customer Privacy No significant
customer health Headway values the protection of customer privacy and strictly maintains customer confidentiality. Adhering to the differences.
and safety, principle of integrity is our commitment to customers. Our company has established the "Code of Ethical Conduct for
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				and the reasons

customer privacy, marketing and labeling of products and services, does the Company comply with relevant laws, regulations and international standards, and stipulate relevant consumer protection policies and complaint procedures?			Employees" as a guide for employees to conduct company business activities, enhance corporate image, and ensure sustainable management. (1) Employees should conduct all matters with integrity and ethics, and faithfully record all transactions. When carrying out tasks, they must ensure the confidentiality of commercial information and maintain complete commercial and operational records. They must also respect the business assets and intellectual property of the Company, customers, and partners. (2) Unauthorized disclosure of confidential information is prohibited, and it is strictly forbidden to use confidential or insider information to seek personal benefits, favors, or harm others. (3) Employees should treat the information of the Company's sales customers fairly and have a duty of confidentiality, except for authorized disclosure or legal requirements. All undisclosed information that may be used or leaked by competitors to cause damage to the Company or customers should be kept confidential. 2. Customer Complaint Handling Procedure We strengthen the emergency response capability of business personnel, handle customer complaints and product abnormalities, develop effective customer complaint handling methods, enhance customer satisfaction, and thus shape a good corporate image. (1) Explanation of the customer complaint handling procedure: a. When receiving customer complaints and quality abnormalities, we follow the customer complaint handling procedures established based on ISO9001 to ensure fair and efficient response. b. For the problems reflected by customers, after determining the root cause, the Company will discuss with relevant departments in accordance with the corrective action procedures established by ISO9001 to efficiently identify the problem points and countermeasures, in order to prevent similar problems from occurring again. c. For the valuable opinions provided by customers, the Company will make every effort to improve products and services. At the same time, we will humbly review customer dissatisfaction with our company, actively seek countermeasures, and turn customer dissatisfaction into satisfaction. (2) Customer satisfaction survey: Our company's business personnel should conduct a customer satisfaction survey for customers who had transactions with us in the previous year, and conduct a customer satisfaction survey once a year. The survey method is to ask customers to fill out a "Customer Satisfaction Survey Form" and record the number of satisfied and dissatisfied cases. If customers express dissatisfaction, business personnel should immediately report it to their superiors and follow up on the subsequent handling. In 2022, the overall customer satisfaction rate reached over 80%.

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Implementation Difference
between the
practices of the
Company and
Sustainable
Items
Y N Summary Development Best
Practice Principles
for TWSE/TPEx
Listed Companies
and the reasons
(6) Does the Company V 1. Headway regards suppliers as partners and is committed to guiding long-term cooperation with them, while continuously No significant
stipulate supplier cultivating stable and long-term cooperative relationships to jointly promote corporate social responsibility. In terms of differences.
management supplier corporate social responsibility management, Headway requires long-term raw material suppliers to sign a "Supplier
policies that Commitment Letter", mainly requiring them to comply with four aspects: labor rights, labor safety and health, environment,
require suppliers and ethical norms.
to comply with (1) Commit to complying with legal provisions related to environmental protection, labor rights, human rights, and
relevant occupational health and safety.
regulations (2) Ensure that products delivered comply with environmental protection regulations in the place of production and
regarding guarantee that the products do not contain internationally prohibited substances harmful to the environment.
environmental (3) Commit to complying with green environmental protection standards.
protection, (4) The signing of the "Supplier Commitment Letter" is included as one of the evaluation items for suppliers, and it is also
occupational included in the new supplier selection criteria.
safety and health, 2. Raw Material Supplier Management:
or labor human Supplier Evaluation: The Company conducts evaluations on raw material suppliers in June and December each year, based
rights? If so, what on quality, delivery, service, and whether they have obtained ISO 14001 certification. The Company will consider the
is the result of evaluation results as a reference for future supplier management and improvement, and work together with suppliers for
implementation? mutual growth. Considering the impact of suppliers on the environment and society, starting from 2022, workplace safety
and environmental protection will be added as evaluation criteria for suppliers. If a supplier's score is unsatisfactory or a
major accident occurs that affects the Company's reputation, workplace safety, product quality, production operation, etc.,
the supplier will be deemed unqualified and transactions will be suspended.
3. Supplier evaluation
Year 2020 2021 2022
June December June December June December
Evaluated
137 137 137 137 127 125
Suppliers
Qualifacation
99% 98% 99% 98% 100% 100%
Rate
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Implementation Difference
between the
practices of the
Company and
Sustainable
Items
Y N Summary Development Best
Practice Principles
for TWSE/TPEx
Listed Companies
and the reasons
4. Evaluation of new engineering contractors in 2021:The management of construction contractors is based on local
contractors, and the construction process relies on on-site personnel supervision and management. In addition to the
construction itself, environmental hygiene and safety, occupational safety, human rights, and labor safety issues must be
implemented.
5. The items for construction performance evaluation are based on ESG criteria, and include:
Material/Constructi Delivery/Co Competitiv
nstruction e Pricing Professionalism (S) Service (E)
on Quality (G)
Schedule (G) (G)
Professional Skills Performance During
Workmanship, Construction
Construction Coordination/Performance
Scheduling Ability in Safety Management
Planning Capability (Contracting Safety
(Contracting Safety and Health Control
and Health Regulations, Site
Commitment, Managers,
Environmental and Environmental
Safety Measures) Maintenance)
20% 20% 10% 20% 30%
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Implementation Difference
between the
practices of the
Company and
Sustainable
Items
Y N Summary Development Best
Practice Principles
for TWSE/TPEx
Listed Companies
and the reasons
5. Does the Company V 1. The Company follows the guidelines of the Global Reporting Initiative (GRI) and publishes an ESG Sustainability Report No significant
take reference to based on the GRI Standards and the "Rules Governing the Preparation and Filing of Sustainability Reports by TWSE Listed differences.
the related Companies "
internationally 2. As the chemical industry is highly focused on four key EHS (Environment, Health, and Safety) issues: energy, water
accepted standards resources, waste, and occupational health and safety, the Company commissioned Deloitte Certified Public Accountants to
or guidelines to perform a limited assurance engagement in accordance with the Standards on Assurance Engagement No.1 "Assurance
prepare corporate Engagements Other than Audits or Reviews of Historical Financial Information " issued by the Accounting Research and
social Development Foundation. This was done to ensure the quality of the information presented in this report complies with
responsibility regulatory requirements. The ESG Sustainability Report for the year 2022 is scheduled to undergo an external assurance
reports and other engagement by certified public accountants in September 2023.
reports to disclose
the Company’s
non-financial
information? Do
such reports as
mentioned above
obtain the
certification or
verification of the
third-party
verification unit?
6. If the Company stipulates its own sustainable development guidelines based on the “Sustainable Development Best Practice Principles for TWSE/TPEx Listed Companies”,
please specify the difference between the Company’s actual practices and the requirements of established regulations:
The Company has implemented the "Sustainable Development Best Practice Principles for TWSE/TPEx Listed Companies" and has not encountered any deviations
from the guidelines to date.
7. Other supporting information for further understanding of the implementation of corporate social responsibility:
1. The Company has established a friendly relationship of coexistence and mutual prosperity with the local community. Over the years, it has actively engaged in
neighborhood cooperation, provided construction subsidies, supported education and culture, assisted in times of emergency, and participated in environmental adoption
and maintenance initiatives.
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Items	Implementation Difference between the practices of the Company and Sustainable Development Best Practice Principles for TWSE/TPEx Listed Companies and the reasons Y N Summary
2. In addition to regular testing and reporting of air pollutants, the Company has implemented reduction plans to effectively minimize air pollution. Measures include switching to natural gas as a fuel source to reduce particulate matter, sulfur oxides (SOx), and nitrogen oxides (NOx) emissions. The Company aims to improve air quality by upgrading its pollution control equipment to achieve a 90% efficiency rate. 3. To conserve water resources, the Company recycles and reuses the discharged water from its main reverse osmosis (RO) pure water equipment, promoting water conservation and reducing wastage. 4. The Company respects human rights and ensures gender equality among its employees, in compliance with labor laws. It also provides diverse welfare measures, including health care support, to its employees. 5. The Company offers various learning channels and development resources to assist employees in enhancing their professional capabilities. The total training hours for the entire company amount to 2,049 hours.

Items

Implementation
Difference
between the
practices of the
Company and
Sustainable
Development Best
Practice Principles
for TWSE/TPEx
Listed Companies
and the reasons
Y
N
Summary

2. In addition to regular testing and reporting of air pollutants, the Company has implemented reduction plans to effectively minimize air pollution. Measures include
switching to natural gas as a fuel source to reduce particulate matter, sulfur oxides (SOx), and nitrogen oxides (NOx) emissions. The Company aims to improve air
quality by upgrading its pollution control equipment to achieve a 90% efficiency rate.
3. To conserve water resources, the Company recycles and reuses the discharged water from its main reverse osmosis (RO) pure water equipment, promoting water
conservation and reducing wastage.
4. The Company respects human rights and ensures gender equality among its employees, in compliance with labor laws. It also provides diverse welfare measures,
including health care support, to its employees.
5. The Company offers various learning channels and development resources to assist employees in enhancing their professional capabilities. The total training hours for the
entire company amount to 2,049 hours.

3.4.6 Difference between the practices of the Company and Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies and the reasons:

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Difference between the
Implementation practices of the Company and
Ethical Corporate Management
Evaluation Items
Best Practice Principles for
Y N Summary TWSE/TPEx Listed Companies
and the reasons
1. Stipulation of ethical corporate
management policies and plans
(1) Does the Company stipulate the V (1) The Company has established the "Code of Conduct and Business (1) No significant
ethical corporate management Practices" to comply with the Company Act, Securities and differences.
policy approved by the board of Exchange Act, Business Entity Accounting Act, Political
directors, and clearly indicate the Donations Act, Anti-Corruption Act, Government Procurement
ethical operation policy and Act, Act on Recusal of Public Servants Due to Conflicts of
practice in regulations and external Interest, relevant regulations for TWSE/TPEx listed companies,
documents, and the commitment of and other applicable laws and regulations related to business
the board of directors and senior conduct. These serve as the fundamental basis for implementing
management level to actively integrity management.
implement the operating policy?
(2) Does the Company stipulate a risk V (2) The Company has established the "Code of Conduct and Business (2) No significant
assessment mechanism for Practices" and is gradually implementing it. New employees and differences.
unethical conduct, regularly existing staff receive training on the Company's integrity
analyze and evaluate business requirements and code of conduct. Preventive measures are taken,
activities with a higher risk of including regular education and training, implementation of
unethical conduct in the business internal control systems, and encouragement for internal and
scope, and stipulate plans to external individuals to report any dishonest or improper behavior.
prevent unethical conduct, which at
least covers the regulations
specified in Paragraph 2 of Article
7 of Ethical Corporate
Management Best Practice
Principles for TWSE/TPEx Listed
Companies.
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Difference between the
Implementation practices of the Company and
Ethical Corporate Management
Evaluation Items
Best Practice Principles for
Y N Summary TWSE/TPEx Listed Companies
and the reasons
(3) Does the Company clearly define V (3) The Company has established the "Code of Conduct and Business (3) No significant
operating procedures, guidelines Practices" to regulate specific practices and preventive measures differences.
for conduct, penalty and complaint against dishonest behavior. This includes operating procedures,
systems for violations in the behavioral guidelines, establishment of promotion, disciplinary,
regulations for preventing unethical complaint, and disciplinary action systems. These regulations
conduct, fully implement such define the requirements and prohibitions for personnel in carrying
plans, and regularly review such out their duties, strictly prohibiting the provision or acceptance of
plans? improper benefits. The Company will continue to review and
revise these guidelines as necessary.
2. Implementation of ethical corporate
management
(1) Does the Company evaluate the V (1) Upholding the principle of integrity in business, the Company has (1) No significant
integrity records of its counterparties established internal control procedures for sales and collections, differences.
and clearly and specifically specify procurement and payments, conducting its commercial activities
the clauses of ethical conduct in the in a fair and transparent manner.
contracts it signs with
counterparties?
(2) Does the Company establish a V (2) The corporate governance officer of the Company is responsible (2) No significant
specific unit under the board of for promoting integrity in business. This includes revising, differences.
directors to promote ethical implementing, interpreting, consulting, and documenting policies
corporate management, regularly (at and prevention plans for integrity in business, supervising their
least once a year) report to the board execution, and regularly reporting to the Board of Directors.
of directors of the policies or plans I. The duties are as follows:
for preventing unethical conduct, a. Assist in integrating integrity and ethical values into the
and supervise the implementation? Company's business strategy, and establish measures to ensure
integrity in business in accordance with laws and regulations.
b. Develop plans to prevent dishonest behavior and establish
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Difference between the
Implementation practices of the Company and
Ethical Corporate Management
Evaluation Items
Best Practice Principles for
Y N Summary TWSE/TPEx Listed Companies
and the reasons
standard operating procedures and behavioral guidelines within
these plans.
c. Plan the organization, responsibilities, and job description
internally, and for high-risk business activities, install
mechanisms for mutual monitoring and balancing.
d. Promote and coordinate the propagation and training of the
integrity policy.
e. Plan a whistleblowing system to ensure its effectiveness.
f. Assist the Board of Directors and management in checking and
assessing whether the preventive measures established for
promoting integrity in business are effectively operating, and
regularly assess the compliance of related business processes
and compile reports.
II. The promotion of integrity in business in 2021: The
responsible unit reported to the Board of Directors on
November 10, 2022.
III. The work plan for 2022:
a. Revise the Company's “Ethical Corporate Management
Principles ", " Code of Conduct and Business Practices ",
"Code of Ethical Conduct for Directors and Managers", " Code
of Ethical Conduct for Employees ", and "Reporting Method
for Violation of Ethical Corporate Management Principles " for
practical implementation of integrity in business policies.
b. Arrange education, training, and advocacy on topics related to
integrity for directors, managers, and employees.
c. Regularly review and communicate with auditors to confirm
whether there has been any dishonest behavior in the Company.
(3) Does the Company stipulate policies (3) Before conducting any business transactions, the Company fully (3) No significant
V
to prevent conflicts of interest, considers and investigates the legality of agents, suppliers, differences.
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Difference between the
Implementation practices of the Company and
Ethical Corporate Management
Evaluation Items
Best Practice Principles for
Y N Summary TWSE/TPEx Listed Companies
and the reasons
provide appropriate channels for customers, or other business counterparts and whether they have a
presentation, and implement these record of dishonest behavior, avoiding transactions with those
measures fully? who have such records. Contracts signed with others include
content adhering to integrity in business policies and stipulate that
contracts can be terminated or dissolved at any time if the
counterparty is involved in dishonest behavior.
(4) Does the Company establish an V (4) The Company has established an accounting system and internal (4) No significant
effective accounting and internal control system according to the Securities Exchange Act, differences.
control system for the effectively auditing and verifying related operations to implement
implementation of ethical corporate integrity management. The auditing unit conducts audits based on
management, have the internal audit the results of risk assessment and the annual audit plan, and
unit stipulate relevant audit plans submits audit reports to the Chairman and Independent Directors.
based on the results of the
assessment of the risk of unethical
conduct, and examine the plans for
preventing unethical conduct
accordingly or appoint the
accountants to perform such
examination?
(5) Does the Company regularly V (5) The regular training sessions held by the Company convey the (5) No significant
organize internal and external concept of integrity through various themes. differences.
education and training on ethical
corporate management?
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Difference between the
Implementation practices of the Company and
Ethical Corporate Management
Evaluation Items
Best Practice Principles for
Y N Summary TWSE/TPEx Listed Companies
and the reasons
3. The operation of the Company’s
whistleblowing system
(1) Does the Company stipulate a V (1) The Company has established a complaint channel. When a (1) No significant
specific whistleblowing and reward complaint event occurs, it is immediately forwarded to the audit differences.
system, provide a convenient for investigation. If a violation of the integrity provisions is found,
whistleblowing channel, and the management department will punish it according to relevant
designate appropriate responsible laws and regulations and the Company's work rules.
personnel for receiving the
reporting?
(2) Does the Company stipulate a V (2) The Company stipulates relevant matters in the " Ethical (2) No significant
standard operating procedure for the Corporate Management Principles ". differences.
investigation of reported matters,
subsequent measures to be taken
after the investigation and related
confidentiality mechanisms?
(3) Does the Company take measures to V (3) The Company will protect the identity of the whistleblower and (3) No significant
protect the whistleblowers from the contents of the complaint, ensuring that they will not be differences.
being improperly treated as a result subjected to improper treatment as a result of reporting.
of the whistleblowing?
4. Improvement of information V The Company has set up a website at www.headway.com.tw to No significant
disclosure disclose information related to corporate governance. The Company differences.
Does the Company disclose on its has a dedicated unit responsible for disclosing financial information
official site and MOPs the content on the Market Observation Post System, and has designated
and promotion results of its ethical spokespersons and deputy spokespersons to represent the Company's
corporate management? unified public statements.
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Difference between the
Implementation practices of the Company and
Ethical Corporate Management
Evaluation Items
Best Practice Principles for
Y N Summary TWSE/TPEx Listed Companies
and the reasons
5. If the Company has stipulated its own regulations for ethical corporate management in accordance with the Ethical Corporate Management
Best Practice Principles for TWSE/GTSM Listed Companies, please specify the difference between the implementation and the
requirements of the established regulations:
The Company has established its " Ethical Corporate Management Principles " in accordance with the " Ethical Corporate Management
Best Practice Principles for TWSE/TPEx Listed Companies ", to comply with relevant laws and regulations, rules related to listing on
TWSE/TPEx market, or other business-related laws, and to implement these effectively.
6. Other supporting information that allows further understanding to the Company’s ethical corporate management (such as the Company’s
review and amendment of the ethical corporate management, etc.):
(1) In addition to complying with legal regulations, the Company's relevant regulations and systems treat all employees equally, protecting
their rights and interests without distinction of nationality.
(2) The "Safety and Health Work Guidelines" were formulated in accordance with the Occupational Safety and Health Enforcement
Regulations to maintain employee safety and health.
(3) The Company has passed the ISO9001 quality certification and ISO 14001 management system verification, and continues to promote
improvements.
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3.4.7 Please disclose how to search the corporate governance regulations and relevant rules stipulated by the Company (if any):

The Company has established a series of management rules for investors to review, including the Articles of Incorporation, Board of Directors Meeting Rules, Remuneration Committee Organizational Regulations, Corporate Governance Best Practice Principles, Corporate Social Responsibility Best Practice Principles, Independent Director Duties Scope Rules, Code of Ethical Conduct for Directors and Managers, Director and Board Performance Evaluation Measures, Code of Ethical Conduct for Employees, Organizational Structure and Manager Appointment Methods, Shareholders' Meeting Rules, Ethical Corporate Management Principles, Code of Conduct and Business Practices, Reporting Method for Violation of Ethical Corporate Management Principles, Human Rights Policy, Organizational Regulations of the Audit Committee, Assessment Measures for Independence and Qualification of Independeit Auditors, Application for Suspension and Resumption of Trading Procedures, and Guidelines for Preventing Insider Trading. Relevant information is disclosed on the Company's website at https://www.headway.com.tw.

3.4.8 Please disclose other supporting information which allows further understanding of the implementation of the Company's corporate governance (if any): None.

3.4.9 Implementation of Internal Control System

3.4.9.1 Declaration of the International Control System

Headway Advanced Materials Inc. Declaration of the International Control System

Date: March 14, 2023 The Company inspected the 2021 internal control system autonomously with the following results:

The Company is fully aware that the Board of Directors and the management are responsible for the establishment, implementation, and maintenance of the internal control system and it has been established accordingly. The purpose of its establishment was to reasonably ensure the fulfillment of effective operation and efficiency (including profit, performance, and protection of assets safety), and the reliability, timeliness, transparency and regulatory compliance of financial reports.
The internal control system design has inherent limitations. No matter how perfect such control is, it can only provide reasonable assurance of the fulfillment of the three objectives referred to above. The effectiveness of such an internal control system could be influenced by changes of the environment and other circumstances. Therefore, the Company internal control system has been designed with a self-monitoring mechanism so that corrective action will be activated immediately upon the identification of any nonconformity.
The Company has assessed the effectiveness of the design and implementation of the internal control system in accordance with criteria provided in the “Regulations Governing the Establishment of Internal Control Systems by Public Companies” (hereinafter referred to as “the Regulations”). The criteria defined in “the Regulations” include five elements that depend on the management control process: (1) environment controls, (2) risk assessment, (3) control processes, (4) information and communications, and (5) supervision. Each of the five elements is then divided into sub-categories. Please refer to “the Regulations” for details.
The Company has implemented criteria for inspection of the internal control system referred to above to ascertain its effectiveness, design and implementation.
The Company, based on the inspection results referred to above, declared (on December 31, 2022) that the internal control system, including the supervision and management of subsidiaries, is reasonably effective and achieves the objectives of operation and efficiency, the financial report is of reliability, timeliness, transparency and regulatory compliance.
The Declaration of Internal Control System is the main content of the Company’s annual report and published prospectus. Any false statement and concealment of the published content referred to above involves liability set out in Article 20, Article 32, Article 171, and Article 174 of the Securities and Exchange Act.
The Declaration of the Internal Control System was resolved at a meeting of the Board of Directors on March 14, 2023 with with none of the 9 attending directors expressing dissenting opinions, and the remainder all affirming the contents of this Statement.

Headway Advanced Materials Inc.

Chairman: Liou, Han Yin

General Manager: Chao, Wei Chun

3.4.9.2. The internal control audit report issued by the CPA commissioned to conduct an internal control audit, if any: None.
3.4.10 Punishment of the Company or its internal personnel in accordance with the law, punishment of internal personnel by the Company for violating internal control system regulations, main deficiencies, and improvements during the recent year and up to the date of publication of this annual report: N/A.
3.4.11 Resolutions reached at a meeting of shareholders or by the Board of Directors during the recent year and up to the date of publication of this annual report:
3.4.11.1 Shareholders’ Meeting:

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Date Meeting Resolution / Implementation Status
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Date	Meeting	Resolution / Implementation Status

2022/6/9	Annual Shareholders’ Meeting (Note)	1. Ratification of 2021 Business Report and Financial Statements proposal / Implementation Status: Execution according to the resolution`。` 2. Ratification of 2022 Earnings Distribution proposal / Implementation Status: The ex-dividend record date was set for September 3, 2022, and in accordance with the shareholders' meeting resolution, the total distribution was completed on September 16, 2022 (cash distribution of 1.5 TWD per share). 3. Approval of the Amendments of Articles of Incorporation / Implementation Status: It was announced on June 9, 2022. 4. Approval of the Amendments of Procedure for Lending Funds to Others / Implementation Status: It was announced on June 9, 2022. 5. Approval of the Amendments of Endorsement and Guarantee Method / Implementation Status: It was announced on June 9, 2022. 6. Approval of the establishment of the Restricted stock Units plan in the 2022 fiscal year / Implementation Status: It was announced on June 9,2022.

Note: All members of the Board of Directors and the Audit Committee personally attended this annual shareholders' meeting

3.4.11.2 Board of Directors Meeting:

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Term Date Significant Resolutions
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Session 4 of the 17th Term	2022.03.09	1. Approval of the 2021 Business Report and Financial Statements. 2. Approval of the 2021 Earnings Distribution. 3. Apporval of the Declaration of the International Control System for the 2021 fiscal year. 4. Approval of the allocation and distribution of director and

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Term Date Significant Resolutions
employee compensation for the 2021 fiscal year.
5. Approval of the distribution of manager from the employee
compensation for the 2021 fiscal year.
6. Approval of the distribution of management performance
bonuses for the 2021 fiscal year.
7. Approval of the fund lending to third parties by subsidiary
URASIA.
8. Approval of the revision of the endorsement and guarantee for
others by the Company.
9. Approval of Amendment of the "Articles of Incorporation" of the
Company.
10. Approval of the authorization to purchase corporate bonds from
the U.S. companies.
11. Approval of Appointment of CPA firm for the year 2022.
12. Approval of the replacement of independent auditor(rotation
within the same firm).
13. Approval of the appointment of the Company's internal audit
officer, acting internal audit officer, and corporate governance
officer.
14. Approval of the implementation of the Restricted stock Units
plan in the 2022 fiscal year.
15. Approval of the convening of the 2022 annual shareholders’
aeeting.
16. Approval of the bank credit authorization case.
1. Approval of the amendment of related measures about the "
Ethical Corporate Management Principles" of the Company.
2. Approval of the establishment of Company’s Human Rights
Policy.
3. Approval of the establishment of “ Assessment Measures for
Independence and Qualification of Independeit Auditors”.
Session 5 4. Approval of the amendment of the “Corporate Governance Best
of the 17th 2022.05.12 Practice Principles”.
Term
5. Approval of the bank credit authorization case.
6. Approval of the Company's endorsement and guarantee for
others.
7. Approve the overall salary adjustment plan for the 2022 fiscal
year.
8.Approval of the earnings distribution Plan of subsidiary
URASIA.
Session 6 1. Approval of the consolidated financial statements for the second
of the 17th 2022.08.09 quarter of 2022 for the Company and its subsidiaries.
Term
2. Approval of the bank credit authorization case.
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Term Date Significant Resolutions	Term Date Significant Resolutions	Term Date Significant Resolutions
3. Approval of the amendment of the “Risk Management Policy” of the Company. 4. Approval of the amendment of the “Corporate Governance Best Practice Principles” of the Company. 5. Approval of the establishment of the " Sustainable Development Best Practice Principles" of the Company. 6. Approval of the decision on the ex-dividend record date for earnings distribution of the Company.
Session 7 of the 17th Term 2022.11.10 1. Approval of the consolidated financial statements for the third quarter of 2022 for the Company and its subsidiaries. 2. Approval of the the social welfare activity plan for the year 2023. 3. Approval of the Cancellation of Restricted Stock Units. 4. Approval of the 2023 internal audit plan. 5. Approval of the amendment of "Assessment Measures for Independence and Qualification of Independeit Auditors". 6. Approval of the establishment of the "Organizational Regulations for the Sustainability Committee". 7. Approval of the 2023 Operational Objectives.
Session 8 of the 17th Term 2023.02.14 1. Approval of the convening of the 2023 annual shareholders’ aeeting.
Session 9 of the 17th Term	2023.03.14	1. Approval of the 2022 Business Report and Financial Statements. 2. Approval of the 2022 Earnings Distribution. 3. Apporval of the Declaration of the International Control System for the 2022 fiscal year. 4. Approval of the allocation and distribution of director and employee compensation for the 2022 fiscal year. 5. Approval of the distribution of manager from the employee compensation for the 2022 fiscal year. 6. Approval of the distribution of management performance bonuses for the 2022 fiscal year. 7. Approval of the appointment of CPA firm for the year 2023 and the replacement of independent auditor(rotation within the same firm). 8. Approval of the fund lending to third parties by subsidiary URASIA. 9. Approval of the bank credit authorization case. 10. Approval of the amendment of " Board of Directors Meeting Rules ". 11. Approval of the amendment of the internal control system CA-113 regarding the management of board meeting operations. 12. Approval of the organizational restructuring proposal of the

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Term Date Significant Resolutions
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Company. 13. Approval of the amendment of " Organizational Regulations for the Sustainability Committee ". 14. Approval of the establishment of the " Intellectual Property Management Regulations ". 15. Approval of the captital reduction by returning rhare capital in cash. 16. Approval of the amendment of the reasons for convening the 2023 Annual shareholders’ Meeting.

3.4.12 Recorded or written statements of dissent made by any Director or Supervisor to important resolutions passed by the Board of Directors during the recent year and up to the date of publication of this annual report: None.
3.4.13 Summary of discharge and resignation of parties relating to the annual report (Chairman, General Manager, Chief Accountant, Financial Officer, Chief Internal Auditor and R&D Officer) in the recent year and up to the date of publication of this annual report:

Job Title	Name	Appointed Date	Dicharged Date	Reason for Discharge or Resignation
Internal Audit Officer	Cheng, Lin Feng	2018.11.01	2022.04.01	Transfer of Corporate Governance Officer

3.5. Information on CPA professional fees

Uint: NTD in Thousand

Accounting Firm	Name of CPA	Period Covered by CPA’s Audit Audit Fee	Non-audit Fee	Subtot al	Note
Deloitte & Touche (Taiwan)	Kent C. Chang	2022/01/ 01-2022/ 12/31 3,100	100	3,200	Non-auditService Details: 1.NTD 80,000 for the issuance of restricted stock units. 2.NTD 20,000 for reduction of capital (cancellation of restricted stock units).
	Gorden Chen

3.6. Replacement of CPA: None.
3.7. Information regarding the Chairman, General Manager, and Financial or Accounting Manager of the Company who has worked with the CPA firm which conducts the Audit of the Company or an affiliate of said firm in the recent year: None.
3.8. Recently, and up to the date of printing the annual report, information about changes in the transfer and pledge of share ownership by directors, supervisors, executives, and shareholders holding more than 10% of the shares.
(1) Changes in share ownership by directors, supervisors, executives, and major shareholders are as follows:

Unit:share

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2022 As of Apjril 2, 2023
Pledge Pledge
Job Title Name Shares Shares
shares shares
increase increase
increase increase
(decrease) (decrease)
(decrease) (decrease)
Chariman Liou, Han Yin - - - -
Director &
General Chao, Wei Chun 11,400 - - -
Manger
Director Lee, Hwang Pao (16,000) -
Director Chen, Yu Ting - - - -
Director Chen, Tzu Chien - - - -
Director Cheng, Chih Wen - - - -
Independent
Lee, Lin Sheng - - - -
Director
Independent
Chen, Chien Yuan - - - -
Director
Independent
Chang, Juei Fang - - - -
Director
Technology &
12,260
Production Chen, Jian Ming - - -
Section DGM (94,000)
Finance &
Administration Liao, Pei Hung 9,050
Section DGM
PU Film Dept. Wong, Cheng
Manager Shun (Note1) - - - -
PU Salse Dept. Chen, Chih Shiin
Manager (Note2) - - - -
PU Production &
Plant Affairs Dept Cheng, Su Hui 8,880 - - -
Manager
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2022 As of Apjril 2, 2023
Pledge Pledge
Job Title Name Shares Shares
shares shares
increase increase
increase increase
(decrease) (decrease)
(decrease) (decrease)
Administration
Dept. Deputy Lan, Pei Yu 4,300 - - -
Manager
Investment 8,250
Hsiao, Hsu Jung - - -
Manager (6,000)
Investment
Hsu, Chen Yu 8,100 - - -
Manager
Finance
Chang, Kuei Mei 6,700 - - -
Manager
Corporate
Cheng, Lin Feng
Governance 5,650 - - -
(Note3)
Officer
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Note 1: Resigned as manager on March 1, 2022. Note 2: Resigned as manager on April 1, 2022. Note 3: Appointed as manager on April 1, 2022.

(2) Related parties were involved in the transfer of equity: None.

(3) Related parties were involved in the pledge of equity: None.

3.9. Top 10 shareholders and their relationships:

April 2, 2023

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Name, relationship
of top 10
Shares held by Shares held in shareholders being
Shares held the related
Spouses and another person's
currently party as spouse or
Minor Children name kin within the
Name
second tier under the
Civil Code
Quantity Share Quantity Share Quantity Share Rela
Holding Holding( Holding( Name tions
(Share) (Share) (Share)
(%) %) %) hip
Jin Teng Investment Co., 6,268,937 8.92 - - - - - - -
Ltd.
Jin Teng Investment Co.,
Ltd. Representative: 205,771 0.29 44,676 0.06 6,268,937 8.92 - - -
Chen, Guan Xian
Yu Long Investment 3,849,642 5.48 - - - - - - -
Corporation
Yu Long Investment
Lee,
Corporation 1,017,920 1.45 1,348,336 1.92 3,849,642 5.48 Hwang Spous -
Representative: e
Pao
Hsieh, Mei Lan
Zheng Chen Industrial 2,943,314 4.19 - - - - - - -
Co., Ltd.
Zheng Chen Industrial
Co., Ltd. Representative: 1,037,268 1.48 6,139 0.01 3,795,262 5.40 - - -
Cheng, Chih Wen
Note
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100

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Name, relationship
of top 10
Shares held by Shares held in shareholders being
Shares held the related
Spouses and another person's
currently party as spouse or
Minor Children name kin within the
Name
second tier under the
Civil Code
Quantity Share Quantity Share Quantity Share Rela
Holding Holding( Holding( Name tions
(Share) (Share) (Share)
(%) %) %) hip
Shen Suan Investment
2,598,635 3.70 - - - - - - -
Co., Ltd.
Shen Suan Investment
Co., Ltd. Representative: 1,023,549 1.46 122,030 0.17 2,598,635 3.70 - - -
Chen, Jung Shen
Wang, Juei Lin 2,278,897 3.24 - - - - - - -
Liou, Jian
Brother
Liou, Han Yin 2,031,832 2.89 1,169,732 1.66 1,976,131 2.81 Hung -
Liou, Yan Daught
Jun er
Tongqing Investment 1,976,131 2.81 - - - - - - -
Co., Ltd.
Liou, Jian
Tongqing Investment Brother
Co., Ltd. Representative: 2,031,832 2.89 1,169,732 1.66 1,976,131 2.81 Hung -
Liou, Yan Daught
Liou, Han Yin Jun er
Liou, Yan Jun 1,779,431 2.53 - - - Liou, Han Yin Father -
Liou, Jian Hung 1,624,838 2.31 - - - - Liou, Han Yin Brother -
Lee, Hwang Pao 1,348,336 1.92 1,017,920 1.45% 3,849,642 5.48% Hsieh, Mei Lan Spouse -
Note
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3.10 The number of shares held by the Company and Company Directors, Supervisor, management personnal and the entities directly or indirectly controlled by the Company in a single company, and calculating the consolidated shareholding percentage of the above categories.

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March 31, 2023
Invested by Directors,
Supervisor, Management,
Invested by the
and enterprises controlled Combined Investment
Investment Company
by the Company directly
(Note) or indirectly
Quantity Share Quantity Share Quantity Share
(Share) Holding(%) (Share) Holding(%) (Share) Holding(%)
Headway
Polyurethane 6,808,400 50 - - 6,808,400 50
Corporation Limited
Urasia International Inc.
- 100 - - - 100
（ Panama ）
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101

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Invested by Directors,
Supervisor, Management,
Invested by the
and enterprises controlled Combined Investment
Investment Company
by the Company directly
(Note) or indirectly
Quantity Share Quantity Share Quantity Share
(Share) Holding(%) (Share) Holding(%) (Share) Holding(%)
Shanghai Huiyu
- 74 - - - 74
Construction Co., Ltd
Anhui Huiyu
Materials Technology 74 - - - 74
Co., Ltd.
Headway Advanced
Matereials(Vietnam) - 100 - - - 100
Co., Ltd.
Cheng Yu Develop
- 100 - - - 100
Co., Ltd.
Shanshui Lianmei
- 100 - - - 100
Chemical Co., LTD.
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Note: The Company's investments accounted for using the equity method.

102

4.Capital Review

4.1 Capital Shares

4.1.1 Source of capital

4.1.1.1 The formation process of share capital.

Unit: Thousand Shares; NTD in Thousand March 31, 2023

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Authorized Capital Paid-in Capital None
Issuing
Price Capital
increased
Year Month (Par in
NTD) Shares Amount Shares Amount Source of Capital assets by Others
other than
cash
1976 4 10 110 1,100 110.00 1,100.00 Increased by Cash None TaiJianShangShe No.62539
1977 9 10 150 1,500 150.00 1,500.00 Increased by Cash None 66 JianShangZi
No.148642
1979 7 10 1,050 10,500 1,050.00 10,500.00 Increased by Cash None 68 JianShangZi
No.166055
70 JianShangZi
1981 12 10 1,950 19,500 1,950.00 19,500.00 Increased by Cash None
No.219283
73 JianShangZi
1984 8 10 2,700 27,000 2,700.00 27,000.00 Increased by Cash None
No.193703
1988 3 10 4,800 48,000 4,800.00 48,000.00 Increased by Cash None Jin(77)Sheng No. 07090
1990 2 10 7,500 75,000 7,500.00 75,000.00 Increased by Cash None Jin(79)Sheng No.136849
1992 2 10 9,600 96,000 9,600.00 96,000.00 Increased by Cash None Jin(81)Sheng No.100083
1998 7 10 15,600 156,000 15,600.00 156,000.00 Merger None Jin(87)Sheng
No.087117691
Jin(88)Sheng
1999 9 10 24,200 242,000 17,750.00 177,500.00 [Increased from Retained ] None
Earnings No.088135636
Jin(89)Sheng
2000 9 10 24,200 242,000 18,389.00 183,900.00 [Increased from Retained ] None
Earnings No.089134742
Jin(90)Sheng
2001 8 10 24,200 242,000 22,300.00 223,000.00 Increased from capital surplus None No.9001301260
SFCTaiCaiZhengYiZi No.
2002 8 10 30,000 300,000 25,950.00 259,500.00 [Increased from Retained ] None
Earnings 第 0910150032
2003 8 10 36,900 369,000 31,745.00 317,450.00 [Increased from Retained ] None SFCTaiCaiZhengYiZi
Earnings No.0920135754
2004 10 10 38,100 381,000 37,200.00 372,000.00 [Increased from Retained ] None SFCTaiCaiZhengYiZi
Earnings No.0930137826
FSCJinGuanZhengYiZi
2005 8 10 46,500 465,000 40,920.00 409,200.00 [Increased from Retained ] None
Earnings No.0940127235
FSCJinGuanZhengYiZi
2008 8 10 46,500 465,000 43,125.00 431,250.00 [Increased from Retained ] None
Earnings No.0970029267
FSCJinGuanZhengYiZi
2010 8 10 60,000 600,000 47,637.50 476,375.00 [Increased from Retained ] None
Earnings No.0990030610
FSCJinGuanZhengYiZi
2011 10 10 60,000 600,000 50,495.75 504,957.50 [Increased from Retained ] None
Earnings No.1000036685
2012 9 10 60,000 600,000 53,220.66 532,206.60 [Increased from Retained ] None FSCJinGuanZhengYiZi
Earnings No.1010034626
2013 7 10 60,000 600,000 56,607.55 566,075.50 [Increased from Retained ] None FSCJinGuanZhengYiZi
Earnings No.1020029242
FSCJinGuanZhengYiZi
2014 7 10 60,000 600,000 61,376.09 613,760.99 [Increased from Retained ] None
Earnings No.1030028695
FSCJinGuanZhengYiZi
2016 5 10 60,000 600,000 69,560.09 695,600.99 Increased by Cash None
No.1051801171
FSCJinGuanZhengFaYiZi
2019 9 10 426 4,260 69,986.99 699,860.99 Restricted sotck units None
No.1080108321
FSCJinGuanZhengFaYiZi
2020 4 10 374 3,740 70,360.99 703,600.99 Restricted sotck units None
No.1080108321
2020 9 10 (13.1) (131) 70,346.99 703,469.99 Cancel Restricted sotck units None FSCJinGuanZhengFaYiZi
No.1080108321
2021 7 10 (11.7) (117) 70,335.30 703,352.99 Cancel Restricted sotck units None FSCJinGuanZhengFaYiZi
No.1080108321
FSCJinGuanZhengFaYiZi
2022 11 10 (31.97) (319.7) 70,303.33 703,033.29 Cancel Restricted sotck units None
No.1080108321
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103

4.1.1.2 Type of Share

Unit: Share

4.1.1.2 Type of Share Unit: Share	4.1.1.2 Type of Share Unit: Share	4.1.1.2 Type of Share Unit: Share	4.1.1.2 Type of Share Unit: Share	4.1.1.2 Type of Share Unit: Share
Share Type Authorized Capital Stock Note Outstanding Shares Remark Unissued Shares Total
Common Stock	70,303,329	9,696,671	80,000,000	TWSE Listed Company

4.1.2 Composition of Shareholders

April 2, 2023

4.1.2 Composition of Shareholders April 2,2023	4.1.2 Composition of Shareholders April 2,2023	4.1.2 Composition of Shareholders April 2,2023	4.1.2 Composition of Shareholders April 2,2023	4.1.2 Composition of Shareholders April 2,2023	4.1.2 Composition of Shareholders April 2,2023	4.1.2 Composition of Shareholders April 2,2023
Composition of Shareholders Quantity Government apparatus Financial organization Other Legal persons Individuals Foreign institution or foreigner Total
Number of Persons - 2 12 4,168 14 4,196
Shares - 180,300 20,115,717 49,531,563 475,749 70,303,329
%	-	0.26	28.61	70.45	0.68	100.00
Note:First listed (OTC) companies and emerging stock companies should disclose their shareholding ratio of Chinese investment; Chinese investment refers to individuals, legal entities, groups, other organizations as defined in Article 3 of the Regulations Governing the Permission of Mainland Area People to Invest in Taiwan, or companies invested by them in a third region.

4.1.3 Distribution Profile of Share Ownership

April 2, 2023

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Number of
Number of Shares Shareholding
Shareholders Ownership
Shareholders Owned ratio ( ％ )
(Shares)
1-999 1,868 73,457 0.10
1,000-5,000 1,675 3,430,419 4.88
5,001-10,000 267 2,164,085 3.08
10,001-15,000 84 1,075,531 1.53
15,001-20,000 80 1,438,367 2.05
20,001-30,000 50 1,233,572 1.75
30,001-40,000 30 1,027,072 1.46
40,001-50,000 27 1,224,690 1.74
50,001-100,000 47 3,324,067 4.73
100,001-200,000 18 2,426,714 3.45
200,001-400,000 13 3,503,783 4.98
400,001-600,000 6 2,763,527 3.93
600,001-800,000 6 4,384,258 6.24
800,001-1,000,000 5 4,419,751 6.29
>1,000,001 20 37,814,036 53.79
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104

Shareholders Ownership Number of Shareholders Number of Shares Owned (Shares) Shareholding ratio (`％`)	Shareholders Ownership Number of Shareholders Number of Shares Owned (Shares) Shareholding ratio (`％`)	Shareholders Ownership Number of Shareholders Number of Shares Owned (Shares) Shareholding ratio (`％`)	Shareholders Ownership Number of Shareholders Number of Shares Owned (Shares) Shareholding ratio (`％`)
Total	4,196	70,303,329	100.00

4.1.4 Major Shareholders

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April 2, 2023
Total shares
Quantity of shares Shareholding
owned
Major Shareholders ratio ( ％ )
(Shares)
Jin Teng Investment Co., Ltd. 6,268,937 8.92
Yu Long Investment 3,849,642 5.48
Zheng Chen Industrial Co., 2,943,314 4.19
Shen Suan Investment Co., 2,598,635 3.70
Wang, Juei Lin 2,278,897 3.24
Liou, Yan Jun 2,031,832 2.89
Tongqing Investment Co., Ltd. 1,976,131 2.81
Liou, Yan Jun 1,779,431 2.53
Liou, Jian Hung 1,624,838 2.31
Lee, Hwang Pao 1,348,336 1.92
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4.1.5 Market Price, Net Value, Earnings and Dividends per Common Share Latest two years

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As of March
Year
2021 2022 31, 2023
Item
(Note 10)
Market Highest 29.90 23.00 17.45
price per Lowest 15.85 16.20 16.30
share (Note
Average 19.51 19.17 16.85
1)
Net value Before distribution 14.93 14.33 14.45
per share
After distribution 13.43 13.73 (Note9) -
(Note 2)
Weighted Average
Earnings per 69,560,099 69,668,780 69,964,879
Outstanding Shares
share
EPS(Note3) 2.05 0.27 0.08
Cash Dividend (Note 4) 1.50 0.6 (Note9) -
Stock Earnings - - -
Divid
Dividends Captital Surplus - - -
ends
per Share
Accumulated
Undistributed - - -
Dividends (Note 5)
Investment Price / Earnings Ratio 9.52 71 -
(Note 6)
Return
Price / Dividend Ratio
Analysis 13.01 31.95 (Note9) -
(Note 7)
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105

	Cash Dividend Yield Rate (Note 8)	0.08	0.03(Note9)	-

Note 1: List the highest and lowest market prices of common stocks in each year, and calculate the average market prices for each year based on the transaction value and volume of each year. Note 2: Please fill in the list based on the number of issued shares at the end of the year and the distribution based on the resolution of the shareholders meeting in the following year.

Note 3: If retrospective adjustment is required due to circumstances such as gratuitous allotment, the earnings per share before and after adjustment should be shown.
Note 4: The profit distribution plan for the year 2022 has been approved by the Board of Directors on March 14, 2023, but it has not yet been approved by the shareholders' meeting.
Note 5: If the equity securities issuance conditions stipulate that the dividends not paid in the current year will be accumulated to the year when there is a surplus, the dividends accumulated and not paid up to the current year shall be disclosed separately.
Note 6: Price / Earnings Ratio = Average Market Price / Earnings per Share
Note 7: Price / Dividend Ratio = Average Market Price / Cash Dividends per Share
Note 8: Cash Dividend Yield Rate = Cash Dividends per Share / Average Market Price
Note 9: The profit distribution plan for the year 2022 has been approved by the Board of Directors on March 14, 2023, but it has not yet been approved by the shareholders' meeting.
Note 10: The financial information for the year ending March 31, 2023, has been reviewed by the Independent auditor.

4.1.6 The Company’s Policies regarding Dividends and Implementation Status

(1) Dividends policies

When there is a earning in the annual financial statements of the Company, the Company shall first pay taxes, offset the losses from the previous fiscal year, recognize 10% of the legal reserve, and recognize or reverse the special reserve complying with the relevant laws and regulations. The remaining earning adds accumulated undistributed earnings from the previous fiscal year shall be considered as distributable earnings. The Board of Directors shall propose a resolution for the distribution of dividends to the Shareholders' Meeting, and the dividends payable to shareholders shall be 50% to 100% of the distributable earnings.

If dividends or bonuses are to be paid in cash, the Board of Directors may be authorized to do so by a resolution passed by at least two-thirds of the directors present and with the consent of more than half of the attending directors, and shall report to the Shareholders' Meeting.

The Company's dividend distribution shall take into account the overall development needs of the Company, and the cash dividends shall not be less than 10% of the total dividends distributed.

(2) Dividend distribution proposal submitted to the shareholders’ meeting

The proposed profit distribution for the fiscal year 2022 have been approved by the board of directors on March 14, 2023. Based on the total issued shares of 70,303,329 as of the printing date of the annual report, the cash dividend is

106

calculated at NT$0.6 per share, amounting to NT$42,181,997. However, it is still pending approval by the shareholders' meeting.

4.1.7 The impact of the proposal of issuance of bonus shares to be reviewed by the shareholders’ meeting on the Company’s business operating performance and EPS: N/A.
4.1.8 Employees Wage and Compensation of Directors and Supervisors:
(1) The percentage and scope of the employees' wages and the remuneration of directors and supervisors as stated in the Company’s articles of association:

When the Company makes a profit in a fiscal year, it shall allocate 5% to 8% of the profit as employee compensation and up to 5% of the profit as director compensation, provided that the amount allocated does not exceed the accumulated losses.

The employee compensation may be paid in stock or cash, and shall be approved by a resolution passed by at least two-thirds of the directors present and with the consent of more than half of the attending directors, and reported to the Shareholders' Meeting.

If the Board of Directors decides to pay employee compensation in stock, it may also pass a resolution at the same time to issue new shares or repurchase the Company's shares.

The Company's Articles of Incorporation may specify the recipients of the stock or cash, including employees of controlled or affiliated companies who meet certain conditions, and the relevant procedures shall be authorized by the Board of Directors.

(2) The calculation basis for the estimated amount of employee wage and the compensation of directors and supervisors of the current period, the calculation basis for the number of shares for distribution of stock dividends, and the accounting treatment when there is a difference between the estimated amount and the actual distributed amount:

The estimated amount of employee bonuses and directors' and supervisors' compensation in the Company is based on the current period's profit up until the reporting date, within the range specified in the Company's Articles of Incorporation, and considering the potential distribution percentage. After the end of the fiscal year, if there are significant changes in the amount approved by the board of directors, the originally provisioned annual expenses are adjusted accordingly. On the date of the shareholders' meeting, if there are still changes in

107

the amount, they are accounted for based on accounting estimates and adjusted in the year of the shareholders' meeting resolution.

(3) The proposed distributed amount of employees wage approved by the board of directors:
a. The amounts of employee compensation and directors' and supervisors' compensation distributed in cash or stock shall be disclosed. If there are any differences between the amounts distributed and the estimated provisions for the year, the differences, reasons, and handling methods shall be disclosed:

The Company's board of directors, in a resolution dated March 14, 112, approved the distribution of employee compensation for the year 2022(cash distribution) amounting to NTD 2,088,546, and the distribution of director compensation (cash distribution) amounting to NTD 1,305,341. The estimated accrued employee compensation payable on the books is NTD 2,088,546, and the accrued director compensation payable is NTD 1,305,341, which is the same as the distribution amount.

b. The proposed distributed amount of employees' wages in the form of stocks and its proportion of the total amount of net profit after tax and total mployee wage specified in the individual financial report for the current period: Not applicable.
(4) The actual distribution of employee dividends and remuneration of directors and supervisors for the previous fiscal year:

The employee compensation amounted to 9,711,209, and the director compensation amounted to 5,826,725. The employee compensation was distributed in cash, and the amounts distributed for employee compensation and director compensation are consistent with the estimated provisions for the year's expenses.

4.1.9 Buy-back of Treasury Stock: None.
4.2 Issuance of Corporate Bonds: None.
4.3 Issuance of Preferred Stock: None.
4.4 Issuance of Global Depositary Receipts: None.

108

4.5 Issuance of Employee Stock Options : None.

4.6 Issuance of Restricted Stock Units:

4.6.1 Any outstanding restricted stock units that have not yet fully vested should be disclosed regarding the status as of the date of the annual report printing and their impact on shareholders' equity.

April 2, 2023

4.6.1 Any outstanding restricted stock units that have not yet fully vested should be disclosed regarding the status as of the date of the annual report printing and their impact on shareholders' equity. April 2, 2023	4.6.1 Any outstanding restricted stock units that have not yet fully vested should be disclosed regarding the status as of the date of the annual report printing and their impact on shareholders' equity. April 2, 2023
Types of restricted stock units: the First Offering in 2018 (Tranche1) The Second Offering in 2018 (Tranche2)
Effective Date and Total Number May 20, 2018/ 800,000 Shares
Effective Date September 25, 2019 April 15, 2020
Number of Restricted Stock Units Already Issued 426,000 Shares 374,000 Shares
Remaining Restricted Stock Units Available for Issuance 0 0
Issue Price NTD 10 NTD 10
Percentage of Issued Restricted StockUnitstoTotal Issued Shares 0.61% 0.53%
Vesting Conditions for Restricted Stock Units	Upon receiving the restricted stock units(RSUs) under this policy, employees must meet the following conditions within the specified vesting periods, starting from the date of capital increase. They should remain employed, achieve a certain level of performance based on annual individual performance evaluations, adhere to the service code, and have no violations of the Company's service agreement, integrity and ethics, work rules, or contractual obligations with the Company. The respective percentage of shares that can be vested based on the fulfillment of the conditions is as follows: 1. After 1 year of employment: 30% of the allocated shares, subject to achieving a performance rating of "B" or above in the Company's annual assessment. 2. After 2 years of employment: 30% of the allocated shares, subject to achieving a performance rating of "B" or above in the Company's annual assessment. 3. After 3 years of employment: 40% of the allocated shares, subject to achieving a performance rating of "B" or above in the Company's annual assessment.

109

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the First Offering in 2018 The Second Offering in 2018
Types of restricted stock units:
(Tranche 1) (Tranche 2)
1. Prior to the fulfillment of the vested conditions,
employees shall not sell, pledge, transfer, gift, or
dispose of the restricted stock units obtained under this
policy, or undertake any other form of transaction.
2. Prior to the fulfillment of the vested conditions, in
addition to the aforementioned restricted rights, the
Restricted Rights of Restricted
rights and obligations of employees (including
Stock Units:
participation in stock offerings, dividends, attendance
at shareholders' meetings, proposal submissions,
speaking rights, voting rights, election rights, cash
capital increase subscription, and other matters related
to shareholder rights) shall be the same as those of the
common shares already issued by the Company.
A total of 2,000 shares A total of 131,300 shares shall
Custody of Restricted Stock Units shall be delivered to the be delivered to the trust
for Employees: trust custodian for custodian for safekeeping.
safekeeping.
In the event that an employee fails to meet the vesting
Treatment of Employees Prior to
conditions of the restricted stock units, the Company
Meeting the Vesting Conditions of
reserves the right to reclaim the shares without any
Allocated or Subscribed Shares:
compensation and proceed with their cancellation.
The number of restricted stock
units that have been reclaimed or 21,220 shares 35,550 shares
bought back.
Number of restricted stock units
402,780 shares 207,150 shares
released
Number of restricted stock units
2,000 shares 131,300 shares
unreleased
Percentage of unreleased restricted
stock units to total issued shares 0.003% 0.19%
(%)
The impact on diluted earnings per share of the Company
Impact on shareholders' equity is limited, therefore there is no significant impact on
shareholders' equity.
----- End of picture text -----

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4.6.2 Top ten employees, including executives, who have acquired restricted stock units up to the date of the annual report's printing, along with their names and acquisition details:

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April 2, 2023
Restriction Released Restriction Unreleased
Number Issue Issue Percenta Number Issu Issue Percenta
of Price Amount ge of of Shares e Amount ge of
Shares Pric Shares
Percentag Shares with
umber of e with
e of Total Restricti
Job Title Name RSUs Restricti
Issued ons
Acquired ons
Shares Released
Unreleas
to Total
ed to
Issued
Total
Shares
Issued
Shares
GM Chao,Wei CHun
DGM Chen, Jin Ming
DGM Liao Pei Hung
Manager Cheng, Su Hui
Manager Wong, Cheng
Shun (Note1)
Chen, Chih Shiin
Manager (Note2)
D. Manager [Lan, Pei Yu ] 257,200 0.37% 218,200 10 2,182,000 0.31% 39,000 10 390,000 0.06%
Manager Hsiao, Hsu Jung
Manager Hsu, Chen Yu
Manager Chang, Kuei Mei
Corporate
Cheng, Lin Feng
Governanace
(Note3)
Officeer
Deputy unit
Chiu, Chi Lin
supervisor
Unit
Tsai, Ming Hui
supervisor
D. Manager Jiang, You Liang
Unit
Hsu, Yi Hsun
supervisor
Deputy
Chen, Xiang Lei
administrator
164,000 0.23% 140,000 10 1,400,000 0.20% 24,000 10 240,000 0.03%
Deputy
Ruan, Wen Zhi
Researcher
D. Manager Wu, Tzu Li
D. Manager Wu, Meng Wei
Assistant
Miao, Yong Jin
Manager
Unit
Fan, Zhen Zeng
supervisor
Management Personnal
Employee
----- End of picture text -----

Note 1: Resigned as manager on March 1, 2022; Note 2: Resigned as manager on April 1, 2022; Note 3: Appointed as manager on April 1, 2022.

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4.7 Issuance of New Shares in Connection with Mergers or Acquisitions or with Acquisitions of Shares of Other Companies ： None.
4.8 Financing Plans and Implementation: N/A.

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5. Operation Overview

5.1 Business Conetnt

5.1.1 Business Scope

(1) Main Operation

a. Manufacturing and trading of PU curing agents, processing agents, coatings, coating resins, adhesives, flattening agents, and related raw materials.
b. Processing and trading of leather, second layer cowhide and synthetic leather.
c. Import and export trading of the raw materials related to the preceding items.
d. H701010 Residential and building development, leasing and sales.
e. C801040 Manufacturing of synthetic resins.
f. C802030 Manufacturing of coatings and paints.
g. EZ11010 Paving engineering of stadium tracks made of resin materials.
h. C802990 Manufacturing of miscellaneous chemical products (anti-dust pads).
i. C805020 Manufacturing of plastic film and bags.
j. C801030 Manufacturing of fine chemical materials.
k. C801990 Manufacturing of other chemical materials (photoresist materials).
l. F401030 Manufacturing and exporting industry.
m. C801060 Manufacturing of synthetic rubber.
n. C801050 Manufacturing of plastic raw materials.
o. C805010 Manufacturing of plastic leather, fabrics, plates, and tubes.
p. C805060 Manufacturing of plastic leather products.
q. CE01030 Manufacturing of optical instruments.
r. The Company's business activities are not limited except for the licensed

business which shall be specified in the articles of incorporation.

(2) Proportions of sales

The main product categories, sales performance, and their respective proportions in the Company's business for the fiscal year 2022 are as follows:

Unit: NTD in Thousand; %

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Sales Ratio
Category Unit Quantity
Revenue (%)
Metric
PU Resin 11,353 1,110,064 76.66
Ton
Metric
TPU 1,903 217,712 15.04
Ton
Others(Note) 2,074 120,253 8.30
Total Nte Sales 15,330 1,448,029 100.00
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Note: The "Others" category mainly includes PU films and specialty chemicals.

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(3) Current Product Portfolio and Planned New Product Development:

a. Current Product

Our company's main products include PU resins, PU curing agents, and TPU pellets. Within the PU resin category, we offer solvent-based PU resins, water-based PU resins, and solvent-free PU resins. These products serve as essential materials for various downstream applications such as coating, adhesives, lamination, molding, and plastic processing. Ultimately, they are used in a wide range of consumer and industrial products, including sports shoes, breathable waterproof clothing, furniture, building materials, synthetic leather, and more. Our primary customers are manufacturers engaged in the processing and manufacturing of these diverse applications. Our main sales territories include Taiwan, mainland China, and Vietnam, with a focus on the Asia-Pacific region.

b. Planned New Product Development

Development of eco-friendly leather alternatives
PUR product development
PUR product development
Eco-friendly polyols development
Water-based processing agents
Development of hot-melt adhesives for lamination
Development of highly formable tubing materials
Development of ultra-low melting point hot-melt adhesives

5.1.2 The industry overview

(1) Current Status and Development of the Industry

The Company and its subsidiaries are professional manufacturers of PU (polyurethane) synthetic resins. We operate as intermediate raw material suppliers in the chemical industry. Our main business involves the production and sale of PU resins, PU curing agents, and TPU pellets, which are used in various downstream applications such as coatings, adhesives, laminates, molding, and plastic processing. Ultimately, our products are utilized in essential consumer and industrial products, including sports shoes, breathable waterproof clothing, furniture, construction materials, textiles, and synthetic leather. Therefore, our primary customers are manufacturers involved in these various applications.

According to the "Standard Industrial Classification of the Republic of China" published by the Directorate-General of Budget, Accounting and Statistics,

114

enterprises engaged in the manufacturing of polyethylene (PE), polypropylene (PP), polystyrene (PS), polyvinyl chloride (PVC), polyvinyl acetate, phenolic resins, epoxy resins, alkyd resins, polyester resins, silicone resins, ion exchange resins, and other synthetic resins fall under the category of "Synthetic Resin and Plastic Manufacturing Industry". Here, we will provide an overview of the industry in which our company and its subsidiaries operate:

a. Industry

The "Synthetic Resin and Plastic Manufacturing Industry" to which our company and subsidiaries belong is part of the petrochemical industry chain. The petrochemical industry refers to the manufacturing of chemicals using petroleum or natural gas as raw materials. The products produced in this industry are known as petrochemical products. The scope of the petrochemical industry covers the upstream industries that produce basic raw materials such as ethylene, propylene, butadiene, benzene, toluene, xylene, and other basic chemicals.

These basic raw materials undergo processes such as polymerization, esterification, alkylation, and other chemical reactions to produce intermediate products such as synthetic resins and plastics, synthetic rubbers, raw materials for synthetic fibers, and petrochemicals. These intermediate products can then be further formulated to exhibit different properties and functionalities. They find extensive applications in various industries, including footwear, furniture, construction, textiles, packaging, printing, automotive, sporting goods, and medical materials, among others.

The petrochemical industry in our country has developed through reverse integration, starting with the establishment of downstream processing industries. Then, the import of petrochemical processing materials forms the midstream system, and finally, the construction of light oil (petroleum naphtha) cracking plants provides basic petrochemical raw materials, forming a complete upstream, midstream, and downstream petrochemical system.

The raw materials used in the PU synthetic resin products of our company and its subsidiaries are mainly polyurethane materials. The main raw materials include toluene diisocyanate (TDI), diphenylmethane diisocyanate (MDI), and adipic acid (AA). The cost of these main raw materials is influenced not only by the fluctuations in petroleum naphtha prices but also by the supply and demand dynamics in the polyurethane raw

115

materials market.

In addition to the vast market in mainland China, the Southeast Asian region has emerged as a target for investment and expansion by many international giants in the synthetic resin industry, such as BASF and Dow Chemical. It is expected that Southeast Asia will be a rapidly growing region in the global petrochemical industry in the next 10 years. Our company and its subsidiaries have expanded their presence beyond mainland China and established a manufacturing facility in Vietnam in 2004. With the favorable economic growth trend in Vietnam, it has provided a conducive environment for the operational performance of companies in our industry. We have actively pursued market expansion in Vietnam and completed a capital increase and expansion of our new plant in 2018. The expanded capacity of the new plant in Vietnam will contribute to our future expansion plans in countries such as India and Myanmar. In terms of regional development strategy, our company has shifted its reliance from the mainland China market due to increased costs, price competition, and concerns over environmental safety. With the initiation of the national "New Southbound Policy," the Southeast Asian region has become more active. Vietnam, in particular, has experienced high GDP growth and requires greater resource allocation to enhance business operations in the Southeast Asian market.

b. Trends in Production and Sales Volume in the Industry

According to the classification by the Department of Statistics, Ministry of Economic Affairs, the "Synthetic Resins and Plastics Manufacturing Industry" can be divided into categories such as medium and low-density polyethylene (MLDPE), polystyrene (PS), polypropylene (PP), ABS resins, polyester pellets, nylon pellets (fiber grade), other plastic pellets, unsaturated polyesters (UP), phenolic resins (PF), epoxy resins (EPOXY), other synthetic resins, engineering plastics, and PU synthetic resins. Currently, the most common types of "Synthetic Resins" in the domestic market are ABS resins, unsaturated polyesters (UP), epoxy resins (EPOXY), other synthetic resins, and PU synthetic resins. Our company and its subsidiaries mainly produce various types of PU synthetic resins, so if we classify them by product type, they fall under the category of "PU Synthetic Resins" according to the classification by the Department of Statistics.

The sales of PU synthetic resins are mainly directed towards downstream synthetic resin manufacturers who further process them for various applications in industries such as footwear, furniture, construction materials, textiles, and packaging. The products have a wide range of applications. According to the statistical data on production and sales

116

volume of PU synthetic resins provided by the Department of Statistics, Ministry of Economic Affairs (see Appendix 2), the production and sales volume has remained at a certain level over the years, indicating that the industry's business cycle is not highly volatile, and there is still a certain level of demand even during economic downturns.

Appendix 2:PU Synthetic Resins Production and Sales Volume Statistics Table

Unit: Metric Ton; NTD in Thousand; %

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Production Sales
年度 Amount Amount Growth Amount
Quantity Growth Quantity Amount Growth
Rate
Rate (%) Rate (%)
2018 162,606 14,497,955 (0.72) 144,286 (5.95) 12,850,560 (0.08)
2019 153,692 13,386,827 (7.66) 140,195 (2.84) 12,251,520 (4.66)
2020 137,404 11,180,643 (16.48) 132,399 (5.56) 10,707,979 (12.60)
2021 163,179 14,384,072 28.65 158,190 19.48 13,753,979 28.45
2022 140,828 14,150,208 (1.63) 138,562 (12.41) 13,943,772 1.38
----- End of picture text -----

Date Source: Department of Stastics, Ministry of Economic Affairs

(2) The interrelationship between the upstream, midstream, and downstream

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

upstream The Company downstream
Petrochemical Polyurethane raw Polyurethane resin Processing industry End Product
feedstock materials
∙ Liquid chlorine ∙ TDI ∙ Solvent-based PU resin Footwear processing ∙ Footwear industry
∙∙ Toluene Nitric acid ∙ ∙ MDIAA ∙∙ Water-based PU resin Solvent-free PU resin Ink processing Coating processing ∙∙ Furniture industry Construction
∙∙ Benzene Calcium carbide ∙∙ Polyether polyols Polyester polyols ∙ PU curing agents, PU Engineering construction materials industry ∙ Textile industry
∙ Ethylene/propylene ∙ Various types of polyols crosslinking agents Leather ∙ Luggage and bag
/butene ∙ Ethyl acetate (EAC) ∙ TPU pellets processing Foam molding industry
∙ Methanol ∙ Trimethylolpropane ∙ Others Elastomer ∙ Printing industry
∙ Liquefied (TMP) processing Plastic injection ∙ Machinery and
petroleum gas (LPG) ∙ Methyl ethyl ketone molding automotive industry
(MEK) Plastic extrusionPlastic film ∙ Sports equipment
∙ Various solvents blowing industry
Plastic ∙ Medical materials
calendaring
industry
----- End of picture text -----

The main upstream raw materials for the PU synthetic resin industry of our company and its subsidiaries include diphenylmethane diisocyanate (MDI), toluene diisocyanate (TDI), adipic acid (AA), polyester polyols, polyether polyols, various types of polyols, ethyl acetate (EAC), and various solvents. Additionally, as the raw materials for the petrochemical industry are byproducts

117

of petroleum cracking, the prices of upstream petrochemical raw materials in our industry are influenced by international oil prices and the international supply and demand market conditions.

Our company and its subsidiaries belong to the midstream of the PU synthetic resin industry. Through various downstream processing procedures, the end products are applied in various industries such as footwear, breathable waterproof functional clothing, furniture, construction materials, and synthetic textiles.

(3) Product Development Trends

Due to changing trends and increasingly stringent regulations, the development of the chemical industry has been greatly affected. Countries around the world are implementing stricter environmental regulations. For example, the USA introduced the CPSIA (Consumer Product Safety Improvement Act) in 2008, the EU implemented REACH (Registration, Evaluation, Authorization, and Restriction of Chemicals) in 2009, and our country has established general regulations for the safety of children's products. These regulations impose restrictions on the chemical substances used in various products, including footwear. The Zero Discharge of Hazardous Chemicals (ZDHC) initiative, composed of multinational apparel and footwear brands such as Nike, Adidas, New Balance, and Puma, has committed to completely eliminate the use of harmful substances in their supply chains or products. In line with the trend of environmental protection, our company and its subsidiaries are focusing on the development of environmentally friendly products, such as water-based polyurethane resins, solvent-free products, and TPU materials. We are also continuously improving our processes to reduce solvent usage and developing products with low energy consumption characteristics. Additionally, we are promoting the reuse of packaging containers to reduce waste production. We aim to expand our sales market in line with future market trends while actively contributing to a greener Earth.

(4) Competitive situation

Our company and its subsidiaries are professional manufacturers of various PU synthetic resins. Currently, among the listed companies in Taiwan, our main competitors in the industry include Evermore , Sunko, and ShuangBang, who are also engaged in similar product lines. The major competitors are listed as follows:

Unit: NTD in Thousand

118

Company Item Headway (1776) Evermore (1735) Sunko (1721) SHuang Bang (6506)	Company Item Headway (1776) Evermore (1735) Sunko (1721) SHuang Bang (6506)	Company Item Headway (1776) Evermore (1735) Sunko (1721) SHuang Bang (6506)	Company Item Headway (1776) Evermore (1735) Sunko (1721) SHuang Bang (6506)	Company Item Headway (1776) Evermore (1735) Sunko (1721) SHuang Bang (6506)
Sales (Parent Company) 784,456 1,882,582 2,976,358 1,981,438
Sales (Consolidated) 1,448,029 2,957,191 3,008,554 2,186,641
Capital	703,033	993,880	1,848,841	823,608

Date Resource: MOPS/Electronic Books/Financial Statements(2022)

Due to the wide range of specific products and applications in the PU synthetic resin industry, competition among peers is inevitable. However, our company has accumulated over 40 years of industry experience, established extensive industry relationships, and developed customized solutions to meet customer needs. We provide products with high compatibility, stability, and adaptability. Our focus is on value creation rather than price competition, and we aim to win customer trust through product differentiation and high added value. Despite the ongoing relocation of downstream processing industries in Taiwan, our company has taken proactive steps towards internationalization, with a broader source of production capacity and revenue compared to our competitors. We also provide comprehensive technical services to customers in close proximity, maintaining our competitive advantage. Therefore, our company possesses a certain level of competitive capability in the industry.

5.1.3 Technology and Research and Development Overview

(1) Technological Level and Research and Development in Business Operations
a. The organizational development of the Research and Development department

Year	Milestone
1976	1. The Company was established in Hengshan Township, Hsinchu County, with a focus on the production of leather processing agents and curingagents to replace importedproducts.
1977	1. Technology Unit was Established. 2. The PU curing agents have been widely used in various formulations for PU coatings and PU synthetic leather. Additionally, the R&D efforts have focused on developing moisture-curing PU resins that are applied in floor paints, plastic eyewear coatings, mirror-like leather coatings,waterproof materials,and sealants.

119

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

Year Milestone
1. the Research and Development department was Established.
2. Successful development has been achieved in PU synthetic leather
for both the coating surface and base materials.
3. PU resin elastomers with prepolymers are used for track materials
1984 and sports field materials.
4. Foam injection molding compound is used for shoe soles, insoles,
and foam cushions, as well as self-skinning foam armrests for
construction materials. We are the leading manufacturer to introduce
water-based PU products.
1. We established a joint venture with BASF Group from Germany to
1988 develop PU composite materials, elastic materials, and waterproof
materials for track surfaces, among other technologies and markets.
1. The Hengshan Factory was relocated to the Hsinchu Industrial Park
Plant, with an expansion of the R&D department's manpower,
1993
strengthening the application scope of various solvent-based PU,
water-based PU, and new products.
1. A TPU (Thermoplastic Polyurethane) technical team was introduced
2001
from the industry to establish a TPU plant.
1. Due to individual strategic considerations of both parties, the joint
venture with BASF Group has come to an end. The products and
2003
technologies of the original joint venture are now integrated into the
research and development department for further development.
1. A joint venture with downstream customers was established to form
Headway Polyurethane Co., Ltd. The TPU technology team has been
transferred to the subsidiary company to continue its development.
2006 2. We have developed a series of low free monomer curing agents and
PU resins for synthetic leather inks. We have established a
benchmark brand, and our product line covers various application
areas.
1. We have initiated the development of green and environmentally
friendly materials, focusing on water-based PU and solvent-free PU
solutions. We are also dedicated to exploring the use of recycled
2013
plastics and biomass materials in PU resin applications. Additionally,
we are investigating the application of green and renewable natural
materials in PU resin formulations.
1. We have integrated the Taiwan Solvent-based Department,
Water-based Department, Specialized Department, and Processing
Technical Service into a Research and Development Center. This
integration aims to strengthen the technical collaboration among
2018
various research and development units, business divisions, and
customers. By integrating resources, we aim to enhance product
competitiveness, improve research and development efficiency, and
increase the success rate of market application development.
1. We have launched Taiwan's first transparent and waterproof reactive
hot melt adhesive, designed to withstand wet conditions.
2019
Additionally, we continue to develop various functional
polyurethane (PUR) products to meet specific application
----- End of picture text -----

120

Year	Milestone
	requirements.
2020	1. We have introduced an environmentally-friendly leather solution by combiningwater-basedpolyurethane(PU)with PUR technology.
2021	1. The combination of polyaspartic/PUR hardener is applied in metal coatings and floor coatings. This formulation offers enhanced performance and durability in protecting and beautifying metal surfaces and floorings. 2. Collaborating with renowned manufacturers, we have jointly developed car seat cushions. By leveraging our expertise in PU materials and their applications, we strive to deliver high-quality and comfortable seatingsolutions for the automotive industry.
2022	1. We have launched a carbodiimide crosslinker, which is applied in the water-based product market. 2. We have introduced bio-based materials and recycled materials into our polyurethane products, ensuring compliance with GRS (Global Recycled Standard) and USDA (United States Department of Agriculture)standards.

b. Research and Development Organizational Structure

The Company's overseas investment layout includes production bases in East China (in 1993), Vietnam (in 2004), and South China (in 2014) to serve customers in proximity to the market. Processing technology service centers are established in each subsidiary to support the application and development of integrated group products in the Asia-Pacific region. In 2018, the Company integrated research and development resources in Taiwan to establish the "Research and Development Center." The Taiwan R&D center serves as the technical backbone for various processing technology service centers, actively promoting the market, and developing new products and applications.

==> picture [272 x 138] intentionally omitted <==

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

R&D Center in Taiwan
Synthetic Coating Water-based TPU
Leather Lab Lab PU Lab Lab
Technology Technology Technology
Service Cneter in Service Cneter Service Cneter in
Shanghai in Guangdong Vietnam
----- End of picture text -----

c. Research Technologh

Our company has accumulated 45 years of experience in product development and application. We possess extensive integration technology and have independently developed key raw materials. This enables us to

121

quickly provide customers with diverse and customized products. Our products have excellent stability and reliability, allowing us to offer various material solutions to our customers. We are adept at adapting to the ever-changing market and industrial environment by leveraging our existing foundation and continuously pursuing transformational development. This allows our company to move towards comprehensive applications of polyurethane materials.

(2) Research and Development Personnel and Their Educational Backgrounds

Unit: Personnel

==> picture [399 x 219] intentionally omitted <==

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

Year 2021 2022 March 31, 2023
Education Number of Number of Number of
Ratio(%) Ratio(%) Ratio(%)
Personnel Personnel Personnel
Ph. D. 0 0.0 0 0.0 0 0.0
Master's degree 4 22.2 4 22.2 4 21.0
Bachelor's degree
& 14 77.8 14 77.8 14 73.7
College diploma
High school
0 0.0 0 0.0 1 5.3
diploma
Below high
0 0.0 0 0.0 0 0.0
school
Total 18 100.0 18 100.0 19 100.0
----- End of picture text -----

(3) esearch and Development Expenditure in the Last Five Years (Annual)

Unit: NTD in Thousand

) esearch and Development Expenditure in the Last Five Years (Annual) Unit: NTD in Thousand	) esearch and Development Expenditure in the Last Five Years (Annual) Unit: NTD in Thousand	) esearch and Development Expenditure in the Last Five Years (Annual) Unit: NTD in Thousand	) esearch and Development Expenditure in the Last Five Years (Annual) Unit: NTD in Thousand	) esearch and Development Expenditure in the Last Five Years (Annual) Unit: NTD in Thousand	) esearch and Development Expenditure in the Last Five Years (Annual) Unit: NTD in Thousand
Year Item 2018 2019 2020 2021 2022
R&D Expenditure 38,653 32,436 31,241 27,188 26,874
Net Sales 1,918,688 1,614,375 1,380,972 1,476,066 1,448,029
Ratio (%)	2.01	2.01	2.26	1.84	1.86

(4) Technologies or Products Successfully Developed in the Past Five Years

==> picture [377 x 17] intentionally omitted <==

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

Year Product Research and Development Achievements
----- End of picture text -----

hnologies or Products Successfully Developed in the Past Five Years	hnologies or Products Successfully Developed in the Past Five Years
Year Product Research and Development Achievements

2018	1. Water-based PU wood paint coating 2. Water-based breathable PU resin 3. Foam composite material for wood imitation 4. Recycled PET-based polyol 5. Reactive hot melt adhesive for wood bonding 6. Solvent-free high-gloss reactive coating 7. Environmentally-friendly solvent-based ink resin 8. Low free isocyanate curing agent

122

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

Year Product Research and Development Achievements
1. Environmentally-friendly non-crystalline reactive hot melt
adhesive
2. Ketone-free ink resin
3. Moisture-curing coating
4. Water-based in-mold paint
2019
5. Water-based treatment agent and fabric for automotive
leather and sofa leather
6. High hardness water-based resin
7. Non-yellowing solvent-free fast-drying coating for
construction materials/flooring
1. PUR for sofa leather and shoe leather
2. Moisture-curing coating - Provides good adhesion and
processability for PC and Nylon
3. High hardness water-based resin for coatings and hook and
2020
loop fasteners
4. Improvement of water-based PU process efficiency
5. High-performance foam elastomer for automotive seat
cushions
1. PUR (Solvent-free Reactive Hot Melt Adhesive) with an
annual production capacity of over 400 tons, currently
applied in the following areas:
(1) Moisture-permeable and waterproof functional textiles
(2) High-strength special fabrics lamination
(3) Industrial specialty material bonding
(4) Sofa leather and shoe leather applications
(5) Construction materials
2. Environmentally friendly ink for steam-resistant food
packaging
3. Solvent-free coating adhesives
(1) Application of polyisocyanate/PU hardener combination
in metal coatings and floor coatings
2021
(2) Water-dilutable curing agents for high gloss and
extended usage time
4. PU foam elastomers
(1)Collaborative development with well-known
manufacturers for automotive seat cushions
(2) Application and development of all-water foam,
environmentally safe and explosion-proof
(3) Wear-resistant and environmentally friendly elastomers
(TDI/MOCA-free)
5. Improvement of water-based PU processes
(1) Stable production processes
(2) Energy-saving and recycling initiatives
(3) Enhanced production efficiency
1. PUR(solvent-free reactive hot melt adhesive PU), current
application:
(1) Bio-based polyol PUR for textile lamination
(2) Recycled polyol PUR for textile lamination
2022
(3) Environmentally friendly PUR for system furniture and
kitchenware lamination
(4) Environmentally friendly PUR for wood board and
wood flooring lamination
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123

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

Year Product Research and Development Achievements
2. Environmentally friendly ink for steam-resistant food
----- End of picture text -----

packaging: Ink for OPP food packaging materials 3. Solvent-free coating adhesives (1) Production process of carbodiimide curing agents has improved color and stability 4. PU foam/ PU elastomer (1) Foam composite for medical rehabilitation equipment (2) PU encapsulants for hemodialysis filter 5. High flexibility and weather-resistant waterborne PU ink

  - 5.1.4 Long-term and Short-term Business Development Plans

     - (1) Short-term Plan

        - a. Continuously develop differentiated and high-value PU resin and TPU pellet products and focus on their application and market to enhance future revenue and profitability.

        - b. Establish a comprehensive sales and distribution network for Exhibition Polymer products in the Greater China region, closely integrating with the headquarters in Taiwan.

        - c. Leverage the established manufacturing facility in Vietnam to capture the emerging opportunities in the footwear, textile, and furniture industries driven by the RCEP agreement, establishing a strong presence in Southeast Asia.

     - (2) Long-term Plan

        - a. Collaborate with overseas subsidiaries to actively maintain existing customer relationships, jointly develop potential markets and increase market share. At the same time, strengthen efforts to acquire new customers and explore new markets to establish a leading position as a PU material manufacturer in the Asia-Pacific region.

        - b. Focus on the Indonesian and Indian markets, evaluate investment opportunities, and expand business prospects.

        - c. Continuously invest in R&D for environmentally friendly products, promote water-based polyurethane and solvent-free polyurethane products, gradually phasing out traditional industry products. Aim to achieve energy efficiency, waste reduction, and develop products that are green, natural, renewable, biodegradable, and pollution-free.

d. Commitment to clean production policies, reducing the environmental impact of manufacturing processes and products, and fulfilling social responsibilities.
5.2 Market and Sales Overview
5.2.1 Market Analysis

124

(1) Sales (Provision) Regions of Main Products/Services

Unit: NTD in Thousand

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

Year 2021 2022
Region Amount % Amount %
Domestic 750,906 50.87 699,556 48.31
Mainland China 343,570 23.28 275,138 19.00
Voetnam 318,880 21.60 379,575 26.21
India 9,744 0.66 24,883 1.72
Others 52,966 3.59 68,877 4.76
Total 1,476,066 100.00 1,448,029 100.00
----- End of picture text -----

(2) Market Share

Based on an estimation of sales value of PU synthetic resins from our company and competitors (Evermore, Sunko, and Shuangbang), according to statistics from the Department of Statistics, Ministry of Economic Affairs, our company's market share in Taiwan is estimated to be around 6% to 8%.

(3) The future supply and demand situation, growth prospects, and competitive advantages in the market:
a. Supply and demand situation

In terms of supply, our company and its subsidiaries produce PU synthetic resin products that utilize petrochemical raw materials. These products can be customized based on the specific requirements of customers. Additionally, different resin synthesis formulations and processes can result in products with varied physical properties, allowing for a wide range of PU resin specifications. Each company in the market has its own set of resources and capabilities, and it is challenging for any single enterprise to meet all customer demands. Therefore, it is unlikely for any company to monopolize the market.

In terms of demand, according to industrial production statistics from the Ministry of Economic Affairs (refer to Table 2), domestic production capacity exceeds domestic demand. As a result, the industry primarily relies on exports. This indicates that the domestic demand growth for the industry is limited, while the importance of the export market is increasing.

b. Growth prospects

The synthetic resin industry has been affected by market competition, leading to reduced profit margins for certain products. As a result, low-margin goods have moved to downstream markets with lower-end product demands. Domestic market demand and manufacturers have started shifting towards high-value-added products. Our company and its subsidiaries will focus on niche products and R&D in Taiwan while expanding our presence in overseas markets. Our main export customers are located in emerging countries such as China, Vietnam, India, and Indonesia, with an increasing sales proportion in Vietnam and India in recent years.

Since our products are mainly used in everyday consumer goods

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such as footwear and furniture, which are closely related to people's daily lives, the market demand in these industries tends to be stable and growing. However, the overall supply-demand balance in the industry has not been achieved in the short term. The industry still faces the challenge of oversupply in the supply chain, exacerbated by abnormal climate conditions due to global warming. Environmental protection, which requires advanced technology, also contributes to the difficulty in achieving a balance. Solvent-free synthetic resin demand is increasing, but it requires integration and changes in the industry ecology and processes. While there is growth, it is not rapid.

With research institutions forecasting promising future growth in the footwear industry and stable growth in the furniture industry due to economic stability and various countries' economic and industrial revitalization policies, the demand for PU synthetic resin is expected to increase, maintaining a stable growth trend.

c. Competitive advantages

I. As a leading manufacturer in the industry, our company and its subsidiaries are known for stable and excellent product quality and flexible production efficiency:

We specialize in providing a variety of material solutions in the field of PU synthetic resins, particularly in polyisocyanates (PU hardeners and crosslinking agents). Our company has a strong advantage in product quality stability, allowing us to provide customized services to meet customers' specific property requirements. Additionally, we possess the capability for small-scale, diversified production, which enables us to fulfill the product demands of our nearly 1,500 sales customers. It is evident that Exhibitor continues to focus on value creation rather than price competition, securing a solid position in the market.

II. Being a trusted partner for material solutions, we have gained the trust of our customers through the independent development of key raw materials and process technologies:

With nearly 45 years of experience in the industry, we have continuously improved our capabilities in new product development, formula optimization, and performance enhancement. We actively collaborate with downstream manufacturers to develop new products, aiming for product diversification and creating differentiation in the market. This approach helps us maintain our competitive advantage in the industry.

III. Our company has established a comprehensive sales and production network in the Asia-Pacific region. This enables us to provide excellent technical services to our customers in close proximity:

We have a comprehensive sales and production network in the Asia-Pacific region, with manufacturing facilities in Taiwan, Guangdong, and Vietnam. This allows us to provide efficient technical services in close proximity to our customers and maintain long-term, stable relationships with them.

IV Our company is committed to focusing on the development trends in our industry and continuously exploring the application of green and

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renewable materials:

In addition to our core business of manufacturing and sales, we are dedicated to providing comprehensive material solutions that address the specific needs of our customers. We are actively involved in the development of environmentally friendly recycling materials to meet increasingly stringent environmental regulations.

(4) Factors Affecting Future Market Development: Opportunities, Challenges, and Strategies.

a. Opportunities

I. Growth from emerging economies.

The rapid rise of emerging markets, including the substantial domestic market in China, has led to a significant increase in demand for our industry. Our company and its subsidiaries have established manufacturing facilities or sales offices in Taiwan, East China, South China, and Vietnam, completing our basic layout in the Asia-Pacific region. This allows us to provide comprehensive technical services to our customers in close proximity.

II. Increasing Global Environmental Awareness.

In response to the rising global environmental awareness, countries around the world are implementing stricter regulations and standards for environmental protection. Examples include the CPSIA (Consumer Product Safety Improvement Act) implemented by the United States in 2008, the REACH (Registration, Evaluation, Authorization and Restriction of Chemicals) regulation officially enforced in the European Union since 2009, and the general safety requirements for children's products established in our country. These regulations impose restrictions on the chemical substances contained in products, including footwear. The ZDHC (Zero Discharge of Hazardous Chemicals) alliance, consisting of multinational clothing and footwear brands such as Nike, Adidas, New Balance, and Puma, has committed to completely eliminate the use of hazardous substances in their supply chains or products. This environmental trend has created a larger market space for our company's environmentally-friendly products, such as water-based polyurethane resins, various solvent-free products, and TPU. We aim to utilize our existing foundation for continuous transformation and development, ensuring the sustainable growth of our company.

III. PU synthetic resins have a wide range of applications.

Our company is a professional manufacturer of PU (polyurethane) synthetic resins, serving as an intermediate raw material supplier in the chemical industry. Our main business involves the production and sales of PU resins and TPU pellets, which are used in various downstream applications such as coatings, adhesives, lamination, molding, and plastic processing. Our customers primarily consist of manufacturers in these application areas. The end markets include various types of footwear, breathable waterproof functional clothing, furniture, construction materials, textile synthetic leather,

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and other products that are widely used in daily life. As a result, countries around the world are investing significant resources and manpower to develop this industry into an important sector for their respective economies.

b. Challenges

I. The environmental regulations for the chemical industry are becoming increasingly stringent in various countries:

In response to the global environmental awareness, the relevant environmental regulations for our industry are becoming stricter, particularly in mainland China where environmental regulations have been tightened in recent years. This will have a long-term impact on the promotion of our solvent-based products.

Strategies:

Our company has implemented pollution prevention equipment and detection systems to comply with environmental regulations in our production processes. We are also actively improving our processes to reduce solvent usage and promote the recycling of packaging containers to minimize waste generation. Furthermore, we are committed to developing green and environmentally friendly materials solutions, such as water-based polyurethane resins, solvent-free products, and TPU, and expanding our market presence to achieve sustainable operations and corporate responsibility.

II. Raw Material Fluctuations:

Within our company's production cost structure, raw materials account for approximately 80-90% of the total cost, making our production costs vulnerable to fluctuations in raw material prices. The main raw materials we use include AA, MDI, DMF, TDI, etc. Among them, TDI and MDI are not domestically produced and rely on imports. Therefore, the prices of raw materials are easily affected by international petrochemical trends and supply-demand dynamics. In recent years, there has been a continuous increase in raw material prices, directly impacting the Company's profitability and posing significant challenges to product margins.

Strategies:

We adopt a group purchasing model to enhance our bargaining power and maintain long-term cooperative relationships with suppliers to secure more favorable transaction prices and conditions. Additionally, we communicate with our customers and make appropriate adjustments to selling prices to reflect changes in raw material costs. Our goal is to achieve a balance between fluctuations in raw material prices and sales prices, ensuring a certain level of profitability. Furthermore, we strengthen product research and development, utilizing our existing foundation to continuously seek transformation and development. We focus on leveraging our technical advantages to develop new formulations or alternative materials to reduce costs. We also aim to continuously improve production efficiency to enhance future revenue and profitability.

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5.2.2 Important Uses and Production Processes of Main Products:

(1) Important Usage

mportant Uses and Production Processes of Main Products: (1) Important Usage	mportant Uses and Production Processes of Main Products: (1) Important Usage	mportant Uses and Production Processes of Main Products: (1) Important Usage
Category Product Usage
PU Resin	Solvent-based PU Resin Theycan be used in various fields such as leather, textiles, inks, coatings, and construction materials. Specific products include synthetic leather, surface treatment for genuine leather, waterproof fabrics, water repellent fabrics, coatings for fabric waterproofing, shoe materials and inks, wood furniture coatings, waterproof construction materials, and track materials for athletics. Water-based PU Resin
	Solvent-free PU Resin Solvent-free PU resin can be used in a wide range of applications, including shoe soles, insoles, textile coatings, industrial machinery components and wheels, molded parts such as PU armrests for synthetic leather, imitation wood furniture, bedding, car steering wheels, baseball bats, and more. Additionally, it can be applied in shock-absorbing construction materials and PU track materials.
Polyisocyanates (PU Hardener, Crosslinking Agent) It can be used in combination with resins in wood coatings, leather, textiles, inks, and other applications. They enhance the scratch resistance, wear resistance, gloss, and hardness properties of PU resins and coatings.
Thermoplastic Polyurethane (TPU Pellets)		TPU can be used in various applications. In the footwear industry, they are used for shoe trims, air cushions, shoe heels, and textile components. They can also be applied in the production of tents, umbrellas, travel bags, and waterproof garments. TPU can be processed into ink for printing on footwear and advertising materials. It can also be laminated using PVC production lines to create leather-like materials for suitcases, travel bags, furniture, or shoe applications. Additionally, TPU can be extruded into pipes or wires, such as TPU waterpipes or air hoses.

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(2) Production Process

Production Procedure `（` PU Resin `）`

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Reactor equipment Raw material feeding Process control Discharge packaging
(Time, temperature, additives, catalysts)
Process inspection
Product shipment
Inspection of raw Pre-discharge
materials inspection
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Production Procedure `（` TPU `）`

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

Water-based granulation
Material preparation Double-axis reaction system system Dehydration
Automatic control of raw Automatic feeding using a Granulation control TPU granulation
material conveying metering system
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----- Start of picture text -----

Drying
Drying process control
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Packaging Shipping
Automatic metering Finished product
control for packaging
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5.2.3 Supply status of main raw materials

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

Main Raw Supply
Supplier Usage
Materials Status
PU
TDI BASF Well
Resin
PU
EAC CELANESE Well
Resin
PU
TO Young SUn 、 Chimei 、 Lau Fong Lee Well
Resin
PU
AA BASF 、 Huafon Well
Resin
PU
CY Ronder 、 Abram Well
Resin
PU
MDI BASF 、 MITSUBISHI Well
Resin
PU
PET 膜 Landyear 、 Coprosper Well
Resin
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5.2.4 The names of suppliers who have accounted for more than 10% of net purchases in any of the most recent two fiscal years, volume purchased from them and proportions, and the reasons for the increase or decrease in the volume:
(1) Name and amount of suppliers that accounted for more than 10% of the total procurement amount in any of the past two years, including their respective purchase amount and percentage:

Unit: NTD in Thousand

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

2021 2022 As of Mar. 31, 2023
Percentage
Percentage to Percentage to
to Relations Relations Relations
Annual Net Q1 Net
Name Amount Annual Net with the Name Amount with the Name Amount with the
Purchases Purchases
Purchases Company Company Company
(%) (%)
(%)
1 BASF 222,317 19.99 None BASF 196,151 17.54 None BASF 30,630 18.22 None
Others 889,933 80.01 Others 922,448 82.46 Others 137,443 71.78
Net Net Net
1,112,250 100.00 1,118,599 100.00 168,073 100.00
Purchases Purchases Purchases
Reasons for changes in suppliers: There have been no significant changes in the main purchasing suppliers in the past two years.
Customers' names, sales amounts, and percentages that accounted for more than 10% of total sales in any one of the past two years:
Unit: NTD in Thousand
2021 2022 As of Mar. 31, 2023
Percentage to Percentage to Percentage to
Relations Relations Relations
Annual Net Annual Net Q1 Net
Name Amount with the Name Amount with the Name Amount with the
Sales Sales Sales
Company Company Company
(%) (%) (%)
Customer CustomerA Customer 30,024 9.41
1 115,626 7.83 None 171,737 11.86 None None
A A
Others 1,360,440 92.17 Others 1,276,292 88.14 Others 289,162 90.59
Net Sales 1,476,066 100.00 Net Sales 1,448,029 100.00 Net Sales 319,186 100.00
Item
Item
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Reasons for changes in suppliers: There have been no significant changes in the main purchasing suppliers in the past two years.

(2) Customers' names, sales amounts, and percentages that accounted for more than 10% of total sales in any one of the past two years:

Unit: NTD in Thousand

Reasons for fluctuations in customer sales:In the case of Customer A, the increase in sales is attributed to the slowdown in the impact of the overseas pandemic in 2022, resulting in increased sales volume.

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5.2.5 Production volume and value in the last two years:

Unit: NTD in Thgousand

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2021 2022
Production Production
Main Products Unit
Capacity Volume Value Capacity Volume Value
Metric
PU Resin Ton 29,100 13,012 1,000,623 27,830 10,800 945,015
Thermoplastic Metric
Polyurethane (TPU) Ton 5,000 2,290 288,052 4,800 1,988 219,061
Others 4,324 2,315 57,426 4,079 2,413 77,999
Total 38,424 17,617 1,346,101 36,709 15,201 1,242,075
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5.2.6 Sales volume and value in the last two years:

Unit: NTD in Thgousand

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

2021 2022
Main
Unit Domestic sales Export sales Domestic sales Export sales
Products
Volume Value Volume Value Volume Value Volume Value
Metric
PU Resin Ton 10,797 951,067 1,895 146,969 9,392 926,817 1,961 183,247
Thermoplastic
Metric
Polyurethane Ton 2,069 238,909 264 30,045 1,799 206,301 104 11,411
(TPU)
Others 2,380 93,001 193 16,075 1,853 95,941 221 24,312
Total 15,246 1,282,977 2,352 193,089 13,044 1,229,059 2,286 218,970
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5.3 Information of employees in the most recent two years and as of the publication date of

the annual report

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

As of
Year 2021 2022
March 31, 2023
Direct Labor 88 95 90
Number of
Indirect Labor 163 152 153
Employee
Total 251 247 243
Average Age 43.4 43.7 44.4
Average Years of Service 10.6 10.9 11.5
Ph.D. 0.0 0.0 0.0
Master 5.2 6.1 6.2
Academy College 51.4 48.2 49.0
Ratio(%)
Senior High School 27.5 26.3 29.2
Below Senior High School 15.9 19.4 15.6
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5.4 Environmental expenditure information: In the latest fiscal year and as of the printing date of the annual report, losses incurred due to environmental pollution (including compensation and penalties resulting from violations of environmental regulations) shall be disclosed. This information should include the date and reference number of the penalties, the violated provisions of the regulations, the nature of the violations, and the details of the penalties imposed. Additionally, the estimated amounts and corresponding measures for current and potential future expenses should be disclosed. If a reasonable estimation cannot be made, the reasons for the inability to provide such an estimation should be explained:

Unit: NTD in Thousand

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Violated Penalty
Item Date Basis Violation Penalty Response
Regulation Article
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Item	Date	Basis	Violated Regulation	Violation	Penalty Article	Penalty	Unit: NTD in Thousan Response

1	2022.03.10	Environmental Industry Letter No. 1113400672	Violation of Article 31, Paragraph 1, Clause 1 of the Waste Disposal Act.	The on-site storage of non-hazardous organic wastewater or solvent (D-1504) generated from the polyester resin manufacturing process with the code 180324 was found to have a flash point below 40°C based on on-site sampling test results. This classifies it as hazardous industrial waste with a flash point below 60°C. However, the first plant did not apply for a modification of the waste disposal plan for this item. Despite that, the production and storage of the aforementioned hazardous industrial waste were carried out following approval from this authority, which constitutes a violation of Article 31, Paragraph 1, Clause 1 of the Waste Disposal Act.	Penalty under Article 53, Paragraph 1, Clause 1 of the Waste Disposal Act.	60	Amendment of the Waste Disposal Plan.

134

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

Violated Penalty
Item Date Basis Violation Penalty Response
Regulation Article
----- End of picture text -----

Item	Date	Basis	Violated Regulation	Violation	Penalty Article	Penalty	Response

2	2022.04.25	Environmental Industry Letter No. 1113401146	Violation of Article 31, Paragraph 1, Subparagraph 1 of the Waste Disposal Act.	From June to December of year 2020, during the online declaration of waste, the first plant (located at No. 24, Guangfu North Road, Zhongxing Village, Hukou Township, Hsinchu County, Control Number: J5904159) reported the production of 180339 waste resin (waste code: D-0202) from June to October, with monthly quantities of 3.85, 6.48, 3.738, 4.415, and 3.601 metric tons, respectively. All of these quantities exceeded ten percent of the maximum monthly generation quantity of 2.5 metric tons as stated in the factory's waste disposal plan, without prior application for a modification of the waste disposalplan.	Penalty under Article 52 of the Waste Disposal Act.	6	Amendment of the Waste Disposal Plan.

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5.5 Labor-Management Relations
5.5.1 Employee welfare measures, training and development programs, retirement system, and implementation status, as well as agreements between labor and management and measures to protect employee rights:
- (1) Employee welfares
  - a. In accordance with government regulations, a empolyee welfare committee has been established to implement various welfare measures.
  - b. We value lifelong learning for all employees and provide education and training programs tailored to their job requirements.
  - c. Employee trips: The Company organizes annual trips for employees.
  - d. Festival gifts: In accordance with local customs and festivals, the Company provides gifts or bonuses to employees during holidays.
  - e. We place great importance on labor-management relations and creating equal employment opportunities. We continuously improve the employment environment and occupational health and safety management system to prevent accidents and occupational diseases from occurring.
- (2) Education and training programs for employees

The Company implements internal and external on-the-job training programs to enhance employees' professional skills and improve work efficiency, taking into consideration employees' job requirements and the Company's future business conditions.

(3) Retirement system and implementation status
a. The Company complies with government regulations by allocating employee retirement reserves and depositing them in a dedicated account at the Central Trust of China(Bank of Taiwan now). In accordance with the Labor Standards Act, the Company also handles the payment of employee retirement benefits. Since July 1, 2005, employees who choose to apply the Labor Pension Act for their retirement system have their retirement benefits allocated to their personal retirement accounts at the Bureau of Labor Insurance, in accordance with relevant regulations.
b. In addition to labor insurance, health insurance, and social insurance as required by the government, the Company also provides group insurance coverage to fully protect its employees.
c. The Company regards employees as its most valuable assets and takes full responsibility for providing various welfare measures. As a result, there have been no labor disputes, and it is anticipated that the cooperation between labor and management will become even closer in the future.
(4) Agreements between labor and management and measures to protect employee rights:

136

The Company not only adheres to various laws and regulations and protects employees' rights and benefits but also conducts thorough communication and dissemination of information with employees before implementing significant policies to understand their needs. This approach aims to gain employees' support and foster a mutually beneficial and harmonious labor-management relationship.

5.5.2 In the most recent fiscal year up until the printing date of the annual report, the Company incurred losses due to labor disputes (including violations of labor standards based on labor inspection results). The losses include information such as the date of disciplinary action, reference number of the action, violated legal provisions, details of the violations, and the content of the disciplinary measures. The Company also discloses the estimated amounts of current and future losses and the corresponding measures. In cases where a reasonable estimation is not possible, the report explains the reasons for the inability to provide a reasonable estimation: None.

5.6 Information Technology Security Management

5.6.1 IT Security Risk Management Framework, IT Security Policy, Specific Management Procedures and Resources Invested in IT Security Management:

To maintain Headway's competitive advantage in technology leadership, excellent manufacturing, and customer trust, information security and protection of confidential information are key commitments to customers, shareholders, and partners. Headway has implemented effective information security management systems by establishing relevant policies, management procedures, and guidelines. This ensures a robust capability for information security and protection. Headway actively strengthens mechanisms for information security and safeguarding of confidential information to protect the interests of the Company's customers and business partners.

(1) IT Security Risk Management Framework
a. Information Security Policy and Organization

In order to ensure effective governance of information security within the Company, Headway adopted the "Information Security Policy and Management" in 2020. The head of the IT Office serves as the convener and is responsible for developing and planning the Company's information security policy and implementation measures. Through the implementation of the policy and compliance with regulations, the effectiveness of the information security risk management mechanisms is continuously reviewed, aiming to enhance the overall information security of the Company.

137

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b. The responsibilities of the IT Office in information security are as follows:
I. Plan and implement annual information security policies, and annually review and adjust the timeliness and appropriateness of the information security management system.
- II. Plan and design the Company's information security software, hardware systems, and control scope, and establish management regulations for user information operations with corresponding audits.
- III. Responsible for controlling and maintaining the security settings (policies) and control details of all company information system equipment (physical/virtual servers, network devices, and firewalls); develop contingency plans for incidents of attacks.
- IV. Plan, install, configure, and maintain system monitoring.

(2) IT Scurity Policy

The Company has completed information security policy and management measures by the end of 2020, establishing an information security management system and constructing the forth shift documents for information security management. These documents serve as the basis for the current information security management operations in the Company. The operations will reference the ISO 27001 Information Security Management Standard to strengthen and implement information security risk assessment and management practices, ensuring the confidentiality, integrity, availability, and protection of the Company's information assets and personal data.

a. Planning: Information Risk Management
I. Enterprise Information Security Risk Assessment
II. Formulation of Information Security Risk Management and

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Countermeasures

III. Reference to International Information Security Standards (ISO 27001)

b. Implementation: Information Security Protection
- I. Information Asset Management
- II. Physical and Environmental Security Management
- III. Access Control
- IV. Network Security Management
- V. Information Security Incident Management
c. Inspection: Monitoring the Effectiveness of Information Security Management
- I. Continuous Monitoring of Information Security
- II. Quantification of Information Security Indicators
- III. Internal Audit of Information Security
d. Action: Review and Continuous Improvement
- I. Review and Improvement of Information Security Measures
- II. Information Security Education, Training, and Awareness
(3) Specific Management Plans:
a. Network Security: Implement next-generation firewalls to enhance network security protection capabilities.
b. Infrastructure Strengthening: Revise the original network connectivity model for unified management and policy-making.
c. Endpoint Security: Establish endpoint antivirus measures and strengthen detection of malicious software behavior.
e. Backup System Planning: Revise the original backup method and regularly perform backups, conducting periodic disaster recovery exercises and testing for core systems.
f. Education and Training: Enhance employee awareness of information security and assist colleagues in identifying social engineering and phishing education opportunities.
(4) Allocation of Resources for Information Security Management:
a. Endpoint Protection: Perform weekly virus code checks and updates, and quarterly checks for operating system updates.
b. Hardware Defense: Implement NGFW (Next-Generation Firewall) to strengthen network security management.
c. Software Inventory: Conduct an annual software inventory to ensure the use of legally licensed software and prevent malicious software.
e. Information Security Case Sharing and Awareness Enhancement: Conduct periodic analysis and educational training upon receiving suspicious cases.
f. Backup Mechanism Establishment: Establish backup management mechanisms and systems to ensure data security and availability.
g. Continuous Development: Continuously develop information-related

139

management measures and monitoring devices.

5.6.2 Due to significant information security incidents in the recent year and up to the date of printing the annual report, the losses incurred, potential impacts, and corresponding measures are outlined as follows. In cases where a reasonable estimation is not possible, the inability to make such estimation is also indicated:

There have been no significant information security incidents that have impacted the operational risks of the Company in the recent year up to the date of printing the annual report.

5.7 Important Contracts

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Restricted
Nature Conuterparty Period Contant
item
Loan Chang Hwa Bank 2022.09-2023.08 Collateralized Loan None
Loan Chang Hwa Bank 2022.09-2023.08 Credit Loan None
Loan Mega Bank 2022.08-2023.08 Credit Loan None
Loan Hua Nan Bank 2022.07-2023.07 Credit Loan None
Loan E. Sun Bank 2022.06-2023.06 Credit Loan None
Loan Taipei Fubon Bank 2022.08-2023.08 Credit Loan None
Loan CTBC Bank 2022.08-2023.07 Credit Loan None
Loan Bank SinoPac 2022.05-2023.05 Collateralized Loan None
Loan China Bill Finance Co. 2022.09-2023.09 Commercial Bill None
Loan Mega Bills 2022.11-2023.11 Commercial Bill None
Loan Mega Bank 2022.08-2023.08 Credit Loan None
Loan First Bank 2022.11-2023.10 Credit Loan None
Loan Bank SinoPac 2022.05-2023.05 Credit Loan None
Loan CTBC Bank 2022.08-2023.07 Credit Loan None
Loan Bank for Froeign Trade
112.02-2024.02 Collateralized Loan - LC None
of Vietnam
Loan Bank of China 2022.08-2023.08 Credit Loan None
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140

6. Financial Information

6.1 Condensed balance sheet and comprehensive income statement information for the Last Five Fiscal Years
6.1.1 Consolidated balance sheet

Unit: NTD inThousand

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Year Financial information for the last five years As of March
31, 2023
Item (Note2)
2018 2019 2020 2021 2022
Current assets 1,187,202 1,398,122 1,413,478 1,371,513 1,343,251 1,317,781
Property, plant
643,784 354,775 356,944 338,353 337,559 329,800
and equipment
Intangible assets 701 518 6,117 1,833 1,993 1,882
Other assets 137,241 127,070 116,434 120,827 110,995 139,221
Total assets 1,968,928 1,880,485 1,892,973 1,832,526 1,793,798 1,788,684
Before
distribution 622,071 605,941 539,338 445,039 480,806 410,130
Current
liabilities After - 522,988 -
distribution 644,433 578,029 550,542 （ Note1 ）
Non-current
220,762 161,522 254,768 218,653 198,989 255,209
liabilities
Before
Total distribution 842,833 767,463 794,106 663,692 679,795 665,339
liabiliti
es distributionAfter - 805,955 832,797 769,195 （ 721,977Note1 ） -
Equity belong the
1,016,839 998,381 984,356 1,050,312 1,007,363 1,015,566
Company owners
Capital stock 695,602 699,861 703,470 703,353 703,033 703,033
Capital Surplus 116,104 62,469 44,300 12,761 13,081 13,081
Before
distribution 264,612 324,109 328,736 431,674 349,624 355,284
Retailed
earnings After - 307,442 -
distribution 285,617 290,045 326,171 （ Note1 ）
Other equity (59,479) (88,058) (92,150) (97,476) (58,375) (55,832)
Non-controlling
109,256 114,641 114,511 118,522 106,640 107,779
Interest
Before
distribution 1,126,095 1,113,022 1,098,867 1,168,834 1,114,003 1,123,345
Total
equities After - 1,071,821 -
distribution 1,074,530 1,060,176 1,063,331 （ Note1 ）
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Note1: The earnings distribution plan for the fiscal year 2022 has been approved by the board of directors on March 14, 2023. However, it has not yet been approved by the shareholders' meeting.

Note2: The financial information for the period ending March 31, 2023 has been reviewed by the independent auditor.

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6.1.2 Condensed comprehensive income statement

Unit: NTD inThousand

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

Year Financial information for the last five years As of March
31, 2023
Item (Note)
2018 2019 2020 2021 2022
Sales Revenue 1,918,688 1,614,375 1,380,972 1,476,066 1,448,029 319,186
Gross profit 216,372 299,340 297,775 284,086 194,241 41,735
Operating profit or
(14,117) 78,294 102,555 90,546 14,697 2,811
loss
Non-Operating
3,122 13,134 (4,815) 7,129 15,221 4,454
income and expense
Net income before
(10,995) 91,428 97,740 97,675 29,918 7,265
tax
Profit (loss) from
continuing (24,537) 74,348 75,381 47,019 20,996 6,745
operations
Profit (loss) from
- - - -
discontinuing (19,362) 110,813
Operations
Profit (loss) for the
(24,537) 74,348 56,019 157,832 20,996 6,745
year
other
comprehensive (10,462) (23,866) (5,274) (18,421) 42,802 2,385
income(After Tax)
Total
comprehensive (34,999) 50,482 50,745 139,411 63,798 9,130
income
Profit (loss)
attributable to The (34,365) 59,512 45,221 142,631 18,609 5,660
Company owners
Profit (loss)
attributable to
9,828 14,836 10,798 15,201 2,387 1,085
Non-controlling
interests
Comprehensive
income
(44,403) 36,208 39,625 124,345 60,809 7,991
attributable to The
Company owners
Comprehensive
income
attributable to 9,404 14,274 11,120 15,066 2,989 1,139
Non-controlling
interests
EPS (0.49) 0.86 0.65 2.05 0.27 0.08
----- End of picture text -----

Note: The financial information for the period ending March 31, 2023 has been reviewed by the independent

auditor.

142

Unit: NTD inThousand

6.1.3 Parent company only balance sheet

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

Financial information for the last five years
Year
Item
2018 2019 2020 2021 2022
Current assets 458,973 450,639 514,216 523,379 481,596
Property, plant and
162,319 152,860 160,695 171,399 183,610
equipment
Intangible assets 352 259 161 62 199
Other assets 1,000,344 985,023 933,815 890,386 881,526
Total assets 1,621,988 1,588,781 1,608,887 1,585,226 1,546,931
Before
distribution 397,626 456,761 393,780 330,386 349,486
Current
liabilities After 391,668
distribution - 495,253 432,471 435,889 (Note)
Non-current
207,523 133,639 230,751 204,528 190,082
liabilities
Before
distribution 605,149 590,400 624,531 534,914 539,568
Total
liabilities After 581,750
distribution - 628,892 663,222 640,417 (Note)
Capital stock 695,602 699,861 703,470 703,353 703,033
Capital Surplus 116,104 62,469 44,300 12,761 13,081
Before
distribution 264,612 324,109 328,736 431,674 349,624
Retailed
earnings After - 307,442
distribution 285,617 290,045 326,171 (Note)
Other equity (59,479) (88,058) (92,150) (97,476) (58,375)
Before
Total distribution 1,016,839 998,381 984,356 1,050,312 1,007,363
equities After - 965,181
distribution 959,889 945,665 944,809 (Note)
----- End of picture text -----

Note: The earnings distribution plan for the fiscal year 2022 has been approved by the board of directors on March 14, 2023. However, it has not yet been approved by the shareholders' meeting.

143

6.1.4 Parent company only comprehensive income statement

Unit: NTD inThousand

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Year
Financial information for the last five years
Item
2018 2019 2020 2021 2022
Sales Revenue 924,164 850,683 716,192 758,140 784,456
Gross profit 114,015 161,245 150,282 130,755 104,156
Operating profit or loss 4,521 48,751 41,522 15,914 4,361
Non-Operating income
(36,119) 15,398 13,438 162,773 18,352
and expense
Net income before tax (31,598) 64,149 54,960 178,687 22,713
Profit (loss) from
continuing (34,365) 59,512 45,221 142,631 18,609
operations
Profit (loss) from
- - - - -
discontinuing
Operations
Profit (loss) for the year (34,365) 59,512 45,221 142,631 18,609
other comprehensive
(10,038) (23,304) (5,596) (10,226) 42,200
income(After Tax)
Total comprehensive
(44,403) 36,208 39,625 132,405 60,809
income
EPS (0.49) 0.86 0.65 2.05 0.27
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6.1.5 CPAs’ Name and audit opinion

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Year CPA Firm Name Audit Opinion
Yixin Kao, Tung-Hui An unqualified
2018 Deloitte Taiwan
Yeh opinion
Yixin Kao, Minghui An unqualified
2019 Deloitte Taiwan
Chen opinion
Yixin Kao, Minghui An unqualified
2020 Deloitte Taiwan
Chen opinion
Yixin Kao, Minghui An unqualified
2021 Deloitte Taiwan
Chen opinion
、
Zhiyi Chang Minghui An unqualified
2022 Deloitte Taiwan
Chen opinion
----- End of picture text -----

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6.2 Financial analysis for the last five years

6.2.1 Consolidated financial analysis

6.2 Financial analysis for the last five years 6.2.1 Consolidated financial analysis	6.2 Financial analysis for the last five years 6.2.1 Consolidated financial analysis
Year Analysis Item Financial information for the last five years As of March 31, 2023 (Note) 2018 2019 2020 2021 2022
Financial	Liabilities to assets 42.81 40.81 41.95 36.22 37.90 37.20
structure (%)	Long-term fund for property, plant and equipment 209.21 359.25 379.23 410.07 388.97 418.00
Liquidity analysis (%)	Current ratio 190.85 230.74 262.08 308.18 279.37 321.31
	Quick ratio 121.45 122.84 140.16 220.09 195.45 233.14
	Interest coverage ratio (1.28) 18.27 18.70 19.89 6.21 4.29
Operatio n performa nce analysis	Receivables turnover (times) 3.75 3.56 3.17 3.65 4.17 3.92
	Average collection days 97 103 115 100 88 93
	Inventory turnover (times) 4.11 3.56 3.50 3.71 3.28 2.90
	Payables turnover (times) 6.22 7.02 6.86 7.87 8.69 8.79
	Average inventory turnover days 89 103 104 98 111 126
	Property, plant and equipment turnover(times) 3.04 3.23 3.88 4.25 4.28 3.83
	Total assets turnover (times) 0.93 0.84 0.73 0.79 0.80 0.71
	Return on assets (%) (1.00) 4.08 3.20 8.70 1.41 0.48
	Return on equity (%) (2.04) 6.64 5.07 13.92 1.84 0.60
Profitabil ity pre-tax net income to paid-in capital ratio(%) (1.58) 13.06 13.89 13.89 4.26 1.03 Net profit margin (%) (1.28) 4.61 4.06 10.69 1.45 2.11
	Net profit margin (%) (1.28) 4.61 4.06 10.69 1.45 2.11
	EPS (NT$) (0.49) 0.86 0.65 2.05 0.27 0.08
Cash flow (%)	Cash flow ratio (%) (7.53) 27.38 21.28 27.31 19.27 4.88
	Cash flow adequacy ratio (%) 70.42 79.19 73.67 57.55 57.02 84.40
	Cash flow reinvestment ratio (%) - 5.73 2.33 2.06 - 1.00
Leverage	Operating leverage (18.06) 4.30 3.43 3.87 17.06 21.45
	Financial leverage 0.75 1.07 1.06 1.06 1.64 4.65
Explanation of the changes in financial ratios in the past two years (Analysis can be omitted if the changes are less than 20%): 1. Interest coverage ratio, return on assets, return on equity, pre-tax net income to paid-in capital ratio, net profit margin, and earnings per share have decreased: This is primarily due to a decrease in after-tax net profit. 2. Cash flow ratio has decreased: This is mainly attributed to a decrease in net cash flow from operating activities. 3. Operating leverage and financial leverage have increased: This is primarily due to a decrease in operatingincome.

Note: The financial information for the period ending March 31, 2023 has been reviewed by the independent auditor.

145

6.2.2 Parent company only financial analysis

Year Analysis Item	Year Analysis Item	Financial information for the last five years
		2018 2019 2020 2021 2022
Financial structure (%)	Liabilities to assets	37.30 37.16 38.82 33.74 34.88
	Long-term fund for property, plant and equipment	754.29 740.56 756.16 737.78 652.17
Liquidity analysis (%)	Current ratio	115.42 98.65 130.58 158.41 137.80
	Quick ratio	71.31 65.55 90.89 104.59 87.75
	Interest coverage ratio	(7.52) 17.60 16.75 50.64 6.26
Operatio n performa nce analysis	Receivables turnover (times)	4.14 4.10 3.63 4.23 4.81
	Average collection days	88 89 101 86 76
	Inventory turnover (times)	4.80 4.14 3.61 3.65 3.54
	Payables turnover (times)	5.32 5.33 4.73 5.18 6.43
	Average inventory turnover days	76 88 101 100 103
	Property, plant and equipment turnover(times)	5.29 5.40 4.57 4.57 4.42
	Total assets turnover (times)	0.55 0.53 0.45 0.47 0.50
Profitabil ity Return on assets (%) Return on equity (%) pre-tax net income to paid-in capital ratio(%) Net profit margin (%) EPS (NT$)	Return on assets (%)	(1.87) 3.91 3.01 9.12 1.42
	Return on equity (%)	(3.14) 5.91 4.56 14.02 1.81
		(4.54) 9.17 7.81 25.41 3.23
	Net profit margin (%)	(3.71) 7.00 6.31 18.81 2.37
	EPS (NT$)	(0.49) 0.86 0.65 2.05 0.27
Cash flow (%)	Cash flow ratio (%)	(7.24) 15.93 12.16 6.60 (14.06)
	Cash flow adequacy ratio (%)	33.93 45.14 35.65 24.28 25.26
	Cash flow reinvestment ratio (%)	- 1.21 - - -
Leverage	Operating leverage	30.60 3.93 4.33 10.02 29.43
	Financial leverage	5.55 1.09 1.09 1.29 96.91
Explanation of the changes in financial ratios in the past two years (Analysis can be omitted if the changes are less than 20%): 1. payables turnover ratio(times) has increased: This is due to a decrease in average accounts payable caused by an increase in the cost of sales. 2. Interest coverage ratio, return on assets, return on equity, pre-tax net income to paid-in capital ratio, net profit margin, and earnings per share have decreased: This is primarily due to a decrease in after-tax net profit. 3. Cash flow ratio has decreased: This is mainly attributed to a decrease in net cash flow from operating activities. 4. Operating leverage and financial leverage have increased: This is primarily due to a decrease in operatingincome.

146

Note: The financial analysis formula:

Financial structure
(1) Debt ratio = Total liabilities/total assets.
(2) Long term funds to property, plant, and equipment ratio = (Total shareholders’ equity + non-current liabilities)/net property, plant, and equipment
Solvency
(1) Current ratio = Current assets/current liabilities
(2) Quick ratio = (Current assets - inventory - prepaid expenses)/current liabilities
(3) Times Interest Earned = Net income before tax and interest expense/current interest expense
Operating ability
(1) Accounts Receivable (including account receivable and note receivable from operating) turnover = Net sales/average Receivables (including account receivable and note receivable from operating) balance
(2) Average collection period = 365 days/ accounts receivable turnover
(3) Inventory turnover (times) = Cost of goods sold/average inventory
(4) Accounts Payable (including Account payable and Note payable from operating) turnover = Cost of goods sold/average accounts payable (including Account payable and Note payable from operating)
(5) Average inventory turnover days = 365 days/ inventory turnover
(6) Property, plant, and equipment turnover (times) = Net sales/ average net average property, plant, and equipment
(7) Total asset turnover = Net sales/average total assets
Profitability
(1) Return on total assets = [net income + interest expense x (1-tax ratio)]/average total assets
(2) Return on shareholder’s equity = Net income/average total shareholder’s equity
(3) Profit margin = Net income/ net sales
(4) Earnings per Share = (Net income attributable to parent company’s shareholders - preferred stock dividend)/ weighted average number of shares issued
Cash flow
(1) Cash flow ratio = Cash flow from operating activities/current liabilities
(2) Net cash flow adequacy ratio = Five-year sum of cash from operations / Five-year sum of capital expenditures, inventory additions, and cash dividends
(3) Cash reinvestment ratio = (Net cash flow from operating activities - cash dividends)/ (gross property, plant, and equipment + long-term investments + other non-current assets + working capital)
Leverage
(1) Operating leverage = (Net operating income - variable operating cost and expense)/operating income
(2) Financial leverage = Operating income/ (operating income - interest expenses)

147

6.3 Audit Committee’s Report for the Most Recent Year

HEADWAY ADVANCED MATERIALS INC. Audit Committee’s review report

2022

To 2023 shareholders’ meeting of Headway Advanced Materials Inc.:

The Board of Directors has prepared and submitted the Company's 2022 annual business report, financial statements and the earings distribution proposal, among which the financial statements had been audited by the accounting firm Deloitte & Touche, who also provided an independent auditor's report. The above annual business report, financial statements and the earings distribution proposal have been reviewed by the Audit Committee to be without any discrepancies. This report is prepared in accordance with Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act. Please review and approve the same.

The Convener of the Audit Committee:

Chien Yuan Chen

Mar 14, 2023

148

6.4 The audited consolidate financial statements of recnet year

INDEPENDENT AUDITOR’S REPORT

To Headway Advanced Materials Inc.:

Opinion

We have audited the accompanying financial statements of Headway Advanced Materials Inc. (the Company) and the subsidiaries, which comprise the consolidated balance sheets as of December 31, 2022, and 2021, and the statements of consolidated comprehensive income, changes in consolidated equity, consolidated cash flows from January 1 to December 31, 2022, and 2021, and the notes to the consolidated financial statements (including a summary of significant accounting policies).

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company and the subsidiaries as of December 31, 2022, and 2021, and the consolidated financial performance and consolidated cash flows from January 1 to December 31, 2022, and 2021 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, International Financial Reporting Standards recognized and announced by the Financial Supervisory Commission with validity, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and Auditing Standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company and the subsidiaries in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were most significant in our audit of the 2022 consolidated financial statements of Headway Advanced Materials Inc. and its subsidiaries. These matters were addressed in the

149

context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on the matters.

Key audit matters for the 2022 consolidated financial statements of Headway Advanced Materials Inc. and the subsidiaries are stated as follows:

Revenue Recognition

Sales revenue from PU resin products of Headway Advanced Materials Inc. and its subsidiaries is significant and accounts for 77% of the total consolidated revenue. As the global economic environment has been challenging in the current year, the overall gross margin has declined, although the gross margin for some products has only slightly changed. Therefore, we have identified revenue recognition of these products as a key audit matter. Refer to Notes 4(13) and 24 for information on the related accounting policies.

1.We assessed the effectiveness of relevant internal controls over the sales cycle, including the related internal control procedures and operating systems, to confirm and evaluate their effectiveness during the sales transactions.
2.We selected samples of sales list and examined customer sales orders, export declarations or delivery notes signed by external customers, sales invoices, and examined whether there were any abnormalities in the collection of sales revenue and the identity of sales and collection targets to confirm the validity of revenue.

Other Matters

Headway Advanced Materials Inc. has prepared the 2022 and 2021 parent company olny financial statements with the auditor report expressing an unqualified opinion, archived for reference.

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

Management is responsible for the preparation of and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, International Financial Reporting Standards recognized and announced by the Financial Supervisory Commission with validity, International Accounting Standards, the consolidated financial statements explaining and the consolidated financial statements prepared with explanation with fair expression, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud and error.

In preparing the consolidated financial statements, management is responsible for assessing the ability of Headway Advanced Materials Inc. and the subsidiaries to continue as a going concern, disclosing, applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate Headway Advanced Materials Inc. and the subsidiaries or to cease operations, or has a realistic alternative but to do so.

150

The governance unit (including the Audit Committee) of Headway Advanced Materials Inc. and its subsidiaries is responsible for monitoring the financial report process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

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

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

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.
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 internal control of Headway Advanced Materials Inc. and the subsidiaries.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
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 and subsidiaries’ 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 Headway Advanced Materials Inc. and subsidiaries to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements (including the relevant notes), and whether the

151

consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Obtain sufficient and appropriate audit evidence regarding the financial information of entities formed in Headway Advanced Materials Inc. and its subsidiaries to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of Headway Advanced Materials Inc. and subsidiaries 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 provide those charged with governance with a statement that we have complied with The Norm of the Professional Ethics for Certified Public Accountant regarding the independence of personnel from our firm, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence (and where applicable, related safeguards).

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the 2022 consolidated financial statements of Headway Advanced Materials Inc. and are therefore the audit key matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosures 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.

Deloitte & Touche Taipei, Taiwan Republic of China March 14, 2023

Auditor Kent C. Chang Auditor Gorden Chen Securities and Futures Securities and Futures Commission Approval Document No. Commission Approval Document No. Jin-Guang-Zheng—Sheng-Zi Jin-Guang-Zheng—Sheng-Zi No. 1100378647 No. 0930128050

152

Headway Advanced Materials Inc. and Subsidiaries

Consolidated Balance Sheets

December 31, 2022 & 2021

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

Unit: In NTD Thousand
December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Code Assets Amount ％ Amount ％ Code Liabilities & Equity Amount ％ Amount ％
Current Assets Current Liabilities
1100 Cash and cash equivalents (Note 4, 2100 Short-trem borrowings (Note 20, 31
6 & 31) $ 515,296 29 $ 527,636 29 & 33) $ 160,530 9 $ 113,715 6
1136 Current financial assets at amortized cost 2110 Short-trem bills payable (Note 20 &
(Note 4, 9 & 31) 130,150 7 99,557 6 31) 99,907 6 39,984 2
1150 Notes receivable, net (Note 4, 5, 11, 31 2130 Contract liabilities (Note 24) 10,081 1 3,023 -
& 32) 32,163 2 51,971 3 2150 Notes payble (Note 31 & 32) 59,307 3 74,911 4
1170 Accounts receivable, net (Note 4, 5, 2170 Accounts payable (Note 31 & 32) 73,990 4 80,382 4
11, 31 & 32) 262,139 15 300,318 16 2206 compensation payable to employees
1220 Current tax assets (Note 4 & 26) 10,507 - - - & directors (Note 25) 3,455 - 16,819 1
130X Inventories (Note 4, 5 & 12) 346,689 19 313,596 17 2220 Other payables (Note 21) 63,594 4 76,486 4
1476 Other financial assets – current 2230 Current tax liabilities (Note 4 & 26) 2,154 - 26,718 2
(Notes 10, 31 & 32) 30,000 2 61,923 3 2280 Lease liabilities – current (Note 4, 16
1479 Other current Assets (Note 19) 16,307 1 16,512 1 & 31) 4,466 - 9,821 1
11XX Total Current Assets 1,343,251 75 1,371,513 75 2399 Other current liabilities (Note 21) 3,322 - 3,180 -
21XX Total Current Liabilities 480,806 27 445,039 24
Non-current Assets Non-current Liabilities
1510 Financial assets at fair value through 2540 Long-term borrowings (Note 20, 31
profit or loss – non-current (Note & 33 ） 165,000 9 165,000 9
4, 7&31) 11,113 1 2,736 - 2570 Deferred tax liabilities (Note 4 & 26) 24,475 1 33,675 2
1517 Financial assets at fair value through 2580 Lease liabilities – non-current (Note
other comprehensive income - 4, 16 & 31 ） 9,514 1 13,970 1
non-current (Note 4, 8 & 31) 1,467 - 2,399 - 2640 Defined benefit liabilities (Note 4 &
1600 Properity, plant and equipment ( 22 ） - - 6,008 -
Note 4, 15 & 33) 337,559 19 338,353 19 25XX Total Non-current Liabilities 198,989 11 218,653 12
1755 Right-of-use assets (Note 4 & 16 ） 41,524 2 51,203 3 2XXX Total Liabilities 679,795 38 663,692 36
1780 Intangible assets (Note 4 & 18) 320 - 184 -
1805 Goodwill (Note 4 & 17) 1,673 - 1,649 - Equity (Note 23)
1840 Deferred tax assets (Note 4 & 26) 23,752 1 32,292 2 Equity Attributable To Owners of The
1920 Guarantee deposits paid 6,184 - 6,412 - Company
1975 Net defined benefit assets (Note 4 & Capital
22) 181 - - - 3110 Common stock captial 703,033 39 703,353 38
1990 Other non-current assets – others 3200 Capital surplus 13,081 1 12,761 1
(Note 19) 26,774 2 25,785 1 Retained earnings
15XX Total Non-current Assets 450,547 25 461,013 25 3310 Legal reserve 215,371 12 201,208 11
3320 Special reserve 95,488 5 86,263 4
3350 Unappropriatee retained
earnings 38,765 2 144,203 8
3300 Total Retained Earnings 349,624 19 431,674 23
3400 Other equity ( 58,375 ) ( 3 ) ( 97,476 ) ( 5 )
31XX Total Equity Attributable To
Owners of The Company 1,007,363 56 1,050,312 57
36XX Non-controlling Interests 106,640 6 118,522 7
3XXX Total Equity 1,114,003 62 1,168,834 64
1XXX Total Assets $ 1,793,798 100 $ 1,832,526 100 Total Liabilities & Equity $ 1,793,798 100 $ 1,832,526 100
----- End of picture text -----

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

Chairman ： Liou, Han-Yin

Manager ： Chao, Wei-Chun

Accountant in Charge ： Liao, Pei-Hung

153

Headway Advanced Materials Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

From January 1 to December 31, 2022 & 2021

Unit: In NTD Thousand, EPS in NTD

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

2022 2021
Code Amount ％ Amount ％
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4000
Net sales revenue (Note 4, 24,
32 & 37)
$ 1,448,029
100
$ 1,476,066

5000
Total cost of sales (Note 12 &
25)
1,253,788
87
1,191,980

5900
Gross profit (loss)

194,241
13

284,086

Operating expenses (Note 25)
6100
Selling expenses
56,513
4
58,655
6200
Administrative expenses
91,288
6
111,705
6300
R&D expenses
26,874
2
27,188
6450
Expected credit loss (gain)
4,869

-
(
4,008)

6000
Total operating
expenses

179,544
12

193,540

6900
Operating income (loss)

14,697

1

90,546

Non-operating income and
Expenses (Note 4, 25 & 37)
7100
Interest income
10,741
1
8,594
7010
Other income
19,256
1
9,126
7020
Other gains and losses
(
9,038 )
(
1 )
(
5,419 )
7050
Financial costs
(
5,738)

-
(
5,172)

7000
Total non-operating
income and expenses

15,221

1

7,129

7900
Profit (loss) from continuing
operations before tax
29,918
2
97,675
7950
Total tax expense (income)
(Note 4 & 26)

8,922

1

50,656

8000
Profit (loss) from continuing
operations
20,996
1
47,019
8100
Profit (loss) from discontinuing
Operations (Note 13)

-

-

110,813

8200
Profit (loss) for the year

20,996

1

157,832

100
81
19
4
7
2
-
13
6
-
1
-
-
1
7
4
3
7
10

154

Other comprerhensive income(Note 23) 8310 Items that will not be reclassified ubsequently to profit or loss: 8311 Remeasurement of defined benefit plans 8316 Unrealized gains and losses on investments in equity instruments at fair value through other comprehensive income 8360 Items that may be reclassified ubsequently to profit or loss: 8361 Exchange differences on translation of the financial statement of foreign operations 8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss (Note 26) ( 8300 Total other comprehensive income 8500 Total comprehensive income Profit (loss) attributable to: 8610 The Company owners 8620 Non-controlling interests 8600 Comprehensive income attributable to: 8710 The Company owners 8720 Non-controlling interests 8700 Earnings per share (Note 27) from continuing & discontinuing operations 9750 Basic 9850 Diluted	$ 4,940 ( 314 ) 47,672 9,496) 42,802 $ 63,798 $ 18,609 2,387 $ 20,996 $ 60,809 2,989 $ 63,798 $ 0.27 $ 0.26	- ( $ 1,049 ) - - 738 - 3 ( 20,602 ) ( 1 ) - 2,492 - 3 ( 18,421) ( 1) 4 $ 139,411 9 1 $ 142,631 10 - 15,201 1 1 $ 157,832 11 4 $ 124,345 8 - 15,066 1 4 $ 139,411 9 $ 2.05 $ 2.02

155

from continuing operations 9710 Basic 9810 Diluted	$ 0.27 $ 0.26	$ 0.46 $ 0.45

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

Chairman ： Manager ： Accountant in Charge ： Liou, Han-Yin Chao, Wei-Chun Liao, Pei-Hung

156

Headway Advanced Materials Inc. and Subsidiaries

Co ns o lid ate d Sta te me nt of C ha n ges in Eq uit y

Fro m Ja nua ry 1 t o De ce mbe r 31, 202 2 & 20 21

U nit : In N TD T ho usa nd

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Equity Attributable To Owners of The Company
Other Equity
Unrealized
gains and
Capital surplus (Note 23) losses on
Common stock captial Retained earnings (Note 23) Exchange investments in
differences on equity
translation of instruments at
the financial fair value
Shares Unappropriated statement of Unrealized through other Non
(Thousand Additional from logn-term Employee Restricted retained foreign revaluation comprehensive Unearned -controlling
Code shares) Amount paid-in capital investement stock options stock units From merger Total Legal reserve Special reserve earnings Total operations increments income compensation Total Interests Total Equity
A1 Balance January 1, 2021 70,348 $ 703,470 $ 34,436 $ 1,497 $ 3,225 $ 4,251 $ 891 $ 44,300 $ 196,896 $ 82,768 $ 49,072 $ 328,736 ( $ 89,913 ) $ 6,800 ( $ 3,149 ) ( $ 5,888 ) $ 984,356 $ 114,511 $ 1,098,867
2021 Appropriation and distribution of
retained earnings:
B1 Legal reserve - - - - - - - - 4,312 - ( 4,312 ) - - - - - - - -
B3 Special reserve - - - - - - - - - 3,495 ( 3,495 ) - - - - - - - -
B5 Cash dividends - - - - - - - - - - ( 38,691 ) ( 38,691 ) - - - - ( 38,691 ) - ( 38,691 )
Changes in capital suplus
C15 Cash dividends distributed by
capital suplus - - ( 31,656 ) - - - - ( 31,656 ) - - - - - - - - ( 31,656 ) - ( 31,656 )
D1 Net profit - - - - - - - - - - 142,631 142,631 - - - - 142,631 15,201 157,832
D3 Other comprehensive income - - - - - - - - - - ( 1,002 ) ( 1,002 ) ( 18,022 ) - 738 - ( 18,286 ) ( 135 ) ( 18,421 )
D5 Total comprehensive income - - - - - - - - - - 141,629 141,629 ( 18,022 ) - 738 - 124,345 15,066 139,411
N1 Compensation cost from restricted stock
units - - 1,362 - - ( 1,362 ) - - - - - - - - - 3,898 3,898 - 3,898
N1 Write off restricted stock units ( 12 ) ( 117 ) - - - 117 - 117 - - - - - - - - - - -
O1 Cash dividends for non-controlling
interests - - - - - - - - - - - - - - - - - ( 11,055 ) ( 11,055 )
T1 Reclassified to discontinuing operations
profit(loss) - - - - - - - - - - - - 8,060 - - - 8,060 - 8,060
Z1 Balance December 31, 2021 70,336 703,353 4,142 1,497 3,225 3,006 891 12,761 201,208 86,263 144,203 431,674 ( 99,875 ) 6,800 ( 2,411 ) ( 1,990 ) 1,050,312 118,522 1,168,834
2022 Appropriation and distribution of
retained earnings:
B1 Legal reserve - - - - - - - - 14,163 - ( 14,163 ) - - - - - - - -
B3 Special reserve - - - - - - - - - 9,225 ( 9,225 ) - - - - - - - -
B5 Cash dividends - - - - - - - - - - ( 105,503 ) ( 105,503 ) - - - - ( 105,503 ) - ( 105,503 )
D1 Net profit - - - - - - - - - - 18,609 18,609 - - - - 18,609 2,387 20,996
D3 Other comprehensive income - - - - - - - - - - 4,536 4,536 37,978 - ( 314 ) - 42,200 602 42,802
D5 Total comprehensive income - - - - - - - - - - 23,145 23,145 37,978 - ( 314 ) - 60,809 2,989 63,798
N1 Compensation cost from restricted stock
units - - 1,445 - - ( 1,445 ) - - - - - - - - - 1,745 1,745 - 1,745
N1 Write off restricted stock units ( 32 ) ( 320 ) - - - 320 - 320 - - - - - - - - - - -
O1 Cash dividends for non-controlling
interests - - - - - - - - - - - - - - - - - ( 14,871 ) ( 14,871 )
Q1 Disposal of investments in equity
instruments at fair value through other
comprehensive income - - - - - - - - - - 308 308 - - ( 308 ) - - - -
Z1 Balance December 31, 2022 70,304 $ 703,033 $ 5,587 $ 1,497 $ 3,225 $ 1,881 $ 891 $ 13,081 $ 215,371 $ 95,488 $ 38,765 $ 349,624 ( $ 61,897 ) $ 6,800 ( $ 3,033 ) ( $ 245 ) $ 1,007,363 $ 106,640 $ 1,114,003
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T he acc o mpa ny in g note s are a n int e gra l pa rt o f t he c ons o lidate d fina nc ia l st ate me nt s .

Manager ： Chao, Wei-Chun

Accountant in Charge ： Liao, Pei-Hung

Chairman ： Liou, Han-Yin

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Headway Advanced Materials Inc. and Subsidiaries

Consolidated Cash Flow Statement

From January 1 to December 31, 2022 & 2021

Unit: In NTD Thousand

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Code 2022 2021
Cash flows from (used in) operating activities:
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A00010 Profit (loss) from continuing operations before tax A00020 Profit (loss) from discontinuing operations before tax A10000 Profit (loss) before tax A20010 Total adjustments to reconcile profit (loss): A20100 Depreciation expense A20200 Amortization expense A20300 Expected credit loss(gain)/ Provision (reversal of provision) for bad debt expense A20400 Net loss (gain) on financial liabilities at fair value through loss(profit) A20900 Interest expense A21200 Interest income ( A21900 Compensation cost from restricted stock units A22500 Loss (gain) on disposal of property, plant and equipment ( A23200 Loss (gain) on disposal of subsidiaries A23700 Impairment loss on non-financial assets A29900 Loss for market price decline and obsolete and slow-moving inventories A24100 Loss (gain) on foreign exchange, net A30000 Total changes in operating assets and liabilities A31130 Notes receivable A31150 Accounts receivable A31200 In inventories ( A31240 Other current assets A31250 Other financial assets – current A31990 Net defined benefit assets ( A32130 Notes payable ( A32150 Accounts payable ( A32180 Other payable & Other current liabilities ( A32190 compensation payable to employees & directors ( A32125 Contract liabilities A32240 Net defined benefit liabilities ( A33000 Cash inflow (outflow) generated from operations A33300 Interest paid ( A33500 Income taxes paid ( AAAA Net cash flows from (used in) operating activities	$ 29,918 - 29,918 62,387 281 4,869 ( 1,401 ( 5,738 10,741 ) ( 1,745 459 ) ( - ( - 11,113 42,315 ( 19,866 ( 41,822 44,742 ) ( 1,755 30,070 573 ) 15,604 ) 8,304 ) 13,144 ) ( 13,364 ) 7,058 ( 677) ( 152,730 5,926 ) ( 54,149) ( 92,655	$ 97,675 110,813 208,488 60,565 261 4,008 ) 29 ) 5,172 8,594 ) 3,898 1,540 ) 117,381 ) 4,081 3,857 1,372 ) 1,631 ) 54,102 78,098 ) 16,680 22,336 - 2,572 6,770 13,462 ) 11,105 1,524 ) 1,307) 170,941 5,891 ) 43,507) 121,543

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Cash flows from (used in) investing activities: B00020 Proceeds from disposal of financial assets at fair value through other comprehensive income B00040 Acquisition of financial assets at amortised cost ( B00050 Proceeds from disposal of financial assets at amortised cost B00100 Acquisition of financial assets at fair value through profit or loss ( B02300 Net cash inflow on disposal of subsidiaries B02700 Acquisition of property, plant and equipment ( B02800 Proceeds from disposal of property, plant and equipment B03800 Decrease(increase) in guarantee deposits paid B04500 Acquisition of intangible assets ( B07100 Increase in prepayments for business facilities ( B07500 Interest received BBBB Net cash flows from (used in) investing activities ( Cash flows from (used in) financing activities: C00100 Increase(decrease) in Short-trem borrowings C00500 Increase(decrease) in Short-trem bills payable C01600 Proceeds from long-term borrowings C01700 Repayment of long-term borrowings ( C04020 Repayment of the principal portion of lease liabilities ( C04500 Cash dividends paid ( C05200 Cash dividends for non-controlling interests paid ( CCCC Net cash flows from (used in) financing activities ( DDDD Effect of exchange rate changes on cash and cash equivalents ( EEEE Net increase (decrease) in cash and cash equivalents ( E00100 Cash and cash equivalents at beginning of period E00200 Cash and cash equivalents at end of period	$ 618 87,389 ) ( 61,847 9,767 ) ( - 45,801 ) ( 611 240 ( 416 ) ( 989 ) ( 9,657 71,389) 47,110 ( 60,000 ( 245,000 245,000 ) ( 9,868 ) ( 105,503 ) ( 14,871) ( 23,132) ( 10,474) 12,340 ) 527,636 $ 515,296	$ - 27,308 ) 28,526 2,728 ) 410,482 32,768 ) 1,791 2,000 ) 93 ) 5,607 ) 8,598 378,893 92,359 ) 20,000 ) 165,000 185,000 ) 9,250 ) 70,347 ) 11,055) 223,011) 14 277,439 250,197 $ 527,636

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

Chairman ： Manager ： Accountant in Charge ： Liou, Han-Yin Chao, Wei-Chun Liao, Pei-Hung

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Headway Advanced Materials Inc. and Subsidiaries Notes to Consolidated Financial Statements

From January 1 to December 31, 2022 & 2021

(Amounts expressed in NTD Thousand, unless stated otherwise ）

1. Company History

Headway Advanced Materials Inc. (hereinafter referred to as "the Company") was established on April 24, 1976. Its business includes the manufacture, processing, and sale of PU curing agents, processing agents, coatings, resins for coatings, adhesives, flatting agents, and related raw materials.

The Company's stock has been listed on the Taiwan Stock Exchange since May 2016.

This consolidated financial report is expressed in the functional currency of the Company, which is New Taiwan dollars.

Hereinafter, the Company and its subsidiaries will be collectively referred to as " the Consolidated Company".

2. Date and Procedures of the Authorization of Financial Statements

The consolidated financial statement was authorized by the Board of Directors on March 14, 2023.

3. Application of the Newly Announced and Amended Regulations and Interpretations

(1) The Company has adopted International Financial Reporting Standards (IFRSs) that were recognized by the Financial Supervisory Commission, International Accounting Standards (IAS), Interpretations, and Notices (IFRS), Interpretation (IFRIC), and Interpretative Announcement (SIC) for the first time.

The Company has started applying the amended International Financial Reporting Standards (IFRSs) that were recognized and announced by the Financial Supervisory Commission and it will not have a significant impact on the accounting policies of the Consolidated Company.

(2) Applicable IFRSs recognized by the Financial Supervisory Commission in 2023

Newly announced / revised / amended Effective date for the regulations and interpretations announcement of the I A S B Amendments to IAS 1 “Disclosure of Accounting Policies” January 1, 2023 （ Remark1 ） Amendments to IAS 8 “Definition of Accounting Estimates” January 1, 2023 （ Remark2 ） Amendments to IAS 12 “Deferred Tax related to Assets and Liabilities arising from a Single Transaction” January 1, 2023 （ Remark3 ）

Remark1: This amendment applies to the annual reporting period commencing on or after January 1, 2023.

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Remark2: This amendment applies to changes in accounting estimates and accounting policies that occur during the annual reporting period commencing on or after January 1, 2023.

Remark3: Except for the recognition of deferred income tax on temporary differences arising from leases and decommissioning obligations as of January 1, 2022, this amendment applies to transactions that occur on or after January 1, 2022.

As of the date of issuance of this consolidated financial report, the Consolidated Company has assessed that other revisions to standards and interpretations will not have a significant impact on their financial position and financial performance.

(3) The IFRSs issued by IASB but not yet endorsed and issued into effect by the FSC

Newly announced / revised / amended regulations Effective date for the and announcement of the interpretations I A S B(Remark1) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture” To be determined by IASB Amendments to IFRS 16 “ Lease Liability in a Sale and Leaseback” January 1, 2024 （ Remark2 ） IFRS 17 “ Insurance Contracts” January 1, 2023 Amendments to IFRS 17 January 1, 2023 Amendments to IFRS 17 “ Initial Application of IFRS 17 and IFRS 9 — Comparative Information” January 1, 2023 Amendments to IAS 1 “Classification of Liabilities as Current or Noncurrent” and “Non-current Liabilities with Covenants” January 1, 2024 Amendments to IAS 1 “ Non-current Liabilities with Covenants” January 1, 2024

Remark1 ： Unless otherwise stated, the above Newly announced/ revised/ amended regulations or interpretations become effective for annual reporting periods beginning on or after the respective dates mentioned.

Remark2 ： A seller-lessee should retrospectively apply the amendments to IFRS 16 for sale and leaseback transactions entered into after the initial application of IFRS 16.

As of the date the accompanying consolidated financial statements were authorized for issue, the Consolidated Company continues in evaluating the impact on its financial position and financial performance from the initial adoption of other standards or interpretations and related applicable period. The related impact will be disclosed when the Consolidated Company completes its evaluation.

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4. Summary of Significant Accounting Policies

(1) Statement of compliance

This consolidated financial report is prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs recognized by and declared effective by the FSC.

(2) Preparation basis for financial statements

Except for the financial instruments measured at fair value and the net defined benefit assets/ liabilities recognized at the present value of the defined benefit obligation net of the fair value of the planned assets, this consolidated financial report is prepared at the historical cost.

The measurement of fair value is divided into Level 1 to Level 3 according to the observability and importance of the relevant input values:

Level 1 input values: It refers to the market price (unadjusted) of the same asset or liability available on the measurement date.

Level 2 input values: It refers to the directly (that is, price) or indirectly (that is, derived from price) observable input value of an asset or liability, except for Level 1 quotation.

Level 3 input values: It refers to the unobservable input value of an asset or liability.

(3) Classification criteria for classifying assets and liabilities as current and

noncurrent

Current assets include:

Assets held primarily for trading purposes;
Assets that are expected to be realized within 12 months after the reporting
- period; and
Cash and cash equivalents (excluding restricted items that will be exchanged or used to liquidate liabilities within 12 months after the balance sheet date).

Current liabilities include:

Liabilities held primarily for trading purposes;
Liabilities that will be due for settlement within 12 months after the balance sheet date, and;
Liabilities that cannot be unconditionally extended for at least 12 months after the balance sheet date.

Assets and liabilities other than current assets and current liabilities are

classified as noncurrent assets and noncurrent liabilities.

(4) Consolidation basis

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This consolidated financial report includes the financial statements of the Company and the entities (subsidiaries) controlled by the Company. The consolidated income statement has included the operating profit and loss of the acquired or disposed subsidiary companies in the current period from the date of acquisition or till the date of disposal. The financial reports of the subsidiaries have been adjusted to make their

accounting policies consistent with the accounting policies of the Consolidated Company. All transactions, account balances, incomes, and expenses between business entities have been written-off at the time of preparing the consolidated financial report. The total comprehensive income of subsidiaries is attributable to the shareholders and non-controlling interests of the Company, even if the non-controlling interests are with a negative balance thereafter.

When the changes in the equity of the subsidiary owned by the Consolidated Company do not result in the loss of control, it is treated as an equity transaction. The book amount of the Consolidated Company and non-controlling interests have been adjusted to reflect changes in its relative equity in the subsidiary. The difference between the adjustment amount of non-controlling interests and the fair value of the consideration paid or received is directly recognized as equity and attributable to the Company’s shareholders.

Please refer to Note 14 and Table 4 for the subsidiaries, shareholding ratio, and business items in detail.

(5) Business combinations

Acquisitions of businesses are accounted for using the acquisition method. Acquisition-related costs are generally recognized in profit or loss as they are incurred.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interests in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net amount of the identifiable assets acquired and liabilities assumed still exceeds the total of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interests in the acquiree on the acquisition date, the difference is recognized as a bargain purchase gain and immediately recognized in profit or loss.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of

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liquidation may be initially measured at fair value. Other types of non-controlling interests are measured at fair value.

(6) Foreign Currency

The business entity that has financial reports prepared in a currency (foreign currency) other than its functional currency shall have it converted into the functional currency at the exchange rate on the trading day.

Foreign currency transactions are converted in accordance with the closing exchange rate on the balance sheet date. The exchange difference amount arising from the settlement or exchange transaction should be recognized as profit and loss.

Non-monetary items in foreign currency measured at the fair value are converted at the exchange rate on the day when the fair value is determined, and the resulted exchange difference is recognized as profit and loss. However, if the change in fair value is recognized in other comprehensive income, the resulted exchange difference is recognized in the other comprehensive income.

Non-monetary items in foreign currency measured at the historical cost are converted at the exchange rate on the trading day and will not be converted again.

The assets and liabilities of a foreign operating entity (including the subsidiaries, associates, or joint venture operations in a different country or use different currencies) are converted into New Taiwan Dollar in accordance with the exchange rate on the balance sheet date when a consolidated financial report is prepared. Profit and loss items are converted at the current average exchange rate, and the resulted exchange

difference is recognized in the other comprehensive income (and is attributable to the shareholder’s equity and non-controlling interests of the Company).

When the Consolidated Company disposes of the ownership interests of foreign operating entities, or dispose of a portion of the ownership interests of a foreign operating entity's subsidiary and lose control, or if the retained interests in the foreign operating entity after disposal are financial assets and are accounted for using the accounting policy for financial instruments, all cumulative foreign exchange differences that are attributable to the Company's equity holders and related to the foreign operating entity will be reclassified to profit or loss.

If the partial disposal of a subsidiary of a foreign operating entity does not result in the loss of control, any cumulative foreign exchange differences are reattributed proportionally to the non-controlling interests of the subsidiary, rather than recognized in profit or loss. In any other partial disposal of a

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foreign operating entity, cumulative foreign exchange differences are reclassified to profit or loss based on the proportion of the disposal.

(7) Inventory

Inventories include raw materials, work-in-process products, and finished products. Inventory is measured at the lower of cost or net realizable value. The comparison of the cost and net realizable value, except for the same type of inventories, is itemized. Net realizable value refers to the estimated selling price under normal circumstances minus the estimated cost required to complete the project and the estimated cost required to complete the sale. The weighted average method is adopted for the calculation of inventory cost.

(8) Property, plant and equipment

Property, plant, and equipment are recognized at the cost first and then measured at the cost net of accumulated depreciation and accumulated impairment loss subsequently.

Property, plant, and equipment are depreciated on a straight-line basis within the service life for each significant part separately. The Consolidated Company shall review the estimated service life, residual value, and depreciation method at least once at the end of each year, and defer the effect of changes in the applicable accounting estimates.

The difference between the net disposal amount of the property, plant, and equipment and the book amount is recognized as profit and loss at the time of having them delisted.

(9) Goodwill

The cost of the goodwill obtained in a business merger is based on the amount of goodwill recognized on the acquisition date, and it is subsequently measured at the cost net of the accumulated impairment loss.

For the purpose of impairment testing, goodwill is allocated to each cash-generating unit or group (referred to as “cash-generating unit”) that the Consolidated Company expects to benefit from the synergy of the merger.

The cash-generating unit that received the amortized goodwill has performed an impairment test by comparing the book value of the cash-generating unit containing goodwill with its recoverable amount annually (and when there are indications that the unit may have been impaired). If the goodwill allocated to the cash-generating unit is obtained from a business merger of the current year, the impairment test of the cash-generating unit should be performed before the end of the current year. If the recoverable amount of the cash-generating unit with allocated goodwill is lower than its book value, the impairment loss is to first reduce the book amount of the cash-generating unit’s amortized goodwill and then reduce the book value of the other assets of the cash-generating unit

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proportionally. The impairment loss, if any, is directly recognized as the current loss. The impairment loss of goodwill shall not be reversed in the subsequent period.

When disposing of a operation of a cash-generating unit that reveived a portion of the amortized goodwill, the amount of goodwill related to the disposed operation is included in the carrying amount of the operation to determine the gain or loss on disposal.

(10) Intangible assets
(a)Individually acquired:

Individually acquired finite-lived intangible assets are initially measured at cost and subsequently measured at cost less accumulated amortization. Intangible assets are amortized on a straight-line basis over their useful lives. The Consolidated Company review the estimated useful lives, residual values, and amortization methods at least at each annual reporting period end and defers the effect of any accounting estimate changes. Indefinite-lived intangible assets are reported at cost less accumulated impairment losses.

(b)Acquired in a business combination:

Intangible assets acquired in a business combination are recognized at fair value as of the acquisition date and are separately recognized from goodwill. The subsequent measurement method is the same as that for individually acquired intangible assets.

(c)Derecognition:

When intangible assets are derecognized, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss for the period.

(11) Impairment of property, plant and equipment, right-of-use assets, and intangible

assets

The Consolidated Company assesses on each balance sheet date whether there is any sign indicating that property, plant and equipment, right-of-use assets, and intangible assets may have been impaired. If there is any sign of impairment, the recoverable amount of the asset should be

estimated. If the recoverable amount of an individual asset cannot be estimated, the Consolidated Company should estimate the recoverable amount of the cash-generating unit to which the asset belongs.

For intangible assets with indefinite-lived and are not yet available for use, impairment tests are conducted at least annually and when there are indications of impairment.

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The recoverable amount is the higher of the fair value net of the cost of sale or its use-value. If the recoverable amount of an individual asset or a cash-generating unit is lower than its book value, the book value of the asset or the cash-generating unit should be reduced to its recoverable amount, and the impairment loss is recognized in profit and loss.

When the impairment loss is subsequently reversed, the book value of the asset or the cash-generating unit is adjusted up to the revised recoverable amount; however, the increased book value may not exceed the book value (net of amortization or depreciation) without any impairment loss of the assets or cash-generating unit recognized in previous years. The reversal of the impairment loss is recognized in the profit and loss.

(12) Financial instruments

Financial assets and financial liabilities are recognized in the consolidated balance sheet when the contractual terms of the instrument become binding on the Consolidated Company.

When financial assets or financial liabilities are initially recognized, if they are not measured at fair value through profit or loss, they are measured at fair value plus transaction costs directly attributable to the acquisition or issue of the financial asset or financial liability. The transaction costs directly attributable to the acquisition or issue of financial assets or financial liabilities measured at fair value through profit or loss are recognized immediately in profit or loss.

Financial assets

Conventional transactions of financial assets are recognized and derecognzied in accordance with the trade date accounting.

(1) Type of measurement

The types of financial assets held by the Consolidated Company are financial assets measured at fair value through profit and loss, financial assets measured at amortized cost, and equity instrument investment measured at fair value through other comprehensive income.

A. Financial assets measured at fair value through profit and loss Financial assets measured at fair value through profit and loss
are financial assets measured at fair value through profit and loss mandatorily. Financial assets measured at fair value through profit and loss mandatorily include equity instrument investments that are not designated by the Consolidated Company to be measured at fair value through other comprehensive income and debt instrument investments that are not classified as to be

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measured at amortized cost or measured at fair value through other comprehensive income.

Financial assets measured at fair value through profit or loss are measured at fair value, and any dividends or interest generated by them are recognized separately in other income and interest income, respectively. Any gains or losses resulting from the subsequent measurement are recognized in other income or loss. Please refer to Note 31 for the determination of fair value.

B. Financial assets measured at amortized cost

If an investment in financial assets of the Consolidated Company meets both of the following conditions, it is classified as a financial asset measured at amortized cost:

a. It is held within a business model whose objective is to hold financial assets to collect contractual cash flows; and

b. The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets measured at amortized cost (including cash and cash equivalents, accounts receivable measured at amortized cost, other financial assets, and term deposits with original maturities of more than 3 months) after initial recognition are subsequently measured at the amortized cost, the book value determined by the effective interest method less any impairment losses. Any foreign exchange gains or losses are recognized in profit or loss. Except for the following two circumstances, interest income is calculated by having the effective interest rate multiplied by the total book value of the financial assets:

a. For financial assets with the purchase or original impairment, interest income is calculated by having the effective interest rate after credit adjustment multiplied by the amortized cost of the financial asset.
b. For financial assets not with the purchase or original credit impairment, but subsequently become credit-impaired financial assets, interest income should be calculated by having the effective interest rate multiplied by the amortized cost of the financial asset from the next reporting period after the credit impairment.

Cash equivalents include time deposits and bonds with a repurchase agreement that are highly liquid and have a maturity of

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less than 3 months from the acquisition date. They can be easily converted into a fixed amount of cash and have a minimal risk of value fluctuation, and are used to meet short-term cash commitments.

C. Equity instruments investment measured at fair value through other comprehensive income

The Consolidated Company at the time of initial recognition can make an irrevocable choice to have the equity instrument investment that is not held-for-trade and not recognized through a business merger or with considerations paid measured at fair value through other comprehensive income.

Equity instrument investment is measured at fair value through other comprehensive income; subsequent changes in fair value are reported in other comprehensive income and accumulated in other equity. At the time of disposing the investment, the accumulated profit and loss is directly transferred to retained earnings and is not reclassified as profit and loss.

Dividends from equity instrument investment measured at fair value through other comprehensive income are recognized in the profit and loss when the Company’s right to receive payments is established unless the dividends clearly represent part of the investment cost recovered.

(2) Impairment of financial assets

The Consolidated Company assesses the impairment loss of financial assets (including accounts receivable) measured at amortized cost according to the expected credit loss on each balance sheet date.

Allowance for loss is recognized for accounts receivable according to the expected credit loss throughout the duration. For other financial assets, assess whether there is a significant increase in credit risk after the initial recognition, if there is no significant increase, the allowance for loss is recognized according to the 12-month expected credit loss; however if there is a significant increase in credit risk, the allowance for

loss is recognized according to the expected credit loss throughout the duration.

Expected credit loss is the weighted average credit loss based on the risk of default. The 12-month expected credit loss refers to the expected credit loss caused by

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the possible default event of the financial instrument within 12 months after the reporting date, and the expected credit loss throughout the duration refers to the expected credit loss caused by all possible default events throughout the duration of the financial instrument.

The impairment loss of all financial assets is with the book amount adjusted down through the allowance account.

(3) Derecognition of financial assets

The Consolidated Company will have the financial assets derecognized only when the contractual right from the cash flow of the financial asset is terminated, or, the financial asset has been transferred and almost all the risks and rewards related to the ownership of the asset have been transferred to other companies.

When a financial asset measured at amortized cost is derecognized entirely, the difference between the book value and the consideration received is recognized in the profit or loss. When equity instrument investments measured at fair value through other comprehensive inocme are dereconnized entirely, the accumulated profit and loss is directly transferred to retained earnings without having it reclassified as profit and loss.

Financial liabilities
(1) Subsequent measurement

Financial liabilities are measured at the amortized cost in accordance with the effective interest method.

(2) Derecognition of financial liabilities

When financial liabilities are derecognized, the difference

between the book value and the total consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

(13) Income recognition

The Consolidated Company after identifying the performance obligations in the contract will have the transaction price amortized to each performance obligation and will recognize income when each performance obligation is fulfilled.

Commodity sales income

Commodity sales income from the sale of chemical products is recognized at the time of shipment because customers have confirmed prices and rights to use the products, as well as the primary responsibility for resale and the risk of obsolescence of the products. The Consolidated

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Company recognizes revenue and accounts receivable at that point in time.

Revenue from contracts with customers

Revenue from contracts with customers is recognized by the

Consolidated Company in accordance with the completion of performance obligations.

(14) Lease

The Consolidated Company assesses whether it is (or includes) a lease contract on the contract date.

The Consolidated Company is the lessor

When the lease clause is to transfer almost all the risks and rewards attached to the ownership of the asset to the lessee, it is classified as a financial lease. All other leases are classified as operating leases.

Under operating leases, lease payments are recognized as revenue on a straight-line basis over the term of the relevant lease, after deduction of any lease incentives.

The Consolidated Company is the lessee

Except for the lease payments of low-value underlying asset leases and short-term leases that are subject to the applicable recognition, the exemption is recognized as expenses on a straight-line basis during the lease period, other leases are recognized as right-of-use assets and lease liabilities on the lease start date.

The right-of-use asset is originally measured at cost (including the original measurement amount of the lease liability, the lease payment paid before the lease start date minus the lease incentives received, and the original direct cost and the estimated cost of the restored underlying asset), and is subsequently measured at the cost net of the accumulated depreciation and accumulated impairment loss; also, adjust the

re-measurement amount of the lease liability. The right-of-use assets are separately expressed on the consolidated balance sheet.

Right-of-use assets are depreciated on a straight-line basis from the lease start date to the expiration of the service life or the expiration of the lease period, whichever is earlier.

The lease liability was originally measured at the present value of the lease payment (including fixed payments). If the implicit interest rate of the lease is easy to determine, the lease payment is discounted at such an interest rate. If the interest rate is not easy to determine, the lessee’s incremental loan interest rate is applied.

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Subsequently, the lease liability is measured at the amortized cost in accordance with the effective interest approach, and the interest expense is amortized during the lease period. If there are changes occurring in the lease period, the Consolidated Company will re-measure the lease liability and relatively adjust the right-of-use asset. However, if the book value of the right-of-use asset is reduced to zero, the remaining re-measurement amount is recognized in the profit and loss. Lease liabilities are separately expressed in the consolidated balance sheet.

(15) Borrowing Cost
All borrowing costs are recognized as profit and loss in the current period.
(16) Employee Benefit
Short-term employee benefits

Short-term employee benefit-related liabilities are measured by the expected non-discounted amount of cash to be paid in exchange for employee services.

Retirement benefits

The pension of the defined contribution plan is recognized as an expense for an amount equivalent to the retirement fund appropriated for the employee’s service period.

The defined benefit cost of a defined benefit retirement plan (including service cost, net interest, and remeasurement) is calculated using the projected unit credit method. Service cost (including current service cost and settlement gains or losses) and net defined benefit liability (assets) net interest are recognized as employee benefits expense when they occur and when settlements occur. Remeasurement (including actuarial gains and losses and the return on plan assets net of interest) is recognized in other comprehensive income when it occurs and is included in retained earnings and is not subsequently reclassified to profit or loss.

The net defined benefit liabilities (assets) are the appropriation shortage (surplus) of the defined benefit plan. The net defined benefit assets shall not exceed the present value of the refunded appropriation of the plan or the reduced appropriation in the future.

Other long-term employee benefits

The accounting treatment for other long-term employee benefits is similar to that of defined benefit retirement plans, except that any related remeasurements are recognized in the income statement.

(17) Stock-based compensation

Restricted stock units (RSUs) are recognized as equity instruments at their fair value on the grant date, and the best estimate of the number of units

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expected to vest. The expenses are recognized on a straight-line basis over the vesting period, and Capital Surplus-Restricted Stock Units and other equity (unearned employee compensation) are adjusted accordingly. If the RSUs are immediately vested on the grant date, the entire expense is recognized on that date.

When the Company issues RSUs, other equity ( unearned employee compensation ) is recognized on the grant date, and Capital Surplus-Restricted Stock Units is adjusted accordingly. If the RSUs are issued for consideration and the employees are required to return the consideration upon separation from the Company, the related payable should be recognized.

The estimated number of RSUs expected to vest is revised at each balance sheet date by the Consolidated Company. If the original estimate is revised, the impact is recognized in the profit and loss, and the cumulative expense is adjusted to reflect the revised estimate, with a corresponding adjustment to "Capital Surplus-Restricted Stock Units".

(18) Income tax

Income tax expense is the sum of current income tax and deferred income tax.

1. Current income tax

The Consolidated Company determines the current income (loss) in accordance with the law and regulations established by each income tax agency in order to calculate the income tax payable (recoverable ) accordingly.

The income tax to be levied on the undistributed earnings that are calculated in accordance with the Income Tax Act of the Republic of China is to be recognized in the year it is resolved in the shareholders meeting.

Adjustments to income tax payable of previous years are included in current income tax.

2. Deferred income tax

Deferred income tax is calculated according to the temporary difference between the book value of assets and liabilities and the tax basis for calculating taxable income.

Deferred income tax liabilities are generally recognized for all taxable temporary differences, while deferred income tax assets are recognized when there is likely having income tax credit derived from taxable income available for deducting temporary differences and loss credit.

Taxable temporary differences related to investment in subsidiaries and associates are recognized as deferred income tax liabilities unless

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otherwise provided that the Consolidated Company can control the timing of the reversion of the temporary differences; and the temporary differences are unlikely to be reversed in the foreseeable future. The deductible temporary differences related to this type of investment will be recognized as deferred income tax assets only if it is likely to have sufficient taxable income to realize the temporary differences, and within the scope expected to be reversed in the foreseeable future.

The book amount of deferred income tax assets is reviewed on each balance sheet date, and the book amount is reduced for those that are no longer likely to have sufficient taxable income to recover all or part of the assets. Those that have not been recognized as deferred income tax assets will also be reviewed on each balance sheet date, and the book amount is increased for those that are likely to generate taxable income in the future for the recovery of all or part of the assets.

Deferred income tax assets and liabilities are measured at the tax rate of the period when the liability is expected to be settled or the asset is expected to be realized. The said tax rate is based on the tax rate and tax law that has been legislated or substantively legislated on the balance sheet date. The measurement of the deferred income tax liabilities and assets reflects the tax consequences arising from the manner in which the Consolidated Company expects to recover or settle the book amount of the assets and liabilities on the balance sheet date.

Current and deferred income tax

Current and deferred income taxes are recognized in profit and loss; however, current and deferred income taxes related to items recognized in other comprehensive income or directly included in equity are recognized in other comprehensive income or directly included in equity, respectively.

5 Significant Accounting Judgments, Estimations, and the Main Sources of Assumption Uncertainties

When the Consolidated Company adopts accounting policies, for those that cannot easily obtain relevant information from other sources, the management must make relevant judgments, estimations, and assumptions based on historical experience and other relevant factors. Actual results may differ from estimates. The Consolidated Company has taken into consideration the recent developments of the COVID-19 epidemic in our country and its potential impacts on the economic environment, inflation, and market interest rate volatility, in assessing significant accounting estimates related to cash flow projections, growth rates, discount rates, profitability, and other factors., and the management will continue

174

to review the estimates and basic assumptions. If the revision of the estimate only affects the current period, it is recognized in the current period; if the revision of the accounting estimate affects both the current period and the future period, it is recognized in the current period and the future period.

6. Cash and Cash Equivalents

sh and Cash Equivalents	sh and Cash Equivalents
December 31, 2022 December 31, 2021 Cash on hand and petty cash $ 529 $ 566 Bank checking deposit and demand deposit 233,906 367,951 Cash equivalents Bank term deposit 425,609 320,599 Repurchase agreement bonds 15,402 - 675,446 689,116 Term deposits with original maturities of more than 3 months ( 89,889 ) ( 63,269 ) Restricted bank deposit ( 40,261 ) ( 36,288 ) Pledged bank deposit ( 30,000) ( 61,923) Total $ 515,296 $ 527,636 The interest rate range of bank deposits on the balance sheet date is as follows: December 31, 2022 December 31, 2021 Bank deposit 0.05%~6% 0.01%~2.9% Repurchase agreement bonds 4.25% - ancial Assets Measured at Fair Value through Profit and Loss December 31, 2022 December 31, 2021 Financial assets–current Measured at fair value through profit and loss mandatorily Non-derivative financial assets `－`Foreign Bonds $ 3,968 $ 2,736 `－`Domestic TWSE/TPEx listing stock 1,030 - `－`Domestic Fund beneficiary certificate 6,115 - $ 11,113 $ 2,736		December 31, 2021
		$ 566 367,951 320,599 - 689,116 ( 63,269 ) ( 36,288 ) ( 61,923) $ 527,636 sheet date is as December 31, 2021
Financial assets–current Measured at fair value through profit and loss mandatorily Non-derivative financial assets `－`Foreign Bonds `－`Domestic TWSE/TPEx listing stock `－`Domestic Fund beneficiary certificate	December 31, 2022 $ 3,968 1,030 6,115 $ 11,113
			$ 2,736 - - $ 2,736

7. Financial Assets Measured at Fair Value through Profit and Loss

8. Financial Assets Measured at Fair Value through Other Comprehensive income

Non-current Equity investment Equity investment Non-current Domestic investment Non-TWSE/TPEx listing stock TWSE/TPEx listing and	December 31, 2022 $ 1,467 December 31, 2022 $ 1,467 -	December 31, 2021	December 31, 2021
		$ 2,399 December 31, 2021
			$ 1,822 577

(1) Equity investment

175

Emerging Stock

$ 1,467

$ 2,399

The Consolidated Company has based on the mid-term and long-term strategic purpose to invest in Non-TWSE/TPEx listing stocks, TWSE/TPEx listing stocks and Emerging Stocks, and expect to make profits through long-term investment. The management of the Consolidated Company believes that if the short-term fluctuation in the fair value of the investment is included in the profit and loss, it is inconsistent with the aforementioned long-term investment plan; therefore, the management chooses to have such investments measured at fair value through other comprehensive income.

9. Financial Assets Measured at the Amortized Cost

Current Term deposits with original maturities of more than 3 months (Remark 1) Restricted bank deposit(Remark 2)	December 31, 2022 $ 89,889 40,261 $ 130,150	December 31, 2021	December 31, 2021
			$ 63,269 36,288 $ 99,557

Remark 1 As of December 31, 2022 and 2021, the interest rate range of time deposits with an original maturity of more than 3 months was 0.945%~8.09%, and 0.53%~5.30% per annum, respectively.
Remark 2 The Company has obtained approval from the National Tax Administration of the Ministry of Finance to repatriate USD 15 million under the "Regulations Governing the Investment of Overseas Funds Repatriated" and has submitted an investment plan to the Ministry of Economic Affairs. According to the regulations, the repatriated funds are restricted to the approved investment plan and cannot be used for other purposes.

10. Other Financial Assets

ther Financial Assets
Current Pledged bank deposit	December 31, 2022 $ 30,000	December 31, 2021
			$ 61,923

The Consolidated Company has established pledges as collateral for borrowings, please refer to Note 33.

Notes Receivable and Accounts Receivable

Notes receivable Measured at the amortized cost Total book amount Less: Allowance for loss Accounts receivable	December 31, 2022 $ 32,248 ( 85) $ 32,163	December 31, 2021	December 31, 2021
	(	(	$ 52,114 143) $ 51,971

176

Measured at the amortized cost Total book amount Less: Allowance for loss (	$ 288,660 26,521) ( $ 262,139	$ 322,211 21,893) $ 300,318

(1) Accounts receivalbe

The credit period granted by the Consolidated Company to customers is generally between 30 and 120 days from the end of the month. The allowance for loss is estimated based on the analysis of overdue accounts, customer creditworthiness, and financial status to estimate the amount of uncollectible accounts. Before accepting new customers, the Consolidated Company evaluates the credit quality of the potential customer through a credit rating system and sets the customer's credit limit. The customer's credit limit and rating are reviewed regularly every year.

The Consolidated Company recognizes the allowance for loss of accounts receivable based on the expected credit loss over the remaining lifetime of the accounts. The expected credit loss is calculated using a provision matrix, which considers the customer's past default history and current financial condition, the economic situation of the industry, and future prospects. Because the credit loss historical experience of the Consolidated Company shows no significant differences in the loss patterns among different customer groups, the provision matrix does not distinguish between customer groups, but only sets the expected credit loss rate based on the number of days overdue of accounts receivable.

The provision for doubtful accounts and notes receivable of the Consolidated Company is measured based on the provision matrix as follows: December 31, 2022

==> picture [410 x 226] intentionally omitted <==

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

O v e r d u e O v e r d u e
O v e r d u e O v e r d u e 246~429 Over 430
Not Overdue 1 ~ 60 d a y s 61~245 d a y s d a y s d a y s Total
Total book amount $ 258,610 $ 30,991 $ 4,909 $ 8,549 $ 17,849 $ 320,908
Allowance for loss
(expected credit
loss in the
duration) ( 130 ) ( 112 ) ( 1,758 ) ( 6,757 ) ( 17,849 ) ( 26,606 )
Amortized cost $ 258,480 $ 30,879 $ 3,151 $ 1,792 $ - $ 294,302
December 31, 2021
O v e r d u e O v e r d u e
O v e r d u e O v e r d u e 246~429 Over 430
Not Overdue 1 ~ 60 d a y s 61~245 d a y s d a y s d a y s Total
Total book amount $ 320,263 $ 31,162 $ 3,971 $ 4,638 $ 14,291 $ 374,325
Allowance for loss
(expected credit
loss in the
duration) ( 124 ) ( 84 ) ( 2,899 ) ( 4,638 ) ( 14,291 ) ( 22,036 )
Amortized cost $ 320,139 $ 31,078 $ 1,072 $ - $ - $ 352,289
----- End of picture text -----

177

The changes in the allowance for loss of the notes receivable and accounts receivable are as follows:

receivable are as follows:
		2022		2021
Beginning Balance		$ 22,036		$ 30,549
Add:Expected credit impairment
loss appropriated (reversed)
for the current year		4,869	(	4,008 )
Less:Actual write-off for the
current year	(	611 )	(	4,326 )
Exchange differences on
translation		312	(	179)
Ending Balance		$ 26,606		$ 22,036
Inventories
	December 31, 2022		December 31, 2021
Commodities		$ 3,713		$ 2,615
Finished goods		165,059		139,331
Work-in-process goods		17,793		14,818
Raw materials		138,391		156,832
Construction in progress		21,733		-
		$ 346,689		$ 313,596

12. Inventories

The nature of the cost of goods sold is as follows:

Cost of inventory sold Inventory impirement loss Physical inventory Gain(loss)	December 31, 2022 $ 1,253,788 $ 11,113 $ 371	December 31, 2021 $ 1,191,980 $ 3,857 ( $ 327 )

13. Non -current Assets Held for Sale

(1) Discontinued Operations

The Consolidated Company approved the disposal of Headway Shanghai Company in its board meeting on March 27, 2019 and signed the equity transfer agreement with the buyer on December 12, 2019. The Consolidated Company and the buyer agreed to dispose of all inventories and collect accounts receivable before transferring the plant and equipment and equity. The aforementioned transaction was completed on May 31, 2021, and control of Headway Shanghai Company was transferred to the acquirer on that day. Please refer to Note 29 for details.

The profit or loss details and cash flow information of the discontinued operation are as follows:

operation are as follows:
Sales revenue Cost of sales Gross profit Administrative Expense Operating loss Interest income Other		2021
	( ( (	$ - - - 6,361) 6,361 ) 5 212)

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Loss before tax ( Disposal gain (Note 29) Tax expense Profit for the year Profit form discontinuing operations Profit (loss) from discontinuing Operations attributable to: The Company owners Non-controlling interests Cash flow Operating activities ( Investing activities Financing activities Net cash flow out (	6,568 ) 117,381 - 110,813 $ 110,813 $ 110,813 - $ 110,813 $ 7,132 ) - - $ 7,132 )

The carrying amounts of assets and liabilities of Headway Shanghai Company on the disposal date are disclosed in Note 29.

14. Subsidiaries

(1) Subsidiaries included in the consolidated financial report

The main business entities of the consolidated financial report are as follows:

==> picture [412 x 113] intentionally omitted <==

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

The ratio of
ownership equity
held by The
Company
Location
of
Name of establish
Investing Name of N a t u r e o f ment and Dec. 31, Dec. 31,
C o m p a n y Subsidiary B u s i n e s s operation 2022 2021
The Urasia International General investment Panama 100% 100%
----- End of picture text -----

Name of Investing C o m p a n y The	Name of Subsidiary Urasia International	N a t u r e o f B u s i n e s s General investment	of establish ment and operation Panama	Dec. 31, 2022 100%	Dec. 31, 2021 100%
Company	Inc.`（`URASIA`）`	business
	Headway Polyurethane	Manufacturing and	Taiwan	50%	50%
	Corporation Limited	sales of TPU
	`（`TPU Company`）`
URASIA	Shanghai Huiyu	Construction of	Shanghai	74%	74%
	Construction Co., Ltd.	housing projects,
	(Shanghai Huiyu	construction of
	Company)	municipal public
		works projects,
		construction of
		mechanical and
		electrical installation
		projects, construction
		of building decoration
		projects, construction
		of anti-corrosion and
		waterproofing projects,
		construction of sports
		tracks, stadiums,
		artificial turf projects,
		and wholesale of

179

sports field materials.

	Headway Advanced	PU resin products	Vietnam	100%	100%
	Matereials(Vietnam)
	Co., Ltd. (Headway
	Vietnam Company)
	Cheng Yu Develop	General investment	Hong	100%	100%
	Co., Ltd.`（`Cheng Yu	business	Kong
	Company`）`
Cheng Yu	Fo-Shan City Shanshui	PU resin products	Fo-Shan	100%	100%
Company	Lianmei Chemical Co.,		City
	LTD.`（`Shanshui
	Lianmei Company`）`
Shanghai	Anhui Huayu	Research,	Chizhou	100%	100%
Huiyu	Materials Technology	manufacturing, import	City
Company	Co., Ltd.`（`Anhui Huiyu	and export of plastic
	Company`）`	materials for sports
		fields, and sports
		facility construction.

(2) Information on subsidiaries with significant non-controlling interests

Name of Subsidiary TPU Company	The ratio of equity and voting rights held by non-controllinginterests	The ratio of equity and voting rights held by non-controllinginterests
	December 31, 2022 50%	December 31, 2021
		50%

The information of the Company's main business premises and the country of registration is available in Table 4.

Name of Subsidiary TPU Company		Profit and loss distributed to non-controllinginterest 2022 2021 $ 844 $ 16,499	Profit and loss distributed to non-controllinginterest 2022 2021 $ 844 $ 16,499	Non-controllinginterests	Non-controllinginterests
		2022 $ 844		December 31, 2022 $ 92,432	December 31, 2021 $ 106,055

The financial information summary of TPU Company is compiled according to the amount before writing off the inter-company transactions:

Current Assets Non-current Assets Current Liabilities Non-current Liabilities Equity Equity Equtiy attributable to: The Company owners Non-controlling interests of TPU Company	December 31, 2022 $ 207,564 40,607 54,008 9,299 $ 184,864 $ 92,432 92,432 $ 184,864	December 31, 2021	December 31, 2021
			$ 231,627 52,503 58,562 13,458 $ 212,110 $ 106,055 106,055 $ 212,110

180

Sales revenue Profit for the year Other comprehensive income Total comprehensive income Profit (loss) attributable to: The Company owners Non-controlling interests of TPU Company Comprehensive income attributable to: The Company owners Non-controlling interests of TPU Company Cash flow Operating activities Investing activities Financing activities Effect of exchange rate Net cash flow in (out) Cash dividends for non-controlling interests paid: TPU Company	( (	2022 $ 224,202 $ 1,688 807 $ 2,495 $ 844 844 $ 1,688 $ 1,248 1,247 $ 2,495 $ 22,739 29,632 16,177 ) 208) $ 35,986 $ 14,871	( ( ( ( (	2021 $ 271,340 $ 32,998 94) $ 32,904 $ 16,499 16,499 $ 32,998 $ 16,452 16,452 $ 32,904 $ 45,539 1,551 ) 54,483 ) 82) $ 10,577 ) $ 11,055

15. Property, Plant and Equipment

(1) Self-Use

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

Land Transportat Miscellane
improveme House and Machinery ion ous Other Construction
Land nts Building equipment equipment equipment equipment in progress Total
Cost
Balance January
1, 2022 $109,145 $ 151 $284,491 $410,180 $ 40,760 $ 14,799 $111,466 $ 1,932 $972,924
Addition - - 1,208 9,662 3,681 1,168 22,929 7,659 46,307
Disposal - - - ( 4,118) ( 3,441) ( 516) ( 624) - ( 8,699)
Reclassification - - - - - - 1,027 ( 1,027) -
Net exchange
difference - - 3,971 3,958 617 42 161 5 8,754
Balance
December 1, $
2022 $109,145 $ 151 $289,670 $419,682 $ 41,617 $ 15,493 $134,959 $ 8,569 1,019,286
Accumulated
depreciation
Balance January
1, 2022 $ - $ 151 $198,594 $321,575 $ 27,092 $ 11,017 $ 76,142 $ - $634,571
Depreciation - - 9,097 25,342 4,989 1,540 10,844 - 51,812
Disposal - - - ( 3,966) ( 3,441) ( 516) ( 624) - ( 8,547)
Net exchange
difference - - 1,329 2,060 348 38 116 - 3,891
Balance
December 1,
2022 $ - $ 151 $209,020 $345,011 $ 28,988 $ 12,079 $ 86,478 $ - $681,727
Net balance
December 1,
2022 $109,145 $ - $ 80,650 $ 74,671 $ 12,629 $ 3,414 $ 48,481 $ 8,569 $337,559
----- End of picture text -----

181

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

Land Transportat Miscellane
improveme House and Machinery ion ous Other Construction
Land nts Building equipment equipment equipment equipment in progress Total
Cost
Balance January
1, 2021 $109,145 $ 151 $283,644 $408,431 $ 47,146 $ 21,363 $ 90,918 $ 920 $961,718
Addition - - 1,664 4,450 1,434 2,626 21,777 1,014 32,965
Disposal - - - ( 1,875) ( 7,713) ( 9,119) ( 1,194) - ( 19,901)
Net exchange
difference - - ( 817 ) ( 826 ) ( 107 ) ( 71 ) ( 35 ) ( 2 ) ( 1,858 )
Balance
December 1,
2021 $109,145 $ 151 $284,491 $410,180 $ 40,760 $ 14,799 $111,466 $ 1,932 $972,924
Accumulated
depreciation
Balance January
1, 2021 $ - $ 151 $189,731 $297,127 $ 29,490 $ 19,158 $ 69,117 $ - $604,774
Disposal - - 9,198 26,570 5,256 1,045 8,204 - 50,273
Depreciation - - - ( 1,766) ( 7,602) ( 9,119) ( 1,163) - ( 19,650)
Net exchange
difference - - ( 335 ) ( 356 ) ( 52 ) ( 67 ) ( 16 ) - ( 826 )
Balance
December 1,
2021 $ - $ 151 $198,594 $321,575 $ 27,092 $ 11,017 $ 76,142 $ - $634,571
Net balance
December 1,
2021 $109,145 $ - $ 85,897 $ 88,605 $ 13,668 $ 3,782 $ 35,324 $ 1,932 $338,353
----- End of picture text -----

Depreciation expenses are accrued on a straight-line basis according to the following years of useful life:

years of useful life:
Land improvements	25 Years
House and Building	3~47 Years
Machinery equipment	1~14 Years
Transportation equipment	3~10 Years
Miscellaneous equipment	3~13 Years
Other equipment	1~18 Years

Please refer to Note 33 for the property, plant and equipment that are pledged as collateral for loans.

16. Lease Agreement

(1) Right-of-use assets

ight-of-use assets
Book amount of right-of-use assets Right-of-use land Building Transportation equipment Addition of right-of-use assets Depreciation expense of right-of-use assets Right-of-use land Building Transportation equipment	December 31, 2022 $ 28,487 12,189 848 $ 41,524 2022 $ - $ 893 9,046 636 $ 10,575	December 31, 2021
			$ 28,539 21,181 1,483 $ 51,203 2021 $ 1,907 $ 869 8,999 424 $ 10,292

Apart from the recognition of depreciation expenses, there was no significant subleasing or impairment of the right-of-use assets of the

182

Consolidated Company during the period from January 1 to December 31, 2022 and 2021, respectively.

(2) Lease liability

December 31, 2022 December 31, 2021 Book amount of lease liability Current $ 4,466 $ 9,821 Non-current $ 9,514 $ 13,970

The discount rate ranges for lease liabilities are as follows:

December 31, 2022 December 31, 2021 Building 2.5%~4.05% 2.5%~4.05% Transportation equipment 1.07% 1.07%

(3) Key leasing activities and terms:

The Consolidated Company leases buildings for use as factories and offices with lease terms of 3 to 10 years. At the end of the lease term, the Consolidated Company has no preferential purchase option for the leased buildings.

Additionally, the Consolidated Company has land use rights in Mainland China and Vietnam with lease terms of 50 years and 48 years, respectively.

(4) Other lease information

Short-term lease expense Low-value assets lease expense Total lease cash (outflow)	(	2022 $ 1,486 $ 70 $ 11,890 )	(	2021 $ 1,513 $ 38 $ 11,530 )

The Consolidated Company chose to apply the recognition Exemption for assets, such as employee dormitories, company vehicles, and office equipment, qualify for short-term leases and qualify for low-value asset leases, and did not recognize related right-of-use assets and lease liabilities for such leases.

17. Goodwill

dwill
Cost Beginning Balance Impirement loss Net exchange difference	December 31, 2022 $ 1,649 - 24 $ 1,673	December 31, 2021
		( (	$ 5,763 4,081 ) 33) $ 1,649

183

18. Intangible Assets

ngible Assets
Cost Balance January 1. 2022 Acquired separately Dispoals Net exchange difference Balance December 1. 2022 Accumulated amortization and impirement Balance January 1. 2022 Amortization expense Disposal Net exchange difference Balance December 1. 2022 Net balance December 1. 2022 Cost Balance January 1. 2021 Acquired separately Dispoals Net exchange difference Balance December 1. 2021 Accumulated amortization and impirement Balance January 1. 2021 Amortization expense Disposal Net exchange difference Balance December 1. 2021 Net balance December 1. 2022	Computer softeware
	( ( ( ( ( (	$ 442 416 93 ) 4 $ 769 $ 258 281 93 ) 3 $ 449 $ 320 $ 626 93 274 ) 3) $ 442 $ 272 261 274 ) 1) $ 258 $ 184

Amortization expenses are accrued on a straight-line basis according to the following years of useful life:

Computer softeware

1~5 Years

19. Other Assets

er Assets
Current Prepaid expenses overpaid sales tax Other receivable income tax refund receivable Other Non-current Advance payments for equipment and construction	December 31, 2022 $ 10,802 2,699 1,324 867 615 $ 16,307 $ 26,774	December 31, 2021
			$ 8,751 539 2,240 2,412 2,570 $ 16,512 $ 25,785

184

20. Borrowings

(1) Short-term borrowings

hort-term borrowings
Pledged loans(Note 33) Bank loans (Remark 1) Unsecured loans Credit line loans (Remark 2)	December 31, 2022 $ 54,836 105,694 $ 160,530	December 31, 2021
			$ 22,156 91,559 $ 113,715

Remark 1 The interest rates of bank loans were 1.77% ~ 3.85% and 2.25% ~

3.85% on December 31, 2022 and 2021, respectively.

Remark 2 The interest rates of credit line loans were 1.54% ~ 2.28% and 0.90% ~ 2.28% on December 31, 2022 and 2021, respectively.

(2) Short-term bills payable

hort-term bills payable
Commercial paper payable Less: Discount on Short-term bills payable	December 31, 2022 $ 100,000 ( 93) $ 99,907	December 31, 2021
	(	(	$ 40,000 16) $ 39,984

The outstanding short-term bills payable, which have not yet matured, are as follows:

December 31, 2022

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

Book
Guarantor/Acce Discount Book Interest value of
ptor institution Face value amount value rate range Collateral Collateral
Commercial
paper
payable
China bills
finance co. $50,000 $ 9 $49,991 1.94% None $ -
Mega bills
finance co. $50,000 $ 84 $49,916 2.04% None $ -
December 31, 2021
Book
Guarantor/Acce Discount Book Interest value of
ptor institution Face value amount value rate range Collateral Collateral
Commercial
paper
payable
China bills
finance co. $30,000 $ 9 $29,991 0.96% None $ -
Mega bills
finance co. $10,000 $ 7 $ 9,993 1.00% None $ -
----- End of picture text -----

185

(3) Long-term borrowings

ong-term borrowings
Pledged loans Mortgage loan (Remark 1) Mortgage loan (Remark 2) Mortgage loan (Remark 3) Mortgage loan (Remark 4) Long-term borrowings	December 31, 2022 $ 85,000 80,000 - - $ 165,000	December 31, 2021
			$ - - 85,000 80,000 $ 165,000

Remark 1 The bank loan is secured by the Company's real estate, plant, and equipment (refer to Note 33), with a maturity date of October 14, 2024. As of December 31, 2022, the effective annual interest rate is 1.57%.
Remark 2 The bank loan is secured by the Company's real estate, plant, and equipment (refer to Note 33), with a maturity date of October 14, 2024. As of December 31, 2022, the effective annual interest rate is 1.57%.

Remark 3 The bank loan is secured by the Company's real estate, plant, and equipment (refer to Note 33), with a maturity date of December 30, 2023. It was fully repaid in October 2022, and as of December 31, 2021, the effective annual interest rate is 1.07%.

Remark 4 The bank loan is secured by the Company's real estate, plant, and equipment (refer to Note 33), with a maturity date of September 7, 2023. It was fully repaid in October 2022, and as of December 31, 2021, the effective annual interest rate is 1.07%.

21. Other Liabilities

er Liabilities
Current Other payable Payroll and bonus payable Professional service payable Payables on equipment Other Other current liabilities	December 31, 2022 $ 32,376 5,080 3,697 22,441 $ 63,594 $ 3,322	December 31, 2021
			$ 40,107 4,315 3,191 28,873 $ 76,486 $ 3,180

22. Retirement Benefit Plan

(1) Defined contribution plan

The retirement pension system of the Company and its domestic subsidiaries in the Consolidated Company, is a defined contribution plan under the "Labor Pension Act" regulated by the government. The Company contributes 6% of employees' monthly salaries to their personal accounts at the labor insurance bureau as retirement pension.

URASIA and Cheng Yu Company do not have an employee retirement policy, and there are no mandatory government regulations regarding employee retirement policy. Anhui Huiyu Company, Shanghai Huiyu Company, Sanshui Lianmei Company, Headway Shanghai Company and Headway Vietnam Company pay basic endowment insurance premiums to the

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government-managed retirement plan, which are recognized as current expenses when they are provided.

(2) Defined benefit plan

The retirement pension system of the Company and TPU Company in the Consolidated Company is a government-managed defined benefit retirement plan under the “Labor Standards Act” of Taiwan R.O.C. The payment of employee retirement pension is calculated based on the length of service and the average monthly salary for the six months prior to the approved retirement date. The Company and TPU Company respectively contribute 4% and 7% of the total monthly salary of applicable old system employees to the retirement pension, which is deposited into an account in the name of the “Supervisory Committee of Business Entities’ Labor Retirement Reserve” at Bank of Taiwan. Before the end of the fiscal year, if the account balance is insufficient to pay the workers who are expected to meet the retirement conditions in the next year, the difference will be paid in a lump sum before the end of March of the next year. This account is managed by the “Bureau of Labor Funds, Ministry of Labor,” and the Consolidated Company has no right to affect the investment management strategy.

The amount of the defined benefit plan included in the consolidated balance sheet is as follows:

balance sheet is as follows:
Present value of the defined benefit obligation Fair value of the planned assets Net defined benefit liabilities (assets)	December 31, 2022 $ 18,803 ( 18,984) ( $ 181 )	December 31, 2021
	( (	(	$ 26,758 20,750) $ 6,008

The changes in net defined benefit liabilities (assets) are as follows:

January 1, 2021 Service cost Current service cost Past service cost and settlement loss (gain) Interest expense (income) Recognized in profit and loss	Present value of the defined benefit obligation $ 26,508 165 - 132 297	( ( ( (	Fair value of the plann assets $ 20,242) - 114 ) 110) 224)	Net defined benefit liabilities (assets) $ 6,266 165 ( 114 ) 22 73

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Re-measurement amount Return on planned assets (except for the amount included in net interest) Actuarial loss –changes in demography statistical assumption Actuarial loss – adjustment by experience Recognized in other comprehensive income Appropriation of employer Settlement ( December 31, 2021 Service cost Current service cost Past service cost and settlement gain Interest expense (income) Recognized in profit and loss Re-measurement amount Return on planned assets (except for the amount included in net interest) Actuarial profit -changes in financial assumption ( Actuarial profit – adjustment by experience ( Recognized in other comprehensive income ( Appropriation of employer Payment of plan assets ( Settlement ( December 31, 2022	- ( 702 601 1,303 ( - ( 1,350) 26,758 ( 126 - ( 135 ( 261 ( - ( 2,191 ) 1,128) 3,319) ( - ( 3,397) 1,500) $ 18,803 (	254 ) ( - - 254) 1,380) ( 1,350 20,750) - 23 ) ( 107) 130) 1,621 ) ( - ( - ( 1,621) ( 1,380) ( 3,397 1,500 $ 18,984 ) (	254 ) 702 601 1,049 1,380) - 6,008 126 23 ) 28 131 1,621 ) 2,191 ) 1,128) 4,940) 1,380) - - $ 181 )

The amount recognized in profit and loss for defined benefit plan by function is summarized as follows:

is summarized as follows:
Cost of sales Selling expenses Administrative expenses R&D expenses		2022 $ 57 67 5 2 $ 131		2021
				$ 34 23 15 1 $ 73

The Consolidated Company is exposed to the following risks due to the pension system of the “Labor Standards Act”:

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a. Investment risk: The “Bureau of Labor Funds, Ministry of Labor” invests in domestic (foreign) equity securities, debt securities, and bank deposits through its own operation and entrusted management services. However, the distributable amount of the Consolidated Company’s planned assets is an amount not less than the income generated from a 2-year time deposit interest rate of the local bank.
b. Interest rate risk: The decline in the interest rate of government bonds/corporate bonds will cause the present value of the defined benefit obligations to go up; however, the debt investment returns of the planned assets will also go up, and the impact of the two on the net defined benefit liabilities will partially offset each other.
c. Salary risk: The calculation of the present value of the defined benefit obligation is by referring to the future salary of the members of the plan. Therefore, the increase in the salary of the members of the plan will cause the present value of the defined benefit obligation to go up.

The present value of the defined benefit obligation of the Consolidated Company is actuarially calculated by a qualified actuary. The major assumptions made on the measurement date are as follows:

Discount rate Expected salary increase rate	December 31, 2022 1.50% 2.00%	December 31, 2021
		0.50% 2.00%

If the major actuarial assumptions experience reasonably possible changes, with all other assumptions remain unchanged, the amount of increase (decrease) in the defined benefit obligation present value is as follows:

Discount rate Increased by 0.25% Decreased by 0.25% Expected salary increase rate Increased by 0.25% Decreased by 0.25%	December 31, 2022 ( $ 448 ) $ 464 $ 454 ( $ 440 )	December 31, 2021	December 31, 2021
	( (	( (	$ 656 ) $ 682 $ 661 $ 639 )

Since actuarial assumptions may be correlated, it is unlikely that there is

only one single assumption changed, so the aforementioned sensitivity analysis may not be able to reflect the actual changes in the present value of the defined benefit obligations.

Amount expected to be appropriated in 1 year Average due date of the defined benefit obligation	December 31, 2022 $ 1,380 10 Years	December 31, 2021 $ 1,380 10 Years

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23. Equity

(1) Common stock capital

Authorized stock shares (thousand shares) Authorized capital stock Stock shared issued and paid in full (thousand shares) Outstanding capital stock	December 31, 2022 80,000 $ 800,000 70,304 $ 703,033	December 31, 2021 80,000 $ 800,000 70,336 $ 703,353

The par value of the issued common shares is 10 NTD per share, with each share entitled to one voting right and the right to receive dividends.

The changes in the Company's common stsock capital are mainly due to the issuance and cancellation of restricted stock units granted to employees.

(2) Capital surplus

apital surplus
Applicable for making up for losses, distributing cash, or capitalization Additional paid-in capital Difference between consideration and book amount of subsidiary’s stock shares acquired or disposed From merger Cannot be used for any purpose Employee stock option Restricted sotck units	December 31, 2022 $ 5,587 1,497 891 3,225 1,881 $ 13,081	December 31, 2021
			$ 4,142 1,497 891 3,225 3,006 $ 12,761

The portion of capital surplus that exceeds the par value of stock issuance (including the issuance of ordinary shares above par) and the portion received as donations may be used to offset losses. When the Company has no losses, it may also be used to distribute cash dividends or allocate to common stock capital, subject to an annual limit based on a certain percentage of the paid-in capital.

(3) Retained earnings and dividend policy

The Company revised its Articles of Incorporation and approved a dividend policy of distributing 50% to 100% of unappropriated retained earnings at the shareholder meeting on July 30, 2021.

According to the revised policy, if there are profits in the annual financial statements, the Company shall first pay taxes, make up for losses from previous years, set aside 10% of the legal reserve, and make adjustments for special reserves according to laws or regulations. After adding the accumulated unappropriated retained earnings from previous years, the remaining amount shall be distributable earnings. The board of directors shall propose a

190

shareholder dividend or profit distribution plan for approval at the shareholder meeting, with a distribution range of 50% to 100% of distributable earnings.

If the distribution of dividends or profits is made in cash, the board of directors may authorize it with the approval of two-thirds of the directors present and the majority of attending directors, and report it to the shareholder meeting

Under the previous policy, if there were profits in the annual financial statements, the Company shall first pay taxes, make up for losses from previous years, set aside 10% of the legal reserve, and make adjustments for special reserves according to laws or regulations. After adding the accumulated unappropriated retained earnings from previous years, the board of directors may retain it based on business needs and propose a shareholder dividend or profit distribution plan for approval at the shareholder meeting.For the Company's employee and director compensation distribution policy, please refer to (7) of Note 25 on employee and director compensation.

According to the Company's Articles of Incorporation, the dividend policy will consider the overall development needs of the enterprise and make appropriate dividend distributions. The cash dividends shall not be less than 10% of the total amount of dividends.

The legal reserve should be set aside until its balance reaches the total amount of the Company's issued and paid-up capital. The legal reserve can be used to offset losses. If the legal reserve exceeds 25% of the total amount of the outstanding capital, the excess can be used for cash distribution in addition to capitalization.

The Company held regular shareholder meetings on June 9, 2022 and July 30, 2021 to have the 2021 and 2020 earnings distribution proposals resolved as follows:

Legal reserve Special reserve Cash dividends Cash dividend per share`（`NTD`）`		2021 $ 14,163 $ 9,225 $ 105,503 $ 1.50		2020 $ 4,312 $ 3,495 $ 38,691 $ 0.55

In addition, the Company held its annual shareholders' meeting on July 30, 2021, and resolved to distribute cash dividends of NTD 31,656 thousand from the capital surplus.

On March 14, 2023, the Board of Directors of the Company proposed shareholder dividend distribution plan for the fiscal year 2022 as follows:

Legal reserve Reversal of Special Reserve	(	2022 $ 2,345 $ 37,358 )

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Cash dividends $ 42,182 Cash dividend per share （ NTD ） $ 0.60

The shareholder dividend distribution plan for the fiscal year 2022 is still

pending and is expected to be determined at the shareholder meeting to be held on May 31st, 2023.

(4) Special reserve

pecial reserve
Beginning balance appropriation to special reserve Reduction in other equity items Ending Balance		2022 $ 86,263 9,225 $ 95,488		2021
				$ 82,768 3,495 $ 86,263

(5) Other equity

a.Exchange differences on translation of the financial statement of foreign

operations

operations
Beginning balance Exchange differences on translation of the financial statement of foreign operations Income tax effect The accumulated exchange difference that has been reclassified from equity to profit or loss comes from the subsidiary's net assets and related hedging tools due to the loss of control over the subsidiary Ending balance		2022 $ 98,875 ) 47,474 9,496 ) - $ 61,897 )		2021
	( ( (		( ( (	$ 89,913 ) 20,514 ) 2,492 8,060 $ 99,875 )

b. Unrealized profit and loss in valuation of financial assets measured at fair value through other comprehensive inocme

Beginning balance Incurred in the current year Unrealized profit and loss Equity instrument Other comprehensive inocme of the current year Accumulated profit/loss from the disposal of equity instrument transferred to retained earnings	( ( ( (	2022 $ 2,411) 314) 314) 308)	(	2021 $ 3,149 ) 738 738 -

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( $ 3,033 )

( $ 2,411 )

Ending balance

c. Unrealized revaluation increments

Beginning and ending balance		2022 $ 6,800		2021 $ 6,800

d. Unearned compensation

The Company's shareholders' meeting resolved on May 31, 2019 to

issue restricted stock units. Please refer to Note 28 for further details.

Beginning balance Recognition of share-based payment expense Ending balance		2022 $ 1,990 ) 1,745 $ 245 )		2021
	( (		( (	$ 5,888 ) 3,898 $ 1,990 )

(6) Non-controlling interests

on-controlling interests
Beginning balance Attributation to Non-Controlling Interests Profit for the year Exchange differences on translation of the financial statement of foreign operations Defined Benefit Plan Remeasurements Cash dividends from subsidiaries Ending balance		2022 $ 118,522 2,387 198 404 14,871) $ 106,640		2021
	(		( ( (	$ 114,511 15,201 88 ) 47 ) 11,055) $ 118,522

24 Sales Revenu

The analysis of the sales revenue generated by the Consolidated Company is as follows:

follows:
PU resin Thermoplastic Polyurethane`（`TPU`）` Others		2022 $ 1,110,064 217,712 120,253 $ 1,448,029		2021
				$ 1,098,036 268,953 109,077 $ 1,476,066

(1) Contract balance

Accounts receivable(Note 11) Contract liabilities Contract liabilities-cruuent		December 31, 2022 $ 262,139 $ 10,081		December 31, 2021 $ 300,318 $ 3,023		January 1, 2021 $ 353,465 $ 4,547

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The changes in contract liabilities mainly arise from the timing difference between satisfying performance obligations and the timing of customer payments.

(2) Subdivision of contract revenues by customers

Please refer to Note 37 for details on subdivision of contract revenues.

25. Profit (loss) from Continuing Operations

(1) Interest income

(1) Interest income
Bank deposits (2) Other income Miscellaneous income Rental income Dividend income (3) Other gains and losses Net loss from foreign currency exchange Impairment loss of non-financial assets Gain on disposal of property, plant, and equipment Financial assets measured at fair value through profit and loss mandatorily Miscellaneous losses (4) Financial costs Interest on bank borrowing Interest on lease liabilities (5) Depreciation and Amortization Depreciation expense summarized by functions Cost of sales Operating expenses Miscellaneous losses Amortization expense summarized by functions Cost of sales		2022 $ 10,741 2022 $ 15,204 4,052 - $ 19,256 2022 $ 5,577 ) - 459 1,401 ) 2,519) $ 9,038 ) 2022 $ 5,272 466 $ 5,738 2022 $ 53,640 8,577 170 $ 62,387 $ -		2021 $ 8,594 2021
				$ 5,919 3,202 5 $ 9,126 2021
	( ( ( (		( ( ( (	$ 280 ) 4,081 ) 1,540 29 2,627) $ 5,419 ) 2021
				$ 4,443 729 $ 5,172 2021
				$ 50,917 9,379 269 $ 60,565 $ -

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Operating expenses	281 $ 281	261
		$ 261

(6) Employee benefit expense

short-term employee benefits Post-employment benefits(Note 22) Defined contribution plan Defined benefit plan Share-based payment Equity settlement Other employee benefit Total employee benefit expense Summarized by functions Cost of sales Operating expenses		2022 $ 141,241 7109 131 7,240 1,745 23,204 $ 173,430 $ 84,040 89,390 $ 173,430		2021 $ 165,143 6,819 73 6,892 3,898 23,385 $ 199,318 $ 89,083 110,235 $ 199,318

(7) Compensation to employees and dircetors

The Company has compensation to employees and directors appropriated for an amount to 5%~8% and not higher than 5% of the net income before tax and before deducting the compensation to employees and directors, respectively, in accordance with the Article of Incorporation. The estimated employee compensation and director compensation for 2022 and 2021 are as follows: Estimation ratio

Estimation ratio
Employee compensation Director compensation	2022 8% 5%	2021
		5% 3%

Amount

Amount
Employee compensation Director compensation	2022 Cash Stock $ 2,089 $ - 1,305 -	2021
	Cash	Cash	Stock $ - -
	$ 2,089 1,305	$ 9,711 5,827

The changes in the amount of the consolidated financial report after the publication date shall be processed according to the change in accounting estimates and adjusted and recorded in the next year.

Please refer to the Market Observation Post System of Taiwan Stock Exchange for information on the compensation to employees and directors resolved by the Company’s board of directors.

(8) Foreign currency exchange profit and loss

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Total foreign currency exchange profit Total foreign currency exchange loss Net profit (loss)		2022		2021
	( (	$ 29,694 35,271) $ 5,577 )	( (	$ 6,558 6,838) $ 280 )

Continuing Operations Income Tax
(1) Income tax recognized in profit and loss

The main composition items of income tax expense as follows:

Current income tax Incurred in the current year Adjustment of prior periods Deferred income tax Incurred in the current year Income tax expense recognized in profit and loss		2022 $ 18,831 247 19,078 10,156) $ 8,922		2021
	(		(	$ 57,308 308 57,616 6,960) $ 50,656

The adjustment of accounting income and income tax expenses is as follows:

Continuing operations net income before tax Income tax expense calculated according to statutory tax rate for net income before tax Unrecognized deductible temporary difference Deferred income tax Temporary difference Current income tax expense of previous periods adjusted in the current year Income tax expense recognized in profit and loss	(	2022 $ 29,918 $ 5,983 12,848 10,156 ) 247 $ 8,922	(	2021 $ 97,675 $ 19,535 37,773 6,960 ) 308 $ 50,656

The tax rate applicable to the subsidiaries in Mainland China is 25%; the

tax amounts generated in other territories are calculated based on the tax rates applicable to each respective territory .

(2) Income tax recognized in other comprehensive income.

Deferred income tax Incurred in the current year- `－`Conversion through overseas operations Income tax recognized in other comprehensive inocme		2022 $ 9,496) $ 9,496 )		2021
	( (			$ 2,492 $ 2,492

(3) Current income tax assets and liabilities

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Current income tax assets Income tax refund receivable Current income tax liabilities Income tax payable	December 31, 2022 $ 10,507 $ 2,154	December 31, 2021	December 31, 2021
			$ - $ 26,718

(4) Deferred income tax assets and liabilities

The changes in deferred income tax assets and liabilities are as follows:

2022

==> picture [412 x 468] intentionally omitted <==

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

Recognized in
Recognized other
Deferred income tax assets Beginning in profit and comprehensive Exchange
(liabilities) balance loss profit and loss difference Ending balance
Temporary difference
Unrealized Inventory
loss $ 400 $ 956 $ - $ - $ 1,356
Defined benefit
- - -
pension plan 3,732 3,732
Undistributed
earnings of
subsidiaries ( 22,500 ) 9,200 - - ( 13,300 )
Provision for the land
value incremental
tax ( 11,175 ) - - - ( 11,175 )
Exchange differences
arising from
- -
foreign operations 28,160 ( 9,496 ) 18,664
( $ 1,383 ) $ 10,156 ( $ 9,496 ) $ - ( $ 723 )
2021
Recognized in
Recognized other
Deferred income tax assets Beginning in profit and comprehensive Exchange
(liabilities) balance l o s s profit and loss difference Ending balance
Temporary difference
Unrealized Inventory
loss $ 421 ( $ 21 ) $ - $ - $ 400
Defined benefit
- - -
pension plan 3,732 3,732
Impirement loss 520 ( 520 ) - - -
Undistributed
earnings of
subsidiaries ( 30,000 ) 7,500 - - ( 22,500 )
Provision for the land
value incremental
tax ( 11,175 ) - - - ( 11,175 )
Exchange differences
arising from
- -
foreign operations 25,668 2,492 28,160
( $ 10,834 ) $ 6,959 $ 2,492 $ - ( $ 1,383 )
----- End of picture text -----

(5) Income tax audit

The income tax returns for the Company and TPU Company have been approved by the tax authorities up to the year 2020.

Earnings per Share

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Basic earnings per share From continuing operations From discontinuing operations Total Diluted earnings per share From continuing operations From discontinuing operations Total		2022 $ 0.27 - $ 0.27 $ 0.26 - $ 0.26		2021
				$ 0.46 1.59 $ 2.05 $ 0.45 1.57 $ 2.02

The net income and weighted average number of outstanding common shares used to compute earnings per share are as follows:

Net income for the calculation of basic and diluted earnings per share Less: Discontinuing operations net profit used to calculate basic loss per share of discontinuing operations. Net income for calculation of earnings per share of continuing operations. Shares Weighted average number of common stock shares for the calculation of basic earnings per share The impact of potential diluted common stock shares: Employee compensation Restricted stock units Weighted average number of common stock shares for the calculation of diluted earnings per share		2022 2021 $ 18,609 $ 142,631 - 110,813 $ 18,609 $ 31,818 Unit`：`Thousand shares 2022 2021 69,669 69,560 216 492 629 560 70,514 70,612

average number of outstanding shares is included in the potential diluted common stock for the calculation of the diluted earnings per share. When calculating the diluted earnings per share before the distribution of remuneration in the form of stock resolved in the shareholders meeting of the following year, the dilution effect of this potential common stock will be considered continuously.

Share -based Payment

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Restricted stock units

The Company resolved to issue restricted stock units at the shareholder meeting held on May 28, 2018, with an issuance price of NTD 0 per share (i.e., free of charge). The aforementioned restricted stock units issuance was approved by the Securities and Futures Bureau under the Financial Supervisory Commission R.O.C. Taiwan. and became effective on May 20, 2019. The details of the issuance resolved by the Board of Directors are as follows:

Unit:Thousand shares

Grant date 108.09.25 109.04.15	Grant amount 426 374	Fair value per share 15.10 17.65	Issuance and capital raising record date 108.09.25 109.04.15	Actual shares issued
				426 374

After the restricted stock units are granted to employees under this policy, they must meet certain conditions and fulfill their service obligations without any violation of the Company's employment agreement, code of conduct, work rules, contractual obligations, or regulations. In addition, they must achieve a certain level of annual performance evaluation. The granted restricted stock units shall vest in the employees according to the following schedule, subject to their continued employment on the vesting date:

(1) After one year of employment, employees can receive 30% of the granted restricted stock units if they achieve a performance evaluation level of B or above.
(2) After two years of employment, employees can receive an additional 30% of the granted restricted stock units if they achieve a performance evaluation level of B or above.
(3) After three years of employment, the remaining 40% of the granted restricted stock units can be vested if they achieve a performance evaluation level of B or above.

If the above-mentioned dates fall on a holiday, the transaction will be processed on the next business day.

The handling methods for employees who fail to meet the vested conditions are as follows:

(1) If an employee violates these regulations, trust agreements, labor contracts, work rules, or contractual agreements between the employee and the Company (related contractual agreements are authorized by the Board of Directors to be negotiated and signed by the Chairman on behalf of the

199

Company), the Company has the right to retrieve the restricted stock units granted but not yet vested to the employee and cancel them free of charge.

(2) If an employee fails to meet the vested conditions, the Company has the right to retrieve the restricted stock units granted but not yet vested to the employee and cancel them free of charge.
(3) For general resignation (voluntary/retirement/layoff/dismissal), the Company will retrieve the restricted stock units granted but not yet vested to the employee in accordance with the law and cancel them free of charge.
(4) For leave without pay: Employees who are granted restricted stock units and have applied for leave without pay with the Company's approval will be deemed as not having met the vested conditions during the period of leave. After returning to their original position, the employee's restoration of their rights will be subject to approval by the Chairman. The vested conditions, percentage, and deadline for meeting them will be reevaluated within the scope of the granted shares.
(5) For general death, the Company will retrieve the restricted stock units granted but not yet vested to the employee in accordance with the law and cancel them free of charge.
(6) or occupational accidents:
a. If an employee suffers a disability due to an occupational accident and cannot continue working, the restricted stock units granted but not yet vested will be vested ahead of schedule from the date of effective resignation.
b. If an employee dies due to an occupational accident, the restricted stock units granted but not yet vested will be vested ahead of schedule from the date of death, and the inheritance will receive them.
(7) For job transfer: If an employee transfers to a related enterprise or another Company (excluding subsidiaries), the restricted stock units granted but not yet vested will be handled in the same manner as specified in the "general resignation" clause. However, for operational needs, if an employee is assigned by the Company to work at a related enterprise or another company, their restricted stock units granted but not yet vested will not be affected by the transfer.
(8) Employees who have been granted restricted stock units but have not met the vested conditions are not required to return the stock dividend and cash dividend they have received.

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The restricted rights and obligations of employees who have been allocated or subscribed to new shares but have not yet met the vesting conditions are as follows:

(1) Prior to meeting the vesting conditions, employees shall not sell, pledge, transfer, gift, or otherwise dispose of the restricted stock units allocated under this policy.
(2) Employees who have been allocated new shares but have not yet met the vesting conditions shall have the same rights and obligations (including the right to participate in rights issues, dividends, attend shareholder meetings, propose resolutions, speak, vote, elect, subscribe to cash increases, and other matters related to shareholder rights and interests) as the common shares already issued by the Company, except for the aforementioned restricted rights.
(3) The restricted stock units issued this time may be held in trust by a trustee. Before meeting the vesting conditions, the employee shall not request the trustee to return the restricted stock units for any reason or by any means.

Summary of restricted stock units information of the Company:

Beginning balance Cancellation in current year Ending balance	Shares (Thousand shares) 2022 775 ( 32) 743	Shares (Thousand shares)	Shares (Thousand shares)
			2021
	(	(	787 12) 775

The recognized compensation costs for the Company in 2022 and 2021 were NTD 1,745 thousand and NTD 3,898 thousand, respectively.

29. Disposal of Subsidiaries

201

(1) Consideration received

Cash and cash equivalents

Headway Shanghai Company $ 414,948

(2) Analysis of un-controlling assets and liabilities

Headway Shanghai Company Current assets Cash and cash equivalents $ 4,466 Other receivable 1,017 Non-current Assets Held for Sale 300,145 Current liabilities Other payable ( 1 ) Net assets disposed $ 305,627

(3) Profit from the disposal of subsidiary

Headway Shanghai Company Consideration received $ 414,948 Net assets disposed ( 305,627 ) The accumulated exchange difference that has been reclassified from equity to profit or loss comes from the subsidiary's net assets and related hedging tools due to the loss of control over the subsidiary 8,060 Profit from disposal $ 117,381

The profit from the disposal of Headway Shanghai Company is included in the results of the discontinuing operations.

(4) Net cash inflow from the disposal of subsidiary

The consideration received in cash and cash equivalents Less: Cash and cash equivalents balance disposed

Headway Shanghai Company	Headway Shanghai Company
(	$ 414,948 4,466) $ 410,482

30. Capital Risk Management

The Consolidated Company conducts capital management to ensure that each enterprise within the group can maximize shareholder returns by optimizing debt and equity balances under the assumption of going concern. The overall strategy of the Consolidated Company has not undergone significant changes.

The Consolidated Company's senior management regularly reviews its capital structure, considering the cost and associated risks of various types of capital. Based on the recommendations of senior management, The Consolidated Company balances its overall capital structure through methods such as paying dividends, issuing new stocks, and so on.

202

The Consolidated Company is not required to comply with any other external capital regulations.

31. Financial Instruments

(1) Fair value information - Financial instruments that are not measured at fair value The management of the Company believes that the carrying amounts of financial assets and financial liabilities that are not measured at fair value approximate their fair value.

(2) Fair value information - financial instruments measured at fair value on a repeatability basis
Fair value level

Fair value level
December 31, 2022 Financial assets valued at fair value through profit and loss Foreign Bonds Domestic TWSE/TPEx listing stock Domestic Fund beneficiary certificate Total Financial assets measured at fair value through other comprehensive income Domestic non- TWSE/TPEx listing stock December 31, 2021 Financial assets valued at fair value through profit and loss Foreign Bonds Financial Assets Measured at Fair Value through Other Comprehensive income Domestic TWSE/TPEx listing and Emerging Stock Domestic non- TWSE/TPEx listing	Level 1 $ 3,968 1,030 6,115 $ 11,113 $ - Level 1 $ 2,736 $ 577 -	Level 2 $ - - - $ - $ - Level 2 $ - $ - -	Level 3 $ - - - $ - $ 1,467 Level 3 $ - $ - 1,822	Total
				$ 3,968 1,030 6,115 $ 11,113 $ 1,467 Total
				$ 2,736 $ 577 1,822

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stock

$ 577 $ - $ 1,822 $ 2,399

There was no transfer between Level 1 and Level 2 fair value measurements in 2022 and 2021.

Evaluation technology and the input value of Level 3 fair value

measurement

The domestic unlisted equity investments are valued using the net asset value method, where the company measures the fair value of the investments based on its net assets on the balance sheet date.

(3) Types of financial instruments

ypes of financial instruments
Financial assets Financial assets measured at fair value through other comprehensive income Financial assets measured at the amortized cost (Remark1) Measured at fair value through profit and loss Financial assets measured at fair value through profit and loss mandatorily Financial liabilities Measured at the amortized cost (Remark2)	December 31, 2022 $ 1,467 969,748 11,113 558,734	December 31, 2021
		$ 2,399 1,041,405 2,736 473,992

Remark 1 The balance includes financial assets measured at amortized cost such as cash and cash equivalents, financial assets measured at amortized cost, notes receivable, accounts receivable, and other financial assets. Remark 2 The balance includes financial liabilities measured at amortized cost such as short-term borrowings, short-term bills payable, notes payable, accounts payable and long-term borrowings.

(4) Financial risk management objectives

The main financial instruments of the Consolidated Company include notes and accounts receivable, accounts payable, lease liabilities, long-term and short-term borrowings. The financial management department of the Consolidated Company provides services to all business units, plans and coordinates entering the domestic and international financial markets, analyzes internal risk exposure according to the degree and breadth of risk, and reports, supervises, and manages the financial risks related to the operations of the Company. These risks include market risk (including exchange rate risk and interest rate risk), credit risk, and liquidity risk.

Market risk

204

The main financial risks from the operating activities of the Consolidated Company are the risk of changes in foreign currency exchange rates (see (1) below) and the risk of changes in interest rates (see (2) below).

(1) Exchange rate risk

Several subsidiaries of the Company engage in sales and purchase transactions denominated in foreign currencies, which exposes the Consolidated Company to foreign exchange risk.

Please refer to Note 35 for the book value of monetary assets and monetary liabilities denominated in non-functional currencies (including monetary items denominated in non-functional currencies that have been offset in the consolidated financial statements) and the book value of derivative instruments with foreign exchange risk exposure of the Consolidated Company as of the balance sheet date.

Sensitivity Analysis

The Consolidated Company is mainly exposed to fluctuations in the exchange rates of the U.S. dollar and Chinese yuan.

The sensitivity analysis below illustrates the impact on the Consolidated Company's earnings before tax when the functional currency of the relevant foreign currencies increases or decreases by 5% against the New Taiwan Dollar (the functional currency). The 5% sensitivity ratio is used by the Company's management to report foreign exchange risks to senior management and represents the reasonable possible range of exchange rate fluctuations assessed by management. The sensitivity analysis includes only the foreign currency-denominated monetary items outstanding and adjusts their year-end translation by 5% for exchange rate movements. A positive number in the table below indicates that a 5% depreciation of the New Taiwan Dollar against the relevant foreign currency will increase earnings before tax by the stated amount, while a 5% appreciation will reduce earnings before tax by the same amount.

Effect of USD Effect of Chinese yuan 2022 2021 2022 2021 P&L $ 9,859 $ 5,363 $ 2,481 $ 12,997

(i) The primary source of the impact is from the US dollar cash and US dollar-denominated accounts receivable and accounts payable of the Consolidated Company that were outstanding

205

and not hedged against cash flow risks on the balance sheet date.

(ii) The primary source of the impact is from the Chinese yuan cash and Chinese yuan-denominated accounts receivable and accounts payable of the Consolidated Company that were outstanding and not hedged against cash flow risks on the balance sheet date.

The management believes that sensitivity analysis cannot fully represent the inherent risk of exchange rate fluctuations, as the exchange rate exposure at the balance sheet date may not reflect the exposure throughout the year.

(2) Interest rate risk

The Consolidated Company is exposed to interest rate risk due to the fact that individual entities within the Company borrow funds at both fixed and floating rates. To manage this risk, the Consolidated Company maintains an appropriate mix of fixed and floating rate instruments, and uses interest rate swap and forward rate contracts. The Consolidated Company regularly evaluates its hedging activities to ensure that they align with its interest rate outlook and established risk preferences, in order to adopt the most cost-effective hedging strategies.

The book amount of the financial assets and financial liabilities of the Consolidated Company with interest rate risk exposure on the balance sheet date are as follows:

With fair value interest rate risk `－`Financial assets `－`Financial liabilities With cash flow interest rate risk `－`Financial assets `－`Financial liabilities	December 31, 2022 $ 441,011 159,417 233,907 280,000	December 31, 2021
		$ 320,599 177,490 367,951 165,000

Sensitivity Analysis

The sensitivity analysis below is based on the interest rate risk exposure of the non-derivative instruments on the balance sheet date. For floating rate liabilities, the analysis is based on the assumption that the amount of liabilities that were in circulation on the balance sheet date was in circulation throughout the reporting period.

206

If the interest rate increases/decreases by 1% with all other variables held constant, the Consolidated Company's net income after tax for 2022 and 2021 fiscal years will increase/decrease by NTD 461 thousand and NTD 2,030 thousand, respectively, mainly due to the interest rate risk associated with the Company's variable-rate borrowings.

2. Credit risk

Credit risk refers to the risk that the counterparty of the transaction defaults on contractual obligations and causes financial losses to the Consolidated Company. As of the balance sheet date, the maximum credit risk exposure of the Consolidated Company that may cause financial losses due to the counterparty’s failure to perform its obligations and financial guarantees provided by the Consolidated Company is mainly derived from:

(1) the book value of financial assets recognized in the consolidated balance sheet.
(2) The maximum amount that may need to be paid by the Consolidated Company for providing financial guarantees, regardless of the likelihood of occurrence.

The Consolidated Company adopts a policy of conducting credit ratings on counterparties and obtaining adequate collateral in necessary situations to mitigate the risk of financial losses caused by default. The Consolidated Company continues to monitor credit risk and counterparties' credit ratings, and diversifies the total transaction amount among qualified clients with different credit ratings. The credit risk is controlled by annual credit limit reviews by the credit control unit.

To mitigate credit risk, the Consolidated Company's management assigns dedicated units to decide on credit limits, credit approval, and other monitoring procedures to ensure that appropriate actions are taken to recover overdue receivables. In addition, the Consolidated Company conducts a review of the recoverable amount of receivables on the balance sheet date to ensure that appropriate impairment losses are recognized for irrecoverable receivables. Therefore, the management of the Consolidated Company believes that the credit risk of the Company has been significantly reduced.

3. Liquidity risk

The Consolidated Company manages and maintains sufficient positions of cash and cash equivalents to support the group's operations and reduce the impact of cash flow volatility. The management of the Consolidated

207

Company supervises the usage of bank financing facilities and ensures compliance with the terms of borrowing agreements.

Bank borrowings are an important source of liquidity for the Consolidated Company. As of December 31, 2022 and 2021, the unused financing facilities of the Consolidated Company are explained in the following (2) financing facilities.

(1) Non-derivative financial liabilities liquidity and interest rate risk list

The remaining contract maturity analysis of non-derivative financial liabilities is prepared based on the earliest date when the Consolidated Company may be required to repay the liabilities, using the undiscounted cash flows of the financial liabilities (including principal and estimated interest). Therefore, the bank borrowings that the Consolidated Company may be required to repay immediately are listed in the earliest period in the table, without considering the probability of the bank immediately exercising such rights; other non-derivative financial liabilities are prepared based on the contractual repayment dates.

Dcecmber 31, 2022

Non-derivative financial liabilities Non-interest-bea ring liabiblities Lease liabilities Floating interest rate instrument Fixed interest rate instrument	I	m m e d i a t e payment or p a y i n g w i t h i n 1 month $ - 1,288 30,000 103,224 $ 134,512		1~3 months $ 133,297 572 50,000 31,193 $ 215,062		3months ~ 1 year $ - 2,606 35,000 11,020 $ 48,626		1~5 years $ - 9,514 165,000 - $ 174,514	Over 5 years
									$ - - - - $ -

Further information on the maturity analysis of financial

liabilities mentioned above is as follows:

Less than 1 year 1~5 years Lease liabilities $ 4,740 $ 9,859 Dcecmber 31, 2021 I m m e d i a t e payment or p a y i n g 1~3 m	o	5`～`10 years $ - nths 3m	on y	10`～`15 years $ - ths ~ 1 ear	1	15`～`20 years $ - ~5 years	Over 20 years $ - Over 5 years

208

Non-derivative financial liabilities Non-interest-bea ring liabiblities Lease liabilities Floating interest rate instrument Fixed interest rate instrument		w i t h i n 1 month $ - 1,253 - 73,210 $ 74,463		$155,293 1,177 - 30,941 $187,411		$ - 7,391 - 49,548 $ 56,939		$ - 13,970 165,000 - $178,970
									$ - - - - $ -

Further information on the maturity analysis of financial liabilities mentioned above is as follows:

Less than 5 ～ 10 10 ～ 15 15 ～ 20 Over 20 1 year 1~5 years years years years years Lease liabilities $ 10,284 $ 14,585 $ - $ - $ - $ -

(2) Financing facilities

Financing facilities
Unsecured bank overdraft facility (reviewed annually) `－`Used amount `－`Unused amount Secured bank borrowing facility (extendable by mutual agreement) `－`Used amount `－`Unused amount	December 31, 2022 $ 226,305 413,695 $ 640,000 $ 205,610 111,759 $ 317,369	December 31, 2021 $ 138,354 616,646 $ 755,000 $ 221,639 79,386 $ 301,025
			$ 138,354 616,646 $ 755,000 $ 221,639 79,386 $ 301,025

32. Related Party Transactions

The transactions, account balances, and income and expenses between the Company and its subsidiaries (related parties) are all eliminated at the time of consolidation; therefore, they are not disclosed in this note. In addition to the disclosure in other notes, the transactions between the Consolidated Company and other related parties are as follows.

(1) Name and relationship of related parties

Name of related praties Isotech Products Incorporated Chaei Hsin Enterprise Co., Ltd. Liou, Han -Yin	Relation with the Consolidated Company Substantial related party Substantial related party Key management personnel

209

(2) Sale revenue

Account Sales revenue	Classification of Related party Substantial related party		2022 $ 136,107		2021 $ 132,020

Transactions with related parties are carried out at the agreed prices between both parties, with a payment term of 90 days from the end of the month, in principle.

(3) Purchase

Classification of Related party Substantial related party		2022 $ 970		2021 $ 611

The price and transaction terms for purchases made by the Consolidated Company from related parties are determined by mutual agreement, with a payment period of 90 days from the end of each month.

(4) Receivables from related parties (excluding the loaning of funds to the related parties)

Account Notes receivable Accounts receivable	Classification of Related party Substantial related party Substantial related party		2022 $ 1,958 $ 35,527		2021 $ 3,094 $ 36,599

There is no guarantee for the outstanding receivables from related parties. As of December 31, 2022 and 2021, the provision for doubtful accounts related to receivables from related parties was NTD 108 thousand and NTD 49 thousand, respectively.

(5) Payables to related parties(excluding the loaning of funds from the related parties)

Account Notes payable Accounts payable	Classification of Related party Substantial related party Substantial related party		2022 $ 283 $ 39		2021 $ 378 $ -

The balance of payables to related parties outstanding is unsecured.

(6) Endorsements/guarantees

Guaranteed by

Classification of Related party The amount guaranteed by key management personnel	December 31, 2022 $ 392,130	December 31, 2021 $ 533,580

210

(7) Remunerations to the management

The total remuneration of directors and other key management personnel is as follows:

Short-term employee benefits		2022 $ 17,149		2021 $ 14,036

The remuneration of directors and other key management personnel is determined by the Remuneration Committee of the Company based on individual performance and market trends. In addition, the Consolidated Company provides official cars for business use by key management personnel, with a total acquisition cost of NTD 4,197 thousand.

33. Collateral Assets

The following assets of the Consolidated Company have been pledged as collateral for short-term and long-term borrowings:

Pledged bank deposit Property, plant and equipment	December 31, 2022 $ 30,000 111,325 $ 141,325	December 31, 2021	December 31, 2021
			$ 61,923 125,242 $ 187,165

Contractual Commitment with Material or Liabilities without Recognition

Except as described in other notes, the significant commitments and contingencies of the Company as of the balance sheet date are as follows:

(1) Significant commitments

As of December 31, 2022 and 2021, the balance of letters of credit issued but unused was USD 396 thousand and USD 1,642 thousand, respectively.

(2) Contingencies

Shanghai Huiyu Company signed an engineering subcontracting contract with Shanghai Hongao Sports Industry Co., Ltd. (hereinafter referred to as Hongao Company), and completed the work in collaboration with a third party, Shanghai Longning Building Materials Co., Ltd. (hereinafter referred to as Longning Company). On January 13, 2021, a court judgment ruled that the contract payment should belong to Hongao Company in full. Therefore, on February 24, 2021, Shanghai Huiyu Company filed a lawsuit against Longning Company for undue benefits, claiming CNY 2,206 thousand. On September 30, 2022, the final judgment was made, and Longning Company was ordered to pay the contract payment to Shanghai Huiyu Company. Shanghai Huiyu Company has received the payment of CNY 2,206 thousand on December 12, 2022.

Information on Significantly Influential Assets and Liabilities in Foreign Currency

The following information is summarized and expressed in foreign currencies other than the functional currencies of each business entity in the Consolidated

211

Company. The disclosed exchange rates refer to the exchange rates for the conversion of the foreign currencies into functional currencies. The influential assets and liabilities in foreign currency are as follows:

December 31, 2022

December 31, 2022
Financial assets Monetary item USD CNY Financial liabilities Monetary item USD December 31, 2021 Financial assets Monetary item USD CNY Financial liabilities Monetary item USD CNY	Foreign currency $ 7,317 11,255 896 Foreign currency $ 5,023 59,865 1,148 25	Exchange rate 30.71 4.408 30.71 Exchange rate 27.68 4.344 27.68 4.344	Carrying amount
			$ 224,705 49,612 $ 274,317 $ 27,516 Carrying amount
				$ 139,037 260,054 $ 399,091 $ 31,777 109 $ 31,886

The foreign exchange losses (realized and unrealized) of the Consolidated Company for the fiscal years 2022 and 2021 were NTD 5,577 thousand and NTD 280 thousand, respectively. Due to the variety of foreign currency transactions and functional currencies of individual entities within the Consolidated Company, it is not possible to disclose the exchange gains or losses by significant foreign currency types.

36. Notes to Disclosure

(1) Information on major transactions and (2) Investment related information:
Financing provided to others: Table 1.
Endorsements/guarantees provided: Table 2.
The Marketable securities held (excluding investment in the equity of the subsidiaries and associates): Table 3.
Marketable securities acquired or disposed at costs or prices at least NTD 300 million or 20% of the paid-in capital: None.
Acquisition of individual real estate at costs of at least NTD 300 million or 20% of the paid-in capital: None.

212

Disposal of individual real estate at prices of at least NTD 300 million or 20% of the paid-in capital: None.
Total purchases from or sales to related parties amounting to at least NTD 100 million or 20% of the paid-in capital: None.
Receivables from related parties amounting to at least NTD 100 million or 20% of the paid-in capital: None.
Trading in derivative instruments: See Note 7 for details.
Others: The business relationship between the parent company and the subsidiaries and between each subsidiary, and the circumstances and amounts of any significant transactions:

==> picture [387 x 77] intentionally omitted <==

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

Transactions
Ratio to
Relation consolidated
ship Trade total
income or
Company (Remar terms(R total assets
Name Counterparty k1) Account Amount emark2) (%)
The TPU 1 Sales revenue $ 73 － -
----- End of picture text -----

Company Name The	Counterparty TPU	Remar k1) 1	Account Sales revenue	Amount $ 73	terms(R emark2) `－`	total assets (%) -
Company	Company
			Cost of sales	12,845	`－`	1
			Other income	1,050	`－`	-
			Notes
			receivable	275	`－`	-
			Accounts
			receivable	92	`－`	-
			Notes
			payable	2,031	`－`	-
			Accounts
			payable	661	`－`	-
			R&D
			Expense	6	`－`	-
	Shanshui	1	Sales revenue	53,029	`－`	4
	Lianmei
	Company
			Cost of sales	491	`－`	-
			Accounts
			receivable	19,798	`－`	1
	Headway	1	Sales revenue	44,829	`－`	3
	Vietnam
	Company
			Cost of sales	2,061	`－`	-
			Accounts
			receivable	3,509	`－`	-
Shanshui	Shanghai	2	Selling
Lianmei	Huiyu		expense	1,748	`－`	-
Company	Company
			Prepaid
			expense	13	`－`	-
	Anhui Huayu	2	Sales revenue	752	`－`	-
	Company
			Accounts
			receivable	283	`－`	-
Shanghai	Anhui Huayu	2	Sales revenue	242	`－`	-
Huiyu	Company
Company
			Cost of sales	62,525	`－`	4

213

		Prepaid
		expense	23,971	`－`	1
URASIA	2	Short-term
		borrowing	22,040	`－`	1
		Interest
		expnese	328	`－`	-
		Other payable	145	`－`	-

  - Remark1: “1” represents the parent company dealings with its subsidiaries.

  - “2” represents the subsidiary dealings with other subsidiaries.

  - Remark2: The selling prices of products to subsidiaries by the Company are generally equivalent to those charged to third-party customers, with a payment term of 90 days after month-end. However, for certain products that assist subsidiaries in expanding local business, their selling prices are based on agreed prices between the Company and the subsidiaries. As of December 31, 2022, the payment terms for subsidiaries are subject to their respective financial conditions.

Information on investees: Table 4.
(3) Information on investment in Mainland China:
Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment gain or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area: Talbe 5.
Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, unrealized gains or losses and other information relevant to understanding the impact of Mainland China investment on the financial statements: Talbe 6.
- (1) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.
- (2) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period
- (3) The amount of property transactions and the amount of the resultant gains or losses.
- (4) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.

214

(5) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.
(6) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.
(4) Information of major shareholders: list of the shareholders with ownership of 5% or greater, showing the names, the number of shares and percentage of ownership held by each shareholder: Talbe 7.

37. Segment Information

The operating decision-makers of the Consolidated Company focus on the financial information of each operating segment to allocate resources and evaluate segment performance, and the measurement basis of this financial information is the same as that of this financial statements. The reporting segments of the Consolidated Company are Taiwan, Mainland China, and Vietnam.

(1) Segment revenues and operating results

The revenue and operating results of the continuing operations of the

Consolidated Company are analyzed by the reporting segments as follows. For a detailed explanation of the discontinuing operations, please refer to Note 13.

Segment	Segmentprofit(loss)	Segmentprofit(loss)	Segmentprofit(loss)
2022 $ 897,882 244,885 305,262 $1,448,029	2022 $ 4,737 ( 7,265 ) 17,225 14,697 ( 5,577 ) 10,741 - ( 1,401 ) 459 ( 5,738 ) 16,737 $ 29,918		2021
		$ 52,982 11,562 26,002 90,546 ( 280 ) 8,594 ( 4,081 ) 29 1,540 ( 5,172 ) 6,499 $ 97,675	$ 52,982
			11,562
			26,002
			90,546
			6,499

			$ 97,675

Segment profit refers to the profits earned by each segment, excluding allocated operating expenses, non-operating income and gains, and

215

non-operating expenses and losses. This measurement amount is provided to the main operating decision-makers for allocating resources to segments and evaluating their performance.

(2) Segment assets

The Company did not provide the operating decision-makers with a measure of departmental assets, and therefore the measured amount of assets is zero.

(3) Revenue from main products and services (please refer to Note 24 for details).
(4) Regional information

The company's operations are in three regions - Taiwan, Mainland China, and Vietnam.

The revenue from continuing operations of the Company from external customers is presented below, segmented by region of operation, and non-current assets are presented by the regional location of the assets:

Taiwan Mainland China Vietnam	Revenue from external customers 2022 2021 $ 897,882 $ 919,683 244,885 296,830 305,262 259,553 $ 1,448,029 $ 1,476,066	Revenue from external customers 2022 2021 $ 897,882 $ 919,683 244,885 296,830 305,262 259,553 $ 1,448,029 $ 1,476,066	Revenue from external customers 2022 2021 $ 897,882 $ 919,683 244,885 296,830 305,262 259,553 $ 1,448,029 $ 1,476,066	Non-current assets	Non-current assets	Non-current assets
		2022 $ 897,882 244,885 305,262 $ 1,448,029		December 31, 2022 $ 245,856 87,226 74,768 $ 407,850	December 31, 2021
						$ 246,497 94,323 76,354 $ 417,174

The non-current assets do not include deferred tax assets, net defined benefit assets, financial instruments, and guarantee deposits paid.

(5) Information about major customers

The external customer that accounted for more than 10% of the consolidated operating revenue of the Consolidated Company was as follows:

Customer name Customer A	2022	Percentage of operating revenue% 12	2021
	Sales amount $ 171,737		Sales amount $ 115,626	Percentage of operating revenue%
				8

216

Headway Advanced Materials Inc. and Subsidiaries

Financing Provided to Others

From January 1 to December 31, 2022

Table 1

Unit: In NTD Thousand, Unless Stated Otherwise

No.	Lender	Borrower Account	Borrower Account	Related party	Maximum balance for the period	Ending balance	Actual amount drawn	Interest rate range	Nature of financing Transaction amount	Nature of financing Transaction amount	Reason for financing	Allowance for bad debt	Collateral	Collateral	Financing limits for each borrower (Remark 1)	Lander’s total financing limit	Note
													Item	Value
1	URASIA INTERNATIONAL INC.	Shanghai Huiyu Company	Other receivable	Y	$ 44,260	$ 22,420	$ 22,420	2.25%	Remark 2	$ -	Working capital	$ -	`－`	$ -	$ 292,921	$ 292,921	(Rem ark 1)

Remark 1: The short-term financing provided by URASIA INTERNATIONAL INC. to to entities in need of working capital are subject to individual and aggregate limits , which shall not exceed 40% of the net worth of the Company both.

Remark 2: In need of short-term financing.

217

Headway Advanced Materials Inc. and Subsidiaries

Endorsements/Guarantees Provided

From January 1 to December 31, 2022

Table 2

Unit: In NTD Thousand, Unless Stated Otherwise

No.	Endorser/ guarantor	Endorsee/guarantee	Endorsee/guarantee	Limits on endorsements /guarantees given on behalf of each party	Maximum amount endorsements /guarantees during the period	Outstanding endorsements /guarantees the end of the period Actual ount drawn	Outstanding endorsements /guarantees the end of the period Actual ount drawn	Amount endorsements /guarantees by collaterals	Ratio of accumulated endorsements /guarantees to net equity per latest financial statements(%)	Maximum endorsements /guarantees amount allowable (Remark 1)	Endorsements /guarantees given by parent on behalf of subsidiaries	Endorsements /guarantees by subsidiaries on behalf of parent	Endorsements /guarantees given on behalf of companies in Mainland China	Note
		Company name	Relationship
0	The Company	Headway Vietnam Company	2	Remark 2	$ 115,675	$ 59,410	$ 774	$ -	5.90	$ 402,945	Y	N	N	`－`

Remark 1: The total amount of endorsements/guarantes shall not exceed 40% of the net worth of this Company.

Remark 2: The endorsement/guarantee limit for a single entity shall not exceed 25% of the current net worth of the Company.

218

Headway Advanced Materials Inc. and Subsidiaries

Unit: In NTD Thousand, Unless Stated Otherwise

The Marketable securities held

December 31, 2022

Table 3

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December 31, 2022
Type and name of marketable Relationship with the holding Shares
Holding company name Financial statement account Percentage of Note
securities company (Thousand Carrying Amount Fair value
ownership (%)
shares)
－
The Company Anchor digital technology Corporation/ Financial assets at fair value through other
Stock shares comprehensive income – non-current 185 $ 1,467 6.06 $ 1,467 －
－
Verizon Communications Inc/ Corporate Financial assets at fair value through profit
bond or loss – non-current - 1,882 - 1,882 －
－
Apple Inc./ Corporate bond Financial assets at fair value through profit
or loss – non-current - 2,086 - 2,086 －
－
Yuanta 2-10 year investment grade Financial assets at fair value through profit
corporate bond fund or loss – non-current 20 6,115 - 6,115 －
M.J. International Co., Ltd./ Stock shares － Financial assets at fair value through profit
or loss – non-current 25 1,030 0.04 1,030 －
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Remark 1: The aforementioned marketable securities were not provided as collateral, pledged, or otherwise restricted as of December 31, 2022.

Remark 2: Please refer to Table 4 for the information of investment in subsidiaries.

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Unit: In NTD Thousand, Unless Stated Otherwise

Headway Advanced Materials Inc. and Subsidiaries

Information on investees

From January 1 to December 31, 2022

Table 4

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Original Investment Amount Balance as of December 31, 2022 Net Income
Main businesses and Investment Gain
Investor company Investee company Location December 31, December 31, Shares Ratio (Loss) of the Note
products Carrying Amount (Loss)
2022 2021 (Thousand shares) (%) Investee
The Company URASIA Panama General investment business $ 223,251 $ 223,251 78 100 $ 725,416 $ 5,212 $ 4,566 －
TPU Company Taiwan Manufacturing and sales of TPU 68,084 68,084 6,808 50 92,383 1,688 855 －
URASIA Headway Vietnam Company Vietnam PU resin products USD 5,000 thousand USD 5,000 thousand - 100 USD 8,026 thousand USD 532 thousand USD 532 thousand －
Cheng Yu Company Hong Kong General investment business USD 7,384 thousand USD 7,384 thousand - 100 USD 5,554 thousand USD 99 thousand USD 99 thousand －
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Remark: Please refer to Table 5 for the information on investment in Mainland China

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Unit: In NTD Thousand, Unless Stated Otherwise

Headway Advanced Materials Inc. and Subsidiaries

Information on Investment in Mainland China

From January 1 to December 31, 2022

Table 5

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Accumulated outward Investment flows Accumulated outward Percentage of Accumulated
remittance for remittance for ownership of repatriation of
Main businesses and Total amount of Method of Investment gain Carrying amount as of
Investee company investments from investments from direct or investment income as
products paid-in capital investment Outward Inward (Loss) December 31, 2022
Taiwan as of Taiwan as of indirect of December 31, 2022
January 1, 2022 December 31, 2022 investment (Remark 4)
Shanghai Huiyu Construction of housing RMB 10,600 thousand Remark 1 USD 324 thousand $ - $ - USD 324 thousand 74% USD 144 thousand USD 1,346 thousand USD 5,958 thousand
Company projects, construction of
municipal public works
projects, construction of
mechanical and electrical
installation projects,
construction of building
decoration projects,
construction of
anti-corrosion and
waterproofing projects,
construction of sports
tracks, stadiums, artificial
turf projects, and
wholesale of sports field
materials.
Shanshui Lianmei PU resin products HKD 57,170 thousand Remark 2 - - - - 100% HKD 776 thousand HKD 43,313 thousand -
Company
Anhui Huiyu Research, manufacturing, RMB 8,058 thousand Remark 3 - - - - 100% (RMB 277 thousand) RMB 2,552 thousand -
Company import and export of
plastic materials for sports
fields, and sports facility
construction.
Accumulated outward remittance for Limits on the investment in Mainland China
Investment amount authorized by the
investments in Mainland China as of according to the Investment Commission,
Investment Commission, MOEA
December 31, 2022 MOEA
USD 23,020 thousand &
USD 324 thousand (Remark 4)
HKD 26,200 thousand
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Remark 1: Invested through subsidiary URASIA.

Remark 2: Invested through subsidiary Cheng Yu Company.

Remark 3: Invested through Shanghai Huiyu Company.

Remark 4: According to the revised "Principles for Reviewing Investment or Technical Cooperation in the Mainland" on August 29, 2008, enterprises that have been issued a certificate of operation headquarters scope by the Industrial Development Bureau of the Ministry of Economic Affairs are not subject to this limit.

Remark 5: As of December 31, 2022, the accumulated investment income repatriated was USD 5,958 thousand for Shanghai Huiyu Company, which exceeded the cumulative investment amount remitted out, and the Investment Commission, MOEA has approved USD 5,958 thousand.

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Headway Advanced Materials Inc. and Subsidiaries

Significant Transactions with Investee Companies in Mainland China,

either Directly or Indirectly through

a Third Party, and their Prices, Payment Terms, Unrealized Gains or Losses and Other Related Information

From January 1 to December 31, 2022

Table 6

Unit: In NTD Thousand, Unless Stated Otherwise

Investee company	Transaction type	Purchase, sales	Purchase, sales	Price	Transaction terms	Transaction terms	Notes receivable (payable), accoutsreceivable (payable)	Notes receivable (payable), accoutsreceivable (payable)	unrealized gains/losses	Note
		Amount	Percentage		Payment term	Comparison with ordinarytransactions	Amount	Percentage
Shanshui Lianmei Company	Sales	$ 53,029	4%	Remark	Remark	Remark	$ 19,798	7%	$ -	`－`

Remark: The selling prices of products to subsidiaries by the Company are generally equivalent to those charged to third-party customers, with a payment term of 90 days after month-end. However, for certain products that assist subsidiaries in expanding local business, their selling prices are based on agreed prices between the Company and the subsidiaries. As of December 31, 2022, the payment terms for subsidiaries are subject to their respective financial conditions.

222

Headway Advanced Materials Inc. and Subsidiaries

Information of major shareholders

December 31, 2022

Talbe 7

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Shares
Name of the major shareholder Percentage of
Number of shares owned
ownership
Jinteng Investment Co., Ltd. 6,268,937 8.91%
Youlong Investment Co., Ltd. 3,849,642 5.47%
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Remark 1: The information of major shareholders presented in this table is provided by the Taiwan Depository & Clearing Corporation based on the number of ordinary shares and preference shares held by shareholders with ownership of 5% or greater, that have been issued without physical registration (including treasury shares) by the Consolidated Company as of the last business day for the current quarter. The share capital in the consolidated financial statements may differ from the actual number of shares that have been issued without physical registration because of different preparation basis.
Remark 2: If a shareholder delivers the shareholdings to the trust, the above information will be disclosed by the individual truster who opened the trust account. For shareholders who declare insider shareholdings with ownership greater than 10% in accordance with the Security and Exchange Act, the shareholdings include shares held by shareholders and those delivered to the trust over which shareholders have rights to determine the use of trust property. For information relating to insider shareholding declaration, refer to Market Observation Post System.

223

6.5 The audited parent company only financial statements of recnet year

INDEPENDENT AUDITOR’S REPORT

To Headway Advanced Materials Inc.:

Opinion

We have audited the accompanying financial statements of Headway Advanced Materials Inc. (the Company), which comprise the parent company only balance sheets as of December 31, 2022, and 2021, and the parent company only statements of comprehensive income, changes in equity, cash flows from January 1 to December 31, 2022, and 2021, and the notes to the parent company only financial statements (including a summary of significant accounting policies).

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and 2021, and the parent company only financial performance and parent company only cash flows from January 1 to December 31, 2022, and 2021 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and Auditing Standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

224

Key audit matters are those matters that, in our professional judgment, were most significant in our audit of the 2022 parent company only financial statements of Headway Advanced Materials Inc. These matters were addressed in the context of our audit of the parent company only financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on the matters.

Key audit matters for the 2022 parent company only financial statements of Headway Advanced Materials Inc. are stated as follows:

Revenue Recognition

Sales revenue from PU resin products of Headway Advanced Materials Inc. is significant and accounts for 92% of the total revenue. As the global economic environment has been challenging in the current year, the overall gross margin has declined, although the gross margin for some products has only slightly changed. Therefore, we have identified revenue recognition of these products as a key audit matter. Refer to Notes 4(11) and 21 for information on the related accounting policies.

1.We assessed the effectiveness of relevant internal controls over the sales cycle, including the related internal control procedures and operating systems, to confirm and evaluate their effectiveness during the sales transactions.
2.We selected samples of sales list and examined customer sales orders, export declarations or delivery notes signed by external customers, sales invoices, and examined whether there were any abnormalities in the collection of sales revenue and the identity of sales and collection targets to confirm the validity of revenue.

Responsibilities of Management and Those Charged with Governance for the

Parent Company Only Financial Statements

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

In preparing the parent company only financial statements, management is responsible for assessing the ability of Headway Advanced Materials Inc. to continue as a going concern, disclosing, applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate Headway Advanced Materials Inc. or to cease operations, or has a realistic alternative but to do so.

225

The governance unit (including the Audit Committee) of Headway Advanced Materials Inc. is responsible for monitoring the financial report process.

Auditors’ Responsibilities for the Audit of the Parent Company Only Financial Statements

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

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

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.
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 internal control of Headway Advanced Materials Inc.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
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

226

attention in our auditors’ report to the related disclosures in the paretn 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 Headway Advanced Materials Inc. to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the parent company only financial statements (including the relevant notes), and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient and appropriate audit evidence regarding the financial information of entities formed in Headway Advanced Materials Inc. to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of Headway Advanced Materials Inc. audit. We remain solely responsible for our audit opinion.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the 2022 parent company only financial statements of Headway Advanced Materials Inc. and are therefore the audit key matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosures 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.

227

Deloitte & Touche Taipei, Taiwan Republic of China March 14, 2023

228

Headway Advanced Materials Inc.

Parent Company Only Balance Sheets

December 31, 2022 & 2021

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Unit: In NTD Thousand
December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
Code Assets Amount ％ Amount ％ Code Liabilities & Equity Amount ％ Amount ％
Current Assets Current Liabilities
1100 Cash and cash equivalents (Note 4, 6 & 27) $ 106,055 7 $ 144,758 9 2100 Short-trem borrowings (Note 17 & 27) $ 115,829 8 $ 86,559 6
1136 Current financial assets at amortized cost 2110 Short-trem bills payable (Note 17 & 27) 99,907 7 39,984 3
(Note 4, 9 & 27) 40,261 3 36,288 2 2130 Contract liabilities (Note 21) 667 - 414 -
1150 Notes receivable – non-related parties (Note 4, 5, 2150 Notes payable – non-related parties (Note 27) 51,089 3 68,947 4
10 & 27) 22,192 1 35,456 2 2160 Notes payable – related parties(Note 27 & 28) 2,315 - 1,895 -
1160 Notes receivable – related parties (Note 4,5,10 2170 Accounts payable – non-related praties (Note
27) 32,501 2 53,647 3
27 & 28) 2180 Accounts payable – related parties (Note 27 &
2,232 - 3,370 - 28) 700 - 516 -
1170 Accounts receivable - non-related parties (Note 2206 compensation payable to employees & directors
(Note 22) 3,394 - 15,538 1
4, 5, 10 & 27) 112,185 7 103,979 7 2220 Other payables (Note 18) 41,948 3 41,952 3
1180 Accounts receivable – related parties (Note 2230 Current tax liabilities (Note 4 & 23) - - 19,855 1
4, 5, 10, 27 & 28) 23,758 2 21,699 2 2280 Lease liabilities – current (Note 4, 14 & 27) 640 - 633 -
1220 Current tax assets (Note 4 & 23) 10,507 1 - - 2399 Other current liabilities (Note 18) 496 - 446 -
130X Inventories (Note 4, 5 & 11) 159,507 10 172,466 11 21XX Total Current Liabilities 349,486 23 330,386 21
1479 Other current Assets (Note 16) 4,899 - 5,363 -
11XX Total Current Assets 481,596 31 523,379 33 Non-current Liabilities
2540 Long-term borrowings (Note 17, 27 & 29) 165,000 11 165,000 11
Non-current Assets 2570 Deferred tax liabilities (Note 4 & 23) 24,475 1 33,675 2
1510 Financial assets at fair value through profit or 2580 Lease liabilities – non-current (Note 4, 14 & 27) 215 - 855 -
loss – non-current (Note4, 7 & 27) 11,113 1 2,736 - 2640 Defined benefit liabilities (Note 4 & 19) 392 - 4,998 -
1517 Financial assets at fair value through other
comprehensive income - non-current (Note 4, 25XX Total Non-current Liabilities 190,082 12 204,528 13
8 & 27) 1,467 - 2,399 -
1550 Investments accounted for using equity method
(Notes 4 & 12) 817,799 53 824,800 52 2XXX Total Liabilities 539,568 35 534,914 34
1600 Properity, plant and equipment (Note 4, 13 &
29) 183,610 12 171,399 11 Equity (Note 20)
1755 Right-of-use assets (Note 4 & 14) 847 - 1,483 - Capital
1780 Intangible assets (Note 4 & 15) 199 - 62 - 3110 Common stock captial 703,033 45 703,353 44
1840 Deferred tax assets (Note 4 & 23) 22,396 1 31,892 2 3200 Capital surplus 13,081 1 12,761 1
1920 Guarantee deposits paid (Note 16) 1,997 - 2,241 - Retained earnings
1990 Other non-current assets – others (Note 16) 25,907 2 24,835 2 3310 Legal reserve 215,371 14 201,208 13
15XX Total Non-current Assets 1,065,335 69 1,061,847 67 3320 Special reserve 95,488 6 86,263 5
3350 Unappropriatee retained earnings 38,765 3 144,203 9
3300 Total Retained Earnings 349,624 23 431,674 27
3400 Other equity ( 58,375 ) ( 4 ) ( 97,476 ) ( 6 )
3XXX Total Equity 1,007,363 65 1,050,312 66
1XXX Total Assets $ 1,546,931 100 $ 1,585,226 100 Total Liabilities & Equity $ 1,546,931 100 $ 1,585,226 100
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The accompanying notes are an integral part of the parent company only financial statements.

Chairman ： Liou, Han-Yin

Manager ： Chao, Wei-Chun

Accountant in Charge ： Liao, Pei-Hung

229

Headway Advanced Materials Inc.

Parent Company Only Statements of Comprehensive Income

From January 1 to December 31, 2022 & 2021

Unit: In NTD Thousand, EPS in NTD

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2022 2021
Code Amount ％ Amount ％
4000 Net sales revenue (Note 4, 21
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& 28)
$ 784,456
100
$ 758,140

5000
Total cost of sales (Note 11, 22
& 28)

680,300
86

627,385

5900
Gross profit (loss)
104,156
14
130,755

5920
Realized ( unrealized ) profit
from sales to susidiaries

610

-
(
1,245)

5950
Realized gross profit from
operations

104,766
14

129,510

Operating expenses (Note 22 &
28)
6100
Selling expenses
31,647
4
30,897
6200
Administrative expenses
45,697
6
59,157
6300
R&D expenses
22,596
3
23,529
6450
Expected credit loss (gain)
465

-

13

6000
Total operating
expenses

100,405
13

113,596

6900
Operating income (loss)

4,361

1

15,914

Non-operating income and
Expenses (Note 4 & 22)
7100
Interest income
1,181
-
1,639
7010
Other income
1,607
-
1,162
7020
Other gains and losses
14,459
2
(
407 )
7050
Financial costs
(
4,316 )
(
1 )
(
3,600 )
7070
Share of profit (loss) of
subsidiaries and
associates accounted for
using equity method

5,421

1

163,979

7000
Total non-operating
income and expenses

18,352

2

162,773

7900
Profit (loss) before tax
$ 22,713
3
$ 178,687

7950
Total tax expense (income)
(Note 4 & 23)

4,104

1

36,056

8200
Profit (loss) for the year

18,609

2

142,631

Other comprerhensive income

100
83
17
-
17
4
8
3
-
15
2
-
-
-
-
22
22
24
5
19

230

8310
Items that will not be
reclassified ubsequently
to profit or loss:
8311
Remeasurement of
defined benefit
plans (Note 19)
4,133
8316
Unrealized gains and
losses on
investments in
equity instruments
at fair value
through other
comprehensive
income
(
314 )
8330
Share of other
comprehensive
income of
subsidiaries and
associates
accounted for
using equity
method
403
8360
Items that may be
reclassified ubsequently
to profit or loss:
8361
Exchange differences
on translation of
the financial
statement of
foreign operations
(Note 20)
47,474
8399
Income tax related to
components of
other
comprehensive
income that will be
reclassified to
profit or loss (Note
20 & 23)
(
9,496)
(
8300
Total other
comprehensive
income

42,200

8500
Total comprehensive income
$ 60,809
Earnings per share (Note 24)
9750
Basic
$ 0.27
9850
Diluted
$ 0.26

1
(
955 )
-
-
738
-
-
(
47 )
-
6
(
12,454 )
(
2 )

1)

2,492

-
6
(
10,226)
(
2)
8
$ 132,405
17
$ 2.05
$ 2.02

The accompanying notes are an integral part of the parent company only financial statements. Chairman ： Manager ： Accountant in Charge ： Liou, Han-Yin Chao, Wei-Chun Liao, Pei-Hung

231

U nit : I n N T D T ho usa nd

Headway Advanced Materials Inc.

Pa re nt C omp a ny O nly St ate me nt o f C ha nges in E q uit y

Fro m Ja nua ry 1 t o De ce mbe r 31, 202 2 & 20 21

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Other Equity
Unrealized
gains and losses
Capital surplus (Note 20) Exchange on investments
Common stock captial Retained earnings (Note 20) differences on in equity
translation of instruments at
the financial fair value
Shares Unappropriated statement of Unrealized through other
(Thousand Additional from logn-term Employee stock Restricted stock retained foreign revaluation comprehensive Unearned
Code shares) Amount paid-in capital investement options units From merger Total Legal reserve Special reserve earnings Total operations increments income compensation Total Equity
A1 Balance January 1, 2021 70,348 $ 703,470 $ 34,436 $ 1,497 $ 3,225 $ 4,251 $ 891 $ 44,300 $ 196,896 $ 82,768 $ 49,072 $ 328,736 ( $ 89,913 ) $ 6,800 ( $ 3,149 ) ( $ 5,888 ) $ 984,356
2021 Appropriation and distribution of
retained earnings:
B1 Legal reserve - - - - - - - - 4,312 - ( 4,312 ) - - - - - -
B3 Special reserve - - - - - - - - - 3,495 ( 3,495 ) - - - - - -
B5 Cash dividends - - - - - - - - - - ( 38,691 ) ( 38,691 ) - - - - ( 38,691 )
Changes in capital suplus
C15 Cash dividends distributed by capital
suplus - - ( 31,656 ) - - - - ( 31,656 ) - - - - - - - - ( 31,656 )
D1 Net profit - - - - - - - - - - 142,631 142,631 - - - - 142,631
D3 Other comprehensive income - - - - - - - - - - ( 1,002 ) ( 1,002 ) ( 9,962 ) - 738 - ( 10,226 )
D5 Total comprehensive income - - - - - - - - - - 141,629 141,629 ( 9,962 ) - 738 - 132,405
N1 Compensation cost from restricted stock
units - - 1,362 - - ( 1,362 ) - - - - - - - - - 3,898 3,898
N1 Write off restricted stock units ( 12 ) ( 117 ) - - - 117 - 117 - - - - - - - - -
Z1 Balance December 31, 2021 70,336 703,353 4,142 1,497 3,225 3,006 891 12,761 201,208 86,263 144,203 431,674 ( 99,875 ) 6,800 ( 2,411 ) ( 1,990 ) 1,050,312
2022 Appropriation and distribution of
retained earnings:
B1 Legal reserve - - - - - - - - 14,163 - ( 14,163 ) - - - - - -
B3 Special reserve - - - - - - - - - 9,225 ( 9,225 ) - - - - - -
B5 Cash dividends - - - - - - - - - - ( 105,503 ) ( 105,503 ) - - - - ( 105,503 )
D1 Net profit - - - - - - - - - - 18,609 18,609 - - - - 18,609
D3 Other comprehensive income - - - - - - - - - - 4,536 4,536 37,978 - ( 314 ) - 42,200
D5 Total comprehensive income - - - - - - - - - - 23,145 23,145 37,978 - ( 314 ) - 60,809
N1 Compensation cost from restricted stock
units - - 1,445 - - ( 1,445 ) - - - - - - - - - 1,745 1,745
N1 Write off restricted stock units ( 32 ) ( 320 ) - - - 320 - 320 - - - - - - - - -
Q1 Disposal of investments in equity
instruments at fair value through other
comprehensive income - - - - - - - - - - 308 308 - - ( 308 ) - -
Z1 Balance December 31, 2022 70,304 $ 703,033 $ 5,587 $ 1,497 $ 3,225 $ 1,881 $ 891 $ 13,081 $ 215,371 $ 95,488 $ 38,765 $ 349,624 ( $ 61,897 ) $ 6,800 ( $ 3,033 ) ( $ 245 ) $ 1,007,363
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T he acc o mpa ny in g note s are a n int e gra l pa rt o f t he pa re nt c o mp a ny o nly fi na nc ia l s tat e me nt s.

Chairman ： Liou, Han-Yin Manager ： Chao, Wei-Chun Accountant in Charge ： Liao, Pei-Hung

232

Headway Advanced Materials Inc.

Parent Company Only Cash Flow Statement

From January 1 to December 31, 2022 & 2021

Unit: In NTD Thousand

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Code 2022 2021
Cash flows from (used in) operating activities:
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A10000 Profit (loss) before tax Total adjustments to reconcile profit (loss): A20100 Depreciation expense A20200 Amortization expense A20300 Expected credit loss/ Provision for bad debt expense A20400 Net loss (gain) on financial assets at fair value through loss (profit) A20900 Interest expense A21200 Interest income ( A21900 Compensation cost from restricted stock units A22400 Share of profit (loss) of subsidiaries and associates accounted for using equity method ( A22500 Gain on disposal of property, plant and equipment ( A23800 Loss for market price decline and obsolete and slow-moving inventories A24000 Unrealized ( realized ) profit from sales to susidiaries ( A24100 Loss (gain) on foreign exchange, net ( A30000 Total changes in operating assets and liabilities A31130 Notes receivable A31140 Notes receivable - related parties A31150 Accounts receivable ( A31160 Accounts receivable - related parties ( A31200 In inventories A31240 Other current assets A31250 Other current assets - current A32130 Notes payable ( A32140 Notes payable - related parties A32150 Accounts payable ( A32160 Accounts payable - related parties A32180 Other payable ( A32230 compensation payable to employees & directors ( A32125 Contract liabilities A32230 Other current liabilities A32240 Net defined benefit liabilities ( A33000 Cash inflow (outflow) generated from operations ( A33300 Interest paid ( A33500 Income taxes paid ( AAAA Net cash flows from (used in) operating activities (	$ 22,713 19,615 174 465 1,401 ( 4,316 1,181 ) ( 1,745 5,421 ) ( 440 ) ( 427 610 ) 19,042 ) 13,306 ( 1,144 ( 230 ) 2,100 ) 12,532 ( 1,139 ( - 17,858 ) 420 ( 20,909 ) 184 ( 881 ) ( 12,144 ) 253 ( 50 ( 473) ( 1,405 ) 4,081 ) ( 43,666) ( 49,152)	$ 178,687 17,793 192 13 29 ) 3,600 1,639 ) 3,898 163,979 ) 963 ) 1,125 1,245 2,832 7,944 ) 2,563 ) 17,882 17,997 52,908 ) 1,681 ) 31,952 5,285 613 ) 3,487 191 ) 5,383 ) 10,759 2,365 ) 103 ) 533) 55,853 3,595 ) 30,463) 21,795

Cash flows from (used in) investing activities:

233

B00020 Proceeds from disposal of financial assets at fair value through other comprehensive income B00100 Acquisition of financial assets at fair value through profit or loss ( B02700 Acquisition of property, plant and equipment ( B02800 Proceeds from disposal of property, plant and equipment B03800 Decrease(increase) in guarantee deposits paid B04500 Acquisition of intangible assets ( B07100 Increase in prepayments for business facilities ( B07500 Interest received B07600 Cash dividens from subsidiaries received BBBB Net cash flows from (used in) investing activities Cash flows from (used in) financing activities: C00100 Increase(decrease) in Short-trem borrowings C00500 Increase(decrease) in Short-trem bills payable C01600 Proceeds from long-term borrowings C01700 Repayment of long-term borrowings ( C04020 Repayment of the principal portion of lease liabilities ( C04500 Cash dividends paid ( CCCC Net cash flows from (used in) financing activities ( DDDD Effect of exchange rate changes on cash and cash equivalents EEEE Net increase (decrease) in cash and cash equivalents ( E00100 Cash and cash equivalents at beginning of period E00200 Cash and cash equivalents at end of period	$ 618 9,767 ) ( 30,619 ) ( 440 244 ( 311 ) ( 1,072 ) ( 970 60,909 21,412 29,281 ( 60,000 ( 245,000 245,000 ) ( 633 ) ( 105,503) ( 16,855) ( 5,892 38,703 ) 144,758 $ 106,055	$ - 2,728 ) 27,822 ) 1,081 1,986 ) 93 ) 5,305 ) 1,650 207,882 172,679 67,682 ) 20,000 ) 165,000 185,000 ) 419 ) 70,347) 178,448) 832 16,858 127,900 $ 144,758

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

Chairman ： Manager ： Accountant in Charge ： Liou, Han-Yin Chao, Wei-Chun Liao, Pei-Hung

234

Headway Advanced Materials Inc.

Notes to Parent Company Only cvFinancial Statements From January 1 to December 31, 2022 & 2021

(Amounts expressed in NTD Thousand, unless stated otherwise ）

1. Company History

The Company's stock has been listed on the Taiwan Stock Exchange since May 2016.

This parent company only financial report is expressed in the functional currency of the Company, which is New Taiwan dollars.

2. Date and Procedures of the Authorization of Financial Statements

The parent company only financial statement was authorized by the Board of Directors on March 14, 2023.

Application of the Newly Announced and Amended Regulations and Interpretations

(1) The Company has adopted International Financial Reporting Standards (IFRSs) that were recognized by the Financial Supervisory Commission, International Accounting Standards (IAS), Interpretations, and Notices (IFRS), Interpretation (IFRIC), and Interpretative Announcement (SIC) for the first time.

(2) Applicable IFRSs recognized by the Financial Supervisory Commission in 2023

Remakr1: This amendment applies to the annual reporting period commencing on or after January 1, 2023.

235

Remark2: This amendment applies to changes in accounting estimates and accounting policies that occur during the annual reporting period commencing on or after January 1, 2023.

As of the date of issuance of this parent company only financial report, the Company has assessed that other revisions to standards and interpretations will not have a significant impact on their financial position and financial performance.

(3) The IFRSs issued by IASB but not yet endorsed and issued into effect by the FSC

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Newly announced / revised / amended regulations Effective date for the
and announcement of the
interpretations I A S B(Remark1)
Amendments to IFRS 10 and IAS 28 “Sale or
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Newly announced / revised / amended regulations and interpretations Amendments to IFRS 10 and IAS 28 “Sale or	Effective date for the announcement of the I A S B(Remark1)
Contribution of Assets between an Investor and its
Associate or Joint Venture”	To be determined by IASB
Amendments to IFRS 16`“`Lease Liability in a Sale and
Leaseback”	January 1, 2024`（`Remark2`）`
IFRS 17`“`Insurance Contracts”	January 1, 2023
Amendments to IFRS 17	January 1, 2023
Amendments to IFRS 17`“`Initial Application of IFRS 17
and IFRS 9 — Comparative Information”	January 1, 2023
Amendments to IAS 1 “Classification of Liabilities as
Current or Noncurrent” and “Non-current Liabilities
with Covenants”	January 1, 2024
Amendments to IAS 1`“`Non-current Liabilities with
Covenants”	January 1, 2024

Remark1 ： Unless otherwise stated, the above Newly announced/ revised/

amended regulations or interpretations become effective for annual reporting periods beginning on or after the respective dates mentioned.

Remark2 ： A seller-lessee should retrospectively apply the amendments to IFRS 16 for sale and leaseback transactions entered into after the initial application of IFRS 16.

As of the date the accompanying parent company only financial statements were authorized for issue, the Company continues in evaluating the impact on its financial position and financial performance from the initial adoption of the aforementioned standards or interpretations and related applicable period. The related impact will be disclosed when the Company completes its evaluation.

236

4. Summary of Significant Accounting Policies

(1) Statement of compliance

This parent company only financial report is prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs recognized by and declared effective by the FSC.

(2) Preparation basis for financial statements

Except for the financial instruments measured at fair value and the net defined benefit liabilities recognized at the present value of the defined benefit obligation net of the fair value of the planned assets, this parent company olny financial report is prepared at the historical cost.

The measurement of fair value is divided into Level 1 to Level 3 according to the observability and importance of the relevant input values: Level 1 input values: It refers to the market price (unadjusted) of the same asset or liability available on the measurement date. Level 2 input values: It refers to the directly (that is, price) or indirectly (that is, derived from price) observable input value of an asset or liability, except for Level 1 quotation.

Level 3 input values: It refers to the unobservable input value of an asset or liability.

When preparing the parent company only financial statements, the Company accounted for subsidiaries and associates using the equity method. In order to agree with the amount of net income, other comprehensive income, and equity attributable to shareholders of the parent in the consolidat ed financial statements, the differences in the accounting treatment between the parent company only basis and the consolidated basis were adjusted under the heading of investments accounted for using equity method, share of profit (loss) of subsidiaries and associates accounted for using equity method, share of other comprehensive income of subsidiaries and associates accounted for using equity method.

(3) Classification criteria for classifying assets and liabilities as current and noncurrent

Current asses include:

Assets held primarily for trading purposes;
Assets that are expected to be realized within 12 months after the reporting period; and
Cash and cash equivalents (excluding restricted items that will be exchanged or used to liquidate liabilities within 12 months after the balance sheet date).

237

Current liabilities include:

Liabilities held primarily for trading purposes;
Liabilities that will be due for settlement within 12 months after the balance sheet date, and;
Liabilities that cannot be unconditionally extended for at least 12 months after the balance sheet date.
(4) Foreign Currency

The Company that has financial reports prepared in a currency (foreign currency) other than its functional currency shall have it converted into the functional currency at the exchange rate on the trading day.

Non-monetary items in foreign currency measured at the historical cost are converted at the exchange rate on the trading day and will not be converted again.

(5) Inventory

(6) Investments i n Subsi diari es

Investments accounted for using the equity method include investments in subsidiaries.

A subsidiary is an entity that is controlled by the Company.

Under the equity method, an investment in a subsidiary is initially recognized at cost and adjusted thereafter to recognize the Company’s share of profit or loss and other comprehensive income of the subsidiary as well as the

238

distribution received. The Company also recognizes its share in the changes in the equity of subsidiaries.

Changes in the Company’s ownership interests in subsidiaries that do not result in the Company losing control over the subsidiaries are accounted for as equit y transactions. Any difference between the carrying amount of the subsidiary and the fair value of the consideration paid or received is recognized directly in equity.

When the share of loss of a subsidiary for the Company is equal to or exceeds its equity in the subsidiary (including the book value of the subsidiary under equity method and the other long-term equities substantially attributable to the Compan y’s composition on the net investment of the subsidiary), the loss is recognized according to the ongoing shareholding ratio.

The acquisition cost exceeding the shares at a net fair value of identifiable assets and liabilities that constitute the subsidiary business to which the Company is entitled on the date of acquisition shall be recognized as goodwill. Such goodwill includes the book value of the investments and may not be amortized. The shares at the net fair value of identifiable assets and liabilities that constitute the subsidiary business which the Company is entitled on the date of acquisition exceeding the acquisition cost shall be recognized as current revenue.

The Company takes overall consideration of cash-generating units and compares with the recoverable amount and book value of the financial statements in the evaluation of impairment. In case of an increase in the recoverable amount of assets, the reversal of impairment loss will be recognized as revenue. Nonetheless, the book value of the assets after the reversal of impairment loss may not exceed the book value less the due amortization without recognizing the impairment loss. The impairment loss attributable to goodwill may not be reversed later.

When the Company loses control of a subsidiary, any retained investment of the former subsidiary is measured at the fair value at that date. A gain or loss is recognized in profit or loss and calculated as the difference between (a) the aggregate of the fair value of consideration received and the fair value of any retained interest at the date when control is lost; and (b) the previous carrying amount of the investments in such subsidiary. In addition, the Company shall account for all amounts previously recognized in other comprehensive income in relation to the subsidiary on the same basis as would be required if the subsidiary had directly disposed of the related assets and liabilities.

Unrealized gains and losses from downstream transactions between the Company and its subsidiaries are eliminated in the parent company only

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financial statements. Gains and losses resulting from upstream and lateral transactions between the Company and its subsidiaries are recognized in the parent company only financial statements only to the extent that they are unrelated to the Company's interest in the subsidiaries.

(8) Property, plant and equipment

Property, plant, and equipment are recognized at the cost first and then measured at the cost net of accumulated depreciation and accumulated impairment loss subsequently.

Property, plant, and equipment are depreciated on a straight-line basis within the service life for each significant part separately. The Company shall review the estimated service life, residual value, and depreciation method at least once at the end of each year, and defer the effect of changes in the applicable accounting estimates. The difference between the net disposal amount of the property, plant, and equipment and the book amount is recognized as profit and loss at the time of having them delisted.

(8) Intangible assets
(a)Individually acquired:

Individually acquired finite-lived intangible assets are initially measured at cost and subsequently measured at cost less accumulated amortization. Intangible assets are amortized on a straight-line basis over their useful lives. The Company review the estimated useful lives, residual values, and amortization methods at least at each annual reporting period end and defers the effect of any accounting estimate changes. Indefinite-lived intangible assets are reported at cost less accumulated impairment losses. 。

(b)Derecognition:

When intangible assets are derecognized, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss for the period.

(9) Impairment of property, plant and equipment, right-of-use assets, and intangible assets

The Company assesses on each balance sheet date whether there is any sign indicating that property, plant and equipment, right-of-use assets, and intangible assets may have been impaired. If there is any sign of impairment, the recoverable amount of the asset should be estimated. If the recoverable amount of an individual asset cannot be estimated, the Company should

240

estimate the recoverable amount of the cash-generating unit to which the asset belongs.

For intangible assets with indefinite-lived and are not yet available for use, impairment tests are conducted at least annually and when there are indications of impairment.

(10) Financial instruments

Financial assets and financial liabilities are recognized in the parent company only balance sheet when the contractual terms of the instrument become binding on the Company.

Financial assets

Conventional transactions of financial assets are recognized and derecognzied in accordance with the trade date accounting. (1) Type of measurement

The types of financial assets held by the Company are financial assets measured at fair value through profit and loss, financial assets measured at amortized cost, and equity instrument investment measured at fair value through other comprehensive income.

A. Financial assets measured at fair value through profit and loss Financial assets measured at fair value through profit and loss incloude financial assets measured at fair value through profit and loss mandatorily. Financial assets measured at fair value through

241

profit and loss mandatorily include equity instrument investments that are not designated by the Company to be measured at fair value through other comprehensive income and debt instrument investments that are not classified as to be measured at amortized cost or measured at fair value through other comprehensive income.

B. Financial assets measured at amortized cost

If an investment in financial assets of the Company meets both of the following conditions, it is classified as a financial asset measured at amortized cost:

a. It is held within a business model whose objective is to hold financial assets to collect contractual cash flows; and
b. The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets measured at amortized cost (including cash and cash equivalents, accounts receivable and other receivable measured at amortized cost, term deposits with original maturities of more than 3 months) after initial recognition are subsequently measured at the amortized cost, the book value determined by the effective interest method less any impairment losses. Any foreign exchange gains or losses are recognized in profit or loss.

Except for the following two circumstances, interest income is calculated by having the effective interest rate multiplied by the total book value of the financial assets:

a. For financial assets with the purchase or original impairment, interest income is calculated by having the effective interest rate after credit adjustment multiplied by the amortized cost of the financial asset.
b. For financial assets not with the purchase or original credit impairment, but subsequently become credit-impaired financial assets, interest income should be calculated by having the effective interest rate multiplied by the amortized cost of the financial asset from the next reporting period after the credit impairment.

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Cash equivalents include time deposits and bonds with a repurchase agreement that are highly liquid and have a maturity of less than 3 months from the acquisition date. They can be easily converted into a fixed amount of cash and have a minimal risk of value fluctuation, and are used to meet short-term cash commitments.

C. Equity instruments investment measured at fair value through other

comprehensive income

The Company at the time of initial recognition can make an irrevocable choice to have the equity instrument investment that is not held-for-trade and not recognized through a business merger or with considerations paid measured at fair value through other comprehensive income.

(2) Impairment of financial assets

The Company assesses the impairment loss of financial assets (including accounts receivable) measured at amortized cost according to the expected credit loss on each balance sheet date.

Expected credit loss is the weighted average credit loss based on the risk of default. The 12-month expected credit loss refers to the expected credit loss caused by the possible default event of the financial instrument within 12 months after the reporting date, and the expected credit loss throughout the duration refers to the expected credit loss caused by all

243

possible default events throughout the duration of the financial instrument.

The impairment loss of all financial assets is with the book amount adjusted down through the allowance account.

(3) Derecognition of financial assets

The Company will have the financial assets derecognized only when the contractual right from the cash flow of the financial asset is terminated, or, the financial asset has been transferred and almost all the risks and rewards related to the ownership of the asset have been transferred to other companies.

When a financial asset measured at amortized cost is derecognized entirely, the difference between the book value and the consideration received is recognized in the profit or loss. When equity instrument investments measured at fair value through other comprehensive income are dereconnized entirely, the accumulated profit and loss is directly transferred to retained earnings without having it reclassified as profit and loss.

Financial liabilities
(1) Subsequent measurement

Financial liabilities are measured at the amortized cost in accordance with the effective interest method.

(2) Derecognition of financial liabilities

When financial liabilities are derecognized, the difference between the book value and the total consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss 。

(11) Income recognition

The Company after identifying the performance obligations in the contract will have the transaction price amortized to each performance obligation and will recognize income when each performance obligation is fulfilled.

(12) Lease

The Company assesses whether it is (or includes) a lease contract on the contract date.

The Company is the lessor

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Under operating leases, lease payments are recognized as revenue on a straight-line basis over the term of the relevant lease, after deduction of any lease incentives.

The Company is the lessee

Right-of-use assets are depreciated on a straight-line basis from the lease start date to the expiration of the service life or the expiration of the lease period, whichever is earlier.

Subsequently, the lease liability is measured at the amortized cost in accordance with the effective interest approach, and the interest expense is amortized during the lease period. If there are changes occurring in the lease period, the Company will re-measure the lease liability and relatively adjust the right-of-use asset. However, if the book value of the right-of-use asset is reduced to zero, the remaining re-measurement amount is recognized in the profit and loss. Lease liabilities are separately expressed in the parent company only balance sheet.

(13) Borrowing Cost

All borrowing costs are recognized as profit and loss in the current period. (14) Employee Benefit

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1. Short-term employee benefits

Short-term employee benefit-related liabilities are measured by the expected non-discounted amount of cash to be paid in exchange for employee services.

Retirement benefits

The pension of the defined contribution plan is recognized as an expense for an amount equivalent to the retirement fund appropriated for the employee’s service period.

Other long-term employee benefits

The accounting treatment for other long-term employee benefits is similar to that of defined benefit retirement plans, except that any related remeasurements are recognized in the income statement.

(15) Stock-based compensation

Restricted stock units (RSUs) are recognized as equity instruments at their fair value on the grant date, and the best estimate of the number of units expected to vest. The expenses are recognized on a straight-line basis over the vesting period, and Capital Surplus-Restricted Stock Units and other equity (unearned employee compensation) are adjusted accordingly. If the RSUs are immediately vested on the grant date, the entire expense is recognized on that date.

246

The estimated number of RSUs expected to vest is revised at each balance sheet date by the Company. If the original estimate is revised, the impact is recognized in the profit and loss, and the cumulative expense is adjusted to reflect the revised estimate, with a corresponding adjustment to "Capital Surplus-Restricted Stock Units". 。

(16) Income tax

Income tax expense is the sum of current income tax and deferred income tax.

Current income tax

The Company determines the current income (loss) in accordance with the law and regulations established by each income tax agency in order to calculate the income tax payable (recoverable ) accordingly.

Adjustments to income tax payable of previous years are included in current income tax.

Deferred income tax

Deferred income tax is calculated according to the temporary difference between the book value of assets and liabilities and the tax basis for calculating taxable income.

Taxable temporary differences related to investment in subsidiaries and associates are recognized as deferred income tax liabilities unless otherwise provided that the Company can control the timing of the reversion of the temporary differences; and the temporary differences are unlikely to be reversed in the foreseeable future. The deductible

temporary differences related to this type of investment will be recognized as deferred income tax assets only if it is likely to have sufficient taxable income to realize the temporary differences, and within the scope expected to be reversed in the foreseeable future.

247

assets. Those that have not been recognized as deferred income tax assets will also be reviewed on each balance sheet date, and the book amount is increased for those that are likely to generate taxable income in the future for the recovery of all or part of the assets.

Deferred income tax assets and liabilities are measured at the tax rate of the period when the liability is expected to be settled or the asset is expected to be realized. The said tax rate is based on the tax rate and tax law that has been legislated or substantively legislated on the balance sheet date. The measurement of the deferred income tax liabilities and assets reflects the tax consequences arising from the manner in which the Company expects to recover or settle the book amount of the assets and liabilities on the balance sheet date.

Current and deferred income tax

5. Significant Accounting Judgments, Estimations, and the Main Sources of

Assumption Uncertainties

When the Company adopts accounting policies, for those that cannot easily obtain relevant information from other sources, the management must make relevant judgments, estimations, and assumptions based on historical experience and other relevant factors. Actual results may differ from estimates.

The Company has taken into consideration the recent developments of the COVID-19 epidemic in our country and its potential impacts on the economic environment, inflation, and market interest rate volatility, in assessing significant accounting estimates related to cash flow projections, growth rates, discount rates, profitability, and other factors., and the management will continue to review the estimates and basic assumptions. If the revision of the estimate only affects the current period, it is recognized in the current period; if the revision of the accounting estimate affects both the current period and the future period, it is recognized in the current period and the future period.

6. Cash and Cash Equivalents

sh and Cash Equivalents
Cash on hand and petty cash Bank checking deposit and demand deposit	December 31,2022 $ 178 115,287	December 31,2021
		$ 217 128,701

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Cash equivalents Bank term deposit Repurchase agreement bonds Restricted bank deposit ( Total	15,449 15,402 146,316 40,261) ( $ 106,055	52,128 - 181,046 36,288) $ 144,758

The interest rate range of bank deposits on the balance sheet date is as follows:

follows:
Bank deposit Repurchase agreement bonds	December 31,2022 0.05%~4.00% 4.25%	December 31,2021
		0.01%~2.51% -

7. Financial Assets Measured at Fair Value through Profit and Loss

Financial assets–current Measured at fair value through profit and loss mandatorily Non-derivative financial assets `－`Foreign Bonds `－`Domestic TWSE/TPEx listing stock `－`Domestic Fund beneficiary certificate	December 31,2022 $ 3,968 1,030 6,115 $ 11,113	December 31,2021	December 31,2021
			$ 2,736 - - $ 2,736

8. Financial Assets Measured at Fair Value through Other Comprehensive income

Non-current Equity investment Equity investment Non-current Domestic investment Non-TWSE/TPEx listing stock TWSE/TPEx listing and Emerging Stock	December 31,2022 $ 1,467 December 31,2022 $ 1,467 - $ 1,467	December 31,2021 $ 2,399 December 31,2021	December 31,2021 $ 2,399 December 31,2021
			$ 1,822 577 $ 2,399

(1) Equity investment

The Company has based on the mid-term and long-term strategic purpose to invest in Non-TWSE/TPEx listing stocks, TWSE/TPEx listing stocks and Emerging Stocks, and expect to make profits through long-term investment. The management of the Company believes that if the short-term fluctuation in the fair value of the investment is included in the profit and loss, it is inconsistent with the aforementioned long-term investment plan; therefore, the

249

management chooses to have such investments measured at fair value through other comprehensive income.

9. Financial Assets Measured at the Amortized Cost

Current Restricted bank deposit	December 31,2022 $ 40,261	December 31,2021	December 31,2021
			$ 36,288

The Company has obtained approval from the National Tax Administration of the Ministry of Finance to repatriate USD 15 million under the "Regulations Governing the Investment of Overseas Funds Repatriated" and has submitted an investment plan to the Ministry of Economic Affairs. According to the regulations, the repatriated funds are restricted to the approved investment plan and cannot be used for other purposes.

10. Notes Receivable and Accounts Receivable

Notes receivable Measured at the amortized cost: Total carrying amount – related parties Less: Allowance for loss Total carrying amount – non-related parties Less: Allowance for loss Accounts receivable Measured at the amortized cost: Total carrying amount – related parties Less: Allowance for loss Total carrying amount – non-related parties Less: Allowance for loss	December 31,2022 $ 2,243 ( 11) 2,232 22,262 ( 70) 22,192 $ 24,424 $ 23,863 ( 105) 23,758 112,949 ( 764) 112,185 $ 135,943	December 31,2021	December 31,2021
	( ( ( (	( ( ( (	$ 3,387 17) 3,370 35,568 112) 35,456 $ 38,826 $ 21,763 64) 21,699 104,271 292) 103,979 $ 125,678

(1) Accounts receivalbe

The credit period granted by the Company to customers is generally between 30 and 120 days from the end of the month. The allowance for loss is estimated based on the analysis of overdue accounts, customer creditworthiness, and financial status to estimate the amount of uncollectible accounts. Before accepting new customers, the Company evaluates the credit quality of the

250

potential customer through a credit rating system and sets the customer's credit limit. The customer's credit limit and rating are reviewed regularly every year.

The Company recognizes the allowance for loss of accounts receivable based on the expected credit loss over the remaining lifetime of the accounts. The expected credit loss is calculated using a provision matrix, which considers the customer's past default history and current financial condition, the economic situation of the industry. Because the credit loss historical experience of the Company shows no significant differences in the loss patterns among different customer groups, the provision matrix does not distinguish between customer groups, but only sets the expected credit loss rate based on the number of days overdue of accounts receivable.

The provision for doubtful accounts and notes receivable of the Company is measured based on the provision matrix as follows: December 31, 2022

==> picture [410 x 246] intentionally omitted <==

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

O v e r d u e O v e r d u e
O v e r d u e O v e r d u e 246~429 Over 430
Not Overdue 1 ~ 60 d a y s 61~245 d a y s d a y s d a y s Total
Total book amount $ 144,109 $ 14,965 $ 1,521 $ 588 $ 134 $ 161,317
Allowance for loss
(expected credit
loss in the
duration) ( 130 ) ( 112 ) ( 301 ) ( 273 ) ( 134 ) ( 950 )
Amortized cost $ 143,979 $ 14,853 $ 1,220 $ 315 $ - $ 160,367
December 31, 2021
O v e r d u e O v e r d u e
O v e r d u e O v e r d u e 246~429 Over 430
Not Overdue 1 ~ 60 d a y s 61~245 d a y s d a y s d a y s Total
Total book amount $ 153,887 $ 10,704 $ 187 $ - $ 211 $ 164,989
Allowance for loss
(expected credit
loss in the
duration) ( 124 ) ( 84 ) ( 66 ) - ( 211 ) ( 485 )
Amortized cost $ 153,763 $ 10,620 $ 121 $ - $ - $ 164,504
----- End of picture text -----

The changes in the allowance for loss of the notes receivable and accounts receivable are as follows:

receivable are as follows:
Beginning Balance Add:Expected credit impairment loss appropriated for the current year Ending Balance		2022 $ 485 465 $ 950		2021
				$ 472 13 $ 485

Inventories

ntories
Commodities Finished goods	December 31,2022 $ 1,118 73,850	December 31,2021
		$ 784 69,524

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Raw materials

84,539 102,158 $ 159,507 $ 172,466

The nature of the cost of goods sold is as follows:

Cost of inventory sold Inventory impirement loss Physical inventory Gain(loss)		2022 $ 680,300 $ 427 $ 412	(	2021 $ 627,385 $ 1,125 $ 8 )

Investments Accounted for Using Equity Method

ments Accounted for Using Equity	Method
estments in subsidiaries vestments in subsidiaries Urasia International Inc. `（`URASIA`）` Headway Polyurethane Corporation Limited`（`TPU Company`）`	December 31,2022 $ 817,799 111`年`12`月`31`日` $ 725,416 92,383 $ 817,799	December 31,2021 $ 824,800 110`年`12`月`31`日`
			$ 718,804 105,996 $ 824,800

Investments in subsidiaries

(1) Investments in subsidiaries

Name of Subsidiary URASIA TPU Company	Percentages for ownership equity and votingrights	Percentages for ownership equity and votingrights
	December 31,2022 100% 50%	December 31,2021
		100% 50%

The Company invested in URASIA in 1996 for the purpose of establishing overseas production and marketing bases through engaging in various overseas investment businesses. As of December 31, 2022, URASIA has mainly invested in Shanghai Huiyu Construction Co., Ltd. (with a 74% shareholding, referred to as Shanghai Huiyu Company), Headway Advanced Matereials(Vietnam) Co., Ltd. (with a 100% shareholding, referred to as Headway Vietnam Company), and Cheng Yu Develop Co., Ltd. (with a 100% shareholding, referred to as Cheng Yu Company). Cheng Yu Company invested Fo-Shan City Shanshui Lianmei Chemical Co., LTD. (with a 100% shareholding, referred to as Shanshui Lianmei Company) in Mainland China, and Shanghai Huiyu Company acquired Anhui Huiyu Materials Technology Co., Ltd. (with a 100% shareholding, referred to as Anhui Huiyu Company) in Mainland China. The aforementioned investment cases in Mainland China have been approved by the Investment Commission of the Ministry of Economic Affairs. The Company transferred the

252

equity interest of Headway Shanghai Company and control over it on May 31, 2021.

The Company invested and established TPU Company on February 24, 2006, with a shareholding ratio of 50%. The Company is mainly engaged in the manufacture and sales of TPU.

Investments accounted for using the equity method in 2022 and 2021, as well as the Company's share of their profits and other comprehensive income, are recognized based on the audited financial statements.

13. Property, Plant and Equipment

(1) Self-Use

==> picture [413 x 385] intentionally omitted <==

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

Land Transportati Miscellaneo
improvemen House and Machinery on us Other Construction
Land ts Building equipment equipment equipment equipment in progress
Cost
Balance January
1, 2022 $ 109,145 $ 151 $ 129,369 $ 142,771 $ 19,211 $ 9,824 $ 86,968 $ 497,439
Addition - - 836 6,014 1,580 700 22,060 31,190
Disposal - - - ( 3,649) ( 2,165) ( 135 ) ( 602 ) ( 6,551)
Balance
December 1,
2022 $ 109,145 $ 151 $ 130,205 $ 145,136 $ 18,626 $ 10,389 $ 108,426 $ 522,078
Accumulated
depreciation
Balance January
1, 2022 $ - $ 151 $ 119,895 $ 126,209 $ 13,456 $ 7,004 $ 59,325 $ 326,040
Depreciation - - 2,800 5,121 2,054 1,098 7,906 18,979
Disposal - - - ( 3,649) ( 2,165) ( 135 ) ( 602 ) ( 6,551)
Balance
December 1,
2022 $ - $ 151 $ 122,695 $ 127,681 $ 13,345 $ 7,967 $ 66,629 $ 338,468
Net balance
December 1,
2022 $ 109,145 $ - $ 7,510 $ 17,455 $ 5,281 $ 2,422 $ 41,797 $ 183,610
Cost
Balance January
1, 2021 $ 109,145 $ 151 $ 128,587 $ 140,756 $ 23,531 $ 7,918 $ 67,546 $ 477,634
Addition - - 782 3,418 1,300 2,223 20,468 28,191
Disposal - - - ( 1,403) ( 5,620) ( 317 ) ( 1,046) ( 8,386)
Balance
December 1,
2021 $ 109,145 $ 151 $ 129,369 $ 142,771 $ 19,211 $ 9,824 $ 86,968 $ 497,439
Accumulated
depreciation
Balance January
1, 2021 $ - $ 151 $ 116,948 $ 121,541 $ 16,891 $ 6,676 $ 54,732 $ 316,939
Depreciation - - 2,947 6,071 2,074 645 5,632 17,369
Disposal - - - ( 1,403) ( 5,509) ( 317 ) ( 1,039) ( 8,268)
Balance
December 1,
2021 $ - $ 151 $ 119,895 $ 126,209 $ 13,456 $ 7,004 $ 59,325 $ 326,040
Net balance
December 1,
2021 $ 109,145 $ - $ 9,474 $ 16,562 $ 5,755 $ 2,820 $ 27,643 $ 171,399
----- End of picture text -----

Depreciation expenses are accrued on a straight-line basis according to the

following years of useful life:

years of useful life:
Land improvements	25 Years
House and Building	3~35 Years
Machinery equipment	1~14 Years
Transportation equipment	3~8 Years
Miscellaneous equipment	3~7 Years

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Other equipment

1~18 Years

Please refer to Note 29 for the property, plant and equipment that are pledged as collateral for loans.

14. Lease Agreement

(1) Right-of-use assets

ight-of-use assets
Book amount of right-of-use assets Transportation equipment Addition of right-of-use assets Depreciation expense of right-of-use assets Transportation equipment	December 31, 2022 $ 847 2022 $ - $ 636	December 31, 2021
			$ 1,483 2021 $ 1,907 $ 424

Apart from the recognition of depreciation expenses, there was no significant subleasing or impairment of the right-of-use assets of the Company during the period from January 1 to December 31, 2022 and 2021, respectively.

(2) Lease liability

ease liability
Book amount of lease liability Current Non-current	December 31, 2022 $ 640 $ 215	December 31, 2021
			$ 633 $ 855

The discount rate ranges for lease liabilities are as follows:

Transportation equipment	December 31, 2022 1.07%	December 31, 2021
		1.07%

(3) Key leasing activities and terms:

The Company leases transportation equipment for operational use for a

period of 3 years. At the end of the lease term, the Company has no bargain purchase option for the leased transportation equipment.

(4) Other lease information

Short-term lease expense Low-value assets lease expense Total lease cash (outflow)	(	2022 $ 567 $ 32 $ 1,245 )	(	2021 $ 426 $ - $ 857 )

The Company chose to apply the recognition Exemption for assets, such as employee dormitories, company vehicles, and office equipment, qualify for short-term leases and qualify for low-value asset leases, and did not recognize related right-of-use assets and lease liabilities for such leases.

254

15. Intangible Assets

ngible Assets
Cost Balance January 1. 2022 Acquired separately Dispoals Balance December 1. 2022 Accumulated amortization and impirement Balance January 1. 2022 Amortization expense Disposal Balance December 1. 2022 Net balance December 1. 2022 Cost Balance January 1. 2021 Acquired separately Dispoals Balance December 1. 2021 Accumulated amortization and impirement Balance January 1. 2021 Amortization expense Disposal Balance December 1. 2021 Net balance December 1. 2022	Computer softeware
	( ( ( (	$ 93 311 93) $ 311 $ 31 174 93) $ 112 $ 199 $ 274 93 274) $ 93 $ 113 192 274) $ 31 $ 62

16. Other Assets

er Assets
Current Prepaid expenses income tax refund receivable Other receivable temporary payments Other Total Non-current Advance payments for equipment and construction Guarantee deposits paid Total	December 31, 2022 $ 3,767 608 309 158 57 $ 4,899 $ 25,907 1,997 $ 27,904	December 31, 2021
			$ 285 2,378 694 1,974 32 $ 5,363 $ 24,835 2,241 $ 27,076

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17. Borrowings

(1) Short-term borrowings

hort-term borrowings
Pledged loans(Note 29) Bank loans (Remark 1) Unsecured loans Credit line loans (Remark 2)	December 31, 2022 $ 35,000 80,829 $ 115,829	December 31, 2021
			$ - 86,559 $ 86,559

Remark 1 The interest rates of bank loans were 1.77% on December 31, 2022.

Remark 2 The interest rates of credit line loans were 1.54% ~ 2.28% and 0.90% ~ 1.05% on December 31, 2022 and 2021, respectively.

(2) Short-term bills payable

hort-term bills payable
Commercial paper payable Less: Discount on Short-term bills payable	December 31, 2022 $ 100,000 ( 93) $ 99,907	December 31, 2021
	(	(	$ 40,000 16) $ 39,984

The outstanding short-term bills payable, which have not yet matured, are as follows:

December 31, 2022

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

Book
Guarantor/Acce Discount Book Interest value of
ptor institution Face value amount value rate range Collateral Collateral
Commercial
paper
payable
China bills
finance co. $ 50,000 $ 9 $ 49,991 1.94% 無 $ -
Mega bills
finance co. $ 50,000 $ 84 $ 49,916 2.04% 無 $ -
December 31, 2021
Book
Guarantor/Acce Discount Book Interest value of
ptor institution Face value amount value rate range Collateral Collateral
Commercial
paper
payable
China bills
finance co. $ 30,000 $ 9 $ 29,991 0.96% 無 $ -
Mega bills
finance co. $ 10,000 $ 7 $ 9,993 1.00% 無 $ -
----- End of picture text -----

(3) Long-term borrowings

December 31, 2022 December 31, 2021

Pledged loans

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Mortgage loan (Remark 1) Mortgage loan (Remark 2) Mortgage loan (Remark 3) Mortgage loan (Remark 4) Long-term borrowings	$ 85,000 80,000 - - $ 165,000	$ - - 85,000 80,000
		$ 165,000

Remark 1 The bank loan is secured by the Company's real estate, plant, and equipment (refer to Note 29), with a maturity date of October 14, 2024. As of December 31, 2022, the effective annual interest rate is 1.57%.
Remark 2 The bank loan is secured by the Company's real estate, plant, and equipment (refer to Note 29), with a maturity date of October 14, 2024. As of December 31, 2022, the effective annual interest rate is 1.57%.
Remark 3 The bank loan is secured by the Company's real estate, plant, and equipment (refer to Note 29), with a maturity date of December 30, 2023. It was fully repaid in October 2022, and as of December 31, 2021, the effective annual interest rate is 1.07%.
Remark 4 The bank loan is secured by the Company's real estate, plant, and equipment (refer to Note 29), with a maturity date of September 7, 2023. It was fully repaid in October 2022, and as of December 31, 2021, the effective annual interest rate is 1.07%.

18. Other Liabilities

er Liabilities
Current Other payable Payroll and bonus payable Professional service payable Payables on equipment Insurance payable Other Other current liabilities	December 31, 2022 $ 18,582 4,769 3,641 1,440 13,516 $ 41,948 $ 496	December 31, 2021
			$ 20,388 3,889 3,070 1,484 13,121 $ 41,952 $ 446

19. Retirement Benefit Plan

(1) Defined contribution plan

The retirement pension system of the Company is a defined contribution plan under the "Labor Pension Act" regulated by the government. The Company contributes 6% of employees' monthly salaries to their personal accounts at the labor insurance bureau as retirement pension.

(2) Defined benefit plan

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The retirement pension system of the Company is a government-managed defined benefit retirement plan under the “Labor Standards Act” of Taiwan R.O.C. The payment of employee retirement pension is calculated based on the length of service and the average monthly salary for the six months prior to the approved retirement date. The Company contributes 4% of the total monthly salary of employees to the retirement pension, which is deposited into an account in the name of the “Supervisory Committee of Business Entities’ Labor Retirement Reserve” at Bank of Taiwan. Before the end of the fiscal year, if the account balance is insufficient to pay the workers who are expected to meet the retirement conditions in the next year, the difference will be paid in a lump sum before the end of March of the next year. This account is managed by the “Bureau of Labor Funds, Ministry of Labor,” and the Company has no right to affect the investment management strategy.

The amount of the defined benefit plan included in the parent company only balance sheet is as follows:

balance sheet is as follows:
Present value of the defined benefit obligation Fair value of the planned assets Net defined benefit liabilities	December 31, 2022 $ 13,724 ( 13,332) $ 392	December 31, 2021
	(	(	$ 20,569 15,571) $ 4,998

The changes in net defined benefit liabilities (assets) are as follows:

January 1, 2021 Service cost Current service cost Settlement gain Interest expense (income) Recognized in profit and loss Re-measurement amount Return on planned assets (except for the amount included in net interest) Actuarial loss –changes in demography statistical assumption Actuarial loss – adjustment by experience Recognized in other comprehensive income Appropriation of employer Settlement December 31, 2021	Present value of the defined benefit obligation $ 20,493 165 - 102 267 - 530 629 1,159 - ( 1,350) 20,569	Fair value of the plann assets ($ 15,917) - ( 114 ) ( 86) ( 200) ( 204 ) - - ( 204) ( 600) 1,350 ( 15,571)	Net defined benefit liabilities (assets) $ 4,576 165 ( 114 ) 16 67 ( 204 ) 530 629 955 ( 600) - 4,998

258

Service cost
Current service cost		126		-		126
Settlement gain		-	(	23 )	(	23 )
Interest expense
(income)		103	(	79)		24
Recognized in profit and loss		229	(	102)		127
Re-measurement amount
Return on planned assets
(except for the
amount included in
net interest)		-	(	1,242 )	(	1,242 )
Actuarial profit
-changes in financial
assumption	(	1,624 )		-	(	1,624 )
Actuarial profit –
adjustment by
experience	(	1,267)		-	(	1,267)
Recognized in other
comprehensive
income	(	2,891)	(	1,242)	(	4,133)
Appropriation of employer		-	(	600)	(	600)
Payment of plan assets	(	2,683)		2,683		-
Settlement	(	1,500)		1,500		-
December 31, 2022		$ 13,724	( $	13,332 )		$ 392

The amount recognized in profit and loss for defined benefit plan by function is summarized as follows:

summarized as follows:
Cost of sales Selling expenses Administrative expenses R&D expenses		2022 $ 54 66 5 2 $ 127		2021
				$ 28 23 15 1 $ 67

The Company is exposed to the following risks due to the pension system of the “Labor Standards Act”:

a. Investment risk: The “Bureau of Labor Funds, Ministry of Labor” invests in domestic (foreign) equity securities, debt securities, and bank deposits through its own operation and entrusted management services. However, the distributable amount of the Company’s planned assets is an amount not less than the income generated from a 2-year time deposit interest rate of the local bank.
b. Interest rate risk: The decline in the interest rate of government bonds will cause the present value of the defined benefit obligations to go up; however, the debt investment returns of the planned assets will also go up, and the impact of the two on the net defined benefit liabilities will partially offset each other.
c. Salary risk: The calculation of the present value of the defined benefit obligation is by referring to the future salary of the members of the plan.

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Therefore, the increase in the salary of the members of the plan will cause the present value of the defined benefit obligation to go up.

The present value of the defined benefit obligation of the Company is actuarially calculated by a qualified actuary. The major assumptions made on the measurement date are as follows:

Discount rate Expected salary increase rate	December 31, 2022 1.50% 2.00%	December 31, 2021
		0.50% 2.00%

Discount rate Increased by 0.25% Decreased by 0.25% Expected salary increase rate Increased by 0.25% Decreased by 0.25%	December 31, 2022 ( $ 320 ) $ 331 $ 324 ( $ 314 )	December 31, 2021	December 31, 2021
	( (	( (	$ 498 ) $ 517 $ 501 $ 485 )

Since actuarial assumptions may be correlated, it is unlikely that there is

only one single assumption changed, so the aforementioned sensitivity analysis may not be able to reflect the actual changes in the present value of the defined benefit obligations.

Amount expected to be appropriated in 1 year Average due date of the defined benefit obligation	December 31, 2022 $ 600 9.52 Years	December 31, 2021 $ 600 10 Years

20. Equity

(1) Common stock capital

Authorized stock shares (thousand shares) Authorized capital stock Stock shared issued and paid in full (thousand shares) Outstanding capital stock	December 31, 2022 80,000 $ 800,000 70,304 $ 703,033	December 31, 2021 80,000 $ 800,000 70,336 $ 703,353

The par value of the issued common shares is 10 NTD per share, with each share entitled to one voting right and the right to receive dividends.

The changes in the Company's common stsock capital are mainly due to

the issuance and cancellation of restricted stock units granted to employees.

(2) Capital surplus

260

Applicable for making up for losses, distributing cash, or capitalization Additional paid-in capital Difference between consideration and book amount of subsidiary’s stock shares acquired or disposed From merger Cannot be used for any purpose Employee stock option Restricted sotck units	December 31, 2022 $ 5,587 1,497 891 3,225 1,881 $ 13,081	December 31, 2021	December 31, 2021
			$ 4,142 1,497 891 3,225 3,006 $ 12,761

(3) Retained earnings and dividend policy

The Company revised its Articles of Incorporation and approved a dividend policy of distributing 50% to 100% of unappropriated retained earnings at the shareholder meeting on July 30, 2021.

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profit distribution plan for approval at the shareholder meeting.For the Company's employee and director compensation distribution policy, please refer to (7) of Note 22 on employee and director compensation.

The Company held regular shareholder meetings on June 9, 2022 and July 30, 2021 to have the 2021 and 2020 earnings distribution proposals resolved as follows:

Legal reserve Special reserve Cash dividends Cash dividend per share`（`NTD`）`		2021 $ 14,163 $ 9,225 $ 105,503 $ 1.50		2020 $ 4,312 $ 3,495 $ 38,691 $ 0.55

In addition, the Company held its annual shareholders' meeting on July 30, 2021, and resolved to distribute cash dividends of NTD 31,656 thousand from the capital surplus.

On March 14, 2023, the Board of Directors of the Company proposed shareholder dividend distribution plan for the fiscal year 2022 as follows:

Legal reserve Reversal of Special Reserve Cash dividends Cash dividend per share`（`NTD`）`	(	2022 $ 2,345 $ 37,358 ) $ 42,182 $ 0.60

The shareholder dividend distribution plan for the fiscal year 2022 is still pending and is expected to be determined at the shareholder meeting to be held on May 31st, 2023.

(4) Special reserve

pecial reserve
Beginning balance appropriation to special reserve Reduction in other equity items Ending Balance		2022 $ 86,263 9,225 $ 95,488		2021
				$ 82,768 3,495 $ 86,263

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(5) Other equity

a.Exchange differences on translation of the financial statement of foreign

operations Beginning balance Occurrence in current year Exchange differences of foreign operations Income tax effect Ending balance		2022 $ 99,875 ) 47,474 9,496) $ 61,897 )		2021
	( ( (		( ( (	$ 89,913 ) 12,454 ) 2,492 $ 99,875 )

b. Unrealized profit and loss in valuation of financial assets measured at fair

value through other comprehensive inocme

Beginning balance ( Incurred in the current year Unrealized profit and loss Equity instrument ( Other comprehensive inocme of the current year ( Accumulated profit/loss from the disposal of equity instrument transferred to retained earnings ( Ending balance ( nrealized revaluation increments Beginning and ending balance	2022 $ 2,411) 314) 314) 308) $ 3,033 ) 2022 $ 6,800	( (	2021 $ 3,149 ) 738 738 - $ 2,411 ) 2021 $ 6,800

c. Unrealized revaluation increments
d. Unearned compensation

The Company's shareholders' meeting resolved on May 31, 2019 to issue restricted stock units. Please refer to Note 25 for further details.

Beginning balance Recognition of share-based payment expense Ending balance		2022 $ 1,990 ) 1,745 $ 245 )		2021
	( (		( (	$ 5,888 ) 3,898 $ 1,990 )

Sales Revenu

s Revenu
Revenue from contracts with customers PU resin Thermoplastic Polyurethan (TPU`）`	2022 $ 719,345 20,794	2021
		$ 679,666 5,250

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Others 44,317 73,224 $ 784,456 $ 758,140

(1) Contract balance

Accounts receivable(Note 10) Contract liabilities Contract liabilities-cruuent	December 31, 2022 $ 135,943 $ 667	December 31, 2021 $ 125,678 $ 414		January 1, 2021 $ 164,313 $ 2,779

The changes in contract liabilities mainly arise from the timing difference between satisfying performance obligations and the timing of customer payments.

22. Profit (loss) from Continuing Operations

(1) Interest income

(1) Interest income
Bank deposits (2) Other income Other income – other Miscellaneous income Dividend income (3) Other gains and losses		2022 $ 1,181 2022 $ 1,607 - $ 1,607		2021 $ 1,639 2021
				$ 1,157 5 $ 1,162

(3) Other gains and losses
Net profit (loss) from foreign currency exchange Gain on disposal of property, plant, and equipment Profit (loss) from financial assetsand financial liabiblities Financial assets measured at fair value through profit and loss mandatorily Miscellaneous losses (4) Financial costs Interest on bank borrowing Interest on lease liabilities		2022 $ 15,529 440 1,401 ) 109) $ 14,459 2022 $ 4,303 13 $ 4,316		2021
	( (		( ( (	$ 1,274 ) 963 29 125) $ 407 ) 2021
				$ 3,588 12 $ 3,600

(5) Depreciation and Amortization

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Depreciation expense summarized by functions Cost of sales Operating expenses Amortization expense summarized by functions Cost of sales Operating expenses mployee benefit expense short-term employee benefits Post-employment benefits Defined contribution plan Defined benefit plan(Note 19) Share-based payment Equity settlement Other employee benefit Total employee benefit expense Summarized by functions Cost of sales Operating expenses		2022 $ 14,791 4,824 $ 19,615 $ - 174 $ 174 2022 $ 84,529 3,750 127 3,877 1,745 14,050 $ 104,201 $ 49,302 54,899 $ 104,201		2021
				$ 13,445 4,348 $ 17,793 $ - 192 $ 192 2021 $ 103,433 3,949 67 4,016 3,898 14,241 $ 125,588 $ 53,114 72,474 $ 125,588

(6) Employee benefit expense

(7) Compensation to employees and dircetors

Estimation ratio
Employee compensation Director compensation	2022 8% 5%	2021 5% 3%

Amount

Employee compensation Director compensation	2022 Cash Stock $ 2,089 $ - 1,305 -	2021	2021
	Cash	Cash	Stock $ - -
	$ 2,089 1,305	$ 9,711 5,827

265

The changes in the amount of the parent company only financial report after the publication date shall be processed according to the change in accounting estimates and adjusted and recorded in the next year.

Please refer to the Market Observation Post System of Taiwan Stock Exchange for information on the compensation to employees and directors resolved by the Company’s board of directors.

(8) Foreign currency exchange profit and loss

Total foreign currency exchange profit Total foreign currency exchange loss Net profit (loss)		2022		2021
	(	$ 25,703 10,174) $ 15,529	( (	$ 8,113 9,387) $ 1,274 )

23. Continuing Operations Income Tax

(1) Income tax recognized in profit and loss

The main composition items of income tax expense as follows:

Current income tax Incurred in the current year Adjustment of prior periods Deferred income tax Incurred in the current year Income tax expense recognized in profit and loss		2022 $ 13,057 247 9,200) $ 4,104		2021
	(		(	$ 42,849 187 6,980) $ 36,056

The adjustment of accounting income and current income tax expenses is as follows:

Continuing operations net income before tax Income tax expense calculated according to statutory tax rate for net income before tax Unrecognized deductible temporary difference Current income tax expense of previous periods adjusted in the current year Income tax expense recognized in profit and loss	(	2022 $ 22,713 $ 4,543 686 ) 247 $ 4,104		2021 $ 178,687 $ 35,737 132 187 $ 36,056

(2) Income tax recognized in other comprehensive income.

Deferred income tax Incurred in the current year- `－`Conversion through overseas operations		2022 $ 9,496)		2021
	(			$ 2,492

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2022 Income tax recognized in other comprehensive inocme ( $ 9,496 ) urrent income tax assets and liabilities December 31, 2022 Current income tax assets Income tax refund receivable $ 10,507 Current income tax liabilities Income tax payable $ -	2021 $ 2,492 December 31, 2021	2021 $ 2,492 December 31, 2021
		$ - $ 19,855

(3) Current income tax assets and liabilities
(4) Deferred income tax assets and liabilities

The changes in deferred income tax assets and liabilities are as follows:

2022

==> picture [412 x 489] intentionally omitted <==

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

Recognized in
Recognized other
Deferred income tax Beginning in profit and comprehensive
assets (liabilities) balance loss profit and loss Ending balance
Temporary difference
Undistributed
earnings of
subsidiaries ( $ 22,500 ) $ 9,200 $ - ( $ 13,300 )
Provision for the
land value
incremental tax ( 11,175 ) - - ( 11,175 )
Exchange
differences
arising from
foreign
operations 28,160 - ( 9,496 ) 18,664
Defined benefit
pension plan 3,732 - - 3,732
( $ 1,783 ) $ 9,200 ( $ 9,496 ) ( $ 2,079 )
2021
Recognized in
Recognized other
Deferred income tax Beginning in profit and comprehensive
assets (liabilities) balance loss profit and loss Ending balance
Temporary difference
Undistributed
earnings of
subsidiaries ( $ 30,000 ) $ 7,500 $ - ( $ 22,500 )
Impirement loss 520 ( 520 ) - -
Provision for the
land value
incremental tax ( 11,175 ) - - ( 11,175 )
Exchange
differences
arising from
foreign
operations 25,668 - 2,492 28,160
Defined benefit
- -
pension plan 3,732 3,732
( $ 11,255 ) $ 6,980 $ 2,492 ( $ 1,783 )
----- End of picture text -----

267

(5) Income tax audit

The income tax returns for the Company have been approved by the tax authorities up to the year 2020.

24. Earnings per Share

ings per Share
Basic earnings per share From continuing operations Diluted earnings per share From continuing operations		2022		2021
		$ 0.27 $ 0.26		$ 2.05 $ 2.02

The net income and weighted average number of outstanding common shares used to compute earnings per share are as follows:

Current income Net income for the calculation of basic and diluted earnings per share Shares Weighted average number of common stock shares for the calculation of basic earnings per share The impact of potential diluted common stock shares: Employee compensation Restricted stock units Weighted average number of common stock shares for the calculation of diluted earnings per share		2022 2021 $ 18,609 $ 142,631 Unit`：`Thousand shares 2022 2021 69,669 69,560 216 492 629 560 70,514 70,612

If the Company may choose to pay remuneration to employees in the form of stocks or cash, when calculating the diluted earnings per share, it is assumed that the remuneration to employees is paid in the form of stocks, and the weighted average number of outstanding shares is included in the potential diluted common stock for the calculation of the diluted earnings per share. When calculating the diluted earnings per share before the distribution of remuneration in the form of stock resolved in the shareholders meeting of the following year, the dilution effect of this potential common stock will be considered continuously.

Share -based Payment

Restricted stock units

268

Grant date 108.09.25 109.04.15	Grant amount 426 374	Fair value per share 15.10 17.65	Unit:Thousand shares Issuance and capital raising record date Actual shares issued 108.09.25 426 109.04.15 374

(1) After one year of employment, employees can receive 30% of the granted restricted stock units if they achieve a performance evaluation level of B or above.
(2) After two years of employment, employees can receive an additional 30% of the granted restricted stock units if they achieve a performance evaluation level of B or above.
(3) After three years of employment, the remaining 40% of the granted restricted stock units can be vested if they achieve a performance evaluation level of B or above.

If the above-mentioned dates fall on a holiday, the transaction will be processed on the next business day.

The handling methods for employees who fail to meet the vested conditions are as follows:

(1) If an employee violates these regulations, trust agreements, labor contracts, work rules, or contractual agreements between the employee and the Company (related contractual agreements are authorized by the Board of Directors to be negotiated and signed by the Chairman on behalf of the Company), the Company has the right to retrieve the restricted stock units granted but not yet vested to the employee and cancel them free of charge.

269

(2) If an employee fails to meet the vested conditions, the Company has the right to retrieve the restricted stock units granted but not yet vested to the employee and cancel them free of charge.
(3) For general resignation (voluntary/retirement/layoff/dismissal), the Company will retrieve the restricted stock units granted but not yet vested to the employee in accordance with the law and cancel them free of charge.
(4) For leave without pay: Employees who are granted restricted stock units and have applied for leave without pay with the Company's approval will be deemed as not having met the vested conditions during the period of leave. After returning to their original position, the employee's restoration of their rights will be subject to approval by the Chairman. The vested conditions, percentage, and deadline for meeting them will be reevaluated within the scope of the granted shares.
(5) For general death, the Company will retrieve the restricted stock units granted but not yet vested to the employee in accordance with the law and cancel them free of charge.
(6) or occupational accidents:
a. If an employee suffers a disability due to an occupational accident and cannot continue working, the restricted stock units granted but not yet vested will be vested ahead of schedule from the date of effective resignation.
b. If an employee dies due to an occupational accident, the restricted stock units granted but not yet vested will be vested ahead of schedule from the date of death, and the inheritance will receive them.
(7) For job transfer: If an employee transfers to a related enterprise or another company (excluding subsidiaries), the restricted stock units granted but not yet vested will be handled in the same manner as specified in the "general resignation" clause. However, for operational needs, if an employee is assigned by the Company to work at a related enterprise or another company, their restricted stock units granted but not yet vested will not be affected by the transfer.
(8) Employees who have been granted restricted stock units but have not met the vested conditions are not required to return the stock dividend and cash dividend they have received.

The restricted rights and obligations of employees who have been allocated or subscribed to new shares but have not yet met the vesting conditions are as follows:

270

(1) Prior to meeting the vesting conditions, employees shall not sell, pledge, transfer, gift, or otherwise dispose of the restricted stock units allocated under this policy.
(2) Employees who have been allocated new shares but have not yet met the vesting conditions shall have the same rights and obligations (including the right to participate in rights issues, dividends, attend shareholder meetings, propose resolutions, speak, vote, elect, subscribe to cash increases, and other matters related to shareholder rights and interests) as the common shares already issued by the Company, except for the aforementioned restricted rights.
(3) The restricted stock units issued this time may be held in trust by a trustee. Before meeting the vesting conditions, the employee shall not request the trustee to return the restricted stock units for any reason or by any means.

Summary of restricted stock units information of the Company:

Beginning balance Cancellation in current year Ending balance	Shares (Thousand shares) 2022 775 ( 32) 743	Shares (Thousand shares)	Shares (Thousand shares)
			2021
	(	(	787 12) 775

The recognized compensation costs for the Company in 2022 and 2021 were NTD 1,745 thousand and NTD 3,898 thousand, respectively.

26. Capital Risk Management

The Company conducts capital management to ensure that can maximize shareholder returns by optimizing debt and equity balances under the assumption of going concern. The overall strategy of the Company has not undergone significant changes.

The Company's senior management regularly reviews its capital structure, considering the cost and associated risks of various types of capital. Based on the recommendations of senior management, The Company balances its overall capital structure through methods such as paying dividends, issuing new stocks, and so on.

The Company is not required to comply with any other external capital regulations.

27. Financial Instruments

(1) Fair value information - Financial instruments that are not measured at fair value

271

The management of the Company believes that the carrying amounts of financial assets and financial liabilities that are not measured at fair value approximate their fair value.

(2) Fair value information - financial instruments measured at fair value on a repeatability basis
Fair value level

Fair value level
December 31, 2022 Financial assets valued at fair value through profit and loss Foreign Bonds Domestic TWSE/TPEx listing stock Domestic Fund beneficiary certificate Total Financial assets measured at fair value through other comprehensive income Domestic non- TWSE/TPEx listing stock December 31, 2021 Financial assets valued at fair value through profit and loss Foreign Bonds Financial Assets Measured at Fair Value through Other Comprehensive income Domestic TWSE/TPEx listing and Emerging Stock Domestic non- TWSE/TPEx listing stock Total	Level 1 $ 3,968 1,030 6,115 $ 11,113 $ - Level 1 $ 2,736 $ 577 - $ 577	Level 2 $ - - - $ - $ - Level 2 $ - $ - - $ -	Level 3 $ - - - $ - $ 1,467 Level 3 $ - $ - 1,822 $ 1,822	Total
				$ 3,968 1,030 6,115 $ 11,113 $ 1,467 Total
				$ 2,736 $ 577 1,822 $ 2,399

There was no transfer between Level 1 and Level 2 fair value measurements in 2022 and 2021.

272

Evaluation technology and the input value of Level 3 fair value measurement

The domestic unlisted equity investments are valued using the net asset value method, where the Company measures the fair value of the investments based on its net assets on the balance sheet date.

(3) Types of financial instruments

ypes of financial instruments
Financial assets Financial assets measured at fair value through other comprehensive income Financial assets measured at the amortized cost (Remark1) Measured at fair value through profit and loss Financial assets measured at fair value through profit and loss mandatorily Financial liabilities Measured at the amortized cost (Remark2)	December 31, 2022 $ 1,467 306,683 11,113 467,341	December 31, 2021
		$ 2,399 345,550 2,736 416,548

Remark 1: The balance includes financial assets measured at amortized cost such as cash and cash equivalents, financial assets measured at amortized cost, notes receivable and accounts receivable (including related parties).

Remark 2 The balance includes financial liabilities measured at amortized cost such as short-term borrowings, short-term bills payable, notes payable and accounts payable (including related parties) and long-term borrowings.

(4) Financial risk management objectives

The main financial instruments of the Company include notes and accounts receivable, accounts payable, lease liabilities, long-term and short-term borrowings. The financial management department of the Company provides services to all business units, plans and coordinates entering the domestic and international financial markets, analyzes internal risk exposure according to the degree and breadth of risk, and reports, supervises, and manages the financial risks related to the operations of the Company. These risks include market risk (including exchange rate risk and interest rate risk), credit risk, and liquidity risk.

1. Market risk

273

The main financial risks from the operating activities of the Company are the risk of changes in foreign currency exchange rates (see (1) below) and the risk of changes in interest rates (see (2) below).

(1) Exchange rate risk

The Company engages in sales and purchase transactions denominated in foreign currencies, which exposes the Company to foreign exchange risk.

Please refer to Note 31 for the book value of monetary assets and monetary liabilities denominated in non-functional currencies and the book value of derivative instruments with foreign exchange risk exposure of the Company as of the balance sheet date.

Sensitivity Analysis

The Company is mainly exposed to fluctuations in the exchange rates of the U.S. dollar and Chinese yuan.

The sensitivity analysis below illustrates the impact on the Company's earnings before tax when the functional currency of the relevant foreign currencies increases or decreases by 5% against the New Taiwan Dollar (the functional currency). The 5% sensitivity ratio is used by the Company's management to report foreign exchange risks to senior management and represents the reasonable possible range of exchange rate fluctuations assessed by management. The sensitivity analysis includes only the foreign currency-denominated monetary items outstanding and adjusts their year-end translation by 5% for exchange rate movements. A positive number in the table below indicates that a 5% depreciation of the New Taiwan Dollar against the relevant foreign currency will increase earnings before tax by the stated amount, while a 5%

appreciation will reduce earnings before tax by the same amount.

Effect of USD Effect of Chinese yuan 2022 2021 2022 2021 P&L $ 8,072 $ 5,578 $ 1,370 $ 4,971

(i) The primary source of the impact is from the US dollar cash and US dollar-denominated accounts receivable and accounts payable of the Company that were outstanding and not hedged against cash flow risks on the balance sheet date.
(ii) The primary source of the impact is from the Chinese yuan cash and Chinese yuan-denominated accounts receivable and accounts payable of the Company that were outstanding and not hedged against cash flow risks on the balance sheet date.

274

(2) Interest rate risk

The Company is exposed to interest rate risk due to the fact that the Company borrows funds at both fixed and floating rates. To manage this risk, the Company maintains an appropriate mix of fixed and floating rate instruments, and uses interest rate swap and forward rate contracts. The Company regularly evaluates its hedging activities to ensure that they align with its interest rate outlook and established risk preferences, in order to adopt the most cost-effective hedging strategies.

The book amount of the financial assets and financial liabilities of the Company with interest rate risk exposure on the balance sheet date are as follows:

date are as follows:
With fair value interest rate risk `－`Financial assets `－`Financial liabilities With cash flow interest rate risk `－`Financial assets `－`Financial liabilities	December 31, 2022 $ 30,851 101,591 115,287 280,000	December 31, 2021
		$ 52,128 128,031 128,701 165,000

Sensitivity Analysis

If the interest rate increases/decreases by 1% with all other variables held constant, the Company's net income after tax for 2022 and 2021 fiscal years will decrease/increase by NTD 1,647 thousand and NTD 363 thousand, respectively, mainly due to the interest rate risk associated with the Company's variable-rate borrowings.

2. Credit risk

Credit risk refers to the risk that the counterparty of the transaction defaults on contractual obligations and causes financial losses to the

275

Company. As of the balance sheet date, the maximum credit risk exposure of the Company that may cause financial losses due to the counterparty’s failure to perform its obligations and financial guarantees provided by the Company is mainly derived from:

(1) the book value of financial assets recognized in the parent company only balance sheet.
(2) The maximum amount that may need to be paid by the Company for providing financial guarantees, regardless of the likelihood of occurrence.

The Company adopts a policy of conducting credit ratings on counterparties and obtaining adequate collateral in necessary situations to mitigate the risk of financial losses caused by default. The Company continues to monitor credit risk and counterparties' credit ratings, and diversifies the total transaction amount among qualified clients with different credit ratings. The credit risk is controlled by annual credit limit reviews by the credit control unit.

To mitigate credit risk, the Company's management assigns dedicated units to decide on credit limits, credit approval, and other monitoring procedures to ensure that appropriate actions are taken to recover overdue receivables. In addition, the Company conducts a review of the

recoverable amount of receivables on the balance sheet date to ensure that appropriate impairment losses are recognized for irrecoverable receivables. Therefore, the management of the Company believes that the credit risk of the Company has been significantly reduced.

Liquidity risk

The Company manages and maintains sufficient positions of cash and cash equivalents to support the Company's operations and reduce the impact of cash flow volatility. The management of the Company

supervises the usage of bank financing facilities and ensures compliance with the terms of borrowing agreements.

Bank borrowings are an important source of liquidity for the Company. The unused financing facilities of the Company are explained in the following (2) financing facilities.

(1) Non-derivative financial liabilities liquidity and interest rate risk list

The remaining contract maturity analysis of non-derivative

financial liabilities is prepared based on the earliest date when the Company may be required to repay the liabilities, using the undiscounted cash flows of the financial liabilities (including

276

principal and estimated interest). Therefore, the bank borrowings that the Company may be required to repay immediately are listed in the earliest period in the table, without considering the probability of the bank immediately exercising such rights; other non-derivative financial liabilities are prepared based on the contractual repayment dates.

Dcecmber 31, 2022

Non-derivative financial liabilities Non-interest-beari ng liabiblities Lease liabilities Floating interest rate instrument Fixed interest rate instrument	I	m m e d i a t e payment or p a y i n g w i t h i n 1 month		1~3 months		3months ~ 1 year		1~5 years		Over 5 years
		$ - 54 30,000 99,907 $129,961		$ 86,605 106 50,000 829 $137,540		$ - 480 35,000 - $ 35,480		$ - 215 165,000 - $165,215		$ - - - - $ -

Further information on the maturity analysis of financial liabilities mentioned above is as follows:

==> picture [354 x 245] intentionally omitted <==

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

Less than 5 ～ 10 10 ～ 15 15 ～ 20 Over 20
1 year 1~5 years years years years years
Lease
liabilities $ 646 $ 215 $ - $ - $ - $ -
Dcecmber 31, 2021
I m m e d i a t e
payment or
p a y i n g
w i t h i n 3months ~ 1
1 month 1~3 months year 1~5 years Over 5 years
Non-derivative
financial
liabilities
Non-interest-beari
ng liabiblities $ - $125,005 $ - $ - $ -
Lease liabilities 53 105 475 855 -
Floating interest
rate instrument - - - 165,000 -
Fixed interest rate
instrument 73,210 23,333 30,000 - -
$ 73,263 $148,443 $ 30,475 $165,855 $ -
----- End of picture text -----

Further information on the maturity analysis of financial liabilities mentioned above is as follows:

==> picture [354 x 48] intentionally omitted <==

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(2) Financing facilities

Financing facilities
Unsecured bank overdraft facility (reviewed annually) `－`Used amount `－`Unused amount Secured bank borrowing facility (extendable by mutual agreement) `－`Used amount `－`Unused amount	December 31, 2022 $ 218,058 371,942 $ 590,000 $ 165,000 35,000 $ 200,000	December 31, 2021
			$ 133,354 586,646 $ 720,000 $ 165,000 35,000 $ 200,000

Related Party Transactions

In addition to the disclosure in other notes, the transactions between the Company and related parties are as follows:

(1) Name and relationship of related parties

Name of related praties Relation with the Company TPU Company Subsidiary Headway Vietnam Company Subsidiary URASIA Subsidiary Shanshui Lianmei Company Subsidiary Isotech Products Incorporated Substantial related party Chaei Hsin Enterprise Co., Ltd. Substantial related party Liou, Han -Yin Key management personnel

(2) Sale revenue

ale revenue
Account Sales revenue	Classification of Related party Subsidiary Substantial related party		2022 $ 97,931 8,456 $ 106,387		2021
					$ 100,949 10,043 $ 110,992

Transactions with related parties are carried out at the agreed prices between both parties, with a payment term of 90 days from the end of the month, in principle. However, as of December 31, 2022, payment is collected based on the financial status of each related party.

(3) Purchase

urchase
Classification of Related party Subsidiary Substantial related party		2022 $ 15,397 970 $ 16,367		2021
				$ 12,217 611 $ 12,828

278

The price and transaction terms for purchases made by the Company from related parties are determined by mutual agreement, with a payment period of 90 days from the end of each month.

(4) Receivables from related parties (excluding the loaning of funds to the related
parties)

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Classification of December 31, December 31,
Account Related party/ Name 2022 2021
Notes receivable Substantial related party
Isotech Products
Incorporated $ 1,958 $ 3,094
Subsidiary 274 276
$ 2,232 $ 3,370
Accounts receivable Subsidiary
Shanshui Lianmei
Company $ 19,798 $ 16,952
Headway Vietnam
Company 3,509 3,394
Other subsidiaries 92 92
Substantial related party 359 1,261
$ 23,758 $ 21,699
----- End of picture text -----

There is no guarantee for the outstanding receivables from related parties.

(5) Payables to related parties(excluding the loaning of funds from the related parties)

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

Classification of December 31, December 31,
Account Related party/ Name 2022 2021
Notes payable Subsidiary/ TPU Company $ 2,031 $ 1,517
Substantial related party/
Isotech Products
Incorporated 284 378
$ 2,315 $ 1,895
Accounts payable Subsidiary/ TPU Company $ 661 $ 516
Substantial related party 39 -
$ 700 $ 516
----- End of picture text -----

The balance of payables to related parties outstanding is unsecured.

(6) Endorsements/guarantees

Guaranteed by

Classification of Related party The amount guaranteed by key management personnel	December 31, 2022 $ 392,130	December 31, 2021 $ 533,580

(7) Other transactions

Account Other income Operating	Classification of Related party/ Name Subsidiary/ TPU Company Subsidiary		2022 $ 1,050 $ 6		2021 $ 1,050 $ 6

279

expenses

(8) Remunerations to the management

The total remuneration of directors and other key management personnel is

as follows:

Short-term employee benefits		2022 $ 15,984		2021 $ 10,757

The remuneration of directors and other key management personnel is determined by the Remuneration Committee of the Company based on individual performance and market trends. In addition, the Company provides official cars for business use by key management personnel, with a total acquisition cost of NTD 4,197 thousand.

29. Collateral Assets

The following assets have been pledged as collateral for short-term and long-term borrowings:

December 31, 2022 December 31, 2021 Property, plant and equipment $ 104,959 $ 118,619

Contractual Commitment with Material or Liabilities without Recognition

As of December 31, 2022 and 2021, the balance of letters of credit issued but unused was USD 102 thousand and USD 302 thousand, respectively.

Information on Significantly Influential Assets and Liabilities in Foreign Currency

The following information is summarized and expressed in foreign currencies other than the functional currencies of the Company. The disclosed exchange rates refer to the exchange rates for the conversion of the foreign currencies into functional currencies. The influential assets and liabilities in foreign currency are as follows:

December 31, 2022

December 31, 2022
Assets in Foreign Currency Monetary item USD CNY Liabilities in Foreign Currency Monetary item USD	Foreign currency $ 5,706 6,215 449	Exchange rate 30.71 4.408 30.71	Carrying amount
				$ 175,231 27,396 $ 202,627 $ 13,789

December 31, 2021

280

Assets in Foreign Currency Monetary item USD CNY Liabilities in Foreign Currency Monetary item USD CNY	Foreign currency $ 4,670 22,912 640 25	Exchange rate 27.68 4.344 27.68 4.344	Carrying amount	Carrying amount
				$ 129,266 99,530 $ 228,796 $ 17,715 109 $ 17,824

The foreign exchange gains (losses) (realized and unrealized) of the Company for the fiscal years 2022 and 2021 were NTD 15,529 thousand and NTD (1,274) thousand, respectively.

32. Notes to Disclosure

(1) Information on major transactions and (2) Investment related information:
Financing provided to others: Table 1.
Endorsements/guarantees provided: Table 2.
The Marketable securities held (excluding investment in the equity of the subsidiaries and associates): Table 3.
Marketable securities acquired or disposed at costs or prices at least NTD 300 million or 20% of the paid-in capital: None.
Acquisition of individual real estate at costs of at least NTD 300 million or 20% of the paid-in capital: None.
Disposal of individual real estate at prices of at least NTD 300 million or 20% of the paid-in capital: None.
Total purchases from or sales to related parties amounting to at least NTD 100 million or 20% of the paid-in capital: None.
Receivables from related parties amounting to at least NTD 100 million or 20% of the paid-in capital: None.
Trading in derivative instruments: None.
Information on investees: Table 4.
(3) Information on investment in Mainland China:
Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment gain or loss, carrying amount of the investment at the end of the period, repatriations of investment income,

281

and limit on the amount of investment in the mainland China area: Talbe 5.

Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, unrealized gains or losses: Talbe 6.
- (1) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.
- (2) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period
- (3) The amount of property transactions and the amount of the resultant gains or losses.
- (4) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.
- (5) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.
- (6) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.
(4) Information of major shareholders: list of the shareholders with ownership of 5% or greater, showing the names, the number of shares and percentage of ownership held by each shareholder: Talbe 7.

282

Unit: In NTD Thousand, Unless Stated Otherwise

Headway Advanced Materials Inc.

Financing Provided to Others

From January 1 to December 31, 2022

Table 1

No.	Lender	Borrower Account	Borrower Account	Related party	Maximum balance for the period	Ending balance	Actual amount drawn	Interest rate range	Nature of financing Transaction amount	Nature of financing Transaction amount	Reason for financing	Allowance for bad debt	Collateral	Collateral	Financing limits for each borrower (Remark 1)	Lander’s total financing limit	Note
													Item	Value
1	URASIA INTERNATIONAL INC.	Shanghai Huiyu Company	Other receivable	Y	$ 44,260	$ 22,420	$ 22,420	2.25%	Remark 2	$ -	Working capital	$ -	`－`	$ -	$ 292,921	$ 292,921	(Rem ark 1)

Remark 2: In need of short-term financing.

283

Headway Advanced Materials Inc.

Endorsements/Guarantees Provided

From January 1 to December 31, 2022

Table 2

Unit: In NTD Thousand, Unless Stated Otherwise

No.	Endorser/ guarantor	Endorsee/guarantee	Endorsee/guarantee	Limits on endorsements /guarantees given on behalf of each party	Maximum amount endorsements /guarantees during the period	Outstanding endorsements /guarantees the end of the period Actual ount drawn	Outstanding endorsements /guarantees the end of the period Actual ount drawn	Amount endorsements /guarantees by collaterals	Ratio of accumulated endorsements /guarantees to net equity per latest financial statements(%)	Maximum endorsements /guarantees amount allowable (Remark 1)	Endorsements /guarantees given by parent on behalf of subsidiaries	Endorsements /guarantees by subsidiaries on behalf of parent	Endorsements /guarantees given on behalf of companies in Mainland China	Note
		Company name	Relationship
0	The Company	Headway Vietnam Company	2	Remark 2	$ 115,675	$ 59,410	$ 774	$ -	5.90	$ 402,945	Y	N	N	`－`

Remark 1: The total amount of endorsements/guarantes shall not exceed 40% of the net worth of this Company.

Remark 2: The endorsement/guarantee limit for a single entity shall not exceed 25% of the current net worth of the Company.

284

Headway Advanced Materials Inc.

Unit: In NTD Thousand, Unless Stated Otherwise

The Marketable securities held December 31, 2022

Table 3

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Remark 1: The aforementioned marketable securities were not provided as collateral, pledged, or otherwise restricted as of December 31, 2022.

Remark 2: Please refer to Table 4 for the information of investment in subsidiaries.

285

Headway Advanced Materials Inc.

Unit: In NTD Thousand, Unless Stated Otherwise

Information on investees

From January 1 to December 31, 2022

Table 4

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Remark: Please refer to Table 5 for the information on investment in Mainland China

286

Unit: In NTD Thousand, Unless Stated Otherwise

Headway Advanced Materials Inc.

Information on Investment in Mainland China

From January 1 to December 31, 2022

Table 5

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Remark 1: Invested through subsidiary URASIA.

Remark 2: Invested through subsidiary Cheng Yu Company.

Remark 3: Invested through Shanghai Huiyu Company.

Remark 5: As of December 31, 2022, the accumulated investment income repatriated was USD 5,958 thousand for Shanghai Huiyu Company, which exceeded the cumulative investment amount remitted out, and the Investment Commission, MOEA has approved USD 5,958 thousand.

287

Headway Advanced Materials Inc.

Significant Transactions with Investee Companies in Mainland China,

either Directly or Indirectly through

a Third Party, and their Prices, Payment Terms, Unrealized Gains or Losses and OtherRelated Information

From January 1 to December 31, 2022

Table 6

Unit: In NTD Thousand, Unless Stated Otherwise

Investee company	Transaction type	Purchase, sales	Purchase, sales	Price	Transaction terms	Transaction terms	Notes receivable (payable), accoutsreceivable (payable)	Notes receivable (payable), accoutsreceivable (payable)	unrealized gains/losses	Note
		Amount	Percentage		Payment term	Comparison with ordinarytransactions	Amount	Percentage
Shanshui Lianmei Company	Sales	$ 53,029	4%	Remark	Remark	Remark	$ 19,798	7%	$ -	`－`

288

Headway Advanced Materials Inc. and Subsidiaries

Information of major shareholders

December 31, 2022

Talbe 7

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Remark 1: The information of major shareholders presented in this table is provided by the Taiwan Depository & Clearing Corporation based on the number of ordinary shares and preference shares held by shareholders with ownership of 5% or greater, that have been issued without physical registration (including treasury shares) by the Company as of the last business day for the current quarter. The share capital in the parent company only financial statements may differ from the actual number of shares that have been issued without physical registration because of different preparation basis.
Remark 2: If a shareholder delivers the shareholdings to the trust, the above information will be disclosed by the individual truster who opened the trust account. For shareholders who declare insider shareholdings with ownership greater than 10% in accordance with the Security and Exchange Act, the shareholdings include shares held by shareholders and those delivered to the trust over which shareholders have rights to determine the use of trust property. For information relating to insider shareholding declaration, refer to Market Observation Post System.

289

THE CONTENTS OF STATEMENTS

OF

MAJOR ACCOUNTING ITEMS

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Items STATEMENT INDEX
Major Accounting Items in Assets, Liabilities and
----- End of picture text -----

Major Accounting Items in Assets, Liabilities and
Equity
Statement of Cash and Cash Equivalent	1
Statement of Notes receivable	2
Statement of Accounts receivable	3
Statement of Inventories	4
Statement of Financial Assets measured at fair
value through profit and loss – non-current	5
Statement of Financial Assets measured at fair
value through Other comprehensive income –
non-current	6
Statement of Investments Accounted for Using
Equity Method	7
Statement of Property, plant and equipment	Note 13
Statement of Right-of-Use Assets	8
Statement of Intangible Assets	Note 15
Statement of Short-term Borrowings	9
Statement of Notes Payable	10
Statement of Accounts Payable	11
Statement of Other payable	Note 18
Statement of Lease Liabilities	12
Statement of Long-term Borrwoings	13
Major Accounting Items in Profit and Loss
Satement of Sales Revenue	14
Satement of Cost of Sales	15
Satement of Operating Expenses	16
Satement of Labor, Depreciation and
Amortization by Function	17

290

Headway Advanced Materials Inc.

Statement of

Cash and Cash Equivalent

December 31, 2022

Statement 1

Unit: In NTD Thousand

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

Item Amonut
Cash
Cash on hand $ 29
Petty cash 149
178
Cash Equivalent - Repurchase agreement bonds 15,402
Bank Deposit
Demand deposit 26,652
Foreign currency demand deposit
(Remark 1) 48,374
Foreign currency term deposit
(Remark 2) 15,449
90,475
$ 106,055
----- End of picture text -----

Remark 1: USD demand deposit of USD 1,327 thousand with an exchange rate of US$1: NT$30.71; CNY demand deposit of CNY 1,727 thousand with an exchange rate of RMB$1: NT$4.408.
Remark 2: USD term deposit of USD 503 thousand with an exchange rate of US$1: NT$30.71.

291

Headway Advanced Materials Inc.

Statement of Notes Receivable

December 31, 2022

Statement 2

Unit: In NTD Thousand

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

Client Name Amonut
Related Parties
Isotech Products Incorporated $ 1,968
TPU Company 275
2,243
Less ： Allowance for loss 11
2,232
Non-related Parties
Client A 4,784
Client B 1,448
Client C 1,374
Others (Remark) 14,656
22,262
Less ： Allowance for loss 70
22,192
$ 24,424
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Remark: The amount of individual client included in others does not exceed 5% of the account balance.

292

Headway Advanced Materials Inc.

Statement of Accounts Receivable

December 31, 2022

Statement 3

Unit: In NTD Thousand

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

Client Name Amonut
Related Parties
Shanshui Lianmei Company $ 19,903
Headway Vietnam Company 3,509
Isotech Products Incorporated 353
TPU Company 92
Chaei Hsin Enterprise Co., Ltd. 6
23,863
Less ： Allowance for loss 105
23,758
Non-related Parties
Client A 28,504
Client B 19,284
Client C 6,590
Client D 6,464
Client E 6,247
Others (Remark) 45,860
112,949
Less ： Allowance for loss 764
112,185
$ 135,943
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Remark: The amount of individual client included in others does not exceed 5% of the account balance.

293

Headway Advanced Materials Inc.

Statement of Inventories

December 31, 2022

Statement 4

Unit: In NTD Thousand

Item Commodities Finished Goods Raw Materials		Amount	Amount	Amount
		Cost $ 1,118 73,850 84,539 $ 159,507	Net Realizable Value
				$ 1,390 89,429 86,547 $ 177,366

294

Headway Advanced Materials Inc.

Statement of Financial Assets Measured at Fair Value through Profit and Loss – Non-current

December 31, 2022

Statement 5

Unit: In NTD Thousand, Unless Stated Otherwise

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

Beginning Balance Increase During this Year Decrease During this Year Ending Balance
Adjustment
Name Shares/ Units Amount Shares/ Units Amount Shares/ Units Amount (Remark) Shares/ Units Amount
Apple Inc./ Corporate bond - $ 2,736 - $ - - $ - ( $ 650 ) - $ 2,086
Verizon Communications Inc/
Corporate bond - - - 2,580 - - ( 698 ) - 1,882
Yuanta 2-10 year investment grade
corporate bond fund - - 20,000 6,178 - - ( 63 ) 20,000 6,115
M.J. International Co., Ltd./ Stock
shares - - 25,000 1,009 - - 21 25,000 1,030
$ 2,736 $ 9,767 $ - ( $ 1,390 ) $ 11,113
----- End of picture text -----

Remark: It represents unrealized gains (losses) on foreign currency and gains (losses) on financial assets measured at fair value through profit and loss.

295

Headway Advanced Materials Inc.

Statement of Financial Assets Measured at Fair Value through Other Comprehensive Income – Non-current

December 31, 2022

Statement 6

Unit: In NTD Thousand, Unless Stated Otherwise

Name Equity Instruments TWSE/TPEx listing and Emerging Stock Chitec Technology Co., Ltd. Non-TWSE/TPEx listing stock Anchor Digital Technology Corporation	BeginningBalance Shares (thousand) Fair Value 10 $ 577 185 1,822 $ 2,399	BeginningBalance Shares (thousand) Fair Value 10 $ 577 185 1,822 $ 2,399	Increase During	Increase During	this Year Amount $ - - $ -	Decrease During	Decrease During	this Year Amount $ 618 ) - $ 618 )		Fair Value Changes $ 41 355) $ 314 )	EndingBalance Shares (thousand) Fair Value - $ - 185 1,467 $ 1,467	EndingBalance Shares (thousand) Fair Value - $ - 185 1,467 $ 1,467	Pledge None None	Note
	Shares (thousand) 10 185		Shares (thousand) - -			Shares (thousand) ( 10 ) -					Shares (thousand) - 185
							( (		( (					`－` `－`

296

Headway Advanced Materials Inc.

Statement of Investments Accounted for Using Equity Method

December 31, 2022

Statement 7

Unit: In NTD Thousand, Unless Stated Otherwise

BeginningBalance Shares (thousand) Amount 78 $ 718,804 6,808 105,996 $ 824,800	Increase Duringthis Year Shares (thousand) Amount - $ - - - $ -	Increase (Decrease) Amount Using the Equity Method Investment Gain (Loss) Realized ( Unrealized ) Profit from Sales Foreign Exahnge Adjustment $ 4,566 $ 610 $ 47,474 855 - - $ 5,421 $ 610 $ 47,474	Increase (Decrease) Amount Using the Equity Method Investment Gain (Loss) Realized ( Unrealized ) Profit from Sales Foreign Exahnge Adjustment $ 4,566 $ 610 $ 47,474 855 - - $ 5,421 $ 610 $ 47,474	Cah Dividend ( $ 46,038 ) ( 14,871) ( $ 60,909 )		EndingBalance	Shareholders' Equity
		Investment Gain (Loss) $ 4,566 855 $ 5,421	Realized ( Unrealized ) Profit from Sales $ 610 - $ 610
Shares (thousand) 78 6,808	Shares (thousand) - -				Shares (thousand) 78 6,808	Percentage of Ownership `％` 100 50
				( ( (			$ 732,304 184,864 $ 917,168

297

Headway Advanced Materials Inc.

Statement of Right-of-Use Assets

December 31, 2022

Statement 8

Unit: In NTD Thousand

Transportation Equipment Cost Balance, January 1, 2022 $ 1,907 Additions - Balance, December 1, 2022 1,907 Accumulated Depreciation Balance, January 1, 2022 424 Depreciation 636 Balance, December 1, 2022 1,060 Net Balance, December 31, 2022 $ 847

298

Headway Advanced Materials Inc.

Statement of

Short-term Borrowings

December 31, 2022

Statement 9

Unit: In NTD Thousand, Unless Stated Otherwise

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

Interest Rate Reange Guarantee or
Creditor Type Ending Balance Contract Term (%) Credit Line Pledge
Mega International
Commercial Bank Bank overdraft $ 829 － - - －
Chang Hwa Bank Secured loans 20,000 2022.11.07~2023.05.07 1.77 70,000 Remark
Chang Hwa Bank Secured loans 15,000 2022.12.07~2023.12.07 1.77 70,000 Remark
E. Sun Bank Short-term
loans 30,000 2022.10.26~2023.01.19 1.54 50,000 －
E. Sun Bank Short-term
loans 20,000 2022.12.06~2023.03.06 1.54 50,000 －
Taipei Fubon Bank Short-term
loans 20,000 2022.11.07~2023.02.05 2.20 30,000 －
Taipei Fubon Bank Short-term
loans 10,000 2022.09.21~2023.03.20 2.28 30,000 －
$ 115,829
----- End of picture text -----

Remark : The collateral consists of land with a value of NTD 101,719 thousand and the buildings with a valu e of NTD 3,240 thousand.

299

Headway Advanced Materials Inc.

Statement of Notes Payable

December 31, 2022

Statement 10

Unit: In NTD Thousand

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

Supplier Amount
Related Parties
TPU Company $ 2,031
Isotech Products Incorporated 284
2,315
Non-related Parties
Supplier A 5,885
Supplier B 5,215
Supplier C 3,593
Supplier D 3,284
Supplier E 2,936
Others (Remark) 30,176
51,089
$ 53,404
----- End of picture text -----

Remark: The amount of individual Supplier included in others does not exceed 5% of the account balance.

300

Headway Advanced Materials Inc.

Statement of

Accounts Payable

December 31, 2022

Statement 11

Unit: In NTD Thousand

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

Supplier Amount
Related Parties
TPU Company $ 661
Isotech Products Incorporated 39
700
Non-related Parties
Supplier A 8,707
Supplier B 5,291
Others (Remark) 18,503
32,501
$ 33,201
----- End of picture text -----

Remark: The amount of individual Supplier included in others does not exceed 5% of the account balance.

301

Headway Advanced Materials Inc.

Statement of Lease Liabilities

December 31, 2022

Statement 12

Unit: In NTD Thousand

Item Lease Term Discount Rate Ending Balance Transportation equipment From 2021.05 to 2024.04 1.07% $ 855 Less ： Lease libailities - current ( 640 ) Lease libailities – non-current $ 215

302

Headway Advanced Materials Inc.

Statement of Long-term Borrowings

December 31, 2022

Statement 13

Unit: In NTD Thousand, Unless

Stated Otherwise

Creditor Chang Hwa Bank Total	Type Mortgage loan		Amount $ 85,000 80,000 $ 165,000	Contract Term 2022.10.14~2024.10.14 2022.10.14~2024.10.14	Interest Rate (%) 1.57 1.57	Guarantee or Pledge
						Remark Remark

Remark: The collateral consists of land with a book value of NTD 101,719 thousand and the buildings with a book value of NTD 3,240 thousand.

303

Headway Advanced Materials Inc.

Statement of Sales Revenue

From January 1 to December 31, 2022

Statement 14

Unit: In NTD Thousand, Unless Stated Otherwise

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

Quantity
Item （ Metric Ton ） Amount
PU Resin 6,926 $ 721,727
Thermoplastic Polyurethane （ TPU ） 212 20,879
Others Remark 45,941
788,547
Less ： Sale Return & Salse Allowence ( 4,091 )
Net Sales Revenue $ 784,456
----- End of picture text -----

Remark : Due to the diverse unit specifications, it is not feasible to list them one by one.

304

Headway Advanced Materials Inc.

Statement of Cost of Sales

From January 1 to December 31, 2022

Statement 15

Unit: In NTD Thousand

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

Item Amount
Beginning Raw Materials $ 102,158
Inbound this Year 533,098
Ending Raw Materials ( 84,539 )
Reclassification as expenses and other losses ( 4,582 )
Sales of Raw Materials ( 5,184 )
Direct Raw Materials 540,951
Direct Labor 19,417
Manufacturing expense 99,493
Manufacturing Cost 659,861
Beginning Finshed Goods 69,524
Ending Finshed Goods ( 73,850 )
Reclassification as expenses and other losses ( 1,881 )
Production and marketing cost 653,654
Beginning Commodities 784
Pruchasing Commodities 21,127
Ending Commodities ( 1,118 )
Others 669
Purchasing and marketing cost 21,462
Sales of Raw Materials 5,184
Cost of Goods Sold $ 680,300
----- End of picture text -----

305

Headway Advanced Materials Inc.

Statement of Operating Expenses

From January 1 to December 31, 2022

Statement 16

Unit: In NTD Thousand

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

Administrative
Item Selling Expenses expenses R&D expenses
Payroll Expense $ 7,038 $ 25,888 $ 13,100
Shipping Expense 10,389 - -
Commision
Expense 3,874 - -
Export Expense 2,987 - -
Depreciation 663 2,235 1,926
Electricity Expense 343 572 1,225
Other expense -
Professional
Service 556 6,522 6
Other expense –
Use of Raw
Materials - - 1,903
Others (Remark) 5,797 10,480 4,436
$ 31,647 $ 45,697 $ 22,596
----- End of picture text -----

Remark: The amounts for each item do not exceed 5% of the respective account balances.

306

Headway Advanced Materials Inc.

Statement of Labor, Depreciation and Amortization by Function

From January 1 to December 31, 2022 and 2021

Statement 16

Unit: In NTD Thousand

Employee benefit expense Payroll Expense Director compensation Labor and national health insurance expenses Pension expense Other employee benefit expenses Depreciation Expense Amortization Expnese				2022		Total $ 84,969 1,305 9,410 3,877 4,640 $ 104,201 $ 19,615 $ 174				2021
		Under Operating Costs $ 40,249 - 4,679 1,846 2,528 $ 49,302 $ 14,791 $ -		Under Operating Expenses $ 44,720 1,305 4,731 2,031 2,112 $ 54,899 $ 4,824 $ 174				Under Operating Costs $ 43,871 - 4,913 1,925 2,405 $ 53,114 $ 13,445 $ -		Under Operating Expenses $ 57,633 5,827 4,861 2,091 2,062 $ 72,474 $ 4,348 $ 192		Total
												$ 101,504 5,827 9,774 4,016 4,467 $ 125,588 $ 17,793 $ 192

Remark 1: As of December 31, 2022 and 2021, the Company had 130 and 136 employees, respectively. There were both 7 non-employee directors. The calculation basis for employee benefits is consistent with that of the employee benefits expense.
Remark 2: Listed companies on TWSE or TPEx shall disclose the following information:
(1) The average employee benefit expense for the current year was NTD 837 thousand ("Total employee benefit expenses for the current year - Total director compensation for the current year" / "Number of employees for the current year - Number of non-employee directors ").
- The average employee benefit expense for the previous year was NTD 928 thousand ("Total employee benefit expenses for the previous year - Total director compensation for the previous year for the previous year" / "Number of employees for the previous year - Number of non-employee directors for the previous year").
(2) The average payroll expense for the current year was NTD 691 thousand ("Total payroll expenses for the current year / "Number of employees for the current year - Number of non-employee directors for the current year").
- The average payroll expense for the previous year was NTD 787 thousand (Total payroll expenses for the previous year / "Number of employees for the previous year - Number of non-employee directors for the previous year").
(3) Ther percentage of the changes of the average payroll expense is (12.20) % (“The average payroll expense for the current year - The average payroll expense for the previous year” / The average payroll expense for the previous year)
(4) In 2022 and 2021, the Company did not have a supervisor, and therefore, there was no supervisor-related compensation.

307

(5) The Company pays director compensation in accordance with the "Director and Manager Compensation Policy and System" and the "Articles of Incorporation" approved by the Remuneration Committee and the Board of Directors, and pays transportation expenses based on directors' attendance at board meetings. The Company pays executive compensation based on the position held, responsibilities assumed, and business performance and risk in relation to future developments, and refers to industry standards for similar positions. In addition to monthly salaries, the Company provides performance-based bonuses and employee compensation as stipulated in the Company's Articles of Incorporation. The Company conducts regular performance assessments of employees as the basis for promotion and reward distribution.

308

6.6 In the most recent fiscal year and up to the date of printing of the annual report, if there were any financial difficulties encountered by the Company and its affiliated enterprises, the impact on the financial condition of the Company is as follows: No such situation.

7. Review and Analysis of Financial Status and Performance and Risk Management

7.1 Analysis of Financial Status

Unit: NTD inThousand

Analysis of Financial Status	Unit: NTD inThousa
Year Item 2022 2021	Difference
	Amount %
Current Asset 1,343,251 1,371,513	(28,262) (2)
Property, Plant and Equipment 337,559 338,353	(794) -
Intangible assets 1,993 1,833	160 9
Other Assets 110,995 120,827	(9,832) (8)
Total assets 1,793,798 1,832,526	(38,728) (2)
Current liabilities 480,806 445,039	35,767 8
Non-current liabilities 198,989 218,653	(19,664) (9)
Total liabilities 679,795 663,692	16,103 2
Capital stock 703,033 703,353	(320) -
Capital Surplus 13,081 12,761	320 3
Retailed earnings 349,624 431,674	(82,050) (19)
Other equity (58,375) (97,476)	39,101 40
Non-controlling Interest 106,640 118,522	(11,882) (10)
Total equities 1,114,003 1,168,834	(54,831) (5)
Reasons for the changes and their impact (if the changes between the periods are above 20%): Increase in other equity: Mainly due to an increase in foreign exchange translation differences in the financial statements of overseas operating entities duringthe currentyear.

7.2 Analysis of Financial Performance

7.2.1 Comparison and Analysis of Operating Results in the last two year

309

Unit: NTD inThousand

	Unit: NTD inThousand
Year Item	2022 2021 Increase (Decrease) Amount Changing Ratio `（`%`）`
Net sales revenue	1,448,029 1,476,066 (28,037) (2)
Cost of sales	1,253,788 1,191,980 61,808 5
Grossprofit	194,241 284,086 (89,845) (32)
Operatingexpenses	179,544 193,540 (13,996) (7)
Operationprofit(loss)	14,697 90,546 (75,849) (84)
Non-operating income and Expenses	15,221 7,129 8,092 114
Profit before tax	29,918 97,675 (67,757) (69)
Profit from continuingoperations	20,996 47,019 (26,023) (55)
Profit from discontinuing perations	- 110,813 (110,813) (100)
Profit for theyear	20,996 157,832 (136,836) (87)
Other comprehensive income (After tax)	42,802 (18,421) 61,223 332
Total comprehensive income	63,798 139,411 (75,613) (54)
Profit attributable to the Company owners	18,609 142,631 (124,022) (87)
Profit attributable to Non-controllinginterests	2,387 15,201 (12,814) (84)
Comprehensive income attributable to The Companyowners	60,809 124,345 (63,536) (51)
Comprehensive income attributable to Non-controlling interests	2,989 15,066 (12,077) (80)
EPS	0.27 2.05 (1.78) (87)
Explanation of significant changes (changes of 20% or more) between periods: 1. Decrease in gross profit, Operation profit, Profit before tax, and profit from continuing operations: Mainly due to the increase in raw material prices, resulting in lower gross profit and net profit. 2. Increase in non-operating income and expenses: Primarily due to the receipt of compensation payment from a subsidiary's litigation. 3. Increase in other comprehensive income (after tax): Mainly attributable to the increase in foreign exchange translation differences in the financial statements of overseas operating entities. 4. Decrease in profit from discontinued operations, profit for the year, total comprehensive income, profit attributable to the Company owners, comprehensive income attributable to the Company owners, and earnings per share: Mainly due to the disposal of a subsidiary in the previous year, resulting in lower profit compared to the previous year. 5. Decrease in profit attributable to non-controlling interests and comprehensive income attributable to non-controlling interests: Primarily due to lower net profit from non-100% owned subsidiaryin the currentyear compared to thepreviousyear.

Increase in other comprehensive income (after tax): Mainly attributable to the increase in foreign exchange translation differences in the financial statements of overseas operating entities.

310

7.2.2 Sales quantity forecast and basis:

The forecasted sales quantity of the Company is based on the actual performance in the previous year (2022) and the projected order intake for the current year (2023), as well as the development of new customers and consideration of market trends. These factors are taken into account to set the sales targets and shipment goals for the Company.

7.2.3 Potential impacts on the Company's future financial operations and corresponding action plans:

The Company operates in a mature and stable phase in its existing market. In addition to focusing on product development and applications, the Company leverages the presence of its subsidiaries within the group to expand into overseas markets. This includes exploring new market opportunities and promoting existing and new products to increase market share in these new markets.

7.3 Analysis of Cash Flow

`一` 7.3.1( ) 1)Cash Flow Analysis for the Current Year:

Unit: NTD inThousand

Year Item 2022 2021 Increase (Decrease) Amount Changing Ratio `（`%`）`
Net cash flows from operating activities 92,655 121,543 (28,888) (24)
Net cash flows from investing activities (71,389) 378,893 (450,282) (119)
Net cash flows from financing activities (23,132) (223,011) 199,879 (90)
Total (1,866) 227,425 (229,291)
Explanation of significant changes (changes of 20% or more) between periods:
1. The decrease in net cash inflow from operating activities is primarily due to the
absence of profits from discontinued operations in the previous year, resulting in a
decrease in the current year compared to the previous year.
2. The decrease in net cash outflow from investing activities is primarily due to the
absence of net cash inflow from the disposal of subsidiary companies in the
previous year, resulting in a decrease in the current year compared to the previous
year.
3. The decrease in net cash outflow from financing activities is mainly attributed to an
increase in borrowings in the current year.

311

7.3.2 Improvement Plan for Insufficient Liquidity:

The Company's operating profit in 2022 resulted in a net cash inflow from operating activities. In addition, the Company has sufficient funds to support cash outflows from investment and financing activities, therefore there is no concern regarding insufficient liquidity.

7.3.3 Cash Flow Analysis for the Coming Year:

Unit: NTD inThousand

7.3.3 Cash Flow Analysis for the Coming Year:	Unit: NTD inThousa
Balance of cash-beginning (1) Net Cash Inflows from Operating Activities all year round (2) Cash outflow over the year (3) (Note) Cash Surplus (Deficit) (1)+(2)-(3)	Remedy for Deficit in Cash
	Investment Plan Financing Plan
515,296 80,258 180,588 414,966	- -
1. The analysis of cash flow variations this year: Operating activities: Primarily expected cash inflows generated from the Company's operations. Investing activities: Mainly anticipated cash outflows for the increase in real estate, plants, and equipment. Fincncing activities: Anticipated cash outflows for the payment of cash dividends and repayment of loans. 2. Improvement plan for inadequate currency: The Company anticipates profitability in the year 2023, therefore no expected liquidity shortage inthe coming year.

Note: It includes cash flows from both investment and financing activities.

7.4 The impact of major capital expenditures in the most recent fiscal year on financial operations: None.
7.5 Reinvestment policies in the most recent fiscal year, the main reasons for the gains or losses, and the plans for improvement and investment plan for next fiscal year
7.5.1 Investment Policy: The Company's investment policy focuses on the mainland China and Southeast Asian markets.

312

7.5.2 Main reasons for recent year's investment gains or losses and improvement plans:

==> picture [420 x 580] intentionally omitted <==

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

2022
Shareholding Main Reason
Investment Improvement
Investement Ratio for Porfit or
Gain(Loss) Plan
（ % ） Loss
( 仟元 )
Responsible for
Headway the manufacturing
and sales of TPU,
Polyurethane 50 855 N/A
the operational
Corporation Limited performance
remains good.
A holding
Urasia International company for
100 4,566 N/A
Inc,(Panama) overseas
investments.
Responsible for
Shanghai Huiyu the sales of sports
field materials, the
Construction Co., 74 USD 144 N/A
operational
Ltd
performance
remains good.
To improve the
Anhui Huayu Affected by the operating
pandemic, the
Materials RMB (27 management
74 demand for the
Technology Co., 7) of Anhui
runway market
Ltd. has decreased. Huiyu
Company.
Responsible for
the manufacturing
Headway Advanced and sales of PU
Matereials(Vietnam) 100 USD 532 products, the N/A
Co., Ltd. operational
performance
remains good.
A holding
company for
Shanshui Lianmei
Chemical Co.,
Cheng Yu Develop
100 USD 99 LTD., recognizing N/A
Co., Ltd. the investment
gains from
SanShui LianMei
Company.
Responsible for
the manufacturing
and sales of PU
Shanshui Lianmei
100 HKD 776 products, the N/A
Chemical Co., LTD.
operational
performance
remains good.
----- End of picture text -----

7.5.3 Investmetn Plan for the coming year: None.

313

7.6 Analysis and Assessment of Risks
7.6.1 The impact of interest rates, changes in exchange rates, and inflation on the Company’s gains and losses and future countermeasures:
- (1) The impact of interest rate changes on the Company's profitability and future measures:

The Company's interest expenses for the year 2022 and 2021 were NT$5,738 thousand and NT$5,172 thousand, respectively, representing a ratio of 0.40% and 0.35% of net operating revenue. In addition to maintaining good relationships with multiple banks, the Company actively negotiates favorable interest rates and seeks low-interest funding to reduce the amount of interest expenses.

(2) The impact of exchange rate fluctuations on the Company's income statement and future measures:

The Company engages in foreign currency-denominated sales and purchase transactions. The net exchange losses for the 2022 and 2021 were NT$5,577 thousand and NT$280 thousand, respectively, representing ratios of 0.39% and 0.02% of net revenue, and ratios of 37.95% and 0.31% of operating net income. These figures indicate that exchange rate fluctuations have minimal impact on the Company's revenue and operations. Some raw material purchases and sales are denominated in US dollars and Chinese yuan. In addition to the natural hedging effect from matching the receipts and payments, the Company also holds foreign currency assets to mitigate exchange rate volatility, taking into account relevant market information. It may also engage in forward foreign exchange transactions or currency swaps as needed to minimize exchange rate risks.

(3) The impact of inflation on the Company's income statement and future measures: The Company has not experienced any significant impact from inflation.
We closely monitor fluctuations in the market prices of raw materials and maintain good relationships with suppliers and customers. We adjust our business strategies based on the extent of inflation or contraction in order to mitigate the impact of inflation on the Company.
7.6.2 Policies, main reasons for profit or loss, and future measures regarding high-risk, high-leverage investments, lending of funds to others, endorsement and guarantee, and derivative transactions:
(1) Policies, main reasons for profit or loss, and future measures regarding high-risk, high-leverage investments: The Company primarily focuses on the development

314

of its core business and does not engage in investments in other high-risk industries. The Company has always adopted a conservative financial policy and has not pursued high-risk or high-leverage investments.

(2) Policies, main reasons for profit or loss, and future measures regarding lending of funds to others: The Company engages in transactions involving the lending of funds to others, following the Company's "Operating Procedures for Lending of Funds to Others."
(3) Policies, main reasons for profit or loss, and future measures regarding endorsement and guarantee: The Company engages in transactions involving endorsement and guarantee, following the Company's "Operating Procedures for Endorsement and Guarantee."
(4) Policies, main reasons for profit or loss, and future measures regarding derivative transactions: The Company engages in derivative transactions, following the Company's "Operating Procedures for Derivative Transactions."
7.6.3 Future research and development plans and expected investment in research and development expenses:
(1). Future research and development plans

In response to future growth and environmental trends, our company is actively engaged in the research and development of new products and technologies. The following are the five major categories of product development directions:

==> picture [391 x 25] intentionally omitted <==

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

Category Development Direction
----- End of picture text -----

Moisture-curing
reactive hot
melt adhesive
(PUR)

1. Taiwan's highest market share in breathable reactive hot
melt adhesive.
2. Introduction of bio-based and recycled materials.
2.1 Use of non-edible bio castor oil as a substitute for
petroleum-based materials, could be certified by USDA.
2.2 Use of recycled PET (polyethylene terephthalate)
materials for polyester polyols, could becertified by
GRS.
3. Achieve 3R principles: Replace (substitute
petroleum-based materials), Recycle (promote recycling
and circular economy), Reduce (reduce energy
consumption) for sustainable development.
4. Promote eco-friendly construction materials, furniture,
and wood industry with formaldehyde-free and low VOC
emission reactive hot melt adhesives.

315

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

Category Development Direction
5. Obtain certifications such as Bluesign, REACH, RoHS
for green products.
1. Highest market share in Taiwan: Certified ink resins and
curing agents.
2. Highest grade water-resistant and flex-resistant ink
resins.
3. Automotive-grade fabric resins and treatment agents.
4. Water-based curing agents and water-resistant agents.
5. Future development focus:
5.1. Introduction of eco-friendly and recycled materials.
5.2. Continuous development of new process technologies
to reduce working hours and carbon emissions.
Water-based PU 5.3. High-quality water-based PU: Introducing CO2-based
resin
polycarbonate polyols as a new type of aliphatic
water-based PU resin.
5.3.1 Suitable for soft materials such as textiles, leather ink
resins, and shoe material coatings.
5.3.2 Features high adhesion, water wash resistance, water
resistance, and excellent flexibility.
5.3.3 This product is solvent-free, meets low VOC
requirements in response to ESG demands, and complies
with environmental and chemical regulations such as EU
REACH and RoHS, aligning with global environmental
trends.
1. A new type of aliphatic resin with weather resistance,
abrasion resistance, high coefficient of friction, and easy
application. It can be used as a protective coating for
wind power facilities and heavy equipment, replacing
traditional epoxy flooring.
Polyaspartic
2. In addition to solvent-free polyaspartic ester coatings,
ester resin
efforts will be made to develop water-dispersible
polyaspartic ester coatings.
3. Can be applied in water-based resin products and adjust
the working time with water as a solvent, minimizing
VOC impact compared to solvent-based products.
1. Development of solvent-free two-component adhesives
for flexible packaging materials, utilizing proprietary
Solvent-free polyols including bio-based and recycled materials to
two-component increase added value.
resin
2. Development of high-density polyurethane composite
panels, leveraging experience in wood-like furniture
development, and incorporating bio-based materials for
----- End of picture text -----

316

Category Development Direction	Category Development Direction
applications in construction and modular housing. 3. High-value elastomers, solvent-resistant elastomers for ink rollers, self-developed polycarbonate polyols as a substitute for imported products. 4. Development of low hysteresis loss cushions in collaboration with well-known manufacturers, applied in bicycle seats,motorcycle seats,and other applications.
Thermoplastic polyurethane (TPU)	1. Development of modified ether film materials. 2. Development of vacuum-formed shoe materials. 3. Development of hot melt adhesives for wood edge banding. 4. Development of vacuum-formed extrusion materials. 5. Development of high-formability pipe materials.

(2) The estimated R&D expenses to be invested are as follows:

In the fiscal year 2022, the Company invested 2.687 million NT dollars in R&D, accounting for 1.86% of the revenue. To ensure and enhance competitive advantages, the Company will continue to invest in research and development and improvements to expand the value-added of PU resin and pursue environmental and green material development. It is projected that in the year 2023, an additional R&D expense of 2.8 million NT dollars will be invested, with flexibility for adjustment based on operational conditions and future demands.

7.6.4 The impact of significant domestic and international policy and legal changes on the

Company's financial operations, as well as the corresponding measures taken:

The execution of various business operations of the Company is conducted in compliance with the regulations and requirements of the competent authorities. The Company consistently monitors the developments and changes in important domestic and international policies and laws to promptly take necessary measures in response to these changes.

7.6.5 The impact of technological changes (including information security risks) and

industry changes on the Company's financial operations, as well as the corresponding measures taken:

(1) Technological Changes (including information security risks):

To strengthen and ensure the information security management of the Company, and to fulfill the responsibilities of management, promote operational efficiency, and safeguard investor rights, measures are implemented to prevent unauthorized access, use, control, disclosure, destruction, alteration, or other infringements of important assets within the Company (such as research data,

317

strategies, contracts, intellectual property, information systems, etc.). Confidentiality, integrity, and availability of information are ensured, and compliance with relevant laws and regulations is followed to protect the Company from intentional or accidental internal and external threats. The "Information Security Policy and Management" is formulated and implemented to address these concerns.

(2) Industry Changes:

In order to meet market demands and enhance product quality, the Company emphasizes research and development and continuous improvement. Future technological development plans are centered around market developments, which should be able to adapt to the impact of technological changes and industry changes. In recent years, there have been no significant impacts on the Company's financial operations due to technological changes and industry changes.

7.6.6 The impact of changes in corporate image on crisis management and the corresponding measures:

Since its establishment, the Company has adhered to the principle of prudent management, complied with relevant laws and regulations, and maintained a good corporate image. By being listed on the stock exchange, the Company has attracted more talented individuals and has been able to share its business achievements with shareholders and contribute to society. These efforts have further enhanced the Company's corporate image. Therefore, in the recent years and up until the date of the publication of the public disclosure document, there have been no changes in the Company's corporate image that have had an impact on crisis management.

7.6.7 Expected benefits, potential risks, and response measures for mergers and acquisitions:

As of now, the Company does not have any plans for acquiring or merging with other companies.

7.6.8 Expected benefits, potential risks, and response measures for expanding the factory:

None.

7.6.9 Risks and response measures for concentrated procurement or sales:

(1) Procurement:

The Company maintains long-term relationships with various suppliers, ensuring stability. If a supplier fails to provide a stable supply or meet delivery schedules, alternative suppliers or suitable substitute materials will be sought.The Company's major raw materials are not solely sourced from a single supplier. Long-term cooperation and good relationships have been established

318

with suppliers.The Company periodically reviews the quality of materials from suppliers and explores the market for other excellent suppliers to diversify procurement risks.

(2) Sales:

The Company does not rely heavily on any single customer, with no single customer accounting for more than 10% of annual revenue. The customer base is diversified, reducing the risk of sales concentration.

7.6.10 Directors, supervisors, or major shareholders holding more than 10% of the

 - Company's shares and the impact, risks, and response measures of significant transfers or changes in equity: The Company does not have such a situation.

7.6.11 The impact, risks, and measures to be taken in response to changes in management rights: The Company does not have such a situation.
7.6.12 Litigation or non-litigation events involving the Company, its directors, supervisors, general manager, substantial shareholders holding over 10% of the shares, and subsidiary companies, which have been finally adjudicated or are still pending and may have a significant impact on shareholders' equity or securities prices, should be disclosed. The disclosure should include the disputed facts, the amount in dispute, the date of commencement of the litigation, the main parties involved in the litigation, and the status of the proceedings as of the date of the annual report publication:
- (1) In addition to applying for claims certificates due to outstanding receivables from customers, the Company has not encountered any other litigation or non-litigation events. The total amount of claims certificates, when compared to the Company's historical revenue and capital, is not expected to have a significant adverse impact on shareholders' equity or securities prices.
- (2) The directors, general manager, substantial shareholders holding over 10% of the shares, and subsidiary companies of the Company are not involved in any significant litigation, non-litigation, or administrative disputes that have been finally adjudicated or are currently pending.
7.6.13 Other significant risks and corresponding measures: None.
7.7 Other major matters: None.

319

8. Special Disclosure

8.1 Affiliated Companies:
8.1.1 Summary of related companies:
- (1) Structure of related companies:

March 31, 2023

Headway Advanced Materials Inc.

==> picture [435 x 214] intentionally omitted <==

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

Urasia Headway
International Polyurethane
Inc,(Panama) Corporation Limited
100% 50%
Shanghai Huiyu Headway Cheng Yu
Construction Advanced Develop Co., Ltd.
Co., Ltd Matereials(Vietna 100%
74% m) Co., Ltd.
100%
Anhui Huayu Shanshui Lianmei
Materials Chemical Co., LTD.
Technology Co., 100%
Ltd.
----- End of picture text -----

(2) Profiles of related companies:

Unit: Thousand ; March 31, 2023

Unit: Thousand ; March 31,	Unit: Thousand ; March 31,	Unit: Thousand ; March 31,	Unit: Thousand ; March 31,	Unit: Thousand ; March 31,
Company Name Funded Date Address Paid-in Capital Main Operation and Production
Headway Polyurethane Corporation Limited 2006/02/24 No. 9, Siwei Rd., Hukou Township, Hsinchu County, Taiwan (R.O.C.) NTD 136,168 Thermoplastic Polyurethane (TPU) Pellets
Urasia International Inc,(Panama) 1996/06/17 Arango-Orillac Bldg.,2nd Floor,East54th Street,P.O.BOX 8320,Panama 7,Republic Of Panama. USD 7,758 Investment Holding Company
Shanghai Huiyu Construction Co., Ltd.	1993/09/01	No. 45, Zhouzhu Road, ZhouPu town, Nanhui District, Shanghai, China.	USD 1,800	Wholesale of construction materials for housing construction, anti-corrosion and waterproofing construction,sports

320

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

Company Funded Paid-in Main Operation
Address
Name Date Capital and Production
tracks, stadiums,
artificial turf, etc.
Research,
manufacturing, and
Factory Building A4, Jiangnan
Anhui Huayu import/export of
Industrial Concentration Zone,
Materials RMB plastic materials for
2018/01/18 New Energy Production Park,
Technology Co., 8,058 sports field
Chizhou City, Anhui Province,
Ltd. China. applications and
construction of
sports facilities.
Headway 319B Road, Nhon Trach 5
Curing agents and
Advanced Industrial Park, Nhon Trach USD
2004/07/13 various types of PU
Matereials(Vietna District , Dong Nai Province, 5,000 resins
m) Co., Ltd. Vietnam.
PM.804,SINO
Cheng Yu USD Investment Holding
2009/12/18 CENTRE,582-592 NATHAN
Develop Co., Ltd. 7,384 Company
RD.,MONGKOK,KLN.,H.K.
Shanshui Lianmei No. 32-1, Datang Industrial Curing agents and
HK
Chemical Co., 2006/12/18 Park, Sanshui District, Foshan various types of PU
LTD. City, Guangdong, China 5,7170 resins
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(3) Information of directors, supervisors and excutives of the related companies:

March 31, 2023

==> picture [475 x 248] intentionally omitted <==

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

Shareholding
Sharehol
Company Name Job Title Name or Legal Representative Quantity
ding
（ Share ）
Ratio(%)
Chariman Wang, Shu Mu (Representative of
Hsin Hong Investment Co., Ltd.)
Director Jan, YuTing (Representative of Hsin
6,808,400 50
Hong Investment Co., Ltd.)
Director Lin, HsiuYa (Representative of Hsin
Hong Investment Co., Ltd.)
Headway
Vice Chairman/General Liou, Han Yin(Representative of
Polyurethane
Corporation Manager Headway)
Limited Director Chao, Wei Chun(Representative of
6,808,400 50
Headway)
Diretor Chen, Jin Ming(Representative of
Headway)
Supervisor Liao, Pei Hung - -
Supervisor Liao, Ya Hui - -
----- End of picture text -----

321

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

Shareholding
Sharehol
Company Name Job Title Name or Legal Representative Quantity
ding
（ Share ）
Ratio(%)
Chairman Liou, Han Yin(Representative of
Headway)
Director Cheng, Chin Wen(Representative of
Headway)
Urasia
Director Chao, Wei Chun(Representative of
International - 100
Headway)
Inc,(Panama)
Director Lee, Hwang Pao(Representative of
Headway)
Director Chen, Yu Tin(Representative of
Headway)
Chairman/General Liou, Han Yin(Representative of
Manager Headway)
Director Chao, Wei Chun(Representative of
Headway)
- 74
Director Chen, Jin Ming(Representative of
Shanghai Huiyu Headway)
Construction Co.,
Supervisor Liao, Pei Hung(Representative of
Ltd.
Headway)
Director Ho, Kun Zhou (Representative of
- 18.13
Yunshan)
Direcgtor Zhang, Yong Ding (Representative of
- 7.87
Shanghai Shenlu)
Anhui Huayu Chairman/General Ren Feng (Representative of
Materials Manager Shanghai Huiyu)
- 74
Technology Co., Supervisor Liao, Pei Hung (Representative of
Ltd. Shanghai Huiyu)
Chairman Liou, HanYin(Representative of
Headway)
Direcgtor/General Hsiao, Hsu Jung(Representative of
Headway Manager Headway)
Advanced Director Chao, Wei Chun(Representative of
- 100
Matereials(Vietna Headway)
m) Co., Ltd. Director Chen, Jin Ming(Representative of
Headway)
Director Liao, Pei Hung(Representative of
Headway)
Chairman Liou, Han Yin(Representative of
Headway)
Direcgtor Cheng, Chin Wen(Representative of
Headway)
Cheng Yu
Director Chao, Wei Chun(Representative of
Develop Co., - 100
Ltd. Headway)
Director Lee, Hwang Pao(Representative of
Headway)
Director Chen, Yu Tin(Representative of
Headway)
Chairman Liou, Han Yin(Representative of
Shanshui
Headway)
Lianmei
Direcgtor/General Hsu, Chen Yu(Representative of - 100
Chemical Co.,
LTD. Manager Headway)
Director Chao, Wei Chun(Representative of
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322

Shareholding	Shareholding	Shareholding	Shareholding	Shareholding
Company Name Job Title Name or Legal Representative Quantity `（`Share`）` Sharehol ding Ratio(%)
	Director Director Supervisor	Headway) Chen, Jin Ming(Representative of Headway) Liao, Pei Hung(Representative of Headway) Chen, Yu Ting(Representative of Headway)

(4) Business Operations Overview of related Companies `：`

Unit: Thousand, except for the Vietnamese Company which is in Million.

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

Ttotal
Company currency [Paid-in ] Total Liabilitie Net Sales Oprating Profit(L EPS
Captial Assets Value Revenue Income oss)
s
Headway
Polyurethane
NTD 136,168 248,170 63,306 184,864 224,202 2,845 1,688 0.12
Corporation
Limited
Urasia
International USD 7,758 23,950 104 23,846 - (159) 160 -
Inc,(Panama)
Shanghai Huiyu
Construction RMB 10,600 24,973 12,302 12,670 12,348 (1,125) 1,567 -
Co., Ltd.
Anhui Huayu
Materials
RMB 8,058 9,868 6,799 3,069 17,864 (1,075) (374) -
Technology Co.,
Ltd.
Headway
Advanced
VND 99,958 218,675 27,590 191,085 242,643 14,512 12,360 -
Matereials(Vietn
am) Co., Ltd.
Cheng Yu
Develop Co., HKD 57,170 43,313 - 43,313 - - 776 -
Ltd.
Shanshui
Lianmei
RMB 45,178 44,879 6,184 38,694 39,639 416 687 -
Chemical Co.,
LTD.
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8.1.2 Consolidated financial statement of affiliates:

The companies required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2022 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as provided in International Financial Reporting

323

Standards No. 10, “Consolidated Financial Statements”. Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies. Hence, we do not prepare a separate set of consolidated financial statements of affiliates.

8.2 Private placement of securities over past year and up to the date of publication of the annual report: None.
8.3 Recent year and up to the date of the annual report printing, the situation on holdings or disposals of the Company's stocks by its subsidiaries: None.
8.4 Other Supplementary Information: None

9. Material Event Impact, pursuant to Article 36-3-2 of the Securities and

Exchange Act, on Shareholders' Equity or Share Price from Last Year up to the Annual Report being Published ： N/A

HEADWAY ADVANCED MATERIALS INC.

CHAIRMAN LIOU HAN YIN

324

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HEADWAY
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AI assistant

Headway — Annual Report 2022

51919_rns_2023-06-13_6d627b90-d2b5-4136-b37b-7c96659303cb.pdf

Code:1776

HEADWAY ADVANCED MATERIALS INC.

Annual Report 2022

1. Letter To Shareholders

1. 2022 Operating Result:

(4) Research & Development:

B. Develop environmental protection and green materials.

2. Company Profil

2.1 Date of Incorporation: April 24, 1976

2.2 Company History:

3. Corporate Governance Report

3.1.2. Responsibilities of Each Unit:

3.2.1 Directors

3.2.1.1 Information of Directors:

April 2, 2023

3.2.1.5 Diversity and independence of the board of directors.

3.2.1.5.2 Independence of the board of directors:

3.2.2 Information of General Manager, Deputy General Manager, General Manager, department and branch managers. ：

3.3 The remuneration paid to directors, supervisors, general manager, and deputy general manager for the most recent fiscal year.

3.3.1 Remuneration of Directors (Independent Directors included):

3.3.2 Remuneration of the General Manager and Deputy General Manager

3.3.3 Employee Compensation amount paid to Management personnel:

3.4.1 Operations of Board of Directors

3.4.2 The operating status of the Audit Committee or the participation of the Supervisor in the operation of the Board of Directors:

3.4.2.1 Audit Committee Members Information

Note 1:

(1) Independence Assessment Form for Independent Auditor:

(2) Qualification Assessment Form for Independent Auditor:

3.4.4 If the Company has established a remuneration committee, it shall disclose composition, responsibilities, and operating status of the Remuneration Committee:

3.4.4.1 Remuneration Committee Members Information

3.4.4.2. Responsibilities of the Remuneration Committee:

3.4.7 Please disclose how to search the corporate governance regulations and relevant rules stipulated by the Company (if any):

3.4.9 Implementation of Internal Control System

Headway Advanced Materials Inc. Declaration of the International Control System

3.4.11.2 Board of Directors Meeting:

4.Capital Review

4.1 Capital Shares

4.1.1 Source of capital

4.1.1.1 The formation process of share capital.

4.1.1.2 Type of Share

4.1.2 Composition of Shareholders

4.1.3 Distribution Profile of Share Ownership

4.1.4 Major Shareholders

4.1.5 Market Price, Net Value, Earnings and Dividends per Common Share Latest two years

4.1.6 The Company’s Policies regarding Dividends and Implementation Status

(1) Dividends policies

(2) Dividend distribution proposal submitted to the shareholders’ meeting

4.5 Issuance of Employee Stock Options : None.

4.6 Issuance of Restricted Stock Units:

5. Operation Overview

5.1 Business Conetnt

5.1.1 Business Scope

(1) Main Operation

(3) Current Product Portfolio and Planned New Product Development:

a. Current Product

b. Planned New Product Development

5.1.2 The industry overview

a. Industry

b. Trends in Production and Sales Volume in the Industry

Appendix 2:PU Synthetic Resins Production and Sales Volume Statistics Table

(2) The interrelationship between the upstream, midstream, and downstream

(3) Product Development Trends

(4) Competitive situation

5.1.3 Technology and Research and Development Overview

b. Research and Development Organizational Structure

c. Research Technologh

(2) Research and Development Personnel and Their Educational Backgrounds

(1) Sales (Provision) Regions of Main Products/Services

(2) Market Share

b. Growth prospects

c. Competitive advantages

a. Opportunities

I. Growth from emerging economies.

II. Increasing Global Environmental Awareness.

III. PU synthetic resins have a wide range of applications.

b. Challenges

Strategies:

Headway Annual Report 2022

3.2.2 Information of General Manager, Deputy General Manager, General Manager, department and branch managers. `：`

Production Procedure `（` PU Resin `）`

Production Procedure `（` TPU `）`