HOLY STONE — Audit Report / Information 2021

Nov 4, 2021

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Stock Code:3026

HOLY STONE ENTERPRISE CO., LTD.

Parent Company Only Financial Statements

With Independent Auditors’ Report For the Years Ended December 31, 2021 and 2020

Address: 1F., No. 62, Sec. 2, Huang Shan Rd., Nei Hu Dist, Taipei City, Taiwan (R.O.C.) Telephone: (02)26270383

The independent auditors’ report and the accompanying parent company only financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ report and parent company only financial statements, the Chinese version shall prevail.

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Table of contents

Contents 1. Cover Page 2. Table of Contents 3. Independent Auditors’ Report 4. Balance Sheets 5. Statements of Comprehensive Income 6. Statements of Changes in Equity 7. Statements of Cash Flows 8. Notes to the Parent Company Only Financial Statements (1) Company history (2) Approval date and procedures of the financial statements (3) New standards, amendments and interpretations adopted (4) Summary of significant accounting policies (5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty (6) Explanation of significant accounts (7) Related-party transactions (8) Pledged assets (9) Commitments and contingencies (10) Losses Due to Major Disasters (11) Subsequent Events (12) Other (13) Other disclosures (a) Information on significant transactions (b) Information on investees (c) Information on investment in mainland China (d) Major shareholders (14) Segment information 9. Statements of major accounting items

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KPMG

台北市110615信義路5段7號68樓(台北101大樓) 電 話 Tel + 886 2 8101 6666 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, 傳 真 Fax + 886 2 8101 6667 Xinyi Road, Taipei City 110615, Taiwan (R.O.C.) 網 址 Web home.kpmg/tw

Independent Auditors’ Report

To the Board of Directors of Holy Stone Enterprise Co., Ltd.:

Opinion

We have audited the financial statements of Holy Stone Enterprise Co., Ltd.(“the Company”), which comprise the balance sheets as of December 31, 2021 and 2020, the statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the report of another auditor (please refer to Other Matter paragraph), the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audit in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and the 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 Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. Based on our audits and the report of another auditor, we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Other Matter

We did not audit the financial statements of a subsidiary, which represented investment in another entity accounted for using the equity method of the Company. Those statements were audited by another auditor, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the subsidiary, is based solely on the report of another auditor. The investment in the subsidiary accounted for using the equity method constituting 2.33% and 2.52% of total assets at December 31, 2021 and 2020, respectively, and the related share of profit of subsidiaries accounted for using the equity method constituting 0.91% and 1.16% of total profit before tax for the years then ended, respectively.

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

3-1

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

1. Revenue recognition

Please refer to Note 4(m) “Revenue from contracts with customers” for accounting policy and Note 6(s) “ Revenue from contracts with customers” for details of revenue to the parent company only financial statements.

Description of key audit matter:

The Company engages primarily in the manufacturing and sales of MLCC, integrated circuits, modules, and other electronic components. The Operating Revenue is the main indicator for the investor to evaluate the financial and business performance of the Company. Therefore, it has been identified as a key audit matter.

How the matter was addressed in our audit:

Regarding the key audit matter mentioned above, our key audit procedures include understanding the design and implementation of internal control over revenue recognition and verifying the compliance of accounting policy; analyzing the changes in sales revenue from top ten clients and comparing them with those of the same period in the previous year to confirm whether or not there are significant exceptions or irregular transactions exist; examining the vouchers to determine the appropriate cut offs for revenue recognition within selected periods before and after the balance sheet date to evaluate whether the revenue was recorded in the appropriate period.

1. Impairment evaluation of accounts receivable

Please refer to Note 4(f)(i)(1) “ Financial assets measured at amortized cost” ; Note 5(a) “ Significant accounting assumptions and judgments, and major sources of estimation uncertainty”, and Note 6(d) “Notes and accounts receivables” to the parent company only financial statements.

Description of key audit matter:

The Company measured its accounts receivable by the recoverable amounts. Impairment evaluation of accounts receivable is one of the key judgmental areas for our audit, particularly in respect of the great influence of given the challenging industry climate. Due to the provision of bad debt allowance that is subject to the management’ s judgement, it is uncertain to have enough of information of recoverability before the issuance of the financial statements.

How the matter was addressed in our audit:

Our principal audit procedures included understanding the design and implementation of internal control; assessing the rationality of the provision policy and verifying the compliance of provision policy for accounts receivable allowance; examining the aging analysis table and checking the amount of receivables received after the balance date, as well as discussing with the management to assess the whether or not the provision is reasonable; evaluating the adequacy of the Company’s disclosure for bad debt allowance.

3. Inventory valuation

Please refer to Note 4(g) “Inventories” ; Note 5(b) “Significant accounting assumptions and judgments, and major sources of estimation uncertainty”, and Note 6(f) “Inventories” to the parent company only financial statements.

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Description of key audit matter:

Inventories are measured at the lower of cost and net realizable value in the financial statements. However, with the rapid development of the consumer market and the volatility of sales, that may result in the cost of inventory may exceed its net realizable value. Therefore, it has been identified as a key audit matter.

How the matter was addressed in our audit:

Regarding the key audit matter mentioned above, our audit procedures included evaluating the reasonableness of the Company’s inventory valuation policy and the management’s assumption used when measuring allowance for inventory valuation and obsolescence losses; performing a retrospective review of the Company’s historical accuracy of judgments with reference to inventory valuation and comparing them with the current year’s calculation to evaluate the appropriateness of estimation and assumption used for inventory valuation; assessing the adequacy of the Company’s disclosure for inventories.

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

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

In preparing the financial statements, management is responsible for assessing the Company’ s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including the audit committee) are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

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

1. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

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

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

3-3

1. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

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

3. Obtain sufficient and appropriate audit evidence regarding the financial information of the investment in other entities accounted for using the equity method to express an opinion on this financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

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

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’report are Hsu, Ming-Fang and Chen, Pei-Chi.

KPMG

Taipei, Taiwan (Republic of China) March 9, 2022

Notes to Readers

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

The independent auditors’ report and the accompanying parent company only financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ report and parent company only financial statements, the Chinese version shall prevail.

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(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) HOLY STONE ENTERPRISE CO., LTD.

Balance Sheets

December 31, 2021 and 2020

(Expressed in Thousands of New Taiwan Dollars)

Assets Current assets: 1100 Cash and cash equivalents (note 6(a)) 1110 Current financial assets at fair value through profit or loss (note 6(b)) 1150 Notes and accounts receivables, net (note 6(d)(s)) 1180 Accounts receivable-related parties, net (note 6(d)(s) and 7) 1200 Other receivables, net (note 6(e)) 130X Inventories (note 6(f)) 1410 Prepayments and other current assets Total current assets Non-current assets: 1510 Non-current financial assets at fair value through profit or loss (note 6(b)) 1550 Investments accounted for using the equity method (note 6(g)) 1600 Property, plant and equipment (note 6(i) and 7) 1755 Right-of-use assets (note 6(j)) 1840 Deferred tax assets (note 6(p)) 1915 Prepayments for business facilities (note 7) 1990 Other non-current assets, others (note 8) Total non-current assets	December 31, 2021 Amount % $ 2,903,284 19 259,475 2 2,138,382 14 618,020 4 126,761 1 2,802,115 18 15,042 - 8,863,079 58 6,023 - 2,100,984 14 3,810,478 26 3,692 - 40,448 - 338,986 2 40,562 - 6,341,173 42	December 31, 2020
		Amount % 3,412,615 25 199,779 1 2,120,533 16 495,098 4 92,758 1 1,990,735 15 25,284 - 8,336,802 62 9,905 - 1,928,011 14 3,160,713 24 4,668 - 50,126 - 35,987 - 18,532 - 5,207,942 38

$ 15,204,252 100 13,544,744 100

Total assets

Liabilities and Equity Current liabilities: 2100 Short-term borrowings (note 6(k)) 2130 Current contract liabilities (note 6(s)) 2170 Accounts payable 2180 Accounts payable to related parties (note 7) 2200 Other payables (note 6(l)) 2230 Current tax liabilities 2280 Current lease liabilities (note 6(n)) Total current liabilities Non-Current liabilities: 2540 Long-term borrowings (note 6(m)) 2570 Deferred tax liabilities (note 6(p)) 2580 Non-current lease liabilities (note 6(n)) 2640 Net defined benefit liability, non-current (note 6(o)) 2670 Other non-current liabilities, others Total non-current liabilities Total liabilities Equity (note 6(o)(q)): 3110 Ordinary share 3200 Capital surplus Retained earnings: 3310 Legal reserve 3320 Special reserve 3350 Unappropriated retained earnings Total retained earnings Other equity: 3410 Exchange differences on translation of foreign financial statements 3420 Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income Total other equity Total equity Total liabilities and equity	December 31, 2021		December 31, 2020 Amount % 1,903,447 14 12,540 - 869,532 6 87,260 1 715,780 5 179,604 1 2,388 - 3,770,551 27 423,932 3 68,211 1 2,318 - 71,841 1 6 - 566,308 5 4,336,859 32 1,579,908 12 3,109,960 23 1,638,205 12 128,821 1 2,873,375 21 4,640,401 34 (51,074) - (71,310) (1) (122,384) (1) 9,207,885 68 13,544,744 100
	Amount %
	$ 1,682,790 11 26,911 - 941,407 6 222,016 2 941,414 6 8,501 - 2,447 - 3,825,486 25 1,367,608 9 80,981 1 1,292 - 64,983 - 6 - 1,514,870 10 5,340,356 35 1,579,908 10 3,140,525 21 1,638,205 11 122,384 1 3,546,728 23 5,307,317 35 (88,988) (1) (74,866) - (163,854) (1) 9,863,896 65 $ 15,204,252 100

See accompanying notes to parent company only financial statements.

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(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) HOLY STONE ENTERPRISE CO., LTD.

Statements of Comprehensive Income

For the years ended December 31, 2021 and 2020

(Expressed in Thousands of New Taiwan Dollars , Except for Earnings Per Share)

4000 Operating revenue (note 6(s) and 7) 5000 Operating costs (note 6(f)(o), 7 and 12) Gross profit 5910 Unrealized profit (loss) from sales Net gross profit Operating expenses (note 6(o)(t), 7 and 12): 6100 Selling and administrative expenses 6300 Research and development expenses 6450 Expected credit loss (note 6(d)) Total operating expenses Net operating income Non-operating income and expenses: 7020 Other gains and losses, net 7050 Finance costs 7070 Share of profit (loss) of subsidiaries accounted for using the equity method 7100 Interest income Total non-operating income and expenses 7900 Profit before tax 7950 Less: Income tax expenses(note 6(p)) Profit 8300 Other comprehensive income (loss): 8310 Components of other comprehensive income (loss) that will not be reclassified to profit or loss: 8311 Losses on remeasurements of defined benefit plans 8316 Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income 8330 Share of other comprehensive income of subsidiaries accounted for using the equity method, components of other comprehensive income that will not be reclassified to profit or loss 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss Total components of other comprehensive income (loss) that will not be reclassified to profit or loss 8360 Components of other comprehensive income (loss) that may not be reclassified to profit or loss 8361 Exchange differences on translation of foreign financial statements 8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss Total components of other comprehensive income (loss) that may be reclassified to profit or loss 8300 Other comprehensive income, net of tax 8500 Total comprehensive income Earnings per share (note 6(r)) 9750 Basic earnings per share (NT dollars) 9850 Diluted earnings per share (NT dollars)	2021 Amount % $ 13,845,582 100 10,717,338 77 3,128,244 23 12,895 - 3,141,139 23 878,492 6 197,958 2 261 - 1,076,711 8 2,064,428 15 (3,785) - (8,297) - 86,187 1 11,028 - 85,133 1 2,149,561 16 197,144 2 1,952,417 14 (13,811) - (11,225) - (95) - - - (25,131) - (37,914) - - - (37,914) - (63,045) - $ 1,889,372 14 $ 12.36 $ 12.16	2020 Amount % 12,389,397 100 9,740,094 79 2,649,303 21 (20,655) - 2,628,648 21 734,439 6 188,907 2 - - 923,346 8 1,705,302 13 16,811 - (13,601) - (78,445) (1) 12,832 - (62,403) (1) 1,642,899 12 330,554 3 1,312,345 9 (7,746) - 8,646 - (145) - 1,571 - 2,326 - (3,780) - - - (3,780) - (1,454) - 1,310,891 9 8.31 8.20

See accompanying notes to parent company only financial statements.

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(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) HOLY STONE ENTERPRISE CO., LTD.

Statements of Changes in Equity

For the years ended December 31, 2021 and 2020

(Expressed in Thousands of New Taiwan Dollars)

Balance at January 1, 2020 Profit Other comprehensive income Total comprehensive income Appropriation and distribution of retained earnings: Cash dividends of ordinary shares Reversal of special reserve Other changes in capital surplus: Cash dividends from capital surplus Difference between consideration and carrying amount of subsidiaries acquired or disposed Changes in ownership interests in subsidiaries Balance at December 31, 2020 Profit Other comprehensive income Total comprehensive income Appropriation and distribution of retained earnings: Cash dividends of ordinary shares Reversal of special reserve Changes in ownership interests in subsidiaries Balance at December 31, 2021	Ordinary shares		Capital surplus			Retained earnings	Retained earnings				Other equity Exchange differences on translation of foreign financial statements Unrealized gains (losses) on financial assets measured at fair value through other comprehensive income	Other equity Exchange differences on translation of foreign financial statements Unrealized gains (losses) on financial assets measured at fair value through other comprehensive income	Other equity Exchange differences on translation of foreign financial statements Unrealized gains (losses) on financial assets measured at fair value through other comprehensive income	Total equity
					Legal reserve		Special reserve		Unappropriated retained earnings		Exchange differences on translation of foreign financial statements
	$ 1,579,908 - - - - - - - - 1,579,908 - - - - - - $ 1,579,908		3,402,323		1,638,205		132,916		2,372,512		(47,294) - (3,780) (3,780) - - - - - (51,074) - (37,914) (37,914) - - - (88,988)		(81,527) - 10,217 10,217 - - - - - (71,310) - (11,225) (11,225) - - 7,669 (74,866)	8,997,043
			- -		- -		- -							1,312,345 (1,454)
			-		-		-							1,310,891
					- - - - -									(789,954) - (315,982) (17,729) 23,616
					1,638,205									9,207,885
					- -									1,952,417 (63,045)
					-									1,889,372
					- - -									(1,263,926) - 30,565
					1,638,205									9,863,896

See accompanying notes to parent company only financial statements.

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

HOLY STONE ENTERPRISE CO., LTD.

Statements of Cash Flows

For the years ended December 31, 2021 and 2020

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from operating activities: Profit before tax Adjustments: Adjustments to reconcile profit (loss): Depreciation expense Expected credit loss Net gain on financial assets at fair value through profit or loss Interest expense Interest revenue Dividend revenue Share of profit (loss) of subsidiaries, accounted for using the equity method Gain from disposal of property, plant and equipment Gain on disposal of investments Unrealized profit (loss) from sales Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Changes in operating assets: Current financial assets at fair value through profit or loss Notes and accounts receivable Accounts receivable-related parties Other receivables Inventories Prepayments and other current assets Total changes in operating assets Changes in operating liabilities: Contract liabilities Accounts payable Accounts payable to related parties Other payables Net defined benefit liability Total changes in operating liabilities Net changes in operating assets and liabilities Total adjustments Cash inflow generated from operations Interest received Dividends received Interest paid Income taxes paid Net cash flows from operating activities Cash flows used in investing activities: Acquisition of financial assets at fair value through profit or loss Proceeds from disposal of financial assets at fair value through profit or loss Acquisition of investments accounted for using the equity method Proceeds from disposal of investments accounted for using the equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in other non-current assets, others Increase in prepayments for business facilities Dividends received Net cash flows used in investing activities Cash flows used in financing activities: (Decrease) increase in short-term borrowing Proceeds from long-term borrowings Repayments of long-term borrowings Payment of lease liabilities Cash dividends paid Net cash flows used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

See accompanying notes to parent company only financial statements.

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(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) HOLY STONE ENTERPRISE CO., LTD.

Notes to the Parent Company Only Financial Statements

For the years ended December 31, 2021 and 2020

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

(1) Company history

Holy Stone Enterprise Co., Ltd. (the “ Company” ) was legally established with the approval of the Ministry of Economic Affairs (R.O.C.) on June 1, 1981, with registered address at 1F., No.62, Sec. 2, Huang Shan Rd., Nei Hu Dist, Taipei City, Taiwan (R.O.C.). The major business activitivties of the Company are manufacturing and sales of MLCC, integrated circuits, modules, and other electronic components.

(2) Approval date and procedures of the financial statements:

The parent company only financial statements were authorized for issue by the Board of Directors on March 9, 2022.

(3) New standards, amendments and interpretations adopted:

• (a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.

The Company has initially adopted the following new amendments, which do not have a significant impact on its financial statements, from January 1, 2021:

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

• －

• ●Amendments to IFRS 9, IAS39, IFRS7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform Phase 2”

The Company has initially adopted the following new amendments, which do not have a significant impact on its financial statements, from April 1, 2021:

• ●Amendments to IFRS 16 “Covid-19-Related Rent Concessions beyond June 30, 2021”

• (b) The impact of IFRS issued by the FSC but not yet effective

The Company assesses that the adoption of the following new amendments, effective for annual period beginning on January 1, 2022, would not have a significant impact on its financial statements:

• －

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

• －

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

• ●Annual Improvements to IFRS Standards 2018–2020

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

(Continued)

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HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

• (c) The impact of IFRS issued by IASB but not yet endorsed by the FSC

The following new and amended standards, which may be relevant to the Company, have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

Standards or Interpretations Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” Amendments to IAS 12 “Deferred Tax related to Assets and Liabilities arising from a Single Transaction”

Content of amendment Effective date per IASB The amendments aim to promote consistency in applying the requirements by helping companies determine whether, in the statement of balance sheet, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. The amendments include clarifying the classification requirements for debt a company might settle by converting it into equity. January 1, 2023 The amendments narrowed the scope of the recognition exemption so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. January 1, 2023

The Company is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its consolidated financial position and financial performance. The results thereof will be disclosed when the Company completes its evaluation.

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

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

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

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

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

(Continued)

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HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(4) Summary of significant accounting policies:

The significant accounting policies presented in the parent company only financial statements are summarized as follows. And the accounting policies have been applied consistently to all periods presented in these parent company only financial statements, except for which explained specially.

(a) Statement of compliance

The parent company only financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese Ianguage consolidated financial statements, the Chinese version shall prevail.

These financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as "the Regulations").

• (b) Basis of preparation

• (i) Basis of measurement

Except for the following significant accounts, the financial statements have been prepared on a historical cost basis:

• 1) Financial instruments at fair value through profit or loss are measured at fair value;

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

• 3) The defined benefit liabilities (at assets) are measured at fair value of the plan assets less the present value of the defined benefit obligation, limited as explained in note 4(n).

• (ii) Functional and presentation currency

The functional currency of the Company entity is determined based on the primary economic environment in which the entity operates. The financial statements are presented in New Taiwan Dollar (NTD), which is the Company’s functional currency. All financial information presented in NTD has been rounded to the nearest thousand.

(c) Foreign currencies

(i) Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies of Company entities at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currencies using the exchange rate at the date that the fair value was determined. Non-monetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

(Continued)

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HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

Exchange differences are generally recognized in profit or loss, except for those differences relating to the following, which are recognized in other comprehensive income:

• ●an investment in equity securities designated as at fair value through other comprehensive income;

• ●a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or

• ●qualifying cash flow hedges to the extent that the hedges are effective.

• (ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into the presentation currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into the presentation currency at the average exchange rate. Exchange differences are recognized in other comprehensive income.

When a foreign operation is disposed of such that control, significant influence, or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to noncontrolling interests. When the Company disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, Exchange differences arising from such a monetary item that are considered to form part of the net investment in the foreign operation are recognized in other comprehensive income.

• (d) Classification of current and non-current assets and liabilities

An asset is classified as current under one of the following criteria, and all other assets are classified as non-current.

• (i) It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;

• (ii) It is held primarily for the purpose of trading;

• (iii) It is expected to be realized within twelve months after the reporting period; or

• (iv) The asset is cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

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

(Continued)

12

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

An entity shall classify a liability as current when:

• (i) It is expected to be settled in the normal operating cycle;

• (ii) It is held primarily for the purpose of trading;

• (iii) It is due to be settled within twelve months after the reporting period; or

• (iv) The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.

• (e) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes, should be recognized as cash equivalents.

(f) Financial instruments

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

(i) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

On initial recognition, a financial asset is classified as measured at: amortized cost; Fair value through other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

• 1) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

• ‧ it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

(Continued)

13

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

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

These assets are subsequently measured at amortized cost, which is the amount at which the financial asset is measured at initial recognition, plus/minus, the cumulative amortization using the effective interest method, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, as well as impairment, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

• 2) Fair value through other comprehensive income (FVOCI )

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

• ‧ it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

• ‧ it is contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Some accounts receivables are held within a business model whose objective is achieved by both collecting contractual cash flows and selling by the Company, therefore, those receivables are measured at FVOCI. However, they are included in the ‘ trade receivables’ line item.

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’ s fair value in other comprehensive income. This election is made on an instrument-by-instrument basis.

Debt investments at FVOCI are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in other comprehensive income. On derecognition, gains and losses accumulated in other comprehensive income are reclassified to profit or loss.

Equity investments at FVOCI are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in other comprehensive income and are never reclassified to profit or loss.

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

(Continued)

14

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

• 3) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets. Accounts receivables that the Company intends to sell immediately or in the near term are measured at FVTPL; however, they are included in the ‘accounts receivables’ line item. On initial recognition, the Company may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

4) Business model assessment

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

5) Impairment of financial assets

The Company recognizes loss allowances for expected credit losses (ECL) on financial assets measured at amortized cost (including cash and cash equivalents, amortized costs, notes and accounts receivables, other receivable, guarantee deposit paid and other financial assets), debt investments measured at FVOCI and contract assets.

The Company measures loss allowances at an amount equal to lifetime ECL, except for the following which are measured as 12-month ECL:

• ‧ debt securities that are determined to have low credit risk at the reporting date; and

• ‧ other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

Loss allowance for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Company’ s historical experience and informed credit assessment as well as forwardlooking information.

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Company considers a financial asset to be in default when the financial asset is more than 90 days past due or the debtor is unlikely to pay its credit obligations to the Company in full.

(Continued)

15

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

The Company considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘ investment grade which is considered to be BBB- or higher per Standard & Poor’s, Baa3 or higher per Moody’s or twA or higher per Taiwan Ratings’.

Lifetime ECL are the ECL that result from all possible default events over the expected life of a financial instrument.

12-month ECL are the portion of ECL that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECL is the maximum contractual period over which the Company is exposed to credit risk.

ECL are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive). ECL are discounted at the effective interest rate of the financial asset.

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘ credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data:

• ‧ significant financial difficulty of the borrower or issuer;

• ‧ a breach of contract such as a default or being more than 90 days past due;

• ‧ the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider;

• ‧ it is probable that the borrower will enter bankruptcy or other financial reorganization; or

• ‧ the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognized in other comprehensive income instead of reducing the carrying amount of the asset.

(Continued)

16

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

6) Derecognition of financial assets

The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Company enters into transactions whereby it transfers assets recognized in its statement of balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

• (ii) Financial liabilities and equity instruments

1) Classification of debt or equity

Debt and equity instruments issued by the Company are classified as financial liabilities or equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

2) Equity instrument

An equity instrument is any contract that evidences residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued are recognized as the amount of consideration received, less the direct cost of issuing.

3) Financial liabilities

Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

4) Derecognition of financial liabilities

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

(Continued)

17

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

On derecognition of a financial liability, the difference between the carrying amount of a financial liability extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

5) Offsetting of financial assets and liabilities

Financial assets and financial liabilities are offset and the net amount presented in the statement of balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

(g) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is calculated using the weighted average method, and includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing them to their present location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(h) Investment in associates

Associates are those entities in which the Company has significant influence, but not control or joint control, over their financial and operating policies.

Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition less any accumulated impairment losses.

The financial statements include the Company’s share of the profit or loss and other comprehensive income of those associates, after adjustments to align their accounting policies with those of the Company, from the date on which significant influence commences until the date on which significant influence ceases. The Company recognizes any changes of its proportionate share in the investee within capital surplus, when an associate’s equity changes due to reasons other than profit and loss or comprehensive income, which did not result in changes in actual proportionate share.

Gains and losses resulting from transactions between the Company and an associate are recognized only to the extent of unrelated Company’s interests in the associate.

When the Company’s share of losses of an associate equals or exceeds its interests in an associate, it discontinues recognizing its share of further losses. After the recognized interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.

(Continued)

18

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(i) Investment in subsidiaries

When preparing the parent Company only financial statements, investment in subsidiaries which are controlled by the Company is accounted for using the equity method. Under the equity method, 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 distribution received. The Company also recognized its share in the changes in the equity of subsidiaries.

Changes in a parent’s ownership interest in a subsidiary that do not result in the loss of control are accounted for within equity.

(j) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.

• (iii) Depreciation

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

Land is not depreciated.

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

1)	Buildings and structures	3～50 years
2)	Machinery and equipment	1～8 years
3)	Other facilities	1～20 years

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

(Continued)

19

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(k) Leases

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

• (i) As a lessee

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

• － fixed payments, including in-substance fixed payments;

• － variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

• － amounts expected to be payable under a residual value guarantee; and

• － payments for purchase or termination options that are reasonably certain to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

• － there is a change in future lease payments arising from the change in an index or rate; or

• － there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee; or

• － there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset, or

• － there is a change of its assessment on whether it will exercise a extension or termination option; or

• － there is any lease modification

(Continued)

20

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Company accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease.

The Company presents right-of-use assets that do not meet the definition of investment and lease liabilities as a separate line item respectively in the statement of financial position.

The Company has elected not to recognize right-of-use assets and lease liabilities for shortterm leases that have a lease term of 12 months or less and leases of low-value assets. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(ii) As a lessor

When the Company acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Company makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease. If a head lease is a short-term lease to which the Company applies the exemption described above, then it classifies the sub-lease as an operating lease.

If an arrangement contains lease and non-lease components, the Company applies IFRS15 to allocate the consideration in the contract.

The Company recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other income’.

(l) Impairment of non-financial assets

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories, and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units (CGUs).

(Continued)

21

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(m) Revenue from contracts with customers

Revenue is measured based on the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Company’s main types of revenue are explained below.

(i) Sale of goods

The Company manufactures and sells MLCC, integrated circuits, modules and other electronic components.The Company recognizes revenue when control of the products has been transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.

A receivable is recognized when the goods are delivered as this is the point in time that the Company has a right to an amount of consideration that is unconditional.

(n) Employee benefits

(i) Defined contribution plans

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

(ii) Defined benefit plans

The Company’s net obligation in respect of defined benefit plans is calculated separately for each the plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

(Continued)

22

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income, and accumulated in retained earnings within equity. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset). Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

• (iii) Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(o) Income taxes

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

Current taxes comprise the expected tax payables or receivables on the taxable profits (losses) for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received. It is measured using tax rates enacted or substantively enacted at the reporting date.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes are recognized except for the following:

• (i) temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction;

• (ii) temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

(Continued)

23

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(iii) taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax assets are recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realized.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax assets and liabilities are offset if the following criteria are met:

• (i) the Company has a legally enforceable right to set off current tax assets against current tax liabilities; and

• (ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:

• 1) the same taxable entity; or

• 2) different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

(p) Earnings per share

The Company discloses the Company’s basic and diluted earnings per share attributable to ordinary shareholders of the Company. Basic earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding. Diluted earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as employee compensation.

(q) Operating segments

The Company discloses the operating segments information in the consolidated financial statements. Therefore, the Company does not disclose the operating segment information in the parent company only financial statement.

(Continued)

24

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

The preparation of parent company only financial statements in conformity with the Regulations require management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the following period.

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in financial statements is as follows:

(a) Impairment of accounts receivable

When there is objective evidence of impairment loss, the Company takes into consideration the estimation of future cash flows. When the actual future cash flows are less than expected, a material impairment loss may arise. Please refer to note 6(d) for further description of the impairment of accounts receivable.

(b) Valuation of inventories

As inventories are stated at the lower of cost or net realizable value, the Company estimates the net realizable value of inventories for obsolescence and unmarketable items at the end of the reporting period and then writes down the cost of inventories to net realizable value. The net realizable value of the inventory is mainly determined based on assumptions as to future demand within a specific time horizon. Due to the rapid industrial transformation, there may be significant changes in the net realizable value of inventories. Please refer to note 6(f) for further description of the valuation of inventories.

The Company’s accounting policies include measuring financial and non-financial assets and liabilities at fair value through profit or loss.

The Company’s financial instrument valuation group conducts independent verification on fair value by using data sources that are independent, reliable, and representative of exercise prices. This financial instrument valuation group also periodically adjusts valuation models, conducts back testing, renews input data for valuation models, and makes all other necessary fair value adjustments to assure the rationality of fair value. The Company strives to use market observable inputs when measuring assets and liabilities. Different levels of the fair value hierarchy to be used in determining the fair value of financial instruments are as follows:

• (a) Level 1: quoted prices (unadjusted) in active markets for identifiable assets or liabilities.

• (b) Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• (c) Level 3: inputs for the assets or liability that are not based on observable market data.

For any transfer within the fair value hierarchy, the impact of the transfer is recognized on the reporting date. Please refer to Note 6(u) for assumptions used in measuring fair value.

(Continued)

25

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(6) Explanation of significant accounts:

• (a) Cash and cash equivalents

Cash on hand Demand and check deposit Time deposit	December 31, 2021 $ 2,270 1,237,014 1,664,000 $ 2,903,284	December 31, 2020
		842 1,832,373 1,579,400
		3,412,615

Please refer to note 6(u) for the disclosure of the interest rate risk and the sensitivity analysis for financial assets and liabilities.

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

December 31, 2021 Current: Domestic stocks $ 55,350 Fund beneficiary certificates 204,125 $ 259,475 Non-current： Foreign listed stocks $ 6,023 Financial assets at fair value through other comprehensive income December 31, 2021 Foreign unlisted stocks $ -	December 31, 2020
	42,400 157,379
	199,779
	9,905
	December 31, 2020
	-

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

• (i) Equity investments at fair value through other comprehensive income

The Company designated the investment shown above as equity securities at fair value through other comprehensive income because these equity securities represent those investments that the Company intends to hold for long-term strategic purpose.

• (ii) For credit risk and market risk, please refer to note 6(u).

• (iii) As of December 31, 2021 and 2020, the aforementioned financial assets were not pledged as collateral.

(Continued)

26

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(d) Notes and accounts receivable

Notes receivable Accounts receivable Accounts receivable to related parties Less: loss allowance	December 31, 2021 $ 38,519 2,113,094 618,020 (13,231) $ 2,756,402	December 31, 2020 37,687 2,095,816 495,098 (12,970) 2,615,631

The Company applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due, as well as the incorporated forward-looking information. The loss allowance provisions were determined as follows:

Current 1 to 30 days past due 31 to 60 days past due More than 61 days past due Current 1 to 30 days past due 31 to 60 days past due More than 61 days past due	December 31, 2021	December 31, 2021
	Gross carrying amount Weighted- average loss rate $ 2,750,132 0%~3% 14,134 0%~40% 769 100% 4,598 100% $ 2,769,633 December 31, 2020		Loss allowance provision
			2,210 5,654 769 4,598
			13,231
		Weighted- average loss rate 0%~3% 0%~40% 100% 100%	Loss allowance provision
			2,181 3,865 859 6,065
			12,970

(Continued)

27

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

The movements in the allowance for notes and accounts receivable were as follows:

Balance at January 1 Impairment losses recognized Amounts written off Balance at December 31	For the years ended December 31, 2021 2020 $ 12,970 13,000 261 - - (30) $ 13,231 12,970

As of December 31, 2021 and 2020, the notes and accounts receivable of the Company were not pledged as collaterals.

For further credit risk information, please refer to note 6(u).

(e) Other receivables

Income tax refund receivables Purchase discount receivable Interest receivables	December 31, 2021 $ 59,807 66,093 861 $ 126,761	December 31, 2020
		52,813 38,564 1,381
		92,758

For further credit risk information, please refers to note 6(u).

(f) Inventories

Raw materials Supplies Work in progress Semi-finished goods Finished goods Merchandise	December 31, 2021 $ 283,617 29,553 201,170 48,137 829,490 1,410,148 $ 2,802,115	December 31, 2020
		152,913 24,972 187,129 92,720 597,237 935,764
		1,990,735

For the years ended December 31, 2021 and 2020 the Company recognized cost of sales and operating expense amounted to $10,715,876 and $9,742,469, respectively. For the years ended December 31, 2021 and 2020 , the gain of $38,991 and $23,893 were recognized from the reversal of provision arising from scrapping, where in such loss were included in cost of sales.

As of December 31, 2021 and 2020, the inventories were not pledged.

(Continued)

28

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(g) Investments accounted for using the equity method

A summary of the Company’s financial information for investments accounted for using the equity method at the reporting date is as follows:

Subsidiaries Associates	December 31, 2021 $ 1,973,376 127,608 $ 2,100,984	December 31, 2020
		1,875,250 52,761
		1,928,011

Please refer to the consolidated financial statements for the year ended December 31, 2021.

As of December 31, 2021 and 2020, the Company did not provide any investment accounted for using the equity method as collateral for its loans.

• (h) Changes in a parent’s ownership interest in a subsidiary

• (i) Acquisitions of NCI

In October 2020, the Company acquired an additional interest in Uholy Investment Co., Ltd. for $247,500 in cash, increasing the shareholding ratio from 57.69% to 100%. The Company did not have any transaction with non-controlling interests in 2021.

The effects of the changes in shareholdings were as follows:

Carrying amount on acquisition Consideration Retained earnings－differences between consideration and carrying amounts subsidiaries acquired	2020 $ 229,771 (247,500) $ (17,729)

(Continued)

29

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(i) Property, plant and equipment

The cost and depreciation of the property, plant and equipment of the Company were as follows:

Cost: January 1, 2021 Additions Reclassification Disposal Balance at December 31, 2021 Balance at January 1, 2020 Additions Reclassification Disposal Balance at December 31, 2020 Accumulated depreciation: January 1, 2021 Depreciation Disposal Balance at December 31, 2021 Balance at January 1, 2020 Depreciation Disposal Balance at December 31, 2020 Carrying amounts: Balance at December 31, 2021 Balance at January 1, 2020 Balance at December 31, 2020	Land $ 716,348 - - - $ 716,348 $ 716,348 - - - $ 716,348 $ - - - $ - $ - - - $ - $ 716,348 $ 716,348 $ 716,348	Buildings and construction 1,308,542 - 16,336 (3,154) 1,321,724 1,290,879 1,238 17,378 (953) 1,308,542 482,054 68,399 (3,154) 547,299 408,630 74,377 (953) 482,054 774,425 882,249 826,488	Machinery and equipment 3,412,150 2,179 82,409 (22,644) 3,474,094 3,255,204 - 164,764 (7,818) 3,412,150 2,567,598 363,921 (22,644) 2,908,875 2,230,064 345,294 (7,760) 2,567,598 565,219 1,025,140 844,552	Other facilities 357,600 15,487 28,012 (7,951) 393,148 337,651 8,015 22,444 (10,510) 357,600 294,694 46,917 (6,747) 334,864 265,540 39,664 (10,510) 294,694 58,284 72,111 62,906	Construction in progress and testing equipment 710,419 1,112,540 (126,757) - 1,696,202 - 661,215 49,204 - 710,419 - - - - - - - - 1,696,202 - 710,419	Total 6,505,059 1,130,206 - (33,749) 7,601,516 5,600,082 670,468 253,790 (19,281) 6,505,059 3,344,346 479,237 (32,545) 3,791,038 2,904,234 459,335 (19,223) 3,344,346 3,810,478 2,695,848 3,160,713

As of December 31, 2021 and 2020, the property, plant and equipment of the Company were not pledged as collateral.

(Continued)

30

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(j) Right-of-use assets

Information about leases for which the Company as a lessee was presented below:

Cost: Balance at January 1, 2021 $ Additions Balance at December 31, 2021 $ Balance at January 1, 2020 $ Additions Balance at December 31, 2020 $ Accumulated depreciation: Balance at January 1, 2021 $ Depreciation for the year Balance at December 31, 2021 $ Balance at January 1, 2020 $ Depreciation for the year Balance at December 31, 2020 $ Carrying amount: Balance at December 31, 2021 $ Balance at January 1, 2020 $ Balance at December 31, 2020 $	Buildings and construction
	11,150 2,274
	13,424
	5,758 5,392
	11,150
	6,482 3,250
	9,732
	3,239 3,243
	6,482
	3,692
	2,519
	4,668

(k) Short-term borrowings

The short-term borrowings were summarized as follows:

Unsecured bank loans Unused short-term credit lines Range of interest rates	December 31, 2021 $ 1,682,790 $ 2,504,690 0.49%~0.8%	December 31, 2020
		1,903,447
		1,933,132
		0.4%~2.79%

(Continued)

31

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(l) Other payables

Employee bonus payable Compensation due to directors and supervisors Payables on machinery and equipment Salaries and bonus payables Professional service payables Commission payables Labor/health insurance payables Others	December 31, 2021 $ 344,106 49,133 155,121 143,210 1,894 1,358 19,053 227,539 $ 941,414	December 31, 2020
		335,352 37,552 32,243 67,094 3,598 3,573 15,503 220,865
		715,780

(m) Long-term borrowings

The details were as follows:

Unsecured bank loans Unused long-term credit lines Unsecured bank loans Unused long-term credit lines		December	31, 2021	31, 2021
	Currency NTD	Rate 0.4% December	Maturity year Amount 116~117 $ 1,367,608 $ 632,392 31, 2020
	Currency NTD	Rate 0.4%	Maturity year Amount 116 $ 423,932 $ 1,576,068	Amount

(n) Lease liabilities

The Company’s finance lease liabilities were as follows:

Current Non-current	December 31, 2021 $ 2,447 $ 1,292	December 31, 2020
		2,388
		2,318

For the maturity analysis, please refer to note 6(u).

(Continued)

32

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

The amounts recognized in profit or loss were as follows:

Interest on lease liabilities Variable lease payments not included in the measurement of lease liabilities	2021 $ 78 $ 3,724	2020
		88
		3,709

The amounts recognized in the statement of cash flows for the Company were as follows:

Total cash outflow for leases	2021 $ 7,043	2020
		7,024

(i) Real estate leases

As of December 31, 2021, the Company leases buildings for its office space. The leases of office space typically run for a period of 1 to 2 years. Some leases include an option to renew the lease for an additional period of the same duration after the end of the contract term.

(ii) Other leases

The Company leases other facilities with one year. These leases are short-term and/or leases of low-value items. The Company has elected not to recognize right-of-use assets and lease liabilities for these leases.

(o) Employee benefits

(i) Defined benefit plans

The reconciliation of defined benefit obligation at present value and plan asset at fair value is as follows:

Present value of the defined benefit obligations Fair value of plan assets Effect of the asset ceiling Net defined benefit liabilities	December 31, 2021 $ 180,510 (115,527) 64,983 - $ 64,983	December 31, 2020 185,659 (113,818) 71,841 - 71,841

The Company makes defined benefit plan contributions to the pension fund account with Bank of Taiwan that provides pensions for employees upon retirement. Plans (covered by the Labor Standards Law) entitle a retired employee to receive retirement benefits based on years of service and average monthly salary for the six months prior to retirement.

(Continued)

33

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

• 1) Composition of plan assets

The Company allocates pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Bureau of Labor Funds, Ministry of Labor. With regard to the utilization of the funds, minimum earnings shall be no less than the earnings attainable from two-year time deposits with interest rates offered by local banks.

The Company’ s Bank of Taiwan labor pension reserve account balance amounted to $110,582 as of December 31, 2021. For information on the utilization of the labor pension fund assets, including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

• 2) Movements in present value of the defined benefit obligations

The movements in present value of the defined benefit obligations for the Company were as follows:

Defined benefit obligations at January 1 Current service costs and interest cost Remeasurements loss (gain): －Actuarial loss (gain) arising from: financial assumptions Benefits paid Defined benefit obligations at December 31	2021 $ 185,659 1,641 15,418 (22,208) $ 180,510	2020 176,106 2,628 10,478 (3,553) 185,659

• 3) Movements in fair value of plan assets

The movements in the value of the plan assets for the Company were as follows:

Fair value of plan assets at January 1 Interest income Remeasurements loss (gain): －Return on plan assets excluding interest income Contributions paid by the employer Benefits paid Fair value of plan assets at December 31	2021 $ 113,818 405 1,607 3,934 (4,237) $ 115,527	2020 109,864 894 2,733 3,880 (3,553) 113,818

(Continued)

34

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

• 4) Movements of the effect of the asset ceiling

There is no change in the effect of the asset ceiling for 2021 and 2020.

• 5) Expenses recognized in profit or loss

The expenses recognized in profit or loss for the Company were as follows:

Current service costs Net interest of net liabilities for defined benefit obligations Operating cost Operating expenses	2021 $ 991 245 $ 1,236 2021 $ 1,448 (212) $ 1,236	2020
		1,219 515
		1,734
		2020
		1,447 287
		1,734

• 6) Remeasurement of net defined benefit liability recognized in other comprehensive income

The Company’s remeasurement of the net defined benefit liability recognized in other comprehensive income were as follows:

Accumulated amount at January 1 Recognized during the period Accumulated amount at December 31	2021 $ (88,280) (13,811) $ (102,091)	2020 (80,534) (7,746) (88,280)

• 7) Actuarial assumptions

The principal actuarial assumptions at the reporting date were as follows:

Discount rate Future salary increase rate	December 31, 2021 December 31, 2020 % 0.650 % 0.350 % 2.500 % 2.500

The expected allocation payment to be made by the Company to the defined benefit plans for the one-year period after the reporting date is $3,900.

The weighted-average lifetime of the defined benefits plans is 12 years.

(Continued)

35

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

8) Sensitivity analysis

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

		Influences of defined	benefit obligation
		Increased 0.25%	Decreased 0.25%
December 31, 2021
Discount rate	$	4,029	(4,167)
Future salary increasing (decreasing)		(3,989)	3,878
December 31, 2020
Discount rate		4,434	(4,592)
Future salary increasing (decreasing)		(4,385)	4,258

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

There is no change in the method and assumptions used in the preparation of sensitivity analysis for 2021 and 2020.

(ii) Defined contribution plans

The Company allocates 6% of each employee’s monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Company allocates a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation.

The pension costs incurred from the contribution to the Bureau of the Labor Insurance amounted to $36,477 and $31,938 for the years ended December 31, 2021 and 2020, respectively.

(p) Income taxes

(i) Income tax expense

• 1) The components of income tax in the years 2021 and 2020 were as follows:

Current tax expense Current period Deferred tax expense Origination and reversal of temporary differences	2021 $ 174,696 22,448 $ 197,144	2020
		317,203 13,351 330,554

(Continued)

36

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

• 2) The amount of income tax recognized in other comprehensive income for 2021 and 2020 was as follows:

		2021		2020
Items that will not be reclassified to profit or
loss:
Unrealized gains (losses) from financial	$	-		1,571
assets measured at fair value through other
comprehensive income
The reconciliation of income tax and profit before	tax for 2021		and 2020 is as follows:
		2021		2020
Profit before tax	$	2,149,561		1,642,899
Income tax using the Company’s domestic tax rate	$	429,912		328,580
Change in unrecognized temporary differences		(165,724)		18,130
Adjustment for prior periods			(479)	6,933
Others		(66,565)		(23,089)
	$	197,144		330,554

• 3) The reconciliation of income tax and profit before tax for 2021 and 2020 is as follows:

• (ii) Deferred tax assets and liabilities

• 1) Unrecognized deferred tax assets

Deferred tax assets have not been recognized in respect of the following items:

Tax effect of deductible Temporary Differences	December 31, 2021 $ 48	December 31, 2020
		165,395

• 2) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2021 and 2020 were as follows:

Deferred tax assets: Balance at January 1, 2021 Recognized in profit or loss Balance at December 31, 2021	Allowance for inventory valuation losses $ 39,867 (7,798) $ 32,069	Others 10,259 (1,880) 8,379	Total 50,126 (9,678) 40,448

(Continued)

37

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

Balance at January 1, 2020 Recognized in profit or loss Recognized in other comprehensive income Balance at December 31, 2020 Deferred tax liabilities: Balance at January 1, 2021 Recognized in profit or loss Balance at December 31, 2021 Balance at January 1, 2020 Recognized in profit or loss Balance at December 31, 2020	Allowance for inventory valuation losses $ 44,645 (4,778) - $ 39,867 Profit or loss of subsidiary in equity method $ 68,211 10,115 $ 78,326 $ 64,398 3,813 $ 68,211	Others 13,448 (4,760) 1,571 10,259 Others - 2,655 2,655 - - -	Total 58,093 (9,538) 1,571 50,126 Total 68,211 12,770 80,981 64,398 3,813 68,211

(iii) Assessment of tax

The Company’s tax returns for the years through 2018 were assessed by the Taipei National Tax Administration.

(q) Capital and other equity

As of December 31, 2021 and 2020, the total value of authorized ordinary shares each amounted to of $4,500,000, respectively, with a par value of $10 per share, of which 450,000 thousand shares. In addition, the issuance of ordinary shares each consisted of 157,991 thousand shares. All issued shares were paid up upon issuance.

The reconciliation of outstanding shares for 2021 and 2020 was as follows:

Balance on December 31	Ordinary shares (in thousand of shares)	Ordinary shares (in thousand of shares)
	2021 157,991	2020
		157,991

(Continued)

38

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(i) Capital surplus

The balances of capital surplus were as follows:

The balances of capital surplus were as follows:
Share capital Additional paid-in capital arising from bond conversion Capital surplus from merger Employee share options Employee compensation transferred to capital Gain or loss on disposal of subsidiary share options Expired share/stock options	December 31, 2021 $ 1,108,172 1,500,091 144,225 188,297 15,410 54,184 130,146 $ 3,140,525	December 31, 2020
		1,108,172 1,500,091 144,225 188,297 15,410 23,619 130,146
		3,109,960

The Company decided to distribute cash dividends $315,982 by capital surplus via the general meeting of shareholders held on June 9, 2020.

According to the R.O.C. Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the common stock or be distributed as cash dividends. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring capital surplus in excess of par value should not exceed 10% of the total common stock outstanding.

(ii) Retained earnings

According to the Company’ s article of incorporation, if there is a surplus considering all accounts by the end of a fiscal year, the surplus shall be allocated in the following order:

• 1) Offset accumulated deficits from previous years.

• 2) 10% is to be appropriated as legal reserve, unless reserve has reached total paid-in capital.

• 3) Allocate a portion to special capital reserve, as required by relevant laws and regulations.

• 4) Any remaining profit together with any undistributed retained earnings, including the adjusted unappropriated retained earnings, after deduction of items (1) to (3) shall be allocated to shareholders according to the distribution plan proposed by the Board of Directors and submitted to the stockholders’ meeting for approval, wherein the distributable dividend and bonus may be paid by issuing new shares.

(Continued)

39

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

According to Article 240, paragraphs 5 of Company Act, the distributable dividends and bonus, in whole or in part, or the legal reserve and capital reserved, in whole or in part, which are brought in Article 241, paragraphs 1 of Company Act, may be paid in cash after a resolution has been adopted by a majority vote at a meeting of the board of directors attended by two-thirds of the total number of directors, and in addition thereto, a report of such distribution shall be submitted to the shareholders' meeting.

The Company formulated its dividend policy by considering the mid-to-long term operating growth and capital need for investing activities, together with the purpose of healthy financial structure. The board drafts an earnings distribution plan and proposes it to the annual general shareholders’ meeting. The appropriation of the Company’s net income may be distributed by ways of cash dividend and/or stock dividends considering future capital demand and stock dilution. Stock dividend accounts for 0% to 50% of total dividends, while cash dividend accounts for 50% to 100% of total dividends.

If there is no retained earnings to be distributed, or there is but way below the actual distribution from last fiscal year, or any concern with regard to finance/business/operation, the reserve could be distributed in accordance with regulations and authorities.

1) Legal reserve

When a company incurs no loss, it may, pursuant to a resolution by a shareholders’ meeting, distribute its legal reserve by issuing new shares or by distributing fund, and only the portion of legal reserve which exceeds 25% of capital may be distributed.

2) Special reserve

In accordance with the regulations of the FSC, a portion of current-period earnings and undistributed prior-period earnings shall be reclassified as special earnings reserve during earnings distribution. The amount to be reclassified should equal the currentperiod total net reduction of other shareholders’ equity. Similarly, a portion of undistributed prior-period earnings shall be reclassified as special earnings reserve (and does not qualify for earnings distribution) to account for cumulative changes to other shareholders’ equity pertaining to prior periods. Amounts of subsequent reversals pertaining to the net reduction of other shareholders’ equity shall qualify for additional distributions.

3) Earnings distribution

The amounts of cash dividends on the appropriation of earnings for 2020 and 2019 had been approved during the board meeting on March 10, 2021 and March 11, 2020, respectively. The relevant dividend distributions to shareholders were as follows:

Dividends distributed to ordinary shareholders: Cash	2020 2019 Amount per share Total amount Amount per share Total amount $ 8.00 1,263,926 5.00 789,954	2020 2019 Amount per share Total amount Amount per share Total amount $ 8.00 1,263,926 5.00 789,954
	Amount per share $ 8.00	Total amount
		789,954

(Continued)

40

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

The amount of cash dividends on appropriation of earning for 2021 been approved during the board meeting on March 9, 2022. The relevent dividend distribution to shareholders were as follows:

Dividends distributed to ordinary shareholders: Cash (iii) Other equity	2021	2021
	Amount per share $ 9.00	Total amount
		1,421,917

Balance at January 1, 2021 Exchange differences on foreign operations: The Company Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income: Subsidiaries Disposal of investments in equity instruments designated at fair value through other comprehensive income Subsidiaries Balance at December 31, 2021 Balance at January 1, 2020 Exchange differences on foreign operations: The Company Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income: The Company Subsidiaries Balance at December 31, 2020	Exchange differences on translation of foreign financial statements $ (51,074) (37,914) - - $ (88,988) Exchange differences on translation of foreign financial statements $ (47,294) (3,780) - - $ (51,074)	Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income (71,310) - (11,225) 7,669 (74,866) Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income (81,527) - (6,283) 16,500 (71,310)	Total
			(122,384) (37,914) (11,225) 7,669
			(163,854)
			Total
			(128,821) (3,780) (6,283) 16,500
			(122,384)

(Continued)

41

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(r) Earnings per share

(i) Basic earnings per share 1) Profit attributable to ordinary shareholders of the Company 2021 Profit attributable to ordinary shareholders of the Company $ 1,952,417 2) Weighted average number of outstanding ordinary shares (In thousands of shares) 2021 Weighted average number of ordinary shares at December 31 157,991 (ii) Diluted earnings per share 1) Profit attributable to ordinary shareholders of the Company 2021 Profit attributable to ordinary shareholders of the Company (basic) $ 1,952,417 2) Weighted average number of ordinary shares (diluted) (in thousands of shares) 2021 Weighted average number of ordinary shares (basic) 157,991 Effect of employee share bonus 2,507 Weighted average number of ordinary shares (diluted) at December 31 160,498 (s) Revenue from contracts with customers (i) Details of revenue 2021 Electronic department Major products/service lines: Passive components $ 5,485,379 Active components 4,297,662 System and modules 2,967,514 others 1,095,027 $ 13,845,582	2020
	1,312,345
	2020
	157,991
	2020
	1,312,345
	2020
	157,991 1,964
	159,955
	2020
	Electronic department
	4,927,574 3,657,562 2,360,854 1,443,407
	12,389,397

(Continued)

42

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(ii) Contract balances

Notes receivables Accounts receivables Accounts receivables to related parties Less: loss allowance Total Contract liabilities	December 31, 2021 $ 38,519 2,113,094 618,020 (13,231) $ 2,756,402 $ 26,911	December 31, 2020 37,687 2,095,816 495,098 (12,970) 2,615,631 12,540	January 1, 2020 37,191 1,781,678 436,313 (13,000) 2,242,182 36,090

For details on notes and accounts receivable and allowance for impairment, please refer to note 6(d).

• (t) Remuneration to employees, directors and supervisors

In accordance with the articles of incorporation the Company should contribute no less than 7% of the profit as employee compensation and less than 3% as directors’ and supervisors’ remuneration when there is profit for the year. However, if the Company has accumulated deficits, including the adjusted unappropriated retained earnings, the profit should be reserved to offset the deficit. The amount of remuneration of each director and supervisor and of compensation for employees entitled to receive the abovementioned employee compensation is approved by the Board of Directors. Employee compensation, directors’ and supervisors’ remuneration may be paid in cash or share after a resolution has been adopted by a majority vote at a meeting of the board of directors attended by two-thirds of the total number of directors, and in addition thereto, a report of such distribution shall should only be submitted to the shareholders’ meeting. The directors’ and supervisors’ remuneration should only be paid in cash. The recipients of shares and cash may include the employees of the Company’s affiliated companies who meet certain conditions.

For the years ended December 31, 2021 and 2020, the Company estimated its employee remuneration amounting to $257,947 and $197,148, and directors’ and supervisors’ remuneration amounting to $49,133 and $37,552, respectively. The estimated amounts mentioned above are calculated based on the net profit before tax, excluding the remuneration to employees, directors and supervisors of each period, multiplied by the percentage of remuneration to employees, directors and supervisors, as specified in the Company’ s articles. These remunerations were expensed under operating costs or operating expenses during each period. Related information would he available at the Market Observation Post System website. The amounts, as stated in the financial statements, are identical to those of the actual distributions for 2021 and 2020.

(Continued)

43

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(u) Financial instruments

• (i) Credit risk

• 1) Credit risk exposure

The carrying amount of financial assets represents the maximum amount exposed to credit risk.

• 2) Concentration of credit risk

The Company’s majority customers are in high-tech industries, to reduce concentration of credit risk, the Company evaluates customers’ financial positions periodically and requires its customers to provide collateral or promissory notes, if necessary.

• 3) Receivables

For credit risk exposure of note and accounts receivables, please refer to note 6(d).

Other financial assets at amortized cost include other receivables.

All of these financial assets are considered to have low risk, and thus, the impairment provision recognized during the period is limited to 12 months expected losses.

(ii) Liquidity risk

The following table shows the contractual maturities of financial liabilities, including the impact of estimated interest payments.

December 31, 2021 Non-derivative financial liabilities Short-term borrowings Current contract liabilities Accounts payable Accounts payable to related parties Other payables Lease liabilities Long-term borrowings December 31, 2020 Non-derivative financial liabilities Short-term borrowings Current contract liabilities Accounts payable Accounts payable to related parties Other payables Lease liabilities Long-term borrowings	Carrying amount $ 1,682,790 26,911 941,407 222,016 941,414 3,739 1,367,608 $ 5,185,885 $ 1,903,447 12,540 869,532 87,260 715,780 4,706 423,932 $ 4,017,197	Contractual cash flows 1,684,305 26,911 941,407 222,016 941,414 3,795 1,389,403 5,209,251 1,905,119 12,540 869,532 87,260 715,780 4,820 431,527 4,026,578	Within 1 year 1,684,305 26,911 941,407 222,016 941,414 2,484 5,470 3,824,007 1,905,119 12,540 869,532 87,260 715,780 2,453 1,696 3,594,380	1-5 years - - - - - 1,311 1,032,338 1,033,649 - - - - - 2,367 268,208 270,575	Over 5 years
					- - - - - - 351,595
					351,595
					- - - - - - 161,623
					161,623

(Continued)

44

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

The Company does not expect the cash flows included in the maturity analysis to occur significantly earlier or at significantly different amounts.

• (iii) Currency risk

• 1) Exposure to foreign currency risk

The Company’s significant exposure to foreign currency risk was as follows:

Financial assets Monetary items USD EUR HKD JPY CNY Non-monetary items USD Financial liabilities Monetary items USD HKD GBP JPY CNY	December 31, 2021 Foreign currency Exchange rate NTD $ 89,767 27.6800 2,484,748 293 31.3200 9,187 17,018 3.5490 60,396 397,946 0.2405 95,706 94,658 4.3440 411,193 1,236 27.6800 34,214 75,776 27.6800 2,097,474 271 3.5490 960 130 37.3000 4,837 360,810 0.2405 86,775 11,688 4.3440 50,771	December 31, 2021 Foreign currency Exchange rate NTD $ 89,767 27.6800 2,484,748 293 31.3200 9,187 17,018 3.5490 60,396 397,946 0.2405 95,706 94,658 4.3440 411,193 1,236 27.6800 34,214 75,776 27.6800 2,097,474 271 3.5490 960 130 37.3000 4,837 360,810 0.2405 86,775 11,688 4.3440 50,771	December 31, 2020	December 31, 2020
	Foreign currency $ 89,767 293 17,018 397,946 94,658 1,236 75,776 271 130 360,810 11,688	Exchange rate 27.6800 31.3200 3.5490 0.2405 4.3440 27.6800 27.6800 3.5490 37.3000 0.2405 4.3440	Foreign currency 81,054 101 17,948 457,757 100,388 910 87,524 496 94 198,529 8,326	Exchange rate NTD 28.4800 2,308,430 35.0200 3,554 3.6730 65,925 0.2763 126,478 4.3770 439,396 28.4800 25,915 28.4800 2,492,678 3.6730 1,821 38.9000 3,642 0.2763 54,853 4.3770 36,441

• 2) Sensitivity analysis

The Company’ s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts and other receivables, loans and borrowings; and accounts and other payables that are denominated in foreign currency.

A strengthening (weakening) of 5% of the NTD against the USD, EUR, JPY, HKD and CNY as of December 31, 2021 and 2020 would have increased (decreased) the net profit after tax by $41,016 and $17,717, respectively. The analysis for the two periods were on the same basis.

• 3) Foreign exchange gain and loss on monetary items

The information on foreign exchange gain (loss) (including realized and unrealized portions) and exchange rate on monetary items was amounted as follows:

NTD	2021	2021		2020	2020
	Exchange gain (loss) $ (32,644)	Rate		Exchange gain (loss) (26,297)	Rate
		-			-

(Continued)

45

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(iv) Interest rate analysis

Please refer to the notes on liquidity risk management and interest rate exposure of the Company’s financial assets and liabilities.

The following sensitivity analysis is based on the exposure to the interest rate risk of derivative and non-derivative financial instruments on the reporting date. Regarding assets with variable interest rates, the analysis is based on the assumption that the amount of assets outstanding at the reporting date was outstanding throughout the year. The rate of change is expressed as the interest rate increases or decreases by 1% when reporting to management internally, which also represents the Company management's assessment of the reasonably possible interest rate change.

If the interest rate had increased / decreased by 1% of basis points, the Company’s net income would have increased / decreased by $30,504 and $23,274 for the years ended December 31, 2021 and 2020, repectively, assuming all other variable factors remain constant. This is mainly due to the Company’s borrowing in floating variable rates and investment at variable-rate bills.

(v) Other market price risk

If the equity price changes, the impact to comprehensive income, using the sensitivity analysis based on the same variables except for the price index for both periods, will be as follows:

Prices of securities at the reporting date Increasing 1% Decreasing 1%	2021	2021
	After-tax other comprehensive income $ - $ -	After-tax profit (loss)
		614

Information related to major foreign currency equity investment on the report date was as follows:

follows:
USD	December 31, 2021			December 31, 2020 Currency Rate NTD 348 28.480 9,905
	Currency $ 218	Rate 27.680	NTD		Rate NTD 28.480 9,905
			6,023

(Continued)

46

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(vi) Fair value of financial instruments

• 1) Fair value hierarchy

The fair value of financial assets at fair value through profit or loss, and financial assets at fair value through other comprehensive income is measured on a recurring basis. The carrying amount and fair value of the Company’ s financial assets and liabilities, including the information on fair value hierarchy were as follows; however, except as described in the following paragraphs, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, and lease liabilities, disclosure of fair value information is not required:

Financial assets at fair value through profit or loss Financial assets measured at amortized cost: Cash and cash equivalents Notes and accounts receivable, net Account receivables to related parties, net Other receivables Subtotal Total Financial liabilities measured at amortized cost: Short-term borrowings Current contract liabilities Accounts payable Accounts payable to related parties Other payables Lease liabilities Long-term borrowings Subtotal Total		December 31, 2021	December 31, 2021	December 31, 2021
	Book Value $ 265,498 2,903,284 2,138,382 618,020 126,761 5,786,447 $ 6,051,945 $ 1,682,790 26,911 941,407 222,016 941,414 3,739 1,367,608 5,185,885 $ 5,185,885		Fair Value
		Level 1 265,498 - - - - - 265,498 - - - - - - - - -	Level 2 - - - - - - - - - - - - - - - -	Level 3 - - - - - - - - - - - - - - - -	Total
					265,498
					- - - -
					-
					265,498
					- - - - - - -
					-
					-

(Continued)

47

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

Financial assets at fair value through profit or loss Financial assets measured at amortized cost: Cash and cash equivalents Notes and accounts receivable, net Accounts payable to related parties, net Other receivables Subtotal Total Financial liabilities measured at amortized cost: Short-term borrowings Current contract liabilities Accounts payable Accounts payable to related parties Other payables Lease liabilities Long-term borrowings Subtotal Total		December 31, 2020	December 31, 2020	December 31, 2020
	Book value $ 209,684 3,412,615 2,120,533 495,098 92,758 6,121,004 $ 6,330,688 $ 1,903,447 12,540 869,532 87,260 715,780 4,706 423,932 4,017,197 $ 4,017,197		Fair value
		Level 1 209,684 - - - - - 209,684 - - - - - - - - -	Level 2 - - - - - - - - - - - - - - - -	Level 3 - - - - - - - - - - - - - - - -	Total
					209,684
					- - - -
					-
					209,684
					- - - - - - -
					-
					-

2) Valuation techniques for financial instruments not measured at fair value

The Company’s valuation techniques and assumptions used for financial instruments not measured at fair value are as follows:

2.1) Financial assets measured at amortized cost

If the quoted prices in active markets are available, the market price is established as the fair value. However, if quoted prices in active markets are not available, the estimated valuation or prices used by competitors are adopted.

2.2) Financial assets and financial liabilities measured at amortized cost

If there is quoted price generated by transactions, the recent transaction price and quoted price data is used as the basis for fair value measurement. However, if no quoted prices are available, the discounted cash flows are used to estimate fair values.

(Continued)

48

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

The book values of the Company’s loans and receivables, financial asset carried at cost, and financial liabilities measured at amortized cost are similar to their fair values.

• 3) Valuation techniques for financial instruments measured at fair value

• 3.1) Non-derivative financial instruments

A financial instrument is regarded as being quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’ s-length basis. Whether transactions are taking place ‘regularly’ is a matter of judgment and depends on the facts and circumstances of the market for the instrument.

Quoted market prices may not be indicative of the fair value of an instrument if the activity in the market is infrequent, the market is not well-established, only small volumes are traded, or bid-ask spreads are very wide. Determining whether a market is active involves judgment.

The fair value of financial instruments with an active market were as follow according to the categories and attributes:

The listed stock is traded in the active market and its fair value is based on the quoted market price accordingly.

Measurements of fair value of financial instruments without an active market are based on valuation technique or quoted price from a competitor. Fair value, measured by a valuation technique can be extrapolated from similar financial instruments, the discounted cash flow method or other valuation techniques including a model using observable market data at the reporting date.

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

The Company’s financial instruments that use Level 3 inputs to measure fair value include “ financial assets measured at fair value through profit or loss-debt investment” and “ fair value through other comprehensive income – equity investments”.

• (v) Financial risk management

• (i) Overview

The Company have exposures to the following risks from its financial instruments:

• 1) credit risk

• 2) liquidity risk

• 3) market risk

(Continued)

49

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

The following likewise discusses the Company’ s objectives, policies and processes for measuring and managing the above mentioned risks. For more disclosures about the quantitative effects of these risks exposures, please refer to the respective notes in the accompanying consolidated financial statements.

(ii) Structure of risk management

The Company’ s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Audit Committee oversees how the management supervision is in compliance with the Company’ s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

(iii) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to financial instrument fails to meet its contractual obligations, that arises principally from the Company’s accounts receivables and investments in securities.

1) Accounts receivable Trade and other receivables

The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered.

In order to reduce the credit risk, the Company also regularly assess of the financial statues of its customers, if necessary, and will require its customers to provide security or guarantee.

The Company sets allowance for doubtful accounts to reflect the estimated loss resulted from its accounts and notes receivable. The main portion of allowance for doubtful accounts included specific loss component related to significant exposure and loss component occurred but not recognized on similar company of assets. The allowance for doubtful accounts of the Company was based on the statistic information of past payment of similar financial assets.

(Continued)

50

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

2) Investments

The exposure to credit risk for the bank deposits, fixed income investments, and other financial instruments is measured and monitored by the Company’ s finance and accounting department. The Company only deals with banks, other external parties, corporate organizations, government agencies and financial institutions with good credit rating. The Company does not expect any counterparty above fails to meet its obligations hence there is no significant credit risk arising from these counterparties.

3) Guarantees

Guarantees provided by the Company as of December 31, 2021 and 2020, are disclosed in note 7.

(iv) Liquidity risk

The Company manages sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Company’s management supervises the banking facilities and ensures compliance with the terms of loan agreements.

Loans and borrowings from the bank form an important source of liquidity for the Company. As of December 31, 2021 and 2020, the Company’s unused credit line amounted to $3,137,082 and $3,509,200, respectively.

(v) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity prices, will affect the Company’ s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

1) Currency risk

The Company devoted in foreign exchange purchases and sales, forming the variable exposure from exchange rate. The management of exchange rate exposure is to use forward foreign exchange rate contract to manage the risk under the policy.

The loan interest is valued under the currency of principals. In general. The currency of loans shall be identical to the cash flow generated from operating activities, mostly NTD, but JPY and USD as well. The Company provides economic hedge and there is no need to sign for derivatives under such circumstances; hence the hedge accounting is not adopted.

When short-term imbalance happens to monetary assets and liabilities measured at foreign currency, the Company maintains its exposure risk within acceptable by buying or selling foreign currency at board exchange rate.

(Continued)

51

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

2) Interest rate risk

The risk of the changes in fair value and the cash flow risk are generated from the Company simultaneously borrowing at fixed and floatmg rate The Company manages interest rate risk through keeping an adequate combination between fixed and floating interest rate and interest rate SWAP.

• 3) Other market price risk

The Company is exposed to equity price risk due to the investment in equity securities. These are strategic investments and are not held for trading. The Company does not actively trade in these investments as the management of the Company minimizes the risk by holding different investment portfolios.

(w) Capital management

The Company’s objectives for managing capital are to safeguard its capacity to continue to operate and continue to provide a return on shareholders, to maintain the interest of other related parties, and to maintain an optimal capital structure to reduce its cost of capital. The total capital and equity include share capital, capital surplus, retained earnings, and other equity, plus net debt.

As of December 31, 2021, the Company’s capital management strategy is consistent with the prior year as of December 31, 2020. The Company’s debt-to-equity ratio at the end of the reporting period as of December 31, 2021 and 2020, is as follows:

Total liabilities Less: cash and cash equivalents Net debt Total equity Less: adjustment Adjusted equity Debt-to-equity ratio	December 31, 2021 $ 5,340,356 (2,903,284) $ 2,437,072 $ 9,863,896 - $ 9,863,896 % 24.71	December 31, 2020 4,336,859 (3,412,615) 924,244 9,207,885 - 9,207,885 % 10.04

(Continued)

52

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

• (x) Investing and financing activities not affecting current cash flow

The Company’s investing and financing activities which did not affect the current cash flow in the years ended December 31, 2021 and 2020 were as follows:

• (i) For right-of-use assets under leases, please refer to note 6(j).

• (ii) Reconciliation of liabilities arising from financing activities were as follows:

Lease liabilities Lease liabilities	January 1, 2021 $ 4,706 January 1, 2020 $ 2,541	Cash Flow (3,319) Cash Flow (3,315)		Non-cash changes	Non-cash changes	Other - Other -	December 31, 2021 3,739
			Acquisition 2,274	Foreign exchange movement Interest expense - 78 Non-cash changes
							December 31, 2020 4,706
			Acquisition 5,392	Foreign exchange movement -	Interest expense 88

(7) Related-party transactions:

(a) Names and relationship with related parties

Name of related party

Holy Stone Enterprise (Hong Kong) Co., Limited

Holy Stone Holdings Co., Ltd. UHOLY Investment Co., Ltd. Martek Co., Ltd. Jung Chan Investment Co., Ltd. Holy Stone Industry India Private Limited Holy Stone Investments Co., Ltd. Holypaq Corporation Green Glory Holdings Ltd. Mayatek Co., Ltd. Everplus Material Co., Ltd. (EPM) Holy Stone Holdings (Singapore) Pte. Ltd. Holy Stone International Trading Co., Ltd. (Shanghai)

Infortech (China) Co., Ltd. Milestone Global Technology Ltd. Holy Stone (Europe) Ltd. Holy Stone Healthcare Co., Ltd. Global Search Holdings Ltd.

Relationship with the Company

First-tier subsidiary

First-tier subsidiary First-tier subsidiary First-tier subsidiary First-tier subsidiary First-tier subsidiary Second-tier subsidiary Second-tier subsidiary Second-tier subsidiary Second-tier subsidiary Second-tier subsidiary Second-tier subsidiary Third-tier subsidiary

Third-tier subsidiary Third-tier subsidiary Third-tier subsidiary Second-tier subsidiary Second-tier subsidiary

(Continued)

53

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

Name of relatedparty	Relationship with the Company
MDT INT'L SA	Third-tier subsidiary
Holy Stone Biotech Co., Ltd.	Third-tier subsidiary
AIHOL Corporation	Third-tier subsidiary
OHGA Smartthings Co., Ltd.	Second-tier subsidiary
Herztek Incorporation	Second-tier subsidiary
eGalax_eMPIA Technology Inc.	An associste
Empia Technology Inc.	An associste

• (b) Significant transactions with related parties

• (i) Sales and receivables from related parties

Subsidiary-International Trading Co., Ltd. (Shanghai) Subsidiary-Holy Stone Enterprise (Hong Kong) Co., Limited Subsidiary-Infortech (China) Co., Ltd. Other subsidiaries	Sales 2021 2020 $ 1,731,797 1,383,614 962,400 1,064,541 747,382 555,849 1,114 501 $ 3,442,693 3,004,505	Sales 2021 2020 $ 1,731,797 1,383,614 962,400 1,064,541 747,382 555,849 1,114 501 $ 3,442,693 3,004,505	Receivables from related parties	Receivables from related parties
	2021		December 31, 2021 354,271 188,183 74,926 98 617,478	December 31, 2020
	$ 1,731,797 962,400 747,382 1,114 $ 3,442,693			333,749 84,947 76,051 10
				494,757

The selling price for related parties approximated the market price. The credit terms ranged from 30 to 120 days, while the credit term for routine sales transactions was within 30 days to 150 days.

• (ii) Purchases and payables to related parties

Subsidiary-Everplus Material Co., Ltd. Other subsidiaries Associate-eGalax-eMPIA Technology Inc. Other associates	Purchases 2021 2020 $ 430,806 289,441 72,476 - 415,730 285,520 640 2,588 $ 919,652 577,549	Purchases 2021 2020 $ 430,806 289,441 72,476 - 415,730 285,520 640 2,588 $ 919,652 577,549	Payables to related parties	Payables to related parties
	2021		December 31, 2021 56,351 67,554 75,429 - 199,334	December 31, 2020
	$ 430,806 72,476 415,730 640 $ 919,652			27,600 - 46,957 1,137
				75,694

(Continued)

54

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

The purchase price with related parties is not comparable to the purchase price with third-party vendors as there is no similar products purchased from other vendors. The payment term with related parties is no different from the payment terms given by other vendors.

(iii) Purchases of services and payables to related parties

Transaction 2021 Subsidiaries-Brand and marketing services $ 61,399 Subsidiaries-Technology and consulting services 30,962 $ 92,361	Transaction	amount 2020 44,647 36,199 80,846	Payables to related parties	Payables to related parties
	2021		December 31, 2021 11,092 11,590 22,682	December 31, 2020
				6,525 5,041
				11,566

(iv) Guarantee

The Company was the guarantor for the subsidiary’s loans for financial institutions amounting to $384,600 and $402,920, for the years ended December 31, 2021 and 2020, respectively. The amounts of guarantees used to secured loans for its subsidiaries were both JPY400,000, respectively.

(v) Other

• 1) As of December 31, 2021 and 2020, the subsidiaries helped the Company to purchase property, plant and equipment amounting to $325,678 and $22,849, respectively. The prepayment for business facilities amounted to $75,972 and $23,258, respectively.

• 2) As of December 31, 2021 and 2020, other receivables from collection and payment, other expense and other expenditures paid by the subsidiaries and the associates on behalf of the Company amounted to $542 and $341, respectively.

• 3) In October 2020, the Company purchased its shares from other shareholders of UHOLY Investment Co., Ltd., acquiring 16,500 thousand shares for $247,500 in cash, increasing the shareholding ratio from 57.69% to 100%. All payments from this transaction are made.

• (c) Key management personnel compensation

Key management personnel compensation comprised:

Short-term employee benefits

2021 $ 67,122	2020
	49,024

(Continued)

55

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(8) Pledged assets:

The carry values of property assets were as follows:

Pledged Assets	Object	December 31, 2021 $ 39,753	December 31, 2020
Time deposit	Purchases and commodity tax guarantee		17,728

(9) Commitments and contingencies:

• (a) As of December 31, 2021 and 2020, the unused letters of credit amounted to $135,000 and $143,800, respectively.

• (b) The unrecognized commitments of acquisition of property, plant and equipment were as follows:

Acquisition of property, plant and equipment	December 31, 2021 $ 365,899	December 31, 2020
		303,826

• (c) An anti-trust investigation regarding the former Japanese subsidiary was filed against the Company in March 2014. The Company has engaged attorneys to process the investigation and US Civil litigation. The anti-trust investigation was still in progress as of December 31, 2021.

(10) Losses Due to Major Disasters: None.

(11) Subsequent Events: None.

(12) Other:

• (a) The followings were the summary statements of employee benefits, depreciation, and amortization expenses by function:

By function By item		2021			2020
	Cost of Sales	Operating expenses	Total	Cost of Sales	Operating expenses	Total
Employee benefits Salary Labor and health insurance Pension Remuneration of directors Others Depreciation	416,165 47,984 23,857 - 14,250 463,337	576,574 33,238 13,856 45,172 8,097 19,150	992,739 81,222 37,713 45,172 22,347 482,487	338,959 38,601 20,017 - 11,791 444,920	455,753 29,197 13,655 31,377 7,721 17,658	794,712 67,798 33,672 31,377 19,512 462,578

(Continued)

56

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

For the years ended 2021 and 2020, employees and employee benefits expenses were as follows

Number of employees Number of directors who were not employees The average employee benefit The average salaries and wages The adjustment rate of average employee salaries Remuneration of supervisors

The Company’ s remuneration policy, which is included directors, supervisors, managers and employees, is mentioned as follow:

• (i) In accordance with article 19 of the articles of incorporation, the Company should contribute no less than 7% of the profit as employee compensation and less than 3% as directors' and supervisors' remuneration when there is profit for the year. In accordance with article 16 of the articles of incorporation, director’ s and supervisors’ transportation allowance and remuneration are based on their involvement in the Company’s operations and contribution to the Company and consider other equivalent allowance. The Board of Directors is authorized to decide such remuneration.

Employee compensation, director’s and supervisors’ remuneration mentioned above may be paid in cash or share after the deliberation of remuneration committee and the distribution plan proposed by the Board of Directors, and in addition thereto, a report such distribution should only be submitted to the shareholders’ meeting.

• (ii) In accordance with the articles of incorporation and remuneration committee charter, remuneration committee reviews employee compensation, director’ s and supervisors’ remuneration, evaluates performance in the following ways. Remuneration committee would make the suggestions regarding remuneration and submits them to the Board of Directors.

• 1) Remuneration to directors and supervisors

Remuneration to each director or supervisor is assessed based on his/her involvement and contribution to the operation. Remuneration is connected with the rationality and fairness of risk of performance and determined based on company's operating performance and the appropriate standards of the industry.

• 2) Compensation to the president and vice presidents

Compensation to the president and vice presidents is based on comprehensive consideration such as personal working performances, goal achievements, contribution to the Company, the association and rationality with future risk. In addition, such compensation is determined based on the Company’s operating performance for the year and standards of the industry.

After such compensation is determined, remuneration committee would adequately review remuneration to directors, supervisors and managers in accordance with actual operating conditions and related laws and regulations.

(Continued)

57

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(13) Other disclosures:

• (a) Information on significant transactions:

The following is the information on significant transactions required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Company for the year ended December 31, 2021:

(i) Loans to other parties: None.

(ii) Guarantees and endorsements for other parties:

No.	Name of guarantor	Counter-party of guarantee and endorsement	Counter-party of guarantee and endorsement	Limitation on amount of guarantees and endorsements for a specific enterprise	Highest balance for guarantees and endorsements during the period	Balance of guarantees and endorsements as of reporting date	Actual usage amount during the period	Property pledged for guarantees and endorsements (Amount)	Ratio of accumulated amounts of guarantees and endorsements to net worth of the latest financial statements	Maximum amount for guarantees and endorsements	Parent company endorsements/ guarantees to third parties on behalf of subsidiary	Subsidiary endorsements/ guarantees to third parties on behalf of parent company	Endorsements guarantees to third parties on behalf of companies in Mainland China
		Name	Relationship with the Company
0 0 0	The Company The Company The Company	Holy Stone Holdings Co., Ltd. Jung Chan Investment s Co., Ltd. Everplus Material Co., Ltd.	2 2 2	1,972,779 1,972,779 1,972,779	142,675 150,000 110,520	138,400 150,000 96,200	- - 96,200	- - -	% 1.40 % 1.52 % 0.98	4,931,948 4,931,948 4,931,948	Y Y Y	N N N	N N N

Note 1: The total amount available for endorsement provided to one entity shall not exceed 20% of the Company’s net worth; and the total amount available endorsement provided to others shall not exceed 50% of the Company’s net worth.

Note 2: Seven forms of relationships in which corporate guarantees exist are defined as follows:

(a) At entity that is with business relationship.

(b) A Subsidiary which owned more than 50% by the guarantor.

(c) An investee owned more than 50% in total by both the guarantor and its subsidiary.

(d) An investee owned more than 90% by the guarantor or its subsidiary.

(e) Fulfillment of contractual obligations by providing mutual endorsements and guarantees for peer or joint builders in order to undertake a construction project.

(f) An entity that is guaranteed and endorsed by all capital contributing shareholders in proportion to their shareholding percentages.

(g) The companies in the same industry provide among themselves joint and several securities for a performance guarantee of a sales contract for pre-construction homes pursuant to the Consumer Protection Act for each other.

• (iii) Securities held as of December 31, 2021 (excluding investment in subsidiaries, associates and joint ventures):

(In Thousands of Shares or Units)

Name of holder	Category and name of security	Relationship with company	Account title	Ending balance	Ending balance	Ending balance	Ending balance	Note
				Shares	Carrying value	Percentage of ownership (%)	Fair Value
The Company The Company The Company The Company The Company The Company The Company The Company	Fuh Hwa Smart Energy Bond Fund I Fuh Hwa Smart Energy Bond Fund II INVESCO QQQ ETF SPDR S&P500 ETF MSCI EMERGING MKT ETP FIDELITY FNDSJAPAN Taiwan Semiconductor Manufacturing Company Limited Stock GSI TECHNOLOGY INC. Stock	- - - - - - - -	Current financial asset at fair value through profit or loss Fund beneficiary certificate 〃 〃 〃 〃 〃 Current financial asset at fair value through profit or loss-Domestic stock Non-current financial asset at fair value through profit or loss	2,997 12,660 1 1 1 14 90 47	33,324 142,610 6,607 13,147 1,352 7,085 55,350 6,023	- - - - - - - % 0.20	33,324 142,610 6,607 13,147 1,352 7,085 55,350 6,023	- - - - - - - -

(Continued)

58

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

Name of holder	Category and name of security	Relationship with company	Account title	Ending balance	Ending balance	Ending balance	Ending balance	Note
				Shares	Carrying value	Percentage of ownership (%)	Fair Value
The Company Martek Co., Ltd. Holy Stone Enterprise (Hong Kong) Co., Limited Holy Stone Enterprise (Hong Kong) Co., Limited Holy Stone Enterprise (Hong Kong) Co., Limited Holy Stone Enterprise (Hong Kong) Co., Limited Holy Stone Holdings Co., Ltd. Holy Stone Holdings Co., Ltd. Holy Stone Holdings Co., Ltd. Holy Stone Holdings Co., Ltd. Holy Stone Holdings Co., Ltd. UHOLY Investment Co., LTD. UHOLY Investment Co., LTD. UHOLY Investment Co., LTD. UHOLY Investment Co., LTD. UHOLY Investment Co., LTD. UHOLY Investment Co., LTD. UHOLY Investment Co., LTD. UHOLY Investment Co., LTD. UHOLY Investment Co., LTD. UHOLY Investment Co., LTD. Jung Chan Investment Co., Ltd.	CNO Co., Ltd. Stock Taiwan Semiconductor Manufacturing Company Limited Stock SPDR S&P500 ETF INVESCO QQQ ETF FIDELITY FNDS- JAPAN ALLANZ-EURO EQGR S_ATH2USD Greenvity Communications, Inc ISHARES RUSSELL1000 VALUE ETF FIDELITY FNDS- JAPAN ALLANZ-EURO EQGR S_ATH2USD SPDR S&P500 ETF METANOIA COMMUNICATIONS INC. Stock IFIT Co., Ltd. Stock Sen Yun Co., Ltd. Stock C2 MICROSYSTEMS INC. Win Win Precision Technology CO., LTD. Stock AZOTEK CO., LTD. Stock Taiwan Semiconductor Manufacturing Company Limited Stock O-TA Precision Industry CO., LTD. Stock NAN YA PRINTED CIRCUIT BOARD CORPORATION Stock CHILISIN ELECTRONICS CORP. Stock JYA-NAY CO., LTD. Stock	- - - - - - - - - - - - - - - - - - - - - -	Non-current financial asset at fair value through other comprehensive income Current financial asset at fair value through profit or loss-Domestic stock Current financial asset at fair value through profit or loss Fund beneficiary certificate 〃 〃 〃 Non-current financial asset at fair value through other comprehensive income Current financial asset at fair value through profit or loss-Fund beneficiary certificate 〃 〃 〃 Non-current financial asset at fair value through other comprehensive income 〃 〃 Non-current financial assets at fair value through profit or loss 〃 〃 Current financial asset at fair value through profit or loss-Domestic stock 〃 〃 〃 Non-current financial asset at fair value through other comprehensive income	1,400 12 1 1 16 15 220 1 11 10 1 155 269 140 1,200 1,388 981 75 70 15 1 2,976	- 7,380 7,231 4,405 8,344 8,580 - 1,394 5,562 5,720 5,259 - - - - 22,903 31,377 46,125 10,290 8,580 95 25,868	% 12.28 - - - - - % 0.76 - - - - % 0.18 - - % 3.20 % 3.05 % 1.63 - - - - % 12.40	- 7,380 7,231 4,405 8,344 8,580 - 1,394 5,562 5,720 5,259 - - - - 22,903 31,377 46,125 10,290 8,580 95 25,868	- - - - - - - - - - - - - - - - - - - - - -

(Continued)

59

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

Name of holder	Category and name of security	Relationship with company	Account title	Ending balance	Ending balance	Ending balance	Ending balance	Note
				Shares	Carrying value	Percentage of ownership (%)	Fair Value
Jung Chan Investment Co., Ltd. Jung Chan Investment Co., Ltd. Jung Chan Investment Co., Ltd. Jung Chan Investment Co., Ltd. Jung Chan Investment Co., Ltd. Jung Chan Investment Co., Ltd. Jung Chan Investment Co., Ltd. Jung Chan Investment Co., Ltd. Jung Chan Investment Co., Ltd. Jung Chan Investment Co., Ltd. Jung Chan Investment Co., Ltd. OHGA Smartthings Co., Ltd. OHGA Smartthings Co., Ltd. OHGA Smartthings Co., Ltd. OHGA Smartthings Co., Ltd. OHGA Smartthings Co., Ltd.	EMPIA TECHNOLOGY CORPORATION Stock CNO Co., Ltd. Stock METANOIA COMMUNICATIONS INC. Stock THROUGHTEK CO., LTD. Stock WOM ASIA CO., LTD. Stock Genovior Biotech Corporation Stock Taiwan Semiconductor Manufacturing Company Limited Stock O-TA Precision Industry CO., LTD. Stock TONG HSING ELECTRONIC INDUSTRIES, LTD. Stock NAN YA PRINTED CIRCUIT BOARD CORPORATION Stock King Yuan ELECTRONICS CO., LTD. Stock EMPIA TECHNOLOGY CORPORATION Stock THROUGHTEK CO., LTD. Stock NFORE TECHNOLOGY CO., LTD. Stock Taiwan Semiconductor Manufacturing Company Limited Stock CHILISIN ELECTRONICS CORP. Stock	- - - - - - - - - - - - - - - -	Non-current financial asset at fair value through other comprehensive income 〃 〃 Non-current financial assets at fair value through profit or loss 〃 〃 Current financial assets at fair value through profit or loss-Domestic stock 〃 〃 〃 〃 Non-current financial asset at fair value through other comprehensive income Non-current financial assets at fair value through other profit or loss 〃 Current financial assets at fair value through profit or loss-Domestic stock 〃	1,846 494 27 140 645 3,590 75 70 20 10 30 540 140 261 8 10	24,874 - - 2,156 2,485 28,002 46,125 10,290 5,950 5,720 1,344 7,195 2,156 5,991 4,920 946	% 11.99 % 4.33 % 0.04 % 0.54 % 2.45 % 3.52 - - - - - % 3.51 % 0.54 % 1.52 - -	24,874 - - 2,156 2,485 28,002 46,125 10,290 5,950 5,720 1,344 7,195 2,156 5,991 4,920 946	- - - - - - - - - - - - - - - -

(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock:

									(In Thousands of Units)	(In Thousands of Units)	(In Thousands of Units)	(In Thousands of Units)	(In Thousands of Units)	(In Thousands of Units)
Name of company	Category and name of security	Account name	Name of counter- party	Relationship with the company	Beginning Balance		Purchases		Sales				Ending Balance
					Shares	Amount	Shares	Amount	Shares	Price	Cost	Gain (loss) on disposal	Shares	Amount
he ompany	Taishin 1699 Money Market Fund	Current financial assets at fair value through profit or loss	-	-	-	-	21,970	300,000	21,970	300,150	300,000	150	-	-

(Continued)

60

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

Name of company	Category and name of security	Account name	Name of counter- party	Relationship with the company	Beginning Balance	Beginning Balance	Purchases	Purchases	Sales	Sales	Sales	Sales	Ending Balance	Ending Balance
					Shares	Amount	Shares	Amount	Shares	Price	Cost	Gain (loss) on disposal	Shares	Amount
The Company The Company The Company The Company Jung Chan Investment Co., Ltd.	Franklin Templeton Sinoam Money Market Fund Prudential Financial Money Market Fund Capital Money Market Fund Taishin Ta- Chong Money Market Fund Yuanta Wan Tai Money Market Fund	Current financial assets at fair value through profit or loss 〃 〃 〃 〃	- - - - -	- - - - -	- - - - -	- - - - -	95,811 18,802 27,655 41,861 34,195	1,000,000 300,000 450,000 600,000 522,000	95,811 18,802 27,655 41,861 34,195	1,000,494 300,192 450,208 600,198 522,055	1,000,000 300,000 450,000 600,000 522,000	494 192 208 198 55	- - - - -	- - - - -

• (v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None.

• (vi) Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None.

• (vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$300 million or 20% of the capital stock:

Name of company	Related party	Nature of relationship	Transaction details	Transaction details	Transaction details	Transaction details	Transactions wit from o	h terms different thers	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)	Note
			Purchase/Sale	Amount	Percentage of total purchases/sales	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
The Company International Trading Co.,Ltd (Shanghai) The Company Holy Stone Enterprise (Hong Kong) Co., Limited The Company Infortech (China) Co.,Ltd EPM The Company eGalax_eMPIA Technology Inc The Company	International Trading Co.,Ltd (Shanghai) The Company Holy Stone Enterprise (Hong Kong) Co., Limited The Company Infortech (China) Co.,Ltd The Company The Company EPM The Company eGalax_eMPIA Technology Inc	Third-tier Subsidiary Ultimate parent company First-tier Subsidiary Ultimate parent company Third-tier Subsidiary Ultimate parent company Ultimate parent company Second-tier Subsidiary Affiliated company Affiliated company	Sale Purchase Sale Purchase Sale Purchase Sale Purchase Sale Purchase	(1,731,797) 1,731,797 (962,400) 962,400 (747,382) 747,382 (796,695) 430,806 (415,730) 415,730	% (12.51) % 91.52 % (6.95) % 92.14 % (5.40) % 69.74 % (100.00) % 4.26 % (28.43) % 4.11	Next month-end 150 days Next month-end 150 days Next month-end 120 days Next month-end 120 days This month-end 120 days This month-end 120 days This month-end 30 days This month-end 30 days This month-end 30 days This month-end 30 days	- - - - - - - - - -	- - - - - - - - - -	354,271 (354,271) 188,183 (188,183) 74,926 (74,926) 67,941 (67,941) 75,429 (75,429)	12.85% (90.16)% 6.83% (89.41)% 2.72% (99.02)% 100.00% (5.84)% 33.50% (6.48)%	- - - - - - - - - -

• (viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock:

Name of company	Counter-party	Nature of relationship	Ending balance	Turnover rate	Overdue Amount Action taken	Overdue Amount Action taken	Amounts received in subsequent period	Loss allowance
						Action taken
The Company The Company	Holy Stone Enterprise (Hong Kong) Co., Limited International Trading Co.,Ltd (Shanghai)	First-tier Subsidiary Third-tier Subsidiary	188,183 354,271	7.05 5.03	- -	- -	97,332 222,332	- -

(ix) Trading in derivative instruments: None.

(Continued)

61

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(b) Information on investees:

The following is the information on investees for the year ended December 31, 2021 (excluding information on investees in Mainland China):

(In Thousands of Shares)

Name of investor	Name of investee	Location	Main businesses and products	Original investrment amount	Original investrment amount	Balance as of December 31, 2021	Balance as of December 31, 2021	Balance as of December 31, 2021	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2021	December 31, 2020	Shares	Percentage of ownership	Carrying value
The Company The Company The Company The Company The Company The Company The Company Holy Stone Holdings Co., Ltd. Holy Stone Holdings Co., Ltd. Holy Stone Holdings Co., Ltd. Holy Stone Holdings Co., Ltd. Holy Stone Holdings Co., Ltd. Holy Stone Holdings Co., Ltd. ( Green Glory Holdings Ltd. Green Glory Holdings Ltd. UHOLY INVESTMENT Co., LTD. UHOLY INVESTMENT Co., LTD. Holy Stone Healthcare Co., Ltd. Holy Stone Healthcare Co., Ltd. Global Search Holdings Ltd.	Holy Stone Enterprise (Hong Kong) Co., Limited Holy Stone Holdings Co., Ltd. UHOLY Investment Co., LTD. Martek Co., Ltd. Jung Chan Investments Co., Ltd Holy Stone Industry India Private Limited eGalax_eMPIA Technology Inc Holy Stone Investments Co., Ltd Holypaq Corporation Green Glory Holdings Ltd. Mayatek Co., Ltd. Everplus Material Co., Ltd. Holy Stone Holdings Singapore) Pte. Ltd Milestone Global Technology Ltd. Holystone(Europe) Ltd. Holy Stone Healthcare Co., Ltd. eGalax_eMPIA Technology Inc MDT INT'L SA Global Search Holdings Ltd. Holy Stone Biotech Co., Ltd.	Hong Kong Samoa Taipei City Taipei City Taipei City India Taipei City Hong Kong Cayman Islands Samoa Belize Japan Singapore America England Taipei City Taipei, Taiwan Switzerland Samoa England	MLCC and electronic components trading Investment activities Investment activities Electric appliances precision instrument, computers and machinery and equipment selling Investment activities Retail sale of Electronic Parts and components Product designing, wholesale and retail of electronic materials Investment activities Investment activities Investment activities Electric appliances precision instrument, computers and machinery and equipment selling Electric appliances precision instrument, computers and machinery and equipment selling Retail sale of Electronic Parts and components Electronic components developing and selling Retail sale of Electronic Parts and components Wholesaling of western Medicine and medical instruments Retail sale of Electronic Parts and components Electronic components developing and selling Wholesaling of western Medicine and medical instruments Development and trading of medical instruments and biotechnology services	49,046 1,795,317 472,500 20,000 340,000 29,260 122,683 190,992 33,216 34,340 386,856 117,845 2,768 13,840 19,013 683,837 26,705 78,768 96,316 66,539	49,046 1,795,317 472,500 20,000 340,000 - 52,761 196,512 34,176 35,333 398,036 135,387 2,848 14,240 19,562 683,837 26,705 78,768 84,036 61,432	11,500 21,000 39,000 5,100 42,100 7,400 2,165 6,900 1,200 1,310 2,500 5 100 500 350 42,436 6,210 2,550 3,210 1,590	% 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 3.53 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 34.57 % 10.14 % 100.00 % 100.00 % 100.00	353,971 594,467 520,352 57,765 419,610 27,211 127,608 476,183 741 46,400 97,330 135,554 6,760 29,853 16,321 91,291 331,587 92,073 4,203 1,516	19,623 76,705 (11,486) 5,010 (5,405) (241) 372,489 59,268 - 12,584 9,311 8,915 136 7,805 4,822 (181,308) 372,489 16,490 (10,674) (5,703)	19,623 71,771 (16,002) 5,010 (5,551) (241) 11,577 59,268 - 12,584 9,311 8,915 136 7,805 4,822 (62,678) 37,766 16,490 (10,674) (5,703)	Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company The Company's Investment accounted for using the equity Subsidiary of Holy Stone Holdings Co., Ltd. Subsidiary of Holy Stone Holdings Co., Ltd. Subsidiary of Holy Stone Holdings Co., Ltd. Subsidiary of Holy Stone Holdings Co., Ltd. Subsidiary of Holy Stone Holdings Co., Ltd. Subsidiary of Holy Stone Holdings Co., Ltd. Subsidiary of Green Glory Holdings Subsidiary of Green Glory Holdings Subsidiary of UHOLY Investment Co., Ltd. Subsidiary of UHOLY Investment Co., Ltd. Subsidiary of Holy Stone Healthcare Co., Ltd. Subsidiary of Holy Stone Healthcare Co., Ltd. Second-tier subsidiary of Holy Stone Healthcare Co., Ltd.

(Continued)

62

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

Name of investor	Name of investee	Location	Main businesses and products	Original investrment amount	Original investrment amount	Balance as of December 31, 2021	Balance as of December 31, 2021	Balance as of December 31, 2021	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2021	December 31, 2020	Shares	Percentage of ownership	Carrying value
Global Search Holdings Ltd. Jung Chan Investments Co., Ltd. Jung Chan Investments Co., Ltd. Jung Chan Investments Co., Ltd. Jung Chan Investments Co., Ltd. OHGA Smartthings Co., Ltd.	AIHOL Corporation OHGA Smartthings Co., Ltd. Holy Stone Healthcare Co., Ltd. Merztek Incorporation eGalax_eMPIA Technology Inc YUASA J?WAN Co., Ltd.	America New Taipei, Taiwan Taipei City Hsin?Chu, Taiwan Taipei City New Taipei, Taiwan	Research development and patent application Electronic appliances, audio- visual electronics manufacturing and medical instruments Wholesaling of western Medicine and medical instruments Wholesaling of western Medicine and telecon Product designing, wholesale and retail of electronic Wholesale and retail of Batteries	21,314 334,806 44,603 100,000 9,475 1,000	16,234 332,640 73,296 100,000 9,475 1,000	10,750 15,348 2,580 10,000 202 100	% 100.00 % 71.06 % 2.10 % 100.00 % 0.33 % 31.50	2,269 139,870 8,921 94,924 10,202 994	(4,884) (9,070) (181,308) (3,933) 372,489 223	(4,884) (6,431) (5,361) (3,933) 1,228 84	Second-tier subsidiary of Holy Stone Healthcare Co., Ltd. Subsidiary of Jung Chan Investments Co., Ltd Jung Chan's Investments accounted for using the equity. Subsidiary of Jung Chan Investments Co., Ltd Jung Chan's Investments accounted for using the equity. OHGA Smartthings's Investment accounted for using the equity

(c) Information on investment in mainland China:

(i) The names of investees in Mainland China, the main businesses and products, and other information:

Name of investee	Main businesses and products	Total amount of capital surplus	Method of investment (Note 1)	Accumulated outflow of investment from Taiwan as of January 1, 2021	Investment flows	Investment flows	Accumulated outflow of investment from Taiwan as of December 31, 2021	Net income (losses) of the investee (Note 2)	Percentage of ownership	Investment income (losses) (Note 2)	Book value	Accumulated remittance of earnings in current period
					Outflow	Inflow
Holystone International Trading (Shanghai) Co., Ltd. Infortech International Trading (Shanghai) Ltd. Infortech (China) Co., Ltd.	Sale of electronic products Development and sale of electronic products Sale of electronic products	110,997 27,680 58,128	( 2 ) ( 2 ) ( 2 )	99,925 27,680 58,128	- - -	- - -	99,925 27,680 (Note 3) 58,128	49,625 - 9,722	100.00% 100.00% 100.00%	49,625 - 9,722	294,419 - 181,576	- - -

Note 1: Investments are made through one of three ways:

(1)Direct investment from Mainland China

(2)Indirect investment from third-party country

(3)Others

Note 2: The recognition of gain and loss on investment based on the financial report which was audited by Group's auditor.

Note 3: Infortech International trading (Shanghai) Ltd. had been liquidated in April 2015, and application of cancellation was completed by July 29 in 2015.

(Continued)

63

HOLY STONE ENTERPRISE CO., LTD. Notes to the Parent Company Only Financial Statements

(ii) Limitation on investment in Mainland China:

itation on investment in Mainland China:
Accumulated Investment in Mainland China as of December 31, 2021	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment
185,733	196,805	5,918,337

(iii) Significant transactions:

The significant inter-company transactions with the subsidiary in Mainland China, are disclosed in “Information on significant transactions”.

(d) Major shareholders:

None of shareholders holds more than 5% of shares.

(14) Segment information:

The Company discloses the segment information in the consolidated financial statements.

64

Holy Stone Enterprise Co., Ltd.

Statement of cash and cash equivalents

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Item	Description		Amount
Cash on hand		$	2,270
Demand deposits－NTD			633,251
Demand deposits－Foreign currency (Note)	USD:15,500 thousands		429,052
	EUR: 144 thousands		4,521
	JPY: 332,402 thousands		79,943
	HKD: 7,045 thousands		25,003
	CNY: 14,036 thousands		60,970
Check deposits			4,274
Time deposits－NTD	maturity within one year；the annual rate		1,664,000
	ranges between 0.37% and 0.815%
		$	2,903,284
Note: The ending rates of foreign currency deposits on December 31, 2021 are as follow:
USD：NTD＝1：27.68
EUR：NTD＝1：31.32
JPY：NTD＝1：0.2405
HKD：NTD＝1：3.549
CNY：NTD＝1：4.344

65

Holy Stone Enterprise Co., Ltd.

Statement of financial assets measured at fair value

through profit or loss-current

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Name of financial instrument Domestic Stock: TSMC (2330) Subtotal Fund Beneficiary Certificate: Fuh Hwa Smart Energy Bond Fund I Fuh Hwa Smart Energy Bond Fund II INVESCO QQQ ETF SPDR S&P 500 ETF MSCI EMERGING MKT ETP FIDELITY FNDS-JAPAN Subtotal Total		Amount
	$ 55,350 55,350 33,324 142,610 6,607 13,147 1,352 7,085 204,125 $ 259,475	55,350
		55,350
		33,324 142,610 6,607 13,147 1,352 7,085
		204,125

66

Holy Stone Enterprise Co., Ltd.

Statement of notes and accounts receivable

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Item Notes Receivable: Others（Less than 5％） Accounts Receivable: Client AB Client AD Others（Less than 5％） Subtotal Less: loss allowance Total

67

Holy Stone Enterprise Co., Ltd.

Statement of inventory

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Item Raw material Supplies Work in progress Semi-finished goods Finished goods Merchandise Subtotal Less: loss allowance	Amount Cost Fair value $ 301,246 - 30,492 - 204,515 - 50,473 - 857,146 1,071,407 1,507,184 1,947,745 2,951,056 (148,941) $ 2,802,115	Note
		Note 〞 〞 〞 Net realizable value 〞

Note 1：Raw materials, supplies, work in progress and semi-finished goods are used for production of finished goods. Due to net realizable value of finished goods higher than cost, net realizable value of raw materials, supplies, work in progress and semi-finished goods is higher than cost.

68

Holy Stone Enterprise Co., Ltd.

Statement of movement of investments accounted for using the equity method

For the year ended December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Name of investee Holy Stone Enterprise (HK) Holy Stone Holdings Co., Ltd. UHOLY INVESTMENT Co., LTD. Martek Co., Ltd. Jung Chan Investment Co., Ltd. Holy Stone Industry India Private Limited eGalax_eMPIA Technology Inc	Beginning	Balance Amount $ 340,729 536,749 544,800 52,755 400,217 - 52,761 $ 1,928,011	Incre	ase Amount - - - - - 29,260 69,922 99,182	Decre	ase Shares - - - - - - - -	Gains (losses) on investment	Other (Note)	Ending Balance	Ending Balance	Amount	Market Value or N	et Assets Value Total Amounts 362,097 632,001 520,352 57,765 419,610 27,211 163,679	Basis	Collateral
	Shares 11,500 47,000 39,000 5,100 42,100 - 895		Shares - - - - - 7,400 1,270		Shares - 26,000 - - - - -				Shares 11,500 21,000 39,000 5,100 42,100 7,400 2,165	Percentage % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 3.53		Unite Price 31.49 30.10 13.34 11.33 9.97 0.36 75.60
							19,623 71,771 (16,002) 5,010 (5,551) (241) 11,577 86,187	(6,381) (14,053) (8,446) - 24,944 (1,808) (6,652) (12,396)			353,971 594,467 520,352 57,765 419,610 27,211 127,608			the equity method the equity method the equity method the equity method the equity method the equity method the equity method	None None None None None None None
											2,100,984

Note：Increase/ decrease in net assets value of investee, foreign currency translation adjustment, unrealized profit on intercompany sales and dividend revenue.

69

Holy Stone Enterprise Co., Ltd.

Statement of short-term borrowings

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Item Letters of Credit 〞 〞 〞 〞 Total	Bank China Trust Commercial Bank Tunpei Branch Mizuho Bank, Ltd. Bank of Taiwan Hsinyi Branch Land Bank of Taiwan Hsi Hu Branch HSBC Bank (Taiwan) Limited	Ending Balance (Note) $ 354,147 218,205 186,432 724,308 199,698 $ 1,682,790	Period	Interest Rate	Financing Amount 500,000 830,400 415,200 800,000 415,200	Collateral
			〞 〞 〞 〞 〞	0.72%~0.80% 0.65% 0.63% 0.54%~0.62% 0.60%		None None None None None

(Note) Borrowing in NTD and USD.

70

Holy Stone Enterprise Co., Ltd.

Statement of accounts payable December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Item Vender A Vender F Vender J Others（Less than 5％） Total	Amount
	$ 290,972 219,640 170,493 260,302 $ 941,407

71

Holy Stone Enterprise Co., Ltd.

Statement of long-term borrowings

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Bank Hua Nan Bank Hsin-Wei Branch 〃 〃 〃 〃 〃 Bank of Taiwan Hsinyi Branch 〃 〃 〃 〃	Ending Balances $ 247,700 90,862 6,249 49,390 193,961 114,234 176,232 83,911 64,569 248,976 91,524 $ 1,367,608	Period 109.06~116.05 110.03~116.05 110.09~116.05 110.03~117.03 110.09~117.03 110.11~117.03 109.09~116.08 110.03~116.08 110.09~116.08 110.09~117.09 110.11~117.09	The Annual Rate	Collateral
			0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4%	None None None None None None None None None None None

72

Holy Stone Enterprise Co., Ltd.

Statement of operating revenue

For the year ended December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Item Passive components Active components System and modules Others Net operating revenue	Number (KPCS) 11,940,087 750,761 216,817 713,662	Amount
		$ 5,485,379 4,297,662 2,967,514 1,095,027 $ 13,845,582

Note：Sales returns and allowances $116,284 were subtracted from amounts described above.

73

Holy Stone Enterprise Co., Ltd.

Statement of cost of sales

For the year ended December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Item Merchandise Beginning balance of merchandise Add：Purchase Processing cost Less：Ending balance of merchandise Transfer to selling expenses and administrative expenses Loss on disposition Cost of merchandise sold Raw materials Beginning balance of raw materials Add：Purchase Less：Ending balance of raw materials Transfer to selling expenses and administrative expenses Transfer to research and development expenses Loss on disposition Raw materials used Supplies Beginning balance of supplies Add：Purchase Less：Ending balance of supplies Transfer to selling expenses and administrative expenses Transfer to research and development expenses Loss on disposition Indirect material cost Direct labor Manufacturing overhead Total manufacturing cost Add：Beginning balance of work in progress and semi-finished goods Less：Ending balance of work in progress and semi-finished goods Transfer to selling expenses and administrative expenses Transfer to research and development expenses Loss on disposition Cost of finished goods Add：Beginning balance of finished goods Purchase Less：Ending balance of finished goods Transfer to selling expenses and administrative expenses Transfer to research and development expenses Loss on disposition Cost of finished goods sold Related expenses of inventory Total cost of sales

Amount $ 1,060,063 8,646,127 12,567 (1,507,184) (6) (26,211) 8,185,356 170,912 600,187 (301,246) (9,312) (12,270) (10,882) 437,389 25,044 127,025 (30,492) (67) (2,179) (14) 119,317 401,676 1,047,447 2,005,829 283,675 (254,988) (1,768) (11,555) (308) 2,020,885 638,973 734,665 (857,146) (918) (8) (5,931) 2,530,520 1,462 $ 10,717,338

74

Holy Stone Enterprise Co., Ltd.

Statement of selling expenses and administrative

expenses

For the year ended December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Item		Amount
Wages and salaries	$	463,557
Freight		86,952
Entertainment expense		47,385
Commissions expense		77,424
Other expenses (Less than 5％)		203,174
Total	$	878,492

Statement of research and development expenses

	Item		Amount
Wages and salaries		$	113,017
Material used			32,120
Other expenses	(Less than 5％)		52,821
Total		$	197,958

Statement of property, plant and equipment please refer to note 6(i).

Statement of accumulated depreciation of property, plant and equipment please refer to note 6(i). Statement of right-of-use assets please refer to note 6(j).

Statement of accumulated depreciation of right-of-use assets please refer to note 6(j).