Infortrend — Annual Report 2020

Jul 22, 2021

Stock Code: 2495

The Annual Report is available at: http://mops.twse.com.tw http://www.infortrend.com

Infortrend Technology Inc. 2020

Annual Report

Printed on April 30, 2021

Corporate contacts

I. Contact Information of Spokesperson

Name: Chen, Ching-Tung Title: Special Assistant to President

Tel: 886-2-2226-0126 Email: investor@infortrend.com

II. Contact Information of Deputy Spokesperson

Name: Liu, Shu-Hua Title: Assistant Manager of Finance and Accounting Department

Tel: 886-2-2226-0126 Email: investor @infortrend.com

III. Contact Information of Headquarters, Branches and Plants

Headquarters: 6-8F., No. 102, Sec. 3, Zhongshan Rd., Zhonghe Dist., New Taipei City 235010, Taiwan (R.O.C.)

Tel: 886-2-2226-0126

Plant: 4-5F., No. 102, Sec. 3, Zhongshan Rd., Zhonghe Dist., New Taipei City 235010, Taiwan (R.O.C.) (Zhongshan Plant)

6F., No. 79 and 6F., No. 101, Lide St., Zhonghe Dist., New Taipei City 235030, Taiwan (R.O.C.) (Lide Plant)

IV. Contact Information of Stock Transfer Agency

Name: Stock Management Service Department, Yuanta Securities

Address: B1F., No. 210, Sec. 3, Chengde Rd., Datong Dist., Taipei City 103045, Taiwan (R.O.C.)

Website: http: //www.yuanta.com.tw

Tel: 886-2-2586-5859

V. Contact Information of the CPAs for the Latest Financial Statements

Names: Kuo, Rou-Lan & Lien, Shu-Ling

CPA Firm: KPMG Taiwan

Address: 68F, No. 7, Sec. 5, Xinyi Road, Taipei City, Taiwan (R.O.C.) Website: http://www.kpmg.com.tw

Tel: 886-2-8101-6666

VI. Overseas Securities Exchange Where Securities are Listed and Method

of Inquiry: None.

VII. Company Website: http://www.infortrend.com

Contents

Chapter I. Letter to Shareholders .............................................................................................................. 1 Chapter II. Company Profile ...................................................................................................................... 6 Chapter III. Corporate Governance Report ............................................................................................. 8 3.1 Organization ...................................................................................................................................................................... 8 3.2 Directors, Supervisors and Management Team .......................................................................................................... 13 3.3 Remuneration of Directors, Supervisors, President, and Vice Presidents................................................................. 18 3.4 Implementation of Corporate Governance .................................................................................................................. 21 3.5 Information Regarding the Company’s Audit Fee and Independence ..................................................................... 73 3.6 Replacement of CPAs .................................................................................................................................................... 74 3.7 Where the company’s chairperson, general manager, or any managerial officer in charge of finance or accounting matters has in the most recent year held a position at the accounting firm of its certified public accountant or at an affiliated enterprise of such accounting firm, the name and position of the person, and the period during which the position was held, shall be disclosed ................................................................................. 74 3.8 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders ...................................... 74 3.9 Relationship among the Top Ten Shareholders ........................................................................................................... 76 3.10 Ownership of Shares in Affiliated Enterprises .......................................................................................................... 76 Chapter IV. Capital Overview .................................................................................................................. 77 4.1 Capital and Shares .......................................................................................................................................................... 77 4.2 Corporate Bonds ............................................................................................................................................................. 82 4.3 Preferred Shares .............................................................................................................................................................. 82 4.4 Global Depository Shares .............................................................................................................................................. 82 4.5 Employee Stock Options ............................................................................................................................................... 82 4.6 Restricted Stock Awards to key employee ................................................................................................................... 82 4.7 Issuance of New Shares in Connection with Mergers or Acquisitions or with Transfer of Shares of Other Companies ............................................................................................................. 82 4.8 Implementation of the Company's Fund Raising and Utilization ............................................................................. 82 Chapter V. Operational Highlights .......................................................................................................... 83 5.1 Business Activities .......................................................................................................................................................... 83 5.2 Market and Sales Overview .......................................................................................................................................... 92 5.3 Human Resources ........................................................................................................................................................... 97 5.4 Environmental Protection Expenditure ........................................................................................................................ 98 5.5 Labor Relations ............................................................................................................................................................... 98 5.6 Important Contracts ...................................................................................................................................................... 101

Chapter VI. Financial Information ........................................................................................................ 103 6.1 Most Recent 5-Year Concise Financial Information ................................................................................................ 103 6.2 Most Recent 5-Year Financial Analyses .................................................................................................................... 108 6.3 Audit Committee's Review Report for Financial Statement in the Most Recent Fiscal Year .............................. 111 6.4 Financial Statements for the Most Recent Fiscal Year ............................................................................................. 111 6.5 Parent Company Only Financial Statement for the Most Recent Fiscal Year, Certified by the CPA ................. 111 6.6 In the Most Recent Fiscal Year and up to the Date of Publication of the Annual Report, Any Financial Difficulties Experienced by the Company or Its Affiliates and How Said Difficulties Will Affect the Company's Financial Situation ........................................................................................................ 111 Chapter VII. Review of the Financial Conditions, Financial Performance, and Risk Management: ............................................................................................................................................. 112 7.1 Analysis of Financial Status ......................................................................................................................................... 112 7.2 Financial Performance ................................................................................................................................................. 113 7.3 Analysis on Cash Flows ............................................................................................................................................... 114 7.4 Major Capital Expenditure Items and Impact on Financial and Business ............................................................. 114 7.5 Investment Policy in 2020, Main Causes for Profits or Losses, Improvement Plans and Investment Plans in 2021. ................................................................................................. 114 7.6 Analysis of Risk Management .................................................................................................................................... 115 7.7 Other Important Matters .............................................................................................................................................. 119 Chapter VIII. Special Disclosure ............................................................................................................ 120 8.1 Summary of Affiliated Companies ............................................................................................................................. 120 8.2 Private Placement Securities in the Most Recent Years............................................................................................ 123 8.3 Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years ..................................... 123 8.4 Other matters that require additional description....................................................................................................... 123 8.5 Situations Listed in Article 36, Paragraph 2, Subparagraph 2 of the Securities and Exchange Act Which Might Materially Affect Shareholders' Equity or the Price of the Company's Securities Occurring During the Most Recent Fiscal Year and up to the Date of Publication of the Annual Report ........................ 123

Chapter I. Letter to Shareholders

Dear shareholders:

To contain the COVID-19 pandemic which started in 2020, countries have adopted lockdown policies which include movement control, border closure and various contact restrictions. These preventive measures have affected company operations and consumption in various countries, impacted economic activities as well as global economic and trade momentum, and reduced the demand for electronic products. Global IT spending has declined. Infortrend Technology Inc. (hereinafter Infortrend Technology or the Company) was also affected by the pandemic. Our consolidated revenue was NT$1,130 million in 2020, down 18% compare to 2019. Net loss after tax amounted to NT$65 million, a decrease of NT$270 million from the net income after tax in 2019. Loss per share was NT$0.24.

In terms of product development, Infortrend Technology launched a comprehensive range of multimedia shared storage models in line with the fast-growing media and entertainment industry due to the pandemic. Those models have high-performance computing and capacity, and come in great diversity to satisfy different scales of post-production. Our multi-media shared storage models can be categorized into three groups based on customer segments: EonStor CS is a scale-out shared storage system suitable for large studio or fast-growing enterprises while GS and GSe are more appropriate for smaller studios. In addition, our multi-media shared storage models support the industry's mainstream editing software, i.e., Adobe Premiere Pro, Apple Final Cut Pro and DaVinci Resolve, allowing video editing professionals to collaborate easily. These professionals can thus handle the work on their own without spending enormous resources on deployment and configuration. The multi-media shared storage models not only adopt enterprise-level hardware designs but also come equipped with EonOne management software, which has graphical user interface. In addition, we offer EonView desktop utility for Windows and macOS workstation computers. Video editing teams can easily connect to data storage systems and mount shared network storage as a local disk. The collaboration setup is quickly completed.

Maintaining social distance to prevent the spread of COVID-19 is the consensus view of people around the world. As crowd control at all places tightens, the importance of a smart crowd control system also rises. Infortrend Technology has developed the new-generation EonServ and Gsi where AI computing and in-house smart NVR system are used for functions include monitoring, crowd control, facial recognition and intrusion detection. They are combined with storage as all-in-one devices to satisfy the fast and diverse market demand in the future.

Infortrend Technology was founded in 1993, specializing in the research and development (R&D), manufacturing and marketing of network storage systems. With the spirit of vertical integration, advanced product R&D capacity and customer-oriented marketing, we have developed the core technology for storage system and continuously provide high-performance and high-quality rack-mounted redundant storage systems. Our users include small and medium enterprises as well as large companies and organizations such as government bodies, multinational corporations, and financial institutions.

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I. 2020 Operating Report

• (I) Results of operations based on our 2020 business plan

• The net consolidated operating revenue was NT$1,130,547 thousand in 2020, a decrease of NT$247,986 thousand compared to NT$1,378,533 thousand in 2019.

• The consolidated net loss before income tax amounted to NT$60,422 thousand in 2020, a decrease of NT$291,298 thousand compared to NT$230,876 thousand in 2019.

• The consolidated net loss after tax was NT$65,419 thousand in 2020, a decrease of NT$267,992 thousand compared to NT$$202,573 thousand in 2019.

• (II) Profitability analysis*

rofitabilityanalysis*
Item		Ratio
Return on Assets		-1.14%
Return on Equity		-1.60%
As a percentage to Paid-in Capital	Net OperatingIncome	-1.10%
	Net Income before Income Tax	-2.21%
Net Margin		-5.79%
Earnings Per Share(NT$)		-0.24

• Calculated based on the audited consolidated financial statements for the year ended December 31, 2020.

(III) Research and development status

In 2020, we continued to expand the product performance of EonStor CS, which is an excellent NAS solution with high scalability and both scale-out and scale-up options. As the demand for data storage capacity increases, EonStor CS can support horizontal expansion by adding more nodes in the NAS cluster to simultaneously enhance the capacity and performance of the storage system. Today, with the advancement in software and hardware technologies, the expansion of storage systems is no longer limited to scale-up capacity. The performance expansion also becomes increasingly important. Under the scale-out structure, the performance and capacity of storage systems will grow together with enterprises' increasing capacity and performance requirements.

In addition, EonStor CS supports not only horizontal expansion by adding nodes, but also the traditional scale-up expansion by adding hard disk enclosures, providing the most cost-effective choice for enterprises that only need capacity expansion without performance expansion. CS also offers a wide range of rack sizes to choose from, allowing enterprises to make the most efficient use of their space.

In terms of data protection, besides the original RAID, EonStor CS also supports the Erasure code and Replica mode, providing an additional layer of data protection between nodes to prevent data loss from node damage. As for the backup solution of EonStor CS, CS also supports the Rsync function, where data can be delivered to different clusters or NAS for offsite backup to avoid data loss due to natural disasters or other conditions. In the future, we will further develop the EonCloud Gateway of CS, enabling CS to be connected to the cloud

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for a more comprehensive backup solution.

Besides improving the functions and performance of CS, we also developed EonStor GS 3000/4000 Gen2 in 2020. GS 3000/4000 Gen2 is the second generation of GS 3000/4000, a unified storage system. We mainly upgraded the CPU platform, which significantly enhanced the throughput efficiency of NAS and thereby provided better user experience for video editing and file sharing. We also improved the IOPS performance and allowed better efficiency in the application of random access to small files.

In conjunction with the introduction of new products, Infortrend also launched two new integrated solutions – a video editing solution and an office solution. Through simplifying the user pages, we made it easier for users to install and manage storage systems. In addition, the new desktop utility – EonView allowed folders in the storage system to be mounted to personal computers or notebook computers through simple operation, greatly reducing users' burden on operating the storage systems.

In 2020, our storage system began to support 32GB Fiber Channel and 25Gb high-speed internet interface, allowing users to upgrade their network interface to higher bandwidth for better and more stable performance.

II. Outline of 2021 Business Plan for 2021

• (I) Business Objectives

• All-flash NVMe solution

Applications such as AI, virtual IT infrastructure, high-performance computing and high-definition (4K/8K) video editing are increasingly demanding on the performance of storage systems. These types of applications often require fast response time and high throughput. As the performance of SAS/SATA SSD gradually fails to satisfy the demand, NVMe SSD has become an integral part in meeting the high-performance needs of these applications.

For these applications, the All-flash NVMe storage solution has become the trend in the storage system development. We will develop a complete product line of All-flash NVMe storage system and integrate it with as well as be certified for third-party software of various applications in respond to the trends of future IT solutions and enhance customer confidence in our products.

1. Scale-out unified storage system solution

2. Besides scale-out NAS, there is an increasing demand for scale-out SAN to streamline IT environment management. The convenience and flexibility of a virtual IT environment is gaining popularity among users. IT environment often adopts multiple storage systems to accommodate the storage requirements from numerous types of virtual machines. Therefore, the convenience of scale-out unified storage becomes a huge advantage. In addition to being the SAN for virtual machines and database, scale-out unified storage can configure several storage systems into a single NAS namespace. Users do not have to purchase additional storage systems for data sharing, providing a high cost-effective solution.

3. AI computing storage system solution

EonServ and GSi support more powerful GPU and use Docker platform to deploy containers

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for storage and application services, which significantly reduces construction costs. Under the impact of COVID-19, as places have tightened crowd control, the importance of smart crowd control systems is rising. With the computing efficiency of GPU and the in-house smart NVR system, both EonServ and GSi can be an all-in-one device capable of monitoring, crowd control and storage, making it the number one monitoring solution in the post-pandemic era.

1. Comprehensive services and training programs

In order for customers to apply our products correctly in various applications, we prepare more detailed product selection criteria in training content for each solution, so that dealers can have a deeper understanding of our product performance and its applications, thereby facilitate the promotion of various products. We also provide a wide range of services accordingly, such as extension of customer warranty, early replacement and maintenance, 24/7 hotline consultation, specialist home service, etc., to quickly resolve various problems and enhance customer satisfaction and loyalty.

• (II) Sales volume forecast and basis

24/7 hotline consultation, specialist home service, and enhance customer satisfaction and loyalty. ales volume forecast and basis	etc., to quickly resolve various problems
Product Type	Sales
RAID controller and system	57,000
Total	57,000

Based on the industry environment and market supply and demand, and with reference to estimates from various research institutions, the sales of RAID controllers and systems are projected to be 57,000 units in 2021, representing an increase of 4,007 units compared to 52,993 units in 2020.

• (III) Key production and sales policy

We will streamline our supply chain management system. In terms of sales, we aim to shorten delivery times and increase customer satisfaction. In respect of production, we will strengthen the management of procurement and suppliers; improve production efficiency and quality management; and plan, implement and control the efficient movement and storage of inventory based on international trends in order for sales/production forecasts, material preparation, orders and transportation to meet operation requirements, thereby establish a global operation management model to achieve the goal of continuous cost reduction and product competitiveness enhancement.

III. Future Development Strategies

1. We will enhance the marketing of our private brands and stay closer to consumers via short films which create a livelier image for our products. Also, we would boost confidence in our products through experience sharing of successful cases. A complete test report on various solutions will prove our products perform well in various industries. Certifications from well-known application software such as MileStone and Veeam increase customer confidence, and joint press release brings increasing product inquiries.

2. For service accessibility and management simplicity, virtualization of IT environment has gradually become the mainstream. In a virtual environment, several storage systems are required for performance and capacity besides a large number of virtual machines. To make it

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easier for users to manage the environment, we introduce the scale-out unified storage system where users can manage several storage systems in a single interface. We also integrate our products with well-known virtualization software, VMware, to further improve our product competitiveness.

1. Due to COVID-19, the demand for monitoring solution to not only has video recording but also incorporates crowd control and facial recognition increases every day. We develop the new generation of smart NVR system with features including crowd control, facial recognition and intrusion detection on top of video surveillance. Together with the new generation of EonServ and GSi, we offer a brand-new all-in-one monitoring solution as a highly cost-effective monitoring system for communities and shopping malls.

IV. The Impact of the External Competitive Environment, Regulatory Environment, and Macroeconomic Conditions

Infortrend Technology is a professional network storage equipment provider with products sold worldwide. Our customers include system integrators, dealers and distributors. The rapid technology developments and explosive growth of data volume nowadays lead to an increasing demand on capacity and performance of storage systems from enterprises. In response to these trends, Infortrend Technology launches the All-flash NVMe solution and the scale-out unified storage systems. The All-flash NVMe product will be offered within our DS/GS/CS families in response to the demand for high performance from applications such as high-definition video editing, high-speed computing and virtual IT environments. In addition to scale-out NAS products, the increasing popularity of virtual IT environment drives the demand for scale-out SAN. Thus, we introduce the scale-out unified storage system which has a unified management interface and a shared space in a single namespace, making it easier for users to manage the IT environment so as to improve work efficiency and save costs.

Infortrend Technology will continue to enhance R&D capabilities, develop new products in line with current trends, and strengthen brand recognition. We hope to create a wonderful future with our partners.

With support and care, we hope you can continue to take part in our future developments. Thank you!

We wish you all good fortune and health.

Infortrend Technology Inc.

Chairperson: Lo, Shih-Tung

President: Lo, Shih-Tung

Accounting Manager: Liu, Shu-Hua

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Chapter II. Company Profile

I. Date of Incorporation: January 19, 1993

II. Company History:

	I. Date of Incorporation: January 19, 1993 II. Company History:
Year	Major Events
2016	．Launched advanced features for video on demand (VOD), making it a great storage solution for media editing. ．Integrated motherboard which supports FCoE port. ．Launched a new unified cloud storage system – EonStor GS family, a powerful storage solution combining files, blocks and cloud. ．Launched a new small & medium enterprise (SME) scalable unified storage system - EonStor GSe family. . Launched the new EonStor DS 1036B, a storage system specifically for 2.5-inch, small-sized hard drives. ．Introduced a new management tool, EonOne, to make storage management easier. ．Launched our flagship unified storage system, EonStor GS 4000, a system with 32 host ports which provided great construction flexibility. ．Our products were once again acknowledged by the 2016 Gartner Magic Quadrant report and were one of the top 19 storage brands in the world. Cloud gateways and storage tiering feature of our storage products within the EonStor GS family were widely accepted. ．EonStor GS products won the Annual Hybrid Disk Array Storage Product Award of the UK Storage Magazine.
2017	．Storage systems which supported super high speed host interface, including 56Gb/s InfiniBand, 40Gb/s iSCSI, and 16Gb/s FC. ．EonStor GS storage system which supported Symmetric Active-Active controllers with an added convenient technical service manager function. ．Won the honor for SPC-2 Price-Performance. ．The turbo model, EonStor GS 3000T/4000T, brought breakthrough performance enhancement. ．SCHAEFER, a well-known German company, adopted our storage systems and Intel servers to build a super high speed IT structures, 57 times faster than the original structure. ．Our storage systems obtained the Autodesk Flame 2018 certification, providing a more powerful and professional media solution. ．Our storage systems supported full-year surveillance of more than 2,500 cameras in Kwanak District, Seoul. ．The Museum of the History of Polish Jews adopted our storage system and perfectly integrated with its Hyper-V virtual environment. ．Launched the EonStor GSe Pro 200 family, a multiple operating systems (OS) data sharing cloud integrated storage system for SMEs. ．Launched 2U 25-bay high density blazing speed All-flash storage system. ．Brand-new EonStor GSe Pro 3000 family for a more complete product line. ．Launched EonStor GS 3025B, a high density 2U 25-bay storage system, perfectly enhancing server room efficiency. ．Upgraded the HDD of storage system, overcame system transmission bottleneck and doubled capacity expansion. ．EonStor GS 3060, a new high density 4U 60-bay storage system to solve the explosive data growth and server room issues. ．Entry-level storage system fully supported the 12Gb/s SAS interface, accelerating storage efficiency for SMEs. ．Launched two Thunderbolt storage solutions which supported 4K video editing. ．Launched the EonStor GSe Pro storage system. The complete product line offered entry-level customers with more options. ．Service Manager and service entry provided simpler and easier support to the storage systems. ．Released the EonStor GS 5000 family, our flagship unified storage system. ．Included in Gartner Magic Quadrant for three consecutive years.

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2018	．6 Gb/s network bridge which supported 25Gb/s fast ethernet interface and targeted dual controller models. ．AI all-in-one machine - EonStor GSi 3000 and 5000 families. ．Hybrid cloud storage products - GSc 2000, 3000, and 5000 families. ．All-flash storage solutions - EonStor GSa 2000, 3000, and 5000 families. ．Hybrid cloud solutions - EonCloud Gateway. ．Provided deduplication and compression technologies. ．Virtualization solutions - Infortrend vCenter Plug-in management kit.
2019	．Supported 32Gb/s high speed FC transmission interface. ．EonStor GS/GSc/GSa/GSi/GSe/GSe Pro families, unified storage devices which supported Docker platform. ．Launched EonStor GS 3000/4000 Gen2, a new generation of unified storage system, GS 3000/4000. ．Launched EonStor GSe 3000/4000 Gen2, a new generation of SME scalable unified storage system GSe 3000/4000. ．Introduced EonStor CS 2000, 3000, and 4000 families, scale-out NAS storage systems. ．Launched EonView, a desktop utility for shared storage. ．Released M&E Shared Storage Solution, a solution specifically for video edition industry. ．Released Office Shared Storage Solution, a solution specifically for SME offices. ．All-flash storage array models of EonStor GSa with 25GbE connectivity won the Future's Best of Show Award organized by the National Association of Broadcasters. ．EonStor GSc family, the hybrid storage devices, won the "Storage Product of the Year" and the "Cloud Enabler of the Year" awards of UK's Storage Magazine.
2020	．Launched EonServ 5000 Gen2, a new generation of system which combined Network Video Recorder (NVR) server with data storage function. ．Added SMB Multichannel function to EonStor CS, a scale-out NAS storage system, allowing end-user devices to connect with Infortrend devices via a converged NIC to ensure uninterrupted network services. ．EonStor CS family, a scale-out NAS storage system, obtained the Veeam Ready Repository certification, proving quick and reliable backup of data on virtual machines. ．For improvement in data access efficiency and storage capacity utilization rate, the scale-out NAS storage system, EonStor CS family, adopted distributed mode as well as added the DNS load balancing and SSD cache functions. ．For big data analysis, high performance computing (HPC) and machine learning, the scale-out NAS storage system, EonStor CS, adopted RDMA for internal network to enhance the overall cluster performance. ．Introduced EonStor GS hybrid cloud integrated data storage solution, fully compatible with Hitachi content platform (HCP). ．EonServ 5000 Gen2 hybrid storage server obtained the VMS certification of Milestone Xprotect, building a quality video monitoring IT infrastructure. ．For two consecutive years, the Company won the "Editor Choice-Company" and "Cloud Product of the Year" awards of UK's Storage Magazine(EonStor GS Gen2 models).

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Chapter III. Corporate Governance Report

3.1 Organization

(I) Organization chart

==> picture [288 x 260] intentionally omitted <==

				Shareholders' Meeting	Shareholders' Meeting
				Board of Directors		Audit Committee
				Chairperson		Remuneration Committee
						Audit Office
				President		President Office
						Legal Office
						Occupational Safety Office
R&D First Division	R&D Second Division	Technology Division	R&D Third Department	Product Planning Department	Quality Assurance and Production Division	Global Marketing Division	Asia-Pacific Sales Division	IT Department	Finance and Accounting Department	Administrat ion Department

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(II) Department functions

Department	Key Functions
Audit Office	1. Establish and amend internal control system 2. Draw up enforcement rules for internal audits 3. Carry out internal audits 4. Carry out self-assessments on internal control system 5. Take charge of filings required by the Financial Supervisory Commission
President Office	1. Assist the President to carry out relevant businesses 2. Supervise and plan project researches 3. Track and audit improvements on various operations 4. Plan, facilitate and track procedures of various matters 5. Draw up and carry out capital management schemes and map out investments in marketable securities
Legal Office	1. Draw up and manage contracts and legal documents 2. Provide legal advice and consultation to various businesses and units 3. Handle legal disputes and matters related to intellectual property rights 4. Establish and promote regulatory compliance systems as well as facilitate and handle projects 5. Collect and studyrelevant regulatoryinformation
Occupational Safety Office	1. Formulate occupational safety and health plans and instruct related departments on their implementation 2. Formulate, plan, supervise and facilitate safety and health management of various departments 3. Plan and supervise the examination and inspection of safety and health facilities 4. Plan and supervise patrols, hazard education and work environment monitoring by relevant personnel 5. Plan and implement occupational safety and health education and training 6. Arrange employee health examinations and implement health management 7. Make recommendations on safety and health policy and review as well as coordinate matters related to safety and health 8. Carry out other matters related to occupational safety and health management
Administration Department	1. Human resource (HR) · Plan and carry out HR developments · Formulate and amend HR system and relevant laws and regulations · Plan and carry out talent recruitment/appointment/training · Remuneration and performance management 2. General affairs · Procure and outsource non-production items

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	· Manage, maintain and inventory assets · Regularly inspect, report and maintain fire safety equipment · Inspect, repair and maintain water, electricity and air conditioning equipment · Supervise repair projects · Arrange vendors to carry out public hygiene and waste management such as environment cleaningand vector control
Finance and Accounting Department	1. Finance and accounting · Plan and implement accounting operating systems and financial policies · Draw up and implement matters relating to book keeping and taxes · Take charge of accounts receivable and accounts payable management · Complete various cost analysis and prepare accounting statements · Petty cash and cashier work · Take charge of notes and marketable securities management 2. Stock affairs · Take charge of stock affair operations, public information uploads and filings required by the Securities and Futures Bureau · Corporate governance, meetings of the Board of Directors (the Board) and shareholders, and business registration · To handle important matters of the Board and communications between the Board and functional committees · Manage the Company's business according to resolutions of the shareholders' and the Board meetings
IT Department	1. Establish an efficient and open information system 2. Assist to rationalize and standardize operations of each unit 3. Plan the maintenance and expansion of the Company's computer equipment
Asia-Pacific Sales Division	1. Develop markets and achieve performance targets 2. Budget, sales forecast and inventory management 3. Customer management 4. Handle order/RMA/DOA
Global Marketing Division	1. Collect, organize, analyze and compare global market information 2. Formulate and implement strategies: product channel, price and promotion 3. Production-marketing coordination and new product development coordination 4. Preparation ofproducts andpromotion materials

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Quality Assurance and Production Division	1. Product certification · Plan and implement product certification · Assist R&D unit to clarify issues · Handle corrective and preventive action forms · Assist technical support units with product operating system certification · Regularly conduct pre-shipment inspections on products 2. Quality assurance · Formulate operating norms and standards for quality management system · Carry out supply chain management, audits and counseling affairs · Establish, analyze and improve product reliability performance · Carry out relevant quality inspection operations · Corrective and preventive systems · Services and management for customer returns 3. Manufacturing · Produce and manufacture semi-finished and finished goods · Plan production process and production equipment · Technical support and production counseling · Improve and enhance production efficiency and utilization rate · Analyze reasons for defectives and improve processes · Warehouse management and storage control 4. Logistics · Global logistics management · Production and capacity planning · Material demand plan and procurement management · Material cost control and price negotiation · Supply chain and supplier management · ODM project management · Customer order management
Product Planning Department	1. Collect, organize, analyze and compare information on competitors' products 2. Study market technology trends and develop solutions 3. Set and manage product specifications 4. Test on compatibility with peripheral products and bundle planning 5. Assist customers with solutions-related issues
R&D Third Department	1. Research on new technology (software/hardware) 2. Product planning and development (software/hardware/system application) 3. Product design and specification confirmation (software/hardware/system application) 4. Design quality assurance (software/hardware/system application) 5. Assist in product mass production 6. Assist customers with R&D-related issues

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Technology Division	1. Technical support · Customer technical support services · Replicate technical issues reported by customers and give prompt responses · Carry out correction and prevention measures pursuant to the "Corrective and Preventive Operating Procedures" · Provide technical counseling to business units · Take charge of product certification in various operating systems 2. Intellectual property rights · Take charge of patent application/patent infringement analysis/patent monitoring · Manage intellectualpropertydocuments
R&D Second Division	1. Research on new technology (hardware/system application) 2. Product planning and development (hardware/system application) 3. Product design and specification confirmation (hardware/system application) 4. Design quality assurance (hardware/system application) 5. Assist in product mass production 6. Assist customers with R&D-related issues 7. Document/drawingmanagement
R&D First Division	1. Research on new technology (SW/FW) 2. Product planning and development (SW/FW) 3. Product design and specification confirmation (SW/FW) 4. Design quality assurance (SW/FW) 5. Assist in product mass production 6. Assist customers with R&D-related issues 7. Document/drawing management

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3.2 Directors, Supervisors and Management Team :

3.2.1 Directors :

3.2.1 Directors :	3.2.1 Directors :	3.2.1 Directors :	3.2.1 Directors :	3.2.1 Directors :	3.2.1 Directors :	3.2.1 Directors :
							April										16,2021Unit: Shares
Title	Nationality/ place of registration	Name	Gender	Date elected	Term	Date first elected	Shareholding when elected		Current shareholding		Spouse & minor shareholding		Shareholding by nominees		Experience (education)	Other position concurrently held at the Company or other companies	Executives, directors or supervisors who are spouses or within the second degree of kinship			Remarks
							Shares	%	Shares	%	Shares	%	Shares	%			Title	Name	Relation
Chairperson	R.O.C.	Shih-Tung Lo	Male	2018.6.11	3 years	1999.10.1	38,936,816	13.71%	38,948,816	14.24%	168,000	0.06%	-	-	Graduated from Taiwan University of Science and Technology with a master’s degree, Manager, R&D Department, Acer Inc.	Note 1	-	-	-	Note 4
Directors	R.O.C.	Tse-Han Lee	Male	2019.06.10	2 years	2009.06.10	253,330	0.09%	253,330	0.09%	-	-	-	-	Graduated from Tamkang University with a master’s degree Manager of Dexin Technology	Note 2	-	-	-
Directors	R.O.C.	Li-Wei Chen	Male	2019.06.10	2 years	2012.06.18	-	-	-	-	-	-	-	-	Graduated from University of Pittsburgh with a master’s degree Senior Manager of Quality Assurance at MSI	Note 3	-	-	-
Independent Director	R.O.C.	Ruey-Fu Hou	Male	2018.6.11	3 years	2002.6.27	-	-	-	-	-	-	-	-	M.S. in Management Science, National Chiao Tung University, Taiwan Accountant at Huarui Certified Public Accountants	Independent Director of Huameixn Technology	-	-	-
Independent Director	R.O.C.	Liang-Yin Chen	Male	2018.6.11	3 years	2005.6.10	-	-	-	-	-	-	-	-	B.S. in Finance and Taxation, National Chung Hsing University, Taiwan CPA, Yuan Fu CPAs	None	-	-	-
Independent Director	R.O.C.	Chin-He Chung	Male	2018.6.11	3 years	2015.6.17	-	-	-	-	-	-	-	-	Graduated from the Electronic Engineering Institute of National Chin-Yi University of Technology with a master’s degree Department of Electronci Engineering, Ta Hwa Institute of Technology Assistant Professor	None	-	-	-

13

• Note 1: President of the Company, Legal Representative and Director Representative of Infortrend Corporation and Infortrend Europe Ltd., Director of Infortrend Shanghai Limited, Director of Infortrend Japan, Inc.and Prophet Technology Inc.

• Note 2: The Vice President of the Company, Director of Infortrend Shanghai Limited, and Prophet Technology Inc..

• Note 3: The Vice President of the Company, Director of Infortrend Shanghai Limited,

• Note 4: Where the chairperson of the Board of Directors is the same person, constitutes the mutual spouse or is the relative within the first degree of kinship with the general manager or person of an equivalent post (the highest level manager) of the company, an explanation shall be given of the reason for, reasonableness, necessity thereof, and the future improvement measures:

• Considering the size of the Company and its shareholding distribution of the shareholders, the concurrent assumption of the Chairman and President positions can increase the operating efficiency and the force to execute the decision. The Chairman communicates with the Board of Directors and all Independent Directors as to the recent operating status, plan and guideline of the Company. In future, the Company will also increase the seats of Independent Directors to reinforce the supervisory function of the Board of Directors. So far, the Company has taken the following concrete measures:

• The current three Independent Directors are expert in finance, accounting and electronic-related fields and capable to effectively perform the supervisory function.

• Every year, professional courses are arranged for the directors to enhance the operating efficiency of the Board of Directors.

• The Independent Directors can fully discuss with the functional committees to keep informed of the operating status of the Company and implement the corporate governance.

14

Professional qualifications and independence analysis of directors and supervisors

Criteria Name	Meets one of the following professional qualification requirements, together with at least five years ofworkexperience	Meets one of the following professional qualification requirements, together with at least five years ofworkexperience	Meets one of the following professional qualification requirements, together with at least five years ofworkexperience				Independence	Independence	Independence	criteria (Note 1)	criteria (Note 1)	criteria (Note 1)				Number of Other Public Companies in Which the Individual is Concurrently Serving as an Independent Director
	An instructor or higher position in a department of commerce, law, finance, accounting, or other academic department related to the business needs of the Company in a public or private junior college, college or university	A judge, public prosecutor, attorney, certified public accountant, or other professional or technical specialist who has passed a national examination and has been awarded a certificate in a profession necessary for the Company business	Have Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8	9	10	11	12
Shih-TungLo			✓				✓	✓	✓	✓	✓	✓	✓	✓	✓	None
Tse-Han Lee			✓			✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	None
Li-WeiChen			✓			✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	None
Ruey-FuHou		✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	1
Liang-YinChen		✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	None
Chin-He Chung	✓		✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	None

Note 1: The directors who satisfy the following conditions during the two years prior to being elected or during the term of office: ✓

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

• (2) Not a Director or Supervisor of the Company or any of its affiliates (Not applicable in cases where the person is an Independent Director appointed in accordance with the Securities and Exchange Act or the laws of the country where the business is located by, and concurrently serve as such at, the Company, its parent company, subsidiary, or subsidiaries that belong to the same parent company).

• (3) Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or nominees, in an aggregate amount of 1% or more of the Company’s total number of issued shares or ranks in the top ten in shareholdings.

• (4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the managerial officer in Subparagraph 1, or of any of the above persons in Subparagraphs 2 and 3.

15

• (5) Not a Director, Supervisor, or employee of a corporate shareholder that directly holds 5% or more of the Company's total number of issued shares, ranks in the top five in shareholdings, or appoints representatives to be the Company's Directors or Supervisors pursuant to Paragraph 1 or 2, Article 27 of the Company Act. (Not applicable in cases where the person is an Independent Director appointed in accordance with the Securities and Exchange Act or the laws of the country where the business is located by, and concurrently serve as such at, the Company, its parent company, subsidiary, or subsidiaries that belong to the same parent company).

• (6) Not a Director, Supervisor, or employee of a company whose majority of directorships or voting rights are controlled by a shareholder who also controls the majority of directorships or voting rights of the Company. (Not applicable in cases where the person is an Independent Director appointed in accordance with the Securities and Exchange Act or the laws of the country where the business is located by, and concurrently serve as such at, the Company, its parent company, subsidiary, or subsidiaries that belong to the same parent company).

• (7) Not a director, supervisor, or employee of another company or institution who, or whose spouse, is a chairman, president, or person holding an equivalent position of Aurora (except for an independent director appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, Aurora and its parent or subsidiary or a subsidiary of the same parent).

• (8) Not a Director, Supervisor, managerial officer, or shareholder with shareholding of 5% or more of a specific company or institution that has a financial or business relationship with the Company. (Not applicable in cases where the specific company or institution owns 20% (inclusive) to 50% (exclusive) of the Company's total number of issued shares, and the person is an Independent Director appointed in accordance with the Securities and Exchange Act or the laws of the country where the business is located by, and concurrently serve as such at, the Company, its parent company, subsidiary, or subsidiaries that belong to the same parent company).

• (9) Not a professional individual who, or an owner, partner, Director, Supervisor, or managerial officer of a sole proprietorship, partnership, company, or institution that provides auditing services to the Company or its affiliates, or provides commerce, law, finance, accounting or related services to the Company or its affiliates with an accumulated compensation under NT$500,000 during the most recent two fiscal years, nor a spouse thereof. However, this requirement is not applicable where members of the Remuneration Committee, Public Tender Offer Review Committee, or Special Committee for Merger/Acquisition perform duties pursuant to laws and regulations in association with the Securities and Exchange Act or the Business Mergers and Acquisitions Act

• (10) Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.

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

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

16

3.2 .2 Management Team

3.2 .2 Management Team	3.2 .2 Management Team	3.2 .2 Management Team	3.2 .2 Management Team	3.2 .2 Management Team
													April 16,2021 Managers who are Spouses or Within Two Degrees of Kinship Remarks Title Name Relation - - - Note 5 - - - - - - - - - - - - - - - - - -
Title	Nationality	Name	Gender	Date Effective	Shareholding		Spouse & minor shareholding		Shareholding by Nominee Arrangement		Experience (education)	Other position concurrently held at other companies	Managers who are Spouses or Within Two Degrees of Kinship			Remarks
					Shares	%	Shares	%	Shares	%			Title	Name	Relation
President	R.O.C.	Shih-Tung Lo	Male	2006.06.20	38,948,816	14.24%	168,000	0.06%	-	-	Graduated from Taiwan University of Science and Technology with a master’s degree, Manager, R&D Department, Acer Inc.	Note 1	-	-	-	Note 5
Chief Technology Officer	USA	Michael Schnapp	Male	2006.07.01	160,672	0.06%	-	-	-	-	Department of Geophysics at University of Colorado DTC Tech. Corporation /Staff Engineer	None	-	-	-
Vice Presidents	R.O.C.	Tse-Han Lee	Male	2008.01.01	253,330	0.09%	-	-	-	-	Electronic Engineering Department at Tamkang University ASIC Design Manager of Dexin Technology	Note 2	-	-	-
Vice Presidents	R.O.C.	Li-Wei Chen	Male	2008.01.01	0	0.00%	-	-	-	-	Graduated from University of Pittsburgh with a master’s degree Senior Manager of Quality Assurance at MSI	Note 3	-	-	-
Assistant Manager	R.O.C.	Shu-Hua Liu	Female	2007.01.01	139,558	0.05%	-	-	-	-	Accounting Department of Chinese Culture University Manager of Audit Department of KPMG Taiwan	Note 4	-	-	-
Assistant Manager	R.O.C.	Ching-Hai Hung	Male	2017.01.17	126,790	0.05%	-	-	-	-	Electronic Computing Department at Tamkang University Manager of R&D Department of DynaColor	None	-	-	-
Assistant Manager	R.O.C.	Wen-Jen Yang	Male	2017.01.17	308,320	0.11%	-	-	-	-	Business Administration Department of Tokai University Vice President of Business of FarStone Asia-Pacific Region	None	-	-	-

Note 1: President of the Company, Legal Representative and Director Representative of Infortrend Corporation and Infortrend Europe Ltd., Director of Infortrend Shanghai Limited, Director of Infortrend Japan, Inc.and Prophet Technology Inc. Note 2: Director of Infortrend Shanghai Limited, and Prophet Technology Inc.

Note 3: Director of Infortrend Shanghai Limited,

Note 4: Legal Representative and Director Representative of Infortrend Europe Ltd., Director of Infortrend Japan, Inc. and Director of Prophet Technology Inc.

Note 5: Where the chairperson of the Board of Directors is the same person, constitutes the mutual spouse or is the relative within the first degree of kinship with the general manager or person of an equivalent post (the highest level manager) of the company, an explanation shall be given of the reason for, reasonableness, necessity thereof, and the future improvement measures:

Considering the size of the Company and its shareholding distribution of the shareholders, the concurrent assumption of the Chairman and President positions can increase the operating efficiency and the force to execute the decision. The Chairman communicates with the Board of Directors and all Independent Directors as to the recent operating status, plan and guideline of the Company to implement corporate governance. In future, the Company will also increase the seats of Independent Directors to reinforce the supervisory function of the Board of Directors. So far, the Company has taken the following concrete measures:

1. The current three Independent Directors are expert in finance, accounting and electronic-related fields and capable to effectively perform the supervisory function.

2. Every year, professional courses are arranged for the directors to enhance the operating efficiency of the Board of Directors.

3. The Independent Directors can fully discuss with the functional committees to keep informed of the operating status of the Company and implement the corporate governance.

17

3.3 Remuneration of Directors, Supervisors, President, and Vice Presidents:

3.3.1 Remuneration of Directors and Independent Directors

2020 / Unit: NT$ thousands

Title	Name			Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors			Ratio of total remuneration (A+B+C+D) to net income (%)	Ratio of total remuneration (A+B+C+D) to net income (%)	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Relevant remuneration received by directors who are also employees	Ratio of total compensation (A+B+C+D+E+F+G) to net income (%)	Ratio of total compensation (A+B+C+D+E+F+G) to net income (%)	Compensation paid to directors from an invested company other than the Company's subsidiaries
		Base compensation (A)		Severance pay and pension (B)		Directors' compensation (C)		Busines expe	s execution nses (D)			Salary, bonuses, and allowances (E)		Severance pay and pension (F)		Employee compensation (G) (Note )
		The Company	All companies in the consolidated financial statements	The Company	All companies in the consolidated financial statements	The Company	All companies in the consolidated financial statements	The Company	All companies in the consolidated financial statements	The Company	All companies in the consolidated financial statements	The Company	All companies in the consolidated financial statements	The Company	All companies in the consolidated financial statements	The Company		All companies in the consolidated financial statements		The Company	All companies in the consolidated financial statements
																Cash	Stock	Cash	Stock
Directors	Shih-Tung Lo (General Manager of the Company)	0	0	0	0	0	0	0	0	0	0	5,145	5,145	0	0	0	0	0	0	0	0	None
Directors	Tse-Han Lee	0	0	0	0	0	0	0	0	0	0	2,513	2,513	0	0	0	0	0	0	0	0	None
Directors	Li-Wei Chen	0	0	0	0	0	0	0	0	0	0	1,916	1,916	0	0	0	0	0	0	0	0	None
Independent Director	Ruey-Fu Hou	350	350	0	0	0	0	12	12	362	362	0	0	0	0	0	0	0	0	-0.55%	-0.55%	None
Independent Director	Liang-Yin Chen	350	350	0	0	0	0	12	12	362	362	0	0	0	0	0	0	0	0	-0.55%	-0.55%	None
Independent Director	Chin-He Chung	350	350	0	0	0	0	12	12	362	362	0	0	0	0	0	0	0	0	-0.55%	-0.55%	None

18

Note : No employee compensation in 2020

3.3.2. Remuneration to Supervisors: N/A. The Company has established an Audit Committee to replace Supervisors.

3. 3.3 Remuneration to the President and Vice Presidents

2020 / Unit: NT$ thousands

Title	Name	Salary (A)	Salary (A)	Severance pay and pension (B)	Severance pay and pension (B)	Bonuses and allowances (C)	Bonuses and allowances (C)	Employee compensation (D) (Note)	Employee compensation (D) (Note)	Employee compensation (D) (Note)	Employee compensation (D) (Note)	Ratio of total compensation (A+B+C+D) to net income (%)	Ratio of total compensation (A+B+C+D) to net income (%)	Compensation paid to directors from an invested company other than the Company's subsidiaries
		The Company	All companies in the consolidated financial statements	The Company	All companies in the consolidated financial statements	The Company	All companies in the consolidated financial statements	The Company		All companies in the consolidated financialstatements		The Company	All companies in the consolidated financial statements
								Cash	Stock	Cash	Stock
President	Shih-Tung Lo	9,870	9,870	0	0	2,483	2,483	0	0	0	0	-19%	-19%	None
Chief Technology Officer	Michael Schnapp
Vice Presidents	Tse-Han Lee
Vice Presidents	Li-Wei Chen

Range of Remuneration

Range of remuneration paid to the president and vice presidents	Name of president and vice presidents	Name of president and vice presidents
	The Company	All companies in the consolidated financial statements
Under NT$2,000,000	Li-Wei Chen	Li-Wei Chen
NT$2,000,000 ~ NT$4,999,999	Michael Schnapp/ Tse-Han Lee	Michael Schnapp/ Tse-Han Lee
NT$5,000,000 ~ NT$9,999,999	Shih-TungLo	Shih-TungLo
NT$10,000,000~NT$14,999,999	N/A	N/A
NT$15,000,000~NT$29,999,999	N/A	N/A
NT$30,000,000~NT$49,999,999	N/A	N/A
NT$50,000,000 ~ NT$99,999,999	N/A	N/A
NT$100,000,000 and above	N/A	N/A
Total	4	4

19

3.3.4. Remuneration to the top five highest paid Supervisors

2020 / Unit: NT$ thousands

Title	Name	Salary (A)	Salary (A)	Severance pay and pension (B)	Severance pay and pension (B)	Bonuses and allowances ( C )	Bonuses and allowances ( C )	Employee compensation (D) (Note)	Employee compensation (D) (Note)	Employee compensation (D) (Note)	Employee compensation (D) (Note)	Ratio of total compensation (A+B+C+D) to net income (%)	Ratio of total compensation (A+B+C+D) to net income (%)	Compensation from an invested company other than the Company's subsidiaries or the parent company
		The Company	All companies in the consolidated financial statements	The Company	All companies in the consolidated financial statements	The Company	All companies in the consolidated financial statements	The Company		All companies in the consolidated financial statements		The Company	All companies in the consolidated financial statements
								Cash	Stock	Cash	Stock
President	Shih-Tung Lo	3,897	3,897	-	-	1,248	1,248	-	-	-	-	-7.86%	-7.86%	None
Chief Technology Officer	Michael Schnapp	2,545	2,545	-	-	234	234	-	-	-	-	-4.25%	-4.25%	None
Vice Presidents	Tse-Han Lee	1,940	1,940	-	-	573	573	-	-	-	-	-3.84%	-3.84%	None
Assistant Manager	Ching-Hai Hung	1,658	1,658	-	-	723	723	-	-	-	-	-3.64%	-3.64%	None
Senior Manager	Chao-Feng Lin	1,476	1,476	-	-	748	748	-	-	-	-	-3.40%	-3.40%	None

3.3.5. Name and distribution of employee compensation to managerial officers: No employee compensation in 2020

.

20

• (II) Comparison of Remuneration for Directors, Supervisors, Presidents and Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, Supervisors, Presidents and Vice Presidents :

• Analysis of remuneration and compensation paid to Directors, Supervisors, President and Vice Presidents by the Company and all companies in the consolidated financial statements during the most recent two fiscal years as a percentage of net income in the parent company only or consolidated financial statements:

Title	2019	2019	2019	2019	2020	2020	2020	2020
	Remuneration		As a percentage to net income		Remuneration		As a percentage to net income
	The Company	All companies in the consolidated financial statements	The Company	All companies in the consolidated financial statements	The Company	All companies in the consolidated financial statements	The Company	All companies in the consolidated financial statements
Directors	2,120	2,120	1.05%	1.05%	1,086	1,086	-1.66%	-1.66%
President and Vice Presidents	17,636	17,636	8.71%	8.71%	12,353	12,353	-19%	-19%

1. Remuneration policies, standards, and packages, procedure for determining remuneration, and linkage thereof to operating performance and future risk exposure:

2. Directors: In accordance with Article 21 of the Company's Articles of Incorporation, remuneration to Directors shall be no more than 0.5% of the profits for the year, taking into account the number of Board meetings attended and the overall assessment of Directors' involvement in the Company's operations and performance. Reasonable allocation is determined based on factors including financial indicators (such as revenue and net margin) and non-financial indicators (such as continuing education, other special contributions or significant negative events).

   • The Company's Independent Directors are paid a fixed amount of remuneration with reference to the remuneration standard of the industry and their contribution to the Company's operations. The Remuneration Committee would review and present the distribution proposal to the Board for approval.

3. Managerial officers: The compensation is determined in accordance with the Company's "Rules Governing the Compensation and Performance Assessment of Managerial Officers" as well as the salary levels among peers and degree of contributions by individuals to the Company's operation target. The performance assessment and reasonableness of compensation are reviewed by the Remuneration Committee and presented to the Board for approval. Compensation system is reviewed from time to time according to the actual operating conditions and relevant laws and regulations.

3.4 Implementation of Corporate Governance:

21

3.4.1Board of Directors:

The Board of Directors convened seven (A) Board meetings in 2020. The attendance status of the 9th-term Directors for the seven meetings was as follows:

	Title	Name	Attendance in person(B)	Attendance in person(B)	By proxy	By proxy	Attendance rate (%) (B/A) (Note)	Attendance rate (%) (B/A) (Note)	Remarks
	Chairperson	Lo, Shih-Tung	7		0		100%
	Directors	Lee,Tse-Han	7		0		100%
	Directors	Chen, Li-Wei	7		0		100%
	Independent Director	Chung, Chin-He	7		0		100%
	Independent Director	Hou, Ruey-Fu	7		0		100%
	Independent Director	Chen, Liang-Yin	7		0		100%
	※The attendance status of the Independent Directors in 2020 are as follows: ◎: Attendance in Person;※: Attendance byProxy;*: Absence 2020 1st 2nd 3rd 4th 5th 6th 7th Chung, Chin-He ◎ ◎ ◎ ◎ ◎ ◎ ◎ Hou, Ruey-Fu ◎ ◎ ◎ ◎ ◎ ◎ ◎ Chen, Liang-Yin ◎ ◎ ◎ ◎ ◎ ◎ ◎ Other matters: I. With regard to the operation of the Board, if any of the following circumstances occur, the dates, terms of the meetings, contents of motions, all Independent Directors' opinions and the Company's handling of such opinions shall be specified: (I) Matters referred to in Article 14-3 of the Securities and Exchange Act: Please refer to the Audit Committee section of this Annual Report. All motions were approved by every Independent Director. (II) Except for items specified above, other resolutions on which an Independent Director expresses objection or reservation, either by recorded statement or in writing: None. II. Regarding recusals of Directors from voting due to conflicts of interests, the names of the Directors, contents of motions, reasons for recusal, and results of voting shall be specified: None. III. Board assessment: The Company completed the 2020 performance assessment of the Board and functional committees in the first quarter of 2021 and will submit the assessment results to theBoardmeetinginthe second quarterof 2021. Frequency Evaluation Period Evaluation Scope Evaluation Methodology Evaluation content Annually January 1, 2020 to December 31, 2020 Performance assessment on the Board Self-assessment by the Board I. Level of participation in corporate operations. II. Enhancement on the quality of Board decisions. III. Composition and structure of the Board. IV. Election and continuing education of Directors. V. Internal control.
	Frequency Annually	Evaluation Period		Evaluation Scope		Evaluation Methodology		Evaluation content
		January 1, 2020 to December 31, 2020		Performance assessment on the Board		Self-assessment by the Board		I. Level of participation in corporate operations. II. Enhancement on the quality of Board decisions. III. Composition and structure of the Board. IV. Election and continuing education of Directors. V. Internal control.

22

				I. Command over corporate
				goals and mission.
				II. Understanding of Directors'
Annually	January 1, 2020 to December 31, 2020	Performance assessment on individual Board members	Self-assessment by the Directors	duties. III. Level of participation in corporate operations. IV. Internal relationship management and communication.
				V. Specialty and continuing
				education of Directors.
				VI. Internal control.
				I. Level of participation in
				corporate operations.
		Performance		II. Understanding of functional
		assessment		committees' duties.
	January 1, 2020 to	on Audit	Self-assessment	III. Enhancement on the quality
Annually	December 31,	Committee	by functional	of functional committees'
	2020	and	committees	decisions.
		Remuneration		IV. Composition of the
		Committee		functional committees and
				election of members.
				V. Internal control.

• IV. An assessment of the goals set for strengthening the functions of the Board and implementation status during the current and the most recent fiscal year:

• To establish an audit committee

  • The Company approved the establishment of an Audit Committee on June 11, 2018 to replace Supervisors and all Independent Directors (three Independent Directors) of the Company served as members of the Audit Committee. The election of Independent Directors adopts the candidate nomination system. Independent Directors are to be elected in the shareholders' meeting from the list of Director candidates. The convener of the Audit Committee is Mr. Ruey-Fu Hou, an Independent Director.

• To purchase liability insurance for Directors

  • The Company has purchased the "directors and officers liability insurance" for its Directors, Supervisors and managerial officers, and reported the insurance amount, coverage and premium rates in the two Board meetings on March 12, 2020 and March 11, 2021, respectively.

• To enhance the efficiency of Board operation

  • On March 14, 2019, the Company's Board meeting adopted a resolution to formulate the "Standard Operating Procedures for Handling Directors' Requests," to assist Directors in performing their duties and enhance the efficiency of the Board.

• To enhance information transparency In terms of information transparency, the Company uploads material resolutions to the Market Observation Post System (MOPS) and the corporate governance section within the corporate website in a timely manner after the Board meetings to safeguard the interests of shareholders and to enhance investors' understanding and recognition of the Company.

23

1. Continuing education of Directors

2. Continuing education of the Directors complies with rules set by the competent authorities. Please access MOPS→Corporate Governance→Attendance at the Board Meetings and Training of Directors and Supervisors for course details.

Note: Attendance Rate (%) is calculated based on the number of Board meetings called and the actual number of meetings Directors attended during their term of office.

3.4.2 Audit Committee:

1. The Company's Audit Committee comprises three members. Term of current Committee members is from June 11, 2018 to June 10, 2021.

2. The Audit Committee convened five (A) meetings in 2020. The attendance status of the Independent Directors were as follows:

Title	Name	Attendance in person (B)	By proxy	Attendance rate (%) (B/A) (Note)	Remarks
Independent Director	Hou, Ruey-Fu	5	0	100
Independent Director	Chen, Liang-Yin	5	0	100
Independent Director	Chung, Chin-He	5	0	100
Other matters: The Audit Committee convened five (A) meetings in 2020. Items reviewed primarily included: 1. Financial reports: The Board has prepared the Company's 2019 business report, financial statements and earnings distribution proposal. The financial statements were audited by independent auditors of KPMG Taiwan with independent auditors' reports issued. The above-mentioned business report, financial statements and earnings distribution proposal have been reviewed and determined to be accurate by the Audit Committee. 2. Auditing and accounting policies and procedures 3. Internal control system and related policies and procedures ⚫ Assessed the effectiveness of internal control system The Audit Committee has assessed the effectiveness of the design and implementation of the Company's internal control system (including control measures such as finance, operation, risk management, information security, regulatory compliance, etc.) and reviewed the work of the Company's audit department and CPAs. The committee referred to the Internal Control-Integrated Framework which is published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013, and concluded that the Company's internal control system is effective and the Company has adopted required control mechanism to supervise and correct violations. ⚫ Amended the internal control system – "Management on the Preparation Procedures for Financial statements" 4. CPAqualification and independence

24

5. Risk management of the Company
6. Regulatory compliance
⚫ Amended the Company's "Charter for Audit Committee"
⚫ Formulated the Company's "Rules Governing the Performance Assessment of the Board of
Directors"
I. With regard to the operation of the Audit Committee, if any of the following circumstances
occur, the dates, terms of the meetings, contents of motions, all resolutions of the committee and
the Company's handling of committee's opinions shall be specified:
(I) Matters referred to in Article 14-5 of the Securities and Exchange Act:
	Matters specified in
Date Contents of Motions and Actions Taken	Article 14-5 of the Securities and
	Exchange Act
1. To approve consolidated financial statements for
the year ended December 31, 2019.
2. To approve the assessment on the effectiveness
10th meeting of the 1st term 2020.03.12 of internal control system for 2019 and the Statement of Internal Control System. 3. To amend the internal control system - "Management on the Preparation Procedures	V
for Financialstatements"
Resolution: Approved byall attendingmembers.
Actions taken: None.
(II) Other matters which were not approved by the Audit Committee but were approved by
two-thirds or more of all Directors: None.
II. Regarding recusals of Independent Directors from voting due to conflicts of interests: None.
III. Communications between the Independent Directors, the Company's chief internal auditor		and
CPAs:
(I) The Independent Directors, chief internal auditor and CPAs	shall hold meetings at least
once a year to fully communicate on matters of the Company's financial reports, financial
operation status, key audit matters, audit results of the internal control system and			the
impact of regulatory amendments. In the event of a material abnormality, a meeting		may
be held at any time.
Communications between Independent Directors, chief internal auditor and CPAs are
summarized as follows:
Date Discussion Points	Outcome orOpinion
I. Annual audit plan - Key audit matters
2020.12.24 II. Communication at the end of audit on the	No objections
Group-audit strategies for key subsidiaries

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				III. Key audit matters 1. Inventories: Valuation of allowance to reduce inventory to market 2. Accounts receivable: Valuation of impairment of accounts receivables IV. KPMG engagement - Computer audit V. Recommendations for internal control management of information environment IV.Questions and discussions	III. Key audit matters 1. Inventories: Valuation of allowance to reduce inventory to market 2. Accounts receivable: Valuation of impairment of accounts receivables IV. KPMG engagement - Computer audit V. Recommendations for internal control management of information environment IV.Questions and discussions
							Outcome or
		Date	Meeting		Discussion Points
							Opinion
	2020.03.12		Audit Committee		1. Review of internal control system deficiencies for 2019. 2. The execution of internal audit in the first quarter. 3. Assessment on the effectiveness of internal control system for 2019 and the Statement of Internal Control System. 4. Amendments to the internal control system - "Management on the Preparation Proceduresfor Financialstatements."		No objections
	2020.05.07		Audit Committee		N/A		No objections
	2020.08.06		Audit Committee		The execution of internal audit in the second quarter.		No objections
	2020.11.05		Audit Committee		1. The execution of internal audit in the third quarter. 2.2021annualaudit plan.		No objections
	2020.12.24		Audit Committee		The execution of internal audit in the fourth quarter.		No objections

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3.4.3 Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best-Practice

Principles for TWSE/TPEx Listed Companies”

Evaluation item	Implementationstatus	Implementationstatus	Implementationstatus	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons Thereof
	Yes	No	Description
I. Does the Company establish and disclose its Corporate Governance Best-Practice Principles based on the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies?	V		The Company has formulated the "Corporate Governance Best-Practice Principles" in accordance with the "Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies." The Corporate Governance Best-Practice Principles have been approved by the Board and fully disclosed at the MOPS and the Company's website (http://www.infortrend.com.) The Company applies the essence of corporate governance and relevant regulations in the internal control system and relevant monitoring rules.	No significant deviation.
II. Shareholding structure and shareholders' rights (I) Has the Company established internal procedures to deal with shareholders' proposals, inquiries, disputes and litigations, and has the Company acted in accordance with the procedures? (II) Has the Company possessed a list of its	V V		(I) The Company maintains an "Investor Relations" section on the corporate website where shareholders can submit opinions or recommendations using phone numbers or emails listed under contact information. Designated personnel would handle these matters and make replies. (II) The Company has designated personnel in charge of the list of its major shareholders with controlling power as well as a list ofpersons with ultimate	No significant deviation. No significant deviation.

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Evaluation item			Implementationstatus	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and ReasonsThereof
	Yes	No	Description
major shareholders with controlling power as well as a list of persons with ultimate control over those major shareholders? (III) Has the Company established and enforced risk controls and firewall system within its affiliated companies? (IV) Has the Company established internal rules against insiders using undisclosed information to trade marketable securities?	V V		control over those major shareholders. (III) All of the Company's affiliated companies are wholly-owned subsidiaries. The Company has established operation rules for subsidiaries and implemented accordingly. (IV) The Company has established the "Management System for Prevention of Insider Trading" in its internal control system, and has also stipulated in the "Ethical Corporate Management Policy and Prevention Measures" that insiders are prohibited from using undisclosed information for securities trading nor disclosing such information to other parties for the latter to engage in insider trading. Insiders of the Company have been told to strictly complywith the rules.	No significant deviation. No significant deviation.
III.Composition and responsibilities of the Board (I)Has the Board developed and implemented a diversity policy for the composition of its members?	V		(I)Each Board member has practical experience in the industry and is elected based on his/her experience relevant to the finance, accounting or other business of the Company. Also, the Company has established a diversity policy for the composition of its Board members in its Corporate Governance Best-Practice Principles.	No significant deviation.

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Evaluation item			Implementationstatus	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and ReasonsThereof
	Yes	No	Description
(II) In addition to Remuneration Committee and Audit Committee established according to laws, has the Company voluntarily established other functional committees?		V	50% of the Company's Directors and Independent Directors are also employees of the Company. The term of all three Independent Directors expires in June 2021. Diverse core items Name of Directors Business Manage ment Leadership and Decision Making Industrial Knowledge Finance and AccountingTenure of Independent Directors Less than 3 years 3 to 9 years Over 9 years Directors Lo, Shih-Tung V V V Directors Lee, Tse-Han V V Directors Chen, Li-Wei V V Independent Director Hou, Ruey-Fu V V Independent Director Chen, Liang-Yin V V Independent Director Chung, Chin-He V V (II) The Company has established the "Renumeration Committee" and the "Audit Committee", but has yet to set up other functional committees.	The Company currently has a sound management control mechanism; thus, no other functional committees are scheduled to be established.

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Evaluation item			Implementationstatus	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and ReasonsThereof
	Yes	No	Description
(III) Has the Company established standards to measure the performance of the Board and implemented such annually? Has the Company reported the results of the performance assessment to the Board and used them as references for individual Director's remuneration and nomination of term renewal? (IV) Has the Company assessed the independence of the CPAs regularly?	V V		(III) The Company has formulated the "Self-Assessment or Peer Assessment Rules of the Board of Directors" with implementation started upon approval in the Board meeting in 2020. The self-assessment on Board performance was completed in the first quarter of 2021 and will be used as the basis for selecting or nominating Directors in the future. The outcome of individual Director's performance assessment will be used as the basis in determining their individual remuneration. (IV) The Company engages the services of reputable CPA firm and CPAs who are not related parties to the Company nor have any conflict of interest. They have maintained their independence. In addition, the Company establishes CPA independence assessment items (Note 1) annually pursuant to the independence stipulated by the Certified Public Accountant Act and Bulletin No. 10 "Integrity, Objectivity and Independence" of the Norm of Professional Ethics for Certified Public Accountant to assess the independence of the appointed CPAs. The CPA independence assessment was submitted to the Board for discussion and approved on March 11, 2021.	No significant deviation. No significant deviation.

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Evaluation item	Implementationstatus	Implementationstatus	Implementationstatus	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and ReasonsThereof
	Yes	No	Description
IV. Has the TWSE/TPEx company allocated a sufficient number of qualified corporate governance staff and appointed a chief corporate governance office to take charge of affairs related to corporate governance (including but not limited to providing information required for Directors and Supervisors to perform their functions, assisting Directors and Supervisors in regulatory compliance, handling matters related to Board and shareholders' meetings according to the law, and producing minutes of the Board and shareholders' meetings)?	V		The Company's Board had approved the appointment of the Assistant Manager of Finance and Accounting Department as the chief corporate governance officer on August 6, 2020 to take charge of promoting and executing corporate governance-related affairs. The chief corporate governance officer has served in the managerial position for finance and accounting in a public company for over three years. The main duties are as follows: (Please refer to Note 2 for continuing education of chief corporate governance officer in 2020) 1. Handle matters pertaining to the Board and shareholders' meetings according to laws and regulations. 2. Produce minutes of Board and shareholders' meetings. 3. Assist Directors to take office and continuing education. 4. Provide information required by Directors to perform their duties. 5. Assist Directors with regulatory compliance. 6. Other matters as stipulated in the Company's Articles of Incorporation or contract. Implementation of corporate governance in 2020: 1. Assisted Directors to carry out their duties and provided meeting information seven days before the Board meeting. 2. Prepared minutes for meetings of the Board and other functional committees within 20 days after the meetings. The Company convened seven Board meetings and five Audit Committee meetings in 2020. 3. Reviewed and thoroughly implemented key management rules and regulations. Please refer to "Key Resolutions of the Board" of this Annual Report for the establishment and amendments of key management rules in 2020.	No significant deviation.

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Evaluation item	Implementationstatus	Implementationstatus	Implementationstatus	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and ReasonsThereof
	Yes	No	Description
			4. Supervised and enhanced the Company's corporate governance implementation. 5. Assisted Directors with continuing education: Made arrangements for Directors to participate in courses of "Keep Abreast of the Global Economic Situation and Technological Trends – Key Topics for Enterprises" and "The impact of Developments in Blockchain Technology and Its Applications on Enterprises" for six hours. 6. Assisted Directors with regulatory compliance.
V. Has the Company established communication channels and set up a dedicated section on its website for stakeholders (including but not limited to shareholders, employees, customers, and suppliers)? Has the Company responded to concerns of stakeholders regarding important corporate social responsibility (CSR) issues in a proper manner?	V		The Company respects the basic rights of stakeholders and sees stakeholder engagement as an important part in corporate operation. Thus, we set up a stakeholder section with contract information of relevant units at our corporate website to facilitate our understanding of stakeholders' reasonable expectations, demand and questions as well as properly respond to concerns of stakeholders regarding important CSR issues. Relevant information can be found on the Company's website (http://www.infortrend.com) or the industrial value chain information platform (http://ic.gretai.org.tw/company_csr.php?stk_code=2495). (I) Shareholders: In addition to the annual shareholders' meeting, the Company has set up an "Investor Relations" section on the corporate website to disclose relevant information and an email account, investor@infortrend.com, where designated personnel would make replies. These measures allow shareholders and stakeholders to have timely access to Company information.	No significant deviation.

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Evaluation item	Implementationstatus	Implementationstatus	Implementationstatus	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons Thereof
	Yes	No	Description
			(II) Employees: 1. The Company regularly holds cross-unit manager meetings and various project coordination meetings to facilitate the discussion and communication of the Company's important policies. These meetings also enhance internal communications and improve management/policy execution efficiency. 2. We set up "Employee Suggestion Box" and "Employee Complaint Mechanism" to ensure employees' opinions/questions are handled and addressed fairly, reasonably and efficiently. 3. We convene "labor-management meetings" regularly to communicate important decisions of the Company and promote labor-management relations. (III) Customers: In addition to communication channels for daily business and regular meetings, we set up the "Service Center" on our corporate website for dedicated units to promptly provide services to and resolve issues for customers. (IV) Suppliers: In addition to communication channels for daily business and regular meetings, we have established the supplier selection and assessment mechanism to improve the quality of goods provided by the suppliers. We have also incorporated polities and standards pertaining to corporate responsibilities in the supplier contracts, so as to demand our suppliers to fulfill their obligations on quality, environment, employees and ethics.

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Evaluation item			Implementationstatus	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and ReasonsThereof
	Yes	No	Description
VI. Has the Company appointed a professional shareholder service agency to handle matters associated with shareholders' meetings?	V		The Company has appointed the Stock Management Service Department of Yuanta Securities to organize the shareholders' meetings.	No significant deviation.
VII. Information disclosure (I) Has the Company had a corporate website to disclose information on the Company's financial operation and corporate governance? (II) Has the Company adopted other means of information disclosure (such as setting up an English language website, designating personnel to collect and disclose company information, implementing the spokesperson system, and disclosing the process of investor conferences on the corporate website)?	V V		(I) The Company has set up the "Investor Relations", "Stakeholder" and "Corporate Social Responsibility" sections on the corporate website (http://www.infortrend.com) to disclose information on the Company's corporate governance and financial operation in a timely manner for investors and stakeholders. (II) The Company has provided relevant information in both Chinese and English to stakeholders on the website, designated personnel to collect and disclose company information, implemented the spokesperson and deputy spokesperson system as well as uploaded investor conference information on the corporate website (http://www.infortrend.com).	No significant deviation. No significant deviation.

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Evaluation item	Implementationstatus	Implementationstatus	Implementationstatus	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and ReasonsThereof
	Yes	No	Description
(III) Has the Company publicly announced and filed its annual financial report within two months after the end of financial year, and its financial reports of the first three quarters as well as operational status of each month prior to the prescribed deadlines?		V	(III) Status of the Company's public announcements and filing of financial reports as well as monthly operational status to the competent authorities pursuant to laws and regulations: 1. The Company has publicly announced and filed its annual financial reports, which have been audited by CPAs and approved by the Audit Committee and the Board, within three months after the end of each financial year. 2. The Company has publicly announced and filed its financial reports of the first three quarters, which have been reviewed by CPAs and approved by the Board, prior to the prescribed deadlines in each financial year. 3. The Company has publicly announced and filed its operational status of the previous month prior to the 10th day of each month.	In the future, the Company will strive to expedite the preparation of the Group's financial statements and publicly announce the financial reports and operational status as soon as possible.
VIII. Is there any other important information to facilitate a better understanding of the Company's corporate governance practices (including but not limited to employee rights, employee care, investor relations, supplier relations, stakeholder rights,	V		(I) Employee rights We believe that talents are the most important assets of the Company. Therefore, we are committed to providing a healthy and safe working environment, fair career development opportunities and room for employees to demonstrate their abilities, as well as reasonable compensation and benefits to take care of employees' physical and mental health and assist them with improving their professional competency and self-development, thereby become assets in our sustainable development. Besides, we have "Employee Development and Care" and "Stakeholder – Employee Relations" sections on our corporate website where employee benefits, retirement system and relevant information can be found to safeguard employee rights.	No significant deviation.

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Evaluation item	Implementationstatus	Implementationstatus	Implementationstatus	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and ReasonsThereof
	Yes	No	Description
directors' and supervisors' continuing education, implementation of risk management policies and risk assessment measures, implementation of customer policies, and purchases of liability insurance for directors and supervisors)?			1. Provide a safe and healthy working environment (1) Set up a dedicated occupational safety and health unit or personnel, comply with rules associated with the Occupational Safety and Health Act, and continuously promote and implement occupational safety and health management to ensure a safe working environment for employees. (2) Free group insurance and regular health examinations for employees, and monthly on-site health consultation services and environmental examinations provided by occupational medicine specialists from National Taiwan University Hospital to facilitate employees in health management and promotion. 2. Adhere to the principle of equal opportunities and provide room for talent growth and development. (1) Whether it is external recruitment or internal job rotation, the Company selects the most suitable talents in an open and fair manner. (2) Comply with relevant laws and regulations and give equal and fair opportunities for recruitment/appointment/training/development/promotion of different race, gender, age, religion, political parties and nationality. 3. Reasonable compensation and benefits (1) In addition to monthly salary, employees are entitled to annual bonuses equal to two-month salaries as well as performance bonus andprofit bonus based on the Company's annual operating

36

Evaluation item	Implementationstatus	Implementationstatus	Implementationstatus	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and ReasonsThereof
	Yes	No	Description
			performance and individual's performance. The distribution is conducted pursuant to relevant management rules. (2) The Company has established an Employee Welfare Committee. In addition to subsidies for birthday/childbirth/wedding and funeral, we regularly organize activities such as company trips, ball games and dining for employees to maintain a work-life balance. 4. Employee communication (1) We set up "Employee Suggestion Box" and "Employee Complaint Mechanism" to ensure employees' opinions/questions can be expressed fully and are handled and addressed fairly, reasonably and efficiently. (2) We convene "labor-management meetings" regularly to communicate important decisions of the Company and promote labor-management relations. 5. Employee training and development We believe that the continuous employee growth is the key to enhance the Company's competitiveness. Therefore, in order to improve employees' knowledge and skills and implement the Company's policies and philosophy, a diverse education and training mechanism has been established to achieve the goal of talent training and development. (1) Diverse training mechanism In addition to in-house training courses and on-the-job training (OJT), employee development is also conducted through e-learning. R&D seminars are held from time to time,encouragingemployees to share

37

Evaluation item	Implementationstatus	Implementationstatus	Implementationstatus	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and ReasonsThereof
	Yes	No	Description
			their experience. Employees may apply for and attend external training courses at the request of their supervisors or at their own discretion according to their work development needs. (2) Skill certification mechanism In order to encourage competence development of employees and build our learning culture, skill certification mechanisms are implemented for operators and integrated with the remuneration and promotion system for implementation purpose. 6. Retirement system The Company has established an employee retirement system in accordance with the "Labor Standards Act" and the "Labor Pension Act". We also have a sound financial system to ensure the contribution and payment of retirement funds to our employees, further encouraging long-term planning and contribution in working for the Company. We regularly make contributions, evaluate the pension required to employees who are eligible for retirement with seniority accumulated under the former pension system annually, and review the balance of the labor retirement reserve account. The new pension system requires a monthly contribution of 6% to the individual pension account in accordance with the laws and regulations.

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Evaluation item	Implementationstatus	Implementationstatus	Implementationstatus	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and ReasonsThereof
	Yes	No	Description
			(II) Employee care The Company complies with relevant labor regulations and internationally recognized principles of basic labor rights to safeguard the legal rights and interests of employees, and has established a variety of communication platforms for employees to understand the Company's policies and promote exchanges between labor and management: 1. We regularly hold cross-unit manager meetings and various project coordination meetings to facilitate the discussion and communication of the Company's important policies. These meetings also enhance internal communications and improve management/policy execution efficiency. 2. We set up "Employee Suggestion Box" and "Employee Complaint Mechanism" within the Company to ensure employees' opinions/questions are handled and addressed fairly, reasonably and efficiently. 3. We convene "labor-management meetings" regularly to communicate important decisions of the Company and promote labor-management relations. (III) Investor relations In order to safeguard shareholders' interests, the Company, in addition to providing regular business reports, financial reports, and annual reports as well as convening annual shareholders' meetings in accordance with the relevant laws and regulations and requirements of the Taiwan Stock Exchange Corporation,has set upthe "Investor Relations" and contact

39

Evaluation item	Implementationstatus	Implementationstatus	Implementationstatus	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and ReasonsThereof
	Yes	No	Description
			information on the corporate website to regularly disclose relevant information of the Company in order to fulfill our duty and obligation of disclosure. Moreover, we have investor hotline and dedicated personnel to provide investors with communication channels and services. (IV) Supplier relations We have established the supplier selection and assessment mechanism to improve the quality of goods provided by the suppliers, as well as the "Supplier Relations" and contact information within the stakeholder section on the corporate website. We have also incorporated polities and standards pertaining to corporate responsibilities in the supplier contracts, so as to demand our suppliers to fulfill their obligations on quality, environment, employees and ethics. (V) Please refer to Note 3 for continuing education of the 9th-term Directors. (VI) Risk management policy The Company conducts risk management and assessments pursuant to the internal control system and management rules. (VII) Implementation of customer policies In order to provide customers with quality products and services, the Company not only actively invests in innovative R&D to enhance product quality and develop new products to meet customers' needs, but also establishes the "Customer Relations" and contact information within the

40

Evaluation item	Implementationstatus	Implementationstatus	Implementationstatus	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and ReasonsThereof
	Yes	No	Description
			stakeholder section of the corporate website as well as the Service Center opinion exchange platform for dedicated units to promptly provide services to and resolve issues for customers. (VIII) Purchase of liability insurance for Directors The Company has purchased liability insurance for Directors and the extent of coverage and contents were reported in the Board meeting on March 11, 2021. 1. Insured amount: US$2 million 2. Insurance premium rate (1/1000): 0.975 3. Insurance coverage: (1) Damage compensation for improper management and employment practices, costs of defense and compensation liability of the insured individuals. (2) Damage liability and compensation liability for marketable securities and employment practices of the insured company. (3)Risk management expense.
IX. Please explain the improvements made in accordance with the Corporate Governance Evaluation results released by the Taiwan Stock Exchange's Corporate Governance Center in the most recent fiscal year, and provide the priorities and plans for improvement with items yet to be improved.
I. Improvements made: 1. The Company established the "Risk Management Policy and Procedures" and set up the "Risk Management Taskforce" per Board resolution on November 5, 2020. The purpose of the "Risk Management Taskforce" is to implement the risk management policies approved by the Board, the highest decision-makingunit of risk management,and to oversee the establishment of the Company's risk management framework. It also

41

Evaluation item	Implementationstatus	Implementationstatus	Implementationstatus	Deviations from the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and ReasonsThereof
	Yes	No	Description
reviews risk control reports submitted by the responsible units within the internal hierarchy and handle issues associated with risk management, as well as oversees the execution of risk management and coordination. 2. The Company has disclosed the identified stakeholders, issues of concern, communication channels and response methods on the corporate website and reported the status of stakeholder communications to the Board on an annual basis. The implementation status was reported to the Board on November 5, 2020. 3. The Company formulated the "Rules Governing Intellectual Property Rights" per Board resolution on November 5, 2020, and reported to the Board annually. The implementation status was reported to the Board on December 24, 2020. The rules and implementation status have been disclosed in the "Investor Relations" section on the corporate website. II. Priorities and plans for improvement: Our future focus will be improvements in the aspects of "safeguarding the rights and equal treatment of shareholders", including the preparation and disclosure of English-version financial reports,annual reports and thegeneral shareholders' meetingagenda.

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Note 1: Standards for CPA independence assessment:

No.	Assessment Item (Summary List of Significant Items)	Evaluation Result	Independence Status
1	1. Whether the appointed CPAs have direct or indirect relationshipconcerningfinancial interests with the Company.	No	Yes
2	2. Whether the appointed CPAs engage in financing or guarantees activities with the Company or Directors/Supervisors of the Company	No	Yes
3	3. Whether the appointed CPAs have close business relationships or potential employment relationships with the Company.	No	Yes
4	4. Whether the appointed CPAs or the audit team members are currently or had served as the Company's Director/Supervisor or managerial officers within thepast twoyears.	No	Yes
5	5. Whether the appointed CPAs provide non-audit services to the Company that may have a direct impact on the audits.	No	Yes
6	6. Whether the appointed CPAs promote or are agents of stocks or other securities issued by the Company.	No	Yes
7	7. Whether the appointed CPAs hold the position of the Company's defender or coordinate on behalf of the Company regarding conflicts with other thirdparties.	No	Yes
8	8. Whether the appointed CPAs have kinship relationship with the Company's Directors, managerial officers or personnel who have significant influence on the audit work.	No	Yes

Note 2: Hours of continuing education of chief corporate governance officer in 2020

Organizer	Course	Duration
Accounting Research and Development Foundation in Taiwan	Analysis of practical issues in compliance and prevention concerning "information security" and "personalprivacy" for internal auditpersonnel	6 hours
Taiwan Stock Exchange, Taipei Exchange	2020 Seminar of Corporate Governance and Corporate Integrity for Directors and Supervisors	3 hours
Taiwan Corporate Governance Association	The impact of Developments in Blockchain Technology and Its Applications on Enterprises	3 hours

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Note 3: Hours of continuing education of the 9th-term Directors

Title	Name	Organizer	Course	Duration
Directors	Lo, Shih-Tung	Taiwan Corporate Governance Association	● Innovation, Information Technology, and Competitive Advantages ● Corporate Governance - Analysis of the Latest Amendments to the Company Act ● The Tariff Impacts Faced by Enterprises under the China-US Trade War, and Countermeasures ● Business and Risk Management of Enterprises ● Understanding Global Economic Status and Technology Trends - Key Topic for Enterprises ● The impact of Developments in Blockchain Technologyand Its Applications on Enterprises	18
Directors	Lee, Tse-Han			12
Directors	Chen,Li-Wei			12
Independent Director	Hou, Ruey-Fu			18
Independent Director	Chen, Liang-Yin			18
Independent Director	Chung, Chin-He			18

(VI) Composition, Duties and Operation of the Remuneration Committee

The Company has established the Remuneration Committee in accordance with the "Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Taiwan Stock Exchange or the Taipei Exchange" promulgated by the Financial Supervisory Commission, and holds meetings regularly or when it deems necessary to exercise relevant authorities, with a view to enhance corporate governance and improve the remuneration system of the Directors and managerial officers. The members and operations of the Renumeration Committee are as follows:

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1. Professional qualifications and independence analysis of remuneration committee members:

Title	Criteria Name	Meets One of the Following Professional Qualifications Requirements, Together with atLeastFive years’Work Experience	Meets One of the Following Professional Qualifications Requirements, Together with atLeastFive years’Work Experience	Meets One of the Following Professional Qualifications Requirements, Together with atLeastFive years’Work Experience	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Independence Criteria(Note)	Number of Other Public Companies in Which the Individual is Concurrently Serving as an Remuneration Committee Member	Remarks
		An instructor or higher position in a department of commerce, law, finance, accounting, or other academic department related to the business needs of the Company in a public or private junior college, college or university	A judge, public prosecutor, attorney, certified public accountant, or other professional or technical specialist who has passed a national examination and has been awarded a certificate in a profession necessary for the Company business	Has work experience in the areas of commerce, law, finance, or accounting, or otherwise necessary for the business of the Company	1	2	3	4	5	6	7	8	9	10
Independent Director	Chen, Liang-Yin		V	V	V	V	V	V	V	V	V	V	V	V	0	1. Formulate and regularly review the performance assessment, and the compensation policies, systems, standards and structures of Directors and managerial officers. 2. Regularly assess and determine compensation to Directors and managerialofficers.
Independent Director	Hou, Ruey-Fu		V	V	V	V	V	V	V	V	V	V	V	V	0	Regularly assess and determine compensation to Directors and managerialofficers.
Independent Director	Chung, Chin-He	V			V	V	V	V	V	V	V	V	V	V	0	Regularly assess and determine compensation to Directors and managerial officers.

Note: Please check "V" the corresponding boxes if the remuneration committee members meet the following conditions during the two years prior to the nomination and during the term of office.

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

• (2) Not a Director or Supervisor of the Company or any of its affiliates (Not applicable in cases where the person is an Independent Director appointed in accordance with the Securities and Exchange Act or the laws of the country where the business is located by, and concurrently serve as such at, the Company, its parent company, subsidiary, or subsidiaries that belong to the same parent company).

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• (3) Not a natural-person shareholder who holds shares, together with those held by the person's spouse, minor children, or nominees, in an aggregate amount of 1% or more of the Company's total number of issued shares or ranks in the top ten in shareholdings.

• (4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the managerial officer in Subparagraph 1, or of any of the above persons in Subparagraphs 2 and 3.

• (5) Not a Director, Supervisor, or employee of a corporate shareholder that directly holds 5% or more of the Company's total number of issued shares, ranks in the top five in shareholdings, or appoints representatives to be the Company's Directors or Supervisors pursuant to Paragraph 1 or 2, Article 27 of the Company Act. (Not applicable in cases where the person is an Independent Director appointed in accordance with the Securities and Exchange Act or the laws of the country where the business is located by, and concurrently serve as such at, the Company, its parent company, subsidiary, or subsidiaries that belong to the same parent company).

• (6) Not a Director, Supervisor, or employee of a company whose majority of directorships or voting rights are controlled by a shareholder who also controls the majority of directorships or voting rights of the Company. (Not applicable in cases where the person is an Independent Director appointed in accordance with the Securities and Exchange Act or the laws of the country where the business is located by, and concurrently serve as such at, the Company, its parent company, subsidiary, or subsidiaries that belong to the same parent company).

• (7) Not a Director, Supervisor or employee of a company or institution whose chairperson, president, or an officer of equivalent position is the same person as, or a spouse to, one of the persons holding the same positions in the Company. (Not applicable in cases where the person is an Independent Director appointed in accordance with the Securities and Exchange Act or the laws of the country where the business is located by, and concurrently serve as such at, the Company, its parent company, subsidiary, or subsidiaries that belong to the same parent company).

• (8) Not a Director, Supervisor, managerial officer, or shareholder with shareholding of 5% or more of a specific company or institution that has a financial or business relationship with the Company. (Not applicable in cases where the specific company or institution owns 20% (inclusive) to 50% (exclusive) of the Company's total number of issued shares, and the person is an Independent Director appointed in accordance with the Securities and Exchange Act or the laws of the country where the business is located by, and concurrently serve as such at, the Company, its parent company, subsidiary, or subsidiaries that belong to the same parent company).

• (9) Not a professional individual who, or an owner, partner, Director, Supervisor, or managerial officer of a sole proprietorship, partnership, company, or institution that provides auditing services to the Company or its affiliates, or provides commerce, law, finance, accounting or related services to the Company or its affiliates with an accumulated compensation under NT$500,000 during the most recent two fiscal years, nor a spouse thereof. However, this requirement is not applicable where members of the Remuneration Committee, Public Tender Offer Review Committee, or Special Committee for Merger/Acquisition perform duties pursuant to laws and regulations in association with the Securities and Exchange Act or the Business Mergers and Acquisitions Act.

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

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2. Attendance of Members at Remuneration Committee Meetings

• (1) The Company's Remuneration Committee comprises three members.

• (2) Term of current Committee members: July 9, 2018 to June 10, 2021. The Remuneration Committee held two (A) meetings in 2020. The attendance status is as follows:

Title	Name	Attendance in Person (B)	By proxy	Attendance Rate (%) (B/A)	Remarks
Convener	Chen, Liang-Yin	2	0	100%
Member	Hou, Ruey-Fu	2	0	100%
Member	Chung,Chin-He	2	0	100%
Other mentionable items: I. If the Board refuses to adopt or amend a recommendation of the Remuneration Committee, the date of the Board meeting, terms of the meetings, contents of motions, resolutions of the Board and the Company's handling of committee's opinions shall be specified (if the remuneration plan approved by the Board is better than the one recommended by the Remuneration Committee, the differences and the cause thereof shall be specified): None. II. If there were resolutions of the Remuneration Committee to which members objected or expressed reservations, either by recorded statement or in writing, the date of the committee meeting, terms of the meetings, contents of motions, opinions of all members and the handlingof such opinions shall be specified: None.

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(3) The Remuneration Committee held two (A) meetings in 2020. Details are as follows:

Session	Date and Time	Contents of Motions	Resolutions	Actions Taken
5th meeting of the 4th term	11:30 a.m., May 7, 2020 (Thursday)	2019 compensation to managerial officers and employees	The total amount of bonuses approved ranged between NT$5,875 thousand and NT$7,181 thousand with reference to the compensation level of the market andpeers.	Reported to the Board and approved by all Directors present.
6th meeting of the 4th term	1:30 p.m., December 24, 2020 (Thursday)	2020 annual bonus to managerial officers	The average annual bonus to managerial officers was NT$959 thousand in 2020. The total amount to be distributed ranged between NT$5,179 thousand and NT$6,329 thousand.	Reported to the Board and approved by all Directors present.

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3.4.5 Social Responsibility Performance and Deviations from the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx-Listed Companies and Reasons :

Evaluation item			Implementation status	Implementation status	Implementation status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
I. Has the Company conducted risk assessments on environmental, social and corporate governance issues related to the Company's operations in accordance with the materiality principle, and formulate relevant risk management policies or strategies?	V		The Company follows the established management organization system and internal control system, and formulates and implements management mechanisms relating to environmental protection, social and corporate governance issues in the most cost-effective way to cope with the risks that shall be taken into account in the management control process. In addition, the Company established the "Risk Management Policy and Procedures" per Board resolution on November 5, 2020.			No significant deviation.
			Material Issue	Risk Assessment Item/Event	Risk Control Mechanism/Strategy
			Environment	Environmental protection and ecological conservation	The Company has passed the ISO14001:2015 Environmental Management System certification and established an environmental management system in accordance with the ISO14001 so that our products comply with the relevant international environmental regulations. At the same time, we are committed to various resources-saving measures. From product R&D, manufacturing and production to employee activities, we move towards environmental protection and regularly monitor the achievement status of each item.
				Energy management	˙Regularly commission vendors for machine maintenance and cleaning. ˙Measure the electricity flow and keep the records at air-conditioning maintenance table for performance evaluation. ˙Annual departmental target - "Energy management improvement plan for air-conditioning system".

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				Waste management	˙Hazardous industrial wastes are delivered to Class A recycling vendors and the concept of recycling hazardous industrial wastes is conveyed to employees. ˙Keep the records at waste disposal table for performance evaluation. ˙Annual departmental target - "Industrial Waste managementimprovement plan".	o
			Society	Occupational safety	The Company carries out risk controls over significant environmental considerations and occupational safety and health through ISO14001:2015 Environmental Management System, and sets up a dedicated occupational safety and health unit or personnel to comply with rules associated with the Occupational Safety and Health Act as well as continuously promote and implement occupational safety and health management tasks. In addition, regular occupational safety and health training and fire drills are held, and occupational medicine specialists from National Taiwan University Hospital are engaged to assess employee health and conduct environmental examinations so as to promote employee health management and occupational safety environment.
				Pregnancy protection	˙Tin smoke at workplace may cause harm to the fetus and therefore, we intend to strengthen pregnancy protection. ˙Protection programs for pregnant employees: (1) Temporary job transfer until return from the childbirth. (2) Wear protective masks provided by the Company during work.
				Product safety	For product R&D, the design and material selection are in compliance with requirements concerning electromagnetic compatibility, radiation and safety regulations. Certifications obtained include UL, LVD CoC, CB, FCC, and BSMI. We also demand products from suppliers t comply with the accepted procedures and supplier to sign the "Guarantee Letter on Restricted Substance Compliance for Materials of Parts"to

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					ensure these products comply with relevant regulations and international standards. We assess qualified suppliers in accordance with the "Operating Procedures for Supplier Development and Assessment" and establish product tracking procedures to ensure after-sales services. The Company is committed to environmental protectionand thehealthand safety ofusers.
				Product development and technology innovation	˙Incorporate quality-related engineering changes (ECs) into assessment items (once a year) to review and improve special cases where R&D lower quality requirements to meet development schedule. ˙Annual departmental target - "Project delay percentage"≦30% and "Quality-related EC control scheme" ≦five cases.
			Corporate governance	Socioeconomic and regulatory compliance	The Company has established accounting systems, internal control systems as well as management rules to manage various risks. In addition, the Company has formulated the "Ethical Corporate Management Best Practice Principles", "Ethical Corporate Management Policy and Prevention Measures" and "Code of Ethical Conduct", which are approved by the Board and disclosed on the corporate website. The Board, management level and relevant units are committed to these principles and incorporate them into HR rules. The Company regularly reports the implementation of ethical corporate management during the year to the Board. The Company has established the "Management System for Prevention of Insider Trading", and has also stipulated in the "Ethical Corporate Management Policy and Prevention Measures" that insiders are prohibited from using undisclosed information for securities trading nor disclosing such information to other parties for the latter to engage in insider trading. In terms of compliance with the labor laws, the Company formulates work rules and relevant HR management regulations with reference to the International Bill of Human Rights and relevant domestic regulations, and stipulates labor rights in the regulations.

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				Operation	˙Introduce and consolidate new suppliers as well as introduce replacement materials to reduce procurement costs and enhance our market competitiveness. ˙Strategic procurement of materials: We carry out strategic procurement for materials with no excess material risk when we expect market prices to increase in order to mitigate the price risk. ˙Annual departmental target - "Annual production cost reduction plan". Annual targets are set for the five major categories of Key HDD, Memory, Main PCB, Key ME and Components.
II. Has the Company established an exclusively (or concurrently) dedicated unit to promote CSR, and has the Board authorized senior management to carry out CSR activities and report the progresses to the Board?	V		The Company's Administration Department is responsible for the promotion of the CSR policies. Senior management is authorized by the Board to handle relevant affairs and report the status to the Board at least twice every year. Specific CSR plans and results for the year are also disclosed on the corporate website for stakeholders to better understand the Company's CSR activities. Please access our corporate website for details on relevant operations and status of implementation. (Website:http://www.infortrend.com)			No significant deviation.
III. Environmental issues (I) Has the Company established environmental management systems proper to its industry's characteristics?	V		(I) The Company has passed the ISO14001:2015 Environmental Management System certification (Note) and established an environmental management system in accordance with the ISO14001. Our products also meet the following standards per customer requests: 1. RoHS (Directive on the restriction of the use of certain hazardous substances in electrical and electronic equipment) 2. Waste Electrical and Electronic Equipment Directive (WEEE) 3. Conflict Mineral 4. 80 PLUS Certification on PSU Note: ISO14001 certificate is valid between 2019/12/12 ~ 2022/12/12.			No significant deviation.

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(II) Has the Company endeavored to utilize all resources more efficiently and use renewable materials that have low impact on the environment?	V		(II)The Company is committed to various resources-saving measures. Whether it is product R&D, manufacturing and production or employee activities, we move towards environmental protection. Details are as follows: 1. Launch a number of green storage technologies, such as storage virtualization and thin provisioning, to reduce users' electricity spending while attending to the system's service requirements during operation. 2. All stages within the product life cycle, including materials, packaging materials and manufacturing, require compliance with the concepts and standards of environmental protection and energy saving. 3. For daily operation, we implement energy saving and carbon reduction measures, such as the use of information system to reduce paper documents and the adoption of duplex printing policy. We took the average paper consumption between 2017 to 2019 as the base and carried out projects with a three-year term. We used 295 thousand sheets of paper in 2020, a reduction of 24.3% compared to the average consumption in the previous three-year term.	(II)The Company is committed to various resources-saving measures. Whether it is product R&D, manufacturing and production or employee activities, we move towards environmental protection. Details are as follows: 1. Launch a number of green storage technologies, such as storage virtualization and thin provisioning, to reduce users' electricity spending while attending to the system's service requirements during operation. 2. All stages within the product life cycle, including materials, packaging materials and manufacturing, require compliance with the concepts and standards of environmental protection and energy saving. 3. For daily operation, we implement energy saving and carbon reduction measures, such as the use of information system to reduce paper documents and the adoption of duplex printing policy. We took the average paper consumption between 2017 to 2019 as the base and carried out projects with a three-year term. We used 295 thousand sheets of paper in 2020, a reduction of 24.3% compared to the average consumption in the previous three-year term.	(II)The Company is committed to various resources-saving measures. Whether it is product R&D, manufacturing and production or employee activities, we move towards environmental protection. Details are as follows: 1. Launch a number of green storage technologies, such as storage virtualization and thin provisioning, to reduce users' electricity spending while attending to the system's service requirements during operation. 2. All stages within the product life cycle, including materials, packaging materials and manufacturing, require compliance with the concepts and standards of environmental protection and energy saving. 3. For daily operation, we implement energy saving and carbon reduction measures, such as the use of information system to reduce paper documents and the adoption of duplex printing policy. We took the average paper consumption between 2017 to 2019 as the base and carried out projects with a three-year term. We used 295 thousand sheets of paper in 2020, a reduction of 24.3% compared to the average consumption in the previous three-year term.	(II)The Company is committed to various resources-saving measures. Whether it is product R&D, manufacturing and production or employee activities, we move towards environmental protection. Details are as follows: 1. Launch a number of green storage technologies, such as storage virtualization and thin provisioning, to reduce users' electricity spending while attending to the system's service requirements during operation. 2. All stages within the product life cycle, including materials, packaging materials and manufacturing, require compliance with the concepts and standards of environmental protection and energy saving. 3. For daily operation, we implement energy saving and carbon reduction measures, such as the use of information system to reduce paper documents and the adoption of duplex printing policy. We took the average paper consumption between 2017 to 2019 as the base and carried out projects with a three-year term. We used 295 thousand sheets of paper in 2020, a reduction of 24.3% compared to the average consumption in the previous three-year term.	(II)The Company is committed to various resources-saving measures. Whether it is product R&D, manufacturing and production or employee activities, we move towards environmental protection. Details are as follows: 1. Launch a number of green storage technologies, such as storage virtualization and thin provisioning, to reduce users' electricity spending while attending to the system's service requirements during operation. 2. All stages within the product life cycle, including materials, packaging materials and manufacturing, require compliance with the concepts and standards of environmental protection and energy saving. 3. For daily operation, we implement energy saving and carbon reduction measures, such as the use of information system to reduce paper documents and the adoption of duplex printing policy. We took the average paper consumption between 2017 to 2019 as the base and carried out projects with a three-year term. We used 295 thousand sheets of paper in 2020, a reduction of 24.3% compared to the average consumption in the previous three-year term.	No significant deviation.
(III) Has the Company evaluated the current and future potential risks and opportunities of climate change, and adopted countermeasures related to climate issues?	V		Unit:In Thousands ofSheets 2020 2017 ~ 2019 Percentage of changes (compared to the base year) Paper (A3/A4) 295 390 -24.3% 4. Regular maintenance and cleaning of air conditioning system's filters and cooling towers to improve cooling efficiency among others. (III) Countermeasures related to climate issues 1. The Company is not an energy-intensive industry with high GHG emissions. Therefore, we are not directly affected by the risk of climate-related regulations. Nevertheless, we will continue to monitor domestic and overseas regulatory			Unit:In Thousands ofSheets		No significant deviation.
					2020	2017 ~ 2019	Percentage of changes (compared to the base year)
				Paper (A3/A4)	295	390	-24.3%

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(IV) Has the Company calculated its greenhouse gas (GHG) emissions, water consumption and total waste weight in the past two years, and formulated policies for energy saving, reductions of carbon, GHG and water consumption, or other waste management?	V		changes, understand regulatory trends to prepare countermeasures in advance, and carry out energy saving and carbon reduction practices to fulfill the responsibility of a global citizen. 2. As we value natural resources, we incorporate energy saving and carbon reduction concepts into product R&D as well as production. For instance, we cut down the use of raw materials, e.g., reducing paper consumption and recycling packaging materials, to effectively improve GHG emission and lower our operating costs. (IV) In order to implement the energy saving and carbon reduction policies and carry out environmental protection measures such as GHG reduction, besides improvement plans on management schemes and works, the Company has persisted on implementing a series of energy saving policies. We hope to achieve energy conservation through measures of power-saving policy, water saving awareness, waste recycling, resource recycling, etc. with a view to conserve energy and reduce GHG emissions and waste. 1. GHG emissions: With GHG emissions between 2017 to 2019 as the base, we carry out projects with a three-year term. We aim to reduce GHG emissions by 2 to 3 % on average in the next project term. Our GHG emissions in recent years Unit: CO2e	changes, understand regulatory trends to prepare countermeasures in advance, and carry out energy saving and carbon reduction practices to fulfill the responsibility of a global citizen. 2. As we value natural resources, we incorporate energy saving and carbon reduction concepts into product R&D as well as production. For instance, we cut down the use of raw materials, e.g., reducing paper consumption and recycling packaging materials, to effectively improve GHG emission and lower our operating costs. (IV) In order to implement the energy saving and carbon reduction policies and carry out environmental protection measures such as GHG reduction, besides improvement plans on management schemes and works, the Company has persisted on implementing a series of energy saving policies. We hope to achieve energy conservation through measures of power-saving policy, water saving awareness, waste recycling, resource recycling, etc. with a view to conserve energy and reduce GHG emissions and waste. 1. GHG emissions: With GHG emissions between 2017 to 2019 as the base, we carry out projects with a three-year term. We aim to reduce GHG emissions by 2 to 3 % on average in the next project term. Our GHG emissions in recent years Unit: CO2e	changes, understand regulatory trends to prepare countermeasures in advance, and carry out energy saving and carbon reduction practices to fulfill the responsibility of a global citizen. 2. As we value natural resources, we incorporate energy saving and carbon reduction concepts into product R&D as well as production. For instance, we cut down the use of raw materials, e.g., reducing paper consumption and recycling packaging materials, to effectively improve GHG emission and lower our operating costs. (IV) In order to implement the energy saving and carbon reduction policies and carry out environmental protection measures such as GHG reduction, besides improvement plans on management schemes and works, the Company has persisted on implementing a series of energy saving policies. We hope to achieve energy conservation through measures of power-saving policy, water saving awareness, waste recycling, resource recycling, etc. with a view to conserve energy and reduce GHG emissions and waste. 1. GHG emissions: With GHG emissions between 2017 to 2019 as the base, we carry out projects with a three-year term. We aim to reduce GHG emissions by 2 to 3 % on average in the next project term. Our GHG emissions in recent years Unit: CO2e	changes, understand regulatory trends to prepare countermeasures in advance, and carry out energy saving and carbon reduction practices to fulfill the responsibility of a global citizen. 2. As we value natural resources, we incorporate energy saving and carbon reduction concepts into product R&D as well as production. For instance, we cut down the use of raw materials, e.g., reducing paper consumption and recycling packaging materials, to effectively improve GHG emission and lower our operating costs. (IV) In order to implement the energy saving and carbon reduction policies and carry out environmental protection measures such as GHG reduction, besides improvement plans on management schemes and works, the Company has persisted on implementing a series of energy saving policies. We hope to achieve energy conservation through measures of power-saving policy, water saving awareness, waste recycling, resource recycling, etc. with a view to conserve energy and reduce GHG emissions and waste. 1. GHG emissions: With GHG emissions between 2017 to 2019 as the base, we carry out projects with a three-year term. We aim to reduce GHG emissions by 2 to 3 % on average in the next project term. Our GHG emissions in recent years Unit: CO2e	changes, understand regulatory trends to prepare countermeasures in advance, and carry out energy saving and carbon reduction practices to fulfill the responsibility of a global citizen. 2. As we value natural resources, we incorporate energy saving and carbon reduction concepts into product R&D as well as production. For instance, we cut down the use of raw materials, e.g., reducing paper consumption and recycling packaging materials, to effectively improve GHG emission and lower our operating costs. (IV) In order to implement the energy saving and carbon reduction policies and carry out environmental protection measures such as GHG reduction, besides improvement plans on management schemes and works, the Company has persisted on implementing a series of energy saving policies. We hope to achieve energy conservation through measures of power-saving policy, water saving awareness, waste recycling, resource recycling, etc. with a view to conserve energy and reduce GHG emissions and waste. 1. GHG emissions: With GHG emissions between 2017 to 2019 as the base, we carry out projects with a three-year term. We aim to reduce GHG emissions by 2 to 3 % on average in the next project term. Our GHG emissions in recent years Unit: CO2e	No significant deviation.
				2020	2019	Average of 2017 to 2019	Percentage of changes (compared to the base year)
			GHG Emissions in CO2e (Tonnes)	2,576.2	2,575.5	2,545.5	1.2%

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1. Energy saving and carbon reduction: In accordance with water and electricity management regulations, the Company implements energy saving plans for items such as lighting facilities, air-conditioning and water consumption. Our improvement scheme will focus on tying equipment with higher electricity consumption with energy-saving devices in the new year. As for water consumption, we are unable to get the exact number as the Park totals the consumption in a consolidated basis. However, we implement our water saving policy by continuously educating our employees on water-saving habits. 3. Raw material reduction In order to reduce waste and costs, we minimize the use of raw materials during the production process. Measures taken include the reduction of paper consumption and the recycling of packaging materials. 4. Waste management and recycling We store, dispose and recycle general and hazardous industrial wastes in accordance with waste management rules and strengthen our supervision and management over the disposal companies. Waste management measures taken during the year are as follows: a. Sorting waste for renewable resources to be recycled. b. Setting up battery recycling bins to avoid contaminating the environment. c. Waste PCB break-away can reduce waste and lower PCB procurement costs. We took the average waste recycling volume between 2017 to 2019 as the base and carried out projects with a three-year term. The waste recycling volume dropped significantly in 2020.

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			Our waste recycling performance in in recent years: Unit: Tonnes	Our waste recycling performance in in recent years: Unit: Tonnes	Our waste recycling performance in in recent years: Unit: Tonnes	Our waste recycling performance in in recent years: Unit: Tonnes	Our waste recycling performance in in recent years: Unit: Tonnes
				2020	2019	Average of 2017 to 2019	Percentage of changes (compared to the base year)
			PCB waste materials containing metal and powders thereof	0.266	0.393	0.281	-5.3%
			Waste electronic parts and components and waste PCB with parts and components	0	0.409	0.128	-100%
			Scrap materials (iron, paper, plastic, mixed hardware etc.)	1.86	3.26	2.08	-10.6%
IV. Social issues (I) Has the Company formulated appropriate management policies and procedures according to relevant regulations and the International Bill of Human Rights?	V		(I)In order to fulfill its corporate social responsibilities, the Company complies with the laws and regulations of places where its operations are located around the world, protects the basic human rights of employees and stakeholders, supports and complies with International Bill of Human Rights such as the United Nations' Universal Declaration of Human Rights and ILO Conventions, and formulates work rules and relevant HR management regulations. It sets out labor rights (non-discrimination, working hours, benefits, etc.), health and safety (occupational safety, health protection, etc.), ethics (ethical corporate management, no improper advantages, etc.), environmental protection (environmental permits, carbon reduction plans, etc.), management system (management system, training and communication), etc. in the regulations to protect the employees' human rights and legal rights and interests, and treat all employees with respect.					No significant deviation.

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(II) Has the Company formulated and implemented reasonable employee welfare measures (including remuneration, leaves and other benefits), and properly reflected the operating performance or achievements in the employee remuneration? (III) Has the Company provided employees with a safe and healthy working environment, with regular safety and health training?	V V		(II) The Company has established the Remuneration Committee to review the performance assessment and remuneration policy of managerial officers on a regular basis, and set up employee reward and discipline systems to include ethics and integrity into performance assessment. In addition, employees are provided with annual/holiday bonuses, performance bonuses and profit-sharing bonus with salaries adjusted annually based on operation performance. The average salary adjustment was 2.5% in January 2021. In respect of employee benefit measures, the Company complies with the labor laws to protect employees' entitlement to leaves and discloses such at relevant regulations publicly. Employees are entitled to birthday cash gifts as well as wedding, funeral and childbirth subsidies for certain occasions. There are also various employee welfare practices, such as benefit allowance for travel, continuing education, book purchase, and sports courses; annual company trips, ball games, department meals, birthday parties, etc., for employees to achieve a work-life balance. (III) In view of the importance of work environment and employee safety measures, the Company carries out risk controls over significant environmental considerations and occupational safety and health through ISO14001:2015 Environmental Management System, and sets up a dedicated occupational safety and health unit or personnel to comply with rules associated with the Occupational Safety and Health Act as well as continuously promote and implement occupational safety and health management tasks. Occupational safety and health training is included in the orientation courses for new recruits to ensure a safe working environment for employees. Six-three new recruits and 40 employees with 3-year seniority had completed the annual safety and health training program in 2020. Besides, we have free group insurance and annual health examinations for employees. Occupational medicine specialists from National Taiwan University Hospital are engaged monthly to provide a 3-hour session on health consultation services and environmental examinations in order to facilitate employees in health management andpromotion.	No significant Deviation. No significant deviation

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(IV) Has the Company established effective career development training programs for its employees? (V) Has the Company complied with related regulations and international standards in terms of customer health and safety, customer privacy, marketing and labeling of products and services, and formulate relevant consumer protection policies and complaint procedures?	V V		(IV) The Company establishes a diversified education and training mechanism to carry out employee training and development and build an organizational learning culture. 1. Employee development adopts diverse training mechanisms. In addition to in-house training courses and OJT for new recruits, e-learning is also available. The Company also conducts regular interviews with employees to understand their needs and encourage experience sharing. Employees may apply for and attend external training courses at the request of their supervisors or at their own discretion according to their work development needs. 2. Operators are subject to competency education and training which are integrated with the remuneration and promotion system for job training purpose. (V) Our products are sold worldwide. Since the R&D stage, the design and material selection are in compliance with requirements concerning electromagnetic compatibility, radiation and safety regulations. Certifications obtained including UL, CB, LVD CoC, FCC, and BSMI are clearly listed or labeled on the sales documents and the products themselves. We also demand products from suppliers to comply with the accepted procedures and suppliers to sign the "Guarantee Letter on Restricted Substance Compliance for Materials of Parts" to ensure these products comply with relevant regulations and international standards. We assess qualified suppliers in accordance with the "Operating Procedures for Supplier Development and Assessment" and establish product tracking procedures to ensure after-sales services. We draw up the product tracking procedures to ensure after-sales services. Product-related certifications and regulations are disclosed on the corporate website to ensure our products are eco-friendly and the health and safety of users are protected. A Service Center has been set up on the corporate website for consumers to communicate or file complaints concerning	No significant deviation. No significant deviation.

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(VI) Has the Company formulated supplier management policies that require suppliers to follow relevant regulations on issues such as environmental protection, occupational safety and health, or labor rights, and the implementation results?	V		product issues. Customer satisfaction questionnaires are given after cases closed to protect consumer rights. The ERP system which keeps records of customer transactions is subject to identity verification and authorization control mechanisms to protect the privacy of the Company's customers. (VI) The Company has established the "Operating Procedures for Supplier Development and Assessment" to identify quality suppliers and requests suppliers to provide materials that meet RoHS and other relevant environmental directives. We conduct annual supplier environmental surveys and keep written documents to understand suppliers' environmental management status and keep track of suppliers with significant impacts on the environment. In addition, the Company incorporates the spirit of international human rights into the assessments of all partners including suppliers. Their relevant efforts are important factors in our considerations for cooperation in order to jointly enhance the management of human rights related issues and human rights awareness, and comply with the spirit and fundamental principles of occupational safety and health and the Bill of Human Rights. The Company's component suppliers are required to sign the "Integrity Commitment" and "Guarantee Letter on Restricted Substance Compliance for Materials of Parts," and we are entitled to terminate or rescind the contracts at any time if the suppliers violate the CSR policies and cause significant impact on the environment and society. We aim for our product quality to comply with relevant regulations and international standards so as to ensure our products are eco-friendly and the health and safety of users are protected. We also set up warranty clauses and provide after-sale services to product consumers' rights and interests. We are committed to enhance CSR with our suppliers.	No significant deviation.
V.Has the Company referred to the internationally accepted report preparation standards or guidelines for its preparation of CSR or other reports which disclose the Company's non-financial information? Have the aforementioned reports obtained a third-party assurance or verification statement?		V	The Company has established the "Corporate Social Responsibility" section on the corporate website (http://www.infortrend.com) to disclose CSR implementation plans and update the outcomes regularly. However, the Company has yet to compile a CSR report.

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VI. If the Company has established its CSR principles according to "Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies", please describe the operational status and difference:

• The Company has established and complied with the "Corporate Social Responsibility Best Practice Principles." There is no significant difference. VII. Other important information to facilitate better understanding of the Company's CSR practices:

• Hold investor conferences regularly and disclose corporate information in a timely manner to protect investors' rights and interests and fulfill our obligations to shareholders.

• Continuing education for Directors and Supervisors on a regular basis.

• Examine and repair assets on a regular basis or commission legitimate vendors for scrapping.

• Health examinations and medical consultation for employees on a regular basis.

• External occupational safety courses for employees to fully understand occupational safety and health issues and formulate prevention and exception handling actions.

• Fire drills and first aid training to ensure employees have the capability to handle accidents and protect themselves in the event of disasters. 7. Work environment monitoring to prevent workplace hazards.

• Promote energy conservation and carbon reduction as well as conduct environmental education and training.

• Actively participate in blood donation activities and combine them with our public welfare actions by ordering and giving charity goods from disadvantaged groups to blood donors as encouragement and appreciation.

• Encourage employees to donate invoices to Eden Social Welfare Foundation. A total number of 1,803 invoices were donated. 11. Participate in the promotion of animal protection education associated with the movie, Twelve Nights 2: Back to Day Zero, and donate NT$45,000.

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3.4.6 Performance in Ethical Management and Deviations from the Ethical Corporate Management Best Practice Principles for TWSE/TPEx-Listed Companies and Reasons :

Evaluation item	Implementation status	Implementation status	Implementation status	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
I. Establishment of ethical corporate management policies and schemes (I) Has the Company formulated ethical corporate management policies approved by the Board of Directors and clearly expressed relevant policies and actions as well as the Board and senior management's commitment to implement these policies in the Company's internal rules and external documents? (II) Has the Company established assessment mechanism for risk arising from unethical conducts, regularly analyzed and assessed operating activities with higher risk of unethical conduct within its business, and formulated preventive schemes accordingly, which at least contain preventive measures for conducts set forth in Paragraph 2, Article 7 of the "Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies"?	V V		(I) The Company has formulated the "Ethical Corporate Management Best Practice Principles" and the "Ethical Corporate Management Policy and Prevention Measures", which are approved by the Board and disclosed on the corporate website. The Board and the management are committed to these principles and incorporate them into HR rules to prevent the provision or acceptance of improper benefits and conduct business activities in a fair and transparent manner. (II) The Company has established the "Risk Management Policies and Procedures", which set out risk assessment mechanisms and preventive measures based on the procedures of risk identification, risk assessment and risk management for unethical conducts in the "Ethical Corporate Management Best Practice Principles" and the "Ethical Corporate Management Policy and Prevention Measures" drawn up pursuant to the "Ethical Corporate Management Best Practice Principles for TWSE/TPEx-Listed Companies", and examined and controlled relevant risks through internal control systems.	No significant deviation. No significant deviation.

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Evaluation item	Implementation status	Implementation status	Implementation status	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(III) Has the Company had clear statements regarding relevant procedures, conduct guidelines, disciplinary measures and compliant system in the preventive schemes, and has the Company implemented them accordingly and regularly review these schemes?	V		(III) The Company has clearly stated the procedures, conduct guidelines, disciplinary measures and compliant system for the prevention of unethical conducts in the "Ethical Corporate Management Policy and Prevention Measures" and "Work Rules" and implemented them accordingly. No such incident has occurred so far. The Company also regularly assesses and reviews the implementation status and the corrective measures required.	No significant deviation.
II. Implementation of ethical corporate management (I) Does the Company review the counterparty's history of ethical conduct and include the compliance of business ethics as a clause in the contract? (II) Has the Company established a dedicated department under the Board to promote ethical conducts and report regularly (at least once per year) its ethics policies and preventive schemes for unethical conducts as well as implementation status to the Board?	V V		(I) The Company has formulated the "Operating Procedures for Supplier Development and Assessment" to acquire the suppliers' basic information and conduct relevant assessments including assessments on ethical behaviors. Once the business relations are established, suppliers would be asked to sign the "Integrity Commitment," stating their compliance with the Company's ethics-related rules. (II) The Company has appointed the Legal Office as the unit in charge of formulating and implementing the ethical corporate management policy and prevention measures. It reported its supervision and implementation status for 2020 to the Board on November 5, 2020 and disclosed relevant information on the corporate website simultaneously.	No significant deviation. No significant deviation.

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Evaluation item	Implementation status	Implementation status	Implementation status	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(III) Has the Company established policies to prevent conflicts of interest, provide appropriate communication channels and thoroughly implement the policies? (IV) Has the Company established effective accounting and internal control systems for the implementation of ethical corporate management and had the internal audit unit formulating relevant audit plans based on the assessment outcome of risk associated with unethical conducts? Has the Company then performed audits on the compliance with the preventive schemes for unethical conducts accordingly, or entrust the CPAs to conduct the audits? (V) Has the Company regularly held internal and external education and training sessions on ethical corporate management?	V V V		(III) In the "Ethical Corporate Management Best Practice Principles", "Ethical Corporate Management Policies and Preventive Measures" and "Code of Ethical Conduct", the Company have clearly stated policies to prevent conflicts of interest, provide appropriate communication channels and demand thorough implementation by relevant units within the Company. These internal policies are also available on the MOPS and corporate website. (IV) The Company has established effective accounting systems and internal controls. The Audit Office in conjunction with the ethical corporate management taskforce carry out audits and establish a mutual monitoring and check-and-balance mechanism to prevent any irregularities and ensure the effectiveness of the Company's ethical corporate management policies. (V) The Company promotes the awareness of ethical corporate management among all employees and demand compliance with ethical corporate management and ethics during the orientation for new recruits. A series of training courses on the topics of "Uphold ethical values and corporate sustainable development" is included in employee training. Also, the concepts of banning the use of position to accept illegal benefits such as entertainment, gifts or rebates	No significant deviation. No significant deviation. No significant deviation.

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Evaluation item	Implementation status	Implementation status	Implementation status	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
			from others as stipulated in the "Ethical Corporate Management Best Practice Principles", "Ethical Corporate Management Policies and Preventive Measures", "Code of Ethical Conduct" and "Work Rules" are promoted and taught. Six-two new recruits and 299 employees participated in the training in 2020. In addition, the promotion on prevention of insider trading is incorporated into the courses for Directors and Supervisors annually.
III. Implementation of complaint system (I) Has the Company established specific complaint and reward systems, set up conveniently accessible complaint channels, and designated responsible individuals to handle the complaint received? (II) Has the Company established standard operating procedures for investigating the complaints received, actions to be taken upon the completion of investigation, and mechanisms for confidentiality?	V V		(I) We include integrity and ethics in employee performance assessment. For illegal (including corruption) and unethical conducts, the complaint channels (including internet/ hotline/physical mailbox) and systems (complaint channels have been released on the corporate website) are specified in the "Code of Ethical Conduct", "Ethical Corporate Management Policy and Prevention Measures" and "Employee Complaint System". The HR supervisor would handle the cases and conduct subsequent investigations. (II) The investigations on reported misconducts are conducted in accordance with the procedures stipulated in the Company's "Code of Ethical Conduct", "Ethical Corporate Management Policy and Prevention Measures", "Work Rules" and "Employee Complaint System". We have established internal independent complaint mailbox and hotline. Complaints are handled	No significant deviation. No significant deviation.

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Evaluation item	Implementation status	Implementation status	Implementation status	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
(III) Has the Company established measures to protect whistleblowers from retaliation?	V		by HR units with investigations carried out once cases are accepted. All actions are carried out under the confidentiality mechanism. Once the complaints are verified to be true, the Company shall charge relevant units with the task of reviewing the internal control system and relevant procedures and proposing corrective measures to prevent recurrence. For cases which violate the Code of Ethical Conduct, HR unit shall prepare an investigation report and report such violation to the Board. Cases where Directors or managerial officers are involved, relevant information and actions taken shall be disclosed on the MOPS immediately. (III) The Company encourages the reporting of any illegal actions or violations of the Code of Ethical Conduct, and protects the confidentiality of the whistleblower's identity, case details, and documents provided for investigation. Unrelated parties are banned from accessing the information. We also prohibit any threat, retaliation or punishment against the whistleblower, and do our best to protect the his/her safety.	No significant deviation.
IV. Enhancing information disclosure (I) Has the Company disclosed its ethical corporate management principles and the results of its implementation on the corporate website and MOPS?	V		(I) The Company's "Ethical Corporate Management Best Practice Principles" and relevant information are disclosed on the corporate website (http://www.infortrend.com) and the MOPS.	No significant deviation.
V. If the Company has established its own ethical corporate management principles based on the "Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies", please describe the implementation and any deviations from the Principles: The Company has formulated the "Ethical Corporate Management Best Practice Principles" and "Ethical Corporate Management Policy and Prevention Measures."Our internal management regulations and external documents have all compliedwith the ethical corporate management

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Evaluation item	Implementation status	Implementation status	Implementation status	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
policies and our operation has never deviated or violated these policies.
VI. Other important information to facilitate better understanding of the Company's ethical corporate management: We amend our Principles based on practices and relevant laws and regulations to demonstrate our commitment to ethical corporate management. In order to incorporate ethics into our business culture and comply with relevant laws and regulations, we amended our "Code of Ethical Conduct" and "Ethical Corporate Management Best Practice Principles" on June 11, 2018 and June 10, 2020, respectively. We also formulated the "Ethical Corporate Management Policy and Prevention Measures" on December 26, 2019 which took effect after being approved by the Board and reported in the shareholders' meeting. Audits on the implementation of ethical corporate management and assessments on compliance for 2020 were reported to the Board on November 5,2020.

3.4.7 Means to access corporate governance principles and related guidelines:

The corporate website at http://www.infortrend.com.

3.4.8 Other important information to facilitate better understanding of the Company's corporate governance practices: None.

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3.4.9 Internal Control System Execution Status:

1. Statement on Internal Control

Infortrend Technology Inc.

Statement of Internal Control System

Date: March 11, 2021

The Company hereby states the results of the self-assessment of the internal control system for 2020 as follows:

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

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

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

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

• V. Based on the results of the determination in the preceding paragraph, the Company is of the opinion that, as of December 31, 2020, the internal control system (including the supervision and management of subsidiaries), including the design and implementation of the internal control system relating to the effectiveness and efficiency of the operations, reliability, timeliness, and transparency of reporting, and compliance with applicable standards, laws and regulations, is effective and can reasonably assure the achievement of the foregoing goals.

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• VI. This statement will constitute the main content of the Company's annual report and the prospectus and will be disclosed to the public. Any falsehood or concealment with regard to the above contents will entail legal liability under Articles 20, 32, 171 and 174 of the Securities and Exchange Act.

• VII. This statement was approved by the Board of Directors on March 11, 2021, and out of the 6 Directors in attendance all consented to the content expressed in this statement.

Infortrend Technology Inc.

Chairman/President: Lo, Shih-Tung

2. If CPA was retained to conduct a special audit of the internal control system, disclose

the audit report: None.

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• 3.4.10 Any penalties imposed upon the Company or internal personnel by laws, or punishment imposed by the Company on internal personnel for violation of the Company's internal control system regulations, details on the punishment if it might have significant impact on the shareholders' equity or security prices, major defects and corrective action thereof in the most recent fiscal year and up to the date of publication of the Annual Report: None.

3.4.11 Major Resolutions of Shareholders' Meeting and Board Meetings:

Major resolutions of the 2020 shareholders' meeting

Date	Proposal	Major resolutions	Implementation Status
Shareholders' Meeting June 10, 2020	1. To approve the Company's 2019 business report and financial statements.	Affirmative votes constituted 83.13% of voting rights of the participating shareholders. Thisproposal was approved.	Approved as per the resolution.
	2. To approve the Company's 2019 earning distribution proposal.	Affirmative votes constituted 83.29% of voting rights of the participating shareholders. This proposal was approved.	Approved as per the resolution. The record date: August 3, 2020 The distribution date: August 26, 2020 With cash dividend of NT$0.606 per share, the total cash bonus to shareholders amounted to NT$165,772,523. The distribution was completed on August 26,2020.
	3. To discuss the amendments to the Company's "Procedures for Endorsement and Guarantee".	Affirmative votes constituted 83.24% of voting rights of the participating shareholders. This proposal was approved.	The amended "Procedures for Endorsement and Guarantee" took effect and was released at the corporate website.
	4. To discuss the amendments to the Company's "Procedures for Lending Funds to Other Parties".	Affirmative votes constituted 83.27% of voting rights of the participating shareholders. This proposal was approved.	The amended "Procedures for Lending Funds to Other Parties" took effect and was released at the corporate website.
	5. To discuss the amendments to the Company's "Rules of Procedure for Shareholders' Meeting."	Affirmative votes constituted 83.29% of voting rights of the participating shareholders. This proposal was approved.	The amended "Rules of Procedure for Shareholders' Meeting" took effect and was released at the corporate website.

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Major resolutions of the Board meetings

Term	Year	Date	Major resolutions
9-19	2021	March 11, 2021	1. Reported the implementation status of CSR plans in the second half of 2020. 2. Approved the independence assessment of Company's CPAs in 2021. 3. Approved the Company's 2020 business report and parent company only financial statements. 4. Approved the Company's 2020 consolidated financial statements. 5. Approved the Company's 2021 business plans. 6. Approved the Company's 2020 earning distribution/loss compensation. 7. Approved the distribution of cash dividend from capital surplus at NT$0.3 per share. 8. Approve the assessment on the effectiveness of internal control system for 2020 and the Statement of Internal Control System. 9. Approved amendments to the Company's "Rules of Procedure for Shareholders' Meeting." 10. Approved amendments to the Company's "Director Election Procedures." 11. Approved the Company's 2021 CSR promotion plans. 12. Approve the election of Directors across the board. 13. Approved the nomination and reviewed the candidates for Director election (including Independent Directors). 14. Approved the removal of non-compete clause for newly elected Directors. 15. Approved matters associated with shareholders' nomination of Directors (including Independent Directors.) 16. Approved matters associated with shareholders' right to propose in the shareholders' meeting. 17. Approved the date for 2021 shareholder's meeting to be on June 15, 2021.
9-18	2020	December 24, 2020	1. Reported the implementation status of risk management mechanism in 2020. 2. Reported the implementation status of intellectual property right management plan in 2020. 3. Approved customs duty endorsement/guarantee. 4. Approved the amount of 2020 year-end bonus to managerial officers reviewed bythe Remuneration Committee.
9-17	2020	November 5, 2020	1. Reported the Company's consolidated financial statements for the nine months ended September 30, 2020. 2. Reported the Company's stakeholder engagement in 2020. 3. Report the audits on the implementation of ethical corporate management and assessments on compliance for 2020.

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			4. Approved the 2021 annual audit plan. 5. Approved applications for the renewal and an increased line of credit of our short-term credit facility with Mega International Commercial Bank: The credit line increased from NT$200 million to NT$300 million. 6. Approved the establishment of the Company's "Risk Management Policy and Procedures." 7. Approved the establishment of the Company's "Rules Governing Intellectual PropertyRights."
9-16	2020	August 6, 2020	1. Reported the Company's consolidated financial statements for the six months ended June 30, 2020. 2. Reported the implementation status of CSR plans in the first half of 2020. 3. Reported the implementation status of the Company's 11th repurchase of treasury shares. 4. Approved the establishment of the Company's "Rules Governing the Performance Assessment of the Board of Directors." 5. Approved the Company's appointment of chief corporate governance officer. 6. Approved the Company's 10th and 11th repurchases of treasury shares with the record date for capital reduction/cancellation set on August 8, 2020 and 2,736,000 shares to be cancelled. 7. Approved the applications for the renewal of comprehensive financing facility and the credit risk limit for derivative transactions with Taiwan Business Bank: The credit lines were NT$350 million and US$3 million, respectively. 8. Approved the Company's accounts receivable from Infortrend Shanghai Limited which had passed due the normal collection period were not of financing nature. 9. Approved the Company's accounts receivable from Data Fault Tolerance System Co., Ltd. that the Company had engaged Infortrend Shanghai Limited for the collection and had passed due the normal collectionperiod were not of financingnature.
9-15	2020	July 9, 2020	1. Approved matters associated with setting the ex-dividend date to be August 3, 2020. 2. Approved the applications for the renewal of comprehensive financing facility and the credit risk limit for derivative transactions with E.SUN Bank: The credit lines were NT$200 million and US$1 million,respectively.
9-14	2020	May 7, 2020	1. Reported the implementation status of the Company's 10th repurchase of treasury shares. 2. Reported the Company's consolidated financial statements for the three months ended March 31, 2020. 3. Approved the application for the renewal of short-term credit facility

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			with Taishin International Bank: The credit line was NT$500 million. 4. Approved the Remuneration Committee's proposal for the distribution of 2019 employee compensation to managerial officers. 5. Approved amendments to the Company's "Corporate Social Responsibility Best Practice Principles." 6. Approved amendments to the Company's "Corporate Governance Best-Practice Principles." 7. Approved the Company's withdrawal of the fourth issuance of new restricted employee shares at zero compensation with the record date for capital reduction/cancellation set on May 9, 2020 and 3,200 shares to be cancelled. 8. Approved matters associated with the repurchase of the Company's shares.
9-13	2020	March 25, 2020	Approved matters associated with the repurchase of the Company's shares.
9-12	2020	March 12, 2020	1. Reported the implementation status of CSR plans in the second half of 2019. 2. Approved the 2019 employee compensation of NT$38,000 thousand and Director remuneration of NT$1,000 thousand. Both are to be paid in the form of cash. 3. Approved the independence assessment of Company's CPAs in 2020. 4. Approved the Company's 2019 business report and parent company only financial statements. 5. Approved the Company's 2019 consolidated financial statements. 6. Approved the Company's 2020 business plans. 7. Approved the 2019 earning distribution proposal: Shareholders are entitled to cash dividend of NT$0.6 per share. 8. Approved the assessment on the effectiveness of internal control system for 2019 and the Statement of Internal Control System. 9. Approved amendments to the Company's "Rules of Procedure for Shareholders' Meeting." 10. Approved amendments to the Company's "Rules of Procedure for the Board of Directors' Meetings." 11. Approved amendments to the Company's "Charter for Audit Committee." 12. Approved amendments to the Company's "Charter for Remuneration Committee." 13. Approved amendments to the internal control system - "Management on the Preparation Procedures for Financial statements." 14. Approved the establishment of the Company's 2020 CSR plans. 15. Approved matters associated with shareholders' right to propose in the shareholders' meeting. 16. Approved the date for 2020 shareholder's meeting to be on June 10, 2020.

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• 3.4.12 Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors: None.

• 3.4.13 Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, CEO, and Heads of Accounting, Finance, Internal Audit, Corporate governance officer and R&D ： None.

• 3.5 Information Regarding the Company’s Audit Fee and Independence:

(I) Information on CPA

nformation on CPA
Accounting Firm	Name of CPAs	Period Covered by CPA’s Audit	Remarks
KPMG Taiwan	Kuo, Rou-Lan	2020/01/01 - 2020/12/31
	Lien, Shu-Ling

Unit: NT$ thousands

Fee Items Range of fees	Fee Items Range of fees	Audit fee	Non-audit fee	Total
1	1. Under NT$2,000,000
2	2. NT$2,000,000 ~ NT$3,999,999	2,660	220	2,880
3	3. NT$4,000,000 ~ NT$5,999,999
4	4. NT$6,000,000 ~ NT$7,999,999
5	5. NT$8,000,000 ~ NT$9,999,999
6	6. NT$10,000,000 and above

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(II) Audit Fees for CPA:

1. Amount of audit and non-audit fees paid to the CPA, CPA firm and their affiliates and details of the non-audit services rendered:

Unit: NT$ thousands

Accounting Firm	Name of CPAs	Name of CPAs	Audit fee	Non-audit fee	Non-audit fee	Non-audit fee	Non-audit fee	Non-audit fee	Period Covered by CPA’s Audit	Remarks
				System Design	Company Registration	Human Resource	Others	Subtotal
KPMG Taiwan	Kuo, Rou-Lan	Lien, Shu-Ling	2,260	-	-	-	20	20	2020/01/01 - 2020/12/31	Fee for reviewing the salary information of non-executive employees
	Yeh, Wei-Tun		400	-	-	-	200	200	2020/01/01 - 2020/12/31	Fee for reviewing the supplementary notes for National Taxation Bureau's audits on transfer pricingin 2017
	Total		2,660	-	-	-	220	220

1. When the company changes its accounting firm and the audit fees paid for the fiscal year in which such change took place are lower than those for the previous fiscal year, the amounts of the audit fees before and after the change and the reasons shall be disclosed: None.

2. When the audit fees paid for the current fiscal year are lower than those for the previous fiscal year by 10 percent or more, the reduction in the amount of audit fees, reduction percentage, and reason(s) thereof shall be disclosed: None.

3.6 Replacement of CPAs: None.

• 3.7 Where the company’s chairperson, general manager, or any managerial officer in charge of finance or accounting matters has in the most recent year held a position at the accounting firm of its certified public accountant or at an affiliated enterprise of such accounting firm, the name and position of the person, and the period during which the position was held, shall be disclosed: None.

3.8 Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders:

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3.8.1 Changes in equity interest by Directors, Supervisors, managerial offices, and major shareholders:

Title	Name	2020	2020	December 31, 2021	December 31, 2021	Remarks
		Increase (Decrease) in Shares Held	Increase (Decrease) in Shares Pledged	Increase (Decrease) in Shares Held	Increase (Decrease) in Shares Pledged
Chairman/ General Manager (Major Shareholder)	Shih-Tung Lo	12,000	-	-	-
Director / Vice Presidents	Tse-Han Lee	-	-	-	-
Director / Vice Presidents	Li-Wei Chen	-	-	-	-
Independent Director	Chin-He Chung	-	-	-	-
Independent Director	Ruey-Fu Hou	-	-	-	-
Independent Director	Liang-Yin Chen	-	-	-	-
Chief Technology Officer	Michael Schnapp	-	-	-	-
Assistant Manager	Shu-Hua Liu	-	-	-	-
Assistant Manager	Ching-Hai Hung	19,900	-	-	-
Assistant Manager	Wen-Jen Yang	(83,800)	-	(9,000)	-

3.8.2 Shares Trading with Related Parties: None.

3.8.3 Shares Pledge with Related Parties: None.

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3.9. Relationship among the Top Ten Shareholders:

April 16, 2021 Unit: Shares；%

Name	Current Shareholding	Current Shareholding	Spouse’s / minor’s shareholding	Spouse’s / minor’s shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Name and Relationship Between the Company’s Top Ten Shareholders, or Spouses or Relatives Within Two Degrees	Name and Relationship Between the Company’s Top Ten Shareholders, or Spouses or Relatives Within Two Degrees	Remarks
	Shares	%	Shares	%	Shares	%	Name	Relationship
Shih-Tung Lo	38,948,816	14.24	168,000	0.06	-	-	Tung Yu Investment Co., Ltd	Is the spouse of the head of the Company
Special investment account of Beevest Securities Limited entrusted for custody by Chinatrust Commercial Bank	25,405,815	9.29	-	-	-	-	-	-
Tung Yu Investment Co., Ltd Person in charge: Mei-ling Lin	21,075,300	7.70	-	-	-	-	Shih-Tung Lo	Is the spouse of the head of the Company
Ting-Hua Lai	13,309,488	4.87	13,005,484	4.75	-	-	Xiu-Jin Lu	Spouse
							Hyde Investment Co., Ltd	Is the spouse of the head of the Company
Hsiu-Chin Lu	13,005,484	4.75	13,309,488	4.87	-	-	Ting-Hua Lai	Spouse
Hyde Investment Co., Ltd. Person in charge: Xiu-Jin lu	5,334,909	1.95	-	-	-	-		-
Special investment account with Norwegian Central Bank under custody by Citibank	4,790,287	1.75	-	-	-	-	-	-
Ling-Chu Chen	4,533,000	1.66	-	-	-	-	-	-
Ba-Jia Lai	4,411,170	1.61	-	-	-	-	Ting-Hua Lai Xiu-Jin Lu	Offspring
Ba-Xun Lai	4,410,743	1.61	-	-	-	-	Ting-Hua Lai Xiu-Jin Lu	Offspring

3.10 Ownership of Shares in Affiliated Enterprises: None.

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Chapter IV. Capital Overview

4.1. Capital and Shares:

(I) Issued Shares

		Unit：NT$ thousands; Shares thousands	Unit：NT$ thousands; Shares thousands	Unit：NT$ thousands; Shares thousands	Unit：NT$ thousands; Shares thousands	Unit：NT$ thousands; Shares thousands	Unit：NT$ thousands; Shares thousands	Unit：NT$ thousands; Shares thousands
Month/ Year	Par Value (NT$)	Authorized Capital		Paid-in capital		Remarks
		Shares	Amount	Shares	Amount	Sources of Capital	Capital increase by assets other thancash	Other
2016.04	0	312,000	3,120,000	279,533	2,795,333	Issuance of new restricted shares 987.4	N/A	Jing-Shou-Shang-Zi No. 10501063430 on 2016.04.06
2016.04	0	312,000	3,120,000	279,228	2,792,284	Cancellation of new restricted shares -304.9	N/A	Jing-Shou-Shang-Zi No. 10501063430 on 2016.04.06
2016.08	0	312,000	3,120,000	279,175	2,791,748	Cancellation of new restricted shares -53.6	N/A	Jing-Shou-Shang-Zi No. 10501203420 on 2016.08.23
2016.11	0	312,000	3,120,000	279,111	2,791,110	Cancellation of new restricted shares -63.8	N/A	Jing-Shou-Shang-Zi No. 10501269040 on 2016.11.22
2017.04	0	312,000	3,120,000	280,130	2,801,299	Issuance of new restricted shares 1,018.9	N/A	Jing-Shou-Shang-Zi No. 10601040910 on 2017.04.06
2017.04	0	312,000	3,120,000	279,815	2,798,150	Cancellation of new restricted shares -314.9	N/A	Jing-Shou-Shang-Zi No. 10601040910 on 2017.04.06
2017.08	0	312,000	3,120,000	279,682	2,796,819	Cancellation of new restricted shares -133.1	N/A	Jing-Shou-Shang-Zi No. 10601121180 on 2017.08.28
2018.04	0	312,000	3,120,000	279,983	2,799,829	Issuance of new restricted shares 301	N/A	Jing-Shou-Shang-Zi No. 10701034330 on 2018.04.03
2018.04	0	312,000	3,120,000	279,681	2,796,812	Cancellation of new restricted shares -301.7	N/A	Jing-Shou-Shang-Zi No. 10701034330 on 2018.04.03
2018.08	0	312,000	3,120,000	279,646	2,796,463	Cancellation of new restricted shares -34.9	N/A	Jing-Shou-Shang-Zi No. 10701108420 on 2018.08.28
2019.03	0	312,000	3,120,000	279,345	2,793,453	Cancellation of new restricted shares-301	N/A	Jing-Shou-Shang-Zi No. 10801033910 on 2019.04.01
2019.03	0	312,000	3,120,000	279,419	2,764,193	Cancellation of treasury shares -2,926	N/A
2019.01	0	312,000	3,120,000	276,291	2,762,907	Cancellation of new restricted shares -22.6; Cancellation of treasury shares-106	N/A	Jing-Shou-Shang-Zi No. 10901000590 on 2020.01.15
2020.05	0	312,000	3,120,000	276,288	2,762,876	Cancellation of treasury shares -3.2	N/A	Jing-Shou-Shang-Zi No. 10901082310 on 2020.05.26
2020.08	0	312,000	3,120,000	273,552	2,735,515	Cancellation of treasury shares -2,736	N/A	Jing-Shou-Shang-Zi No. 10901156320 on 2020.08.28

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Type of Stock

Type of Stock	Type of Stock	Type of Stock	Type of Stock	Type of Stock
As of 4/16/2021(Unit: Shares
Share type	Authorized capital			Remarks
	Issued Shares	Un-issued Shares	Total
Common Shares	273,551,538	38,448,462	312,000,000	All are outstanding public shares

4.1.2 Shareholding Structure

4.1.2 Shareholding Structure	4.1.2 Shareholding Structure	4.1.2 Shareholding Structure	4.1.2 Shareholding Structure	4.1.2 Shareholding Structure	4.1.2 Shareholding Structure	4.1.2 Shareholding Structure
As of 4/16/202
Structure Item	Government agencies	Financial institutions	Other juridical persons	Domestic natural persons	Foreign institutions & naturalpersons	Total
Number of shareholders	-	1	26	14,593	64	14,684
Shareholding (shares)	-	19,000	34,047,151	189,562,730	49,922,657	273,551,538
Percentage (%)	-	0.01	12.45	69.29	18.25	100%

4.1.3 Shareholding distribution status

1. Common shares

As of 4/16/2021

1. Common shares			As of 4/16/2021
Class of Shareholding (Unit: Share)	Number of shareholders	Shareholding (shares)	Percentage (%)
1 - 999	4,752	632,618	0.23
1,000 - 5,000	6,706	15,028,278	5.49
5,001 - 10,000	1,464	11,689,705	4.27
10,001 - 15,000	514	6,548,799	2.39
15,001 - 20,000	321	5,936,305	2.17
20,001 - 30,000	277	7,140,070	2.61
30,001 - 40,000	144	5,192,181	1.90
40,001 - 50,000	117	5,549,987	2.03
50,001 - 100,000	206	14,949,844	5.47
100,001 - 200,000	92	12,892,499	4.71
200,001 - 400,000	44	12,066,546	4.41
400,001 - 600,000	15	7,206,000	2.63
600,001 - 800,000	6	4,252,097	1.55
800,001 - 1,000,000	4	3,661,163	1.34
1,000,001 - 9,999,999,999 Total	22	160,805,446	58.80
	14,684	273,551,538	100.00

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2. Preferred shares: The Company did not issue any preferred shares.

4.1.4 List of major shareholders: (Shareholders with holdings equal to or exceed 5%)

Shares Shareholder's name	Shareholding (shares)	Percentage (%)
Shih-TungLo	38,948,816	14.24
Special investment account of Beevest Securities Limited entrusted for custodybyChinatrust Commercial Bank	25,405,815	9.29
TungYu Investment Co., Ltd	21,075,300	7.7

Note: There are less than 10 shareholders with holding percentage exceeding 5%. Please refer to page 76 for details of the top 10 shareholders.

4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share:

	As of April 30,2021	As of April 30,2021	As of April 30,2021	As of April 30,2021	As of April 30,2021
Item	Year		2019	2020	01/01/2021 to 03/30/2021 (Note 8)
Market price per share (Note 1)	Highest		15.60	14.40	14.55
	Lowest		11.15	10.00	11.65
	Average		13.28	12.58	12.92
Net worth per share (Note 2)	Before distribution		15.33	14.49	14.62
	After distribution		12.95	(Note 9)	N/A
Earnings per share	Weighted average shares (thousand shares)		276,083	274,549	273,552
	Earningsper share(Note 3)		0.73	-0.24	0.12
Dividends per share	Cash dividends		0.6	0.3(Note 9)	N/A
	Stock dividends	Dividends from retained earnings	-	-	N/A
		Dividends from capital surplus	-	-	N/A
	Accumulated undistributed dividends (Note4)		-	-	N/A
Return on investment	Price/earnings ratio (Note 5)		18.19	-51.58	N/A
	Price/dividend ratio (Note 6)		22.13.	41.27	N/A
	Cash dividend yield rate (Note 7)		4.52%	2.42%	N/A

Note 1: Please identify the highest and the lowest market prices of the common shares in various years, and calculate the average market price of each year based on the trading value and turnover of each year.

Note 2: The numbers are based on the number of shares outstanding at the end of year and the distribution plan approved by the shareholders' meeting in the following year.

Note 3: Where retrospective adjustment is required due to matters such as stock dividends, earnings per share before and after the adjustment shall be listed.

• Note 4: If the terms of issuance of the equity securities provide that any dividends declared but not paid may

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be carried forward until the Company has earnings, the amount of accumulated unpaid dividends as at the end of such fiscal year shall be disclosed: None.

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

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

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

• Note 8: Please identify the net worth per share and earnings per share available in the latest quarterly financial information reviewed by the independent auditors before the date of publication of the annual report, and the information available until the date of publication of the annual report in the other sections.

• Note 9: The numbers are based on the distribution plan approved by the following year's shareholders' meeting: Earnings distribution for 2019 is pending for approvals from the shareholders' meeting.

4.1.6 Dividend Policy and Implementation Status:

A. Dividend policy

The annual earnings of the Company, if any, shall be first appropriated to pay taxes and offset accumulated losses before allocating 10% of the remaining earnings to the legal reserve until the accumulated legal reserve has equaled the Company's paid-in capital. Next, special reserve shall be appropriated or reversed in accordance with the Company's operating needs and pursuant to the applicable law and regulations. The Board would then draft an earnings distribution proposal based on the remaining earnings together with accumulated undistributed earnings at the beginning of the period and submit it to the shareholders' meeting for approval.

After taking into account the environment and development stage of the Company, the needs of capital in the future, long-term financial planning and shareholders' demand for cash, the distribution of shareholders' bonus would be in the form of share and cash. The cash dividends shall not be less than 10% of the total dividend payout.

The dividend policy of the Company is based on the operating performance, capital requirements and the interests of shareholders. Where there is no other special circumstance, the total dividend to be distributed shall be at least 60% of the distributable earnings, net of legal reserve.

B. Proposed Distribution of Dividend

The Company's earning distribution proposal was approved in the Board meeting on March 11, 2021 where the legal reserve would be used to offset losses and pay for cash dividend of NT$0.3 per share. After the proposal is approved in the shareholders' meeting, the Board would set the record date and dividends would be paid based on the shareholder register as of the record date.

• 4.1.7 Effect upon business performance and earnings per share of any stock dividend distribution proposed or adopted at the most recent shareholders' meeting: Not applicable

4.1.8 Compensation to employees and to directors:

• 1.The percentages or ranges with respect to employee and director compensation, as set

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forth in the company's Articles of Incorporation:

The Company shall set aside at least 1% of its annual earnings, if any, as compensation to employees and no greater than 0.5% as remuneration to Directors. When there are accumulated losses, the Company shall reserve a portion of the earnings to offset the losses first.

Earnings refers to the income before taxes, employee compensation and Director remuneration.

The parties entitled to employee compensation in the form of cash or dividend under Paragraph 1 may include employees in the subsidiaries.

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

(1) No appropriation of employee compensation and Director remuneration for 2020.

• (2) The basis for calculating the number of shares to be distributed as employee compensation: N/A.

(3) The difference between the actual distributed amount and the estimated figure is recognized in the profit or loss account of the following year.

3.Information on the Board's resolution concerning renumeration:

• (1) Employee compensation and Director remuneration: No appropriation of employee compensation and Director remuneration for 2020.

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

• (3) The estimated earnings per share after employee compensation and Director remuneration: N/A.

• 4.The actual distribution of employee compensation and Director and Supervisor remuneration for the previous fiscal year (2019):

4.The actual distribution of employee compensation and Director and Supervisor remuneration for the previous fiscal year (2019):	4.The actual distribution of employee compensation and Director and Supervisor remuneration for the previous fiscal year (2019):	4.The actual distribution of employee compensation and Director and Supervisor remuneration for the previous fiscal year (2019):	4.The actual distribution of employee compensation and Director and Supervisor remuneration for the previous fiscal year (2019):
Unit: NT$
2019	Amount recognized in the statement of profit or loss in 2019	Amount resolved in the shareholders' meeting	Difference
Employee compensation - cash	38,000,000	38,000,000	N/A
Employee compensation - stock	0	0	N/A
Director/Supervisor remuneration	1,000,000	1,000,000	N/A

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4.1.9 Buyback of Treasury Stock :

Repurchases already completed

chases already completed	chases already completed	chases already completed
As of April30,2021
Treasury stocks: Batch Order	Tenth	Eleventh
Purpose of the repurchase	Maintain company credit and shareholders' rights	Maintain company credit and shareholders' rights
Period for the repurchase (Actual repurchase period)	2020/03/30 ~ 2020/04/24	2020/05/08 ~ 2020/07/06
Price Range of the shares to be repurchased	NT$9.00 ~ 13.00	NT$9.00 ~ 13.00
Type and number of shares already repurchased (In thousands of shares)	1,000 thousand common shares	1,736 thousand common shares
Monetary amount of shares already repurchased (in thousands of New Taiwan dollars)	11,316	20,867
Ratio of the number of shares that were repurchased to the planned number of shares to be repurchased (%)	100%	58%
Shares canceled or transferred	All shares are cancelled	All shares are cancelled
Accumulated number of company shares held	-	-
Percentage of total company shares held (%)	-	-

4.2 Corporate Bonds: None.

4.3 Preferred Shares: None.

4.4 Global Depository Shares : None.

4.5 Employee Stock Options: None.

4.6 Restricted Stock Awards to key employee: None.

4.7 Issuance of New Shares in Connection with Mergers or Acquisitions or with Transfer of

Shares of Other Companies: None.

4.8 Implementation of the Company's Fund Raising and Utilization: None.

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Chapter V. Operational Highlights

5.1 Business Activities:

5.1.1 Business Scope:

1. Principal business and sales proportion: The Company mainly engages in the research and development, production and sales of products associated with "RAID system, network attached storage, storage software and peripheral components," which accounted for 100% of the sales.

2. Current Main products:

• (1) SAN storage

• (2) NAS storage

• (3) Unified storage

• (4) All Flash storage

• (5) Hybrid cloud storage

• (6) Scale-out NAS

• (7) Storage server

• (8) Expansion enclosure

3. New products development:

• (1) EV 5000 Gen 2 - second generation of EV 5000 storage server

• (2) EV 7000 Gen 2 - second generation of EV 7000 storage server

• (3) Si 3016/5016 Gen2 - second generation of GSi AI storage system

• (4) GS 5000 Gen2 - second generation of GS 5000

• (5) Support high-speed internet transmission interface 100Gb/s

• (6) NVMe SSD storage

• (7) (EonServ for AI

5.1.2 Industry Overview:

1. Industry Status and Development

With the rise and booming development of the IoT, cloud computing, big data, AI and 5G, data volume has shown explosive growth in recent years. The expansion demand on storage systems is no longer limited to capacity, but also includes performance expansion. Scale-out storage systems can simultaneously expand both performance and capacity, and the adoption of such systems by users will gradually increase.

With the development of the audio-visual industry, 4K and 8K videos become more popular and the demand for high-speed internet interface and storage system performance is increasing. Thus, the storage systems shall evolve to support the new generation of high-speed internet interface quickly so as to deliver a more stable and efficient performance.

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2. Relationship amongst upstream, midstream, and downstream of the industry

Upstream (raw materials) Midstream Downstream

==> picture [663 x 377] intentionally omitted <==

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

CPU
MEMORY
．ROM
Semiconductors
半導體 ．RAM
TTL IC Large internet operators (ISP, ICP, IDC)
ASIC 磁碟陣列控制器RAID controller Transnational enterprise network
E-Business operator
PCB Online library
Metal plastic component 金屬塑膠元件 Data warehouse operator
CONNECTOR
SME network server
FIRMWARE
Software 軟體
DRIVER Aerospace transportation unit
Hard drive 硬碟 Telecommunications business
Medical & scientific research unit
Securities and futures industry, trading centers
機殼Case Semiconductor Industry
Animation films or advertising production
Graphics workstation & computer-aided design
Hospitals & government bodies
電源供應器Power supply
Internet
Intranet
----- End of picture text -----

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1. Product development trend and competition: (1) (1) Product development trend

2. a. The traditional direct-attached storage (DAS) structure is no longer sufficient.

==> picture [73 x 9] intentionally omitted <==

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

DAS structure
----- End of picture text -----

==> picture [236 x 204] intentionally omitted <==

Storage systems traditionally adopt the DAS structure, which connects storage devices directly to the servers. Data are stored through servers with one-to-one access. The design provides great security. However, it often faces the following bottleneck:

• 1) Insufficient storage space in some servers while other still have plenty of room for storage.

• 2) Data in different platform servers cannot be shared, e.g., NTFS of NT and UNIX cannot access each other's data.

• 3) LAN and servers are quired for data transmission, which not only increases the workload of servers but also slows down the LAN.

• In the Internet era, where enterprise data volume is experiencing explosive growth, DAS gradually fails to satisfy enterprises' need for resource sharing and cross-platform operations. Thus, we see the rise of storage area network (SAN) and network attached storage (NAS) structures.

• b. Network attached storage (NAS)

NAS structure

==> picture [250 x 197] intentionally omitted <==

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NAS combines storage devices, RAID controllers and servers with only file access function, and connects it to the original LAN. File access is done through NAS while other serves take on computing or more important tasks. The strengths of NAS are as follows:

• 1) Data request, access, and transmission are not done through servers of each groups, which reduces burdens on the servers and thus improve their performance.

• 2) In contrast to DAS, storage devices under NAS do not belong to a specific server. Instead, they use shared storage to achieve the purpose of file and hardware resource sharing.

• 3) NAS uses the TCP/IP protocol of LAN, thus, it can be operated under the existing network structure. Its construction is easier than SAN and configurations are not required at the terminal end, which simplifies the management process.

• 4) NAS has standard protocols. It can be operated on multiple platforms (e.g., Window PC, Mac, Linux, UNIX, etc.) and enjoys high compatibility. Besides, it does not require the use of NT server as file server, thus, it is more cost competitive than SAN. The disadvantage of NAS is that it continues to use LAN for data transmission. The loading on internet slows down the speed. Consequently, SAN is superior in terms of data sharing than NAS.

• 5) The dual redundant controller design allows the entire storage system to remain fully active and even continue to safeguard data security and maintain high availability under significant maintenance or partial hardware failure.

• c. Storage area network (SAN)

SAN structure

==> picture [254 x 212] intentionally omitted <==

SAN is a dedicated network of storage devices such as tape drives, optical disk libraries, and RAIDs, and connects with many servers where data access can be done directly through SAN. SAN often adopts the fiber channel structure, which eliminates the issues of unstable signals and insufficient length of connection, satisfying the

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growing data storage volume. The strengths of SAN are as follows:

• 1) Good connectivity: Any server can be directly connected to a storage device, or storage devices can be directly connected to each other.

• 2) The structure and composition of SAN are quite flexible. Companies can increase their storage devices without adding workloads on servers and LAN.

• 3) It can manage storage devices located in different places.

• 4) Storage devices are no longer connected to a specific server; thus, storage resources can be shared among many servers.

• 5) LAN and servers are not used for backup: As storage devices are directly connected to each other, the backup work does not take up server space nor the bandwidth of LAN.

The disadvantages are as follows:

• 1) No common standard: At present, cross-platform operation of SAN products only exists between certain operating systems and products.

• 2) High cost and time-consuming set-up.

In summary, NAS structure is simpler and easier to manage than SAN and it is a low-cost storage device in comparison. However, it fails in terms of scalability. As these two structures are often adopted in different environments, they are competing against as well as complementing each other. They can be combined to create an optimal structure for companies (as illustrated below).

==> picture [249 x 191] intentionally omitted <==

(2) Product competition

• a. Products have no industrial standards. Technical competency is the key to success.

• RAIDs are unlike other IT products which have generally accepted industrial standards or large quantities of standardized components available; for instance, easy replacement is possible for motherboards as products of different brands can substitute each other under the PCI-E. The core technology of RAID lies in the firmware, which determines functions such as data partitioning, storage, backup, and redundancy. Switching to products of

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different brands may cause problems in accessing or reorganizing partitioned data. Although the core controllers can adopt the standardized CPUs, they would not deliver the best result. Self-development and optimization are still needed. Consequently, RAIDs not only require independent technical competency for firmware writing and hardware design, but their length and size in terms of their appearance also have no specifications. Since they are mostly employed for professional applications such as mainframes or servers, which are extremely demanding of quality, manufacturers strive to introduce products with new specifications and features, thereby accumulate special technical barriers to entry. b. Higher customer loyalty

As information, transactions and business operations are considerably digitalized nowadays, loss of data may result in inestimable damage. Therefore, even though security is costly, it is still the top priority for enterprises in choosing their RAIDs. Since RAIDs do not have industrial standards, each brand opts for different processing methods and results in terms of structure, feature, interface, fault tolerance and efficiency. Products of different brand cannot substitute each other. For data security concerns, and increasing conversion cost due to high unit price of the products, we often enjoy higher customer loyalty.

RAIDs are mostly used in professional applications such as midrange server, mainframe, work station, servers, etc. with a higher unit price. Even though the specifications of interfaces including SATA, SAS and Fibre continue to improve, the same type of interfaces can support hard drives with newer specs (e.g., RAID with SAS 3G interface can use SAS 6G hard drives) with a less-than-optimal efficiency. In contrast, issues including downtime, hard drive backup and transfers shall be considered when replacing storage systems. Thus, the change of generation for RAID occurs at a lower frequency than the peripherals of personal computers. RAIDs have a longer life cycle of about two to three years.

• c. Products with longer life cycles

RAIDs are mostly used in professional applications such as midrange server, mainframe, work station, servers, etc. with a higher unit price. Even though the specifications of interfaces including SATA, SAS and Fibre continue to improve, the same type of interfaces can support hard drives with newer specs (e.g., RAID with SAS 3G interface can use SAS 6G hard drives) with a less-than-optimal efficiency. In contrast, issues including downtime, hard drive backup and transfers shall be considered when replacing storage systems. Thus, the change of generation for RAIDs occurs at a lower frequency than the peripherals of personal computers. The former has a longer life cycle of about two to three years.

• d. High market concentration

Currently, the majority of RAID controllers are sold to server manufacturers and adopted by mission-critical operations, e.g., aerospace, medical, e-commerce and process

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management. Using RAID of the server brand, whether it is self-developed or commissioned by the manufacturer, is more reliable in terms of compatibility and safety. Therefore, internal RAID controllers are often shipped with servers whereas external RAID controllers often require system integrators (some system integrators produce their own RAID controllers, e.g., EMC.) However, even for companies with long-term business relationships, new products still need to undergo testing for several months. Quality and reputation accumulated over the years have forged challenging barriers of entry. Therefore, over 80% of the market share concentrates on the top ten manufactures. Professional manufactures of RAID controller inevitably have to face the issue of market share expansion in the future.

5.13 Research and Development:

1. Research and development expenses from 2016 to the date of publication of the annual report

report	report
		Unit; NT$ thousands
Year	2016	2017	2018	2019	2020	2021(As of March31)
R&D Expenses	365,295	342,825	305,133	370,889	299,039	72,630
Revenue	1,955,428	1,626,233	1,384,101	1,378,533	1,130,547	245,008
Percentage of Revenue(%)	18.68%	21.08%	22.05%	26.90%	26.45%	29.64%

1. R&D accomplishments up to the date of publication of the annual report:

2. 2016

3. Integrated motherboard which supported FCoE port, with high-speed and stability of FC and high penetration and easy deployment of ethernet.

4. Launched a new unified cloud storage system – EonStor GS family, a powerful storage solution combining files, blocks and cloud.

5. Launched a new SME scalable unified storage system - EonStor GSe family.

6. Launched the new EonStor DS 1036B, a storage system specifically for 2.5-inch, small-sized hard drives.

7. Introduced a new management tool, EonOne, to make storage management easier. The tool not only has a built-in wizard for initial configuration and streamline workflows guiding users to quickly and easily complete all storage-related setup, but also enables centralized management over multiple systems as well as features such as storage resource management (SRM), system monitoring, access authorization and event notification.

8. Launched our flagship unified storage system, EonStor GS 4000, with the greatest advantages being its excellent storage setup and connectivity flexibility. The single system has 32 host ports and supports multi-protocol data access as well as hybrid storage.

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• Our products were once again acknowledged by the 2016 Gartner Magic Quadrant report and were one of the top 19 storage brands in the world. Cloud gateways and storage tiering feature of our storage products within the EonStor GS family were widely accepted.

• EonStor GS products won the Annual Hybrid Disk Array Storage Product Award of the UK Storage Magazine.

• Storage systems which supported super high speed host interface: 56Gb/s InfiniBand, 40Gb/s iSCSI, and four 16Gb/s FC.

• EonStor GS storage system which supported symmetric active-active controllers.

• 2017

• Storage systems which supported super high speed host interface, including 56Gb/s InfiniBand, 40Gb/s iSCSI, and 16Gb/s FC.

• Storage system which supported Symmetric Active-Active controllers with an added convenient technical service manager function.

• Won the honor for SPC-2 Price-Performance.

• The turbo model, EonStor GS 3000T/4000T, brought breakthrough performance enhancement.

• Used our storage systems and Intel servers to build SCHAEFER, a well-known German company, a super high speed IT structures, 57 times faster than the original structure.

• EonStor DS 4000 obtained the Autodesk Flame 2018 certification, providing a more powerful and professional media solution.

• Launched the EonStor GSe Pro 200 family, a multiple operating systems (OS) data sharing cloud integrated storage system for SMEs.

• Launched 2U 25-bay high density blazing speed All-flash storage system.

• Launched the brand-new EonStor GSe Pro 3000 family.

• Launched EonStor GS 3025B, a high density 2U 25-bay storage system, perfectly enhancing server room efficiency.

• EonStor DS 3000U was upgraded to SAS 12Gb/s to solve the transmission bottleneck and doubled the capacity expansion.

• EonStor GS 3060, a new high density 4U 60-bay storage system to solve the explosive data growth and server room issues.

• Entry-level storage system fully supported the 12Gb/s SAS interface, accelerating storage efficiency for SMEs.

• Launched two Thunderbolt storage solutions which supported 4K video editing.

• Launched the EonStor GSe Pro storage system. The complete product line offered entry-level customers with more options.

• Service Manager and service entry provided simpler and easier support to the storage systems.

• Released the EonStor GS 5000 family, our flagship unified storage system.

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• Included in Gartner Magic Quadrant for three consecutive years.

• 2018

• 6 Gb/s network bridge which supported 25Gb/s fast ethernet interface.

• 6 Gb/s network bridge which targeted dual controller models.

• AI all-in-one machine - EonStor GSi 3000 and 5000 families.

• Hybrid cloud storage products - GSc 2000, 3000, and 5000 families.

• All-flash storage solutions - EonStor GSa 2000, 3000, and 5000 families.

• Hybrid cloud solutions - EonCloud Gateway.

• Provided deduplication and compression technologies.

• Virtualization solutions - Infortrend vCenter Plug-in management kit.

• 2019

• Supported 32Gb/s high speed FC transmission interface.

• EonStor GS/GSc/GSa/GSi/GSe/GSe Pro families, unified storage devices which supported Docker platform.

• Launched EonStor GS 3000/4000 Gen2, a new generation of unified storage system, GS 3000/4000.

• Launched EonStor GSe 3000/4000 Gen2, a new generation of SME scalable unified storage system GSe 3000/4000.

• Introduced EonStor CS 2000, 3000, and 4000 families, scale-out NAS storage systems.

• Launched EonView, a desktop utility for shared storage.

• Released M&E Shared Storage Solution, a solution specifically for video edition industry.

• Released Office Shared Storage Solution, a solution specifically for SME offices.

• All-flash storage array models of EonStor GSa with 25GbE connectivity won the Future's Best of Show Award organized by the National Association of Broadcasters.

• EonStor GSc family, the hybrid storage devices, won the "Storage Product of the Year" and the "Cloud Enabler of the Year" awards of UK's Storage Magazine.

2020

• Launched EonServ 5000 Gen2, a new generation of system which combined Network Video Recorder (NVR) server with data storage function.

• Added SMB Multichannel function to EonStor CS, a scale-out NAS storage system, allowing end-user devices to connect with Infortrend devices via a converged NIC to ensure uninterrupted network services.

• EonStor CS family, a scale-out NAS storage system, obtained the Veeam Ready Repository certification, proving quick and reliable backup of data on virtual machines.

• For improvement in data access efficiency and storage capacity utilization rate, the scale-out NAS storage system, EonStor CS family, adopted distributed mode as well as added the DNS load balancing and SSD cache functions.

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• For big data analysis, high performance computing (HPC) and machine learning, the scale-out NAS storage system, EonStor CS, adopted RDMA for internal network to enhance the overall cluster performance.

• Introduced EonStor GS hybrid cloud integrated data storage solution, fully compatible with Hitachi content platform (HCP).

• EonServ 5000 Gen2 hybrid storage server obtained the VMS certification of Milestone Xprotect, building a quality video monitoring IT infrastructure.

• For two consecutive years, the Company won the "Editor Choice-Company" and "Cloud Product of the Year" awards of UK's Storage Magazine (EonStor GS Gen2 models).

5.1.4 Long- and short-term business development plans

Short-term BusinessDevelopmentPlan	Long-term BusinessDevelopmentPlan
(1) Actively research and develop new products to maintain our leading position in technology.	(1) Introduce CRM system to establish a global customer service team for enhancing customersatisfaction.
(2) Acquire medium and large ODM customers to expand ouroperationscale.	(2) Expand product lines to satisfy customers' needforone-stop shop.
(3) Develop new applications to increase market share.	(3) Establish R&D centers to proactively conduct R&D on future technologies and secure ourproductleading position.
(4) Participate in various storage related exhibitions both at home and abroad to enhance brand awareness.

5.2 Market and Sales Overview:

5.2.1 Market analysis:

A. Sales Region:

Unit: NT$ thousands

2.1 Market analysis: Sales Region:	2.1 Market analysis: Sales Region:			Unit: NT$ thousands	Unit: NT$ thousands
Year		2019		2020
Region		Amount	Ratio (%)	Amount	Ratio (%)
Domestic		53,028	3.85%	59,380	5.25%
Overseas	America	156,444	11.35%	127,667	11.29%
	Europe	326,081	23.65%	311,860	27.58%
	Asia	698,914	50.70%	498,860	44.13%
	Others	144,066	10.45%	132,780	11.75%
	Subtotal	1,325,505	96.15%	1,071,167	94.75%
	Total	1,378,533	100%	1,130,547	100%

B. Market Share :

Gartner's statistics show that Infortrend Technology accounted for 1.7% of the

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worldwide external storage equipment shipment in 2016.

C. Future market supply and demand and Future Growth:

At present, the storage equipment can be categorized into DAS, NAS, and SAN. As DAS requires direct connection with the server, it is gradually replaced by NAS and SAN under the network structure. Thus, both NAS and SAN markets show a promising future.

Whether it be DAS, NAS or SAN, RAID system is relied on as the main storage equipment. The most important component of the RAID system is RAID controllers, which are divided into two types: internal or external. Internal RAID controllers are mostly sold with servers; thus, 80% of the market is dominated by manufacturers such as HP, LSI and Adaptec. With the rise of rack dense server and RAID on motherboard, internal RAID system will gradually be replaced by external RAID systems (i.e., NAS and SAN) and market for the later will continue to grow.

D. Competitive Niches:

RAID controllers have high technical requirements. The Company has accumulated years of experience on software and hardware R&D as well as manufacturing since its establishment. We are ahead of others in terms of technical level and have the R&D capability in hardware integration to ensure product reliability and performance. In line with market trends, we continuously develop products which support various industrial standards (e.g., SAS, iSCSI, and Fibre channel) and the next-generation products to satisfy various demands.

E.Favorable and unfavorable factors for long-term development and countermeasures:

• (1) Favorable factors:

• A. Robust development of the internet

Internet has become increasingly popular around the world in recent years. In addition to an increasing number of internet users, online transactions and information digitalization become part of life. As hardware technology advances, various applications, e.g., wireless network, online shopping, and online games, continue to evolve and significantly improve the convenience of life. People's lifestyles are changing and their reliance on internet is growing. Limited by bandwidth, the transmission speed is slow in the past. The situation where internet is mostly used on text and picture transmission will change due to the construction of broadband network. Applications which transmit sound and image would become more popular in the future, accompanied by a significant increase in data bit. The existing hard drive technology has yet to catch up with the increase in data volume. Effective storage media management devices are essential in enhancing the access efficiency and the main function of RAID

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controller is effective management of hard drives. Therefore, the internet development is an important driving force for our product growth.

• B. Solid R&D and innovation capabilities

Since its establishment, the Company has been committed to product design and development as well as technology innovation. Our R&D team has the ability to design hardware, firmware and software, such high-density RAID with hot swapping and redundant functions (power suppliers, RAID controllers, etc.), products which support DC supply of the telecommunications industry, and NAS products with ZFS, dual controllers and support data de-duplication. Due to our strong R&D capabilities, we can keep up with customer demands and industry developments, and maintain our product competitiveness and profitability.

• C. Difficult to find substitute product

The Company's product, RAID controllers, are positioned as the "administrator" of storage devices. Our current focus is on hard drive management, i.e., enhance access speed and add fault tolerance feature. Even after a more powerful storage device is developed in the future, the "administrator" can still improve the access speed and data security. In terms of cost effectiveness, it has its market value. Therefore, in comparison to the producers of hard drives and other storage devices, our product life can be extended longer and is more difficult to be replace.

• (2) Unfavorable factors and countermeasures:

• A. Some key components still rely on imports

Key components for the Company's products, such as CPU, currently rely on supplies from overseas manufacturers. It often takes more than one month from placing the orders to shipments. Also, as our order quantities are less than that of other information products, we have limited control over the suppliers. Consequently, we face business risk from the possible disruption of important parts and components which would affect our production. The Company adopts the following countermeasures:

• a. Besides maintaining good and long-term cooperation with existing key suppliers, we seek alternative procurement sources to avoid having purchases overly concentrated on a small number of manufacturers and increasing the business risk.

• b. We set the inventory level of key components based on estimated future supply and demand of products and exercise tight control over inventory quantity with considerations on costs of inventory and supply shortage to avoid the risk of price decline.

94

B. A lack of RAID talents at home and abroad.

Countermeasures: Focus on human resources development, long-term training of talents and employee profit-sharing/stock ownership plan to attract talents.

5.2.2 Main applications and manufacturing process of key products:

A. Main application of key products:

At present, there are a variety of choices on RAID's hardware components such as hard drives and interfaces on the market and they require different RAID type depending on the application environments. More advanced RAIDs are normally adopted in an environment more demanding of information security. Factors such as price, space, distance, efficiency, scalability, backup methods and so on shall also be taken into account. Environments for advanced, mid-range and entry-level RAID are list as follows:

• (1) Advanced

• A. Mission-critical non-stop applications

• a. Aerospace transportation unit, telecommunications operations, medical and scientific research units

• b. Large internet operators (ISP and ICP), transnational enterprise network, E-Business operator

• c. Securities and futures industry, trading centers

• d. Semiconductor Industry

• e. High-speed data interchange processing center

• B. Demand for ultra-high capacity and ultra-high speed

• a. Animation films or advertising production

• b. Online library

• c. Near-line file backup

• d. Online video blog

• e. Vault data management system

• (2) Mid-range and entry-level

• a. Graphics workstation & computer-aided design (CAD/CAM/CAE)

• b. Email servers, network servers

• c. Video-On-Demand, Audio-On-Demand

• d. Data warehouse operator, SME network server

• e. Hospitals & government bodies

• f. Servers for small companies and departments

• g. Small Office Home Office (SOHO)

• h. Digital video recording equipment

• i. Nonlinear data editing

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B. Manufacturing process:

==> picture [498 x 179] intentionally omitted <==

5.2.3 Supply Status of Main Materials: (using codes)

Main Material	KeySupplier	Domestic	Overseas	SupplySituation
HD	A3082	V		Passed
	A3037		V	Passed
ASIC	A0507	V		Passed
	A3133		V	Passed
CPU	A0649	V		Passed
	A0173	V		Passed

5.2.4 Major Suppliers and Clients:

A. Key Suppliers: (using codes)

Unit: NT$ thousands

									Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
	2019				2020				2021 (As of March 31)
Item	Name	Amount	Percentag e (%)	Relation with Issuer	Name	Amount	Percentag e (%)	Relation with Issuer	Name	Amount	Percentage (%)	Relation with Issuer
1	C	259,351	18.81	-	C	275,747	24.39	-	C	93,165	38.03	-
2	Others	1,119,183	81.19	-	Others	854,800	75.61	-	Others	151,843	61.97	-
	Total	1,378,534	100	-	Total	1,130,547	100	-	Total	245,008	100	-

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B. Key Buyers:

Unit: NT$ thousands

	B. Key Buyers:	B. Key Buyers:	B. Key Buyers:	B. Key Buyers:					Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
	2019				2020				2021 (As of March 31)
Item	Name	Amount	Percentag e (%)	Relation with Issuer	Name	Amount	Percentag e (%)	Relation with Issuer	Name	Amount	Percentag e (%)	Relation with Issuer
1	A3041	78,966	14.52	-	A3082	77,782	16.46	-	A3037	19,892	15.84	-
2	A3082	64,857	11.93	-	A3037	71,905	15.22	-	A0173	12,992	10.34	-
					A3041	57,406	12.15	-
	Others	400,019	73.55	-	Others	265,455	56.17	-	Others	92,736	73.82
	Total	543,842	100	-	Total	472,548	100	-	Total	125,620	100	-

Note:Changes are primality caused by meeting demand for different products and lowering purchase prices.

5.2.5 Production quantity and amount in the most recent two years

Unit: PCS; NT$ thousands

				Unit: PCS;NT$thousands	Unit: PCS;NT$thousands	Unit: PCS;NT$thousands
Year Output Major Products	2019			2020
	Capacity	Quantity	Amount	Capacity	Quantity	Amount
RAID controllers	72,000	53,318	594,928	50,000	45,591	522,057

5.2.6 Shipments and sales in the most recent two years:

Unit: PCS; NT$ thousands

					Unit: PCS;NT$thousands	Unit: PCS;NT$thousands	Unit: PCS;NT$thousands	Unit: PCS;NT$thousands
Year Shipm ent/Sales MajorProducts	2019				2020
	Domestic		Export		Domestic		Export
	Quantity	Amount	Quantity	Amount	Quantity	Amount	Quantity	Amount
RAID controllers	3,496	40,485	60,392	1,298,636	3,228	37,118	49,765	1,044,785
Others	-	12,670	-	26,742	-	22,507	-	26,136
Total	3,496	53,155	60,392	1,325,378	3,228	59,625	49,765	1,070,922

5.3 Human Resources

Employee Data during the Past Two Years

	Year	2019	2020	As at Mar. 31st,2021
No. of Employees	Administration personnel	126	106	109
	R&D personnel	297	293	287
	Production personnel	85	81	81
	Total	508	480	477
Average age		42.5	38.1	38.22
Average year of services		6.32	8.15	8.34

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Distribution of Education	PhD	0.59%	0.21%	0.21%
	Master's degree	30.12%	27.08%	26.42%
	Bachelor's degree	59.65%	63.75%	64.36%
	Senior High School	9.25%	8.75%	8.81%
	Below Senior High School	0.39%	0.21%	021%

5.4 Environmental Protection Expenditure

5.4.1 Total Losses and Penalties

The loss or penalty caused by environmental pollution during the latest year and up to the printing date of this annual report: None

5.4.2 Countermeasures and possible disbursements to be made in the future: None

5.5 Labor Relations

• (I) Employee welfare and benefits, continuing education, training, and retirement plans and the implementation status thereof, agreements between labor and management, measures taken to safeguard employee rights:

• The Company complies with labor laws and regulations in Taiwan as well as internationally recognized principles of basic labor rights to protect the legal rights and interests of employees.

• Reasonable compensation and welfare packages

  • (1) In addition to an annual salary of 12 months, employees are entitled to a 2-month festival bonus. Performance and surplus bonuses are distributed based on the annual performance of the Company and individual.

  • (2) The Company has established the "Employee Welfare Committee" to coordinate and organize various welfare activities of the Company for employees to maintain a work-life balance. Welfare measures are listed below:

    • a. Company trips, activities, etc. are regularly organized to provide employees physical and metal relaxation.

    • b. Cash gifts for birthday, Labor Day, and Mid-Autumn Festival as well as subsidies for childbirth, weddings and funeral.

    • c. Benefit allowance for domestic and overseas travel, personal education and training or book purchases.

• A safe and healthy work environment for employees:

  • (1) Set up a dedicated occupational safety and health unit or personnel, comply with rules associated with the Occupational Safety and Health Act, and continuously promote and implement occupational safety and health management to ensure a safe working environment for employees.

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• (2) In addition to labor insurance and national health insurance, the Company provides free group insurance, regular health examinations for employees, and monthly on-site health consultation services and environmental examinations provided by occupational medicine specialists from National Taiwan University Hospital in order to facilitate employees in health management and promotion.

• Employee training and development:

• We believe that the continuous employee growth is the key to enhance the Company's competitiveness. Therefore, in order to improve employees' knowledge and skills and implement the Company's policies and philosophy, a diverse education and training mechanism has been established to achieve the goal of talent training and development.

• (1) Diverse training mechanism

• a. Training for new recruits

• In order to facilitate fresh graduates with fitting into the Company and acquaint themselves with the industry, we organize basic training, professional technical basis and advanced courses for new recruits to familiarize themselves with the Company's basic operation and relevant knowledge in products, technology and process as well as attitudes and competence required at work in a short time.

• b. Professional training courses

• i. In-house training courses: R&D-related courses, such as product development plans, product sales analysis, and quality R&D and management are held on a regular basis for employees to understand the product blueprint, sales and quality and thereby carry out R&D from a macro perspective.

• ii. Short-term training: We set up a short-term training mechanism for project needs. Employees can actually work with customers and project contact persons during the training period to understand the detailed work procedures of the training unit and accumulate practical experience and competitive advantages.

• iii. External training: Employees may apply for external training courses according to their work development needs with the consent of their supervisors, or the Company may assign employees to attend seminars or training courses organized by external training institutions and thereby acquire new industrial knowledge and enhance their professional competence.

• c. Skill certification mechanism

• In order to implement employee training and development as well as build an organizational learning culture, skill certification mechanisms are implemented for operators and integrated with the remuneration and promotion system for implementation purpose.

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• (2) Careen plans

  • a. The Company adopts the "dual career ladder": management position and technical professionals. Through regular assessment, training and observation, supervisors would discuss with employees on their aptitude directions.

  • b. Infortrend Technology encourages outstanding employees to develop second skills through job rotation and short-term training.

• Retirement system:

• (1) The Company has established an employee retirement system in accordance with the "Labor Standards Act" and the "Labor Pension Act". Employees are entitled to apply for retirement when one of the conditions below is met:

  • a. Where the employee attains the age of 55 and has worked for 15 years or more,

  • b. Where the employee has worked for 25 years or more, or

  • c. Where the employee attains the age of 60 and has worked for 10 years or more.

• (2) Pension standards:

  • a. Old pension system: Subject to the Labor Standards Act where employee's pension is calculated based on the employee's length of service and average monthly salary in the final six months before retirement.

  • b. New pension system: Subject to the Labor Pension Act where the employer is required to contribute 6% of the employees' salary to the employees' individual retirement reserve accounts on a monthly basis.

No employees have applied for retirement in the past three fiscal years.

1. Agreements between Labor and Management:

2. (1) We set up "Employee Suggestion Box" and "Employee Complaint Mechanism" to ensure employees' opinions/questions can be expressed fully and are handled and addressed fairly, reasonably and efficiently.

3. (2) We convene "labor-management meetings" regularly to communicate important decisions of the Company and promote labor-management relations.

4. (3) Since establishment, the Company has not had any loss incurred due to industrial disputes.

5. (II) Any losses suffered by the Company in the most recent fiscal year and up to the date of publication of the annual report due to industrial disputes (including any violations of Labor Standards Act found in labor inspection, specifying the disposition dates, disposition reference numbers, the articles and details of law violated, and the content of the dispositions), and disclosing an estimate of possible expenses that could be incurred currently and in the future and countermeasures being or to be taken. If a reasonable estimate cannot be made, an explanation of the facts of why it cannot be made shall be provided: None.

100

5.6 Important Contracts

(I) Supply/sales contracts

Nature	Counterparty	Duration	Major contents	Restrictive covenants
Sales	Foreign customer	Effective from July 10, 2006 until terminated bynotice of eitherparty	Product sales	-
Sales	Foreign customer	Effective from December 1, 2010 until terminated bynotice of eitherparty	Product sales	-
Sales	Foreign customer	Effective from May 4, 2015 until terminated bynotice of eitherparty	Product sales	-
Sales	Foreign customer	Effective from May 1, 2016 until terminated bynotice of eitherparty	Product sales	-
Sales	Foreign customer	Effective from May 1, 2016 until terminated bynotice of eitherparty	Product sales	-
Sales	Foreign customer	Effective from June 26, 2016 until terminated bynotice of eitherparty	Product sales	-
Sales	Foreign customer	March 1, 2019 ~ February28, 2022	Product sales	-
Purchase	Domestic vendor	Effective from December 30, 2003 until terminated bynotice of eitherparty	Power supplies	-
Purchase	Domestic vendor	Effective from February 1, 2004 until terminated bynotice of eitherparty	Power supplies	-
Purchase	Domestic vendor	Effective from February 18, 2004 until terminated bymutual agreement	ASICs	-
Purchase	Foreign customer	Effective from February 10, 2006 until terminated bynotice of eitherparty	ASICs	-
Purchase	Domestic vendor	Effective from 2007 until terminated by notice of eitherparty	Brandcom chips	-
Purchase	Domestic vendor	Effective from March 30, 2007 until terminated bynotice of eitherparty	PCBs	-
Purchase	Domestic vendor	Effective from October 1, 2007 until terminated bynotice of eitherparty	Mechanical parts	-
Purchase	Domestic vendor	Effective from January 7, 2008 until terminated bynotice of eitherparty	CPUs and ASICs	-
Purchase	Domestic vendor	Effective from October 14, 2009 until terminated bynotice of eitherparty	Samsung SSD	-
Purchase	Domestic vendor	Effective from May 13, 2010 until terminated bynotice of eitherparty	Fans	-
Purchase	Domestic vendor	Effective from July 23, 2010 until terminated bynotice of eitherparty	HDD	-
Purchase	Domestic vendor	Effective from September 18, 2012 until terminated bynotice of eitherparty	Mellanox chips	-
Purchase	Foreign customer	Effective from January 4, 2019 until terminated bynotice of eitherparty	Transceivers	-
Purchase	Domestic vendor	Effective from June 30, 2019 until terminated bynotice of eitherparty	DIMM	-

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(II) Technical collaboration contract: None.

(III) Engineering contract: None.

(IV) Long-term loans: None.

• (V) Other contracts: None.

102

Chapter VI. Financial Information

6.1 Most Recent 5-Year Concise Financial Information

• 6.1.1 Most Recent 5-Year Concise Consolidated Balance Sheet and Consolidated Statement of Comprehensive income

A. Consolidated Condensed Balance Sheet

Unit: NT$ thousands

Year Item	Year Item	Financial summaryfor the last fiveyears(Note 1)	Financial summaryfor the last fiveyears(Note 1)	Financial summaryfor the last fiveyears(Note 1)	Financial summaryfor the last fiveyears(Note 1)	Financial summaryfor the last fiveyears(Note 1)	As of March 31, 2021 (Note2)
		2016	2017	2018	2019	2020
Current assets		4,093,447	4,003,240	4,221,579	4,479,236	4,431,326	4,522,379
Financial assets at fair value through profit or loss - non-current		97,414	103,025	61,912	73,696	27,547	28,688
Property, plant and equipment		651,193	634,747	620,722	613,993	596,401	594,946
Right-of-use assets		-	-	-	28,654	17,091	14,103
Intangible assets		3,903	3,700	1,572	1,508	721	615
Other assets		57,236	47,816	62,222	47,765	46,065	45,994
Total asset		4,903,193	4,792,528	4,968,007	5,244,852	5,119,151	5,206,725
Current liabilities	Before distribution	565,671	557,054	746,098	920,473	1,067,624	1,125,097
	After distribution	816,014	668,535	856,571	1,086,246	Note 3	Note 3
Non-current liabilities		74,285	72,837	75,093	89,605	87,180	82,866
Total liabilities	Before distribution	639,956	629,891	821,191	1,010,078	1,154,804	1,207,963
	After distribution	890,299	741,372	931,664	1,175,851	Note 3	Note 3
Equity attributable to shareholders of the parent		4,263,237	4,162,637	4,146,816	4,234,774	3,964,347	3,998,762
Common stock		2,791,110	2,796,819	2,796,463	2,762,907	2,735,515	2,735,515
Capital surplus		88,388	92,179	91,785	89,704	88,802	88,802
Retained earnings	Before distribution	1,411,213	1,277,060	1,290,611	1,375,174	1,134,682	1,168,616
	After distribution	1,160,870	1,165,579	1,180,138	1,209,401	Note 3	Note 3
Other equityinterest		(27,474)	(3,421)	(2,062)	6,989	5,348	5,829
Treasurystock		-	-	(29,981)	-	-	-
Non-controlling interest		-	-	-	-	-	-
Total equity	Before distribution	4,263,237	4,162,637	4,146,816	4,234,774	3,964,347	3,998,762
	After distribution	4,012,894	4,051,156	4,036,343	4,069,001	Note 3	Note 3

Note 1: The above financial information audited by CPA.

Note 2: The consolidated financial report for the first quarter of 2021 were reported in the Board meeting on May 6 and audited by CPA.

Note 3: Pending shareholders’ approval.

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B. Consolidated Condensed Statements of Comprehensive Income

Unit: NT$ thousands /Earnings Per Share (NT$)

Year Item	Financial summary for the last five years	Financial summary for the last five years	Financial summary for the last five years	Financial summary for the last five years	(Note 1)	As of March 31, 2021 (Note 2)
	2016	2017	2018	2019	2020
OperatingRevenue	1,955,428	1,626,233	1,384,101	1,378,533	1,130,547	245,008
Gross profit	927,813	724,443	572,967	648,373	492,154	111,456
Operatingincome	252,868	126,384	45,580	14,013	(30,151)	(8,607)
Non-operating income and expenses	88,031	4,509	88,261	216,863	(30,271)	47,752
Profit before tax	340,899	130,893	133,841	230,876	(60,422)	39,145
Net income (loss) from continuing operations	298,080	116,988	119,414	202,573	(65,419)	33,934
Loss from discontinued operations	-	-	-	-	-	-
Netincome (loss)	298,080	116,988	119,414	202,573	(65,419)	33,934
Other comprehensive income for the year, net of tax	(6,049)	22,721	(438)	(2,635)	(7,596)	481
Total comprehensive income forthe year	292,031	139,709	118,976	199,938	(73,015)	34,415
Profit attributable to owners of theCompany	298,080	116,988	119,414	202,573	(65,419)	33,934
Profit attributable to non-controllinginterests	-	-	-	-	-	-
Total comprehensive income attributable to owners of the Company	292,031	139,709	118,976	199,938	(73,015)	34,415
Total comprehensive income attributable to non-controllinginterests	-	-	-	-	-	-
Earningsper share(EPS)	1.07	0.42	0.43	0.73	(0.24)	0.12

Note 1: The above financial information audited by CPA.

Note 2: The consolidated financial report for the first quarter of 2021 were reported in the Board meeting on May 6 and audited by CPA.

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6.1.2 Most Recent 5-Year Concise Balance Sheet and Statement of Comprehensive income

A. Condensed Balance Sheet

Unit: NT$ thousands

Year Item	Year Item	Financial summary for the last five years (Note 1)	Financial summary for the last five years (Note 1)	Financial summary for the last five years (Note 1)	Financial summary for the last five years (Note 1)	Financial summary for the last five years (Note 1)
		2016	2017	2018	2019	2020
Current assets		4,231,301	3,972,992	4,170,343	4,427,219	4,358,439
Financial assets at fair value through profit or loss - non-current		97,414	103,025	61,912	73,696	27,547
Investments accounted for using the equitymethod		14,861	38,111	64,260	53,675	50,075
Property, plant and equipment		646,229	627,136	612,437	606,417	591,332
Right-of-use assets		-	-	-	19,166	12,876
Intangible assets		3,903	3,700	1,572	1,508	721
Other assets		48,272	41,852	55,867	39,083	40,643
Total asset value		5,041,980	4,786,816	4,966,391	5,220,764	5,081,633
Current liabilities	Before distribution	548,073	533,231	731,648	894,677	1,044,603
	After distribution	798,416	644,712	842,121	1,060,450	Note 2
Non-current liabilities		230,670	90,948	87,927	91,313	72,683
Total liabilities	Before distribution	778,743	624,179	819,575	985,990	1,117,286
	After distribution	1,029,086	735,660	930,048	1,151,763	Note 2
Equity attributable to shareholders ofthe parent		4,263,237	4,162,637	4,146,816	4,234,774	3,964,347
Common stock		2,791,110	2,796,819	2,796,463	2,762,907	2,735,515
Capital surplus		88,388	92,179	91,785	89,704	88.802
Retained earnings	Before distribution	1,411,213	1,277,060	1,290,611	1,375,174	1,134,682
	After distribution	1,160,870	1,165,579	1,180,138	1,209,401	Note 2
Other equity interest		(27,474)	(3,421)	(2,062)	6,989	5,348
Treasury stock		-	-	(29,981)	-	-
Non-controlling interest		-	-	-	-	-
Total equity	Before distribution	4,263,237	4,162,637	4,146,816	4,234,774	3,964,347
	After distribution	4,012,894	4,051,156	4,036,343	4,069,001	Note 2

Note 1: The above financial information audited by CPA. Note 2: Pending shareholders’ approval.

105

B. Concise Statements of Comprehensive Income

Unit: NT$ thousands (Earnings Per Share (NT$))

B. Concise Statements	of Comprehensive Income Unit: NT$ thousands (Earnings Per Share(NT$))	of Comprehensive Income Unit: NT$ thousands (Earnings Per Share(NT$))	of Comprehensive Income Unit: NT$ thousands (Earnings Per Share(NT$))	of Comprehensive Income Unit: NT$ thousands (Earnings Per Share(NT$))	of Comprehensive Income Unit: NT$ thousands (Earnings Per Share(NT$))
Year Item	Financial summary for the last five years (Note 1)
	2016	2017	2018	2019	2020
Operating Revenue	1,731,108	1,394,559	1,150,031	1,177,540	966,363
Gross profit	745,216	565,464	442,186	529,646	396,416
Operating income	269,733	105,544	1,744	19,525	(32,774)
Non-operating income and expenses	70,848	25,250	130,635	213,593	(30,135)
Profit before tax	340,581	130,794	132,379	233,118	(62,909)
Net income (loss) from continuing operations	298,080	116,988	119,414	202,573	(65,419)
Loss from discontinued operations	-	-	-	-	-
Net income (loss)	298,080	116,988	119,414	202,573	(65,419)
Other comprehensive income for theyear,net of tax	(6,049)	22,721	(438)	(2,635)	(7,596)
Total comprehensive incomeforthe year	292,031	139,709	118,976	199,938	(73,015)
Profit attributable to owners ofthe Company	298,080	116,988	119,414	202,573	(65,419)
Profit attributable to non-controllinginterests	-	-	-	-	-
Total comprehensive income attributable to owners ofthe Company	292,031	139,709	118,976	199,938	(73,015)
Total comprehensive income attributable to non-controllinginterests	-	-	-	-	-
Earnings per share (EPS)	1.07	0.42	0.43	0.73	(0.24)

Note 1: The above financial information audited by CPA.

106

6.1.3 CPAs and Their Opinions for the Most Recent 5-year

Year Item	Name of CPAs and Audit Opinions for the Most Recent 5-Year	Name of CPAs and Audit Opinions for the Most Recent 5-Year	Name of CPAs and Audit Opinions for the Most Recent 5-Year	Name of CPAs and Audit Opinions for the Most Recent 5-Year	Name of CPAs and Audit Opinions for the Most Recent 5-Year
	2016	2017	2018 (Note)	2019 (Note)	2020
CPA	KPMG Taiwan	KPMG Taiwan	KPMG Taiwan	KPMG Taiwan	KPMG Taiwan
	Yang,Leou-Fong	Kuo,Rou-Lan	Kuo,Rou-Lan	Kuo,Rou-Lan	Kuo,Rou-Lan
	Chiang, Chung-Yi	Yang, Leou-Fong	Yang, Leou-Fong	Lien, Shu-Ling	Lien, Shu-Ling
Audit opinion	An Unqualified Opinion	An Unqualified Opinion	An Unqualified Opinion	An Unqualified Opinion	An Unqualified Opinion

Note: Change of CPA due to administrative adjustment within the CPA firm.

107

6.2 Most Recent 5-Year Financial Analyses

6.2.1 Consolidated Financial Analysis – Based on IFRS

Year Item	Year Item	Most Recent 5-Year Financial Information	Most Recent 5-Year Financial Information	Most Recent 5-Year Financial Information	Most Recent 5-Year Financial Information	Most Recent 5-Year Financial Information	2021(As of March 31)
		2016	2017	2018	2019	2020
Financial Structure %	Debt Ratio	13.05	13.14	16.53	19.26	22.56	23.20
	Ratio of long-term capital to property, plant and equipment	666.09	667.27	680.16	704.30	679.33	686.05
Solvency %	Current Ratio	723.64	718.64	565.82	486.62	415.06	401.95
	Quick Ratio	638.80	641.85	507.82	445.89	381.99	368.40
	Interest earned ratio(times)	129.11	83.27	30.98	32.95	-6.84	18.16
Operating Performance	Accounts receivable turnover(times)	5.00	4.50	4.46	5.09	5.60	1.50
	Average collectionperiod	73	81	82	72	65	61
	InventoryTurnover(Times)	2.19	2.00	1.90	1.83	1.77	0.37
	Accounts payable turnover(times)	3.43	3.29	3.34	2.94	3.06	0.76
	Average days in sales	166	182	192	200	206	247
	Property, Plant and Equipment Turnover (Times)	2.93	2.53	2.20	2.23	1.87	0.41
	Total Assets Turnover (Times)	0.41	0.34	0.28	0.27	0.22	0.05
Profitability	Return on Total Assets(%)	6.25	2.44	2.52	4.08	-1.14	0.69
	Return on Equity (%)	7.03	2.78	2.87	4.83	-1.60	0.85
	Net Income before Income Tax to Paid-in Capital Ratio (%)	12.21	4.68	4.79	8.36	-2.21	1.43
	Profit ratio(%)	15.24	7.19	8.63	14.69	-5.79	13.85
	Earningsper Share(NT$)	1.07	0.42	0.43	0.73	-0.24	0.12
Cash Flow	Cash Flow Ratio(%)	19.36	104.12	31.81	23.52	11.39	-2.84
	Cash Flow Adequacy Ratio (%)	72.94	107.98	89.20	128.64	130.65	119.74
	Cash Reinvestment Ratio (%)	-3.11	7.42	2.81	2.32	-1.01	0
Leverage	OperatingLeverage	1.17	1.24	1.56	3.58	-0.15	2.88
	Financial Leverage	1.01	1.01	1.11	2.06	0.8	0.79
Analysis of financial ratio differences for the last two years. (Not required if the difference does not exceed 20%) 1. The decrease in Times Interest Earned was mainly due to a decrease in revenue and a significant increase in non-operating expenses. 2. The decreases in profitability ratios were mainly due to a decrease in revenue which led to an increase in net loss. 3. The decreases in Cash Flow Ratio and Cash Flow Reinvestment Ratio were mainly due to a decrease in sales which led to a decrease in net cash provided by operating activities. 4. The decreases in OperatingLeverage and Financial Leverage were mainlydue to a decrease in sales.

Note 1: Please refer to page 110 for formulas of these financial ratios. Note 2: The above financial information audited by CPA.

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6.2.2 Financial Analysis – For Parent-company-only – Based on IFRS

Year Item	Year Item	Most Recent 5-Year Financial Information	Most Recent 5-Year Financial Information	Most Recent 5-Year Financial Information	Most Recent 5-Year Financial Information	Most Recent 5-Year Financial Information
		2016	2017	2018	2019	2020
Financial Structure %	Debt Ratio	15.45	13.04	16.50	18.89	21.99
	Ratio of long-term capital to property, plant and equipment	695.00	678.26	691.46	713.38	682.70
Solvency %	Current Ratio	772.00	745.08	569.99	494.84	417.23
	Quick Ratio	710.07	685.76	521.52	459.97	387.50
	Interest earned ratio (times)	128.99	83.21	30.65	33.87	-7.25
Operating Performance	Accounts receivable turnover (times)	3.14	2.67	2.45	2.99	3.46
	Average collection period	116	137	149	122	105
	Inventory Turnover (Times)	3.12	2.55	2.13	1.97	1.90
	Accounts payable turnover (times)	3.46	3.19	3.04	2.72	2.93
	Average days in sales	117	143	171	185	192
	Property, Plant and Equipment Turnover(Times)	2.62	2.19	1.86	1.93	1.61
	Total Assets Turnover (Times)	0.35	0.28	0.24	0.23	0.19
Profitability	Return on Total Assets (%)	6.05	2.41	2.52	4.09	-1.15
	Return on Equity (%)	7.03	2.78	2.87	4.83	-1.60
	Net Income before Income Tax to Paid-in Capital Ratio(%)	12.20	4.68	4.73	8.44	-2.30
	Profit ratio (%)	17.22	8.39	10.38	17.20	-6.77
	Earnings per Share (NT$)	1.07	0.42	0.43	0.73	-0.24
Cash Flow	Cash Flow Ratio (%)	44.04	108.22	28.57	25.42	11.38
	Cash Flow Adequacy Ratio (%)	77.49	113.40	89.09	127.96	124.90
	Cash Reinvestment Ratio (%)	(0.18)	7.35	2.18	2.56	-1.09
Leverage	Operating Leverage	1.10	1.20	11.47	2.32	0.60
	Financial Leverage	1.01	1.02	(0.64)	1.57	0.81
Analysis of financial ratio differences for the last two years. (Not required if the difference does not exceed 20%) 1. The decrease in Times Interest Earned was mainly due to a decrease in revenue and a significant increase in non-operating expenses. 2. The decreases in profitability ratios were mainly due to a decrease in revenue which led to an increase in net loss. 3. The decreases in Cash Flow Ratio and Cash Flow Reinvestment Ratio were mainly due to a decrease in sales which led to a decrease in net cash provided by operating activities. 4. The decreases in OperatingLeverage and Financial Leverage were mainlydue to a decrease in sales.

Note 1: The above financial information audited by CPA.

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※ Formulas of key financial ratios

1. Financial structure

2. (1) Debt Ratio = Total Liabilities / Total Assets

3. (2) Ratio of long-term capital to property, plant and equipment = (Equity + Non-current Liabilities) / Net

Property, Plant and Equipment

1. Solvency

2. (1) Current Ratio = Current Assets / Current Liabilities

3. (2) Quick Ratio = (Current Assets - Inventories - Prepaid Expenses) / Current Liabilities

4. (3) Interest earned ratio = Net Income before Interest expense and income tax / Interest Expenses

5. Operating performance

6. (1) Account receivable turnover (includes account receivable and notes receivable from operations) = Net

Revenue / Average Trade Receivables (includes accounts receivable and notes receivable from operations)

• (2) Average collection period = 365 / account receivable turnover

• (3) Inventory Turnover = Cost of Goods Sold / the average of inventory

• (4) Accounts payable turnover (includes accounts payable and notes payable from operations) = Cost of Revenue / Average Trade Payables (includes accounts payable and notes payable from operations)

• (5) Average days in sales = 365 / Inventory Turnover

• (6) Property, Plant and Equipment Turnover = Net Revenue / Average Net Property, Plant and Equipment

• (7) Total Assets Turnover = Net Revenue / Average Total Assets

• Profitability

• (1) Return on Total Assets = (Net Income (Loss) + Interest Expenses * (1 - Tax Rate)) / Average Total Assets

• (2) Return on Equity = Net Income (Loss) / Average Equity

• (3) Profit ratio = Net Income (Loss) / Net Revenue

• (4) Earnings Per Share = (Net Income Attributable to Owners of the Parent Company - Preferred Stock Dividend) / Weighted Average Number of Shares Outstanding

• Cash flow

• (1) Cash Flow Ratio = Cash flow from operating activities / Current Liabilities

• (2) Cash Flow Adequacy Ratio = Five-year Sum of Cash from Operations / Five-year Sum of Capital Expenditures, Inventory Additions, and Cash Dividend

• (3) Cash Reinvestment Ratio = (Net Cash Provided by Operating Activities - Cash Dividends) / (Gross

• Property, Plant and Equipment + Long-term Investments + Other Non-current Assets + Working Capital)

• Leverage:

• (1) Operating Leverage = (Net Revenue - Variable cost of goods sold and operating expense) / Operating Income

• (2) Financial Leverage = Operating Income / (Operating Income - Interest Expenses)

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6.3 Audit Committee's Review Report for Financial Statement in the Most Recent Fiscal Year

Audit Committee's Review Report

The Board of Directors has prepared the Company's 2020 business report, financial statements and earnings distribution/loss compensation proposal. The financial statements were audited by KPMG with independent auditors' reports issued. The above-mentioned business report, financial statements, and earnings distribution/loss compensation proposal have been reviewed and determined to be accurate by the Audit Committee. According to Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act, we hereby submit this report.

Infortrend Technology Inc.

Convener of the Audit Committee: Hou, Ruey-Fu

March 11, 2021

6.4 Financial Statements for the Most Recent Fiscal Year: Please refer to Page 125.

6.5 Parent Company Only Financial Statement for the Most Recent Fiscal Year, Certified by the CPA: Please refer to Page 185.

6.6 In the Most Recent Fiscal Year and up to the Date of Publication of the Annual Report, Any Financial Difficulties Experienced by the Company or Its Affiliates and How Said Difficulties Will Affect the Company's Financial Situation: None.

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Chapter VII. Review of the Financial Conditions, Financial Performance, and Risk Management:

7.1 Analysis of Financial Status

			Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
Year
Item			Increase
				Change	Remarks
	December 31,	December 31,
			(Decrease)
	2020	2019		ratio %	(Note)
			Amount
Current assets	4,431,326	4,479,236	(47,910)	(1.07)	N/A
Property, plant and
	596,401	613,993	(17,592)	(2.87)	N/A
equipment
Right-of-use assets	17,091	28,654	(11,563)	(40.35)	Note 1
Intangible assets	721	1,508	(787)	(52.00)	N/A
Other assets	73,612	121,461	(47,849)	(39.39)	Note 2
Total assets	5,119,151	5,244,852	(125,701)	(2.40)	N/A
Current liabilities	1,067,624	920,473	147,151	15.99	N/A
Non-current liabilities	87,180	89,605	(2,425)	(2.71)	N/A
Total liabilities	1,154,804	1,010,078	144,726	14.30	N/A
Common stock	2,735,515	2,762,907	(27,392)	(0.99)	N/A
Capital surplus	88,802	89,704	(902)	(1.01)	N/A
Retained earnings	1,134,682	1,375,174	(240,492)	(17.49)	N/A
Other equity interest	5,348	6,989	(1,641)	(23.48)	N/A
Total equity	3,964,347	4,234,774	(270,427)	(6.39)	N/A
Analysis is not required for changes less than 20% in percentage or less than NT$10 million in amount.
Note 1: The decrease in right-of-use assets was mainly due to the decrease in "accumulated depreciation -
right-of-use assets".
Note 2: The decrease in other assets was mainly due to the decrease in "financial assets at fair value
through profit or loss - non-current".
2. Impact of significant changes in the Company's financial position in the most recent two fiscal years
and countermeasures: The Company has no significant changes.

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7.2 Financial Performance:

7.2.1 2020 vs. 2019 operating result analysis

Unit: NT$ thousands

Year
Item			Increase	Change
					Analysis on
	2020	2019
			(Decrease)	ratio %	variance (Note)
Operating Revenue	1,130,547	1,378,533	(247,986)	(17.99)	N/A
Cost of Sales	638,393	730,160	(91,767)	(12.57)	N/A
Gross profit	492,154	648,373	(156,219)	(24.09)	Note 1
Operating expenses	522,305	634,360	(112,055)	(17.66)	N/A
Operating Income	(30,151)	14,013	(44,164)	(315.16)	Note 1
Non-operating income and
	(30,271)	216,863	(247,134)	(113.96)	Note 2
expenses
Profit before tax	(60,422)	230,876	(291,298)	(126.17)	Note 1
Less: Income tax expense
	4,997	28,303	(23,306)	(82.34)	Note 1
(benefit)
Net income	(65,419)	202,573	(137,514)	(67.71)	Note 1
Other comprehensive
income for the year, net of	(7,596)	(2,635)	(4,961)	(188.27)	N/A
tax
Total comprehensive
	(73,015)	199,938	(272,953)	(136.52)	Note 2
income for theyear

Note: Analysis is not required for changes less than 20% in percentage or less than NT$10 million in amount.

• Note 1: Due to COVID-19, revenue dropped significantly. Also, the continuous appreciation of New Taiwan dollars led to increasing cost of revenue which resulted in decreasing operating income, income before income tax and net income.

• Note 2: The decreases in non-operating income and expenses and total comprehensive income for the period was mainly due to a decrease in interest income, foreign exchange loss and an increase in net loss on financial assets at fair value through profit or loss.

• 7.2.2 Sales prediction for the following year and reasons: Please refer to Chapter I. Letter to Shareholders.

• 7.2.3 Possible impact on the Company's finance operations in the future: None.

• 7.2.4 Future countermeasure: N/A.

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7.3 Analysis on Cash Flows:

7.3.1 Analysis on cash flow changes in 2020

Cash,	Net Cash		Impact of		Leverage of Cash	Leverage of Cash
		Net Cash Used by		Cash Surplus
Beginning	Provided by		Exchange		Deficit
	Operating	Investing and
Balance			Rate Changes	(Shortage)	Investm	Financing
	Activities	Financing Activities
(A)			(D)	(A+B+C+D)	ent Plan	Plan
	(B)	(C)
239,223	121,612	(69,660)	(2,187)	288,988	-	-

Explanations on changes in consolidated cash flows in 2020:

1. Operating activities: Mainly due to decreases in financial assets at fair value through profit or loss, accounts payable and other payables.

2. Investing activities: Mainly due to the acquisition and disposal of financial assets at fair value through profit or loss and dividends received.

3. Financing activities: Mainly due to the distribution of cash dividends, the increase in short-term loans, repurchase of treasury shares and repayment of lease principal.

7.3.2 Improvement plans for liquidity shortage: N/A.

7.3.3 Liquidity analysis for 2021

	Net Cash			Remedies for Cash	Remedies for Cash
Cash,			Ch Sl
	Provided by	Cash	as urpus	Shortage
Beginning of			(Shortage)
	Operating	Outflows (C)		Investment	Financing
Year (A)			(A+B-C)
	Activities(B)			Plan	Plan
288,988	156,494	82,065	363,417	-	-

1. (1) Operating activities: Net cash inflow from operating activities is expected to be NT$156,494 thousand.

2. (2) Investing activities: Cash required for capital expenditures is expected to be NT$400,000 thousand.

3. (3) Financing activities: Cash required for the distribution of cash dividends is expected to be NT$82,065 thousand and bank financing is estimated to be NT$400,000 thousand.

We expect the ending balance of cash to be NT$363,417 thousand after adding the increase in cash of NT$74,429 thousand to the beginning balance of NT$288,988 thousand. We do not foresee any cash shortage.

1. Remedies and analysis for cash shortage: None.

7.4 Major Capital Expenditure Items and Impact on Financial and Business :

7.4.1 Major Capital Expenditure Items and Source of Capital: No major capital expenditure

In 2021

7.4.2 Expected Benefits : N/A

7.5 Investment Policy in 2020, Main Causes for Profits or Losses, Improvement Plans and Investment Plans in 2021.

The Group's sales offices in the U.S., Europe and other countries were affected by COVID-19, and the capital expenditure of companies in major economies such as Europe, the U.S.

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and China became conservative. Although the overall sales decreased compared to 2019, the Group cut down various operating expenses and achieved a slightly higher profits in the Group's reinvestments on a year-over-year basis.

7.6 Analysis of Risk Management :

7.6.1Effects of Changes in Interest Rates, Foreign Exchange Rates and Inflation on Corporate Finance, and Future Response Measures :

• (1) Effect upon the company's profits (losses) of interest rate fluctuations and response measures to be taken in the future

  • The interest income or fair value of credit-linked notes and financial bonds invested by the consolidated entity would be affected by changes in market interest rates. However, the impact on the Company's working capital is minimal.

• (2) Effect upon the company's profits (losses) of exchange rate fluctuations and response measures to be taken in the future

  • The consolidated entity is exposed to exchange rate risk arising from sales and purchases in currencies other than the functional currency of entities within the Group. The functional currency of most entities within the Group is the New Taiwan dollar, while U.S. dollar, Renminbi, and Japanese Yen are also adopted. Major transaction currencies include New Taiwan dollars, Euro, U.S. dollar, British Pounds and Japanese Yen.

  • In addition to natural hedge of accounts receivable and accounts payable, the consolidated entity uses forward foreign exchange contracts or other financial instruments with a duration of one year or less to hedge foreign exchange risk.

• (3) Effect upon the company's profits (losses) of changes in the inflation rate and response measures to be taken in the future As most of the consolidated entity's sales are direct or indirect exports, domestic inflation has minimal impact on the consolidated entity.

• 7.6.2 Policies, Main Causes of Gain or Loss and Future Response Measures with Respect to High-risk, High-leveraged Investments, Lending or Endorsement Guarantees, and Derivatives Transactions :

• (1) High-risk and highly leveraged investments: The Group is committed to the development of its core business. Thus, it does not engage in high-risk and highly leveraged investments.

• (2) Loans to other parties: The Group did not provide loans to other parties in the most recent fiscal year and up to the date of publication of the annual report.

• (3) Endorsements and guarantees: The Group did not provide endorsements nor guarantees in the most recent fiscal year and up to the date of publication of the annual report.

• (4) Derivatives transactions: To lower the exchange rate risk on U.S. dollar exposure, the parent company engages in exchange rate derivative instruments when the need arises to control exchange rate risk associated with realized sales revenue (recognized as accounts receivable.)

7.6.3 Future Research & Development Projects and Corresponding Budget :

The Group sets the goal of technology independence and major technologies are developed through years of in-house R&D. In order to expand the operation, enrich the product line and maintain the technological leadership, the Group's R&D plans and expected R&D investments in the coming year are as follows:

115

Unit: NT$ thousands

R&D plan	Progress	Expected R&D investment	Date of completion	Major factors that influence the success of R&D in the future
CS 4014N	Under development	189,000	2021/Q1	Whether the efficiency can reach the target
GS 4025N	Under development		2021/Q2
GS 3025N	Under development
GS 3024N	Under development		2021/Q3	New chipintegration
GS 2024N	Under development		2021/Q3	New chipintegration
DS 4024N	Under development		2021/Q3	New chipintegration
DS 3024N	Under development		2021/Q3	New chipintegration
GSi 208T	Under development		2021/Q1	Hardware/software integration
GSi 3116	Under development		2021/Q1	Hardware/software integration and efficiency
EV 5116	Under development		2021/Q1	Hardware/software integration and efficiency
iSCSI 100G host board	Under development		2021/Q4	Signal stability

7.6.4 Effects of and Response to Changes in Policies and Regulations Relating to Corporate Finance and Sales:

There was no changes in major polities nor laws and regulations at home and abroad in the most recent fiscal year that would affect the Company's financial operations. The Group operates in compliance with relevant laws and regulations both at home and abroad, and constantly monitors associated changes as well as product development trends to fully understand and be able to respond to changes in market conditions and thereby formulate countermeasures accordingly.

7.6.5 Effects of and Response to Changes in Technology and the Industry Relating to Corporate Finance and Sales :

In recent years, hybrid product which supports SAN and NAS simultaneously has emerged as the trend in the storage industry. We have launched similar products and are currently studying and developing other products in the same family in hope to serve our customers with more comprehensive product lines and more diverse software and hardware functions. In addition, the applications of the new-type solid state drive will also be an important new technology. We have launched similar products and will continue to observe the application environment in this area and roll out more related products in the future.

7.6.6 The Impact of Changes in Corporate Image on Corporate Risk Management, and the

Company’s Response Measures :

The consolidated entity has committed to maintaining a sound corporate image for years, and complied with relevant laws and regulations. When incident which may affect the corporate image occurs, a crisis task force will immediately be formed to formulate response measures. Up till now, incident that may damage the Company's corporate image has never

116

occurred.

7.6.7 Expected Benefits from, Risks Relating to and Response to Merger and Acquisition

Plans :

The consolidated entity did not have plans to merge or acquire another company in the most recent fiscal year and up to the date of publication of the annual report. Thus, no such risk exists.

7.6.8 Expected Benefits from, Risks Relating to and Response to Factory Expansion Plans :

The consolidated entity did not expand its plant in the most recent fiscal year and up to the date of publication of the annual report.

7.6.9 Risks Relating to and Response to Excessive Concentration of Purchasing Sources and

Excessive Customer Concentration :

Apart from considering the quality, price and level of cooperation, we have more than one supplier for every raw material to avoid the risk of supply chain disruption. As for sales, we not only actively seek out new cooperation projects, but also strive to expand our channels in hope to minimize potential impacts.

7.6.10 Effects of, Risks Relating to and Response to Large Share Transfers or Changes in

Shareholdings by Directors, Supervisors, or Shareholders with Shareholdings of over

10% :

None.

7.6.11 Effects of, Risks Relating to and Response to the Changes in Management Rights :

None.

7.6.12 Litigation or Non-litigation Matters :

For major litigations, non-litigations, or administrative disputes in the most recent two fiscal years and as of the date of publication of the annual report and have significant impacts on the interests of shareholders or share prices, the facts, amount in dispute, commencement date, major parties involved, and the status shall be disclosed: (1) Consolidated entity: None.

(2) Directors, Supervisors, president, de facto responsible person, and major shareholders with a stake of more than 10%: None.

7.6.13 Other Major Risks :

Information security risk assessment: rmation security risk management structure:

(1) The Company's IT Department is responsible for planning, establishing and promoting information security management rules and procedures. It ensures the implementation of various information security standards through internal and external audits on cyber security annually and continues to improve deficiencies identified during the audits to ensure the information security management procedures keep up with the times.

117

• (2) The Company's Audit Office is the supervising unit for information security. It is responsible for supervising the implementation of internal information security. If any defect is identified during the audits, it would immediately demand the audited unit to propose improvement plans with specific actions and regularly monitor the effectiveness of improvement in order to reduce internal information security risks.

• (3) The organization's operation mode adopts the PDCA (Plan-Do-Check-Act) circular management to ensure the achievement of reliability target and continuous improvement.

Information security policy:

• (1) The Company has established operating standards for information security management to ensure the confidentiality, integrity and availability of the Company's information assets and comply with relevant government regulations.

• (2) Information security risk assessment is conducted regularly every year, high availability and backup/redundancy mechanisms are established according to the risk level, and software and hardware equipment are upgraded in a timely manner to ensure the stable operation of the enterprise as a whole.

• (3) Information security-related data is shared with employees from time to time to raise their awareness on the issue. Employees are required to comply with information security related rules.

Specific information security management programs:

• (1) Equipment An environmental control system is installed in the Company’s security: server room to constantly monitor its temperature and humidity. The system would alter the network management personnel when irregularity is detected to ensure the safety of the information equipment.

• (2) Data The Company has established a comprehensive backup/redundancy security: mechanism. Important internal data have full and incremental backups and disaster recovery drills are conducted regularly to ensure the integrity and availability of backup data.

• (3) Endpoint Anti-virus software is installed on employee computers and security: important servers, and operating system security updates are carried out on a regular basis. Rules on personal password complexity is set to protect terminal equipment from hacking.

• (4) Email Secure gateways are installed to filter suspicious and malicious security: emails. IT department also continuously collects relevant cases and promotes them from time to time to raise awareness of information security and avoid social engineering attacks.

• (5) Network Corporate firewall is used to block malicious attacks from external security: sources and restrictions on internet access are imposed with malicious websites blocked to enhance internet security and reduce hacking risk.

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• (6) Access ▓ All internal systems have access control mechanisms. Login control: requires employees’ personal accounts.

• ▓ Accesses are granted based on employees' organizational level or functions and specific functions cannot be used without authorization.

▓ The rights to access file servers shall be applied via e-procedures. Impact of major information security incidents and response measures Up to the date of publication of the annual report, no material information security breach affecting the operation has been identified. The Company continues to monitor information security issues and updates information security standards and procedures to effectively prevent information security threats as well as reduce operational risks.

7.7. Other Important Matters: None.

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Chapter VIII. Special Disclosure

8.1 Summary of Affiliated Companies

• (I) Consolidated business report of the affiliates:

• 1.Overview of the affiliates:

• (1) Chart of the affiliates:

==> picture [463 x 389] intentionally omitted <==

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

USA
Infortrend Corporation
UK Germany
Infortrend Europe Limited Infortrend Deutschland
GmbH
Affiliates of
Infortrend
Technology Inc. Mauritius
Infortrend Shanghai
Limited
Infortrend Limited
Japan
Infortrend Japan Inc.
Taiwan Taiwan
Prophet Technology Inc. Surveon Technology Inc.
----- End of picture text -----

120

(2)Basic information on affiliates:

Unit: NT$ thousands

Name	Date of Incorporation	Address	Paid-in Capital	Main Business / Products
Infortrend Corporation	1996.10.03	435 Lakeside Dr. Sunnyvale, CA 94085, USA	58,645	Trading of computer peripherals
Infortrend Europe Ltd.	2001.3.31	57 Tempus Business Centre, Kingsclere Road, Basingstoke, Hampshire, RG21 6XG, UK	89,174	Trading of computer peripherals
Infortrend Deutschland GmbH	2006.12.07	Konigsallee 92a, Dusseldorf, 40212, Germany	1,015	Trading of computer peripherals
Name	Date of Incorporation	Address	Paid-in Capital	Main Business / Products
Infortrend Shanghai Limited	2003.6.26	Room 1804, Block C, Ocean International Center, Chaoyang Dist., Beijing, China	68,121	Trading of computer peripherals
Infortrend Japan Inc.	2004.10.17	6F Okayasu Bldg., 1-7-14 Shibaura Minato-ku, Tokyo, 105-0023 Japan	930	Trading of computer peripherals
Prophet Technology Inc.	2008.12.09	7F.-5, No. 102, Sec. 3, Zhongshan Rd., Zhonghe Dist., New Taipei City 235010, Taiwan (R.O.C.)	15,000	Trading of computer peripherals
Surveon Technology Inc.	2008.12.23	6F.-5, No. 102, Sec. 3, Zhongshan Rd., Zhonghe Dist., New Taipei City 235010,Taiwan(R.O.C.)	10,000	Trading of computer peripherals

(3)Industries covered by the business operation of the affiliates:

A. The Company:

The Company mainly engages in the research and development, production and sales of RAID controllers.

B. Infortrend Corporation

A subsidiary set up to expand our U.S. market with principal business being the sales agent of our products.

C. Infortrend Europe Limited

A subsidiary set up to expand our Europe market with principal business being the sales agent of our products.

D. Infortrend Deutschland GmbH

A second-tier subsidiary set up to expand our U.S. market with principal business being the sales agent of our products.

121

E. Infortrend Shanghai Limited

A wholly-own trading company set up through a third area, Mauritius, with principal business being the selling of our products.

• F. Infortrend Japan Inc.

A subsidiary set up to expand our Japan market with principal business being the sales agent of our products.

• G. Prophet Technology Inc.

Trading of computer peripherals in Taiwan

• H. Surveon Technology Inc.

Trading of computer peripherals in Taiwan

(4)Information on Directors, Supervisors, and Presidents of affiliates:

			December31,2020	December31,2020
Name	Title	Name or Representative	Shareholding
			Shares	Percentage (%)
Infortrend Corporation	Directors	Infortrend Technology Inc. Representative:Lo, Shih-Tung	153,824	100%
	Directors	Infortrend Technology Inc. Representative: Pao, Chung-Hua
	Directors	Infortrend Technology Inc. Representative: Lai, Ting-Hua
Infortrend Europe Ltd.	Directors	Infortrend Technology Inc. Representative:Lo, Shih-Tung	2,200,000	100%
	Directors	Infortrend Technology Inc. Representative:Lai,Ting-Hua
	Directors	Infortrend Technology Inc. Representative:Liu, Shu-Hua
Infortrend Shanghai Limited	Directors	Infortrend Technology Inc. Representative:Lo, Shih-Tung	-	100%
	Directors	Infortrend Technology Inc. Representative: Lee, Tse-Han
	Directors	Infortrend Technology Inc. Representative: Chen,Li-Wei
Infortrend Japan Inc.	Directors	Infortrend Technology Inc. Representative:Lo, Shih-Tung	60	100%
	Directors	Infortrend Technology Inc. Representative:Liu, Shu-Hua
	Directors	Infortrend Technology Inc. Representative:Tu, Chien-Fong
Prophet Technology Inc.	Directors	Infortrend Technology Inc. Representative:Lo, Shih-Tung	1,500,000	100%
	Directors	Infortrend Technology Inc. Representative:Lee,Tse-Han
	Directors	Infortrend Technology Inc. Representative: Liu,Shu-Hua

122

2.Operational highlights of affiliates:

Unit: NT$ thousands/As of December 31, 2020

Name of Subsidiary	Capital	Total assets	Total liabilities	Net Worth	Operating Revenue	Operating Income	Net Profit (After-tax)
Infortrend Corporation	58,645	71,088	50,515	20,573	127,667	(9,536)	6,678
Infortrend Europe Ltd.	89,174	51,936	34,452	17,484	101,043	(8,298)	(8,929)
Infortrend Limited	120,270	87,165	86,736	429	166,669	3,851	10,141
Infortrend Japan Inc.	930	14,202	13,488	714	54,818	(2,305)	(1,346)
Prophet Technology Inc.	15,000	17,421	1,318	16,103	3,879	962	569

• 8.1.2 Consolidated financial statements of affiliates: Please refer to Page 125.

8.1.3 Affiliation reports: Not applicable

8.2 Private Placement Securities in the Most Recent Years: None.

8.3 Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years: None.

8.4 Other matters that require additional description: None.

8.5 Situations Listed in Article 36, Paragraph 2, Subparagraph 2 of the Securities and Exchange Act Which Might Materially Affect Shareholders' Equity or the Price of the Company's Securities Occurring During the Most Recent Fiscal Year and up to the Date of Publication of the Annual Report: None.

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Statement of Declaration

Companies required to be included in the consolidated financial statements of affiliates for the year 2020 (from January 1 to December 31, 2020) under the "Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises" are all the same as companies required to be included in the consolidated financial statements of parent and subsidiary companies as provided in IFRS 10 endorsed by the Financial Supervisory Commission (FSC), and relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the aforementioned Consolidated Financial Statements of parent and subsidiary companies, thus the Company does not prepare separate consolidated financial statements of affiliates.

Hereby declare.

Company Name: Infortrend Technology Inc.

Chairman: Shih-Tung Lo

Date: March 11, 2021

124

Independent Auditors' Report

To the Board of Directors of Infortrend Technology Inc.,

Opinion

The Consolidated Balance Sheet as of December 31, 2020 and 2019, and the Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity, and Consolidated Statement of Cash Flow for the period from January 1 to December 31, 2020 and 2019, as well as the Notes to the Consolidated Financial Statements (including the Summary of Significant Accounting Policies) of Infortrend Technology Inc. and its subsidiaries, have been audited and attested by us.

In our opinion, the aforementioned Consolidated Financial Statements are prepared in all material respects in accordance with the "Regulations Governing the Preparation of Financial Statements by Securities Issuers," as well as the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations developed by the International Financial Reporting Interpretation Committee (IFRIC) or the former Standing Interpretations Committee (SIC) as endorsed and issued to take effect by the Financial Supervisory Commission (FSC), which properly present the consolidated financial position of Infortrend Technology Inc. and its subsidiaries as of December 31, 2020 and 2019, and the consolidated financial performance and consolidated cash flows for the period from January 1 to December 31, 2020 and 2019.

Basis for Opinion

We performed the audit in accordance with the "Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants" and the Generally Accepted Auditing Standards. Our responsibility under those standards will be further described in the section titled "CPA's responsibility for the audit on the Consolidated Financial Statements." We, subject to the codes of independence of the accounting firm which we are affiliated with, have kept absolute independent relationship with Infortrend Technology Inc. and its subsidiaries in accordance with the CPA Code of Professional Ethics, and have performed other obligations under this Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters refer to those matters that, in our professional judgment, are of most significance for our audit on the Consolidated Financial Statements for 2020 of Infortrend Technology Inc. and its subsidiaries. These matters have been addressed in the course of Consolidated Financial Statements as a whole and in forming our opinion thereon. We do not express a separate opinion on such matters individually. In our judgment, the key audit matters to be communicated in the audit report are as follows:

125

1. Valuation of the allowance for inventory loss from market price decline

Please refer to Note 4 (8) to the Consolidated Financial Statements for the accounting policy regarding the inventory valuation. Please refer to Note 5 (2) to the Consolidated Financial Statements for the uncertainties of accounting estimates and assumptions regarding the realizability of inventory assessment. Please refer to Note 6 (5) to the Consolidated Financial Statements for an explanation of the inventory assessment.

Description of key audit matters:

Infortrend Technology Inc. and its subsidiaries offers a wide range of products for sale to its customers. Its inventory is measured by cost and the net realized value, whichever is lower. In order to improve the service quality, the Company has spared no effort to improve the product efficiency. The introduction of new products may lead to a drop in the price of old products, resulting in the uncertainty of inventory loss from market price decline and of loss on obsolete and slow-moving inventories.

How the matter was addressed in our audit:

Our main audit procedures regarding the aforementioned key audit matters included the following:

Understand the Company's provision policy for allowance for inventory loss from market price decline and for loss on obsolete and slow-moving inventories and evaluate the appropriateness of the policy; Obtain the evaluation form prepared by the Company to evaluate the performance of the Company, check and verify the data used, and evaluate the correctness of the source data used; Recalculate and evaluate the correctness of the calculation according to the evaluation data used by the Company; Obtain the disclosure information of the Company's financial statements on allowance for inventory, and assess whether the disclosure is appropriate.

2. Evaluation of impairment of trade receivables

Please refer to Note 4 (7) to the Consolidated Financial Statements for the accounting policy regarding the asset impairment evaluation. Please refer to Note 5 (1) to the Consolidated Financial Statements for the accounting estimates and assumptions regarding the evaluation of trade receivables. Please refer to Note 6 (3) to the Consolidated Financial Statements for an explanation of the evaluation of trade receivables.

Description of key audit matters:

As the overall industry is still in the downturn, some customers are affected by the economic climate, and their repayment is not as fast as expected. The provision of allowance for bad debts of trade receivables depends on the Company's policy and the evaluation of the management, which indirectly increases the uncertainty of the evaluation of trade receivables since the evaluation involves human subjective judgment.

How the matter was addressed in our audit:

Our main audit procedures regarding the aforementioned key audit matters included the following:

Understand the Company's evaluation policy for allowance for trade receivables and evaluate the appropriateness of the policy; Obtain the evaluation form prepared by the Company to evaluate the performance of the Company, check and verify the data used, and evaluate the correctness of the source data used; Recalculate and evaluate the correctness of the calculation according to the evaluation data used by the Company; Obtain the disclosure information of the Company's financial statements on allowances for trade receivables and impairment losses, and assess whether the disclosure is appropriate.

126

Other matters

Infortrend Technology Inc. has prepared its Parent Company Only Financial Statements for 2020 and 2019, with the audit report issued by our CPA without any unqualified opinion for future reference.

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

It is the responsibility of management to prepare and fairly present the Consolidated Financial Statements in accordance with the "Regulations Governing the Preparation of Financial Statements by Securities Issuers," as well as the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations developed by the International Financial Reporting Interpretation Committee (IFRIC) or the former Standing Interpretations Committee (SIC) as endorsed and issued to take effect by the Financial Supervisory Commission (FSC), and to maintain internal controls which are necessary for the preparation of the Consolidated Financial Statements to ensure that there are no material misrepresentations that are attributed to fraud or error therein.

In the preparation of the Consolidated Financial Statements, it is also the responsibility of management to assess the ability of Infortrend Technology Inc. and its subsidiaries to continue as a going concern, to disclose relevant matters, and to adopt the accounting basis for going concern, unless the management intends to liquidate Infortrend Technology Inc., Ltd. and its subsidiaries or discontinue operations, or has to do so without any other practical alternatives.

The governing body of Infortrend Technology Inc. and its subsidiaries (including the audit committee) has the responsibility to supervise the reporting process of financial statement.

CPA's responsibility for the audit on the Consolidated Financial Statements

Our audit on the Consolidated Financial Statements aims to obtain reasonable assurance on whether the Consolidated Financial Statements as a whole are free from material misstatement arising from fraud or error, and to issue an audit report. Reasonable assurance refers to high level of assurance. However, our audit conducted in accordance with Generally Accepted Auditing Standards does not guarantee that material misrepresentations in the Consolidated Financial Statements will be detected. Misrepresentations may be attributable to fraud or error. A misrepresentation of an individual amount or amount in aggregate is considered as materiality if it is reasonably expected to affect the economic decisions made by users on the basis of the Consolidated Financial Statements.

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

1. Identified and assessed the risk of a material misrepresentation attributable to fraud or errors in the Consolidated Financial Statements; designed and carried out appropriate countermeasures for the assessed risks; and obtained sufficient and appropriate evidence as the basis for the audit opinion. As fraud may involve collusion, forgery, intentional omission, misrepresentation, or override of internal control, the risk of a material misrepresentation that is not attributable to fraud is higher than that which is attributable to error.

2. Obtained necessary understanding of internal controls pertaining to the audit in order to develop audit procedures appropriate for the circumstances. Nevertheless, the purpose of such understanding is not to express an opinion on the effectiveness of the internal controls of Infortrend Technology Inc. and its subsidiaries.

3. Assessed the appropriateness of the accounting policies adopted by the management, as well as

127

the reasonableness of their accounting estimates and relevant disclosures.

1. Concluded, based on the audit evidence available, on the appropriateness of management's adoption of the accounting basis for going concern and whether material uncertainties exist where events or circumstances that may cause material doubt on the ability of Infortrend Technology Inc. and its subsidiaries to continue as a going concern. If, in our opinion, there is material uncertainty about such events or circumstances, we are required to remind the user of the Consolidated Financial Statements of the relevant disclosure therein, or amend our audit opinion if such disclosure is inappropriate. Our conclusion is based on the audit evidence acquired as of the date of the audit report. However, future events or circumstances may result in that Infortrend Technology Inc. and its subsidiaries may cease to continue as a going concern.

2. Evaluated the overall presentation, structure and content of the Consolidated Financial Statements (including relevant notes), and whether the Consolidated Financial Statements present the relevant transactions and events fairly.

3. Obtained sufficient and appropriate audit evidence of the financial information of the entities within the Group to express an opinion on the Consolidated Financial Statements. We are responsible for the direction, supervision and performance of the audit of and the formation of our audit opinion on the Group.

We communicated matters with the governing body, including the planned scope and timing of the audit, as well as the material audit findings (including material deficiencies in internal control identified during our audit).

We also provided the governing body with the CPA's declaration of independence that we have complied with the CPA Code of Professional Ethics concerning independence, and communicated with the governing body all the relationships and other matters that may be considered to affect our independence (including relevant preventive measures).

From the matters communicated with the governing body, we determined the key audit matters for the Consolidated Financial Statements for 2020 of Infortrend Technology Inc. and its subsidiaries. We have stated such matters in the audit report. Unless public disclosure of a particular matter is prohibited by law or, in very rare circumstances, we determined not to communicate such matter in the audit report where it can reasonably be expected that the negative impact of such communication will outweigh the public benefits.

KPMG Taiwan

Taipei 101 Tower, 68F, No.7, Sec. 5, Xinyi Road, Taipei City 110615, Taiwan (R.O.C.)

CPA: Rou-Lan Kuo (郭柔蘭) Shu-Ling Lien (連淑凌) Securities Financial-Supervisory-Securitie Competent s-Auditing-1070304941 Authority Financial-Supervisory-Securitie Approval No.: s-Six-0940100754

March 11, 2021

128

Infortrend Technology Inc. and Its Subsidiaries

Consolidated Balance Sheet December 31, 2020 and 2019

Unit: NT$ Thousands

Assets Current assets: 1100 Cash and cash equivalents (Note 4 and 6 (1)) 1110 Financial assets at fair value through profit or loss - current (Note 4, 6 (2) and 8) 1170 Net trade receivables (Note 4 and 6 (3)) 1200 Other receivables (Note 6 (4)) 1220 Current tax assets 130X Inventory (Note 4 and 6 (5)) 1470 Other current assets Non-current assets: 1510 Financial assets at fair value through profit or loss - non-current (Note 4 and 6 (2)) 1600 Property, plant, and equipment (Note 4 and 6 (6)) 1755 Right-of-use assets (Note 4 and 6 (7)) 1780 Intangible assets (Note 4 and 6 (8)) 1840 Deferred tax assets (Note 4 and 6 (13) 1980 Other financial assets - non-current (Note 8) 1990 Other non-current assets - others Total assets	2020.12.31	% 6 68 3 2 1 7 -	2019.12.31 Amount % 239,223 5 3,503,184 67 241,968 5 77,785 1 27,768 - 371,093 7 18,215 - 4,479,236 85 73,696 1 613,993 12 28,654 1 1,508 - 39,650 1 6,019 - 2,096 - 765,616 15 5,244,852 100 Liabilities and equity Current liabilities: 2100 Short-term loans (Note 6 (9)) 212 Financial liabilities measured at fair value through profit or loss - current (Note 4 and 6 (2)) 2130 Contract liabilities - current (Note 4 and 6 (17)) 2170 Trade payables 2200 Other payables 2230 Current tax liabilities 2280 Lease liabilities - current (Note 4 and 6 (10)) 2300 Other current liabilities Non-current liabilities: 2527 Contract liabilities - non-current (Note 4 and 6 (17)) 2550 Provisions - non-current (Note 4 and 6 (11)) 2570 Deferred tax liabilities (Note 4 and 6 (13) 2580 Lease liabilities - non-current (Note 4 and 6 (10)) 2640 Net defined benefit liabilities - non-current (Note 4 and 6 (12)) 2670 Other non-current liabilities - others Total liabilities Equity attributable to owners of the parent company: 3100 Share capital (Note 6 (14)) 3200 Capital surplus (Note 6 (14)) Retained earnings: 3310 Legal reserve (Note 6 (14)) 3350 Unappropriated earnings (Note 6 (14)) 3400 Other equity (Note 6 (14)) Total equity Total liabilities and equity	2020.12.31	% 17 - - 1 3 - - -	2019.12.31 Amount % 655,000 12 338 - 16,277 - 78,233 2 152,332 3 3,430 - 11,823 - 3,040 -	2019.12.31 Amount % 655,000 12 338 - 16,277 - 78,233 2 152,332 3 3,430 - 11,823 - 3,040 -
	Amount $ 288,988 3,494,414 162,074 96,295 27,815 349,691 12,049		Amount 239,223 3,503,184 241,968 77,785 27,768 371,093 18,215	Amount $ 850,000 - 15,458 50,783 135,237 481 9,579 6,086		Amount 655,000 338 16,277 78,233 152,332 3,430 11,823 3,040
	4,431,326	87	4,479,236
	27,547 596,401 17,091 721 39,395 5,446 1,224	1 11 - - 1 - -	73,696 613,993 28,654 1,508 39,650 6,019 2,096
				1,067,624	21	920,473	17
				35,112 5,721 16 7,664 29,940 8,727	1 - - - 1 -	32,768 6,735 582 16,950 23,258 9,312	1 - - - 1 -
	687,825	13	765,616	87,180	2	89,605	2
				1,154,804	23	1,010,078	19
				2,735,515 88,802 1,172,751 (38,069) 5,348	53 2 23 (1) -	2,762,907 89,704 1,152,494 222,680 6,989	53 2 22 4 -
				3,964,347	77	4,234,774	81
	$ 5,119,151	100	5,244,852	$ 5,119,151	100	5,244,852	100

Chairman: Shih-Tung Lo

(Please refer to the attached Notes to the Consolidated Financial Statements for details) Manager: Shih-Tung Lo

Accounting Supervisor: Shu-Hua Liu

129

Infortrend Technology Inc. and Its Subsidiaries

Consolidated Statement of Comprehensive Income From January 1 to December 31, 2020 and 2019 Unit: NT$ Thousands

4000 Operating revenue (Note 6 (17)) 5000 Operating costs (Note 6 (5)) Gross operating profit Operating expenses (Note 6 (18)): 6100 Selling and marketing expenses 6200 Administrative expenses 6300 Research and development expenses 6450 Expected credit impairment (profit) loss (Note 4 and 6 (3)) Net operating (loss) profit Non-operating income and expenses (Note 6 (19)): 7100 Interest income 7010 Other income 7020 Other gains and losses 7050 Financial costs 7900 Net profit (net loss) before tax 7950 Less: income tax expense (Note 4 and 6 (13)) 8200 Net profit (net loss) for the current period Other comprehensive income: 8310 Items that are not reclassified into profit or loss 8311 Remeasurement of defined benefit plans 8349 Less: income tax relating to items that will not be reclassified subsequently to profit or loss 8360 Items that may be subsequently reclassified into profit or loss 8361 Exchange differences resulting from translating the financial statements of foreign operations 8399 Less: income tax relating to items that may be reclassified subsequently to profit or loss Other comprehensive income in current period (net after tax) 8500 Total comprehensive income for the current period Earnings per share (NT$) (Note 4 and 6 (16)) 9750 Basic earnings (loss) per share (unit: NT$) 9850 Diluted earnings per share (unit: NT$)	2020		2019	% 100 53
	Amount	%	Amount 1,378,533 730,160
	$ 1,130,547 638,393	100 56
	492,154	44	648,373	47
	53,649 171,589 299,039 (1,972)	5 15 26 -	51,108 203,309 370,889 9,054	4 15 27 -
	522,305	46	634,360	46
	(30,151)	(2)	14,013	1
	43,731 82,155 (148,453) (7,704)	4 7 (13) (1)	67,849 70,766 85,475 (7,227)	5 5 6 -
	(30,271)	(3)	216,863	16
	(60,422) 4,997	(5) -	230,876 28,303	17 2
	(65,419)	(5)	202,573	15
	(6,698) 1,340	(1) -	(4,364) 873	- -
	(5,358)	(1)	(3,491)	-
	(2,238) -	- -	856 -	- -
	(2,238)	-	856	-
	(7,596)	(1)	(2,635)	-
	$ (73,015)	(6)	199,938	15
	$	(0.24)		0.73
				0.72

(Please refer to the attached Notes to the Consolidated Financial Statements for details)

Chairman: Shih-Tung Lo

Manager: Shih-Tung Lo

Accounting Supervisor: Shu-Hua Liu

130

Infortrend Technology Inc. and Its Subsidiaries

Consolidated Statement of Changes in Equity From January 1 to December 31, 2020 and 2019 Unit: NT$ Thousands

Balance as of January 1, 2019 Net profit in the current period Other comprehensive income for the current period Total comprehensive income for the current period Appropriation and distribution of earnings: Provision for legal reserve Cash dividends on ordinary shares Repurchase of treasury shares Cancellation of treasury shares Share-based payment transaction Balance as of December 31, 2019 Net loss in current period Other comprehensive income for the current period Total comprehensive income for the current period Appropriation and distribution of earnings: Provision for legal reserve Cash dividends on ordinary shares Repurchase of treasury shares Cancellation of treasury shares Share-based payment transaction Balance as of December 31, 2020		Equity attributable to owners of the parent company	Equity attributable to owners of the parent company	Equity attributable to owners of the parent company		Total equity
	Share capital Share capital of ordinary shares Capital surplus $ 2,796,463 91,785 - - - -	Retained earnings	Other equity items		Treasury shares
			Exchange differences resulting from translating the financial statements of foreign operations	Unpaid employee remuneration
		Legal reserve Unappropriated earnings 1,140,553 150,058 - 202,573 - (3,491)
			6,730 - 856	(8,792) - -	(29,981) - -	4,146,816 202,573 (2,635)
	- -	- 199,082	856	-	-	199,938
	- - - - - - (30,320) (962) (3,236) (1,119)	11,941 (11,941) - (110,473) - - - (4,046) - -	- - - - -	- - - - 8,195	- - (5,347) 35,328 -	- (110,473) (5,347) - 3,840
	2,762,907 89,704 - - - -	1,152,494 222,680 - (65,419) - (5,358)	7,586 - (2,238)	(597) - -	- - -	4,234,774 (65,419) (7,596)
	- -	- (70,777)	(2,238)	-	-	(73,015)
	- - - - - - (27,360) (881) (32) (21)	20,257 (20,257) - (165,773) - - - (3,942) - -	- - - - -	- - - - 597	- - (32,183) 32,183 -	- (165,773) (32,183) - 544
	$ 2,735,515 88,802	1,172,751 (38,069)	5,348	-	-	3,964,347

(Please refer to the attached Notes to the Consolidated Financial Statements for details)

Chairman: Shih-Tung Lo

Manager: Shih-Tung Lo

Accounting Supervisor: Shu-Hua Liu

131

Infortrend Technology Inc. and Its Subsidiaries

Consolidated Statement of Cash Flow From January 1 to December 31, 2020 and 2019 Unit: NT$ Thousands

2020 Cash flow from operating activities: Net profit (net loss) before tax for the current period $ (60,422) Reconciliation items: Income and expenses items Depreciation expenses 33,902 Amortization expenses 787 Interest expenses 7,704 Interest income (43,731) Dividend income (64,030) Remuneration costs of share-based payment 544 Net loss (profit) on financial assets and liabilities measured at fair value through profit or loss 134,054 Expected credit impairment (profit) loss (1,972) Disposal and retirement of property, plant and equipment loss 66 Others (4) Total income and expense items 67,320 Changes in assets/liabilities related to operating activities: Net changes in assets related to operating activities Trade receivables 80,128 Other receivables 3,210 Inventories 19,580 Other current assets 5,919 Other non-current assets - others- 74 Total net changes in assets related to operating activities 108,911 Net change in liabilities related to operating activities: Contract liabilities 2,557 Trade payables (25,213) Other payables (14,674) Other current liabilities 3,277 Net defined benefit liabilities (16) Other non-current liabilities - others- (799) Total net changes in liabilities related to operating activities (34,868) Total net changes in assets and liabilities related to operating activities 74,043 Total adjustments 141,363 Cash generated from operations 80,941 Interest received 55,687 Interest paid (7,748) Income tax paid (7,268) Net cash inflow from operating activities 121,612 Cash flow from investing activities: Purchase of financial assets at fair value through profit or loss (1,587,596) Disposal of financial assets at fair value through profit or loss 1,472,295 Acquisition of property, plant and equipment (4,328) Acquisition of intangible assets - Other financial assets - non-current- 518 Other non-current assets 264 Dividends received 64,030 Net cash outflow from investment activities (54,817) Net cash flow from financing activities Increase in short-term borrowings 195,000 Repayment of leasing principal (11,887) Cash dividends paid (165,773) Repurchase of treasury shares (32,183) Net cash (outflow) inflows from financing activities (14,843) Effects of exchange rate changes on the balance of cash held in foreign currencies (2,187) Increase (decrease) in cash and cash equivalents for the current period 49,765 Balance of cash and cash equivalents at the beginning of period 239,223 Balance of cash and cash equivalents at the end of the period $ 288,988	2020 Cash flow from operating activities: Net profit (net loss) before tax for the current period $ (60,422) Reconciliation items: Income and expenses items Depreciation expenses 33,902 Amortization expenses 787 Interest expenses 7,704 Interest income (43,731) Dividend income (64,030) Remuneration costs of share-based payment 544 Net loss (profit) on financial assets and liabilities measured at fair value through profit or loss 134,054 Expected credit impairment (profit) loss (1,972) Disposal and retirement of property, plant and equipment loss 66 Others (4) Total income and expense items 67,320 Changes in assets/liabilities related to operating activities: Net changes in assets related to operating activities Trade receivables 80,128 Other receivables 3,210 Inventories 19,580 Other current assets 5,919 Other non-current assets - others- 74 Total net changes in assets related to operating activities 108,911 Net change in liabilities related to operating activities: Contract liabilities 2,557 Trade payables (25,213) Other payables (14,674) Other current liabilities 3,277 Net defined benefit liabilities (16) Other non-current liabilities - others- (799) Total net changes in liabilities related to operating activities (34,868) Total net changes in assets and liabilities related to operating activities 74,043 Total adjustments 141,363 Cash generated from operations 80,941 Interest received 55,687 Interest paid (7,748) Income tax paid (7,268) Net cash inflow from operating activities 121,612 Cash flow from investing activities: Purchase of financial assets at fair value through profit or loss (1,587,596) Disposal of financial assets at fair value through profit or loss 1,472,295 Acquisition of property, plant and equipment (4,328) Acquisition of intangible assets - Other financial assets - non-current- 518 Other non-current assets 264 Dividends received 64,030 Net cash outflow from investment activities (54,817) Net cash flow from financing activities Increase in short-term borrowings 195,000 Repayment of leasing principal (11,887) Cash dividends paid (165,773) Repurchase of treasury shares (32,183) Net cash (outflow) inflows from financing activities (14,843) Effects of exchange rate changes on the balance of cash held in foreign currencies (2,187) Increase (decrease) in cash and cash equivalents for the current period 49,765 Balance of cash and cash equivalents at the beginning of period 239,223 Balance of cash and cash equivalents at the end of the period $ 288,988	2019 230,876 34,782 1,334 7,227 (67,849) (51,679) 3,840 (90,432) 9,054 122 1,615
	67,320	(151,986)
	80,128 3,210 19,580 5,919 74	46,522 1,167 55,106 2,131 (452)
	108,911	104,474
	2,557 (25,213) (14,674) 3,277 (16) (799)	(1,531) (11,126) 16,174 2,785 - -
	(34,868)	6,302
	74,043	110,776
	141,363	(41,210)
	80,941 55,687 (7,748) (7,268)	189,666 61,024 (6,901) (27,293)
	121,612	216,496
	(1,587,596) 1,472,295 (4,328) - 518 264 64,030	(2,419,685) 1,797,869 (17,962) (1,270) 650 (279) 51,679
	(54,817)	(588,998)
	195,000 (11,887) (165,773) (32,183)	205,000 (11,628) (110,473) (7,338)
	(14,843)	75,561
	(2,187) 49,765 239,223	(1,871) (298,812) 538,035
	$ 288,988	239,223

Chairman: Shih-Tung Lo

(Please refer to the attached Notes to the Consolidated Financial Statements for details) Manager: Shih-Tung Lo

Accounting Supervisor: Shu-Hua Liu

132

Infortrend Technology Inc. and Its Subsidiaries

Notes to the Consolidated Financial Statements 2020 and 2019 (Unless otherwise indicated, all amounts are in NT$ Thousands)

1. Company Overview

Infortrend Technology Inc. (hereinafter referred to as "the Company") was established on January 19, 1993 with the approval of the Ministry of Economic Affairs at the registered address of 8F., No. 102, Sec. 3, Zhongshan Rd., Zhonghe Dist., New Taipei City 235010, Taiwan (R.O.C.). The Company and its subsidiaries (hereinafter referred to as the "Group") are mainly engaged in research and development, manufacturing and trading business of all kinds of computer peripherals (RAID control system), etc. The Company's shares were officially listed on the Taiwan Stock Exchange Corporation (TWSE) on March 25, 2002.

2. Date and Procedures for the Adoption of the Consolidated Financial Statements

The Consolidated Financial Statements were approved and issued by the board of directors on March 11, 2021.

3. Application of New and Revised Standards and Interpretations

• a. The impact of newly issued and revised standards and interpretations that have been adopted by the Group as endorsed by the Financial Supervisory Commission

The Group have adopted the following revised IFRS since January 1, 2020, without any material impact on the Consolidated Financial Statements.

• Amendments to IFRS 3 - Definition of a Business

• Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest Rate Benchmark Reform

• Amendments to IAS 1 and IAS 8 - Definition of Material

Amendments to IFRS 16 - COVID-19-Related Rent Concessions

• b. The impact of IFRS endorsed by the FSC but yet to be adopted by the Group

The Group have evaluated that the adoption of the following revised IFRSs, effective from January 1, 2021, will not have a material impact on the Consolidated Financial Statements.

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

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

• c. Newly issued and revised standards and interpretations yet to be endorsed by the FSC

The Group anticipates that the following newly issued and revised standards, which have not yet been endorsed by the FSC, will not have a material impact on the Consolidated 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

• Amendment to IAS 1 - Classification of Liabilities as Current or Non-current

• Amendment to IAS 16 - Property, Plant and Equipment: Proceeds before Intended Use

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• Amendment to IAS 37 - Onerous Contracts - Cost of Fulfilling a Contract

• Annual Improvements to IFRSs 2018-2020 Cycle-

• Amendments to IFRS 3 - Updating a Reference to the Conceptual Framework

• Amendments to IAS 1 - Disclosure Initiative-Accounting Policies

• Amendments to IAS 8 - Definition of Accounting Estimates

4 Summary of Significant Accounting Policies

The significant accounting policies adopted in the Consolidated Financial Statements are summarized as follows. Unless otherwise stated, the following accounting policies have been consistently applied to all periods of presentation of the Consolidated Financial Statements.

• a. Statement of compliance

The Consolidated Financial Statements are prepared in accordance with the "Regulations Governing the Preparation of Financial Statements by Securities Issuers" (hereinafter referred to as "Preparation Regulations"), as well as the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations developed by the International Financial Reporting Interpretation Committee (IFRIC) or the former Standing Interpretations Committee (SIC) as endorsed and issued to take effect by the Financial Supervisory Commission (FSC) (hereinafter referred to as "IFRS as endorsed by the FSC").

• b. Basis of preparation

• 1) Basis of measurement

The Consolidated Financial Statements have been prepared on a historical cost basis except for the following important items in the balance sheet:

• a) Financial assets measured at fair value through profit or loss are measured at fair value;

• b) The net defined benefit liabilities (or assets) are measured by deducting the present value of the defined benefit obligations and the cap impact as described in Note 4 (15) from the fair value of the pension plan assets.

• 2) Functional currency and presentation currency

Each individual entity of the Group adopts the currency of the major economic environment in which it operates as its functional currency. The Consolidated Financial Statements are presented in the New Taiwan dollar, the Company's functional currency. All financial information presented in New Taiwan Dollars is in NT$ Thousands.

• c. Basis of consolidation

• 1) Basis of preparation for the Consolidated Financial Statements

Consolidated Financial Statements are prepared by the Company and the entities (i.e., subsidiaries) controlled by the Company. The Company controls an entity when it is exposed, or has rights, to variable returns from its involvement with the investee entity and has the ability to affect those returns through its power over the entity.

The Company includes the Financial Statements of a subsidiary in the consolidated Financial Statements from the date of gaining control over the subsidiary until the date of loss of control. The transactions, balances and any unrealized income, expenses and losses within the Group have all been eliminated at the time of preparation of the consolidated Financial Statements. The total comprehensive income of subsidiaries is attributable to the

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owner of the Company.

The Financial Statements of subsidiaries have been adjusted to ensure that their accounting policies are consistent with those adopted by the Group.

If the change in the ownership interest of the Group in a subsidiary does not result in the loss of control over the subsidiary, it shall be treated as an equity transaction with the owner.

• 2) Subsidiaries included in the Consolidated Financial Statements

Subsidiaries included in the Consolidated Financial Statements include:

			Percentage	Percentage
			ofequityheld
Name of investment
company	Subsidiaryname	Businessnature	2020.12.31	2019.12.31	Explanation
The Company	Infortrend	Transaction of	100.00%	100.00%
	Corporation	computer
		peripherals
The Company	Infortrend Europe	Transaction of	100.00%	100.00%
	Limited	computer
		peripherals
The Company	Infortrend Japan	Transaction of	100.00%	100.00%
	Inc.	computer
		peripherals
The Company	Infortrend Limited	Investment	100.00%	100.00%
The Company	Prophet Technology	Transaction of	100.00%	100.00%
	Inc.	computer
		peripherals
Infortrend Europe	Infortrend	Transaction of	100.00%	100.00%
Limited	Deutschland GmbH	computer
		peripherals
Infortrend Limited	Infortrend Shanghai	Transaction of	100.00%	100.00%
	Limited	computer
		peripherals
Prophet Technology Inc.	Surveon	Transaction of	100.00%	100.00%
	Technology Inc.	computer
		peripherals

• 3) Subsidiaries not included in the Consolidated Financial Statements: None

• d. Foreign currency

• 1) Foreign currency transactions

Transactions in foreign currency are translated into the functional currency at exchange rates prevailing at the transaction dates. Foreign currency monetary items are translated into functional currency at the end date of each subsequent reporting period (hereinafter referred to as the reporting date) at the exchange rate on that day. Foreign currency non-monetary items measured at fair value are translated into functional currency at the exchange rate on the date when their fair value is measured, while foreign currency non-monetary items measured at historical cost are translated at the exchange rate prevailing at the transaction date.

Exchange differences resulting from translating the foreign currency are generally recognized as profit and loss, but the following items are recognized as Other comprehensive income:

• a) Equity instruments designated as measured at fair value through other comprehensive income;

• b) Financial liabilities designated as net investment hedging for foreign operations within the effective hedging range; or

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• c) Qualified cash flow hedge within the effective hedging range.

• 2) Foreign operations

The assets and liabilities of the foreign operations, including goodwill and fair value adjustments at the time of acquisition, are translated into New Taiwan dollars at the exchange rate as at the reporting date; Income and expense items are translated into New Taiwan dollars at the average exchange rate of the current period, and the exchange differences are recognized as other comprehensive income.

In the event of loss of control, joint control or material impact as a result from the disposal of a foreign operation, the cumulative exchange difference related to the foreign operation is fully reclassified into profit or loss. In the case of partial disposal of a subsidiary with a foreign operation, the accumulated exchange difference is reclassified into non-controlling interest in proportion. In the case of partial disposal of investments in an affiliated enterprise or joint venture with a foreign operation, the accumulated exchange difference is reclassified into profit or loss in proportion.

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, the related gains and losses arising from the foreign currency exchange are regarded as part of the net investment in that foreign operation and recognized as other comprehensive income.

• e. Classification of current and non-current assets and liabilities

Assets that meet one of the following conditions are classified as current assets, and all other assets that are not current assets are classified as non-current assets:

• 1) The asset is expected to be realized, or intended to be sold or consumed in the normal operating cycle;

• 2) The asset is held primarily for trading purposes;

• 3) The asset is expected to be realized within 12 months after the reporting period; or

• 4) The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to pay off a liability for at least 12 months after the reporting period.

Liabilities that meet one of the following conditions are classified as current liabilities, and all other liabilities that are not current liabilities are classified as non-current liabilities:

• 1) The liability is expected to be paid off in the normal operation cycle;

• 2) The liability is held primarily for trading purposes;

• 3) The liability is expected to be paid off within 12 months after the reporting period; or

• 4) The liability of which the settlement term cannot be deferred unconditionally to at least 12 months after the date of the balance sheet. The terms of a liability which may, at the option of the counterparty, result in the settlement by issuing of an equity instrument will not affect its classification.

• f. Cash and cash equivalents

Cash includes cash on hand and demand deposits. Cash equivalents refer to short-term investments with highly liquidity that can be converted into quota cash at any time with little risk of change in value. Time deposits that meet the foregoing definition and are held for short-term cash commitments other than investment or other purposes are presented as cash at hand.

• g. Financial instruments

Trade receivables are initially recognized at the time of generation. All other financial assets

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and financial liabilities are initially recognized when the Group became a party to the financial instrument contract. Financial assets that are not measured at fair value through profit or loss (other than trade receivables that do not contain material financial components) or financial liabilities are initially measured at fair value plus transaction costs directly attributable to the acquisition or issuance. trade receivables that do not contain material financial components are initially measured at transaction prices.

1) Financial assets

Where the purchase or sale of financial assets conforms to customary practice transaction, the Group adopts the same trading day accounting treatment for all purchases and sales of financial assets classified in the same manner.

At the time of initial recognition, financial assets are classified as: financial assets at amortized cost and financial assets at fair value through profit or loss. The Group will reclassify all the affected financial assets from the first day of the next reporting period only when changing its business model for managing financial assets.

• a) Financial assets measured at amortized cost

Financial assets are measured at amortized cost when they meet all the following conditions and are not designated as measured at fair value through profit or loss:

• The financial asset is held under a business model for the purpose of collecting contract cash flows.

• The cash flow generated on a specific date from the contract terms of the financial asset is solely for the payment of principal and interest on outstanding principal.

Such assets are subsequently measured at the initially recognized amount plus or minus the accumulated amortization calculated by the effective interest method, and at the amortized cost after adjustments for any loss allowances. Interest income, foreign currency exchange gains and losses and impairment losses are recognized in profit and loss. When derecognizing, the profit or loss is recognized in profit and loss.

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

Financial assets at fair value through other comprehensive income are measured at fair value through profit or loss, including derivative financial assets. trade receivables, which the Group intends to sell immediately or in the near future, are measured at fair value through profit or loss but are included under trade receivables. On initial recognition, the Group may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or measured at fair value through other comprehensive income, as a financial assets at fair value through profit or loss so as to eliminate or materially reduce improper accounting matching.

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Such assets are subsequently measured at fair value, and their net benefits or losses (including any dividend and interest income) are recognized as profit and loss.

• c) Financial assets held for trading and managed and evaluated on a fair value basis are measured at fair value through profit or loss.

• d) Impairments of financial assets

The Group recognizes the expected credit loss of financial assets (including cash and cash equivalents, trade receivables, other receivables and other financial assets, etc.) at amortized cost as allowance for loss.

The allowance for losses of the following financial assets is measured by the amount of expected credit losses in 12 months, and the remaining are measured by the amount of expected credit losses in the duration:

• The credit risk of debt securities was determined to be low at the reporting date; and

• The credit risk of other debt securities and bank deposits (i.e., the risk of default during the expected duration of the financial instrument) has not increased significantly since the initial recognition.

The allowance for losses on trade receivables is measured by the amount of expected credit losses in the duration.

In determining whether the credit risk of a financial asset has increased significantly since the initial recognition, the Group considers reasonable and verifiable information which is available without excessive cost or effort, including qualitative and quantitative information, as well as analysis based on the Group's historical experience, credit assessments and forward-looking information.

If the contract payment is more than 90 days overdue, the Group assumes that the credit risk of the financial assets has increased significantly.

If the contract payment is more than 120 days overdue or the borrower is unlikely to fulfill its credit obligation to pay the Group in full, the Group considers that default occurs on the financial asset.

Expected credit losses over the duration refer to the expected credit losses arising from all possible defaults during the expected duration of a financial instrument.

Expected credit losses in 12 months refer to the expected credit losses arising from the possible defaults of a financial instrument within 12 months (or shorter period, if the expected duration of the financial instrument is less than 12 months) after the reporting.

The maximum period over which expected credit losses are measured is the maximum contractual period over which the Group is exposed to credit risk.

Expected credit losses are the weighted estimates of the probability of credit losses over the expected duration of a financial instrument. The credit loss is measured by the present value of all cash shortfall, that is, the difference between the cash flows that the Group can collect under the contract and the cash flows that the Group expects to receive. Expected credit losses are discounted at the effective interest rate on financial assets.

The Group evaluates whether there is a credit impairment of financial assets as measured at amortized cost on each reporting date. When one or more events that

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have an adverse effect on the estimated future cash flow of a financial asset have occurred, the financial asset has suffered a credit impairment. Evidence of a credit impairment of a financial asset includes the observable information for the following events:

• Major financial difficulties of the borrower or issuer;

• Default, such as delay or overdue for more than 120 days;

• The Group makes concessions for the borrower that would not have been considered for economic or contractual reasons related to the borrower's financial difficulties;

• The borrower is most likely to file for bankruptcy or conduct other financial restructuring; or

• The active market for the financial asset disappears due to financial difficulties.

The allowance for loss of a financial asset at amortized cost are deducted from the carrying amount of the asset.

When the Group cannot reasonably anticipate the recovery of financial assets in whole or in part, it directly reduces the total carrying amount of its financial assets. The Group analyzes the timing and amount of the write-off on the basis of whether it is reasonably expected to be recovered. The Group expects that the amount written off will not be materially reversed. However, the written-off financial assets may still be enforced to comply with the procedures for the Group to recover the overdue amount.

e) Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights derived from the cash flows of the asset are terminated, or it has transferred a financial asset and virtually has transferred all the risks and rewards of the ownership of the asset to another enterprise, or virtually has neither transferred nor retained the ownership of all of the risks and rewards and nor retained the control of the financial asset.

If all or substantially all of the risks and rewards associated with ownership of a transferred financial asset in transactions entered into by the Group are retained, the financial asset is constantly recognized on the balance sheet.

• 2) Financial liabilities and equity instruments

• a) Classification of liabilities or equities

The debt and equity instruments issued by the Group are classified as financial liabilities or equity according to the substance of the contractual agreement and the definition of financial liabilities and equity instruments.

• b) Equity instruments

Equity instruments refer to any contract that recognizes the residual equity in the Group's assets after the deduction of all its liabilities. The equity instruments issued by the Group are recognized as the amount of the proceeds obtained after deducting the direct cost of issuance.

c) Treasury shares

In the repurchase of the equity instruments recognized by the Group, the consideration paid, including direct attributed costs, is recognized as a reduction in equity. The repurchased shares are classified as treasury shares. For any

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subsequent sale or re-issue of treasury shares, the amount received is recognized as a reduction in equity, and the surplus or loss arising from the transaction is recognized as capital surplus or retained earnings (where capital surplus are insufficient to offset).

d) Financial liabilities

Financial liabilities are classified as amortized cost or measured at fair value through profit or loss. Financial liabilities, if held for trading, are derivatives or designated at the time of initial recognition, are classified as measured at fair value through profit or loss. Financial liabilities measured at fair value through profit or loss are measured at fair value and the related net profits and losses, including any interest expense, are recognized in profit and loss.

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

e) Derecognition of financial liabilities

The Group derecognizes financial liabilities when its contractual obligations have been performed, canceled or due. When the terms of financial liabilities are revised and there is a material difference in the cash flow of the revised liabilities, the initial financial liabilities will be derecognized and new financial liabilities will be recognized at fair value on the basis of the revised terms.

When derecognizing a financial liability, the difference between its carrying amount and the total consideration paid or payable (including any non-cash assets transferred or liabilities assumed) is recognized as profit and loss.

3) Derivative financial instruments

The Group holds derivative financial instruments for hedging against the exposure to foreign currency and interest rate risks.

Derivative instruments are initially measured at fair value and subsequently measured at fair value, and the benefits or losses arising from the remeasurement are directly recognized as profit and loss.

• h. Inventories

Inventories are measured at cost and net realized value, whichever is lower. Costs include costs and other costs for acquisition, manufacturing or processing incurred in bringing them to the place and condition where they are available for use, and are calculated by a weighted average method. The cost of inventory of finished goods and work in process includes manufacturing expenses apportioned to normal capacity in appropriate proportion.

Net realizable value refers to the balance of the estimated selling price under normal business operation minus the estimated costs required for completion and the estimated costs required for completion of the sale.

• i. Property, plant and equipment

• 1) Recognition and measurement

Property, plant, and equipment items are measured at cost (including capitalized borrowing costs) less accumulated depreciation and any accumulated impairment.

The material components of property, plant and equipment with different service lives are treated as separate items (major components) of property, plant and equipment.

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The gain or loss on disposal of the property, plant, and equipment is recognized as profit and loss.

2) Subsequent costs

Subsequent expenditures are capitalized only when their future economic benefits are likely to flow into the Group.

3) Depreciation

Depreciation is calculated at the cost of the asset minus the residual value and is recognized as profit and loss over the estimated service life of each component using a straight-line method.

No depreciation provision will be made for the land.

The estimated useful lives of the current period and the comparative period are as follows:

a)	Buildings and structures	5 ~ 50 years
b)	Machinery equipment	2 ~ 7 years
c)	Transportation equipment	5 ~ 10 years
d)	Office equipment	3 ~ 4 years
e)	Other equipment	2 ~ 8 years

The Group reviews the depreciation method, useful lives, and residual value on each reporting date, and makes appropriate adjustments as necessary.

• j. Leases

• 1) Identify a lease

The Group evaluates whether the contract is a lease or contains a lease upon the conclusion of the contract. If the contract transfers control over the use of the identified assets for a period of time in exchange for consideration, the contract is a lease or contains a lease. To evaluate whether the contract is a lease, the Group evaluates the following items:

• a) The contract involves the use of an identified asset, which is explicitly designated in the contract or implicitly designated when it is available for use, and its substance may be distinguished or may represent substantially all capacity. If the provider poses substantive rights to replace the asset, the asset is not an identified asset; and

• b) The right to obtain substantially all of the economic benefits arising from the use of the identified assets throughout the life of the use; and

• c) Acquire the right to dominate the use of the identified assets if:

• The right to direct the use and the purposes of the identified assets throughout the use period; or

• The relevant decisions about the use method and purpose of use of the asset are determined in advance, and:

  • The right to operate the asset throughout the life of its use, and the provider does not have the right to change any such operation instructions; or

  • The way in which the asset is designed predetermines how and for what purpose it will be used throughout its life.

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2) Lessee

The Group recognizes the right-of-use assets and lease liabilities on the commencement date of the lease, initially measures the right-of-use assets at cost, which includes the initial measured amount of the lease liabilities, adjusts any lease payments made on or before the commencement date of the lease, and adds the initial direct costs incurred and the estimated costs of dismantling and removing the underlying assets, and restoring the underlying assets and their locations, and deducts any leasing incentives received.

The right-of-use assets are subsequently depreciated using the straight-line method from the commencement date of the lease to the expiration of the service life of the use right assets or the expiration of the lease term, whichever is earlier. In addition, the Group regularly evaluates whether there is any impairment of the right-of-use assets and treats with any impairment losses that have been incurred, and adjusts the right assets in the event of remeasurement of the lease liabilities.

The lease liability is measured at the present value of the outstanding lease payments at the commencement date of the lease. If the implicit interest rate of the lease is easy to determine, it is applied as the discount rate; if not, the Group's incremental borrowing rate is applied. In general, the Group adopts the incremental borrowing rate as the discount rate.

Lease payments included in the measure of lease liabilities include:

• a) Fixed payments, including substantial fixed payments;

• b) Variable lease payments subject to an index or rate are initially measured by the index or rate on the commencement date of the lease;

• c) Residual value guaranteed amount expected to be paid, and;

• d) The strike price at which the purchase option or lease termination option is reasonably determined to be exercised or the penalty required to be paid.

Lease liabilities are subsequently accrued interest by the effective interest method and measured under the following circumstances:

• a) Changes in future lease payments resulting from changes in the index or rate used to determine lease payments;

• b) Changes in the residual value guaranteed amount expected to be paid;

• c) Changes in the valuation of the underlying asset call option;

• d) Changes in the estimate of whether or not to exercise the extension or termination option may alter the assessment of the lease term; or

• e) Modification of the subject, scope or other terms of the lease.

When the lease liabilities are remeasured as a result of the foregoing changes in the index or rate used to determine lease payments, changes in the residual value guaranteed amount, and changes in the estimate of the call option, extension or termination option, the carrying amount of the right-of-use assets are adjusted accordingly, and the remaining remeasured amount is recognized as profit and loss when the carrying amount of the right-of-use assets are reduced to zero. For a lease modification that reduces the scope of the lease, the carrying amount of the right-of-use asset is reduced to reflect the partial or full termination of the lease, and the difference between the carrying amount and the remeasured amount of the lease liability is recognized as the profit and loss.

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The Group presents the right-of-use assets and lease liabilities that do not meet the definition of investment properties respectively in the balance sheet as separate-line items.

If the agreement contains leasing and non-leasing components, the Group apportions the consideration in the agreement to the individual leasing components on a relatively separate price basis. However, in the case of leasing the land and the building, the Group chooses not to classify the non-leasing components and treat the leasing components and the non-leasing components as the single leasing components.

For short-term leases of warehouses, parking spaces and offices and leases of low-value underlying assets, the Group chooses not to recognize the right-of-use assets and lease liabilities, but recognizes the relevant lease payments as expenses on a straight line basis during the lease term in instead.

3) Lessor

For transactions in which the Group is the lessor, the lease contract is classified according to whether almost all risks and rewards attached to the ownership of the underlying asset are transferred on the commencement date of the lease. If so, it is classified as a financial lease; otherwise, it is classified as an operating lease. At the time of evaluation, the Group considers relevant specific indicators, including whether the lease term covers a major part of the economic life of the underlying asset.

• k. Intangible assets

1) Recognition and measurement

Goodwill arising from the acquisition of a subsidiary is measured as cost less cumulative impairment.

Expenditures related to research activities are recognized as profit and loss when incurred.

Development expenditures are only capitalized when they can be reliably measured, when the technical or commercial feasibility of the product or process has been achieved, when the future economic benefits are likely to flow into the Group, and when the Group intends and has sufficient resources to complete the development and to use or sell the asset. Other development expenditures are recognized as profit and loss as incurred. After the initial recognition, capitalized development expenditures are measured by the amount of their costs less accumulated amortization and accumulated impairment.

Other intangible assets with limited service life that are acquired by the Group are measured by the amount of cost less accumulated amortization and accumulated impairment.

2) Subsequent expenditures

Subsequent expenditures are capitalized only to the extent that they will increase the future economic benefits of the specific asset concerned. All other expenditures, including internally developed goodwill and brand, are recognized as profit and loss as incurred.

3) Amortization

Except goodwill, amortization is calculated on the basis of the cost of the asset less the estimated residual value and is recognized as profit and loss over the estimated service life of the intangible assets by the straight-line method from the time the assets reach the serviceable state.

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The estimated useful lives of the current period and the comparative period is as follows:

Computer software 3 ~ 5 years

The Group reviews the amortization method, useful lives and residual value of intangible assets on each reporting date and makes appropriate adjustments if necessary.

• l. Impairment of non-financial assets

At each reporting date, the Group assesses whether there is any indication that the carrying amount of non-financial assets (other than inventory and deferred tax assets) may be impaired, and estimates the recoverable amount of the asset if any impairment indication.

For the purpose of the impairment test, the minimum identifiable group of assets is defined as one of the groups of cash inflows that are largely independent of other individual assets or asset groups. Goodwill derived from the business combination is apportioned to the cash generating units or groups of cash generating units that are expected to benefit from the overall benefits of the business combination.

The recoverable amount is the fair value of individual assets or cash generating units less disposal costs, and its use value, whichever is higher. In assessing the use value, it is estimated that the future cash flows are translated to present value at the pre-tax discount rate, which shall reflect the current market's assessment of the time value of money and the specific risk of the asset or cash generating unit.

If the recoverable amount of an individual asset or cash generating unit is lower than the carrying amount, the impairment loss will be recognized.

Impairment loss is recognized immediately as profit or loss, reducing firstly the carrying amount of the amortized goodwill of the cash generating unit and then the carrying amount of each asset in proportion to the carrying amount of the other assets of the unit.

Non-financial assets other than goodwill are reversed only to the extent not exceeding the carrying amount of the asset determined when the impairment loss has not been recognized in the previous year (less depreciation or amortization).

m. Provisions

The recognition of a provision for liabilities means that the Group has a present obligation arising from a past event, and it is likely that the Group will have to discharge resources with economic benefit in the future to fulfill the obligation, the amount of which can be reliably estimated.

1) Warranty

Provision for warranty liabilities is recognized at the time of sale of goods or services and is measured on a weighted basis according to its relative probability based on historical warranty information and all possible outcomes.

• n. Recognition of income

• 1) Revenue from contracts with customers

Income is measured at the consideration to which it is expected to be entitled in transferring the goods or services. The Group recognizes income only when the control of goods or services is transferred to customers and the performance obligations are fulfilled. According to the main revenue items of the Group, it is described as follows:

• a) Sales of goods - computer peripherals

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The Group conducts research and development, manufacturing, and sales to the downstream manufacturers. The Group recognizes income only when the control of goods is transferred. The control transfer of the product means that the product has been delivered to the customer, the customer is fully in a position to determine the distribution channel and price of the product and there are no outstanding obligations which would affect the acceptance of the product by the customer. Delivery mainly occurs when the product is shipped from the point of departure, the risk of obsolescence and loss has been transferred to the customer, the customer has accepted the product in accordance with the sales contract, the acceptance terms have lapsed, or the Group considers that all the acceptance conditions have been met with objective evidence.

The Group provides standard warranty for computer peripherals and therefore assures a refund obligation for defects, and has recognized the provision for warranty liabilities in respect of this obligation. Please refer to Note 6 (11) for details.

The Group recognizes the trade receivables at the time of delivery of goods, since the Group reserves the right to collect consideration unconditionally at that time.

b) Rendering of services

The Group provides software updates and product maintenance services for enterprises, and recognizes the relevant income during the financial statement period for the rendering of services. For fixed-price contracts, income is recognized on the basis of the percentage of services actually rendered to total services as of the reporting date, as determined by the percentage of costs incurred to the estimated total costs of the transaction.

Under a fixed price contract, the customer pays a fixed amount at the agreed time. Contract assets are recognized when the value of services rendered exceeds the payments, while contract liabilities are recognized when payments exceed the value of services rendered.

c) Financial component

The Group expects that the time between the transfer of goods or services to the customer under all customer contracts and the payment for such goods or services by the customer is not exceed one year. Therefore, the Group does not adjust the time value of money of the transaction price.

• o. Employee benefits

• 1) Defined contribution plans

The contribution obligations for the defined contribution plans are recognized as expenses during the period of service rendered by the employee.

• 2) Defined benefit plans

The Group calculates the net obligation for the defined benefit plans by converting the amount of future benefits earned by the employee' service in the current or previous periods to the present value for each benefit plan separately and deducting the fair value of any plan assets.

Defined benefit obligations are calculated on an actuarial and annual basis by a qualified actuary using the estimated unit benefit method. Where the calculation is likely to be favorable to the Group, the recognized assets are limited to the present value of any economic benefit available in the form of a refund of contributions from the plan or a reduction in future contributions to the plan. The present value of economic benefits is

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calculated by taking into account any minimum capital contributions.

Remeasurement of the net defined benefit liabilities, including actuarial gains and losses, returns on planned assets (excluding interest), and any changes in the cap impact of the asset (excluding interest), is immediately recognized as other comprehensive income and accumulated in retained earnings. The Group determines the net interest expense (income) of the net defined benefit liabilities (assets) by using the net defined benefit liabilities (assets) and the discount rate determined at the beginning of the annual reporting period. The net interest expense and other expenses of the net defined benefit plan are recognized as profit and loss.

Changes in benefits related to the service costs or reduction of benefits or losses in previous period arising from a plan modification or reduction are immediately recognized as profit and loss. The Group recognizes the settlement gains and losses of the defined benefit plan at the time of settlement.

3) Short-term employee benefits

Short-term employee benefit obligations are recognized as expenses at the time of service delivery. If the Group has a present statutory or constructive payment obligation arising out of the services rendered by an employee in the past and such obligation can be reliably estimated, the amount will be recognized as a liability.

p. Share-based payment transaction

For the share-based payment agreement for the equity delivery, the expenses are recognized at fair value at the grant date and the relative equity is increased within the vesting period of the award. The recognized expenses are adjusted according to the amount of awards expected to meet the service conditions and non-market vesting conditions, and the final recognized amount is measured on the basis of the amount of awards that meet the service conditions and non-market vesting conditions on the vesting day.

Non-vesting conditions relating to share-based awards are reflected in the fair value measurement of the share-based payments on the grant date, and the difference between the expected and actual results is not subject to verification and adjustment.

The fair value of the share appreciation right in cash delivery to be paid to the employee is recognized as expenses and increased to relative liabilities during the period in which the employee is entitled to unconditionally receive remuneration. The liability is remeasured at the fair value of the share appreciation right at each reporting date and closing date and its any change is recognized as profit and loss.

The date on which the share-based payment is made is the date approved by the board of directors.

q. Income tax

Income tax includes current and deferred income tax. Current income tax and deferred income tax are recognized as profit and loss, except for those related to business combination and items directly recognized as equity or other comprehensive income.

The Group determines that any interest or penalty (including uncertain tax treatment) related to income tax does not meet the definition of income tax and is therefore subject to the accounting treatment of IAS 37.

Current income tax includes the estimated income tax payable or tax refunds receivable based on tax gains (losses) for the current year and any adjustments to income taxes payable or tax refunds receivable for previous years. The amount of current income tax is the best estimate of the amount expected to be paid or received as measured by the statutory or substantive legislative tax rates at the reporting date.

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Deferred income tax is measured and recognized at the temporary difference between the carrying amount and the tax basis of assets and liabilities on the financial statement date. Temporary differences arising from the following circumstances are not recognized as deferred income tax:

• 1) Temporary differences arising from the initial recognition of assets or liabilities other than in the transaction of a business combination which do not affect accounting profits and tax gains (losses) at the time of the transaction;

• 2) Temporary differences arising from investment in subsidiaries, affiliates and joint venture equity, of which the Group can control the timing and which are unlikely to reverse in the foreseeable future; and

• 3) Taxable temporary differences arising from the initial recognition of goodwill.

Deferred income tax is measured at the tax rate at the time of reversal of expected temporary differences based on the statutory or substantive legislative tax rate at the reporting date.

The Group will offset deferred tax assets and deferred tax liabilities against each other only if all of the following conditions are satisfied:

• 1) Has the legal executive power to offset the current income tax assets and current income tax liabilities; and

• 2) Deferred tax assets and deferred tax liabilities are related to one of the following taxpayers of tax levied by the same tax authority:

• a) The same taxpayer; or

• b) Different taxpayers, but each taxpayer intends to pay off the current tax liabilities and assets on a net basis or realize the assets and settle the liabilities at the same time during each future period when the deferred tax assets of a significant amount are expected to be recovered and the deferred tax liabilities are expected to be paid off.

Unused tax losses, unused income tax credits transferred in later period and deductible temporary differences are recognized as deferred tax assets to the extent that future tax income is likely to be available, are reassessed at each reporting date and reduced to the extent that the relevant income tax benefit is not likely to be realized, or reversed on the amount originally reduced to the extent that there is likely to be sufficient taxable income.

• r. Earnings per share

The Group presents the basic and diluted earnings per share attributable to the ordinary equity holders of the Group. The basic earnings per share of the Group is calculated by dividing the profit and loss attributable to the ordinary equity holders of the Group by the weighted average number of ordinary shares outstanding during the current period. Diluted earnings per share calculated by adjusting the profit and loss attributable to the ordinary equity holders of the Group and the weighted average number of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares. The dilutive potential ordinary shares of the Group include new restricted employee shares granted to employees.

• s. Segment information

The operating segments are an integral part of the Group and engage in operating activities that may generate revenue and incur expenses (including income and expenses related to transactions between other segments of the Group). The operating results of all operating segments are periodically reviewed by the Group's key operating decision makers to determine the allocation of resources to the segments and to measure their performance.

147

Each operating segment has its separate financial information.

5 Major Sources of Uncertainty in Material Accounting Judgments, Estimates and Assumptions

When preparing the Consolidated Financial Statements in accordance with the "Regulations Governing the Preparation of Financial Statements by Securities Issuers," as well as the International Financial Reporting Standards (IFRS) as endorsed by the FSC, the management must make judgments, estimates and assumptions that will affect the adoption of accounting policies and the reported amounts of assets, liabilities, earnings and expenses. Actual results may differ from estimates.

Management continually reviews estimates and underlying assumptions, and recognizes the changes in accounting estimates in the period of change and in the affected future periods.

The Group has no accounting policies that involve material judgments and have material impact on the amounts recognized in the Consolidated Financial Statements.

For the uncertainties in the assumptions and estimates, the information related to the material risk that will result in a material adjustment in the next fiscal period is as follows:

• a. Evaluation of impairment of trade receivables

The Group's allowance for losses on trade receivables is estimated based on the assumption of default risk and expected loss ratio. The Group considers historical experience, current market conditions and forward-looking estimates for each reporting date to determine the assumptions to be adopted and the input values to be selected in calculating the impairment. Please refer to Note 6 (3) for details of the relevant assumptions and input values.

• b. Valuation of inventory

Since inventory must be measured at the lower of cost and net realized value, the Group evaluates the amount of inventory for normal wear and wear, obsolescence, or without market value on the reporting date and deducts the cost of inventory to net realized value. This inventory valuation is based on product demand during a specific period in the future and may be subject to change due to rapid industrial changes. Please refer to Note 6 (5) for details of inventory valuation.

6 Descriptions of Significant Accounting Subjects

a. Cash and cash equivalents

scriptions of Significant Accounting Subjects Cash and cash equivalents
Cash Demand and check deposit Foreign currency deposit Time deposits Cash and cash equivalents presented in the Statement of Cash and cash equivalents in the statement of cash flow	2020.12.31 2019.12.31 $ 165 208 137,844 102,568 125,389 92,136 25,590 44,311
	$ 288,988 239,223

Please refer to Note 6 (20) for the disclosure of sensitivity analysis of financial assets of the Group.

148

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

Financial assets (liabilities) at fair value through profit or	loss
Financial assets mandatorily measured at fair value through profit or loss: Non-derivative financial assets Beneficiary certificate - fund Investment on bonds Preferred shares Ordinary shares Non-hedging derivative instruments Perpetual bonds Subtotal Financial liabilities held for trading: Non-hedging derivative instruments Swap contracts Total Current Non-current Total	2020.12.31 $ 749,872 659,967 2,072,879 11,696 27,547	2019.12.31 770,417 1,053,853 1,667,491 11,423 73,696 3,576,880 (338) 3,576,542 3,502,846 73,696 3,576,542
	3,521,961
	-
	$ 3,521,961
	$ 3,494,414 27,547
	$ 3,521,961

1) Preferred shares

The Group holds preferred shares issued by domestic listed companies, all of which are non-cumulative preferred shares, and the dividends are paid at the agreed annual rate, which is adjusted and reset periodically in accordance with the agreed period. None of the shares has a maturity date, but the issuing company may recover all or part of the issued preferred shares at the original issue price upon the expiration of the agreed term, and its rights and obligations shall continue under the original terms and conditions of issuance if the shares are not recovered. The preferred shares held by the Group are non-voting and non-convertible preference shares, except for the Non-cumulative Convertible Class A preferred shares issued by O-Bank which are convertible into ordinary shares commencing on the day following the one-year expiry of the issue.

2) Perpetual bonds

On July 14, 2017, the Company purchased the perpetual bonds issued by SoftBank Group Corp.(SOFTBK) on July 12, 2017 through Yuanta Asset Management (H.K.) Limited for a transaction amount of NT$30,749 thousand, at the initial distribution ratio of 6.000%, which will expire on December 29, 2049. The issuer is entitled to the first right of redemption on July 19, 2023, and will be charged additional interest at 4.226% if it fails to repurchase by the expiration date.

On August 2, 2017, the Group purchased the perpetual bonds issued by Radiant Access Ltd. on May 11, 2017 through Yuanta Asset Management (H.K.) Limited for a transaction amount of NT$44,572 thousand, at the initial distribution ratio of 4.600%, which will expire on December 29, 2049. The issuer has repurchased the perpetual bonds on November 19, 2020 for a transaction amount of NT$43,058 thousand.

3) Swap contracts

Engaging in derivative financial instruments aims to avoid exchange rate risks arising from operating activities. The details of the derivatives presented as financial assets measured at fair value through profit or loss due to the fact that the Group does not apply hedging accounting are as follows:

149

2019.12.31	Contract amount (NT$ Thousands) Currency Maturity period
Swap	USD 1,000 NTD to USD 2020.3.12

The Group has disclosed the exposure to risks of credit, currency and interest rate associated with financial instruments in Note 6 (20).

On December 31, 2020, the Group mortgaged 3,333 thousand Class A preferred shares issued by Fubon Financial Holding, 2,493 thousand Class A preferred shares issued by Cathay Financial Holdings, 5,551 thousand Class A preferred shares issued by Union Bank, 7,729 thousand Class E Registered preferred shares issued by Taishin Holdings and 5,400 thousand Class A preferred shares of Shin Kong Financial Holding as the guarantee for short-term borrowings and financing amount. On December 31, 2019, the Group mortgaged 3,333 thousand Class A preferred shares issued by Fubon Financial Holding, 2,493 thousand Class A preferred shares issued by Cathay Financial Holdings, 5,551 thousand Class A preferred shares issued by Union Bank and 5,855 thousand Class E Registered preferred shares issued by Taishin Holdings as the guarantee for short-term borrowings and financing amount. Please refer to Note 8 for the disclosure of collateral mortgage.

c. Trade receivables

Trade receivables Less: allowance for losses	2020.12.31 $ 170,776 (8,702)	2019.12.31 252,560 (10,592)
	$ 162,074	241,968

The Group estimates the expected credit losses for all trade receivables using a simplified approach, that is, measures by the expected credit losses over the duration. For the measurement, such trade receivables are grouped according to the common credit risk characteristics represent the ability of customers to pay all amounts due under the contract terms and have been included in the forward-looking information. The analysis of expected credit loss of the Group's trade receivables from Taiwan is as follows:

2020.12.31

Not overdue Overdue for less than 30 days Overdue for 31 to 60 days Overdue for 61 to 90 days Overdue for 91 to 120 days Overdue for more than 121 days Not overdue Overdue for less than 30 days Overdue for 31 to 60 days Overdue for 61 to 90 days Overdue for 91 to 120 days Overdue for more than 121 days	Carrying amount of trade receivables $ 106,800 - - 1,293 398 3,734	Weighted average expected credit loss rate		Allowance for expected credit losses over the duration - - - - 86 3,734
		0.00% 0.00% 0.00% 0.00% 0.00%~42.11% 100.00% 2019.12.31
	$ 112,225			3,820
				Allowance for expected credit losses over the duration - - - - - 2,028
	Carrying amount of trade receivables $ 147,472 5,375 - 1,963 - 2,030	Weighted average expected credit loss rate
		0.00% 0.00% 0.00% 0.00%~18.99% 28.15%~35.60% 99.92%~100.00%
	$ 156,840			2,028

The analysis of expected credit loss of the Group's trade receivables from other regions is as follows:

150

Not overdue Overdue for less than 30 days Overdue for 31 to 60 days Overdue for 61 to 90 days Overdue for 91 to 120 days Overdue for more than 121 days Not overdue Overdue for less than 30 days Overdue for 31 to 60 days Overdue for 61 to 90 days Overdue for 91 to 120 days Overdue for more than 121 days		2020.12.31	Allowance for expected credit losses over the duration 3,858 810 - - - 214
	Carrying amount of trade receivables	Weighted average expected credit loss rate 0.00%~0.33% 0.00%~0.64% 0.00%~18.99% 0.00%~33.12% 0.00%~79.86% 100.00% 2019.12.31
	$ 48,399 9,938 - - - 214
	$ 58,551		4,882
			Allowance for expected credit losses over the duration 31 67 2,353 1,433 10 4,670
	Carrying amount of trade receivables	Weighted average expected credit loss rate 0.00%~0.25% 0.00%~0.56% 0.00%~18.99% 0.00%~30.42% 0.00%~63.27% 100.00%
	$ 47,969 18,415 16,535 8,115 16 4,670
	$ 95,720		8,564

The movement in the allowance for losses on the trade receivables of the Group is as follows:

Beginning balance Recognition (reversal) of impairment loss Payments written off as a result of being unrecoverable Amount of bad debts recovered at the current period which has been written off Translation profit and loss of foreign exchange Ending balance	2020	2019 1,552 9,054 - - (14) 10,592
	$ 10,592 (1,972) (8) 215 (125)
	$ 8,702

Allowance for losses on trade receivables is used to record expected credit losses, but if and when the Group believes that the relevant amount may not be recoverable, it will be directly credited to financial assets.

• d. Other receivables

Other receivables	2020.12.31	2019.12.31 77,785
	$ 96,295

As other receivables as of December 31, 2020 and 2019 are not overdue, there is no risk of impairment.

Please refer to Note 6 (20) for further information on the remaining credit risks.

151

e. Inventories

Raw materials and consumables Work in process Finished products	2020.12.31 $ 243,265 36,611 69,815 $ 349,691	2019.12.31 218,269 45,731 107,093
		371,093

The composition of the cost of goods sold of the Group is as follows:

Cost of goods sold Inventories loss (profit) Inventory scrap loss Inventory loss from market price decline and loss on obsolete and slow-moving inventories Total	2020 $ 621,749 642 9,996 6,006 $ 638,393	2019 695,086 (71) 20,325 14,820 730,160

As of December 31, 2020 and 2019, the Group's inventory has not been pledged as collateral.

f. Property, plant, and equipment

The breakdown of movement in cost and depreciation of the Group's property, plant and equipment for 2020 and 2019 is as follows:

Balance as of January 1, 2020 Additions Transfer in Disposal and retirement Effect of changes in exchange rate Balance as of December 31, 2020 Balance as of January 1, 2019 Additions Disposal and retirement Effect of changes in exchange rate Balance as of December 31, 2019 Balance as of January 1, 2020 Depreciation in current year Transfer in Disposal and retirement Effect of changes in exchange rate Balance as of December 31, 2020 Balance as of January 1, 2019 Depreciation in current year Disposal and retirement Effect of changes in exchange rate Balance as of December 31, 2019 Carrying value: December 31, 2020 January 1, 2019 December 31, 2019	Land	Buildings and structures 344,331 794 465 - - 345,590 345,183 - (852) - 344,331 155,917 11,236 13 - - 167,166 145,378 11,269 (730) - 155,917 178,424 199,805 188,414		Machinery equipment	Transporta tion equipment 7,833 - - - - 7,833 7,833 - - - 7,833 7,021 487 - - - 7,508 6,534 487 - - 7,021 325 1,299 812		Office equipment		Other equipment		Total
	$ 398,945 - - - -			78,566 98 - (161) - 78,503 78,742 - (176) - 78,566 78,089 358 - (161) - 78,286 77,433 832 (176) - 78,089 217			27,991 530 - (1,657) (1,278)		155,887 2,906 - (8,091) (423) 150,279 146,387 15,794 (6,006) (288) 155,887 136,904 7,705 - (8,091) (361) 136,157 135,191 7,971 (6,006) (252) 136,904 14,122 11,196 **18,983 **		1,013,553 4,328 465 (9,909) (1,701) 1,006,736 1,005,295 16,534 (7,342) (934) 1,013,553 399,560 21,979 13 (9,843) (1,374) 410,335 384,573 22,966 (7,220) (759) 399,560 596,401 620,722 613,993
	$ **398,945 **						25,586
	$ 398,945 - - -						28,205 740 (308) (646)
	$ **398,945 **						27,991
	$ - - - - -						21,629 2,193 - (1,591) (1,013)
	$ -						21,218
	$ - - - -						20,037 2,407 (308) (507)
	$ -						21,629
	$ **398,945 **						4,368
	$ **398,945 **			1,309			8,168
	$ **398,945 **			477			6,362

152

As of December 31, 2020 and 2019, they are not provided as guarantee for borrowing and financing amount.

g. Right-of-use assets

The changes in the cost and depreciation of buildings and structures leased by the Group are as follows:

Cost of right-of-use assets: Balance as of January 1, 2020 Additions Decrease Effect of changes in exchange rate Balance as of December 31, 2020 Balance as of January 1, 2019 (amount on the initial application date) Additions Decrease Effect of changes in exchange rate Balance as of December 31, 2019 Depreciation of right-of-use assets: Balance as of January 1, 2020 Provision for depreciation Decrease Effect of changes in exchange rate Balance as of December 31, 2020 Balance as of January 1, 2019 Provision for depreciation Decrease Effect of changes in exchange rate Balance as of December 31, 2019 Carrying value: December 31, 2020 January 1, 2019 December 31, 2019	Buildings and structures
	$ 37,542 863 (737) (55)
	$ 37,613
	$ 32,926 12,633 (7,476) (541)
	$ 37,542
	$ 8,888 11,923 (316) 27
	$ 20,522
	$ - 11,816 (2,740) (188)
	$ 8,888
	$ 17,091
	$ 32,926
	$ 28,654

h. Intangible assets

Intangible assets refer to the acquisition costs of computer software. The cost and amortization of the Group's intangible assets for 2020 and 2019 are as follows:

Cost: Balance as of January 1, 2020 Disposal and retirement Impact of changes in exchange rate Balance as of December 31, 2020 Balance as of January 1, 2019 Additions Disposal and retirement Impact of changes in exchange rate Balance as of December 31, 2019 Amortization and impairment loss: Balance as of January 1, 2020 Current amortization Disposal and retirement Impact of changes in exchange rate Balance as of December 31, 2020 Balance as of January 1, 2019 Current amortization Disposal and retirement Impact of changes in exchange rate Balance as of December 31, 2019 Carrying value: December 31, 2020 January 1, 2019 December 31, 2019	Cost of computer software
	$ 36,247 (76) (1)
	$ 36,170
	$ 35,593 1,270 (610) (6)
	$ 36,247
	$ 34,739 787 (76) (1)
	$ 35,449
	$ 34,021 1,334 (610) (6)
	$ 34,739
	$ 721
	$ 1,572
	$ 1,508

153

The amortization expenses of intangible assets for 2020 and 2019 are presented in the Consolidated Statement of Comprehensive Income under the following items:

Operating expenses	2020		2019
	$ **787 **		1,334

i. Short-term loans

ii.

The details, terms and conditions of the short-term loans of the Group are as follows:

Unsecured bank loans Secured bank loans Total Unused credit line Unsecured bank loans Secured bank loans Total Unused credit line		2020.12.31	2020.12.31	Amount $ 357,500 492,500 $ 850,000 $ 450,000 Amount $ 266,250 388,750 $ 655,000 $ 545,000
	Currency	Range of interest rate	**Maturity year **
	TWD TWD
	Currency	Range of interest rate	Maturity year
	TWD TWD		109 109
		1.10%~1.35% 1.10%~1.13%

Please refer to Note 6 (20) for further information on the liquidity risk exposure of the Group.

Please refer to Note 6 (2) and 8 for the mortgage of the Group's assets as collateral for bank loans.

• j. Lease liabilities

The carrying amount of the Group's leasing liabilities is as follows:

Current Non-current	2020.12.31 $ 9,579	2019.12.31 11,823
	$ 7,664	16,950

Please refer to Note 6 (20) Financial instruments for details of maturity analysis.

The amount of lease recognized in profit and loss is as follows:

Interest expense on lease liabilities Expenses for short-term leases The amount of lease recognized in the Statement of Cash Total cash outflow from leases	2020 $ 291	2019 363
	$ 4,035	5,239
	Flow is as follows: 2020 2019 $ 16,159 16,955
		16,955

The amount of lease recognized in the Statement of Cash Flow is as follows:

1) Lease of buildings and structures

The Group leases buildings and structures as offices and warehouses for a period of 2~6 years.

2) Other leases

The Group leases some warehouses, parking spaces and offices for a period of less than one year, which belong to short-term leases. The Group chooses to apply the exemption from recognition and does not recognize its relevant right-of-use assets and lease liabilities.

154

k. Provisions

Balance as of January 1, 2020 Provisions reversed in current period Impact of changes in exchange rate Balance as of December 31, 2020 Balance as of January 1, 2019 Impact of changes in exchange rate Balance as of December 31, 2019	Warranty
	$ 6,735 (796) (218) $ 5,721 $ 6,836 (101) $ 6,735

The Group's provision for warranty liabilities in 2020 and 2019 is primarily related to the sale of products, and is estimated on the basis of historical warranty information for similar goods and services.

l. Employee benefits

1) Defined benefit plans

The movements between the present value of defined benefit obligations and the fair value of the plan assets of the Company is as follows:

Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities	2020.12.31 $ 59,724 (29,784)	2019.12.31 51,374 (28,116)
	$ 29,940	23,258

The Company's defined benefit plan is allocated to the labor retirement reserve fund account established in the Bank of Taiwan. The retirement pension payment of each employee who applies the Labor Standards Act is calculated according to the base from years of service and the average salary for the six months prior to retirement.

a) Composition of plan assets

The pension fund allocated by the Company in accordance with the Labor Standards Act is managed by the Bureau of Labor Funds, Ministry of Labor (hereinafter referred to as the Bureau of Labor Funds). According to the :Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund," for the utilization of the fund, the minimum return distributed in the final accounts each year shall not be lower than the return calculated at the interest rate for two-year fixed deposits at local banks.

As of the reporting date, the balance of the Company's labor retirement reserve fund account established in the Bank of Taiwan is NT$29,784 thousand. Information on the utilization of labor retirement fund assets includes return on funds and fund asset allocation. Please refer to the information published on the website of the Bureau of Labor Funds, Ministry of Labor for more details.

b) The movements in the present value of defined benefit obligations

The movements in the present value of the defined benefit obligations of the Company in 2020 and 2019 are as follows:

Defined benefit obligations as of January 1 Current service cost and interest Remeasurement of the net defined benefit liabilities - Actuarial gains and losses arising from changes in demographic assumptions - Actuarial gains and losses arising from changes in financial assumptions - Experience adjustments Defined benefit obligations as of December 31	2020	2019 45,140 978 (23) (114) 5,393
	$ 51,374 773 491 2,455 4,631
	$ 59,724	51,374

155

c) The movements in the fair value of defined benefit plan assets

The movements in the fair value of the defined benefit plan assets of the Company in 2020 and 2019 are as follows:

Fair value of plan assets as of January 1 Interest income Remeasurement of the net defined benefit liabilities - Return on plan assets (excluding current interest) Amount allocated to the plan Fair value of plan assets as of December 31	2020 $ 28,116 228 895 545	2019 26,246 296 892 682
	$ 29,784	28,116

d) Expenses recognized as profit and loss

The expenses recognized as profit and loss in 2020 and 2019 are as follows:

Current service cost Interest on the net defined benefit liabilities Administrative expenses	2020 $ 362 183	2019 470 212
	$ 545	682
	$ 545	682

e) Actuarial assumption

The material actuarial assumptions used by the Company to determine the present value of the defined benefit obligations on the closing date of financial statement are as follows:

Discount rate Increase in future salary	2020.12.31 0.350% 2.625%	2019.12.31 0.800% 2.625%

The Company expects to make an allocation of NT$338 thousand to the defined benefit plan within one year after the reporting date of 2020.

The weighted average duration of the defined benefit plan is 13 years.

f) Sensitivity analysis

The impact of the changes in the major actuarial assumptions adopted on the present value of defined benefit obligations as of December 31, 2020 and 2019 is as follows:

December 31, 2020 Discount rate (change by 0.25%) Future salary increase (change by 0.25%) December 31, 2019 Discount rate (change by 0.25%) Future salary increase (change by 0.25%)	Impact on the defined benefit obligations Increase Decrease $ (1,383) 1,436 1,369 (1,326) Impact on the defined benefit obligations Increase Decrease $ (1,295) 1,346 1,288 (1,246)
	Increase $ (1,295) 1,288

The above sensitivity analysis refers to the analysis of the impact of changes in a single assumption under the premise that other assumptions remain unchanged. In practice, many changes in assumptions may be linked. The methods used for sensitivity analysis is consistent with that used to calculate the net defined benefit liabilities of the balance sheet.

156

The methods and assumptions used for sensitivity analysis in current period are the same as those used in previous periods.

2) Defined contribution plans

In accordance with the provisions of the Labor Pension Act, the Group's defined contribution plan is allocated to the individual labor pension account at the Bureau of Labor Insurance, Ministry of Labor (the Bureau of Labor Insurance) at a contribution rate of 6% of the worker's monthly wages. There is no statutory or constructive obligation on the Group to pay any additional amount after the Group has made a fixed contribution to the Bureau of Labor Insurance under the such plan.

The pension expenses allocated by the Group under its defined pension contribution plan in 2020 and 2019 were NT$16,399 thousand and NT$16,567 thousand respectively (after deducting the ending payable expenses of NT$2,685 thousand and NT$2,781 thousand), which has been allocated to the Bureau of Labor Insurance.

In addition, the pension expenses recognized by foreign subsidiaries in accordance with relevant local laws and regulations in 2020 and 2019 are NT$797 thousand and NT$2,037 thousand respectively.

m. Income tax

1) Income tax expenses (benefits)

The income tax expenses (profits) of the Group for 2020 and 2019 are as follows:

Current income tax expenses (benefits) Incurred in the current period Adjustment of current income tax in the previous period Deferred income tax expenses (benefits) Occurrence and reversal of temporary differences Income tax expenses of continuing operations	2020 $ 4,757 (485)	2019 18,853 2,243
	4,272	21,096
	725	7,207
	$ 4,997	28,303

There is no income tax directly recognized as equity for 2020 and 2019 of the Group.

The income tax profits (expenses) recognized under other comprehensive income of the Group for 2020 and 2019 are as follows:

Actuarial gains (loss) from defined benefit plans	2020 $ 1,340	2019 873

The adjustment of relationship between the Group's income tax expenses (benefits) and net profit before tax for 2020 and 2019 is as follows:

t before tax for 2020 and 2019 is as follows:
Net profit before tax Income tax calculated according to the domestic tax rate at the place where the Group is located Non-deductible expenses Investment tax credit Recognition of tax losses unrecognized in previous period Changes in temporary difference unrecognized	2020 $ (60,422)	2019 230,876
	(11,306) 16,478 - (669) (1,208)	44,968 (25,974) (6,935) (513) 13,855

157

Current tax loss of items unrecognized as deferred tax assets: Overestimate/underestimate for previous period Surtax on unappropriated earnings Income basic tax Overestimate/underestimate of temporary differences Total	2020 1,672 (485) - 24 491	2019 364 2,243 131 24 140
	$ 4,997	28,303

• 2) Deferred tax assets and liabilities

• a) Unrecognized deferred tax assets

Items not recognized as deferred tax assets by the Group are as follows:

Deductible temporary differences Unused tax loss carryforwards Tax incentives	2020.12.31 $ 45,124 70,547 31,358	2019.12.31 47,615 83,304 31,144
	$ 147,029	162,063

As of December 31, 2020 and 2019, the Company estimated that some of the temporary differences were unlikely to be realized in the foreseeable future. Therefore, the Company did not recognize any deferred tax assets.

• b) Recognized deferred tax assets and liabilities

The movements in deferred tax assets and liabilities for 2020 and 2019 are as follows:

Deferred tax liabilities: Balance as of January 1, 2020 Debit (credit) profit and loss Balance as of December 31, 2020 Balance as of January 1, 2019 Debit (credit) profit and loss Balance as of December 31, 2019 Deferred tax assets: Balance as of January 1, 2020 (Debit) credit profit and loss (Debit) credit Other comprehensive income Impact of changes in exchange rate Balance as of December 31, 2020 Balance as of January 1, 2019 (Debit) credit profit and loss (Debit) credit Other comprehensive income Impact of changes in exchange rate Balance as of December 31, 2019	Defined benefit plan	Others 582 (566)	Total 582 (566)
	$ - -
	$ -	16	16
	$ - -	8,618 (8,036)	8,618 (8,036)
	$ -	582	582
	$ 3,365 - 1,340 -	36,285 (1,291) - (304)	39,650 (1,291) 1,340 (304)
	$ 4,705	34,690	39,395
	$ 2,492 - 873 -	51,622 (15,243) - (94)	54,114 (15,243) 873 (94)
	$ 3,365	36,285	39,650

158

Defined benefit plan Others

Total

3) As of December 31, 2020, the Group’s unrecognized deferred tax assets resulted from loss carryforwards and expiry year were as follows:

Loss year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020	Lossesnot yet deducted $ 13,484 19,781 34,458 24,087 24,389 17,719 8,438 150,048 10 10 18 $ 292,442	Expiry year
		2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

In addition to those presented in the above table, the subsidiary Infortrend Corporation has a loss not yet deducted of NT$12,072 thousand and has recognized deferred tax assets of NT$2,087 thousand; and the subsidiary Infortrend Europe Limited has a loss not yet deducted of NT$63,468 thousand, which has not been recognized as a deferred income tax asset of NT$12,059 as the estimate that the temporary difference is unlikely to be realized in the foreseeable future.

4) Assessment of income tax

The Company ’ s tax returns for 2018 were examined and approved by the Taiwan National Tax Administration, and the Company ’ s tax returns for 2017 is still under examination.

n. Capital and other equity

Both the total authorized ordinary share capital of the Company as of December 31, 2020 and 2019 is NT$3,120,000 thousand for 312,000 thousand shares with a par value per share of NT$10. The number of ordinary shares outstanding was 273,552 thousand and 276,291 thousand, respectively, and share capital of shares outstanding has been collected.

Below is the reconciliation statement for the number of outstanding shares of the Company for 2020 and 2019:

(presented in thousands of shares)

for 2020 and 2019:		(presented in thousands of shares)	(presented in thousands of shares)
Beginning balance as of January 1 Repurchase the shares of the Company New restricted employee shares Ending balance as of December 31		Ordinary shares 2020 2019 276,076 276,117 (2,736) (430) 212 389
		2020
		276,076 (2,736) 212
		273,552	276,076

159

1) Issuance of ordinary shares

In accordance with the new restricted employee share plan adopted by the shareholders' meeting on June 10, 2013, June 13, 2014, June 8, 2016 and June 13, 2017, the Company issued 913 thousand, 987 thousand, 1,019 thousand and 301 thousand ordinary shares at face values for aggregate amounts of NT$9,129 thousand, NT$9,874 thousand, NT$10,189 thousand and NT$3,010 thousand, respectively, by resolution of the board of directors on March 16, 2015, March 15, 2016, March 13, 2017 and March 12, 2018. Among them, 17 thousand, 21 thousand, 283 thousand, 47 thousand, 64 thousand, 311 thousand, 133 thousand, 301 thousand, 35 thousand, 301 thousand, 23 thousand and 3 thousand shares, due to employee turnover and performance ratings not up to standard, were canceled on August 10, 2015, November 10, 2015, March 17, 2016, August 10, 2016, November 8, 2016, March 17, 2017, August 10, 2017, March 17, 2018, August 10, 2018, March 17, 2019, December 31, 2019 and May 9, 2020, respectively, and their registration of change were completed on September 2, 2015, November 27, 2015, April 6, 2016, August 23, 2016, November 22, 2016, April 6, 2017, August 28, 2017, April 3, 2018, August 28, 2018, April 1, 2019, January 15, 2020 and May 26, 2020. Please refer to Note 6 (15) for details.

2) Capital surplus

Balance of the Company's capital surplus is as follows:

apital surplus ce of the Company's capital surplus is as follows:
Share premium New restricted employee shares Income from endowments received by the Company Total	2020.12.31 $ 88,085 - 717	2019.12.31 87,556 1,431 717 89,704
	$ 88,802

In accordance with the provisions of the Company Act, only after covering losses by capital surplus, the Company may distribute new shares or cash from realized capital surplus according to the proportion of the shareholders' original shares. The term "realized capital surplus" referred to in the preceding paragraph includes the income derived from the issuance of new shares at a premium and income from endowments received by the Company. In accordance with the Regulations Governing the Offering and Issuance of Securities by Issuers, when capital surplus is capitalized, the combined amount capitalized in any 1 year may not exceed 10 percent of paid-in capital.

3) Retained earnings

In accordance with the Articles of Incorporation of the Company, any earnings after the Company's annual closing of the books, it shall be first used to pay all taxes and dues and cover accumulated losses, then 10 percent of the earnings shall be reserved as the legal reserve; provided that this restriction shall not apply to the circumstances that the legal reserve has reached the paid-in capital of the Company. Provision (reversal) for special reserve shall be made from the remaining earnings as required by the Company's operation or by law. If there is still a balance, the board of directors shall draw up an earnings distribution plan for the balance and the unappropriated earnings at the beginning of period, and submit it to the board of shareholders for a resolution on distribution.

The Company will, considering the Company's environment and growth stage, taking into account its future capital needs and long-term financial planning, satisfying the needs of shareholders for cash inflows, distribute shareholders' dividends in the form of both stock dividends and cash dividends, in which the proportion of cash dividends shall not be less than 10 percent of the total dividend of shareholders.

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a) 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 cash, providing that the portion of legal reserve exceeds 25% of capital may be distributed.

b) Special reserve

Pursuant to Financial-Supervisory-Securities-Corporate-1010012865 issued on April 6, 2012, the Company shall allocate a special reserve of the same amount from the after-tax earnings for the current year and the unappropriated earnings in the previous period for the net deduction of shareholders' equity incurred for the current year. For the deduction of accumulated shareholders' equity for the preceding period, the special reserve of the same amount that should be allocated from the unappropriated earnings in the previous period shall not be distributed. In the event of a subsequent reversal of the amount of the reduction in shareholders' equity, the earnings may be distributed from such reversal. As of December 31, 2020 and 2019, the balance of the special reserve is NT$0.

c) Earning distribution

The Company's earnings distribution plans for the year 2019 and 2018 were resolved at the regular shareholders' meeting on June 10, 2020 and June 10, 2019 respectively. The payout ratio and amount of dividends distributed to owners are as follows:

as follows:
Dividends distributed to owners of ordinary shares: Cash	2019 Payout ratio (NT$) Amount $ 0.60 165,773		2018 Payout ratio (NT$) Amount 0.40 110,473
	Payout ratio (NT$)		Payout ratio (NT$)
	$ 0.60		0.40

The Company's earnings distribution plan for 2020 was resolved by the board of directors on March 11, 2021. The payout ratio and amount of dividends distributed to owners are as follows:

distributed to owners are as follows:
Dividends distributed to owners of ordinary shares: Cash	2020 Payoutratio (NT$) Amount $ 0.30 82,065
	Payoutratio (NT$) $ 0.30

d) Treasury shares

In 2020, the Company repurchased a total of 2,736 thousand treasury shares as necessary to protect the Company's credit and shareholders' equity in accordance with Article 28-2 of the Securities and Exchange Act. Balance as of December 31, 2020, all the said treasury shares repurchased have been canceled.

The treasury shares held by the Company shall not be pledged in accordance with the Securities and Exchange Act, and no shareholders' right shall be enjoyed until they are transferred.

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e) Other equity (net after tax)

e) Other equity (net after tax)
Balance as of January 1, 2020 Exchange differences resulting from translating the net assets of foreign operations Unpaid employee remuneration Balance as of December 31, 2020 Balance as of January 1, 2019 Exchange differences resulting from translating the net assets of foreign operations Unpaid employee remuneration Balance as of December 31, 2019	Exchange differences resulting from translating the financial statements of foreignoperations	Unpaid employee remuneration (597) - 597 - (8,792) - 8,195 (597)	Total 6,989 (2,238) 597 5,348 (2,062) 856 8,195 6,989
	$ 7,586 (2,238) - $ 5,348 $ 6,730 856 - $ 7,586

o. Share-based payment transaction

On June 11, 2018, the Company issued 800 thousand new restricted employee shares by the resolution of shareholders' meeting, which were granted to only full-time employees of the Company who meet certain conditions and have been filed for effective registration with the Securities and Futures Bureau, Financial Supervisory Commission, R.O.C.

On June 13, 2017, June 8, 2016, June 13, 2014, and June 10, 2013, respectively, the Company issued 1,300 thousand, 1,500 thousand, 1,000 thousand and 2,500 thousand new restricted employee shares by the resolution of shareholders' meeting, which were granted to only full-time employees of the Company who meet certain conditions and have been filed for effective registration with the Securities and Futures Bureau, Financial Supervisory Commission, R.O.C. And on March 12, 2018, March 13, 2017, March 15, 2016 and March 16, 2015, respectively, the Company issued 301 thousand, 1,019 thousand, 987 thousand and 913 thousand shares by resolutions of the board of directors.

Employees who are allotted the aforesaid new restricted employee shares may obtain 30%, 30% and 40% of the allotted shares under vesting conditions respectively if they have been in service for the first, second and third years after the date of allotment of shares and have met the performance criteria required by the Company.

After subscribing for the new shares, employees shall not sell, pledge, transfer, grant, or otherwise dispose of the new shares, nor shall they enjoy the allotment rights on dividends and reserves, nor the stock options to increase cash capital until the vesting conditions are met. From 15 business days prior to the book closure date of bonus shares and the book closure date of cash dividends to the base date of right distribution, the employees who have reached the vesting conditions during this period still do not be entitled to the right of earnings distribution on their shares which have been removed from the restriction.

Upon allotment of the new shares, employees shall, until the vesting conditions are met, deliver the shares in full to the trust institution designated by the Company for custody. During the trust custody period, the voting rights of the shareholders' meeting of the shares shall be exercised by the trust custody institution in accordance with the relevant laws and regulations. If any employee fails to meet the vesting conditions after being allotted the new shares, the Company will recover the shares without compensation and perform the cancellation of the shares according to law.

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Relevant information on new restricted employee shares of the Company is as follows:

Number of shares outstanding as of January 1 (thousand shares) Current vesting amount (thousand shares) Current lost amount (thousand shares) Number of shares outstanding as of December 31 (thousand shares)		2020 215 (212) (3)	2019 928 (389) (324)
		-	215

1) Measurement parameters of fair value on the grant date

The Company adopts the Black-Scholes option pricing model to estimate the fair value of share-based payment at the grant date. The input value of this model is as follows:

Offering date Fair value on the grant date Share price on the grant date Strike price Expected volatility (%) Duration (years) Expected rate of dividend (%) Risk-free interest rate (%)		Newrestricted employee shares

The Company's expected volatility is based on historical volatility. The duration is governed by the Company's issuance rules. The expected dividends are calculated based on cash dividends distributed by the Company in 2017, 2016, 2015 and 2014, respectively. The risk-free interest rate refers to the interest rate for one to three-year fixed deposits of the Bank of Taiwan. The determination of fair value does not take into account the services and non-market performance conditions included in the transaction.

2) Employee expenses and liabilities

The expenses and liabilities incurred from share-based payments by the Company for 2020 and 2019 are as follows:

2020 and 2019 are as follows:
Expenses incurred by new restricted employee shares		2020 544	2019 3,840

p. Earnings per share

1) Basic earnings per share

The basic earnings per share of the Group for 2020 and 2019 is calculated on the basis of the net profit attributable to the ordinary equity holders of the Group and the weighted average number of ordinary shares outstanding as follows:

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a) Net profit attributable to the ordinary equity holders of the Company

2020 Net profit attributable to the ordinary equity holders of the Company $ (65,419) Weighted average number of ordinary shares outstanding 2020 Ordinary shares outstanding as of January 1 276,076 Impact of new restricted employee shares 169 Impact of treasury shares (1,696) Weighted average number of ordinary shares outstanding as of December 31 274,549	2020	2020	2019 202,573 2019 276,117 310 (345) 276,082
	$ (65,419)
		276,076 169 (1,696)
		274,549

b) Weighted average number of ordinary shares outstanding

2) Diluted earnings per share

The basic earnings per share of the Company for 2019 is calculated on the basis of the net profit attributable to the ordinary equity holders of the Company and the weighted average number of ordinary shares outstanding after adjusting for the dilution effect of all potential ordinary shares as follows:

• a) Net profit attributable to the ordinary equity holders of the Company (diluted)

Net profit attributable to the ordinary equity holders of the Company (diluted) b) Weighted average number of ordinary shares outstanding (diluted) Weighted average number of ordinary shares outstanding (basic) Impact of employee stock remuneration New restricted employee shares not acquired Balance as of December 31 - weighted average number of ordinary shares outstanding (diluted)	2019 $ 202,573 2019 276,082 3,250 268 279,600

Since it is a net loss for 2020 for the Company, there is no dilution effect. Therefore, the disclosure of diluted earnings per share (loss) is not required.

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q. Revenue from contracts with customers

• 1) Disaggregation of income

Head Office Subsidiary in the USA Primary geographical markets: USA $ - 127,667 Europe 96,217 - Taiwan 59,262 - China 611 - Japan 276,744 - Germany 117,567 - Other countries 130,101 - $ 680,502 127,667 Major products: Computer peripherals $ 653,799 120,004 Rendering of services 26,703 7,663 $ 680,502 127,667 Head Office Subsidiary in the USA Primary geographical markets: USA $ - 156,444 Europe 184,970 - Taiwan 52,377 - China 1,364 - Japan 359,719 - Germany 52,886 - Other countries 137,431 - $ 788,747 156,444 Major products: Computer peripherals $ 770,546 147,681 Rendering of services 18,201 8,763 $ 788,747 156,444 2) Contract balance trade receivables Less: allowance for losses Total Contract liabilities			2020	2020	2020					Total 127,667 181,847 59,380 167,298 331,562 130,013 132,780 1,130,547 1,075,596 54,951 1,130,547 Total 156,444 263,153 53,028 280,721 418,193 62,928 144,066 1,378,533 1,327,078 51,455 1,378,533 2019.1.1 301,771 (1,552) 300,219 50,963
	Head Office	Subsidiary in the USA 127,667 - - - - - - 127,667 120,004 7,663 127,667	Subsidiary in the UK	Subsidiary in China			Other segments
	$ - 96,217 59,262 611 276,744 117,567 130,101 $ 680,502 $ 653,799 26,703 $ 680,502		- - 84,565 - - - - 166,669 - - 12,446 - - - 97,011 166,669 86,129 162,323 10,882 4,346 97,011 166,669 2019				- 1,065 118 18 54,818 - 2,679
							58,698
							53,341 5,357
							58,698
	Head Office		Subsidiary in the UK	Subsidiary in China			Other segments
							- 2,905 651 29 58,474 - 6,635
							68,694
							63,700 4,994
							68,694
					241,968
					49,045

Please refer to Note 6 (3) for details of disclosure of trade receivables and their impairment.

The beginning balance of contract liabilities as of January 1, 2020 and 2019 was recognized as income of NT$15,348 thousand and NT$16,746 thousand in 2020 and 2019, respectively. The changes in the contract liabilities are mainly from the difference between the time point at which the performance obligation is met and the time point at which the customer pays.

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r. Employee’s and directors’ compensation

In accordance with the Articles of Incorporation of the Company, if the Company has gained profits within a fiscal year, at least 1 percent of the profits shall be allocated as the employees' compensation, and less than 0.5 percent as the director's remuneration. However, in case of the accumulated losses, certain profits shall first be reserved to cover them. Profits refer to pre-tax benefits before deducting remuneration to employees and directors. The remuneration to employees referred to in the preceding paragraph may be distributed by shares or cash to employees of subsidiaries.

The Company's remuneration for employees in 2019 is accrued at NT$38,000 thousand, and the compensation for directors is accrued at NT$1,000 thousand, which are based on the amount of the Company's net pre-tax income before deducting the remuneration to employees and directors for each period multiplied by the distribution percentage of remuneration to employees and directors as stipulated in the Articles of Incorporation, and presented as operating costs or operating expenses for the period. It is a pre-tax loss for 2020, thus no provision has been made for the expenses related to the remuneration to employees and directors.

There is no difference between the actual distribution of remuneration to employees, directors and supervisors in 2019 and the provision amount in the Group's Consolidated Financial Statements for 2019. The relevant information is available at the Market Observation Post System.

s. Non-operating income and expenses

1) Interest income

The interest income of the Group in 2020 and 2019 is as follows:

rvation Post System. perating income and expenses nterest income nterest income of the Group in 2020 and 2019 is as	follows:
Interest income Financial assets at fair value through profit or loss Interest on bank deposits Others Total interest income	2020 $ 42,926 795 10	2019 64,390 3,449 10 67,849
	$ 43,731

2) Other income

Other income of the Group in 2020 and 2019 is as follows:

Rental income Dividend income	2020 $ 18,125 64,030	2019 19,087 51,679 70,766
	$ 82,155

3) Other gains and losses

Other gains and losses of the Group in 2020 and 2019 are as follows:

Foreign exchange loss Net profit (loss) of financial assets (liabilities) measured at fair value through profit or loss Disposal and retirement of property, plant and equipment loss Other gains and losses	2020 $ (19,855) (134,054) (66) 5,522	2019 (11,006) 90,432 (122) 6,171 85,475
	$ (148,453)

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4) Financial cost

The financial costs of the Group in 2020 and 2019 are as follows:

Interest expenses	2020 $ 7,704	2019 7,227

• t. Financial instruments

• 1) Credit risk

a) Exposure to credit risk

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

b) Concentration of credit risk

The Group's credit risk exposure is mainly affected by the individual circumstance of each customer. However, management also takes into account the statistics of the Group's customer base, including the default risk of the customer's industry and country, as these factors may affect credit risk. As of December 31, 2020 and 2019, 41.84% and 39.15% of the net trade receivables of the Group are derived from a single customer, as a result, there is a significant concentration of credit risk in the Group. In order to reduce the credit risk of trade receivables, the Group continuously assesses the financial position of its customers, periodically evaluates the possibility of collection of trade receivables and makes provision for bad debts.

c) Credit risk of receivables

Please refer to Note 6 (3) for information on the credit risk exposure of trade receivables. Other financial assets at amortized cost include other receivables and certificates of deposit. Please refer to Note 6 (4) for relevant information and provision for impairment allowance.

The foregoing items are financial assets with low credit risk, so the allowance for losses for the period are measured by the amount of the expected 12-month credit losses (Please refer to Note 4 (7) for instructions on how the Group determines the low credit risk). Time deposits held by the Group are traded with and performed by financial institutions of investment grade or above, and therefore are deemed to have low credit risk.

2) Liquidity risk

The table below shows the expiration dates of contract on financial liabilities, including the estimated interest but excluding the impact of netting agreement:

December 31, 2020 Non-derivative financial liabilities Secured bank loans Unsecured bank loans Trade payables Other payables Lease liabilities	Carrying amount	Contract cash flow	Within 6 months	6-12 months-	12years-	25 years-	More than 5 years
	$ 492,500 357,500 50,783 135,237 17,243	493,781 357,996 50,783 135,237 17,538	493,781 357,996 50,783 135,237 6,166	- - - - 3,617	- - - - 4,239	- - - - 3,516	- - - - -
	$ 1,053,263	1,055,335	1,043,963	3,617	4,239	3,516	-

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Carrying amount December 31, 2019 Non-derivative financial liabilities Secured bank loans $ 388,750 Unsecured bank loans 266,250 Trade payables 78,233 Other payables 152,332 Lease liabilities 28,773 Derivative financial liabilities Swap contracts for non-hedging purposes: Cash inflow - Outflow 338 $ 914,676	Carrying amount December 31, 2019 Non-derivative financial liabilities Secured bank loans $ 388,750 Unsecured bank loans 266,250 Trade payables 78,233 Other payables 152,332 Lease liabilities 28,773 Derivative financial liabilities Swap contracts for non-hedging purposes: Cash inflow - Outflow 338 $ 914,676	Contract cash flow	Within 6 months	6-12 months-	12years-	25 years-	More than 5 years
		389,263 266,728 78,233 152,332 29,375 (30,012) 30,350	389,263 266,728 78,233 152,332 6,056 (30,012) 30,350	- - - - 6,056 - -	- - - - 9,566 - -	- - - - 7,697 - -	- - - - - - -
	$ 914,676	916,269	892,950	6,056	9,566	7,697	-

The Group does not expect that the cash flow for the due date analysis will occur significantly earlier or that the actual amount may vary significantly.

• 3) Exchange rate risk

• a) Exposure to exchange rate risk

The Group's financial assets and liabilities that are exposed to significant foreign exchange risk are as follows:

2020.12.31

		2020.12.31
Financial assets Monetary items USD EUR RMB ZAR INR Financial liabilities Monetary items USD	Foreign currency (thousand dollars) $ 38,515.95 208.92 96.84 101,300.44 34,354.50 111,197.58 108.33 2,826.42 343.94	Exchange rate USD:NTD 28.1100 USD:JPY 103.1181 EUR:NTD 34.5500 RMB:NTD 4.3200 ZAR:NTD 1.9200 INR:NTD 0.3847 USD:NTD 28.1100 USD:RMB 6.5069 USD:JPY 103.1181	NTD 1,082,683 5,873 3,346 437,618 65,961 42,781 3,045 79,451 9,668

2019.12.31

Financial assets Monetary items USD EUR RMB ZAR INR IDR Financial liabilities Monetary items USD	Foreign currency (thousand dollars) $ 47,790.14 206.91 55.56 85,536.80 44,377.22 463,311.50 14,000,000.00 $ 336.63 3,935.50 562.09	Exchangerate USD:NTD 29.9850 USD:JPY 108.6807 EUR:NTD 33.6100 RMB:NTD 4.3050 ZAR:NTD 2.1300 INR:NTD 0.4206 IDR:NTD 0.0022 USD:NTD 29.9850 USD:RMB 6.9652 USD:JPY 108.6807	NTD 1,432,987 6,204 1,867 368,236 94,523 194,869 30,800 10,094 118,006 16,854

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b) Sensitivity analysis

The exchange rate risk of the Group's monetary items mainly derives from the foreign currency exchange gains and losses generated at the time of translation of foreign-currency-denominated cash and cash equivalents, trade receivables and other receivables, financial assets at fair value through profit or loss, trade payables and other payables etc. As of December 31, 2020 and 2019, when the functional currency depreciates or appreciates by 0.5% relative to the non-functional currency, with all other factors remain unchanged, the net profit after tax as of December 31, 2020 and 2019 will increase by NT$6,184 thousand and NT$7,938 thousand respectively.

Due to the wide variety of functional currencies adopted, the Group discloses the exchange gains and losses of monetary items in a consolidated manner. The gains and losses (realized and unrealized) on foreign currency exchange in 2020 and 2019 were a loss of NT$19,855 thousand and a loss of NT$11,006 thousand respectively.

4) Interest rate analysis

The interest rate exposure of the Group's financial assets and financial liabilities is described in the liquidity risk management section of this Note. The following sensitivity analysis is based on the interest rate exposure of both derivative and non-derivative instruments as at the reporting date. For floating rate liabilities, the analysis assumes that the amount of liabilities outstanding on the reporting date is outstanding for the entire year. The rate of change used internally to report interest rates to key management is a 1% increase or decrease in interest rates, which also represents the management's assessment of the reasonable range of possible changes in interest rates.

If the interest rate increases or decreases by 1%, with all other variables remain unchanged, the net profit of the Group in 2020 and 2019 will decrease or increase by $6,800 and $5,240, mainly resulting from the Group's borrowings at variable interest rates.

5) Fair value information

• a) Type of financial instruments and fair value

The financial assets and liabilities measured at fair value through profit or loss of the Group are measured at fair value on a repeatability basis. The carrying amount and fair value of various types of financial assets and financial liabilities (including fair value classification information, but the carrying amounts of financial instruments not measured at fair value which are a reasonable approximation of the fair value, and the lease liabilities are not required to disclose the fair value information) are presented as follows:

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Financial assets at fair value through profit or loss Derivative financial assets Non-derivative financial assets mandatorily measured at fair value through profit or loss Subtotal Financial assets at amortized cost Cash and cash equivalents Trade receivables and other receivables Other financial assets Subtotal Total Financial liabilities at amortized cost Short-term borrowings Trade payables Other payables Lease liabilities Total Financial assets at fair value through profit or loss Derivative financial assets Non-derivative financial assets mandatorily measured at fair value through profit or loss Subtotal Financial assets at amortized cost Cash and cash equivalents Trade receivables and other receivables Other financial assets Subtotal Total Financial liabilities measured at fair value through profit or loss Derivative financial liabilities Financial liabilities at amortized cost Short-term borrowings Trade payables Other payables Lease liabilities Subtotal Total			2020.12.31
	Carrying amount	Level 1 27,547 3,494,414 3,521,961 - - - - 3,521,961 - - - - -	Fair	value
			Level 2 - - - - - - - - - - - - - 2019.12.31	Level 3 - - - - - - - - - - - - -	Total 27,547 3,494,414 3,521,961 - - - - 3,521,961 - - - - -
	$ 27,547 3,494,414 3,521,961 288,988 258,369 5,446 552,803 $ 4,074,764 $ 850,000 50,783 135,237 17,243 $ 1,053,263
	Carrying amount	Level 1 73,696 3,503,184 3,576,880 - - - - 3,576,880 - - - - - - -	Fair	value
			Level 2 - - - - - - - - 338 - - - - - 338	Level 3 - - - - - - - - - - - - - - -	Total 73,696 3,503,184 3,576,880 - - - - 3,576,880 338 - - - - - 338
	$ 73,696 3,503,184 3,576,880 239,223 319,753 6,019 564,995 $ 4,141,875 $ 338 655,000 78,233 152,332 28,773 914,338 $ 914,676

b) Each fair value hierarchy is defined as follows:

i. Level 1: The publicly quoted prices (unadjusted) in active markets for identical assets or liabilities.

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• ii.

Level 2: The input parameters other than publicly quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. price) or indirectly (and derived from price).

iii. Level 3: The inputs for assets or liabilities that are not based on observable market prices and counterparty quoted prices (non-observable parameters).

• c) Valuation technique of fair value of financial instruments measured at fair value

The Group presents the fair value of financial assets and financial liabilities by class and attribute as follows:

• i. Redeemable corporate bonds and open-end funds listed (OTC) are financial assets that are subject to standard terms and conditions and are traded in an active market, and their fair value is based on the publicly quoted prices in active markets.

• ii. Forward contracts and exchange rates for derivative financial instruments are usually valued according to valuation models accepted widely by market users at current forward exchange rates. The fair value for structured derivative instruments is calculated by the cash flow discount analysis using the yield curve applied to the duration of derivative commodities.

• d) Transfer between Level 1 and Level 2

There is no transfer in 2020 and 2019.

• e) Changes in Level 3

The movement in the reconciliation of Level 3 fair values in the Group’s financial assets for 2019 was as follows:

assets for 2019 was as follows:
Balance as of January 1, 2019 Total profit or loss Purchase Disposal / Liquidation Balance as of December 31, 2019		Financial assets at fair value throughprofit or loss
		$ 66,860 (360) 66,600 (133,100)
		$ -

The above total profit or loss are presented as other gains and losses. There is no asset still held as of December 31, 2020 and 2019.

• u. Financial risk management

• 1) Summary

The Group is exposed to the following risks as a result of the use of financial instruments:

• a) Credit risk

• b) Liquidity risk

• c) Market risk

This Note presents the information on the Group's exposure to the above risks and the Group's objectives, policies and procedures for measuring and managing risk. Please refer to relevant notes to the Consolidated Financial Statements for details of further quantitative disclosure.

• 2) Risk management framework

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The board of directors shall fully take the responsibilities for establishment and supervision of the risk management framework of the Group.

The risk management policy of the Group is established to identify and analyze risks encountered by the Group, set appropriate risk limits and controls, and supervise the compliance of risks and risk limits. Risk management policies and systems are periodically reviewed to reflect changes in market conditions and the Group's operations. The Group develops a disciplined and constructive control environment through training, management guidelines and procedures to enable all employees to understand their roles and obligations.

The audit committee of the Group supervises the compliance of the Group's risk management policies and procedures, and reviews the appropriateness of the Group's relevant management framework for the risks encountered. The internal auditors assist the audit committee of the Group in its supervisory role by conducting periodic and exceptional reviews on risk management controls and procedures and reporting the review results to the audit committee.

3) Credit risk

Credit risk refers to the risk of the Group's financial loss arising from the failure of a customer or a counterparty to a financial instrument to fulfill its contractual obligations, which is mainly derived from the Group's trade receivables from customers, bank deposits and securities investments.

• a) trade receivables and other receivables

The Group has developed a credit policy for a wide range of customers, under which the Group shall analyze the credit rating of each new customer on an individual basis. To reduce credit risk, the Group regularly and continuously evaluates the financial position of its customers, but does not normally require customers to provide collateral.

b) Investments

The credit risk of bank deposits, fixed income investments and other financial instruments is measured and monitored by our management and finance department. Since the parties which the Group trades with and the investments performed by are all banks of good credit and financial institutions and corporate organizations with investment grade or above, there is no significant doubts on performance, thus there is no material credit risk.

4) Liquidity risk

Liquidity risk refers to the risk that the Group is unable to deliver cash or other financial assets to pay off its financial liabilities and fail to meet its obligations. The Group manages its liquidity in such a way as to ensure, to the extent possible, that the Group has adequate liquidity under normal and stressful circumstances to meet its liabilities when they come due without the risk of unacceptable loss or damage to the Group's reputation.

5) Market risks

Market risk refers to the risk that the Group's earnings or the value of financial instruments held by the Group may be affected by changes in market prices, such as changes in exchange rates, interest rates, or prices of equity instruments. Market risk management aims to control the exposure of market risk to a tolerable extent and to maximize the return on investment.

The Group engages in derivatives transaction to manage market risk. All transactions are conducted in accordance with the Group's Derivative Commodity Handling Procedures.

172

a) Exchange rate risk

The Group is exposed to exchange rate risks arising from sales, procurements and borrowing transactions that are not denominated in the functional currencies of each of the Group's enterprises. The functional currencies of the Group's enterprises are mainly New Taiwan dollar, as well as US dollar, RMB and Japanese yen, while the main currencies used for transactions are New Taiwan dollar, Euro, US dollar, British pound and Japanese yen.

In addition to the natural hedging by trade receivables and trade payables, the Group also adopts one-year forward foreign exchange contracts or other financial instruments to hedge foreign exchange risks.

b) Interest rate risk

The Group's investments in financial bonds and borrowings may affect interest income, expenses or fair value as market interest rates change, but slightly affect the working capital of the Group.

c) Other market price risks

The Group is exposed to equity prices risk derived from listed (OTC) equity securities investments. The equity investments are not held for trading but are strategic investments. The Group does not actively trade such investments, and the Group's management personnel manage risk by holding different risk investment portfolios. The Group's equity price risk is mainly concentrated in equity instruments issued by financial enterprises on the Taiwan Stock Exchange. In addition, the Group assigns a specific team to monitor the price risk and to assess when it is necessary to increase the hedging position of the risk to be avoided.

v. Capital management

The capital management the Group aims to ensure the ability as a going concern, so as to provide shareholder returns and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the dividends paid to shareholders, reduce capital to refund shareholders, issue new shares or sell assets to pay off liabilities.

In line with its peers, the Group manages capital on the basis of its debt-to-capital ratio, which is calculated by dividing net liabilities by total capital. Net liabilities are the total liabilities presented in the balance sheet minus cash and cash equivalents. Total capital is the total component of equity (i.e., share capital, capital surplus, retained earnings, treasury shares and other equity).

the total component of equity (i.e., share capital, capital shares and other equity).	surplus, retained	earnings, treasury
Total liabilities Less: cash and cash equivalent Net liabilities Total equity Debt-to-capital ratio	2020.12.31	2019.12.31 1,010,078 (239,223) 770,855 4,234,774 18.20%
	$ 1,154,804 (288,988) $ 865,816 $ 3,964,347 21.84%

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As of December 31, 2020, the Group's approach to capital management remained unchanged.

• w. Investment and financing activities involved in non-cash transactions

The Group's investment activities in 2020 and 2019 are not involved in non-cash transactions. Financing activities involved in non-cash transactions refer to acquisition of right-of-use assets by lease. Please refer to Note 6 (7) for details.

The adjustment of liabilities from financing activities is shown in the table below:

Lease liabilities Total liabilities generated from the financing activities Lease liabilities Total liabilities generated from the financing activities	2020.1.1 $ 28,773 $ 28,773 108.1.1	Cash flow (11,887) (11,887) Cash flow (11,628) (11,628)		Non-cash changes	2020.12.31
				357 357 Non-cash changes 7,475 7,475	17,243
					17,243
					108.12.31
	$ 32,926 $ 32,926				28,773
					28,773

7. Related-Party Transactions

• a. Transactions with key management personnel

Compensation of key management personnel includes:

Short-term employee benefits Post-employment benefits	2020 $ 20,650 3,192 $ 23,842	2019
		20,978 3,598
		24,576

8. Pledged Assets

The carrying value of the assets pledged as guarantee by the Group is as follows:

Pledged assets	Object ofpledge guarantee Short-term borrowings and financing amount Guarantee for customs duties Guarantee for national defense service and deposit for housing and parking space	2020.12.31 $ 1,292,051 2,600 2,846 $ 1,297,497	**2019.12.31 **
Financial assets at fair value through profit or loss - current Other financial assets - non-current Other financial assets - non-current			1,006,591 2,600 3,419
			1,012,610

9. Significant Contingent Liabilities and Unrecognized Contractual Commitments

• a. Significant unrecognized contractual commitments:

• 1) The refundable deposit notes issued by the Group for the loan limit are as follows:

NTD USD	2020.12.31 $ 800,000 -	2019.12.31 700,000 14,993

10. Losses due to Major Disasters: None.

11. Significant Events after the End of the Financial Reporting Period: None.

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12. Others

• a. The summary of employee benefits, depreciation, depletion and amortization expenses by function is as follows:

function is as follows:
Function Gender	2020			2019
	Operating costs	Operating expenses	Total	Operating costs	Operating expenses	Total
Employee benefit expenses Salary expenses Labor and health insurance expenses Pension expenses Other employee benefits expenses Depreciation expenses Amortization expenses	102,389 9,858 4,903 5,376 9,995 -	332,192 24,679 12,838 11,052 23,907 787	434,581 34,537 17,741 16,428 33,902 787	105,097 10,104 5,025 5,649 10,058 -	370,008 25,872 14,261 12,684 24,724 1,334	475,105 35,976 19,286 18,333 34,782 1,334

b. Influences of COVID-19:

The COVID-19 outbreak in early 2020 has affected the sales of the Group's subsidiary in Mainland China, Infortrend Shanghai Limited, and its subsidiary in the USA, Infortrend Corporation, including order reduction and delayed delivery, but does not affect their going concern assumption as their revenue have gradually recovered and they will receive full support from the parent company. The Group will continue to closely monitor the development of events for immediate assessment, and take relevant measures to prevent the epidemic.

13. Supplementary Disclosures

• a. Information on significant transactions

In accordance with the "Regulations Governing the Preparation of Financial Statements by Securities Issuers," the Group discloses the information concerning significant transactions in 2020 as follows:

• 1) Financings provided: None.

• 2) Guarantee and endorsement provided: None.

• 3) Marketable securities held at the end of period (excluding investments in subsidiaries, associates, and joint ventures):

Unit: NT$ Thousands

Holding company	Type and name of securities	Relationship with the issuer of securities	Accounting subject	End of the Period	End of the Period	End of the Period	End of the Period	Interim highest share holdings or capital contributions	Remarks
				Number of shares	Carrying amount	Shareholdin g ratio	Fair value
Infortrend Technology Inc. " " " "	SoftBank Perpetual Bonds Mega Diamond Money Market Fund UPAMC James Bond Money Market Fund Jih Sun Money Market Fund Cathay High Income Fund of Funds	- - - - -	Derivatives measured at fair value through profit or loss - non-current- Debt instruments measured at fair value through profit or loss - current- " " "	- 146,600.77 3,632,174.68 1,681,491.00 726,172.90	27,547 1,854 61,169 25,138 9,663	- % - % - % - % - %	27,547 1,854 61,169 25,138 9,663	- % - % - % - % - %

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Holding company	Type and name of securities	Relationship with the issuer of securities	Accounting subject	End of the Period	End of the Period	End of the Period	End of the Period	Interim highest share holdings or capital contributions	Remarks
				Number of shares	Carrying amount	Shareholdin g ratio	Fair value
" " " " " " " " "	Manulife China Offshore Bond Fund Prudential Financial India Opportunity Bond Fund Nomura Global Financial Bond Fund Dis - USD- Nomura Global Financial Bond Fund Dis - RMB- Allianz US Low Average Duration High Yield Fund - RMB- Allianz US Low Average Duration High Yield Fund - USD- Allianz Global Investors Fund - USD- Cathay Senior Secured High Yield Bond Fund - USD- Cathay Asian High Yield Bond Fund - USD-	- - - - - - - - -	" " " " " " " " "	910,050.60 3,304,668.11 98,734.45 938,812.31 1,047,955.40 187,778.80 116,492.78 3,576,003.00 199,616.48	10,073 34,670 32,745 48,499 49,308 57,087 35,595 36,107 57,499	- % - % - % - % - % - % - % - % - %	10,073 34,670 32,745 48,499 49,308 57,087 35,595 36,107 57,499	- % - % - % - % - % - % - % - % - %
Infortrend Technology Inc. " " " " " " " "	Cathay High Income Fund of Funds - USD- Manulife China Offshore Bond Fund - RMB- Fuh Hwa South Africa Short-Term Income ZAR Fund- Fuh Hwa Emerging Market RMB Fixed Inc - RMB- Prudential Financial India Opportunity Bond Fund - USD- Jih Sun Asian High Yield Bond Fund - RMB- European Investment Bank ZAR Bonds Asian Development Bank INR Bonds SoftBank USD Bonds	- - - - - - - - -	Debt instruments measured at fair value through profit or loss - current- " " " " " " " "	5,481,297.40 5,100,874.49 275,377.20 692,133.90 107,350.63 6,513,424.42 - - -	70,984 63,560 8,729 38,960 34,336 73,896 57,120 42,781 59,271	- % - % - % - % - % - % - % - % - %	70,984 63,560 8,729 38,960 34,336 73,896 57,120 42,781 59,271	- % - % - % - % - % - % - % - % - %

176

Holding company	Type and name of securities	Relationship with the issuer of securities	Accounting subject	End of the Period	End of the Period	End of the Period	End of the Period	Interim highest share holdings or capital contributions	Remarks
				Number of shares	Carrying amount	Shareholdin g ratio	Fair value
" " " " " " " " " " " " " " " " " " " "	BMW RMB Bonds Swiss Bank USD Bonds Barclays Bank USD Bonds Fortis Insurance USD Bonds Westpac Bank RMB Bonds CICC USD Bonds Hitachi Capital Corp Subsidiary RMB Bonds RBS USD Bonds RBS USD Bonds Industrial and Commercial Bank of China Singapore Branch RMB Bonds CDB Leasing USD Bonds Standard Charter Group USD Bonds Agricultural Development Bank of China RMB Bonds Class A preferred shares issued by Fubon Financial Holding Class B preferred shares issued by Fubon Financial Holding Class A preferred shares issued by Cathay Financial Holdings Class E Registered preferred shares issued by Taishin Holdings Class A preferred shares issued by Union Bank Class A preferred shares issued by WPG Holdings Class A preferred shares issued by Shin Kong Financial Holding	- - - - - - - - - - - - - - - - - - - -	" " " " " " " " " " " " " Equity instruments measured at fair value through profit or loss - current- " " " " " "	- - - - - - - - - - - - - 4,629,000.00 2,576,000.00 4,059,000.00 7,729,000.00 8,293,000.00 3,845,000.00 5,468,000.00	21,730 93,212 62,241 43,888 39,881 11,229 25,943 32,032 30,861 47,885 43,349 44,217 4,327 288,387 161,000 250,846 406,546 429,577 192,635 239,225	- % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - %	21,730 93,212 62,241 43,888 39,881 11,229 25,943 32,032 30,861 47,885 43,349 44,217 4,327 288,387 161,000 250,846 406,546 429,577 192,635 239,225	- % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - %	Note Note Note Note Note
Infortrend Technology Inc.	Class B preferred shares issued by Shin Kong Financial Holding	-	Equity instruments measured at fair value through profit or loss - current-	1,535,000.00	65,007	- %	65,007	- %

177

Holding company	Type and name of securities	Relationship with the issuer of securities	Accounting subject	End of the Period	End of the Period	End of the Period	End of the Period	Interim highest share holdings or capital contributions	Remarks
				Number of shares	Carrying amount	Shareholdin g ratio	Fair value
" "	Non-Cumulative Convertible Class A preferred shares issued by O-Bank Ordinary shares of Inventec Corporation Ordinary shares of Cathay Financial Holdings Co., Ltd.	- - -	" " "	3,907,000.00 270,000.00 123,465.00	39,656 6,480 5,216	- % - % - %	39,656 6,480 5,216	- % - % - %

Note: Please refer to Note 6 (2) for details about stock pledge.

• 4) Accumulated buying/selling of the same marketable securities amounting at least NT$300 million or 20% of paid-in capital: None.

• 5) Acquisition of real estate amounting at least NT$300 million or 20% of paid-in capital: None.

• 6) Disposition of rea estate amounting at least NT$300 million or 20% of paid-in capital: None.

• 7) Total purchases from or sales to related parties that amount at least NT$100 million or 20% of paid-in capital:

Unit: NT$ Thousands

A company purchases (sales) goods	Name of the counterparty	Relationship	Transaction details	Transaction details	Transaction details	Transaction details	Details of and reasons why the terms of the transaction are different from a general transaction	Details of and reasons why the terms of the transaction are different from a general transaction	Notes/trade receivables (payables)	Notes/trade receivables (payables)	Remarks
			Purchase (sale) of goods	Amount	As a proportion of total goods purchased (sold)	Credit period	Unit price (Note (1))	Credit period (Note (2))	Balance	As a proportion of notes/trade receivables (payables)
Infortrend Technology Inc. Infortrend Shanghai Limited	Infortrend Shanghai Limited Infortrend Technology Inc.	Sub-subsidiary 100% invested by the Company Ultimate Parent Company of the Company	Sales of goods Purchase of goods	(109,149) 109,149	(11.29)% 88.05%	3 months "	- -	- -	73,147 (73,147)	34.43% (96.38)%

Note (1): 10~20 % lower than the general trading price.

Note (2): 1~1.5 months more than the general conditions of credit.

Note (3): The above transactions were written off at the time of preparation of the consolidated financial statements.

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• 8) Trade receivable from related parties that amount at least NT$100 million or 20% of paid-in capital: None.

• 9) Trading in derivative instruments: Notes 6 (2) and 6 (20)

• 10) The business relationship between the parent and the subsidiaries and between each subsidiary, and the circumstances of any significant transactions between them:

Number	Name of trader	Trading partner	Relationships with trader	Business transaction	Business transaction	Business transaction	Business transaction
				Subject	Amount	Terms of the transaction	As a proportion of total consolidated operating revenue or total assets
0 0 0 0 0 0 0 0	Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc.	Infortrend Corporation Infortrend Europe Limited Infortrend Japan Inc. Infortrend Shanghai Limited Infortrend Corporation Infortrend Europe Limited Infortrend Japan Inc. Infortrend Shanghai Limited	1 1 1 1 1 1 1 1	Sales income Sales income Sales income Sales income Trade receivables Trade receivables Trade receivables Trade receivables	79,373 55,256 39,825 109,149 4,334 16,184 9,668 73,147	10~20 % lower than the general trading price 10~20 % lower than the general trading price 10~20 % lower than the general trading price 10~20 % lower than the general trading price 11.5 months more than the general conditions of credit- 11.5 months more than the general conditions of credit- 11.5 months more than the general conditions of credit- 11.5 months more than the general conditions of credit-	7.02% 4.89% 3.52% 9.65% 0.08% 0.32% 0.19% 1.43%
1 2 3 4 1 2 3 4	Infortrend Corporation Infortrend Europe Limited Infortrend Japan Inc. Infortrend Shanghai Limited Infortrend Corporation Infortrend Europe Limited Infortrend Japan Inc. Infortrend Shanghai Limited	Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc.	2 2 2 2 2 2 2 2	Purchase of goods Purchase of goods Purchase of goods Purchase of goods Trade payables Trade payables Trade payables Trade payables	79,373 55,256 39,825 109,149 4,334 16,184 9,668 73,147	10~20 % lower than the general trading price 10~20 % lower than the general trading price 10~20 % lower than the general trading price 10~20 % lower than the general trading price 11.5 months more than the general conditions of credit- 11.5 months more than the general conditions of credit- 11.5 months more than the general conditions of credit- 11.5 months more than the general conditions of credit-	7.02% 4.89% 3.52% 9.65% 0.08% 0.32% 0.19% 1.43%

Note (1): The number shall be filled in as follows:

1. 0 represents the parent company.

2. Subsidiaries are numbered sequentially starting with the Arabic numeral 1 by company.

Note (2): The types of relationships with traders are indicated as follows:

1. Parent company's transaction with subsidiary.

2. Subsidiary's transaction with its parent company.

3. Transaction between subsidiaries.

Note (3): Transactions whose amount do not exceed 1% of the total operating revenue will not be disclosed.

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b. Information on investments in other companies:

The information on the Group's investments in other companies in 2020 is as follows (excluding the investee companies in the Mainland China):

Unit: NT$ Thousands

Name of investment company	Name of investee	Region	Principal business	Original investment amount (Note (2))	Original investment amount (Note (2))	Shareholding at the end of the period	Shareholding at the end of the period	Shareholding at the end of the period	Interim highest share holdings or capital contributions	Current profit or loss of investee	Investment profit or loss recognized in the current period	Remarks
				End of current period	End of last year	Number of shares	Ratio	Carrying amount
Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Europe Limited Prophet Technology Inc.	Infortrend Corporation Infortrend Europe Limited Infortrend Japan Inc. Prophet Technology Inc. Infortrend Limited Infortrend Deutschland GmbH Surveon Technology Inc.	USA United Kingdom Japan Taiwan Mauritius Germany Taiwan	Transaction of computer peripherals Transaction of computer peripherals Transaction of computer peripherals Transaction of computer peripherals Investment Transaction of computer peripherals Transaction of computer peripherals	65,628 89,174 930 15,000 120,270 1,015 10,000	65,628 89,174 930 15,000 120,270 1,015 10,000	153,824 2,200,000 60 1,500,000 - - 1,000,000	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%	18,493 15,479 (577) 16,103 (9,258) 4,089 11,133	- % - % - % - % - % - % - %	6,678 (8,929) (1,346) 569 10,141 143 588	6,597 (8,929) (1,346) 569 10,141 143 588	Subsidiary " " " " Sub-subsidiary "

Note (1): The above transactions were written off at the time of preparation of the consolidated financial statements.

Note (2): The exchange rate is the historical exchange rate at the time of each investment.

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c. Information on investments in Mainland China:

1) Information on investments in Mainland China:

Unit: NT$ Thousands

==> picture [484 x 126] intentionally omitted <==

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

Accumulated Outward remittance
outward or recovery of Accumulated
remittance of investment in the outward
investment current period (Note remittance of Investment
from Taiwan 3) investment Shareholding profit or Repatriated
at the from Taiwan ratio of the Interim loss investment
Name of beginning of at the end of Current Company's highest share recognized Ending income as
investee in Paid-in the current the current profit or direct or holdings or in the carrying of the end
Mainland Principal capital Method of period period loss of indirect capital current value of of current
China business (Note 3) investment (Note 3) Remittance Recovery (Note 3) investee investments contributions period investments period
Infortrend Transaction 68,121 (II) 68,121 - - 68,121 10,132 100.00% - % 10,132 (15,559) -
Shanghai of computer
Limited peripherals
----- End of picture text -----

2) Limit on the amount of investments in Mainland China:

Accumulated outward remittance of investment to Mainland China from Taiwan at the end of the current period (Note (3))	Investment amount approved by the Investment Commission, MOEA (MOEAIC) (Note (3))	Limit on the amount of investments in Mainland China authorized by MOEAIC (Note (4))
68,121	68,121	2,378,608

Note (1): (a) Invest in mainland companies through remittance from the third region.

(b) Reinvest in the mainland companies by establishing a company through investment in the third region.

(c) Reinvest in a mainland company by reinvesting in an existing company in the third region.

(d) Invest directly in mainland companies.

(e) Other methods.

Note (2): It is presented according to the financial statements of the investee company.

Note (3):The exchange rate is the historical exchange rate at the time of each investment.

Note (4): The limit for other enterprises is 60% of net worth.

Note (5): The above transactions were written off at the time of preparation of the consolidated financial statements.

3) Significant transactions:

Please refer to the section titled "Information on significant transactions" for details of significant transactions, direct or indirect, between the Group and its investee companies in Mainland China in 2020, which have been written off at the time of preparation of the consolidated reports.

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d. Information on major shareholders:

Unit: Share

d. Information on major shareholders:		Unit: Share
Share Name of major shareholders	Number of shares held	Shareholding ratio
Shih-Tung Lo	38,948,816	14.23%
Special investment account of Beevest Securities Limited entrusted for custody by Chinatrust Commercial Bank	25,405,815	9.28%
Tung Yu Investment Co., Ltd	21,075,300	7.70%

• Note: (1) The information of major shareholders in this table refers to the information calculated by Taiwan Depository & Clearing Corporation (TDCC) on the last business day at the end of each quarter on the total number of ordinary shares and preferred shares (including treasury shares) of the Company held by shareholders which have been delivered with book-entry registration at least 5 percent in total. The capital stock recorded in the Financial Statements of the Company and the number of shares actually delivered with book-entry registration may vary depending on the calculation basis of preparation.

• (2) If the above information is about the circumstance that the shareholders have entrusted their shares to the trust institutions, it shall be disclosed by the trustor who opened the trust account with the trustee by the individual trust account. Shareholders shall register their shareholding as insider holding more than 10 percent of the shares in accordance with the Securities and Exchange Act, including the shares held by themselves plus the shares they have entrusted to the trust institutions and have the right to use the trust property. Please refer to the Market Observation Post System for information on insider equity registration.

14. Segment Information

The Group has five reporting segments: the head office, the subsidiary in China, the subsidiary in the USA, the subsidiary in the UK and other segments, in which the head office is engaged in the research, development, manufacturing and trading business of RAID controllers, etc. The subsidiary in China, the subsidiary in the USA, the subsidiary in the UK and other segments are sales bases located around the world by the head office, mainly selling products developed and manufactured by the head office.

The accounting policies of the operating segments are the same as the summarized important accounting policies stated in Note 4. The profit and loss of the Group's operating segments are measured by the after-tax operating profit and loss and are used as the basis for performance evaluation.

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Information and adjustments of the Group's operating segments are as follows:

2020	Head Office $ 680,502 285,881	Subsidiary in China 166,669 -	Subsidiary in the USA 127,667 -	Subsidiary in the UK 97,011 4,032	Other segments 58,698 -	Adjustment and elimination - (289,913)	Total 1,130,547 -
Income: Income from external customers Inter-segment income Total income Depreciation and amortization Share of the profit or loss of associates and joint ventures accounted for using the equity method Profit and loss of reporting segments Assets: Investments accounted for using equity method Liabilities: Investment credit balance accounted for using equity method Assets of reporting segments Liabilities of reporting segments 2019
	$ 966,383	166,669	127,667	101,043	58,698	(289,913)	1,130,547
	$ 26,455 7,032 $ (65,419)	4,920 - 10,141	17,423 - 6,678	937 - (8,929)	1 - (777)	(15,047) (7,032) (7,113)	34,689 - (65,419)
	$ 50,075 $ 9,835 $ 5,081,633	- - 87,145	- - 71,087	- - 51,936	- - 31,623	(50,075) (9,835) (204,273)	- - 5,119,151
	$ 1,117,286	86,717	50,514	34,451	14,807	(148,971)	1,154,804
	$ 788,747 388,793	279,328 -	156,444 -	85,320 19,846	68,694 -	- (408,639)	1,378,533 -
Income: Income from external customers Inter-segment income Total income Depreciation and amortization Share of the profit or loss of associates and joint ventures accounted for using the equity method Profit and loss of reporting segments Assets: Investments accounted for using equity method Liabilities: Investment credit balance accounted for using equity method Assets of reporting segments Liabilities of reporting segments
	$ 1,177,540	279,328	156,444	105,166	68,694	(408,639)	1,378,533
	$ 28,052 (4,116) $ 202,573	5,443 - 1,703	17,893 - (5,175)	493 - (1,938)	1 - 2,381	(15,766) 4,116 3,029	36,116 - 202,573
	$ 53,675 $ 29,538 $ 5,220,764	- - 134,567	- - 124,914	- - 52,948	- - 41,139	(53,675) (29,538) (329,480)	- - 5,244,852
	$ 985,990	144,414	109,634	25,576	21,554	(277,090)	1,010,078

The description of major adjustment items of the above information on the reporting segments are as follows:

The inter-segment income of NT$289,913 thousand and NT$408,639 thousand shall be written off from the total income of reporting segments in 2020 and 2019, respectively.

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a. Information on products and services

The information on the income from external customers of the Group is as follows:

Name of products and services RAID controllers Others Total	2020 $ 1,075,596 54,951 $ 1,130,547	2019 1,327,078 51,455 1,378,533

b. Region information:

The region information of the Group is as follows, in which the income is classified based on the geographical location of customers, while the non-current assets are classified based on the geographical location of the assets.

Region Income from external customers: USA Europe Taiwan Mainland China Japan Germany Other countries Total Region Non-current assets: Taiwan Other countries Total	2020 $ 127,667 181,847 59,380 167,298 331,562 130,013 132,780 $ 1,130,547 2020.12.31 $ 608,625 12,258 $ 620,883	2019 156,444 263,153 53,028 280,721 418,193 62,928 144,066 1,378,533 2019.12.31 631,739 20,531 652,270

Non-current assets include property, plant and equipment, right-of-use assets, intangible assets, other financial assets and other non-current assets, but do not include non-current assets of financial instruments and deferred tax assets.

• c. Information on key customers whose transaction amount amounts to 10% of the total operating revenue

Customer A

2020	2019
$ 275,746	259,351

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Independent Auditors' Report

To the Board of Directors of Infortrend Technology Inc.,

Auditor's Opinion

The Balance Sheet as of December 31, 2020 and 2019, and the Statement of Comprehensive Income, Statement of Changes in Equity, and Statement of Cash Flow for the period from January 1 to December 31, 2020 and 2019, as well as the Notes to Parent Company Only Financial Statements (including the Summary of Significant Accounting Policies) of Infortrend Technology Inc., have been audited and attested by us.

In our opinion, the aforementioned Parent Company Only Financial Statements are prepared in all material respects in accordance with the "Regulations Governing the Preparation of Financial statements by Securities Issuers," which properly present the financial position of Infortrend Technology Inc. as of December 31, 2020 and 2019, and the financial performance and cash flows for the period from January 1 to December 31, 2020 and 2019.

Basis of Auditor's Opinion

We performed the audit in accordance with the "Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants" and the Generally Accepted Auditing Standards. Our responsibility under those standards will be further described in the section titled "CPA's responsibility for the audit on the Parent Company Only Financial Statements." We, subject to the codes of independence of the accounting firm which we are affiliated with, have kept absolute independent relationship with Infortrend Technology Inc. in accordance with the CPA Code of Professional Ethics, and have performed other obligations under this Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters refer to those matters that, in our professional judgment, are of most significance for our audit on the Parent Company Only Financial Statements for 2020 of Infortrend Technology Inc. These matters have been addressed in the course of our audit of the Parent Company Only Financial Statements as a whole and in forming our opinion thereon. We do not express a separate opinion on such matters individually. In our judgment, the key audit matters to be communicated in the audit report are as follows:

1. Valuation of the allowance for inventory loss from market price decline

Please refer to Note 4 (7) to the Parent Company Only Financial Statements for the accounting policy regarding the inventory evaluation. Please refer to Note 5 (2) to the Parent Company Only Financial Statements for the uncertainties of accounting estimates and assumptions regarding the realizability of inventory assessment. Please refer to Note 6 (5) to the financial statement for an explanation of the inventory assessment.

Description of key audit matters:

Infortrend Technology Inc. offers a wide range of products for sale to its customers. Its

185

inventory is measured by cost and the net realized value, whichever is lower. In order to improve the service quality, the Company has spared no effort to improve the product efficiency. The introduction of new products may lead to a drop in the price of old products, resulting in the uncertainty of inventory loss from market price decline and of obsolete and slow-moving inventories.

How the matter was addressed in our audit:

Our main audit procedures regarding the aforementioned key audit matters included the following:

Understand the Company's provision policy for allowance for inventory loss from market price decline and for loss on obsolete and slow-moving inventories and evaluate the appropriateness of the policy; Obtain the evaluation form prepared by the Company to evaluate the performance of the Company, check and verify the data used, and evaluate the correctness of the source data used; Recalculate and evaluate the correctness of the calculation according to the evaluation data used by the Company; Obtain the disclosure information of the Company's financial statements on allowance for inventory, and assess whether the disclosure is appropriate.

1. Evaluation of impairment of trade receivables

Please refer to Note 4 (6) to the Parent Company Only Financial Statements for the accounting policy regarding the asset impairment evaluation. Please refer to Note 5 (1) to the Parent Company Only Financial Statements for the accounting estimates and assumptions regarding the evaluation of trade receivables. Please refer to Note 6 (3) to the financial statement for an explanation of the evaluation of trade receivables.

Description of key audit matters:

As the overall industry is still in the downturn, some customers are affected by the economic climate, and their repayment is not as fast as expected. The provision of allowance for bad debts of trade receivables depends on the Company's policy and the evaluation of the management, which indirectly increases the uncertainty of the evaluation of trade receivables since the evaluation involves human subjective judgment.

How the matter was addressed in our audit:

Our main audit procedures regarding the aforementioned key audit matters included the following:

Understand the Company's evaluation policy for allowance for trade receivables and evaluate the appropriateness of the policy; Obtain the evaluation form prepared by the Company to evaluate the performance of the Company, check and verify the data used, and evaluate the correctness of the source data used; Recalculate and evaluate the correctness of the calculation according to the evaluation data used by the Company; Obtain the disclosure information of the Company's financial statements on allowances for trade receivables and impairment losses, and assess whether the disclosure is appropriate.

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

It is the responsibility of management to prepare and fairly present the Parent Company Only Financial Statements in accordance with the "Regulations Governing the Preparation of Financial statements by Securities Issuers," and to maintain internal controls which are necessary for the preparation of the Parent Company Only Financial Statements to ensure that there are no material misrepresentations that are attributed to fraud or error therein.

In the preparation of the Parent Company Only Financial Statements, it is also the responsibility of management to assess the ability of Infortrend Technology Inc. to continue as a going concern, to disclose relevant matters, and to adopt the accounting basis for going concern, unless the management intends to liquidate Infortrend Technology Inc., Ltd. or discontinue operations, or has

186

to do so without any other practical alternatives.

The governing body of Infortrend Technology Inc. (including the audit committee) has the responsibility to supervise the reporting process of financial statement.

CPA's responsibility for the audit on the Parent Company Only Financial Statements

Our audit on the Parent Company Only Financial Statements aims to obtain reasonable assurance on whether the Parent Company Only Financial Statements as a whole are free from material misstatement arising from fraud or error, and to issue an audit report. Reasonable assurance refers to high level of assurance. However, our audit conducted in accordance with Generally Accepted Auditing Standards does not guarantee that material misrepresentations in the Parent Company Only Financial Statements will be detected. Misrepresentations may be attributable to fraud or error. A misrepresentation of an individual amount or amount in aggregate is considered as materiality if it is reasonably expected to affect the economic decisions made by users on the basis of the Parent Company Only Financial Statements.

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

1. Identified and assessed the risk of a material misrepresentation attributable to fraud or errors in the Parent Company Only Financial Statements; designed and carried out appropriate countermeasures for the assessed risks; and obtained sufficient and appropriate evidence as the basis for the audit opinion. As fraud may involve collusion, forgery, intentional omission, misrepresentation, or override of internal control, the risk of a material misrepresentation that is not attributable to fraud is higher than that which is attributable to error.

2. Obtained necessary understanding of internal controls pertaining to the audit in order to develop audit procedures appropriate for the circumstances. Nevertheless, the purpose of such understanding is not to express an opinion on the effectiveness of the internal controls of Infortrend Technology Inc.

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

4. Concluded, based on the audit evidence available, on the appropriateness of management's adoption of the accounting basis for going concern and whether material uncertainties exist where events or circumstances that may cause material doubt on the ability of Infortrend Technology Inc. to continue as a going concern. If, in our opinion, there is material uncertainty about such events or circumstances, we are required to remind the user of the Parent Company Only Financial Statements of the relevant disclosure therein, or amend our audit opinion if such disclosure is inappropriate. Our conclusion is based on the audit evidence acquired as of the date of the audit report. However, future events or circumstances may result in that Infortrend Technology Inc. may cease to continue as a going concern.

5. Evaluated the overall presentation, structure and content of the Parent Company Only Financial Statements (including relevant notes), and whether the Parent Company Only Financial Statements present the relevant transactions and events fairly.

6. Obtained sufficient and appropriate audit evidence of the financial information of the investee using the equity method to express an opinion on the Parent Company Only Financial Statements. We are responsible for the direction, supervision and performance of the audit and the formation of our audit opinion on Infortrend Technology Inc.

We communicated matters with the governing body, including the planned scope and timing of the audit, as well as the material audit findings (including material deficiencies in internal control identified during our audit).

We also provided the governing body the declaration of independence of the CPA subject to the codes of independence of the accounting firm which the CPA is affiliated with, that we have

187

complied with the CPA Code of Professional Ethics concerning independence, and communicated with the governing body all the relationships and other matters that may be considered to affect our independence (including relevant preventive measures).

From the matters communicated with the governing body, we determined the key audit matters for the Parent Company Only Financial Statements in 2020 of Infortrend Technology Inc. We have stated such matters in the audit report. Unless public disclosure of a particular matter is prohibited by law or, in very rare circumstances, we determined not to communicate such matter in the audit report where it can reasonably be expected that the negative impact of such communication will outweigh the public benefits.

KPMG Taiwan

Taipei 101 Tower, 68F, No.7, Sec. 5, Xinyi Road, Taipei City 110615, Taiwan (R.O.C.)

CPA: Rou-Lan Kuo (郭柔蘭) Shu-Ling Lien (連淑凌) Securities : Financial-Supervisory-Securitie Competent s-Auditing-1070304941 Authority Financial-Supervisory-Securitie Approval No. s-Six-0940100754 March 11, 2021

188

Infortrend Technology Inc.

Balance Sheet December 31, 2020 and 2019 Unit: NT$ Thousands

Assets Current assets: 1100 Cash and cash equivalents (Note 4 and 6 (1)) 1110 Financial assets measured at fair value through profit or loss - current (Note 4 and 6 (2)) 1170 Net trade receivables (Note 4 and 6 (3)) 1180 Net trade receivables - related parties (Note 4, 6 (3) and 7) 1200 Other receivables (Note 6 (4) and 7) 1220 Current tax assets 130X Inventory (Note 4 and 6 (5)) 1470 Other current assets Non-current assets: 1510 Financial assets measured at fair value through profit or loss - non-current (Note 4 and 6 (2)) 1550 Investments accounted for using equity method (Note 4 and 6 (6)) 1600 Property, plant, and equipment (Note 4 and 6 (7)) 1755 Right-of-use assets (Note 4 and 6 (8)) 1780 Intangible assets (Note 4 and 6 (9)) 1840 Deferred tax assets (Note 4 and 6 (14) 1980 Other financial assets - non-current (Note 8) 1990 Other non-current assets - others Total non-current assets Total assets	2020.12.31 Amount % $ 207,967 4 3,494,414 69 108,333 2 104,108 2 101,500 2 27,815 1 307,143 6 7,159 - 4,358,439 86	2020.12.31 Amount % $ 207,967 4 3,494,414 69 108,333 2 104,108 2 101,500 2 27,815 1 307,143 6 7,159 - 4,358,439 86	2020.12.31 Amount % $ 207,967 4 3,494,414 69 108,333 2 104,108 2 101,500 2 27,815 1 307,143 6 7,159 - 4,358,439 86	2019.12.31 Amount % 150,888 3 3,503,184 67 154,812 3 190,863 4 81,500 1 27,768 1 308,099 6 10,105 - 4,427,219 85 73,696 1 53,675 1 606,417 12 19,166 - 1,508 - 34,535 1 4,096 - 452 - 793,545 15 5,220,764 100 Liabilities and equity Current liabilities: 2100 Short-term loans (Note 4 and 6 (10)) 2120 Financial liabilities at fair value through profit or loss - current (Note 4 and 6 (2)) 2130 Contract liabilities - current (Note 4, 6 (18) and 7) 2170 Trade payables 2200 Other payables 2230 Current tax liabilities 2280 Lease liabilities - current (Note 4 and 6 (11)) 2300 Other current liabilities Non-current liabilities: 2527 Contract liabilities - non-current (Note 4, 6 (18) and 7) 2550 Provisions - non-current (Note 4 and 6 (12)) 2570 Deferred tax liabilities (Note 4 and 6 (14) 2580 Lease liabilities - non-current (Note 4 and 6 (11)) 2640 Net defined benefit liabilities - non-current (Note 4 and 6 (13)) 2650 Investment credit balance accounted for using equity method (Note 4 and 6 (6)) 2670 Other non-current liabilities - others Total liabilities Equity: 3100 Share capital (Note 6 (15)) 3200 Capital surplus (Note 6 (15)): Retained earnings: 3310 Legal reserve (Note 6 (15)) 3350 Unappropriated earnings (Note 6 (15)) 3400 Other equity (Note 6 (15)) Total equity Total liabilities and equity	2019.12.31 Amount % 150,888 3 3,503,184 67 154,812 3 190,863 4 81,500 1 27,768 1 308,099 6 10,105 - 4,427,219 85 73,696 1 53,675 1 606,417 12 19,166 - 1,508 - 34,535 1 4,096 - 452 - 793,545 15 5,220,764 100 Liabilities and equity Current liabilities: 2100 Short-term loans (Note 4 and 6 (10)) 2120 Financial liabilities at fair value through profit or loss - current (Note 4 and 6 (2)) 2130 Contract liabilities - current (Note 4, 6 (18) and 7) 2170 Trade payables 2200 Other payables 2230 Current tax liabilities 2280 Lease liabilities - current (Note 4 and 6 (11)) 2300 Other current liabilities Non-current liabilities: 2527 Contract liabilities - non-current (Note 4, 6 (18) and 7) 2550 Provisions - non-current (Note 4 and 6 (12)) 2570 Deferred tax liabilities (Note 4 and 6 (14) 2580 Lease liabilities - non-current (Note 4 and 6 (11)) 2640 Net defined benefit liabilities - non-current (Note 4 and 6 (13)) 2650 Investment credit balance accounted for using equity method (Note 4 and 6 (6)) 2670 Other non-current liabilities - others Total liabilities Equity: 3100 Share capital (Note 6 (15)) 3200 Capital surplus (Note 6 (15)): Retained earnings: 3310 Legal reserve (Note 6 (15)) 3350 Unappropriated earnings (Note 6 (15)) 3400 Other equity (Note 6 (15)) Total equity Total liabilities and equity	2020.12.31 Amount % $ 850,000 17 - - 8,795 - 48,359 1 130,017 3 481 - 6,085 - 866 - 1,044,603 21	2020.12.31 Amount % $ 850,000 17 - - 8,795 - 48,359 1 130,017 3 481 - 6,085 - 866 - 1,044,603 21	2019.12.31 Amount % 655,000 13 338 - 9,315 - 71,052 1 148,413 3 3,430 - 6,231 - 898 - 894,677 17	2019.12.31 Amount % 655,000 13 338 - 9,315 - 71,052 1 148,413 3 3,430 - 6,231 - 898 - 894,677 17
	Amount $ 207,967 3,494,414 108,333 104,108 101,500 27,815 307,143 7,159 4,358,439			Amount 150,888 3,503,184 154,812 190,863 81,500 27,768 308,099 10,105		Amount		Amount 655,000 338 9,315 71,052 148,413 3,430 6,231 898
						$ 850,000 - 8,795 48,359 130,017 481 6,085 866 1,044,603
							21	894,677	17
			86	4,427,219		23,306 2,657 16 6,922 29,940 9,835 7 72,683	- - - - 1 - -	22,261 2,657 582 13,007 23,258 29,538 10	- - - - 1 1 -
		27,547 50,075 591,332 12,876 721 37,047 3,596 - 723,194	- 1 12 - - 1 - -	73,696 53,675 606,417 19,166 1,508 34,535 4,096 452
							1	91,313	2
						1,117,286	22	985,990	19
						2,735,515 88,802 1,172,751 (38,069) 5,348 3,964,347	54 2 23 (1) -	2,762,907 89,704 1,152,494 222,680 6,989	53 2 22 4 -
			14	793,545
							78	4,234,774	81
						$ 5,081,633	100	5,220,764	100
	$ 5,081,633		100	5,220,764

Total assets $ 5,081,633 100 5,220,764 100

Chairman: Shih-Tung Lo

(Please refer to the attached Notes to the Consolidated Financial Statements for details) Manager: Shih-Tung Lo Accounting Supervisor: Shu-Hua Liu

189

Infortrend Technology Inc.

Statement of Comprehensive Income From January 1 to December 31, 2020 and 2019 Unit: NT$ Thousands

2020 Amount 4000 Operating revenue (Note 6 (18) and 7) $ 966,383 5000 Operating costs (Note 4 and 6 (5)) 583,240 Gross operating profit 383,143 5910 Less: unrealized profit and loss on sales (Note 7) 13,893 5920 Add: realized profit and loss on sales (Note 7) 27,166 396,416 Operating expenses (Note 6 (19) and 7): 6100 Selling and marketing expenses 48,182 6200 Administrative expenses 80,169 6300 Research and development expenses 299,039 6450 Expected credit impairment loss (Note 4 and 6 (3)) 1,800 429,190 Net operating (loss) profit (32,774) Non-operating income and expenses (Note 6 (20) and 7): 7100 Interest income 43,496 7010 Other income 80,595 7020 Other gains and losses (153,631) 7050 Financial costs (7,627) 7070 Share of the profit or loss of associates and joint ventures accounted for using the equity method 7,032 (30,135) 7900Net profit (loss) before tax (62,909) 7950 Less: income tax expense (Note 4 and 6 (14)) 2,510 8200Net profit (loss) in the current period (65,419) Other comprehensive income: 8310 Items that are not reclassified into profit or loss 8311 Remeasurement of defined benefit plans (6,698) 8349 Less: income tax relating to items that will not be reclassified subsequently to profit or loss 1,340 (5,358) 8360 Items that may be subsequently reclassified into profit or loss 8361 Exchange differences resulting from translating the financial statements of foreign operations (2,373) 8370 Shares of other comprehensive income of subsidiaries, associates, and joint ventures accounted for using equity method - items that may be reclassified into profit or loss- 135 8399 Less: income tax relating to items that may be reclassified subsequently to profit or loss - (2,238) Other comprehensive income in current period (net after tax) (7,596) 8500Total comprehensive income for the current period $ (73,015) Earnings per share (NT$) (Note 4 and 6 (17)) 9750Basic earnings per share (unit: NT$) $ 9850Diluted earnings per share (unit: NT$)	2020		2019 Amount 1,177,540 650,270	% 100 55
	Amount $ 966,383 583,240	%
		100 60
	383,143 13,893 27,166	40 1 2	527,270 27,166 29,542	45 2 2
	396,416	41	529,646	45
	48,182 80,169 299,039 1,800	5 9 31 -	53,122 85,028 370,889 1,082	5 7 31 -
	429,190	45	510,121	43
	(32,774)	(4)	19,525	2
	43,496 80,595 (153,631) (7,627) 7,032	5 8 (16) (1) 1	67,444 70,353 87,004 (7,092) (4,116)	6 6 7 (1) -
	(30,135)	(3)	213,593	18
	(62,909) 2,510	(7) -	233,118 30,545	20 3
	(65,419)	(7)	202,573	17
	(6,698) 1,340	(1) -	(4,364) 873	- -
	(5,358)	(1)	(3,491)	-
		- - -	(1,027) 1,883 -	- - -
	(2,238)	-	856	-
	(7,596)	(1)	(2,635)	-
	$ (73,015)	(8)	199,938	17
	$	(0.24)		0.73
				0.72

Chairman: Shih-Tung Lo

(Please refer to the attached Notes to the Consolidated Financial Statements for details) Manager: Shih-Tung Lo

Accounting Supervisor: Shu-Hua Liu

190

Infortrend Technology Inc.

Statement of Changes in Equity From January 1 to December 31, 2020 and 2019 Unit: NT$ Thousands

Balance as of January 1, 2019 Net profit in the current period Other comprehensive income for the current period Total comprehensive income for the current period Appropriation and distribution of earnings: Provision for legal reserve Cash dividends on ordinary shares Repurchase of treasury shares Cancellation of treasury shares Share-based payment transaction Balance as of December 31, 2019 Net loss in current period Other comprehensive income for the current period Total comprehensive income for the current period Appropriation and distribution of earnings: Provision for legal reserve Cash dividends on ordinary shares Repurchase of treasury shares Cancellation of treasury shares Share-based payment transaction Balance as of December 31, 2020	Share capital	Capital surplus	Retained	earnings	Other equity items Exchange differences resulting from translating the financial statements of foreign operations Unpaid employee remuneration 6,730 (8,792)	Other equity items Exchange differences resulting from translating the financial statements of foreign operations Unpaid employee remuneration 6,730 (8,792)	Treasury shares	Total equity 4,146,816 202,573 (2,635) 199,938 - (110,473) (5,347) - 3,840 4,234,774 (65,419) (7,596) (73,015) - (165,773) (32,183) - 544 3,964,347
	Share capital of ordinary shares		Legal reserve	Unappropriated earnings
	$ 2,796,463	91,785	1,140,553	150,058	6,730	(8,792)	(29,981)
	- -	- -	- -	202,573 (3,491)	- 856	- -	- -
	-	-	-	199,082	856	-	-
	- - - (30,320) (3,236)	- - - (962) (1,119)	11,941 - - - -	(11,941) (110,473) - (4,046) -	- - - - -	- - - - 8,195	- - (5,347) 35,328 -
	2,762,907 - -	89,704 - -	1,152,494 - -	222,680 (65,419) (5,358)	7,586 - (2,238)	(597) - -	- - -
	-	-	-	(70,777)	(2,238)	-	-
	- - - (27,360) (32)	- - - (881) (21)	20,257 - - - -	(20,257) (165,773) - (3,942) -	- - - - -	- - - - 597	- - (32,183) 32,183 -
	$ 2,735,515	88,802	1,172,751	(38,069)	5,348	-	-

Chairman: Shih-Tung Lo

(Please refer to the attached Notes to the Parent Company Only Financial Statements for details) Manager: Shih-Tung Lo Accounting Supervisor: Shu-Hua Liu

191

Infortrend Technology Inc.

Statement of Cash Flow From January 1 to December 31, 2020 and 2019 Unit: NT$ Thousands

Cash flow from operating activities: Net profit (net loss) before tax for the current period Reconciliation items: Income and expenses items Depreciation expenses Amortization expenses Interest expenses Interest income Dividend income Remuneration costs of share-based payment Valuation profit (loss) on financial assets measured at fair value through profit or loss Share of loss (profit) of subsidiaries, associates and joint ventures accounted for using the equity method Disposal and retirement of property, plant and equipment loss Expected credit impairment losses Others Total income and expense items Changes in assets/liabilities related to operating activities: Net changes in assets related to operating activities Trade receivables Other receivables Inventories Other current assets Total net changes in assets related to operating activities Net change in liabilities related to operating activities: Contract liabilities Trade payables Other payables Other current liabilities Net defined benefit liabilities Other non-current liabilities - others Total net changes in liabilities related to operating activities Total net changes in assets and liabilities related to operating activities Total adjustments Cash inflow generated from operations Interest received Interest paid Income tax paid Net cash inflow from operating activities Cash flow from investing activities: Purchase of financial assets at fair value through profit or loss Disposal of financial assets at fair value through profit or loss Acquisition of property, plant and equipment Acquisition of intangible assets Other financial assets - non-current Other non-current assets - others Dividends received Net cash outflow from investment activities Net cash flow from financing activities Increase in short-term borrowings Repayment of leasing principal Cash dividends paid Repurchase of treasury shares Net cash (outflow) inflows from financing activities Increase (decrease) in cash and cash equivalents for the current period Balance of cash and cash equivalents at the beginning of period Balance of cash and cash equivalents at the end of the period		2020	2019 233,118 26,718 1,334 7,092 (67,444) (51,679) 3,840 (90,432) 4,116 122 1,082 (2,400)
		$ (62,909) 25,668 787 7,627 (43,496) (64,030) 544 134,054 (7,032) - 1,800 (13,273)
		42,649	(167,651)
		131,434 1,624 956 2,946	95,429 1,702 42,763 1,613
		136,960	141,507
		525 (22,693) (16,105) (32) (16) (3)	(1,310) (14,984) 9,852 36 - -
		(38,324)	(6,406)
		98,636	135,101
		141,285	(32,550)
		78,376 55,453 (7,671) (7,244)	200,568 60,618 (6,766) (27,033)
		118,914	227,387
		(1,587,596) 1,472,295 (3,841) - 500 - 65,994	(2,419,685) 1,797,869 (15,968) (1,270) 650 (452) 53,564
		(52,648)	(585,292)
		195,000 (6,231) (165,773) (32,183)	205,000 (6,185) (110,473) (7,338)
		(9,187)	81,004
		57,079 150,888	(276,901) 427,789
		$ 207,967	150,888

(Please refer to the attached Notes to the Parent Company Only Financial Statements for details) Chairman: Shih-Tung Lo Manager: Shih-Tung Lo Accounting Supervisor: Shu-Hua Liu

192

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

Infortrend Technology Inc.

Notes to Parent Company Only Financial Statements 2020 and 2019 (Unless otherwise indicated, all amounts are in NT$ Thousands)

1. Company Overview

Infortrend Technology Inc. (hereinafter referred to as "the Company") was established on January 19, 1993 with the approval of the Ministry of Economic Affairs at the registered address of 8F., No. 102, Sec. 3, Zhongshan Rd., Zhonghe Dist., New Taipei City 235010, Taiwan (R.O.C.). The Company is mainly engaged in research and development, manufacturing and trading business of all kinds of computer peripherals (RAID control system), etc. The Company's shares were officially listed on the Taiwan Stock Exchange Corporation (TWSE) on March 25, 2002.

2. Date and Procedures for the Adoption of Financial Statements

The Parent Company Only Financial Statements were approved and issued by the board of directors on March 11, 2021.

3. Application of New and Revised Standards and Interpretations

• a. The impact of newly issued and revised standards and interpretations that have been adopted by the Company as endorsed by the Financial Supervisory Commission

The Company has adopted the following revised IFRS since January 1, 2020, without any material impact on the Parent Company Only Financial Statements.

• Amendments to IFRS 3 - Definition of a Business

• Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest Rate Benchmark Reform

• Amendments to IAS 1 and IAS 8 - Definition of Material

Amendments to IFRS 16 - COVID-19-Related Rent Concessions

• b. The impact of IFRS endorsed by the FSC but yet to be adopted by the Company

The Company has evaluated that the adoption of the following revised IFRSs, effective from January 1, 2021, will not have a material impact on the Parent Company Only Financial Statements.

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

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

• c. Newly issued and revised standards and interpretations yet to be endorsed by the FSC

The Company anticipates that the following newly issued and revised standards, which have not yet been endorsed by the FSC, will not have a material impact on the Parent Company Only 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

• Amendment to IAS 1 - Classification of Liabilities as Current or Non-current

• Amendment to IAS 16 - Property, Plant and Equipment: Proceeds before Intended Use

• —

• Amendment to IAS 37 - Onerous Contracts Cost of Fulfilling a Contract

• Annual Improvements to IFRSs 2018-2020 Cycle-

• Amendments to IFRS 3 - Updating a Reference to the Conceptual Framework

• Amendments to IAS 1 - Disclosure Initiative-Accounting Policies

193

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

• Amendments to IAS 8 - Definition of Accounting Estimates

4. Summary of Significant Accounting Policies

The significant accounting policies adopted in the Parent Company Only Financial Statements are summarized as follows. Unless otherwise stated, the following accounting policies have been consistently applied to all periods of presentation of the Parent Company Only Financial Statements.

• a. Statement of compliance

The Parent Company Only Financial Statements are prepared in accordance with the Regulations Governing the Preparation of Financial statements by Securities Issuers.

• b. Basis of preparation

• 1) Basis of measurement

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

• a) Financial assets measured at fair value through profit or loss are measured at fair value;

• b) The net defined benefit liabilities (or assets) are measured by deducting the present value of the defined benefit obligations and the cap impact as described in Note 4 (15) from the fair value of the pension plan assets.

• 2) Functional Currency and Presentation Currency

Each individual entity of the Company adopts the currency of the major economic environment in which it operates as its functional currency. The Parent Company Only Financial Statements are presented in the New Taiwan dollar, the Company's functional currency. All financial information presented in New Taiwan Dollars is in NT$ Thousands.

• c. Foreign currency

• 1) Foreign currency transactions

Transactions in foreign currency are translated into the functional currency at exchange rates prevailing at the transaction dates. Foreign currency monetary items are translated into functional currency at the end date of each subsequent reporting period (hereinafter referred to as the reporting date) at the exchange rate on that day. Foreign currency non-monetary items measured at fair value are translated into functional currency at the exchange rate on the date when their fair value is measured, while foreign currency non-monetary items measured at historical cost are translated at the exchange rate prevailing at the transaction date.

Exchange differences resulting from translating the foreign currency are generally recognized as profit and loss, but the following items are recognized as other comprehensive income:

• a) Equity instruments designated as measured at fair value through other comprehensive income;

• b) Financial liabilities designated as net investment hedging for foreign operations within the effective hedging range; or

• c) Qualified cash flow hedge within the effective hedging range.

• 2) Foreign operations

The assets and liabilities of the foreign operations, including goodwill and fair value adjustments at the time of acquisition, are translated into NTD at the exchange rate as at the reporting date; Income and expense items are translated into New Taiwan dollars

194

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

at the average exchange rate of the current period, and the exchange differences are recognized as other comprehensive income.

In the event of loss of control, joint control or material impact as a result from the disposal of a foreign operation, the cumulative exchange difference related to the foreign operation is fully reclassified into profit or loss. In the case of partial disposal of a subsidiary with a foreign operation, the accumulated exchange difference is reclassified into non-controlling interest in proportion. In the case of partial disposal of investments in an affiliated enterprise or joint venture with a foreign operation, the accumulated exchange difference is reclassified into profit or loss in proportion.

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, the related gains and losses arising from the foreign currency exchange are regarded as part of the net investment in that foreign operation and recognized as other comprehensive income.

• d. The classification criteria for assets and liabilities whether are current or non-current

Assets that meet one of the following conditions are classified as current assets, and all other assets that are not current assets are classified as non-current assets:

• 1) The asset is expected to be realized, or intended to be sold or consumed in the normal operating cycle;

• 2) The asset is held primarily for trading purposes;

• 3) The asset is expected to be realized within 12 months after the reporting period; or

• 4) The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to pay off a liability for at least 12 months after the reporting period.

Liabilities that meet one of the following conditions are classified as current liabilities, and all other liabilities that are not current liabilities are classified as non-current liabilities:

• 1) The liability is expected to be paid off in the normal operation cycle;

• 2) The liability is held primarily for trading purposes;

• 3) The liability is expected to be paid off within 12 months after the reporting period; or

• 4) The liability of which the settlement term cannot be deferred unconditionally to at least 12 months after the date of the balance sheet. The terms of a liability which may result in the settlement of an equity instrument at the option of the counterparty will not affect its classification.

e. Cash and cash equivalents

Cash includes cash on hand and demand deposits. Cash equivalents refer to short-term investments with highly liquidity that can be converted into quota cash at any time with little risk of change in value. Time deposits that meet the foregoing definition and are held for short-term cash commitments other than investment or other purposes are presented as cash at hand.

f. Financial instruments

Trade receivables are initially recognized at the time of generation. All other financial assets and financial liabilities are initially recognized when the Company became a party to the financial instrument contract. Financial assets that are not measured at fair value through profit or loss (other than trade receivables that do not contain material financial components) or financial liabilities are initially measured at fair value plus transaction costs directly attributable to the acquisition or issuance. Trade receivables that do not contain material financial components are initially measured at transaction prices.

195

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

1) Financial assets

Where the purchase or sale of financial assets conforms to customary practice transaction, the Company adopts the same trading day accounting treatment for all purchases and sales of financial assets classified in the same manner.

At the time of initial recognition, financial assets are classified as: financial assets measured at amortized cost and financial assets measured at fair value through profit or loss. The Company will reclassify all the affected financial assets from the first day of the next reporting period only when changing its business model for managing financial assets.

• a) Financial assets measured at amortized cost Financial assets are measured at amortized cost when they meet all the following conditions and are not designated as measured at fair value through profit or loss:

• The financial asset is held under a business model for the purpose of collecting contract cash flows.

• The cash flow generated on a specific date from the contract terms of the financial asset is solely for the payment of principal and interest on outstanding principal.

Such assets are subsequently measured at the initially recognized amount plus or minus the accumulated amortization calculated by the effective interest method, and at the amortized cost after adjustments for any loss allowances. Interest income, foreign currency exchange gains and losses and impairment losses are recognized in profit and loss. When derecognizing, the profit or loss is recognized in profit and loss.

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

Financial assets that are not measured at amortized cost or measured at fair value through other comprehensive income are measured at fair value through profit or loss, including derivative financial assets. Trade receivables, which the Company intends to sell immediately or in the near future, are measured at fair value through profit or loss but are included under trade receivables. On initial recognition, the Company may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or measured at fair value through other comprehensive income, as a financial asset measured at fair value through profit or loss so as to eliminate or materially reduce improper accounting matching.

Such assets are subsequently measured at fair value, and their net benefits or losses (including any dividend and interest income) are recognized as profit and loss.

• c) Financial assets held for trading and managed and evaluated on a fair value basis are measured at fair value through profit or loss.

• d) Impairments of financial assets

The Company recognizes the expected credit loss of financial assets (including cash and cash equivalents, trade receivables, other receivables and other financial assets, etc.) measured at amortized cost as allowance for loss.

The allowance for losses of the following financial assets is measured by the amount of expected credit losses in 12 months, and the remaining are measured by the amount of expected credit losses in the duration:

• The credit risk of debt securities was determined to be low at the reporting date; and

196

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

• The credit risk of other debt securities and bank deposits (i.e., the risk of default during the expected duration of the financial instrument) has not increased significantly since the initial recognition.

The allowance for losses on trade receivables is measured by the amount of expected credit losses in the duration.

In determining whether the credit risk of a financial asset has increased significantly since the initial recognition, the Company considers reasonable and verifiable information which is available without excessive cost or effort, including qualitative and quantitative information, as well as analysis based on the Company's historical experience, credit assessments and forward-looking information.

If the contract payment is more than 90 days overdue, the Company assumes that the credit risk of the financial assets has increased significantly.

If the contract payment is more than 120 days overdue or the borrower is unlikely to fulfill its credit obligation to pay the Company in full, the Company considers that default occurs on the financial asset.

Expected credit losses over the duration refer to the expected credit losses arising from all possible defaults during the expected duration of a financial instrument.

Expected credit losses in 12 months refer to the expected credit losses arising from the possible defaults of a financial instrument within 12 months (or shorter period, if the expected duration of the financial instrument is less than 12 months) after the reporting.

The maximum period over which expected credit losses are measured is the maximum contractual period over which the Company is exposed to credit risk.

Expected credit losses are the weighted estimates of the probability of credit losses over the expected duration of a financial instrument. The credit loss is measured by the present value of all cash shortfall, that is, the difference between the cash flows that the Company can collect under the contract and the cash flows that the Company expects to receive. Expected credit losses are discounted at the effective interest rate on financial assets.

The Company evaluates whether there is a credit impairment of financial assets as measured at amortized cost on each reporting date. When one or more events that have an adverse effect on the estimated future cash flow of a financial asset have occurred, the financial asset has suffered a credit impairment. Evidence of a credit impairment of a financial asset includes the observable information for the following events:

• Major financial difficulties of the borrower or issuer;

• Default, such as delay or overdue for more than 120 days;

• The Company makes concessions for the borrower that would not have been considered for economic or contractual reasons related to the borrower's financial difficulties;

• The borrower is most likely to file for bankruptcy or conduct other financial restructuring; or

• The active market for the financial asset disappears due to financial difficulties.

• The allowance for loss of a financial asset measured at amortized cost are deducted from the carrying amount of the asset.

197

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

When the Company cannot reasonably anticipate the recovery of financial assets in whole or in part, it directly reduces the total carrying amount of its financial assets. The Company analyzes the timing and amount of the write-off on the basis of whether it is reasonably expected to be recovered. The Company expects that the amount written off will not be materially reversed. However, the written-off financial assets may still be enforced to comply with the procedures for the Company to recover the overdue amount.

e) Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights derived from the cash flows of the asset are terminated, or it has transferred a financial asset and virtually has transferred all the risks and rewards of the ownership of the asset to another enterprise, or virtually has neither transferred nor retained the ownership of all of the risks and rewards and nor retained the control of the financial asset.

If all or substantially all of the risks and rewards associated with ownership of a transferred financial asset in transactions entered into by the Company are retained, the financial asset is constantly recognized on the balance sheet.

2) Financial liabilities and equity instruments

• a) Classification of liabilities or equities

The debt and equity instruments issued by the Company are classified as financial liabilities or equity according to the substance of the contractual agreement and the definition of financial liabilities and equity instruments.

• b) Equity instruments

Equity instruments refer to any contract that recognizes the residual equity in the Company's assets after the deduction of all its liabilities. The equity instruments issued by the Company are recognized as the amount of the proceeds obtained after deducting the direct cost of issuance.

c) Treasury shares

In the repurchase of the equity instruments recognized by the Company, the consideration paid, including direct attributed costs, is recognized as a reduction in equity. The repurchased shares are classified as treasury shares. For any subsequent sale or re-issue of treasury shares, the amount received is recognized as a reduction in equity, and the surplus or loss arising from the transaction is recognized as capital surplus or retained earnings (where capital surplus are insufficient to offset).

d) Financial liabilities

Financial liabilities are classified as measured at amortized cost or measured at fair value through profit or loss. Financial liabilities, if held for trading, are derivatives or designated at the time of initial recognition, are classified as measured at fair value through profit or loss. Financial liabilities at fair value through profit or loss are measured at fair value and the related net profits and losses, including any interest expense, are recognized in profit and loss.

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

198

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

e) Derecognition of financial liabilities

The Company derecognizes financial liabilities when its contractual obligations have been performed, canceled or due. When the terms of financial liabilities are revised and there is a material difference in the cash flow of the revised liabilities, the initial financial liabilities will be derecognized and new financial liabilities will be recognized at fair value on the basis of the revised terms.

When derecognizing a financial liability, the difference between its carrying amount and the total consideration paid or payable (including any non-cash assets transferred or liabilities assumed) is recognized as profit and loss.

• 3) Derivative financial instruments

The Company holds derivative financial instruments for hedging against the exposure to foreign currency and interest rate risks.

Derivative instruments are initially measured at fair value and subsequently measured at fair value, and the benefits or losses arising from the remeasurement are directly recognized as profit and loss.

g. Inventories

Inventories are measured at cost and net realized value, whichever is lower. Costs include costs and other costs for acquisition, manufacturing or processing incurred in bringing them to the place and condition where they are available for use, and are calculated by a weighted average method. The cost of inventory of finished goods and work in process includes manufacturing expenses apportioned to normal capacity in appropriate proportion.

Net realizable value refers to the balance of the estimated selling price under normal business operation minus the estimated costs required for completion and the estimated costs required for completion of the sale.

• h. Investments in subsidiaries

In the preparation of the Parent Company Only Financial Statements, the Company adopts the equity method to evaluate the investee companies that it has control over. Under the equity method, the current profit and loss and other comprehensive profit and loss of the Parent Company Only Financial Statements are the same as the apportionment of the current profit and loss and other comprehensive income attributable to the owners of the parent company in the financial statements prepared on a consolidated basis, and the owner's equity of the Parent Company Only Financial Statements is the same as the owner's equity attributable to the owners of the parent company in the financial statements prepared on the consolidated basis.

If the change in the ownership interest of a subsidiary does not result in the loss of control, the Company accounts for it as an equity transaction with the owner.

• i. Property, plant and equipment

1) Recognition and measurement Property, plant, and equipment items are measured at cost (including capitalized borrowing costs) less accumulated depreciation and any accumulated impairment.

The material components of property, plant and equipment with different service lives are treated as separate items (major components) of property, plant and equipment.

The gain or loss on disposal of the property, plant, and equipment is recognized as profit and loss.

2) Subsequent costs Subsequent expenditures are capitalized only when their future economic benefits are likely to flow into the Company.

199

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

• 3) Depreciation

Depreciation is calculated at the cost of the asset minus the residual value and is recognized as profit and loss over the estimated service life of each component using a straight-line method.

No depreciation provision will be made for the land.

The estimated service life of the current period and the comparative period is as follows:

• a) Buildings and structures 5 ~ 50 years b) Machinery equipment 2 ~ 7 years c) Transportation equipment 5 ~ 10 years d) Office equipment 3 ~ 4 years e) Other equipment 2 ~ 8 years

The Company shall review the depreciation method, useful life, and residual value on each reporting date, and make appropriate adjustments as necessary.

• j. Leases

• 1) Identify a lease

The Company evaluates whether the contract is a lease or contains a lease upon the conclusion of the contract. If the contract transfers control over the use of the identified assets for a period of time in exchange for consideration, the contract is a lease or contains a lease. To evaluate whether the contract is a lease, the Company evaluates the following items:

• a) The contract involves the use of an identified asset, which is explicitly designated in the contract or implicitly designated when it is available for use, and its substance may be distinguished or may represent substantially all capacity. If the provider poses substantive rights to replace the asset, the asset is not an identified asset; and

• b) The right to obtain substantially all of the economic benefits arising from the use of the identified assets throughout the life of the use; and

• c) Acquire the right to dominate the use of the identified assets if:

  • The right to direct the use and the purposes of the identified assets throughout the use period; or

  • The relevant decisions about the use method and purpose of use of the asset are determined in advance, and:

    • The right to operate the asset throughout the life of its use, and the provider does not have the right to change any such operation instructions; or

    • The way in which the asset is designed predetermines how and for what purpose it will be used throughout its life.

• 2) Lessee

The Company recognizes the right-of-use assets and lease liabilities on the commencement date of the lease, initially measures the right-of-use assets at cost, which includes the initial measured amount of the lease liabilities, adjusts any lease payments made on or before the commencement date of the lease, and adds the initial direct costs incurred and the estimated costs of dismantling and removing the underlying assets, and restoring the underlying assets and their locations, and deducts any leasing incentives received.

200

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

The right-of-use assets are subsequently depreciated using the straight-line method from the commencement date of the lease to the expiration of the service life of the use right assets or the expiration of the lease term, whichever is earlier. In addition, the Company regularly evaluates whether there is any impairment of the right assets and treats with any impairment losses that have been incurred, and adjusts the right assets in the event of remeasurement of the lease liabilities.

The lease liability is measured at the present value of the outstanding lease payments at the commencement date of the lease. If the implicit interest rate of the lease is easy to determine, it is applied as the discount rate; if not, the Company's incremental borrowing rate is applied. In general, the Company adopts the incremental borrowing rate as the discount rate.

Lease payments included in the measure of lease liabilities include:

• a) Fixed payments, including substantial fixed payments;

• b) Variable lease payments subject to an index or rate are initially measured by the index or rate on the commencement date of the lease;

• c) Residual value guaranteed amount expected to be paid, and;

• d) The strike price at which the purchase option or lease termination option is reasonably determined to be exercised or the penalty required to be paid.

Lease liabilities are subsequently accrued interest by the effective interest method and measured under the following circumstances:

• a) Changes in future lease payments resulting from changes in the index or rate used to determine lease payments;

• b) Changes in the residual value guaranteed amount expected to be paid;

• c) Changes in the valuation of the underlying asset call option;

• d) Changes in the estimate of whether or not to exercise the extension or termination option may alter the assessment of the lease term; or

• e) Modification of the subject, scope or other terms of the lease.

When the lease liabilities are remeasured as a result of the foregoing changes in the index or rate used to determine lease payments, changes in the residual value guaranteed amount, and changes in the estimate of the call option, extension or termination option, the carrying amount of the right-of-use assets are adjusted accordingly, and the remaining remeasured amount is recognized as profit and loss when the carrying amount of the right-of-use assets are reduced to zero.

For a lease modification that reduces the scope of the lease, the carrying amount of the right-of-use asset is reduced to reflect the partial or full termination of the lease, and the difference between the carrying amount and the remeasured amount of the lease liability is recognized as the profit and loss.

The Company presents the right-of-use assets and lease liabilities that do not meet the definition of investment properties respectively in the balance sheet as separate-line items.

If the agreement contains leasing and non-leasing components, the Company apportions the consideration in the agreement to the individual leasing components on a relatively separate price basis. However, in the case of leasing the land and the building, the Company elects not to classify the non-leasing components and treat the leasing components and the non-leasing components as the single leasing components.

201

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

For the short-term lease of the premises and equipment, the Company chooses not to recognize the right-of-use assets and lease liabilities, but recognizes the relevant lease payments as expenses on a straight-line basis during the lease term in instead.

• 3) Lessor

For transactions in which the Company is the lessor, the lease contract is classified according to whether almost all risks and rewards attached to the ownership of the underlying asset are transferred on the commencement date of the lease. If so, it is classified as a financial lease; otherwise, it is classified as an operating lease. At the time of evaluation, the Company considers relevant specific indicators, including whether the lease term covers a major part of the economic life of the underlying asset.

• k. Intangible assets

• 1) Recognition and measurement

Goodwill arising from the acquisition of a subsidiary is measured as cost less cumulative impairment.

Expenditures related to research activities are recognized as profit and loss when incurred. Development expenditures are only capitalized when they can be reliably measured, when the technical or commercial feasibility of the product or process has been achieved, when the future economic benefits are likely to flow into the Company, and when the Company intends and has sufficient resources to complete the development and to use or sell the asset. Other development expenditures are recognized as profit and loss as incurred. After the initial recognition, capitalized development expenditures are measured by the amount of their costs less accumulated amortization and accumulated impairment.

Other intangible assets with limited life that are acquired by the Company are measured by the amount of cost less accumulated amortization and accumulated impairment.

• 2) Subsequent expenditures

Subsequent expenditures are capitalized only to the extent that they will increase the future economic benefits of the specific asset concerned. All other expenditures, including internally developed goodwill and brand, are recognized as profit and loss as incurred. 3) Amortization

Except goodwill, amortization is calculated on the basis of the cost of the asset less the estimated residual value and is recognized as profit and loss over the estimated service life of the intangible assets by the straight-line method from the time the assets reach the serviceable state.

The estimated service life of the current period and the comparative period is as follows: Computer software 3 ~ 5 years

The Company reviews the amortization method, service life and residual value of intangible assets on each reporting date and makes appropriate adjustments if necessary.

• l. Impairment of non-financial assets

At each reporting date, the Company assesses whether there is any indication that the carrying amount of non-financial assets (other than inventory and deferred tax assets) may be impaired, and estimates the recoverable amount of the asset if any impairment indication.

For the purpose of the impairment test, the minimum identifiable group of assets is defined as one of the groups of cash inflows that are largely independent of other individual assets or asset groups. Goodwill derived from the business combination is apportioned to the cash generating units or groups of cash generating units that are expected to benefit from the overall benefits of the business combination.

202

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

The recoverable amount is the fair value of individual assets or cash generating units less disposal costs, and its use value, whichever is higher. In assessing the use value, it is estimated that the future cash flows are translated to present value at the pre-tax discount rate, which shall reflect the current market's assessment of the time value of money and the specific risk of the asset or cash generating unit.

If the recoverable amount of an individual asset or cash generating unit is lower than the carrying amount, the impairment loss will be recognized.

Impairment loss is recognized immediately as profit or loss, reducing firstly the carrying amount of the amortized goodwill of the cash generating unit and then the carrying amount of each asset in proportion to the carrying amount of the other assets of the unit.

Non-financial assets other than goodwill are reversed only to the extent not exceeding the carrying amount of the asset determined when the impairment loss has not been recognized in the previous year (less depreciation or amortization).

m. Provisions

The recognition of a provision for liabilities means that the Company has a present obligation arising from a past event, and it is likely that the Company will have to discharge resources with economic benefit in the future to fulfill the obligation, the amount of which can be reliably estimated.

1) Warranty

Provision for warranty liabilities is recognized at the time of sale of goods or services and is measured on a weighted basis according to its relative probability based on historical warranty information and all possible outcomes.

• n. Recognition of income

• 1) Revenue from contracts with customers

Income is measured at the consideration to which it is expected to be entitled in transferring the goods or services. The Company recognizes income only when the control of goods or services is transferred to customers and the performance obligations are fulfilled. According to the main revenue items of the Company, it is described as follows:

• a) Sales of goods - computer peripherals

• The Company conducts research and development, manufacturing, and sales to the downstream manufacturers. The Company recognizes income only when the control of goods is transferred. The control transfer of the product means that the product has been delivered to the customer, the customer is fully in a position to determine the distribution channel and price of the product and there are no outstanding obligations which would affect the acceptance of the product by the customer. Delivery mainly occurs when the product is shipped from the point of departure, its obsolescence and the risk of loss has been transferred to the customer, the customer has accepted the product in accordance with the sales contract, the acceptance terms have lapsed, or the Company considers that all the acceptance conditions have been met with objective evidence.

• The Company provides standard warranty for computer peripherals and therefore assures a refund obligation for defects, and has recognized the provision for warranty liabilities in respect of this obligation. Please refer to Note 6 (12) for details.

The Company recognizes the trade receivables at the time of delivery of goods, since the Company reserves the right to collect consideration unconditionally at that time.

203

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

• b) Rendering of services

• The Company provides software updates and product maintenance services for enterprises, and recognizes the relevant income during the financial statement period for the rendering of services. For fixed-price contracts, income is recognized on the basis of the percentage of services actually rendered to total services as of the reporting date, as determined by the percentage of costs incurred to the estimated total costs of the transaction.

Under a fixed price contract, the customer pays a fixed amount at the agreed time. Contract assets are recognized when the value of services rendered exceeds the payments, while contract liabilities are recognized when payments exceed the value of services rendered.

• c) Financial component

The Company expects that the time between the transfer of goods or services to the customer under all customer contracts and the payment for such goods or services by the customer is not exceed one year. Therefore, the Company does not adjust the time value of money of the transaction price.

• o. Employee benefits

• 1) Defined contribution plans

The contribution obligations for the defined contribution plans are recognized as expenses during the period of service rendered by the employee.

• 2) Defined benefit plans

The Company calculates the net obligation for the defined benefit plans by converting the amount of future benefits earned by the employee' service in the current or previous periods to the present value for each benefit plan separately and deducting the fair value of any plan assets.

Defined benefit obligations are calculated on an actuarial and annual basis by a qualified actuary using the estimated unit benefit method. Where the calculation is likely to be favorable to the Company, the recognized assets are limited to the present value of any economic benefit available in the form of a refund of contributions from the plan or a reduction in future contributions to the plan. The present value of economic benefits is calculated by taking into account any minimum capital contributions.

Remeasurement of the net defined benefit liabilities, including actuarial gains and losses, returns on planned assets (excluding interest), and any changes in the cap impact of the asset (excluding interest), is immediately recognized as other comprehensive income and accumulated in retained earnings. The Company determines the net interest expense (income) of the net defined benefit liabilities (assets) by using the net defined benefit liabilities (assets) and the discount rate determined at the beginning of the annual reporting period. The net interest expense and other expenses of the net defined benefit plan are recognized as profit and loss.

Changes in benefits related to the service costs or reduction of benefits or losses in previous period arising from a plan modification or reduction are immediately recognized as profit and loss. The Company recognizes the settlement gains and losses of the defined benefit plan at the time of settlement.

• 3) Short-term employee benefits

Short-term employee benefit obligations are recognized as expenses at the time of service delivery. If the Company has a present statutory or constructive payment obligation arising out of the services rendered by an employee in the past and such obligation can be reliably estimated, the amount will be recognized as a liability.

204

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

p. Share-based payment transaction

For the share-based payment agreement for the equity delivery, the expenses are recognized at fair value at the grant date and the relative equity is increased within the vesting period of the award. The recognized expenses are adjusted according to the amount of awards expected to meet the service conditions and non-market vesting conditions, and the final recognized amount is measured on the basis of the amount of awards that meet the service conditions and non-market vesting conditions on the vesting day.

Non-vesting conditions relating to share-based awards are reflected in the fair value measurement of the share-based payments on the grant date, and the difference between the expected and actual results is not subject to verification and adjustment.

The fair value of the share appreciation right in cash delivery to be paid to the employee is recognized as expenses and increased to relative liabilities during the period in which the employee is entitled to unconditionally receive remuneration. The liability is remeasured at the fair value of the share appreciation right at each reporting date and closing date and any change is recognized as profit and loss.

The date on which the share-based payment is made is the date approved by the board of directors.

q. Income tax

Income tax includes current and deferred income tax. Current income tax and deferred income tax are recognized as profit and loss, except for those related to business combination and items directly recognized as equity or other comprehensive income.

The Company determines that any interest or penalty (including uncertain tax treatment) related to income tax does not meet the definition of income tax and is therefore subject to the accounting treatment of IAS 37.

Current income tax includes the estimated income tax payable or tax refunds receivable based on tax gains (losses) for the current year and any adjustments to income taxes payable or tax refunds receivable for previous years. The amount of current income tax is the best estimate of the amount expected to be paid or received as measured by the statutory or substantive legislative tax rates at the reporting date.

Deferred income tax is measured and recognized at the temporary difference between the carrying amount and the tax basis of assets and liabilities on the financial statement date. Temporary differences arising from the following circumstances are not recognized as deferred income tax:

• 1) Temporary differences arising from the initial recognition of assets or liabilities other than in the transaction of a business combination which do not affect accounting profits and tax gains (losses) at the time of the transaction;

• 2) Temporary differences arising from investment in subsidiaries, affiliates and joint venture equity, of which the Company can control the timing and which are unlikely to reverse in the foreseeable future; and

• 3) Taxable temporary differences arising from the initial recognition of goodwill.

Deferred income tax is measured at the tax rate at the time of reversal of expected temporary differences based on the statutory or substantive legislative tax rate at the reporting date.

The Company will offset deferred tax assets and deferred tax liabilities against each other only if all of the following conditions are satisfied:

205

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

• 1) Has the legal executive power to offset the current income tax assets and current income tax liabilities; and

• 2) Deferred tax assets and deferred tax liabilities are related to one of the following taxpayers of income tax levied by the same tax authority:

• a) The same taxpayer; or

• b) Different taxpayers, but each taxpayer intends to pay off the current income tax liabilities and assets on a net basis or realize the assets and settle the liabilities at the same time during each future period when the deferred tax assets of a significant amount are expected to be recovered and the deferred tax liabilities are expected to be paid off.

Unused tax losses, unused income tax credits transferred in later period and deductible temporary differences are recognized as deferred tax assets to the extent that future tax income is likely to be available, are reassessed at each reporting date and reduced to the extent that the relevant income tax benefit is not likely to be realized, or reversed on the amount originally reduced to the extent that there is likely to be sufficient taxable income.

• r. Earnings per share

The Company presents the basic and diluted earnings per share attributable to the ordinary equity holders of the Company. The basic earnings per share of the Company is calculated by dividing the profit and loss attributable to the ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the current period. Diluted earnings per share calculated by adjusting the profit and loss attributable to the ordinary equity holders of the Company and the weighted average number of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares. The dilutive potential ordinary shares of the Company include new restricted employee shares granted to employees.

s. Segment Information

The Company has disclosed the segment information in consolidated financial statements, therefore, such information is not disclosed in the Parent Company Only Financial Statements.

5. Major Sources of Uncertainty in Material Accounting Judgments, Estimates and Assumptions

When preparing the Parent Company Only Financial Statements in accordance with the Regulations Governing the Preparation of Financial statements by Securities Issuers, the management must make judgments, estimates and assumptions that will affect the adoption of accounting policies and the reported amounts of assets, liabilities, earnings and expenses. Actual results may differ from estimates.

Management continually reviews estimates and underlying assumptions, and recognizes the changes in accounting estimates in the period of change and in the affected future periods.

The Company has no accounting policies that involve material judgments and have material impact on the amounts recognized in the Parent Company Only Financial Statements.

For the uncertainties in the assumptions and estimates, the information related to the material risk that will result in a material adjustment in the next fiscal period is as follows:

a. Allowance for loss of trade receivables

The Company's allowance for losses on trade receivables is estimated based on the assumption of default risk and expected loss ratio. The Company considers historical experience, current market conditions and forward-looking estimates for each reporting date to determine the assumptions to be adopted and the input values to be selected in calculating

206

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

the impairment. Please refer to Note 6 (3) for a detailed description of the relevant assumptions and input values.

b. Valuation of inventory

Since inventory must be measured at the cost and net realized value, the Company evaluates the amount of inventory for normal wear and wear, obsolescence, or without market value on the reporting date and deducts the cost of inventory to net realized value. This inventory valuation is based on product demand during a specific period in the future and may be subject to change due to rapid industrial changes. Please refer to Note 6 (5) for details of inventory valuation.

6. Descriptions of Significant Accounting Subjects

• a. Cash and cash equivalents

scriptions of Significant Accounting Subjects Cash and cash equivalents
Cash Demand and check deposit Foreign currency deposit Time deposits Cash and cash equivalents presented in the Statement of Cash and cash equivalents in the statement of cash flow	2020.12.31 $ 27 97,871 96,569 13,500	2019.12.31 47 54,915 64,211 31,715 150,888
	$ 207,967

Please refer to Note 6 (21) for the disclosure of sensitivity analysis of financial assets and liabilities of the Company.

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

Financial assets mandatorily measured at fair value through profit or loss: Non-derivative financial assets Beneficiary certificate - Fund Investment on bonds Preferred shares Ordinary shares Non-hedging derivative instruments Perpetual bonds Subtotal Financial liabilities held for trading: Non-hedging derivative instruments Swap contracts Total Current Non-current Total	2020.12.31		2019.12.31 770,417 1,053,853 1,667,491 11,423 73,696 3,576,880 (338) 3,576,542 3,502,846 73,696 3,576,542
	$ 749,872 659,967 2,072,879 11,696 27,547
	3,521,961
	- $ 3,521,961
	$ 3,494,414 27,547
	$ 3,521,961

• 1) Preferred shares

The Company holds preferred shares issued by domestic listed companies, all of which are non-cumulative preferred shares, and the dividends are paid at the agreed annual rate, which is adjusted and reset periodically in accordance with the agreed period. None of the shares has a maturity date, but the issuing company may recover all or part of the issued preferred shares at the original issue price upon the expiration of the agreed term, and its rights and obligations shall continue under the original terms and conditions of issuance if the shares

207

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

are not recovered. The preferred shares held by the Company are non-voting and non-convertible preferred shares, except for the Non-cumulative Convertible Class A Preferred Shares issued by O-Bank which are convertible into ordinary shares commencing on the day following the one-year expiry of the issue.

2) Perpetual bonds

On July 14, 2017, the Company purchased the perpetual bonds issued by SoftBank Group Corp. on July 12, 2017 through Yuanta Asset Management (H.K.) Limited for a transaction amount of NT$30,749 thousand, at the initial distribution ratio of 6.000%, which will expire on December 29, 2049. The issuer is entitled to the first right of redemption on July 19, 2023, and will be charged additional interest at 4.226% if it fails to repurchase by the expiration date.

On August 2, 2017, the Company purchased the perpetual bonds issued by Radiant Access Ltd., on May 11, 2017 through Yuanta Asset Management (H.K.) Limited for a transaction amount of NT$44,572 thousand, at the initial distribution ratio of 4.600%, which will expire on December 29, 2049. The issuer has repurchased the perpetual bonds on November 19, 2020 for a transaction amount of NT$43,058 thousand.

3) Swap contracts

Engaging in derivative financial instruments aims to avoid exchange rate risks arising from operating activities. The details of the derivatives presented as financial assets measured at fair value through profit or loss due to the fact that the Company does not apply hedging accounting are as follows:

2019.12.31	Contract amount (NT$ Thousands) Currency Maturity period
Swap	USD 1,000 NTD to USD 2020.3.12

The Company has disclosed the exposure to risks of credit, currency and interest rate associated with financial instruments in Note 6 (21).

On December 31, 2020, the Company mortgaged 3,333 thousand Class A Preferred Shares issued by Fubon Financial Holding, 2,493 thousand Class A Preferred Shares issued by Cathay Financial Holdings, 5,551 thousand Class A Preferred Shares issued by Union Bank, 7,729 thousand Class E Registered Preferred Shares issued by Taishin Holdings and 5,400 thousand Class A Preferred Shares of Shin Kong Financial Holding as the guarantee for short-term borrowings and financing amount. On December 31, 2019, the Company mortgaged 3,333 thousand Class A Preferred Shares issued by Fubon Financial Holding, 2,493 thousand Class A Preferred Shares issued by Cathay Financial Holdings, 5,551 thousand Class A Preferred Shares issued by Union Bank and 5,855 thousand Class E Registered Preferred Shares issued by Taishin Holdings as the guarantee for short-term borrowings and financing amount. Please refer to Note 8 for the disclosure of collateral mortgage.

• c. Trade receivables

mortgage. Trade receivables
Trade receivables - related parties Trade receivables - non-related parties Less: allowance for losses	2020.12.31 $ 104,108 112,153 (3,820)	2019.12.31 190,863 156,832 (2,020) 345,675
	$ 212,441

208

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

The Company estimates the expected credit losses for all trade receivables using a simplified approach, that is, measures by the expected credit loss over the duration. For the measurement, such trade receivables is grouped according to the common credit risk characteristics represent the ability of customers to pay all amounts due under the contract terms and have been included in the forward-looking information. The expected credit loss analysis of the Company's trade receivables - non-related parties is as follows:

Not overdue Overdue for less than 30 days Overdue for 31 to 60 days Overdue for 61 to 90 days Overdue for 91 to 120 days Overdue for more than 121 days Not overdue Overdue for less than 30 days Overdue for 31 to 60 days Overdue for 61 to 90 days Overdue for 91 to 120 days Overdue for more than 121 days		2020.12.31		Allowance for expected credit losses over the duration - - - - 86 3,734
	Carrying amount of trade receivables $ 106,728 - - 1,293 398 3,734	Weighted average expected credit loss rate
		0.00% 0.00% 0.00% 0.00% 42.11% 100.00% 2019.12.31
	$ 112,153			3,820
				Allowance for expected credit losses over the duration - - - - - 2,020
	Carrying amount of trade receivables $ 147,472 5,375 - 1,963 - 2,022	Weighted average expected credit loss rate
		0.00% 0.00% 0.00% 0.00% 0.00% 99.92%
	$ 156,832			2,020

The expected credit loss analysis of the Company's trade receivables - related parties is as follows:

follows:
Not overdue Overdue for less than 30 days Overdue for 31 to 60 days Overdue for 61 to 90 days Overdue for 91 to 120 days Overdue for more than 121 days Not overdue Overdue for less than 30 days Overdue for 31 to 60 days Overdue for 61 to 90 days Overdue for 91 to 120 days Overdue for more than 121 days		2020.12.31		Allowance for expected credit losses over the duration - - - - - -
	Carrying amount of trade receivables $ 58,038 - - - - 46,070	Weighted average expected credit loss rate
		0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 2019.12.31
	$ 104,108			-
				Allowance for expected credit losses over the duration - - - - - -
	Carrying amount of trade receivables $ 97,479 21,491 2,840 - - 69,053	Weighted average expected credit loss rate
		0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
	$ 190,863			-

209

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

The statement of changes in the allowance for losses on the trade receivables of the Company is as follows:

Company is as follows:
Beginning balance Recognized impairment loss Ending balance	2020 $ 2,020 1,800	2019 938 1,082 2,020
	$ 3,820

Allowance for losses on trade receivables is used to record expected credit losses, but if and when the Company believes that the relevant amount may not be recoverable, it will be directly credited to financial assets. The overdue trade receivables of the Company as of December 31, 2020 and 2019 were mainly payments for goods to related parties, and the Company has determined that there is no doubt about recovery based on the overall fund utilization of the Group. As of March 5, 2021, the Company has recovered NT$36,775 thousand from elated parties after the period.

• d. Other receivables

Other receivables	2020.12.31 $ 101,500	2019.12.31 81,500

Based on historical experience, no expected credit loss arising from default events is expected to incur from the above-mentioned other receivables during their existence, thus it is estimated that their expected credit loss rate is zero.

Please refer to Note 6 (21) for further information on the remaining credit risks.

• e. Inventories

Inventories
Raw materials and consumables Work in process Finished products	2020.12.31 $ 243,265 36,611 27,267	2019.12.31 218,269 45,731 44,099 308,099
	$ 307,143

The breakdown of the Company's cost of goods sold for 2020 and 2019 were as follows:

Cost of goods sold Gain on physical inventory Inventory scrap loss Inventory loss from market price decline and loss on obsolete and slow-moving inventories Total	2020 $ 571,468 (45) 6,797 5,020	2019 627,464 (71) 13,501 9,376 650,270
	$ 583,240

As of December 31, 2020 and 2019, the Company's inventory has not been pledged as collateral.

• f. Investment and investment credit balance accounted for using equity method

The investments accounted for using equity method of the Company as of the reporting date are presented as follows:

are presented as follows:
Subsidiary Subsidiary	2020.12.31 $ 50,075 (9,835)	2019.12.31 53,675 (29,538) 24,137
	$ 40,240

210

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

1) Subsidiary

Please refer to the Consolidated Financial statements for 2020.

As of December 31, 2020 and 2019, the investments accounted for using equity method of the Company have not been subject to pledges, guarantees or restrictions.

g. Property, plant, and equipment

The breakdown of changes in cost and depreciation of the Company's property plant and equipment for 2020 and 2019 is as follows:

Cost or deemed cost: Balance as of January 1, 2020 Addition Transfer in Disposal and retirement Balance as of December 31, 2020 Balance as of January 1, 2019 Addition Disposal and retirement Balance as of December 31, 2019 Depreciation and impairment losses: Balance as of January 1, 2020 Depreciation in current year Transfer in Disposal and retirement Balance as of December 31, 2020 Balance as of January 1, 2019 Depreciation in current year Disposal and retirement Balance as of December 31, 2019 Carrying value: December 31, 2020 January 1, 2019 December 31, 2019	Land $ 398,945 - - -	Buildings and structures 344,331 794 465 -	Machinery equipment 78,566 98 - (161)	Transportat ion equipment 7,833 - - -	Office equipment 2,658 181 - (178)	Other equipment 144,624 2,768 - (1,887)	Total
							976,957 3,841 465 (2,226)
	$ 398,945	345,590	78,503	7,833	2,661	145,505	979,037
	$ 398,945 - -	345,183 - (852)	78,742 - (176)	7,833 - -	2,966 - (308)	136,090 14,540 (6,006)	969,759 14,540 (7,342)
	$ 398,945	344,331	78,566	7,833	2,658	144,624	976,957
	$ - - - -	155,917 11,236 13 -	78,089 358 - (161)	7,021 487 - -	2,658 41 - (178)	126,855 7,256 - (1,887)	370,540 19,378 13 (2,226)
	$ -	167,166	78,286	7,508	2,521	132,224	387,705
	$ - - -	145,378 11,269 (730)	77,433 832 (176)	6,534 487 -	2,966 - (308)	125,011 7,850 (6,006)	357,322 20,438 (7,220)
	$ -	155,917	78,089	7,021	2,658	126,855	370,540
	$ 398,945	178,424	217	325	140	13,281	591,332
	$ 398,945	199,805	1,309	1,299	-	11,079	612,437
	$ 398,945	188,414	477	812	-	17,769	606,417

As of December 31, 2020 and 2019, they are not provided as guarantee for borrowing and financing amount.

h. Right-of-use assets

The changes in the cost and depreciation of buildings and structures leased by the Company are as follows:

are as follows:
Cost of right-of-use assets: Balance as of December 31, 2020 (i.e., beginning balance) Balance as of January 1, 2019 (amount on the initial application date) Addition Reduction Balance as of December 31, 2019 Depreciation of right-of-use assets: Balance as of January 1, 2020 Provision for depreciation Balance as of December 31, 2020 Balance as of January 1, 2019 Provision for depreciation Reduction Balance as of December 31, 2019 Carrying value: December 31, 2020 January 1, 2019 December 31, 2019	Buildings and structures
	$ 23,301 $ 19,772 9,402 (5,873) $ 23,301 $ 4,135 6,290 $ 10,425 $ - 6,280 (2,145) $ 4,135 $ 12,876 $ 19,772 $ 19,166

211

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

i. Intangible assets

Intangible assets refer to the acquisition costs of computer software. The cost and amortization of the Company's intangible assets for 2020 and 2019 are as follows:

Cost: Balance as of December 31, 2020 (i.e., beginning balance) Balance as of January 1, 2019 Addition Disposal and retirement Balance as of December 31, 2019 Amortization: Balance as of January 1, 2020 Current amortization Balance as of December 31, 2020 Balance as of January 1, 2019 Current amortization Disposal and retirement Balance as of December 31, 2019 Carrying value: December 31, 2020 January 1, 2019 December 31, 2019

Cost of computer software $ 35,815 $ 35,155 1,270 (610) $ 35,815 $ 34,307 787 $ 35,094 $ 33,583 1,334 (610) $ 34,307 $ 721 $ 1,572 $ 1,508

The amortization expenses of intangible assets for 2020 and 2019 are presented in the Statement of Comprehensive Income under the following items:

Operating expenses	2020 $ 787	2019 1,334

j. Short-term loans

The details, terms and conditions of the short-term borrowings of the Company are as follows:

follows:
Unsecured bank loans Secured bank loans Total Unused quota Unsecured bank loans Secured bank loans Total Unused credit line		2020.12.31		Amount $ 357,500 492,500 $ 850,000 $ 450,000 Amount $ 266,250 388,750 $ 655,000 $ 545,000
	Currency	Range of interest rate	Maturity year
	TWD TWD
	Currency	Range of interest rate	Maturity year
	TWD TWD		109 109
		1.10%~1.35% 1.10%~1.13%

Please refer to Note 6 (21) for further information on the liquidity risk exposure of Company.

Please refer to Note 6 (2) and 8 for the mortgage of the Company's assets as collateral for bank loans.

212

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

k. Lease liabilities

The carrying amount of the Company's leasing liabilities is as follows:

Current Non-current	2020.12.31 $ 6,085	2019.12.31 6,231
	$ 6,922	13,007

Please refer to Note 6 (21) Financial instruments for details of maturity analysis.

The amount of lease recognized in profit and loss is as follows:

Interest expense on lease liabilities Expenses for short-term leases The amount of lease recognized in the Statement of Cash Total cash outflow from leases	2020 $ 214	2019 228
	$ 128	135
	Flow is as follows: 2020 2019 $ 6,573 6,548

The amount of lease recognized in the Statement of Cash Flow is as follows:

1) Lease of buildings and structures

The Company leases buildings and structures as offices and warehouses for a period of 2~6 years.

2) Other leases

The Company leases the premises and equipment for a period of less than one year, which belong to short-term leases. The Company chooses to apply the exemption from recognition and does not recognize its relevant right-of-use assets and lease liabilities.

• l. Provisions

and does not recognize its relevant right-of-use assets and lease liabilities. Provisions
Balance as of December 31, 2020 (i.e., beginning balance) Balance as of December 31, 2019 (i.e., beginning balance)	Warranty $ 2,657
	$ 2,657

The Company's provision for warranty liabilities in 2020 and 2019 is primarily related to the sale of products, and is estimated on the basis of historical warranty information for similar goods and services.

m. Employee benefits

1) Defined benefit plans

The movements between the present value of defined benefit obligations and the fair value of the plan assets of the Company is as follows:

e plan assets of the Company is as follows:
Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities	2020.12.31 $ 59,724 (29,784)	2019.12.31 51,374 (28,116)
	$ 29,940	23,258

The Company's defined benefit plan is allocated to the labor retirement reserve fund account established in the Bank of Taiwan. The retirement pension payment of each employee who applies the Labor Standards Act is calculated according to the base from years of service and the average salary for the six months prior to retirement.

213

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

a) Composition of plan assets

The pension fund allocated by the Company in accordance with the Labor Standards Act is managed by the Bureau of Labor Funds, Ministry of Labor (hereinafter referred to as the Bureau of Labor Funds). According to the "Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund," for the utilization of the fund, the minimum return distributed in the final accounts each year shall not be lower than the return calculated at the interest rate for two-year fixed deposits at local banks.

As of the reporting date, the balance of the Company's labor retirement reserve fund account established in the Bank of Taiwan is NT$29,784 thousand. Information on the utilization of labor retirement fund assets includes return on funds and fund asset allocation. Please refer to the information published on the website of the Bureau of Labor Funds, Ministry of Labor for more details.

b) The movements in the present value of defined benefit obligations

The changes in the present value of the defined benefit obligation of the Company in 2020 and 2019 are as follows:

in 2020 and 2019 are as follows:	in 2020 and 2019 are as follows:
2020 Defined benefit obligations as of January 1 $ 51,374 Current service cost and interest 773 Remeasurement of the net defined benefit liabilities - Actuarial gains and losses arising from changes in demographic assumptions 491 - Actuarial gains and losses arising from changes in financial assumptions 2,455 - Experience adjustments 4,631 Defined benefit obligations as of December 31 $ 59,724		2019 45,140 978 (23) (114) 5,393
	$ 59,724	51,374

c) The movements in the fair value of plan assets

The changes in the fair value of the defined benefit plan assets of the Company in 2020 and 2019 are as follows:

2020 and 2019 are as follows:
Fair value of plan assets as of January 1 Interest income Remeasurement of the net defined benefit liabilities - Return on plan assets (excluding current interest) Amount allocated to the plan Fair value of plan assets as of December 31	2020 $ 28,116 228 895 545	2019 26,246 296 892 682 28,116
	$ 29,784

d) Expenses recognized in profit or loss

The expenses recognized in profit or loss in 2020 and 2019 are as follows:

Current service cost Interest on defined benefit liabilities Administrative expenses	2020 $ 362 183	2019 470 212 682 682
	$ 545
	$ 545

214

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

e) Actuarial assumption

The material actuarial assumptions used by the Company to determine the present value of the defined benefit obligations on the closing date of financial statement are as follows:

Discount rate Increase in future salary	2020.12.31 0.350% 2.625%	2019.12.31 0.800% 2.625%

The Company expects to make an allocation of NT$338 thousand to the defined benefit plan within one year after the reporting date of 2020.

The weighted average duration of the defined benefit plan is 13 years.

f)

Sensitivity analysis

The impact of the changes in the major actuarial assumptions adopted on the present value of defined benefit obligations as of December 31, 2020 and 2019 is as follows:

as follows:
December 31, 2020 Discount rate (change by 0.25%) Future salary increase (change by 0.25%) December 31, 2019 Discount rate (change by 0.25%) Future salary increase (change by 0.25%)	Impact on the defined benefit obligations
	Increase Decrease $ (1,383) 1,436 1,369 (1,326) Impact on the defined benefit obligations	Decrease
	Increase $ (1,295) 1,288	Decrease
		1,346 (1,246)

The above sensitivity analysis refers to the analysis of the impact of changes in a single assumption under the premise that other assumptions remain unchanged. In practice, many changes in assumptions may be linked. The methods used for sensitivity analysis is consistent with that used to calculate the net defined benefit liabilities of the balance sheet.

The methods and assumptions used for sensitivity analysis in current period are the same as those used in previous periods.

2) Defined contribution plans

In accordance with the provisions of the Labor Pension Act, the Company's defined contribution plan is allocated to the individual labor pension account at the Bureau of Labor Insurance, Ministry of Labor (the Bureau of Labor Insurance) at a contribution rate of 6% of the worker's monthly wages. There is no statutory or constructive obligation on the Company to pay any additional amount after the Company has made a fixed contribution to the Bureau of Labor Insurance under the such plan.

The pension expenses allocated by the Company under its defined pension contribution plan in 2020 and 2019 were NT$16,386 thousand and NT$16,495 thousand respectively (after deducting the ending payable expenses of NT$2,685 thousand and NT$2,766 thousand), which has been allocated to the Bureau of Labor Insurance.

215

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

n. Income tax

1) Income tax expenses (benefits)

The components of income tax expense (benefit) for the years ended December 31, 2020 and 2019 were as follows:

019 were as follows:
Current income tax expenses Incurred in the current period Adjustment of current income tax in the previous period Deferred income tax expenses Occurrence and reversal of temporary differences Income tax expenses of continuing operations	2020 $ 4,733 (485)	2019 18,773 2,349 21,122 9,423 30,545
	4,248
	(1,738)
	$ 2,510

There is no income tax directly recognized as equity for 2020 and 2019 of the Company. The details of the income tax benefits recognized under other comprehensive income of the Company in 2020 and 2019 are as follows:

Actuarial gains (loss) from defined benefit plans

2020 $ 1,340	2019 873

The reconciliation of income tax benefit and profit before tax for the years ended December 31, 2020 and 2019 were as follows:

020 and 2019 were as follows:
Net profit before tax Income tax calculated according to the domestic tax rate at the place where the Company is located Non-deductible expenses Investment tax credit Changes in temporary difference unrecognized Overestimate/underestimate for previous period Overestimate/underestimate of temporary differences Surtax on unappropriated earnings Total	2020 $ (62,909)	2019 233,118 46,624 (25,553) (6,935) 13,789 2,349 140 131 30,545
	(12,582) 16,699 - (1,293) (485) 171 -
	$ 2,510

• 2) Deferred tax assets and liabilities

• a) Unrecognized deferred tax assets

Items not recognized as deferred tax assets by the Company are as follows:

Deductible temporary differences Tax incentives	2020.12.31 $ 44,910 31,358	2019.12.31 47,486 31,144 78,630
	$ 76,268

As of December 31, 2020 and 2019, the Company estimated that some of the temporary differences were unlikely to be realized in the foreseeable future. Therefore, the Company did not recognize any deferred tax assets.

• b) Deferred tax assets and liabilities recognized

Changes in deferred tax assets and liabilities for 2020 and 2019 are as follows:

Defined benefit

	Defined benefit
Deferred tax liabilities: Balance as of January 1, 2020 Debit (credit) profit and loss Balance as of December 31, 2020 Balance as of January 1, 2019 Debit (credit) profit and loss Balance as of December 31, 2019	plan	Others 582 (566)	Total 582 (566) 16 8,618 (8,036) 582
	$ - -
	$ -	16
	$ - -	8,618 (8,036)
	$ -	582

216

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

Deferred tax assets: Balance as of January 1, 2020 (Debit) credit profit and loss (Debit) credit other comprehensive income Balance as of December 31, 2020 Balance as of January 1, 2019 (Debit) credit profit and loss (Debit) credit other comprehensive income Balance as of December 31, 2019	Defined benefit plan	Others	Total 34,535 1,172 1,340 37,047 51,121 (17,459) 873 34,535
	$ 3,365 - 1,340	31,170 1,172 -
	$ 4,705	32,342
	$ 2,492 - 873	48,629 (17,459) -
	$ 3,365	31,170

c) Assessment of income tax

The Company’s tax returns for 2018 were examined and approved by the Taiwan National Tax Administration, and the Company’s tax returns for 2017 is still under examination.

o. Capital and other equity

Both the total authorized ordinary share capital of the Company as of December 31, 2020 and 2019 is NT$3,120,000 thousand for 312,000 thousand shares with a par value per share of NT$10. The number of ordinary shares outstanding was 273,552 thousand and 276,291 thousand, respectively, and share capital of shares outstanding has been collected.

Below is the reconciliation statement for the number of outstanding shares of the Company for 2020 and 2019:

for 2020 and 2019:
Beginning balance as of January 1 Repurchase the shares of the Company New restricted employee shares Ending balance as of December 31		(presented in thousands of shares) Ordinary shares 2020 2019 276,076 276,117 (2,736) (430) 212 389 273,552 276,076
		2020
		276,076 (2,736) 212
		273,552

1) Issuance of ordinary shares

In accordance with the new restricted employee share plan adopted by the shareholders' meeting on June 10, 2013, June 13, 2014, June 8, 2016 and June 13, 2017, the Company issued 913 thousand, 987 thousand, 1,019 thousand and 301 thousand ordinary shares at face values for aggregate amounts of NT$9,129 thousand, NT$9,874 thousand, NT$10,189 thousand and NT$3,010 thousand, respectively, by resolution of the board of directors on March 16, 2015, March 15, 2016, March 13, 2017 and March 12, 2018. Among them, 17 thousand, 21 thousand, 283 thousand, 47 thousand, 64 thousand, 311 thousand, 133 thousand, 301 thousand, 35 thousand, 301 thousand, 23 thousand and 3 thousand shares, due to employee turnover and performance ratings not up to standard, were canceled on August 10, 2015, November 10, 2015, March 17, 2016, August 10, 2016, November 8, 2016, March 17, 2017, August 10, 2017, March 17, 2018, August 10, 2018, March 17, 2019, December 31, 2019 and May 9, 2020, respectively, and their registration of change were completed on September 2, 2015, November 27, 2015, April 6, 2016, August 23, 2016, November 22, 2016, April 6, 2017, August 28, 2017, April 3, 2018, August 28, 2018, April 1, 2019, January 15, 2020 and May 26, 2020. Please refer to Note 6 (16) for details.

217

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

2) Capital surplus

Balance of the Company's capital surplus is as follows:

Capital surplus nce of the Company's capital surplus is as follows:
Share premium New restricted employee shares Income from endowments received by the Company Total	2020.12.31 $ 88,085 - 717	2019.12.31 87,556 1,431 717 89,704
	$ 88,802

In accordance with the provisions of the Company Act, only after covering losses by capital surplus, the Company may distribute new shares or cash from realized capital surplus according to the proportion of the shareholders' original shares. The term "realized capital surplus" referred to in the preceding paragraph includes the income derived from the issuance of new shares at a premium and income from endowments received by the Company. In accordance with the Regulations Governing the Offering and Issuance of Securities by Issuers, when capital surplus is capitalized, the combined amount capitalized in any 1 year may not exceed 10 percent of paid-in capital.

3) Retained earnings

In accordance with the Articles of Incorporation of the Company, any earnings after the Company's annual closing of the books, it shall be first used to pay all taxes and dues and cover accumulated losses, then 10 percent of the earnings shall be reserved as the legal reserve; provided that this restriction shall not apply to the circumstances that the legal reserve has reached the paid-in capital of the Company. Provision (reversal) for special reserve shall be made from the remaining earnings as required by the Company's operation or by law. If there is still a balance, the board of directors shall draw up an earnings distribution plan for the balance and the unappropriated earnings at the beginning of period, and submit it to the board of shareholders for a resolution on distribution.

The Company will, considering the Company's environment and growth stage, taking into account its future capital needs and long-term financial planning, satisfying the needs of shareholders for cash inflows, distribute shareholders' dividends in the form of both stock dividends and cash dividends, in which the proportion of cash dividends shall not be less than 10 percent of the total dividend of shareholders.

a) Legal reserve

If there is no loss, the Company may, by resolution of the shareholders' meeting, distribute new shares or cash from legal reserves, but only the portion of the reserve exceeding 25 percent of the paid-in capital shall be distributed.

b) Special reserve

Pursuant to Financial-Supervisory-Securities-Corporate-1010012865 issued on April 6, 2012, The Company shall allocate a special reserve of the same amount from the after-tax earnings for the current year and the unappropriated earnings in the previous period for the net deduction of shareholders' equity incurred for the current year. For the deduction of accumulated shareholders' equity for the preceding period, the special reserve of the same amount that should be allocated from the unappropriated earnings in the previous period shall not be distributed. In the event of a subsequent reversal of the amount of the reduction in shareholders' equity, the earnings may be distributed from such reversal. As of December 31, 2020 and 2019, the balance of the special reserve is NT$0.

• c) Earning distribution

218

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

The Company's earnings distribution plans for the year 2019 and 2018 were resolved at the regular shareholders' meeting on June 10, 2020 and June 10, 2019 respectively. The payout ratio and amount of dividends distributed to owners are as follows:

as follows:
Dividends distributed to owners of ordinary shares: Cash	2019 Payout ratio (NT$) Amount $ 0.60 165,773		2018 Payout ratio (NT$) Amount 0.40 110,473
	Payout ratio (NT$)		Payout ratio (NT$)
	$ 0.60		0.40

The Company's earnings distribution plan for 2020 was resolved by the board of directors on March 11, 2021. The payout ratio and amount of dividends distributed to owners are as follows:

directors on March 11, 2021. The payout to owners are as follows:	ratio and amount of dividends distributed	ratio and amount of dividends distributed
Dividends distributed to owners of ordinary shares: Cash	2020 Payoutratio (NT$) Amount $ 0.30 82,065
	Payoutratio (NT$)
	$ 0.30

4) Treasury shares

In 2020, the Company repurchased a total of 2,736 thousand treasury shares at the amount of 32,183 thousand as necessary to protect the Company's credit and shareholders' equity in accordance with Article 28-2 of the Securities and Exchange Act. Balance as of December 31, 2020, all the said treasury shares repurchased have been canceled.

The treasury shares held by the Company shall not be pledged in accordance with the Securities and Exchange Act, and no shareholders' right shall be enjoyed until they are transferred.

• 5) Other equity (net after tax)

transferred. Other equity (net after tax)
Balance as of January 1, 2020 Exchange differences resulting from translating the net assets of foreign operations Unpaid employee remuneration Balance as of December 31, 2020 Balance as of January 1, 2019 Exchange differences resulting from translating the net assets of foreign operations Unpaid employee remuneration Balance as of December 31, 2019	Exchange differences resulting from translating the financial statements of foreign operations	Unpaid employee remuneration	Total 6,989 (2,238) 597 5,348 (2,062) 856 8,195 6,989
	$ 7,586 (2,238) -	(597) - 597
	$ 5,348	-
	$ 6,730 856 -	(8,792) - 8,195
	$ 7,586	(597)

219

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

p. Share-based payment

On June 11, 2018, the Company issued 800 thousand new restricted employee shares by the resolution of shareholders' meeting, which were granted to only full-time employees of the Company who meet certain conditions and have been filed for effective registration with the Securities and Futures Bureau, Financial Supervisory Commission, R.O.C.

On June 13, 2017, June 8, 2016, June 13, 2014, and June 10, 2013, respectively, the Company issued 1,300 thousand, 1,500 thousand, 1,000 thousand, and 2,500 thousand new restricted employee shares by the resolution of shareholders' meeting, which were granted to only full-time employees of the Company who meet certain conditions and have been filed for effective registration with the Securities and Futures Bureau, Financial Supervisory Commission, R.O.C. And on March 12, 2018, March 13, 2017, March 15, 2016 and March 16, 2015, respectively, the Company issued 301 thousand, 1,019 thousand, 987 thousand and 913 thousand shares by resolutions of the board of directors.

Employees who are allotted the aforesaid new restricted employee shares may obtain 30%, 30% and 40% of the allotted shares under vesting conditions respectively if they have been in service for the first, second and third years after the date of allotment of shares and have met the performance criteria required by the Company.

After subscribing for the new shares, employees shall not sell, pledge, transfer, grant, or otherwise dispose of the new shares, nor shall they enjoy the allotment rights on dividends and reserves, nor the stock options to increase cash capital until the vesting conditions are met. From 15 business days prior to the book closure date of bonus shares and the book closure date of cash dividends to the base date of right distribution, the employees who have reached the vesting conditions during this period still do not be entitled to the right of earnings distribution on their shares which have been removed from the restriction.

Upon allotment of the new shares, employees shall, until the vesting conditions are met, deliver the shares in full to the trust institution designated by the Company for custody. During the trust custody period, the voting rights of the shareholders' meeting of the shares shall be exercised by the trust custody institution in accordance with the relevant laws and regulations. If any employee fails to meet the vesting conditions after being allotted the new shares, the Company will recover the shares without compensation and perform the cancellation of the shares according to law.

Relevant information on new restricted employee shares of the Company is as follows:

Number of shares outstanding as of January 1 (thousand shares) Current vesting amount (thousand shares) Current lost amount (thousand shares) Number of shares outstanding as of December 31 (thousand shares)		2020 215 (212) (3)	2019 928 (389) (324) 215
		-

220

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

1) Measurement parameters of fair value on the grant date

The Company adopts the BlackScholes option pricing model to estimate the fair value of share-based payment at the grant date. The input value of this model is as follows:-

			Newrestricted employee shares	Newrestricted employee shares
		Second grant	Third grant	Fourthgrant	Fifthgrant
Grant date		2015.3.16	2016.3.15	2017.3.13	2018.3.12
Fair value on the	$	17.05	17.40	16.65	13.35
grant date
Share price on the		17.05	17.40	16.65	13.35
grant date
Strike price		-	-	-	-
Expected	24.089%~26.433%		30.490%~32.957%	27.786%~31.762%	26.333%~35.314%
volatility (%)
Duration (years)		3	3	3	3
Expected rate of		3.52%	5.17%	5.41%	3.00%
dividend (%)
Risk-free interest		1.345%~1.395%	1.230%~1.305%	1.065%~1.115%	1.065%~1.115%
rate (%)

The Company's expected volatility is based on historical volatility. The duration is governed by the Company's issuance rules. The expected dividends are calculated based on cash dividends distributed by the Company in 2017, 2016, 2015 and 2014, respectively. The risk-free interest rate refers to the interest rate for one to three-year fixed deposits of the Bank of Taiwan. The determination of fair value does not take into account the services and non-market performance conditions included in the transaction.

2) Employee expenses and liabilities

The expenses and liabilities incurred from share-based payments by the Company for 2020 and 2019 are as follows:

Expenses incurred by new restricted employee shares	2020 $ 544	2019 3,840

• q. Earnings per share

• 1) Basic earnings per share

The basic earnings per share of the Company for 2020 and 2019 are calculated on the basis of the net profit attributable to the ordinary equity holders of the Company and the weighted average number of ordinary shares outstanding as follows:

• a) Net profit attributable to the ordinary equity holders of the Company

Net profit attributable to the ordinary equity holders of the Company	2020 $ (65,419)	2019 202,573

• b) Weighted average number of ordinary shares outstanding

Ordinary shares outstanding as of January 1 Impact of new restricted employee shares Impact of treasury shares Weighted average number of ordinary shares outstanding as of December 31		2020 276,076 169 (1,696)	2019 276,117 310 (345)
		274,549	276,082

221

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

2) Diluted earnings per share

The basic earnings per share of the Company for 2019 is calculated on the basis of the net profit attributable to the ordinary equity holders of the Company and the weighted average number of ordinary shares outstanding after adjusting for the dilution effect of all potential ordinary shares as follows:

• a) Net profit attributable to the ordinary equity holders of the Company (diluted)

Net profit attributable to the ordinary equity holders of the Company (diluted)	2019 $ 202,573

• b) Weighted average number of ordinary shares outstanding (diluted)

Weighted average number of ordinary shares outstanding (basic) Impact of employee stock remuneration New restricted employee shares not acquired Balance as of December 31 - weighted average number of ordinary shares outstanding (diluted)	2019 276,082 3,250 268 279,600

Since it is a net loss for 2020 for the Company, there is no dilution effect. Therefore, the disclosure of diluted earnings per share (loss) is not required.

• r. Revenue from contracts with customers

• 1) Disaggregation of income

nue from contracts with customers Disaggregation of income
Primary geographical markets: USA Europe Taiwan Mainland China Japan Germany Other countries Major products: Computer peripherals Rendering of services Contract balance Trade receivables Less: allowance for losses Total Contract liabilities	2020.12.31	2020		2019 116,746 223,349 58,015 178,019 411,094 52,886 137,431 1,177,540 1,164,564 12,976 1,177,540 2019.1.1 443,124 (938) 442,186 32,886
		$ 79,372 151,473 61,541 109,760 316,569 117,567 130,101
		$ 966,383
		$ 958,932 7,451
		$ 966,383
			2019.12.31
			347,695 (2,020)
	$ 212,441		345,675
	$ 32,101		31,576

• 2) Contract balance

Please refer to Note 6 (3) for details of disclosure of trade receivables and their impairment. The beginning balance of contract liabilities as of January 1, 2020 and 2019 was recognized as income of NT$9,853 thousand and NT$13,058 thousand in 2020 and 2019, respectively.

222

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

s. Employees’ and directors’ compensation

In accordance with the Articles of Incorporation of the Company, if the Company has gained profits within a fiscal year, at least 1 percent of the profits shall be allocated as the employees' compensation, and less than 0.5 percent as the director's remuneration. However, in case of the accumulated losses, certain profits shall first be reserved to cover them. Profits refer to pre-tax benefits before deducting remuneration to employees and directors. The remuneration to employees referred to in the preceding paragraph may be distributed by shares or cash to employees of subsidiaries.

The Company's remuneration for employees in 2019 is accrued at NT$38,000 thousand, and the compensation for directors is accrued at NT$1,000 thousand, which are based on the amount of the Company's net pre-tax income before deducting the remuneration to employees and directors for each period multiplied by the distribution percentage of remuneration to employees and directors as stipulated in the Articles of Incorporation, and presented as operating costs or operating expenses for the period. It is a pre-tax loss for 2020, thus no provision has been made for the expenses related to the remuneration to employees and directors.

There is no difference between the actual distribution of remuneration to employees, directors and supervisors in 2019 and the provision amount in the Company's Parent Company Only Financial Statements for 2019. The relevant information is available at the Market Observation Post System.

• t. Non-operating income and expenses

1) Interest income

The interest income of the Company in 2020 and 2019 is as follows:

Interest income Financial assets measured at fair value through profit or loss Interest on bank deposits Others Total interest income	2020 $ 42,926 560 10	2019 64,390 3,044 10 67,444
	$ 43,496

• 2) Other income

Other income of the Company in 2020 and 2019 is as follows:

Rental income Dividend income	2020 $ 16,565 64,030	2019 18,674 51,679 70,353
	$ 80,595

3) Other gains and losses

Other gains and losses of the Company in 2020 and 2019 are as follows:

2020 Disposal and retirement of property, plant and equipment loss $ - Foreign exchange losses (24,090) Net profit (loss) of financial assets (liabilities) measured at fair value through profit or loss (134,054) Others 4,513 $ (153,631)	2020 Disposal and retirement of property, plant and equipment loss $ - Foreign exchange losses (24,090) Net profit (loss) of financial assets (liabilities) measured at fair value through profit or loss (134,054) Others 4,513 $ (153,631)	2019 (122) (7,118) 90,432 3,812 87,004
	$ (153,631)

223

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

4) Financial cost

The financial cost of the Company in 2020 and 2019 are as follows:

Interest expenses	2020 $ 7,627	2019 7,092

• u. Financial instruments

• 1) Credit risk

  • a) Exposure to credit risk

The carrying amount of financial assets and contract assets represents the maximum credit risk exposure amount.

• b) Concentration of credit risk

The Company's credit risk exposure is mainly affected by the individual circumstance of each customer. However, management also takes into account the statistics of the Company's customer base, including the default risk of the customer's industry and country, as these factors may affect credit risk. As of December 31, 2020 and 2019, 49.01% and 55.21% of the net trade receivables of the Company are trade receivables from related parties, as a result, there is a significant concentration of credit risk in the Company. In order to reduce the credit risk of trade receivables, the Company continuously assesses the financial position of its customers and periodically evaluates the possibility of collection of trade receivables. To date, the Company is in good condition for cash receipt and does not expect to incur any loss on bad debts.

• c) Credit risks in receivables and debt securities

Please refer to Note 6 (3) for information on the credit risk exposure of trade receivables. Other financial assets measured at amortized cost include other receivables and certificates of deposit. Please refer to Note 6 (4) for relevant information and provision for impairment allowance.

The foregoing items are financial assets with low credit risk, so the allowance for losses for the period are measured by the amount of the expected 12-month credit losses (Please refer to Note 4 (6) for instructions on how the Company determines the low credit risk). Time deposits held by the Company are traded with and performed by financial institutions of investment grade or above, and therefore are deemed to have low credit risk.

• 2) Liquidity risk

The table below shows the expiration dates of contract on financial liabilities, including the estimated interest but excluding the impact of netting agreement:

December 31, 2020 Non-derivative financial liabilities Secured bank borrowings Unsecured bank borrowings Trade payables Other payables Lease liabilities	Carrying amount	Contract cash flow	Within 6 months	6-12 months-	12years-	25 years-	More than 5 years
	$ 492,500 357,500 48,359 130,017 13,007	493,781 357,996 48,359 130,017 13,222	493,781 357,996 48,359 130,017 3,222	- - - - 2,993	- - - - 3,686	- - - - 3,321	- - - - -
	$ 1,041,383	1,043,375	1,033,375	2,993	3,686	3,321	-

224

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

December 31, 2019
Non-derivative financial
liabilities
Secured bank borrowings	$	388,750	389,263	389,263	-		-		-		-
Unsecured bank		266,250	266,728	266,728	-		-		-		-
borrowings
Trade payables		71,052	71,052	71,052	-		-		-		-
Other payables		148,413	148,413	148,413	-		-		-		-
Lease liabilities		19,238	19,668	3,223		3,223		6,215		7,007	-
Derivative financial liabilities
Swap contracts for
non-hedging purposes:
Inflow		-	(30,012)	(30,012)	-		-		-		-
Outflow		338	30,350	30,350	-		-		-		-
	$	894,041	895,462	879,017		3,223		6,215		7,007	-

The Company does not expect that the cash flow for the due date analysis will occur significantly earlier or that the actual amount may vary significantly.

• 3) Exchange rate risk

• a) Exposure to exchange rate risk

The Company's financial assets and liabilities that are exposed to material foreign exchange risk are as follows:

exchange risk	are as follows:
Financial assets Monetary items USD RMB ZAR INR Non-monetary items USD Financial liabilities Monetary items USD Non-monetary items RMB Financial assets Monetary items USD RMB ZAR INR IDR Non-monetary items USD Financial liabilities Monetary items USD Non-monetary items RMB		2020.12.31	NTD 1,066,681 437,614 65,961 42,778 33,972 2,989 9,258 NTD 1,415,512 368,232 94,523 194,869 30,800 36,177 10,034 29,232
	Foreign currency (thousand dollars) $ 37,946.68 101,299.54 34,354.50 111,197.58 1,208.57 106.33 2,143.06	Exchange rate USD:NTD 28.1100 RMB:NTD 4.3200 ZAR:NTD 1.9200 INR:NTD 0.3847 USD:NTD 28.1100 USD:NTD 28.1100 RMB:NTD 4.3200 2019.12.31
	Foreign currency (thousand dollars) $ 47,207.33 85,535.90 44,377.22 463,311.50 14,000,000.00 1,206.50 334.63 6,790.22	Exchangerate USD:NTD 29.9850 RMB:NTD 4.3050 ZAR:NTD 2.1300 INR:NTD 0.4206 IDR:NTD 0.0022 USD:NTD 29.9850 USD:NTD 29.9850 RMB:NTD 4.3050

• b) Sensitivity analysis

The exchange rate risk of the Company's monetary items mainly derives from the foreign currency exchange gains and losses generated at the time of translation of foreign-currency-denominated cash and cash equivalents, trade receivables and other receivables, financial assets measured at fair value through profit or loss, trade payables and other payables etc. As of December 31, 2020 and 2019, when

225

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

the functional currency depreciates or appreciates by 0.5% relative to the non-functional currency, with all other factors remain unchanged, the net profit after tax as of December 31, 2020 and 2019 will increase by NT$6,443 thousand and NT$8,376 thousand respectively.

Due to the wide variety of functional currencies adopted, the Company discloses the exchange gains and losses of monetary items in a consolidated manner. The gains and losses (realized and unrealized) on foreign currency exchange in 2020 and 2019 were a loss of NT$24,090 thousand and a loss of NT$7,118 thousand respectively.

4) Interest rate analysis

The interest rate exposure of the Company's financial assets and financial liabilities is described in the liquidity risk management section of this Note.

The following sensitivity analysis is based on the interest rate exposure of both derivative and non-derivative instruments as at the reporting date. For floating rate liabilities, the analysis assumes that the amount of liabilities outstanding on the reporting date is outstanding for the entire year. The rate of change used internally to report interest rates to key management is a 1% increase or decrease in interest rates, which also represents the management's assessment of the reasonable range of possible changes in interest rates.

If the interest rate increases or decreases by 1%, with all other variables remain unchanged, the net profit of the Company in 2020 and 2019 will decrease or increase by $6,800 and $5,240, mainly resulting from the Company's borrowings at variable interest rates.

• 5) Fair value information

• a) Type of financial instruments and fair value

The financial assets and liabilities measured at fair value through profit or loss of the Company are measured at fair value on a repeatability basis. Except as described below, the carrying amount of all financial instruments of the Company is a reasonable approximation of the fair value and the disclosures of fair value are not required.

Financial assets measured at fair value through profit or loss Derivative financial assets Non-derivative financial assets mandatorily measured at fair value through profit or loss Subtotal Financial assets measured at amortized cost Cash and cash equivalents Trade receivable and other receivables Other financial assets Subtotal Total Financial assets at amortized cost Short-term borrowings Trade payables Other payables Lease liabilities Total			2020.12.31	2020.12.31	Total 27,547 3,494,414
	Carrying amount $ 27,547 3,494,414		Fair value
		Level 1 27,547 3,494,414	Level 2 - -	Level 3 - -
	3,521,961	3,521,961	-	-	3,521,961
	207,967 313,941 3,596	- - -	- - -	- - -	- - -
	525,504	-	-	-	-
	$ 4,047,465	3,521,961	-	-	3,521,961
	$ 850,000 48,359 130,017 13,007	- - - -	- - - -	- - - -	- - - -
	$ 1,041,383	-	-	-	-

226

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

2019.12.31

			2019.12.31	2019.12.31
Financial assets measured at fair value through profit or loss Derivative financial assets Non-derivative financial assets mandatorily measured at fair value through profit or loss Subtotal Financial assets measured at amortized cost Cash and cash equivalents Trade receivable and other receivables Other financial assets Subtotal Total Financial liabilities at fair value through profit or loss Derivative financial liabilities Financial liabilities at amortized cost Short-term borrowings Trade payables Other payables Lease liabilities Subtotal Total	Carrying amount $ 73,696 3,503,184		Fair value		Total 73,696 3,503,184
		Level 1 73,696 3,503,184	Level 2 - -	Level 3 - -
	3,576,880	3,576,880	-	-	3,576,880
	150,888 427,175 4,096	- - -	- - -	- - -	- - -
	582,159	-	-	-	-
	$ 4,159,039	3,576,880	-	-	3,576,880
	$ 338	-	338	-	338
	655,000 71,052 148,413 19,238	- - - -	- - - -	- - - -	- - - -
	893,703	-	-	-	-
	$ 894,041	-	338	-	338

• b) Each fair value hierarchy is defined as follows:

• i. Level 1: The publicly quoted prices (unadjusted) in active markets for identical assets or liabilities.

• ii. Level 2: The input parameters other than publicly quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. price) or indirectly (and derived from price).

• iii. Level 3:The inputs for assets or liabilities that are not based on observable market prices and counterparty quoted prices (non-observable parameters).

• c) Valuation technique of fair value of financial instruments measured at fair value The Company presents the fair value of financial assets and financial liabilities by class and attribute as follows:

• i. Redeemable corporate bonds and open-end funds listed (OTC) are financial assets that are subject to standard terms and conditions and are traded in an active market, and their fair value is based on the publicly quoted prices in active markets.

• ii. Forward contracts and exchange rates for derivative financial instruments are usually valued according to valuation models accepted widely by market users at current forward exchange rates. The fair value for structured derivative instruments is calculated by the cash flow discount analysis using the yield curve applied to the duration of derivative commodities.

• d) Transfer between Level 1 and Level 2 There is no transfer in 2020 and 2019.

• e) Changes in Level 3 The movement in the reconciliation of Level 3 fair values for 2019 was as follows:

Balance as of January 1, 2019 Total profit or loss Purchase Disposal/Liquidation Balance as of December 31, 2019	Financial assets measured at fair value throughprofit or loss $ 66,860 (360) 66,600 (133,100) $ -

The above total profit or loss are presented as other gains and losses. There is no asset still held as of December 31, 2020 and 2019.

227

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

• v. Concentration of financial risk

• 1) Summary

The Company is exposed to the following risks as a result of the use of financial instruments:

• a) Credit risk

• b) Liquidity risk

• c) Market risk

This Note presents the information on the Company's exposure to the above risks and the Company's objectives, policies and procedures for measuring and managing risk. Please refer to relevant notes to the Parent Company Only Financial Statements for details of further quantitative disclosure.

• 2) Risk management framework

The board of directors shall fully take the responsibilities for establishment and supervision of the risk management framework of the Company.

The risk management policy of the Company is established to identify and analyze risks encountered by the Company, set appropriate risk limits and controls, and supervise the compliance of risks and risk limits. Risk management policies and systems are periodically reviewed to reflect changes in market conditions and the Company's operations. The Company develops a disciplined and constructive control environment through training, management guidelines and procedures to enable all employees to understand their roles and obligations.

The audit committee of the Company supervises the compliance of the Company's risk management policies and procedures, and review the appropriateness of the Company's relevant management framework for the risks encountered. The internal auditors assist the audit committee of the Company in its supervisory role by conducting periodic and exceptional reviews on risk management controls and procedures and reporting the review results to the audit committee.

• 3) Credit risk

Credit risk refers to the risk of the Company's financial loss arising from the failure of a customer or a counterparty to a financial instrument to fulfill its contractual obligations, which is mainly derived from the Company's trade receivables from customers, bank deposits and securities investments.

• a) Trade receivables and other receivables

The Company has developed a credit policy for a wide range of customers, under which the Company shall analyze the credit rating of each new customer on an individual basis. To reduce credit risk, the Company regularly and continuously evaluates the financial position of its customers, but does not normally require customers to provide collateral.

• b) Investments

The credit risk of bank deposits, fixed income investments and other financial instruments is measured and monitored by our management and finance department. Since the parties which the Company trades with and the investments performed by are all banks of good credit and financial institutions and corporate organizations with investment grade or above, there is no significant doubts on performance, thus there is no material credit risk.

228

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

4) Liquidity risk

Liquidity risk refers to the risk that the Company is unable to deliver cash or other financial assets to pay off its financial liabilities and fail to meet its obligations. The Company manages its liquidity in such a way as to ensure, to the extent possible, that the Company has adequate liquidity under normal and stressful circumstances to meet its liabilities when they come due without the risk of unacceptable loss or damage to the Company's reputation.

• 5) Market risks

Market risk refers to the risk that the Company's earnings or the value of financial instruments held by the Company may be affected by changes in market prices, such as changes in exchange rates, interest rates, or prices of equity instruments. Market risk management aims to control the exposure of market risk to a tolerable extent and to maximize the return on investment.

The Company engages in derivatives transaction to manage market risk. All transactions are conducted in accordance with the Company's Derivative Commodity Handling Procedures.

• a) Exchange rate risk

The Company is exposed to exchange rate risks arising from sales, procurements and borrowing transactions that are not denominated in the functional currencies of each of the Group's enterprises. The functional currencies of the Group's enterprises are mainly New Taiwan dollar, as well as US dollar, RMB and Japanese yen, while the main currencies used for transactions are New Taiwan dollar, Euro, US dollar, British pound and Japanese yen.

In addition to the natural hedging by trade receivables and trade payables, the Company also adopts one-year forward foreign exchange contracts or other financial instruments to hedge foreign exchange risks.

• b) Interest rate risk

The Company's investments in financial bonds and borrowings may affect interest income, expenses or fair value as market interest rates change, but slightly affect the working capital of the Company.

• c) Other market price risks

The Company is exposed to equity prices risk derived from listed (OTC) equity securities investments. The equity investments are not held for trade but are strategic investments. The Company does not actively trade such investments, and the Company's management personnel manage risk by holding different risk investment portfolios. The Company's equity price risk is mainly concentrated in equity instruments issued by financial enterprises on the Taiwan Stock Exchange. In addition, the Company assigns a specific team to monitor price risk and to assess when to increase the hedging position of the risk to be avoided.

w. Capital management

The capital management the Company aims to ensure the ability as a going concern, so as to provide shareholder returns and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the dividends paid to shareholders, reduce capital to refund shareholders, issue new shares or sell assets to pay off liabilities.

229

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

In line with its peers, the Company manages capital on the basis of its debt-to-capital ratio, which is calculated by dividing net liabilities by total capital. Net liabilities are the total liabilities presented in the balance sheet minus cash and cash equivalents. Total capital is the total component of equity (i.e., share capital, capital surplus, retained earnings, treasury shares and other equity).

shares and other equity).
Total liabilities Less: cash and cash equivalent Net liabilities Total equity Debt-to-capital ratio	2020.12.31 $ 1,117,286 (207,967)		2019.12.31 985,990 (150,888)
	$ 909,319		835,102
	$ 3,964,347		4,234,774
		22.94%	19.72%

As of December 31, 2020, the Company's approach to capital management remained unchanged.

• x. Investing and financing activities not affecting current cash flow

The Company's investment activities in 2020 and 2019 are not involved in non-cash transactions. Financing activities involved in non-cash transactions refer to acquisition of right-of-use assets by lease. Please refer to Note 6 (8) for details.

The Company’s financing activities that did not affect the current cash flow for the years ended December 31, 2020 and 2019 were as follows:

Lease liabilities Total liabilities generated from the financing activities Lease liabilities Total liabilities generated from the financing activities		2020.1.1 $ 19,238 $ 19,238 2019.1.1 $ 19,772 $ 19,772	Cash flow (6,231) (6,231) Cash flow (6,185) (6,185)	Non-cash changes - - Non-cash changes 5,651 5,651	2020.12.31 13,007
					13,007
					2019.12.31 19,238
					19,238

7. Related-Party Transactions

• a. Name and relationship of related parties

Subsidiaries of the Company and other related parties involved in transactions with the Company during the period covered by the Parent Company Only Financial Statements are as follows:

as follows:
Name of related parties Infortrend Corporation Infortrend Europe Limited Infortrend Japan Inc. Prophet Technology Inc. Infortrend Limited Surveon Technology Inc. Infortrend Shanghai Limited	Relationship with the Company
	Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Subsidiary of the Company Sub-subsidiary of the Company Sub-subsidiary of the Company

• b. Significant transactions with related parties

• 1) Operating income

The amount of significant sales transactions between the Company and related parties were as follows:

were as follows:
Subsidiary Infortrend Shanghai Limited Other subsidiaries	2020 $ 109,149 176,732	2019 176,655 212,138
	$ 285,881	388,793

230

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

The price at which the Company sells to its related parties is about 10 ~ 20 % lower than the usual price, and the payment shall be made in three months. The unrealized gross margin on sales to related parties in 2020 and 2019 is NT$13,893 thousand and NT$27,166 thousand, respectively.

2) Receivables from related parties

The details of the Company's trade receivables from related parties are as follows:

Accountingitems	Types of relatedparties	2020.12.31 $ 4,334 73,147 26,627 6,304	2019.12.31 48,656 118,006 24,201 6,954 197,817
Trade receivables Other receivables	Subsidiary Infortrend Corporation Infortrend Shanghai Limited Other subsidiaries Subsidiary
		$ 110,412

3) Trade payables to related parties

The details of the Company's trade payables to related parties are as follows:

Accountingitems Types of related parties Other payables Subsidiary 4) Contract liabilities Types of related parties Subsidiary Infortrend Corporation Infortrend Europe Limited Infortrend Japan Inc. Other subsidiaries 5) Rental income Types of related parties Subsidiary Infortrend Corporation 6) Other income Types of related parties Subsidiary Infortrend Corporation Other subsidiaries 7) Service fee Types of related parties Subsidiary Infortrend Europe Limited Transactions of main management personnel Remuneration of main management personnel includes: Short-term employee benefits Post-employment benefits	Accountingitems	Types of related parties	2020.12.31 $ 339	2019.12.31 3,628 2019.12.31 5,463 10,504 7,294 1,364 24,625 2019 17,666 2019 227 228 455 2019 19,737 2019 16,658 3,598 20,256
			2020.12.31 $ 6,212 11,034 7,127 1,212
			$ 25,585
			2020 $ 15,703
			2020 $ 2,404 315
			$ 2,719
			2020 $ 4,014
			2020 $ 16,052 3,192
			$ 19,244

c. Transactions of main management personnel

231

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

8. Pledged Assets

The book value of the assets pledged as guarantee by the Company is as follows:

Pledged assets	Object ofpledgeguarantee	2020.12.31 $ 1,292,051 2,500 1,096	2019.12.31 1,006,591 2,500 1,596
Financial assets measured at fair value through profit or loss - current- Other financial assets - non-current Other financial assets - non-current	Short-term borrowings and financing amount Guarantee for customs duties Guarantee for national defense service and deposit for housing and parking space
		$ 1,295,647	1,010,687

9. Significant Contingent Liabilities and Unrecognized Contractual Commitments

• a. Significant unrecognized contractual commitments:

• 1) The refundable deposit notes issued by the Company for the loan limit are as follows:

NTD USD	2020.12.31 $ 800,000 -	2019.12.31 700,000 14,993

10. Losses due to Major Disasters: None.

11. Significant Events after the End of the Financial Reporting Period: None.

12. Others

• a. The summary of employee benefits, depreciation, depletion and amortization expenses by function is as follows:

Function Nature	2020	2020	2020	2019	2019	2019	2019	2019	2019
	Operating costs	Operating expenses	Total	Operating costs			Operating expenses		Total
Employee benefit expenses Salary expenses Labor and health insurance expenses Pension expenses Director's remuneration Other employee benefits expenses Depreciation expenses Amortization expenses	102,389 9,858 4,903 - 5,376 9,995 -	278,417 19,139 12,028 1,122 7,804 15,673 787	380,806 28,997 16,931 1,122 13,180 25,668 787	105,097 10,104 5,025 - 5,649 10,058 -			304,990 19,405 12,152 2,120 8,067 16,660 1,334		410,087 29,509 17,177 2,120 13,716 26,718 1,334
Additional information on the number of employees and employee benefits expenses of the Company in 2020 and 2019 is as follows: 2020 2019 Numbers of employees 443 457 The number of directors who do not serve concurrently as employees 3 3 Average employee benefits expenses $ 1,000 1,036 Average employee salary expenses $ 865 903 Adjustment on the average employee salary expenses (Note 1) (4.21)% Supervisor's remuneration (Note 2) $ - -
					3			3
					$ 1,000			1,036
					$ 865			903
					(4.21)% $ -	(4.21)%		-

Additional information on the number of employees and employee benefits expenses of the Company in 2020 and 2019 is as follows:

• Note 1: The Company adjusts salary in January every year based on individual performance. In 2020, the salary was adjusted from 0% to 15%, with an average salary adjustment range of about 2.8%. Compared with the previous period, the average employee salary expense adjustment decreased by 4.21% in this period, which should be caused by multi factors such as employee structure, individual performance appraisal and company operating status.

Note 2: The Company has established an Audit Committee to replace the Supervisor.

232

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

The Company's remuneration policy (including remuneration to directors, managers and employees) is as follows:

1) Employee

The employee's monthly salary is determined according to his/her job category, education and experience, professional years of experience, professional knowledge and technology, and additional bonus and remuneration will be given according to the Company's annual operating status and personal performance, and the annual salary adjustment range will be determined on such basis.

2) Manager

The remuneration is paid in accordance with the Company's "Management Measures on Manager Remuneration and Performance Appraisal," the salary level of the position in the industry market and the contribution of the position to the Company's operational objectives. The reasonableness of relevant performance appraisal and remuneration has been reviewed by the Remuneration Committee and submitted to the board of directors for approval, and the remuneration system will be timely reviewed in light of the actual operating conditions and relevant laws and regulations.

3) Director

In accordance with Article 21 of the Articles of Incorporation of the Company, the remuneration to directors for the current year shall not more than 0.5% of the annual profit, and shall be reasonably distributed taking into account the number of board meetings attended and their contribution to the Company's performance. The remuneration to independent directors shall be determined by reference to the market situation of the same industry and their contribution to the Company's operation, which shall be reviewed by the Remuneration Committee and submitted to the board of directors for approval in advance.

• b. Influences of COVID-19:

The COVID-19 outbreak in early 2020 has affected the sales of the Company's subsidiary in Mainland China, Infortrend Shanghai Limited and its subsidiary in the USA, Infortrend Corporation, including order reduction and delayed delivery, but does not affect their going concern assumption as their revenue have gradually recovered and they will receive full support from the parent company. The Company will continue to closely monitor the development of events for immediate assessment, and take relevant measures to prevent the epidemic.

13. Supplementary Disclosures

• a. Information on significant transactions

In accordance with the "Regulations Governing the Preparation of Financial statements by Securities Issuers," the Company shall disclose the following information concerning significant transactions in 2020:

• 1) Financings provided: None.

• 2) Guarantee and endorsement provided: None.

• 3) Marketable securities held at the end of period (excluding investments in subsidiaries, associates, and joint ventures):

233

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

Unit: NT$ Thousands

Holding company	Type and name of securities	Relationship with the issuer of securities	Accounting subject	End of the period	End of the period	End of the period	End of the period	Remarks
				Number of shares	Carrying amount	Shareholdin g ratio	Fair value
Infortrend Technology Inc. " " " " " "	SoftBank Perpetual Bonds Mega Diamond Money Market Fund UPAMC James Bond Money Market Fund Jih Sun Money Market Fund Cathay High Income Fund of Funds Manulife China Offshore Bond Fund Prudential Financial India Opportunity Bond Fund	- - - - - - -	Derivatives measured at fair value through profit or loss - non-current- Debt instruments measured at fair value through profit or loss - current- " " " " "	- 146,600.77 3,632,174.68 1,681,491.00 726,172.90 910,050.60 3,304,668.11	27,547 1,854 61,169 25,138 9,663 10,073 34,670	- % - % - % - % - % - % - %	27,547 1,854 61,169 25,138 9,663 10,073 34,670
Infortrend Technology Inc. " " " " " " " " " " " " " " "	Nomura Global Financial Bond Fund Dis - USD- Nomura Global Financial Bond Fund Dis - RMB- Allianz US Low Average Duration High Yield Fund - RMB- Allianz US Low Average Duration High Yield Fund - USD- Allianz Global Investors Fund - USD- Cathay Senior Secured High Yield Bond Fund - USD- Cathay Asian High Yield Bond Fund - USD- Cathay High Income Fund of Funds - USD- Manulife China Offshore Bond Fund - RMB- Fuh Hwa South Africa Short-Term Income ZAR Fund- Fuh Hwa Emerging Market RMB Fixed Inc - RMB- Prudential Financial India Opportunity Bond Fund - USD- Jih Sun Asian High Yield Bond Fund - RMB- European Investment Bank ZAR Bonds Asian Development Bank INR Bonds SoftBank USD Bonds	- - - - - - - - - - - - - - - -	Debt instruments measured at fair value through profit or loss - current- " " " " " " " " " " " " " " "	98,734.45 938,812.31 1,047,955.40 187,778.80 116,492.78 3,576,003.00 199,616.48 5,481,297.40 5,100,874.49 275,377.20 692,133.90 107,350.63 6,513,424.42 - - -	32,745 48,499 49,308 57,087 35,595 36,107 57,499 70,984 63,560 8,729 38,960 34,336 73,896 57,120 42,781 59,271	- % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - %	32,745 48,499 49,308 57,087 35,595 36,107 57,499 70,984 63,560 8,729 38,960 34,336 73,896 57,120 42,781 59,271

234

Infortrend Technology Inc. and Its Subsidiaries (Continued)

Notes to the Consolidated Financial Statements of

" " " " " " " " " " " " " " "	BMW RMB Bonds Swiss Bank USD Bonds Barclays Bank USD Bonds Fortis Insurance USD Bonds Westpac Bank RMB Bonds CICC USD Bonds Hitachi Capital Corp Subsidiary RMB Bonds RBS USD Bonds RBS USD Bonds Industrial and Commercial Bank of China Singapore Branch RMB Bonds CDB Leasing USD Bonds Standard Charter Group USD Bonds Agricultural Development Bank of China RMB Bonds Class A Preferred Shares issued by Fubon Financial Holding Class B Preferred Shares issued by Fubon Financial Holding	- - - - - - - - - - - - - - -	" " " " " " " " " " " " " Equity instruments measured at fair value through profit or loss - current- "	- - - - - - - - - - - - - 4,629,000.00 2,576,000.00	21,730 93,212 62,241 43,888 39,881 11,229 25,943 32,032 30,861 47,885 43,349 44,217 4,327 288,387 161,000	- % - % - % - % - % - % - % - % - % - % - % - % - % - % - %	21,730 93,212 62,241 43,888 39,881 11,229 25,943 32,032 30,861 47,885 43,349 44,217 4,327 288,387 161,000	Note
Infortrend Technology Inc. " " " " " " "	Class A Preferred Shares issued by Cathay Financial Holdings Class E Registered Preferred Shares issued by Taishin Holdings Class A Preferred Shares issued by Union Bank Class A Preferred Shares issued by WPG Holdings Class A Preferred Shares issued by Shin Kong Financial Holding Class B Preferred Shares issued by Shin Kong Financial Holding Non-cumulative Convertible Class A Preferred Shares issued by O-Bank Ordinary shares of Inventec Corporation Ordinary shares of Cathay Financial Holdings Co., Ltd.	- - - - - - - - -	Equity instruments measured at fair value through profit or loss - current- " " " " " " " "	4,059,000.00 7,729,000.00 8,293,000.00 3,845,000.00 5,468,000.00 1,535,000.00 3,907,000.00 270,000.00 123,465.00	250,846 406,546 429,577 192,635 239,225 65,007 39,656 6,480 5,216	- % - % - % - % - % - % - % - % - %	250,846 406,546 429,577 192,635 239,225 65,007 39,656 6,480 5,216	Note Note Note Note

Note: Please refer to Note 6 (2) for details about stock pledge.

• 4) Accumulated buying/selling of the same marketable securities amounting at least NT$300 million or 20% of paid-in capital: None.

• 5) Acquisition of real estate amounting at least NT$300 million or 20% of paid-in capital:

235

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

None.

• 6) Disposition of real estate amounting at least NT$300 million or 20% of paid-in capital: None.

• 7) Total purchases from or sales to related parties that amount at least NT$100 million or 20% of paid-in capital:

Unit: NT$ Thousands

A company purchases (sales) goods	Name of the counterparty	Relationship	Transaction details	Transaction details	Transaction details	Transaction details	Details of and reasons why the terms of the transaction are different from a general transaction	Details of and reasons why the terms of the transaction are different from a general transaction	Notes/trade receivables (payables)	Notes/trade receivables (payables)	Remarks
			Purchase (sale) of goods	Amount	As a proportio n of total goods purchased (sold)	Credit period	Unit price (Note 1)	Credit period (Note 2)	Balance	As a proportion of notes/trade receivables (payables)
Infortrend Technology Inc. Infortrend Shanghai Limited	Infortrend Shanghai Limited Infortrend Technology Inc.	Sub-subsidia ry 100% invested by the Company Ultimate Parent Company of the Company	Sales of goods Purchase of goods	(109,149) 109,149	(11.29)% 88.05%	3 months "	- -	- -	73,147 (73,147)	34.43% (96.38)%

Note 1: 10~20 % lower than the general trading price.

Note 2: 1~1.5 months more than the general conditions of credit.

• 8) Trade receivable from related parties that amount at least NT$100 million or 20% of paid-in capital: None.

• 9) Trading in derivative instruments: Notes 6 (2) and 6 (21)

• b. Information on investments in other companies:

The information on investments in other companies in 2020 is as follows (excluding the investee companies in the Mainland China):

Unit: NT$ Thousands

Name of investment company	Name of investee	Region	Principal business	Original investment amount (Note 1)	Original investment amount (Note 1)	Shareholding at the end of the period	Shareholding at the end of the period	Shareholding at the end of the period	Current profit or loss of investee	Investment profit or loss recognized in the current period	Remarks
				End of current period	End of last year	Number of shares	Ratio	Carrying amount
Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Technology Inc. Infortrend Europe Limited Prophet Technology Inc.	Infortrend Corporation Infortrend Europe Limited Infortrend Japan Inc. Prophet Technology Inc. Infortrend Limited Infortrend Deutschland GmbH Surveon Technology Inc.	USA United Kingdom Japan Taiwan Mauritius Germany Taiwan	Transaction of computer peripherals Transaction of computer peripherals Transaction of computer peripherals Transaction of computer peripherals Investment Transaction of computer peripherals Transaction of computer peripherals	65,628 89,174 930 15,000 120,270 1,015 10,000	65,628 89,174 930 15,000 120,270 1,015 10,000	153,824 2,200,000 60 1,500,000 - - 1,000,000	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%	18,493 15,479 (577) 16,103 (9,258) 4,089 11,133	6,678 (8,929) (1,346) 569 10,141 143 588	6,597 (8,929) (1,346) 569 10,141 143 588	Subsidiary " " " " Subsidiary "

Note 1: The exchange rate is the historical exchange rate at the time of each investment.

236

Notes to the Consolidated Financial Statements of Infortrend Technology Inc. and Its Subsidiaries (Continued)

• c. Information on investments in Mainland China:

• 1) Information on investments in Mainland China:

Unit: NT$ Thousands

Name of investee in Mainland China	Principal business	Paid-in capital (Note 3)	Method of investment	Accumulated outward remittance of investment from Taiwan at the beginning of the current period (Note 3)	Outward remittance or recovery of investment in the current period (Note 3)	Outward remittance or recovery of investment in the current period (Note 3)	Accumulated outward remittance of investment from Taiwan at the end of the current period (Note 3)	Current profit or loss of investee	Shareholding ratio of the Company's direct or indirect investments	Investment profit or loss recognized in the current period	Ending book value of investment	Repatriated investment income as of the end of current period
					Remittance	Recovery
Infortrend Shanghai Limited	Transaction of computer peripherals	68,121	'(2)	68,121	-	-	68,121	10,132	100.00%	10,132	(15,559)	-

2) Limit on the amount of investments in Mainland China:

Accumulated Outward Remittance of Investment to Mainland China from Taiwan at the End of the Current Period (Note 3)	Investment Amount Approved by the Investment Commission, MOEA (MOEAIC) (Note 3)	Limit on the Amount of Investments in Mainland China Authorized by MOEAIC (Note 4)
68,121	68,121	2,378,608

Note 1: (1) Invest in mainland companies through remittance from the third region.

• (2) Reinvest in the mainland companies by establishing a company through investment in the third region.

• (3) Reinvest in a mainland company by reinvesting in an existing company in the third region.

• (4) Invest directly in mainland companies.

• (5) Other methods.

Note 2: It is presented according to the financial statements of the investee company. Note 3: The exchange rate is the historical exchange rate at the time of each investment. Note 4: The limit for other enterprises is 60% of net worth.

1. Significant transactions:

Please refer to Information relating to "Information on Significant Transactions" for details of significant transactions, direct or indirect, between the Company and its investee companies in mainland China in 2020 (written off at the time of preparation of the consolidated reports).

237

d. Information on major shareholders:

Unit: Share

d. Information on major shareholders:		Unit: Share
Share Name of major shareholders	Number of shares held	Shareholding ratio
Shih-Tung Lo	38,948,816	14.23%
Special investment account of Beevest Securities Limited entrusted for custody by Chinatrust Commercial Bank	25,405,815	9.28%
Tung Yu Investment Co., Ltd	21,075,300	7.70%

• Note: (1) The information of major shareholders in this table refers to the information calculated by Taiwan Depository & Clearing Corporation (TDCC) on the last business day at the end of each quarter on the total number of ordinary shares and preferred shares (including treasury shares) of the Company held by shareholders which have been delivered with book-entry registration at least 5 percent in total. The capital stock recorded in the financial statements of the Company and the number of shares actually delivered with book-entry registration may vary depending on the calculation basis of preparation.

• (2) If the above information is about the circumstance that the shareholders have entrusted their shares to the trust institutions, it shall be disclosed by the trustor who opened the trust account with the trustee by the individual trust account. Shareholders shall register their shareholding as insider holding more than 10 percent of the shares in accordance with the Securities and Exchange Act, including the shares held by themselves plus the shares they have entrusted to the trust institutions and have the right to use the trust property. Please refer to the Market Observation Post System for information on insider equity registration.

14. Segment Information

Please refer to the Consolidated Financial statements for 2020 for details.

238

STATEMENT 1

Infortrend Technology Inc.

Schedule of Cash and Cash Equivalents As of December 31, 2020 Unit: NT$ Thousands

Item	Abstract	Amount $ 27 97,863 8 96,569 13,500
Cash Bank deposits Total	Current deposits Check deposits Foreign currency deposits (US$2,526 thousand, RMB 5,290 thousand, GBP 31 thousand and EUR 41 thousand) Demand deposits
		$ 207,967

239

STATEMENT 2

Infortrend Technology Inc.

Schedule of Financial Assets (Liabilities) Measured at Fair Value through Profit or Loss As of December 31, 2020 Unit: NT$ Thousands

Financial instruments	Abstract Mega Diamond Money Market Fund UPAMC James Bond Money Market Fund Jih Sun Money Market Fund Cathay High Income Fund of Funds Manulife China Offshore Bond Fund Prudential Financial India Opportunity Bond Fund Nomura Global Financial Bond Fund Dis - USD- Nomura Global Financial Bond Fund Dis - RMB- Allianz US Low Average Duration High Yield Fund - RMB- Allianz US Low Average Duration High Yield Fund - USD- Allianz Global Investors Fund - USD- Cathay Senior Secured High Yield Bond Fund - USD- Cathay Asian High Yield Bond Fund - USD- Cathay High Income Fund of Funds - USD- Manulife China Offshore Bond Fund - RMB- Fuh Hwa South Africa Short-Term Income ZAR Fund- Fuh Hwa Emerging Market RMB Fixed Inc - RMB- Prudential Financial India Opportunity Bond Fund - USD- Jih Sun Asian High Yield Bond Fund - RMB- Class A Preferred Shares issued by Fubon Financial Holding Class B Preferred Shares issued by Fubon Financial Holding Class A Preferred Shares issued by Cathay Financial Holdings Class E Registered Preferred Shares issued by Taishin Holdings Class A Preferred Shares issued by Union Bank Class A Preferred Shares issued by WPG Holdings Class A Preferred Shares issued by Shin Kong Financial Holding Class B Preferred Shares issued by Shin Kong Financial Holding Non-Cumulative Convertible Class A Preferred Shares issued by O-Bank Ordinary shares of Inventec Corporation Ordinary shares of Cathay Financial Holdings Co., Ltd. European Investment Bank ZAR Bonds Asian Development Bank INR Bonds SoftBank USD Bonds BMW RMB Bonds Swiss Bank USD Bonds Barclays Bank USD Bonds Fortis Insurance USD Bonds Westpac Bank RMB Bonds CICC USD Bonds Hitachi Capital Corp Subsidiary RMB Bonds RBS USD Bonds RBS USD Bonds Industrial and Commercial Bank of China Singapore Branch RMB Bonds CDB Leasing USD Bonds Standard Charter Group USD Bonds Agricultural Development Bank of China RMB Bonds SoftBank Perpetual Bonds	Number/Nu mber of shares	Face value		Total amount - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	Interest rate		Acquisition cost 1,809 61,110 25,046 9,132 10,000 34,676 33,125 45,110 46,475 57,355 36,160 39,094 57,773 71,272 62,702 7,824 39,190 34,890 74,138 281,879 162,895 252,184 403,459 431,113 195,839 247,315 64,685 39,772 5,847 4,321 70,123 53,897 60,196 22,342 93,639 59,887 45,030 40,245 12,292 26,773 31,886 32,152 49,013 46,585 48,900 4,365	Fair	Fair	value Total amount 1,854 61,169 25,138 9,663 10,073 34,670 32,745 48,499 49,308 57,087 35,595 36,107 57,499 70,984 63,560 8,729 38,960 34,336 73,896 288,387 161,000 250,846 406,546 429,577 192,635 239,225 65,007 39,656 6,480 5,216 57,120 42,781 59,271 21,730 93,212 62,241 43,888 39,881 11,229 25,943 32,032 30,861 47,885 43,349 44,217 4,327	Changes in fair value attributable to changes in credit risk - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	Remarks
									Unit price (NT$) 12.6499 16.8408 14.9500 13.3064 11.0684 10.4911 331.6446 51.6599 47.0513 304.0097 305.5557 10.0971 288.0488 12.9503 12.4606 31.6992 56.2896 319.8524 11.3452 62.3000 62.5000 61.8000 52.6000 51.8000 50.1000 43.7500 42.3500 10.1500 24.0000 42.2500 - - - - - - - - - - - - - - - - -
Financial assets mandatorily measured at fair value through profit or loss - current:- Fund " " " " " " " " " " " " " " " " " Preferred shares " " " " " " " " Ordinary shares " Bonds " " " " " " " " " " " " " " Financial assets mandatorily measured at fair value through profit or loss - non-current: Perpetual bonds		146,600.77 $ - 3,632,174.68 - 1,681,491.00 - 726,172.90 - 910,050.60 - 3,304,668.11 - 98,734.45 - 938,812.31 - 1,047,955.40 - 187,778.80 - 116,492.78 - 3,576,003.00 - 199,616.48 - 5,481,297.40 - 5,100,874.49 - 275,377.20 - 692,133.90 - 107,350.63 - 6,513,424.42 - 4,629,000.00 - 2,576,000.00 - 4,059,000.00 - 7,729,000.00 - 8,293,000.00 - 3,845,000.00 - 5,468,000.00 - 1,535,000.00 - 3,907,000.00 - 270,000.00 - 123,465.00 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -				- % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % - % 9.00% 6.00% 4.75% 4.40% 5.13% 4.38% 4.13% 4.35% 1.45% 4.60% 6.00% 6.13% 4.50% 3.75% 5.70% 3.05% - %							Note Note Note Note Note
					-			3,533,515			3,494,414	-
					-			30,749			27,547	-
				$ -				3,564,264			3,521,961	-

Note: Please refer to Note 6 (2) for details about stock pledge.

240

STATEMENT 3

Infortrend Technology Inc.

Schedule of Trade receivables As of December 31, 2020 Unit: NT$ Thousands

Customer name	Abstract (USD thousand)	Amount $ 4,334 16,184 73,147 9,668 775	Remarks
Related parties: IFT-USA- IFT-EU- IFT-CHINA (Infortrend)- IFT-JP- IFT-S (Surveon)- Non-related parties: CANON-M- STARLINE Others Less: allowance for losses Net amount Total	USD154 USD576 USD2,602 USD344 USD27 Subtotal USD2,522 USD330 Subtotal		The balance did not exceed 5%
		104,108
		70,898 9,290 31,965
		112,153 (3,820)
		108,333
		$ 212,441

Schedule of Other Receivables

Item	Abstract	Amount $ 13,298 51,901 27,966 2,031 6,304	Remarks
Other receivables Other receivables - related parties	Bond interest receivable Redemption fund Redemption bonds Others
		$ 101,500

241

STATEMENT 4

Infortrend Technology Inc.

Inventory Schedule As of December 31, 2020 Unit: NT$ Thousands

Item	Amount Cost Net realizable value $ 262,285 255,099 44,792 37,602 50,022 32,667 357,099 325,368 (49,956) $ 307,143	Amount Cost Net realizable value $ 262,285 255,099 44,792 37,602 50,022 32,667 357,099 325,368 (49,956) $ 307,143	Remarks
	Cost
Raw material Work in process Finished products Subtotal Allowance for inventory loss from market price decline and for loss on obsolete and slow-moving inventories Net amount	$ 262,285 44,792 50,022 357,099 (49,956) $ 307,143		Replacement cost Net realizable value Net realizable value

Schedule of Other Current Assets

Item	Abstract	Amount $ 7,106 53 $ 7,159	Remarks
Other current assets Temporary payment	Tax refund receivable, etc. Temporary payment of patent fees, etc.

242

STATEMENT 5

Infortrend Technology Inc.

Schedule of Changes in Investments Using Equity Method As of December 31, 2020 Unit: NT$ Thousands

Name Investments accounted for using equity method Infortrend Europe Limited Infortrend Corporation Prophet Technology Inc. Total Investment credit balance accounted for using equity method Infortrend Limited Infortrend Japan Inc. Total	Beginning balance Number of shares Amount 2,200,000 $ 24,725 153,824 11,452 1,500,000 17,498 $ 53,675 - $ 27,589 60 1,949 $ 29,538	Beginning balance Number of shares Amount 2,200,000 $ 24,725 153,824 11,452 1,500,000 17,498 $ 53,675 - $ 27,589 60 1,949 $ 29,538	Increase in the	current period Amount - 7,041 569 7,610 - - -	Decrease in the current period Number of shares Amount - 9,246 - - - 1,964 11,210 - 18,331 - 1,372 19,703	Decrease in the current period Number of shares Amount - 9,246 - - - 1,964 11,210 - 18,331 - 1,372 19,703		Ending balance		Amount 15,479 18,493 16,103 50,075 9,258 577 9,835	Market price or net equity value Unit price (NT$) Total price 7.95 17,484 133.74 20,573 10.74 16,103 54,160 - (428) 11,896.08 (714) (1,142)	Market price or net equity value Unit price (NT$) Total price 7.95 17,484 133.74 20,573 10.74 16,103 54,160 - (428) 11,896.08 (714) (1,142)	Provision of guarantee or pledge None " " None "	Remarks
	Number of shares		Number of shares - - - - -		Number of shares - - - - -		Number of shares 2,200,000 153,824 1,500,000 - 60	Shareholding ratio 100.00% 100.00% 100.00% 100.00% 100.00%			Unit price (NT$) 7.95 133.74 10.74 - 11,896.08
	2,200,000 153,824 1,500,000 - 60													(Note) " " (Note) "

(Note): The market price of the unlisted (OTC) company is the net equity value, which is presented according to the financial statements of the investee company that have been audited and attested by a CPA.

243

STATEMENT 6

Infortrend Technology Inc.

Schedule of Short-term Borrowings As of December 31, 2020 Unit: NT$ Thousands

Type of Borrowing Credit loans " " Guaranteed loans "	Description Taiwan SMEs Bank E.SUN Bank Taishin International Bank Taishin International Bank Mega Bank		Ending balance $ 180,000 100,000 77,500 232,500 260,000 $ 850,000	Term of borrowing 2020.12.31~2021.01.29 2020.10.16~2021.04.16 2020.12.11~2021.01.25 2020.12.11~2021.01.25 2020.11.06~2021.06.14	Range of interest rate 1.05% 1.08% 1.00% 1.00% 1.05%	Financing amount 350,000 150,000 125,000 375,000 300,000	Mortgage or guarantee None " " Yes "	Remarks

244

STATEMENT 7

Infortrend Technology Inc.

Schedule of Contract Liabilities As of December 31, 2020 Unit: NT$ Thousands

Item	Abstract	Amount $ 669 5,847 25,585	Remarks
Advances on sales - non-related parties Long-term deferred income - non-related parties Long-term deferred income - related parties
		$ 32,101

Schedule of Trade payables

Customer name	Abstract	Amount $ 8,999 7,091 6,791 5,803 3,260 2,861 13,554	Remarks
Non-related parties: Trade payables	Toshiba Taiwan Synnex Technology Pentens 3Y Power Technology Plotech Technology Allianz Vantage Others		The balance of single customer did not exceed 5%
		$ 48,359

245

STATEMENT 8

Infortrend Technology Inc.

Schedule of Other Payables As of December 31, 2020 Unit: NT$ Thousands

Item	Abstract	Amount
Wages payable Expense payables Other expense payables Other payables	Others	$ 105,228 7,590 12,130 5,069
		$ 130,017

Schedule of Other Current Liabilities

Item	Abstract	Amount $ 866	Remarks
Collection for others	Labor and health insurance expenses

246

STATEMENT 9

Infortrend Technology Inc.

Schedule of Provisions - Non-current As of December 31, 2020 Unit: NT$ Thousands

Item	Abstract	Amount $ 2,657	Remarks
Provision for after-sales service guarantee - three years

Schedule of Other Non-current Liabilities

Item	Abstract	Amount $ 7	Remarks
Guarantee deposits	Deposit for parking space

247

STATEMENT 10

Infortrend Technology Inc.

Schedule of Operating Cost From January 1 to December 31, 2020 Unit: NT$ Thousands

Item Raw material Raw material at the beginning of period Add: material purchased for the current period Inventory profit Less: raw material at the end of period Sale Scrap Expenses Direct labor Manufacturing expenses Manufacturing costs for the current period Add: work in process at the beginning of period Purchase for the current period Return after sales Expense transferred in Less: work in process at the end of period Scrap Product costs for the current period Add: finished goods at the beginning of period Expense transferred in Less: finished goods at the end of period Expenses Inventory loss Scrap Cost of goods manufactured Add: selling cost of raw materials and work in process Inventory scrap loss Maintenance cost - RMA Gain on physical inventory Inventory loss from market price decline and loss on obsolete and slow-moving inventories Total costs of goods sold		Amount	Amount
		Subtotal $ 232,660 442,450 49 (262,285) (22,307) (3,905) (15,385) 32,312 113,575 51,763 242 303 1,656 (44,792) (1,707) 68,612 2,251 (50,022) (48) (4) (1,185) 22,004 6,797 5,231 (45) 5,020		Total
				371,277 145,887 517,164 7,465 524,629 19,604 544,233 39,007 $ 583,240

248

STATEMENT 11

Infortrend Technology Inc.

Schedule of Selling and Marketing Expenses From January 1 to December 31, 2020 Unit: NT$ Thousands

Item	Abstract	Amount $ 19,250 4,014 4,911 9,006 3,892 7,109	Remarks
Payroll expenses Service fees Transportation expenses Commission expenses Export expenses Others			The amount of a single item did not exceed 5%
		$ 48,182

Schedule of Administrative Expenses

Item	Abstract	Amount $ 51,420 6,775 6,042 5,118 10,814	Remarks
Payroll expenses Insurance premium Other expenses Depreciation Others			The amount of a single item did not exceed 5%
		$ 80,169

249

STATEMENT 12

Infortrend Technology Inc.

Schedule of Research Expenses From January 1 to December 31, 2020 Unit: NT$ Thousands

Item	Abstract	Amount $ 220,861 78,178	Remarks
Payroll expenses Others			The amount of a single item did not exceed 5%
		$ 299,039

250

251

252