KYE — Annual Report 2020

Nov 11, 2020

Stock Code: 2365

KYE Systems Corp.

Individual Financial Statements and Independent Auditors’ Report 2020 and 2019

(For the convenience of readers, this English individual financial statements and independent auditors' report are translated from the original Chinese version. The English version is not Audited or Certified by a CPA.)

Address: No. 492, Sec. 5, Chongxin Rd., Sanchong Dist., New Taipei City, Taiwan (R.O.C.) Tel: (02)2995-6645

• 1 -

§TABLE OF CONTENTS§

ITEM I. Cover II. Table of Contents III. Independent Auditors’ Report IV. Individual Balance Sheet V. Individual Statement of Comprehensive Income VI. Individual Statement of Changes in Equity VII. Individual Statement of Cash Flows VIII. Notes to Individual Financial Statements (I) Company Milestones (II) Approval date and procedures of the financial statements (III) Application of new and amended standards and interpretations (IV) Summary of significant accounting policies (V) Major sources of uncertainty of significant accounting judgments, estimates, and assumptions (VI) Description of major accounting titles (VII) Related party transactions (VIII) Pledged and mortgaged assets (IX) Significant contingent liability and unrecognized contractual commitment (X) Significant losses from disasters (XI) Significant subsequent events (XII) Others (XIII) Disclosures of notes 1. Information on major transactions 2. Information on investees 3. Information on investments in Mainland China 4. Information on Major Shareholders (XIV) Segment information IX. Statements regarding major accounting titles	PAGE 1 2 3–5 6 7–9 10 11–12 13 13 13–15 15–26 26–27 27–56 56–58 58 59 - - 59–61 61–62, 63–66 62, 63–66 62, 67 62, 68 - 69–86	FINANCIAL STATEMENTS NOTE NO.
		- - - - - - - I. II. III. IV. V. VI.–XXIV. XXV. XXVI. XXVII. - - XXVIII.–XXIX. XXX. XXX. XXX. XXX. - -

• 2 -

Independent Auditors’ Report

To KYE Systems Corp.:

Audit Opinions

We audited the individual balance sheets of KYE Systems Corp. as of December 31, 2020 and 2019, its individual statements of comprehensive income, individual statements of changes in equity and individual statements of cash flows for the periods from January 1 to December 31, 2020 and 2019, and the notes to its individual financial statements (including the summary of significant accounting policies).

In our opinion, the said individual financial statements were prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and thus presented fairly, in all material aspects, the individual financial positions of KYE Systems Corp. as of December 31, 2020 and 2019, and the individual financial performance and cash flows for the periods from January 1 to December 31, 2020 and 2019.

Basis of Audit Opinions

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and the generally accepted auditing standards. Our responsibilities under such standards are further described in the “Responsibilities of Accountants for the Audit of Individual Financial Statements” section in this report. We were independent of KYE Systems Corp., in accordance with the Norms of Professional Ethics for Certified Public Accountants and fulfilled all other responsibilities thereunder. We believe that we acquired sufficient and appropriate audit evidence to use as the basis of our audit opinions.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the individual financial statements of KYE Systems Corp. for the year of 2020. Such matters were addressed in the context of our audit of the individual financial statements as a whole and, in forming our opinions thereon, we do not provide any separate opinion on these matters.

The key audit matters in the individual financial statements of KYE Systems Corp. for the year of 2020 are as follows:

Occurrence of recognition of sales revenue

The sales revenue of KYE Systems Corp. in 2020 was higher than that in 2019, and the sales revenue from certain sales customers in the current year saw a significant increase from that in the previous year. Since the amount and proportion thereof are a matter of significance, we have deemed the occurrence of recognition of the sales revenue from that certain sales

• 3 -

customers to be a key audit matter of the individual financial statements of KYE Systems Corp. for 2020. For the accounting policy on recognition of revenue, see Notes 4 and 19 to the individual financial statements.

The audit procedures we performed for the above-mentioned key audit matter included understanding and testing of the design and implementation effectiveness of the internal controls related to the recognition of sales revenue. We analyzed the reasons for change in the amount of the sales revenue from the above-mentioned sales customers. We conducted an audit by sampling the transaction details of the sales revenue from the above-mentioned sales customers. We also reviewed the relevant shipment certificates and payment receipts to confirm the occurrence of the sales revenue. We reviewed whether there were significant sales returns or discounts subsequently on the part of the above-mentioned sales customers.

Responsibilities of the Management and Governing Bodies for Individual Financial Statements

The management was responsible for preparation of the financial statements with fair presentation in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and maintaining the necessary internal control related to the preparation of the individual financial statements to ensure that the individual financial statements were free of material misstatement due to fraud or error.

During preparation of the individual financial statements, the management was also responsible for evaluating KYE Systems Corp.’s ability as a going concern, disclosure of relevant matters, and application of the going concern basis of accounting unless the management intended to make KYE Systems Corp. enter into liquidation or terminate its operations, or there were no other actual or feasible solutions other than liquidation or termination of its operations.

The governing bodies (including the Audit Committee) of KYE Systems Corp. are responsible for supervising the process of financial reporting.

Responsibilities of Accountants for the Audit of Individual Financial Statements

The purpose of our audit of the individual financial statements is to obtain reasonable assurance about whether the individual financial statements were free of material misstatements due to fraud or error, with an audit report issued thereafter. Reasonable assurance means high assurance. However, it cannot be guaranteed that no material misstatement contained in the individual financial statements will be discovered during an audit conducted in accordance with generally accepted auditing standards. Any misstatement may be due to fraud or error. A misstatement is deemed material if the individual or aggregate amount misstated is reasonably expected to affect the economic decisions made by users of the individual financial statements.

We used our professional judgment to be skeptical during the audit conducted based on the generally accepted auditing standards. We also performed the following tasks:

1. We identified and assessed the risk of any misstatement in the individual financial statements due to fraud or error, designed and implemented response measures suitable for the evaluated risks, and acquired sufficient and appropriate audit evidence to use as the basis of our audit opinions. Since fraud may involve collusion, forgery, omission on purpose, fraudulent statements or violation of internal control, we did not find that the risk of misstatement due to fraud was higher than the same due to errors.

2. We understood the internal control related to the audit to the extent necessary to design audit procedures appropriate for the current circumstances. However, the purpose of such work

3. 4 -

was not to express opinions regarding the effectiveness of KYE Systems Corp.’s internal control.

1. We evaluated the appropriateness of the accounting policies adopted by the management and the rationality of the accounting estimates and relevant disclosures made by the management.

2. We drew a conclusion about the appropriateness of the application of the going concern basis of accounting by the management and whether the event or circumstances which may cast significant doubt about KYE Systems Corp.’s ability as a going concern had a material uncertainty. If any material uncertainty was deemed to exist in such event or circumstances, we must provide a reminder in the audit report for the users of the individual financial statements to pay attention to the relevant disclosure therein, or amend our audit opinions when such disclosure is inappropriate. Our conclusion was based on the audit evidence obtained as of the date of this audit report. However, future events or circumstances might result in a situation where KYE Systems Corp. would no longer have its ability as a going concern.

3. We evaluated the overall presentation, structure, and contents of the individual financial statements (including relevant notes), and whether the individual financial statements presented the relevant transactions and events fairly.

4. We acquired sufficient and appropriate audit evidence for the financial information of the entities forming KYE Systems Corp. to provide opinions regarding the individual financial statements. We were responsible for guidance, supervision and implementation in relation to audit cases and formation of audit opinions for KYE Systems Corp.

The matters for which we communicated with the governing bodies include the planned audit scope and time, as well as major audit findings (including the significant deficiencies of the internal control identified during the audit).

We also provided a declaration of independence to the governing bodies, which assured that we complied with the requirements related to independence in the Norm of Professional Ethics for Certified Public Accountant, and communicated all relationships and other matters (including relevant protective measures) which we deemed to be likely to cause an impact on the independence of CPAs to the governing bodies.

The key audit matters in the audit of the individual financial statements of KYE Systems Corp. for 2020 were determined by us from the matters addressed in our communication with the governing bodies. We specified such matters in the audit report except when public disclosure of certain matters was prohibited by related laws or regulations, or in very exceptional circumstances, we determined not to cover such matters in the audit report as we could expect that the negative impact of the coverage would be greater than the public interest brought thereby.

Deloitte Taiwan CPA Mei-Hui Wu CPA Yao-Lin Huang

Approval No. from the Securities and Futures Approval No. from the Financial Supervisory Commission Commission Tai-Cai-Zheng-Liu-Zi No. 0920123784 Jin-Guan-Zheng-Shen-Zi No. 1060004806

March 25, 2021

• 5 -

KYE Systems Corp. Individual Balance Sheet December 31, 2020 and 2019

Unit: NTD thousand

Code 1100 1110 1120 1170 1197 1200 130X 1410 1470 11XX 1517 1550 1600 1755 1840 194D 1990 15XX 1XXX Code 2170 2219 2230 2280 2399 21XX 2570 2580 2640 2670 25XX 2XXX 3110 3200 3310 3320 3350 3300 3400 3XXX	Asset Current assets Cash and cash equivalents (Notes 4 and 6) Financial assets measured at fair value through profit or loss – current (Notes 4 and 7) Financial assets measured at fair value through other comprehensive income – current (Notes 4 and 8) Notes and accounts receivable (Notes 4, 9, 19 and 25) Finance leases receivable – current (Notes 4 and 10) Other receivables (Notes 4, 16 and 25) Inventory (Notes 4 and 11) Prepayments Other current assets Total current assets Non-current assets Financial assets measured at fair value through other comprehensive income – non-current (Notes 4, 8 and 12) Investment under the equity method (Notes 4 and 12) Property, plant and equipment (Notes 4, 13 and 26) Right-of-use assets (Notes 4 and 14) Deferred income tax assets (Notes 4 and 21) Finance leases receivable – non-current (Notes 4 and 10) Other non-current assets (Notes 4 and 27) Total non-current assets Total assets Liabilityand equity Current liabilities Notes and accounts payable (Notes 15 and 25) Other payables (Notes 16 and 25) Current income tax liabilities (Notes 4 and 21) Lease liabilities – current (Notes 4 and 14) Other current liabilities (Note 25) Total current liabilities Non-current liabilities Deferred income tax liabilities (Notes 4 and 21) Lease liabilities – non-current (Notes 4 and 14) Net defined benefit liabilities – non-current (Notes 4 and 17) Other non-current liabilities (Note 4) Total non-current liabilities Total liabilities Other equity (Note 18) Share capital Common stock Capital reserves Retained earnings Legal reserves Special reserves Undistributed earnings (losses to be covered) (Notes 4, 8 and 12) Total retained earnings Other equity (Notes 4, 8 and 12) Total equity Total liabilities and equity		December 31,2020 Amount % $ 588,481 18 1,713 - - - 102,874 3 3,729 - 536,848 17 165,599 5 6,276 - 34,094 1 1,439,614 44 82,267 3 1,236,632 37 421,949 13 2,998 - 108,732 3 3,150 - 11,960 - 1,867,688 56 $ 3,307,302 100 $ 102,446 3 61,156 2 24,216 1 6,044 - 80,612 2 274,474 8 24,554 1 4,790 - 31,654 1 2,728 - 63,726 2 338,200 10 2,245,285 68 382,898 12 428,064 13 429,317 13 144,615 4 1,001,996 30 661,077 ) (20 ) 2,969,102 90 $ 3,307,302 100		December 31,2019	December 31,2019
			Amount $ 588,481 1,713 - 102,874 3,729 536,848 165,599 6,276 34,094 1,439,614 82,267 1,236,632 421,949 2,998 108,732 3,150 11,960 1,867,688 $ 3,307,302 $ 102,446 61,156 24,216 6,044 80,612 274,474 24,554 4,790 31,654 2,728 63,726 338,200 2,245,285 382,898 428,064 429,317 144,615 1,001,996 661,077 ) 2,969,102 $ 3,307,302		Amount $ 546,690 - 23,039 93,555 - 648,044 159,346 13,806 34,878 1,519,358 157,860 1,265,510 423,189 19,156 129,812 - 48,213 2,043,740 $ 3,563,098 $ 95,290 68,299 3,298 8,299 96,985 272,171 16,688 10,834 31,723 2,027 61,272 333,443 2,345,385 456,206 452,988 496,095 91,702 ) 857,381 429,317 ) 3,229,655 $ 3,563,098	%
		(		( (		15 - 1 3 - 18 5 - 1 43 4 35 12 1 4 - 1 57 100 2 2 - - 3 7 1 - 1 - 2 9 66 13 13 14 ( 3 ) 24 (12 ) 91 100

The attached notes are part of the individual financial statements.

Chairman: SHIH-KUN TSO

Manager: SHIH-KUN TSO

Accounting Manager: AN-MIN KAO

• 6 -

KYE Systems Corp. Individual Statement of Comprehensive Income January 1 to December 31, 2020 and 2019

Unit: NTD thousand; EPS unit: NTD

Code 4110 Total operating revenue 4170 Less: Sales returns and discounts 4100 Net operating revenue (Notes 4, 19 and 25) 5110 Operating costs (Notes 4, 11, 20 and 25) 5900 Operating gross profit 5920 Realized profits from sales (Note 4) 5950 Net operating gross profit Operating expenses (Notes 4, 9, 17, 20 and 25) 6100 Marketing expenses 6200 Administrative expense 6300 R&D Expense 6450 Expected profit on reversal of credit impairment 6000 Total operating expenses 6900 Net operating profit Non-operating revenue and expense 7070 Share of profit/loss of subsidiaries and associates under the equity method (Notes 4 and 12) 7020 Other profits and losses (Notes 4, 20 and 29)		2020	% 103 3 100 72 28 - 28 5 9 - - 14 14 - 1		2019
						%
						104 4 100 72 28 - 28 8 10 1 - 19 9 ( 6 ) 3

(Continued to next page)

• 7 -

(Continued from previous page)

Code 7100 Interest income (Note 4) 7510 Interest expense (Note 4) 7215 Profits on the disposal of investment property (Note 4) 7670 Impairment loss from financial assets (Notes 4 and 12) 7000 Total of other non-operating revenues and expenses 7900 Net profit before tax 7950 Income tax expense (Notes 4 and 21) 8200 Net profit in the year Other comprehensive income (Note 4) Titles not reclassified as profit or loss: 8311 Remeasurement of the defined benefit plan (Note 17) 8316 Unrealized profit/loss on valuation of investment in equity instruments measured at fair value through other comprehensive income 8320 Share of other comprehensive income from subsidiaries and associates under the equity method (Note 12) 8349 Income tax relating to non-reclassified items (Note 21) 8310	2020	% - - - - 1 15 3 12 - ( 7 ) ( 9 ) ( 2 ) (18 )	2019
	Amount $ 2,141 ( 230 ) - - 8,917 181,217 34,981 146,236 ( 21 ) ( 86,937 ) ( 113,688 ) ( 21,947 ) ( 222,593 )		Amount $ 1,681 ( 8,939 ) 159,342 ( 38,202 ) 79,962 169,838 18,358 151,480 ( 2,778 ) ( 144,049 ) 133,382 26,837 13,392	%
				- ( 1 ) 16 ( 4 ) 8 17 2 15 - ( 15 ) 13 3 1

(Continued to next page)

• 8 -

(Continued from previous page)

Code Titles potentially reclassified as profit or loss subsequently: 8361 Exchange differences from the translation of foreign operations’ financial statements 8399 Income tax related to items likely to be reclassified as profit or loss (Note 21) 8360 8300 Other net comprehensive income 8500 Total comprehensive income in the year EPS (Note 22) 9710 Basic EPS 9810 Diluted EPS	2020	% ( 2 ) - ( 2 ) (20 ) ( 8 )	2019
	Amount ( $ 23,605 ) 4,631 ( 18,974 ) ( 241,567 ) ($ 95,331 ) $ 0.64 $ 0.64		Amount ( $ 29,439 ) 4,297 ( 25,142 ) ( 11,750 ) $ 139,730 $ 0.65 $ 0.64	%
				( 3 ) 1 ( 2 ) ( 1 ) 14

The attached notes are part of the individual financial statements.

Chairman: SHIH-KUN TSO Manager: SHIH-KUN TSO Accounting Manager: AN-MIN KAO

• 9 -

KYE Systems Corp. Individual Statement of Changes in Equity January 1 to December 31, 2020 and 2019

Unit: NTD thousand

Code A1 Balance on January 1, 2019 Earning allocations and distribution in 2018 B1 Legal reserves appropriated B3 Special reserves appropriated B5 Cash dividend for common stocks D1 Net profit in 2019 D3 Other comprehensive income in 2019 D5 Total comprehensive income in 2019 M7 Changes in equity ownership in subsidiaries Q1 Disposal of equity instruments measured at fair value through other comprehensive income Z1 Balance on December 31, 2019 Earning allocations and distribution in 2019 B13 Legal reserves for covering losses B17 Special reserves for reversal B5 Cash dividend for common stocks D1 Net profit in 2020 D3 Other comprehensive income in 2020 D5 Total comprehensive income in 2020 L1 Purchase of treasury stock L3 Cancellation of treasury stock M7 Changes in equity ownership in subsidiaries Q1 Disposal of equity instruments measured at fair value through other comprehensive income Z1 Balance on December 31, 2020		Share capital $ 2,345,385 - - - - - - - - 2,345,385 - - - - - - - 100,100 ) - - $ 2,245,285		Capital reserves $ 503,164 - - 46,908 ) - - - 50 ) - 456,206 - - 93,815 ) - - - - 21,348 841 ) - $ 382,898			Retained earnings	Undistributed earnings (Losses to be covered) $ 392,197 ( 9,724 ) ( 382,473 ) - 151,480 ( 2,222 ) 149,258 - ( 240,960 ) ( 91,702 ) 24,924 66,778 - 146,236 ( 17 ) 146,219 - - - ( 1,604 ) $ 144,615	Other equity Exchange differences from the translation of foreign operations’ financial statements Unrealized profit/loss from the financial assets measured at fair value through other comprehensive income $ 207 ( $ 660,956 ) - - - - - - - - ( 25,142 ) 15,614 ( 25,142 ) 15,614 - - - 240,960 ( 24,935 ) ( 404,382 ) - - - - - - - - ( 18,974 ) ( 222,576 ) ( 18,974 ) ( 222,576 ) - - - - 8,186 - - 1,604 ($ 35,723 ) ($ 625,354 )	Other equity Exchange differences from the translation of foreign operations’ financial statements Unrealized profit/loss from the financial assets measured at fair value through other comprehensive income $ 207 ( $ 660,956 ) - - - - - - - - ( 25,142 ) 15,614 ( 25,142 ) 15,614 - - - 240,960 ( 24,935 ) ( 404,382 ) - - - - - - - - ( 18,974 ) ( 222,576 ) ( 18,974 ) ( 222,576 ) - - - - 8,186 - - 1,604 ($ 35,723 ) ($ 625,354 )	Treasurystocks $ - - - - - - - - - - - - - - - - ( 78,752 ) 78,752 - - $ -		Total equity
									Exchange differences from the translation of foreign operations’ financial statements $ 207 - - - - ( 25,142 ) ( 25,142 ) - - ( 24,935 ) - - - - ( 18,974 ) ( 18,974 ) - - 8,186 - ($ 35,723 )
						Legal reserves $ 443,264 9,724 - - - - - - - 452,988 24,924 ) - - - - - - - - - $ 428,064	Special reserves $ 113,622 - 382,473 - - - - - - 496,095 - ( 66,778 ) - - - - - - - - $ 429,317
	(		( ( ( (		(		(	( ( ( ( ( ( (	( ( ( ( ( (	( ( ( ( (	(	( ( ( ( ( ( (	$ 3,136,883 - - 46,908 ) 151,480 11,750 ) 139,730 50 ) - 3,229,655 - - 93,815 ) 146,236 241,567 ) 95,331 ) 78,752 ) - 7,345 - $ 2,969,102

The attached notes are part of the individual financial statements.

Chairman: SHIH-KUN TSO

Manager: SHIH-KUN TSO

Accounting Manager: AN-MIN KAO

• 10 -

KYE Systems Corp. Individual Statement of Cash Flows January 1 to December 31, 2020 and 2019

Unit: NTD thousand

Code Cash flow from operating activities A10000 Net profit before tax in the year A20010 Profit and expense/loss: A23700 Profit on reversal of impairment loss from non-financial assets A29900 Material preparation losses appropriated (reversed) A20100 Depreciation expense A20200 Amortization expenses A24100 Unrealized profit from the translation of foreign currencies A21200 Interest income A20400 Profit on the valuation of financial assets measured at fair value through profit or loss A22300 Share of profit/loss of subsidiaries and associates under the equity method A21300 Dividend income A24000 Realized sales profit on inter-affiliate accounts A20900 Interest expenses A20300 Expected profit on reversal of credit impairment A22700 Profit on disposal of investment property A23500 Impairment loss from financial assets A22500 Profit on disposal of property, plant and equipment A30000 Net changes in operating assets and liabilities A31150 Notes and accounts receivable A31180 Other receivables A31200 Inventory A31230 Prepayments A31240 Other current assets A32150 Notes and accounts payable A32180 Other payables A32230 Other current liabilities A32240 Net defined benefit liabilities A33000 Cash inflow from operations A33500 Income tax paid A33100 Interest received A33200 Dividend received AAAA Net cash inflow from operating activities		2020 $ 181,217 28,700 ) 9,200 ) 12,395 3,954 2,555 ) 2,141 ) 1,713 ) 1,708 1,604 ) 1,550 ) 230 230 ) - - - 6,310 ) 111,157 22,447 7,619 2,947 ) 5,500 5,876 ) 7,096 ) 55 ) 276,250 2,433 ) 2,180 1,604 $ 277,601		2019
	( ( ( ( ( ( ( ( ( ( ( ( ( (		( ( ( ( ( ( ( ( ( ( ( ( (	$ 169,838 68,198 ) 18,570 12,719 11,694 1,251 ) 1,681 ) - 63,135 727 ) 2,735 ) 8,939 742 ) 159,342 ) 38,202 1,257 66,041 27,113 41,532 5,590 ) 3,848 19,284 ) 9,980 ) 6,877 ) 7,934 ) 178,547 18,348 ) 1,679 727 $ 162,605

(Continued to next page)

• 11 -

(Continued from previous page)

Code Cash flows from investing activities B01800 Acquisition of long-term equity investments under the equity method B01900 Disposal of long-term equity investments under the equity method B06700 Decrease (Increase) in other non-current assets B02400 Refunds from decapitalization of the invested company under the equity method B00020 Disposal of proceeds from financial assets measured at fair value through other comprehensive income B02700 Acquisition of property, plants, and equipment B07600 Dividend received B05500 Disposal of investment property B00010 Acquisition of financial assets measured at fair value through other comprehensive income B02800 Disposal of property, plants, and equipment BBBB Net cash inflows (outflows) from investing activities Cash flows from financing activities C04500 Distribution of cash dividends C04900 Cost of repurchasing treasury stocks C04020 Repayment of the principal of lease liabilities C03000 Increase (decrease) in guaranteed deposits received C05600 Interest paid C00200 Decrease in short-term loans C01700 Repayment of long-term loans C00600 Decrease in short-term notes payable CCCC Net cash outflow from financing activities EEEE Increase in cash and cash equivalents of the year E00100 Balance of cash and cash equivalents – beginning of the year E00200 Balance of cash and cash equivalents – ending of the year		2020 $ 220,775 ) 98,313 36,953 19,022 11,510 2,800 ) 2,397 - - - 55,380 ) 93,815 ) 78,752 ) 8,299 ) 666 230 ) - - - 180,430 ) 41,791 546,690 $ 588,481		2019
	( ( ( ( ( ( ( (		( ( ( ( ( ( ( ( ( ( ( (	$ 21,335 ) - 16,401 ) - - 2,650 ) - 1,094,863 44,460 ) 543 1,010,560 46,908 ) - 3,899 ) 1,901 ) 9,226 ) 500,000 ) 225,499 ) 149,984 ) 937,417 ) 235,748 310,942 $ 546,690

The attached notes are part of the individual financial statements.

Chairman: SHIH-KUN TSO

Manager: SHIH-KUN TSO Accounting Manager: AN-MIN KAO

• 12 -

KYE Systems Corp.

Notes to Individual Financial Statements

January 1 to December 31, 2020 and 2019

(All amounts are in NTD thousand unless otherwise specified)

I. Company Milestones

The Company was established in November 1983, originally under the name of KYE Systems Ltd., which was changed to KYE Systems Corp. in November 1988, and became a public listed company in 1991. The Company’s stock was listed for trading on the Taiwan Stock Exchange on November 3, 1997.

We mainly focus our business on the manufacturing, processing, and sale of computer peripheral products such as mice, keyboards, and card readers, video-image products, including web cameras and security control cameras, and consumer electronic products, like headsets, speakers, and gaming products.

The individual financial statements were stated in the Company’s functional currency, NT dollar.

II. Approval date and procedures of the financial statements

The individual financial statements were proposed at the Board meeting and subsequently released on March 25, 2021.

III. Application of new and amended standards and interpretations

• (I) The International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), interpretations (IFRIC) and the statements of interpretation (SIC) (hereinafter collectively referred to as “IFRSs”) approved and released by the Financial Supervisory Commission (hereinafter referred to as “FSC”) were applied for the first time.

We expected no other material changes to the accounting policies of the Company after adopting the amended IFRSs approved and released by the FSC.

• (II) FSC-approved IFRSs applied in 2021

New/Amended/Revised standards and interpretations

Effective date as per the IASB

Amendment to IFRS 4: “Extension of the Temporary Effective from the date of Exemption from Applying IFRS 9” publication. Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and Effective during the annual IFRS 16: “Interest Rate Benchmark Reform – reporting period Phase 2” beginning from January 1, 2021.

• Amendment to IFRS 16: “COVID-19-Related Rent Effective during the annual Concessions” reporting period beginning from, June 1, 2020.

• 13 -

Up to the approval and release date of the individual financial statements, the Company assessed the effects of the above-mentioned amendments to the standards and interpretation of the financial position and performance on a continuous basis. The relevant effects would be disclosed after the assessment.

(III) IFRSs published by the IASB but not yet approved and released by the FSC

New/Amended/Revised standards and interpretations “Annual Improvements to 2018–2020 Cycle” Amendment to IFRS 3: “Changes in Reference to the Conceptual Framework” 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” Amendment to IFRS 17 Amendment to IAS 1: “Classification of Liabilities as Current or Non-current” Amendment to IAS 1: “Disclosure of Accounting Policies” Amendment to IAS 8: “Definition of Accounting Estimates” Amendment to IAS 16: “Property, Plant and Equipment – Proceeds before Intended Use” Amendment to IAS 37: “Onerous Contracts – Cost of Fulfilling a Contract”

Effective date as per the IASB (Note 1)

January 1, 2022 (Note 2) January 1, 2022 (Note 3) Undetermined January 1, 2023 January 1, 2023 January 1, 2023 January 1, 2023 (Note 6) January 1, 2023 (Note 7) January 1, 2022 (Note 4) January 1, 2022 (Note 5)

• Note 1: Unless otherwise specified, the above-mentioned new/amended/revised standards or interpretation shall become effective in the annual reporting periods beginning on or after each effective date for such standards or interpretation.

• Note 2: The amendment to IFRS 9 applies to exchanges or modifications of the terms of financial liabilities that occur during the annual reporting period beginning from January 1, 2022. The amendment to IAS 41 “Agriculture” applies to measurement of fair values during the annual reporting period beginning from January 1, 2022. The amendment to IFRS 1 “First-time Adoption of IFRSs” applies retroactively to the annual reporting period beginning from January 1, 2022.

• Note 3: The amendment applies to business mergers with an acquisition date during the annual reporting period beginning from January 1, 2022.

• Note 4: The amendment applies to plants, property and equipment that are brought to the locations and conditions necessary for them to be capable of operating in the manner intended by the management on or after January 1, 2021.

• 14 -

• Note 5: The amendment applies to contracts whose obligations have not been completely fulfilled on or after January 1, 2022.

• Note 6: The amendment applies prospectively to the annual reporting period beginning from January 1, 2023.

• Note 7: The amendment applies to changes in accounting estimates and policies that occur during the annual reporting period beginning from January 1, 2023.

Up to the approval and release date of the individual financial statements, the Company assessed the effects of the above-mentioned amendments to the standards and interpretation of the financial position and performance on a continuous basis. The relevant effects would be disclosed after the assessment.

IV. Summary of significant accounting policies

• (I) Statement of compliance

The individual financial statements were prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and related laws and regulations.

• (II) Basis for preparation

Except for the financial instruments measured at fair value, the individual financial statements were prepared on the basis of historical cost.

Fair value measurement is classified into Level 1, 2, and 3 based on the degree to which an input is observable and the significance of the input:

1. Level 1 inputs: The quoted price in an active market for identical assets or liabilities that are accessible on the measurement date (before adjustment).

2. Level 2 inputs: Other than the quoted prices included in Level 1, the inputs that are observable for assets or liabilities directly (namely, the price) or indirectly (namely, presumed from the price).

3. Level 3 inputs: The inputs that are not observable for assets or liabilities.

During preparation of the individual financial statements, the Company adopted the equity method for investment in subsidiaries and associates. To align the profit or loss, other comprehensive income and equity of the year in the individual financial statements with the profit or loss, other comprehensive income and equity of the year attributable to the owner of the Company in the consolidated financial statements, the differences between the accounting treatments under the individual and consolidated bases were treated through adjustment of related equity items, including “investment under the equity method,” “share of profit/loss of subsidiaries, associates and joint ventures under the equity method,” “share of other comprehensive income of subsidiaries, associates, and joint ventures.”

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

Current assets include:

1. Assets held mainly for the purpose of trading;

2. Assets expected to be realized within 12 months after the balance sheet date; and

3. 15 -

4. Cash or cash equivalents (excluding those that are restricted for being used for exchange or settlement of liabilities within 12 months after the balance sheet date).

Current liabilities include:

1. liabilities held mainly for the purpose of trading;

2. liabilities to be settled within 12 months after the balance sheet date, (irrelevant with whether any long-term refinancing or payment rearrangement agreement has been completed after the balance sheet date but before the date of release of financial statements; such liabilities are still current liabilities); and

3. liabilities whose due date cannot be unconditionally extended to more than 12 months after the balance sheet date. However, the terms and conditions of the liabilities that may, at the option of the counterparty, result in settlement of the liabilities by issuance of equity instruments do not affect the classification of liabilities.

Assets or liabilities that were not the above-mentioned current assets or current liabilities were classified as non-current assets or non-current liabilities.

(IV) Foreign currency

During preparation of the individual financial statements, the transactions using currencies other than the Company’s functional currency (foreign currencies) were stated in the functional currency based on the exchange rate on the date of transaction.

Monetary items in foreign currencies were translated at the closing exchange rate on each balance sheet date. Exchange differences arising from settlement or translation of the monetary items were recognized in profit or loss of the period.

Non-monetary items in foreign currencies measured at fair value were translated at the exchange rate on the date of determining the fair value, and the exchange differences resulting therefrom were recognized in profit or loss of the period. However, when changes in the fair value were recognized in other comprehensive income, the exchange differences arising therefrom were recognized in the same.

Non-monetary items in foreign currencies measured at historical cost were translated at the exchange rate on the date of transaction and were not retranslated.

(V) Inventory

Inventory included raw materials, finished goods and work-in-progress goods. The inventory was measured based on the lower of cost or net realizable value. The cost and the net realizable value were compared on the basis of the individual item. Net realizable value refers to the estimated selling price in a normal situation less the estimated cost needed to complete the work and the estimated cost needed to complete the sale. The standard cost plus or less the difference allocated was used to calculate the inventory cost. The inventory was mainly measured based on the standard cost and then adjusted on the balance sheet date to be close to the cost calculated using the weighted average method.

• 16 -

(VI) Investment under the equity method

The Company treated our investments in subsidiaries and associates using the equity method.

1. Investment in subsidiaries

A subsidiary refers to an entity controlled by the Company.

Under the equity method, the investment was initially recognized at its costs, and the amount of increase or decrease in the book value of such investment after the date of acquisition depended on the Company’s shares of profits/losses and other comprehensive income in subsidiaries and the distributed profits. In addition, changes to the Company’s equity in the subsidiaries were recognized based on the shareholding ratio.

Changes to the Company’s equity ownership in the subsidiaries were treated as equity transactions when they did not result in loss of control. The difference between the book value of investment and the fair value of paid or received consideration was directly recognized in equity.

When the Company’s shares of losses in the subsidiaries were equal or exceeded our equity in the subsidiaries, we continued recognition for loss based on our shareholding ratio.

When the acquisition cost exceeded the Company’s shares of the net fair value of the identifiable assets and liabilities of subsidiaries constituting a business on the date of acquisition, such excess was recognized in goodwill which was included in the book value of such investments and might not be amortized. When the Company’s shares of the net fair value of the identifiable assets and liabilities of subsidiaries constituting a business on the date of acquisition exceeded the acquisition cost, such excess was recognized in the profit of the period.

For impairment evaluation, the Company took all of the cash generating units in the financial statements into account and made a comparison between the recoverable amount and the book value thereof. If the recoverable amount of assets increased thereafter, the reversal of impairment losses was recognized in profit. However, the assets’ book value after the reversal of the impairment losses shall not exceed the assets’ book value, without recognition of the impairment losses, less amortization. Impairment losses attributable to goodwill shall not be reversed in the subsequent periods.

If the Company lost control of subsidiaries, the residual investment in the former subsidiaries was measured at the fair value on the date of loss of control. The difference between the fair value of the residual investment and any disposal proceeds and the investment book value on the date of loss of control was recognized in the profit or loss of the period. In addition, for the total amounts related to the subsidiaries in other comprehensive income, the Company treated them with the accounting treatment as the basis which our direct disposal of relevant assets or liabilities shall be in accordance with.

The unrealized profit or loss from the downstream transactions between the Company and subsidiaries was removed in the individual financial statements. The profit or loss generated from the upstream and side stream transactions between the Company and subsidiaries was recognized in the

• 17 -

individual financial statements only when such profit or loss was irrelevant to the Company’s equity in the subsidiaries.

1. Investment in associates

An associate refers to a company having a significant effect on the Company, but it is not a subsidiary or joint venture.

Under the equity method, the investment in associates was initially recognized at its costs, and the amount of increase or decrease in the book value of such investment after the date of acquisition depended on the Company’s shares of profit/loss and other comprehensive income in the associates and joint ventures and the distributed profits. In addition, changes to the Company’s equity in the associates were recognized based on our shareholding ratio.

When the acquisition cost exceeded the Company’s shares of the net fair value of the associates’ identifiable assets and liabilities on the date of acquisition, such excess was recognized in goodwill which was included in the book value of such investment and might not be amortized. When the Company’s shares of the net fair value of the associates’ identifiable assets and liabilities on the date of acquisition exceeded the acquisition cost, such excess was recognized in profit of the period.

When the Company did not subscribe for new shares issued by the associates based on our shareholding ratio, resulting in changes to the shareholding ratio and consequently to the net equity value of investment and the capital reserve – changes in the net equity of associates and joint ventures recognized under the equity method were adjusted based on the aforesaid changes. However, if the subscription or acquisition of the shares was not based on the shareholding ratio, leading to a decrease in the Company’s ownership equity in the associates, the amount related to the associates in other comprehensive income were reclassified according to the percentage of such decrease and treated with the same accounting treatment basis as the one which the associates’ direct disposal of relevant assets or liabilities should be in accordance with. If the said adjustment should be debited to capital reserves, and the balance of capital reserves arising from investment under the equity method was insufficient to be offset, the difference was debited to retained earnings.

When the Company’s shares of losses in the associates equaled or exceeded our equity in the associates, we stopped further recognition for loss. The Company recognized additional losses and liabilities only when any legal obligation or constructive obligation was incurred or the Company made payment on behalf of the associates.

For impairment evaluation, the Company tested the entire investment book value (including goodwill) for impairment as a single asset by comparing the recoverable amount and book value of the investment. Any recognized impairment loss also belonged to part of the investment book value. Any reversal of the impairment loss was recognized to the extent that the recoverable amount of the investment subsequently increased.

Once the investment was not classified as an investment in an associate, the Company stopped using the equity method and measured the retained

• 18 -

earnings of the former associates at fair value. The differences between the fair value of the retained earnings and proceeds from disposal and the investment book value on the date when the equity method was discontinued were recognized in profit or loss of the period. Besides, for the total amounts related to the associates in other comprehensive income, the basis of the accounting treatment thereof was the same as the basis on which the associates’ direct disposal of the relevant assets or liabilities must be in accordance with.

The profit or loss generated from the upstream, downstream, and side stream transactions between the Company and our associates was recognized in the individual financial statements only when such profit or loss was irrelevant to the Company’s equity in the associates.

(VII) Property, plant and equipment

The property, plant and equipment was recognized in accordance with the cost and subsequently measured based on the cost net of accumulated depreciation and accumulated impairment losses.

Each significant part of the property, plant and equipment was separately depreciated on the straight-line basis over its useful life. When the lease term was less than the useful life, the depreciation was recognized over the lease term. The Company reviewed the estimated useful life, residual value, and method of amortization at least at the end of each year and prospectively recognized the effect from changes in accounting estimates.

For the derecognition of property, plants, and equipment, the difference between the net disposal proceeds and the asset book value was recognized in profit or loss

(VIII) Investment property

An investment property refers to a property held for earning rent income or for capital appreciation, or both.

The investment property was initially measured based on the cost (including transaction cost) and subsequently measured based on the cost net of accumulated depreciation and accumulated impairment losses. The investment property was depreciated on the straight-line basis.

For derecognition of the investment property, the difference between the net disposal proceeds and the asset book value was recognized in profit or loss

• (IX) Impairment of property, plant and equipment, right-of-use assets, and intangible assets (excluding goodwill)

The Company assessed whether there were any signs indicating that any tangible and/or intangible assets (except for goodwill) might be impaired on each balance sheet date. If there was any of such signs of impairment, the recoverable amount of the asset was estimated. When the recoverable amount of an individual asset could not be estimated, the Company estimated the recoverable amount of the cash-generating unit to which the asset belonged. If corporate assets could be amortized on a reasonable and consistent basis to cash-generating units, they were amortized to an individual cash-generating unit. Otherwise, they were amortized to the smallest group of cash-generating units which could be amortized on a reasonable and consistent basis

• 19 -

The recoverable amount was the higher of the fair value less costs of sale and the value in use.

When the recoverable amount of an individual asset or cash-generating unit was less than the book value, the book value of the individual asset or cash-generating unit was adjusted down to the recoverable amount, and the impairment loss was recognized in profit or loss.

When the impairment loss was reversed subsequently, the book value of the asset or cash-generating unit was adjusted up to the revised recoverable amount. However, the increased book value did not exceed the book value (less the amortization or depreciation) determined under the circumstance that the impairment loss of the asset or cash-generating unit was not recognized in the previous year. The reversal of the impairment loss was recognized in profit or loss.

(X) Financial instruments

Financial assets and financial liabilities were recognized in the individual balance sheet when the Company became a party to the financial instrument contract.

For initial recognition of the financial assets and financial liabilities, when the financial assets or financial liabilities were not measured at fair value through profit or loss, the assets or liabilities were measured at the fair value plus any transaction cost directly attributable to acquisition or issuance of the financial assets or financial liabilities. Any transaction cost measured at fair value through profit or loss directly attributable to the acquisition or issuance of the financial assets or financial liabilities was immediately recognized in profit or loss.

1. Financial assets

The regular transactions of financial assets were recognized and removed based on the accounting on the transaction date.

(1) Type of measurement

The financial assets held by the Company were the financial assets measured at fair value through profit or loss, financial assets measured at amortized cost, and investment in equity instruments measured at fair value through other comprehensive income.

• A. Financial assets measured at fair value through profit or loss

Financial assets measured at fair value through profit or loss are measured at fair value through profit or loss on a mandatory basis. The financial assets measured at fair value through profit or loss on a mandatory basis include investments in equity instruments measured at fair value through other comprehensive income and investments in debt instruments not classifiable as measured at amortized cost or measured at fair value through other comprehensive income.

The financial assets measured at fair value through profit or loss were measured at fair value, and their dividends, interest and profits or losses from remeasurement were recognized as other profits and losses. For the determination of fair value, see Note 24.

• 20 -

B. Financial assets measured at amortized cost

When the Company’s investments in financial assets met the following two conditions at the same time, they were classified as financial assets measured at amortized cost:

• a. The investment in financial assets held under a business model with the purpose of holding financial assets to collect contractual cash flows, and

• b. The contractual terms gave rise on specified dates to cash flows that were solely payments of principal and interest on the principal amount outstanding.

After the financial assets (including cash and cash equivalents, accounts receivable measured at amortized cost, other receivables and guarantee deposits paid) measured at amortized cost were initially recognized, the financial assets were measured based on the amortized cost equal to the total book value determined under the effective interest method less any impairment losses, and any profit or loss from foreign currency translation was recognized in profit or loss.

Except for the following two circumstances, the interest income was calculated as the effective interest rate times the total book value of financial assets:

• a. For purchased or originated credit-impaired financial assets, the interest income was calculated as the credit-adjusted effective interest rate times the amortized cost of the financial assets.

• b. For financial assets originally not purchased or originated credit-impaired but subsequently becoming credit-impaired, the interest income was calculated as the effective interest rate times the amortized cost of the financial assets in the next reporting period after the credit impairment

Credit-impaired financial assets represent significant financial difficulties confronting the issuer or debtor, default, the circumstance that the debtor is likely to file for bankruptcy or other financial reorganization, or that the active market of financial assets disappeared due to financial difficulties.

Cash equivalents include highly liquid time deposits that could be converted into defined amounts of cash at any time within 1 year after the date of acquisition and were subject to an insignificant risk of changes in value, and were used to meet short-term cash commitments.

• C. Investment in equity instruments measured at fair value through other comprehensive income

At initial recognition, the Company might make an irrevocable election to measure the investment in equity instruments held not for trading and not recognized by the acquirer in a business merger or with consideration at fair value through other comprehensive income.

Investment in equity instruments measured at fair value through other comprehensive income was measured at fair value. Subsequent

• 21 -

changes in the fair value were recognized in other comprehensive income and accumulated in other equity. For disposal of the investment, any cumulative profits or losses were directly transferred to retained earnings and not reclassified as profit or loss.

After the Company’s right to receive dividends was determined, the dividends of investment in equity instruments measured at fair value through other comprehensive income were recognized in profit or loss except that such dividends apparently represented a partial return of the investment cost.

(2) Impairment of financial assets

We assessed impairment losses on the financial assets (including accounts receivable) measured according to amortized cost based on the expected credit losses on each balance sheet date.

Loss allowances for accounts receivable were recognized based on the lifetime expected credit losses We first assessed whether the credit risk on other financial assets significantly increased after the initial recognition. When the increase was not significant, the loss allowance for the financial assets was recognized based on the 12-month expected credit losses. When the increase was significant, it was recognized based on the lifetime expected credit losses.

The expected credit losses were the average credit losses weighted by the risk of default. 12-month expected credit losses represent the expected credit losses on financial instruments from any potential default within 12 months after the reporting date. Lifetime expected credit losses represent the expected credit losses on financial instruments from any potential default during the expected lifetime.

For the purpose of internal credit risk management, when any internal or external information indicating that a debtor could not pay off their debts was determined to exist by the Company, without consideration of the collateral held, the financial assets were deemed to be defaulted.

The impairment loss on all financial assets was deducted from the book value of the financial assets through allowance accounts.

(3) Removal of financial assets

The Company removed financial assets only when the contractual rights on the cash flows from the assets became invalid, or the financial assets and almost all the risks and returns over the ownership of the financial assets were transferred to other companies.

For removal of the entire financial assets measured at amortized cost, the differences between the book value and the received consideration were recognized in profit or loss. For removal of the entire investments in equity instruments measured at fair value through other comprehensive income, the cumulative profits or losses were directly transferred to retained earnings and not reclassified as profit or loss.

• 22 -

2. Equity instrument

The debt and equity instruments issued by the Company were classified as financial liabilities or equity based on the definition of substance and financial liabilities and equity instruments under the terms and conditions in the contracts.

The equity instruments issued by the Company were recognized at the payment net of the direct cost of issuance.

When a reacquired equity instrument was originally owned by the Company, the reacquisition was recognized as a deduction to equity. Purchase, sale, issuance or cancellation of the equity instruments owned by the Company were not recognized in profit or loss.

1. Financial liabilities

2. (1) Subsequent measurement

All financial liabilities were measured at amortized cost under the effective interest method.

• (2) Removal of financial liabilities

For removal of financial liabilities, the differences between the book value and the consideration paid (including any non-cash assets transferred and any liabilities assumed) were recognized in profit or loss.

• (XI) Recognition of revenue

After our recognition of performance obligations under a contract with clients, we allocated the transaction price to each performance obligation and recognized the allocated amount in revenue after each performance obligation was met.

1. Revenue from sale of goods

The revenue from sale of goods was generated from the sale of computer peripherals. Once the computer peripherals were delivered to the client-designated location, the client was entitled to the products’ price determination and right of use, had the main responsibility to resell the products, as well as taking the risk that the products might become out-of-fashion. Therefore, the revenue and accounts receivable were recognized at the point of time.

When exporting raw materials for processing, the control over the ownership of processed products was not transferred, and thus the revenue for the export of raw materials was not recognized.

1. Service income

The service income was generated from provision of services under a contract and recognized based on the progress in completion of the contract.

• 23 -

(XII) Lease

We assessed whether an agreement was (or contained) a lease on the date of entering into the agreement.

1. The Company was the lessor

The lease was classified as a finance lease when almost all the risks and returns attached to the ownership of assets were transferred to the lessee according to the agreement, and all the other leases were classified as operating leases.

For the sublease of right-of-use assets by the Company, the classification of the sublease was determined based on the right-of-use asset (instead of the underlying assets). However, when the main lease was recognized in the Company’s short-term leases to which the exemption of recognition was applied, the sublease was classified as an operating lease.

Fixed payments were included in the lease payments under finance leases. Net investment in a lease was measured based on the total present value of the lease payment receivable and the unguaranteed residual value plus the initial direct cost and recognized in finance leases receivable. The finance profits were allocated to each accounting period to reflect the Company’s fixed rate of return available for undue net investment in the lease in each respective period.

The lease payment under operating leases less the lease incentives was recognized in profit on the straight-line basis over the lease term. The original direct costs generated from the acquisition of the operating leases plus the book value of underlying assets were recognized in expenses on the straight-line basis over the lease term.

1. The Company was the lessee

The lease payment from the leases of low-value underlying assets to which the exemption of recognition was applied and short-term leases were recognized in expenses on the straight-line basis over the lease term, while right-of-use assets and lease liabilities with respect to other leases were recognized on the lease commencement date.

The right-of-use assets were initially measured based on the cost (including the initial recognized amount of lease liabilities, the lease payment paid before the lease commencement date less the lease incentives received, the initial direct cost and the cost estimated to restore the underlying asset) and subsequently measured based on the cost net of accumulated depreciation and accumulated impairment losses, and then the remeasurement of the lease liabilities was adjusted. The right-of-use assets were separately presented in the individual balance sheet.

The right-of-use assets were depreciated on the straight-line basis over the period from the lease commencement date to the expiration of the useful life or the lease term, whichever was sooner.

The lease liabilities were initially measured based on the present value of lease payments (including fixed payments). If the interest rate implicit in a lease could be readily determined, the lease payments were discounted at the

• 24 -

interest rate. When such interest rate could not be readily determined, the lessee’s incremental borrowing rate of interest was used.

Subsequently, the lease liabilities were measured at amortized cost under the effective interest method, and the interest expenses were amortized over the lease term. When any changes in the lease term resulted in changes to the future lease payments, we remeasured the lease liabilities and adjusted the right-of-use assets accordingly. However, the residual remeasurement was recognized in profit or loss when the book value of right-of-use assets was reduced to zero. The lease liabilities were separately presented in the individual balance sheet.

(XIII) Employee benefits

1. Post-employment benefits

Every pension fund contributed under the defined pension appropriation plan was recognized in expanses during the period when employees provided services.

Defined retirement benefit costs (including servicing costs, net interest and remeasurement) under the defined retirement benefit plan were calculated actuarially using the projected unit credit method. Service costs (including current service costs) and net interest on net defined benefit liabilities (assets) were recognized in employee benefit expenses when they were incurred. Remeasurement (including actuarial profits or losses, changes in the effect of asset limits, and return on plan assets net of interest) was recognized in other comprehensive income and presented in retained earnings when it occurred. It was not reclassified as profit or loss in the subsequent periods.

Net defined benefit liabilities represented the contribution deficit of the defined retirement benefit plan. Net defined benefit assets shall not exceed the present value of contribution refunded from the defined retirement benefit plan or future deductible contribution.

2. Other long-term employee benefits

The accounting treatment for other long-term employee benefits was the same as the one for the defined retirement benefit plan. However, any relevant remeasurement was recognized in profit or loss.

(XIV) Income tax

The tax expenses were the total of current income and deferred income taxes.

1. Current income tax

The Company determines the current income in accordance with the laws enacted by the authority of the income tax return filing jurisdiction to calculate the income tax payable.

The additional income tax on undistributed earnings calculated according to the Income Tax Act of the Republic of China (Taiwan) was recognized in the year when the related resolution was made at the shareholders’ meeting.

The adjustments to the income tax payable in the previous year were recognized in the current income tax.

• 25 -

2. Deferred income tax

The deferred income tax was calculated based on the temporary difference between the book value of assets and liabilities in the book and the tax base for calculation of taxable income. Deferred income tax liabilities were generally recognized based on all taxable temporary differences; deferred income tax assets were recognized when we were likely to have taxable income available to offset the income tax arising from deductible temporary differences, loss carryforwards, purchase of machine/equipment, R&D and talent training.

Taxable temporary differences generated from investment in subsidiaries and associates were recognized in deferred income tax liabilities except that the Company could control the timing of reversal of the taxable temporary differences, and that such differences were not likely to be reversed in the foreseeable future. Deductible temporary differences related to such investment and equity were recognized, to the extent that they were expected to be reversed in the foreseeable future, in deferred income tax assets only when we were likely to have taxable income adequate to realize the temporary differences.

The book value of deferred income tax assets was reviewed at each balance sheet date. When any of the deferred income tax assets was not likely to have taxable income adequate to return all or part of the assets anymore, the book value thereof was reduced. Those that were not originally recognized in deferred income tax assets were reviewed at each balance sheet date. When any of those was likely to generate taxable income adequate to return all or part of the assets in the future, the book value thereof was increased.

The deferred income tax assets and liabilities were measured at the tax rate of the period in which the liabilities or assets were expected to be settled or realized. The tax rate was subject to the tax rate and tax laws legislated or substantively legislated on the balance sheet date. The deferred income tax liabilities and assets were measured to reflect the tax on the balance sheet date arising from the method that we expected to use to recover or settle the book value of the liabilities and assets.

3. Current and deferred income taxes

The current and deferred income taxes were recognized in profit or loss other than those related to the titles stated as other comprehensive income or as equity directly, which were recognized in other comprehensive income separately or in equity directly.

V. Major sources of uncertainty of significant accounting judgments, estimates, and assumptions

For adoption of the accounting policies, our management must make judgments, estimates, and assumptions related to the information that could not be readily acquired from other sources based on historical experience and other relevant factors. The actual results might differ from those estimates.

The Company takes the economic impact caused by COVID-19 into the consideration of significant accounting estimates, and the management will continue to review the estimates and basic presumptions. When the amendments to the estimates only affected the current period, they were recognized in the period in which they were

• 26 -

made; when the amendments to the estimates affected the current and future periods at the same time, they were recognized in the period in which they were made and the future period.

VI. Cash and cash equivalents

h and cash equivalents
Cash on hand Bank check and demand deposit Cash equivalents Repurchase of commercial papers Time deposit	December 31, 2020 $ 1,181 587,300 - - $ 588,481	December 31, 2019
			$ 599 444,752 79,814 21,525 $ 546,690

VII. Financial instruments measured at fair value through profit or loss

December 31, 2020 December 31, 2019 Financial assets – current Mandatory measurement at fair value through profit or loss Non-derivative financial assets - Domestic non-listed - (non-OTC) common stocks $ 1,713 $

VIII. Financial assets measured at fair value through other comprehensive income

Current Investment in equity instruments measured at fair value through other comprehensive income Domestic listed (OTC) common stocks Non-current Investment in equity instruments measured at fair value through other comprehensive income Domestic non-listed (non-OTC) common stocks Domestic listed (OTC) common stocks Domestic non-listed (non-OTC) preferred stocks Total	December 31, 2020 $ - $ 71,287 10,950 30 $ 82,267	December 31, 2019	December 31, 2019
			$ 23,039 $ 56,298 101,532 30 $ 157,860

• 27 -

The Company invested in the equity instruments according to our medium and long-term strategies and expected to gain profits through long-term investment. Since the Company’s management deemed that the recognition of short-term changes in the investment’s fair value in profit or loss was not consistent with the said long-term investment plan, they opted to have the investment measured at fair value through other comprehensive income.

In July, August and September 2020, the Company made adjustment to its investment position and sold the shares of Solteam Incorporation and part of those of Coretek Opto Corporation at a fair value of NTD11,510,000. Other related equity – unrealized valuation loss on financial assets measured at fair value through other comprehensive income, amounting to NTD1,789,000, was carried forward to retained earnings.

IX. Notes and accounts receivable

es and accounts receivable
Notes and accounts receivable Measurement at amortized cost Total book value Less: Loss allowance	December 31, 2020 $ 103,363 ( 489 ) $ 102,874	December 31, 2019
	(	(	$ 101,333 7,778 ) $ 93,555

We provided an average 60-day loan period for sale of goods, and interest did not accrue on unpaid accounts receivable.

In order to mitigate the credit risk, our management set the credit authorization quota and approved credit authorization to ensure that appropriate actions were adopted for the recovery of overdue accounts receivable. In addition, the Company reviewed the recoverable amount of accounts receivable separately on the balance sheet date to make sure that the appropriate impairment loss of the accounts receivable that could not be recovered was recognized. As such, our management considered that the Company’s credit risk was reduced significantly.

We recognized the loss allowance for accounts receivable based on the lifetime expected credit losses. The lifetime expected credit losses were calculated using a provision matrix with consideration of the clients’ historical default record and current financial position, industrial and economic environment, and GDP forecasts and industrial prospects. Since our historical experience of credit losses showed no significant difference in the type of loss between different clients, the clients were not further classified in the provision matrix. We only set the expected credit loss rate based on the aging of accounts receivable.

When there was any evidence showing that the counterparty was facing serious financial difficulties and we could not estimate a reasonable recoverable amount, the Company directly wrote off the related accounts receivable, continued to claim for payment, and recognized the recovered amount therefrom in profit or loss.

Our loss allowances for accounts receivable measured using the provision matrix are as follows:

• 28 -

December 31, 2020

December 31, 2020
Percentage of expected credit loss Total book value Loss allowance (lifetime expected credit losses) Amortized cost	Account age for no more than 60 days		Account age for 61–90 days		Account age for 91–120 days		Account age for more than 120 days			Total
	(	0%–1% $ 98,617 288 ) $ 98,329	(	1%–5% $ 4,685 140 ) $ 4,545		5%–10% $ - - $ -	(	100% $ 61 61 ) $ -	(	- $ 103,363 489 ) $ 102,874

December 31, 2019

December 31, 2019
Percentage of expected credit loss Total book value Loss allowance (lifetime expected credit losses) Amortized cost	Account age for no more than 60 days		Account age for 61–90 days		Account age for 91–120 days		Account age for more than 120 days			Total
	(	0%–1% $ 88,796 336 ) $ 88,460	(	1%–5% $ 4,891 147 ) $ 4,744	(	5%–10% $ 390 39 ) $ 351	(	100% $ 7,256 7,256 ) $ -	(	- $ 101,333 7,778 ) $ 93,555

The information of changes in loss allowance for accounts receivable is as follows:

Balance – beginning of the year Plus: Impairment loss reversed in the year Less: Actual amount written off in the year Balance – ending of the year Finance leases receivable Undiscounted lease payments 1st year 2nd year Lease payments receivable Less: Unearned financial income Net investment in lease Book value of finance leases receivable Current Non-current	2020 $ 7,778 ( 230) ( 7,059 ) $ 489	2019	2019
		$ 8,735 ( 742) ( 215 ) $ 7,778 December 31,2020
		(	$ 3,807 3,172 6,979 100 ) $ 6,879 $ 3,729 3,150 $ 6,879

X. Finance leases receivable

• 29 -

The Company subleased the premises and buildings in Neihu District to another company with a fixed lease payment of NTD3,807,000 collected on a yearly basis. Since the remaining lease term in the main lease agreement was transferred due to the sublease, the sublease was classified as a finance lease.

The interest rate implicit in a lease during a lease term was not changed as of December 31, 2020. The annual interest rate implicit in the finance lease was 1.50%.

The Company measured the loss allowance for the finance leases receivable based on the lifetime expected credit losses. Since there were no overdue or unrecovered finance leases receivable as of the balance sheet date, and with consideration of the counterparty’s historical default record and collateral value, the Company believed that the aforesaid finance leases receivable was not impaired.

XI. Inventory

ntory
Finished good Work in process Raw materials	December 31, 2020 $ 74,073 60,634 30,892 $ 165,599	December 31, 2019
			$ 118,673 25,539 15,134 $ 159,346

The cost of sales related to inventories in 2020 and 2019 was NTD884,351,000 and NTD712,945,000, respectively.

The amounts of NTD28,700,000 and NTD68,198,000 from reversal of allowances for inventory devaluation losses were included in the cost of sales in 2020 and 2019, respectively.

XII. Investment under the equity method

stment under the equity method
Investment in subsidiaries Investment in associates	December 31, 2020 $ 1,004,280 232,352 $ 1,236,632	December 31, 2019
			$ 1,026,384 239,126 $ 1,265,510

(I) Investment in subsidiaries

Investment in subsidiaries
Name of the Subsidiary Genius Holding Co., Ltd. Chung-Chiang Investment Co., Ltd. Hung-Cheng Investment Co., Ltd. KYE International Corporation KYE Systems Europe GmbH KYE Systems (Hong Kong) Corp. Digilife Technologies Co., Ltd. Digilife Pty Ltd.		December 31, 2020 Amount Shareholding% $ 301,777 100.00 63,693 100.00 44,116 100.00 4,138 100.00 630 100.00 8,864 100.00 581,062 94.61 - - $ 1,004,280		December 31, 2019
		Amount		Amount	Shareholding%
		$ 301,777 63,693 44,116 4,138 630 8,864 581,062 - $ 1,004,280		$ 436,031 63,717 44,130 7,175 605 9,289 363,074 102,363 $1,026,384	100.00 100.00 100.00 100.00 100.00 100.00 91.37 39.20

• 30 -

The Company’s investee, KYE Systems Europe GmbH terminated its business operations in December 2017 and is currently under liquidation.

The Company’s investee, Digilife Technologies Co., Ltd., made an offer for capital increase in cash in June 2020. The Company purchased 20,560,000 shares, and its shareholding percentage increased from 91.37% to 94.61%.

In November 2020, the Company sold all the shares of DIGILIFE PTY LTD held by it to Digilife Technologies Co., Ltd. The transaction was deemed by the Company to be an equity transaction since it did not change the Company’s control of DIGILIFE PTY LTD.

In November 2020, the Company’s investee, Digilife Technologies Co., Ltd., made adjustment to its investment position and sold financial assets measured at fair value through other comprehensive income at a fair value of NTD1,550,000. Other related equity – unrealized valuation profit on financial instruments measured at fair value through other comprehensive income, amounting to NTD185,000, was carried forward to retained earnings.

• (II) Investment in associates

forward to retained earnings. nvestment in associates
Important associates Timing Pharmaceutical Co., Ltd. (Timing Pharmaceutical Company) Individual unimportant associates	December 31, 2020 $ 211,917 20,435 $ 232,352	December 31, 2019
			$ 216,851 22,275 $ 239,126

1. Important associates

Important associates
Company Name Timing Pharmaceutical Company	Ratio of shareholdings	and voting rights
	December 31, 2020 22.64%	December 31, 2019
		22.64%

For the above-mentioned associate information related to the nature of business, main territory, and the country in which the company is registered, please refer to Table 5 “Name and Territory of Investees and Other Relevant Information.”

The investment in Timing Pharmaceutical Company was recognized in non-current financial assets measured at fair value through other comprehensive income on December 31, 2018. The Company purchased 3,000,000 shares from Timing Pharmaceutical Company with NTD44,460,000 in January 2019, increasing the shareholding ratio to 22.64%. Due to its significant impact, the purchase was stated in investment under the equity method. A loss of NTD240,960,000 was recognized in the disposal of equity instruments measured at fair value through other comprehensive income and then stated as a deduction from equity.

• 31 -

Our management performed the impairment test for Timing Pharmaceutical Company, our investee, in 2019. The result showed that the recoverable amount of the investment was less than the book value. The impairment was caused mainly due to Timing Pharmaceutical Company’s overall profit which was not as good as expected. Therefore, the Company recognized an impairment loss of NTD38,202,000 in investment under the equity method in 2019.

The following financial information was prepared based on the associates’ IFRS consolidated financial statements. It also reflected the adjustments made after using the equity method.

after using the equity method.
2020 Current assets $ 841,264 Non-current assets 1,716,927 Current liabilities ( 968,981 ) Non-current liabilities ( 326,989 ) Equity 1,262,221 Non-controlling equity ( 326,274 ) $ 935,947 The Company’s shareholding ratio 22.64% The Company’s interests $ 211,917 Investment book value $ 211,917 Operating revenue $ 798,199 Current net loss ( $ 30,726 ) Other comprehensive income 7,243 Total comprehensive income ($ 23,483 ) Summary of individual unimportant associates 2020 The Company’s shares Current net loss ( $ 2,024 ) Other comprehensive income - Total comprehensive income ($ 2,024 )	2019
	$ 730,975 1,858,092 ( 964,118 ) ( 330,567 ) 1,294,382 ( 336,641 ) $ 957,741 22.64% $ 216,851 $ 216,851 $ 761,813 ( $ 167,643 ) ( 13,278 ) ($ 180,921 ) 2019
		( $ 6,106 ) - ($ 6,106 )

1. Summary of individual unimportant associates

Investments under the equity method and our shares of profit or loss and other comprehensive income therein were recognized based on each associate’s CPA-audited financial statements in the same period other than those in Timing Pharmaceutical Company, which were calculated based on its financial statements

• 32 -

not audited by CPAs. However, our management considered that significant impacts would not result from the situation where the aforesaid investees financial statements were not audited by the CPAs.

XIII. Property, plant and equipment

Cost Balance on January 1, 2020 Addition Disposal Balance on December 31, 2020 Accumulated depreciation and impairment Balance on January 1, 2020 Disposal Depreciation expense Balance on December 31, 2020 Net amount on December 31, 2020 Cost Balance on January 1, 2019 Addition Disposal Balance on December 31, 2019 Accumulated depreciation and impairment Balance on January 1, 2019 Disposal Depreciation expense Balance on December 31, 2019 Net amount on December 31, 2019		Land $ 339,557 - - $ 339,557 $ 11,046 - - $ 11,046 $ 328,511 $ 339,557 - - $ 339,557 $ 11,046 - - $ 11,046 $ 328,511	Premises and buildings $ 171,905 - - $ 171,905 $ 80,602 - 3,231 $ 83,833 $ 88,072 $ 171,905 - - $ 171,905 $ 77,370 - 3,232 $ 80,602 $ 91,303	Machine and equipment $ 23,026 - ( 220 ) $ 22,806 $ 23,026 ( 220 ) - $ 22,806 $ - $ 23,026 - - $ 23,026 $ 23,026 - - $ 23,026 $ -	Miscellaneous equipment $ 151,508 2,800 ( 152 ) $ 154,156 $ 148,133 ( 152 ) 809 $ 148,790 $ 5,366 $ 150,975 2,650 ( 2,117 ) $ 151,508 148,192 ( 317 ) 258 $ 148,133 $ 3,375		Total
						$ 685,996 2,800 ( 372 ) $ 688,424 $ 262,807 ( 372 ) 4,040 $ 266,475 $ 421,949 $ 685,463 2,650 ( 2,117 ) $ 685,996 $ 259,634 ( 317 ) 3,490 $ 262,807 $ 423,189

• 33 -

The Company’s property, plants, and equipment were depreciated on the straight-line basis over the following useful lives:

ine basis over the following useful lives:
Premises and buildings	50 to 55 years
Machine and equipment	2 to 9 years
Miscellaneous equipment
Office equipment	2 to 5 years
Transport equipment	2 to 5 years
Leasehold improvement	4 to 10 years
Passenger and freight elevators	15 years
Computer equipment	1 to 5 years
Others	2 to 8 years

For the amount of our property, plants and equipment pledged as collateral for loans, see Note 26.

XIV. Lease agreement

(I) Right-of-use assets

. Lease agreement (I) Right-of-use assets
Book value of right-of-use assets Building Office equipment Transport equipment Addition of right-of-use assets Depreciation expense of right-of-use assets Building Office equipment Transport equipment (II) Lease liabilities Book value of lease liabilities Current Non-current	December 31, 2020 $ 1,957 412 629 $ 2,998 2020 $ - $ 5,322 138 2,895 $ 8,355 December 31, 2020 $ 6,044 $ 4,790	December 31, 2019
			$ 15,082 550 3,524 $ 19,156 2019
		$ 17,479 $ 888 2,745 137 $ 3,770 December 31, 2019
			$ 8,299 $ 10,834

• 34 -

The range of discount rate for lease liabilities is as follows:

Building Office equipment Transport equipment	December 31, 2020 1.5% 1.5% 1.5%	December 31, 2019
		1.5% 1.5% 1.5%

(III) Material lease activities and terms

We rented buildings, office equipment, and transport equipment with a lease term from 2019 to 2023 for offices and conduct of business. When the lease term expires, we will not be entitled to renew the lease agreement of the rented properties and the bargain purchase option.

(IV) Other lease information

The Company opted to apply the exemption of recognition to the lease of office equipment which met the short-term lease and lease of low-value assets and did not recognize right-of-use assets and lease liabilities with respect to such lease.

The Company did not have any short-term lease commitments to which the exemption of recognition was applied on December 31, 2020 and 2019.

XV. Accounts payable

Accounts payable did not include interest expenses. The Company established the financial risk management policies to ensure that all payables could be paid back within the pre-agreed term of credit.

XVI. Other receivables – related parties and other payables

The advances provided due to the Company’s purchase of materials through KYE Trade Co., Ltd., from a subsidiary of KYE Inc., Dong-Guan Kunying Computer Products Co., Ltd., were recognized respectively in other receivables – related parties and other payables.

XVII. Retirement benefit plans

(I) Defined contribution plan

The pension system specified in the “Labor Pension Act” adopted by the Company is the defined pension appropriation plan managed by the government. A pension equal to 6% of an employee’s monthly wage shall be appropriated to the individual labor pension account at the Bureau of Labor Insurance.

The Company recognized the amounts that must be appropriated in accordance with the percentage specified in the defined appropriation plan of 2020 and 2019. The total amounts recognized in the statement of comprehensive income in 2020 and 2019 were NTD2,423,000 and NTD2,791,000, respectively.

(II) Defined benefit plan

The Company is subject to the retirement pension system specified in the “Labor Standards Act.” The system defines the payment of pension. Two bases are given for each full year of service rendered if an employee has seniority of less than 15 years. For the rest of the years over 15 years, one base is given for each full year of service rendered. The total number of bases shall be no more than 45. The years of

• 35 -

service rendered and the average wage of six months (base) prior to the approved retirement date shall be the reference for calculation of the pension to be paid to the employee. We appropriate 2% of the total wage of an employee as the labor pension fund every month and remit the amount to the labor pension reserve funds account at the Bank of Taiwan in the name of the Labor Pension Fund Supervisory Committee. Before the end of each year, if the assessed balance in the account is inadequate to make a full payment of pensions to the employees who may meet the retirement conditions in the next year, we will make up the difference in one appropriation before the end of March the following year. The account is managed by the Bureau of Labor Funds, Ministry of Labor and we do not have the right to influence the investment management strategies.

Amounts related to the defined benefit plan and included in the individual balance sheet are listed as follows:

balance sheet are listed as follows:
Present value of defined benefit obligation Fair value of plan assets Contribution deficit Net defined benefit liabilities	December 31, 2020 $ 49,794 ( 18,140 ) 31,654 $ 31,654	December 31, 2019
	(	(	$ 48,629 16,906 ) 31,723 $ 31,723

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

Balance on January 1, 2019 Current service cost Previous service cost Interest expenses (income) Recognition in profit or loss Remeasurement Return on plan assets (except for any amount included in net interest) Actuarial loss – changes in demographic assumption Actuarial loss – changes in financial assumption Actuarial loss – experience adjustment	Present value of defined benefit obligation $ 53,047 202 ( 7,687 ) 597 ( 6,888 ) - 20 2,341 1,009	Fair value of plan assets ($ 16,442 ) - - ( 189 ) ( 189 ) ( 592 ) - - -	Net defined benefit liabilities (assets)
			$ 36,605 202 ( 7,687 ) 408 ( 7,077 ) ( 592 ) 20 2,341 1,009

(Continued to next page)

• 36 -

(Continued from previous page)

Recognition in other comprehensive income Contribution by employer Payment of benefits Balance on December 31, 2019 Current service cost Interest expenses (income) Recognition in profit or loss Remeasurement Return on plan assets (except for any amount included in net interest) Actuarial loss – changes in financial assumption Actuarial profit – experience adjustment Recognition in other comprehensive income Contribution by employer Balance on December 31, 2020	Present value of defined benefit obligation 3,370 - ( 900 ) 48,629 208 365 573 - 1,255 ( 663 ) 592 - $ 49,794	Fair value of plan assets ( 592 ) ( 583 ) 900 ( 16,906 ) - ( 129 ) ( 129 ) ( 571 ) - - ( 571 ) ( 534 ) ($ 18,140 )	Net defined benefit liabilities (assets)
	( (		2,778 ( 583 ) - 31,723 208 236 444 ( 571 ) 1,255 ( 663 ) 21 ( 534 ) $ 31,654

The amounts related to the defined benefit plan recognized as profit or loss are summarized by function as follows:

summarized by function as follows:
Marketing expenses Administrative expense R&D expense		2020 $ 118 311 15 $ 444	2019
			( $ 2,206 ) ( 4,367 ) ( 504 ) ($ 7,077 )

The Company was exposed to the following risks due to the pension system under the “Labor Standards Act”:

1. Investment risk: The Bureau of Labor Funds, Ministry of Labor has separately invested the labor pension fund in domestic (foreign) equity and debt securities, and bank deposits. The investment is conducted at the discretion of the Bureau or under the mandated management. However, the profit generated from the

2. 37 -

Company’s plan assets shall be calculated with an interest rate not below the interest rate for a two-year time deposit with local banks.

1. Interest rate risk: A decrease in the interest rates of government bonds and corporate bonds would increase the present value of the defined benefit obligation, and the return on debt investment of the plan assets would be increased accordingly. The net defined benefit liabilities might be partially offset by both increases.

2. Salary risk: The present value of the defined benefit obligation was calculated by reference to the future salary of the plan participants. Therefore, the present value of the defined benefit obligation would be increased by an increase in the plan participants’ salary.

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

measurement are as follows:
Discount rate Rate of expected salary increase	December 31, 2020 0.500% 2.250%	December 31, 2019
		0.750% 2.250%

If there were any reasonably possible changes to the major actuarial assumptions separately, the resulting increase (decrease) in the present value of the defined benefit obligation in the situation where all the other assumptions remained the same is as follows:

the same is as follows:
Discount rate Increase by 0.25% Decrease by 0.25% Rate of expected salary increase Increase by 0.25% Decrease by 0.25%	December 31, 2020 ($ 1,255 ) $ 1,303 $ 1,258 ($ 1,218 )	December 31, 2019
	( (	( (	$ 1,319 ) $ 1,369 $ 1,325 $ 1,284 )

Since the actuarial assumptions might be correlated to each other and it was unlikely that the changes were only in a single assumption, the aforesaid sensitivity analysis might not reflect the actual changes in the present value of the defined benefit obligation.

benefit obligation.
Expected contribution within 1 year Average maturity of defined benefit obligations	December 31, 2020 $ 539 10.2 years	December 31, 2019
			$ 552 11.0 years

• 38 -

XVIII. Equity

(I) Share capital

uity hare capital
Number of authorized shares (thousand shares) Authorized capital Number of issued shares with adequate capital received (thousand shares) Issued capital Issuance in excess of par value	December 31, 2020 390,000 $ 3,900,000 224,528 $ 2,245,285 198,950 $ 2,444,235	December 31, 2019
			390,000 $ 3,900,000 234,538 $ 2,345,385 301,635 $ 2,647,020

A share of issued common stock had a par value of NTD10 and was entitled to one voting right and dividends.

The number of shares of the authorized capital retained for issuance of the employee stock option warrants was 25,000,000 shares.

• (II) Capital reserves

apital reserves
Stock issuance in excess of par value Treasury stock trading Long-term investment	December 31, 2020 $ 198,950 160,257 23,691 $ 382,898	December 31, 2019
			$ 301,635 130,039 24,532 $ 456,206

The excess from stock issuance in excess of par value (including common stock issuance in excess of par value, capital in excess of par from share issuance due to mergers, and treasury stock trading) and the reserve received from donations in capital reserves may be used to offset losses, or to distribute cash dividends or be transferred into the capital if the Company does not incur a loss. However, the amount of the transfer into the capital shall be limited to a certain percentage of the paid-in capital in every year.

The capital reserves deriving from investment under the equity method, employee stock option, and other stock options shall not be used for any purpose.

(III) Retained earnings and dividend policy

According to the Company’s earning distribution policy, if the Company has a profit at the year’s final accounting, it shall first pay the income tax and make up any cumulative losses in accordance with laws, and then make a 10% contribution of the balance to the legal reserve, and also make provision/reversal of special reserves pursuant to the laws. The residual balance shall be added to undistributed earnings for allocation of shareholder dividends and bonuses. The shareholder dividends are allocated in the form of cash dividend or stock dividend. The cash dividend shall be

• 39 -

no less than 10% of the total shareholder dividends, and the residual balance is paid in shares. However, all the shareholder dividends shall be distributed in stock dividends when the cash dividend per share is NTD0.1 or lower.

For the policy of distribution of employee and director/supervisor remuneration regulated in the Company’s Articles of Incorporation, please refer to (4) Remuneration to employees, directors, and supervisors in Note 20.

The Company approved the amendments to the Articles of Incorporation through the resolution made at the shareholders’ meeting on June 21, 2019. The distribution of the Company’s profits and the compensation for its losses may be made after the end of each quarter.

Legal reserves shall be prepared to the amount at which the balance of the legal reserves reaches to the total paid-in capital. Legal reserves may be used to make up loss. Where the Company does not sustain loss, the part of the legal reserves that exceeds the total paid-in capital by 25% may be appropriated as capital or distributed by cash.

The Company provides and reverses special reserves according to the letters under Jin-Guan-Zheng-Fa-Zi No. 1010012865 and Jin-Guan-Zheng-Fa-Zi No. 1010047490 as well as “Q&A for Provision of Special Reserve Upon First-Time Adoption of IFRSs.” If there is any reversal of the decrease in shareholder’ equity, the earnings may be distributed based on the reversal proportion.

The Company held the general shareholders’ meetings respectively on June 18, 2020 and June 21, 2019. The proposal for loss compensation in 2019 and the proposal for profit distribution in 2018, respectively approved at the said meetings, are as follows:

are as follows:
Legal reserves Special reserves Legal reserves for covering losses Reversal of special reserves		2019 $ - $ - $ 24,924 ) $ 66,778 )		2018
	( (			$ 9,724 $ 382,473 $ - $ -

The shareholders decided at the general shareholders’ meetings of the Company on June 18, 2020 and June 21, 2019 to distribute the income derived from the issuance of common stocks at a premium as a capital reserve to the amount of NTD93,815,000 and NTD46,908,000 to the shareholders by cash pursuant to Article 241 of the Company Act.

The proposal for profit distribution in 2020 submitted by the Board meeting on March 25, 2021 is as follows:

March 25, 2021 is as follows:
Legal reserves Special reserves		2020
		$ 14,461 $ 130,154

The Board of Directors of the Company decided on March 25, 2021 to distribute the income derived from the issuance of common stocks at a premium as a

• 40 -

capital reserve to the amount of NTD67,359,000 to the shareholders by cash pursuant to Article 241 of the Company Act.

The proposal for profit distribution in 2020 is expected to be resolved at the general shareholders’ meeting to be held on June 23, 2021.

• (IV) Other equity

• Exchange differences from the translation of foreign operations’ financial statements

statements
Balance – beginning of the year Amounts incurred in the year Exchange differences from foreign operations Share of associates under the equity method Balance – ending of the year	2020 ( $ 24,935 ) ( 12,624 ) 1,836 ($ 35,723 )	2019
		$ 207 ( 21,831 ) ( 3,311 ) ($ 24,935 )

1. Unrealized profit/loss from the financial assets measured at fair value through other comprehensive income

other comprehensive income
		2020			2019
Balance – beginning of the year	($ 404,382		)	($ 660,956		)
Amounts incurred in the year
Unrealized profit/loss –
equity instrument	(	108,888	)	(	117,767	)
Share of subsidiaries and
associates under the
equity method	(	113,688	)		133,381
Other comprehensive income in
the year	(	222,576	)		15,614
Cumulative profit or loss on
disposal of equity
instruments transferred to
retained earnings		1,604			240,960
Balance – ending of the year	($ 625,354		)	($ 404,382		)

• 41 -

(V) Treasury stocks

reasury stocks
Cause of repurchase Number of shares on January 1, 2020 Increase in the year Decrease in the year Number of shares on December 31, 2020	Maintenance of the Company’s credit and shareholders’ equity (1,000 shares)
	(	- 10,010 10,010 ) -

To protect the Company’s credit and shareholders’ equity, the Board of Directors resolved on March 18, 2020 and May 20, 2020 to buy back 10,000,000 and 5,000,000 shares of the Company respectively during the periods from March 19, 2020 to May 17, 2020 and from May 21 to July 17, 2020 pursuant to Article 28-2 of the Securities and Exchange Act, and define the price ranges of the shares to be repurchased respectively at NTD5–8 and NTD6–10 pursuant to Article 2 of the “Regulations Governing Share Repurchase by Exchange-Listed and OTC-Listed Companies.” In 2020, the Company repurchased 10,010,000 as treasury stocks at a cost of NTD78,752,000.

The Board of Directors of the Company resolved on November 5, 2020 to cancel the 10,010,000 shares repurchased for protection of the Company’s credit and shareholders’ equity, and set the record date of cancellation to November 6, 2020.

According to the Securities and Exchange Act, the treasury stock held by the Company shall not be pledged and entitled to any dividends and voting rights.

XIX. Revenue

Revenue
Revenue from contracts with customers Revenue from sale of goods		2020 $ 1,224,519		2019
				$ 985,434

(I) Description of contracts with customers

The goods sold to customers were measured at the fair value of considerations received or receivable, and the amount recognized as revenue was determined by subtracting returns, rebates and other similar discounts expected from customers.

(II) Contract balance

ontract balance
Notes and accounts receivable (Note 9)		December 31, 2020 $ 102,874		December 31, 2019 $ 93,555	January 1, 2019
						$ 190,198

• 42 -

(III) Sub-items of revenue from customer contracts

				2020			2019
	Mouse		$	446,836		$	410,776
	Keyboard			338,456			358,728
	Speaker			236,406			168,260
	Others			202,821			47,670
			$	1,224,519		$	985,434
XX. Net	profit in the year
(I)	Other profits and losses
				2020			2019
	Other revenue		$	25,195		$	27,665
	Exchange loss – net	(		21,965	)	(	7,986	)
	Rent revenue			2,175			15,581
	Profit on valuation of financial
	assets			1,713			-
	Dividend income			1,604			727
	Other losses	(		8	)	(	6,772	)
	Total		$	8,714		$	29,215
(II)	Depreciation and amortization
				2020			2019
	Property, plant and equipment		$	4,040		$	3,490
	Investment property			-			5,459
	Other non-current assets			3,954			11,694
	Right-of-use assets			8,355			3,770
			$	16,349		$	24,413
	Summary of depreciation
	expenses by function
	Operating expenses		$	12,395		$	7,260
	Non-operating expenses			-			5,459
			$	12,395		$	12,719
	Summary of amortization
	expenses by function
	Operating costs		$	3,765		$	9,331
	Operating expenses			189			2,363
			$	3,954		$	11,694

• 43 -

(III) Employee benefit expense

mployee benefit expense
Retirement benefits (Note 17) Defined contribution plan Defined benefit plan Separation benefits Other employee benefits Total of employee benefit expenses Summarized by function Operating expenses		2020 $ 2,423 444 2,867 195 73,442 $ 76,504 $ 76,504		2019
			$ 2,791 ( 7,077 ) ( 4,286 ) 9,108 77,185 $ 82,007 $ 82,007

(IV) Remuneration for employees, directors and supervisors

After deducting the profit before tax of the current year prior to distribution of the remuneration to employees, directors and supervisors, the amount no less than 1% and no more than 15% was appropriated as the remuneration to employees and no more than 1% was appropriated as remuneration to directors and supervisors. The remuneration for employees, directors and supervisors in 2020 and 2019 was resolved by the Board of Directors on March 25, 2021 and March 26, 2020, respectively, as follows:

Estimated ratio

respectively, as follows: Estimated ratio
Remuneration to employees Remuneration to directors and supervisors Amount Remuneration to employees Remuneration to directors and supervisors		2020 3% 1% 2020 $ 5,663 $ 1,887		2019
				3% 1% 2019
				$ 5,370 $ 1,769

If there were any changes in the amount after the approval and release date of annual individual financial statements, the change was treated as a change in accounting estimates and accounted for in the following year.

There was no discrepancy between the actual distribution of remuneration to employees, directors and supervisors in 2019 and 2018 and the amount recognized in the individual financial statements in 2019 and 2018.

The information about remuneration to employees, directors and supervisors resolved by the Board of Directors may be viewed at the “MOPS” of TWSE.

• 44 -

XXI. Income tax

• (I) Income tax recognized in profit or loss

Major components of income tax expenses are as follows:

ome tax ncome tax recognized in profit or loss Major components of income tax expenses are as follows:
2020 2019 Current income tax Tax incurred in the year $ 28,747 $ 10,643 Adjustments for the previous year ( 5,396 ) ( 486 ) 23,351 10,157 Deferred income tax Tax incurred in the year 11,630 8,201 Income tax expense recognized as profit or loss $ 34,981 $ 18,358 Adjustments to accounting income and income tax expenses are as follow: 2020 2019 Net profit before tax $ 181,217 $ 169,838 Income tax expense on net profit before tax calculated at the statutory tax rate $ 36,243 $ 34,377 Losses not deductible and tax-free income not included when determining taxable income 4,503 ( 26,743 ) Adjustment to income tax expenses of the previous year in the year ( 5,396 ) ( 486 ) Unrecognized deductible temporary difference ( 369 ) 11,210 Income tax expense recognized as profit or loss $ 34,981 $ 18,358		2019
	$ 169,838 $ 34,377 ( 26,743 ) ( 486 ) 11,210 $ 18,358

• 45 -

(II) Income tax recognized in other comprehensive income

Deferred income tax Amounts incurred in the year －Unrealized profit/loss from the financial assets measured at fair value through other comprehensive income －Translation from foreign operations －Remeasurement of the defined benefit plan Income tax profit (expenses) recognized in other comprehensive income	2020 ( $ 21,951 ) 4,631 4 ($ 17,316 )		2019
			$ 26,281 4,297 556 $ 31,134

(III) Deferred income tax assets and liabilities

Changes in deferred income tax assets and liabilities are as follows:

2020

2020
Deferred income tax assets Temporary difference Inventory Defined retirement benefit plan Other non-current assets Investment under the equity method Financial assets measured at fair value through other comprehensive income Deferred loss on purchase commitment Exchange differences from foreign operations Others		Balance – beginning of the year $ 16,980 8,654 7,990 20,374 46,837 13,180 11,676 4,121 $ 129,812	Recognition in profit or loss ( $ 5,740 ) ( 18 ) ( 340 ) ( 37 ) - ( 1,840 ) - ( 3,641 ) ($ 11,616 )	Recognition in other comprehensive income $ - - - - ( 14,028 ) - 4,564 - ($ 9,464 )	Balance – ending of the year
			( ( ( ( ( ( (	( (		$ 11,240 8,636 7,650 20,337 32,809 11,340 16,240 480 $ 108,732

(Continued to next page)

• 46 -

(Continued from previous page)

Deferred income tax liabilities Temporary difference Exchange differences from foreign operations Defined retirement benefit plan Investment under the equity method Financial assets measured at fair value through other comprehensive income Others		Balance – beginning of the year $ 3,893 2,309 10,486 - - $ 16,688	Recognition in profit or loss $ - - ( 95 ) - 109 $ 14	Recognition in other comprehensive income ( $ 67 ) ( 4 ) - 7,923 - $ 7,852	Balance – ending of the year	Balance – ending of the year
			(	( (		$ 3,826 2,305 10,391 7,923 109 $ 24,554

2019

2019
Deferred income tax assets Temporary difference Inventory Defined retirement benefit plan Other non-current assets Investment under the equity method Financial assets measured at fair value through other comprehensive income Deferred loss on purchase commitment Exchange differences from foreign operations Others		Balance – beginning of the year $ 30,620 10,186 7,990 17,379 $ 32,810 9,466 9,563 4,627 $ 122,641	Recognition in profit or loss ( $ 13,640 ) ( 1,532 ) - 2,995 $ - 3,714 - ( 506 ) ($ 8,969 )	Recognition in other comprehensive income $ - - - - $ 14,027 - 2,113 - $ 16,140	Balance – ending of the year
			( ( ( (			$ 16,980 8,654 7,990 20,374 $ 46,837 13,180 11,676 4,121 $ 129,812

(Continued to next page)

• 47 -

(Continued from previous page)

Deferred income tax liabilities Temporary difference Exchange differences from foreign operations Defined retirement benefit plan Investment under the equity method Financial assets measured at fair value through other comprehensive income		Balance – beginning of the year $ 6,077 2,865 11,254 12,254 $ 32,450	Recognition in profit or loss $ - - ( 768 ) - ($ 768 )	Recognition in other comprehensive income ( $ 2,184 ) ( 556 ) - ( 12,254 ) ($ 14,994 )	Balance – ending of the year	Balance – ending of the year
			( (	( ( ( (		$ 3,893 2,309 10,486 - $ 16,688

(IV) Authorization of income tax

The Company’s income tax returns up to 2018 were audited and approved by the tax authorities. The declared loss from sale of sluggish materials in 2012 was deducted pursuant to the approved adjustment and a tax amount of NTD5,257,000 was exempted as a result. The Company did not accept the said approval and filed an administrative action. On July 8, 2020, the Taipei High Administrative Court issued a final decision for settlement with an approved amount of refundable tax of NTD2,104,000.

XXII. EPS

The earning and the weighted average number of common stocks used for calculating EPS are as follows:

Net profit in the year

calculating EPS are as follows: Net profit in the year
Net profit in the year Effect of potential diluted common stocks: Remuneration to employees Profit used for calculation of diluted EPS		2020 $ 146,236 - $ 146,236		2019
				$ 151,480 - $ 151,480

• 48 -

Number of shares Weighted average number of common stocks used for calculating basic EPS Effect of potential diluted common stocks: Remuneration to employees Weighted average number of common stocks used for calculating diluted EPS		2020 228,307 657 228,964	Unit: 1,000 shares 2019	Unit: 1,000 shares 2019
				234,538 783 235,321

When the Company could select stocks or cash as the remuneration to employees, it was assumed that the employee’s remuneration was paid with stocks when the diluted EPS was calculated. The weighted average outstanding common stocks were added when the potential common stocks had diluting capability to calculate the diluted EPS. The diluting capability of the potential common stocks was referenced in the next year when the Board of Directors resolved to calculate the diluted EPS prior to payment of the employee’s remuneration with stocks.

XXIII. Capital risk management

The Company conducted capital management to ensure the companies of the Group could keep operating while maximizing shareholders’ return by optimizing the liability and equity balances. The overall strategies of the Company did not have substantial changes.

The capital structure of the Company was comprised of the net liabilities (i.e. loans minus cash and cash equivalents) and shareholders’ equity attributable to the owner of the Company (i.e. capital stock, capital reserves, retained earnings, and other equities).

The Company did not need to observe external capital requirements.

The management of the Company conducted annual review of the Group’s capital structure. Observing the suggestions of the management, the Company balanced the overall capital structure by paying dividends, issuing new stocks, repurchasing stocks, and issuing new corporate bonds, or repaying existing liabilities.

XXIV. Financial instruments

• (I) Fair value information – financial instruments not measured at fair value

Since the book value of the Company’s financial instruments not measured at fair value, including cash and cash equivalents, notes and accounts receivable, other receivables, guarantee deposits paid, notes and accounts payable, other payables and guarantee deposits received, was a reasonable approximation of fair value, we did not disclose the fair value.

• 49 -

• (II) Fair value information – financial instruments measured at fair value on a repetitive basis

• Fair value hierarchy

December 31, 2020

Fair value hierarchy December 31, 2020
Financial assets measured at fair value through profit or loss Investment in equity instruments －Domestic non-listed (OTC) stocks Financial assets measured at fair value through other comprehensive income Investment in equity instruments －Domestic listed (OTC) stocks －Domestic non-listed (non-OTC) stocks Total December 31, 2019 Financial assets measured at fair value through other comprehensive income Investment in equity instruments －Domestic listed (OTC) stocks －Domestic non-listed (non-OTC) stocks Total		Level 1 $ - $ - - $ - Level 1 $ 23,039 - $ 23,039		Level 2 $ - $ - - $ - Level 2 $ - - $ -		Level 3 $ 1,713 $ 10,950 71,317 $ 82,267 Level 3 $ 101,532 56,328 $ 157,860		Total
								$ 1,713 $ 10,950 71,317 $ 82,267 Total
								$ 124,571 56,328 $ 180,899

There was no transfer of fair value measurements between Level 1 and Level 2 in 2020 and 2019.

• 50 -

• Adjustments to the fair value of financial instruments based on Level 3 measurement

2020

measurement 2020
Balance – beginning of the year Recognition in profit or loss (other profits and losses) Recognition in other comprehensive income Disposal Balance – ending of the year 2019 Balance – beginning of the year Recognition in other comprehensive income Purchase Disposal Balance – ending of the year	Financial assets measured at fair value through profit or loss $ - 1,713 - - $ 1,713 Financial assets measured at fair value through profit or loss $ - - - - $ -	Financial assets measured at fair value through other comprehensive income $ 157,860 - ( 75,537 ) ( 56 ) $ 82,267 Financial assets measured at fair value through other comprehensive income $ 543,748 ( 142,164 ) 44,460 ( 288,184 ) $ 157,860		Total
			( (	$ 157,860 1,713 75,537 ) 56 ) $ 83,980 Total
		( (	( (	$ 543,748 142,164 ) 44,460 288,184 ) $ 157,860

3. Evaluation technology and inputs of Level 3 fair value measurement

For the domestic non-listed (non-OTC) stocks held by the Company and measured at fair value, such fair value was determined with reference to the price supported with the observable market price or estimated using the comparable multiple method. The fair value for the stock private placement for domestic listed companies was determined using the option pricing model based on the observable market price.

• 51 -

(III) Type of financial instruments

ype of financial instruments
Financial assets Financial assets measured at amortized cost (Note 1) Measurement at fair value through profit or loss Mandatory measurement at fair value through profit or loss Financial assets measured at fair value through other comprehensive income Investment in equity instruments Financial liabilities Measurement at amortized cost (Note 2)	December 31, 2020 $ 1,236,976 1,713 82,267 164,271	December 31, 2019
		$ 1,294,838 - 180,899 163,592

• Note 1: The balance included the financial assets measured at amortized cost, such as cash and cash equivalents, notes and accounts receivable, finance leases receivable, other receivables and guarantee deposits paid.

• Note 2: The balance included the financial assets measured at amortized cost, such as notes and accounts payable, other payables and guarantee deposits received.

(IV) Financial risk management purpose and policy

The Company’s main financial instruments included investments in equity, accounts receivable, accounts payable, loans, and lease liabilities. Our financial management department was responsible for provision of services for business units, planning and coordination of investments in domestic and international financial markets, analysis of internal risk exposure based on the risk level and scope, and reporting, supervision, and management of the financial risks related to the Company’s operations. The said risks included the market risk (such as exchange rate risk, interest rate risk, and other price risks), credit risk, and liquidity risk.

The Company used derivative financial instruments to avoid risk exposure and mitigate the impact of such risks. Derivative financial instruments were used subject to the policies adopted at the meeting of the Board of Directors or shareholders of the Company. These policies included the exchange rate risk, interest rate risk, credit risk, use of derivative and non-derivative financial instruments, and the written current funds investment principle. Internal reviewers reviewed the compliance of the policies and the exposure limits on an ongoing basis. The Company did not conduct transactions of financial instruments (including derivative financial instruments) for speculation purposes.

• 52 -

The finance management department reported to the Board of Directors of the Company every quarter.

1. Market risk

The major financial risk that the operating activities imposed on the Company was the foreign exchange rate risk. (Refer to (1) below.) The Company was engaged in various derivative financial instruments to manage the imposed foreign exchange rate risk.

The Company did not change the risk exposure on the financial instrument market or the methods for management and measurement of such exposure.

(1) Exchange rate risk

The Company was engaged in sales and purchase transactions in foreign currency. These transactions exposed the Company to the exchange rate fluctuation risk. More than 99% of the sales amount of the Company was not valuated with the functional currency. About 40% of the purchase amount was not valuated with the functional currency. The Company used currency options to manage the exchange rate risk within the policies.

For the book value of the monetary assets and liabilities of the Company valued with non-functional currency on the balance sheet date, see Note 29.

Sensitivity analysis

The Company was affected primarily by fluctuation in the exchange rate of USD.

Our sensitivity analysis for the exchange rate of NTD (functional currency) to USD increasing or decreasing by 1% is described in the following table: The sensitivity analysis only included the outstanding foreign currency items. The translation thereof at the end of the period was adjusted by an increase or decrease of 1% in the exchange rate. The positive number in the following table means the reduced amount of the pre-tax net profit when NTD appreciates by 1% against USD; when NTD depreciates by 1% against USD, the effect on the pre-tax net profit is represented with a negative number of the same amount.

Profit or loss (Note)	2020 $ 2,987	2019
		$ 2,726

Note: The profit or loss was mainly generated from the Company’s accounts receivable and payable denominated in USD which were outstanding on the balance sheet date and were not hedged against the cash-flow risk.

The management found that the sensitivity analysis could not represent the inherent risk of exchange rate. Since the sales changed in seasons, the foreign currency risk exposure on the balance sheet date could not reflect the exposure in the midyear.

• 53 -

(2) Interest rate risk

The interest rate risk exposure occurred because the Company’s entities borrowed funds and deposits with the undertaking bank at fixed and floating rates at the same time.

The book value of the financial assets and liabilities of the Company exposed to the interest rate risk on the balance sheet date are as follows:

With fair value interest rate risk －Financial assets With cash flow interest rate risk －Financial assets	December 31, 2020 $ - 586,582	December 31, 2019
		$ 101,512 442,702

Sensitivity analysis

The following sensitivity analysis is based on the interest rate risk exposure of the non-derivative instruments on the balance sheet date. The analysis mainly focuses on the assets and liabilities with floating interest rate and assumes that the amount of outstanding assets and liabilities on the balance sheet date is completely in circulating during the reporting period.

If the interest rate increased/decreased by 25 basis points, with all other variables held constant, the Company’s net profit before tax in 2020 and 2019 was increased/decreased by NTD1,287,000 and NTD624,000, respectively, which was mainly due to the Company’s loans and deposits at floating rates.

(3) Other price risks

The Company sustained equity price risk exposure due to investment in equity securities. This investment was not held for trading but a strategic investment. The Company’s management managed risk by holding different risk investment portfolios. The Company’s equity price risk was mainly in the equity instruments offered by the Taiwan Stock Exchange for the electronics industry. The Company designated responsible teams to monitor the price risk.

Sensitivity analysis

The following sensitivity analysis is based on the equity price risk exposure on the balance sheet date.

If the equity price increased/decreased by 1%, the profit or loss before tax in 2020 was increased/decreased by NTD17,000, respectively, due to increases/decreases of the fair value of the financial assets measured at fair value through profit or loss. Other comprehensive income before tax in 2020 and 2019 was increased/decreased by NTD823,000 and NTD1,809,000, respectively, due to

• 54 -

increases/decreases of the fair value of the financial assets measured at fair value through other comprehensive income.

2. Credit risk

The credit risk refers to the risk in the financial loss of the Group because the counterparty delays in the fulfillment of the contractual obligations. Up to the balance sheet date, the Company’s potential highest credit risk exposure due to failure of the counterparty to fulfill its obligations was mainly derived from the book value of the financial assets recognized in the balance sheet.

In order to mitigate the credit risk, the Company’s management designated responsible teams to set the line of credit, approve credit, and carry out other control procedures to ensure that appropriate actions were adopted for the recovery of overdue accounts receivable. In addition, the Company reviewed the recoverable amount of accounts receivable separately on the balance sheet date to make sure that the appropriate impairment loss of the accounts receivable that could not be recovered was recognized. As such, our management considered that the Company’s credit risk was reduced.

Since the counterparty of the current funds and derivative financial instruments was a financial institution having good credit rating, no significant credit risk was expected.

Receivables were to be collected from a lot of customers. They belonged to different industries and were located in different geographic areas. The Company continuously assessed the financial status of the customers from which receivables should be recovered and, if necessary, entered into credit insurance contracts.

Up to December 31, 2020 and 2019, the balance of receivables of the Top 10 customers accounted for 71% and 63% of that of the Company, respectively. The credit concentration risk of other receivables was insignificant.

3.

Liquidity risk

The Company managed liquidity risk for the purpose to maintain the cash and cash equivalents needed for the operation, securities of high liquidity, and full banking facility to ensure that the Company had adequate financial flexibility.

Liquidity and interest rate risks

The following table describes the remaining contractual maturity analysis of the non-derivative financial liabilities within the agreed repayment period of the Company. The table is compiled based on the earliest repayment date required to the Company and the non-discounted cash flow of the financial liabilities, excluding the cash flow of the interest.

• 55 -

December 31, 2020

December 31, 2020
Non-derivative financial liability Non-interest-bearing liabilities Lease liabilities December 31, 2019 Non-derivative financial liability Non-interest-bearing liabilities Lease liabilities	Less than 1 year $ 164,721 6,164 $ 170,885 Less than 1 year $ 163,592 8,527 $ 172,119	1 to 2 years $ - 4,682 $ 4,682 1 to 2 years $ - 6,164 $ 6,164	2 to 5 years $ - 143 $ 143 2 to 5 years $ - 4,825 $ 4,825	Over 5 years
				$ - - $ - Over 5 years
					$ - - $ -

XXV. Related party transactions

Transactions between the Company and related parties are as follows:

(I) Names of related parties and their relationship with the Company and subsidiaries

Name of Related Party

KYE International Corporation (KYI) KYE Systems Europe GmbH KYE Systems (Hong Kong) Corp. DIGILIFE TECHNOLOGIES CO., LTD. (DigiLife Taiwan)

KYE Systems America Corporation (KYA)

KYE Trade (HK) Co., Ltd. (KYE Trade)

Dong-Guan Kunying Computer Products Co., Ltd. (Dong-Guan Kunying) Chung-Chiang Investment Co., Ltd. Hung-Cheng Investment Co., Ltd. STAR REACH LIMITED KAI CHIEH LIMITED

Relationship with the Company

Subsidiary Subsidiary Subsidiary

Subsidiary

Subsidiary (It was completely liquidated in February 2020)

Subsidiary

Subsidiary Subsidiary Subsidiary Associate

The Company’s de facto related party before January 23, 2019

• 56 -

(II) Operating transaction

perating transaction
Sale Subsidiary Purchase KYE Trade Subsidiary Associate		2020 $ - $ 484,510 7,710 285 $ 492,505		2019
				$ 7,329 $ 149,765 - 6,205 $ 155,970

The Company’s payment terms for exports were usually T/T, Sight or Usance L/C, and D/P. The payment was collected under O/A 120 days, 60 days, and 30 days for the transactions respectively with KYI, KYA, and DigiLife Taiwan. The Company’s sales price offered to the aforesaid related parties, except for KYI and KYA, was approximately same as the price for other individual customers. The Company’s sales price offered to KYI and KYA was determined with consideration of the products’ manufacturing costs and sales expenses based on the initial cost plus necessary and reasonable profits.

As described in Note 16 of the financial statements, for the purchase trading with KYE Trade, the Company purchased raw materials as entrusted and had them transported to the subsidiary in China for processing to finished products, which were then resold to the Company. Among the losses from material preparation of the subsidiary in China that the Company agreed to bear in the purchase trading with KYE Trade, the Company recognized NTD9,200,000 of profit on reversal of losses from material preparation and NTD18,570,000 of losses from material preparation. As of December 31, 2020 and 2019, the amounts of losses from material preparation recognized by the Company were NTD56,700,000 and NTD65,900,000 respectively, which were accounted for as costs of sales and other current liabilities. The Company’s purchase/sale with other related parties was conducted based on the transaction terms same as the terms for non-related parties.

Manufacturing expense De facto related party		2020 $ -		2019
				$ 23,215

Balance of accounts receivable from related parties on the balance sheet date is as follows:

as follows:
Subsidiary	December 31, 2020 $ -	December 31, 2019
			$ 3,434

• 57 -

Balance of other receivables from related parties on the balance sheet date is as follows:

follows:
Dong-Guan Kunying Subsidiary	December 31, 2020 $ 534,294 2,554 $ 536,848	December 31, 2019
			$ 615,283 32,750 $ 648,033

Balance of accounts payable to related parties on the balance sheet date is as follows:

follows:
Subsidiary Associate	December 31, 2020 $ 26,113 - $ 26,113	December 31, 2019
			$ - 831 $ 831

The outstanding balance of the accounts payable to related parties was not guaranteed and to be paid by cash. No guarantee was requested for the accounts receivable from related parties.

Balance of accounts payable to other related parties (including expenses payable) on the balance sheet date is as follows:

Subsidiary emuneration to key management Short-term employee benefits Post-employment benefits	December 31, 2020 $ 5,723 2020 $ 22,063 330 $ 22,393	December 31, 2019	December 31, 2019
			$ 4,636 2019
			$ 15,991 330 $ 16,321

(III) Remuneration to key management

The remuneration to the directors and key management was decided by the Remuneration Committee subject to personal performance and market trend.

XXVI. Pledged and mortgaged assets

The following assets were pledged or mortgaged to the banks as guarantee for issuance of letters of credit and for short-term loans:

Property – net	December 31, 2020 $ 344,974	December 31, 2019	December 31, 2019
			$ 346,318

• 58 -

XXVII. Significant contingent liability and unrecognized contractual commitment

In addition to those described in other notes, the Company’s significant commitments and contingencies on the balance sheet date are as follows:

(I) Significant commitments

The Company’s total prices of additional pre-sold house purchase contracts and paid payment are as follows:

payment are as follows:
Total contract price Paid payment (Note)	December 31, 2019
		$ 173,690 $ 28,771

Note: The paid payment was recognized in prepayment for equipment.

In May 2020, the Company canceled its purchase of the pre-sold house in Zhonghe District, New Taipei City, and recovered the deposit paid.

• (II) Contingencies

The SFIPC claimed that the Company is a corporate director of Unity Opto Technology, Ltd. (hereinafter referred to as “Unity Opto”), and that the financial statements of Unity Opto used circular transactions to inflate the operating revenue and exaggerated the amount of work-in-progress goods to inflate profits, causing a total of NTD569,202,000 in damage to investors. As a result, a claim for damages was filed against Unity Opto and its directors and supervisors (including the Company). The case is being adjudicated in the Taiwan New Taipei District Court, and its result is currently unknown to us. Therefore, no losses related to the case were recognized.

XXVIII. Other matters

Due to spread of the COVID-19 pandemic worldwide, the Dongguan Plant and most of the supply chain suppliers of the Company’s subsidiary in China had their Chinese New Year holidays extended to the end of February or the beginning of March when work was resumed. Warehousing and transportation services also delayed the resumption of their work, affecting the progress of consolidation and shipment of goods. As a result, the Company’s operating revenue in February 2020 dropped by 48% from the same period of 2019. Shipments have gradually returned to normal since March. Despite the easing of the pandemic in Taiwan, the Company’s sales customers in Eastern and Western Europe, Latin America and Asia Pacific were still under closed management. As the global economy continues to recede, consumers are spending their money on web shopping rather than in physical stores, and social life is instead conducted through remote interaction. Nevertheless, since the Company and its customers have promptly made adjustments, the net operating revenue in the period from January 1 to December 31, 2020 increased by NTD239,085,000 (with an annual growth of approximately 24%) from the same period of 2019, and the operating profit of NTD172,300,000 was an increase of approximately 92% from the same period of 2019. The COVID-19 pandemic has not caused significant impact to the going concern ability, working capital liquidity turnover rate, asset impairment and financing risk of the Company.

• 59 -

Due to the possibility that the pandemic will last for some time and continue to affect the global economy and the lifestyle of consumers, the Company plans to take the following measures:

Adjustment to the operational strategy

• (I) The Company will engage in the promotion of non-physical web and online marketing jointly with its customers.

• (II) The Company will introduce more products relating to the economic and lifestyles that have emerged in the post-pandemic era including stay-at-home economy, remote working and distance education.

XXIX. Information on foreign currency financial assets and liabilities with significant effect

The following information was summarized and stated based on the foreign currencies other than the Company’s functional currency. The disclosed exchange rate represents the exchange rate of such foreign currencies to the functional currency. Foreign currency financial assets and liabilities with significant effect are as follows:

December 31, 2020

December 31, 2020
Financial assets Monetary items USD RMB Investment under the equity method USD RMB HKD Financial liabilities Monetary items USD RMB	Foreign currency $ 11,208 14,673 $ 10,741 2,571 2,413 719 14,778	Exchange Rate 28.480 4.377 28.480 4.377 3.673 28.480 4.377	Book value
			$ 319,216 64,224 $ 305,915 11,253 8,864 20,486 64,684

• 60 -

December 31, 2019

December 31, 2019
Financial assets Monetary items USD RMB Investment under the equity method USD RMB AUD HKD Financial liabilities Monetary items USD HKD RMB	Foreign currency $ 9,891 9,744 14,783 2,681 4,873 2,413 799 8,482 9,858	Exchange Rate 29.980 4.305 29.980 4.305 21.005 3.849 29.980 3.849 4.305	Book value
			$ 296,517 41,948 443,206 11,543 102,363 9,289 23,967 32,646 42,440

The realized and unrealized foreign currency exchange losses of the Company in 2020 and 2019 were NTD21,965,000 and NTD7,986,000, respectively. However, it is infeasible to disclose the exchange loss and gain of each significant foreign currency because of numerous functional currencies in foreign currency transactions.

XXX. Disclosures of notes

• (I) Information on major transactions:

• Loans to others: None.

• Endorsements/guarantees for others: None.

• Securities – ending (excluding those controlled by invested subsidiaries, associates and joint ventures): Table 1.

• Aggregate purchases or sales of the same securities reaching NTD300 million or more than 20% of the paid-up capital: None.

• Acquisition of property reaching NTD300 million or more than 20% of the paid-up capital: None.

• Disposal of property reaching NTD300 million or more than 20% of the paid-in capital: None.

• Purchases or sales of goods from and to related parties reaching NTD100 million or more than 20% of the paid-up capital: Table 2.

• Accounts receivable from related parties reaching NTD100 million or more than 20% of the paid-up capital: Table 3.

• 61 -

• Trading in derivative instruments: None.

• (II) Information on investees: Table 4.

• (III) Information on investments in Mainland China:

• Information about investees in Mainland China, such as the name, main business operations, paid-in capital, method of investment, inward and outward remittance of funds, shareholding ratio, profit or loss from investments, investment book value at the end of the period, profit or loss received from investments, and limit on the amount of investment in Mainland China: Table 5.

• Any of the following significant transactions with investees in Mainland China, either directly or indirectly through a third-party area, and their prices, payment conditions, and unrealized profits or losses: Tables 2, 3 and 5.

  • (1) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.

  • (2) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.

  • (3) The amount of property transactions and the amount of resulting profits or losses.

  • (4) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.

  • (5) The highest balance, the end-of-period balance, the interest rate range, and total current interest with respect to financing of funds.

  • (6) Other transactions that have a material effect on the profit or loss of the period or on the financial position, such as the rendering or receiving of services.

• (IV) Information on major shareholders: The names and the numbers and percentages of shares held by shareholders who hold at least 5% of the total shares. (Table 6)

• 62 -

Unit: NTD thousand

KYE Systems Corp. Securities Held at the End of the Period December 31, 2020

Table 1

Holding Company	Type and Name of Securities	Relationship with the Issuer of Securities	Account Title		At the End of the Period	At the End of the Period
				Number of shares/Number of units (1,000 shares/1,000 units)	Book value	Shareholding ratio	Fair value (Note 1)
KYE Systems Corp.	Stock Powerchip Semiconductor Manufacturing Corp. Coretek Opto Corporation Monterey International Corp. Ta Shee Resort Co., Ltd. (preferred stock) Unity Opto Technology Co., Ltd. AIPTEK (private placement) Unity Opto Technology Co., Ltd. (private placement)	None The Company’s director is the chairman of the company. None None The Company’s director is the chairman of the company. None The Company’s director is the chairman of the company.	Financial assets measured at fair value through profit or loss – current Financial assets measured at fair value through other comprehensive income – non-current Financial assets measured at fair value through other comprehensive income – non-current Financial assets measured at fair value through other comprehensive income – non-current Financial assets measured at fair value through other comprehensive income – current Financial assets measured at fair value through other comprehensive income – non-current Financial assets measured at fair value through other comprehensive income – non-current	34 6,583 2,631 - 1,913 3,000 15,789	$ 1,713 48,467 22,820 30 - (Note 2) 10,950 - (Note 2)	- 9.96% 7.71% - - 2.36% 3.42%	$ 1,713 48,467 22,820 30 - (Note 2) 10,950 - (Note 2)

Note 1: The market price was determined as follows: The price of the private placement of stock, the trade of which was restricted, was estimated using the valuation method. The prices of domestic non-listed and non-OTC stocks were calculated using the valuation method.

Note 2: Unity Opto ceased trading on April 7, 2020, so there were no open market price and verifiable financial figures that could serve as the basis of valuation. The Company assessed that the fair value of Unity Opto’s equity was 0 and recognized unrealized valuation losses on investment in equity instruments measured at fair value through other comprehensive income in 2020.

Note 3: The securities held at the end of the period were not provided as guarantees or pledged as collateral for loans.

• 63 -

Purchases or sales of goods from and to related parties reaching NTD100 million or more than 20% of the paid-up capital 2020

Unit: NTD thousand

KYE Systems Corp.

Table 2

Purchaser/Seller	Counterparty	Relationship		Transaction	Transaction		Trading conditions distinct from those of general transactions and reasons thereof	Trading conditions distinct from those of general transactions and reasons thereof	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Remarks
			Purchase (sale)	Amount	Percentage in total purchases (sales)	Loan period	Unit price	Loan period	Balance	Percentage in total notes/accounts receivable (payable)
KYE Systems Corp. KYE Trade (HK) Co., Ltd.	KYE Trade (HK) Co., Ltd. Dong-Guan Kunying Computer Products Co., Ltd.	The Company’s sub-subsidiary With the same parent company	Purchase (Note 1) Purchase	$ 484,510 483,655	55% 55%	Irregularly offset by accounts receivable Irregularly offset by accounts receivable	- -	－ －	$ - -	- -

Note 1: As for the purchase trading with KYE Trade (HK) Co., Ltd., the Company purchased raw materials as entrusted and had them transported to the subsidiary in China for processing to finished products, which were then resold to the Company.

• 64 -

Unit: NTD thousand

KYE Systems Corp. Accounts receivable from related parties reaching NTD100 million or more than 20% of the paid-up capital December 31, 2020

Table 3

Company Booking Accounts Receivable	Counterparty	Relationship	Balance of Accounts Receivable from Related Parties	Turnover Rate	Overdue Accounts Receivable from Related Parties	Overdue Accounts Receivable from Related Parties	Subsequent Recovered Amount of Accounts Receivable from Related Parties	Appropriated loss allowance
					Amount	Treatment
KYE Trade (HK) Co., Ltd.	Dong-Guan Kunying Computer Products Co., Ltd.	With the same parent company	$ 534,294	(Note 1)	(Note 1)	(Note 1)	(Note 1)	$ -

Note 1: They were mainly the receivables from entrusted purchases of raw materials and machine/equipment and intermittently offset by accounts payable.

• 65 -

KYE Systems Corp.

Name and Territory of Investees and Other Relevant Information

2020

Table 4

Unit: NTD and foreign currency (thousand)

Name of Investor	Name of Investee	Territory	Main Business Operation	Original Investment Amount	Original Investment Amount	Held at the End of the Period	Held at the End of the Period	Held at the End of the Period	Current Profit (Loss) of Investee	Profit (loss) from Investments Recognized in the Current Period	Remarks
				End of the current period	End of the previous year	Number of shares (thousand shares)	Ratio (%)	Book value
KYE Systems Corp.	Genius Holding Co., Ltd. Chung-Chiang Investment Co., Ltd. Hung-Cheng Investment Co., Ltd. KYE International Corporation KYE Systems Europe GmbH KYE Systems (Hong Kong) Corp. DIGILIFE TECHNOLOGIES CO., LTD. DIGILIFE PTY LTD. SHINYOPTICS CORP. STAR REACH LIMITED TIMING PHARMACEUTICAL CO., LTD.	British Cayman Islands New Taipei City Taipei City United States of America Germany Hong Kong Taipei City Australia Tainan City Samoan Islands New Taipei City	Investment holdings Investment business Investment business Sales of computer peripherals and consumer electronic products Sales of computer peripherals and consumer electronic products Sales of computer peripherals and consumer electronic products Digital video/audio products Tourism and real estate development R&D, design, manufacturing, and sale of optical engines Investment holdings Manufacturing of Chinese medicine	USD 28,467 85,000 85,000 USD 2,610 EUR 2,270 HKD 500 652,962 AUD - 61,200 USD 417 288,184	USD 28,467 85,000 85,000 USD 2,760 EUR 2,270 HKD 500 447,367 AUD 4,900 61,200 USD 417 288,184	21,467 6,452 9,578 235 - 500 51,563 - 3,400 - 19,446	100.00 100.00 100.00 100.00 100.00 100.00 94.61 - 22.97 25.00 22.64	$ 301,777 63,693 44,116 4,138 630 8,864 581,062 - 9,181 11,254 211,917	USD 359 21 2,347 USD 4 - - 6,056 ( AUD 668 ) ( 6,753 ) ( RMB 441 ) ( 29,037 )	$ 4,218 21 2,347 132 - - 5,474 ( 5,302 ) ( 1,552 ) ( 472 ) ( 6,575 )	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary; Note 1 Subsidiary Subsidiary Subsidiary; Note 2 Investment under the equity method Investment under the equity method Investment under the equity method

Note 1: KYE Systems Europe GmbH terminated its business operations in December 2017 and is currently under liquidation.

Note 2: In November 2020, the Company sold all the shares of DIGILIFE PTY LTD held by it to Digilife Technologies Co., Ltd. The transaction was deemed by the Company to be an equity transaction since it did not change the Company’s control of DIGILIFE PTY LTD.

• 66 -

Unit: NTD and foreign currency (thousand)

KYE Systems Corp. Information on Investments in Mainland China

2020

Table 5

Name of Chinese Investees	Main Business Operation	Paid-in Capital	Paid-in Capital	Method of Investment	Accumulated Amount of Investments from Taiwan at the Beginning of the Current Period	Accumulated Amount of Investments from Taiwan at the Beginning of the Current Period	Amount of Investments Remitted or Recovered in the Current Period	Amount of Investments Remitted or Recovered in the Current Period	Accumulated Amount of Investments from Taiwan at the End of the Current Period	Current Profit (Loss) of Investee	The Company’s Shareholdin g Ratio of Direct or Indirect Investment	Profit or Loss from Investments Recognized in the Current Period (Note 4)	Investment Book Value – Ending	Profits Received from Investments as of the End of the Current Period
							Remittance	Return
Dong-Guan Kunying Computer Products Co., Ltd. Dongguan Gaoying Electronic Technology Co., Ltd. Dongguan Chiaying Electronics Co., Ltd.	Manufacturing and sales of computer mice and computer game consoles R&D and sale of computers and computer peripherals Manufacturing and sale of computer accessories, appliances and molds.	USD 15,965 USD 2,706 RMB 3,722		Indirectly invested in KYE Inc. through Genius Holding Co., Ltd. to have a 100% shareholding Indirectly invested in Moustek Investment Co., Ltd. through Genius Holding Co., Ltd. and invested operating funds through the same company Indirectly invested in Chia Ying Plastics (HK) Co., Limited through STAR REACH LIMITED and invested 25% operating funds through the same company	USD 15,965 USD 2,706 USD 417		$ - - -	$ - - -	USD 15,965 USD 2,706 USD 417	( $ 772 ) ( RMB 1,486 ) ( RMB 441 )	100% 100% 25%	( $ 772 ) ( RMB 1,486 ) ( 472 )	( USD 11,209 ) USD 380 11,253	$ - - -
Accumulated Amount of Investments from Taiwan to Mainland China at the End of the Current Period			Investment Amount Approved by the Investment Commission, MOEA			Limit on the Amount of Investments in Mainland China Specified by the Investment Commission, MOEA
USD 35,431 (Note 2 and 3)			USD 40,520 (Note 2 and 3)			$1,781,461 (Note 1)

Note 1: It was calculated based on 60% of the net value.

Note 2: The amounts of USD 150,000 from Beijing Kunying Technology Ltd. whose registration was canceled on February 28, 2005, USD 6,900,000 from Changying Electronic Factory (Houjie, Dongguan) whose registration was canceled on April 2, 2009, and USD 248,000 from Su-Te Technology (Shanghai) Co., Ltd. whose registration was canceled on November 30, 2009 were included in it.

Note 3: The Company indirectly invested in Shanghai Global Lighting Technologies Inc., Suzhou Global Lighting Technologies Inc, and Suzhou Opto Technologies Inc. through Global Lighting Technologies Inc. Since Global Lighting Technologies Inc. has been traded publicly at Taiwan Stock Exchange since July 28, 2011, please refer to the open financial statements of the company for this information.

Note 4: As for the field of the Profit or Loss from Investments Recognized in the Current Period, the invested companies in China were reviewed and certified by the same CPA’s firm in Taiwan.

• 67 -

KYE Systems Corp. Information on major shareholders December 31, 2020

Table 6

Names of Major Shareholders	Shares	Shares
	Number of Shares Held	Shareholding percentage
Ching-Hsin Cho	11,959,488	5.32%

• Note: The information on major shareholders in this table is based on the data where the total of the common and preferred shares held by a shareholder which have been registered and delivered on a non-physical basis by the Company (including treasury stocks) on the last business day at the end of the quarter, as calculated by the TDCC, is at least 5%. The capital stock recorded in the Company’s individual financial statements may differ from the actual number of shares registered and delivered on a non-physical basis due to different bases of preparation and calculation.

• 68 -

§ CONTENTS OF STATEMENTS REGARDING MAJOR ACCOUNTING ITEMS §

ITEM Statements of assets, liabilities, and equity items Statement of cash and cash equivalents Statement of financial assets measured at fair value through profit or loss – current Statement of notes and accounts receivable Statement of inventories Statement of changes in financial assets measured at fair value through other comprehensive income – non-current Statement of changes in investment under the equity method Statement of changes in property, plants, and equipment Statement of changes in accumulated depreciation of property, plants, and equipment Statement of changes in right-of-use assets Statement of changes in accumulated depreciation of right-of-use assets Statement of deferred income tax assets Statement of other non-current assets Statement of notes and accounts payable Statement of other payables Statement of other current liabilities Statement of lease liabilities Statement of deferred income tax liabilities Statements of profit or loss items Statement of net operating revenue Statement of operating costs Statement of operating expenses Statement of other profits, expenses, and losses Statement of current employee benefits, depreciation, depletion, and amortization expenses by function

NO./INDEX

1 2 3 4 5 6 Note 13 Note 13 7 8 Note 21 9 10 11 12 13 Note 21 14 15 16 Note 20 17

• 69 -

KYE Systems Corp. Statement of cash and cash equivalents December 31, 2020

Statement 1 Item Cash Cash on hand Bank deposit Foreign currency deposit Demand deposit Check deposit Total	Unit: NTD and foreign currency (thousand) Summary Amount Including USD26,000, EUR4,000, HKD44,000, RMB9,000 and NTD102,000 $ 1,181 Including USD7,552,000, EUR25,000, HKD576,000 and RMB14,664,000 282,279 304,304 717 $ 588,481

Note: USD, EUR, HKD and RMB were exchanged at the rates of US$1=$28.48, EUR$1=$35.02, HK$1=$3.673 and RMB$1=$4.377, respectively.

• 70 -

KYE Systems Corp.

Statement of financial assets measured at fair value through profit or loss – current December 31, 2020

Statement 2 Name of Financial Instruments Powerchip Semiconductor Manufacturing Corp.	Number of Shares or Pieces 34,277	Unit: NTD thousand, except for the price per share, in NTD. Fair Value Acquisition Cost Unit Price Total $ - 49.98$ 1,713	Unit: NTD thousand, except for the price per share, in NTD. Fair Value Acquisition Cost Unit Price Total $ - 49.98$ 1,713	Unit: NTD thousand, except for the price per share, in NTD. Fair Value Acquisition Cost Unit Price Total $ - 49.98$ 1,713	Unit: NTD thousand, except for the price per share, in NTD. Fair Value Acquisition Cost Unit Price Total $ - 49.98$ 1,713
			Unit Price 49.98		Total
					$ 1,713

Note: The aforesaid assets were not provided as guarantees or pledged as collateral for loans.

• 71 -

KYE Systems Corp. Statement of notes and accounts receivable December 31, 2020

KYE Systems Corp. Statement of notes and accounts receivable December 31, 2020
Statement 3 Name of Customer A company B company C company D company E company F company G company H company Others (Note) Subtotal Less: Loss allowance Notes and accounts receivable – net	Unit: NTD thousand Amount $ 19,370 10,336 8,665 8,252 7,900 7,633 7,587 7,093 26,527 103,363 ( 489 ) $ 102,874
	(

Note: The balance of each customer did not exceed 5% of the balance of this item.

• 72 -

==> picture [445 x 236] intentionally omitted <==

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

KYE Systems Corp.
Statement of inventories
December 31, 2020
Statement 4 Unit: NTD thousand
Market Price
Item Amount (Note 1)
Finished good $ 74,073 $ 107,815
Work in process 60,634 60,624
Raw materials 30,892 31,215
Total $ 165,599 $ 199,654
----- End of picture text -----

Note: The market price was valuated at the net realizable value.

• 73 -

KYE Systems Corp.

Statement of changes in financial assets measured at fair value through other comprehensive income – non-current January 1 to December 31, 2020

Statement 5

Unit: NTD thousand

Name CORETEK OPTO CORPORATION Monterey International Corp. Ta Shee Resort Co., Ltd. AIPTEK International Inc. Unity Opto Technology Co., Ltd. Total	Balance at the Beginning of the Period Number of shares Book value 6,593,476 $ 34,022 2,630,600 22,276 3 30 3,000,000 5,850 15,789,000 95,682 $ 157,860	Balance at the Beginning of the Period Number of shares Book value 6,593,476 $ 34,022 2,630,600 22,276 3 30 3,000,000 5,850 15,789,000 95,682 $ 157,860	Increase in the Current Period Number of shares Amount - $ 14,543 - 544 - - - 5,100 - - $ 20,187	Increase in the Current Period Number of shares Amount - $ 14,543 - 544 - - - 5,100 - - $ 20,187	Decrease in the	Current Period Amount $ 98 - - - 95,682 $ 95,780	Balance at the endingof theperiod Number of shares Book value 6,583,476 $ 48,467 2,630,600 22,820 3 30 3,000,000 10,950 15,789,000 - $ 82,267	Balance at the endingof theperiod Number of shares Book value 6,583,476 $ 48,467 2,630,600 22,820 3 30 3,000,000 10,950 15,789,000 - $ 82,267	Provided as Guarantees or Pledges None None None None None	Remarks
	Number of shares 6,593,476 2,630,600 3 3,000,000 15,789,000		Number of shares - - - - -		Number of shares 10,000 - - - -		Number of shares 6,583,476 2,630,600 3 3,000,000 15,789,000
										Common stock (Notes 1 and 2) Common stock (Note 1) Preferred stock Common stock (Note 1) Common stock (Note 2)

Note 1: The increase was recognized in the profit from valuation of the year.

Note 2: The decrease was recognized in the loss from valuation and the disposal of part of shares in the year.

• 74 -

KYE Systems Corp.

Statement of changes in investment under the equity method January 1 to December 31, 2020

Statement 6

Statement 6 Name Genius Holding Co., Ltd. Chung-Chiang Investment Co., Ltd. Hung-Cheng Investment Co., Ltd. KYE International Corporation KYE Systems Europe GmbH KYE Systems (Hong Kong) Corp. DIGILIFE TECHNOLOGIES CO., LTD. SHINYOPTICS CORP. ADVANCE TOP LIMITED STAR REACH LIMITED DIGILIFE PTY LTD. TIMING PHARMACEUTICAL CO., LTD. Total	Balance at the Beginning of the Period Number of shares Amount 21,467,377 $ 436,031 6,451,800 63,717 9,578,103 44,130 250,000 7,175 - 605 500,000 9,289 31,003,057 363,074 3,400,000 10,732 150,000 - - 11,543 4,900,000 102,363 19,445,600 216,851 $ 1,265,510		Increase in the Current Period (Note 1) Number of shares Amount - $ 4,224 - 21 - 2,347 50,000 16,856 - 25 - - 20,559,541 221,896 - - - - - 183 - - - 1,654 $ 247,206		Decrease in the Current Period (Note 2) Number of shares Amount - $ 138,478 - 45 - 2,361 65,000 19,893 - - - 425 - 3,908 - 1,551 - - - 472 4,900,000 102,363 - 6,588 $ 276,084		Balance at the ending of the			period Amount $ 301,777 63,693 44,116 4,138 630 8,864 581,062 9,181 - 11,254 - 211,917 $ 1,236,632	Market Price or Net Equity (Note 3) Unit Price Total amount 14.71 $ 315,777 9.87 63,693 4.61 44,116 17.61 4,138 - 630 17.73 8,864 11.27 581,062 2.70 9,181 - - - 11,254 - - 10.9 211,917 $ 1,250,632		Unit: NTD thousand; Unit price: NTD Provided as Guarantees or Pledges None 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃
	Number of shares 21,467,377 6,451,800 9,578,103 250,000 - 500,000 31,003,057 3,400,000 150,000 - 4,900,000 19,445,600		Number of shares - - - 50,000 - - 20,559,541 - - - - -		Number of shares - - - 65,000 - - - - - - 4,900,000 -		Shareholdi ng % 100.00 100.00 100.00 100.00 100.00 100.00 94.61 22.97 20.00 25.00 - 22.64	Number of shares 21,467,377 6,451,800 9,578,103 235,000 - 500,000 51,562,598 3,400,000 150,000 - - 19,445,600			Unit Price 14.71 9.87 4.61 17.61 - 17.73 11.27 2.70 - - - 10.9

Note 1: The decrease included capital increase in cash, profits from investment under the equity method, adjustments from foreign currency translation, adjustments to unrealized gross margin, capital reserves, unrealized profits or losses of financial products and sales of the shares held.

Note 2: The decrease included cash dividends, losses from investment under the equity method, adjustments from foreign currency translation, adjustments to unrealized gross margin, capital reserves and unrealized profits or losses of financial products. Note 3: It was calculated based on the CPA audited financial statements of the investee in the same period.

• 75 -

Statement 7 Item Building Office equipment Transport equipment	KYE Systems Corp. Statement of changes in right-of-use assets January 1 to December 31, 2020 Unit: NTD thousand Balance at the Beginning of the Period Increase in the Current Period Decrease in the Current Period Balance at the ending of the period Remarks $ 15,970 $ - $ 7,803 $ 8,167 - 687 - - 687 - 6,269 - 4,759 1,510 - $ 22,926 $ - $ 12,562 $ 10,364

• 76 -

KYE Systems Corp.

Statement of changes in accumulated depreciation of right-of-use assets January 1 to December 31, 2020

Statement 8 Item Building Office equipment Transport equipment	Balance at the Beginning of the Period $ 888 137 2,745 $ 3,770	Increase in the Current Period $ 5,322 138 2,895 $ 8,355	Decrease in the Current Period $ - - 4,759 $ 4,759	Unit: NTD thousand Balance at the ending of the period Remarks $ 6,210 Note 275 Note 881 Note $ 7,366

Note: The depreciation was computed on the straight-line basis over the following useful lives: 3 years for building, 5 years for office equipment, 1 to 2 years for transport equipment.

• 77 -

KYE Systems Corp. Statement of other non-current assets December 31, 2020 Statement 9 Item Amount Unamortized expense – others $ 57 Unamortized expense – molds 544 Subtotal 601 Non-operating assets 9,481 Guarantee deposits paid 1,878 Total $ 11,960	Unit: NTD thousand Remarks Amortization over 2 years Amortization over 1 year

• 78 -

KYE Systems Corp. Statement of notes and accounts payable December 31, 2020

KYE Systems Corp. Statement of notes and accounts payable December 31, 2020
Statement 10 Name of Partner Related party KYE Trade (HK) Co., Ltd. Non-related party KAI CHIEH LIMITED JOVIAL DAY HOLDINGS LIMITED Others (Note) Subtotal Total	Unit: NTD thousand Amount $ 26,113 63,168 8,503 4,662 76,333 $ 102,446

Note: The balance of each partner did not exceed 5% of the balance of this item.

• 79 -

KYE Systems Corp. Statement of other payables December 31, 2020

KYE Systems Corp. Statement of other payables December 31, 2020
Statement 11 Item Related party KYE Systems (Hong Kong) Corp. Others (Note) Subtotal Non-related party Salaries and bonuses payable Service fees payable Market promotion fee payable Others (Note) Subtotal Total	Unit: NTD thousand Amount $ 3,976 1,747 5,723 11,934 10,908 6,901 25,690 55,433 $ 61,156

Note: Each balance did not exceed 5% of the balance of this item.

• 80 -

KYE Systems Corp.

Statement of other current liabilities

December 31, 2020

KYE Systems Corp. Statement of other current liabilities December 31, 2020
Statement 12 Item Provision for losses on purchase commitments Receipts in advance Agency receipts Temporary receipts Sales tax payable Total	Unit: NTD thousand Amount
		$ 56,700 15,646 6,413 1,796 57 $ 80,612

• 81 -

Unit: NTD thousand

KYE Systems Corp. Statement of lease liabilities December 31, 2020

Statement 13

Item Building – current Building – non-current Office equipment – current Office equipment – non-current Transport equipment – current	Summary Office and parking space Office and parking space Printing equipment Printing equipment Company car	Lease term January 2021 – December 2021 January 2022 – November 2022 January 2021 – December 2021 January 2022 – December 2023 January 2021 – November 2021	Discount rate 1.5% 1.5% 1.5% 1.5% 1.5%	Balance at the ending of the period $ 5,336 4,508 137 282 571 $ 10,834	Remarks

• 82 -

KYE Systems Corp. Statement of net operating revenue January 1 to December 31, 2020 Statement 14 Item Quantity Mouse 4,694,628 Keyboard 2,019,907 Speaker 1,437,634 Others 1,101,159 Total	Unit: NTD thousand Amount $ 446,836 338,456 236,406 202,821 $ 1,224,519

• 83 -

KYE Systems Corp. Statement of operating costs January 1 to December 31, 2020

Statement 15

Unit: NTD thousand

Item Raw material consumption Raw material at beginning of the year Plus: Raw material purchased in the year Less: Raw material at ending of the year Cost to sell raw materials Consumption in the year Transfer to other expenses Plus: Manufacturing expenses Input costs in the year Plus: Work in process at the beginning of the year Work in process purchased in the year Less: Work in process at the ending of the year Costs to sell works in process Transfer to other titles Costs of finished goods Plus: Finished goods at the beginning of the year Finished goods purchased in the year Less: Finished goods at the ending of the year Transfer to other titles Cost of sale of finished goods Cost of sale of raw materials Cost of sale of works in process Total operating costs

Amount

$ 15,134 196,200 ( 30,892 ) ( 2 ) 180,440 1 153,833 334,274 25,539 70,599 ( 60,634 ) ( 26,879 ) ( 12,270 ) 330,629 118,673 502,331 ( 74,073 ) ( 20,090 ) 857,470 2 26,879 $ 884,351

• 84 -

KYE Systems Corp. Statement of operating expenses January 1 to December 31, 2020

Statement 16

Unit: NTD thousand

Item Salary expense Service fee Export expenses Depreciation expense Others (Note) Total		Marketing expenses $ 13,464 16,371 17,325 35 14,172 $ 61,367	Administrative expense $ 42,644 13,510 - 12,360 37,406 $ 105,920		R&D Expense $ 1,693 - - - 438 $ 2,131		Total
							$ 57,801 29,881 17,325 12,395 52,016 $ 169,418

Note: Each amount did not exceed 5% of the balance of this item.

• 85 -

KYE Systems Corp.

Statement of current employee benefits, depreciation, and amortization expenses by function January 1 to December 31, 2020 and 2019

Statement 17

Unit: NTD thousand

Employee benefit expense Salary expense Labor and health insurance expenses Pension expenses Remuneration to directors Other employee benefit expenses Total Depreciation expense Amortization expenses		2020	2020		Total $ 57,801 5,086 2,867 2,907 7,843 $ 76,504 $ 12,395 $ 3,954		2019	2019
	Classified as operatingcosts $ - - - - - $ - $ - $ 3,765	Classified as operatingexpenses $ 57,801 5,086 2,867 2,907 7,843 $ 76,504 $ 12,395 $ 189	Classified as non-operating expenses $ - - - - - $ - $ - $ -			Classified as operatingcosts $ - - - - - $ - $ - $ 9,331	Classified as operatingexpenses $ 59,608 6,040 ( 4,286 ) 2,314 18,331 $ 82,007 $ 7,260 $ 2,363	Classified as non-operating expenses $ - - - - - $ - $ 5,459 $ -	Total
									$ 59,608 6,040 ( 4,286 ) 2,314 18,331 $ 82,007 $ 12,719 $ 11,694

Notes:

1. The number of employees in the year and in the previous year was 62 and 65, respectively, and the number of directors who were not employees was 7 and 7, respectively.

2. (1) The average employee benefit expenses in the year were NTD1,338,000 (“Total employee benefit expenses in the year - total remuneration to directors” / “Number of employees in the year - number of directors who were not employees”). The average employee benefit expenses in the previous year were NTD1,374,000 (“Total employee benefit expenses in the previous year - total remuneration to directors” / “Number of employees in the previous year - number of directors who were not employees”).

3. (2) The average employee salary expenses in the year were NTD1,051,000 (Total salary expenses in the year / “Number of employees in the year - number of directors who were not employees”). The average employee salary expenses in the previous year were NTD1,028,000 (Total salary expenses in the previous year / “Number of employees in the previous year - number of directors who were not employees”).

4. (3) The average employee salary expenses were reduced by about 2% (“Average employee salary expense in the year - average employee salary expense in the previous year” / average employee salary expense in the previous year).

5. (4) The Company does not have any supervisors, and it has established the Audit Committee in accordance with the law to perform supervisory functions.

6. (5) Subject to Article 25 of the Articles of Incorporation, no more than 1% of the earning in the current year shall be remuneration to directors and independent directors for such year. Also, reasonable remunerations may be provided for directors depending on the operating results and their contribution to the Company’s performance. The remuneration to the General Manager and Vice President is subject to the Company’s personnel regulations, the level of salary for such positions in the market, responsibility of such positions in the Company, and contribution to the performance of business targets. The procedure of determining remuneration not only takes the Company’s overall operating performance, future operating risks, and development trend in the industry into account, but also provides reasonable remuneration based on the individual achievement and the contribution to the Company’s performance. Relevant performance evaluations and review remuneration rationality shall be approved by the Remuneration Committee and Board of Directors, and the remuneration system is also reviewed from time to time according to the actual operation and related laws to ensure a balance between the Company’s sustainable operation and risk control.

7. 86 -