KYE — Annual Report 2021

Jul 19, 2021

Stock Code: 2365

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KYE Systems Corp. 2020 Annual Report

Website designated by the Financial Supervisory Commission for information reporting: http://mops.twse.com.tw Website for the Company’s annual report: http://tw.geniusnet.com

May 1, 2021

• I. The Company’s spokesperson and deputy spokesperson Name of spokesperson: Shih-Kun Tso Title of spokesperson: Chief Executive Officer Name of deputy spokesperson: An-Min Kao Title of deputy spokesperson: Vice President Telephone: (02)2995-6645 Email: IR@geniusnet.com.tw

II. Addresses and telephones of the Company and its factory Head Office: 1-8F, No. 492, Sec. 5, Chongxin Rd., Sanchong Dist., New Taipei City (02)2995-6645 Chongxin Factory: 4, 5, 6 and 8F, No. 492, Sec. 5, Chongxin Rd., Sanchong Dist., New Taipei City (02)2995-6645

• III. Stock transfer agency

Name: Stock Agency Division, Mega Securities Co., Ltd. Address: 1F, No. 95, Sec. 2, Zhongxiao E. Rd., Taipei City Website: www.emega.com.tw Telephone: (02)3393-0898

IV. CPA(s) certifying the financial statements of the most recent year Name of CPA(s): Mei-Hui Wu, Yao-Lin Huang Name of accounting firm: Deloitte Taiwan Address: 20F, No. 100, Songren Rd., Xinyi Dist., Taipei City Website: www.deloitte.com.tw Telephone: (02)2725-9988

• V. Name(s) of the exchange(s) where overseas securities are listed and traded, and the method(s) of information inquiry: None.

• VI. The Company’s website: http://tw.geniusnet.com

Table of Contents

	Table of Contents	Table of Contents
Chapter	1. Letter to Shareholders ................................................................................................... 1
I.	2020	operating result .............................................................................................................. 1
II.	Summary of the 2021 business plan ...................................................................................... 3
III.	The strategy of the Company’s future development and the impact of external competitions,
	legal regulations and overall business environment .............................................................. 3
Chapter	2.	Company Profile .......................................................................................................... 5
I.	Date	of establishment ............................................................................................................. 5
II.	Company history .................................................................................................................... 5
Chapter	3.	Corporate Governance Report .................................................................................. 11
I.	Organizational system ...........................................................................................................11
	(I)	The Company’s organizational structure .................................................................11
	(II)	Operations of the main divisions ............................................................................ 12
II.	Information on the directors, supervisors, President, vice presidents, assistant vice
	presidents, and division and branch managers .................................................................... 14
III.	Remuneration for directors, supervisors, President and vice presidents in the most recent
	year ...................................................................................................................................... 19
IV.	Implementation of corporate governance ............................................................................ 22
	(I)	Operations of the Board of Directors ...................................................................... 22
	(II)	Operations of the Audit Committee ........................................................................ 24
	(III)	Participation of supervisors in the operations of the Board of Directors ................ 26
	(IV)	Implementation of corporate governance, differences with the Corporate
		Governance Best Practice Principles for TWSE/TPEx Listed Companies, and
		reasons thereof ........................................................................................................ 27
	(V)	Composition and operation of the Remuneration Committee, if established ......... 33
	(VI)	Fulfillment of corporate social responsibility, differences with the Corporate Social
		Responsibility Best Practice Principles for TWSE/GTSM Listed Companies, and
		reasons thereof ........................................................................................................ 36
	(VII)	Implementation of ethical corporate management, differences with the Ethical
		Corporate Management Best Practice Principles for TWSE/GTSM Listed
		Companies, and reasons thereof ............................................................................. 43
	(VIII) Methods of inquiry about the corporate governance principles and related
		regulations established by the Company ................................................................ 45
	(IX)	Other important information sufficient for increasing understanding of the
		implementation of corporate governance ............................................................... 45
	(X)	Implementation of the internal control system ....................................................... 46
	(XI)	The details, main deficiencies and improvements in relation to legal penalties
		imposed against the Company or its internal personnel or penalties imposed by the
		Company against its internal personnel for violation of the internal control system
		in the most recent year and up until the date of publication of the annual report,
		where the results of such penalties were likely to have significant impact on
		shareholder equities or securities prices ................................................................. 47
	(XII)	Important resolutions by the shareholders’ meeting and the Board of Directors in
		the most recent year and up until the date of publication of the annual report ....... 47
	(XIII) The main contents of dissenting opinions recorded or included in written statements,
		which were expressed by directors or supervisors against important resolutions
		adopted by the Board of Directors in the most recent year and up until the date of
		publication of the annual report .............................................................................. 48
	(XIV) Resignations and discharges of the Chairman, President and accounting, financial,
		internal audit, corporate governance and R&D managers in the most recent year

	and up until the date of publication of the annual report ........................................ 48
V.	Information on CPAs’ professional fees ............................................................................... 48
VI.	Information on change of CPAs ........................................................................................... 48
VII.	The Company’s Chairman, President or any financial or accounting manager who has been
	employed by the firm of the certifying CPA(s) or any of its affiliates in the most recent year
	............................................................................................................................................. 48
VIII.	Changes in the transfer and pledge of equities by directors, supervisors, managers and
	shareholders holding more than 10% of the total shares in the most recent year and up until
	the date of publication of the annual report ......................................................................... 48
IX.	Information on the top-10 shareholders who are related to each other, in a spousal
	relationship or relatives within the second degree of kinship ............................................. 49
X.	Shares held by the Company and its directors, supervisors and managers and by businesses
	directly or indirectly controlled by the Company in a single investee business, and the total
	shareholding ratio calculated on a consolidated basis ......................................................... 50
Chapter 4. Financing .................................................................................................................... 51
I.	Capital and shares ................................................................................................................ 51
	(I) Sources of share capital .......................................................................................... 51
	(II) Composition of shareholders .................................................................................. 52
	(III) Distribution of equity .............................................................................................. 52
	(IV) List of major shareholders ...................................................................................... 52
	(V) Market prices per share, net values, earnings and dividends in the most recent two
	years and the information related thereto ............................................................... 53
	(VI) Impact of the Company’s dividend policy and its implementation and the
	significant changes expected in the dividend policy .............................................. 54
	(VII) Impact of the bonus shares proposed at the shareholders’ meeting on the
	Company’s operating performance and EPS .......................................................... 55
	(VIII) Remuneration to employees and directors .............................................................. 56
	(IX) Repurchase of the Company’s shares...................................................................... 57
II.	Issuance of corporate bonds ................................................................................................. 57
III.	Issuance of preferred shares and global depository receipts ................................................ 57
IV.	Issuance of employee stock warrants ................................................................................... 57
V.	Issuance of restricted stock awards for employees .............................................................. 57
VI.	Issuance of new shares in connection with mergers or acquisitions or with the acquisition of
	the shares of another company ............................................................................................ 57
VII.	Implementation of the capital utilization plan ..................................................................... 57
Chapter 5. Overview of Business Operations ............................................................................. 58
I.	Business activities ................................................................................................................ 58
	(I) Scope of business .................................................................................................... 58
	(II) Overview of the Industry ........................................................................................ 59
	(III) Overview of technology and R&D ......................................................................... 63
	(IV) Long-term and short-term business development plans ......................................... 63
II.	Overview of the market and sales ........................................................................................ 65
	(I) Market analysis ....................................................................................................... 65
	(II) Important purposes and production processes of main products ............................ 70
	(III) Supply status of main materials .............................................................................. 71
	(IV) Names of the customers representing more than 10% of the total purchase (sales) in
	any of the most recent two years, the amounts and percentages of their purchases
	(sales) and the reasons for change in increase/decrease ......................................... 73
	(V) Production value in the most recent two years ....................................................... 74
	(VI) Sales value in the most recent two years................................................................. 74
III.	The number, average years of service, average age and distribution of educational level of
	employees in service for the most recent two years and up until the date of printing of the

	annual report ........................................................................................................................ 74
IV.	Information on environmental protection expenditure ........................................................ 75
V.	Labor-management relations ................................................................................................ 76
VI.	Important contracts .............................................................................................................. 77
VII.	Relevant certificates received from the competent authority by the personnel related to the
	transparency of financial information ................................................................................. 78
VIII.	Code of conduct or ethics for employees ............................................................................. 78
IX.	Procedures for handling material insider information ......................................................... 80
X.	Measures for protection of the working environment and employees’ safety ..................... 80
Chapter 6. Financial Overview .................................................................................................... 82
I.	Condensed balance sheet and statement of comprehensive income for the most recent five
	years .................................................................................................................................... 82
II.	Financial analysis for the most recent five years ................................................................. 86
III.	Audit Committee’s review report on the financial statements of the most recent year ....... 89
IV.	The financial statements of the most recent year ................................................................. 90
V.	Individual financial statements of the Company audited by CPA(s) in the most recent year
	........................................................................................................................................... 156
VI.	The impact of financial distress experienced by the Company and its affiliates, if any, to the
	Company’s financial status in the most recent year and up until the date of publication of
	the annual report ................................................................................................................ 219
Chapter 7. Review and Analysis of Financial Status and Financial Performance and Risk
	Matters ...................................................................................................................... 220
I.	Review and analysis of financial status ............................................................................. 220
II.	Review and analysis of financial performance .................................................................. 221
III.	Review and analysis of cash flow ...................................................................................... 222
IV.	Effect of material capital expenditure in the most recent year on the financial status ....... 223
V.	The main reasons for the gains or losses of investments in the most recent year, the
	improvement plan and the investment plans for the next year .......................................... 223
VI.	Analysis and assessment of the risk in the most recent year and up until the date of
	publication of the annual report ......................................................................................... 223
VII.	Structure and function of risk management organizations ................................................. 228
VIII.	Goals and methods of applicable hedge accounting .......................................................... 228
IX.	Other important matters ..................................................................................................... 228
Chapter 8. Special Information ................................................................................................. 229
I.	Information on affiliates ..................................................................................................... 229
II.	Private placement of securities in the most recent year and up until the date of publication
	of the annual report ............................................................................................................ 234
III.	Holding or disposal of the Company’s shares by its subsidiaries in the most recent year and
	up until the date of publication of the annual report.......................................................... 234
IV.	Resolutions of the 2020 annual shareholders’ meeting and their implementation ............. 234
V.	Information on the affiliates’ endorsement/guarantee, loaning of funds to others, and
	engagement in trading of derivatives ................................................................................ 234
VI.	Other supplementary information required ........................................................................ 234
Chapter 9. Matters that have a significant impact on shareholders’ equity or securities prices
	as set forth in Subparagraph 2, Paragraph 3, Article 36 of the Securities and
	Exchange Act in the most recent year and up until the date of publication of the
	annual report. ........................................................................................................... 235

Chapter 1.Letter to Shareholders

Dear shareholders,

For people around the world, 2020 was a year of pain and hardship. It was a ye ar that KYE has never experienced since the company was founded, and in which the overall external environment was totally uncertain. The two-year old US–China confli ct escalated from a trade war to mutual sanctions and confrontations in national securi ty and technology. The COVID-19 pandemic which broke out at the beginning of the year has spread worldwide, causing more than 100 million cases of infection and ove r 3 million deaths. Many countries locked down major cities, closed their borders, and ceased all social activities. Such attempts to keep the pandemic under control through a stay-at-home lifestyle led to a halt in global economic activities for nearly six mon ths and resulted in big recessions in most countries. Since the second half of the year, lockdowns have been gradually lifted, and governments have introduced unprecedente d monetary easing measures and bailout plans to save the economy. Following the Ch inese New Year holidays, KYE was faced with a difficult situation where factories we re closed at the production end, logistics were stalled, and customer demands and capi tal payments came to a halt. Nevertheless, KYE gradually overcame such challenges b y ensuring sufficient materials for supply chains, resuming factory production and logi stics and getting customer demands to return. Operations and shipments were finally b ack to normal. Beginning from the second half of the year, KYE has benefited from t he demands generated by people living a new lifestyle and economic way under the p andemic with high-speed Internet connection (5G & Wi-Fi 6). Traditional computer bu siness has thrived again thanks to remote teaching and working, online learning, stay-a t-home economy and gaming, which have also spurred the sales of computer periphera ls including mice, keyboards, webcams, speakers and headsets. Since July, KYE’s reve nue has turned around from its weak state during recent years to annual growth drive n by orders generated by a surge in customer demands and has continued to increase on a monthly basis. This has not only proved that opportunities always rise amid diffi culties but also given us a rare chance for pressure test, showing customers, users and all stakeholders that KYE is a brand company capable of ensuring stable supply of materials and products and creating revenues and cash flows under such an adverse en vironment like that of last year. The 2020 net profit after tax attributable to the paren t company was over NTD146 million, with a net profit per share of NTD0.64. The o perating performance of 2020 is summarized as follows:

• I. 2020 operating result

• (I) Results of implementation of the business plan

The Company’s 2020 consolidated net operating revenue was more than NTD1.653 billion, an increase by 3% from NTD1.605 billion in 2019. The 2020 net profit after tax attributable to the parent company was over NTD146 million, a slight decrease from 2019. However, the operating profit from the primary business saw significant growth more than twice that of 2019, with a net profit after tax per share of NTD0.64.

Unit: NTD Thousand

Item	2020	2019	Growth rate
Operating revenue	1,653,269	1,605,479	3%
Gross operating profit	515,571	455,092	13%
Operating expense	353,776	401,811	(12%)

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Operating profit	161,795	53,281	204%
Net profit before tax	184,672	175,192	5%
Net profit after tax	146,905	154,664	(5%)
Net profit attributable to owner of theparent company	146,236	151,480	(3%)

(II) Status of budget implementation

In accordance with the ―Regulations Governing the Publication of Financial Forecasts of Public Companies,‖ this item is not applicable due to non-publication of any financial forecast by the Company in 2020.

• (III) Revenue, expense and profitability analysis

• Revenue and expense analysis

Revenue and expense analysis
	Unit: NTD Thousand
Item	2020	2019	Amount of change
Net cash inflow from operatingactivities	158,859	241,665	(82,806)
Net cash inflow (outflow) from investing activities	(164,791)	1,026,201	(1,190,992)
Net cash outflow from financing activities	(72,834)	(1,055,039)	982,205

The Company’s interest income in 2020 was NTD8,954,000, mostly the interest income from operating activities. The interest expenses were NTD4,156,000, and the net exchange loss was NTD32,161,000. Furthermore, the net cash inflow from operating activities in 2020 was NTD158,859,000, while the consolidated net cash outflow from investing and financing activities was NTD237,625,000. The cash and cash equivalents (including the impact of change in exchange rate) in this year decreased by NTD81,000,000, and the balance of consolidated cash and cash equivalents at the end of the year was NTD1,403,681,000.

2. Profitability analysis

NTD1,403,681,000. Profitabilityanalysis
Item	Year	2020	2019
Financial structure analysis	Ratio of liabilities to assets	18.81%	14.71%
	Ratio of long-term capital to property, plant and equipment	480.11%	673.21%
Solvency analysis	Current ratio	524.47%	577.06%
	Quick ratio	442.95%	506.20%
Operating ability analysis	Collection days for receivables	25	34
	Average sales days	78	64
Profitability analysis	Return on assets	3.97%	3.81%
	Return on equity	4.72%	4.76%
	Net profit margin	8.90%	9.47%
	EPS (NTD)	0.64	0.65

(IV) Performance in research and development

KYE will stay committed to the ideas and appeals of convenience, easy-to-use and high quality and provide a series of cost-effective products that are user-friendly, intuitively applicable and eco-friendly and which are integrated with environmentally friendly processes for the purpose of creating better digital life experience for users. For example, KYE has developed rechargeable, eco-friendly

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and energy-efficient mice with extended battery life and safe design, which do not require battery replacement and can reduce damage to the natural environment. KYE has also developed smart computer peripherals which have integrated software or applications to provide better user experience for consumers and increase user productivity. In addition, KYE’s capacitive stylus pens which can be used in an iOS or Android operating system to meet market demands have received the honor of the Taiwan Excellence Awards, and the products are able to provide consumers with a whole-new experience in drawing and writing.

• II. Summary of the 2021 business plan

• (I) Operational policies

• Continue to increase the sales momentum of private brand products and the primary market.

• Optimize product lines to release price-worthy, innovative products.

• Keep increasing the contribution of employees’ per capita output and controlling the operating expenses.

• (II) 2021 business objectives

• The Company expects to increase the market share of each private brand

• product in 2021.

• (III) Key marketing policies

• Production and quality policies

  • (1) Strengthen factory production and quality management to enhance production efficiency.

  • (2) Implement lean production to reduce the labor and manufacturing expenses of factories.

  • (3) Strictly control the periods of accounts receivable collection and inventory realization.

• Marketing policies

  • (1) Focus on the brand.

  • (2) Integrate smart mobile products.

  • (3) Increase the operating revenues and benefits of smart keyboards & mice, Bluetooth speakers & headsets, smart video and image, and gaming products.

  • (4) Improve the operating revenues and benefits in Europe, ASEAN, Latin America, the Middle East, and Africa.

  • (5) Invest in more flexible and powerful marketing strategies and resources.

  • (6) Adopt both online and offline channels.

III. The strategy of the Company’s future development and the impact of external competitions, legal regulations and overall business environment

• (I) Future development strategy

We exclusively utilize smart mice and keyboards combined with software or APPs as an advantage to surpass our competitors in respect of cost effectiveness and continue to increase our market share in such market. Due to the wide spread of mobile information and various developments regarding network applications, touch interfaces have become the mainstream in the market. The COVID-19 pandemic has changed the ways in which we work, learn and conduct social life, and high-speed Internet connection specifications such as 5G/Wi-Fi 6 have brought opportunities in remote and cloud business. Thus, we have mainly focused on smartphones, smart TVs, tablets, videos and images, gaming products, audio products and touch devices for future operational growth.

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• (II) The impact among the environments of external competition, legal ambiance, and overall business operations.

The Company has operated with the brand for years and established a well-known global brand image. Following computer mice, multiple computer peripherals and consumer electronic products, including computer keyboards, audio speakers, headsets, and digital cameras have become the backbone of the Company. In addition, despite intensive competition in the computer peripheral industry, we continue to develop new video-image and professional gaming products with the aid of our brand and diversified product strategies adopted to spread out risk and minimize related impacts.

For the legal ambiance environment, the Company has gained recognition from major international brands for our compliance with the RoHS and WEEE requirements. Moreover, we have passed several third-party verification processes for IECQ QC 080000 Hazardous Substance Process Management and ISO14064 Greenhouse Gas Control System in the past few years. In addition, better social, economic, and environmental results have also been achieved with membership in and the high standards of the EICC (Electronic Industry Citizenship Coalition).

The keyword of last year (2020) was COVID-19, which made all other things look trivial. Initially, business owners were uneasy when faced with uncertainties, but they did not expect the demands of new economy under the pandemic to revive the sunsetting computer industry which saw the best growth in a decade (YOY+13%). This year (2021), as the world enters the post-pandemic era, the common perception is that the pandemic will ease during the second half of the year after vaccines have been developed and administered worldwide. Furthermore, with the resumption of economic activities, major economies led by the U.S. have introduced large-scale monetary easing and financial stimulus measures. Therefore, a strong recovery of the global economy is expected. According to the latest World Economic Outlook issued by the IMF, the projected global economic growth has been revised upward to 6.0%, the highest since the 1970s. The U.S. and China have remained the two leaders of the global economy. This year, the U.S. is expected to see its growth increase to 6.4%, while China’s growth is likely to reach 8.4%. For developed economies and emerging markets, their growth rates are expected to be 5.1% and 6.7% respectively. Amid such optimism, however, there are also worries. The post-pandemic era is something human history has never witnessed, and the challenges and uncertainties are no less than those of 2020. For example, many countries have adopted zero interest rate policies and printed a huge amount of money, causing flows of hot money, financial market fluctuations and rising costs due to insufficient chip production since Q4 of 2020. Such circumstances have in turn led to a sharp increase in the prices and transportation costs of parts, components, materials, metals, plastics, pulp and other raw materials, as well as shortages of materials, workers, containers, cargo spaces and ships. That is, what’s lacking is not money but goods, and business performance may be affected as a result. Reflected from the producer price index (PPI), the rise of the consumer price index (CPI) of end electronic products and daily supplies has created the risk of heavy inflation. These uncertain factors in the overall environment will be a test for the Company’s ability to respond. As a global leading brand of computer peripherals, KYE hopes to keep following the trends and opportunities of 2020 that saw computer sales thrive and continue the development of innovative products. KYE will also put efforts in brand management and strive to improve its overall performance through the competitiveness of the brand products.

All the best,

Chairman Shih-Kun Tso

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Chapter 2.Company Profile

• I. Date of establishment: November 3, 1983.

• II. Company history

• (I) Mergers, acquisitions, reinvestments in affiliated companies, and restructuring: None.

• (II) A major quantity of shares belonging to a director, supervisor, or shareholder holding greater than a 10 percent stake in the Company has been transferred or has otherwise changed hands: None.

• (III) Changes in management: None.

• (IV) Significant changes in conduct of the operation or the business: None.

• (V) Other major events that have an impact on shareholders’ equity and the impact thereof on the Company:

Date	Important Events
November 1983	Mr. Song-Young Chen and Mr. Shin-Yang Tso jointly planned and established the KYE Systems Ltd.
October 1985	Officiallylaunched computer mice with the―GENIUS‖brand.
November 1988	Name changed to KYE Systems Corp.
August 1994	Acquired the Magic Roller U.S. patent for mouse wheels. (Patent No: 5,530,455)
March 1995	Passed the latest DNVISO-9001 international certification.
November 1996	Passed the DNV ISO-14001 Environmental Management System certification.
November 1997	Officiallylisted our stock onNovember3,1997.
December 2001	Established the TL9000 Electronic Quality Management System for Telecommunications/Communications and passed third party certification.
July 2004	Established the OHSAS 18000 Occupational Safety and Health ManagementSystem andpassed thirdpartycertification.
October 2005	Chemical laboratory in the Kunying DongGuan Factory passed ISO 17025certification.
January2006	First introduced the self-developed RoHScomputer control system.
August 2006	Navigator 535 won the Taiwan Excellence Sliver Award.
October 2006	Look320S (web camera) won theJapaneseGood Design Award.
October 2006	Established the QC 80000 Hazardous Substance Management System andpassed thirdpartycertification.
March 2007	Look 313 Media (web camera) won the German Red Dot Design Award.
June 2007	Launched the first mouse with an optical scroll wheel module in the world.
November 2007	Met the requirements for revising the ISO 9001:2008 Quality ManagementSystem andpassed thirdpartycertification.
January 2008	BT-03i (touch Bluetooth headset) won the U.S. CES Innovations Award.
March 2008	Traveler 525 Laser won the German Red Dot Design Award: Product Design.
April 2009	SlimStar 820V (solar powered keyboard) won the National Product ImageSilver Award.
June 2009	Traveler 915BT Laser and Navigator 365 Laser won the 2009 iF Communication Design Award.
December 2009	Micro Traveler900LS,MousePen M508W,SlimStar i820,and 14

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Date	Important Events
	otherproductswon the 2009 National Product Image Award.
April 2010	Established the ISO14064-1 GHG Emission Inventory Management System andpassed thirdpartycertification.
October 2010	Genius was ranked in the top 20 among international brands in Taiwan for the sixth time.
October 2010	Passed the EICC membershipcertification.
December 2010	Ourwireless RingMousewon theGerman iF Design Award.
December 2010	Completed the carbon footprint investigation for the Micro Traveler 900s Wireless Mouse in accordance with the PAS2050/ISO 14067 CD andpassed thirdpartycertification.
March 2011	Thewireless RingMousewon theGerman Red Dot Design Award.
July2011	KYE Genius won the Taiwan Top100 Brand award.
December 2011	The DEATH TAKER mouse, Imperator Pro backlight keyboard and CAVIMANUS headset in the professional GX-Gaming series won Product of the Year for PCHOME/PCADV/TechBang.
February2012	Won the New Taipei CityOutstandingEnterprise Awards.
May 2012	The SP-i250G mini portable speaker and Ring Presenter wireless ring presenter mouse in the professional GX-Gaming series won the Computex Design&Innovation Awards.
August 2012	The Ring Presenter wireless ring presenter mouse, SP-900BT Bluetooth speaker, GHP-300B headset packaging, DeathTaker professional gaming mouse, Maurus mouse packaging, and SP-i250G packaging won the Golden Pin Design Award of the Taiwan Design Center.
September 2012	The G-Shot HD575T HD digital touch camera won the U.S TechwareLabsSilver Award.
October 2012	The Traveler 9010LS 2-battery wireless laser mouse supporting super resolution screenswon theU.S Overclockers TechGolden Award.
January 2013	The Gila mouse in the professional GX-Gaming series won the U.S. CESInnovations Award.
January2013	RingMouse 2 won the Excellent Design Award of the Computer DIY.
April 2013	The wireless NX-ECO mini mouse won the ―Design Award‖ and ―BestBuyAward‖ from Poland’s Recenzator.
May 2013	The Gila mouse and Manticore keyboard in the professional GX-Gamingseries won the Computex Design & Innovation Awards.
February2014	RingPointerwon theGerman iF Design Award.
April 2014	The energy mouse, wireless mouse with 2 receivers, and DVR-FHD650 vehicle recorder won the 22nd Taiwan Excellence Award in 2014.
May 2014	The SlimStar i280 keyboard won a special award from Russia’s PC Magazine.
August 2014	The SW-G2.1 2000 gaming speaker won the Balkans market TOP 5 award of the 24sata NEWS.
August 2014	The HS-G500V and HS-G550 gaming headsets, and Manticore gaming keyboard in the GX Gaming series were recommended by BRAVO,a Romanian magazine.
October 2014	The GX Gaming Deathtaker gaming mouse won the silver award from Germany’s Gamezoom.
December 2014	The HS-920BT Bluetooth headset and DX-7000X mouse were recommended byTabu,a Romanian media company.
October 2015	The Scorpion K9 gaming keyboard won the recommendation award from Poctacpro kazdeho,aCzech media company.

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Date	Important Events
November 2015	The Scorpion M6-600 gaming mouse won the recommendation award from PCLab.pl,a Polishwebsite.
December 2015	The SP-925BT Bluetooth speaker was recommended on the Polish YouTubewebsite.
February 2017	The GP-B200 touch pen and ECO-7015 rechargeable mouse won the 25th Taiwan Excellence Award in 2017.
June 2017	Launchedthe Scorpion K10 gaming keyboard with the special mechanical keycap design allowing players to enjoy rapid response speed and real-timegamingexperience.
November 2017	Geniuslaunchedthe SlimStar 8008 smart keyboard & mouse set with a metal hairline design and chocolate keys. Its simple appearance and streamlined functionality allow users to click or tap only once to visit any favorite websites at will without complicated steps. A smart life with efficiency can be realized in this easy way and is within our reach.
June 2018	Launched the ECO-8100 and ECO-8015 wireless rechargeable mice allowing users to use them up to 180 days with one charge and without replacing any battery. A built-in lithium-ion battery is designed with additional protective chips to prevent the battery from burning due to overheat, leaking, short circuiting, or overcharging. Users are allowed to use the products without any worries and may adjust the user settingswith theSmartGenius App.
July 2018	Launched a series of Genius Smart Keyboards: Smart KB-100, Smart KB-101 and Smart KB-102. Every profile setting of the Genius Smart Keyboard enables consumers to work in a most convenient and efficient way. With its help, consumers are able to easily complete work and enjoythis technologywithout anytrouble.
August 2018	Launched the ECam 8000 and QCam 6000, the latest 1080p full HD web cameras which can record true-to-life videos and have digital microphones. In order to capture videos and images at any time, the web camera is also designed with a standard USB PnP function without the need to install any drivers. For the purpose of capturing the best image from any angle and wider applications, the web camera is equipped with a removable 360-degree swivel clip and a 90-degree upward/downward angled design. The clip, which fits laptops, LCDs, orCRT monitors,maybe attached to a standard tripod.
June 2019	Launched the Smart KM-8100 & Smart KM-8200 smart wireless keyboard and mouse sets. With innovative technology, the wireless keyboard can support three kinds of devices (tablets, laptops, and PCs) with only one wireless receiver for connection. It allows consumers to switch to use the keyboard with three devices without buying additional keyboards while saving time, money, and space. A shortcut for quickly visiting the SmartGenius may be set up with its ―Genius Smart Key‖ functionalityfor Smart KM-8100 & Smart KM-8200.
June 2019	Launched the HS-G600V vibration light gaming headphone. Incredible game scenes become more realistic and immersive with vibration feedback. The large ear cover design creates a more comfortable experience. A microphone is attached to the headphone to allow users to easily move it to the correct position for reception. It’s also convenient to adjustvolume on thewire.
July 2019	The Smart KM-200 smart wired keyboard and mouse set was launched. A shortcut forquicklyvisitingthe SmartGenius maybe set

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Date	Important Events
	up with its ―Genius Smart Key‖ functionality. A classic stylish design with a spill-resistant feature adds fashion to the keyboard. The symmetrical wired mouse is designed with a round ergonomic contour to comfortablyfit the hand.
July 2019	Launched the USB SoundBar 100 stereo speaker for family entertainment with a simple stylish design and a rectangle shape for easy placement. The USB SoundBar 100 can deliver a deep clear bass response with its stereo system to bring you an immersive experience with theater-level sound effects at home. The USB powered design enables connection to computers or use with travel chargers, allowing you to enjoy music easily. SP-Q180 supports multiple media and may be connected to any device equipped with a 3.5mm jack, including cellphones/tablets/laptops/PCs/MP3s, etc. Use a separate in-line controller to adjust the volume easily at will with no need to do it with the computer.
July 2019	Launched the mini mouse wrist rest pad: The QPad 100 is made of high-performance material and ultra-soft silicone which relax and reduce the pressure on the wrist on a smooth surface in order to mitigate the burden caused by long-time use. The non-slip PU base keeps the QPad 100 pad glued to the table when usingit toprevent thepad from slipping.
July 2019	Launched the G-WP 200M memory foam keyboard pad utilizing high-tech memory foam providing excellent breathability and comfort. The feature makes the pad not only fit and support the wrist softly but also reduces and absorbs the pressure on the wrist when typing to minimize wrist fatigue. Bumpy surface increases breathability and comfort. Non-slip bottom allows the pad to stick to the table without slipping.
January 2019	Launched the Scorpion Spear gaming mouse with a streamlined design which perfectly fits the hand shape, makes the hand feel more comfortable during games, and improves non-slip performance and control accuracy. Trendy breathing lights add atmosphere during games to bring various gaming experience. Scorpion Spear is designed with six buttons, and users may set up the buttons based on different games. It is also equipped with an integrated micro switch with a 5 million click life and side buttons (shortcuts for going forward/backward) for easy and efficient control in professional games. Professional gaming optical engine up to 2000DPI. Its 800/1600/2000DPI switch options enable quick and precise positioning,even when the mouse moves fast.
August 2019	Launched the Scorpion Spear Pro gaming mouse featuring an arc shaped design that ergonomically fits the hand shape, makes the hand feel more comfortable during games, and improves non-slip performance and control accuracy. Trendy breathing lights add atmosphere during games to bring various gaming experience. Scorpion Spear is designed with eight buttons, and users may set up the buttons based on different games. It is also equipped with an integrated micro switch with a 5 million click life and side buttons (shortcuts for going forward/backward) for easy and efficient control in professional games. Professional gaming optical engine up to 3200DPI. Its 400-32000DPI options, enables quick and precise positioning,even when the mouse moves fast. USB braided cable

-8-

Date	Important Events
	promises faster and more stable data transmission and has a longer cycle life due to itswearable and high tensile features.
September 2019	Launched a USB mini powered mobile speaker: Even with its lightweight and space-saving size, the SP-Q160 speaker can deliver a powerful sound, and is equipped with a control knob to adjust the volume at will. The USB powered design enables connection to computers or use with travel chargers, allowing you to enjoy music easily. The SP-Q160 also supports multiple media and may be connected to any device equipped with a 3.5mm jack, including cellphones/tablets/laptops/PCs/MP3s,etc.
September 2019	Launched a USB mini powered mobile speaker: which is designed with a fashionable and striking shape, space-saving size, and curveline design. Moreover, the SP-Q180 speaker can deliver a clear and powerful stereo sound effect. The USB powered design enables connection to computers or use with travel chargers, allowing you to enjoy music easily. SP-Q180 supports multiple media and may be connected to any device equipped with a 3.5mm jack, including cellphones/tablets/laptops/PCs/MP3s, etc. Use a separate in-line controller to adjust the volume easily at will with no need to do it with the computer.
October 2019	Launched a new USB wooden speaker: The SP-HF180 features a wood grain housing with dust cap, making it both versatile and stylish. The USB powered design enables connection to computers or use with travel chargers. SP-HF180 supports multiple media and may be connected to any device equipped with a 3.5mm jack, including cellphones/tablets/laptops/PCs/MP3s, etc. Use a separate in-line controller to adjust the volume easily at will with no need to do it with the computer.
October 2019	Launched the KB-116 full-size classic wired keyboard with a lightweight and space-saving design to save your working space as much as possible. Half-height keycap design provides a comfortable touch, smooth and accurate typing experience, and good rebound. KB-116 is spill-resistant with a water drainage design, so that liquid spilled on the keyboard can be drained out without causing damage to your keyboard. White laser-engraved letters on the keys are wearable and durable and not easily worn out. Users may adjust the legs on the bottom which are ergonomic and ideal for long-time typing. The full-sized keyboard uses the standard layout and integrated number pad to allow you to work more efficiently. A USB interface is adopted to supportplugandplay.
October 2019	Launched the KB-118 full-size elegant wired standard keyboard with a half-height keycap design which provides a comfortable touch, smooth and accurate typing experience, and good rebound. The unique wrist rest design effectively reduces wrist fatigue. KB-118 is spill-resistant with a water drainage design, so that liquid spilled on the keyboard can be drained out without causing damage to your keyboard. White laser-engraved letters on the keys are wearable and durable and not easily worn out. Users may adjust the legs on the bottom which are ergonomic and ideal for long-time typing. The full-sized keyboard uses the standard layout and integrated number pad to allow you to work more efficiently. A USB interface is adopted to support plug and play.

-9-

Date	Important Events
November 2019	Launched the SlimStar 230 streamlined wired chocolate keyboard. Its lightweight design saves your table space while its chocolate key design provides you with a quiet typing experience. The ergonomic design integrated with the unique round edge has the best inclined angle that allows the wrist to relax and be comfortable after a long time typing. SlimStar 230 provides seven multimedia shortcuts to easilyswitch in one tapbetween multiple settings.
December 2019	Launched the Scorpion K8 wired gaming keyboard without a frame but with floating keycaps which provide a mechanical-like touch, force feedback, and perfect fit to your hand curve when typing, allowing you to be in the best condition during each game. Players may switch seven RGB breathing lights at will to enjoy spectacular backlighting and visual effects. The Scorpion K8 is equipped with a 19-key conflict-free design with n-key rollover. Fully programmable keys can be configured using the SmartGenius APP to have the macro recording function. Its iron base design prevents the keyboard from moving because of fast movement to deliver a bettergamingexperience.
December 2019	Launched a hard gaming mouse pad with lighting effect: The GX-Pad 600H RGB is designed with the RGB sidelight effect. Players can switch the lighting effects between ten modes by a single button. The GX-Pad 600H RGB uses the soft cloth surface to enable the players to control the mouse faster, more precisely and smoothly. The non-slip rubber base effectively prevents the pad from slipping when moving the mouse to deliver a better gaming experience. Micro USB connectors.
January 2020	Launched a high-end gaming headphone: With the HS-G710V, incredible game scenes become more realistic and immersive with the 7.1-channel virtual 360-degree surround sound and vibration feedback. The large ear cover design creates a more comfortable experience, making the HS-G710V ideal for long-time use. A microphone is attached to the headphone to allow users to easily move it to the correct position for reception. It’s also convenient to adjust volume on the wire.
October 2020	Launched the KB-117 full-size classic wired keyboard with a lightweight and space-saving design to save your working space as much as possible. Half-height keycap design provides a comfortable touch, smooth and accurate typing experience, and good rebound. KB-116 is spill-resistant with a water drainage design, so that liquid spilled on the keyboard can be drained out without causing damage to your keyboard. White laser-engraved letters on the keys are wearable and durable and not easily worn out. Users may adjust the legs on the bottom which are ergonomic and ideal for long-time typing. The full-sized keyboard uses the standard layout and integrated number pad to allow you to work more efficiently. A USB interface is adopted to supportplugandplay.

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Chapter 3.Corporate Governance Report

I. Organizational system

• (I) The Company’s organizational structure

==> picture [606 x 416] intentionally omitted <==

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

Shareholders’
Meeting
Audit Committee
Board of Directors Remuneration
Committee
Audit Office
Chairman
Chairman Office
President
Original Brand &
Research & Manufacturing
Product Marketing Manufacturing OEM Business Unit
Development Division
Business Unit
Software R&D Dept. Product Design Dept. Network Sales Dept. Marketing Dept. Product Planning Dept. Sales Force VI Sales Force V Sales Force IV Sales Force III Sales Force II Sales Force I OEM Sales Dept. Customer Service Dept. US Subsidiary, KYI DongGuan Factory Human Resource Dept.
China Subsidiary, Gaoying Shipping Management Dept. Material Management Dept. Quality Assurance Division
Finance & Accounting Division
Manufacturing Management Dept. Production Research Technical Dept. Management Information Systems Intellectual Property & Legal Dept.
Outsourcing Project Management Dept.
----- End of picture text -----

-11-

(II) Operations of the main divisions

Main Divisions	Operations
Audit Office	Audit and evaluation for the control implementation and functional operation of
	each division at home and abroad.
Chairman Office	Research, planning, and implementation of specific projects.
	Planning and evaluation for the domestic and overseas investment projects of
	the Group.
	External communication and public relations.
	Coordination and integration of all divisions’ works.
	Overall planning, promotion, and follow ups for business matters and
	operational procedures.
Intellectual	Planning and management of the company’s intellectual property rights, business
Property & Legal	operational risk prevention, dispute handling, and related legal information and
Dept.	service supports.
Human Resource	Corporate organizational planning, company culture promotion, management and
Dept.	implementation of HR strategies, general and administration affairs, employee
	services, and occupational safety and health management.
Management	Planning, establishment, and maintenance of information systems.
Information
Systems
Quality Assurance	ISO9001/QC 080000 system promotion and management, CSR promotion and
Division	report preparation, planning and implementation of new product design
	verification and reliability plans, design and production of the verification
	equipment and tooling, instrument calibration, and design verification of
	purchased products.
Finance &	Financial operations, credit control, accounting treatment for suppliers and clients,
Accounting	and statement preparation.
Division	Voucher examination, account matter handling, receivables and payables
	management, business tax declarations, consolidated financial statements and
	note preparation, operational analysis, accounting system conversion, and
	accounting management for overseas subsidiaries.
	Planning and implementation for supervision of the Company’s funding
	operation to improve financial safety and profitability, foreign exchange risks
	and financing management, and operational analysis.
Manufacturing	Supervision and direction for planning and implementation of the production
Division	strategies for the Company’s products
	Production Research Technical Dept.: Product design development and
	technology transfer planning consistent with the headquarters in Taiwan.
	Manufacturing Management Dept.: Production scheduling, material control
	planning, organization of the meetings about marketing, material checks, and
	material review.
	Material Management Dept.: New business opportunity development, cost
	management, supply chain management, and order and payment
	management.
	Outsourcing Project Management Dept.: Selection of outsourcing suppliers,
	and management of outsourced product quality, cost, delivery dates, and
	order payments.
	Shipping Management Dept.: Shipping operations, and shipment planning
	and management.
	DongGuan Factory: Manufacturing and management of the Company’s
	products.
	China Subsidiary, Gaoying: Business management and support for
	subsidiaries in China.

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Main Divisions	Operations
US Subsidiary, KYI	Business management and support.
Customer Service	Product warranty policy management, product after-sales service, and complaint
Dept.	handling.
OEM Sales	Supervision and planning of OEM/ODM/EMS projects and management.
Division	OEM Sales Dept.: Existing client management, new client development, and new
	product promotion.
Original Brand &	Sales Force I: Private brands, positioning and promotion, product sales
Manufacturing	operation, business development and channel management in the Russian
Business Unit	Federation and CIS areas.
	Sales Force II: Business development and channel management in Latin
	America, business management, and support for overseas subsidiaries,
	business development and channel management in the North American
	market.
	Sales Force III: Private brands, positioning and promotion, product sale
	operation, business development and channel management in the EU.
	Sales Force IV: Private brands, positioning and promotion, product sale
	operation, business development and channel management in the Asia Pacific
	region.
	Sales Force V: Private brand positioning and promotion, product sales
	operation, business development and channel management in the Middle East
	and Africa.
	Sales Force VI: Private brands, positioning and promotion, product sale
	operation, business development, and channel management in Taiwan.
Product Marketing	Product Planning Dept.: Market information collection, evaluation, strategy
	planning, product line development planning, product plan and new
	business/channel development.
	Marketing Dept.: Planning and implementation of product feature marketing
	activities and promotional materials according to the product planning and
	business development, such as public relations events, media reports and
	exhibitions.
	Network Sales Dept.: New product and business opportunity development,
	provision of related market information analysis, data, usage and handling
	suggestions, and expansion of online materials, social media, and online
	shops.
	Product Design Dept.: Transformation of the main organizational goal and
	principle into the design, shape, and packaging of products to highlight the
	focus of the products. Planning and implementation of positioning for the
	overall design and image of the brand and product line.
Research &	Software R&D Dept.: Planning, design, and R&D of the outsourced and in-house
Development	project software, software validation assistance, application for each software
	technology patent, update and optimization of the current website at
	geniusnet.com based on the required functions, introduction of the SmartGenius
	APP into project software planning and design, and joint development of the
	projects.

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II. Information on the directors, supervisors, President, vice presidents, assistant vice presidents, and division and branch managers

(I) Information of directors and supervisors (I)

																	(May1,2021)Unit: Shares;% Other Managers, Directors, or Supervisors who are Spouses or Relatives within the Second Degree of Kinship Remarks Title Name Relations hip Director Ching-H sin Cho Father and son (Note 2)	(May1,2021)Unit: Shares;% Other Managers, Directors, or Supervisors who are Spouses or Relatives within the Second Degree of Kinship Remarks Title Name Relations hip Director Ching-H sin Cho Father and son (Note 2)	(May1,2021)Unit: Shares;% Other Managers, Directors, or Supervisors who are Spouses or Relatives within the Second Degree of Kinship Remarks Title Name Relations hip Director Ching-H sin Cho Father and son (Note 2)	(May1,2021)Unit: Shares;% Other Managers, Directors, or Supervisors who are Spouses or Relatives within the Second Degree of Kinship Remarks Title Name Relations hip Director Ching-H sin Cho Father and son (Note 2)
Title	National ity or Place of Registra tion	Name	Gen der	Date of Election (Start of Office)	Term	Date of First Election	Shareholding at the Time of Election		Current Shareholding		Current Shares Held by Spouse and Minor Children		Shares Held in the Names of Others		Academic and Career Achievements	Concurrent Positions in the Company and in Other Companies	Other Managers, Directors, or Supervisors who are Spouses or Relatives within the Second Degree of Kinship			Remarks
							Number of shares	Share holdi ng ratio	Number of shares	Share holdi ng ratio	Number of shares	Share holdin g ratio	Number of shares	Share holdi ng ratio			Title	Name	Relations hip
Chairman	The Republi c of China	Shih-Ku n Tso	Mal e	2019.06.21	3 years	1988.11.1 5	5,877,815	1.95	5,877,815	2.62	2,938,010	1.31	0	0.00	Vocational high school CEO and President of KYE Systems Corp.	1. CEO and President of KYE Systems Corp. 2. Director of KYE Systems (Hong Kong) Corp. 3. Representative of the Juristic Person Director of KYE International Corporation 4. Representative of the Juristic Person Director of Genius Holding Co., Ltd. 5. Representative of the Juristic Person Director of Globalink Holding Co., Ltd. 6. Representative of the Juristic Person Director of Moustek Investment Co., Ltd. 7. Representative of the Juristic Person Director of KYE Inc. 8. Representative of the Juristic Person Director of Chung-Chiang Investment Co., Ltd. 9. Representative of the Juristic Person Director of Hung-Cheng Investment Co., Ltd. 10. Representative of the Juristic Person Director of Dong-Guan Kunying Computer Products Co., Ltd. 11. Director of KYE Trade (HK) Co., Ltd. 12. Representative of the Juristic Person Director of DIGILIFE TECHNOLOGIES CO., LTD. 13. Representative of the Juristic Person Director of	Director	Ching-H sin Cho	Father and son	(Note 2)

-14-

Title	National ity or Place of Registra tion	Name	Gen der	Date of Election (Start of Office)	Term	Date of First Election	Shareholding at the Time of Election	Shareholding at the Time of Election	Current Shareholding	Current Shareholding	Current Shares Held by Spouse and Minor Children	Current Shares Held by Spouse and Minor Children	Shares Held in the Names of Others	Shares Held in the Names of Others	Academic and Career Achievements	Concurrent Positions in the Company and in Other Companies	Other Managers, Directors, or Supervisors who are Spouses or Relatives within the Second Degree of Kinship	Other Managers, Directors, or Supervisors who are Spouses or Relatives within the Second Degree of Kinship	Other Managers, Directors, or Supervisors who are Spouses or Relatives within the Second Degree of Kinship	Remarks
							Number of shares	Share holdi ng ratio	Number of shares	Share holdi ng ratio	Number of shares	Share holdin g ratio	Number of shares	Share holdi ng ratio			Title	Name	Relations hip
																Dongguan Gaoying Electronic Technology Co., Ltd. 14. Representative of the Juristic Person Director of DIGILIFE PTY LTD.
Director	The Republi c of China	Ching-H sin Cho	Mal e	2019.06.21	3 years	2019.06.2 1	11,959,488	3.97	11,959,488	5.33	0	0.00	0	0.00	Vice President of Cho-Ying Construction Ltd.	None	Chairm an	Shih-Kun Tso	Father and son	None
Director	The Republi c of China	Yung-Fa r Wei	Mal e	2019.06.21	3 years	2007.06.1 3	463,061	0.15	250,061	0.11	0	0.00	0	0.00	Vocational high school Chairman of GWO LIN ELECTRONICS CO., LTD.	1. Chairman of GWO LIN ELECTRONICS CO., LTD. Chairman of SEN SHE TECHNOLOGY INC. Supervisor of DIGILIFE TECHNOLOGIES CO., LTD. Representative of the Juristic Person Director of Dong-Guan Kunying Computer Products Co., Ltd.	None	None	None	None
Director	The Republi c of China	Han-Lia ng Hu	Mal e	2019.06.21	3 years	2019.06.2 1	0	0.00	0	0.00	0	0.00	0	0.00	MBA of Accounting and Management Decision-making, National Taiwan University Passed Senior Qualification Examination of CPAs Independent Director of Hermes Microvision, Inc. Supervisor of United Way of Taiwan	1. Partner Accountant of Cordiality Justice Service CPAS & CO. Director of GODEX INTERNATIONAL CO., LTD. Director of Scientech Corporation Supervisor of Orient Pharma Co., Ltd. Chairman of ALGOLTEK, INC. Director of CHIEN JUI Venture Capital, Ltd. Director of BASECOM TELECOMMUNICATIO N CO., LTD. Independent Director of Episil-Precision Inc. Independent Director of PROMATE ELECTRONIC CO.,LTD.	None	None	None	None
Independ ent Director	The Republi c of China	Hung-Ts u Hsu	Mal e	2019.06.21	3 years	2016.06.0 6	0	0.00	0	0.00	0	0.00	0	0.00	Department of Textile, Nanya Institute of Technology	1. President of VAV INTERNATIONAL CORPORATION Representative of the Juristic	None	None	None	None

-15-

Title	National ity or Place of Registra tion	Name	Gen der	Date of Election (Start of Office)	Term	Date of First Election	Shareholding at the Time of Election	Shareholding at the Time of Election	Current Shareholding	Current Shareholding	Current Shares Held by Spouse and Minor Children	Current Shares Held by Spouse and Minor Children	Shares Held in the Names of Others	Shares Held in the Names of Others	Academic and Career Achievements	Concurrent Positions in the Company and in Other Companies	Other Managers, Directors, or Supervisors who are Spouses or Relatives within the Second Degree of Kinship	Other Managers, Directors, or Supervisors who are Spouses or Relatives within the Second Degree of Kinship	Other Managers, Directors, or Supervisors who are Spouses or Relatives within the Second Degree of Kinship	Remarks
							Number of shares	Share holdi ng ratio	Number of shares	Share holdi ng ratio	Number of shares	Share holdin g ratio	Number of shares	Share holdi ng ratio			Title	Name	Relations hip
															Senior Vice President of Solteam Incorporation Director of Solteam Incorporation	Person Director of VAV INTERNATIONAL CORPORATION
Independ ent Director	The Republi c of China	Jennyum r Kao	Mal e	2019.06.21	3 years	2019.06.2 1	0	0.00	0	0.00	0	0.00	0	0.00	M.A. Program of Applied Physics, Chung Yuan Christian University Researcher of Optoelectronic Laboratory of ITRI Assistant Manager of the R&D Division of TYNTEK CORPORATION	1. Chairman of ANWELL SEMICONDUCTOR CORPORATION President of CORETEK OPTO CORPORATION Chairman of CORETEK OPTO CORPORATION	None	None	None	None
Independ ent Director	The Republi c of China	Anti Tsai	Mal e	2019.06.21	3 years	2016.06.0 6	0	0.00	0	0.00	0	0.00	0	0.00	Dong Rong Junior High School President of EVER GRAND CONSTRUCTION LIMITED	President of EVER GRAND CONSTRUCTION LIMITED	None	None	None	None

Note 1: The shareholdings referred to above are based on the shares registered as of April 25, 2021, the date of transfer suspension.

• Note 2: (1) In consideration of the overall operating plan and strategy implementation performance of the Group, the same person serves as the Chairman and President of the Company while the other directors are not employees of the Company. The Board of Directors still functions effectively and provides supervision.

• (2) The Company intends to increase the number of independent directors for the next reelection of the BOD and will retain half of the directors which are not employees or managers of the Company to strengthen the structure of the Board of Directors.

Note 3: Director Ching-Huei Wu resigned due to personal reason, effective as of Jan. 19, 2021.

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May 1, 2021

(I) Information of directors and supervisors (II)

(I)	Information of directors and supervisors (II)	Information of directors and supervisors (II)	Information of directors and supervisors (II)													May1,2021
Qualifications Name	Having more than five years of experience and the following professional qualifications							Independence (Note)								Number of publicly listed companies in which concurrently serves as an independent director
	Lecturer or above in commerce, law, finance, accounting or subjects required by the Company’s business in public or private colleges or universities	Judge, public prosecutor, attorney, accountant, or other professional or technical specialists who have passed a national examination and received a certificate in a profession necessary for the Company’s business	Commerce, law, finance, accounting, or other work experience required by the Company’s business	1	2	3	4	5	6	7	8	9	10	11	12
Shih-Kun Tso																0
Ching-Hsin Cho																0
Yung-Far Wei																0
Han-Liang Hu																2
Hung-Tsu Hsu																0
Jennyumr Kao																0
Anti Tsai																0

Note: A ―  ‖ is placed in the box if the Director or Supervisor met the following conditions during active duty and two years prior to the election.

• （1） Not employed by the Company or any of its affiliates.

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

• （3） Not a natural-person shareholder who holds shares, together with those held by his/her spouse or minor children or held in the name of another person, in an aggregate amount of at least 1% of the total shares issued by the Company or is one of the top-10 shareholders of the Company.

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

• （5） Not a director, supervisor, or employee that has 5% or higher ownership interest in the company, being the top-5 corporate shareholders or the institutional shareholders who designate representative as the corporate director or supervisor in accordance with Paragraph 1 or 2, Article 27 of the Company Act (the same does not apply, however, in cases where the person is an independent director of the Company, its parent company, any subsidiary, or a subsidiary of the same parent company, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary).

• （6） Not a director, supervisor or employee of other Company in which the number of directors or more than half of the voting shares is under the control of the same person (the same does not apply, however, in cases where the person is an independent director of the Company, its parent company, any subsidiary, or a subsidiary of the same parent company, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary).

• （7） Not a director, supervisor or employee of another company or institution in which the Chairman, President or personnel with equivalent position are the same person or have spouse relationship (the same does not apply, however, in cases where the person is an independent director of the Company, its parent company, any subsidiary, or a subsidiary of the same parent company, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary).

• （8） Not a director, supervisor, manager, or shareholder holding more than 5% of a specified company or institution that has a financial or business relationships with the Company (the same does not apply, to certain companies or institutions holding more than 20% of the total issued shares of the Company, but no more than 50% and to independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at the Company and its parent or subsidiary or a subsidiary of the same parent).

• （9） Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides auditing services to the company or any affiliate of the company, or that provides commercial, legal, financial, accounting, or related services to the company or any affiliate of the company for which the provider in the past two years has received cumulative remuneration exceeding NTD 500,000, or a spouse thereof. However, this shall not apply to the members of the Remuneration Committee, Review Committee for Public Acquisitions or Special Committee for Mergers executing their duties in accordance with the Securities and Exchange Act or Business Mergers and Acquisitions Act.

• （10） Not a spouse or relative within the second degree of kinship of another director.

• （11） Not meet the conditions specified in any of the sub-paragraphs of Article 30 of the Company Act.

• （12） No government agency, juristic person or their representatives are elected under Article 27 of the Company Act.

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(II) Information on the President, vice presidents, assistant vice presidents, and division and branch managers

(May 1, 2021) Unit: Shares; %

Title	Nati onali ty	Name	Gender	Date of Election (Start of Office)	Shareholding	Shareholding	Shares Held by Spouse and/or Minor Children	Shares Held by Spouse and/or Minor Children	Shares Held in the Names of Others	Shares Held in the Names of Others	Academic and Career Achievements	Concurrent Positions in Other Companies	Managers Who are Spouses or Relatives within the Second Degree of Kinship	Managers Who are Spouses or Relatives within the Second Degree of Kinship	Managers Who are Spouses or Relatives within the Second Degree of Kinship	Remarks
					Number of shares	Shareh olding ratio	Number of shares	Shareh olding ratio	Number of shares	Shareh olding ratio			Title	Name	Relation ship
CEO and President	The Repub lic of China	Shih-Kun Tso	Male	2006.10.01	5,877,815	2.62	2,938,010	1.31	0	0.00	Vocational high school President of KYE Systems Corp.	1. Director of KYE Systems (Hong Kong) Corp. Representative of the Juristic Person Director of KYE International Corporation Representative of the Juristic Person Director of Genius Holding Co., Ltd. Representative of the Juristic Person Director of Globalink Holding Co., Ltd. Representative of the Juristic Person Director of Moustek Investment Co., Ltd. Representative of the Juristic Person Director of KYE Inc. Representative of the Juristic Person Director of Chung-Chiang Investment Co., Ltd. Representative of the Juristic Person Director of Hung-Cheng Investment Co., Ltd. Representative of the Juristic Person Director of Dong-Guan Kunying Computer Products Co., Ltd. Director of KYE Trade (HK) Co., Ltd. Representative of the Juristic Person Director of DIGILIFE TECHNOLOGIES CO., LTD. Representative of the Juristic Person Director of Dongguan Gaoying Electronic Technology Co., Ltd. Representative of the Juristic Person Director of DIGILIFE PTY LTD.	None	None	None	(Note 2)
Senior Vice President	The Repub lic of China	Kuo-Ying Wei	Female	2015.02.01	0	0.00	0	0.00	0	0.00	DePaul University, Master of Science LOGITECH FAR EAST LTD., Factory Director of China Suzhou Factory	None	None	None	None	None
Vice President、 Accounting Officer and Corporate Govermance Officer	The Repub lic of China	An-Min Kao	Male	2008.01.01	108,756	0.05	0	0.00	0	0.00	Master’s of Business Administration, The City College of New York Manager of PricewaterhouseCoopers Taiwan	Representative of the Juristic Person Director of Hung-Cheng Investment Co., Ltd.	None	None	None	None

Note 1: The shareholdings referred to above are based on the shares registered as of April 25, 2021, the date of transfer suspension.

Note 2: (1) In consideration of the overall operating plan and strategy implementation performance of the Group, the same person serves as the Chairman and President of the Company while the other directors are not employees of the Company. The Board of Directors still functions effectively and provides supervision.

• (2) The Company intends to increase the number of independent directors for the next reelection of the BOD and will retain half of the directors which are not employees or managers of the Company to strengthen the structure of the Board of Directors.

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III. Remuneration for directors, supervisors, President and vice presidents in the most recent year

• (I) Remuneration to directors and independent directors

(May 1, 2021) Unit: NTD Thousand; 1,000 shares; %

Title	Name	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Remuneration to Directors	Sum of A, B, C, and D as Percentage of Net Income	Sum of A, B, C, and D as Percentage of Net Income	Remuneration to Employees HoldingConcurrent Positions	Remuneration to Employees HoldingConcurrent Positions	Remuneration to Employees HoldingConcurrent Positions	Remuneration to Employees HoldingConcurrent Positions	Remuneration to Employees HoldingConcurrent Positions	Remuneration to Employees HoldingConcurrent Positions	Remuneration to Employees HoldingConcurrent Positions	Remuneration to Employees HoldingConcurrent Positions	Sum of A, B, C, D, E, F and G as Percentage of Net Income	Sum of A, B, C, D, E, F and G as Percentage of Net Income	Remuneration from investees other than subsidiaries or the parent company
		Remuneration (A)		Retirement pension (B)		Remuneration to directors (C) (Note 1)		Business execution expenses (D)				Salaries, bonuses, special allowances, etc. (E) (Note 2)		Retirement pension (F) (Note 3)		Remuneration to employees (G) (Note 4)
		The Com pany	All the companie s included in the financial statement s	The Com pany	All the companie s included in the financial statement s	The Com pany	All the companie s included in the financial statement s	The Com pany	All the companie s included in the financial statement s	The Compa ny	All the compani es included in the financial statemen ts	The Company	All the compani es included in the financial statemen ts	The Com pany	All the compani es included in the financial statemen ts	The Company		All the companies included in the financial statements		The Compan y	All the companies included in the financial statements
																Amount paid in cash	Amou nt paid in shares	Amount paid in cash	Amou nt paid in shares
Chairman	Shih-Kun Tso	-	-	-	-	380	380	60	1,039	0.30	0.97	6,300	12,942	72	72	-	-	-	-	4.66	9.87	None
Director	Ching-Hsin Cho	-	-	-	-	210	210	60	60	0.18	0.18	-	-	-	-	-	-	-	-	0.18	0.18	None
Director	Yung-Far Wei	-	-	-	-	210	210	60	672	0.18	0.60	-	-	-	-	-	-	-	-	0.18	0.60	642
Director	Han-Liang Hu	-	-	-	-	210	210	60	60	0.18	0.18	-	-	-	-	-	-	-	-	0.18	0.18	None
Director	Ching-Huei Wu (Note 5)	-	-	-	-	37	37	60	60	0.07	0.07	-	-	-	-	-	-	-	-	0.07	0.07	None
Independent Director	Hung-Tsu Hsu	-	-	-	-	280	280	240	240	0.36	0.36	-	-	-	-	-	-	-	-	0.36	0.36	None
Independent Director	Jennyumr Kao	-	-	-	-	280	280	240	240	0.36	0.36	-	-	-	-	-	-	-	-	0.36	0.36	None
Independent Director	Anti Tsai	-	-	-	-	280	280	240	240	0.36	0.36	-	-	-	-	-	-	-	-	0.36	0.36	None
1. Please describe the policy, system, standard and structure of remuneration payment for independent directors and specify the correlation with the remuneration payment amount based on certain factors such as the function of the director, risk, and involvement duration: Subject to Article 25 of the Articles of Incorporation, no more than 1% of the earnings in the current year shall be remuneration to directors for such year. Also, reasonable remunerations may be provided for directors depending on the operating results and their contributions to the Company’s performance. However, since the independent directors are responsible for organizing functional committees and serving as the members thereof to improve supervisory capabilities, their remunerations are slightly higher than those of non-independent directors. The Company has also purchased liability insurance for directors to mitigate the risk of them being charged for their due execution of duties by shareholders or other related parties. 2. In addition to what is disclosed in the above table, the remuneration to the Company’s directors for providing services (such as assuming a non-employee advising post) for all the companies included in the financial statement in the most recentyear: None.

• Note 1: The data represents the remuneration amount distributed to the director based on his/her level of participation and contribution from the remuneration to directors and supervisors approved for distribution by the Board of Directors in the most recent year.

• Note 2: The data includes the annual rent and depreciation expenses paid and recognized for corporate vehicles.

• Note 3: The data represents the contribution to the retirement pension.

• Note 4: The data represents the remuneration amount distributed pro rata to employees based on the previous actual distribution amount from the remuneration to employees approved for distribution by the Board of Directors in the most recent year.

• Note 5: The director resigned due to personal reason, effective as of Jan. 19, 2021.

(II) Remuneration to supervisors

The Company carried out reelection at the general shareholders’ meeting in 2019, and established the Audit Committee consisting of three independent directors to replace the supervisors.

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(III) Remuneration to the President and vice presidents

		(May1,2021)Unit: NTD Thousand;1,000 shares;%	(May1,2021)Unit: NTD Thousand;1,000 shares;%	(May1,2021)Unit: NTD Thousand;1,000 shares;%	(May1,2021)Unit: NTD Thousand;1,000 shares;%	(May1,2021)Unit: NTD Thousand;1,000 shares;%	(May1,2021)Unit: NTD Thousand;1,000 shares;%	(May1,2021)Unit: NTD Thousand;1,000 shares;%	(May1,2021)Unit: NTD Thousand;1,000 shares;%	(May1,2021)Unit: NTD Thousand;1,000 shares;%	(May1,2021)Unit: NTD Thousand;1,000 shares;%	(May1,2021)Unit: NTD Thousand;1,000 shares;%	(May1,2021)Unit: NTD Thousand;1,000 shares;%	(May1,2021)Unit: NTD Thousand;1,000 shares;%
Title	Name	Salary (A)		Retirement pension (B) (Note 1)		Bonuses, special allowances, etc. (C) (Note 2)		Amount of remuneration to employees (D) (Note 3)				Ratio of sum of A, B, C and D to net profit after tax (%) to net profit after tax(%)		Rem uner ation from inves tees other than subsi diari es or the pare nt com pany
		The Compa ny	All the compan ies include d in the financia l stateme nts	The Compan y	All the compani es included in the financial statemen ts	The Compa ny	All the compan ies include d in the financia l stateme nts	The Company		All the companies included in the financial statements		The Compan y	All the companie s included in the financial statement s
								Amount paid in cash	Amount paid in shares	Amount paid in cash	Amount paid in shares
CEO and President	Shih-Ku n Tso	9,347	12,762	330	330	8,400	12,429	422	0	422	0	12.65	17.74	None
Senior Vice President	Kuo-Yin gWei
Vice President、 Accounting Officer and Corporate Govermance Officer	An-Min Kao

Note 1: The data represent the contribution to the retirement pension.

Note 2: The data includes the annual rent and depreciation expenses paid and recognized for corporate vehicles.

Note 3: The data represent the remuneration amount distributed pro rata to employees based on the previous actual distribution amount from the remuneration to employees approved for distribution by the Board of Directors in the most recent year.

Range of Remuneration

Range of remuneration to the President and vice presidents	Names of the President and vicepresidents	Names of the President and vicepresidents
	The Company	All the companies included in the financial statements
Below NTD1,000,000	None	None
NTD1,000,000 (inclusive) – NTD2,000,000 (exclusive)	None	None
NTD2,000,000 (inclusive) – NTD3,500,000 (exclusive)	An-Min Kao	An-Min Kao
NTD3,500,000(inclusive)– NTD5,000,000(exclusive)	None	None
NTD5,000,000 (inclusive) – NTD10,000,000 (exclusive)	Kuo-Ying Wei, Shih-Kun Tso	Kuo-Ying Wei
NTD10,000,000 (inclusive) – NTD15,000,000 (exclusive)	None	Shih-Kun Tso
NTD15,000,000 (inclusive) – NTD30,000,000 (exclusive)	None	None
NTD30,000,000 (inclusive) – NTD50,000,000 (exclusive)	None	None
NTD50,000,000 (inclusive) – NTD100,000,000 (exclusive)	None	None
Over NTD100,000,000	None	None
Total	3persons	3persons

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• (IV) Remuneration to the officers as the top-five remuneration payees: N/A

• (V) Names of the managers receiving employee remuneration and the distribution thereof

			(May1,2021)Unit: NTD Thousand;%	(May1,2021)Unit: NTD Thousand;%	(May1,2021)Unit: NTD Thousand;%	(May1,2021)Unit: NTD Thousand;%
	Title	Name	Amount paid in shares	Amount paid in cash	Total	Ratio of total amount to net profit after tax (%) profit after tax(%)
Manager	CEO and President	Shih-Kun Tso	0	422	0	0.29
	Senior Vice President	Kuo-YingWei
	Vice President、Accounting Officer and Corporate Govermance Officer	An-Min Kao

Note: Lists the remuneration amount distributed pro rata to employees based on the previous actual distribution amount from the remuneration to employees amount approved for distribution by the Board of Directors in the most recent year.

• (VI) Analysis of the total remuneration to directors, supervisors, the President and vice presidents of the Company in proportion to the profit after tax from the Company and companies included in the consolidated statements in the most recent two years shown in financial statements, and the policies, standards, and packages based on which they were paid, procedures of determining remunerations, and their correlation with operating performance and future risks.

• Total remuneration to directors, supervisors, the President and vice presidents in proportion to the net income in the most recent two years

				Unit: %
Item		2020		2019
	The Company	All the companies included in the financial statements	The Company	All the companies included in the financial statements
Proportion of total director remuneration to net profit after tax	6.35	11.98	4.74	10.59
Proportion of total supervisor remuneration to net profit after tax	-	-	0.16	0.16
Proportion of total remuneration to the President and vicepresidents to netprofit after tax	12.65	17.74	9.08	14.30

1. Policies, standards, and packages based on which remunerations are paid, procedures of determining remunerations, and their correlation with operating performance and future risks

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 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 President and vice presidents 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.

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IV. Implementation of corporate governance

(I) Operations of the Board of Directors

The Board of Directors convened 8 meetings (A) in the most recent year. The attendance record of the directors is listed as follows:

Title	Title	Name	Name	Actual Attendance (Presence) (B)	Proxy Attendance	Actual Attendance (Presence) Rate (%)	Actual Attendance (Presence) Rate (%)	Remarks	Remarks	Remarks
Chairman		Shih-Kun Tso		8	0	100		Elected for a second term in the reelection on 2019/06/21
Director		Ching-Hsin Cho		7	0	88		Newly elected in the reelection on 2019/06/21
Director		Yung-Far Wei		8	0	100		Elected for a second term in the reelection on 2019/06/21
Director		Han-Liang Hu		7	1	88		Newly elected in the reelection on 2019/06/21
Director		Ching-Huei Wu(Note)		1	1	13		Elected for a second term in the reelection on 2019/06/21
Independent Director		Hung-Tsu Hsu		6	2	75		Elected for a second term in the reelection on 2019/06/21
Independent Director		Jennyumr Kao		6	1	75		Newly elected in the reelection on 2019/06/21
Independent Director		Anti Tsai		8	0	100		Elected for a second term in the reelection on 2019/06/21
Note: The director resigned due to personal reason, effective as of Jan. 19, 2021. Other matters to be stated: I. Where the operations of the Board of Directors meet any of the following circumstances, concerned shall clearly state the meeting date, session, contents of proposals, opinions of all directors, and the Company’s resolution of said opinions: (I) Matters specified in Article 14-3 of the Securities and Exchange Act. Board Meeting Proposal Opinions of Independe nt Directors Company’s Resolution of Independent Directors’ Opinions March 18, 2020 (6th meeting of the 11th term) 1. Proposal for repurchase of shares for the first time in 2020 None None March 26, 2020 (7th meeting of the 11th term) 1. Proposal of the remuneration to the Company’s employees, directors, and supervisors for 2019 Proposal of the business report & financial statements and consolidated financial statements for 2019 Proposal for appropriation of profit and loss for 2019 Proposal for disbursement of cash dividends from capital reserves Proposal for holding the Company’s 2020 annual shareholders’ meeting None None May 7, 2020 (8th meeting of the 11th term) 1. Proposal for non-distribution of the profits for Q1 of 2020 None None May 20, 2020 (9th meeting of the 11th term) 1. Proposal for repurchase of shares for the second time in 2020 None None June 18, 2020 (10th meeting of the 11th term) 1. Proposal for participation in the capital increase in cash by ―Digilife Technologies Co., Ltd.,‖ the subsidiary in which the Companyholds91.37% of its shares. None None August 6, 2020 (11th meeting of the 11th term) 1. Proposal for non-distribution of the profits for Q2 of 2020. None None										the minutes independent Board Meeting Resolution Passed as proposed Passed as proposed Passed as proposed Passed as proposed Passed as proposed Passed as proposed
	Board Meeting		Proposal				Opinions of Independe nt Directors		Company’s Resolution of Independent Directors’ Opinions	Board Meeting Resolution
	March 18, 2020 (6th meeting of the 11th term)		1. Proposal for repurchase of shares for the first time in 2020				None		None	Passed as proposed
	March 26, 2020 (7th meeting of the 11th term)		1. Proposal of the remuneration to the Company’s employees, directors, and supervisors for 2019 Proposal of the business report & financial statements and consolidated financial statements for 2019 Proposal for appropriation of profit and loss for 2019 Proposal for disbursement of cash dividends from capital reserves Proposal for holding the Company’s 2020 annual shareholders’ meeting				None		None	Passed as proposed
	May 7, 2020 (8th meeting of the 11th term)		1. Proposal for non-distribution of the profits for Q1 of 2020				None		None	Passed as proposed
	May 20, 2020 (9th meeting of the 11th term)		1. Proposal for repurchase of shares for the second time in 2020				None		None	Passed as proposed
	June 18, 2020 (10th meeting of the 11th term)		1. Proposal for participation in the capital increase in cash by ―Digilife Technologies Co., Ltd.,‖ the subsidiary in which the Companyholds91.37% of its shares.				None		None	Passed as proposed
	August 6, 2020 (11th meeting of the 11th term)		1. Proposal for non-distribution of the profits for Q2 of 2020.				None		None	Passed as proposed

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November 5, 2020 1. Proposal for non-distribution of the profits None None Passed as (12th meeting of the for Q3 of 2020. proposed 11th term) Proposal for capital reduction by cancellation of the Company’s treasury stocks. December 24, 2020 1. Proposal for amendment to the Company’s None None Passed as (13th meeting of the internal control system, internal audit proposed 11th term) implementation rules, and administrative regulations Proposal of the Company’s 2021 audit plan Proposal for review of the Company’s 2021 operational plan and operating revenue, profit, and expense budget. (II) Any other resolution(s) passed but with independent directors voicing opposing or qualified opinions on the record or in writing other than those described above: None. II. Directors’ avoidance of the proposals involving any conflict of interest, information including the director’s name, contents of the proposals, causes of recusal, and participation in the voting process should be stated: None. III. Information including the cycle, period, scope, method, and contents of the self-evaluation (or peer review) for the Board of Directors: On March 26, 2020, the Board of Directors adopted the Regulations for Evaluation of the Performance of Directors to strengthen the operations and functions of the Board of Directors. Internal evaluation of the performance of the Board of Directors is conducted annually, and external evaluation of the performance of the Board of Directors is conducted by an external professional and independent organization or an external team of experts and academics at least every 3 years. The internal and external evaluations of the performance of the Board of Directors will be completed before the end of Q1 of the next year, and their results will be presented to the Board of Directors for review and improvement. The 2020 evaluation of the performance of the Board of Directors was planned in December 2020. The evaluation questionnaires and related information were distributed in 2021, and all questionnaires were retrieved by the end of January. After summarization and analysis of the evaluation results, they were submitted to the first meeting of the Board of Directors in 2021 (March 25, 2021) and were disclosed on the MOPS after the meeting as required by law. The evaluation results and recommendations for improvement are as follows: (I) Internal evaluation of the Board of Directors The evaluation was divided into five parts consisting of 45 indicators, and the corresponding score was 88/100. The rating of the overall operations was ―Good.‖ The Company’s current directors are professionals in the fields of electronics, science and technology, finance and accounting and commerce, and have sufficient understanding of the industry in which the Company is specialized. The operations of the Board of Directors were satisfactory, with good communication and interaction maintained among its members. It is able to effectively supervise the business performance and development of implementation strategies of the Company. Recommendations for improvement: Formulate a plan for succession or consider adding more seats of independent directors when a by-election is held at the end of the terms of the directors in 2022. Encourage the directors to participate in a variety of educational courses and keep enhancing the supervisory and management functions of the Board of Directors. (II) Directors The evaluation was divided into six parts consisting of 23 indicators, and the corresponding average score for the directors was 91/100. The rating of the operations was ―Excellent.‖ All the directors possess sufficient expertise for performing their duties and are able to effectively supervise the operation of the Company’s system and risk management. The directors have maintained good communication and interaction with the management, and the operation of the Board of Directors has been smooth. Recommendations for improvement: Plan and arrange for the directors to take educational courses. (III) Remuneration Committee The evaluation was divided into four parts consisting of 20 indicators, and the corresponding score was 86/100. The rating of the overall operations was ―Good.‖ The members of the Committee are independent and are professionals in the fields of electronics, science and technology and commerce, and their attendance in meetings has been good. They are able to effectively review the Company’s remuneration policies and conduct performance evaluation. Recommendations for improvement: Examine the Company’s current regulations for performance evaluation. Establish and regularly review policies for evaluation of the performance of directors and managers and for their remuneration. (IV)Audit Committee The evaluation was divided into five parts consisting of 22 indicators, and the corresponding score was 91/100. The rating of the overall operations was ―Excellent.‖ The members of the Committee are

-23-

independent and are professionals in the fields of electronics, science and technology and commerce, and their attendance in meetings has been good. They are able to effectively supervise the Company’s risk management and business performance. Recommendations for improvement: None.

• IV. Enhancements to the functionality of the Board of Directors in the current and the most recent year (e.g. establishment of the Audit Committee, improvement of information transparency), and the progress of such enhancements: The Company’s Board of Directors has performed clear functions and targets with scrutiny and continued to improve the information transparency.

(II) Operations of the Audit Committee

The Company carried out reelection at the general shareholders’ meeting on June 21, 2019, and established the Audit Committee consisting of 3 independent directors to replace the supervisors.

The Audit Committee held 6 meetings (A) in the most recent year. The attendance

record of the independent directors is listed below:

Title	Title	Name	Name	Actual Attendance (B)	Proxy Attendance	Actual Attendance Rate (%) (B/A) (Note)	Actual Attendance Rate (%) (B/A) (Note)	Remarks	Remarks	Remarks
Independe nt Director		Hung-Tsu Hsu		4	2	67		Elected for a second term in the reelection on 2019/06/21
Independe nt Director		Jennyumr Kao		6	0	100		Newly elected in the reelection on 2019/06/21
Independe nt Director		Anti Tsai		6	0	100		Elected for a second term in the reelection on 2019/06/21
	Other matters to be stated: I. Where the operations of the Audit Committee meet any of the following circumstances, the minutes concerned shall clearly state the meeting date, session, contents of proposals, resolutions made by the Audit Committee and the Company’s resolution of the Audit Committee’s opinions: (I) Matters specified in Article 14-5 of the Securities and Exchange Act. Audit Committee Proposal Opinions of Independent Directors Company’s Resolution of Independent Directors’ Opinions Meeting Resolution March 26, 2020 (6th meeting of the 1st term) 1. Proposal of the Company’s internal audit report for December 2019 to February 2020 Proposal of the remuneration to the Company’s employees, directors, and supervisors for 2019 Proposal for self-evaluation results and statements of internal control for 2019 Proposal of the business report & financial statements and consolidated financial statements for 2019 Proposal for appropriation of profit and loss for 2019 Proposal for disbursement of cash dividends from capital reserves None None Passed as proposed May 7, 2020 (7th meeting of the 1st term) 1. Proposal of the Company’s consolidated financial statements for Q1 of 2020 2. Proposal for non-distribution of the profits for Q1 of 2020 3. Proposal of the Company’s internal audit report for March to April of 2020 None None Passed as proposed 2020/06/18 (8th meeting of the 1st term) 1. Proposal for participation in the capital increase in cash by ―Digilife Technologies Co., Ltd.,‖ the subsidiary in which the Companyholds91.37% of its shares. None None Passed as proposed 2020/08/06 (9th meeting of the 1st term) 1. Proposal of the Company’s consolidated financial statements for Q2 of 2020. Proposal for non-distribution of the profits for Q2 of 2020. None None Passed as proposed
	Audit Committee		Proposal				Opinions of Independent Directors		Company’s Resolution of Independent Directors’ Opinions	Meeting Resolution
	March 26, 2020 (6th meeting of the 1st term)		1. Proposal of the Company’s internal audit report for December 2019 to February 2020 Proposal of the remuneration to the Company’s employees, directors, and supervisors for 2019 Proposal for self-evaluation results and statements of internal control for 2019 Proposal of the business report & financial statements and consolidated financial statements for 2019 Proposal for appropriation of profit and loss for 2019 Proposal for disbursement of cash dividends from capital reserves				None		None	Passed as proposed
	May 7, 2020 (7th meeting of the 1st term)		1. Proposal of the Company’s consolidated financial statements for Q1 of 2020 2. Proposal for non-distribution of the profits for Q1 of 2020 3. Proposal of the Company’s internal audit report for March to April of 2020				None		None	Passed as proposed
	2020/06/18 (8th meeting of the 1st term)		1. Proposal for participation in the capital increase in cash by ―Digilife Technologies Co., Ltd.,‖ the subsidiary in which the Companyholds91.37% of its shares.				None		None	Passed as proposed
	2020/08/06 (9th meeting of the 1st term)		1. Proposal of the Company’s consolidated financial statements for Q2 of 2020. Proposal for non-distribution of the profits for Q2 of 2020.				None		None	Passed as proposed

-24-

		Proposal of the Company’s internal audit report for Mayto Julyof 2020
	2020/11/05 (10th meeting of the 1st term)	1. Proposal of the Company’s consolidated financial statements for Q3 of 2020. Proposal for non-distribution of the profits for Q3 of 2020. Proposal of the Company’s internal audit report for August to October of 2020	None	None	Passed as proposed
	2020/12/24 (11th meeting of the 1st term)	1. Proposal of the Company’s internal audit report for November 2020 Proposal for amendment to the Company’s internal control system, internal audit implementation rules, and administrative regulations Proposal of the Company’s 2021 audit plan Proposal for review of the Company’s 2021 operational plan and operating revenue, profit, and expense budget.	None	None	Passed as proposed

-25-

==> picture [429 x 321] intentionally omitted <==

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

consulted with the CPAs and did
not raise any objection.
December 24, I. The CPAs made a statement on the The independent directors fully consulted
2020 responsibility and independence for with the CPAs and did not raise any
the audit of the consolidated objection.
financial statements of 2020 and
the audit plan.
II. The CPAs made a statement on the
key audit matters in the audit report
for the consolidated financial
statements of 2020.
III. The CPAs gave explanations to and
engaged in discussion and
consultation with the meeting
attendees regarding the questions
raised by them.
(VI)All previous communications between independent directors and the chief internal auditor in 2020 are
summarized as follows:
Date Key Matter
March 26, 2020 I. Internal audit report for December 2019 to February 2020
II. Proposal for self-evaluation results and statements of the internal
control system for 2019
May 7, 2020 Internal audit report for March to April of 2020
August 6, 2020 Internal audit report for May to July of 2020
November 5, 2020 Internal audit report for August to October of 2020
December 24, 2020 I. Internal audit report for November 2020
II. Proposal for amendment to the Company’s internal control system,
internal audit implementation rules, and administrative regulations
III. Proposal for the 2021 audit plan
----- End of picture text -----

(III) Participation of supervisors in the operations of the Board of Directors:

The Company has appointed independent directors to perform the functions of supervisors.

-26-

(IV) Implementation of corporate governance, differences with the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies, and reasons thereof

Companies,and reasons thereof
Evaluation Item			Implementation	Differences with the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies and the reasons thereof
	Yes	No	Summary
I. Does the Company establish and disclose its corporate governance principles based on ―Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies‖?			The Company does not establish the corporate governance principles based on ―Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies.‖	Under development.
II. Company’s equity structure and shareholders’ equity (I) Does the Company have any internal operating procedures regulated to deal with suggestions, questions, disputes, and legal actions from shareholders and implement the procedures? (II) Does the Company have a list of the major shareholders who actually control the Company and the persons who are their ultimate controllers? (III) Does the Company establish or implement any risk control measures and firewall mechanisms between the Company and the affiliates? (IV) Does the Company establish internal regulations to prohibit Company insiders from using information not available to the market to trade securities?	   		(I) The Company’s spokesperson and acting spokesperson are responsible for handling shareholders’ suggestions, disputes and queries, and approaching the related divisions based on practical needs to actively deal with the matters related to the shareholders. (II) The Company has appointed the personnel responsible for contacting the major corporate shareholders holding 5% or more of the shares and their major shareholders. (III) The Company has regulated the transaction procedures for related parties, specific companies and group members, and observed such procedures when dealing with the affiliates. (IV) The Company has established the ―Ethical Corporate Management Best Practice Principles‖ and ―Code of Ethical Conduct for Directors and Managers‖ to prohibit insiders from acquiring information with their functions to obtain impropergains.	(I) None. (II) None. (III) None. (IV) None.
III. Composition and responsibilities of the Board of Directors

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Evaluation Item			Implementation	Differences with the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies and the reasons thereof
	Yes	No	Summary
(I) Does the Board of Directors formulate a diversified approach regarding the composition of its members and implement it? (II) Is the Company, in addition to establishing the Remuneration Committee and Audit Committee, pursuant to laws, willing to voluntarily establish any other functional committees? (III) Does the Company establish policies and methods for evaluating the performance of the Board of Directors, conduct regular performance evaluations every year and report the results to the Board of Directors? Does the Company utilize the results as the reference for the individual remuneration and reelection nomination of directors? (IV) Does the Company assess the CPAs for their independence on a regular basis?	 	 	(I) The Company’s ―Articles of Incorporation‖ states that the election of directors (including independent directors) shall be held under a candidate nomination system. For the election of directors (including independent directors), the Company not only takes into account the professional backgrounds of directors (including independent directors), but also formulates an appropriate policy of diversification based on the needs of the Company’s operational development. To ensure diversification in the composition of the Board of Directors, the Company does not set any gender or age limit for the directors and mainly considers their professionalism and contributions. The current Board of Directors is composed of seven directors (including three independent directors) with professional backgrounds and skills in the fields of management, technology, finance and accounting, R&D and marketing and science. All of them have met the qualifications and possess the competencies for the duties performed. (II) The Company has not organized any other functional committees. (III) The Board of Directors has performed clear functions and goals with scrutiny. The Company established the ―Regulations for Self-evaluation for the Board of Directors and Peer Review‖ pursuant to the laws in March 2020, and has conducted regular performance evaluations every year and reported the results to the Board of Directors as the reference for the individual remuneration and reelection nomination of directors. (IV) The Company regularly submits a proposal for evaluation of the CPAs’ remuneration and independence to the Board for	(I) None. (II) Under development. (III) None. (IV) None.

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Evaluation Item			Implementation	Differences with the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies and the reasons thereof
	Yes	No	Summary
			discussion every year. The CPAs are required to provide a Declaration of Independence specifying (1) that there is no joint venture or profit-sharing relationship between the CPA and the Company and related parties thereof; (2) that no CPA serves as the chairman, a director, manager or employee of the Company and related parties thereof; (3) that the CPAs do not violate any other regulations specified in ―the Norms of Professional Ethics No.10,‖ which may influence the independence of the CPA. The Company has confirmed the CPAs’ compliance with the requirements for independence, and they have signed appointment contracts after approval of the Board of Directors.
IV. Does the Company have qualified governance personnel in an appropriate number and designate a corporate governance manager to oversee corporate governance affairs (including but not limited to providing the directors and supervisors with information needed to perform their duties, assisting the legal compliance of the directors and supervisors, handling matters related to board meetings and shareholders’ meetings according to laws and preparing minutes of board and shareholders’ meetings)?			Pursuant to the resolution by the Board of Directors on March 25, 2021, the Company appointed Vice President An-Min Kao of the Finance & Accounting Division as the corporate governance officer in charge of matters related to corporate governance. His main responsibilities include providing the Board of Directors and functional committees with information required for their business, assisting directors and committee members in compliance and convening meetings in accordance with the law, described as follows: (I) Informing, from time to time, the Board of Directors and members of functional committees of the latest revisions and development of the laws and regulations related to the Company’s areas of business and corporate governance. (II) Examining the confidentiality level of the relevant information, providing directors and committee members with the company information they need, and maintaining smooth communication and interaction between directors, committee members and business managers. (III) Checking whether the shareholders’ meeting and meetings of the Board of Directors and functional committees are held in accordance with the applicable laws and the rules and regulations on corporate governance. (IV) Assistingdirectors and committee members in compliance	None.

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Evaluation Item			Implementation	Differences with the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies and the reasons thereof
	Yes	No	Summary
			with and reminding them of the laws and regulations they are required to abide by when conducting business or adopting resolutions at meetings. (V) Reviewing and checking the material information in important resolutions before its publication to ensure the contents of such information are legal and accurate and maintain symmetry of information between investors. (VI) Maintaining good interaction with investors to ensure that shareholders are able to obtain sufficient information to assess the reasonable value of a business in the capital market. (VII)Setting and giving a 7-day prior notice to directors and committee members of the agenda of the meetings of the Board of Directors and functional committees, convening meetings and providing meeting information, giving prior notice of issues requiring avoidance of conflicts of interest, and completing the meeting minutes within 20 days after the end of meetings. (VIII)Registering the date of any shareholders’ meeting in advance as required by law, preparing a meeting notice, a meeting handbook and meeting minutes within the legally required period, and applying for registration of change in the event of amendment to the Articles of Incorporation or by-election of directors. In the current year, the corporate governance manager will complete his educational hours as legally required and make disclosure thereof on the Company’s website and in its annual report.
V. Does the Company build communication channels with stakeholders (including but not limited to shareholders, employees, customers, and suppliers), establish a stakeholder section on the Company’s website, and duly respond to the stakeholders’ concerns on issues related to corporate social			The Company has set up the ―Stakeholder Section,‖ ―Contact Us,‖ and ―Service Center‖ on the official website as the communication channels for shareholders, employees, customers, and suppliers. In the ―Stakeholder Section,‖ the contact numbers and URLs of the Company’s spokesperson and the director of the Accounting Department are provided for the Company to timely receive andproperlyrespond to the stakeholders’ concerns on	None.

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Evaluation Item			Implementation	Differences with the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies and the reasons thereof
	Yes	No	Summary
responsibilities?			important issues.
VI. Does the Company commission a professional registrar to deal with the affairs of shareholders’ meetings?			The Company has commissioned a professional registrar, the Transfer Agency Department of Mega Securities, to handle affairs relate to shareholders’ meetings.	None.
VII. Information disclosure (I) Does the Company establish a corporate website to disclose information concerning financial affairs and corporate governance? (II) Does the Company use other information disclosure methods (e.g. an English website, assignment of specific personnel to collect and disclose corporate information, implementation of a spokesperson system, and the broadcasting of investor conferences via the company website)? (III) Does the Company publicly announce and file the annual financial report within two months after the close of fiscal year and announce and file the financial reports of the first, second and third quarters and the monthly operation statusprior to the regulated deadline?	 		(I) The Company has established a corporate website to disclose information regarding financial affairs and regulations related to corporate governance. (II) In addition to the establishment of Chinese and English websites, the Company has also assigned a spokesman and acting spokesman to collect and disclose the Company’s information to implement the spokesman system, and posted the information of investor conferences on the Company’s website. (III) The Company publicly announces and files the annual financial report (within 3 months), the financial reports of the first, second, and third quarters (within 45 days) and the monthly operation status (by the 10th day of each month) within the deadline specified in Article 36 of the Securities and Exchange Act.	(I) None. (II) None. (III) Under development.
VIII. Does the Company have additional important information that is helpful to understand the implementation of the corporate governance (including but not limited to the interests and care of employees, investor relationships, supplier relationships, rights of stakeholders, continuing education of directors and supervisors, implementation of risk management policies and risk assessment standards, implementation of customer			(I) For measures regarding the interests and care of employees, please refer to page 76 to 81 of this annual report. (II) The Company has assigned a spokesperson and acting spokesperson to deal with the suggestions made via phone or the Company’s website by shareholders and stakeholders for communication and opinion exchange. The Company’s Material Management Department maintains good relationships with suppliers, which is beneficial to making a timely response to supply and demand changes in the market.	None.

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Evaluation Item	Implementation	Implementation	Implementation	Differences with the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies and the reasons thereof
	Yes	No	Summary
policies, and liability insurance coverage for directors and supervisors)?			(III) The Company has formulated a continuing education system for the directors to be subject to and be evaluated. We also provide related courses and information on an irregular basis for the purpose of encouraging the directors to participate in such activities, so as to minimize and spread the risk of causing major damage to the Company and shareholders due to directors’ mistakes or misconduct. (IV) The Company observes the internal control systems and related regulations to implement risk management. In 2019, the audit team completed all audit works, and the results thereof showed that the design and implementation of the internal control system were effective. (V) The Company understands customers’ expectations of the Company and products through the establishment of customer service centers, phone interviews, corporate websites, and media in the hope of having our products and services meet the customers’ needs. (VI) The Company has purchased liability insurance for directors to minimize the risk of them being charged for their due execution of duties byshareholders or other relatedparties.
IX. Please specify the status of the correction based on the corporate governance assessment report released by the Corporate Governance Center of TWSE in the most recent year, and the priority corrective actions and measures against the remaining deficiencies. The Company has improved the corporate governance and disclosed more information on the Company’s website based on the results of the 5th corporate governance evaluation announced by the TWSE in 2019, and will progressively review and improve the maintenance of the shareholders’ interests and the structure and operation of the Board of Directors in 2021 to implement the corporategovernance.

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• (V) Composition and operation of the Remuneration Committee, if established

The Remuneration Committee consists of three members whose appointment was resolved by the Board of Directors, and one of the members is the convener. The Committee members’ professional qualifications and independence are in accordance with Article 5 and Article 6 of the Regulations Governing the Powers of the Remuneration Committee.

The Committee shall faithfully exercise the following duties with the due care of a good administrator and submit the suggestions to the Board of Directors for discussion:

• (1) Periodically review the organization rules and propose amendments.

• (2) Set up and periodically review the yearly and long-term performance goal of the directors and managers of the Company, and the policy, system, standards, and structure of the remuneration.

• (3) Periodically evaluate the performance of the Company’s directors and managers and the goals achieved thereby, and determine the contents and amounts of the individual remuneration thereof.

When the Committee exercises the above duties, the following guidelines shall be observed:

• (1) Ensure the arrangement of the remuneration meets the requirement of relevant laws and regulations and is good enough to attract the best talents.

• (2) The performance evaluation and remuneration for directors and managers shall be in reference to industry peer levels and take certain factors into account, such as the time devoted by the individual, the responsibility assumed, the goal achieved by the individual, the performance of the individual when assuming other positions, and the remuneration the Company paid for equivalent positions in recent years. Also to be evaluated is the reasonableness of the correlation between the individual’s performance and the Company’s operational performance and future risks, with respect to the achievement of short-term and long-term goals and the financial position of the Company.

• (3) Directors and managers shall not be allowed to engage in any behavior beyond the risk appetite of the Company for the purpose of pursuing remuneration.

• (4) With respect to the proportion in which the bonus is distributed to directors and senior managers for their short-term performance and the time at which the variable part of remuneration is paid, the Company shall consider the characteristic of the industry and the business nature to decide such matters.

• (5) The Committee members shall not join the discussion and resolution of their own remuneration.

The remuneration mentioned above includes the cash remuneration, stock options, dividends, retirement benefits, severance pay, various allowances, and other tangible incentives. The scope must be aligned with the remuneration of the directors and managers as stipulated in the Regulations Governing Information to be Published in the Annual Reports of Public Companies.

Where the decision-making and implementation of any matter related to the remuneration of the directors and managers of a Company’s subsidiary shall be reviewed and approved by the Board of Directors, the Committee is required to make recommendations before the matter is submitted to the Board of Directors for discussion.

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Information of the members of the Remuneration Committee

Member type	Qualifications Name	Having more than five years of experience and the following professionalqualifications	Having more than five years of experience and the following professionalqualifications	Having more than five years of experience and the following professionalqualifications	Independence (Note)	Independence (Note)	Independence (Note)	Independence (Note)	Independence (Note)	Independence (Note)	Independence (Note)	Independence (Note)	Independence (Note)	Independence (Note)	Number of publicly listed companies in which a remunerated committee member concurrently serves	Remark s
		Lecturer or above in commerce, law, finance, accounting, or subjects required by the Company’s business in public or private colleges or universities	Judge, public prosecutor, attorney, accountant, or other professional or technical specialists who have passed a national examination and received a certificate in a profession necessary for the Company’s business	Commercial, legal, financial, accounting or other work experience required by the Company’s business	1	2	3	4	5	6	7	8	9	10
Independent Director	Hung-Tsu Hsu														0	None
Independent Director	Jennyumr Kao														0	None
Independent Director	Anti Tsai														0	None

• Note: A ―  ‖ is placed in the box if the member met the following conditions during active duty and two years prior to the election. (1) Not employed by the Company or any of its affiliates.

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

• (3) Not a natural-person shareholder who holds shares, together with those held by his/her spouse or minor children or held in the name of another person, in an aggregate amount of at least 1% of the total shares issued by the Company or is one of the top-10 shareholders of the Company.

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

• (5) Not a director, supervisor, or employee that has 5% or higher ownership interest in the company, being the top-5 corporate shareholders or the institutional shareholders who designate representative as the corporate director or supervisor in accordance with Paragraph 1 or 2, Article 27 of the Company Act (the same does not apply, however, in cases where the person is an independent director of the Company, its parent company, any subsidiary, or a subsidiary of the same parent company, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary).

• (6) Not a director, supervisor or employee of other Company in which the number of directors or more than half of the voting shares is under the control of the same person (the same does not apply, however, in cases where the person is an independent director of the Company, its parent company, any subsidiary, or a subsidiary of the same parent company, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary).

• (7) Not a director, supervisor or employee of another company or institution in which the Chairman, President or personnel with equivalent position are the same person or have spouse relationship (the same does not apply, however, in cases where the person is an independent director of the Company, its parent company, any subsidiary, or a subsidiary of the same parent company, as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary).

• (8) Not a director, supervisor, manager, or shareholder holding more than 5% of a specified company or institution that has a financial or business relationships with the Company (the same does not apply, to certain companies or institutions holding more than 20% of the total issued shares of the Company, but no more than 50% and to independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at the Company and its parent or subsidiary or a subsidiary of the same parent).

• (9) Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides auditing services to the company or any affiliate of the company, or that provides commercial, legal, financial, accounting, or related services to the company or any affiliate of the company for which the provider in the past two years has received cumulative remuneration exceeding NTD 500,000, or a spouse thereof. However, this shall not apply to the members of the Remuneration Committee, Review Committee for Public Acquisitions or Special Committee for Mergers executing their duties in accordance with the Securities and Exchange Act or Business Mergers and Acquisitions Act.

• (10) Not meet the conditions specified in any of the sub-paragraphs of Article 30 of the Company Act.

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Information concerning the operation of the Remuneration Committee

• (1) The Company’s Remuneration Committee consists of three members.

• (2) Term of office: From June 21, 2019 to June 20, 2022. The Remuneration Committee had two meetings (A) convened in the most recent year, and the qualification and attendance of the Committee members are listed as follows:

Title	Title	Name	Name	Actual Attendance (B)	Proxy Attendance	Proxy Attendance	Actual Attendance Rate (%) (B/A)	Remarks	Remarks
Convener		Hung-Tsu Hsu		1		1	50	Elected for a second term in the reelection on 2019/06/21
Committee member		Jennyumr Kao		2		0	100	Newly elected in the reelection on 2019/06/21
Committee member		Anti Tsai		2		0	100	Elected for a second term in the reelection on 2019/06/21
Other matters to be stated: I. Meetings in the most recentyear: Remuneration Committee Proposal Resolution Company’s Handling of the Remuneration Committee’s Opinions 2020/08/06 (4th meeting of the 4th term) 1. Proposal for adjustment to the 2020 remuneration to the Company’s managers Approved by all the present members The proposal was approved by all present directors unanimously 2020/12/24 (5th meeting of the 4th term) 1. Proposal of the remuneration to the Company’s managers Proposal of the Company’s annual bonus for 2020 Proposal of the remuneration to the Company’s employees and directors for 2020 Approved by all the present members The proposal was approved by all present directors unanimously II. If the Board of Directors does not adopt or amend the suggestions from the Remuneration Committee, the date and session of the Board meeting, contents of the proposals, meeting resolutions, and the Company’s handling of the Remuneration Committee’s opinions shall be specified (if the remuneration passed by the Board of Directors is higher than that suggested by the Remuneration Committee, the deviation and causes thereof shall be specified): None. III. In the event that any member of the Remuneration Committee has expressed dissent or reservation over the Committee’s decisions, and that the dissent or reservation has been recorded or delivered in writing, the decision shall indicate the date of the Committee’s meeting, term, contents of the proposal, opinions of all the members, and how the opinions of a member are handled: None.
	Remuneration Committee		Proposal			Resolution			Company’s Handling of the Remuneration Committee’s Opinions
	2020/08/06 (4th meeting of the 4th term)		1. Proposal for adjustment to the 2020 remuneration to the Company’s managers			Approved by all the present members			The proposal was approved by all present directors unanimously
	2020/12/24 (5th meeting of the 4th term)		1. Proposal of the remuneration to the Company’s managers Proposal of the Company’s annual bonus for 2020 Proposal of the remuneration to the Company’s employees and directors for 2020			Approved by all the present members			The proposal was approved by all present directors unanimously

II. If the Board of Directors does not adopt or amend the suggestions from the Remuneration Committee, the date and session of the Board meeting, contents of the proposals, meeting resolutions, and the Company’s handling of the Remuneration Committee’s opinions shall be specified (if the remuneration passed by the Board of Directors is higher than that suggested by the Remuneration Committee, the deviation and causes thereof shall be specified): None.

III. In the event that any member of the Remuneration Committee has expressed dissent or reservation over the Committee’s decisions, and that the dissent or reservation has been recorded or delivered in writing, the decision shall indicate the date of the Committee’s meeting, term, contents of the proposal, opinions of all the members, and how the opinions of a member are handled: None.

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(VI) Fulfillment of corporate social responsibility, differences with the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies, and reasons thereof

Evaluation Item			Implementation	Differences with the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies, and reasons thereof:
	Yes	No	Summary
I. Does the Company implement the risk assessment of environmental, social, and corporate governance issues related to corporate operation and establish relevant risk management policies or strategies based on the principle of materiality?			(I) The Company’s CSR Committee was founded in February 2011 and is responsible for establishing relevant CSR policies and indicators. Since 2011, the Committee has periodically reviewed the implementation of the indicators and utilized the GRI G3 Guidelines (G3.1) regulated by the ―Global Reporting Initiative‖ (GRI) as a basis for the report structure and a guideline to prepare and issue the ―CSR Report‖ reviewed by a third party. In the following three years, the Committee prepared and updated the CSR report of the previous year before issuing it to the public. (II) The Company periodically organizes the CSR educational training every year. (III) 1. The Company requires directors to attend courses related to corporate governance every year and to observe the rules of the related regulations. The Company periodically promotes business ethics policies and specifies the principles of good faith and integrity applicable to the service of employees in the Employment Commitment Letter and the Supplier Agreement. New employees are required to understand the business ethics requested by the CSRs during the recruit training. We have integrated ethical management with the employee performance evaluation and HR policies to establish an effective disciplinary system. The Company formulated the ―Code of Ethical Conduct for Directors and Managers,‖ ―Ethical Corporate Management Best Practice Principles,‖ ―Procedures for Ethical Management and Guidelines for Conduct,‖ and ―Corporate Social Responsibility Best Practice Principles‖ in 2011.	None.

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Evaluation Item			Implementation	Differences with the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies, and reasons thereof:
	Yes	No	Summary
			2. The Company organized the Remuneration Committee in 2011 to regularly review the remuneration system for directors and managers.
II. Does the Company have a specific (or part-time) unit set up to promote corporate social responsibility and have the senior management authorized by the Board of Directors to handle matters and report the processing results to the Board of Directors?			The Company’s CSR Committee organization consists of the chairman, spokesperson, and different groups responsible for various affairs, such as supplier promotion, green design, environmental protection, labor and occupational health and safety, and community participation. The chief officer of each relevant department of the Company concurrently serves as a member of the Committee to promote and perform related activities.	None.
III. Environmental issue (I) Has the Company established environmental policies suitable for the Company’s industrial characteristics? (II) Does the Company endeavor to upgrade the efficient use of available resources and the use of environmentally friendly materials?	 		The Company’s implementation plans and performance focus regarding environmental protection are described as follows: (I) The Company has established ISO14001 (valid period: 2019/10/17–2022/10/17) to evaluate and identify the environmental impact, set relevant goals and implementation projects based on the result, and periodically review the implementation progress. We have also passed the certification of QC 080000 (valid period: 2018/9/14–2021/10/24) Hazardous Substance Management System. (II) In consideration of the environmental impact from each stage of the life cycle, the Company’s products are designed with the purpose of material reduction and energy efficiency improvement. We also adhere to the principle of reliable product quality and utilize renewable materials to mitigate the impact on the environment.	(I) None. (II) None.

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Evaluation Item			Implementation	Differences with the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies, and reasons thereof:
	Yes	No	Summary
(III) Does the Company assess the present and future potential risk and opportunities of climate change in relation to the Company and adopt countermeasures related to climate issues? (IV) Does the Company gather statistics of the greenhouse gas emission, water consumption and the gross weight of the waste in the past two years and establish policies for energy saving, carbon reduction, reduction of greenhouse gas emission and water consumption or other waste management?	 		(III) The Company has intended to integrate risk identification and opportunity assessment regarding climate change into the corporate governance management system and progressively assess the physical risk, transformation risk, and business opportunities in the medium and long terms under the appropriate scenarios of climate change. The assessment results are taken into account regarding operating strategies and financial planning to establish or adjust management approaches and key indicators. (IV) (IV) In accordance with the requirements of ISO 14001 Environmental Management System and based on the characteristics of the industry, the Company establishes environmental management policies and objectives on an annual basis for the purpose of managing electricity and water consumption and waste. The Company also regularly reviews the operation of the system and the achievements of objectives to ensure continued improvement of environmental management.	(III) None. (IV) None.
IV. Social issue (I) Does the Company develop management policies and procedures in accordance with the relevant regulations and international human rights conventions?			(I) The Company has established work rules and personnel regulations regarding remuneration, working hours, insurance and benefits, health and safety, and sexual harassment prevention in accordance with the related local labor acts and laws to protect our workers’ rights and create a working environment in which human rights and equalityareprotected and ensured.	(I) None.

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Evaluation Item			Implementation	Differences with the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies,and reasons thereof:
	Yes	No	Summary
(II) Does the Company establish and implement proper employee benefit measures (including the salary, holidays, and other benefits) and reflect the corporate business performance or achievements in the employee remuneration?			(II) The Company upholds the values of respecting employee dignity and improving the Company’s overall competitiveness to establish multiple communication channels between employers and employees, and receive and respond to the opinions of employees. In addition, for the purpose of creating harmonious employer–employee relations, we also promote and participate in various activities to achieve good employer–employee relations. Various communication channels, such as regular welfare committee meetings and the Human Resource Dept. email hrd@geniusnet.com.tw, are provided for employees to express their opinions. 1. A complaint and proposal system has been established to analyze the expressed opinions and questions and make a summary as a reference for the Company’s future improvement. Handle all operations in accordance with the regulations of the Labor Standards Act. At the employee meetings held by the DongGuan Factory, the Company communicates with the representative of labor unions about the Company’s important policies, understands the employees’ concerns on issues, responds to their questions regarding livelihood, reviews and follows the progress of the to-do matters proposed by the employees in order to maintain harmonious employer–employee relations, and achieves a win-win situation. To ensure smooth communication channels for employees, the Labor Union Committee consisting of the chairperson and members elected through a democratic election holds labor union meetings on a regular basis to receive employees’ opinions and suggestions. If such opinion or suggestion demonstrates a significant and continuous improvement in the performance of the Company, the employee may be given a material reward.	(II) None.

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Evaluation Item			Implementation	Differences with the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies,and reasons thereof:
	Yes	No	Summary
(III) Does the Company provide employees with a safe and healthy work environment, and provide safety and health education to employees regularly? (IV) Does the Company have an effective career capacity development training program established for the employees?	 		(III) We organize fire safety training on a regular basis to provide our employees with complete fire safety knowledge and disaster prevention training, so as to improve their crisis management and contingency response skills. In addition, the internal e-learning website offers courses including the ―Rise of Safety Awareness,‖ ―Safety and Health Training,‖ ―Work Stress Prevention and Testing,‖ and ―Occupational Low Back Pain Prevention.‖ We intend to provide more information related to safety and health issues coordinating with the current trends. In this way, our employees are allowed to learn safety and health information online without the limit of time and space. (IV) For KYE, the key for the Company to ensure sustainable operations is the continuous development of the employees. We strive to establish a complete educational training system and structure. Therefore, the Company has invested adequate resources to train the employees since their employment began. We adopt different training programs using various learning approaches based on different stages, including pre-job and on-the-job training programs, and build a complete E-learning training platform allowing employees to learn without the limit of time and space. The Company hopes that such training can facilitate individual potential and further achieve the three values of the training policies, i.e. ―provision of customer value,‖ ―rise of employee value,‖ and ―creation of organizational value.‖ KYE designs the structural competency training for each function type in line with respective career development to enrich our human resources. Various learning approaches:	(III) None. (IV) None.

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Evaluation Item			Implementation	Differences with the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies,and reasons thereof:
	Yes	No	Summary
(V) Does the Company have related customer interest protection policies and complaint procedures established for customer health and safety, client privacy, marketing and labeling of the products and services in accordance with related laws and regulations and international standards?			 Internal training: Participate the annual training course organized by the HR Department, including the management, cognitive, and professional skill training.  External training: Attend the training courses and seminars held by external organizations related to the work.  On-the-job training: Learn professional skills while performing business. For the professional skills required for an employee’s work, the employee is trained on site by his/her chief officer or personnel designated thereby with the approach of ―learning by doing.‖  Web learning: Learn from various courses on the e-learning platform. (V) 1. The Company has set up a customer service department respectively in Taipei and our Dongguan Factory in China to deal with product after-sales service for our clients and customers. In more than 80 countries where our brand products are sold, product technical manuals and components are provided to allow the local clients offering the product after-sales service to protect the customers’ interests. 2. In addition to the contact information of customer after-sales service on the corporate website for customer inquiries, the Company also provides a real-time product research service and a user feedback mailbox to protect the interests of our global customers using the Company’s products.	(V) None.

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Evaluation Item	Implementation	Implementation	Implementation	Differences with the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies,and reasons thereof:
	Yes	No	Summary
(VI) Does the Company establish supplier management policies and require them to follow relevant regulations on the issues of environmental protection, occupational safety and health, or labor rights? How about the implementation?			3. The Company has set up an Intellectual Property & Legal Department and Product Safety Verification Department dedicated to providing information required by national or international laws and regulations and performing health and safety verification processes for products/services, for example, UL (a standard for fire protection), LVD (Low Voltage Directive), EN71 (a standard for toy safety), etc. The Company’s products are labeled with the product or service information required by the national or international laws and regulations of the regions in which the products are sold, including CE, FCC, REACH, RoHS, and WEEE. (VI) For new appointments of suppliers to perform audit procedures, the Company has incorporated ISO9001, ISO14001 and QC 080000 into the evaluation criteria. We will sign a contract with new suppliers, and if the supplier violates the related agreement, we are entitled to terminate the contract.	(VI) None.
V. Does the Company prepare the CSR report or other reports that disclose non-financial information of the Company with reference to internationally accepted report preparation guidelines or guides? Is any third-party assurance or verification opinion acquired for the above-mentioned reports?			The Company did not prepare the CSR reports disclosing non-financial information of the Company in the most recent year.	Under development.
VI. If the Company has established its own corporate social responsibility best-practice principles in accordance with the ―Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies,‖ specify any discrepancy between the implementation and the principles established by the Company: The Company is dedicated to fulfilling its corporate social responsibility, and the operation thereof is in line with our own ―Corporate Social Responsibility Best Practice Principles.‖
VII. Other information useful to the understandingof the corporate social responsibilityimplementation: None.

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(VII) Implementation of ethical corporate management, differences with the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies, and reasons thereof

Evaluation Item			Implementation	Differences with the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary
I. Enactment of ethical management policy and program (I) Does the Company establish ethical corporate management policies that are adopted by the Board of Directors and explicitly state such policies and the implementation methods in its Articles of Incorporation and external documents? Do the Board of Directors and top management actively implement their commitment to implementing the operating policies? (II) Does the Company establish a risk assessment mechanism against unethical conduct, analyze and assess on a regular basis business activities within their business scope which are at a higher risk of being involved in unethical conduct, and establish prevention programs accordingly with the inclusion of the prevention measures against each behavior specified in Paragraph 2, Article 7 of the ―Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies‖? (III) Whether the Company explicitly defines procedures, guides of conduct, and disciplinary and reporting systems in case of a violation in the preventive solutions of unethical conduct, implements them accordingly, and carries out reviews and modifications of these solutions?	  		(I) The Company has established the ―Code of Ethical Conduct for Directors and Managers‖ and ―Ethical Corporate Management Best Practice Principles‖ approved by the Board of Directors and announced the same on the corporate website to demonstrate the Company’s ethical corporate management policies and implementation thereof. (II) The Company has established its ―Ethical Corporate Management Best Practice Principles‖ as a regulation for internal management, intermittently provided employees with related educational training, and formulated the procedures for risk management and regular reporting. (III) The Company has established related management regulations to specify the laws and disciplinary measures which shall be observed by all employees when engaging in business activities.	The Company is devoted to fulfilling the related regulations of the Ethical Corporate Management Best Practice Principles in accordance with all rules and regulations. (I) None. (II) None. (III) None.
II. Implementation of ethical businesspractices

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Evaluation Item			Implementation	Differences with the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary
(I) Does your company assess the past records of the counterparties regarding ethics? Do contracts between the company and the counterparties include clear clauses governing ethical conduct? (II) Does the Company establish a specific unit subject to Board of Directors to promote corporate ethical business and regularly (at least once a year) report the ethical management policy, prevention program of unethical conduct and implementation status of supervision to Board of Directors? (III) Does the Company define any policy against conflict of interest, provide adequate channels thereof, and fulfill the same precisely? (IV) Has the Company fulfilled ethical management by establishing an effective accounting system and internal control system, and had an internal audit unit develop relevant audit plans according to the risk assessment results of unethical conduct and audited the compliance with the preventive solutions of unethical conduct accordingly, or appointed a CPA to do so? (V) Has the Company organized internal/external educational training for ethical management periodically?	    		(I) The Company completes the evaluation of ethical conduct before entering into a business relationship with others, and requires the party to sign the Letter of Commitment to Integrity before engaging in business activities to ensure such party’s compliance with all integrity rules formulated by the Company. (II) The Company has designated the Human Resources Department as a concurrent unit to promote ethical corporate management. Such unit supervises each operation according to the related management regulations and reports its implementation to the Board of Directors. (III) The Company has offered appropriate channels for the employees to provide information at any time. The responsible unit shall archive such information and solutions thereof for review. (IV) Relevant departments are requested to immediately correct the deficiencies of internal operations found by the Company’s audit personnel through an audit. The Company also implements an internal control self-evaluation operation containing environment control, risk assessment, control operations, information and communication, and supervision on a yearly basis, and then the self-evaluation reports of all departments and subsidiaries are reviewed by the Audit Office to ensure the implementation effectiveness of the internal control system. (V) The Company has actively promoted related regulations and ideal goals of ethical management and provided external educational training to encourage the continuing education of the employees.	(I) None. (II) None. (III) None. (IV) None. (V) None.
III. Implementation of the Company’s whistleblowingsystem

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Evaluation Item	Implementation	Implementation	Implementation	Differences with the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies, and reasons thereof
	Yes	No	Summary
(I) Does the Company define a specific whistleblowing and rewarding system, and establish convenient whistleblowing channels, and assign competent dedicated personnel to deal with the situation? (II) Has the Company defined the standard operating procedure for investigation after acceptance of a reported misconduct, the follow-up actions to be taken after the investigation, and relevant confidentiality mechanism? (III) Has the Company adopted any measures to prevent the whistle blowers from being abused after reporting misconduct?	  		(I) The Company has provided whistleblowing channels and established disciplinary and reporting systems for violations of ethical business practices, and carried out review and modification from time to time to adhere to the principles and rules of ethical business practices. (II) The Company’s responsible unit dedicated to acceptance of reported misconduct has established investigation procedures for different misconduct, and relevant personnel authorized to handle such matters have comprehended the importance of the confidentiality mechanism and adhere to it accordingly. (III) Since the dedicated unit is responsible for acceptance of all the reported misconduct, and all responsible personnel review and handle such misconduct in a confidential manner and with impartiality and objectivity, the whistle blowers will never encounter anymistreatment.	(I) None. (II) None. (III) None.
IV. Enhancing information disclosure Has the Company disclosed the Ethical Management Best Practice Principles and the effect of implementation thereof on its website and Market Observation Post System?			The Company has disclosed the ethical management information on its website at http://www.geniusnet.com and Market Observation Post System.	None.
V. If the Company has established ethical management best-practice principles based on ―Ethical Corporate Management Best Practice Principles for TWSE/GTSM Liste Companies,‖ please describe any discrepancy between the principles and their implementation: The Company has established ethical management best-practice principles based on ―Ethical Corporate Management Best Practice Principles for TWSE/GTSM ListedCompanies‖ and been dedicated to complyingwith the regulations related to the saidprinciples.
VI. Other important information useful to the understanding of the corporate ethical management implementation: The Company has disclosed its ethical management policies on the corporate website and prepared the Supplier Commitment Integrity which a supplier is required to sign before engagingin business activities. We also review related international standards or issues and update relevantpolicies on an intermittent basis.

V. If the Company has established ethical management best-practice principles based on ―Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies,‖ please describe any discrepancy between the principles and their implementation:

• (VIII)Methods of inquiry about the corporate governance principles and related regulations established by the Company

• MOPS of TWSE at http://newmops.twse.com.tw

• The Important Regulations section of Investor Information on the Company’s website at http://tw.geniusnet.com.

• (IX) Other important information sufficient for increasing understanding of the implementation of corporate governance: None.

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• (X) Implementation of the internal control system

• Declaration of internal control

KYE Systems Corp.

Declaration of an Internal Control System

Date: March 25, 2021

The following declaration are made based on the 2020 self-assessment of the Company’s internal control system:

• I. The Company acknowledges and understands that the establishment, implementation and maintenance of the internal control system are the responsibilities of the Board of the Directors and managers. Such system has been established to provide reasonable assurance for achievement of the objectives concerning the effectiveness and efficiency of operations (including profits, performance and protection of asset security), reliability, timeliness, transparency, and regulatory compliance of reporting, and compliance with applicable laws, regulations, and bylaws.

• II. Any internal control system has its inherent limitations. No matter how well an internal control system is designed, it can only provide reasonable assurance for the achievement of the above three objectives. Moreover, the effectiveness of an internal control system may vary as a result of changes in the environment and circumstances. However, our internal control system has a self-monitoring mechanism, and we take corrective actions immediately once a nonconformity is identified.

• III. The Company has assessed the effectiveness of its internal control policy design and implementation in accordance with the criteria determining the effectiveness of the internal control policies provided in the ―Regulations Governing the Establishment of Internal Control Systems by Public Companies‖ (hereinafter referred to as ―the Regulations‖). The determination criteria of the internal control policies adopted in ―the Regulations‖ consist of five major elements depending on the management control process: 1. Environment control, 2. Risk assessment, 3. Control operations, 4. Information and communication, 5. Supervision. Each element contains a number of items. Please refer to ―the Regulations‖ for more details.

• IV. The Company has adopted the aforementioned criteria to assess the effectiveness of its internal control system design and execution.

• V. Based on the result of the preceding assessment, the Company finally determined the effectiveness of the design and implementation of our internal control policy as of December 31, 2020 (including the supervision and management of subsidiaries) regarding the awareness of business results and target accomplishments, the reliability, promptness, and transparency of reports and compliance with relevant laws and regulations. This policy provided reasonable assurance that the above objectives have been achieved.

• VI. This declaration constitutes the main part of the Company’s annual reports and prospectuses, and shall be disclosed to the public. Any illegal misrepresentation or concealment in the public statement above is subject to the legal responsibilities specified in Articles 20, 32, 171, and 174 of the Securities and Exchange Act.

• VII. This declaration was approved at the Company’s Board of Directors meeting held on March 25, 2021 without any objections from the seven attending directors. The contents of the declaration were agreed upon unanimously.

KYE Systems Corp.

Chairman and President:

1. Specific appointment of a CPA to review the internal control report: None.

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• (XI) The details, main deficiencies and improvements in relation to legal penalties imposed against the Company or its internal personnel or penalties imposed by the Company against its internal personnel for violation of the internal control system in the most recent year and up until the date of publication of the annual report, where the results of such penalties were likely to have significant impact on shareholder equities or securities prices: No.

• (XII) Important resolutions by the shareholders’ meeting and the Board of Directors in the most recent year and up until the date of publication of the annual report

Shareholders’ Meeting/ Board Meeting	Meeting date	Important resolutions
Board Meeting	March 18, 2020	1. Proposal for repurchase of shares for the first time in 2020
Board Meeting	March 26, 2020	1. Proposal of the remuneration to the Company’s employees, directors, and supervisors for 2019 Proposal of the business report & financial statements and consolidated financial statements for 2019 Proposal for appropriation of profit and loss for 2019 Proposal for disbursement of cash dividends from capital reserves Proposal for holding the Company’s 2020 annual shareholders’ meeting
Board Meeting	May7,2020	1. Proposal for non-distribution of theprofits forQ1 of 2020
Board Meeting	May20,2020	1. Proposal for repurchase of shares for the second time in 2020
Annual Shareholders’ Meeting	June 18, 2020	1. 2019 Business report Audit Committee’s Review Report on the 2019 Financial Statements Report on the distribution of remuneration to employees, directors, and supervisors of the Company for 2019 Surplus Earning Distribution Report of the First Three Quarters for the 2019 Financial Year Report on amendment to the Company’s ―Regulations Governing Procedures for Board of Directors Meetings‖ Report on the implementation of treasury stocks Proposal of the business report and financial statements for 2019 Proposal for appropriation of profit and loss for 2019 Proposal for disbursement of cash dividends from capital reserves
Board Meeting	June 18, 2020	1. Proposal for participation in the capital increase in cash by ―Digilife Technologies Co., Ltd.,‖ the subsidiary in which the Companyholds 91.37% of its shares.
Board Meeting	August 6, 2020	1. Proposal for non-distribution of the profits for Q2 of 2020.
Board Meeting	November 5, 2020	1. Proposal for non-distribution of the profits for Q3 of 2020. Proposal for capital reduction by cancellation of the Company’s treasurystocks.
Board Meeting	March 25, 2021	1. Proposal of the remuneration to the Company’s employees and directors for 2020 Proposal of the business report & financial statements and consolidated financial statements for 2020 Proposal for distribution of the profits for 2020 Proposal for disbursement of cash dividends from capital reserves Proposal for appointment of a corporate governance manager Proposal for holding the Company’s 2021 annual shareholders’ meeting

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• (XIII)The main contents of dissenting opinions recorded or included in written statements, which were expressed by directors or supervisors against important resolutions adopted by the Board of Directors in the most recent year and up until the date of publication of the annual report: None.

• (XIV)Resignations and discharges of the Chairman, President and accounting, financial, internal audit, corporate governance and R&D managers in the most recent year and up until the date of publication of the annual report: None.

V. Information on CPAs’ professional fees

If fees paid to a CPA or CPA firm or its affiliated company for non-audit services account for a proportion less than one-quarter of the fees paid for the audit service in 2020, and the audit fees for 2020 were equivalent to that for 2019 without any adjustment, the audit fees are shown as follows:

Unit: NTD Thousand

CPA Name of CPA firm	Name of CPA	Audit fees	Non-audit fees	Non-audit fees	Non-audit fees	Non-audit fees	Non-audit fees	CPA Audit period (Note 2)	Remar ks
			System design	Corporate registrati on	Human resource	Others (Note 1)	Subtotal
Deloitte & Touche Taiwan	Mei-Hui Wu	2,890	0	0	0	20	20	2020	None
	Yao-Lin Huang

Note 1: An opinion on reasonable assessment of the price ranges of the shares to be repurchased was issued. Note 2: The CPA’s audit period covers the full fiscal year.

VI. Information on change of CPAs

Starting from Q1 of 2021, CPAs Yao-Lin Huang and Han-Ni Fang will replace CPAs Mei-Hui Wu and Yao-Lin Huang as the certifying CPAs of the Company due to adjustment to the internal operations of Deloitte & Touche (Taiwan), the firm engaged by the Company for certification.

• I. The Company’s Chairman, President or any financial or accounting manager who has been employed by the firm of the certifying CPA(s) or any of its affiliates in the most recent year: None.

• II. Changes in the transfer and pledge of equities by directors, supervisors, managers and shareholders holding more than 10% of the total shares in the most recent year and up until the date of publication of the annual report

• (I) Any change in equities of directors, supervisors, managers, and major shareholders

Unit: Shares

Title	Name	2020	2020	Current year, as of April 25 (Note 1)	Current year, as of April 25 (Note 1)
		No. of increase (decrease) of shares held	No. of increase (decrease) of sharespledged	No. of increase (decrease) of shares held	No. of increase (decrease) of shares pledged
Chairman and President	Shih-Kun Tso	0	0	0	0
Director	Ching-Hsin Cho	0	0	0	0
Director	Yung-Far Wei	(213,000)	0	0	0
Director	Han-LiangHu	0	0	0	0
Director	Ching-Huei Wu(Note 2)	0	0	0	0

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Title	Name	2020	2020	Current year, as of April 25 (Note 1)	Current year, as of April 25 (Note 1)
		No. of increase (decrease) of shares held	No. of increase (decrease) of sharespledged	No. of increase (decrease) of shares held	No. of increase (decrease) of shares pledged
Independent Director	Hung-Tsu Hsu	0	0	0	0
Independent Director	Jennyumr Kao	0	0	0	0
Independent Director	Anti Tsai	0	0	0	0
Senior Vice President	Kuo-YingWei	0	0	0	0
Vice President、 Accounting Officer and Corporate GovermanceOfficer	An-Min Kao	0	0	0	0

• Note 1: The data represents the number of increase/decrease in shares held and pledged as of the last day for share transfer registration for this shareholders’ meeting.

• Note 2: The director resigned due to personal reason, effective as of Jan. 19, 2021. The changes in his shareholding during his term of office are listed.

• (II) Information on the related party who is the counterparty of any equity transfer by a director, supervisor, manager, or major shareholder: None.

• (III) Information on any related party who is the counterparty of a pledge of equity by a director, supervisor, manager, or major shareholder: None.

• III. Information on the top-10 shareholders who are related to each other, in a spousal relationship or relatives within the second degree of kinship

						(April 25,2021)Unit: Shares;%	(April 25,2021)Unit: Shares;%	(April 25,2021)Unit: Shares;%	(April 25,2021)Unit: Shares;%
Name	Shares held by the shareholder		Shares held by spouse and/or minor children		Total share names	s held in the of others	The title or name and relation in case of the top-ten shareholders who are related parties to each other, in a spousal relationship or within the second degree of kinship		Remarks
	Number of shares	Shareholding ratio	Number of shares	Shareholding ratio	Number of shares	Shareholding ratio	Name	Relationship
Ching-Hsin Cho	11,959,488	5.33	0	0.00	0	0.00	Shih-Kun Tso Hsiu-Chin Hsu Song-Young Chen	Father and son In-laws In-laws	None
Shih-Kun Tso	5,877,815	2.62	2,938,010	1.31	0	0.00	Ching-Hsin Cho Hsiu-Chin Hsu Song-Young Chen	Father and son Spouse In-laws	None
Bank SinoPac as Custodian for Maxfar Limited Investment Account	7,678,829	3.42	0	0.00	0	0.00	None	None	None
Chin An Tai Investment, Ltd.	7,297,955	3.25	0	0.00	0	0.00	None	None	None
Representative of Chin An Tai Investment, Ltd.: Hsiu-Chin Hsu	2,938,010	1.31	5,877,815	2.62	0	0.00	Shih-Kun Tso Ching-Hsin Cho Song-Young Chen	Spouse In-laws In-laws	None
Wan Chih Investment Co.,Ltd.	5,239,366	2.33	0	0.00	0	0.00	None	None	None
Wan Chih Investment Co., Ltd. Representative: Hsiu-Chin Hsu	2,938,010	1.31	5,877,815	2.62	0	0.00	Shih-Kun Tso Ching-Hsin Cho Song-Young Chen	Spouse In-laws In-laws	None
Song-Young Chen	4,137,050	1.84	0	0.00		0.00	Ching-Hsin Cho Shih-Kun Tso Hsiu-Chin Hsu	In-laws In-laws In-laws	None
Wan Chuan Investment Corp.	3,269,546	1.46	0	0.00	0	0.00	None	None	None
Wan Chuan Investment Corp. Representative: Li-Yun Shih	0	0.00	3,132,752	1.40	0	0.00	Jui-Tsung Liao	Spouse	None
Jui-TsungLiao	3,132,752	1.40	0	0.00	0	0.00	Li-Yun Shih	Spouse	None
DK Media Group Corporation	3,132,000	1.39	0	0.00	0	0.00	None	None	None
DK Media Group Corporation Representative: Chi-Lin	100,000	0.04	0	0.00	0	0.00	None	None	None

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Yu, corporate representative of DK Media Group Corporation
Chung-Yin Investment Co.,Ltd.	2,951,140	1.31	0	0.00	0	0.00	None	None	None
Chung-Yin Investment Co., Ltd. Representative: Ching-Hsin Cho	11,959,488	5.33	0	0.00	0	0.00	Shih-Kun Tso Hsiu-Chin Hsu Song-Young Chen	Father and son In-laws In-laws	None

• Note: The shareholding ratio is ranked based on the total number of shares held in the name of the shareholder, by the shareholder’s spouse and minor children, and in the names of others.

IV. Shares held by the Company and its directors, supervisors and managers and by businesses directly or indirectly controlled by the Company in a single investee business, and the total shareholding ratio calculated on a consolidated basis

Consolidated Shareholding Ratio

(December 31, 2020) Unit: Shares; NTD; %

Enterprise invested in (Note 1)	Invested by the Company	Invested by the Company	Investment by directors, supervisors, and managers, or by directly or indirectly controlled enterprises	Investment by directors, supervisors, and managers, or by directly or indirectly controlled enterprises	Consolidated investment	Consolidated investment
	Number of shares	Shareholdi ng percentage	Number of shares	Shareholdin g percentage	Number of shares	Shareholdi ng percentage
Chung-Chiang Investment Co., Ltd.	6,451,800	100.00	—	—	6,451,800	100.00
Hung-Cheng Investment Co., Ltd.	9,578,103	100.00	—	—	9,578,103	100.00
KYE International Corporation	235,000	100.00	—	—	235,000	100.00
KYE Systems Europe GmbH (Note 2) (Note 3)	EUR 213,500	100.00	—	—	EUR 213,500	100.00
KYE Systems (Hong Kong) Corp.	500,000	100.00	—	—	500,000	100.00
Genius Holding Co., Ltd.	21,467,377	100.00	—	—	21,467,377	100.00
DIGILIFE TECHNOLOGIES CO., LTD.	51,562,598	94.61	—	—	51,562,598	94.61
ADVANCE TOP LIMITED (Note 2)	USD 150,000	20.00	—	—	USD 150,000	20.00
SHINYOPTICS CORP.	3,400,000	22.97	—	—	3,400,000	22.97
STAR REACH LIMITED (Note 2)	USD 416,667	25.00	—	—	USD 416,667	25.00
TIMING PHARMACEUTICAL CO., LTD.	19,445,600	22.64	—	—	19,445,600	22.64

Note 1: These are the Company’s long-term equity investments evaluated under the equity method. Note 2: This is not a company limited by shares. The data listed is capital contribution and percentage thereof. Note 3: This company terminated its business operation on December 31, 2017 and went into liquidation.

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Chapter 4.Financing

I. Capital and shares (I) Sources of share capital(May 1, 2021) Unit: Shares; NTD

Date	Issue price	Authorized capital	Authorized capital	Paid-upcapital	Paid-upcapital	Paid-upcapital			Remarks	Remarks	Remarks
		Number of shares	Amount	Number of shares		Amount	Source of share capital		Effective date		Document no.	Offset against payments of shares by any propertyother than cash	Others
March 2016	NTD10	390,000,000	3,900,000,000	301,153,496		3,011,534,960	Cancellation of shares repurchased 50,000,000		February 1, 2016		Chin-Kuan-Cheng-Chiao-Tzu No. 1050003867	None	None
2016.05	NTD10	390,000,000	3,900,000,000	291,598,496		2,915,984,960	Transfer of repurchased shares to employees 1,100,000 Cancellation of shares repurchased94,450,000		April 30, 2013 April 27, 2016		Chin-Kuan-Cheng-Chiao-Tzu No. 1020016179 and 1050015554	None	None
July 2016	NTD10	390,000,000	3,900,000,000	287,098,496		2,870,984,960	Cancellation of shares repurchased 4,000,000		July 6, 2016		Chin-Kuan-Cheng-Chiao-Tzu No. 1050026835	None	None
November 2016	NTD10	390,000,000	3,900,000,000	282,098,496		2,820,984,960	Cancellation of shares repurchased 5,000,000		October 12, 2016		Chin-Kuan-Cheng-Chiao-Tzu No. 1050041867	None	None
2017.03	NTD10	390,000,000	3,900,000,000	277,038,496		2,770,384,960	Transfer of repurchased shares to employees 60,000 Cancellation of shares repurchased 5,000,000		March 7, 2014 January 11, 2017		Chin-Kuan-Cheng-Chiao-Tzu No. 1030006730 and 1060000938	None	None
August 2017	NTD10	390,000,000	3,900,000,000	258,538,496		2,585,384,960	Transfer of repurchased shares to employees 5,000,000 Transfer of repurchased shares to employees 3,000,000 Cancellation of shares repurchased 5,000,000 Cancellation of shares repurchased 5,500,000		May 28, 2014 July 16, 2014 May 11, 2017 July 18, 2017		Chin-Kuan-Cheng-Chiao-Tzu No. 1030021361, 1030028201, 1060017324, and 1060026557	None	None
March 2018	NTD10	390,000,000	3,900,000,000	243,538,496		2,435,384,960	Transfer of repurchased shares to employees 5,000,000 Cancellation of shares repurchased 10,000,000		December 27, 2014 November 7, 2017		Chin-Kuan-Cheng-Chiao-Tzu No. 1030053185 and 1060042154	None	None
August 2018	NTD10	390,000,000	3,900,000,000	237,538,496		2,375,384,960	Transfer of repurchased shares to employees 6,000,000		May 9, 2018		Chin-Kuan-Cheng-Chiao-Tzu No. 1070315642	None	None
November 2018	NTD10	390,000,000	3,900,000,000	234,538,496		2,345,384,960	Cancellation of shares repurchased 3,000,000		August 21, 2015		Chin-Kuan-Cheng-Chiao-Tzu No. 1040034823	None	None
July 2020	NTD10	390,000,000	3,900,000,000	224,528,496		2,245,284,960	Cancellation of shares repurchased 5,010,000 Cancellation of shares repurchased 5,000,000		May 20, 2020 July 13, 2020		Chin-Kuan-Cheng-Chiao-Tzu No. 1090344936 and 1090349961	None	None
												April 25,2021
Types of shares							Authorized capital					Remarks
		Outstandingshares(Note)				Treasurystocks		Unissued shares			Total
Common stock		224,528,496				0		165,471,504			390,000,000	None

Note: Such shares are stocks listed on the market.

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(II) Composition of shareholders

(II) Composition of shareholders	(II) Composition of shareholders	(II) Composition of shareholders	(II) Composition of shareholders	(II) Composition of shareholders	(II) Composition of shareholders	(II) Composition of shareholders
April 25,2021
Composition of shareholders Quantity	Government Agency	Financial Institution	Other Corporate Entities	Individual	Foreign Institutions and Foreigners (Note)	Total
Number of Persons	2	5	234	40,738	64	41,043
Number of Shares Held	47	96,148	22,929,046	184,284,002	17,219,253	224,528,496
Shareholding Ratio (%)	0.00	0.04	10.21	82.08	7.67	100.00

Note: No shares held by Chinese investors. A Chinese investor refers to an individual, corporation, organization, or institutions of the Mainland Area or any companies located in a third region invested in thereby, as defined in Article 3 of the Regulations for Approval on Investment in Taiwan by People of the Mainland Area.

(III) Distribution of equity

Common Stock

(III) Distribution of equity	Common Stock	Common Stock	Common Stock
	April 25,2021
Range of Shareholding	Number of Shareholders	Number of Shares Held	ShareholdingRatio(%)
1 to 999	25,689	1,552,783	0.69
1,000 to 5,000	10,073	22,189,693	9.88
5,001 to 10,000	2,394	18,186,932	8.10
10,001 to 15,000	958	11,577,540	5.16
15,001 to 20,000	523	9,547,416	4.25
20,001 to 30,000	495	12,376,011	5.51
30,001 to 50,000	396	15,552,869	6.92
50,001 to 100,000	320	22,831,134	10.17
100,001 to 200,000	104	14,378,968	6.40
200,001 to 400,000	53	14,548,448	6.48
400,001 to 600,000	7	3,390,719	1.51
600,001 to 800,000	7	4,909,127	2.19
800,001 to 1,000,000	6	5,334,524	2.38
1,000,001 and above	18	68,152,332	30.36
Total	41,043	224,528,496	100.00

(IV) List of major shareholders

(IV) List of major shareholders	(IV) List of major shareholders	(IV) List of major shareholders
April 25,2021
Names of Major Shareholders	Number of Shares Held	ShareholdingRatio(%)
Ching-Hsin Cho	11,959,488	5.33
Bank SinoPac as Custodian for Maxfar Limited Investment Account	7,678,829	3.42
Chin An Tai Investment,Ltd.	7,297,955	3.25
Shih-Kun Tso	5,877,815	2.62
Wan Chih Investment Co.,Ltd.	5,239,366	2.33
Song-YoungChen	4,137,050	1.84
Wan Chuan Investment Corp.	3,269,546	1.46
Jui-TsungLiao	3,132,752	1.40
DK Media GroupCorporation	3,132,000	1.39
Chung-Yin Investment Co.,Ltd.	2,951,140	1.31

Note: The table lists the top-10 major shareholders based on shareholding ratio.

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• (V) Market prices per share, net values, earnings and dividends in the most recent two years and the information related thereto

Information on Market Price, Net Value, Earnings, and Dividends per Share

Unit: NTD; 1,000 shares; %

				Unit:	NTD;1,000 shares;%
Item	Year		2019	2020	As of May 1, 2021 (Note 7)
Market price per share (Note 1)	Highest		9.57	12.70	8.68
	Lowest		7.80	5.42	5.42
	Average		8.47	9.14	7.39
Net value per share (Note 2)	Before distribution		13.77	13.22	13.46
	After distribution		13.57	12.81	－
EPS	Weighted average number of shares		234,538	228,307	224,528
	EPS	Before retrospective adjustment	0.65	0.64	0.22
		After retrospective adjustment	0.64	0.64	－
Dividends per share (Note 3)	Cash dividends(Note 3)		0.20	0.41783293	0.30
	Stock dividends	From retained earnings	0	0	－
		From capital reserves	0	0	－
	Accumulated unpaid dividends		0	0	－
ROI analysis	P/E ratio(Note 4)		13.03	14.28	－
	P/D ratio(Note 5)		42.35	21.87	－
	Cash dividendyield(Note 6)		2%	5%	－

Note 1: The table lists the highest and lowest market price of common stocks for each year, and the annual average market price was calculated in accordance with the annual trading value and volume of each year.

Note 2: The data is listed in accordance with the number of outstanding shares at the year end and the distribution of dividends approved in the annual shareholders’ meeting in the following year. Note 3: The data is listed based on the distribution of dividends for 2020 approved by the Board of Directors before the annual shareholders’ meeting.

Note 4: P/E ratio = Average closing price per share in current year/earnings per share

Note 5: P/D ratio = Average closing price per share in current year/cash dividend per share

Note 6: Cash dividend yield = Cash dividend per share/average closing price per share in current year

Note 7: The net value per share and EPS are listed based on the CPA-reviewed consolidated financial statements for Q1 of 2021.

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• (VI) Impact of the Company’s dividend policy and its implementation and the significant changes expected in the dividend policy

• The Company’s dividend policy

The Company may distribute earnings or offset losses after the end of each quarter. The Company’s proposals for earning allocation or loss off-setting for the first three quarters along with the business report and the financial statements audited or reviewed by accountants shall be submitted to the Board of Directors for resolution after being reviewed by the Audit Committee.

When the Company allocates earnings in accordance with the provisions referred to above, such earnings shall be estimated and taken to pay any due tax payment, offset losses and provide for legal reserves as required by the laws. Where such legal reserve amounts to the total paid-in capital, this provision shall not apply.

The Company distributing surplus earning in the form of new shares to be issued thereby shall follow the provisions of Article 240 under the Company Act; if such surplus earning is distributed in the form of cash, it shall be approved by the Board of Directors.

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, unless the legal reserve reaches the amount of the Company paid-in capital, and also make provision/reversal of special reserves pursuant to laws. The residual balance shall be added to undistributed earnings. The Board of Directors shall draft a motion for allocation of the residual balance plus the undistributed earnings, and submit the same to a shareholders’ meeting to resolve whether shareholder bonus shall be allocated. The ratio of distribution shall be at least 50% of the distributable earnings.

Where distribution of the aforesaid shareholders dividends is made in cash, the Board of Directors is authorized to make this decision which shall be resolved with more than two-thirds of the board present, voted in favor by more than half of all attending directors, and subsequently reported in a shareholders’ meeting.

The dividend policy is adopted by the Company in consideration of the current and future development plans, investment environment, financing needs and domestic and international competition as well as the shareholders’ interests and other factors. The Company’s shareholders’ dividends are allocated in the form of cash dividend or stock dividend. The cash dividend shall be no less than 10% of the total shareholders’ dividends, and the residual balance is paid in shares. However, all shareholders’ dividends shall be distributed in stock dividends when the cash dividend per share is NTD0.1 or lower.

Based on the situation of the Company’s industry and the business development cycle, the shareholder dividends during the most recent three years were all in cash, and at least 50% of the dividends in the future are also expected to be in cash.

1. Implementation

Dividend distribution proposed at the annual shareholders’ meeting

Item	Dividendper share(NTD)	Source
Cash dividend	0.30	Capital reserves

1. Effect of expected significant changes in the dividend policy

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None – no expected material changes in the dividend policy.

(VII) Impact of the bonus shares proposed at the shareholders’ meeting on the Company’s operating performance and EPS

operating performance and EPS	operating performance and EPS	operating performance and EPS
Year Item			2021 (Estimated)
Opening paid-upcapital(NTD Thousand)			2,245,285
Dividend distribution for the year	Cash dividendsper share(NTD) (Note 1)		0.30
	Stock dividends per share (from capitalization of earnings) (shares)		0
	Stock dividends per share (from capitalization of reserves) (shares)		0
Changes in business performance (Note 2)	Operating profit (NTD Thousand)		－
	Percentage of increase (decrease) in operating profit from the sameperiod of thepreviousyear		－
	Profit after tax(NTD Thousand)		－
	Percentage of increase (decrease) in net income after tax from the sameperiod of thepreviousyear		－
	EPS (NTD)		－
	Percentage of increase (decrease) in EPS from the same period of thepreviousyear		－
	Annual average ROI(annual average PE ratio)		－
Pro forma EPS and P/E ratio (Note 2)	If capitalized earnings are entirely distributed as cash dividends instead	Pro forma EPS (NTD)	－
		Pro forma annual average ROI	－
	Without capitalization of reserves	Pro forma EPS(NTD)	－
		Pro forma annual average ROI	－
	If capitalized earnings are entirely distributed as cash dividends without the capitalization of serves	Pro forma EPS(NTD)	－
		Pro forma annual average ROI	－

Note 1: A cash dividend of NTD0.30 per share from capital reserves was distributed.

Note 2: Since the Company did not prepare a financial forecast in 2021, the calculation was impossible. Note 3: The table was prepared pursuant to the Letter No. (2002)-Tai-Tsai-Cheng-(I)-Tzu 002534 issued by the Securities and Futures Commission, Ministry of Finance on April 16, 2002.

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(VIII)Remuneration to employees and directors

1. Percentage and range of the remuneration to employees and directors stated in the Articles of Incorporation

1%–15% of the Company’s annual profits, if any, shall be appropriated as employee remuneration which may be distributed in shares or in cash as decided by the Board of Directors. Such employee remuneration may be distributed to the employees of affiliated companies who have met certain requirements. The Board of Directors may decide to appropriate a maximum of 1% of the amount of the said profits as directors’ remuneration. The report on allocation of remuneration to employees and directors shall be submitted to a shareholders’ meeting.

However, profits must first be taken to offset cumulative losses if any before being distributed to employees and directors as remuneration at the percentages mentioned above.

1. The current estimation basis of remuneration for employees and directors, calculation basis for number of shares distributed as remuneration for employees, and methods for the accounting of the difference between actually distributed and estimated amounts

If there is any change in the amount on the date of resolution made by the shareholders’ meeting, the changed amount shall be treated as a change in accounting estimates and accounted in the year of resolution made by the shareholders’ meeting.

1. Distribution of the remuneration approved by the Board of Directors

2. (1) Amounts of remuneration to employees and directors

3. The amounts of remuneration distributed to employees in cash and in

4. shares were NTD5,663,000 and NTD0 respectively. Remuneration distributed to directors was NTD1,887,000. Both remuneration amounts were consistent with the estimates in the year of recognized expenses.

5. (2) The amount of remuneration paid in shares to employees and the ratio of it to the total amount of individual profit after tax and total employee remuneration in the current year

Remuneration paid in shares to employees was NTD0, accounting for

0%.

1. Actual distribution of remuneration to employees and directors in the previous year

year
	Unit: NTD Thousand;1,000shares
Item	Number of shares	Amount	Equity price
Employee remuneration in cash	-	5,370	-
Employee remuneration in shares	-	0	-
Remuneration to directors	-	1,769	-
Total	-	7,139	-

Any discrepancy between the above-mentioned actual distributed remuneration and the recognized remuneration to employees and directors: None.

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(IX) Repurchase of the Company’s shares

1. Repurchase completed

Repurchase completed
	May1,2021
Time of repurchase	1st time in 2020	2nd time in 2020
Purpose of repurchase	Maintenance of the Company’s credit and shareholders’ equity	Maintenance of the Company’s credit and shareholders’ equity
Expected types and numbers of repurchased shares	Common stock 10,000,000 shares	Common stock 5,000,000 shares
Repurchase rangeprice	NTD5–8per share	NTD6–10per share
Repurchaseperiod	March 19 to May15,2020	May21 to July8,2020
Types and numbers of repurchased shares	Common stock 5,010,000 shares	Common stock 5,000,000 shares
Value of repurchased shares	NTD34,837,401	NTD43,914,841
Average repurchase price per share	Common stock 6.95 shares	Common stock 8.78 shares
Number of shares cancelled	Common stock 5,010,000 shares	Common stock 5,000,000 shares
Cumulative number of the Company’s shares held	Common stock 0 shares	Common stock 0 shares
Ratio of cumulative number of the Company’s shares held to the number of total outstandingshares	－	－
Reason for non-completion of implementation	After the current repurchase of shares was implemented, the share price quickly rebounded and stayed above the maximum repurchase range price of NTD8 for most of the time after mid-April. Therefore, repurchase was not possible, and implementation was not completed after an overall consideration of the Company’s financial conditions and shareholders’ equity.	－

1. Repurchase in progress: None.

II. Issuance of corporate bonds: None.

• III. Issuance of preferred shares and global depository receipts: None.

• IV. Issuance of employee stock warrants: None.

• V. Issuance of restricted stock awards for employees: None.

• VI. Issuance of new shares in connection with mergers or acquisitions or with the acquisition of the shares of another company: None.

• VII. Implementation of the capital utilization plan: None.

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Chapter 5.Overview of Business Operations

I. Business activities (I) Scope of business

1. Main content of the operated businesses

The Company is a professional manufacturer of products related to computer peripheral, consumer electronics and video images. We operate business in a diversified manner and market products globally with our private brand ―Genius.‖ The businesses that the Company operated are as follows:

• (1) Production, manufacturing and trade of computer peripheral equipment.

• (2) Manufacturing, processing and trade, and planning, consulting, repair and maintenance services of computer hardware, software and peripheral equipment.

• (3) Import and export trade of the aforementioned businesses.

• Ratio of the operated businesses

The Company specializes in the research, development, production and marketing of the applied technologies of computer peripheral, consumer electronics and video images products. The ratio of each business is as follows:

Main Product Items	Ratio to the OperatingRevenue(%)	Ratio to the OperatingRevenue(%)
	Actual Ratio in 2020	Actual Ratio in 2019
Computer Peripherals	61.42	57.63
Consumer Electronic Products	0.65	1.49
Video Images Products	36.33	40.26
Others	1.60	0.62
Total	100.00	100.00

1. New products planned to develop

2. (1) Continuously develop super mini wireless products.

3. (2) Continuously research into and develop stylus pen technology and tablet computer products.

4. (3) Continuously develop the technology of touch screen with fingers or stylus and apply it to keyboards, mice and remote controls.

5. (4) Continuously develop wireless ring remote control and presenter devices.

6. (5) Continuously develop wireless optical pen mouse devices.

7. (6) Develop an electromagnetic touch module.

8. (7) Develop an electromagnetic and capacitive dual-mode touch module.

9. (8) Develop active capacitive/electromagnetic stylus pens.

10. (9) Develop vehicle recorders.

11. (10) Develop Full HD web cameras and Full HD optical lens cameras.

12. (11) Develop multimedia DLP mini projectors.

13. (12) Develop automatic IR LED fill light web cameras.

14. (13) Develop Smart TV web cameras.

15. (14) Develop USB 3.0 web cameras.

16. (15) Develop new generation of high-fidelity, high-power wooden speakers.

17. (16) Develop Bluetooth products for tablets and smartphones, including Bluetooth keyboards, Bluetooth headsets and Bluetooth speakers.

18. (17) Develop Bluetooth close-range sensing speakers.

19. (18) Develop wireless AirPlay speakers.

20. (19) Develop wireless DLNA speakers.

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(20) Develop wireless audio-video players.

(21) Develop Bluetooth 4.0 power saving devices.

(22) Develop peripheral products of iTV, Smart TV and GTV.

(23) Develop power banks.

(24) Develop sweat-proof sports headsets.

(25) Develop Bluetooth and 2.4Ghz wireless multi-device mice

(26) Develop Bluetooth headsets for NFC devices.

(27) Develop Bluetooth active stylus pens.

(28) Develop SmartGenius APP for setting Genius peripheral products.

(29) Develop wireless Wi-Fi speakers.

(30) Develop stylus pens.

(31) Develop rechargeable wireless mouse.

• (II) Overview of the Industry

• Current situation and development of the industry

As China and the emerging countries rise, the focus of global growth is shifting to emerging countries in Latin America, Asia and Central and Eastern Europe. These countries have gradually become the principal market that supports the global economic growth.

From the industrial perspective, the global industry of personal computers in 2020, benefiting from the new economic and social lifestyles brought by remote and stay-at-home economy, has been revived and saw growth which has been absent for years. According to the statistics of the market research company IDC, the annual shipment of desktop and laptop computers and workstations was more than 30 billion sets, an increase by 13.1%, boosting demands for peripheral devices and video image products. Additionally, with the wide spread of the mobile information and various development of the network application, smartphones with touch screen interfaces have replaced conventional cell phones as the mainstream in the market. These portable laptops, tablet computers, and cellphones have also changed the consumption habits of users, prompting the peripheral products to be developed as wireless, more power-saving products. Wireless audio-video connected products are going to be the mainstream of the leisure and entertainment market. With the wide spread of leisure activities, wireless sensing measurement is used in combination with smart mobile devices in sports and healthcare and gradually valued. Therefore, there will be an inevitable need for wireless sensing measurement devices with extremely low power consumption in the future. Samsung has also launched the electromagnetic stylus pens for its smartphones and tablet computers, which will drive a wider application to meet various touch screen technology needs in the market. In addition, mobile devices such as handheld devices and mobile phones have benefited from the widespread use of high-speed Internet connection (5G & Wi-Fi 6) and generated more high-level demands.

With the new trend of Internet TV by Smart TV, the application of computer peripherals has also shifted towards TV platforms. Moreover, as social media rise, there is a need for web cameras during real-time chat, and many consumers use videos to record their life, maintain relationships as well as sharing feelings via Facebook and YouTube, which all stimulate the rapid growth and upgrade of lots of related peripheral equipment.

1. Relationship between the upstream, midstream and downstream of the industry

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(1) Mouse

Mouse
Upstream	Midstream	Downstream
CMOS sensor component Touch screen component MCU processor Wireless radio frequency (RF) module Printed circuit board (PCB)	Design and assembly of mouse	Tablet computer, desktop, laptop, distributor, consumer

(2) Wireless keyboard and mouse set

Upstream CMOS sensor component MCU processor Wireless radio frequency (RF) module Printed circuit board (PCB) Soft PCB Soft rubber (3) Web camera Upstream CMOS sensor component Backend master controller LENS optical camera AF (autofocus) module Microphone (4) Vehicle recorder Upstream CCD/CMOS sensor component Digital signal processor (DSP) LENS optical camera LCD display screen Wi-Fi, 3G/4G module Memory card Microphone (5) Memorycard reader Upstream Chip for card reader Memory card adapter (6) Bluetooth headset Upstream Wireless RFIC	Upstream	Midstream	Downstream
	CMOS sensor component MCU processor Wireless radio frequency (RF) module Printed circuit board (PCB) Soft PCB Soft rubber	Design and assembly of keyboard and mouse	Desktop, laptop, distributor, consumer
	Upstream	Midstream	Downstream
	CMOS sensor component Backend master controller LENS optical camera AF (autofocus) module Microphone	Appearance and structural design, mechatronic integration, innovation differentiation, product positioning, assembly	Desktop, laptop, distributor, consumer
	Upstream	Midstream	Downstream
	CCD/CMOS sensor component Digital signal processor (DSP) LENS optical camera LCD display screen Wi-Fi, 3G/4G module Memory card Microphone	Appearance design, heat flow processing, mechatronic integration, innovation differentiation, product positioning, assembly	Smart device, distributor, car dealer, consumer
	Upstream	Midstream	Downstream
	Chip for card reader Memory card adapter	Design, assembly and testing of card reader	Computer system manufacturer, distributor, consumer, memory card manufacturer
	Upstream	Midstream	Downstream
	Wireless RFIC	Bluetooth wireless RF	Smartphone,tablet

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Baseband processor IC Speech codec Power supply/management component Battery Headset driver Microphone driver (7) Speaker Upstream Code/DSP audio decoder Plastic/wood cabinet Speaker driver Touch module Electret (8) Keyboard Upstream Touch module MCU processor Wireless radio frequency (RF)module	Baseband processor IC Speech codec Power supply/management component Battery Headset driver Microphone driver	module design, audio frequency design, echo cancellation design, assembly, testing, headset sound quality adjustment	computer, laptop, cell phone manufacturer, distributor, consumer
	Upstream	Midstream	Downstream
	Code/DSP audio decoder Plastic/wood cabinet Speaker driver Touch module Electret	Audio frequency design, echo cancellation design, assembly, testing, speaker sound quality adjustment	Smart phone and tablet computer, speaker manufacturer, distributor, consumer
	Upstream	Midstream	Downstream
	Touch module MCU processor Wireless radio frequency (RF)module	Assembly of touch module, production and testing of wireless RF module	Smart phone and tablet computer, desktop, laptop, distributor, consumer

1. Development trends and competition of the products

Recently, the growth of the laptop market has slowed down, mainly because of the popularity of portable iPads and tablet computers of Apple Computer. These products have not only replaced small laptops but also featured convenient wireless mice, and as the technologies have become mature and the prices have fallen, the sales have grown even more significantly. For consumers who only use Internet for browsing and receiving emails instead of editing things, tablet computers are relatively light and easy to use compared to laptops, which has apparently suppressed the market growth of a part of simple laptops and e-books.

Currently, Apple iPad is still in the lead of tablet computers. Tablet computers feature touch screen function, and as Samsung actively launches the use of stylus input, electromagnetic stylus pen technology has also become a trend in addition to the technology of touch screen with fingers. Computer peripheral products such as multi-touch mouse, keyboard, stylus pen, digitizer, and so on, have also consequently been developed. In the future, technology of touch screens that can be controlled with both fingers and stylus pens will be the mainstream of the market. With the great development of touch screen technology, consumers will be enabled to enjoy the touch screen products that are more convenient.

Due to the increasing need for mobile audio-video products, simple wireless connection technology between products that require no connection cables is going to be an important focus of the development. The development of Bluetooth technology widespread in the market, wireless audio-video AirPlay technology by Apple, DLNA technology by anti-Apple alliance and Miracast technology by Wi-Fi Alliance are going to focus on wireless audio-video products for living room, and further expand the scope to audio-video wireless

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connections of all rooms in a house. Also, for the wireless image transfer technology, other wireless alliances give focus on the development of techniques to display clear image while no lagging and applicable at a long distance, etc. With the competition of various wireless connection technologies, mobile audio-video products are definitely going to be the mainstream of the future market.

Furthermore, as smartphones are widely used, there will be a growing need for related peripheral products such as wireless Bluetooth keyboard, headset microphone, wireless Bluetooth headset and wireless Bluetooth portable speaker.

1. In terms of market competition, the products of the Company’s private brand and the main competitors are as follows:

2. A. The products of Genius, the Company’s private brand, include computer peripheral products such as wired mouse/keyboard, wireless mouse and keyboard, digitizer, presenter; consumer electronics products such as speaker, headset and game platform equipment; and video image products such as HD/FHD web camera and vehicle recorder. Professional e-sports peripheral product series GX-Gaming has been developed.

3. B. The main competitors of Genius’ input device products are Logitech, A4 Tech and Trust. Logitech has a complete product line, and with the great variety from its high-end products to low-end ones, it has different market segments. The recent low-price strategies in emerging countries by A4 Tech, Trust and small local businesses in China have also partially influenced Genius.

4. C. The main competitors of Genius’ audio products (i.e. speakers) are Logitech and regional brands. As for the headset, the main competitors are Philips, Sony and brands from China. Philips and Sony are both world-renowned consumer electronics brands that have lots of products on the market and a wide scope of marketing.

5. D. The main competitor of Genius’ gaming peripheral products is Logitech. The main competitors of the professional e-sports peripheral product series GX-Gaming are brands such as Razer, Steel Series and Thermaltake.

6. E. The main competitors of Genius’ vehicle recorder are Mio, Papago and Abee. Russia market is the current main sales territory. HD/FHD or even wireless models are the future trend in addition to the entry-level VGA model.

7. The marketing focus and competitive advantages of the Company’s private brand Genius are as follows:

8. A. Channels: The Company mainly distributes products via subsidiaries or clients and agents, and the sales channels include assembly markets, hypermarkets, chain stores, retail, bidding, etc. Key channels are mainly retail of hypermarkets and chain stores, but recently, online shopping has also been included in the Company’s channels.

9. B. Pricing: The current main products sold via retail channels are mid-end products, and mid-range pricing strategy is adopted. In this way, the Company earns reasonable profits with the distributors while promoting the brand image. As for products sold via small storefronts, they are mostly entry-level and affordable models.

10. C. Marketing: The marketing strategies of Genius include involvement in

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exhibitions, advertising media, CO-OP funds and marketing developing funds (MDF). Genius has constantly been selected as one of the top 20 brands in Taiwan and won the Taiwan Top 100 Brand award in 2011. In the meantime, various products of Genius won the Taiwan Excellence Award. Besides involvement in exhibitions as well as constant global print and online media exposure, the brand has been promoted through awards by popular electronic media in different countries, too. Meanwhile, the brand has put stress on the employment of the product managers, public relations counselors and channel managers of the major countries and markets, actively taken part in important local festivals, and regularly held distributor meetings, touring exhibitions, sales promotion activities and events on social networks and websites. In addition, a sector for clients to report problems is provided on the website.

  - D. Services: The Company’s headquarters provides after-sales services. At the same time, the Company cooperates with agents around the world in order to give quick response to the calls from consumers and provide immediate repair and replacement services. In terms of warehouse logistics, the Company strives to increase the logistical efficiency while reducing the cost.

  - E. Green design: Products are designed to be green products. The main purpose is to reduce impacts on environment by producing products that meet the requirements for being eco-friendly. Thus, Genius not only implements Bluetooth Low Energy (BLE) technology to cut down power consumption of the products but also applies rechargeable batteries that can be repeatedly used, reducing the environmental impact caused by used batteries.

• (III) Overview of technology and R&D

• R&D expense of the most recent year and that of the first quarter in 2021

Item	2020	1stquarter in 2021
Expense amount(NTD Thousand)	2,131	278
Ratio to the operatingrevenue (%)	0.13	0.06

1. Outcome of research and development

Year

Outcome of research and development

From the most recent year to the date of publication of the annual report

1. From January 1, 2020 to April 30, 2021, having 0 new patent applications in total and obtaining 47 domestic and international patents. 2. Technologies or products successfully developed (1) High resolution gaming mouse (2) Laser gaming mouse with high quality sensor (3) Bluetooth 4.0 BLE mouse (4) Rechargeable lithium-ion battery mouse (5) 2.1ch subwoofer Bluetooth speaker (6) Portable Bluetooth 4.1 dual-mode speaker (7) Bluetooth 4.1 headset (8) LC active capacitive pen (9) Pressure-sensitive active capacitive pen (10) RF wireless LC styluspen

• (IV) Long-term and short-term business development plans

• Short-term business development plan

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• (1) KYE Genius Competitiveness in Technological Innovation

• A. Touch technology: The touch module has the same function as the conventional mouse scrolling structure. The technology is also applicable to stylus pens, presenters, Bluetooth headsets, and speakers.

• B. Optical sensing technology: All of our optical and wireless optical mouse detect moving cursors using the optical sensing components developed and improved on our own account. The components ensure more accuracy of the cursor’s moving coordinates. These optical sensing components are also used in our web cameras to detect colors. The appearances and other characteristics of the colors are converted to signals, and the quality of the images are improved effectively using the sensing decoding and other technologies to enhance the accuracy and reliability of the product.

• C. Wireless technology: We develop short-range or long-range transmission and reception modules and improve the reception quality to reduce power consumption. The 2.4G wireless technology applicable within a longer range is mainly applied to new wireless keyboards and game consoles. We also develop sub-miniature wireless receivers in consideration of the portability. The newly developed ring mice can be used without the need of tabletops or other surfaces. They provide innovative interfaces with the wireless application, environmental protection, compactness, and ergonomics as the core of the design. In addition to winning the German iF and Red Dot awards, the product is patented in Taiwan, China, and the USA. This wireless transmission technology is also used in Bluetooth headsets and provides an interface for smart phone and tablet users to answer calls and listen to music.

• D. Image signal processing algorithm: We improve the general signal processing algorithm to calculate compensation for interpolation in the capture of camera colors, compress transmission formats, and apply to vehicle recorders and web cameras.

• E. Sound effect technology: The features and materials of each driver are used efficiently to improve sound quality. We have been dedicated to improving power drivers, power amplification chips, and performance with cooling and resonating spaces as the focus of R&D. We currently combine the DSP technology and loudness compensation, and find a way of application to high-power speakers.

• F. Electromagnetic resonance technology: The electromagnetic sensing technology can accurately position the cursor and is ideal for CAD drawing software applications and operating control of electronic books. This technology has a wireless and battery pen free design in favor of the environment, and can be used in wireless digitizers.

• G. Software/firmware design technology: The software and hardware of our products are mainly developed and produced by in-house engineers and are distinct from the competitors in their qualify and function. In particular, the software application (app), SmartGenius, to the introduced recently is an integrating platform on which most of the Genius products can be integrated and communicate with each other in the future.

• (2) Brand business: Marketing activities will be increased in emerging countries such as petroleum producing countries, raw material supplying countries, and populous countries. They will be extended to retail channels

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by convening regular large distributor meetings, organizing irregular marketing events with retailers, increasing shelf space, and enhancing channel price management.

1. Long-term business development plan

2. (1) To seize the new platform application opportunities, such as notebooks, tablets, 2-in-1 tablets, smartphones and Smart TVs, in addition to existing customers and channels of computer peripherals, our business will be extended to cover the channels of computers, communication products, electronic consumables, smartphones, and other large retail channels.

3. (2) To meet the requirements of the rapid development of the online and TV shopping markets, we are progressively developing online shopping channel of major countries and extend our brand to emerging potential channels.

4. (3) Focus on the development of emerging markets: We designate local business, sales channel, and PR representatives in selected countries to serve local customers, channels, and media directly. Cross-industry alliance is another approach of us to development of markets.

5. (4) Manufacture and planning: In addition to the production base in DongGuan, China, contracted manufacturers are available to meet the high demand in peak seasons.

6. (5) Customer service: The Company continues to cooperate with distributor customers worldwide to provide product technical manuals and components to allow the local customers offering the product after-sales service to protect the customers’ interests.

7. (6) Sustainable environmental development: Based on the concerns on the issues of sustainable ecological development and fulfillment of our social responsibilities, we make efforts to promote various environmental management systems, such as ISO14001 Environmental Management System and QC 080000 HSF Management System, develop management goals for each environmental protection issue, and review implementation effectiveness on a regular basis to minimize the impact of production, sale, use and disposal of our products on the environment. In addition to establishing environmental management systems, we pay much attention to international environmental protection regulations and requirements with respect to our products. For example, we have introduced green products before EU RoHS & WEEE regulations became effective. In addition to regional and local environmental protection regulations, our products are compliant with relevant EU regulations on recycle of electronic wastes. Likewise, there are similar statutory environmental protection standards in China, the USA, the Middle East, and Russia. Environmental protection is our policy of products. We provide high-quality and environment-friendly products in the European, American and other markets to do our best for the environment.

II. Overview of the market and sales

• (I) Market analysis

• Sales regions for main products

verview of the market and sales arket analysis Sales regions for main products	verview of the market and sales arket analysis Sales regions for main products	verview of the market and sales arket analysis Sales regions for main products
			Unit: NTD Thousand;% 2020 Sales %
Year Location	2019		2020
	Sales	%	Sales	%

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Asia	813,399	50.67	558,586	33.79
America	423,671	26.39	555,171	33.58
Europe	337,954	21.05	436,675	26.41
Taiwan	8,229	0.51	61,379	3.71
Others	22,226	1.38	41,458	2.51
Total	1,605,479	100.00	1,653,269	100.00

1. Market share and future supply, demand and growth in the market

2. (1) Computer peripherals

3. A. Mouse

Wired mice of ―excellent quality at reasonable price‖ were introduced several years ago. They are currently sold on the markets in Southeast Asia, Russia, the Middle East, Europe, and Latin America. With the stable technology and popular price, wireless mice are widely accepted and enjoy a boom in demand. The strong development of the online game market drives a high demand for computer e-sports peripherals. Following the boom in 2020, the GX-Gaming mouse and a brand-new series of wirelessly charged mouse is introduced at reasonable price. Environment-friendly chargeable wireless, Bluetooth and e-sports mice in conjunction with integrated distinct products will still be the main contributions to the revenue of mice in 2021.

• B. Keyboard

Though wired keyboards were the major contribution to the revenue of 2020, the combination of wireless keyboards and mice created more significant percentage in the revenue thanks to the more mature wireless technology and more popular and acceptable price. The demand for wired models dropped slightly. The newly introduced and globally unique smart keyboards drove the sales momentum in 2020. A substantial growth of keyboard revenue and gross profit is expected in 2021.

• (2) Consumer electronic products

• A. Speaker

2.0 and 2.1 channel and USB speakers were the major contributions to the growth of the speaker sales in 2020. Market demand in East Europe and Latin American grew significantly. Various Bluetooth wireless speakers, including Bluetooth mini speakers and Bluetooth stereo speakers, with different market positioning statuses were introduced in conformity to the development trend of smartphones and tablets.

E-sports speakers emphasizing subwoofer effect in combination with our e-sports products were introduced in the past years. Bluetooth speakers, USB wood box speakers and mini sound bars were introduced to meet the demand of smart phone and tablet users in consideration of different tablet sizes. Overall planning of the speakers in 2021 aims to meet the demands of young consumers in the market who use handheld devices to create higher growth.

Unlike the Bluetooth to the ―wireless‖ speakers, Wi-Fi connection evolves and initiates a new era of sound systems. With the same convenience of wireless connection, Wi-Fi sound systems allow a wider connection range, output original sound, and provide more operation possibilities. Despite one-on-one or one-to-many applications, only one mobile phone can control multiple Wi-Fi sound devices at the same time

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and users can listen to music in any location.

• B. Headset/microphone

Population of smartphones and iPad/iPhone devices changes the habit of using headsets among consumers and the ecology of headset microphones. Various models of smart phone headset and Bluetooth microphones were introduced in 2020, and different elements are designed for different user groups of smartphones. Overall, the consumer electronics market will be the focus of headset microphones in 2021.

• (3) Video images products

• A. Web camera

HD and FHD were the major products on the web camera market. Ultra-wide-angle models were commonly used in video conferences and will be the mainstream application in the future. In addition to major models, distinct high-end products, such as ultra-wide angle Full HD model, grew to an opposite direction. The remove video requirements arising from the stay-at-home economy, work from home and home-based learning in many countries due to lockdown against COVID-19 in 2020 brought about tremendous market demands and great sales of web cameras. Such a trend is expected to continue in 2021.

1. Competitive niches as well as favorable and unfavorable factors and countermeasures for our development visions

2. (1) Favorable factors

3. A. We have operated the Genius brand for many years and established the world-leading brand image and awareness, exposure, extensive user base, and brand loyalty. Starting from mice, we have gradually added keyboards, speakers/headsets, digitizers, gaming peripherals, and digital video/image products that were the major sources of contributions to our long-term revenue and profit growth. The brand was supported by extension of products, markets and channels as well as technologies. We have been dedicated to transformation in recent years by adding smart imaging products, e-sports peripherals, handheld smart devices and peripherals, smart TV peripherals, and electromagnetic/capacitive dual touch module to our product lines to find a turning point for our further growth.

4. B. We have become a leading brand company of computer peripherals by positioning our products as premium, convenient, easy-to-use and high quality series at reasonable price. Our business goals are set to the tremendous users of online games on emerging markets and e-sports products. Systematic study and analysis have been conducted with respect to the survey on consumer’s requirement depth. The results are introduced in the internal product development process of the organization to achieve localization of products and marketing of new popular commodities. Channel surveys are conducted to find a way of cross-industry alliance for the Company. We have operated in emerging markets for many years. In addition to keeping maintaining our leading status and competitive advantages, we invest many marketing resources in the development of online shopping channels in China and American markets to facilitate the promotion of our brand.

5. C. As for the development trend of technological industry, the amazing momentum of tablets and smartphones help them supersede notebooks or

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weaken their growing power. The integration of software, hardware and communication technologies in the application of cloud computing is expected to change the PC ecology in the future. We have recognized the growth potential of tablets several years before and designed new peripherals based on the features of the tablets to make them more convenient and comfortable in portability. As for the optimistic device-changing and touch application opportunities brought about by tablets/smartphones, ultrabooks, Microsoft Win 10 OS platforms, we have introduced touch keyboards, touch mice, stylus pens, external touchpads, digitizers with combined pens and multi-touches, universal portable tablet speakers and headsets, and other distinct products that are selected from our existing product lines and not offered by competitors. These will become the growth momentum of the Company in the future,

• D. In addition to the core technology and product development capability in the RF, optical touch, digital imaging application and sound fields, we are capable of integrating software, hardware and firmware interfaces for computer peripherals, cameras, and sound output devices. Wireless mice, optical and imaging devices, acoustic and game peripherals were first introduced to the market based on our innovative technology and proprietary patents. We have an insight into the mainstream of the IT technology and provide customers with the convenience of one-stop shopping and total solutions by taking the strategy of developing convenient, easy-to-use, and high quality new products.

• (2) Disadvantageous factors and countermeasures

• A. Impact of exchange rate fluctuation in emerging markets on the exporters

The COVID-19 pandemic was the biggest negative factor affecting the global economy in 2020. In 2021, after vaccines are developed and administered in most countries, the pandemic is expected to gradually ease in the second half of the year. However, in the short term, the recovering economy is faced with insufficient production and undersupply of raw materials including IC chips, parts, components, iron, plastics and paper, as well as shortages of materials, workers and containers, cargo spaces and ships for logistics and transportation, which has led to rising costs. In addition, countries around the world have introduced large-scale monetary easing and financial stimulus measures which have caused excessive flows of hot money from capital in the market and resulted in heavy fluctuations in the financial market and exchange rates. Foreign hot money also flowed into Taiwan. In 2020, the NTD hit a record high in 20 years with an increase of NTD1.6 or 2.08%, becoming one of the strongest currencies in the world. The RMB initially depreciated but later appreciated against the USD, with an annual increase of nearly 5%. Since our products are mainly exported, the exchange rate has a close relationship with the gross margin and exchange profit/loss. Due to quoting in USD, the wide-spread marketing territories, especially emerging economies, and the drastic change to the exchange rate of different countries, which affected local purchasing power and product pricing, suppressed the revenue of the Company that aims at emerging markets as the targets of exports. Appreciation of the NTD and RMB has increased costs, impacted gross margin and led to more losses in non-operating exchanges.

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Countermeasures: Continuously speeding up the launch of new products with higher gross profit to reflect the costs, and adopting natural hedges by balancing assets and liabilities in foreign currency to reduce the adverse effect of the drastic changes to the exchange rate.

B. New business trend after the touch era initiated by smart devices

The wave of touch was initiated by smartphones and tablets to substantially affect the demand for low-price notebooks and their growing power. However, the data of the market investigation company Gartner pointed out that the global shipment of smartphones in 2020 dropped to 1.35 billion with an annual decrease of 12.5%. This year (2021), with the easing of the pandemic and new phones being introduced by leading brands, the shipment is likely to recover. 5G, Wi-Fi 6, AI and IoT would be the new remarkable trend of the industry.

Countermeasures: Touch and handwriting input are the mainstream of development and we did not dare to ignore their effect on the products that occupied half of our revenue. Though touch and handwriting input functions will not completely supersede mice and keyboards in the coming years due to limited costs, users’ habits, and convenience in use, we have developed distinct products relevant to new technologies in the hope to catch up with the development trend of the technology. Resources have been invested in the development of new product lines such as sound output devices to reduce the percentage of the mouse and keyboard products in the revenue and minimize potential impact in the future. In addition, we embraced this mainstream by developing a series of external Bluetooth keyboards, speakers, headphones, power banks, and other peripherals for smart devices. We also proactively think about the connection to 5G, Wi-Fi 6, AI and IoT as the new trend of the industry.

C. Serious lack of laborers and continuous rise of labor cost in China

The effect of the One-Child policy and the development of the second-tier cities make the demographic dividend disappear, leading to serious lack of laborers and, as a result, insufficiency of materials in the entire supply chain system. Though companies increase the minimum wage and take on additional shifts, the gap of manpower is not made up. Moreover, the income doubling plan in the new ―Twelve Five-Year Plan‖ requiring an annual wage growth rate of 20% in the coming five years, and the personnel cost related to the five-insurance-one-fund will increase the production cost and affect the orders and shipments. Lack of laborers and continuous rise of labor cost have become a heavy burden to the manufacturers having factories in China.

Countermeasures: China’s transformation to inland economy and the structural change in its population bring about the gap in manpower and rise of the labor cost. These are the general environmental factors that the companies with production bases in China cannot avoid. With these issues that manufacturers and competitors encounter, we promote the ideas of lean production and asset-light strategy, and believe that ongoing improvement in purchase of materials, R&D and design, automated processes, and production efficiency as well as reduction of reliance upon labor and decrease of manufacturing costs are the only way to offset the adverse factors brought about lack of laborers and rise of labor cost. In

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addition, with our unique purchase/outsourcing/contract-out strategies, we proactively seek cooperation with more manufacturers who have cost advantages and contract out part of our production or process to partially transfer the cost to upstream partners.

• (II) Important purposes and production processes of main products

• Important purposes of major products

  • (1) Computer peripherals

The peripherals are manly mice, keyboards, digitizers, presenters, etc. Mice are used to control the cursor for clicking and operating on the computer. Keyboards are used for typing to input data. Digitizers can be used for handwriting and drawing purposes, and large-sized ones can be used for engineering drawing. Presenters can be used not only as a pointer during the presentation, but also to operate the volume of the computer speakers and switch pages.

• (2) Consumer electronic products

The products are mainly speakers, headphones, game platform equipment, and service robots. Speakers and headphones are the sound output devices mainly for music or video applications: Speaker products are classified into 2 Channel, 2.1 Channel, 5.1 Channel and single speakers, e-sports speakers, and wireless speakers, or classified by material into with plastic and wood case speakers. If classified by method of use, there are dedicated speakers for PCs, notebooks, TVs, smartphones, and tablets as well as portable speakers. Headphone products include music headphones and headsets for instant calls, smartphones and gaming. If classified by wearing method, there are over-ear, neckband, earbud, and in-ear headphones.

The new-generation professional e-sports GX-Gaming series can be used in conjunction with different game software applications and is ideal for professional players to go through the levels and achieve the goal.

(3) Video Images products

Video Images products are web cameras that can be used for face-to-face taking and video conference via the Internet or connected with smart home concepts.

1. Production process

2. (1) Computer peripherals

3. A. Mouse/Tablet

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Material
preparation
SMT (surface technology)mount Insertion Warehousing Unit assembly Unit software function test Unit exterior inspection Packing
OOBA
insertion Warehousing
IQC
IPQC
FQC & OOBA
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B. Card reader

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Material
IQC preparation
IPQC SMT (surface technology)mount SMT function test backhaInsertion/welding n d Warehousing Unit assembly Unit software function test Unit exterior inspection Packing
FQC & inspectionOOBA Warehousing
OOBA
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• (2) Video Images products DV, DSC, DVR & Web CAM

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Material
preparation
SMT (surface technology)mount SMT function test Sensor & lens cleaning Sensor & lens assembly Bad/word pixelFocus/ test Unit assembly Unit exterior inspection Packing
inspectionOOBA Warehousing
IQC
IPQC
FQC & OOBA
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• (III) Supply status of main materials

Products category	Major component	Source and Supply
Computer peripherals (mouse/tablet)	IC, SENSOR, PCB, FPC, ASIC, COIL, RES, CAP, SWITCH, OPTICAL SENSOR, PLASTIC INJECTION, METAL Parts	1. Supply was possible and stable both domestically and overseas. RF/MCU ICs and sensors were sources of long lead time. Strategic partnership was established with major suppliers or strategic purchase plans were developed to lower the cost and meet the requirements of shipment. 2. Domestic strategic partnership was established with Pixart to supply optical sensor ICs in the hope of improving cost competitiveness and significantly shorten the deliverytime.
Computer peripherals (card reader)	ASIC, Connector, PCB, Metal parts, Cable, RES, CAP, Plastic Injection	1. Strategic partnership was established with Realtek to ensure stable supply of ASICs. Shortening the delivery time and ―quality first‖ were the cores of the partnership. 2. Other components such as connectors and PCBs were supplied in China to lower the cost and meet the CSR/EICC indicators. The distance to the production base was approximately1 hour bycar.
Video images products (DV, DSC,DVR	CCD, LENS, Light source, ASIC, MOTOR,PCB,IC,	1. Both strategies of internal manufacture and purchase were adopted to effectively adjust the bottleneck of high and low

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Products category	Major component	Source and Supply
and Web CAM)	ROLLER, RES, CAP, C-MOS SENSOR IC, BACKEND IC, LCD PANEL, PLASTIC INJECTION, METAL	seasons, stabilize the sources of purchase, and ensure complying with the shipping plan. 2. In consideration of the rising international oil, copper, and iron price and the affected rising trend of the plastic material/hardware, we coordinated with suppliers to work together during such tough times and continuously engage in innovation of processes and improvement of efficiency to lower the cost. 3. Supply was possible and stable both domestically and overseas. ASICs and ICs had long lead time. Transfer of goods from domestic and overseas markets was conducted and coordination was made with specific suppliers for long-term supply of goods. Strategic partnership was established with domestic and overseas sensor IC, backend IC, lens, and LCD panel manufacturers to ensure cost advantage and stable source of supply. 4. More suppliers were contracted to lower the risk.

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• (IV) Names of the customers representing more than 10% of the total purchase (sales) in any of the most recent two years, the amounts and percentages of their purchases (sales) and the reasons for change in increase/decrease

• Data of suppliers from representing more than 10% of the total Company purchases in any of the most recent two years:

Unit: NTD Thousand

										Unit: NTD Thousand	Unit: NTD Thousand	Unit: NTD Thousand
Item		2019				2020				UntilQ1 of 2021
	Name	Amount	Ratio to annual net procurement (%)	Relationship with the issuer	Name	Amount	Ratio to annual net procurement (%)	Relationship with the issuer	Name	Amount	Ratio to annual net procurement (%)	Relationship with the issuer
1	APICAL ELECTRONICS (HK)	279,609	31.30	None	TRIUMPH	230,643	23.76	None	JOVIAL	62,600	22.36	None
2	TRIUMPH	67,726	7.58	None	APICAL ELECTRONICS (HK)	208,413	21.47	None	APICAL ELECTRONICS (HK)	42,595	15.21	None
3	—	—	—	None	JOVIAL	17,223	1.77	None	TRIUMPH	41,864	14.95	None
4	Others	546,026	61.12	—	Others	514,327	53.00	—	Others	132,899	47.48	—
	Netprocurement	893,361	100.00	—	Netprocurement	970,606	100.00	—	Netprocurement	279,958	100.00	—

1. Reasons for change with respect to major suppliers:

The amount of purchase from the suppliers was changed to meet the business development and market requirements.

1. Data of customers to which the sales exceeded 10% of the Company’s total sales in any of the most recent two years:

Unit: NTD Thousand

										Unit: NTD Thousand	Unit: NTD Thousand	Unit: NTD Thousand
Item		2019				2020				UntilQ1 of 2021
	Name	Amount	Ratio to annual net sales (%)	Relationship with the issuer the issuer	Name	Amount	Ratio to annual net sales (%)	Relationship with the issuer the issuer	Name	Amount	Ratio to annual net sales (%)	Relationship with the issuer
1	JES	435,643	27.13	None	JES	256,672	15.53	None	JES	46,990	10.87	None
2	Others	1,169,836	72.87	—	Others	1,396,597	84.47	—	Others	385,227	89.13	—
	Net sales	1,605,479	100.00	—	Net sales	1,653,269	100.00	—	Net sales	432,217	100.00	—

1. Reason of change with respect to major customers: None

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(V) Production value in the most recent two years

Table of production value in the most recent two years

Unit: Thousand sets; NTD Thousand

				Unit: Thousand sets;NTD Thousand	Unit: Thousand sets;NTD Thousand	Unit: Thousand sets;NTD Thousand
Year Mainproduct	2019			2020
	Productio n capacity	Production volume	Production value	Production capacity	Production volume	Production value
Computer peripherals	5,059	5,059	409,812	5,651	5,651	469,462
Consumer electronic products	215	215	55,077	709	709	152,202
Video Images products	0	0	0	0	0	0
Others	451	451	16,972	532	532	18,707
Total	5,725	5,725	481,861	6,892	6,892	640,371

Note 1: Production capacity stands for the output that the Company can achieve using existing equipment and under normal operation in consideration of required downtime, holiday, and other factors.

Note 2: The production capacity and volume of each product is represented in thousand sets. The volume less than a thousand sets is expressed by rounding off.

(VI) Sales value in the most recent two years

Table of sales value in the most recent two years

Unit: Thousand sets; NTD Thousand

								Unit: Thousand sets;NTD Thousand	Unit: Thousand sets;NTD Thousand	Unit: Thousand sets;NTD Thousand	Unit: Thousand sets;NTD Thousand
**II. **	Year Main product		2019					2020
			Domestic market		Export			Domestic market		Export
			Quantity	Value	Quantity		Value	Quantity	Value	Quantity	Value
	Computer peripherals		2	219	7,172		909,225	0	0	8,333	1,015,318
	Consumer electro products		n 0	0	120		23,983	0	0	61	10,782
	Video Images products		19	19,653	452		626,661	47	58,842	1,016	541,820
	Others		436	21,242	532		4,496	458	21,547	16	4,960
	Total		457	41,114	8,276		1,564,365	505	41,114	9,426	1,572,880
	Note: The sales volume of each product is represented in thousand sets. The volume less than a thousand sets is expressed by rounding off. The number, average years of service, average age and distribution of educational level of employees in service for the most recent two years and up untilthe date of printing of the annual report
		Year				2019		2020		Until April 30, 2021
Number of employees		Adm. personnel				139		128		118
		R&D personnel				14		12		9
		Direct personnel				47		36		34
		Total				200		176		161
Average age						40		41		42
Average years of service						9.12		9.67		10.21
Distribution of educational level (%)		Doctoral Degree				0.00		0.00		0.00
		Master’s degree				6.00		5.68		5.59
		University/college				53.50		58.52		58.39
		High school				17.00		18.18		17.39
		Below high school				23.50		17.62		18.63

III. The number, average years of service, average age and distribution of educational level of employees in service for the most recent two years and up until the date of printing of the annual report

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IV. Information on environmental protection expenditure

• (I) The amount of losses and fines that the Company suffered due to environmental pollution in the most recent year up to the publication date of this annual report: None.

• (II) Future countermeasures:

• Improvements to be taken

  • (1) We introduce a green electronic information and communication platform to enhance our capability and efficiency in management of hazardous substances toward suppliers. It helps R&D personnel and suppliers recognize and review green components to achieve the goal of source management.

  • (2) We install XRF and IC ion chromatograph and other halogen-free product testing devices to meet the requirements of the international leading companies for halogen-free products. We also establish control specifications and testing processes for halogen-free products in accordance with the international standard (IEC).

• Effect of improvement

  • (1) Effect on gross operating profit

Though the green process brings a higher production cost, we apply this process completely to meet the development trend of the world, and maintain the original profitability by conducting continuous improvement under TQM despite the affected gross profit in a short time.

• (2) Effect on competitiveness

Since the raw materials and consumables used by the Company meet the requirements of RoHS and WEEE, our products are recognized by international leading companies. They trust us and place orders to us for production under DTO or OEM. Ongoing R&D and innovation of processes are very helpful for us to spread our international reputation and improve our competitive status again.

• (3) Effect on corporate image

We introduced the Hazardous Substance Process Management system (IECQ QC 080000) in 2006 to build our proper hazardous substance management and process control capability. In addition, we manage to save the cost, reduce the risk, and enhance the corporate green competitiveness by operating this management system.

• (III) Adherence to relevant requirements of EU RoHS.

• We have products directly or indirectly sold to Europe or involved in the regulations regarding EU RoSH.

• We have completely implemented product transformation in accordance with EU’s RoHS.

• The products of the Company have acquired the environmental certification of green products from following companies or organizations:

  • (1) Recognized by international leading companies of Microsoft, HP, Acer, Asus and Foxconn.

  • (2) The IECQ QC 080000 HSPM system certificate was received in October 2006.

  • (3) All the facilities, processes, inspection specifications and control points meet the EU regulations on environmental protection. We have OEM/ODM mass production experience and the yield rate meets the

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requirements of the customer.

1. We proactively promote the ideas of green design and management in accordance with EU’s RoHS and WEEE directives. Design is reviewed at the development phase of new products to ensure they are designed in conformity to environmental regulations.

2. We continuously acquire SVHC-related information required by EU’s REACH regulations via green supply chain management, and assess the compliance of our products to REACH.

3. V. Labor-management relations

4. (I) Various employee welfare measures, continuous education, training, retirement systems and their implementation status; agreements between employers and employees and various measures for protecting the interests of employees

5. Welfare measures

General welfare measures are executed by the welfare committee. For domestic travels, gifts for three festivals, birthday parties, etc., the welfare committee members elected among the employees are responsible for planning and execution based on the revenue and budget of the current year. The grants supporting the cash for three festivals, marriages, funerals, festivities, hospitalization, group recreation activities, and other welfare grants in 2020 amounted to about NTD1,760,000.

1. Continuing education and training systems

The training strategy of the Company combines the corporate strategy plans, organizational reforms, and core competitive to improve the customer value, build employee value, and create organizational value. The requirements for growth of the organization and individual are taken into account when educational training is planned and executed. In addition to the facets of ―organizational development strategies,‖ ―core competencies,‖ and ―corporate culture,‖ educational training is designed in conformity to the annual goals of the Company, the R&D of products, and the development trend of the market.

In addition to standardize the training process (ISO9001 certified), we designate dedicated personnel to build the educational training system and take the responsibility for its management and execution in order to provide a professional educational training system. We started to build up our completive strength internally and promote KYE’s corporate culture in 2008 to respond to the rapid change of the external environment and march forward to the goal of sustainable business operation. We are dedicated to build a learning organization to improve the organizational learning capability, promote learning as an inherent DNA of KYE folks, accumulate human capital, and enhance the competitiveness of the organization.

The implementation effectiveness of the Company’s educational training in 2020 is described below:

Internal training session	Internal training man-hour	External training man-hour	Total educational training expenses (NTD)
6	62	36	16,300

1. Post-employment benefits

(1) Defined contribution plans

The pension system specified in the ―Labor Pension Act‖ adopted by the Company and domestic subsidiaries is the defined pension appropriation plan

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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 subsidiaries in Mainland China shall be subject to relevant local pension insurance system and shall annually appropriate a fixed percentage of the salary as the pension to the designated responsible institution. The Company and subsidiaries recognized the amounts that must be appropriated in accordance with the percentage specified in the defined appropriation plans of 2020 and 2019. The total amounts recognized in the consolidated statement of comprehensive income in 2020 and 2019 were NTD3,679,000 and NTD3,919,000, respectively.

• (2) 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 no more 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 service rendered and the average wage of 6 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.

• (II) Any losses that the Company suffered due to labor disputes in the most recent two years up to the publication date of this annual report and any estimated amount and countermeasures that might occur currently or in the future: None

VI. Important contracts

Nature of contract	Parties	Duration	Main contents	Restrictive covenants
Patent License Agreement	MS	From June 2005 to the expiration date agreed by both parties.	Acquisition of a patent license for the Tilt Wheel Function.	Confidentiality Agreement
Patent License Agreement	MS	From January 2006 to the expiration date agreed by both parties.	Acquisition of a patent license for the U2 Tech DetectiveFunction.	Confidentiality Agreement
Patent Portfolio License for DVB-T, MPEG-2, MPEG-4 Visual	MPEG LA, LLC	2008.1.29-2010.12.31. The contract is automatically extended for another 5-year term when it expires.	Acquisition of patent licenses for DVB-T, MPEG-2, MPEG-4 of MPEG LA.	None
Contract Manufacturing Agreement	JC Development Co., Ltd.	2009.12.01–2012.12.01. The contract is automatically extended for another one-year term when it expires.	OEM manufacturing of project products.	Confidentiality Agreement

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General Purchasing Agreement	Philips Consumer Lifestyle International B.V.	2009.12.17–2010.12.17. The contract is automatically extended for another one-year term when it expires.	OEM manufacturing of project products.	Confidentiality Agreement
JIT Procurement Agreement	Inventec Co., Ltd.	2009.06.26–2010.06.25. The contract is automatically extended for another one-year term when it expires.	OEM manufacturing of project products.	Confidentiality Agreement
Hardware Product Purchase Agreement	HP	2012.1.10–2015.01.09. The contract is automatically extended for another one-year term when it expires.	OEM manufacturing of project products.	Confidentiality Agreement

VII. Relevant certificates received from the competent authority by the personnel related to the transparency of financial information

The Company’s Accounting Officer meets the qualifications specified by the laws and has passed the chief accounting officer certification of the Accounting Research and Development Foundation. The Audit Officer has passed the QIA certification of the ROC.

VIII. Code of conduct or ethics for employees

• (I) Integrity is the main focus of the Company’s business operations and corporate culture.

• (II) Our new employees must sign the ―Employment Commitment Letter‖ and observe the code of ethics in Chapter 2 of the ―Code of Service for Employees‖ in the Company’s Personnel Regulations, and the details are as follows: The Company’s employees shall faithfully perform their duties, comply with all laws and the Company’s regulations, obey instructions from chief officers of all levels, and observe the following principles:

• The Company’s employees shall work conscientiously, take good care of public property, reduce consumption, improve quality, increase production in the Company, and keep any information regarding business or work confidential regarding the public.

• For work and business matters, the Company’s employees shall report them in accordance with the related procedures without bypassing their chief officers except for emergency or specific situations.

• The employees shall not see their relatives or friends or be absent without leave during work hours without permission. If the employee needs to receive visitors for reasonable matters, he/she shall see them in a specific reception room.

• The employees shall not bring any dangerous items specified in the Controlling Guns, Ammunition and Knives Act or any recording devices, or inflammable or explosive materials not related to the Company’s production or business into the work premises.

• The employees shall not take away any public property or read any documents, letters, designs and drawings, or information not handled thereby without permission.

• Except for leave of absence, the employees shall be on duty at the specified time and punch in/out in person without doing so by asking others or on behalf of them, and shall not be absent without leave.

• The employees shall not refuse to obey their assignment to any works for its business’s needs without legitimate reasons as long as the employment contract

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is not violated, employee remuneration and other employment conditions are not changed in an unfavorable way for the employees, and they have adequate competence to perform such work.

1. The employees shall wear ID badges during work hours and regulation safety gear in other working premises. If an employee loses his/her ID badge, he/she shall apply for reissuance and pay a fee according to the regulations.

2. The employees shall put documents or materials in order before getting off duty, and shall return their ID badges, business cards, seals, tools, materials, appliances, and individually borrowed items before leaving their present employment.

3. The employees shall not enter into any contracts (e.g. distribution contracts, agency contracts, license contracts) in the name of the Company unless being authorized in writing by the Company. the Company.

4. The employees shall not establish any loan relationship in private with any suppliers or clients of the Company in any form and receive any improper gains, as well as engaging in any behavior of offering or accepting a bribe.

5. The employees shall comply with the management rules established by the Company and be responsible, under criminal and civil laws, for compensating all damages directly or indirectly incurred by the Company due to the employees’ behavior regarding the embezzlement of properties, gross negligence, or violation of rights and interests of the Company or individuals during the employment period.

6. During the employment (engagement) period, all the information, inventions and creations (including the reformed version thereof) developed or designed solely by an employee or jointly with other employees are the properties of KYE Systems Corp. Relevant personnel shall be obligated to assist the Company in obtaining related intellectual property rights and providing R&D-related materials. The Company’s employees shall not apply for a patent or copyright for the aforementioned inventions or creations without the written consent of the Company. If an employee applies to any country for a patent or copyright for products related to the Company’s business within six months after leaving their present employment, and the subject of the application is deemed a product created by the employee during his/her employment in the Company, the employee shall transfer the patent of the subject to the Company.

7. During employment, the Company’s employees shall not, without the written consent of the Company, actively or passively disclose any business secrets obtained or known directly or indirectly due to functions, regional connections, or relations with others to any third party, including any companies, groups, or individuals in any way with or without compensation, and shall also not pry about or steal any business secrets for their own interests. The business secrets of the Company are as follows:

8. (1) All materials, regulations, rules and records, contracts and data, and the information about technologies or patents, including unpublished patents.

9. (2) All business information, for example, sales plans of products, advertisement plans, customers information, company’s sales performance, product costs.

10. (3) All financial and personnel information, such as the company’s financing, asset investment plans, financial books, plans for personnel changes, salaries, etc.

11. (4) Any other documents stamped with a ―Confidential‖ notation by the

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Company or any other items and regulations kept confidential by the Company.

• (5) All the business secrets of other companies or parties which have entered into confidentiality agreements with the Company.

• The employees shall not quote from the Company’s information in their own articles or publish such articles by others unless a written approval from the Company is obtained, and shall promise that they will never disclose or steal the above mentioned business secrets in any case after leaving their present employment, including providing services for other companies, starting an enterprise, or entering into partnership with others.

• The employees promise that their employment in the Company does not violate any contract obligations to previous companies.

• The employees guarantee that they will never use other companies’ intellectual property rights or business secrets in their current work or disclose them to any third party.

• If the employees perform any behaviors violating their commitments with knowledge of the clauses and business secrets mentioned above, they shall be responsible for all compensation and damages under criminal and civil laws

IX. Procedures for handling material insider information

• (I) The Company’s ―Procedures for Handling Material Insider Information‖ and ―Scope of Material Insider Information‖ were established and approved by the Broad of Directors in December 2008, and disclosed under the internal administrative regulations on the Company’s internal website and the Important Regulations section of Investor Information on the public website for all employees, managers and directors to follow.

• (II) The Company conducts educational promotions relevant to the Procedures and related laws and regulations for directors, managers and employees at least once a year. The auditors follow the compliance and prepare an audit report on a regular basis to avoid non-compliance and insider trading by the relevant personnel.

X. Measures for protection of the working environment and employees’ safety

Classification	Item	Description
Employees’ safety	Building safety management	1. We have implemented the annual building high-voltage power maintenance, elevator maintenance twice a month, monthly generation test for generator sets, monthly maintenance and overhaul for air conditioning, seasonal maintenance and overhaul for fire protection equipment, cleaning and water quality inspection for water power every six months, and other regular equipment maintenance plans to maintain the employees’ safety. 2. We have commissioned professional companies to clean the building daily and perform sterilization every six months. 3. We have commissioned qualified security companies to perform access control and maintain security.
	Disaster prevention and response measures response measures	1. We have divided the personnel into groups to conduct fire escape training and rehearsals of disaster prevention and responses every six months in collaboration with the local fire protection bureaus. 2. The Company performs in accordance with the ―Crisis Management Plan for Business Disruption‖ to prevent and mitigate the situations of business disruption and endangering personal safety due to any emergencies or disasters.
Employee	Social insurance	1. All employees are covered by labor and health insurance in accordance with the law and insurance bracket.

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Classification	Item	Description
insurance		2. All personnel dispatched overseas are covered by social insurance pursuant to the local laws.
	Group insurance	All employees are covered by life insurance, accident insurance, medical insurance for accidents, medical insurance, cancer insurance, and occupational accident insurance.
	Travel insurance	We have employees going on a business trip additionally covered by travel insurance (including flight insurance) to ensure their personal safetyduringthe business trip.
Physical and mental health	Medical check-up	We have commissioned qualified medical institutions to perform regular medical check-ups as required by the law and requested the department of health/health center to appoint personnel to supervise the process in order to maintain thequalityof medical check-ups.
	Medical care	The resources from district hospitals and medical center hospitals have been combined.
	Sexual harassment prevention	The Company has incorporated the Regulations of Sexual Harassment Prevention into the employee work rules and assigned dedicated personnel to organize the Sexual Harassment Prevention Committee to deal with related matters.
	Educational trainin	gWe provide courses related to emotional management, stress reduction training, interpersonal communication, occupational harassment prevention,occupational injury prevention,etc.
	Others	1. The Company forbids smoking in office areas and has jointly organized the smoking cessation group with the department of health/health center to provide smoking cessation consultation and medical services. 2. We have commissioned fire protection bureaus to conduct regular CPR emergency rescue training for employees every six months. 3. We provide the company store employees with employee welfare measures, such as activities for three festivals, domestic and overseas travel, employee birthday parties, scholarships, cash gifts to the elderly for Double Ninth Festival, employee cafeteria, subsidies for weddings, funerals, and hospitalization, medical care, and other projects. 4. We encourage employees toparticipate in club activities.

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Chapter 6.Financial Overview

I. Condensed balance sheet and statement of comprehensive income for the most recent five years

• (I) Condensed balance sheet for the most recent five years

Condensed Balance Sheet

		Condensed Balance Sheet	Condensed Balance Sheet	Condensed Balance Sheet
					Unit:		NTD Thousand Financial information up to March 31 of the current year (Note 2) － － － － － － － － － － － － － － － － － － －
Year Item		Financial information for the mos			t recent fiveyears		Financial information up to March 31 of the current year (Note 2)
		2016	2017	2018	2019	2020 (Note 1)
Current assets		1,883,118	1,744,107	1,350,903	1,519,358	1,439,614	－
Property, plant and equipment		434,863	429,291	425,829	423,189	421,949	－
Intangible ass	ets	0	0	0	0	0	－
Other assets		2,855,739	2,653,588	2,612,891	1,620,551	1,445,739	－
Total assets		5,173,720	4,826,986	4,389,623	3,563,098	3,307,302	－
Current liabilities	Before distribution	1,217,539	1,125,367	958,824	272,171	274,474	－
	After distribution	1,217,539	1,196,167	1,005,732	365,986	(註1)	－
Non-current liabilities		354,932	284,661	293,916	61,272	63,726	－
Total liabilities	Before distribution	1,572,471	1,410,028	1,252,740	333,443	338,200	－
	After distribution	1,572,471	1,480,828	1,299,648	427,258	(註1)	－
Share capital		2,820,985	2,435,385	2,345,385	2,345,385	2,245,285	－
Capital reserves	Before distribution	586,770	570,189	503,164	456,206	382,898	－
	After distribution	586,770	504,689	456,256	362,391	(註1)	－
Retained earnings	Before distribution	507,902	562,210	949,083	857,381	1,001,996	－
	After distribution	507,902	556,910	949,083	857,381	1,001,996	－
Other equity		(77,001)	(113,622)	(660,749)	(429,317)	(661,077)	－
Treasurystocks		(237,407)	(37,204)	0	0	0	－
Total equity	Before distribution	3,601,249	3,416,958	3,136,883	3,229,655	2,969,102	－
	After distribution	3,601,249	3,346,158	3,089,975	3,135,840	(註1)	－

Note 1: The disbursement of cash dividends from capital reserves for 2020 was implemented after the resolution made in the annual shareholders’ meeting for 2021.

Note 2: Since 2013, the Company has adopted the International Financial Reporting Standards (IFRS). The financial statements for Q1 of 2021 were not prepared.

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Condensed Consolidated Balance Sheet

Unit: NTD Thousand

Year Item	Year Item	Financial information for the mos	Financial information for the mos	Financial information for the mos	t recent fiveyears	t recent fiveyears	Financial information up to March 31 of the current year (Note 2)
		2016	2017	2018	2019	2020 (Note 1)
Current assets		2,793,369	2,394,035	1,885,276	1,967,621	1,946,772	1,937,657
Property, plant and equipment		781,513	640,315	618,370	494,591	666,311	659,617
Intangible ass	ets	0	0	0	0	0	0
Other assets		2,005,131	2,110,090	2,161,191	1,365,474	1,084,459	1,183,937
Total assets		5,580,013	5,144,440	4,664,837	3,827,686	3,697,542	3,781,211
Current liabilities	Before distribution	1,440,279	1,208,915	1,043,730	340,973	371,187	302,960
	After distribution	1,440,279	1,279,715	1,090,638	434,788	(註1)	(註1)
Non-current liabilities		471,139	475,027	452,296	222,024	324,180	422,030
Total liabilities	Before distribution	1,911,418	1,683,942	1,496,026	562,997	695,367	724,990
	After distribution	1,911,418	1,754,742	1,542,934	656,812	(Note 1)	(Note 1)
Equity attributable to the owner ofparent company		3,601,249	3,416,958	3,136,883	3,229,655	2,969,102	3,023,262
Share capital		2,820,985	2,435,385	2,345,385	2,345,385	2,245,285	2,245,285
Capital reserves	Before distribution	586,770	570,189	503,164	456,206	382,898	382,898
	After distribution	586,770	504,689	456,256	362,391	(Note 1)	(Note 1)
Retained earnings	Before distribution	507,902	562,210	949,083	857,381	1,001,996	1,052,433
	After distribution	507,902	556,910	949,083	857,381	1,001,996	1,052,433
Other equity		(77,001)	(113,622)	(660,749)	(429,317)	(661,077)	(657,354)
Treasurystocks		(237,407)	(37,204)	0	0	0	0
Non-controllingequity		67,346	43,540	31,928	35,034	33,073	32,959
Total equity	Before distribution	3,668,595	3,460,498	3,168,811	3,264,689	3,002,175	3,056,221
	After distribution	3,668,595	3,389,698	3,121,903	3,170,874	(Note 1)	(Note 1)

Note 1: The disbursement of cash dividends from capital reserves for 2020 was implemented after the resolution made in the annual shareholders’ meeting for 2021.

Note 2: Since 2013, the Company has adopted the International Financial Reporting Standards (IFRS). The consolidated balance sheet up to March 31, 2021 has been audited by CPA Yao-Lin Huang and Han-Ni Fang of Deloitte Taiwan.

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(II) Condensed statement of comprehensive income for the most recent five years

Condensed Statement of Comprehensive Income

	Unit: NTD Thousand;EPS unit: NTD Financial information for the most recent fiveyears Financial information up to March 31 of the current year (Note 2) 2016 2017 2018 2019 2020 2,772,057 1,882,696 1,450,867 985,434 1,224,519 － 485,999 387,601 313,876 275,224 341,718 － 69,666 72,679 52,885 89,876 172,300 － (341,703) (19,429) 69,362 79,962 8,917 － (272,037) 53,250 122,247 169,838 181,217 － (299,580) 48,429 95,159 151,480 146,236 － 0 0 0 0 0 － (299,580) 48,429 95,159 151,480 146,236 － (412) (30,742) (269,057) (11,750) (241,567) － (299,992) 17,687 (173,898) 139,730 (95,331) － (1.09) 0.19 0.40 0.65 0.64 －	Unit: NTD Thousand;EPS unit: NTD Financial information for the most recent fiveyears Financial information up to March 31 of the current year (Note 2) 2016 2017 2018 2019 2020 2,772,057 1,882,696 1,450,867 985,434 1,224,519 － 485,999 387,601 313,876 275,224 341,718 － 69,666 72,679 52,885 89,876 172,300 － (341,703) (19,429) 69,362 79,962 8,917 － (272,037) 53,250 122,247 169,838 181,217 － (299,580) 48,429 95,159 151,480 146,236 － 0 0 0 0 0 － (299,580) 48,429 95,159 151,480 146,236 － (412) (30,742) (269,057) (11,750) (241,567) － (299,992) 17,687 (173,898) 139,730 (95,331) － (1.09) 0.19 0.40 0.65 0.64 －	Unit: NTD Thousand;EPS unit: NTD Financial information for the most recent fiveyears Financial information up to March 31 of the current year (Note 2) 2016 2017 2018 2019 2020 2,772,057 1,882,696 1,450,867 985,434 1,224,519 － 485,999 387,601 313,876 275,224 341,718 － 69,666 72,679 52,885 89,876 172,300 － (341,703) (19,429) 69,362 79,962 8,917 － (272,037) 53,250 122,247 169,838 181,217 － (299,580) 48,429 95,159 151,480 146,236 － 0 0 0 0 0 － (299,580) 48,429 95,159 151,480 146,236 － (412) (30,742) (269,057) (11,750) (241,567) － (299,992) 17,687 (173,898) 139,730 (95,331) － (1.09) 0.19 0.40 0.65 0.64 －	Unit: NTD Thousand;EPS unit: NTD Financial information for the most recent fiveyears Financial information up to March 31 of the current year (Note 2) 2016 2017 2018 2019 2020 2,772,057 1,882,696 1,450,867 985,434 1,224,519 － 485,999 387,601 313,876 275,224 341,718 － 69,666 72,679 52,885 89,876 172,300 － (341,703) (19,429) 69,362 79,962 8,917 － (272,037) 53,250 122,247 169,838 181,217 － (299,580) 48,429 95,159 151,480 146,236 － 0 0 0 0 0 － (299,580) 48,429 95,159 151,480 146,236 － (412) (30,742) (269,057) (11,750) (241,567) － (299,992) 17,687 (173,898) 139,730 (95,331) － (1.09) 0.19 0.40 0.65 0.64 －	Unit: NTD Thousand;EPS unit: NTD Financial information for the most recent fiveyears Financial information up to March 31 of the current year (Note 2) 2016 2017 2018 2019 2020 2,772,057 1,882,696 1,450,867 985,434 1,224,519 － 485,999 387,601 313,876 275,224 341,718 － 69,666 72,679 52,885 89,876 172,300 － (341,703) (19,429) 69,362 79,962 8,917 － (272,037) 53,250 122,247 169,838 181,217 － (299,580) 48,429 95,159 151,480 146,236 － 0 0 0 0 0 － (299,580) 48,429 95,159 151,480 146,236 － (412) (30,742) (269,057) (11,750) (241,567) － (299,992) 17,687 (173,898) 139,730 (95,331) － (1.09) 0.19 0.40 0.65 0.64 －	Unit: NTD Thousand;EPS unit: NTD Financial information for the most recent fiveyears Financial information up to March 31 of the current year (Note 2) 2016 2017 2018 2019 2020 2,772,057 1,882,696 1,450,867 985,434 1,224,519 － 485,999 387,601 313,876 275,224 341,718 － 69,666 72,679 52,885 89,876 172,300 － (341,703) (19,429) 69,362 79,962 8,917 － (272,037) 53,250 122,247 169,838 181,217 － (299,580) 48,429 95,159 151,480 146,236 － 0 0 0 0 0 － (299,580) 48,429 95,159 151,480 146,236 － (412) (30,742) (269,057) (11,750) (241,567) － (299,992) 17,687 (173,898) 139,730 (95,331) － (1.09) 0.19 0.40 0.65 0.64 －
Year Item	Financial information for the most recent fiveyears					Financial information up to March 31 of the current year (Note 2)
	2016	2017	2018	2019	2020
Operatingrevenue	2,772,057	1,882,696	1,450,867	985,434	1,224,519	－
Gross operating profit	485,999	387,601	313,876	275,224	341,718	－
Operating profit and loss	69,666	72,679	52,885	89,876	172,300	－
Non-operatingrevenue and expenses	(341,703)	(19,429)	69,362	79,962	8,917	－
Netprofit(loss)before tax	(272,037)	53,250	122,247	169,838	181,217	－
Net profit of continuing operations for theyear	(299,580)	48,429	95,159	151,480	146,236	－
Net loss (after tax) of discontinued operations	0	0	0	0	0	－
Netprofit(loss)for theyear	(299,580)	48,429	95,159	151,480	146,236	－
Other comprehensive income (after tax)for theyear	(412)	(30,742)	(269,057)	(11,750)	(241,567)	－
Total comprehensive income for the year	(299,992)	17,687	(173,898)	139,730	(95,331)	－
EPS(Note 1)	(1.09)	0.19	0.40	0.65	0.64	－

Note 1: From 2016 to 2017, the amount of EPS was that after retroactive adjustment.

Note 2: Since 2013, the Company has adopted the International Financial Reporting Standards (IFRS). The financial statements for Q1 of 2021 were not prepared.

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Condensed Consolidated Statement of Comprehensive Income

	Unit: NTD Thousand;EPS unit: NTD Financial information for the most recent fiveyears Financial information up to March 31 of the current year (Note 2) 2016 2017 2018 2019 2020 3,650,107 2,330,824 2,019,780 1,605,479 1,653,269 431,782 690,141 501,300 448,293 455,092 515,571 122,833 (163,466) (59,760) (41,320) 53,281 161,795 54,839 (112,510) 106,926 161,578 121,911 22,877 5,920 (275,976) 47,166 120,258 175,192 184,672 60,759 (314,113) 42,233 95,119 154,664 146,905 50,516 0 0 0 0 0 0 (314,113) 42,233 95,119 154,664 146,905 50,516 (2,081) (30,927) (257,994) (12,312) (241,637) 3,564 (316,194) 11,306 (162,875) 142,352 (94,732) 54,080 (299,580) 48,429 95,159 151,480 146,236 50,446 (14,533) (6,196) (40) 3,184 669 70 (299,992) 17,687 (173,898) 139,730 (95,331) 54,169 (16,202) (6,381) 11,023 2,622 599 (89) (1.09) 0.19 0.40 0.65 0.64 0.22	Unit: NTD Thousand;EPS unit: NTD Financial information for the most recent fiveyears Financial information up to March 31 of the current year (Note 2) 2016 2017 2018 2019 2020 3,650,107 2,330,824 2,019,780 1,605,479 1,653,269 431,782 690,141 501,300 448,293 455,092 515,571 122,833 (163,466) (59,760) (41,320) 53,281 161,795 54,839 (112,510) 106,926 161,578 121,911 22,877 5,920 (275,976) 47,166 120,258 175,192 184,672 60,759 (314,113) 42,233 95,119 154,664 146,905 50,516 0 0 0 0 0 0 (314,113) 42,233 95,119 154,664 146,905 50,516 (2,081) (30,927) (257,994) (12,312) (241,637) 3,564 (316,194) 11,306 (162,875) 142,352 (94,732) 54,080 (299,580) 48,429 95,159 151,480 146,236 50,446 (14,533) (6,196) (40) 3,184 669 70 (299,992) 17,687 (173,898) 139,730 (95,331) 54,169 (16,202) (6,381) 11,023 2,622 599 (89) (1.09) 0.19 0.40 0.65 0.64 0.22	Unit: NTD Thousand;EPS unit: NTD Financial information for the most recent fiveyears Financial information up to March 31 of the current year (Note 2) 2016 2017 2018 2019 2020 3,650,107 2,330,824 2,019,780 1,605,479 1,653,269 431,782 690,141 501,300 448,293 455,092 515,571 122,833 (163,466) (59,760) (41,320) 53,281 161,795 54,839 (112,510) 106,926 161,578 121,911 22,877 5,920 (275,976) 47,166 120,258 175,192 184,672 60,759 (314,113) 42,233 95,119 154,664 146,905 50,516 0 0 0 0 0 0 (314,113) 42,233 95,119 154,664 146,905 50,516 (2,081) (30,927) (257,994) (12,312) (241,637) 3,564 (316,194) 11,306 (162,875) 142,352 (94,732) 54,080 (299,580) 48,429 95,159 151,480 146,236 50,446 (14,533) (6,196) (40) 3,184 669 70 (299,992) 17,687 (173,898) 139,730 (95,331) 54,169 (16,202) (6,381) 11,023 2,622 599 (89) (1.09) 0.19 0.40 0.65 0.64 0.22	Unit: NTD Thousand;EPS unit: NTD Financial information for the most recent fiveyears Financial information up to March 31 of the current year (Note 2) 2016 2017 2018 2019 2020 3,650,107 2,330,824 2,019,780 1,605,479 1,653,269 431,782 690,141 501,300 448,293 455,092 515,571 122,833 (163,466) (59,760) (41,320) 53,281 161,795 54,839 (112,510) 106,926 161,578 121,911 22,877 5,920 (275,976) 47,166 120,258 175,192 184,672 60,759 (314,113) 42,233 95,119 154,664 146,905 50,516 0 0 0 0 0 0 (314,113) 42,233 95,119 154,664 146,905 50,516 (2,081) (30,927) (257,994) (12,312) (241,637) 3,564 (316,194) 11,306 (162,875) 142,352 (94,732) 54,080 (299,580) 48,429 95,159 151,480 146,236 50,446 (14,533) (6,196) (40) 3,184 669 70 (299,992) 17,687 (173,898) 139,730 (95,331) 54,169 (16,202) (6,381) 11,023 2,622 599 (89) (1.09) 0.19 0.40 0.65 0.64 0.22	Unit: NTD Thousand;EPS unit: NTD Financial information for the most recent fiveyears Financial information up to March 31 of the current year (Note 2) 2016 2017 2018 2019 2020 3,650,107 2,330,824 2,019,780 1,605,479 1,653,269 431,782 690,141 501,300 448,293 455,092 515,571 122,833 (163,466) (59,760) (41,320) 53,281 161,795 54,839 (112,510) 106,926 161,578 121,911 22,877 5,920 (275,976) 47,166 120,258 175,192 184,672 60,759 (314,113) 42,233 95,119 154,664 146,905 50,516 0 0 0 0 0 0 (314,113) 42,233 95,119 154,664 146,905 50,516 (2,081) (30,927) (257,994) (12,312) (241,637) 3,564 (316,194) 11,306 (162,875) 142,352 (94,732) 54,080 (299,580) 48,429 95,159 151,480 146,236 50,446 (14,533) (6,196) (40) 3,184 669 70 (299,992) 17,687 (173,898) 139,730 (95,331) 54,169 (16,202) (6,381) 11,023 2,622 599 (89) (1.09) 0.19 0.40 0.65 0.64 0.22	Unit: NTD Thousand;EPS unit: NTD Financial information for the most recent fiveyears Financial information up to March 31 of the current year (Note 2) 2016 2017 2018 2019 2020 3,650,107 2,330,824 2,019,780 1,605,479 1,653,269 431,782 690,141 501,300 448,293 455,092 515,571 122,833 (163,466) (59,760) (41,320) 53,281 161,795 54,839 (112,510) 106,926 161,578 121,911 22,877 5,920 (275,976) 47,166 120,258 175,192 184,672 60,759 (314,113) 42,233 95,119 154,664 146,905 50,516 0 0 0 0 0 0 (314,113) 42,233 95,119 154,664 146,905 50,516 (2,081) (30,927) (257,994) (12,312) (241,637) 3,564 (316,194) 11,306 (162,875) 142,352 (94,732) 54,080 (299,580) 48,429 95,159 151,480 146,236 50,446 (14,533) (6,196) (40) 3,184 669 70 (299,992) 17,687 (173,898) 139,730 (95,331) 54,169 (16,202) (6,381) 11,023 2,622 599 (89) (1.09) 0.19 0.40 0.65 0.64 0.22
Year Item	Financial information for the most recent fiveyears					Financial information up to March 31 of the current year (Note 2)
	2016	2017	2018	2019	2020
Operatingrevenue	3,650,107	2,330,824	2,019,780	1,605,479	1,653,269	431,782
Gross operating profit	690,141	501,300	448,293	455,092	515,571	122,833
Operating profit and loss	(163,466)	(59,760)	(41,320)	53,281	161,795	54,839
Non-operatingrevenue and expenses	(112,510)	106,926	161,578	121,911	22,877	5,920
Netprofit(loss)before tax	(275,976)	47,166	120,258	175,192	184,672	60,759
Net profit of continuing operations for theyear	(314,113)	42,233	95,119	154,664	146,905	50,516
Net loss (after tax) of discontinued operations	0	0	0	0	0	0
Netprofit(loss)for theyear	(314,113)	42,233	95,119	154,664	146,905	50,516
Other comprehensive income (after tax)for theyear	(2,081)	(30,927)	(257,994)	(12,312)	(241,637)	3,564
Total comprehensive income for the year	(316,194)	11,306	(162,875)	142,352	(94,732)	54,080
Net profit attributable to owner of the parent company	(299,580)	48,429	95,159	151,480	146,236	50,446
Net profit attributable to non-controllingequity	(14,533)	(6,196)	(40)	3,184	669	70
Total comprehensive income attributable to the owner of the parent company	(299,992)	17,687	(173,898)	139,730	(95,331)	54,169
Total comprehensive income attributable to non-controllingequity	(16,202)	(6,381)	11,023	2,622	599	(89)
EPS(Note 1)	(1.09)	0.19	0.40	0.65	0.64	0.22

Note 1: From 2016 to 2017, the amount of EPS was that after retroactive adjustment.

Note 2: Since 2013, the Company has adopted the International Financial Reporting Standards (IFRS). The consolidated statement of comprehensive income for Q1 of 2021 has been audited by CPAs Yao-Lin Huang and Han-Ni Fang of Deloitte Taiwan.

(III) CPAs and their audit opinions for the most recent five years

Year	CPA Firm	CPA	Audit Opinion	Remarks
2016	Deloitte & Touche Taiwan	Mei-Hui Wu, Yi-Chun Wu	Unqualified opinion	-
2017	Deloitte & Touche Taiwan	Mei-Hui Wu, Yi-Chun Wu	Unqualified opinion (emphasis of matters and other matters) – use of other CPAs’ audit (review) reports and separation of duties	-
2018	Deloitte & Touche Taiwan	Mei-Hui Wu, Yi-Chun Wu	Unqualified opinion	-
2019	Deloitte & Touche Taiwan	Mei-Hui Wu, Yao-Lin Huang	Unqualified opinion	-
2020	Deloitte & Touche Taiwan	Mei-Hui Wu, Yao-Lin Huang	Unqualified opinion	-

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II. Financial analysis for the most recent five years

Financial Analysis of Financial Statements

	Financial	Analysis of Financial Statements	Analysis of Financial Statements	Analysis of Financial Statements	Analysis of Financial Statements	Analysis of Financial Statements
Analysis item	Year	Financial analysis for the most recent fiveyears					Financial information up to March 31 of the current year (Note 2)
		2016	2017	2018	2019	2020
Financial structure (%)	Ratio of liabilities to assets	30.39	29.21	28.54	9.36	10.23	－
	Ratio of long-term capital to property, plant and equipment	883.63	848.48	785.83	763.17	703.67	－
Solvency %	Current ratio	154.67	154.98	140.89	558.24	524.50	－
	Quick ratio	132.69	125.78	126.18	494.62	461.88	－
	Times interest earned	(92.36)	6.89	13.26	20.00	788.90	－
Operating ability	Receivables turnover ratio (times)	6.41	6.47	7.13	6.95	12.47	－
	Average collection days	57	56	51	53	29	－
	Inventory turnover ratio (times)	8.20	5.15	5.10	4.88	5.44	－
	Payables turnover ratio(times)	5.28	5.90	6.14	3.99	5.42	－
	Average sales days	45	71	72	75	67	－
	Property, plant and equipment turnover ratio(times)	6.32	4.36	3.39	2.32	2.90	－
	Total asset turnover ratio (times)	0.52	0.38	0.31	0.25	0.36	－
Profitability	Return on assets(%)	(5.62)	1.12	2.24	3.85	4.26	－
	Return on equity (%)	(7.68)	1.38	2.90	4.76	4.72	－
	Ratio of net profit before tax topaid-in capital(%)	(9.64)	2.19	5.21	7.24	8.07	－
	Netprofit margin(%)	(10.81)	2.57	6.56	15.37	11.94	－
	EPS(NTD) (Note 1)	(1.09)	0.19	0.40	0.65	0.64	－
Cash flow	Cash flow ratio(%)	29.42	(16.61)	12.65	59.74	101.14	－
	Cash flow adequacyratio(%)	308.68	141.56	112.94	132.65	101.49	－
	Cash reinvestment ratio(%)	7.81	(6.35)	1.92	3.40	5.77	－
Leverage	Operatingleverage	3.57	3.04	3.19	1.94	1.54	－
	Financial leverage	1.04	1.14	1.23	1.11	1.00	－
※ Reasons for changes in financial ratios for the most recent two years (variations above 20%): (1) Times interest earned: It was mainly due to the year-on-year growth of net profit before tax and a significant decrease in the bank loan interest expense in 2020. (2) Receivables turnover ratio (times): It was mainly due to growth in revenues and good control over accounts receivable in 2020. (3) Average collection days: It was mainly due to growth in revenues and good control over accounts receivable in 2020. (4) Payables turnover ratio (times): It was mainly due to the increase in purchasing as a result of the year-on-year growth of revenue in 2020. (5) Property, plant and equipment turnover ratio (times): It was mainly due to the year-on-year growth of revenue of 2020. (6) Total asset turnover ratio (times): It was mainly due to the year-on-year growth of revenue of 2020. (7) Net profit margin: It was mainly due to the year-on-year increase in revenue and the year-on-year decrease in net profit after tax of 2020. (8) Cash flow ratio: It was mainly due to the year-on-year increase in cash inflow from operations and the slight increase in current liabilities of 2020 from 2019. (9) Cash flow adequacy ratio (%): It was mainly due to the decrease in net cash inflow from operating activities in the most recent five years. (10) Cash reinvestment ratio: It was mainly due to the year-on-year increase in cash inflow from operations of 2020. (11) Operating leverage: It was mainly due to the year-on-year growth of operating profit and significant decrease of interest expense in 2020.

Note 1: From 2016 to 2017, the amount of EPS was that after retroactive adjustment.

Note 2: Since the Company did not prepare the financial statements for Q1 of 2021, the calculation was impossible. Note 3: Since 2013, the Company has adopted the International Financial Reporting Standards (IFRS).

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Financial Analysis of Consolidated Financial Statements

Analysis item	Year	Financial analysis for the most recent fiveyears	Financial analysis for the most recent fiveyears	Financial analysis for the most recent fiveyears	Financial analysis for the most recent fiveyears	Financial analysis for the most recent fiveyears	Financial informatio n up to March 31 of the current year current year, as of March 31 (Note 2)
		2016	2017	2018	2019	2020
Financial structure (%)	Ratio of liabilities to assets	34.25	32.73	32.07	14.71	18.81	19.17
	Ratio of long-term capital to property, plant and equipment	505.46	598.17	568.20	673.21	480.11	509.05
Solvency %	Current ratio	193.95	198.03	180.63	577.06	524.47	639.58
	Quick ratio	164.13	173.55	162.07	506.20	442.95	536.76
	Times interest earned(Note 2)	(24.78)	4.85	10.15	14.75	54.44	49.41
Operating ability	Receivables turnover ratio(times)	6.80	7.50	9.33	10.75	14.71	14.77
	Average collection days	54	49	39	34	25	25
	Inventoryturnover ratio(times)	4.86	4.57	5.64	5.73	4.67	4.55
	Payables turnover ratio(times)	3.98	3.85	4.97	5.33	7.29	12.36
	Average sales days	75	80	65	64	78	80
	Property, plant and equipment turnover ratio(times)	4.67	3.64	3.25	3.23	2.47	2.59
	Total asset turnover ratio(times)	0.65	0.45	0.43	0.42	0.44	0.45
Profitability	Return on assets(%)	(4.97)	1.09	2.15	3.81	3.97	1.38
	Return on equity (%)	(7.68)	1.38	2.90	4.76	4.72	1.68
	Ratio of net profit before tax to paid-in capital(%)	(9.78)	1.94	5.13	7.47	8.22	2.71
	Netprofit margin(%)	(8.22)	2.08	4.74	9.47	8.90	2.95
	EPS(NTD) (Note 1)	(1.09)	0.19	0.40	0.65	0.64	0.22
Cash flow	Cash flow ratio(%)	17.90	(20.35)	22.20	70.88	42.80	(29.11)
	Cash flow adequacyratio(%)	240.68	198.10	172.34	293.93	114.06	48.03
	Cash reinvestment ratio(%)	6.67	(12.06)	5.60	5.66	1.95	(7.02)
Leverage	Operatingleverage	(Note 3)	(Note 3)	(Note 3)	5.15	2.35	8.22
	Financial leverage	0.94	0.83	0.76	1.31	1.03	1.02
※ Reasons for changes in financial ratios for the most recent two years (variations above 20%): (1) Ratio of liabilities to assets: It was mainly due to the disposal of investment property to pay back short-term and long-term loans in 2019. (2) Ratio of long-term capital to property, plant and equipment: It was mainly due to the purchase of property by subsidiaries in 2020. (3) Times interest earned: It was mainly due to the year-on-year growth of net profit before tax and a decrease in the interest expense in 2020. (4) Receivables turnover ratio (times): It was mainly due to growth in revenues and good control over accounts receivable in 2020. (5) Average collection days: It was mainly due to growth in revenues and good control over accounts receivable in 2020. (6) Payables turnover ratio (times): It was mainly due to the increase in purchasing as a result of the year-on-year growth of revenue in 2020. (7) Average sales days: It was mainly due to the increase in purchasing as a result of the growth of revenue in 2020. (8) Property, plant and equipment turnover ratio: It was mainly due to the purchase of property by subsidiaries in 2020. (9) Cash flow ratio: It was mainly due to the year-on-year decrease in cash inflow from operations and the significant increase in current liabilities of 2020. (10) Cash flow adequacy ratio (%): It was mainly due to the decrease in net cash inflow from operating activities in the most recent five years. (11) Cash reinvestment ratio: It was mainly due to the year-on-year decrease in cash inflow from operating activities and increase in cash dividend in 2020. (12) Operating leverage: It was mainly due to the significant increase in the operating profit in 2020 from the previous year. (13) Financial leverage: It was mainly due to the year-on-year increase in operating profit and the year-on-year decrease in interest expense in 2020.

Note 1: From 2016 to 2017, the amount of EPS was that after retroactive adjustment.

Note 2: The information was calculated based on the CPA-reviewed consolidated financial statements for Q1 of 2021. Note 3: The ratio was either zero or negative.

Note 4: Since 2013, the Company has adopted the International Financial Reporting Standards (IFRS). The calculation formulas are as follows:

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1. Financial structure

2. (1) Ratio of liabilities to assets＝ Total liabilities / total assets.

3. (2) Ratio of long-term funds to property, plant and equipment = (Total equity + non-current liabilities) / net property, plant and equipment.

4. Solvency

5. (1) Current ratio = Current assets / current liabilities.

6. (2) Quick ratio = (Current assets – inventory – prepayment) / current liabilities.

7. (3) Times interest earned = Net profit before income tax and interest expenses/ interest expenses for the year.

8. Operating ability

9. (1) Receivables (including accounts receivable and notes receivable from operations) turnover ratio= Net sales / average of accounts receivable (including accounts receivable and notes receivable from operation) balance.

10. (2) Average collection days = 365 / receivables turnover ratio.

11. (3) Inventory turnover ratio = Cost of sales / average inventory.

12. (4) Payables (including accounts payable and notes payable from operation) turnover ratio= Cost of sales / average of accounts payable (including accounts payable and notes payable from operation) balance.

13. (5) Average sales days = 365 / inventory turnover ratio.

14. (6) Property, plant and equipment turnover ratio= Net sales / average net property, plant and equipment.

15. (7) Total asset turnover ratio= Net sales / average total assets.

16. Profitability

17. (1) Return on assets = [Profit and loss after tax + interest expense × (1- tax rate)] / average total assets.

18. (2) Return on equity = Profit and loss after tax / average total equity.

19. (3) Net profit margin = Profit and loss after tax / net sales.

20. (4) EPS = (Profit and loss attributable to the owner of parent company – dividends from preferred shares) / weighted average number of outstanding shares.

21. Cash flow

22. (1) Cash flow rate = Net cash flow from operating activities / current liabilities.

23. (2) Net cash flow adequacy ratio = Net cash flow from operating activities in the most recent five years / (capital expenditure + increase in inventory + cash dividends) in the most recent five years.

24. (3) Cash reinvestment ratio = (Net cash flow from operating activities – cash dividends) / (gross of property, plant and equipment + long-term investment + other non-current assets + operating funds).

25. Leverage

26. (1) Operating leverage = (Net operating revenue – variable costs and expenses of operations) / operating profit.

27. (2) Financial leverage = Operating profit/ (operating profit- interest expenses).

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• III. Audit Committee’s review report on the financial statements of the most recent year

Audit Committee’s Review Report

The Company’s 2020 business report, financial statements and proposal for profit distribution were prepared and submitted by the Board of Directors, and the financial statements were audited by Deloitte Taiwan with an audit report issued thereafter. The review of the above-mentioned business report, financial statements and proposal for profit distribution by the Audit Committee did not find any inconsistencies. Therefore, in accordance with the Securities and Exchange Act and the Company Act, we hereby present this report for further examination.

Audit Committee Convener: Hung-Tsu Hsu

March 25, 2021

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IV. The financial statements of the most recent year

Independent Auditors’ Report

To KYE Systems Corp.:

Audit Opinions

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

In our opinion, the said consolidated financial statements were prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and the International Financial Reporting Standards, International Accounting Standards, interpretations and the statements of interpretation approved and released by the Financial Supervisory Commission, and thus presented fairly, in all material aspects, the consolidated financial position of KYE Systems Corp. and subsidiaries as of December 31, 2020 and 2019, and consolidated business performance and cash flow for the period 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 Consolidated Financial Statements‖ section in this report. We were independent of KYE Systems Corp. and subsidiaries in accordance with the Norms of Professional Ethics for Certified Public Accountants and fulfilled our 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. and subsidiaries for the year of 2020. Such matters were addressed during the overall audit of the consolidated financial statements and the process of forming the audit opinions, and thus we did not provide opinions separately towards such matters.

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

Occurrence of recognition of sales revenue

The sales revenue of KYE Systems Corp. and subsidiaries 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 customers to be a key audit matter of the individual financial statements of KYE Systems Corp. and subsidiaries for 2020. For the accounting policy on recognition of revenue, see Notes 4 and 22 to the consolidated 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.

Other Matters

KYE Systems Corp. has prepared the individual financial statements for 2020 and 2019, and an audit report with unqualified opinions was issued by us for reference.

Responsibilities of the Management and Governing Bodies for Consolidated Financial Statements

The management was responsible for preparation of the consolidated financial statements with fair presentation in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards, International Accounting Standards, interpretations and the statements of interpretation approved and released by the Financial Supervisory Commission and maintaining the necessary internal control related to preparation of the consolidated financial statements to ensure that the consolidated financial statements were free of material misstatement due to fraud or errors.

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

KYE Systems Corp. and subsidiaries’ governance unit (including the Audit Committee) was responsible for supervising the financial reporting procedures.

CPA’s responsibility for the audit of the consolidated financial statements

The purpose of our audit of the consolidated financial statements is to obtain reasonable assurance about whether the consolidated 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 consolidated 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 consolidated 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 consolidated 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 an extent necessary to design audit procedures applicable to the current circumstance. However, the purpose of such work was not to express opinions towards the effectiveness of KYE Systems Corp. and subsidiaries’ internal control.

3. 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.

4. 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 might cause major doubts about KYE Systems Corp. and subsidiaries’ ability as a going concern had any material uncertainty. If any material uncertainty was deemed to exist in such event or circumstance, we must provide a reminder in the consolidated financial statements for the users to pay attention to the relevant disclosure therein, or amend our audit opinions when such disclosure was 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. and subsidiaries would no longer have the ability as a going concern.

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

6. We acquired sufficient and appropriate audit evidence of the financial information of the entities comprising the Group to provide opinions towards the consolidated financial statements. We were responsible for guidance, supervision and implementation in relation to the Group’s audit cases and formation of audit opinions for the Group.

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

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(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 consolidated financial statements of KYE Systems Corp. and subsidiaries 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 reasonably expect that the negative impact of the coverage would be greater than the public interest brought.

Deloitte Taiwan CPA Mei-Hui Wu CPA Yao-Lin Huang Approval No. from the Securities and Approval No. from the Financial Supervisory Futures Commission Commission Tai-Cai-Zheng-Liu-Zi No. 0920123784 Jin-Guan-Zheng-Shen-Zi No. 1060004806

March 25, 2021

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

Unit: NTD thousand

Code 1100 1110 1120 1170 1197 1200 130X 1470 11XX 1517 1550 1600 1755 1760 1840 194D 1990 15XX 1XXX Code 2170 2200 2230 2280 2320 2399 21XX 2540 2570 2580 2640 2670 25XX 2XXX 3110 3200 3310 3320 3350 3300 3400 31XX 36XX 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 and 22) Finance leases receivable – current (Notes 4 and 10) Other receivables (Note 4) Inventory (Notes 4 and 11) 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 13) Investment under the equity method (Notes 4 and 13) Property, plant and equipment (Notes 4, 14 and 29) Right-of-use assets (Notes 4 and 15) Investment property – net (Notes 4, 16 and 29) Deferred income tax assets (Notes 4 and 24) Finance leases receivable – non-current (Notes 4 and 10) Other non-current assets (Notes 4 and 30) Total non-current assets Total assets Liabilityand equity Current liabilities Notes and accounts payable (Notes 18 and 28) Other payables (Note 19) Current income tax liabilities (Notes 4 and 24) Lease liabilities – current (Notes 4, 15 and 28) Long-term loans maturing within one year (Notes 17 and 29) Other current liabilities Total current liabilities Non-current liabilities Long-term loans (Notes 17 and 29) Deferred income tax liabilities (Notes 4 and 24) Lease liabilities – non-current (Notes 4, 15 and 28) Net defined benefit liabilities – non-current (Notes 4 and 20) Other non-current liabilities – others (Note 4) Total non-current liabilities Total liabilities Equity attributable to the owner of the parent company (Note 21) Share capital Common stock Capital reserves Retained earnings Legal reserves Special reserves Undistributed earnings (losses to be covered) (Notes 4, 8 and 13) Total retained earnings Other equity (Notes 4, 8 and 13) Total equity of the owner of parent company Non-controlling equity Total equity Total liabilities and equity		December 31,2020	December 31,2020	% 38 - 1 4 - - 7 3 53 6 8 18 1 9 3 - 2 47 100 4 2 1 1 - 2 10 6 1 1 1 - 9 19 61 10 11 12 4 27 18 ) 80 1 81 100		December 31,2019	December 31,2019
			Amount $ 1,403,681 1,713 43,724 126,219 8,159 4,735 264,415 94,126 1,946,772 199,242 286,435 666,311 46,541 337,099 118,889 8,783 87,470 1,750,770 $ 3,697,542 $ 145,870 97,499 24,264 30,604 8,095 64,855 371,187 229,905 24,554 34,481 31,654 3,586 324,180 695,367 2,245,285 382,898 428,064 429,317 144,615 1,001,996 661,077 ) 2,969,102 33,073 3,002,175 $ 3,697,542				Amount $ 1,484,681 - 71,056 97,197 4,378 9,354 222,782 78,173 1,967,621 375,520 284,928 494,591 91,301 369,143 141,022 10,093 93,467 1,860,065 $ 3,827,686 $ 139,801 119,046 3,345 35,456 - 43,325 340,973 100,000 16,688 70,831 31,723 2,782 222,024 562,997 2,345,385 456,206 452,988 496,095 91,702 ) 857,381 429,317 ) 3,229,655 35,034 3,264,689 $ 3,827,686		%
		(		(		( (		( (	39 - 2 2 - - 6 2 51 10 8 13 2 10 4 - 2 49 100 4 3 - 1 - 1 9 3 - 2 1 - 6 15 61 12 12 13 3 ) 22 11 ) 84 1 85 100

The attached notes are part of the consolidated financial statements.

Chairman: Shih-Kun Tso

Manager: Shih-Kun Tso

Accounting Manager: An-Min Kao

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

Unit: NTD thousand; EPS unit: NTD

Code Operating revenue (Notes 4, 22 and 28) 4100 Sales revenue 4800 Other operating revenues 4000 Total operating revenues Operating costs 5110 Cost of sales (Notes 4, 11, 23 and 28) 5000 Total operating costs 5900 Operating gross profit Operating expenses (Notes 4, 9, 20 and 23) 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 7020 Other profits and losses (Notes 4, 23 and 32) 7060 Share of profit/loss of associates under equity method (Notes 4 and 13)		2020		% 99 1 100 69 69 31 6 15 - - 21 10 2 -		2019
		Amount $ 1,643,434 9,835 1,653,269 1,137,698 1,137,698 515,571 106,373 253,154 2,131 7,882 ) 353,776 161,795 28,407 1,224						%
	(						100 - 100 72 72 28 9 16 - - 25 3 4 ( 2 )

(Continued to next page)

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(Continued from previous page)

Code 7100 Interest income (Note 4) 7215 Profit (loss) on disposal of investment property (Notes 4 and 16) 7510 Interest expense (Notes 4 and 28) 7670 Impairment loss (Notes 4, 13 and 16) 7000 Total of other non-operating revenues and expenses 7900 Net profit before tax 7950 Income tax expense (Notes 4 and 24) 8200 Net profit in the year Other comprehensive income (Note 4) Titles not reclassified as profit or loss: 8311 Remeasurement of the defined benefits plan (Note 20) 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 of associates under the equity method (Note 13) 8349 Income tax relating to non-reclassified items (Note 24) 8310	2020	% - ( 1 ) - - 1 11 2 9 - ( 11 ) ( 1 ) ( 2 ) ( 14 )	2019
	Amount $ 8,954 ( 9,000 ) ( 4,156 ) ( 2,552 ) 22,877 184,672 37,767 146,905 ( 21 ) ( 183,432 ) ( 17,609 ) ( 21,947 ) ( 223,009 )		Amount $ 15,743 148,639 ( 12,739 ) ( 58,702 ) 121,911 175,192 20,528 154,664 ( 2,778 ) ( 7,072 ) ( 3,676 ) 26,837 13,311	%
				1 9 ( 1 ) ( 3 ) 8 11 1 10 - ( 1 ) - 2 1

(Continued to next page)

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(Continued from previous page)

Code Titles potentially reclassified as profit or loss subsequently: 8361 Exchange differences from the translation of foreign operations’ financial statements 8370 Share of other comprehensive income of associates under the equity method (Note 13) 8399 Income tax related to items likely to be reclassified as profit or loss (Note 24) 8360 8300 Other net comprehensive income 8500 Total comprehensive income in the year Net profit/loss is attributable to: 8610 the owner of parent company 8620 non-controlling equity 8600 Total comprehensive income attributable to: 8710 the owner of parent company 8720 non-controlling equity 8700 EPS (Note 25) 9710 Basic EPS 9810 Diluted EPS	2020	% ( 1 ) - - ( 1 ) ( 15 ) ( 6 ) 9 - 9 ( 6 ) - ( 6 )	2019
	Amount ( $ 24,913 ) 1,654 4,631 ( 18,628 ) ( 241,637 ) ($ 94,732 ) $ 146,236 669 $ 146,905 ( $ 95,331 ) 599 ($ 94,732 ) $ 0.64 $ 0.64		Amount ( $ 27,057 ) ( 2,863 ) 4,297 ( 25,623 ) ( 12,312 ) $ 142,352 $ 151,480 3,184 $ 154,664 $ 139,730 2,622 $ 142,352 $ 0.65 $ 0.64	%
				( 2 ) - - ( 2 ) ( 1 ) 9 10 - 10 9 - 9

The attached notes are part of the consolidated financial statements.

Chairman: Shih-Kun Tso Manager: Shih-Kun Tso

Accounting Manager: An-Min Kao

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

Unit: NTD thousand

Code A1 Balance on January 1, 2019 Earning allocation 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 O1 Non-controlling equity 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 O1 Non-controlling equity Q1 Disposal of equity instruments measured at fair value through other comprehensive income Z1 Balance on December 31, 2020 Chairman: Shih-Kun Tso							Equityattributable to the owner of theparent company	Equityattributable to the owner of theparent company
		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
	(		( ( ( (		(				( ng

Manager: Shih-Kun Tso

Accounting Manager: An-Min Kao

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KYE Systems Corp. and Subsidiaries Consolidated Statement of Cash Flow January 1 to December 31, 2020 and 2019

Code Cash flow from operating activities A00010 Net profit before tax in the year A20010 Profit and expense/loss: A20100 Depreciation expense A29900 Reversal of allowances for inventory devaluation losses A20200 Amortization expenses A22700 Loss (profit) on disposal of investment property – net A21200 Interest income A20300 Expected profit on reversal of credit impairment A24100 Unrealized profit (loss) of foreign currency exchange – net A21300 Dividend income A20900 Interest expenses A20400 Profit on the valuation of financial assets measured at fair value through profit or loss A22300 Share of profit/loss of associates under equity method A22500 Loss (profit) on the disposal and obsolescence of property, plants, and equipment – net A23100 Profit on investment disposal – net A23500 Impairment loss from financial assets A23700 Impairment loss from non-financial assets A30000 Net changes in operating assets and liabilities A31115 Financial assets mandatorily measured at fair value through profit or loss A31150 Notes and accounts receivable A31180 Other receivables A31200 Inventory 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 A33100 Interest received A33200 Dividend received A33500 Income tax paid AAAA Net cash inflow from operating activities		Unit: NTD thousand 2020 2019 $ 184,672 $ 175,192 61,724 62,955 48,636 ) ( 73,605 ) 10,086 17,019 9,000 ( 148,639 ) 8,954 ) ( 15,743 ) 7,882 ) ( 1,824 ) 4,438 ) 2,448 4,164 ) ( 838 ) 4,156 12,739 1,713 ) - 1,224 ) 38,050 590 ( 21,633 ) 412 ) ( 3,369 ) - 38,202 - 20,500 412 21,611 15,733 ) 103,477 4,492 26,709 2,902 ) 23,444 17,167 ) 6,501 4,091 ( 19,496 ) 18,699 ) 3,489 942 ( 15,467 ) 51 ) ( 7,378 ) 148,190 244,344 8,993 15,491 4,164 838 2,488 ) ( 19,008 ) 158,859 241,665	Unit: NTD thousand 2020 2019 $ 184,672 $ 175,192 61,724 62,955 48,636 ) ( 73,605 ) 10,086 17,019 9,000 ( 148,639 ) 8,954 ) ( 15,743 ) 7,882 ) ( 1,824 ) 4,438 ) 2,448 4,164 ) ( 838 ) 4,156 12,739 1,713 ) - 1,224 ) 38,050 590 ( 21,633 ) 412 ) ( 3,369 ) - 38,202 - 20,500 412 21,611 15,733 ) 103,477 4,492 26,709 2,902 ) 23,444 17,167 ) 6,501 4,091 ( 19,496 ) 18,699 ) 3,489 942 ( 15,467 ) 51 ) ( 7,378 ) 148,190 244,344 8,993 15,491 4,164 838 2,488 ) ( 19,008 ) 158,859 241,665	Unit: NTD thousand 2020 2019 $ 184,672 $ 175,192 61,724 62,955 48,636 ) ( 73,605 ) 10,086 17,019 9,000 ( 148,639 ) 8,954 ) ( 15,743 ) 7,882 ) ( 1,824 ) 4,438 ) 2,448 4,164 ) ( 838 ) 4,156 12,739 1,713 ) - 1,224 ) 38,050 590 ( 21,633 ) 412 ) ( 3,369 ) - 38,202 - 20,500 412 21,611 15,733 ) 103,477 4,492 26,709 2,902 ) 23,444 17,167 ) 6,501 4,091 ( 19,496 ) 18,699 ) 3,489 942 ( 15,467 ) 51 ) ( 7,378 ) 148,190 244,344 8,993 15,491 4,164 838 2,488 ) ( 19,008 ) 158,859 241,665
	( ( ( ( ( ( ( ( ( ( ( ( ( (		( ( ( ( ( ( ( ( ( ( (	$ 175,192 62,955 73,605 ) 17,019 148,639 ) 15,743 ) 1,824 ) 2,448 838 ) 12,739 - 38,050 21,633 ) 3,369 ) 38,202 20,500 21,611 103,477 26,709 23,444 6,501 19,496 ) 3,489 15,467 ) 7,378 ) 244,344 15,491 838 19,008 ) 241,665

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Code Cash flows from investing activities B02700 Acquisition of property, plants, and equipment B05500 Disposal of investment property B06700 Increase in other non-current assets B00020 Disposal of financial assets measured at fair value through other comprehensive income B06100 Decrease in finance leases receivable B03700 Decrease (increase) in guarantee deposits paid B05400 Acquisition of investment property B02800 Disposal of property, plants, and equipment B00010 Acquisition of financial assets measured at fair value through other comprehensive income BBBB Net cash inflows (outflows) from investing activities Cash flows from financing activities C01600 Borrowing of long-term loans C04500 Distribution of cash dividends C04900 Cost of repurchasing treasury stocks C04020 Repayment of the principal of lease liabilities C05600 Interest paid C03000 Increase (Decrease) in guaranteed deposits received C04300 Increase (Decrease) in other liabilities 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 DDDD Effect of changes in exchange rate on cash and cash equivalents EEEE Increase (decrease) in cash and cash equivalents in 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 $ 196,939 ) 26,851 14,383 ) 13,005 5,519 3,938 2,843 ) 95 34 ) 164,791 ) 138,000 93,815 ) 78,752 ) 34,927 ) 4,109 ) 766 3 - - - 72,834 ) 2,234 ) 81,000 ) 1,484,681 $ 1,403,681		2019
	( ( ( ( ( ( ( ( ( ( ( (		( ( ( ( ( ( ( ( ( ( ( ( ( ( (	$ 39,425 ) 1,150,895 49,760 ) - 4,527 2,244 ) 148,749 ) 155,417 44,460 ) 1,026,201 - 46,908 ) - 31,103 ) 11,984 ) 2,481 ) 3 ) 500,000 ) 312,576 ) 149,984 ) 1,055,039 ) 23,684 ) 189,143 1,295,538 $ 1,484,681

The attached notes are part of the consolidated financial statements.

Chairman: Shih-Kun Tso

Manager: Shih-Kun Tso

Accounting Manager: An-Min Kao

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KYE Systems Corp. and Subsidiaries Notes to Consolidated 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 consolidated financial statements were stated in the Company’s functional currency, NTD.

II. Approval date and procedures of the financial statements

The consolidated 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 and subsidiaries after adopting the amended IFRSs approved and released by the FSC.

• (II) FSC-approved IFRSs applied in 2021

Effective date as per the New/Amended/Revised standards and interpretations 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.

Up to the approval and release date of the consolidated financial statements, the Company and subsidiaries assessed the effects of the above-mentioned amendments to the standards and interpretation on 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

Effective date as per the New/Amended/Revised standards and interpretations IASB (Note 1) ―Annual Improvements to 2018–2020 Cycle‖ January 1, 2022 (Note 2)

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Effective date as per the IASB (Note 1)(Note 1)Note 1))

New/Amended/Revised standards and interpretations IASB (Note 1)(Note 1)Note 1)) Amendment to IFRS 3: ―Changes in Reference to the Conceptual Framework‖ January 1, 2022 (Note 3) Amendments to IFRS 10 and IAS 28: ―Sale or Undetermined Contribution of Assets between an Investor and its Associate or Joint Venture‖ IFRS 17 ―Insurance Contracts‖ January 1, 2023 Amendment to IFRS 17 January 1, 2023 Amendment to IAS 1: ―Classification of Liabilities January 1, 2023 as Current or Non-current‖ Amendment to IAS 1: ―Disclosure of Accounting January 1, 2023 (Note 6) Policies‖ Amendment to IAS 8: ―Definition of Accounting January 1, 2023 (Note 7) Estimates‖ Amendment to IAS 16: ―Property, Plant and January 1, 2022 (Note 4) Equipment – Proceeds before Intended Use‖ Amendment to IAS 37: ―Onerous Contracts – Cost of January 1, 2022 (Note 5) Fulfilling a Contract‖

• 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. 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 consolidated financial statements, the Company and subsidiaries assessed the effects of the above-mentioned amendments to the standards and interpretation on 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 consolidated financial statements were prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs approved and released by the FSC.

• (II) Basis for preparation

Except for the financial instruments measured at fair value, the consolidated 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:

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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.

4. (III) Classification of current and non-current assets and liabilities Current assets include:

5. Assets held mainly for the purpose of trading;

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

7. 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) Basis for consolidation

The consolidated financial statements were financial statements including the Company and the entities controlled thereby (subsidiaries). The operating profits and losses of acquired or disposed subsidiaries from the acquisition date to the disposal date in the period were included in the consolidated statement of comprehensive income. The subsidiaries’ financial statements were adjusted to have their accounting policies be consistent with those of the Company and subsidiaries. All the transactions, account balances, profits, and expenses/losses between entities were removed during preparation of the consolidated financial statements. The subsidiaries’ total comprehensive income was attributable to the owner of the Company and the non-controlling equity, even when this resulted in the non-controlling equity having a deficit balance.

Changes to the Company and subsidiaries’ equity ownership in a subsidiary were treated as equity transactions when they did not result in a loss of control. The Company and subsidiaries’ book value and the non-controlling equity were adjusted to reflect the changes in their relative equity in the subsidiary. The difference between the adjusted amount of the non-controlling equity and the fair value of any paid or received consideration was directly recognized in equity and attributable to the owner of the Company.

When the Company and subsidiaries lost control of a subsidiary, the profit or loss on disposal was the difference between the following two amounts: (1) The total fair value of the received consideration and the residual investment in the former subsidiary

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on the loss of the control date, and (2) the total book value of the former subsidiary’s assets (including goodwill), liabilities, and the non-controlling equity on the loss of control date. For total amounts related to the subsidiary in other comprehensive income, the Company and subsidiaries treated them with the same accounting treatment as the basis which our direct disposal of relevant assets or liabilities shall be in accordance with.

The amount initially recognized and related to the residual investment in the former subsidiary was the fair value on the loss of control date.

For the subsidiaries’ details, shareholding ratios, and business operations, please refer to Note 12 ―Subsidiary,‖ Table 5 ―Name and Territory of Investees and Other Relevant Information,‖ and Table 6 ―Information on Investments in Mainland China.‖

(V) Foreign currency

During preparation of each entity’s financial statements, the transactions using currencies other than the entity’s functional currency (foreign currencies) were stated in the functional currency at 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.

During preparation of the consolidated financial statements, the assets and liabilities of foreign operations (including the subsidiaries and associates within countries in which they operate or currencies they used which were different from those of the Company) were translated into NTD at the exchange rate on each balance sheet date. Their profit and expense/loss items were translated at the average exchange rate of the period, and the exchange differences resulting therefrom were recognized in other comprehensive income (and attributable respectively to the owner of the Company and the non-controlling equity).

If the Company and subsidiaries disposed of all the equity of the foreign operations or partially disposed of the equity of the foreign operations subsidiary but lost the control thereover, or the retained equity after disposal of the foreign operation was related to financial assets and treated with the same accounting policy as the one for financial instruments, all the accumulated exchange differences attributable to the owner of the Company and related to the foreign operation would be reclassified as profit or loss.

When partial disposal of the foreign operations subsidiary did not lead to loss of control, any accumulated exchange differences were reattributed in proportion to the subsidiary’s non-controlling equity but not recognized in profit or loss. For any other partial disposal of foreign operations, any accumulated exchange differences were reclassified as profit or loss based on the proportion of the disposal.

• (VI) 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

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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.

(VII) Investment in associates

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

The Company and subsidiaries adopted the equity method for investment in associates.

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 and subsidiaries’ shares of profit/loss and other comprehensive income in associates and joint ventures and the distributed profits. In addition, changes to the Company and subsidiaries’ equity in associates were recognized based on our shareholding ratio.

When the acquisition cost exceeded the Company and subsidiaries’ 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 and subsidiaries’ 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 or loss of the period.

When the Company and subsidiaries did not subscribe for new shares issued by associates based on our shareholding ratios, resulting in changes to the shareholding ratio and consequently the net equity value of investment and the capital reserve – changes in the net equity of associates and joint ventures recognized under equity method was 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 and subsidiaries’ shares of losses in the associate were equal to or exceeded our equity in the associate, we stopped further recognition for loss. The Company and subsidiaries recognized additional losses and liabilities only when any legal obligation or constructive obligation was incurred or the Company made payment on behalf of the associate.

For impairment evaluation, the Company and subsidiaries 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 was not allocated to any assets constituting any 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 associates, the Company and subsidiaries stopped using the equity method and measured the retaining earnings of the former associate at fair value. The differences between the fair value of

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retaining earnings, proceeds from disposal, and the investment book value on the date when the equity method was discontinued were recognized in the profit or loss of the period. Besides, for total amounts related to the associate in other comprehensive income, the basis of accounting treatment thereof was the same as the basis on which the associate’s direct disposal of relevant assets or liabilities should be in accordance with. When the investment in associates became the investment in joint ventures, or the investment in joint ventures became the investment in associates, the Company and subsidiaries continued to use the equity method but did not remeasure the retained earnings.

The profit or loss generated from the upstream, downstream, and side stream transactions between the Company and subsidiaries and the associate was recognized in the consolidated financial statements to the extent that such profit or loss was irrelevant to the Company and subsidiaries’ equity in the associate.

(VIII) 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 and subsidiaries review the estimated useful life, residual value, and method of amortization at least at the end of each year and prospectively recognize the effect of 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

• (IX) 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.

The investment property under construction was recognized based on the cost net of accumulated impairment losses. The cost included professional service fees and the loan costs eligible for capitalization. Depreciation of the assets started when the assets were ready for their intended use.

For derecognition of the investment property, the difference between the net disposal proceeds and the asset book value was recognized in profit or loss (X) Impairment of property, plant and equipment, right-of-use assets, and intangible assets (excluding goodwill)

The Company and subsidiaries 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 and subsidiaries estimated the recoverable amount of the cash-generating unit to which the asset belonged. Corporate assets were amortized on a reasonable and consistent basis to an individual cash-generating unit or the smallest group of cash-generating units.

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

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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.

• (XI) Financial instruments

Financial assets and financial liabilities were recognized in the consolidated balance sheet when the Company or subsidiaries 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.

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 and subsidiaries 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.

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

The financial assets measured at fair value through profit or loss were measured at fair value, and any profits or losses (excluding any dividends or interest generated from the financial asset) from remeasurement of the financial assets were recognized in profit or loss. For the determination of fair value, see Note 27.

• (2) Financial assets measured at amortized cost

When the Company and subsidiaries’ investment in financial assets met the following two conditions at the same time, it was 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

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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.

• (3) Investment in equity instruments measured at fair value through other comprehensive income

At initial recognition, the Company and subsidiaries 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 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 and subsidiaries’ right of receiving dividends was determined, the dividends from 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.

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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 was not able to pay off their debts was determined to exist by the Company and subsidiaries without consideration of the collateral held, the financial assets were deemed to be defaulted on.

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 and subsidiaries 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.

Equity instrument

The debt and equity instruments issued by the Company and subsidiaries 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 or subsidiaries were recognized based on 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.

Financial liabilities

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.

(XII) Liability reserve

Amounts recognized in liability reserves (including the contractual obligation to maintain or restore infrastructures before they were returned to the grantor, which were specified in service concession arrangements) were the best estimates of the expenses needing to settle the obligation on the balance sheet date with consideration of the risks and uncertainty of the obligation. The liability reserves were measured based on the discounted cash flow estimated to settle the obligation.

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(XIII) 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.

(XIV) Lease

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

1. The Company and subsidiaries were the lessors

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 our sublease of right-of-use assets, the classification of the sublease was determined based on the right-of-use asset (instead of the underlying asset). However, when the main lease was recognized in the Company and subsidiaries’ 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 our 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 and subsidiaries were the lessees

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

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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 consolidated 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 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 consolidated balance sheet.

(XV) 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.

(XVI) Income tax

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

• 1. Current income tax

The Company and subsidiaries determine the current income in accordance with the laws enacted by the authority of the income tax return filing jurisdictions to calculate the income tax payable.

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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.

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 and subsidiaries could control the timing of the reversal of the temporary taxable 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.

1. 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 and subsidiaries take 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

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affected the current period, they were recognized in the period in which they were 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

time, they were recognized in the period in which they were made and the future period. VI. Cash and cash equivalents	time, they were recognized in the period in which they were made and the future period. VI. Cash and cash equivalents	time, they were recognized in the period in which they were made and the future period. VI. Cash and cash equivalents	he future period.	he future period.
December 31,2020 December 31,2019 Cash on hand and petty cash $ 2,733 $ 1,908 Bank check and demand deposit 900,312 856,952 Cash equivalents Repurchase of commercial papers 50,426 150,147 Time deposit 450,210 475,674 $ 1,403,681 $ 1,484,681 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 December 31,2020 December 31,2019 Current Investment in equity instruments measured at fair value through other comprehensive income Domestic listed (OTC) common stocks $ 43,724 $ 71,056 Non-current Investment in equity instruments measured at fair value through other comprehensive income Overseas non-listed (non-OTC) common stocks $ 115,501 $ 214,905 Domestic non-listed (non-OTC) common stocks 72,761 25,031 Domestic listed (OTC) common stocks 10,950 135,554 Domestic non-listed (non-OTC) preferred stocks 30 30 Total $ 199,242 $ 375,520			December 31,2019
			$ 1,908 856,952 150,147 475,674 $ 1,484,681 December 31,2019
	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 Overseas non-listed (non-OTC) common stocks Domestic non-listed (non-OTC) common stocks Domestic listed (OTC) common stocks Domestic non-listed (non-OTC) preferred stocks Total	December 31,2020 $ 43,724 $ 115,501 72,761 10,950 30 $ 199,242
				$ 71,056 $ 214,905 25,031 135,554 30 $ 375,520

The Company and subsidiaries invested in the equity instruments according to their medium and long-term strategies and expected to gain profits through long-term investment. Since the Company and subsidiaries’ 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

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long-term investment plan, they opted to have the investment be measured at fair value through other comprehensive income.

In July, August, September and November 2020, the Company and subsidiaries made adjustment to their investment positions and sold the shares of Solteam Incorporation and part of those of Coretek Opto Corporation and Link Legend Co., Ltd. at a fair value of NTD13,005,000. Other related equity – unrealized valuation loss on financial assets measured at fair value through other comprehensive income, amounting to NTD1,604,000, was carried forward to retained earnings.

IX. Notes and accounts receivable

carried forward to retained earnings. es and accounts receivable
Notes and accounts receivable Measurement at amortized cost Total book value Less: Loss allowance	December 31,2020 $ 134,613 ( 8,394 ) $ 126,219	December 31,2019
	(	(	$ 113,571 16,374 ) $ 97,197

We provided an average 60-day loan period for the 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 and subsidiaries 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 and subsidiaries’ 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 with 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 and subsidiaries directly wrote off the related accounts receivable, continued to claim for payment, and recognized the recovered amount therefrom in profit or loss.

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

ows:
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% $ 105,704 288 ) $ 105,416	(	1%–5% $ 21,108 305 ) $ 20,803		5%–10% $ - - $ -	(	100% $ 7,801 7,801 ) $ -	(	- $ 134,613 8,394 ) $ 126,219

December 31, 2019

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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 Percentage of expected credit loss 0%–1% 1%–5% 5%–10% 100% - Total book value $ 92,388 $ 4,892 $ 395 $ 15,896 $ 113,571 Loss allowance (lifetime expected credit losses) ( 291 ) ( 148 ) ( 39 ) ( 15,896 ) ( 16,374 ) Amortized cost $ 92,097 $ 4,744 $ 356 $ - $ 97,197 The information of changes in loss allowance for accounts receivable is as follows: 2020 2019 Balance – beginning of the year $ 16,374 $ 18,496 Plus: Impairment loss reversed in the year ( 7,882 ) ( 1,824 ) Differences from the translation of foreign currencies ( 98 ) ( 298 ) Balance – ending of the year $ 8,394 $ 16,374 Finance leases receivable December 31,2020 December 31,2019 Undiscounted lease payments 1st year $ 8,374 $ 4,527 2nd year 7,740 4,527 3rd year 1,142 4,527 4th year - 1,132 Lease payments receivable 17,256 14,713 Less: Unearned financial income ( 314 ) ( 242 ) Net investment in a lease (presented as finance leases receivable) $ 16,942 $ 14,471 Book value of finance leases receivable Current $ 8,159 $ 4,378 Non-current 8,783 10,093 $ 16,942 $ 14,471		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	Account age for more than 120 days		Total
							$ 18,496 ( 1,824 ) ( 298 ) $ 16,374 December 31,2019
							(	$ 4,527 4,527 4,527 1,132 14,713 242 ) $ 14,471 $ 4,378 10,093 $ 14,471

X. Finance leases receivable

The Company and subsidiaries subleased the premises and buildings in Neihu District and the plant in Dongguan to another company with a fixed lease payment of NTD3,807,000 and NTD4,567,000 collected respectively 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%.

We 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, we believed that the aforesaid finance leases receivable was not impaired.

XI. Inventory

December 31, 2020 December 31, 2019

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Finished good Work in process Raw materials	$ 130,290 80,419 53,706 $ 264,415	$ 96,204 74,710 51,868 $ 222,782

The cost of sales related to inventories in 2020 and 2019 was NTD1,137,698,000 and NTD1,150,387,000, respectively. The amounts of NTD48,636,000 and NTD73,605,000 from reversal of allowances for inventory devaluation losses were included in the cost of sales in 2020 and 2019, respectively.

XII. Subsidiary

(I) Subsidiaries included in the consolidated financial statements Entities in the consolidated financial statements are as follows:

Name of Investor The Company KYE Systems (Hong Kong) Corp. Genius Holding Co., Ltd.	Name of the Subsidiary Genius Holding Co., Ltd. Chung-Chiang Investment Co., Ltd. Hung-Cheng Investment Co., Ltd. KYE Systems Europe GmbH KYE International Corporation KYE Systems (Hong Kong) Corp. Digilife Technologies Co., Ltd. DIGILIFE PTY LTD Genius Labuan Inc. Globalink Holding Co., Ltd. KYE Systems America Corporation Moustek Investment Co., Ltd. KYE Trade (HK) Co., Ltd. KYE Inc.	Nature of Business 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 Sales of computer peripherals and consumer electronic products Investment holdings Sales of computer peripherals and consumer electronic products Investment holdings Sales of computer peripherals and consumer electronic products Investment holdings	ShareholdingRatio December 31,2020 December 31,2019 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 94.61% 91.37% － 39.20% 100.00% 100.00% 100.00% 100.00% － 98.31% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%	Descripti on
			December 31,2020 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 94.61% － 100.00% 100.00% － 100.00% 100.00% 100.00%
				－ － － Note 1 － － Note 2 Note 3 － － Note 4 － － －

(Continued to next page)

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(Continued from previous page)

Name of Investor Digilife Technologies Co., Ltd. Life Technologies Co., Ltd. LIFE TECHNOLOGIES (HONG KONG) CO., LIMITED KYE Inc. Dong-Guan Kunying Computer Products Co., Ltd. Moustek Investment Co., Ltd.	Name of the Subsidiary Life Technologies Co., Ltd. DIGILIFE PTY LTD. LIFE TECHNOLOGIES (HONG KONG) CO., LIMITED ZISER TECHNOLOGIES (SHENZHEN) CO., LTD. Dong-Guan Kunying Computer Products Co., Ltd. Suo-Yi Technology (Shanghai) Ltd. You-Xiang Technology (Shanghai) Ltd. Dongguan Gaoying Electronic Technology Co., Ltd.	Nature of Business Indirect investments and trading business in third-party countries and in Mainland China Tourism and real estate development Indirect investments and processing businesses in third-party countries and in Mainland China Sale of digital video/audio products Manufacturing and sales of computer mice and computer game consoles - - Sales of computer peripherals and consumer electronic products	ShareholdingRatio December 31,2020 December 31,2019 100.00% 100.00% 100.00% 60.80% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% － － － － 100.00% 100.00%	Descripti on
			December 31,2020 100.00% 100.00% 100.00% 100.00% 100.00% － － 100.00%
				- Note 3 - - - Note 5 Note 5 -

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

Note 2: 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%.

Note 3: 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.

Note 4: KYE Systems America Corporation was completely liquidated in February 2020. Note 5: So-Yi Technology (Shanghai) Ltd., and You-Xiang Technology (Shanghai) Ltd., applied for establishment in January 2015. However, as of December 31, 2020, no capital had been invested in both companies, and both companies had not operated.

(II) Subsidiaries not included in the consolidated financial statements: None.

(III) Information on subsidiaries holding important non-controlling equity: None.

XIII. Investment under the equity method Investment in associates

Investment under the equity method Investment in associates
Important associates TIMING PHARMACEUTICAL CO., LTD. (Timing Pharmaceutical Company) Individual unimportant associates	December 31,2020 $ 211,917 74,518 $ 286,435	December 31,2019
			$ 216,851 68,077 $ 284,928

(I) Important associates

Ratio of shareholdings and voting rights Company Name December 31, 2020 December 31, 2019

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Timing Pharmaceutical Company 22.64% 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 and subsidiaries 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.

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 and subsidiaries recognized an impairment loss of NTD38,202,000 using the investment under the equity method in 2019.

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

ade 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 and subsidiaries’ shareholding ratio 22.64% The Company and subsidiaries’ 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 ) ummary of individual unimportant associates 2020 The Company and subsidiaries’ shares Net profit (loss) in the year $ 7,799 Other comprehensive income ( 17,596 ) Total comprehensive income ($ 9,797 )	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
	( $ 7,927 ) ( 3,533 ) ($ 11,460 )

(II) Summary of individual unimportant associates

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Our shares of profit or loss and other comprehensive income using the investments under equity method were calculated based on the CPA-audited financial statements in the same period other than those in Digilife (Thailand) Co., Ltd., and Timing Pharmaceutical Company, which were calculated based on their financial statements not audited by CPAs. However, our management considered that significant impacts would not result from a situation where the investees’ financial statements were not audited by CPAs.

XIV. Property, plant and equipment

					Premises and	Premises and		Machine and	Machine and			Leasehold	Leasehold		Miscellaneous	Miscellaneous	Miscellaneous
			Land			buildings		equipment				improvement			equipment				Total
Cost
Balance on January 1,
2020		$	339,557		$	174,704		$	258,471			$	68,589		$	217,460		$	1,058,781
Addition			130,074			46,493			3,832				10,086			6,454			196,939
Disposal			-			-	(		59,742	)	(		163	)	(	9,241	) (		69,146	)
Net exchange
differences			-			119			528		(		2	)	(	757	) (		112	)
Transfer of account titles			-			-			-				3,185			-			3,185
Balance on December
31, 2020		$	469,631		$	221,316		$	203,089			$	81,695		$	213,916		$	1,189,647
Accumulated
depreciation and
impairment
Balance on January 1,
2020		$	11,046		$	83,367		$	220,999			$	42,184		$	206,594		$	564,190
Disposal			-			-	(		59,062	)	(		163	)	(	9,236	) (		68,461	)
Depreciation expense			-			3,998			8,259				14,245			2,170			28,672
Net exchange
differences			-			118	(		444	)	(		2	)	(	737	) (		1,065	)
Balance on December
31, 2020		$	11,046		$	87,483		$	169,752			$	56,264		$	198,791		$	523,336
Net amount on
December 31, 2020		$	458,585		$	133,833		$	33,337			$	25,431		$	15,125		$	666,311
Cost
Balance on January 1,
2019		$	429,714		$	218,654		$	323,492			$	68,344		$	224,470		$	1,264,674
Addition			-			-			34,692				917			3,816			39,425
Disposal	(		90,157 )	(		43,816	) (		99,704	)	(		667	)	(	10,483	) (		244,827	)
Net exchange
differences			-	(		134	) (		33	)	(		5	)	(	343	) (		515	)
Transfer of account titles			-			-			24				-			-			24
Balance on December
31, 2019		$	339,557		$	174,704		$	258,471			$	68,589		$	217,460		$	1,058,781
Accumulated
depreciation and
impairment
Balance on January 1,
2019		$	11,046		$	82,409		$	310,323			$	29,206		$	213,320		$	646,304
Disposal			-	(		2,906	) (		99,669	)	(		667	)	(	7,801	) (		111,043	)
Depreciation expense			-			3,996			10,448				13,649			1,420			29,513
Net exchange
differences			-	(		132	) (		103	)	(		4	)	(	345	) (		584	)
Balance on December
31, 2019		$	11,046		$	83,367		$	220,999			$	42,184		$	206,594		$	564,190
Net amount on
December 31, 2019		$	328,511		$	91,337		$	37,472			$	26,405		$	10,866		$	494,591

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

Premises and buildings 10 to 55 years Machine and equipment 2 to 12 years Leasehold improvement 4 to 15 years Miscellaneous equipment

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Transport equipment	2 to 10 years
Office equipment	1 to 13 years
Passenger and freight elevators	15 years
Others	2 to 10 years

For the amount of property, plants and equipment pledged by the Company and subsidiaries as collateral for loans, see Note 29.

XV.Lease agreement

(I) Right-of-use assets

greement ight-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	December 31,2020 $ 41,228 412 4,901 $ 46,541 2020 $ 2,095 $ 25,835 138 4,843 $ 30,816	December 31,2019
			$ 83,102 550 7,649 $ 91,301 2019
			$ 24,095 $ 22,203 137 3,422 $ 25,762

(II) Lease liabilities

December 31, 2020 December 31, 2019 Book value of lease liabilities Current $ 30,604 $ 35,456 Non-current $ 34,481 $ 70,831

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

Building Office equipment Transport equipment	December 31,2020 1.50%–1.69% 1.50% 1.25%–1.69%	December 31,2019
		1.50%–1.69% 1.50% 1.50%–1.69%

(III) Material lease activities and terms

We rented buildings, office equipment, and transport equipment with a lease term from 2019 to 2023 for manufacturing, offices, and conducting 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

ther lease information
Short-term lease expense Expense on lease of low-value assets Total cash outflow from lease		2020 $ 1,970 $ 30 $ 10,328		2019
				$ 5,247 $ 30 $ 36,380

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The Company and subsidiaries 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 lease commitments beginning after the balance sheet date during the lease term are as follows:

	term are as follows:
XVI.	Lease commitments Investment property Cost Balance on January 1, 2020 Addition Disposal Net exchange differences Balance on December 31, 2020 Accumulated depreciation and impairment Balance on January 1, 2020 Depreciation expense Disposal Recognized impairment loss Net exchange differences Balance on December 31, 2020 Balance on December 31, 2020 Cost Balance on January 1, 2019 Addition Disposal Net exchange differences Balance on December 31, 2019 Accumulated depreciation and impairment Balance on January 1, 2019 Depreciation expense Disposal Recognized impairment loss Net exchange differences Balance on December 31, 2019 Balance on December 31, 2019	December 31,2020 $ 147	December 31,2019
			$ 2,240 Investment property
			$ 398,597 2,843 ( 36,208 ) 6,039 $ 371,271 ( $ 29,454 ) ( 2,236 ) 357 ( 2,552 ) ( 287 ) ($ 34,172 ) $ 337,099 $ 1,345,265 148,749 ( 1,090,301 ) ( 5,116 ) $ 398,597 ( $ 89,335 ) ( 7,680 ) 88,045 ( 20,500 ) 16 ($ 29,454 ) $ 369,143

Except for the part of our investment properties whose fair value on December 31, 2020 and 2019 was not evaluated by an independent evaluator but evaluated by our management using the evaluation model commonly used among market participants, the fair

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value of other investment properties was evaluated by an independent evaluation company using the comparative method and income method. Under the comparative method, the fair value was calculated and evaluated based on the closing price and determined sales price of the comparable properties. Under the income method, the fair value was calculated and evaluated based on the estimated net profit and capitalization rate of profit. The fair value of the investment properties on December 31, 2020 and 2019 was NTD178,899,000 and NTD179,016,000, respectively. The fair value of the investment properties evaluated by the Company and subsidiaries was NTD159,092,000 and NTD190,066,000, respectively. The evaluation was performed by reference to the market evidence related to the transaction price of similar properties.

Since the fair value of part of the investment properties was less than the book value, the Company and subsidiaries recognized impairment losses of NTD2,552,000 and NTD20,500,000 in 2020 and 2019, respectively.

The investment properties were depreciated on the straight-line basis over a 50-year useful life.

For the amount of investment property pledged by the Company and subsidiaries as collateral for loans, see Note 29.

XVII. Loan Long-term loans

Loan Long-term loans
Loans with floating interest rate: China Trust Commercial Bank Pledged loans, due in February 2040 (Note 1) Pledged loans, due in August 2024 (Note 2) Total Less: Long-term loans maturing within 1 year	December 31,2020 $ 138,000 100,000 238,000 8,095 $ 229,905	December 31,2019
			$ - 100,000 100,000 - $ 100,000

Note 1:	The interest rate on December 31, 2020 was 1.2%. The principal and interest will be amortized on a monthlybasis from March 2022.
Note 2:	The interest rates on December 31, 2020 and 2019 were 1.2% and 1.5% respectively. The principal and interest will be amortized on a monthlybasis from August 2021.

For the amount of property and investment property pledged by the Company and subsidiaries as collateral for loans, see Note 29.

.

XVIII. Notes and accounts payable

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

XIX. Other payables

Other payables
Salaries and bonuses payable Service fees payable Market promotion fees payable	December 31,2020 $ 37,326 10,324 6,967	December 31,2019
		$ 43,308 7,965 4,485

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Royalties payable Others	4,277 38,605 $ 97,499	6,292 56,996 $ 119,046

XX.Post-employment benefit plan

(I) Defined contribution plan

The pension system specified in the ―Labor Pension Act‖ adopted by the Company and domestic subsidiaries 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 subsidiaries in Mainland China shall be subject to relevant local pension insurance system and shall annually appropriate a fixed percentage of the salary as the pension to the designated responsible institution.

(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 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. The Company contributes 2% of the employee’s total wage as the pension fund on a monthly basis and remits it

to the special account at the Bank of Taiwan in the name of the Labor Pension Fund Supervisory Committee. Before the end of the 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 benefits plan and included in the consolidated balance sheet are listed as follows:

alance 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	Present value of defined benefit obligation $ 53,047 202 ( 7,687 ) 597 ( 6,888 )	Fair value of plan assets ($ 16,442 ) - - ( 189 ) ( 189 )	Net defined benefit liabilities (assets)
		( ( (	$ 36,605 202 ( 7,687 ) 408 ( 7,077 )

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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 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

- ( 592 ) ( 592 ) 20 - 20 2,341 - 2,341 1,009 - 1,009 3,370 ( 592 ) 2,778 - ( 583 ) ( 583 ) 900 ) 900 - 48,629 ( 16,906 ) 31,723 208 - 208 365 ( 129 ) 236 573 ( 129 ) 444 - ( 571 ) ( 571 ) 1,255 - 1,255 663 ) - ( 663 ) 592 ( 571 ) 21 - ( 534 ) ( 534 ) $ 49,794 ($ 18,140 )$ 31,654

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

ummarized 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 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.

2. 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

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increased accordingly. The net defined benefit liabilities might be partially offset by both increases.

1. 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:

ctuarially by a qualified actuary. The re as follows:	major assumptions on the	date of measurement
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:

ollows:
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.

bligation.
Expected contribution within 1 year Average maturity of defined benefit obligations 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 $ 539 10.2 years December 31,2020 390,000 $ 3,900,000 224,528 $ 2,245,285 198,950 $ 2,444,235	December 31,2019
		$ 552 11.0 years December 31,2019
			390,000 $ 3,900,000 234,538 $ 2,345,385 301,635 $ 2,647,020

XXI. Equity (I) Share capital

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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 Articles of Incorporation, 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 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 23.

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

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for profit distribution in 2018, respectively approved at the said meetings, are as follows:

ollows:
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:

arch 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 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 loss compensation 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	(	204,967	)	19,290

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Share of associates under the equity method ( Other comprehensive income in the year ( Cumulative profit or loss on disposal of equity instruments transferred to retained earnings Balance – ending of the year (	17,609 ) ( 222,576 ) 1,604 $ 625,354 ) (	3,676 ) 15,614 240,960 $ 404,382 )

(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.

XXII. Revenue

Revenue
Revenue from contracts with customers Revenue from sale of goods Other operating revenues Other revenue		2020 $ 1,643,434 9,835 $ 1,653,269		2019
				$ 1,598,927 6,552 $ 1,605,479

(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

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December 31, 2020 December 31, 2019 Notes and accounts receivable (Note 9) $ 123,573 $ 97,197 (III) Sub-items of revenue from customer contracts 2020 Computer Peripheral $ 1,015,318 Video Images 600,662 Consumer Electronics 10,782 Others 26,507 $ 1,653,269		December 31, 2019			January1,2019	January1,2019
						$ 200,250 2019
					$ 925,175 646,314 23,983 10,007 $ 1,605,479

XXIII. (I) (II)	Net profit in the year Other profits and losses Other revenue Exchange loss – net Rent revenue Other losses Profit on the valuation of financial assets measured at fair value through profit or loss Loss or profit on disposal and obsolescence of property, plants, and equipment – net Profit on investment disposal – net Total Depreciation and amortization Property, plant and equipment Investment property Other non-current assets Right-of-use assets Summary of depreciation expenses by function Operating costs Operating expenses Non-operating expenses Summary of amortization expenses by function Operating costs Operating expenses	2020 $ 50,055 ( 32,161 ) 11,024 ( 2,046 ) 1,713 ( 590 ) 412 $ 28,407 2020 $ 28,672 2,236 10,086 30,816 $ 71,810 $ 18,751 40,737 2,236 $ 61,724 $ 7,880 2,206 $ 10,086	2019	2019
			$ 45,111 ( 16,841 ) 20,861 ( 7,113 ) - 21,633 3,369 $ 67,020 2019
				$ 29,513 7,680 17,019 25,762 $ 79,974 $ 22,248 33,027 7,680 $ 62,955 $ 13,508 3,511 $ 17,019

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(III) Employee benefit expense

mployee benefit expense
Post-employment benefits Defined contribution plan Defined benefit plan (Note 20) Separation benefits Other employee benefits Total of employee benefit expenses Summarized by function Operating costs Operating expenses		2020 $ 3,679 444 4,123 1,648 198,555 $ 204,326 $ 35,381 168,945 $ 204,326		2019
			$ 3,919 ( 7,077 ) ( 3,158 ) 9,111 217,712 $ 223,665 $ 43,678 179,987 $ 223,665

(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

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 consolidated financial statements, the change was treated as a change in accounting estimate and accounted 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 consolidated 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.

XXIV. Income tax

(I) Income tax recognized in profit or loss

Major components of income tax expenses are as follows:

Current income tax Tax incurred in the year Adjustments for the previous		2020 $ 31,125 5,396 )		2019
	(		(	$ 11,046 585 )

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year 25,729 Deferred income tax Tax incurred in the year 12,683 Foreign exchange rate effect ( 645 ) 12,038 Income tax expense recognized as profit or loss $ 37,767 Adjustments to accounting income and income tax expenses 2020 Net profit before tax $ 184,672 Income tax expense on net profit before tax calculated at the statutory tax rate $ 39,478 Losses not deductible and tax-free income not included when determining taxable income 3,087 Unrecognized deductible temporary difference 3,220 Unrecognized loss carryforwards ( 2,622 ) Adjustment to income tax expenses of the previous year in the year ( 5,396 ) Income tax expense recognized as profit or loss $ 37,767 (II) Income tax recognized in other comprehensive income 2020 Deferred income tax Amounts incurred in the year －Unrealized profit/loss from the financial assets measured at fair value through other comprehensive income ( $ 21,951 ) －Translation from foreign operations 4,631 －Remeasurement of defined benefits plans 4 Income tax recognized in other comprehensive income ($ 17,316 )	10,461 10,183 ( 116 ) 10,067 $ 20,528 are as follows: 2019	10,461 10,183 ( 116 ) 10,067 $ 20,528 are as follows: 2019
	$ 175,192 $ 43,520 ( 26,323 ) 9,997 ( 6,081 ) ( 585 ) $ 20,528 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

Balance – Recognition Recognition Balance – beginning of in profit or in other ending of the the year loss comprehensiv year

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						e income	e income
Deferred income tax assets
Temporary difference
Inventory	$	20,064	( $	8,784	)	$	-		$	11,280
Defined retirement
benefit plan		8,654	(	18	)		-			8,636
Other non-current
assets		13,617	(	1,235	)		-			12,382
Others		6,620	(	3,611	)		-			3,009
Financial assets
measured at fair
value through other
comprehensive
income		46,837		-		(	14,028	)		32,809
Investment under the
equity method		32,050		2,819			4,564			39,433
Deferred loss on
purchase
commitment		13,180	(	1,840	)		-			11,340
	$	141,022	($	12,669	)	($	9,464	)	$	118,889
Deferred income tax
liabilities
Temporary difference
Investment under the
equity method	$	14,379	( $	95	)	( $	67	)	$	14,217
Defined retirement
benefit plan		2,309		-		(	4	)		2,305
Financial assets
measured at fair
value through other
comprehensive
income		-		-			7,923			7,923
Others		-		109			-			109
	$	16,688	$	14		$	7,852		$	24,554
2019
						Recognition
	Balance –		Recognition				in other		Balance –
	beginning of		in	profit or		comprehensiv			ending of the
		theyear		loss		e income				year
Deferred income tax assets
Temporary difference
Inventory	$	33,018	( $	12,954	)	$	-		$	20,064
Defined retirement
benefit plan		10,186	(	1,532	)		-			8,654
Other non-current
assets		18,758	(	5,141	)		-			13,617
Others		5,647		973			-			6,620
Financial assets
measured at fair
value through other
comprehensive
income		32,810		-			14,027			46,837

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Investment under the equity method Deferred loss on purchase commitment Deferred income tax liabilities Temporary difference Investment under the equity method Defined retirement benefit plan Financial assets measured at fair value through other comprehensive income	26,942 2,995 2,113 9,466 3,714 - $ 136,827 ($ 11,945 )$ 16,140 $ 18,325 ( $ 1,762 ) ( $ 2,184 ) 2,865 - ( 556 ) 12,254 - ( 12,254 ) $ 33,444 ($ 1,762 ) ($ 14,994 )	32,050 13,180 $ 141,022 $ 14,379 2,309 - $ 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.

The income tax returns of Chung-Chiang Investment Co., Ltd. and Hung-Cheng Investment Co., Ltd. up to 2018 and of the Digilife Technologies Co., Ltd. up to 2017 were audited and approved by the tax authorities.

XXV. EPS

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

Net profit in the year

are as follows: Net profit in the year
Earnings attributable to the owner of the Company Effect of potential diluted common stocks: Remuneration to employees Profit used for calculation of diluted EPS 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		2020 $ 146,236 - $ 146,236 2020 228,307 657 228,964		2019
			$ 151,480 - $ 151,480 Unit: 1,000 shares 2019
				234,538 783 235,321

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common stocks used for calculating diluted EPS

When the Company and subsidiaries 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.

XXVI. Capital risk management

The Company and subsidiaries 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 and subsidiaries did not have substantial changes.

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

The Company and subsidiaries 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 and subsidiaries balanced the overall capital structure by paying dividends, issuing new stocks, repurchasing stocks, and issuing new corporate bonds, or repaying existing liabilities. XXVII. Financial instruments

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

Since the book value of the Company and subsidiaries’ financial instruments not measured at fair value, including cash and cash equivalents, notes and accounts receivable, finance leases receivable, other receivables, guarantee deposits paid, notes and accounts payable, other payables, long-term liabilities maturing within 1 year, long-term loans and guarantee deposits received, was a reasonable approximation of fair value, we did not disclose the fair value.

• (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		Level 1 $ -		Level 2 $ -		Level 3 $ 1,713		Total
								$ 1,713

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－Domestic listed (OTC) stocks －Domestic non-listed (non-OTC) stocks －Overseas 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 －Overseas non-listed (non-OTC) stocks Total		Level 1 $ 43,724 - - $ 43,724 Level 1 $ 71,056 - - $ 71,056		Level 2 $ - - - $ - Level 2 $ - - - $ -		Level 3 $ 10,950 72,791 115,501 $ 199,242 Level 3 $ 101,532 59,083 214,905 $ 375,520		Total
								$ 54,674 72,791 115,501 $ 242,966 Total
								$ 172,588 59,083 214,905 $ 446,576

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

1. 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 Purchase Disposal Exchange differences from foreign operations Balance – ending of the year	Financial assets measured at fair value through profit or loss $ - 2,125 - 55,315 ( 55,574 ) ( 153 ) $ 1,713	Financial assets measured at fair value through other comprehensive income $ 375,520 - ( 164,346 ) - ( 1,355 ) ( 10,577 ) $ 199,242		Total
	( (	( ( (	( ( (	$ 375,520 2,125 164,346 ) 55,315 56,929 ) 10,730 ) $ 200,955

2019

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Balance – beginning of the year Recognition in profit or loss (other profits and losses) Recognition in other comprehensive income Purchase Disposal Exchange differences from foreign operations Balance – ending of the year	Financial assets measured at fair value through profit or loss $ 18,242 3,369 - 59,540 ( 77,914 ) ( 3,237 ) $ -	Financial assets measured at fair value through other comprehensive income $ 632,506 - ( 11,288 ) 44,460 ( 288,184 ) ( 1,974 ) $ 375,520		Total
	( (	( ( (	( ( (	$ 650,748 3,369 11,288 ) 104,000 366,098 ) 5,211 ) $ 375,520

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

For the domestic and overseas non-listed (non-OTC) stocks held by the Company and subsidiaries 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.

For the investment products for which no market price could be used as a reference, the cash flow discounting method was used to estimate the cash flow in the future based on the observable interest rate at the end of the period. 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.

(III) Type of financial instruments

price. 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 $ 1,563,805 1,713 242,966 482,838	December 31,2019
		$ 1,622,269 - 446,576 359,550

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 andguarantee depositspaid.
Note 2:	The balance included the financial liabilities measured at amortized cost,such as notes

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and accounts payable, other payables, long-term loans maturing within 1 year, long-term loans and guarantee deposits received.

(IV) Financial risk management purpose and policy

The Company and subsidiaries’ 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 and subsidiaries’ 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.

We 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 and subsidiaries. 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 and subsidiaries did not conduct transactions of financial instruments (including derivative financial instruments) for speculation purposes.

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

1. Market risk

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

The Company and subsidiaries 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 and subsidiaries were engaged in sales and purchase transactions in foreign currency. These transactions exposed the Company and subsidiaries to the exchange rate fluctuation risk. More than 99% of the sales amount of the Company and subsidiaries were not valuated with the functional currency of the Company; about 99% of the purchase amount were not valuated with the functional currency of the Company. The Company and subsidiaries 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 and subsidiaries valued with non-functional currency on the balance sheet date, see Note 32.

Sensitivity analysis

The Company and subsidiaries were affected primarily by fluctuations 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

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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.

2020 2019 Profit or loss (Note) $ 8,717 $ 8,880

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

(2)

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. Interest rate risk

The interest rate risk exposure occurred because the Company and subsidiaries’ 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 and subsidiaries exposed to the interest rate risk on the balance sheet date are as follows:

are as follows:
With fair value interest rate risk －Financial assets －Financial liabilities With cash flow interest rate risk －Financial assets －Financial liabilities	December 31,2020 $ 499,271 65,085 830,173 238,000	December 31,2019
		$ 594,390 106,287 880,089 100,000

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.

(3)

If the interest rate increased/decreased by 25 basis points, with all other variables held constant, the Company and subsidiaries’ net profit before tax in 2020 and 2019 was increased/decreased by NTD1,715,000 and NTD1,346,000, respectively. Other price risks

The Company and subsidiaries sustained equity price risk exposure due to investment in equity securities. This investment was not held for trading but a strategic investment. The management of the Company and subsidiaries managed risk by holding different risk investment portfolios. The equity price risk of the Company and subsidiaries was mainly in the equity instruments for the electronic industry. The Company designated responsible teams to monitor the price risk.

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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 NTD2,430,000 and NTD4,466,000, respectively, due to 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 potential highest credit risk exposure of the Company and subsidiaries due to failure of the counterparty to fulfill the obligations was mainly derived from the book value of the financial assets recognized in the consolidated balance sheet.

In order to mitigate the credit risk, the management of the Company and subsidiaries 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 and subsidiaries 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 and subsidiaries’ 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 and subsidiaries 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 49% and 63% of that of the Company and subsidiaries, respectively. The credit concentration risk of other receivables was insignificant.

3.

Liquidity risk

The Company and subsidiaries 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 and subsidiaries 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 and subsidiaries. The table is compiled based on the earliest repayment date required to the Company and subsidiaries and the

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non-discounted cash flow of the financial liabilities, excluding the cash flow of the interest.

December 31, 2020

the interest. December 31, 2020	the interest. December 31, 2020
Less than 1 year Non-derivative financial liability Non-interest-bear ing liabilities $ 244,838 Lease liabilities 31,368 Floating interest rate instruments 8,095 $ 284,301 December 31, 2019 Less than 1 year Non-derivative financial liability Non-interest-bear ing liabilities $ 259,550 Lease liabilities 36,810 Floating interest rate instruments - $ 296,360		1 to 2years $ - 28,717 24,688 $ 53,405 1 to 2years $ - 33,987 8,043 $ 42,030	2 to 5years $ - 6,093 79,071 $ 85,164 2 to 5years $ - 38,059 59,463 $ 97,522	Over 5years
				$ - - 126,146 $ 126,146 Over 5years
Non-derivative financial liability Non-interest-bear ing liabilities Lease liabilities Floating interest rate instruments
					$ - - 32,494 $ 32,494

XXVIII. Related party transactions

Since all the transactions, account balances, profits and expenses/losses between the Company and the subsidiaries (namely, the Company’s related parties) were removed after the merger, they were not disclosed in the Note. Transactions between the Company and subsidiaries and other related parties are as follows:

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

Relationship with the Company and Name of Related Party Subsidiaries STAR REACH LIMITED Associate DigiLife (Thailand) Co., Ltd. Associate KAI CHIEH LIMITED The Company’s de facto related party before January 23, 2019 Shih-Kun Tso The Company’s Chairman Yung-Far Wei De facto related party

(II) Operating transaction

perating transaction
Revenue on processing De facto related party		2020 $ -		2019
				$ 510

The Company and subsidiaries’ revenue on processing from KAI CHIEH LIMITED is credited on a monthly basis every 30 days. The sales price of the Company

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and subsidiaries offered to the aforesaid related parties was approximately same as the price for other individual customers.

rice for other individual customers.
Purchase Associate De facto related party		2020 $ 285 - $ 285		2019
				$ 8,890 7,497 $ 16,387

The purchase transactions of the Company and subsidiaries with STAR REACH LIMITED and KAI CHIEH LIMITED were conducted under O/A 30 days. Except for the aforesaid transactions, all the transactions of the Company and subsidiaries with related parties were conducted under the conditions same as those for the transactions with non-related parties.

ith non-related parties.
Manufacturing expense De facto related party Disposal of property, plants, and equipment De facto related party		Disposal		2020		$ Profit on			2019
				$ - proceeds 2019 $ 1,495				$	23,215 disposal
		2020				2020 $ -				2019
		$ -								$ 663

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

ollows:
Associate	December 31,2020 $ -	December 31,2019
			$ 831

The outstanding balance of the accounts payable to related parties was not guaranteed and to be paid by cash.

(III) Lease agreement

uaranteed and to be paid by cash. ease agreement
Lease liabilities Shih-Kun Tso Interest expenses Shih-Kun Tso	December 31,2020 $ - 2020 $ 108	December 31,2019
			$ 9,807 2019
			$ 174

The Company and subsidiaries rented offices from Shih-Kun Tso with the lease terms and conditions equivalent to non-related parties.

(IV) Remuneration to key management

emuneration to key management
Short-term employee benefits Post-employment benefits		2020 $ 41,811 438 $ 42,249		2019
				$ 42,952 541 $ 43,493

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

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

Property – net Investment property – net	December 31,2020 $ 516,047 178,007 $ 694,054	December 31,2019	December 31,2019
			$ 346,318 179,077 $ 525,395

XXX. Significant contingent liability and unrecognized contractual commitment In addition to those described in other notes, the Company and subsidiaries’ significant commitments and contingencies on the balance sheet date are as follows:

• (I) Significant commitments

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

Total contract price Paid payment (Note)	December 31,2020 $ 168,000 $ 58,000	December 31,2019	December 31,2019
			$ 346,770 $ 53,731

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. In March 2020, the prepayment for equipment made by the Company and subsidiaries for purchase of the pre-sold house in Shilin District, Taipei City was reclassified as property, plant and equipment. See Note 14.

• (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.

XXXI. Other matters

The Company and subsidiaries have been affected by the spread of the COVID-19 pandemic worldwide. The Dongguan Plant and most of the supply chain suppliers of the 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 and subsidiaries’ operating revenue in February 2020 dropped by 49% from the same period of 2019. Shipments have gradually returned to normal since March. Despite the easing of the pandemic in Taiwan, the Company and subsidiaries’ 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 subsidiaries and their customers have promptly made adjustments, the net operating revenue in 2020 increased by NTD47,790,000 (with an annual growth of approximately 3%) from the same period of 2019, and the operating profit of NTD161,795,000 was an increase of approximately 204% from the same period of 2019. The COVID-19 pandemic has not caused significant impact to the going concern ability,

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working capital liquidity turnover rate, asset impairment and financing risk of the Company and subsidiaries.

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 and subsidiaries plan 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.

• XXXII. 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 and subsidiaries’ 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 AUD Investment under the equity method USD RMB THB Financial assets measured at fair value through other comprehensive income RMB THB Financial liabilities Monetary items RMB USD December 31, 2019 Financial assets Monetary items USD RMB AUD EUR Investment under the equity	Foreign currency $ 31,579 28,931 3,238 1,813 2,571 737 25,658 3,800 35,919 972 Foreign currency $ 31,557 25,239 1,937 271	Exchange Rate 28.480 4.377 21.950 28.480 4.377 0.956 4.377 0.923 4.377 28.480 Exchange Rate 29.980 4.305 21.005 33.590	Book value
			$ 899,357 126,632 71,065 51,623 11,253 704 111,994 3,507 157,219 27,674 Book value
			$ 946,071 108,655 40,694 9,203

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method
USD	$	1,441	29.980	$	43,209
RMB		2,681	4.305		11,543
THB		737	1.010		744
Financial assets measured at
fair value through other
comprehensive income
RMB		49,191	4.305		211,398
THB		3,800	0.923		3,507
Financial liabilities
Monetary items
RMB		18,511	4.305		79,688
USD		1,938	29.980		58,111
HKD		9,503	3.849		36,578

The realized and unrealized foreign currency exchange losses of the Company and subsidiaries in 2020 and 2019 were NTD32,161,000 and NTD16,841,000, respectively. However, it is infeasible to disclose the exchange loss and gain of each significant foreign currencies because of numerous foreign currency transactions and functional currencies of the Group.

XXXIII. 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.

• Trading in derivative instruments: None.

• Others: The business relationship and important transactions between the parent company and its subsidiaries, and between subsidiaries: Table 4.

• (II) Information on investees: Table 5.

• (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 6.

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1. 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: Table 6.

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

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

   • (3) The amount of property transactions and the amount of 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.

2. (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 7)

3. XXXIV.Segment information

The information was provided for the chief operating decision maker to distribute resources and evaluate the performance of each department. It focused on the type of each batch of products or services delivered or provided. The reportable segments of the Company and subsidiaries were the electronic and other segments.

• (I) Segment revenue and operating result

Analysis of the Company and subsidiaries’ revenues and operating results from continuing operations by reportable segment is as follows:

Domestic and overseas operatingsegments Revenues from clients other than the parent company and merged subsidiaries Segment profits (losses) Loss on disposal of investment property Other profits and losses Impairment loss Share of profit/loss of associates under equity method Interest income Interest expenses Net profit (loss) before tax Domestic and overseas operatingsegments Revenues from clients				2020
						Total
					$ 1,653,269 $ 161,795 ( 9,000 ) 28,407 ( 2,552 ) 1,224 8,954 ( 4,156 ) $ 184,672
		Electronic products $ 1,602,809		Others $ 2,670		Total
						$ 1,605,479

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other than the parent	other than the parent
company and merged
subsidiaries
Segment profits (losses)			$	56,803		( $	3,522	) $	53,281
Profit on disposal	of
investment property				148,639			-		148,639
Other profits and losses				67,020			-		67,020
Impairment loss		(		58,702	)		-	(	58,702	)
Share of profit/loss	of
associates under equity
method		(		38,050	)		-	(	38,050	)
Interest income				15,183			560		15,743
Interest expenses		(		12,739	)		-	(	12,739	)
Net profit (loss) before tax			$	178,154		( $	2,962	)$	175,192

The segment profit was the earnings of each segment excluding the administration costs of the head office to be shared and the compensation of the directors and supervisors, the portion of the affiliate accounted for under the equity method, loss and gain from disposal of any affiliate, rent income, interest income, loss and gain from disposal of property, plants, and equipment, loss and gain from disposal of investments, net foreign currency exchange gain (loss), financial tool valuation gain (loss), financial costs and income tax. These estimated amounts were provided for the chief operating decision maker to distribute resources to departments and evaluate their performance.

(II) Total segment assets and liabilities

otal segment assets and liabilities
Segment asset Electronic segment Others Total consolidated assets Segment liability Electronic segment Others Total consolidated liabilities	December 31,2020 $ 3,332,615 364,927 $ 3,697,542 $ 694,079 1,288 $ 695,367	December 31,2019
			$ 3,427,964 399,722 $ 3,827,686 $ 532,253 30,744 $ 562,997

(III) Revenue from main products and services

Analysis of the Company’s revenue from main products and services is as follows:

Electronic products Investment		2020 $ 1,650,825 2,444 $ 1,653,269		2019
				$ 1,602,809 2,670 $ 1,605,479

(IV) Information by territory

The Company primarily operates in four regions: Asia, America, Europe, and Taiwan.

The Company’s revenue of continuing operations from external clients and non-current assets was classified respectively by territory and the location where the assets were located. The relevant information is listed as follows:

Income from external clients	Non-current assets 2020 2019

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Asia America Europe Taiwan Others		2020 $ 558,586 555,171 436,675 61,379 41,458 $ 1,653,269		2019 $ 813,399 423,671 337,954 8,229 22,226 $ 1,605,479		December 31 $ 80,910 43 43 1,043,797 - $ 1,124,793		December 31
								$ 104,409 10,003 41 917,483 - $ 1,031,936

The non-current assets did not include financial instruments and deferred income tax assets.

(V) Information about major clients

The income of the electronic segment in 2020 and 2019 was NTD1,650,825,000 and NTD1,602,809,000, respectively, and of which NTD256,672,000 and NTD435,643,000 came from the largest customer of the Group. Except for the above-mentioned largest customer, no income earned from any single customer reached more than 10% of the Group’s total income in 2020 and 2019.

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

Table 1

Unit: NTD and foreign currency (thousand)

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. Globalink Holding Co., Ltd. Hung-Cheng Investment Co., Ltd. Digilife Technologies Co., Ltd.	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) Stock Shenzhen CMK Technology Co., Ltd. Stock Solteam Incorporation FLYTECH Dynamic Medical Technologies, Inc. CORETEK OPTO CORPORATION Stock Cheng-Shih International Co., Ltd. MOTOMOTO Ltd.	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. None None None None The chairman of the company is a director of KYE Systems Corp. None None	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 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 – 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 Financial assets measured at fair value through other comprehensive income – non-current	34 6,583 2,631 - 1,913 3,000 15,789 - 156 486 11 10 50 38	$ 1,713 48,467 22,820 30 - (Note 3) 10,950 - (Note 3) USD 3,932 9,363 30,405 540 74 500 3,507	- 9.96% 7.71% - - 2.36% 3.42% 8.61% - - - - 2.55% 19.00%	$ 1,713 48,467 22,820 30 - (Note 3) 10,950 - (Note 3) USD 3,932 9,363 30,405 540 74 500 3,507

(Continued to next page)

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(Continued from previous page)

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)
	LIAN, JU Biotechnology Co., Ltd Unity Opto Technology Co., Ltd. Shin Kong Financial Holding Co., Ltd. China Petrochemical Development Corporation	The directors of the company are also directors of Digilife Technologies Co., Ltd. The chairman of the company is a director of KYE Systems Corp. None None	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 – current Financial assets measured at fair value through other comprehensive income – current	90 597 176 160	$ 900 - (Note 3) 1,547 1,869	18.00% - - -	$ 900 - (Note 3) 1,547 1,869

Note 1: The market price was determined as follows: The price of the listed and OTC stocks was calculated based on the closing price of Taiwan Stock Exchange and Taipei Exchange at the end of December 2020; the price of the stock private placement the trade of which was restricted was estimated using the valuation method; the price of the non-listed and non-OTC stocks was calculated using the valuation method.

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

Note 2: The securities held at the end of the period were not provided as guarantees or pledged as collateral for loans. Note 3: 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.

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KYE Systems Corp. and Subsidiaries

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

Table 2

Unit: NTD thousand

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 (Note 2) 483,655 (Note 2)	43% 43%	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 then resold to the Company. Note 2: The amount was entirely written off during preparation of the consolidated financial statements.

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

Table 3

Unit: NTD thousand

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 2)	(Note 1)	(Note 1)	(Note 1)	(Note 1)	$ -

Note 1: They were mainly the receivables from the entrusted purchase of raw materials and machine/equipment and intermittently offset by accounts payable. Note 2: The amount was entirely written off during preparation of the consolidated financial statements.

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KYE Systems Corp. and Subsidiaries

The business relationship and important transactions between the parent company and its subsidiaries, and between subsidiaries

2020

Table 4

Unit: NTD thousand

No.	Name of Trader	Counterparty	Relationship with Traders (Note 1)		Transaction	Transaction
				Title	Amount	Trading conditions	Percentage of consolidated total operating revenue or total assets
0 1	The Company Dong-Guan Kunying	KYE Trade KYE Trade KYE Trade KYE Trade	1 1 3 3	Purchase Other receivables Operating revenue Other current liabilities	$ 484,510 534,294 483,655 534,294	Note 2 Note 2 Note 2 Note 2	29% 14% 29% 14%

Note 1: Relationships with traders can be classified into the following three types:

1: Parent company to subsidiary; 2: Subsidiary to parent company; 3: Subsidiary to subsidiary

Note 2: As 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 then resold to the Company. The payables deriving from the purchase trading were offset against the receivables deriving from the entrusted purchase of raw materials on an irregular basis.

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Unit: NTD and foreign currency (thousand)

KYE Systems Corp. and Subsidiaries Name and Territory of Investees and Other Relevant Information 2020

Table 5

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. KYE Systems (Hong Kong) Corp. Genius Holding Co., Ltd. Digilife Technologies Co., Ltd. Life Technologies Co., Ltd.	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. Genius Labuan Inc. Globalink Holding Co., Ltd. KYE Systems America Corporation Moustek Investment Co., Ltd. KYE Trade (HK) Co., Ltd. KYE Inc. Maxfar Limited Life Technologies Co., Ltd. DIGILIFE PTY LTD SHINYOPTICS CORP. DigiLife (Thailand) Co., Ltd. LIFE TECHNOLOGIES (HONG KONG) CO., LIMITED	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 Malaysia British Virgin Islands United States of America British Virgin Islands Hong Kong British Virgin Islands Samoan Islands Samoan Islands Australia Tainan City Thailand Hong Kong	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 Sales of computer peripherals and consumer electronic products Investment holdings Sales of computer peripherals and consumer electronic products Investment holdings Sales of computer peripherals and consumer electronic products Investment holdings Investment business Investment holdings Tourism and real estate development R&D, design, manufacturing, and sale of optical engines Sale of digital video/audio products Design, processing, and sale of digital video/audio products	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 10 USD 8,289 USD - USD 2,806 HKD 10 USD 16,065 USD 1,575 USD 300 AUD 12,500 3,600 THB 1,500 USD 455	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 USD 10 USD 8,289 USD 14,992 USD 2,806 HKD 10 USD 16,065 USD 1,575 USD 300 AUD 7,600 3,600 THB 1,500 USD 455	21,467 6,452 9,578 235 - 500 51,563 - 3,400 - 19,446 10 5,250 - 1 10 3 1,575 455 12,500 200 15 455	100.00 100.00 100.00 100.00 100.00 100.00 94.61 - 22.97 25.00 22.64 100.00 100.00 - 100.00 100.00 100.00 44.37 100.00 100.00 1.35 30.00 100.00	$ 301,777 (Note 1) 63,693 (Note 1) 44,116 (Note 1) 4,138 (Note 1) 630 (Note 1) 8,864 (Note 1) 581,062 (Note 1) - 9,181 11,254 211,917 - USD 4,335 (Note 1) USD - (Note 1) USD 441 (Note 1) ( USD 186 ) (Note 1) ( USD 11,162 ) (Note 1) USD 1,813 11,915 (Note 1) 255,830 (Note 1) 1,757 704 USD 418 (Note 1)	USD 359 21 2,347 USD 4 - - 6,056 ( AUD 668 ) ( 6,753 ) ( RMB 441 ) ( 29,037 ) USD - ( USD 1 ) USD 259 ( USD 217 ) ( 253 ) ( USD 27 ) 22,344 USD 45 ( AUD 777 ) ( 6,753 ) THB - HKD 349	$ 4,218 21 2,347 132 - - 5,474 ( 5,302 ) ( 1,552 ) ( 472 ) ( 6,575 ) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary; Note 2 Subsidiary Subsidiary Subsidiary; Note 3 Investment under the equity method Investment under the equity method Investment under the equity method Indirect subsidiary Indirect subsidiary Sub-subsidiary, Note 4 Indirect subsidiary Indirect subsidiary Indirect subsidiary Investment under the equity method Indirect subsidiary Indirect subsidiary; Note 3 Investment under the equity method Investment under the equity method Indirect subsidiary

Note 1: The amount was entirely written off during preparation of the consolidated financial statements.

Note 2: KYE Systems Europe GmbH terminated its business operations in December 2017 and is currently under liquidation.

Note 3: 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.

Note 4: KYE America Corporation was completely liquidated in February 2020.

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Unit: NTD and foreign currency (thousand)

KYE Systems Corp. and Subsidiaries Information on Investments in Mainland China 2020

Table 6

KYE Systems Corp.	KYE Systems Corp.
Name of Chinese Investees	Main Business Operation	Paid-in Capital		Method of Investment	Accumulated Amount of Investments from Taiwan at the Beginning of 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 USD RMB	15,965 2,706 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 ) (Note 5) ( RMB 1,486 ) (Note 5) ( 472 )	( USD 11,209 ) (Note 5) USD 380 (Note 5) 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
USD35,431(Note 2 and 3)			USD40,520(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.

Note 5: The amount was entirely written off during preparation of the consolidated financial statements.

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Digilife Technologies Co., Ltd.

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	Name of Investee Profit (Loss) of the year	The Company’s Shareholdin g Ratio of Direct or Indirect Investment	Profit or Loss from Investments Recognized in the Current Period (Note 3)	Investment Book value – Ending	Profits Received from Investments as of the End of the Current Period
							Remittance	Return
ZISER TECHNOLOG IES (SHENZHEN) CO.,LTD.	Sale of digital video/audio products	USD	200	Investment through LIFE TECHNOLOGIES (HONG KONG) CO., LIMITED to have a 100% shareholding	USD 200		$ -	$ -	USD 200	RMB 1,251	100%	HKD 1,407 (Note 4)	HKD 2,273 (Note 4)	$ -
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 334(Note 2)			USD 500(Note 2)			$368,482(Note 1)

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

Note 2: KYE Trade (Shenzhen) Co., Ltd. canceled the registered USD29,000 on January 4, 2013 and withdrew the investment amount of USD351,000 on December 25, 2014, which had been approved by the Investment Commission of the Ministry of Economic Affairs. Note 3: The profit or loss from investments was recognized based on the CPA-audited financial statements in the same period.

Note 4: The amount was entirely written off during preparation of the consolidated financial statements.

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

Table 7

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 consolidated 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.

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V. Individual financial statements of the Company audited by CPA(s) in the most recent year

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 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.

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

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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

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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

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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

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(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

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(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

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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

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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

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(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

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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

Effective date as per the New/Amended/Revised standards and interpretations 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.

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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

Effective date as per the New/Amended/Revised standards and interpretations IASB (Note 1) ―Annual Improvements to 2018–2020 Cycle‖ January 1, 2022 (Note 2) Amendment to IFRS 3: ―Changes in Reference to the Conceptual Framework‖ January 1, 2022 (Note 3) Amendments to IFRS 10 and IAS 28: ―Sale or Undetermined Contribution of Assets between an Investor and its Associate or Joint Venture‖ IFRS 17 ―Insurance Contracts‖ January 1, 2023 Amendment to IFRS 17 January 1, 2023 Amendment to IAS 1: ―Classification of Liabilities January 1, 2023 as Current or Non-current‖ Amendment to IAS 1: ―Disclosure of Accounting January 1, 2023 (Note 6) Policies‖ Amendment to IAS 8: ―Definition of Accounting January 1, 2023 (Note 7) Estimates‖ Amendment to IAS 16: ―Property, Plant and January 1, 2022 (Note 4) Equipment – Proceeds before Intended Use‖ Amendment to IAS 37: ―Onerous Contracts – Cost of January 1, 2022 (Note 5) Fulfilling a Contract‖ 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.

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.

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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:

• Assets held mainly for the purpose of trading;

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

• 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

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1. 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.

(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.

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

2. 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

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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 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

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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

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

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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.

• 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

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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 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.

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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.

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.

3. Financial liabilities

• (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

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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.

2. 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.

(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

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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 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

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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.

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

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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 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	December 31, 2020 $ -	December 31, 2019	December 31, 2019
			$ 23,039

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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	$ 71,287 10,950 30 $ 82,267	$ 56,298 101,532 30 $ 157,860

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.

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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:

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

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 no more than 60 days	Account age for 61–90 days	Account age for 61–90 days	Account age for 91–120 days	Account age for 91–120 days	Account age for more than 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:

X.	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	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

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Book value of finance leases receivable Current Non-current	$ 3,729 3,150 $ 6,879

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

			$ 1,236,632		$ 1,265,510	$ 1,265,510
(I)	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

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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

orward 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.

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

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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.
Current assets Non-current assets Current liabilities Non-current liabilities Equity Non-controlling equity The Company’s shareholding ratio The Company’s interests Investment book value Operating revenue Current net loss Other comprehensive income Total comprehensive income	2020 $ 841,264 1,716,927 ( 968,981 ) ( 326,989 ) 1,262,221 ( 326,274 ) $ 935,947 22.64% $ 211,917 $ 211,917 $ 798,199 ( $ 30,726 ) 7,243 ($ 23,483 )	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 )

2. Summary of individual unimportant associates

The Company’s shares Current net loss Other comprehensive income Total comprehensive income	2020 ( $ 2,024 ) - ($ 2,024 )	2019
		( $ 6,106 ) - ($ 6,106 )

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 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

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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

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

llowing 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

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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

e 26. ase agreement ight-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	December 31, 2020 $ 1,957 412 629 $ 2,998 2020 $ - $ 5,322 138 2,895 $ 8,355	December 31, 2019
			$ 15,082 550 3,524 $ 19,156 2019
			$ 17,479 $ 888 2,745 137 $ 3,770

(II) Lease liabilities

ease liabilities
Book value of lease liabilities Current Non-current	December 31, 2020 $ 6,044 $ 4,790	December 31, 2019
			$ 8,299 $ 10,834

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

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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 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:

heet 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

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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 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 $ 53,047 202 ( 7,687 ) 597 ( 6,888 ) - 20 2,341 1,009 3,370 - ( 900 ) 48,629 208 365 573 - 1,255 ( 663 ) 592 - $ 49,794	Fair value of plan assets ($ 16,442 ) - - ( 189 ) ( 189 ) ( 592 ) - - - ( 592 ) ( 583 ) 900 ( 16,906 ) - ( 129 ) ( 129 ) ( 571 ) - - ( 571 ) ( 534 ) ($ 18,140 )	Net defined benefit liabilities (assets)
			$ 36,605 202 ( 7,687 ) 408 ( 7,077 ) ( 592 ) 20 2,341 1,009 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:

2020 2019

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Marketing expenses Administrative expense R&D expense	$ 118 ( $ 2,206 ) 311 ( 4,367 ) 15 ( 504 ) $ 444 ($ 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 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.

2. 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.

3. 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:

ctuarially by a qualified actuary. The re as follows:	major assumptions on the	date of measurement
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:

ollows:
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

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analysis might not reflect the actual changes in the present value of the defined benefit obligation.

	obligation.
XVIII. (I)	Expected contribution within 1 year Average maturity of defined benefit obligations Equity Share 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 $ 539 10.2 years December 31, 2020 390,000 $ 3,900,000 224,528 $ 2,245,285 198,950 $ 2,444,235	December 31, 2019
			$ 552 11.0 years 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

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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 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:

ollows:
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:

arch 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 capital

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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
Balance – beginning of the year Amounts incurred in the year Unrealized profit/loss – equity instrument Share of subsidiaries and associates under the equity method Other comprehensive income in the year Cumulative profit or loss on disposal of equity instruments transferred to retained earnings Balance – ending of the year reasury stocks Cause of repurchase		2020	2019 ($ 660,956 ) ( 117,767 ) 133,381 15,614 240,960 ($ 404,382 ) Maintenance of the Company’s credit and shareholders’ equity (1,000 shares)			2019
Number of shares on January 1, 2020 Increase in the year Decrease in the year Number of shares on December 31, 2020			(		- 10,010 10,010 ) -

• (V) Treasury stocks

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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

(III) Sub-items of revenue from customer contracts

Mouse Keyboard Speaker Others		2020 $ 446,836 338,456 236,406 202,821 $ 1,224,519		2019
				$ 410,776 358,728 168,260 47,670 $ 985,434

XX.Net profit in the year

Net profit in the year
(I) Other profits and losses Other revenue Exchange loss – net Rent revenue Profit on valuation of financial	2020 $ 25,195 ( 21,965 ) 2,175 1,713	2019
		$ 27,665 ( 7,986 ) 15,581 -

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assets Dividend income Other losses Total (II) Depreciation and amortization Property, plant and equipment Investment property Other non-current assets Right-of-use assets Summary of depreciation expenses by function Operating expenses Non-operating expenses Summary of amortization expenses by function Operating costs Operating expenses (III) Employee 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	(	1,604 8 ) $ 8,714 2020 $ 4,040 - 3,954 8,355 $ 16,349 $ 12,395 - $ 12,395 $ 3,765 189 $ 3,954 2020 $ 2,423 444 2,867 195 73,442 $ 76,504 $ 76,504	(	727 6,772 ) $ 29,215 2019
				$ 3,490 5,459 11,694 3,770 $ 24,413 $ 7,260 5,459 $ 12,719 $ 9,331 2,363 $ 11,694 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

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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

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.

XXI. Income tax

(I) Income tax recognized in profit or loss

Major components of income tax expenses are as follows:

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

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Income tax expense recognized as profit or loss	$ 34,981	$ 18,358

(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)

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(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

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(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

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

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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.

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

• Fair value hierarchy

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.

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1. 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.

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(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.

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

1. Market risk

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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.

==> picture [354 x 30] intentionally omitted <==

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.

(2) Interest rate risk

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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:

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 increases/decreases of the fair value of the

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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.

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

KYE Systems America Corporation (KYA)

Subsidiary (It was completely liquidated in February 2020)

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

Subsidiary

Dong-Guan Kunying Computer Products Co., Ltd. (Dong-Guan Kunying)

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

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

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(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:

ollows:
Subsidiary	December 31, 2020 $ -	December 31, 2019
			$ 3,434

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

ollows:
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:

ollows:
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:

on the balance sheet date is as follows:
Subsidiary (III) Remuneration to key management Short-term employee benefits Post-employment benefits	December 31, 2020 $ 5,723 2020 $ 22,063 330 $ 22,393	December 31, 2019
			$ 4,636 2019
			$ 15,991 330 $ 16,321

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:

tters of credit and for short-term loans:
Property – net	December 31, 2020 $ 344,974	December 31, 2019
			$ 346,318

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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.

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

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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

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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.

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1. Trading in derivative instruments: None.

2. (II) Information on investees: Table 4.

3. (III) Information on investments in Mainland China:

4. 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.

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.

6. (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)

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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.

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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.

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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.

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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.

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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
USD35,431 (Note 2 and 3)			USD40,520 (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.

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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.

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• VI. The impact of financial distress experienced by the Company and its affiliates, if any, to the Company’s financial status in the most recent year and up until the date of publication of the annual report: None.

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Chapter 7.Review and Analysis of Financial Status and Financial Performance and Risk Matters

I. Review and analysis of financial status

Comparative Analysis of Financial Status

			Unit: NTD Thousand;%	Unit: NTD Thousand;%
Year Item	2020	2019	Difference
			Amount	%
Current assets	1,946,772	1,967,621	(20,849)	(1.06)
Property, plant and equipment	666,311	494,591	171,720	34.72
Other assets	1,084,459	1,365,474	(281,015)	(20.58)
Total assets	3,697,542	3,827,686	(130,144)	(3.40)
Current liabilities	371,187	340,973	30,214	8.86
Non-current liabilities	324,180	222,024	102,156	46.01
Total liabilities	695,367	562,997	132,370	23.51
Equity attributable to the owner ofparent company	2,969,102	3,229,655	(260,553)	(8.07)
Share capital	2,245,285	2,345,385	(100,100)	(4.27)
Capital reserves	382,898	456,206	(73,308)	(16.07)
Retained earnings	1,001,996	857,381	144,615	16.87
Other equity	(661,077)	(429,317)	(231,760)	(53.98)
Non-controllingequity	33,073	35,034	(1,961)	(5.60)
Total equity	3,002,175	3,264,689	(262,514)	(8.04)
The main reasons for any material changes in the Company’s assets, liabilities, and equity in the most recent two years (variations exceeded 20% between these periods to the amount more than NTD10 million), the effect of these changes, and the measures to be taken I. The main reasons for any material changes in the property, plant and equipment, the effect of these changes, and the measures to be taken (I) The main reason was the acquisition of office property by subsidiaries. (II) Effect and measures to be taken: None. II. The main reasons for any material changes in other assets, the effect of these changes, and the measures to be taken (I) The main reason was a decrease of NTD0.176 billion in the net book value after valuation of non-current financial assets measured at fair value through other comprehensive income. (II) Effect and measures to be taken: The unrealized valuation income under comprehensive income was affected. The net profit and cash flow were not affected. III. The main reasons for any material changes in the non-current liabilities and total liabilities, the effect of these changes, and the measures to be taken (I) The main reason was an increase of NTD0.138 billion of long-term pledged loans due to the acquisition of office property by subsidiaries. (II) Effect and measures to be taken: The Company’s consolidated liabilities ratio was kept below 20%, and the amount of cash was at least twice as much as the total liabilities. The financial structure remained stable and good. IV. The main reasons for any material changes in other equities, the effect of these changes, and the measures to be taken (I) The main reason was an increase in the unrealized valuation loss on financial assets measured at fair value through other comprehensive income. (II) Effect and measures to be taken: None.

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II. Review and analysis of financial performance

Comparative Analysis of Financial Performance

Unit: NTD Thousand; %

			Unit: NTD	Thousand;%
Year Item	2020	2019	Increase (decrease) in Amount	Change in Percentage (%)
Operatingrevenue	1,653,269	1,605,479	47,790	2.98
Operatingcost	1,137,698	1,150,387	(12,689)	(1.10)
Gross operating profit	515,571	455,092	60,479	13.29
Operatingexpense	353,776	401,811	(48,035)	(11.95)
Operatingincome(loss)– net	161,795	53,281	108,514	203.66
Non-operatingrevenue and expenses	22,877	121,911	(99,034)	(81.23)
Net profit (loss) before tax of continuing operations	184,672	175,192	9,480	5.41
Income tax expense	37,767	20,528	17,239	83.98
Current net profit (loss) of continuing operations	146,905	154,664	(7,759)	(5.02)
Loss of discontinued operations	0	0	0	0
Current netprofit(loss)	146,905	154,664	(7,759)	(5.02)
Other comprehensive income	(241,637)	(12,312)	(229,325)	(1,862.61)
Current total comprehensive income	(94,732)	142,352	(237,084)	(166.55)
Net profit (loss) attributable to the owner ofparent company	146,236	151,480	(5,244)	(3.46)
Total comprehensive income attributable to the owner of theparent company	(95,331)	139,730	(235,061)	(168.23)
I. Variation of ratios in the most recent two years Since the second half of the previous year (2020), substantial demands for working from home (WFH) and learning from home (LFH) generated by the COVID-19 pandemic have boosted shipments of web cameras, speakers, headsets and PC peripherals, in addition to optimization of product portfolios and continued cost control and lean streamlining. As a result, the Company’s revenue in 2020 was NTD1.653 billion with an annual growth rate of 2.98% and a gross margin of 31.18%, an increase of 2.83% from the previous year. The operating profit amounted to NTD0.162 billion, a significant rise of 203.66% from 2019. However, there was no non-operating profit in 2020 like that generated by the disposal of the property of Digilife Building in 2019, and an inflow of hot money caused a strong rise of 5.4% in NTD, thus leading to an exchange loss of about NTD32,000,000. The net non-operating revenue in 2020 was NTD22,877,000, a significant decrease from that of NTD121,911,000 in 2019. Therefore, the Company’s net profit after tax attributable to the parent company in 2020 saw a slight decrease of 3.46% from 2019. The comprehensive income saw a decrease of 168.23% from the previous year due to a loss of approximately NTD0.183 billion in the valuation of non-current financial assets measured at fair value through other comprehensive income. II. The business items of the Company did not change and still focused on computer peripherals, video images products and consumer electronics. III. The sales volume of the Company in the coming year and the main influences on the growth or declination on the expected sales volume of the Company Main Product Items Expected Sales Volume in 2021 (Thousand sets) Growth rate Computer peripherals 8,988 13.6% Consumer electronic products 376 8.5% Video images products 613 17.6% Computer peripherals and video images products are expectedly the main products for the operating revenue of the Company. This year (2021), shipments are expected to continue to reflect the new social and economic styles and trends of 2020, and products related to remote working and distance education will contribute to the operatingrevenue andgross margin as the market scale is expanded.

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III. Review and analysis of cash flow

Cash Flow Analysis

III. Review and analysis of cash flow Cash Flow Analysis	III. Review and analysis of cash flow Cash Flow Analysis	III. Review and analysis of cash flow Cash Flow Analysis	III. Review and analysis of cash flow Cash Flow Analysis	III. Review and analysis of cash flow Cash Flow Analysis	III. Review and analysis of cash flow Cash Flow Analysis
Cash balance at beginning of period 	Annual net cash flow from operating activities	Annual cash outflow 	Cash surplus ＋－	Corrective measures against cash deficit
				Investment plan	Financing Plan
1,484,681	158,859	239,859	1,403,681	None	None
I. Analysis of changes in cash flow of the current year (I) Operating activities: The net cash inflow from operating activities in 2020 was NTD158,859,000, equivalent to the net operating profit, mainly because of smooth inflow of cash converted from the operating profit. (II) Investing activities: The net cash outflow from investing activities in 2020 was NTD164,791,000 mainly due to the acquisition of property for operations by subsidiaries. (III) Financing activities: The net cash outflow for financing activities in 2020 was NTD 72,834,000 mainly due to repurchase of NTD78,752,000 of treasury stocks and distribution of cash dividends of NTD93,815,000. II. Corrective measures against cash deficit and analysis of liquidity The cash at the end of 2020 was about NTD1.4 billion. There was no cash deficit. III. Analysis of the liquidity of cash for the coming year The cash will be maintained to the amount of more than NTD1.3 billion. The liquidity will be good without the concern of cash deficit. Unit: NTD Thousand
Cash balance at beginning of period 	Annual net cash flow from operating activities 	Annual cash outflow 	Cash surplus ＋－	Corrective measures against cash deficit
				Investment plan	Financing Plan
1,403,681	163,096	237,554	1,329,223	None	None

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IV. Effect of material capital expenditure in the most recent year on the financial status

(I) Purpose of material capital expenditure and the sources of funds Since 2020, the key subsidiaries of the Company have spent a total of approximately NTD0.345 billion on purchasing office and investment property for the development of current and future operations. The source of funding includes own funds and bank loans.

(II) Expected benefits: None.

V. The main reasons for the gains or losses of investments in the most recent year, the improvement plan and the investment plans for the next year

The investments of the Company aim to the long-term strategic targets. The reinvestment profit recognized by the Company under the equity method in 2020 was NTD1,224,000, representing a turn from loss to profit compared to the recognized loss of NTD38,050,000 in 2019. The main reason was the improvement of the overall operations of the affiliated companies. The Company will continuously review and assess the investment plan for long-term strategies investments.

VI. Analysis and assessment of the risk in the most recent year and up until the date of publication of the annual report

• (I) Impact of interest and exchange rate changes and inflation on the income of the Company, and future measures in response

The COVID-19 pandemic that broke out in early 2020 has spread worldwide. Many countries have closed borders, engaged in lockdowns and imposed restrictions on outdoor activities and social gatherings, but they have yet to effectively control the spread of the pandemic. As a result, the global economy has fallen into serious recession. To rescue the economy, governments around the world have introduced large-scale monetary easing and financial stimulus measures which have led to near-zero interest rate and excessive money flows. We have maintained stable operations, and the book shows that we have sufficient cash and low liabilities. Hence, the fluctuations in interest rates have had very limited impact to us. But low interest rates have also caused a decrease in our interest income. Regarding exchange rates, due to Taiwan’s great performance in pandemic control, the information and electronics industry which primarily relies on exports for foreign exchanges has benefited from the flourishing new economy under the pandemic and become the only growing sector going against the gloomy tide in the world. In addition, large amounts of Taiwanese investment abroad have moved back to the island, making NTD one of the strongest currencies globally. In 2020, NTD hit a record high in 20 years with an increase of NTD1.63 or 5.4%. Since our products are mainly exported, the exchange rate has a close relationship with the gross operating margin and exchange profit/loss. Due to quoting in USD, the wide-spread marketing territories, especially emerging economies, and the drastic change of the exchange rates of currencies against USD in different countries, which affected local purchasing power and product pricing, brought about more uncertainty to the operation of the Company. The Company adopted natural hedges to respond to the change of the exchange rate, and kept balanced a position of foreign currency assets and liabilities to avoid the fluctuation variables of the exchange rate. Regarding inflation, it is expected that unfavorable factors in 2021 including shortage of chip components and parts, higher demands for raw materials and rising shipping costs due to insufficient transportation capacity are likely to cause inflation driven by an increase in production costs. Nevertheless, we

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continuously introduced new products to acquire better revenue and profit and were dedicated to reduce the cost by improving the production and planning efficiency.

• (II) Policies on high-risk, high-leverage investments, capital lending, third-party or endorsed guarantees, and derivative commodity transactions, and the main reasons for profits or losses from these and future response measures

• We were not engaged in any high-risk and high-leverage investments. All of

• our investments complied with relevant laws and regulations and our internal control system and administrative bylaws. They were implemented after review and assessment. Loaning of funds to others, endorsements and guarantees were conducted in accordance with relevant laws, regulations, and our operation procedures. Neither the Company nor our subsidiaries were engaged in loaning of funds to others or provided endorsements or guarantees. Hedging is the only purpose of our engagement in trading of derivatives. All of the activities complied with relevant laws, regulations, and our operation procedures, and were implemented carefully in consideration of potential risk. There was no trading of derivatives during the previous years.

• (III) Future R&D projects and expected R&D expenses

• To take advantage of the opportunities in remote and cloud business brought by the COVID-19 pandemic and high-speed Internet connection and make use of smart devices integrated with applications, we will continue to invest R&D resources in wireless and Bluetooth applications in computer peripherals and video/audio products. Our future research plan is as follows:

  • (1) Low-power, rechargeable, eco-friendly and energy-efficient wireless mice.

  • (2) Bluetooth 4.0 BLE peripheral products.

  • (3) Bluetooth 4.1/4.2 wireless technology.

  • (4) Smart keyboards.

  • (5) Technology for shareability of modularized product mechanisms, firmware and software.

  • (6) Development of iOS/Android apps.

  • (7) Stylus pen technology.

  • (8) Wireless video application products.

  • (9) Gaming mouse, keyboard and headset products.

• The estimated R&D expense in 2021 accounts for 1.5% to 2% of the revenue.

• The main factors affecting the success of R&D in the future:

  • (1) Utilization of cloud and apps and the acquisition and development of the relevant technologies.

  • (2) Maturity and market acceptance of new technologies.

  • (3) Familiarity of the R&D team with the core technologies.

  • (4) Cooperation with the suppliers of and acquisition of the technologies of key parts and components.

  • (5) Accuracy of the results of market research by the marketing department.

• (IV) Changes in important policies and laws in Taiwan and abroad impacting our finances, and measures taken in response: None.

• (V) Impacts from changes in technology and the industry, and measures taken in response

• Impact on the financial status of the Company

  • (1) Smartphones and tablets were installed with touch screens without providing the USB interface, and, thus, some PC peripherals were not compatible.

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  - (2) Digital music and flash memory changed the habit of listening to the music.

  - (3) The number of online game players increased thanks to the improvement of the processor performance and bandwidth.

  - (4) Windows 10 was introduced to the market and compatible with different platforms of PCs, smartphones, and tablets.

  - (5) Hot sale of iPhone and iPad led to increased demand for Apple notebooks.

  - (6) 5G, Wi-Fi 6, AI, and IoT would be the new remarkable trend of the industry.

1. Measures in response

   • (1) We provided speaker boxes, Bluetooth headphones, Bluetooth keyboards, stylus pens, and protective covers.

   • (2) We continuously provided speaker boxes, speakers and headphones for iPad, iPhone, MP3, and smartphones, enabling users to listen to the music anywhere.

   • (3) We developed brand new professional GX series e-sports mice, keyboards, headsets, speaker boxes, and mouse pads.

   • (4) We launched Windows 10 touch products and upgraded the compatibility of existing products.

   • (5) More mid-end and high-end iOS compatible products were launched to the market.

   • (6) We contemplated on the application connectivity of the next-generation products to the new trend of the 5G, Wi-Fi 6, AI and IoT industries.

2. (VI) The impact of changes in the Company’s image upon its crisis management and countermeasures

3. Impact on the Company’s crisis management

Despite our operating performance falling short of expectations in recent years, we have presented reports to and communicated with shareholders at annual shareholders’ meetings regarding our operations. We have also published information related to our operations on our website and held investor conferences on a regular basis. We have been open and transparent in information disclosure and effective in compliance with the applicable laws and regulations. We officially joined the Electronic Industry Citizenship Coalition (EICC) in 2010, and issued the CSR Report to be disclosed in accordance with the GRI/G3.1 Framework (Global Reporting Initiative; GRI) from 2011. The Report was verified by a third party as complying with GRI3.1 Application Level A+. The CSR Report was disclosed thereafter for three consecutive years. We will do our best for a better society, economy and environment. This would be very positive to the image of the Company. There was no adverse effect on the crisis management.

1. Measures in response

We will continuously improve our operating performance, disclose more operating information, and extend our performance in the aspects of society, environment and economy in line with the GRI (Global Reporting Initiative). We will also enhance the participation in social responsibility and communication with stakeholders to create higher added value and improve the corporate image.

• (VII) The expected benefits from merger, the potential risks and responsive measures: None.

(VIII)The expected benefits, potential risks, and responsive measures with regard to any

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plant expansion: None.

• (IX) The risks and responsive measures with regard to any concentrated sales or purchases: None.

• (X) Impacts, risks and responsive measures with regard to any major transfer of equities by directors or shareholders with more than 10% of ownership interest: None.

• (XI) Impacts on the Company, risks and responsive measures with regard to any change in management rights: None.

• (XII) Litigation and non-litigation cases

• Important and finalized or pending litigation, non-contentious or administrative litigation cases of the Company

In November 2020, due to the misrepresentation of financial statements by Unity Opto Technology, Ltd. (hereinafter referred to as ―Unity Opto‖), the SFIPC filed a lawsuit against the Company, a corporate director of Unity Opto, and claimed that the related defendants (32) must be jointly liable for a total of NTD569,202,000 as damages. Since the case is being adjudicated in the Taiwan New Taipei District Court, the liability and the proportion of damages for each defendant requires clarification from the SFIPC. The final result of the case is still unknown, and the Company has not been involved in any misrepresentation of financial statements. Furthermore, it is estimated that all the said defendants may be covered by directors and supervisors’ liability insurance, so there will be little impact to the operations and business of the Company. The related losses have not been recognized.

1. Important and finalized or pending litigation or non-contentious or administrative litigation cases involving the Company’s directors, President, person-in-charge, major shareholders with more than 10% of ownership interest or any affiliate of the Company

In the Unity Opto case mentioned above, the SFIPC not only filed a lawsuit against the Company but also claimed joint liability for damages from Chairman Shih-Kun Tso and Vice President An-Min Kao, who used to be representatives of corporate directors of Unity Opto, and Director Yung-Far Wei, who is serving as an individual director of Unity Opto. Since the case is being adjudicated in the Taiwan New Taipei District Court, the liability and the proportion of damages for each defendant requires clarification from the SFIPC. The final result of the case is still unknown, and the related defendants have not been involved in any misrepresentation of financial statements. Furthermore, it is estimated that all the said defendants may be covered by directors and supervisors’ liability insurance, so there will be little impact to the operations and business of the Company.

(XIII)Other significant risks and corresponding countermeasures

We establish the ―Information Security Policy‖ and relevant rules to implement information security management and information work plans. Use of data and their security protection are subject to strict management. Firewalls and electronic files archiving platforms are built to control and record the access of the personnel and minimize the information security risk of the Company. Education and regular training are implemented according to SOPs to enhance the awareness of information security among the employees. Normal operation of the Company and the security of the documents are ensured by enhancing information protection, exercise, and weakness detection.

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Firewalls, anti-virus systems, anti-invasion systems, and external storage media control systems have been built to enhance anti-disaster, information security, monitoring, reporting and abnormalities management systems. We integrate the information of the Group into a cloud information system and confirm every activity meets the requirements of information security and relevant laws and regulations to make information more transparent and delivered more rapidly and upgrade the overall synergy of the Group. In addition, we continuously introduce server virtualization and deliver the achievement of environmental protection, saving energy, and decrease of maintenance costs by reducing the number of physical servers.

With respect to information equipment including information systems and network equipment, considering that information security insurance is a new type of insurance and that such new insurance is still not mature in the synergy of issues including coverage, investigation and qualifications of investigating agencies, we have decided not to purchase information security insurance after assessment. Nevertheless, faced with the challenges and issues of information security, we have adopted the following strategies: We will keep focusing on the overall information security environment and the trend of its change in accordance with the Company’s information security policy, make reference to the information in technical documents, establish information security safeguard mechanisms and plans, and take appropriate defense measures. We have regularly conducted security testing and strengthening our employees’ awareness of information security crisis and the ability of information security officers to respond for precautions and for effective detection and prevention of proliferation at the earliest time possible.

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VII. Structure and function of risk management organizations

1. Structure of risk management organizations

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Corporate Operation Risk Management System
Safety and Health Management Document and Information
Business Management Council
Committee Security Management Committee
2. Functions of risk management organizations
(1) Business Management Council
Review business indicators and budget implementation status on a
regular basis; check financial operations, control of funds and accounting
transactions to make sure they are dealt with appropriately and avoid
business operation risk.
Group Group Group Group Review Report
Training Group Review Group
Office Safety Group
Employees Safety and Health
Facilities Maintenance and Safety Material Management and Safety Information Security Management Information Security Audit Group Information Security Promotion Information Security Discipline KPI Implementation and Review Financial and Risk Management
Information Security Response Group Business Target Implementation and
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• (2) Document and Information Security Policy Management Committee

Control potential risk with respect to the Company’s confidential documents and information security and make sure they are under control to protect the operational competitiveness of the Company, enhance the awareness of business secrets among the employees, and avoid any loss occurring to the rights and interests of individuals and the Company.

• (3) Safety and Health Management Committee

Implement management related to labor safety and health to prevent accidents from occurring and protect the safety and health of the employees.

VIII. Goals and methods of applicable hedge accounting

The handling of account matters under hedge accounting is not applicable to the hedging transactions of the Company.

IX. Other important matters: None.

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Chapter 8.Special Information

I. Information on affiliates

(I) Organizational chart of the affiliates

December 31, 2020

KYE Systems Corp.

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

KYE Systems KYE Chung-Chiang Hung-Cheng Digilife
(Hong Kong) Genius Holding KYE Systems International Investment Co., Investment Co., Technologies
Corp. Co., Ltd. 100% Europe GmbH 100% Corporation Ltd. Ltd. Co., Ltd.
100% 100% 100% 100% 94.61%
Life
DIGILIFE PTY
Technologies
LTD.
Co., Ltd.
100%
100%
Moustek Globalink
KYE Trade
KYE Inc. Investment Co., Holding Co.,
(HK) Co., Ltd.
100% Ltd. Ltd.
100%
100% 100% LIFE
TECHNOLOGI
ES (HONG
KONG) CO.,
LIMITED
100%
Dong-Guan Dongguan
Kunying Gaoying ZISER
Computer Electronic TECHNOLOGI
Products Co., Technology Co.,
ES (SHEN
Ltd. Ltd.
ZHEN) CO.,
100% 100%
LTD.
100%
----- End of picture text -----

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(II) Basic information on affiliates

(December 31, 2020) Unit: NTD Thousand

Name of enterprise	Incorporation (Acquisition) Time	Address	Paid-in capital	Principal business or production lines
KYE Systems Corp.	72.11	1-8F., No. 492, Sec. 5, Chongxin Rd., Sanchong Dist., New Taipei City	2,245,285	Sales and service of computer peripherals, consumer electronic products, and video imagesproducts
KYE Systems America Corporation(Note 2)	79.12	1 2675 Colony Street, Chino, CA 91710 U.S.A	-	R&D, manufacturing and sale of computer mice
KYE Systems (Hong Kong) Corp.	82.04	Unit 01, 17F, Aitken Vanson Centre,No61 Hoi Yuen Road, Kwen Tong, Kowloon, Hong Kong	1,837	Sales and service of computer peripherals, consumer electronic products, and video imagesproducts
KYE Systems Europe GmbH (Note 3)	82.10	Karl Benz Str.9 D040764 Langenfeld, Germany	-	Sales and service of computer peripherals, consumer electronic products, and video imagesproducts
Dong-Guan Kunying Computer Products Co.,Ltd.	84.02	Guanli Dist., Baotun Li, Houjie Township, Dongguan City,China	514,725	R&D, manufacturing and sale of mice and otherproducts
KYE International Corporation	84.11	1 2675 Colony Street, Chino, CA 91710 U.S.A	66,928	Sales and service of computer peripherals, consumer electronic products, and video imagesproducts
KYE Inc.	85.10	P.O. Box 957, Offshore Incorporation`s Centre, Road Town, Tortola, British Virgin Islands	457,534	Invested Dong-Guan Kunying Computer Products Co., Ltd.
Genius Holding Co., Ltd.	86.12	Scotia Centre, 4thFloor, P.O. Box 2804, George Town, Grand Cayman, Cayman Islands	611,391	General investment business
Globalink Holding Co., Ltd.	86.12	P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands	149,520	General investment business
Chung-Chiang Investment Co., Ltd.	87.01	No. 112, Yongfu St., Sanchong Dist., New Taipei City	64,518	General investment business
Hung-Cheng Investment Co., Ltd.	87.04	10F., No. 22, Sec. 1, Chongqing N. Rd., DatongDist.,Taipei Cit	95,781	General investment business
Moustek Investment Co., Ltd.	87.11	P.O. Box 3321, Road Town, Tortola, British Virgin Islands.	79,914	General investment business
Dongguan Gaoying Electronic Technology Co., Ltd.	94.07	Baotun Village, Houjie Township, Dongguan City, China	78,786	R&D and sale of computer peripherals, consumer electronic products, and video imagesproducts
KYE Trade (HK) Co., Ltd.	97.06	17/F., Tai Shing Commercial (Yaumatei) Building, 498-500 Nathan Road, Yau Ma Tei,Kowloon	39	Sales of computer peripherals, consumer electronic products, and video imagesproducts
DIGILIFE TECHNOLOGIES CO., LTD.	100.09	13F, No. 7, Dexing W. Rd., Shilin Dist., Taipei City	544,975	Design, processing, and sale of digital video/audio products; wholesale and retail of office machines and equipment
Life Technologies Co., Ltd.	100.09	Offshore Chambers, P.O. Box 217, Apia, Samoa	12,968	Investment holdings
LIFE TECHNOLOGIES (HONG KONG) CO., LIMITED	100.09	Unit C, 13thFloor, Nathan Commercial Building, 430-436 Nathan Road, Yaumatei,Kowloon,HongKong.	12,959	Design, processing, and sale of digital video/audio products
ZISER TECHNOLOGIES (SHEN ZHEN) CO., LTD.	104.09	1102, Information Building, Baoyunda Logistics Center, Fuhua Community, Xixiang Avenue, Baoan Dist., Shenzhen City	5,579	Sale of digital video/audio products
DIGILIFE PTY LTD.	107.05	24 JULATTEN DRIVE ROBINA QLD 4226	274,375	Tourism and real estate development

Note 1: In case the original currency used for the listed amount is a foreign currency, it is converted to NTD based on the year-end exchange rate. Note 2: This company was completely liquidated in February 2020. Note 3: This company terminated its business operation on December 31, 2017 and was currently under liquidation.

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• (III) Common shareholders in controlling and controlled companies: None.

(IV) Businesses covered by affiliated companies.

The Company and our affiliated companies are dedicated to the business in the electronics sector except for Chung-Chiang Investment Co., Ltd., Hung-Cheng Investment Co., Ltd., Genius Holding Co., Ltd., KYE Inc., Globalink Holding Co., Ltd., Moustek Investment Co., Ltd., and Life Technologies Co., Ltd., which are engaged in investment business, and DIGILIFE PTY LTD., which is engaged in tourism and real estate development business. The Company is responsible for R&D and marketing with Dong-Guan Kunying Computer Products Co., Ltd. as the production base. Overseas subsidiaries are responsible for marketing in their respective territories and the Company is the main source of products. DIGILIFE TECHNOLOGIES CO., LTD. is responsible for R&D and sale on its own.

(V) Information of directors, supervisors and presidents of each affiliated company

(December 31, 2020) Unit: NTD; shares; %

Name of enterprise	Title	Name or Representative(s)	Shareholding	Shareholding
			Number of shares	Shareholdi ng Ratio (%)
KYE Systems Corp.	Chairman President Director Director Director Director Independent Director Independent Director Independent Director	Shih-Kun Tso Yung-Far Wei Ching-Hsin Cho Han-Liang Hu Ching-Huei Wu (Note 5) Hung-Tsu Hsu Jennyumr Kao Anti Tsai	5,877,815 250,061 11,959,488 0 0 0 0 0	2.62 0.11 5.33 0.00 0.00 0.00 0.00 0.00
KYE Systems America Corporation(Note 2)	Director Director Director President	Genius Holding Co., Ltd. Representative: Shih-Kun Tso Genius Holding Co., Ltd. Representative: Yi-Chen Tso Genius Holding Co., Ltd. Representative: Chi-Wai Chan	- - - - - -	- - - - - -
KYE Systems (Hong Kong) Corp.	Director	Shih-Kun Tso	500,000	100.00
KYE Systems Europe GmbH (Note 1)(Note 3)	Managing director	KYE Systems Corp. Representative: Shih-Kun Tso	- -	- -
Dong-Guan Kunying Computer Products Co., Ltd. (Note 1)	Legal representati ve Director Director	KYE Inc. Representative: Shih-Kun Tso KYE Inc. Representative: Hsiu-Chin Hsu KYE Inc. Representative: Yung-Far Wei	514,724,995 0 514,724,995 0 514,724,995 0	100.00 0.00 100.00 0.00 100.00 0.00
KYE International Corporation	Director Director	KYE Systems Corp. Representative: Shih-Kun Tso KYE Systems Corp. Representative: Yi-Chen Tso	235,000 0 235,000 0	100.00 0.00 100.00 0.00
KYE Inc.	Director	Genius Holding Co., Ltd. Representative: Shih-Kun Tso	3,213 0	100.00 0.00
Genius Holding Co., Ltd.	Director	KYE Systems Corp. Representative: Shih-Kun Tso	21,467,377 0	100.00 0.00

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Name of enterprise	Title	Name or Representative(s)	Shareholding	Shareholding
			Number of shares	Shareholdi ng Ratio (%)
Globalink Holding Co., Ltd.	Director	Genius Holding Co., Ltd. Representative: Shih-Kun Tso	5,250,000 0	100.00 0.00
Chung-Chiang Investment Co., Ltd.	Chairman Director Supervisor	KYE Systems Corp. Representative: Shih-Kun Tso (Note 6) KYE Systems Corp. Representative: An-Min Kao (Note 6) KYE Systems Corp. Representative: Hsiu-Chin Hsu	6,451,800 0 6,451,800 0 6,451,800 0	100.00 0.00 100.00 0.00 100.00 0.00
Hung-Cheng Investment Co., Ltd.	Chairman Director Supervisor	KYE Systems Corp. Representative: Shih-Kun Tso KYE Systems Corp. Representative: An-Min Kao KYE Systems Corp. Representative: Hsiu-Chin Hsu	9,578,103 0 9,578,103 0 9,578,103 0	100.00 0.00 100.00 0.00 100.00 0.00
Moustek Investment Co., Ltd.	Director	Genius Holding Co., Ltd. Representative: Shih-Kun Tso	561 0	100.00 0.00
Dongguan Gaoying Electronic Technology Co., Ltd. (Note 1)	Legal representati ve Director Director	Moustek Investment Co., Ltd. Representative: Ping-Tsun Chang Moustek Investment Co., Ltd. Representative: Shih-Kun Tso Moustek Investment Co., Ltd. Representative: Yi-Chen Tso	78,786,000 0 78,786,000 0 78,786,000 0	100.00 0.00 100.00 0.00 100.00 0.00
KYE Trade(HK)Co.,Ltd.	Director	Shih-Kun Tso	10,000	100.00
DIGILIFE TECHNOLOGIES CO., LTD.	Chairman Director Director President Supervisor	KYE Systems Corp. Representative: Shih-Kun Tso Hsiu-Chin Hsu Chen-Ping Yang Yung-Far Wei	51,562,598 0 201,296 76,000 0	94.61 0.00 0.37 0.14 0.00
Life Technologies Co., Ltd.	Director	DIGILIFE TECHNOLOGIES CO., LTD. Representative: Chen-PingYang	455,324 0	100.00 0.00
LIFE TECHNOLOGIES (HONG KONG) CO., LIMITED(Note 1)	Director	Life Technologies Co., Ltd. Representative: Chen-Ping Yang	12,958,694 0	100.00 0.00
ZISER TECHNOLOGIES (SHEN ZHEN) CO., LTD. (Note 1)	Director	LIFE TECHNOLOGIES (HONG KONG) CO., LIMITED Representative: Ching-Yun Wei	5,578,924 0	100.00 0.00
DIGILIFE PTY LTD. (Note 4)	Director Director Director	DIGILIFE TECHNOLOGIES CO., LTD. Representative: Chen-Ping Yang DIGILIFE TECHNOLOGIES CO., LTD. Representative: Shih-Kun Tso Wen-Chi Hsu	12,500,000 0 12,500,000 0 0	100.00 0.00 100.00 0.00 0.00

Note 1: This is not a company limited by shares. The data listed are capital contribution and percentage thereof.

Note 2: This company was completely liquidated in February 2020.

Note 3: This company terminated its business operation on December 31, 2017 and was currently under liquidation.

Note 4: 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.

Note 5: The director resigned due to personal reason, effective as of Jan. 19, 2021.

Note 6: On April 6, 2021, the company reappointed Shih-Kun Tso and Chen-Ping Yang as the representatives of two corporate directors, and elected Chen-Ping Yang as its chairman.

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(VI) Operating status of affiliate companies

Unit: NTD Thousand; EPS unit: NTD

Name of enterprise	Capital	Total assets	Total liabilities	Net value	Operating revenue	Operating profit	Profit and loss for the year (after tax)	Earnings per share (NTD) (after-tax)
KYE Systems Corp.	$2,245,285	$3,307,302	$338,200	$2,969,102	$1,224,519	$172,300	$146,236	$0.64
KYE Systems America Corporation (Note 2)	0	0	0	0	0	7,654	7,654	0.00
KYE Systems (Hong Kong) Corp.	1,837	9,667	802	8,865	0	0	0	0.00
KYE Systems Europe GmbH (Note 3)	0	0	0	0	0	0	0	0.00
Dong-Guan Kunying Computer Products Co.,	514,725	347,253	666,494	(319,241)	497,793	1,322	(772)	0.00
~~Ltd~~ KYE International Corporation	66,928	4,357	218	4,139	22,781	2,171	132	0.02
KYE Inc.	457,534	(317,884)	0	(317,884)	0	(802)	(802)	(8.45)
Genius Holding Co., Ltd.	611,391	317,001	1,225	315,776	0	(4,769)	10,618	0.02
Globalink Holding Co., Ltd.	149,520	123,461	0	123,461	0	(20)	(20)	(0.00)
Chung-Chiang Investment Co., Ltd.	64,518	63,822	129	63,693	0	(174)	21	0.00
Hung-Cheng Investment Co., Ltd.	95,781	44,606	490	44,116	0	2,296	2,347	0.25
Moustek Investment Co., Ltd.	79,914	12,560	0	12,560	0	(46)	(6,399)	(385.90)
Dongguan Gaoying Electronic Technology Co.,	78,786	13,291	2,441	10,850	16	(6,545)	(6,361)	0.00
~~Ltd~~ KYE Trade (HK) Co., Ltd.	39	176	5,470	(5,294)	484,510	(738)	(253)	(25.34)
DIGILIFE TECHNOLOGIES CO., LTD.	544,975	921,226	307,090	614,136	403,796	22,365	6,056	0.11
Life Technologies Co., Ltd.	12,968	11,915	0	11,915	437	(7,836)	1,329	0.00
LIFE TECHNOLOGIES (HONG KONG) CO.,	12,959	12,099	185	11,914	437	(3,921)	1,329	0.00
~~LIMITED~~ ZISER TECHNOLOGIES (SHEN ZHEN) CO.,	5,579	10,005	1,657	8,348	0	(3,915)	5,358	0.00
~~LTD~~ DIGILIFE PTY LTD.	274,375	256,500	670	255,830	0	(14,985)	(15,840)	0.00

Note 1: In case the original currency used for the listed amount is a foreign currency, it is converted to NTD based on the year-end or annual average exchange rate. Note 2: This company was completely liquidated in February 2021.

Note 3: This company terminated its business operation on December 31, 2017 and was currently under liquidation.

(VII) Consolidated financial statements of affiliated companies

Declaration Letter of Consolidated Financial Statements of Affiliated Companies

Considering that the companies to be included into the consolidated financial statements of affiliates under the ―Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises‖ were the same as those to be included into the consolidated financial statements of the parent and subsidiaries under IFRS 10 in 2020 (from January 1 to December 31, 2020), and the related information to be disclosed in the consolidated financial statements of affiliated companies has already disclosed in said consolidated financial statements of the parent and subsidiaries, no consolidated financial statements of affiliated companies were prepared separately.

In witness thereof, the Declaration is hereby presented.

Company name: KYE Systems Corp.

Responsible person: Shih-Kun Tso

March 25, 2021

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• II. Private placement of securities in the most recent year and up until the date of publication of the annual report: None.

III. Holding or disposal of the Company’s shares by its subsidiaries in the most recent year and up until the date of publication of the annual report: None.

IV. Resolutions of the 2020 annual shareholders’ meeting and their implementation

Item	Proposal	Resolution and implementation
Issues to be reported	1. 2019Business report	Passed bythepresent shareholders unanimously.
	Audit Committee’s Review Report on the 2019 Financial Statements	Passed by the present shareholders unanimously.
	Report on the distribution of remuneration to employees, directors, and supervisors of the Company for 2019	1. The Board of Directors resolved the allocation of remuneration with NTD5,370,000 to employees and NTD1,769,000 to directors and supervisors. The employees receiving remuneration include those of the affiliates meeting the defined requirements. 2. Passed by the present shareholders unanimously. 3. The remuneration for directors was distributed on August 18, 2020, and the remuneration for employees was distributed on February5,2021.
	Surplus Earning Distribution Report of the First Three Quarters for the 2019 Financial Year	1. In consideration for the business development and funding demands of the Company, there is no profit distribution for the first three quarters of 2019. 2. Passed by the present shareholders unanimously.
	5. Report on amendment to the Company’s ―Regulations Governing Procedures for Board of Directors Meetings‖	Passed by the present shareholders unanimously.
	Report on the implementation of treasurystocks	Passed bythepresent shareholders unanimously.
Issues to be ratified	1. Proposal of the business report and financial statements for 2019	Passed by voting.
	2. Proposal for appropriation of profit and loss for 2019	Passed by voting. No profits available for distribution.
Matters to be discussed	1. Proposal for disbursement of cash dividends from capital reserves	1. Passed by voting. 2. The Chairman authorized by the annual general shareholders’ meeting set August 3, 2020 as the ex-dividend date and distributed cash dividends to shareholders to the amount of NTD93,815,400 with NTD0.41783293 disbursed to each share without consideration. Share transfer registration was suspended during the period between July 30 and August 3, 2020. The ex-dividend trading date was set to July 28, 2020 and messages of significance were made public. 3. Cash dividends were distributed as scheduled on August 18,2020.
Extempore motions	None	None.

• V. Information on the affiliates’ endorsement/guarantee, loaning of funds to others, and engagement in trading of derivatives

No affiliates of the Company are involved in any endorsement/guarantee, loaning of funds to others, and engagement in trading of derivatives. VI. Other supplementary information required: None.

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Chapter 9.Matters that have a significant impact on shareholders’ equity or securities prices as set forth in Subparagraph 2, Paragraph 3, Article 36 of the Securities and Exchange Act in the most recent year and up until the date of publication of the annual report: None.

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KYE Systems Corp.

Chairman: Shih-Kun Tso

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