KYEC - Annual Report 2020 | FinancialReports.eu

English Translation of a Report and Financial Statements Originally Issued in Chinese

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 WITH

INDEPENDENT AUDITOR’S REPORT TRANSLATED FROM CHINESE

Address: No. 81, Sec. 2, Gongdao 5th Rd., Hsinchu City 300, Taiwan (R.O.C.) Telephone: 886-3-5751888

The reader is advised that these consolidated financial statements have been prepared originally in Chinese. In the event of a conflict between these financial statements and the original Chinese version or difference in interpretation between the two versions, the Chinese language financial statements shall prevail.

REPRESENTATION LETTER

The entities included in the consolidated financial statements as of December 31, 2020 and for the year then ended prepared under the International Financial Reporting Standards, No.10 are the same as the entities to be included in the combined financial statements of the Company, if any to be prepared, pursuant to the Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises (referred to as “Combined Financial Statements”). Also, the footnotes disclosed in the Consolidated Financial Statements have fully covered the required information in such Combined Financial Statements. Accordingly, the Company did not prepare any other set of Combined Financial Statements than the Consolidated Financial Statements.

Very truly yours,

King Yuan Electronics Co., Ltd.

Chairman: C. K. Lee March 12, 2021

English Translation of a Report Originally Issued in Chinese

Independent Auditors’ Report

To the Board of Directors and Shareholders of King Yuan Electronics Co., Ltd.

Opinion

We have audited the accompanying consolidated balance sheets of King Yuan Electronics Co., Ltd. and its subsidiaries as of December 31, 2020 and 2019, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2020 and 2019, and notes to the consolidated financial statements, including the summary of significant accounting policies (together “the consolidated financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of King Yuan Electronics Co., Ltd. and its subsidiaries as of December 31, 2020 and 2019, and their consolidated financial performance and cash flows for the years ended December 31, 2020 and 2019, in conformity with the requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards, International Accounting Standards, Interpretations developed by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee as endorsed and became effectively by Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of King Yuan Electronics Co., Ltd. and its subsidiaries in accordance with the Norm of Professional Ethics for Certified Public Accountant of the Republic of China (the “Norm”), and we have fulfilled our other ethical responsibilities in accordance with the Norm. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of 2020 consolidated financial statements. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Revenue recognition

King Yuan Electronics Co., Ltd. and its subsidiaries recognized NT$28,959,304 thousand as net sales. Their main activities are providing testing and assembly services that represented 87%, or NT$25,066,252 thousand in the amount, of the net operating revenues.

Since the primary activities of King Yuan Electronics Co., Ltd. and its subsidiaries are providing testing and assembly services, and the services comprise various wafers/integrated circuits testing and assembly processing and rental of machinery, timing of revenue recognition may vary due to varied nature of revenues that increases the complexity of the revenue recognition. Therefore, we determined the matter to be a key audit matter.

Our audit procedures include (but are not limited to) assessing the appropriateness of the accounting policy for revenue recognition; evaluating and testing the effectiveness of internal control relating to the timing of revenue recognition, analyzing the reasonableness of gross profit margin by products, performing cutoff testing for a period before and after the balance sheet date on a sampling basis, performing test of details on selected samples, reviewing the significant terms of sales agreements and examining relevant delivery documents, and reviewing the selected samples of the quantity, specification, period and relevant documents of machinery services.

We also considered the appropriateness of the disclosures of sales. Please refer to Note 4 and Note 6 in notes to the consolidated financial statements.

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards, International Accounting Standards, Interpretations developed by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee as endorsed by Financial Supervisory Commission of the Republic of China and for such internal control as management determines is necessary to enable the preparation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the ability to continue as a going concern of King Yuan Electronics Co., Ltd. and its subsidiaries, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate King Yuan Electronics Co., Ltd. and its subsidiaries or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, including audit committee, are responsible for overseeing the financial reporting process of King Yuan Electronics Co., Ltd. and its subsidiaries.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

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

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

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of King Yuan Electronics Co., Ltd. and its subsidiaries.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
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Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability to continue as a going concern of King Yuan Electronics Co., Ltd. and its subsidiaries. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause King Yuan Electronics Co., Ltd. and its subsidiaries to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the accompanying notes, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within King Yuan Electronics Co., Ltd. and its subsidiaries to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of 2020 consolidated financial statements and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

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Others

We have audited and expressed an unqualified opinion on the parent company only financial statements of King Yuan Electronics Co., Ltd. as of and for the years ended December 31, 2020 and 2019.

Kuo, Shao-Pin

Fuh, Wen-Fun

Ernst & Young, Taiwan March 12, 2021

Notice to Readers

The accompanying consolidated financial statements are intended only to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China.
Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, Ernst & Young cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.
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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

As of December 31, 2020 and 2019

(Amounts in thousands of New Taiwan Dollars)

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ASSETS Notes December 31, 2020 % December 31, 2019 %
Current assets
Cash and cash equivalents 4, 6(1) $8,008,530 13 $6,166,005 11
Financial assets at fair value through other comprehensive income-current 4, 6(2) - - 30,114 -
Contract assets-current 4, 6(16), 6(17), 7 202,972 - 126,182 -
Notes receivable, net 4, 6(3), 6(17) 3,049 - 4,268 -
Accounts receivable, net 4, 6(4), 6(17) 4,164,991 7 4,936,281 9
Accounts receivable from related parties, net 4, 6(4), 6(17), 7 1,724,951 3 911,027 2
Other receivables 161,712 - 278,134 1
Other receivables from related parties 4, 7 33,257 - 7,956 -
Current tax assets 315 - - -
Inventories, net 4, 6(5) 980,969 2 1,081,035 2
Prepayments 6(6) 479,283 1 272,607 1
Other current assets 51,843 - 77,370 -
Other financial assets-current 8 4 - 4 -
Total current assets 15,811,876 26 13,890,983 26
Non-current assets
Financial assets at fair value through other comprehensive income-non-current 4, 6(2) 4,446,563 8 2,425,166 5
Investments accounted for using the equity method 4, 6(7) 69,856 - 65,228 -
Property, plant and equipment 4, 6(8), 6(20), 7, 8 39,147,575 64 36,890,887 67
Right-of-use asset 4, 6(18) 1,328,232 2 1,373,907 2
Intangible assets 4, 6(9), 6(10) 86,442 - 73,795 -
Deferred tax assets 4, 6(21), 6(22) 227,623 - 229,882 -
Other financial assets-non-current 8 115,669 - 113,125 -
Other non-current assets 81,682 - 16,176 -
Total non-current assets 45,503,642 74 41,188,166 74
Total assets $61,315,518 100 $55,079,149 100
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The accompanying notes are an integral part of the consolidated financial statements.

(continued)

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

As of December 31, 2020 and 2019

(Amounts in thousands of New Taiwan Dollars)

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LIABILITIES AND EQUITY Notes December 31, 2020 % December 31, 2019 %
Current liabilities
Short-term loans 4, 6(11), 9 $100,854 - $493,383 1
Contract liabilities-current 4, 6(16), 7 229,603 - 68,330 -
Notes payable 4,435 - 1,633 -
Accounts payable 1,117,955 2 1,054,963 2
Accounts payable to related parties 7 19,487 - 30,713 -
Other payables 2,914,621 5 2,973,602 5
Other payables to related parties 7 65,456 - 91,048 -
Payables on equipment 623,324 1 963,512 2
Current tax liabilities 4, 6(22) 408,303 1 723,277 1
Lease liabilities-current 4, 6(18) 310,144 1 792,980 1
Current portion of long-term loans 4, 6(13), 8, 9 1,844,759 3 403,605 1
Other current liabilities 6(12) 580,856 1 303,923 1
Total current liabilities 8,219,797 14 7,900,969 14
Non-current liabilities
Long-term loans 4, 6(13), 8, 9 21,966,029 36 19,924,440 36
Deferred tax liabilities 4, 6(21), 6(22) 667,968 1 39,921 -
Lease liabilities-non-current 4, 6(18) 566,437 1 485,263 1
Net defined benefit liabilities 4, 6(14) 566,456 1 528,169 1
Guarantee deposits 2,755 - 1,933 -
Total non-current liabilities 23,769,645 39 20,979,726 38
Total liabilities 31,989,442 53 28,880,695 52
Equity attributable to owners of the parent company
Share capital 4, 6(15)
Common stock 12,227,451 20 12,227,451 22
Capital surplus 4, 6(15) 4,588,172 7 4,832,721 9
Retained earnings 4, 6(15)
Legal reserve 2,656,958 4 2,359,299 4
Special reserve 402,406 1 803,172 2
Undistributed earnings 8,147,631 13 6,371,702 12
Total retained earnings 11,206,995 18 9,534,173 18
Other equity 4, 6(15) 1,296,453 2 (402,406) (1)
Equity attributable to owners of the parent company 29,319,071 47 26,191,939 48
Non-controlling interests 4, 6(15) 7,005 - 6,515 -
Total equity 29,326,076 47 26,198,454 48
Total liabilities and equities $61,315,518 100 $55,079,149 100
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The accompanying notes are an integral part of the consolidated financial statements.

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the years ended December 31, 2020 and 2019

(Amounts in thousands of New Taiwan Dollars, except for earnings per share)

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Description Notes 2020 % 2019 %
Net sales 4, 6(16), 6(18), 7 $28,959,304 100 $25,539,437 100
Operating costs 4, 6(5), 6(9), 6(14), (21,005,316) (73) (18,523,521) (73)
6(18), 6(19), 7
Gross profit 7,953,988 27 7,015,916 27
Operating expenses 4, 6(9), 6(14), 6(17),
6(18), 6(19), 7
Selling expenses (387,045) (1) (398,765) (2)
Administrative expenses (1,710,532) (6) (1,516,321) (6)
Research and development expenses (1,202,520) (4) (1,035,207) (4)
- -
Expected credit losses (3,180) (20,609)
Total operating expenses (3,303,277) (11) (2,970,902) (12)
Operating income 4,650,711 16 4,045,014 15
Non-operating income and expenses 4, 6(2), 6(7), 6(8),
6(10), 6(20), 7
Interest income 19,335 - 12,617 -
Other income 260,488 1 175,516 1
- -
Other gains and losses (23,928) (20,947)
Finance costs (379,039) (1) (311,673) (1)
Share of profit of associates accounted for using the 16,088 - 14,336 -
equity method
- -
Total non-operating income and expenses (107,056) (130,151)
Net income before income tax 4,543,655 16 3,914,863 15
Income tax expense 4, 6(22) (906,515) (3) (873,379) (3)
Net income 3,637,140 13 3,041,484 12
Other comprehensive income 4, 6(21)
Items that will not be reclassified subsequently to
profit or loss:
- -
Remeasurements of the defined benefit plan (45,906) (57,525)
Unrealized gains from equity instruments investments 2,056,310 7 687,206 3
measured at fair value through other comprehensive
income
Income tax related to components of other (403,570) (2) (136,555) (1)
comprehensive income that will not be
reclassified to profit or loss
Items that will be reclassified subsequently to profit
or loss:
Exchange differences resulting from translating 105,729 - (186,914) (1)
the financial statements of foreign operations
Income tax related to components of other (21,145) - 37,373 -
comprehensive income that will be
reclassified to profit or loss
Other comprehensive income, net of tax 1,691,418 5 343,585 1
Total comprehensive income $5,328,558 18 $3,385,069 13
Net income attributable to :
Owners of the parent company $3,636,653 13 $3,041,566 12
Non-controlling interests 487 - (82) -
$3,637,140 13 $3,041,484 12
Total comprehensive income attributable to :
Owners of the parent company $5,328,068 18 $3,385,203 13
Non-controlling interests 490 - (134) -
$5,328,558 18 $3,385,069 13
Earnings per share(NT$) 4, 6(23)
Basic Earnings Per Share $2.97 $2.49
Diluted Earnings Per Share $2.94 $2.47
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The accompanying notes are an integral part of the consolidated financial statements.

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English Translation of Financial Statements Originally Issued in Chinese

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the years ended December 31, 2020 and 2019

(Amounts in thousands of New Taiwan Dollars)

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Equity attributable to owners of the parent company
Retained earnings Other equity
Unrealized gains
(losses) from equity
Description Common stock Capital surplus Undistributed differences resulting Exchange investmentsinstruments Equity attributableto owners of the Non-controllinginterests Total Equity
Legal reserve Special reserve earnings financial statementsfrom translating the measured at fair parent company
value through other
of foreign operations
comprehensive
income
Balance as of January 1, 2019 $12,227,451 $4,844,536 $2,179,765 $431,239 $5,597,293 $(292,128) $(511,045) $24,477,111 $42,741 $24,519,852
Appropriation and distribution of 2018 earnings:
Legal reserve - - 179,534 - (179,534) - - - - -
Special reserve - - - 371,933 (371,933) - - - - -
Cash dividends - - - - (1,650,706) - - (1,650,706) - (1,650,706)
Profit for the year ended December 31, 2019 - - - - 3,041,566 - - 3,041,566 (82) 3,041,484
Other comprehensive income for the year ended December 31, 2019 - - - - (57,525) (149,489) 550,651 343,637 (52) 343,585
Total comprehensive income - - - - 2,984,041 (149,489) 550,651 3,385,203 (134) 3,385,069
Changes in ownership interests in subsidiaries - (11,815) - - (7,854) - - (19,669) (36,092) (55,761)
Disposal of equity instruments investments measured at fair value through - - - - 395 - (395) - - -
other comprehensive income
Balance as of December 31, 2019 $12,227,451 $4,832,721 $2,359,299 $803,172 $6,371,702 $(441,617) $39,211 $26,191,939 $6,515 $26,198,454
Balance as of January 1, 2020 $12,227,451 $4,832,721 $2,359,299 $803,172 $6,371,702 $(441,617) $39,211 $26,191,939 $6,515 $26,198,454
Appropriation and distribution of 2019 earnings:
Legal reserve - - 297,659 - (297,659) - - - - -
Cash dividends - (244,549) - - (1,956,392) - - (2,200,941) - (2,200,941)
Reversal of special reserve - - - (400,766) 400,766 - - - - -
Profit for the year ended December 31, 2020 - - - - 3,636,653 - - 3,636,653 487 3,637,140
Other comprehensive income for the year ended December 31, 2020 - - - - (45,906) 84,581 1,652,740 1,691,415 3 1,691,418
Total comprehensive income - - - - 3,590,747 84,581 1,652,740 5,328,068 490 5,328,558
Changes in ownership interests in subsidiaries - - - - 5 - - 5 - 5
Disposal of equity instruments measured at fair value through other - - - - 38,462 - (38,462) - - -
comprehensive income
Balance as of December 31, 2020 $12,227,451 $4,588,172 $2,656,958 $402,406 $8,147,631 $(357,036) $1,653,489 $29,319,071 $7,005 $29,326,076
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The accompanying notes are an integral part of the consolidated financial statements.

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English Translation of Financial Statements Originally Issued in Chinese

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2020 and 2019

(Amounts in thousands of New Taiwan Dollars)

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Description 2020 2019 Description 2020 2019
Cash flows from operating activities : Cash flows from investing activities :
Profit before tax from continuing operations $4,543,655 $3,914,863 Proceeds from disposal of financial assets at fair value through other comprehensive income $65,027 $-
Adjustments for : Proceeds from capital return of financial assets at fair value through other comprehensive income - 395
The profit or loss items which did not affect cash flows: Proceeds from disposal of financial assets at fair value through profit or loss - 101,885
Depreciation 8,355,775 6,971,919 Acquisition of property, plant and equipment (10,935,021) (11,621,595)
Amortization 52,193 87,531 Proceeds from disposal of property, plant and equipment 89,917 121,535
Expected credit losses 3,180 20,609 Increase in refundable deposits (65,528) (192)
Gains on financial assets and liabilities at fair value through profit or loss - (424) Acquisition of intangible assets (64,763) (26,418)
Interest expenses 379,039 311,673 Increase in other financial assets (2,544) (3,213)
Interest income (19,335) (12,617) Dividend received 62,426 49,858
Dividend income (50,966) (38,398) Net cash used in investing activities (10,850,486) (11,377,745)
Investment gain accounted for using the equity method (16,088) (14,336)
Loss (gain) on disposal of property, plant and equipment 15,524 (8,338)
Impairment of non-financial assets 153,955 91,181
Unrealized foreign exchange gain (264,212) (234,047)
Changes in operating assets and liabilities :
Contract Assets (76,790) 163,245
Notes receivable 1,219 9,576
Accounts receivable 791,252 (538,180) Cash flows from financing activities :
Accounts receivable from related parties (813,924) (141,296) Increase in short-term loans 145,628 780,438
Other receivables 99,768 (73,767) Decrease in short-term loans (535,872) (377,519)
Other receivables from related parties (18,780) 3,264 Borrowing in long-term loans 28,934,872 21,591,057
Inventories 100,066 44,717 Repayments of long-term loans (25,212,072) (17,999,744)
Prepayments (266,952) (8,927) Increase in guarantee deposits 822 360
Other current assets 25,527 113,729 Cash payments for the principal portion of the lease liabilities (510,312) (18,186)
Contract liabilities 161,273 (61,873) Cash dividends (2,200,941) (1,650,706)
Notes payable 2,802 (48,523) Acquisition of ownership interests in subsidiaries - (37,070)
Accounts payable 62,992 (128,802) Interest paid (372,098) (274,418)
Accounts payable to related parties (11,226) 18,322 Net cash provided by financing activities 250,027 2,014,212
Other payables (50,354) 673,593
Other payables to related parties (25,592) 13,937
Other current liabilities 276,933 24,255
Accrued pension liabilities (7,619) (10,926)
Cash generated from operating activities 13,403,315 11,141,960 Effect of changes in exchange rate on cash and cash equivalents 40,259 (90,580)
Interest received 15,623 17,209 Net increase in cash and cash equivalents 1,842,525 1,379,379
Income tax paid (1,016,213) (325,677) Cash and cash equivalents at the beginning of the year 6,166,005 4,786,626
Net cash provided by operating activities 12,402,725 10,833,492 Cash and cash equivalents at the end of the year $8,008,530 $6,166,005
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The accompanying notes are an integral part of the consolidated financial statements.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

1. Organization and Operation

King Yuan Electronics Co., Ltd. ("KYEC") was incorporated under the Company Law of the Republic of China (“R.O.C) on May 28, 1987, and commenced operations on July 23, 1987. The Company primarily engages in the business of design, manufacturing, selling, testing and assembly service of integrated circuits, and also engages in manufacturing and selling of IC Monitoring Burn-In machinery and related components. On May 9, 2001, the shares of KYEC were listed on the Taiwan Stock Exchange. KYEC’s registered office and the main business location is at No. 81, Sec. 2, Gongdaowu Road, Hsinchu City 300, Republic of China (R.O.C.).

2. Date and Procedures of Authorization of Financial Statements for Issue

The accompanying consolidated financial statements of KYEC and its subsidiaries (“the Company”) were approved and authorized for issue by the Board of Directors on March 12, 2021.

3. Newly Issued or Revised Standards and Interpretations

(1) Change in accounting policies resulting from applying for the first time certain standards and amendments

The Company applied for the first time International Financial Reporting Standards, International Accounting Standards, and Interpretations issued, revised or amended which are recognized by Financial Supervisory Commission (“FSC”) and become effective for annual periods beginning on or after January 1, 2020. Apart from the nature and impact of the new standard and amendment described below, the remaining new standards and amendments had no material effect on the Company.

Covid-19-Related Rent Concessions (Amendment to IFRS 16)

The Company elected to early apply Covid-19-Related Rent Concessions (Amendment to IFRS 16) and its transitional requirements which are recognized by FSC for annual periods beginning on or after January 1, 2020. For the rent concession arising as a direct consequence of the Covid-19 pandemic, the Company elected not to assess whether it is a lease modification but accounted for it as a variable lease payment. The amendment had no material impact on the Company.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

(2) Standards or interpretations issued, revised or amended, by International Accounting Standards Board (“IASB”) which are endorsed by FSC, but not yet adopted by the Company as at the end of the reporting period are listed below:

Items	New,Revised or Amended Standards and Interpretations	Effective Date Issued byIASB
A	Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9,IAS 39,IFRS 7,IFRS 4 and IFRS 16)	January 1, 2021

A. Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)

The final phase amendments mainly relate to the effects of the interest rate benchmark reform on companies’ financial statements:

a. A company will not have to derecognise or adjust the carrying amount of financial instruments for changes to contractual cash flows as required by the reform, but will instead update the effective interest rate to reflect the change to the alternative benchmark rate;
b. A company will not have to discontinue its hedge accounting solely because it makes changes required by the reform, if the hedge meets other hedge accounting criteria; and
c. A company will be required to disclose information about new risks arising from the reform and how it manages the transition to alternative benchmark rates.

The abovementioned amendments that are applicable for annual periods beginning on or after January 1, 2021 have no material impact on the Company.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

(3) Standards or interpretations issued, revised or amended, by IASB which are not endorsed by FSC, and not yet adopted by the Company as at the end of the reporting period are listed below :

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Effective Date
Items New, Revised or Amended Standards and Interpretations Issued by IASB
A IFRS 10 “Consolidated Financial Statements” and IAS 28 To be determined
“Investments in Associates and Joint Ventures” — Sale or by IASB
Contribution of Assets between an Investor and its Associate
or Joint Venture
B IFRS 17 “Insurance Contracts” January 1, 2023
C Classification of Liabilities as Current or Non-current – January 1, 2023
Amendments to IAS 1
D Narrow-scope amendments of IFRS, including Amendments January 1, 2022
to IFRS 3, Amendments to IAS 16, Amendments to IAS 37
and the Annual Improvements
E Disclosure Initiative - Accounting Policies – Amendments to January 1, 2023
IAS 1
F Definition of Accounting Estimates – Amendments to IAS 8 January 1, 2023
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A. IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures” — Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The amendments address the inconsistency between the requirements in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures, in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture. IAS 28 restricts gains and losses arising from contributions of non-monetary assets to an associate or a joint venture to the extent of the interest attributable to the other equity holders in the associate or joint venture. IFRS 10 requires full profit or loss recognition on the loss of control of the subsidiary. IAS 28 was amended so that the gain or loss resulting from the sale or contribution of assets that constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized in full.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

IFRS 10 was also amended so that the gain or loss resulting from the sale or contribution of a subsidiary that does not constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized only to the extent of the unrelated investors’ interests in the associate or joint venture.

B. IFRS 17 “Insurance Contracts”

IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects (including recognition, measurement, presentation and disclosure requirements). The core of IFRS 17 is the General (building block) Model, under this model, on initial recognition, an entity shall measure a group of insurance contracts at the total of the fulfilment cash flows and the contractual service margin. The fulfilment cash flows comprise of the following:

a. estimates of future cash flows;
b. discount rate: an adjustment to reflect the time value of money and the financial risks related to the future cash flows, to the extent that the financial risks are not included in the estimates of the future cash flows; and
c. a risk adjustment for non-financial risk.

The carrying amount of a group of insurance contracts at the end of each reporting period shall be the sum of the liability for remaining coverage and the liability for incurred claims. Other than the General Model, the standard also provides a specific adaptation for contracts with direct participation features (the Variable Fee Approach) and a simplified approach (Premium Allocation Approach) mainly for short-duration contracts.

IFRS 17 was issued in May 2017 and it was amended in June 2020. The amendments include deferral of the date of initial application of IFRS 17 by two years to annual beginning on or after January 1, 2023 (from the original effective date of January 1, 2021); provide additional transition reliefs; simplify some requirements to reduce the costs of applying IFRS 17 and revise some requirements to make the results easier to explain. IFRS 17 replaces an interim Standard – IFRS 4 Insurance Contracts – from annual reporting periods beginning on or after January 1, 2023.

C. Classification of Liabilities as Current or Non-current – Amendment to IAS 1

These are the amendments to paragraphs 69-76 of IAS 1 Presentation of Financial Statements and the amended paragraphs related to the classification of liabilities as current or non-current.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

D. Narrow-scope amendments of IFRS, including Amendments to IFRS 3, Amendments to IAS 16, Amendments to IAS 37 and the Annual Improvements
a. Updating a Reference to the Conceptual Framework (Amendments to IFRS 3) The amendments updated IFRS 3 by replacing a reference to an old version of the Conceptual Framework for Financial Reporting with a reference to the latest version, which was issued in March 2018. The amendments also added an exception to the recognition principle of IFRS 3 to avoid the issue of potential “day 2” gains or losses arising for liabilities and contingent liabilities. Besides, the amendments clarify existing guidance in IFRS 3 for contingent assets that would not be affected by replacing the reference to the Conceptual Framework.
b. Property, Plant and Equipment-Proceeds before Intended Use (Amendments to IAS 16) The amendments prohibit a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, a company will recognise such sales proceeds and related cost in profit or loss.
c. Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
- The amendments clarify what costs a company should include as the cost of fulfilling a contract when assessing whether a contract is onerous.
d. Annual Improvements to IFRS Standards 2018 - 2020

Amendment to IFRS 1

The amendment simplifies the application of IFRS 1 by a subsidiary that becomes a first-time adopter after its parent in relation to the measurement of cumulative translation differences.

Amendment to IFRS 9 Financial Instruments

The amendment clarifies the fees a company includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability.

Amendment to Illustrative Examples Accompanying IFRS 16 Leases

The amendment to Illustrative Example 13 accompanying IFRS 16 modifies the treatment of lease incentives relating to lessee’s leasehold improvements.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Amendment to IAS 41

The amendment removes a requirement to exclude cash flows from taxation when measuring fair value thereby aligning the fair value measurement requirements in IAS 41 with those in other IFRS Standards.

E. Disclosure Initiative - Accounting Policies – Amendments to IAS 1

The amendments improve accounting policy disclosures that to provide more useful information to investors and other primary users of the financial statements.

F. Definition of Accounting Estimates – Amendments to IAS 8

The amendments introduce the definition of accounting estimates and include other amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to help companies distinguish changes in accounting estimates from changes in accounting policies.

The abovementioned standards and interpretations issued by IASB have not yet been endorsed by FSC at the date when the Company’s financial statements were authorized for issue, the local effective dates are to be determined by FSC. The new or amended standards and interpretations have no material impact on the Company.

4. Summary of Significant Accounting Policies

Statement of Compliance

The accompanying consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (“the Regulations”) and TIFRS as endorsed by FSC.

Basis of Preparation

The accompanying consolidated financial statements have been prepared on a historical cost basis, except for financial instruments that have been measured at fair value. The accompanying consolidated financial statements are expressed in thousands of New Taiwan Dollars (“NT$”) unless otherwise stated.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Basis of Consolidation

Preparation principle of consolidated financial statement

Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Company controls an investee if and only if the Company has:

a. power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
b. exposure, or rights, to variable returns from its involvement with the investee; and
c. the ability to use its power over the investee to affect its returns.

When the Company has less than a majority of the voting or similar rights of an investee, the Company considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

a. the contractual arrangement with the other vote holders of the investee;
b. rights arising from other contractual arrangements;
c. the Company’s voting rights and potential voting rights.

The Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

Subsidiaries are fully consolidated from the acquisition date, being the date on which the Company obtains control, and continue to be consolidated until the date the Company ceases to control the subsidiary. The financial statements of the subsidiaries are prepared for the same reporting period with the parent company, using consistent accounting policies. All intra-group balances, income and expenses, unrealized gains and losses and dividends resulting from intra-group transactions are eliminated in full.

A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction.

Total comprehensive income of the subsidiaries is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

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English Translation of Financial Statements Originally Issued in Chinese

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

If the Company loses control of a subsidiary, it:

a. derecognizes the assets (including goodwill) and liabilities of the subsidiary;
b. derecognizes the carrying amount of any non-controlling interest;
c. recognizes the fair value of the consideration received;
d. recognizes the fair value of any investment retained;
e. recognizes any surplus or deficit in profit or loss; and
f. reclassifies the parent’s share of components previously recognized in other comprehensive income to profit or loss.

The consolidated entities are listed as follows:

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Percentage of Ownership(%)
Investor Subsidiary Business nature 2020.12.31 2019.12.31
----- End of picture text -----

KYEC	KYEC USA Corp.	Sales agent and business	100.00	100.00
		communication in USA
KYEC	KYEC Investment	General investing	100.00	100.00
	International Co., Ltd.
KYEC	KYEC Technology	General investing	100.00	100.00
	Management Co., Ltd.
KYEC	KYEC Japan K.K.	Manufacturing and sales of	89.83	89.83
		electronic parts and
		components, sales agent and
		business communication in
		Japan
KYEC	KYEC SINGAPORE	Sales agent and business	100.00	100.00
	PTE. Ltd.	communication in Southeast
		Asia and Europe
KYEC	King Ding Precision	Manufacturing, selling and	100.00	100.00
	Incorporated Company	wholesale of electronics parts
		and components and repairing
		of electronics related products
KYEC Investment	KYEC Microelectronics	General investing	94.02	94.02
International Co., Ltd.	Co., Ltd.
KYEC Technology	KYEC Microelectronics	General investing	5.98	5.98
Management Co., Ltd.	Co., Ltd.

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English Translation of Financial Statements Originally Issued in Chinese

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

==> picture [454 x 31] intentionally omitted <==

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Percentage of Ownership(%)
Investor Subsidiary Business nature 2020.12.31 2019.12.31
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KYEC	King Long Technology	Sales and manufacturing of	100.00	100.00
Microelectronics	(Suzhou) Ltd.	components of automotive data
Co., Ltd.		processing machinery, solid
		memory parts, monitoring burn-
		in machinery, and testing and
		assembly service of integrated
		circuits
KYEC Investment	Sino-Tech Investment	General investing	-	100.00
International Co., Ltd.	Co., Ltd.		(Note)
KYEC Investment	Strong Outlook	General investing	-	100.00
International Co., Ltd.	Investments Ltd.		(Note)
King Long Technology	Suzhou Zhengkuan	Testing and assembly service of	100.00	100.00
(Suzhou) Ltd.	Technology Ltd.	integrated circuits, sales and after	(Note)	(Note)
		service of processing of
		electronic components and
		materials, components of
		automotive data processing
		machinery, solid memory parts,
		and monitoring burn-in
		machinery

Note:

For the purpose of reorganization, the ownership of Suzhou Zhengkuan Technology Ltd. which was previously held by Sino-Tech Investment Co., Ltd. and Strong Outlook Investments Ltd., was transferred to King Long Technology (Suzhou) Ltd. The liquidation of Sino-Tech Investment Co., Ltd. and Strong Outlook Investments Ltd. was complete in the first quarter of 2020.

Foreign currency transactions

The Company’s consolidated financial statements are presented in NT$, which is also the parent company’s functional currency. Each entity in the Company determines its functional currency upon its primary economic environment and items included in the financial statements of each entity are measured using that functional currency.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Transactions in foreign currencies are initially recorded by the Company’s entities at their respective functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rate of exchange ruling at the reporting date. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Nonmonetary items that are measured at historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

All exchange differences arising on the settlement of monetary items or on translating monetary items are taken to profit or loss in the period in which they arise except for the following:

A. exchange differences arising from foreign currency borrowings for an acquisition of a qualifying asset to the extent that they are regarded as an adjustment to interest costs are included in the borrowing costs that are eligible for capitalization.
B. foreign currency items within the scope of IFRS 9 “Financial Instruments” are accounted for based on the accounting policy for financial instruments.
C. exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation is recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.

When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss is recognized in other comprehensive income. When a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss is recognized in profit or loss.

Translation of financial statements in foreign currency

The assets and liabilities of foreign operations are translated into NT$ at the closing rate of exchange prevailing at the reporting date and their income and expenses are translated at an average rate for the period. The exchange differences arising on the translation are recognized in other comprehensive income. On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in other comprehensive income and accumulated in the separate component of equity, is reclassified from equity to profit or loss when the gain or loss on disposal is recognized. The following partial disposals are accounted for as disposals:

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

A. when the partial disposal involves the loss of control of a subsidiary that includes a foreign operation; and
B. when the retained interest after the partial disposal of an interest in a joint arrangement or a partial disposal of an interest in an associate that includes a foreign operation is a financial asset that includes a foreign operation.

On the partial disposal of a subsidiary that includes a foreign operation that does not result in a loss of control, the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is re-attributed to non-controlling interests in that foreign operation. In partial disposal of an associate or jointly arrangement that includes a foreign operation that does not result in a loss of significant influence or joint control, only the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is reclassified to profit or loss.

Any goodwill and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and expressed in its functional currency.

Current and non-current distinction

An asset is classified as current when:

A. the Company expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;
B. the Company holds the asset primarily for the purpose of trading;
C. the Company expects to realize the asset within twelve months after the reporting period; or
D. the asset is cash or cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is classified as current when:
A. the Company expects to settle the liability in its normal operating cycle;
B. the Company holds the liability primarily for the purpose of trading;
C. the liability is due to be settled within twelve months after the reporting period; or
D. the Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

All other liabilities are classified as non-current.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits and short-term, highly liquid time deposits (including ones that have maturity within twelve months) or investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Financial instruments

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities within the scope of IFRS 9 “Financial Instruments” are recognized initially at fair value plus or minus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

A. Financial instruments: Recognition and Measurement

The Company accounts for regular way purchase or sales of financial assets on the trade date.

The Company classifies financial assets as subsequently measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss considering both factors below:

a. the Company’s business model for managing the financial assets and
b. the contractual cash flow characteristics of the financial asset.

Financial assets measured at amortized cost

A financial asset is measured at amortized cost if both of the following conditions are met and presented as note receivables, trade receivables, financial assets measured at amortized cost and other receivables, etc., on balance sheet as at the reporting date:

a. the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and
b. the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Such financial assets are subsequently measured at amortized cost (the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between the initial amount and the maturity amount and adjusted for any loss allowance) and is not part of a hedging relationship. A gain or loss is recognized in profit or loss when the financial asset is derecognized, through the amortization process or in order to recognize the impairment gains or losses.

Interest revenue is calculated by using the effective interest method. This is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for:

a. purchased or originated credit-impaired financial assets. For those financial assets, the Company applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.
b. financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets. For those financial assets, the Company applies the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods.

Financial assets measured at fair value through other comprehensive income

A financial asset is measured at fair value through other comprehensive income if both of the following conditions are met:

a. the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and
b. the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Recognition of gain or loss on a financial asset measured at fair value through other comprehensive income is described as below:

a. A gain or loss on a financial asset measured at fair value through other comprehensive income is recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses, until the financial asset is derecognized or reclassified.
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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

b. When the financial asset is derecognized the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment.
c. Interest revenue is calculated by using the effective interest method. This is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for:
(a) purchased or originated credit-impaired financial assets. For those financial assets, the Company applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.
(b) financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets. For those financial assets, the Company applies the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods.

Besides, for certain equity investments within the scope of IFRS 9 that are neither held for trading nor contingent consideration recognized by an acquirer in a business combination to which IFRS 3 applies, the Company made an irrevocable election to present the changes of the fair value in other comprehensive income at initial recognition. Amounts presented in other comprehensive income shall not be subsequently transferred to profit or loss (when disposal of such equity instrument, its cumulated amount included in other components of equity is transferred directly to the retained earnings) and these investments should be presented as financial assets measured at fair value through other comprehensive income on the balance sheet. Dividends on such investments are recognized in profit or loss unless the dividends clearly represent a recovery of part of the cost of investment.

Financial assets measured at fair value through profit or loss

Financial assets are classified as measured at amortized cost or measured at fair value through other comprehensive income based on aforementioned criteria. All other financial assets are measured at fair value through profit or loss and presented on the balance sheet as financial assets measured at fair value through profit or loss.

Such financial assets are measured at fair value, the gains or losses resulting from remeasurement is recognized in profit or loss which includes any dividend or interest received on such financial assets.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

B. Impairment of financial assets

The Company recognizes a loss allowance for expected credit losses on debt instrument investments measured at fair value through other comprehensive income and financial asset measured at amortized cost. The loss allowance on debt instrument investments measured at fair value through other comprehensive income is recognized in other comprehensive income and does not reduce the carrying amount in the statement of financial position.

The Company measures expected credit losses of a financial instrument in a way that reflects:

a. an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
b. the time value of money; and
c. reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

The loss allowance is measured as follows:

a. at an amount equal to 12-month expected credit losses: the credit risk on a financial asset has not increased significantly since initial recognition or the financial asset is determined to have low credit risk at the reporting date. In addition, the Company measures the loss allowance at an amount equal to lifetime expected credit losses in the previous reporting period, but determines at the current reporting date that the credit risk on a financial asset has increased significantly since initial recognition is no longer met.
b. at an amount equal to the lifetime expected credit losses: the credit risk on a financial asset has increased significantly since initial recognition or financial asset that is purchased or originated credit-impaired financial asset.
c. for trade receivables or contract assets arising from transactions within the scope of IFRS 15, the Company measures the loss allowance at an amount equal to lifetime expected credit losses.
d. For lease receivables arising from transactions within the scope of IFRS 16, the Company measures the loss allowance at an amount equal to lifetime expected credit losses.
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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

At each reporting date, the Company needs to assess whether the credit risk on a financial asset has increased significantly since initial recognition by comparing the risk of a default occurring at the reporting date and the risk of default occurring at initial recognition. Please refer to Note 12 for further details on credit risk.

C. Derecognition of financial assets

A financial asset is derecognized when:

a. the rights to receive cash flows from the asset have expired.
b. the Company has transferred the asset and substantially all the risks and rewards of the asset have been transferred.
c. the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the consideration received or receivable including any cumulative gain or loss that had been recognized in other comprehensive income, is recognized in profit or loss.

D. Financial liabilities and equity

Classification between liabilities or equity

The Company classifies the instrument issued as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The transaction costs of an equity transaction are accounted for as a deduction from equity to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Compound instruments

The Company evaluates the terms of the convertible bonds issued to determine whether it contains both a liability and an equity component. Furthermore, the Company assesses if the economic characteristics and risks of the put and call options contained in the convertible bonds are closely related to the economic characteristics and risk of the host contract before separating the equity element.

For the liability component excluding the derivatives, its fair value is determined based on the rate of interest applied at that time by the market to instruments of comparable credit status. The liability component is classified as a financial liability measured at amortized cost before the instrument is converted or settled.

For the embedded derivative that is not closely related to the host contract (for example, if the exercise price of the embedded call or put option is not approximately equal on each exercise date to the amortized cost of the host debt instrument), it is classified as a liability component and subsequently measured at fair value through profit or loss unless it qualifies for an equity component. The equity component is assigned the residual amount after deducting from the fair value of the instrument as a whole the amount separately determined for the liability component. Its carrying amount is not remeasured in the subsequent accounting periods. If the convertible bond issued does not have an equity component, it is accounted for as a hybrid instrument in accordance with the requirements under IFRS 9 “Financial Instruments”.

Transaction costs are apportioned between the liability and equity components of the convertible bond based on the allocation of proceeds to the liability and equity components when the instruments are initially recognized.

On conversion of a convertible bond before maturity, the carrying amount of the liability component being the amortized cost at the date of conversion is transferred to equity.

Financial liabilities

Financial liabilities within the scope of IFRS 9 “Financial Instruments ” are classified as financial liabilities at fair value through profit or loss or financial liabilities measured at amortized cost upon initial recognition.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated as at fair value through profit or loss. Gains or losses on the subsequent measurement of liabilities held for trading including interest paid are recognized in profit or loss.

A financial liability is classified as held for trading if:

a. it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;
b. on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or
c. it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

If a contract contains one or more embedded derivatives, the entire hybrid (combined) contract may be designated as a financial liability at fair value through profit or loss; or a financial liability may be designated as at fair value through profit or loss when doing so results in more relevant information, because either:

a. it eliminates or significantly reduces a measurement or recognition inconsistency; or
b. a group of financial liabilities or financial assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the key management personnel.

Gains or losses on the subsequent measurement of liabilities at fair value through profit or loss including interest paid are recognized in profit or loss.

Financial liabilities at amortized cost

Financial liabilities measured at amortized cost include interest bearing loans and borrowings that are subsequently measured using the effective interest rate method after initial recognition. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the effective interest rate method amortization process.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or transaction costs.

Derecognition of financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified (whether or not attributable to the financial difficulty of the debtor), such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts and the consideration paid, including any noncash assets transferred or liabilities assumed, is recognized in profit or loss.

E. Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

Derivative financial instruments

The Company uses derivative instruments to hedge its foreign currency risks and interest rate risks. A derivative is classified in the balance sheet as assets or liabilities at fair value through profit or loss except for derivatives that are designated effective hedging instruments which are classified as derivative financial assets or liabilities for hedging.

Derivative instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Any gains or losses arising from changes in the fair value of derivatives are taken directly to profit or loss, except for the effective portion of hedges, which is recognized in either profit or loss or equity according to types of hedges used.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

When the host contracts are either non-financial assets or liabilities, derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not designated at fair value though profit or loss.

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

a. in the principal market for the asset or liability, or
b. in the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming market participants in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

Inventories

Inventories are valued at lower of cost and net realizable value item by item.

Costs incurred in bringing each inventory to its present location and condition are accounted for as follows:

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Raw materials – Purchase cost on weighted average method

Finished goods and work in progress – Cost of direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Rendering of services is accounted in accordance with IFRS 15 and not within the scope of inventories.

Investments accounted for using the equity method

The Company’s investment in its associates is accounted for using the equity method other than those that meet the criteria to be classified as held for sale. An associate is an entity over which the Company has significant influence. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture.

Under the equity method, the investment in the associate or an investment in a joint venture is carried in the balance sheet at cost and adjusted thereafter for the post-acquisition change in the Company’s share of net assets of the associate or joint venture. After the interest in the associate or joint venture is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. Unrealized gains and losses resulting from transactions between the Company and the associate or joint venture are eliminated to the extent of the Company’s related interest in the associate or joint venture.

When changes in the net assets of an associate or a joint venture occur and not those that are recognized in profit or loss or other comprehensive income and do not affect the Company’s percentage of ownership interests in the associate or joint venture, the Company recognizes such changes in equity based on its percentage of ownership interests. The resulting capital surplus recognized will be reclassified to profit or loss at the time of disposing the associate or joint venture on a pro rata basis.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

When the associate or joint venture issues new shares, and the Company’s interest in an associate or a joint venture is reduced or increased as the Company fails to acquire shares newly issued in the associate or joint venture proportionately to its original ownership interest, the increase or decrease in the interest in the associate or joint venture is recognized in capital surplus and investments accounted for using the equity method. When the interest in the associate or joint venture is reduced, the cumulative amounts previously recognized in other comprehensive income are reclassified to profit or loss or other appropriate items. The aforementioned capital surplus recognized is reclassified to profit or loss on a pro rata basis when the Company disposes the associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reporting period as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Company.

The Company determines at each reporting date whether there is any objective evidence that the investment in the associate or an investment in a joint venture is impaired in accordance with IAS 28 “Investments in Associates and Joint Ventures”. If this is the case, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value and recognizes the amount in the ‘share of profit or loss of an associate’ in the statement of comprehensive income in accordance with IAS 36 “Impairment of Assets”. In determining the value in use of the investment, the Company estimates:

A. its share of the present value of the estimated future cash flows expected to be generated by the associate or joint venture, including the cash flows from the operations of the associate and the proceeds on the ultimate disposal of the investment; or
B. the present value of the estimated future cash flows expected to arise from dividends to be received from the investment and from its ultimate disposal.

Because goodwill that forms part of the carrying amount of an investment in an associate or an investment in a joint venture is not separately recognized, it is not tested for impairment separately by applying the requirements for goodwill impairment testing in IAS 36 “Impairment of Assets”.

Upon loss of significant influence over the associate or joint venture, the Company measures and recognizes any retaining investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognized in profit or loss. Furthermore, if an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the entity continues to apply the equity method and does not remeasure the retained interest.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Property, plant and equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of dismantling and removing the item and restoring the site on which it is located and borrowing costs for construction in progress if the recognition criteria are met. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. When significant parts of property, plant and equipment are required to be replaced in intervals, the Company recognizes such parts as individual assets with specific useful lives and depreciation. The carrying amount of those parts that are replaced is derecognized in accordance with the derecognition provisions of IAS 16 “Property, Plant and Equipment”. When a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

Buildings and facilities	20`～`31 years
Plant equipment	5`～`16 years
Machinery and equipment	2`～`8 years
Transportation equipment	3`～`6 years
Office equipment	3`～`5 years
Right-of-use assets (Note)	6`～`58 years
Leased assets	3`～`11 years
Leasehold improvements	10 years

Note:

The Company reclassified the lease assets to right-of-use assets after the adoption of IFRS 16 from January 1, 2019.

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is recognized in profit or loss.

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Leases

The Company assesses whether the contract is, or contains, a lease, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset for a period of time, the Company assesses whether the contract, throughout the period of use, has both of the following:

(a) the right to obtain substantially all of the economic benefits from use of the identified asset; and
(b) the right to direct the use of the identified asset.

For a contract that is, or contains, a lease, the Company accounts for each lease component within the contract as a lease separately from non-lease components of the contract. For a contract that contains a lease component and one or more additional lease or non-lease components, the Company allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the nonlease components. The relative stand-alone price of lease and non-lease components shall be determined on the basis of the price the lessor, or a similar supplier, would charge the Company for that component, or a similar component, separately. If an observable stand-alone price is not readily available, the Company estimates the stand-alone price, maximizing the use of observable information.

A. The Company as a lessee

Except for leases that meet and elect short-term leases or leases of low-value assets, the Company recognizes right-of-use asset and lease liability for all leases which the Company is the lessee of those lease contracts.

At the commencement date, the Company measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses its incremental borrowing rate. At the commencement date, the lease payments included in the measurement of the lease liability comprise the following payments for the right to use the underlying asset during the lease term that are not paid at the commencement date:

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

(a) fixed payments (including in-substance fixed payments), less any lease incentives receivable;
(b) variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
(c) amounts expected to be payable by the lessee under residual value guarantees;
(d) the exercise price of a purchase option if the Company is reasonably certain to exercise that option; and
(e) payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

After the commencement date, the Company measures the lease liability on an amortized cost basis, which increases the carrying amount to reflect interest on the lease liability by using an effective interest method; and reduces the carrying amount to reflect the lease payments made.

At the commencement date, the Company measures the right-of-use asset at cost. The cost of the right-of-use asset comprises:

(a) the amount of the initial measurement of the lease liability;
(b) any lease payments made at or before the commencement date, less any lease incentives received;
(c) any initial direct costs incurred by the lessee; and
(d) an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

For subsequent measurement of the right-of-use asset, the Company measures the right-of-use asset at cost less any accumulated depreciation and any accumulated impairment losses. That is, the Company measures the right-of-use asset applying a cost model.

If the lease transfers ownership of the underlying asset to the Company by the end of the lease term or if the cost of the right-of-use asset reflects that the Company will exercise a purchase option, the Company depreciates the right-of-use asset from the commencement date to the end of the useful life of the underlying asset. Otherwise, the Company depreciates the right-of-use asset from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

The Company applies IAS 36 “Impairment of Assets” to determine whether the right-of-use asset is impaired and to account for any impairment loss identified.

Except for those leases that the Company accounted for as short-term leases or leases of lowvalue assets, the Company presents right-of-use assets and lease liabilities in the balance sheet and separately presents lease-related interest expense and depreciation charge in the statement of consolidated comprehensive income.

For short-term leases or leases of low-value assets, the Company elects to recognize the lease payments associated with those leases as an expense on either a straight-line basis over the lease term or another systematic basis.

B. The Company as a lessor

At inception of a contract, the Company classifies each of its leases as either an operating lease or a finance lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset. At the commencement date, the Company recognizes assets held under a finance lease in its balance sheet and presents them as a receivable at an amount equal to the net investment in the lease.

For a contract that contains lease components and non-lease components, the Company allocates the consideration in the contract applying IFRS 15.

The Company recognizes lease payments from operating leases as rental income on either a straight-line basis or another systematic basis. Variable lease payments for operating leases that do not depend on an index or a rate are recognized as rental income when incurred.

Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in profit or loss for the year in which the expenditure is incurred.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life is reviewed at least at the end of each financial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates.

Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in profit or loss when the asset is derecognized.

A. Research and development costs

Research costs are expensed as incurred. Development expenditures, on an individual project, are recognized as an intangible asset when the Company can demonstrate:

a. the technical feasibility of completing the intangible asset so that it will be available for use or sale;
b. its intention to complete and its ability to use or sell the asset;
c. how the asset will generate future economic benefits;
d. the availability of resources to complete the asset; and
e. the ability to measure reliably the expenditure during development.

Following initial recognition of the development expenditure as an asset, the cost model is applied requiring the asset to be carried at cost less any accumulated amortization and accumulated impairment losses. During the period of development, the asset is tested for impairment annually. Amortization of the asset begins when development is complete and the asset is available for use. It is amortized over the period of expected future benefit.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

B. Computer software

The cost of computer software is amortized on a straight-line basis over the estimated useful life (3~5 years).

- Impairment of non financial assets

The Company assesses at the end of each reporting period whether there is any indication that an asset in the scope of IAS 36 “Impairment of Assets” may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, The Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognized impairment loss is reversed only if there has been an increase in the estimated service potential of an asset which in turn increases the recoverable amount. However, the reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.

A cash generating unit, or groups of cash-generating units, to which goodwill has been allocated is tested for impairment annually at the same time, irrespective of whether there is any indication of impairment. If an impairment loss is to be recognized, it is first allocated to reduce the carrying amount of any goodwill allocated to the cash generating unit (group of units), then to the other assets of the unit (group of units) pro rata on the basis of the carrying amount of each asset in the unit (group of units). Impairment losses relating to goodwill cannot be reversed in future periods for any reason.

An impairment loss of continuing operations or a reversal of such impairment loss is recognized in profit or loss.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Treasury shares

Acquisitions of the shares of the Company (treasury shares) are recognized at cost and deducted from equity. Any difference between the carrying amount and the consideration, if reissues, is recognized in capital surplus under equity.

When the retirement of treasury shares, capital surplus – share premiums and share capital are debited proportionately, gains on retirement of treasury shares should be recognized under existing capital surplus arising from similar types of treasury shares; losses on retirement of treasury shares should be offset against existing capital surplus form similar types of treasury shares. If there are insufficient capital reserves to be offset against, then such losses should be accounted for under retained earnings.

Revenue recognition

The Company’s revenues arising from contracts with customers are mainly rendering of processing services and rental of testing machinery. The accounting policies are explained as follows:

A. Rendering of services

The Company’s primary activity is to conduct testing and assembly services based on customer’s specification demand. According to the customer contract, the ownership of the work in process belongs to the customer. The customer controls the work in process when the Company provides services to create or enhance it. Accordingly, the Company’s performance obligation is satisfied over time and the Company, based on the consideration stated in the customer contract (less estimated volume discount), recognizes service revenues over time. The Company estimates the volume discounts using the expected value method based on historical experiences. However, revenue is only recognized to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur and when the uncertainty associated with the variable consideration is subsequently resolved. During the period specified in the contract, refund liability is recognized for the expected volume discounts.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

The credit period of the Company’s service revenue is from 30 to 120 days. For most of the contracts, when the Company transfers those processed assets to customers and has a right to an amount of consideration that is unconditional, these contracts are recognized as trade receivables. The Company usually collects the payments shortly after transferring those processed assets to customers; therefore, there is no significant financing component to the contract. For some of the contracts, the Company transfers those processed assets to customers but does not have a right to an amount of consideration that is unconditional, these contacts should be presented as contract assets. Besides, in accordance with IFRS 9, the Company measures the loss allowance for a contract asset at an amount equal to the lifetime expected credit losses.

B. Revenue from rental of machinery

The Company provides rental of testing machineries based on customers’ demand. According to the contract, the Company provides tailored machineries to customers for testing purposes for a certain period of time. During the contract period, those machineries are for the contracted customers’ use only, and will not be mixed with other testing machineries. Meanwhile, during the contract period, those machineries are still under control of the Company, the customer does not have the right to control over or to direct the right of use of the rented machineries. Usually, the unit rental price is fixed and is stated in the contract. Accordingly, the Company’s performance obligations is satisfied over time and the Company recognizes revenues from rental of the machinery by rental hours or testing volume multiplied by the fixed unit price, or over the rental period on a straight line basis.

The credit period of the Company’s service revenue is from 30 to 120 days. For most of the contracts, the Company recognizes trade receivables upon the completion of rental period. These trade receivables usually have short period and no significant financial component is arisen.

For some machinery rental contracts, prepayments are received from customers upon signing the contract, the Company then has the obligation to provide the services subsequently. Accordingly, these amounts are recognized as contract liabilities.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

C. Sales of machinery

The Company manufactures and sells professional testing machinery. Those machineries must be tested for specifications according to the contract signed by both parties before being delivered to customers. The Company performs the specification test in accordance with the contract and issues a machinery inspection report to the customer. After the customer’s confirmation that the operating data and function of the machineries have met the specification stated in the inspection report, the machinery can be delivered to the customer’s designated location stated in the contract and the control of the machinery can be transferred. At this time, the customer has the right to determine the sales channels and price of those testing machineries, and has the ability to prevent other companies from directing the use and obtaining the benefits of these products. Thus, the Company recognizes the revenue generated from the sales of machineries.

Considering the fact that assisting customers for the machinery installation and providing safety guidance are not significant, so the Company issues an invoice with total consideration to the customer and recognizes the amount as trade receivables upon the delivery of the machinery. In addition, the period between the sales of machinery and the actual receipt of the payment is within one year, therefore, there is no significant financial component. The Company provides its customer with a warranty for refund for defectives products. Such warranty is accounted for in accordance with IAS 17 as liability provision.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period when they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Government grants

Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. Where the grant relates to an asset, it is recognized as deferred income and released to income in equal amounts over the expected useful life of the related asset. When the grant relates to an expense item, it is recognized as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Post-employment benefits

All regular employees of KYEC are entitled to a pension plan that is managed by an independently administered pension fund committee. Fund assets are deposited under the committee’s name in the specific bank account and hence not associated with KYEC. Therefore, fund assets are not included in the Company’s consolidated financial statements. Pension benefits for employees of the overseas subsidiaries and the branches are provided in accordance with the respective local regulations.

For the defined contribution plan, the Company and its domestic subsidiaries will make a monthly contribution of no less than 6% of the monthly wages of the employees subject to the plan. The Company recognizes expenses for the defined contribution plan in the period in which the contribution becomes due. Overseas subsidiaries and branches make contribution to the plan based on the requirements of local regulations.

Post-employment benefit plan that is classified as a defined benefit plan uses the Projected Unit Credit Method to measure its obligations and costs based on actuarial assumptions. Remeasurements, comprising of the effect of the actuarial gains and losses, the effect of the asset ceiling (excluding net interest) and the return on plan assets, excluding net interest, are recognized as other comprehensive income with a corresponding debit or credit to retained earnings in the period in which they occur. Past service costs are recognized in profit or loss on the earlier of:

A. the date of the plan amendment or curtailment, and
B. the date that KYEC recognizes restructuring-related costs.

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset, both as determined at the start of the annual reporting period, taking account of any changes in the net defined benefit liability (asset) during the period as a result of contribution and benefit payment.

Share-based payment transactions

The cost of equity-settled transactions between the Company and its subsidiaries is recognized based on the fair value of the equity instruments granted. The fair value of the equity instruments is determined by using an appropriate pricing model.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

The cost of equity-settled transactions is recognized, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period.

No expense is recognized for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

Where the terms of an equity-settled transaction award are modified, the minimum expense recognized is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognized for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognized for the award is recognized immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.

The cost of restricted stocks issued is recognized as salary expense based on the fair value of the equity instruments on the grant date, together with a corresponding increase in other capital reserves in equity, over the vesting period. The Company recognizes unearned employee salary which is a transitional contra equity account; the balance in the account will be recognized as salary expense over the passage of vesting period.

Income taxes

Income tax expense (income) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

A. Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Current income tax relating to items recognized in other comprehensive income or directly in equity is recognized in other comprehensive income or equity and not in profit or loss.

The income tax for unappropriated earnings is recognized as income tax expense in the subsequent year when distribution proposal is approved by the shareholders’ meeting.

B. Deferred tax

Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

a. where the deferred tax liability arises from the initial recognition of goodwill of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
b. in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, the carry forward of unused tax credits and unused tax losses can be utilized, except:

a. where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

b. in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. The measurement of deferred tax assets and deferred tax liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets are reassessed at each reporting date and are recognized accordingly.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

5. Significant Accounting Judgments, Estimates and Assumptions

The preparation of the Company’s consolidated financial statements require management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

A. Determination of the useful lives for plant, property and equipment

The Company’s determination of useful lives is based on the expected utility and the experience on using similar property, plant and equipment in prior periods. Based on the Company’s assets management policy, the Company may dispose certain assets after consuming the economic benefits of the assets to certain extent.

By considering the Company’s previous experience as well as peer experience on using similar property, plant and equipment, on March 14, 2019, the Board of Directors approved to change the estimated useful lives of certain machinery equipment from 6 years to 8 years and certain second-handed machinery equipment from 3 years to 4 years effective from January 1, 2019. The change was aimed at reflecting more accurate useful lives, achieving more reasonable cost allocations, and providing more reliable and relevant information. The change of the accounting estimate decreased the depreciation expense by NT$995,843 thousands for the year ended December 31, 2019. For more information of depreciation, addition and disposal of property, plant and equipment, please refer to Note 6.

B. Recognition of right-of-use assets and lease liabilities

The Company considers the lease period of the leased assets and the lessee’s incremental borrowing interest rate to determine the right-of-use assets and lease liabilities.

To determine the lease period, the Company considers all relevant facts and circumstances that may produce economic incentives to exercise or not to exercise the option to terminate the lease, including expected changes in all facts and conditions from the commencement date of the lease to the exercise date of the option. The main factors to consider include the contract terms and conditions for the period covered by the option and the materiality of the underlying asset to the lessee's operations. When changes of major events or circumstances that are within the control of the Company occur, the lease period is re-evaluated.

In determining a lessee’s incremental borrowing rate used in discounting lease payments, the Company mainly takes into account the market risk-free rates, the estimated lessee’s spread and secured status in a similar economic environment.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

C. Fair value of Level 3 financial instruments

Where the fair value of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using valuation techniques including the income approach (for example the discounted cash flows model) or market approach. Changes in assumptions about these factors could affect the reported fair value of the financial instruments. Please refer to Note 12 for more details.

D. Revenue recognition - sales returns and discounts

The Company estimates sales returns and allowance based on historical experience and other known factors at the time of sale, which reduces the operating revenue. In assessing the aforementioned sales returns and allowance, on the basis of highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Please refer to Note 6. (12) for more details.

6. Contents of Significant Accounts

(1) Cash and cash equivalents

Cash on hand Checking and savings accounts Time deposits Total	December 31, 2020	December 31, 2019
	$814 6,761,722 1,245,994 $8,008,530	$713 6,062,897 102,395 $6,166,005

(2) Financial assets at fair value through other comprehensive income

Equity instrument investments measured at fair value through other comprehensive income- current Listed company’s stocks	December 31, 2020	December 31, 2019
	$-	$30,114

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Equity instrument investments measured at fair value through other comprehensive income- non-current Listed company’s stocks Unlisted company’s stocks Subtotal Total	December 31, 2020	December 31, 2019
	$28,117 4,418,446	$25,009 2,400,157
	4,446,563 $4,446,563	2,425,166 $2,455,280

The Company has equity instrument investments measured at fair value through other comprehensive income. Details on dividends recognized for the years ended of 2020 and 2019 are as follows:

Related to investments derecognized during the period Related to investments held at the end of the reporting period Dividends recognized during the period	For the years ended December 31	For the years ended December 31
	2020	2019
	$783 50,183 $50,966	$- 38,398 $38,398

In consideration of disposition or liquidation of certain investments according to the Company’s investment strategy, the Company derecognized certain equity instrument investments measured at fair value through other comprehensive income. Details on derecognition of the investments for the years ended December 31, 2020 and 2019 are as follows:

The fair value of the investments at the date of derecognition The cumulative gain on disposal	December 31, 2020	December 31, 2019
	$65,027 38,462	$- -

The Company received capital returns in the amount of NT$0 thousand and NT$395 thousand, respectively, from its equity instrument investments measured at fair value through other comprehensive income for the years ended December 31, 2020 and 2019.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Financial assets at fair value through other comprehensive income were not pledged.

(3) Notes receivable

Notes receivables from operating activities Less: loss allowance Total	December 31, 2020	December 31, 2019
	$3,049 - $3,049	$4,268 - $4,268

Notes receivables were not pledged.

The Company adopted IFRS 9 for impairment assessment. Please refer to Note 6 (17) for more details on accumulated impairment. Please refer to Note 12 for more details on credit risk.

(4) Trade receivables and trade receivables from related parties

Trade receivables Less: loss allowance Subtotal Trade receivables from related parties Less: loss allowance Subtotal Total	December 31, 2020	December 31, 2019
	$4,190,171 (25,180)	$4,983,364 (47,083)
	4,164,991	4,936,281
	1,724,951 -	911,027 -
	1,724,951 $5,889,942	911,027 $5,847,308

No trade receivables were pledged.

The receivables are generally on 30 to 120 days terms. Please refer to Note 6 (17) for more details on loss allowance of trade receivables for the years ended December 31, 2020 and 2019. Please refer to Note 12 for more details on credit risk.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

(5) Inventories

Raw materials Work in progress Finished goods Total	December 31, 2020	December 31, 2019
	$719,695 200,562 60,712 $980,969	$789,707 223,213 68,115 $1,081,035

The cost of inventories recognized in operating costs for the years ended December 31, 2020 and 2019 amounted to NT$21,005,316 thousand and NT$18,523,521 thousand, respectively, including the write-down of inventories of NT$40,342 thousand and NT$15,729 thousand, and scrap loss of NT$3,931 thousand and NT$3,510 thousand, respectively.

No inventories were pledged.

(6) Prepayments

Prepaid equipment Prepaid expenses Input tax Others Total	December 31, 2020	December 31, 2019
	$336,191 91,026 41,895 10,171 $479,283	$125,545 72,472 51,152 23,438 $272,607

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

(7) Investments accounted for using the equity method

	December 31,2020	December 31,2020	December 31,2019	December 31,2019
	Carrying amount	Percentage of ownership	Carrying amount	Percentage of ownership
Fixwell Technology Corp. Wei Jiu Industrial Co., Ltd. Total	$46,981 22,875 $69,856	23.33% 34.00%	$45,305 19,923 $65,228	23.33% 34.00%

The Company’s investments in Fixwell Technology Corp. and Wei Jiu Industrial Co., Ltd. are not individually material. The summarized financial information of the Company’s ownership in those associates is as follows:

Net income Other comprehensive income, net of tax Total comprehensive income	For the years ended December 31	For the years ended December 31
	2020	2019
	$16,088 - $16,088	$14,336 - $14,336

The investments mentioned above were not pledged.

(8) Property, plant and equipment

Owner occupied property, plant and equipment Property, plant and equipment leased out under operating leases Total	December 31, 2020	December 31, 2019
	$38,960,077 187,498 $39,147,575	$36,779,355 111,532 $36,890,887

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

A. Owner occupied property, plant and equipment

Land	Buildings and facilities	Plant equipment	Machinery and equipment	Office equipment	Transportation equipment	Miscellaneous equipment	Leasehold improvements	Construction in progress and equipment awaiting examination	Total
$1,143,394 2,880 - - -	$4,682,938 37,596 - (32,986) 15,847	$8,697,635 646,772 (82,939) - 9,433	$86,063,081 6,246,740 (2,428,569) 2,776,823 134,589	$694,066 71,529 (1,258) 1,169 695	$53,957 2,485 - - 80	$5,339,081 403,643 (56,125) 55,765 21,256	$4,425 - - - -	$1,532,268 3,170,651 (9,697) (2,689,031) 5,101	$108,210,845 10,582,296 (2,578,588) 111,740 187,001
$1,146,274	$4,703,395	$9,270,901	$92,792,664	$766,201	$56,522	$5,763,620	$4,425	$2,009,292	$116,513,294
$1,143,394 - - - - $1,143,394	$4,700,454 - - 20,304 (37,820) $4,682,938	$8,275,234 494,405 (55,145) - (16,859) $8,697,635	$78,622,911 7,678,238 (2,702,344) 2,706,187 (241,911) $86,063,081	$711,410 27,647 (43,440) 1,254 (2,805) $694,066	$48,856 6,081 (775) - (205) $53,957	$5,114,784 348,564 (127,585) 55,741 (52,423) $5,339,081	$4,425 - - - - $4,425	$677,083 3,224,561 - (2,361,721) (7,655) $1,532,268	$99,298,551 11,779,496 (2,929,289) 421,765 (359,678) $108,210,845

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

==> picture [694 x 361] intentionally omitted <==

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

Construction in
progress
and equipment
Buildings and Plant Machinery and Office Transportation Miscellaneous Leasehold awaiting
Land facilities equipment equipment equipment equipment equipment improvements examination Total
Accumulated
depreciations and impairment:
As of January 1, 2020 $- $1,834,937 $5,931,834 $59,219,514 $593,520 $37,065 $3,812,555 $2,065 $- $71,431,490
Depreciation - 165,837 507,379 7,100,725 35,964 6,403 380,139 442 - 8,196,889
Disposals - - (82,939) (2,324,940) (1,249) - (54,715) - - (2,463,843)
Transfers - (21,577) - 134,518 - - - - - 112,941
Impairment - - - 153,955 - - - - - 153,955
Exchange differences - 8,410 5,750 92,131 546 72 14,876 - - 121,785
As of December 31, 2020 $- $1,987,607 $6,362,024 $64,375,903 $628,781 $43,540 $4,152,855 $2,507 $- $77,553,217
As of January 1, 2019 $- $1,642,145 $5,484,142 $56,133,580 $589,492 $32,255 $3,616,172 $1,623 $- $67,499,409
Depreciation - 167,396 514,435 5,833,242 45,693 5,760 365,704 442 - 6,932,672
Disposals - - (55,145) (2,622,329) (39,177) (775) (123,383) - - (2,840,809)
Transfers - 43,196 - 4,858 (206) - (12,008) - - 35,840
Impairment - - - 55,267 - - - - - 55,267
Exchange differences - (17,800) (11,598) (185,104) (2,282) (175) (33,930) - - (250,889)
As of December 31, 2019 $- $1,834,937 $5,931,834 $59,219,514 $593,520 $37,065 $3,812,555 $2,065 $- $71,431,490
Net carrying amount as at:
December 31, 2020 $1,146,274 $2,715,788 $2,908,877 $28,416,761 $137,420 $12,982 $1,610,765 $1,918 $2,009,292 $38,960,077
December 31, 2019 $1,143,394 $2,848,001 $2,765,801 $26,843,567 $100,546 $16,892 $1,526,526 $2,360 $1,532,268 $36,779,355
----- End of picture text -----

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

B. Property, plant and equipment leased out under operating leases

Buildings and facilities	Machinery and equipment	Total
$146,480 - - 32,986 143	$220,026 12,537 - 20,540 -	$366,506 12,537 - 53,526 143
$179,609	$253,103	$432,712
$189,678 - - (40,028) (3,170)	$196,421 1,167 - 22,438 -	$386,099 1,167 - (17,590) (3,170)
$146,480	$220,026	$366,506
$83,760 4,949 - 21,577 92	$171,214 25,831 - (62,209) -	$254,974 30,780 - (40,632) 92
$110,378	$134,836	$245,214
$104,911 4,813 - (24,206) (1,758)	$173,034 9,814 - (11,634) -	$277,945 14,627 - (35,840) (1,758)
$83,760	$171,214	$254,974
$69,231 $62,720	$118,267 $48,812	$187,498 $111,532

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

C. Capitalized borrowing costs of property, plant and equipment are as follows:

Construction in progress Capitalization rate of borrowing costs	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$49,810 0.95~ 5.23%	$92,113 1.71~ 5.23%

D. The investing activities partially influenced the cash flow are as follows:

Acquisition of property, plant and equipment Net decrease (increase) in payables to equipment suppliers Net decrease in other payables - related parties Total Disposal of property, plant and equipment Net decrease (increase) in other receivables Net decrease (increase) in other receivables - related parties Total	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	2020	2019
	$99,221 (2,783) (6,521) $89,917	$96,818 24,600 117 $121,535

E. In order to meet the needs of future operation and development, the Company decided to purchase three lots of land and buildings located in Miaoli County for operational use. The total purchase price was NT $ 850 million (including tax). As of December 31, 2020, the Company has paid off the total consideration and recognized the payment in the construction in progress. According to the purchase agreement, ownership transfer registration shall be completed within four months after obtaining the use license.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

In order to meet the needs of future operation and development, the Company decided to acquire the additional floors of the abovementioned buildings for production efficiency improvement. The expected purchase price was NT $350 million (including tax). As of December 31, 2020, the purchase agreement has not been signed.

F. As of December 31, 2020 and 2019, the Company recognized an impairment loss of NT$153,955 thousand and NT$55,267 thousand, respectively, for certain machinery and equipment which were either damaged or idle and could no longer be used.
G. Please refer to Note 8 for property, plant and equipment ledged as collateral.

(9) Intangible assets

Software	Goodwill	Total
$326,722 64,763 (72,287) - 892	$35,914 - - - -	$362,636 64,763 (72,287) - 892
$320,090	$35,914	$356,004
$332,598 26,418 (30,077) - (2,217)	$35,914 - - - -	$368,512 26,418 (30,077) - (2,217)
$326,722	$35,914	$362,636

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Software	Goodwill	Total
$252,927 52,193 (72,287) - 815	$35,914 - - - -	$288,841 52,193 (72,287) - 815
$233,648	$35,914	$269,562
$197,450 87,531 (30,077) - (1,977)	$- - - 35,914 -	$197,450 87,531 (30,077) 35,914 (1,977)
$252,927	$35,914	$288,841
$86,442 $73,795	$- $-	$86,442 $73,795

Amortization expenses of intangible assets recognized are as follows:

Operating costs Selling and administrative expenses Research and development expenses Total	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$28,937 18,403 4,853 $52,193	$66,404 14,543 6,584 $87,531

Please refer to Note 6(10) for goodwill impairment testing.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

(10) Goodwill impairment testing

The Company acquired Dawning Leading Technology Inc. in November 2018, and recognized goodwill of NT$35,914 thousand, which is subject to impairment testing annually. After the acquisition of Dawning Leading Technology Inc., an assembly center was established, and goodwill was allocated to this center (a separate cash-generating unit).

Cash-generating unit of assembly center

As the acquisition date of Dawning Leading Technology Inc. was in November 2018, there is no impairment of goodwill in 2018. However, in 2019, the assembly center suffered an operating loss due mainly to severe competition and the delay in the introduction of new products. The recoverable amount of the assembly center has been determined based on a value-in-use calculation using cash flow projections from financial budgets approved by management covering a five-year period. The projected cash flows have been updated to reflect the change in demand for products and services. The pre-tax discount rate applied to cash flow projections was 13.60% in 2019. As a result, management recognized an impairment loss of NT$35,914 thousand on goodwill in 2019.

Key assumptions used in value-in-use calculations

The calculation of value-in-use for assembly center is most sensitive to the following assumptions:

(a) revenue growth rate applied to cash flow projections.

(b) discount rates.

Revenue growth rates –Revenue growth rate is estimated based on market supply and demand and product implementation progress during the budget period.

Discount rates – discount rates reflect the current market assessment of the risks specific to each cash generating unit (including the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted). The discount rate was estimated based on the weighted average cost of capital (WACC) for the Company, taking into account the particular situations of the Company and its operating segments. The WACC includes both the cost of liabilities and cost of equities. The cost of equities is derived from the expected returns of the Company’s investors on capital, where the cost of liabilities is measured by the interest-bearing loans that the Company has obligation to settle.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

(11) Short-term loans

Unsecured bank loans	Interest Rates (%) 3.85~3.92%	December 31, 2020 $100,854	December 31, 2019 $493,383

The Company’s unused short-term lines of credits amounted to NT$6,395,233 thousand and NT$4,200,151 thousand as at December 31, 2020 and 2019, respectively.

(12) Other current liabilities

Refund liabilities Receipts on behalf of others Others Total	December 31, 2020	December 31, 2019
	$194,956 380,540 5,360 $580,856	$39,080 260,627 4,216 $303,923

- (13) Long term borrowings

As of December 31, 2020

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

Maturity
Lenders Nature Date Balance Terms of repayment
----- End of picture text -----

Lenders	Nature	Date	Balance	Terms of repayment
Shanghai Commerical	Unsecured bank	2023.03.19	$911,360	Revolving Credit
Bank	loans
Shanghai Commerical	Unsecured bank	2022.03.27	375,105	Revolving Credit
Bank	loans
Taishin Bank	Unsecured bank	2023.02.07	1,300,000	Revolving Credit
	loans
Mega Bank	Unsecured bank	2022.09.18	313,280	Revolving Credit
	loans
Land Bank	Unsecured bank	2022.03.03	170,880	Revolving Credit
	loans
First Commercial Bank	Unsecured bank	2022.07.20	12,463	Revolving Credit
	loans
MUFG Bank	Unsecured bank	2022.12.04	56,960	Revolving Credit
	loans
Bank of China	Unsecured bank	2022.10.14	712,000	Revolving Credit
	loans

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English Translation of Financial Statements Originally Issued in Chinese

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

==> picture [423 x 31] intentionally omitted <==

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

Maturity
Lenders Nature Date Balance Terms of repayment
----- End of picture text -----

Lenders	Nature	Date	Balance	Terms of repayment
Taiwan Business Bank	Unsecured bank	2022.03.11	541,120	Revolving Credit
	loans
Cathay United Bank	Unsecured bank	2022.12.25	227,840	Revolving Credit
	loans
HSBC Taiwan Bank	Unsecured bank	2022.10.27	703,485	Revolving Credit
	loans
Shin Kong Commerical	Unsecured bank	2022.12.11	284,800	Revolving Credit
Bank	loans
Mizuho Bank	Unsecured bank	2023.01.01	500,000	Revolving Credit
	loans
KGI Bank	Unsecured bank	2024.07.15	400,000	The principal will be repaid in 5
	loans			semi-annual payments starting
				from July 15, 2022.
O Bank	Unsecured bank	2025.02.07	300,000	The principal will be repaid in 7
	loans			semi-annual payments starting
				from February 7, 2022.
Mega Bank	Unsecured bank	2025.02.07	680,000	50% of principal will be repaid
	loans			on August 7, 2023. The
				remaining principal will be
				repaid on maturity day.
Chang Hwa	Unsecured bank	2025.01.20	695,000	The principal will be repaid in 5
Commercial Bank	loans			semi-annual payments starting
				from January 20, 2023.
Fubon Bank	Unsecured bank	2023.02.07	800,000	50% of principal will be repaid
	loans			on August 7, 2022. The
				remaining principal will be
				repaid on maturity day.
Bank of Taiwan	Unsecured bank	2024.01.20	1,200,000	50% of principal will be repaid
	loans			on July 20, 2022. The remaining
				principal will be repaid on
				maturity day.

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English Translation of Financial Statements Originally Issued in Chinese

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

==> picture [423 x 31] intentionally omitted <==

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

Maturity
Lenders Nature Date Balance Terms of repayment
----- End of picture text -----

Lenders	Nature	Date	Balance	Terms of repayment	Terms of repayment
First Commercial Bank	Unsecured bank	2025.01.20	895,497	The principal will be repaid in 5
	loans			semi-annual	payments starting
				from July 20, 2022.
Far Eastern Bank	Unsecured bank	2023.02.07	1,100,000	Repay at maturity
	loans
CTBC Bank	Unsecured bank	2024.02.07	300,000	50% of principal will be repaid
	loans			on August	7, 2023. The
				remaining principal will be
				repaid on maturity day.
Mega Bank	Commercial	2023.12.06	5,680,000	Revolving	credit. Renewable
and 17 others	paper loans			every three	months. Credit has
				not been fully utilized.
Mega Bank	Commercial	2025.10.11	200,000	Revolving	credit. Renewable
and 13 others	paper loans			every three	months. Credit has
				not been fully utilized.
Bank of Taiwan	Secured bank	2024.02.01	1,799,746	Repayable	in 6 semi-annual
and 6 others	loans			instalments	from August 01,
(King Long)				2021.
Bank of Taiwan	Secured bank	2025.01.05	310,912	Repayable	in 6 semi-annual
and 8 others	loans			instalments from July 05, 2022.
(King Long)
Shanghai Commerical	Unsecured bank	2022.05.23	213,657	Repayable	in 4 semi-annual
Bank (King Long)	loans			instalments	from December 5,
				2020.
Taishin Bank	Unsecured bank	2022.05.29	213,657	Repayable	in 4 semi-annual
(King Long)	loans			instalments	from December 5,
				2020.
Bank of Taiwan	Unsecured bank	2022.07.17	427,314	Repayable	in 7 quarterly
(King Long)	loans			instalments	from January 17,
				2021.
Shin Kong Commerical	Unsecured bank	2022.07.17	284,876	Repayable	in 3 semi-annual
Bank (King Long)	loans			instalments from July 17, 2021.
Yuanta Commercial	Unsecured bank	2022.08.12	284,876	Repayable	in 6 quarterly
Bank (King Long)	loans			instalments from May 30, 2021.

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English Translation of Financial Statements Originally Issued in Chinese

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

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

Maturity
Lenders Nature Date Balance Terms of repayment
O Bank (King Long) Unsecured bank 2022.10.10 94,959 Repayable in 6 semi-annual
loans instalments from April 29, 2020.
E. Sun Bank Unsecured bank 2022.10.11 284,876 Repayable in 4 semi-annual
(King Long) loans instalments from April 30, 2021.
Fubon Bank Unsecured bank 2022.11.27 85,463 After paying US$160 thousand
(King Long) loans on May 28, 2021, repayable in 6
quarterly instalments.
Taiwan Cooperative Unsecured bank 2022.12.16 284,876 Repayable in 7 quarterly
Commercial Bank loans instalments from June 16, 2021.
(King Long)
HSBC Bank Unsecured bank 2022.12.17 341,851 Repayable in 5 semi-annual
(King Long) loans instalments from December 31,
2020.
Chang Hwa Unsecured bank 2023.04.23 427,314 Repay at maturity
Commercial Bank loans
(King Long)
CTBC Bank Unsecured bank 2023.05.08 142,438 Execpt for the last payment of
(King Long) loans US$2,750 thousand, repayable in
4 semi-annual instalments of
US$750 thousand from
November 8, 2021.
HSBC Taiwan Bank Unsecured bank 2021.04.09 28,488 Repayable in 5 semi-annual
(Zhengkuan) loans instalments, except for the last
payment which is due in 5
months from April 27, 2019.
KGI Bank Unsecured bank 2021.11.08 136,741 Repayable in 5 semi-annual
(Zhengkuan) loans instalments, except for the last
payment which is due in 3
months from January 26, 2020.
Shanghai Commerical Unsecured bank 2022.11.07 142,438 Repayable in 4 semi-annual
Bank (Zhengkuan) loans instalments from May 7, 2021.
Subtotal 23,864,272
Less: current portion (1,844,759)
Less: arangement fee (42,717)
Less: unamortized discount (10,767)
Total $21,966,029
Interest Rates 0.50%~4.65%
----- End of picture text -----

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

As of December 31, 2019

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

Maturity
Lenders Nature Date Balance Terms of repayment
----- End of picture text -----

Lenders	Nature	Maturity Date	Balance	Terms of repayment
Citi Bank	Unsecured	2021.11.30	$215,250	Revolving Credit
	bank loans
SinoPac Bank	Unsecured	2021.05.22	539,640	Revolving Credit
	bank loans
HSBC Taiwan Bank	Unsecured	2021.10.14	1,138,600	Revolving Credit
	bank loans
Cathay United Bank	Unsecured	2021.12.23	269,820	Revolving Credit
	bank loans
Bank of china	Unsecured	2021.10.14	749,500	Revolving Credit
	bank loans
Mizuho Bank	Unsecured	2021.01.01	1,230,000	Revolving Credit
	bank loans
Hua Nan Commercial	Unsecured	2021.05.10	299,800	Revolving Credit
Bank	bank loans
E. Sun Bank	Unsecured	2021.09.10	239,840	Revolving Credit
	bank loans
Shin Kong Commercial	Unsecured	2021.01.03	449,700	Revolving Credit
Bank	bank loans
Mega Bank	Unsecured	2021.09.18	749,500	Revolving Credit
	bank loans
Land Bank	Unsecured	2021.03.28	269,820	Revolving Credit
	bank loans
Mega Bank	Unsecured	2021.02.12	319,500	Repay at maturity
	bank loans
Land Bank	Unsecured	2021.02.12	126,000	Repay at maturity
	bank loans
Fubon Bank	Unsecured	2021.02.09	175,500	Repay at maturity
	bank loans
Bank of Taiwan	Unsecured	2021.02.12	479,497	Repay at maturity
	bank loans
Land Bank and 13	Secured bank	2021.03.10	3,750,000	25% of principal will be repaid
others	loans			on September 10, 2019. The
				remaining principal will be
				repaid on maturity day.

65 -

English Translation of Financial Statements Originally Issued in Chinese

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

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

Maturity
Lenders Nature Date Balance Terms of repayment
----- End of picture text -----

Lenders	Nature	Maturity Date	Balance	Terms of repayment
Mega Bank and 17	Commercial	2023.12.06	5,680,000	Revolving credit. Renewable
others	Paper			every three months. Credit has
				not been fully utilized.
Mega Bank and 17	Secured bank	2023.12.06	300,000	25% of principal will be repaid
others	loans			on February 13, 2023. The
				remaining principal will be
				repaid on maturity day.
Bank of Taiwan and 6	Secured bank	2024.02.01	1,262,196	Repayable in 6 semi-annual
others (King Long)	loans			instalments from August 01,
				2021.
Shanghai Commercial	Unsecured	2022.05.23	299,707	Repayable in 4 semi-annual
Bank (King Long)	bank loans			instalments from December 5,
				2020.
Taishin Bank	Unsecured	2022.05.29	299,707	Repayable in 4 semi-annual
(King Long)	bank loans			instalments from December 5,
				2020.
Bank of Taiwan	Unsecured	2022.07.17	449,560	Repayable in 7 quarterly
(King Long)	bank loans			instalments from January 17,
				2021.
Shin Kong Commercial	Unsecured	2022.07.17	299,707	Repayable in 3 semi-annual
Bank (King Long)	bank loans			instalments from July 17, 2021.
Yuanta Commercial	Unsecured	2022.08.12	29,971	Repayable in 6 quarterly
Bank (King Long)	bank loans			instalments from May 30, 2021.
O Bank (King Long)	Unsecured	2022.10.10	149,853	Repayable in 6 semi-annual
	bank loans			instalments from April 29, 2020.
E. Sun Bank	Unsecured	2022.10.11	59,941	Repayable in 4 semi-annual
(King Long)	bank loans			instalments from April 30, 2021.
Fubon Bank	Unsecured	2022.11.27	29,971	After paying US$160 thousand
(King Long)	bank loans			on May 28, 2021, repayable in 6
				quarterly instalments.
Taiwan Cooperative	Unsecured	2022.12.16	59,941	Repayable in 7 quarterly
Bank (King Long)	bank loans			instalments from June 16, 2021.
O Bank (Zhengkuan)	Unsecured	2020.03.27	29,971	After paying US$1 million on
	bank loans			April 07, 2018, repayable in 4
				semi-annual instalments, except
				for the last payment which is due
				in 5 months.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

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

Maturity
Lenders Nature Date Balance Terms of repayment
HSBC Bank Unsecured 2021.04.09 89,912 Repayable in 5 semi-annual
(Zhengkuan) bank loans instalments, except for the last
payment which is due in 5
months from April 27, 2019.
KGI Bank (Zhengkuan) Unsecured 2021.11.08 239,766 Repayable in 5 semi-annual
bank loans instalments, except for the last
payment which is due in 3
months from January 26, 2020.
Shanghai Commercial Unsecured 2022.11.08 89,912 Repayable in 5 semi-annual
Bank (Zhengkuan) bank loans instalments from November 8,
2020.
Subtotal 20,372,082
Less: current portion (403,605)
Less: arrangement fee (37,035)
Less: unamortized discount (7,002)
Total $19,924,440
Interest Rates 0.83%~5.23%
----- End of picture text -----

a. Certain property, plant and equipment were pledged. Please refer to Note 8 for more details.
b. Please refer to Note 9 for the financial covenants during the loan period.

(14) Post-employment benefits

Defined contribution plan

The Company adopted a defined contribution plan in accordance with the Labor Pension Act of the R.O.C. The Company has made monthly contribution of 6% of each individual employee’s salaries or wages to employee’s pension accounts.

Subsidiaries located in the People’s Republic of China will contribute social welfare benefits based on a certain percentage of employee’s salaries or wages to the employee’s individual pension accounts.

Pension benefits for employees of overseas subsidiaries and branches are provided in accordance with the local regulations.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Pension expenses under the defined contribution plan for the years ended December 31, 2020 and 2019 were NT$247,250 thousand and NT$288,659 thousand, respectively.

Defined benefit plan

The Company adopts a defined benefit plan in accordance with the Labor Standards Act of the R.O.C. The pension benefits are disbursed based on the units of service years and the average salaries in the last month of the service year. Two units per year are awarded for the first 15 years of services while one unit per year is awarded after the completion of the 15th year. The total units shall not exceed 45 units. Under the Labor Standards Act, the Company contributes an amount equivalent to 2% of the employees’ total salaries and wages on a monthly basis to the pension fund deposited at the Bank of Taiwan in the name of the administered pension fund committee. Before the end of each year, the Company assesses the balance in the designated labor pension fund. If the amount is inadequate to pay pensions calculated for workers retiring in the same year, the Company will make up the difference in one appropriation before the end of March the following year.

The Ministry of Labor is in charge of establishing and implementing the fund utilization plan in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund. The pension fund is invested in-house or under mandation, based on a passive-aggressive investment strategy for long-term profitability. The Ministry of Labor establishes checks and risk management mechanism based on the assessment of risk factors including market risk, credit risk and liquidity risk, in order to maintain adequate manager flexibility to achieve targeted return without over-exposure of risk. With regard to utilization of the pension fund, the minimum earnings in the annual distributions on the final financial statements shall not be less than the earnings attainable from the amounts accrued from twoyear time deposits with the interest rates offered by local banks. Treasury Funds can be used to cover the deficits after the approval of the competent authority. As the Company does not participate in the operation and management of the pension fund, no disclosure on the fair value of the plan assets categorized in different classes could be made in accordance with paragraph 142 of IAS 19. The Company expects to contribute NT$17,500 thousand to its defined benefit plan during the 12 months beginning after December 31, 2020.

The maturities of the defined benefits plan as at December 31, 2020 and 2019 are both in 2025.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Pension costs recognized in profit or loss for the years ended December 31, 2020 and 2019:

Current period service costs Interest income or expense Overestimate (underestimate) Total	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$5,655 4,226 (4) $9,877	$5,991 4,527 21 $10,539

Changes in the defined benefit obligation and fair value of plan assets are as follows:

Defined benefit obligation at January 1, Plan assets at fair value Other non-current liabilities - accrued pension liabilities recognized on the consolidated balance sheets	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$849,561 (283,105) $566,456	$802,898 (274,729) $528,169

Reconciliation of liability (asset) of the defined benefit plan is as follows:

As at January 1, 2019 Current period service costs Net interest expense (income) Subtotal Remeasurements of the net defined benefit liability (asset): Actuarial gains and losses arising from changes in demographic assumptions Actuarial gains and losses arising from changes in financial assumptions	Defined benefit obligation	Fair value of plan assets	Benefit liability (asset)
	$752,629 5,991 7,074	$(271,059) - (2,547)	$481,570 5,991 4,527
	765,694 55,146 (38,952)	(273,606) - -	492,088 55,146 (38,952)

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Defined benefit obligation	Fair value of plan assets	Benefit liability (asset)
51,181 -	- (9,850)	51,181 (9,850)
67,375	(9,850)	57,525
(30,171) -	30,171 (21,444)	- (21,444)
$802,898 5,655 6,424	$(274,729) - (2,198)	$528,169 5,655 4,226
814,977 - 56,665 (1,354) -	(276,927) - - - (9,405)	538,050 - 56,665 (1,354) (9,405)
55,311	(9,405)	45,906
(20,727) - $849,561	20,727 (17,500) $(283,105)	- (17,500) $566,456

The following significant actuarial assumptions are used to determine the present value of the defined benefit obligation:

Discount rate Expected rate of salary increases	December 31, 2020	December 31, 2019
	0.40% 1.50%	0.80% 1.50%

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

A sensitivity analysis for significant assumptions as at December 31, 2020 and 2019 is shown as below:

as below:
Discount rate increase by 0.5% Discount rate decrease by 0.5% Future salary increase by 0.5% Future salary decrease by 0.5%	Effect on the defined benefit obligation
	2020		2019
	Increase in defined benefit obligation	Decrease in defined benefit obligation	Increase in defined benefit obligation	Decrease in defined benefit obligation
	$- 77,657 76,376 -	$(70,049) - - (69,659)	$- 76,608 75,659 -	$(45,058) - - (45,031)

The sensitivity analyses above are based on a change in a significant assumption (for example: change in discount rate or future salary), keeping all other assumptions constant. The sensitivity analyses may not be representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation of one another.

There was no change in the methods and assumptions used in preparing the sensitivity analyses compared to the previous period.

(15) Equity

A. Share capital

As of December 31, 2020 and 2019, KYEC’s authorized share capital was both NT$15,000,000 thousand; issued share capital was both NT$12,227,451 thousand (1,222,745 thousand shares), with par value of NT$10 per share. Each share has one voting right and a right to receive dividends.

B. Capital surplus

Additional paid-in capital Arising from conversion of bonds Treasury share transactions Arising from the exercise of employee restricted shares Total	December 31, 2020	December 31, 2019
	$578,468 3,588,848 390,101 30,755 $4,588,172	$823,017 3,588,848 390,101 30,755 $4,832,721

71 -

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

According to the Company Act, the capital surplus shall not be used except for offset the deficit of the company. When a company incurs no loss, it may distribute the capital surplus generated from the excess of the issuance price over the par value of share capital and donations. The distribution could be made in cash to its shareholders in proportion to the number of shares being held by each of them.

C. Retained earnings and dividend policy

According to KYEC’s Articles of Incorporation, net profits for each fiscal year, if any, shall be distributed in following order:

a. reserve for tax payments;
b. offset prior year’s losses;
c. set aside 10% of the remaining amount after deducting items (a) and (b) as legal reserve;
d. set aside or reverse special reserve in accordance with law and regulations; and
e. the distribution of the remaining portion, if any, will be recommended by the Board of Directors and resolved in the shareholders’ meeting.

The policy of dividend distribution should reflect factors such as the current and future investment environment, fund requirements, domestic and international competition and capital budgets; as well as the interest of the shareholders, share bonus equilibrium and long-term financial planning, etc. The Board of Directors shall make the distribution proposal annually and present it at the shareholders’ meeting. As the Company currently is still in the growth stage, funding may be required in the near future for expansion. Therefore, the current policy is to distribute cash dividends at no less than 20% of total dividends to be distributed.

According to the Company Act, the Company needs to set aside amount to legal reserve unless where such legal reserve amounts to the total authorized capital. The legal reserve can be used to offset the deficit of the Company. When the Company incurs no loss, it may distribute the portion of legal reserve which exceeds 25% of the paid-in capital by issuing new shares or by cash in proportion to the number of shares being held by each of the shareholders.

Pursuant to existing regulations, the Company is required to set aside additional special reserve equivalent to the net debit balance of the other components of shareholders’ equity. For any subsequent reversal of other net deductions from shareholders’ equity, the amount reversed may be distributed.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Following the adoption of TIFRS, the FSC on April 6, 2012 issued Order No. FinancialSupervisory-Securities-Corporate-1010012865, which sets out the following provisions for compliance:

On a public company's first-time adoption of the TIFRS, for any unrealized revaluation gains and cumulative translation adjustments (gains) recorded in shareholders’ equity that the Company elects to transfer to retained earnings by application of the exemption under IFRS 1, the Company shall set aside an equal amount of special reserve. Following a company’s adoption of the TIFRS for the preparation of its financial reports, when distributing distributable earnings, it shall set aside to special reserve, from the profit/loss of the current period and the undistributed earnings from the previous period, an amount equal to “other net deductions from shareholders’ equity” for the current fiscal year, provided that if the company has already set aside special reserve according to the requirements in the preceding point, it shall set aside supplemental special reserve based on the difference between the amount already set aside and other net deductions from shareholders’ equity. For any subsequent reversal of other net deductions from shareholders’ equity, the amount reversed may be distributed.

As of December 31, 2020 and 2019, special reserve set aside for the first-time adoption of TIFRS amounted to NT$201,416 thousand.

The appropriations for earnings for 2019 were resolved by the shareholders in its meeting on June 10, 2020 while the proposed appropriations of earnings for 2020 were approved by Board of Directors on March 12, 2021. The appropriations and dividends per share were as follows:

Legal reserve Special reserve Cash dividends-common stock Total	Appropriation of earnings	Appropriation of earnings	Dividendper share(NT$)	Dividendper share(NT$)
	2020	2019	2020	2019
	$362,921 (200,990) 2,200,941 $2,362,872	$297,659 (400,766) 1,956,392 $1,853,285	$1.80	$1.60

73 -

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

On March 12, 2021 and June 10, 2020, the Board of Directors and the shareholders’ meeting resolved to debit capital surplus by NT$244,549 thousand and NT$244,549 thousand, respectively, and distribute the same amounts of cash to shareholders.

Please refer to Note 6(19) for information regarding the employees’ compensations (bonuses) and remunerations to directors.

D. Non-controlling interests

Beginning balance Net gain (loss) attributable to non-controlling interests Other comprehensive income, attributable to non- controlling interests, net of tax: Exchange differences resulting from translating the financial statements of foreign operations Increase (decrease) attributable to non-controlling interests Ending balance	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$6,515 487 3 - $7,005	$42,741 (82) (52) (36,092) $6,515

(16) Operating revenues

Assembly and testing processing revenues Revenues from rental of machinery Rental income from property Other operating revenues Total revenues	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$25,066,252 2,075,224 26,010 1,791,818 $28,959,304	$23,778,126 1,148,449 24,288 588,574 $25,539,437

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Relevant information of revenues from contracts with customers for the years ended December 31, 2020 and 2019 are as follows:

A. Disaggregation of revenues

Nature of revenues	Timing of revenue recognition	For theyears ended December 31,	For theyears ended December 31,
		2020	2019
Rendering of services Revenues from rental of machinery Rental income from property Other operating revenues Total	Over time Over time On a straight-line basis or on a systematic basis (Note) At a point in time	$25,066,252 2,075,224 26,010 1,791,818 $28,959,304	$23,778,126 1,148,449 24,288 588,574 $25,539,437

Note: Please refer to Note 6(18) for information regarding leases.

B. Contract balances

(a) Contract assets – current

Nature of revenues Rendering of services	December 31, 2020 $202,972	December 31, 2019 $126,182	January 1, 2019 $289,427

Please refer to Note 6(17) for more details on effect of impairment. Relevant information of revenues from contracts with customers for the year s ended December 31, 2020 and 2019 are as follows:

The opening balance transferred to trade receivables Degree of completion measurement	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$126,182 $202,972	$288,359 $125,114

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

(b)Contract liabilities - current

Nature of revenues	December 31, 2020	December 31, 2019	January 1, 2019
Revenues from rental of machinery Assembly and testing processing revenues Other operating revenues Total	$11,591 70,512 147,500 $229,603	$52,486 14,428 1,416 $68,330	$84,834 44,240 1,129 $130,203

The difference of the beginning and ending balances is the net effect of the various revenue contracts signed before the opening date and the assumption of the new performance obligations for new contracts signed as of the ending date.

(17) Expected credit losses

Operating expenses - expected credit losses (gains)

Contract assets Notes receivable Trade receivables Total	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$- - 3,180 $3,180	$- - 20,609 $20,609

Please refer to Note 12 for more details on credit risk.

The Company measures the loss allowance of its contract assets and receivables (including notes receivable and trade receivables) at an amount equal to lifetime expected credit losses. The assessment of the Company’s loss allowance as at December 31, 2020 and 2019 are as follows:

A. The gross carrying amount of contract assets is NT$202,972 thousand and NT$126,182 thousand, respectively. Expected credit loss ratio is estimated to be 0%.
76 -

English Translation of Financial Statements Originally Issued in Chinese

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

B. The Company considers the grouping of trade receivables by counterparties’ credit ratings, geographical regions and industry sectors. Loss allowance is measured by using a provision matrix. Details are as follows:

As at December 31, 2020

==> picture [420 x 304] intentionally omitted <==

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

Not yet due Overdue
Group 1 (Note) 1-90 days 91-180 days 181-365 days >366 days Total
Gross carrying
amount $5,694,839 $189,765 $10,986 $1,115 $365 $5,897,070
Loss ratio -% -% 1% 2% 5%
Lifetime expected
credit losses (3,929) - (110) (22) (18) (4,079)
Subtotal 5,690,910 189,765 10,876 1,093 347 5,892,991
Not yet due Overdue
Group 2 (Note) 1-90 days 91-180 days 181-365 days >366 days Total
Gross carrying
amount $571 $- $- $45 $20,485 $21,101
Loss ratio 100% -% -% 100% 100%
Lifetime expected
credit losses (571) - - (45) (20,485) (21,101)
Subtotal - - - - - -
Total $5,892,991
----- End of picture text -----

As at December 31, 2019

Group 1	Not yet due (Note)		Overdue	Overdue		Total
		1-90 days	91-180 days	181-365 days	>366 days
Gross carrying amount Loss ratio Lifetime expected credit losses Subtotal	$5,574,530 -%	$266,482 -%	$14,275 1%	$18,228 2%	$2,385 5%	$5,875,900 (24,324)
	(23,697)	-	(143)	(365)	(119)
	5,550,833	266,482	14,132	17,863	2,266	5,851,576

77 -

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

==> picture [420 x 152] intentionally omitted <==

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

Not yet due Overdue
Group 2 (Note) 1-90 days 91-180 days 181-365 days >366 days Total
Gross carrying
amount $233 $- $186 $8,803 $13,537 $22,759
Loss ratio 100% -% 100% 100% 100%
Lifetime expected
credit losses (233) - (186) (8,803) (13,537) (22,759)
Subtotal - - - - - -
Total $5,851,576
----- End of picture text -----

Note: The Company’s notes receivable are not overdue.

The movement in the provision for impairment of contract assets, notes receivable, and trade receivables for the years ended December 31, 2020 and 2019 is as follows:

Contract assets	Notes receivable	Trade receivables	Other receivables
$- - - - -	$- - - - -	$47,083 3,180 (1,941) (23,149) 7	$- - - 23,149 -
$-	$-	$25,180	$23,149
$- - - - $-	$- - - - $-	$27,794 20,609 (1,299) (21) $47,083	$- - - - $-

Note: Although the Company wrote off the financial assets during 2020 and 2019, collection activities are still underway.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

(18) Leases

A. The Company as a lessee

The Company leases land and buildings with lease terms ranging from 6 to 58 years. At the end of the lease terms, the Company does not have the purchase option to acquire the leasehold land and buildings.

The Company leases machinery and equipment for operational use with lease terms ranging from 1 to 2 years. The Company has purchase options to acquire leasehold machinery and lease equipment at the end of the lease terms.

The effect that leases have on the financial position, financial performance and cash flows of the Company are as follows:

a. Amounts recognized in the balance sheet
(a) Right-of-use assets

The carrying amount of right-of-use assets

Land Buildings Machinery and equipment Total	December 31, 2020	December 31, 2019
	$576,345 37,257 714,630 $1,328,232	$553,922 45,314 774,671 $1,373,907

During the years ended December 31, 2020 and 2019, the Company’s additions to right-of-use assets amounted to NT$89,750 thousand and NT$774,671 thousand, respectively.

During the year ended December 31, 2020, the Company exercised the purchase option and transfered the right-of-use assets to machinery and equipment amounting to NT$32,681 thousand. No such transaction occurred in 2019.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

(b) Lease liabilities

Lease liabilities- current Lease liabilities- non-current Total	December 31, 2020	December 31, 2019
	$310,144 566,437 $876,581	$792,980 485,263 $1,278,243

Please refer to Note 6 (20)C for the interest on lease liabilities recognized during the years ended December 31, 2020 and 2019, and refer to Note 12 (3) section E Liquidity Risk Management for the maturity analysis for lease liabilities as at December 31, 2020 and 2019.

b. Amounts recognized in the statement of profit or loss

Depreciation charge for right-of-use assets

Land Buildings Machinery and equipment Total	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$20,867 5,184 102,055 $128,106	$19,354 5,266 - $24,620

c. Income and costs relating to leasing activities

The expenses relating to short-term leases The expenses relating to leases of low-value assets (not including the expenses relating to short-term leases of low-value assets) Total	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$67,682 3,752 $71,434	$54,176 3,300 $57,476

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

d. Cash outflows relating to leasing activities

During the years ended December 31, 2020 and 2019, the Company’s total cash outflows for leases amounted to NT$601,739 thousand and NT$85,499 thousand, respectively.

e. Other information relating to leasing activities

Extension and termination options

Some of the Company’s property rental agreements contain extension and termination options. In determining the lease terms, the non-cancellable period for which the Company has the right to use an underlying asset, together with periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. These options are used to maximize operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only by the Company.

After the commencement date, the Company reassesses the lease term upon the occurrence of a significant event or a significant change in circumstances that is within the control of the lessee and affects whether the Company is reasonably certain to exercise an option not previously included in its determination of the lease term, or not to exercise an option previously included in its determination of the lease term.

B. The Company as a lessor

The Company entered into commercial property leases with remaining terms between one to two years. All leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions.

Lease income for operating leases Income relating to fixed lease payments and variable lease payments that depend on an index or a rate	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$26,010	$24,288

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English Translation of Financial Statements Originally Issued in Chinese

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Please refer to Note 6 (8) for relevant disclosure of property, plant and equipment for operating leases under IFRS 16. For operating leases entered by the Company, the undiscounted lease payments to be received and a total of the amounts for the remaining years as at December 31, 2020 and 2019 are as follows:

Not later than one year Later than one year and not later than five years Total	December 31, 2020	December 31, 2019
	$17,025 601 $17,626	$7,915 187 $8,102

(19) Summary statement of employee benefits, depreciation and amortization expenses by function for the years ended December 31, 2020 and 2019:

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

For the years ended December 31,
2020 2019
Operating Operating Total Operating Operating Total
costs expenses amount costs expenses amount
Employee benefits expense
Salaries $4,721,179 $1,307,172 $6,028,351 $4,352,574 $1,159,150 $5,511,724
Labor and health insurance 403,209 78,411 481,620 380,837 75,846 456,683
Pension 195,103 62,024 257,127 232,212 66,986 299,198
Remuneration of directors - 38,212 38,212 - 33,391 33,391
Other employee benefits
expense 331,506 49,079 380,585 236,951 41,006 277,957
Total $5,650,997 $1,534,898 $7,185,895 $5,202,574 $1,376,379 $6,578,953
Depreciation $7,657,092 $698,683 $8,355,775 $6,389,127 $582,792 $6,971,919
Amortization $28,937 $23,256 $52,193 $66,404 $21,127 $87,531
----- End of picture text -----

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

In accordance with the Articles of Incorporation, no higher than 1% of the profit of the current year is distributable as remuneration to directors (including independent directors). However, the Company’s accumulated losses shall have been covered (if any). The Company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by twothirds of the total number of directors, have the profit distributable as employees’ compensation in the form of shares or in cash; and in addition thereto a report of such distribution is submitted to the shareholders’ meeting. In addition, according to the Company’s Articles of Incorporation, the remuneration paid to directors (including independent directors) is determined based on the Company’s overall operating performance with consideration of the contribution of each director to the Company and reference to industry norm. The remuneration proposal shall be approved by more than half members of the Compensation Committee and submitted to the Board of Directors for further approval.

According to the Company’s Articles of Incorporation and the Company Law, the remuneration of the Company’s executives is determined based on the positions of the executives, contribution to the Company’s operations, individual performance, and consideration of the Company’s future risk and reference to the industry norm. The remuneration is to be reviewed by the Compensation Committee for its plausibility and submitted to the Board of Directors for resolution.

The employee’s compensation policy of the Company takes into account various factors such as individual’s salary, rank, and performance evaluation, the industry norm and the Company’s operating results, etc.

In accordance with the Articles of Incorporation, 8% to 10% of profit of the current year is distributable as employees’ compensation and no higher than 1% of profit of the current year is distributable as remuneration to directors. However, the Company’s accumulated losses shall have been covered (if any). The Company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the profit distributable as employees’ compensation in the form of shares or in cash; and in addition thereto a report of such distribution is submitted to the shareholders’ meeting. Information on the Board of Directors’ resolution regarding the employees’ compensation and remuneration to directors can be obtained from the “Market Observation Post System” on the website of the TWSE.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Based on profit of current period, KYEC estimated the amounts of the employees’ compensation and remuneration to directors for the year ended December 31, 2020 to be 8% of profit of current period (or NT$382,118 thousand) and 0.8% of profit of current period (or NT$38,212 thousand), respectively, which were recognized as salary expense. If the Board of Directors resolved to distribute employees’ compensation in the form of stocks, then the number of stocks distributed is calculated based on the closing price one day prior to the date of resolution. If the estimated amounts differ from the actual distribution resolved by the Board of Directors, the difference will be recognized in the profit or loss in the subsequent year. A resolution was passed at a Board of Directors meeting held on March 12, 2021 to distribute NT$382,118 thousand and NT$38,212 thousand in cash as employees’ compensation and remuneration to directors, respectively, which were consistent with the estimated amounts recognized for the year ended December 31, 2020.

Actual distribution of employees’ compensation and remuneration to directors of 2019 amounted to NT$333,915 thousand and NT$33,391 thousand, respectively. No material differences exist between the estimated amount and the actual distribution of the employee compensation and remuneration to directors for the year ended December 31, 2019.

(20) Non-operating income and expenses

A. Other income

For the years ended December 31,

Dividend income Government grant Others Total	2020	2019
	$50,966 76,551 132,971 $260,488	$38,398 57,469 79,649 $175,516

B. Other gains and losses

Gain(loss) on disposal of property, plant and equipment Foreign exchange gains, net	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$(15,524) 242,514	$8,338 59,506

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English Translation of Financial Statements Originally Issued in Chinese

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Gains on financial assets at fair value through profit or loss (Note) Impairment losses – Property, plant and equipment Impairment losses – Goodwill Others Total	- (153,955) - (96,963) $(23,928)	424 (55,267) (35,914) 1,966 $(20,947)

Note: Balance in current year was arising from financial assets mandatorily measured at fair value through profit or loss.

C. Finance costs

Interest expenses on borrowings from bank Interest expenses on lease liabilities Total	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$359,046 19,993 $379,039	$301,836 9,837 $311,673

(21) Components of other comprehensive income

For the year ended December 31, 2020

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

Reclassification
Arising adjustments Other Other
during the during the comprehensive Income tax comprehensive
period period income expenses income, net of tax
----- End of picture text -----

Not to be reclassified to profit
or loss in subsequent
periods:
Remeasurements of defined
benefit plans	$(45,906)	$-	$(45,906)	$-	$(45,906)
Unrealized gains (losses)
from equity instruments
investments measured at
fair value through other
comprehensive income	2,094,772	(38,462)	2,056,310	(403,570)	1,652,740

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

To be reclassified to profit or

loss in subsequent periods:

Exchange differences resulting from translating the financial statements of foreign operations Total of other comprehensive income	105,729 $2,154,595	- $(38,462)	105,729 $2,116,133	(21,145) $(424,715)	84,584 $1,691,418

For the year ended December 31, 2019

Not to be reclassified to profit or loss in subsequent periods: Remeasurements of defined benefit plans Unrealized gains (losses) from equity instruments investments measured at fair value through other comprehensive income To be reclassified to profit or loss in subsequent periods: Exchange differences resulting from translating the financial statements of foreign operations Total of other comprehensive income	Arising during the period	Reclassification adjustments during the period	Other comprehensive income	Income tax expenses	Other comprehensive income, net of tax
	$(57,525) 687,601 (186,914) $443,162	$- (395) - $(395)	$(57,525) 687,206 (186,914) $(442,767)	$- (136,555) 37,373 $(99,182)	$(57,525) 550,651 (149,541) $343,585

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

(22) Income tax

The major components of income tax expense are as follows:

Income tax expense recognized in profit or loss

Current income tax expense: Current income tax charge Adjustments in respect of current income tax of prior periods Deferred tax expense (income): Deferred tax expense (income) relating to origination and reversal of temporary differences Income tax expense recognized in profit or loss	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$899,168 (198,244) 205,591 $906,515	$757,124 - 116,255 $873,379

Income tax relating to components of other comprehensive income

Deferred tax expense (income): Unrealized gains (losses) from equity instruments investments measured at fair value through other comprehensive income Exchange differences resulting from translating the financial statements of foreign operations Income tax relating to components of other comprehensive income	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$403,570 21,145 $424,715	$136,555 (37,373) $99,182

Reconciliation between tax expense and the product of accounting profit multiplied by applicable tax rates is as follows:

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

Accounting profit before tax from continuing operations Tax at the domestic rates applicable to profits in the country concerned Tax effect of expenses not deductible for tax purposes Tax effect of deferred tax assets/liabilities Different tax rates application between the parent company and subsidiaries Adjustments in respect of current income tax of prior periods Total income tax expense recognized in profit or loss	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$4,543,655	$3,914,863
	$908,731 (150,106) 205,591 140,543 (198,244) $906,515	$782,973 (105,732) 116,255 79,883 - $873,379

Deferred tax assets (liabilities) relate to the following:

For the year ended December 31, 2020

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

Recognized
Recognized in other Charged
Beginning in profit or comprehensive directly to Exchange Ending
balance loss income equity differences balance
----- End of picture text -----

Temporary differences
Unrealized exchange gains
and losses	$(5,624)	$(24,148)	$-	$-	$-	$(29,772)
Impairment loss of goodwill	12,650	-	-	-	-	12,650
Other impairment loss	11,054	24,339	-	-	-	35,393
Depreciation difference for
tax purpose	24,219	(984)	-	-	-	23,235
Unrealized sales discount	7,816	31,175	-	-	-	38,991
Investments accounted for
using the equity method	29,151	(229,157)	-	-	-	(200,006)

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

110,404 (34,297) 11,540 23,048	- (323) 16,555 (23,048)	(21,145) (403,570) - -	- - - -	- - - -	89,259 (438,190) 28,095 -
$189,961	$(205,591)	$(424,715)	$-	$-	$(440,345)

$229,882 $39,921					$227,623 $667,968

For the year ended December 31, 2019

==> picture [454 x 64] intentionally omitted <==

Temporary differences
Unrealized exchange gains
and losses	$495	$(6,119)	$-	$-	$-	$(5,624)
Impairment loss of goodwill	12,650	-	-	-	-	12,650
Other impairment loss	-	11,054	-	-	-	11,054
Depreciation difference for
tax purpose	16,426	7,793	-	-	-	24,219
Unrealized sales discount	6,666	1,150	-	-	-	7,816
Investments accounted for
using the equity method	158,590	(129,439)	-	-	-	29,151

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

73,031 104,007 10,485 23,048	- (1,749) 1,055 -	37,373 (136,555) - -	- - - -	- - - -	110,404 (34,297) 11,540 23,048
$405,398	$(116,255)	$(99,182)	$-	$-	$189,961

$405,398 $-					$229,882 $39,921

The following table contains information of the unused tax losses of the Company:

Entities	Year	Tax losses for the period	Unused tax	losses as at	Expiration year
			December 31, 2020	December 31, 2019
KYEC Foreign Subsidiaries	2009 2015 2016 2017 2018	$372,867 133,282 40,771 32,461 75,906	$- - 40,771 32,461 75,906 $149,138	$115,242 133,282 40,119 31,941 74,692 $395,276	2019 2020 2021 2022 2023

Unrecognized deferred tax assets

As of December 31, 2020 and 2019, deferred tax assets that have not been recognized amounted to NT$37,285 thousand and NT$76,354 thousand, respectively.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

The assessment of income tax returns

As of December 31, 2020, the assessment of the income tax returns of the Company and its subsidiaries is as follows:

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

Entities The assessment of income tax returns
----- End of picture text -----

Entities	The assessment of income tax returns
KYEC	Assessed and approved up to 2018
Subsidiary:
King Long Technology (Suzhou) Ltd.	Filed up to 2019
Suzhou Zhengkuan Technology Ltd.	Filed up to 2019
KYEC USA Corp.	Filed up to 2019
KYEC Japan K.K.	Filed up to 2019
KYEC SINGAPORE PTE. Ltd.	Filed up to 2019
King Ding Precision Incorporated Company	Filed up to 2019 but not yet approved

(23) Earnings per share

Basic earnings per share is calculated by dividing net profit for the year attributable to ordinary equity owners of the Company by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share is calculated by dividing the net profit attributable to ordinary equity owners of the Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

A. Basic earnings per share Profit attributable to ordinary equity owners of the parent Weighted average number of ordinary shares outstanding for basic earnings per share (thousand share) Basic earnings per share (NT$)	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$3,636,653	$3,041,566
	1,222,745 $2.97	1,222,745 $2.49

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

B. Diluted earnings per share Profit attributable to ordinary equity owners of the parent Weighted average number of ordinary shares outstanding for basic earnings per share (in thousands) Effect of dilution: Employee compensation－stock (in thousands) Weighted average number of ordinary shares outstanding after dilution (in thousands) Diluted earnings per share (NT$)	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$3,636,653	$3,041,566
	1,222,745 13,079	1,222,745 10,499
	1,235,824 $2.94	1,233,244 $2.47

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date the financial statements were issued.

(24) Changes in the ownership interest of subsidiaries

Based on the need of long-term development and operation, the Company acquired 51.06% shares of King Ding in a cash consideration of NT$37,070 thousand in January 2019. The acquisition increased its ownership to 100%. This transaction has no impact on the control of the subsidiary. Changes in ownership are treated as equity transactions.

7. Related Party Transactions

Information of the related parties that had transactions with the Company during the financial reporting period is as follows:

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

A. Name and nature of relationship of the related parties

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

Name of the related parties Nature of relationship of the related parties
----- End of picture text -----

Name of the related parties	Nature of relationship of the related parties
MediaTek Inc.	The chairman of the Company and the chairman
	of MediaTek Inc. are close relatives
Mediatek Singapore Pte. Ltd.	Subsidiary of MediaTek Inc.
Airoha Technology Corp.	Subsidiary of MediaTek Inc.
Other related parties (Note)	Subsidiary of MediaTek Inc.
Fixwell Technology Corp.	Associates
Wei Jiu Industrial Co., Ltd.	Associates

Note: The Company's transactions with these companies are not material.

B. Significant transactions with related parties
(a) Operating income

MediaTek Inc. Mediatek Singapore Pte. Ltd. Other related parties Associates Total	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$2,917,792 2,214,857 405,734 5,585 $5,543,968	$1,967,302 940,418 342,566 15,929 $3,266,215

The various trading price to related parties was determined through mutual agreement based on the market demands. The trade credit terms for related parties were 45 to 90 days, while the terms for non-related parties were 30 to 120 days. The outstanding balance due from related parties as of December 31, 2020 and 2019 was unsecured, non-interest bearing and must be settled in cash. The receivables from the related parties were not guaranteed.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

(b) The Company purchased inventories from associates. For the years ended December 31, 2020 and 2019, the purchase amounts were NT$77,608 thousand and NT$51,369 thousand, respectively. The purchase price was based on the market demands. The payment terms with related parties were 30 days, while the terms with non-related parties were 30 to 120 days.
(c) The Company appointed an associate to perform machinery repairs. For the years ended December 31, 2020 and 2019, the operating costs recognized amounted to NT$300,855 thousand and NT$312,790 thousand, respectively.
(d) The Company paid rental expenses for renting machines from associates. For the years ended December 2020 and 2019, the rental expenses amounted to NT$6,605 thousand and NT$0 thousand, respectively. The rental price was based on the similar machine’s rental price in the market. The payment terms with related parties were 30 to 90 days, while terms with non-related parties were 0 to 30 days.
(e) Significant property transactions with related parties:
i. Disposal of property, plant and equipment

Related party Associates	For the year ended December 31,2020	For the year ended December 31,2020	For the year ended December 31,2019	For the year ended December 31,2019
	Sales price $14,869	Disposal gain $5,678	Sales price $9,423	Disposal gain $5,028

The Company deferred the disposal gain derived from sales of property, plant and equipment to related parties, and then recognized such gain over depreciable lives of the disposed assets.

ii. Acquisition of property, plant and equipment

Related party Associates	For the year ended December 31, 2020	For the year ended December 31, 2019
	Purchase price $123,070	Purchase price $106,826

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

The purchase price was determined through mutual agreement based on the market demand.

(f) Contract assets

Contract assets - current

Contract assets - current
Other related parties MediaTek Inc. Mediatek Singapore Pte. Ltd. Total Less: loss allowance Net	December 31, 2020	December 31, 2019
	$- -	$1,293 500
	- - $-	1,793 - $1,793

(g) Trade receivables from related parties

MediaTek Inc. Mediatek Singapore Pte. Ltd. Other related parties Associates Less: loss allowance Net	December 31, 2020	December 31, 2019
	$1,086,058 535,143 103,289 461 - $1,724,951	$478,587 320,837 111,400 203 - $911,027

(h) Other receivables from related parties

MediaTek Inc. Fixwell Technology Corp. Mediatek Singapore Pte. Ltd. Other related parties Net	December 31, 2020	December 31, 2019
	$25,708 6,951 357 241 $33,257	$6,235 - 1,551 170 $7,956

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

(i) Contract liabilities

MediaTek Inc.	December 31, 2020 $183	December 31, 2019 $192

(j) Account payables to related parties

Wei Jiu Industrial Co., Ltd. Associates Total	December 31, 2020	December 31, 2019
	$16,512 2,975 $19,487	$30,713 - $30,713

(k) Other payables to related parties

Fixwell Technology Corp. Wei Jiu Industrial Co., Ltd. Other related parties Total	December 31, 2020	December 31, 2019
	$46,612 18,013 831 $65,456	$62,269 27,712 1,067 $91,048

(l) Other income

Associate	For theyears ended December 31,	For theyears ended December 31,
	2020 $681	2019 $-

(m) Key management personnel compensation

Short-term employee benefits Post-employment benefits Total	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$142,306 1,509 $143,815	$145,025 1,652 $146,677

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

8. Assets Pledged as Security

The following table lists assets of the Company pledged as security:

Items	Carryingamount	Carryingamount	Purpose of pledge
	December 31, 2020	December 31, 2019
Other current financial assets Other non-current financial assets Land Building and facility Machinery and equipment Construction-in-progress Right-of-use assets Total	$4 115,669 914,594 1,740,093 8,199,112 475,287 64,589 $11,509,348	$4 113,125 914,594 2,299,431 2,017,459 324,916 64,960 $5,734,489	L/C guarantee deposits Customs clearance Long-term borrowings Long-term borrowings Long-term borrowings Long-term borrowings Long-term borrowings

9. Significant Contingent Liabilities and Unrecognized Commitments

As of December 31, 2020, the following contingencies and material commitments were not included in the Company’s consolidated financial statements:

A. The Company's issued and outstanding letters of credit is approximately NT$510,912 thousand.
B. To construct the plant and factory premises, the Company had entered into several construction contracts in an aggregate amount of NT$1,024,192 thousand with NT$806,823 thousand already paid and NT$217,369 thousand remaining unpaid (promissory notes have been issued).
C. The promissory notes issued for secured bank loans amounted to NT$48,006,475 thousand.
D. The Company also provided guarantees to Suzhou Zhengkuan Technology Ltd.’s lines of credit. The lines of credit were provided by KGI Bank, HSBC Taiwan Bank, The Shanghai Commercial & Savings Bank, E.SUN Commercial Bank (China) in Dongguan branch, Bank of Taiwan in Shanghai branch and SinoPac Commercial Bank in Shanghai branch in the amount of US$8,000 thousand, US$5,000 thousand, US$5,000 thousand, CNY$30,000 thousand, CNY$30,000 thousand and CNY$50,000 thousand, respectively.
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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

E. The Company entered into loan agreements with Mega International Commercial Bank and First Commercial Bank , the following financial covenants shall be maintained on annual basis during the period from 2020 to 2025:
(a) Current ratio not less than 100%;
(b) Debt ratio not more than 150%;
(c) Interest coverage ratio not less than 300%.

The Company entered into a loan agreement with Far Eastern Int’l Bank , the following financial covenants shall be maintained on semi-annual and annual basis during the period from 2020 to 2023:

(a) Current ratio not less than 100%;
(b) Debt ratio not more than 150%;
(c) Interest coverage ratio no less than 300%.

The Company entered into a syndicated loan agreement with 17 banks, led by Mega International Commercial Bank of Taiwan, and the Company shall maintain the following financial covenants on semi-annual and annual basis during the period from 2018 to 2023:

(a) Current ratio not less than 100%;
(b) Debt ratio not more than 150%;
(c) Interest coverage ratio not less than 300%.

In the case of failure to adhere to the aforementioned financial covenants during the period from 2018 to 2023, Mega International Commercial Bank of Taiwan may assemble a meeting among the banks to govern the matter to decide on a course of action or request for each bank’s written approval for such course of action, when necessary.

The Company entered into a syndicated loan agreement with 13 banks, led by Mega International Commercial Bank of Taiwan, and the Company shall maintain the following financial covenants on semi-annual and annual basis during the period from 2020 to 2025:

(a) Current ratio not less than 100%;
(b) Debt ratio not more than 150%;
(c) Interest coverage ratio not less than 300%.

In the case of failure to adhere to the aforementioned financial covenants during the period from 2020 to 2025, Mega International Commercial Bank of Taiwan may assemble a meeting among the banks to govern the matter to decide on a course of action or request for each bank’s written approval for such course of action, when necessary.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

The subsidiary of King Long Technology (Suzhou) Ltd. entered into a syndicated loan agreement with 6 banks, led by Taiwan Bank in Shanghai branch, and the Company shall maintain the following financial covenants on semi-annual and annual basis during the period from 2019 to 2024:

(a) Current ratio not less than 100%;
(b) Debt ratio not more than 140%;
(c) Interest coverage ratnot less than 100%;
(d) Equity not less than CNY 800 million.

In the case of failure to adhere to the aforementioned financial covenants during the period from 2019 to 2024, Taiwan Bank in Shanghai branch may assemble a meeting among the banks to govern the matter to decide on a course of action or request for each bank’s written approval for such course of action, when necessary.

The subsidiary of King Long Technology (Suzhou) Ltd. entered into a syndicated loan agreement with 8 banks, led by Taiwan Bank in Shanghai branch, and the Company shall maintain the following financial covenants on semi-annual and annual basis during the period from 2019 to 2025:

(a) Current ratio not less than 100%;
(b) Debt ratio not more than 140%;
(c) Interest coverage ratnot less than 100%;
(d) Equity not less than CNY 800 million.

In the case of failure to adhere to the aforementioned financial covenants during the period from 2019 to 2025, Taiwan Bank in Shanghai branch may assemble a meeting among the banks to govern the matter to decide on a course of action or request for each bank’s written approval for such course of action, when necessary.

As of December 31, 2020, the Company did not violate any financial covenants.

F. As some shareholders of Dawning has claimed objections against the merger transaction with Dawning relating to the acquisition price of NT$3.0 per share, the Company has calculated and lodged the redemption price of NT$52,585 thousand with the Taipei District Court for court ruling on the redemption price on November 20, 2018. The Company reached a settlement with the abovementioned shareholders on August 31, 2020, and two parties submitted the settlement letter to Hsinchu District Court in September 2020. This case has no significant impact on the Company’s operation.
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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

10. Losses due to Major Disasters

None.

11. Significant Subsequent Events

On March 12, 2021, the Board of Directors resolved to approve the proposal for King Long Technology (Suzhou) Ltd. to launch an initial public offering (“IPO”) of RMB denominated ordinary shares (A- shares) on the Shanghai Stock Exchange or Shenzhen Stock Exchange. The IPO resolution will need to be approved by the shareholders’ meeting.

12. Others

(1) Categories of financial instruments

Financial assets Financial assets at fair value through profit or loss: Financial assets at fair value through other comprehensive income Financial assets measured at amortized cost (Note) Total Financial liabilities Financial liabilities at amortized cost: Short-term borrowings Payables (including related parties) Other payables (including related parties) Long-term loans (including current portion) Lease liabilities Guarantee deposits Total	December 31, 2020	December 31, 2019
	$4,446,563 14,292,601	$2,455,280 12,431,811
	$18,739,164	$14,887,091
	$100,854 1,141,877 3,603,401 23,810,788 876,581 2,755 $29,536,256	$493,383 1,087,309 4,028,162 20,328,045 1,278,243 1,933 $27,217,075

Note: Includes cash and cash equivalents, notes receivable, trade receivables (including related parties), other receivables (including related parties), other financial assets and refundable deposits.

100 -

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

(2) Financial risk management objectives

The objective of the Company’s financial risk management is mainly to manage the market risk, credit risk and liquidity risk derived from its operating activities. The Company identified, measured and managed the aforementioned risks based on the Company’s policy and risk tendency.

The Company has established appropriate policies, procedures and internal controls for financial risk management. The plans for material treasury activities are reviewed by Board of Directors and Audit Committee in accordance with relevant regulations and internal controls. The Company complies with its financial risk management policies at all times.

(3) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of the changes in market prices. Market prices comprise foreign currency risk, interest rate risk and other price risk (such as equity risk).

In practice, it is rarely the case that a single risk variable will change independently from other risk variables, there are usually interdependencies between risk variables. However, the sensitivity analysis disclosed below does not take into account the interdependencies between risk variables.

A. Foreign currency risk

The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense are denominated in a different currency from the Company’s functional currency) and the Company’s net investments in foreign operations.

Some receivables and payables are denominated in the same foreign currency, and it will result in economic hedging effect. Further, net investments in foreign operations are primarily for strategic purposes, and they are not hedged by the Company.

The Company's sensitivity analysis to foreign currency risk mainly focuses on foreign currency monetary items at the end of the reporting period. The Company’s foreign currency risk is mainly from the volatility in the exchange rates of US$ and CNY. The sensitivity analysis is as follows:

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

When NT$ appreciates or depreciates against US$ by 1%, the profit for the years ended December 31, 2020 and 2019 would have increased/decreased by NT$33,527 thousand and NT$28,332 thousand, respectively.

When NT$ appreciates or depreciates against CNY by 1%, the profit for the years ended December 31, 2020 and 2019 would have decreased/increased by NT$9,081 thousand and NT$4,325 thousand, respectively.

B. Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s loans and receivables at variable interest rates, bank borrowings with fixed interest rates and variable interest rates.

The Company manages its risk by having a balanced portfolio of financial instruments with fixed and floating interest rate. The Company did not apply hedging accounting since such hedging activities did not qualify for criteria of hedge accounting.

The Company’s sensitivity analysis to interest rate risk mainly focuses on items exposed to interest rate risk at the end of the reporting period, including investments with floating interest rates and bank borrowings with floating rates. Assuming investments and bank borrowings had been outstanding for the entire period and all other variables were constant, a hypothetical increase/decrease of 10 basis points of interest rate in a reporting period would have resulted in a decrease/increase in profit by NT$23,965 thousand and NT$20,865 thousand for the years ended December 31, 2020 and 2019, respectively.

C. Equity price risk

The Company’s equity investments, including listed and unlisted equity securities, are exposed to market price risk arising from uncertainties of future values of equity securities. The Company’s investments in listed and unlisted equity securities are classified under financial assets at fair value through other comprehensive income. The Company manages the equity price risk through diversification and placing limits on individual and total equity investments. Reports on the equity portfolio are submitted to the Company’s senior management on a regular basis. The Company’s Board of Directors reviews and approves certain significant equity investments according to level of authority.

102 -

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

At the reporting date ended December 31, 2020 and 2019, a change of 20% in the price of the listed equity securities classified under equity instrument investments measured at fair value through other comprehensive income would have impact of NT$5,623 thousand and NT$11,025 thousand on the equity attributable to the Company.

Please refer to Note 12(3) section H for sensitivity analysis information of other equity instruments or derivatives that are linked to such equity instruments whose fair value measurement is categorized under Level 3.

D. Credit risk management

Credit risk is the risk that counterparty will not meet its obligations under a contract, leading to a financial loss. The Company is exposed to credit risk from operating activities (primarily for contract assets, trade receivables and notes receivable) and from its financing activities (including bank deposits and other financial instruments).

Customer credit risk is managed by each business unit subject to the Company’s established policy, procedures and controls relating to customer credit risk management. Credit limits are established for all customers based on their financial position, rating from credit rating agencies, historical experience, prevailing economic condition and the Company’s internal rating criteria, etc. Certain customer’s credit risk will also be managed by taking credit enhancing procedures, such as requesting for prepayment and insurance.

As of December 31, 2020 and 2019, receivables from top ten customers represented 48% and 47% of the total trade receivables of the Company, respectively. The credit concentration risk of other accounts receivables was insignificant.

The Company manages its exposure to credit risk arising from bank deposits, fixed income securities and other financial instruments in accordance with established group policies. Since the counter-parties are selected reputable financial institutions and companies, the Company believes its exposure to credit risk is not significant.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

E. Liquidity risk management

The Company maintained financial flexibility through the holding of cash and cash equivalents, investments in securities with high liquidity, and facilities of bank borrowings. The table below summarizes the maturity profile of the Company’s financial liabilities based on the contractual undiscounted payments and contractual maturity, and the payment amount also includes the contractual interest. The undiscounted payment relating to borrowings with variable interest rates is extrapolated based on the estimated interest rate yield curve as of the end of the reporting period.

Non-derivative financial instruments

==> picture [453 x 31] intentionally omitted <==

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

Less than Longer than
1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 years Total
----- End of picture text -----

	1 year	1 to 2 years	2 to 3 years	3 to 4 years	4 years	Total
December 31, 2020
Payables	$4,745,278	$-	$-	$-	$-	$4,745,278
Borrowings	2,207,096	8,543,302	10,888,485	2,074,113	963,275	24,676,271
Lease liabilities (Note)	310,144	85,396	22,189	22,662	436,190	876,581
December 31, 2019
Payables	$5,115,471	$-	$-	$-	$-	$5,115,471
Borrowings	1,237,454	12,533,040	2,699,613	5,066,370	218,854	21,755,331
Lease liabilities (Note)	792,980	18,654	19,005	19,363	428,241	1,278,243

Notes: Information about the maturities of lease liabilities is provided in the table below:

Lease liabilities December 31, 2020 December 31, 2019		Maturities Period	Maturities Period	Maturities Period
	Less than 1 year	1 to 5 years	6 to 10 years	>10 years	Total
	$310,144 $792,980	$153,194 $76,728	$108,107 $97,410	$305,136 $311,125	$876,581 $1,278,243

104 -

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

F. Reconciliation of liabilities arising from financing activities

Reconciliation of liabilities for year ended December 31, 2020:

As of January 1, 2020 Cash flows Non-cash changes Syndicated loan issuance costs Amortization on bonds payable Additions to right-of-use assets Remeasurement of lease liabilities Foreign exchange movement As of December 31, 2020	Short-term borrowings	Long-term loans	Lease liabilities	Total liabilities from financing activities
	$493,383 (390,244) - - - - (2,285) $100,854	$20,328,045 3,722,800 19,333 (3,765) - - (255,625) $23,810,788	$1,278,243 (510,312) - - 89,750 25,202 (6,302) $876,581	$22,099,671 2,822,244 19,333 (3,765) 89,750 25,202 (264,212) $24,788,223

Reconciliation of liabilities for year ended December 31, 2019:

As of January 1, 2019 Beginning adjustments Cash flows Non-cash changes Syndicated loan issuance costs Amortization on bonds payable Additions to right-of-use assets Remeasure of lease liabilities Foreign exchange movement As of December 31, 2019	Short-term borrowings	Long-term loans	Lease liabilities	Total liabilities from financing activities
	$111,879 - 402,919 - - - - (21,415) $493,383	$16,935,144 - 3,591,313 14,771 (1,351) - - (211,832) $20,328,045	$- 522,423 (18,186) - - 774,671 135 (800) $1,278,243	$17,047,023 522,423 3,976,046 14,771 (1,351) 774,671 135 (234,047) $22,099,671

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

G. Fair values of financial instruments

a. The methods and assumptions applied in determining the fair value of financial instruments:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used by the Company to measure or disclose the fair values of financial assets and financial liabilities:

(a) The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and other payables approximate their fair value due to their short maturities.
(b) For financial assets and liabilities traded in an active market with standard terms and conditions, their fair value is determined based on market quotation price at the reporting date.
(c) Fair value of equity instruments without market quotations (including private placement of listed equity securities, unquoted public company and private company equity securities) are estimated using the market method valuation techniques based on parameters such as prices based on market transactions of equity instruments of identical or comparable entities and other relevant information (for example, inputs such as discount for lack of marketability, P/E ratio of similar entities and Price-Book ratio of similar entities).
(d) Fair value of debt instruments without market quotations, bank loans and other non-current liabilities are determined based on the counterparty prices or valuation method. The valuation method uses DCF method as a basis, and the assumptions such as the interest rate and discount rate are primarily based on relevant information of similar instruments.
b. Fair value of financial instruments measured at amortized cost

The carrying amounts of the Company’s financial assets and financial liabilities measured at amortized cost approximate their fair value.

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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

c. Fair value measurement hierarchy for financial instruments

Please refer to Note 12(3) section H for fair value measurement hierarchy for financial instruments of the Company.

H. Fair value measurement hierarchy

a. Fair value measurement hierarchy

All asset and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole. Level 1, 2 and 3 inputs are described as follows:

Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2: Input other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly.
Level 3: Unobservable inputs for the assets or liabilities.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization at the end of each reporting period.

b. Fair value measurement hierarchy of the Company’s assets and liabilities

The Company does not have assets measured at fair value on a non-recurring basis; the following table presents the fair value measurement hierarchy of the Company’s assets and liabilities on a recurring basis:

December 31, 2020 Financial assets at fair value through other comprehensive income Equity instruments measured at fair value through other comprehensive income	Level 1	Level 2	Level 3	Total
	$28,117	$-	$4,418,446	$4,446,563

107 -

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

December 31, 2019 Level 1 Level 2 Level 3 Total Financial assets at fair value through other comprehensive income Equity instruments measured at fair value through other comprehensive income $55,123 $- $2,400,157 $2,455,280

Transfers between Level 1 and Level 2 during the period

The transfer between Level 1 and Level 2 during 2019 was because of the expiry of lock-up period of the related investments. There was no such transfer during 2020.

Reconciliation for fair value measurements in Level 3 of the fair value hierarchy for movements during the period is as follows:

For the year ended December 31, 2020： Beginning balances as at January 1, 2020 Total gains and losses recognized for the year ended December 31, 2020: Amount recognized in OCI (presented in “unrealized gains (losses) from equity instruments investments measured at fair value through other comprehensive income”) Ending balances as at December 31, 2020	Assets
	At fair value through other comprehensive income
	Stocks
	$2,400,157 2,018,289 $4,418,446

108 -

English Translation of Financial Statements Originally Issued in Chinese

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

For the year ended December 31, 2019：

For the year ended December 31, 2019：
Beginning balances as at January 1, 2019 Liquidation return of surplus value Total gains and losses recognized for the year ended December 31, 2019: Amount recognized in OCI (presented in “unrealized gains (losses) from equity instruments investments measured at fair value through other comprehensive income”) Reversal of liquidation loss recognized in retain earnings Ending balances as at December 31, 2019	Assets
	At fair value through other comprehensive income
	Stocks
	$1,725,878 (395) 674,279 395 $2,400,157

Information on significant unobservable inputs to valuation

Description of significant unobservable inputs to valuation of recurring fair value measurements categorized within Level 3 of the fair value hierarchy is as follows:

As at December 31, 2020

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

Significant Relationship
Valuation unobservable Quantitative between inputs and Sensitivity of the input to
Financial assets: techniques inputs information fair value fair value
----- End of picture text -----

Financial assets at fair
value through other
comprehensive
income
Stocks	Assets	Discount for	10%	The higher the	10% increase/decrease in
	approach	lack of		discount for lack of	the discount for lack of
		marketability		marketability, the	marketability would result
				lower the fair value	in decrease/increase in the
				of the stocks	Company’s equity by
					NT$489,775 thousand.
Stocks	Markets	P/E, P/B,	30%	The higher the	10% increase/decrease in
	approach	EV/EBITDA,		proportion of	the discount for lack of
		EV/EBIT		similar quantified	marketability would result
		and EV/Sales		information, the	in decrease/increase in the
				higher the fair value	Company’s equity by
				of the stocks	NT$1,495 thousand.

109 -

English Translation of Financial Statements Originally Issued in Chinese

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

As at December 31, 2019

==> picture [454 x 47] intentionally omitted <==

Financial assets at fair
value through other
comprehensive
income
Stocks	Assets	Discount for	10%	The higher the	10% increase/decrease in
	approach	lack of		discount for lack of	the discount for lack of
		marketability		marketability, the	marketability would result
				lower the fair value	in decrease/increase in the
				of the stocks	Company’s equity by
					NT$265,575 thousand.
Stocks	Markets	P/E, P/B,	30%	The higher the	10% increase/decrease in
	approach	EV/EBITDA,		proportion of similar	the discount for lack of
		EV/EBIT		quantified	marketability would result
		and EV/Sales		information, the	in decrease/increase in the
				higher the fair value	Company’s equity by
				of the stocks	NT$1,426 thousand.

Valuation process used for fair value measurements categorized within Level 3 of the fair value hierarchy

The Company’s Finance Department is responsible for validating the fair value measurements and ensuring that the results of the valuation are in line with market conditions, based on independent and reliable inputs which are consistent with other information, and represent exercisable prices. The Department analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the Company’s accounting policies at each reporting date.

110 -

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

I. Significant assets and liabilities denominated in foreign currencies

Information regarding the significant assets and liabilities denominated in foreign currencies is listed below:

Monetaryfinancial assets	December 31,2020	December 31,2020	December 31,2020
	Foreign Currency (thousand)	Exchange rate	NT$ (thousand)
US$ CNY JPY Monetaryfinancial liabilities
US$ CNY JPY Monetaryfinancial assets
	Foreign Currency (thousand)	Exchange rate	NT$ (thousand)
	$156,508 666,207 466,659 251,010 565,735 311,606	29.98 4.305 0.276 29.98 4.305 0.276	$4,692,104 2,868,019 128,798 7,525,289 2,435,488 86,003
US$ CNY JPY Monetaryfinancial liabilities
US$ CNY JPY

Functional currencies of entities of the Company are varied. Accordingly, the Company is not able to disclose the information of exchange gains and losses of monetary financial assets and liabilities by each significant assets and liabilities denominated in foreign currencies. The foreign exchange gains were NT$242,514 thousand and NT$59,506 thousand for the years ended December 31, 2020 and 2019, respectively.

111 -

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

J. Capital management

The primary objective of the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust dividend payment to shareholders, return capital to shareholders or issue new shares.

13. Additional Disclosures

(1) The following are additional disclosures for the Company and its affiliates as required by the R.O.C. Securities and Futures Bureau for the year ended December 31, 2020:
A. Financing provided to others: None.
B. Endorsement/Guarantee provided to others: Please refer to Attachment 1.
C. Securities held as of December 31, 2020: Please refer to Attachment 2.
D. Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20 percent of the capital stock: None.
E. Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20 percent of the capital stock: Please refer to Attachment 3.
F. Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20 percent of the capital stock: None.
G. Related party transactions for purchases and sales amounts exceeding the lower of NT$100 million or 20 percent of the capital stock: Please refer to Attachment 4.
H. Receivables from related parties with amounts exceeding the lower of NT$100 million or 20 percent of capital stock: Please refer to Attachment 5.
I. Financial instruments and derivative transactions: None.
J. Parent-subsidiary relationship between business dealings and important circumstances: Please refer to Attachment 6.
(2) Information on investees

Information regarding investee companies over which the Company can exercise significant influence or control: Please refer to Attachment 7.

(3) Investment in Mainland China: Please refer to Attachment 6 and Attachment 8.
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English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

(4) Major shareholders information: There is no shareholder who owns above 5% securities of the Company as at December 31, 2020.

14. Segment Information

A. General information

The main revenue stream of the Company comes from testing and assembly services. The chief operating decision maker reviews the overall operating results to make decisions about resources to be allocated to and evaluates the overall performance. Therefore, the Company is aggregated into a single segment.

B. Regional information

(a) From external customer revenue:

Taiwan Asia North America Others Total	For theyears ended December 31,	For theyears ended December 31,
	2020	2019
	$8,184,190 14,551,928 5,565,380 657,806 $28,959,304	$6,615,790 13,433,065 4,925,101 565,481 $25,539,437

(b) Non-current assets information is as follows:

Taiwan Asia Others Total	December 31, 2020	December 31, 2019
	$32,645,996 7,893,696 22,557 $40,562,249	$31,678,654 6,631,220 28,715 $38,338,589

113 -

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts are expressed in thousands of New Taiwan dollars unless otherwise stated)

(c) Important customer information

For the years ended December 31, 2020 and 2019, the information of external customer's revenue which exceeds 10% of the Company’s consolidated revenues is as follows:

MediaTek Inc.	For theyears ended December 31,	For theyears ended December 31,	For theyears ended December 31,	For theyears ended December 31,
	2020		2019
	Amount $2,917,792	% to Total 10%	Amount $1,967,302	% to Total 8%

114 -

Attachment 1

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED

For the year ended December 31, 2020

==> picture [733 x 80] intentionally omitted <==

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

(Amounts in New Taiwan Thousand Dollars, Unless Specified otherwise)
Guaranteed Party Limits on Endorsement/ Amount of Ratio of Accumulated Maximum Guarantee Guarantee
Endorsement/ Guarantee Amount Maximum Endorsement/ Endorsement/ Guarantee to Endorsement/ Guarantee Provided to
NO. GuaranteeProvider Name RelationshipNature of to Each GuaranteedParty (Note 2)Provided for the PeriodBalance BalanceEnding Actually DrawnAmount Collateralized byGuaranteeProperties Equity per Latest FinancialStatementsNet Guarantee AmountAllowable(Note 3) Provided byCompanyParent A SubsidiaryProvided by Subsidiariesin MainlandChina
Suzhou Zhengkuan
1 The Company Technology Ltd. (Note1) $5,863,814 $1,364,430 $994,110 $369,806 - 3.39% $11,727,628 Y N Y
----- End of picture text -----

Note1: A subsidiary in which endorser/guarantor holds directly over 50% of equity interest.

Note2: The amount of guarantees/endorsements for any single entity shall not exceed 20% of net worth of endorser/guarantor.

Note3: The maximum endorsement/guarantee amount allowable shall not exceed 40% of the Company's net worth as of December 31, 2020.

115 -

Attachment 2

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

MARKTEABLE SECURITIES HELD

As of December 31, 2020

(Amounts in New Taiwan Thousand Dollars, Unless Specified otherwise)

==> picture [731 x 265] intentionally omitted <==

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

Held Relationship Balances as of December 31, 2020
Securities Securities
Company with the Financial Statement Account Percentage of Note
Type Name Shares/Units Carrying Value Fair Value
Name Company Ownership (%)
Stock ADL Engineering INC. - Non-current financial assets at fair value 210,614 $- 1.76% $-
through other comprehensive income
Stock Shieh Yong Investment Co., Ltd. - Non-current financial assets at fair value 57,810,000 1,203,620 7.58% 1,203,620
through other comprehensive income
Stock APM Communication, Inc. - Non-current financial assets at fair value 10,456 - 0.11% -
through other comprehensive income
Stock Greenliant Systems, Ltd. - Non-current financial assets at fair value 2,333,333 - 2.74% -
through other comprehensive income
The Stock YANN YUAN Investment Co., Ltd. - Non-current financial assets at fair value 25,000,000 3,204,360 16.78% 3,204,360
Company through other comprehensive income
Stock Mcube Inc. - Non-current financial assets at fair value 528,745 - 0.97% -
through other comprehensive income
Stock IROC Co., Ltd. - Non-current financial assets at fair value 436,046 15,174 1.23% 15,174
through other comprehensive income
Stock Subtron Technology Co., Ltd. - Non-current financial assets at fair value 927,147 12,943 0.32% 12,943
through other comprehensive income
Stock CAL-COMP INDÚSTRIA DE - Non-current financial assets at fair value 11,965,500 10,466 17.16% 10,466
SEMICONDUTORES S.A. through other comprehensive income
----- End of picture text -----

116 -

Attachment 3

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

ACQUISITION OF INDIVIDUAL REAL ESTATE AT COSTS OF AT LEAST NT$300 MILLION OR 20% OF THE CAPITAL PAID-IN As of December 31, 2020

(Amounts in New Taiwan Thousand Dollars, Unless Specified otherwise)

==> picture [735 x 146] intentionally omitted <==

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

CompanyNameHeld PropertiesType of TransactionDate Transaction Amount Payment Status Counter-party Relationship Owner Prior Transaction of Related Counter-partywith the IssuerRelationship TransferDate Amount Price Reference Purpose and Usage ofAcquisition CommitmentsOther
The Land and 2020.10.30 $350,000 According to the Henghou None Not applicable Reference to valuation report Purpose : to meet the needs of future None
Company building (Note) trading term of Xingye Co., operation and development
purchase order, Ltd. Using status : ownership not transferred
no payment
needed as of
December 31,
2020.
The Land and 2020.12.25 $639,000 According to the Weishun None Not applicable Price comparison and bargaining Purpose : to meet the needs of future None
Company building (Note) trading term of architecture operation and development
purchase order, Co., Ltd. Using status : ownership not transferred
no payment
needed as of
December 31,
2020.
----- End of picture text -----

Note: Board of Directors approval date. As of December 31, 2020, the purchase agreement has not been signed.

117 -

Attachment 4

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

As of December 31, 2020

(Amounts in New Taiwan Thousand Dollars, Unless Specified otherwise)

King Long Technology (Suzhou) Ltd. The Company Company Name	MediaTek Inc. The chairman of the Company and the chairman of Mediatek Inc. are close relatives Mediatek Singapore Pte. Ltd. Subsidiary of MediaTek Inc. Airoha Technology Corporation Subsidiary of MediaTek Inc. King Long Technology (Suzhou) Ltd. Subsidiary Suzhou Zhengkuan Technology Ltd. Subsidiary Related Party Nature of Relationships	Sales $2,820,870 12.08% Month-end 75 days - - $1,056,080 20.78 % Sales $2,177,299 9.33% Month-end 60 days - - $523,417 10.30 % Sales $247,795 1.06% Month-end 60 days - - $51,245 1.01 % Sales $142,873 0.61% Month-end 180 days - - $67,066 1.32 % Sales $127,948 2.72% Month-end 180 days - - $72,255 9.30 % Purchase/ Sales Amount % to Total Payment Terms Abnormal Transaction Payment Terms % to Total Transaction Details Notes/Accounts Payable or Receivable (Included Contract Assets) Unit Price Ending Balance

118 -

Attachment 5

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

As of December 31, 2020

(Amounts in New Taiwan Thousand Dollars, Unless Specified otherwise)

==> picture [729 x 195] intentionally omitted <==

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

Overdue Amounts Received Allowance for
Company Name Related Party Nature of Relationships Ending Balance Turnover Rates in Subsequent
Amount Action Taken Period Bad Debts
The chairman of the Company and the
MediaTek Inc. chairman of Mediatek Inc. are close $1,081,788 (Note 1) 3.74 $9,560 - $647,514 -
relatives
The Company
Mediatek Singapore Pte. Ltd. Subsidiary of MediaTek Inc. $523,774 (Note 2) 5.22 $16 - $326,683 -
King Long Technology
Subsidiary $138,725 (Note 3) 3.46 $- - $65,397 -
(Suzhou) Ltd.
KING YUAN ELECTRONICS
The Parent company $233,650 (Note 4) 3.90 $- - $- -
King Long CO., LTD.
Technology
(Suzhou) Ltd. Suzhou Zhengkuan
Subsidiary $123,174 (Note 5) 1.71 $- - $43,939 -
Technology Ltd.
----- End of picture text -----

Note 1 : Includes other receivables - related party amounting to NT$25,708 thousand arising from handling charges, freights and tax fees. Note 2 : Includes other receivables - related party amounting to NT$357 thousand arising from customs clearance charges and freights. Note 3 : Includes other receivables - related party amounting to NT$71,659 thousand arising from disposal of equipments and accessories. Note 4 : Includes other receivables - related party amounting to NT$233,456 thousand arising from disposal of equipments and accessories. Note 5 : Includes other receivables - related party amounting to NT$50,919 thousand arising from utility fees.

119 -

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

Attachment 6

INTERCOMPANY RELATIONSHIP AND SIGNIFICANT INTERCOMPANY TRANSACTIONS DURING THE REPORTING PERIOD For the year ended December 31, 2020

(Amounts in New Taiwan Thousand Dollars, Unless Specified otherwise)

==> picture [707 x 288] intentionally omitted <==

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

Number Company name Counterparty Relationship Amount % of Net revenues
Finacial Statement Account (Foreign Currency in Transaction terms
or total assets
Thousands)
Commission expense $46,458 0.16%
KYEC USA Corp.
Accrued expenses 3,987 0.01%
Receivable on equipment 287,847 0.47%
Payables on equipment 243,360 0.40%
Accounts receivable 67,066 0.11%
King Long Technology
Other receivables 71,659 0.12%
(Suzhou) Ltd.
Accrued expenses 233,588 0.38%
Sales revenue 142,873 0.49%
Deferred credits 101,869 0.17%
Other receivables 1,575 0.00%
0 KYEC KYEC Japan. K.K. 1 Accrued expenses 3,052 0.00%
Commission expense 19,844 0.07%
according to contract
KYEC Singapore PTE. LTD. Commission expense 33,084 0.11%
Endorsement guarantee 994,110 -
(US$18,000) -
(CNY 110,000) -
Suzhou Zhengkuan Receivable on equipment 27,847 0.05%
Technology Ltd. Accounts receivable 2,616 0.00%
Other receivables 5,427 0.01%
Sales revenue 8,941 0.03%
Deferred credits 14,307 0.02%
Sales revenue 127,948 0.44%
King Long Technology Suzhou Zhengkuan
1 3 Accounts receivable 72,255 0.12%
(Suzhou) Ltd. Technology Ltd.
Other receivables 50,919 0.08%
----- End of picture text -----

Note 1: The information of transactions between the Company and the conlidated subsidiaries should be noted in "Number" column.

(1) Number 0 represents the Company.

(2) The consolidated subsidiaries are numbered in order from number 1.

Note 2: The transaction relationships with the counterparties are as follows:

(1) The Company to the consolidated subsidiary.
(2) The consolidated subsidiary to the Company.
(3) The consolidated subsidiary to another consolidated subsidiary.

Note 3: In calculating the ratio, the transaction amount is divided by consolidated total assets for balance sheet accounts and is divided by consolidated total revenues for income statement accounts.

120 -

Attachment 7

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE (EXCLUDING INFORMATION ON INVESTMENT IN MAINLAND CHINA)

For the year ended December 31, 2020

(Amounts in New Taiwan Thousand Dollars and United States Thousand Dollars, Unless Specified otherwise)

KYEC Investment International Co., Ltd. KYEC Technology Management Co., Ltd. Investor Company The Company	KYEC USA Corp. Note 1 KYEC Investment International Co., Ltd. Note 2 Investing activities KYEC Technology Management Co., Ltd. Note 3 Investing activities KYEC Japan. K.K. Note 4 KYEC SINGAPORE PTE. LTD. Note 5 Fixwell Technology Corp. Note 6 Wei Jiu Industrial Co., Ltd. Note 7 King Ding Precision Incorporated Company Note 8 KYEC Microelectronics Co., Ltd. Note 9 Investing activities KYEC Microelectronics Co., Ltd. Note 9 Investing activities Investee Company Location Main Businesses and Products Manufacturing, selling and wholesale of electronics parts and components and repairing of electronics related products Sales agent and business communication in USA Manufacturing and sales of electronic parts and components, sales agent and business communication in Japan Manufacturing, selling and wholesale of electronics parts and components and repairing of electronics related products Sales agent and business communication in Southeast Asia and Europe CNC center processing machine, lathe machining processing design and various precision mechanical components manufacturing	December 31, 2020 December 31, 2019 Shares Percentage of Ownership $4,973 $4,973 160,000 100.00 % $12,035 $1,109 $1,109 5,292,315 5,292,315 164,923,636 100.00 % 5,691,034 1,072,053 1,072,053 251,579 251,579 7,500,000 100.00 % 362,498 68,186 68,186 102,735 102,735 1,899 89.83 % 56,828 4,796 4,309 1,830 1,830 78,000 100.00 % 2,130 132 132 28,000 28,000 2,800,000 23.33 % 46,981 43,506 10,076 10,200 10,200 1,020,000 34.00 % 22,875 17,682 6,012 72,600 72,600 6,600,000 100.00 % 69,962 (2,443) (2,443) USD 116,155 USD 116,155 118,000,000 94.02 % USD 199,826 USD 38,319 - USD 7,500 USD 7,500 7,500,000 5.98 % USD 12,728 USD 38,319 - Original Investment Amount Balance as of December 31, 2020 Note CarryingValue Net Income (Loss) of the Investee Investment income (loss) recognised by the Company for the year ended of December 31, 2020.

Note 1：101 Meto Drive., #540 San Jose, CA 95110 USA.

Note 2：Wickhams Cay II Road Town, Tortola, VG1110, British Virgin Islands.

Note 3：Portcullis TrustNet Chambers, P.O. Box 1225, Apia, Samoa.

Note 4：5F 2-3-8 Momochihama, Sawara-ku, Fukuoka 814-0001 Japan. Note 5：750A Chai Chee Road Unit 07-22 Technopark @Chai Chee, Singapore 469001. Note 6 ： No.380, Huashan Rd., Dadu Dist., Taichung City 432, Taiwan (R.O.C.)

Note 7 : No.8, Aly. 8, Ln. 48, Sec. 2, Nan’ai Rd., Xiangshan Dist., Hsinchu City 300, Taiwan (R.O.C.) Note 8 : No. 118, Zhonghua Rd., Zhunan Township, Miaoli County 350, Taiwan (R.O.C.)

Note 9：P.O. Box 2804, George Town, Grand Cayman, Cayman Islands.

121 -

Attachment 8

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

INFORMATION ON INVESTMENT IN MAINLAND CHINA

For the year ended December 31, 2020

(Amounts in New Taiwan Thousand Dollars and United States Thousand Dollars, Unless Specified otherwise)

==> picture [732 x 137] intentionally omitted <==

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

Accumulated Outflow Accumulated Outflow Net Income Accumulated Inward
Investee Company Main Businessesand Products Total Amount ofPaid-in Capital InvestmentMethod of Taiwan as of Januaryof Investment from Investment Flows Taiwan as of Decemberof Investment from (Loss) of theInvestee OwnershipPercentageof Profits/LossesShare of(Note 5) Carrying Amount asof December 31,2020 Earnings as ofRemittance of
1, 2020 Outflow Inflow 31, 2020 Company December 31, 2020
$517,425 Indirectly investment in $3,521,694 $3,521,694 $1,140,239 $1,140,239 $6,053,533
King Long Technology Note 1 Mainland China through $- $- 100% $-
(Suzhou) Ltd. companies registered in a
(USD 18,168) third region (Note 2) (USD 123,655) (USD 123,655) (USD 38,319) (USD 38,319) (USD 212,554)
$2,328,589 Indirectly investment in $1,388,931 $1,388,931 $113,006 $113,006 $505,845
Suzhou Zhengkuan Note 3 Mainland China through $- $- 100% $-
Technology Ltd. companies registered in a
(CNY 533,348) third region (Note 4) (USD 48,769) (USD 48,769) (USD 3,855) (USD 3,855) (USD 17,761)
----- End of picture text -----

Accumulated Investment in Mainland China as of December 31, 2020	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment
$4,910,625	$4,910,625
		$17,591,443
(USD 172,424)	(USD 172,424)

Note 1: Sales and manufacturing of components of automotive data processing machinery, solid memory parts, monitoring burn-in machinery, and testing and assembly service of integarted circuits.

Note 2: The Company obtained the approval from the Investment Commission, MOEA, to invest indirectly in King Long Technology (Suzhou) via KYEC Microelectronics Co., Ltd. which is registered in Cayman Island. KYEC Microelectronics Co., Ltd. is invested by KYEC Investment International Co., Ltd. which is registered in BVI.

Note 3: Testing and assembly service of integrated circuits, sales and after service of processing of electronic components and materials, components of automotive data processing machinery, solid memory parts, and monitoring burn-in machinery. Note 4: Investment was through King Long Technology (Suzhou) Ltd. Note 5: Recognition of investment gains (losses) was calculated based on the investee's audited financial statements.

122 -

AI assistant

KYEC — Annual Report 2020

52090_rns_2020-10-30_dea8f140-d760-411b-9afc-7df033d36981.pdf

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 WITH

INDEPENDENT AUDITOR’S REPORT TRANSLATED FROM CHINESE

REPRESENTATION LETTER

English Translation of a Report Originally Issued in Chinese

Independent Auditors’ Report

Opinion

Basis for Opinion

Key Audit Matters

Revenue recognition

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

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Others

Notice to Readers

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

As of December 31, 2020 and 2019

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

As of December 31, 2020 and 2019

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the years ended December 31, 2020 and 2019

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the years ended December 31, 2020 and 2019

KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2020 and 2019

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Operation

2. Date and Procedures of Authorization of Financial Statements for Issue

3. Newly Issued or Revised Standards and Interpretations

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

B. IFRS 17 “Insurance Contracts”

Amendment to IFRS 1

Amendment to IFRS 9 Financial Instruments

Amendment to Illustrative Examples Accompanying IFRS 16 Leases

Amendment to IAS 41

4. Summary of Significant Accounting Policies

Statement of Compliance

Basis of Preparation

Basis of Consolidation

Preparation principle of consolidated financial statement

English Translation of Financial Statements Originally Issued in Chinese

English Translation of Financial Statements Originally Issued in Chinese

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note:

Foreign currency transactions

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Translation of financial statements in foreign currency

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Current and non-current distinction

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash and cash equivalents

Financial instruments

Financial assets measured at amortized cost

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial assets measured at fair value through other comprehensive income

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial assets measured at fair value through profit or loss

B. Impairment of financial assets

Classification between liabilities or equity

Equity instruments

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Compound instruments

Financial liabilities

Financial liabilities at fair value through profit or loss

Financial liabilities at amortized cost

Derecognition of financial liabilities

E. Offsetting of financial instruments

Derivative financial instruments

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair value measurement

Inventories

Investments accounted for using the equity method

English Translation of Financial Statements Originally Issued in Chinese KING YUAN ELECTRONICS CO., LTD. AND SUBSIDIARIES

KYEC Annual Report 2020