LARGAN - Annual Report 2019 | FinancialReports.eu

Stock Code: 3008TT

http://mops.twse.com.tw http://www.largan.com.tw

Largan Precision Co., Ltd

2019 Annual Report

(Translation)

----Disclaimer----

This is a translation of the 2019 Annual Report of Largan Precision Co., Ltd. The translation is for reference only. If there is any discrepancy between the English version and Chinese version, the Chinese version shall prevail.

Printed April 22[nd] , 2020

Largan Precision Co., Ltd.

Company Spokesperson

Adam Lin CEO 04-36002345 [email protected]

Deputy Spokesperson

Josephine Huang Deputy Manager 04-36002345 [email protected]

Corporate Headquarters and Factories

Head office: No. 11, Jingke Road, Nantun District, Taichung City, Taiwan Telephone: 04-36002345 Factories: No. 4, Gongyequ 16th Road, Taichung City, Taiwan Telephone: 04-36002345 No. 14, Gongyequ 23rd Road, Nantun District, Taichung City, Taiwan Telephone: 04-36002345 No. 11, Jingke Road, Nantun District, Taichung City, Taiwan Telephone: 04-36002345 No. 13, Jingke Road, Nantun District, Taichung City, Taiwan Telephone: 04-36002345

No. 14, Gongyequ 23rd Road, Nantun District, Taichung City, Taiwan Telephone: 04-36002345 No. 11, Jingke Road, Nantun District, Taichung City, Taiwan Telephone: 04-36002345 No. 13, Jingke Road, Nantun District, Taichung City, Taiwan Telephone: 04-36002345

No. 7, Jingke 2nd Road, Nantun District, Taichung City, Taiwan Telephone: 04-36001825

Stock Affairs Agent

Company: Stock-Affairs Agency Department of Taishin International Bank Address: B1, No.96, Sec.1, Jianguo N. Rd., Taipei City Website: www.taishinbank.com.tw Tel: (02) 2504-8125

Certified Public Accountant (CPA) and accounting firm for the financial statements of the

most recent year:

CPA: Tzu-Hsin Chang & Shyhhuar Kuo Company: KPMG Certificated Public Accountants Address: 68F, No.7, Sec.5, Xinyi Rd., Taipei Website: www.kpmg.com/tw Tel: (02) 8101-6666

Offshore secondary exchange and disclosure information: Not Applicable

Company Website: http://www.largan.com.tw

Largan Precision Co., Ltd. Annual Report Contents

		Largan Precision Co., Ltd. Annual Report Contents
		Page	Number
1.		Letter to Shareholders......................................................................................................	1
2.		Company Profile ..............................................................................................................	2
3.		Corporate Governance Report .........................................................................................	4
	3.1.	Company organization .....................................................................................................	4
	3.2.	Information on Directors, Supervisors, President, Vice Presidents, Assistant Vice
		Presidents, and heads of departments and divisions ........................................................	6
	3.3.	Implementation of Corporate Governance ......................................................................	21
	3.4.	Information on CPA fees .................................................................................................	40
	3.5.	Replacement of CPAs ......................................................................................................	41
	3.6.	Company's Chairman, President, or any managerial officer in charge of finance or
		accounting matters who has, in the most recent year, held a position at the accounting
		firm of its CPA or at an affiliated company .....................................................................	42
	3.7.	Equity transfer or changes in equity pledged by the Company's Directors,
		Supervisors, managerial officers or shareholders with shareholding percentage
		exceeding 10% in the most recent fiscal year up to the publication date of the Annual
		Report ..............................................................................................................................	43
	3.8.	Information on the relationship between the top 10 shareholders of the Company ........	44
	3.9.	Information on the number of shares of the companies invested by the Company, its
		Directors, Supervisors and managerial officers or a company directly or indirectly
		controlled by the Company and consolidated percentage of shareholding .....................	45
4.		Funding Status .................................................................................................................	46
	4.1.	Company capital and issuance of shares .........................................................................	46
	4.2.	Issuance of corporate bonds ............................................................................................	50
	4.3.	Preferred shares ...............................................................................................................	50
	4.4.	Overseas depository receipt .............................................................................................	50
	4.5.	Issuance of employee stock options ................................................................................	50
	4.6.	Restrictions on employee shares and mergers, acquisitions or issuance of new shares
		for the acquisition of shares of other companies .............................................................	50
	4.7.	Implementation status of the capital utilization plan .......................................................	50
5.		Operational Highlights ....................................................................................................	51
	5.1.	Business activities ...........................................................................................................	51
	5.2.	Overview of market, production and sales ......................................................................	55
	5.3.	Number of employees during the two most recent years ................................................	59
	5.4.	Environmental protection expenditures ...........................................................................	60
	5.5.	Labor relations .................................................................................................................	60
	5.6.	Important contracts ..........................................................................................................	65
6.		Financial Highlights ........................................................................................................	66
	6.1.	Condensed Balance Sheet and Condensed Consolidated Income Statement for the
		Last Five Years ................................................................................................................	66
	6.2.	Financial Analysis for the Last Five Years ......................................................................	70
	6.3.	2018 Supervisors' Review Report for the Financial Report ............................................	73
	6.4.	Consolidated Financial Statements of the Most Recent Year with Independent
		Auditors’ Report and Notes .............................................................................................	74
	6.5.	Parent Company Only Financial Statements of the Most Recent Year with
		Independent Auditors’ Report and Notes .........................................................................	147
	6.6.	Impact on the Company's financial status due to financial difficulties experienced by
		the Company and its affiliate companies in the most recent year and as of the
		publication date of this Annual Report ............................................................................	226
7.		Review and Analysis of Financial Position and Financial Performance, and Risk
		Management ....................................................................................................................	227
	7.1.	Financial position analysis ..............................................................................................	227
	7.2.	Financial performance .....................................................................................................	227
	7.3.	Cash flow .........................................................................................................................	228

	7.4.	Impact of major capital expenditures on the Company’s financial operations for the
		most recent fiscal year .....................................................................................................	228
	7.5.	Reinvestment policies, main reasons for profits/losses generated thereby,
		improvement plans, and investment plans for the coming year ......................................	228
	7.6.	Risk management and assessment ...................................................................................	228
	7.7.	Other material matters .....................................................................................................	230
8.		Special Notes ...................................................................................................................	231
	8.1.	Information on affiliate companies ..................................................................................	231
	8.2.	Private placement of securities of the past year as of the publication date of this
		Annual Report .................................................................................................................	237
	8.3.	Holding or disposal of the Company's shares by the subsidiaries of the most recent
		year as of the publication date of this Annual Report ......................................................	237
	8.4.	Other necessary supplementary items to be included ......................................................	237
9.		Any event which has a material impact on the shareholders' equity or securities prices
		as prescribed in Subparagraph 2, Paragraph 2, Article 36 of the Securities and
		Exchange Act that has occurred in the most recent year as of the publication date of
		this Annual Report ...........................................................................................................	238

1. Letter to Shareholders

In 2019, with the increasing penetration rate of smartphones, the growth of the market had started to plateau. The Company’s 2019 business results and 2020 business plan are summarized below:

2019 Business Report
(1) Business results: Largan Precision's consolidated revenue in 2019 amounted to NT$60,745,008 thousand, which was a 22% growth over NT$49,952,158 thousand in 2018. The net profit after tax was NT$28,263,082 thousand, which was a 16% increase over NT$24,369,534 thousand in 2018. The net profit after tax per share was NT$210.70.
(2) Financial performance and profitability: Please refer to the financial statements in the attachment for the financial overview of 2019.
(3) Research and development: The Company invested a total of NT$3,764,448 thousand in research and development for the current year, which represented a 16% growth over NT$3,258,445 thousand in the previous year.
2020 Business Plan
(1) Business strategy: Largan Precision upholds the business philosophy of "innovation, professionalism, speed, and flexibility." All employees continuously pursue discipline and growth in the face of a changing business environment, as they commit themselves to product development and quality improvement to create ongoing profit and growth.
(2) Production and sales forecast: The Company shall remain focused on the production and sales of mobile phone camera lenses, and actively enhance production technology and output, with the aim of maintaining the Company's advantages in production cost and making overall production and sales more competitive.
(3) Research and development plans: The Company shall continue to conduct research and development in mobile phone camera lenses. We will continue to expand our R&D team, product range, add new product lines, and improve the scale and quality of products. We shall also commit ourselves to the development of other product applications and improvement of manufacturing capabilities to maintain long-term competitiveness in the industry.

Largan Precision shall continue to work hard and adopt a spirit of constant innovation and in the production of each product. We shall fully develop the Company's core expertise and continue to strengthen the Company's competitiveness in all aspects to respond to the competitive environment and overall business environment. At the same time, the Company complies with regulatory requirements and adopts policies and measures in response to changes in the legal environment. We hereby express our most sincere gratitude for the support of all customers, suppliers, shareholders, and employees.

Chairman: En-Chou Lin

2. Company Profile

(1) Date of founding: April 17, 1987
(2) Addresses and telephone numbers of the head office, branch offices, and plants:

Head office: No. 11, Jingke Road, Nantun District, Telephone: 04-36002345 Taichung City, Taiwan Branch office: None Factories: No. 4, Gongyequ 16th Road, Taichung Telephone: 04-36002345 City, Taiwan No. 14, Gongyequ 23rd Road, Nantun Telephone: 04-36002345 District, Taichung City, Taiwan No. 11, Jingke Road, Nantun District, Telephone: 04-36002345 Taichung City, Taiwan No. 13, Jingke Road, Nantun District, Telephone: 04-36002345 Taichung City, Taiwan No. 7, Jingke 2nd Road, Nantun District, Telephone: 04-36001825 Taichung City, Taiwan

(3) Company history

1987	Largan Precision Co., Ltd. was founded with a capital of NT$10 million. The Company
	specialized in lenses, and viewfinders for scanners, cameras, projectors.
1989	Cash capital increase of NT$500 thousand; paid-up capital increased to NT$10.5 million.
1990	Completed and relocated to new factory in Taichung Industrial Park.
	Capitalized NT$60.9 million of earnings; paid-up capital increased to NT$71.4 million.
1991	Leading Taiwanese company to introduce ultra-precision machining for aspherical lenses
	and developed related manufacturing skills. Successful mass production of the plastic
	aspherical lens in the same year.
1992	Cash capital increase of NT$12.6 million; paid-up capital increased to NT$48 million.
	First in Taiwan to develop hybrid lenses for traditional cameras for mass production.
1993	Received the New Leading Product Development Program Gong (82) No. 2 grant from the
	Industrial Development Bureau Ministry of Economic Affairs. Started the New Leading
	Product Development Program for "manufacturing development program of cameras fitted
	with auto-focusing F35-70 mm zoom lenses".
1995	Awarded "Top Ten Companies in Industrial Automation in 1995" by the Ministry of
	Economic Affairs. The former President of R.O.C. visited the Company’s headquarters.
	Invested in Largan (Hong Kong) Limited and new materials processing factory in Dongguan
	in order to increase productivity, reduce cost, and expand market share.
1997	Introduced electrical discharge machining and ultra-precision CNC machining equipment
	from Japan to improve R&D technology and provide superior products.
	Capitalized NT$10 million of earnings and NT$28 million of capital reservel; paid-up capital
	increased to NT$122 million.
	First in Taiwan to develop hybrid lenses for successful applications in scanners/barcodes.
	Successfully developed optical components for projectors.
1998	Invested in Largan Digital Co., Ltd. to expand into the emerging industry of digital cameras.
	Capitalized NT$38 million of earnings; paid-up capital increased to NT$160 million.
	Successfully entered mass production of scanner hybrid lenses.
	First in Taiwan to develop 2X zoom viewfinder for mass production.
	Successfully developed hybrid lenses for digital cameras.
	Successfully developed precision optical components for SVCD and VCD.
1999	Invested in IBM hardware and Data Systems Consulting ERP system to integrate internal
	procedures of affiliated companies and subsidiaries and facilitate effective use of
	comprehensive resource systems.
	Successfully developed 4000 dpi scanner lens.
	Successfully developed the world's first 600 dpi scanner hybrid lens.
	Successfully developed autofocus module for digital camera.

	Successfully developed high-precision optical components and assemblies applied in DVDs.
2000	Capitalized NT$60 million of earnings and NT$80 million in cash; paid-up capital increased
	to NT$300 million. The Company became publicly listed.
	First in Taiwan to develop 4X zoom viewfinder for mass production.
2001	Passed ISO 9001 quality certification.
	Capitalized NT$233,434,000 of earnings and employee bonus. Issued new shares through a
	capital increase to merge Largan Optronic Co., Ltd. to sustain growth and scale to enhance
	the Company’s competitiveness. Paid-up capital increased to NT$621,621,640.
2002	Publicly listed on the Taiwan Stock Exchange (TWSE) on March 11.
	Capitalized NT$233,182,590 of earnings and employee bonus; paid-up capital increased to
	NT$854,804,230.
	The establishment of the Company’s headquarters was approved in September.
	Successfully developed zoom lenses for projectors.
	Successfully developed camera lenses for mobile phones.
	Successfully developed 3.0 megapixels 3x zoom digital camera lens.
2003	Capitalized NT$104,021,920 of earnings and employee bonus; paid-up capital increased to
	NT$958,826,150.
	Invested in Suzhou Largan Co., Ltd. through NET International Trading Limited to expand
	production capacity and reduce manufacturing cost.
	Successfully developed 3X Zoom lens for digital cameras.
	Successfully developed 1.3 megapixels lens for mobile phones.
	Expanded floor space in plant #1.
2004	Capitalized NT$115,422,610 of earnings and employee bonus; paid-up capital increased to
	NT$1,074,248,760.
	Successfully developed 2.0 megapixels autofocus lens for mobile phones.
2005	Capitalized NT$71,902,440 of earnings and employee bonus; paid-up capital increased to
	NT$1,146,151,200.
	Successfully developed 3.0 megapixels autofocus lens for mobile phones.
	Expanded floor space in Plant #2.
2006	Capitalized NT$67,121,210 of earnings and employee bonus; paid-up capital increased to
	NT$1,213,272,410.
	Completed development of 5.0 megapixels autofocus lens for mobile phones.
2007	Capitalized NT$33,914,470 of earnings and employee bonus; paid-up capital increased to
	NT$1,257,186,880.
	Entered mass production of 5.0 megapixels lens for mobile phones
2008	Capitalized NT$44,145,930 of earnings and employee bonus; paid-up capital increased to
	NT$1,301,332,810.
	Completed development of 8.0 megapixels autofocus lens for mobile phones.
2009	Capitalized NT$521,642,990 of earnings and employee bonus; paid-up capital increased to
	NT$1,341,401,970.
	Inaugurated new plant in the Precision Machinery Innovation Technology Park.
	Became the first company to mass produce EDOF lenses for mobile phones.
	Entered mass production of 8.0 megapixels lens for mobile phones
	Completed development of 12.0 megapixels autofocus lens for mobile phones.
2012	Inaugurated new plant in the Precision Machinery Innovation Technology Park. (Plant #5)
2014	Obtained industrial land in phase 1 of the Taichung City Precision Machinery Innovation
	Technology Park.
2017	Inaugurated new plant in the Precision Machinery Innovation Technology Park. (Plant #7)

3. Corporate Governance Report

3.1 Company organization 3.1.1 Company organization chart

==> picture [436 x 558] intentionally omitted <==

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

Shareholders' Meeting
Supervisors
Board of Directors Compensation Committee
Chairman
Internal Audit Chairman's Office
Occupational Safety and Health Office
CEO
Sales Department
Finance Department
Production Department
Procurement Department Maintenance Department
Administrative Department
Overseas Business Department
Quality Management Department
Information Technology Department Production Management Department
Research and Development Department
----- End of picture text -----

3.1.2 Responsibilities and functions of major departments

Major Department	Responsibilities and Functions
Chairman's Office	Oversees the planning and execution of the Company's operations and implements continuous supervision and improvement of various internal controls.
Internal Audit	Inspects and evaluates the Company’s internal control system and provides analyses and recommendations.
Occupational Safety and Health Office	Formulates, plans, and promotes safety and health management issues and instructs related departments on its implementation.
Information Technology Department	Responsible for the integration, establishment, and maintenance of the Company's IT system.
Finance Department	Responsible for finances, accounting, shareholder services, and taxation affairs.
Administrative Department	Responsible for human resources, general affairs, employee welfare, and labor relations.
Sales Department	Responsible for product marketing, market research, and customer after-sales services.
Procurement Department	Responsible for procurement of raw materials, equipment, and consumables.
Quality Management Department	Responsible for inspection of raw materials, production, and finished goods , and other quality assurance operations.
Production Management Department	Responsible for production planning, raw materials management, outsourcing, and shipment.
Production Department	Responsible for the production of various optical components.
Maintenance Department	Maintenance and repairs of machinery and inspection equipment.
Research and Development Department	New product optical design. Improvement of production technology. Design and development of molding and tooling technology.
Overseas Business Department	Responsible for production, quality assurance, and services for overseas businesses.

Note 2	Note 2	None	None
Other Supervisory or Director Roles Held by a Spouse or Second-Degree Relative	Relationship	-	Father-son Brothers
	Name	-	Yao-Ying Lin En-Ping Lin
	Title	-	Director Vice Chairman
Positions Concurrently Held at the Company and Other Companies		-	Vice President of Largan Precision, Chairman of Amtai International Limited, Director of Astro International Limited, Chairman of Largan (Dongguan) Optronic Ltd., Director of Largan (Hong Kong) Limited, Director representative of Net International Trading Limited, Director of Largan Medical Co., Ltd., Chairman representative of Ba Fang Co., Ltd., Director of NEO (Shanghai) Medical Technology Co., Ltd., Director of LHT, Supervisor of Mao Yu Commemorate Co., Ltd.
Education and Work Experience		-	Degree in Insurance and Banking, Tamkang University Vice President, Largan Digital Co., Ltd.
Shares Held in the Name of Other Persons	%	-	5.81%
	Number of Shares	-	7,790,106
Shares Held by Spouse and Minor Children	%	-	-
	Number of Shares	-	-
Shares Currently Held	%	14.10%	0.00%
	Number of Shares	18,910,616	540
Shares Held When Elected	%	6.47%	2.13%
	Number of Shares	8,672,968	2,861,142
Date First Elected		2019.6.12	1987.4.4 Note 1
Term			3 years
Date Elected		2019.06.12	2019.06.12
Gender		-	Male
Name		Mao Yu Commemorate Co., Ltd.	Representative: En-Chou Lin
Nationality or Place of Registration		Taiwan	Taiwan
Title			Chairman

Note 2	Note 2	None	None	None	None	None
Other Supervisory or Director Roles Held by a Spouse or Second-Degree Relative	Relationship	Father-son Brothers	Father-son	Spouse	–	–
	Name	Yao-Ying Lin En-Chou Lin	En-Chou Lin En-Ping Lin	Tsui-Ying Chiang	–	–
	Title	Director Chairman	Chairman Vice Chairman	Supervisor	–	–
Positions Concurrently Held at the Company and Other Companies		CEO of Largan Precision, Director of Largan (Hong Kong) Limited, Director of Largan (Dongguan) Optronic Ltd., Chairman of Largan Digital Co., Ltd., Chairman of Largan Medical Co., Ltd., Director of Alpha and Beta, Director of LHT, Director representative of Largan Health Technology Co., Ltd. Director of Largan Health AI-Tech Co., Ltd., Director of Mao Yu Commemorate Co., Ltd.	Director of Largan Medical Co., Ltd., Chairman of Mao Yu Commemorate Co., Ltd.	Director of Largan Digital Co. Ltd., Director of Largan Medical Co., Ltd.,	None	None
Education and Work Experience		Master of Business Administration, Dominican University	Degree in Agricultural Chemistry, National Chung Hsing University Chairman, Largan Optronic Chairman, Largan Precision	Degree in Mechanical Engineering, National Cheng Kung University Manager at a German optics company, President, Largan Optronic Chairman, Largan Precision	Degree in Applied Mathematics, Feng Chia University	Taichung Industrial High School, Electrial Engineering Assistant Vice President, Largan Precison
Shares Held in the Name of Other Persons	%	4.48%	1.88%	-	-	-
	Number of Shares	6,011,652	2,526,036	-	-	-
Shares Held by Spouse and Minor Children	%	-	-	4.94%	-	-
	Number of Shares	-	-	6,625,569	-	-
Shares Currently Held	%	0.01%	0.00%	5.04%	2.69%	0.00%
	Number of Shares	8,000	No shares held	6,756,831	3,606,585	No shares held
Shares Held When Elected	%	2.52%	1.14%	5.04%	2.69%	0.00%
	Number of Shares	3,379,506	1,526,036	6,756,831	3,606,585	No shares held
Date First Elected		2007.6.15	1993.7.3	1993.7.3	1996.10.20	2016.6.8
Term				3 years	3 years	3 years
Date Elected		2019.06.12	2019.06.12	2019.06.12	2019.06.12	2019.06.12
Gender		Male	Male	Male	Male	Male
Name		Representative: En-Ping Lin	Representative: Yao-Ying Lin	Shih-Ching Chen	Ming-Yuan Hsieh	Shan-Chieh Yen
Nationality or Place of Registration		Taiwan	Taiwan	Taiwan	Taiwan	Taiwan
Title		Vice Chairman	Director	Director	Director	Independent Director

Note 2	Note 2	None	None	None
Other Supervisory or Director Roles Held by a Spouse or Second-Degree Relative	Relationship	–	–	Spouse
	Name	–	–	Shih-Ching Chen
	Title	–	–	Director
Positions Concurrently Held at the Company and Other Companies		None	Supervisor of Largan Medical Co., Ltd., Supervisor of Largan Digital Co. Ltd.	None
Education and Work Experience		Ming Chi Institute of Technology, Mechanical Engineering Assistant Vice President, Largan Precison	Degree in Finance, National Chengchi University	Degree in German, Tamkang University
Shares Held in the Name of Other Persons	%		0.01%	-
	Number of Shares		8,000	-
Shares Held by Spouse and Minor Children	%	-	0.00%	5.04%
	Number of Shares	-	924	6,756,831
Shares Currently Held	%	0.04%	1.56%	4.94%
	Number of Shares	56,604	2,091,721	6,625,569
Shares Held When Elected	%	0.04%	1.56%	4.94%
	Number of Shares	56,604	2,091,721	6,625,569
Date First Elected		2016.6.8	2004.6.10	2001.7.16
Term		3 years	3 years	3 years
Date Elected		2019.06.12	2019.06.12	2019.06.12
Gender		Male	Male	Female
Name		Ming-Hua Peng	Chung-Jen Liang	Tsui-Ying Chiang
Nationality or Place of Registration		Taiwan	Taiwan	Taiwan
Title		Independent Director	Supervisor	Supervisor

Table 1: Major shareholders of the corporate shareholder

Name of corporate shareholder	Major shareholders of the corporate shareholder
Mao Yu Commemorate Co., Ltd.	En-Ping Lin(31.78%)、En-Chou Lin(21.71%)、Feng-Chen Kao(19.43%)、Yao-Ying Lin(12.18%)、En-Ping Lin Trust Account(7.53%)、En-Chou Lin Trust Account(7.37%)

Table 2: Professional qualifications and independence of the Directors and Supervisors

Criteria Name	Meet the following professional qualification requirements, together with at least5 years ofworkexperience	Meet the following professional qualification requirements, together with at least5 years ofworkexperience	Meet the following professional qualification requirements, together with at least5 years ofworkexperience	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Number of other public companies in which the individual is concurrently serving as an independent director
	An instructor or higher position in a private or public college or university in the field of business, law, finance, accounting, or the business sector of the Company	A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who Has Passed a National Examination and Been Awarded a Certificate in a Profession Necessary for the Business of the Company	Work Experience in the Area of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8	9	10	11	12
Mao Yu Commemorate Co., Ltd. Representative: En-Chou Lin			v									v		v	v	-
Mao Yu Commemorate Co., Ltd. Representative: En-PingLin			v									v		v	v	-
Mao Yu Commemorate Co., Ltd. Representative: Yao-YingLin			v							v		v		v	v	-
Shih-Ching Chen			v					v	v	v		v	v	v	v	-
Ming-Yuan Hsieh			v	v			v	v	v	v	v	v	v	v	v	-
Shan-Chieh Yen			v	v	v	v	v	v	v	v	v	v	v	v	v	-
Ming-Hua Peng			v	v	v	v	v	v	v	v	v	v	v	v	v	-

Criteria Name	Meet the following professional qualification requirements, together with at least5 years ofworkexperience	Meet the following professional qualification requirements, together with at least5 years ofworkexperience	Meet the following professional qualification requirements, together with at least5 years ofworkexperience	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Independence criteria (Note 1)	Number of other public companies in which the individual is concurrently serving as an independent director
	An instructor or higher position in a private or public college or university in the field of business, law, finance, accounting, or the business sector of the Company	A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who Has Passed a National Examination and Been Awarded a Certificate in a Profession Necessary for the Business of the Company	Work Experience in the Area of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8	9	10	11	12
Chung-Jen Liang			v	v				v	v	v		v	v	v	v	-
Tsui-Ying Chiang			v	v				v	v	v	v	v		v	v	-

Note 1: Tick the appropriate corresponding boxes if a Director or Supervisor meets the following criteria during his/her term of office and two years prior to the date elected.
(1) Not an employee of the Company or any of its affiliates.
(2) Not a director or supervisor of the Company or any of its affiliates (not applicable in cases where the person is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
(3) Not a natural-person shareholder who holds shares, together with those held by the person's spouse, minor children, or held by the person under others' names, in an aggregate amount of one percent or more of the total number of issued shares of the company or ranks as one of its top ten shareholders.
(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship of a manager in (1) or personnel in (2) and (3).
(5) Not a director, supervisor, or employee of a corporate shareholder that directly holds 5% or more of the Company's outstanding shares, a top five shareholder, or appointed as the Company's director or supervisor in accordance with Article 27, Paragraph 1 or 2 of the Company Act (not applicable in cases where the person is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
(6) Not a director, supervisor, or employee of other companies controlled by the same person with over half of the Company's director seats or shares with voting rights (not applicable in cases where the person is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
(7) Not a director, supervisor, or employee of another company or institution who is the same

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person or spouse of the Company's chairperson, president or equivalent position (not applicable in cases where the person is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).

(8) Not a director, supervisor, or executive officer of a specific company or institution with financial or business dealings with the Company, or shareholder with 5% or more shares of the Company (not applicable in cases where the specific company or institution holds 20% or more but less than 50% of the Company's outstanding shares, and is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
(9) Not a professional individual who, or an owner, partner, director, supervisor, or manager of a sole proprietorship, partnership, company, or institution that audited or provided commercial, legal, financial, or accounting services for total compensation not exceeding NT$500,000 in the most recent two years to the company or to any affiliate of the company, or a spouse thereof. This does not apply to members of the Remuneration Committee, Public Tender Offer Review Committee, or Merger and Acquisition Special Committee performing duties in accordance with the Securities and Exchange Act or laws and regulations related to mergers and acquisitions.
(10) Not having a marital relationship, or a relative within the second degree of kinship to any other director of the company;
(11) Not having any of the situations set forth in Article 30 of the Company Act of the ROC.
(12) Not a government agency, juristic person, or its representative set forth in Article 27 of the Company Act of the ROC.

1 1

Note 2		None	None
Other Managerial Roles Held by Spouse or Second-Degree Relative	Relationship	Brothers	Brothers
	Name	En-Chou Lin	En-Ping Lin
	Title	Vice President	CEO
Positions Concurrently Held at the Company and Other Companies		Director of Largan (Hong Kong) Limited., Director of Largan (Dongguan) Optronic Ltd., Chairman of Largan Digital Co., Ltd., Chairman of Largan Medical Co., Ltd., Director of Alpha and Beta, Director of LHT, Director representative of Largan Health Technology Co., Ltd., Director of Largan Health AI-Tech Co., Ltd., Director of Mao Yu Commemorate Co., Ltd.	Chairman of Amtai International Limited, Director of Astro International Limited, Chairman of Largan (Dongguan) Optronic Ltd., Director of Largan (Hong Kong) Limited., Director representative of Net International Trading Limited, Director of Largan Medical Co., Ltd, Chairman representative of Ba Fang Co., Ltd., Director of NEO (Shanghai) Medical Technology Co., Ltd., Director of LHT, Supervisor of Mao Yu Commemorate Co., Ltd.
Education and Work	Experience	Master in Business Administration, Dominican University	Degree in Insurance and Banking, Tamkang University Vice President, Largan Digital Co., Ltd.
Shares Held in the Name of Other Persons	%	-	-
	Number of Shares	-	-
Shares Held by Spouse and Minor Children	%	-	-
	Number of Shares	-	-
Number of Shares Held	%	0.01%	0.00%
	Number of Shares	8,000	540
Date Appointed		2007.06.15	1987.04.17
Gender		Male	Male
Name		En-Ping Lin	En-Chou Lin
Nationality		Taiwan	Taiwan
Title		CEO	Vice President

Note 2		None	None	None	None
Other Managerial Roles Held by Spouse or Second-Degree Relative	Relationship	_	_	_	_
	Name	_	_	_	_
	Title	_	_	_	_
Positions Concurrently Held at the Company and Other Companies		Director of Largan (Dongguan) Optronic Ltd., Director representative of Largan Health Technology Co., Ltd., Director of Nanjing Largan Health Technology Co., Ltd., Director of LHT	None	Director of LHT, Director of NEO (Shanghai) Medical Technology Co., Ltd.	Accounting Head of Largan Digital Co., Ltd. and Largan Medical Co., Ltd, Supervisor of NEO (Shanghai) Medical Technology Co., Ltd.
Education and Work	Experience	Degree in Industrial Engineering, Tunghai University	Master in Power Mechanical Engineering, National Tsing Hua University	Degree in Industrial Engineering, Feng Chia University	Master in Accounting, National Chengchi University
Shares Held in the Name of Other Persons	%	-	-	-	-
	Number of Shares	-	-	-	-
Shares Held by Spouse and Minor Children	%	-	-	0.00%	0
	Number of Shares	-	-	212	0
Number of Shares Held	%	0.00%	0.07%	0	0.00%
	Number of Shares	4,000	94,228	0	289
Date Appointed		2005.06.01	2010.01.01	2011.04.01	2011.05.01
Gender		Male	Male	Male	Female
Name		Chung-Shih Lin	Yu-Chih Huang	Sheng-Lien Wang	Hsing-Ju Tsao
Nationality		Taiwan	Taiwan	Taiwan	Taiwan
Title		Vice President	Chief Technology Officer/ Vice President	Assistant Vice President	Finance/ Accounting Director

Compensation received from invested companies other than subsidiaries or the parent company	Compensation received from invested companies other than subsidiaries or the parent company	Compensation received from invested companies other than subsidiaries or the parent company	Compensation received from invested companies other than subsidiaries or the parent company	None	None	None	None		None	None
Ratio of the total sums of A, B, C, D, E, F, and G to the net profit after tax		All Companies in the Financial Report		1.52%					0.01%
		Th	e Company	1.52%					0.01%
Compensation earned as an employee	Employees' Compensation (G)	All Companies in the Financial Report	Stoc k	-					-
			Cash	140,000					-
		The Company	Stock	-					-
			Cash	140,000					-
	Severance Pay and Pension (F)	All Companies in the Financial Report		-					-
		The Company		-					-
	Salary, Bonus and Allowances (E)	All Companies in the Financial Report		18,454					-
		The Company		18,454					-
	Ratio of total compensation (A+B+C+D) to net profit after tax (%)	All Companies in the Financial Report		0.96%					0.01%
		The Company		0.96%					0.01%
Compensation of Directors	Business Expenses (D)	All Companies in the Financial Report		-					-
		The Company		-					-
	Directors' Remuneration (C)	All Companies in the Financial Report		270,853					2,400
		The Company		270,853					2,400
	Severance Pay and Pension (B)	All Companies in the Financial Report		-					-
		The Company		-					-
	Compensation (A)	All Companies in the Financial Report		-					-
		The Company		-					-
		Name		Mao Yu Commemorate Co., Ltd. Representatives: En-Chou Lin En-Ping Lin Yao-Ying Lin			Shih-Ching Chen	Ming-Yuan Hsieh	Shan-Chieh Yen	Ming-Hua Peng
		Title		Chairman	Vice Chairman	Director	Director	Director	Director	Director
						General Director			Independent Director

Sum of the first 7 items (A+B+C+D+E+F+G)	All Companies in the Financial Report	-	Same as left	-	-	-	-	-	Same as left	Same as left	Same as left	8(Including 1 Corporate Director)
	The Company	-	Shan-Chieh Yen, Ming-Hua Peng	-	-	-	-	-	En-Chou Lin, En-Ping Lin, Yao-Ying Lin	Shih-Ching Chen, Ming-Yuan Hsieh	Mao Yu Commemorate Co., Ltd.	8(Including 1 Corporate Director)
Sum of the first 4 items (A+B+C+D)	All Companies in the Financial Report	Same as left	Same as left	-	-	-	-	-	-	Same as left	Same as left	8(Including 1 Corporate Director)
	The Company	En-Chou Lin, En-Ping Lin, Yao-Ying Lin	Shan-Chieh Yen, Ming-Hua Peng	-	-	-	-	-	-	Shih-Ching Chen, Ming-Yuan Hsieh	Mao Yu Commemorate Co., Ltd.	8(Including 1 Corporate Director)
Compensation Range for Each Director of the Company		Less than NT$1,000,000	NT$1,000,000 (inclusive) to NT$2,000,000 (exclusive)	NT$2,000,000 (inclusive) to NT$3,500,000 (exclusive)	NT$3,500,000 (inclusive) to NT$5,000,000 (exclusive)	NT$5,000,000 (inclusive) to NT$10,000,000 (exclusive)	NT$10,000,000 (inclusive) to NT$15,000,000 (exclusive)	NT$15,000,000 (inclusive) to NT$30,000,000 (exclusive)	NT$30,000,000 (inclusive) to NT$50,000,000 (exclusive)	NT$50,000,000 (inclusive) to NT$100,000,000 (exclusive)	NT$100,000,000 and above	Total

Compensation received from invested companies other than subsidiaries or the parent company	Compensation received from invested companies other than subsidiaries or the parent company	Compensation received from invested companies other than subsidiaries or the parent company	None	None
	Ratio of the total sums of A, B, and C to net profit after tax	All Companies in the Financial Report	0.38%
		The Company	0.38%
Compensation for Supervisors	Business Expenses (C)	All Companies in the Financial Report	-
		The Company	-
	Remuneration (B)	All Companies in the Financial Report	108,341
		The Company	108,341
	Compensation (A)	All Companies in the Financial Report	-
		The Company	-
		Name	Chung-Jen Liang	Tsui-Ying Chiang
	Title		Supervisor	Supervisor

Names of Supervisor	Total of (A+B+C)	All Companies in the Financial Report	-	-	-	-	-	-	-	-	Same as left	-	2
		The Company	-	-	-	-	-	-	-	-	Chung-Jen Liang, Tsui-Ying Chiang	-	2
Compensation Range for Each Supervisor of the Company			Less than NT$1,000,000	NT$1,000,000 (inclusive) to NT$2,000,000 (exclusive)	NT$2,000,000 (inclusive) to NT$3,500,000 (exclusive)	NT$3,500,000 (inclusive) to NT$5,000,000 (exclusive)	NT$5,000,000 (inclusive) to NT$10,000,000 (exclusive)	NT$10,000,000 (inclusive) to NT$15,000,000 (exclusive)	NT$15,000,000 (inclusive) to NT$30,000,000 (exclusive)	NT$30,000,000 (inclusive) to NT$50,000,000 (exclusive)	NT$50,000,000 (inclusive) to NT$100,000,000 (exclusive)	NT$100,000,000 and above	Total

Compensation received from invested companies other than subsidiaries or the parent company	Compensation received from invested companies other than subsidiaries or the parent company	Compensation received from invested companies other than subsidiaries or the parent company	None	None	None	None
Ratio of the total sums of A, B, C, and D to the net profit after tax (%)	All Companies in the Financial Report		0.50%
	The	Company	0.50%
Employees' Compensation (D)	All Companies in the Financial Report	Stock	-
		Cash	124,200
	The Company	Stock	-
		Cash	124,200
Bonuses and Allowances, etc. (C)	All Companies in the Financial Report		-
	The Company		-
Severance Pay and Pension (B)	All Companies in the Financial Report		-
	The Company		-
Salary (A)	All Companies in the Financial Report		16,386
	The Company		16,386
Name			En-Ping Lin	En-Chou Lin	Chung-Shih Lin	Yu-Chih Huang
Title			CEO	Vice President	Vice President	Chief Technology Officer

Name of the President and Vice Presidents	All Companies in the Financial Report	-	-	-	-	-	-	-	Same as left	-	-	4	Ratio of total compensations to the net profit after tax (%)	0.66%	0.66%	0.66%	0.66%	0.66%	0.66%
	The Company	-	-	-	-	-	-	-	En-Chou Lin, En-Ping Lin, Chung-Shih Lin, Yu-Chih Huang	-	-	4	Total	186,300
													Cash	186,300
													Stock	-
Compensation Range for the President and Vice Presidents of the Company		Less than NT$1,000,000	NT$1,000,000 (inclusive) to NT$2,000,000 (exclusive)	NT$2,000,000 (inclusive) to NT$3,500,000 (exclusive)	NT$3,500,000 (inclusive) to NT$5,000,000 (exclusive)	NT$5,000,000 (inclusive) to NT$10,000,000 (exclusive)	NT$10,000,000 (inclusive) to NT$15,000,000 (exclusive)	NT$15,000,000 (inclusive) to NT$30,000,000 (exclusive)	NT$30,000,000 (inclusive) to NT$50,000,000 (exclusive)	NT$50,000,000 (inclusive) to NT$100,000,000 (exclusive)	NT$100,000,000 and above	Total
													Name	En-Ping Lin	En-Chou Lin	Chung-Shih Lin	Yu-Chih Huang	Sheng-Lien Wang	Hsing-Ju Tsao
													Title	CEO	Vice President	Vice President	Chief Technology Officer	Assistant Vice President	Finance/Accounting Director
														Management

3.2.4 Comparison of compensation paid by the Company and all the consolidated entities in the last two years to the Company's Directors, Supervisors, President and Vice Presidents as a ratio to the net profit after tax. Explanation on compensation policies, standards and procedures for determining compensation, and association with business performance and future risks:
Analysis of compensation to the Company's Directors, Supervisors, President and Vice Presidents as a ratio of net profit after tax in the most recent year

	Ratio of total compensation to net profit after tax(%)	Ratio of total compensation to net profit after tax(%)	Percentage change
	2019	2018
Director	1.53%	1.57%	(0.04%)
Supervisor	0.38%	0.40%	(0.02%)
President and Vice Presidents	0.50%	0.55%	(0.05%)

Note: 1. The Company's compensation for the Company's Directors, Supervisors, President, and Vice Presidents are determined pursuant to the Company's Articles of Incorporation and Managerial Officer Salary Standards. They are reviewed by the Compensation Committee and authorized by the Board of Directors. There were no material changes in the Company's payment to Directors and Supervisors. Total compensation for Directors to net profit after tax decreased by 0.04%; Total compensation for Supervisors to net profit after tax decreased by 0.02%; Total compensation for the President and Vice Presidents to net profit after tax decreased by 0.05%.
The Company's compensation for Directors and Supervisors is determined pursuant to Article 26 of the Company's Articles of Incorporation. If the Company sustains profit for the current year, it may set aside no more than 5% of profit as Director and Supervisor compensation. With regard to the procedures for determining the amount of compensation, the Company considers personal performance achievement rates and the level of contribution to the Company, while taking into account the Company's overall performance, future trends and business risks of the industry, to provide a reasonable level of compensation. Such performance evaluation and the reasonableness of salary and remuneration are reviewed by the Compensation Committee and the Board of Directors. The remuneration system is also reviewed constantly based on actual business operations and applicable laws.
The compensation of the President and Vice Presidents include salary and employees' compensation which shall be determined in accordance with their positions, responsibilities, and the Company's Managerial Officer Salary Standards. They are reviewed by the Compensation Committee and approved by the Board of Directors.

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3.3 Implementation of Corporate Governance

3.3.1 Operations of the Board of Directors

The Company convened a total of 5 Board of Directors meetings in 2019.The attendance was as follows:

Title	Name	Attendance in Person	Attendance by Proxy	Rate of Attendance in Person(%)	Note (Note1)
Chairman	Mao Yu Commemorate Co., Ltd. Representative: En-ChouLin	3	0	100%	Newly appointed
Vice Chairman	Mao Yu Commemorate Co., Ltd. Representative: En-PingLin	3	0	100%	Newly appointed
Director	Mao Yu Commemorate Co., Ltd. Representative: Yao-YingLin	3	0	100%	Newly appointed
Chairman	En-Chou Lin	2	0	100%	-
Vice Chairman	En-Ping Lin	2	0	100%	-
Director	Yao-Ying Lin	2	0	100%	-
Director	Shih-Ching Chen	5	0	100%	Re-elected
Director	Po-Jen Liang	1	0	50%	-
Director	Ming-Yuan Hsieh	3	0	60%	Re-elected
Director	Tsui-Ying Chiang	2	0	100%	Re-elected
Independent Director	Shan-Chieh Yen	5	0	100%	Re-elected
Independent Director	Ming-Hua Peng	5	0	100%	Re-elected
Annotations: 1. (1) Items included in Article 14-3 of the Securities and Exchange Act and other dissenting or qualified opinions by other Independent Directors in record or the resolutions of the Board of Directors in a written statement: The resolutions of board meetings in 2018 contained no items specified in Article 14-3 of the Securities and Exchange Act. (2) Other resolutions of the Board of Directors on which Independent Directors have dissenting or qualified opinions, and that were documented or issued through written statements: None. 2. Recusals of Directors due to conflicts of interests: The Directors recused themselves from discussion and voting on their salaries and compensation. 3. Implementation of self-evaluations by the Company's Board of Directors: The Company will conduct performance evaluations of the Board of Directors for January 1, 2020 to December 31, 2020 in the first quarter of 2021. 3. Measures taken to strengthen the functions of the Board and the implementation status during the current and preceding fiscal year: The Company established the 4thCompensation Committee on July 22, 2019 to assist the Board of Directors to determine the salaries and compensation of Directors and managerial officers as well as to regularly review the performance of Directors and managerial officers and the Company’s compensationpolicies,systems,standards,and structure.

Note 1：The Company’s Directors and Supervisors were re-elected on June 12, 2019.

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3.3.2 Supervisors' participation in Board meetings

A total of 5 Board of Directors meetings were held in the most recent year. The attendance was as follows:

was as follows:
Title	Name	Attendance in Person	Rate of Attendance in Person(%)	Note (Note 1)
Supervisor	Chung-Jen Liang	5	100%	Re-elected
Supervisor	Tsui-Ying Chiang	3	100%	Newlyappointed
Supervisor	Hui-Fen Chen	1	50%	-
Supervisor	Hsiao-PeiSu	2	100%	-
Annotations: 1. Composition and responsibilities of Supervisors: (1) Communication between Supervisors and the Company's employees and shareholders (e.g. communication channels and methods): If Supervisors deem it necessary, they may actively communicate with employees and shareholders of the Company and the Company's employees may also propose opinions or file claims regarding their rights to the Supervisors. (2) Supervisors' communication with internal auditor manager and CPAs (e.g. communication over the Company's financial and business status, the methods and results, etc.): After the Company's internal auditor manager completes the audit report, the Supervisors are requested to review the contents of the Report. The Company's certifying CPAs may explain the results of the audit of the financial report or internal control to the Directors and Supervisors in accordance with regulations and propose necessary recommendations. If the Supervisors have any questions, they may contact the CPAs at any time. 2. Opinions stated by a Supervisor while attending Board of Directors' meetings, the date, session, contents of the case discussed, resolution of the meeting, as well as the Company's dispositionofopinions stated bythe Supervisor:None.

Note 1：The Company’s Directors and Supervisors were re-elected on June 12, 2019.

3.3.3 Operations of the audit committee: Not applicable as the Company does not have an audit committee.

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3.3.4 Implementation of corporate governance, deviations from Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies, and the reasons for the said deviations

deviations
Assessment Item	Implementation status			Deviations from Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies and Reasons
	Yes	No	Summary
1. Does the Company stipulate and disclose best practice principles for corporate governance according to the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies?	v		The Company has established the "Corporate Governance Best Practice Principles"and disclosed them on the Company's website.	No deviation
2. Shareholding structure & shareholders' rights (1) Does the Company establish an internal procedure for handling shareholder proposals, inquiries, disputes, and litigations? Are such matters handled according to internal procedure? (2) Does the Company maintain a register of major shareholders with controlling power as well as a register of persons exercising ultimate control over those of major shareholders? (3) Does the Company establish and enforce risk control and firewall systems with its affiliated companies? (4) Does the Company have internal regulations in place to prevent its internal staff from trading securities based on information yet to be public on the market?	v v v v		(1) The Company has established a spokesperson and acting spokesperson system to ensure prompt disclosure of information that may affect shareholders' decision-making. The Company has also established a dedicated mailbox to process shareholders' suggestions or disputes. (2) The Company reports changes in the number of shares held by insiders (Directors, managers, and major shareholders holding more than 10% of the shares) monthly in accordance with applicable laws. (3) The Company has established the Subsidiary Company Management Regulations to enforce risk control and firewall systems with affiliated companies. (4) The Company has established the "Procedures for Handling Material Inside Information" as the basis for handling and disclosing the Company's material information. The Procedures have been disclosed on the company's website.	No deviation No deviation No deviation No deviation
3. Composition and responsibilities of the Board of Directors (1) Does the Company establish and implement a policy for diversity for the composition of the Board of Directors?	v		(1) The Company has established the "Corporate Governance Best Practice Principles"and the Procedures for Elections of Directors and Supervisors to take into consideration diversity of the board members. Diversity policy is established for basic qualifications and professional knowledge based on the Company’s operations, business model, and development requirements. The Companyconsiders Directors'	No deviation

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Assessment Item			Implementation status	Deviations from Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies and Reasons
	Yes	No	Summary
(2) In addition to the Compensation Committee and Audit Committee established according to law, does the Company voluntarily establish other functional committees? (3) Does the company establish standards and methods for evaluating Board performance, conduct annual performance evaluations, submit performance evaluation results to the Board, and use the results as a basis for	v	v	diversity in professional background (including ability to make sound operational judgments, accounting and financial analysis capability, business management, crisis management, industry knowledge, understanding of international markets, and leadership ability) when appointing Directors. Of the 7 skills above, the Company targets for more than 70% of the board members to possess 4 skills or more. This target was achieved in this term of the Board of Directors.The implementation status of Board member diversityisprovided below: Name Diversity in Capability Ability to make sound operational judgments Accounting & financial analysis capability Business Management Crisis management Industry knowledge Understanding of international markets Leadership ability En-Chou Lin v v v v v v v En-Ping Lin v v v v v v v Shih-Ching Chen v v v v v v v Yao-Ying Lin v v v v v v v Ming-Yuan Hsieh v v v Shan-Chieh Yen v v v Ming-Hua Peng v v v (2) The Company has established the Compensation Committee, and other corporate governance operations are assigned to other units based on their responsibilities. The Company shall establish other functional committees in accordance with regulations. (3) On October 28, 2019, the Board of Directors passed the "Rules for Board of Directors Performance Assessments", and established that the Company must conduct internal evaluations at least once a year, and submit the evaluation results to the Board, and use the results as a basis for determining the compensation and nomination of directors.	The Supervisors currently take on the duties of the Audit Committee No deviation

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Assessment Item	Implementation status	Implementation status	Implementation status	Deviations from Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies and Reasons
	Yes	No	Summary
determining the compensation and nomination of individual directors? (4) Does the Company regularly assess on the independence of CPAs?	v		1. Internal performance evaluations: In the first quarter of 2021, the Company will conduct internal performance evaluations of the Board of Directors and the Compensation Committee by the relevant department. The scope of assessment for the Board of Directors will include five aspects: level of participation in Company operations, improvement of the quality of the Board's decision making, composition and structure of the Board, nomination and continuing education of the directors as well as internal control.The scope of assessment for the functional committee will also include five aspects: participation in the operation of the company, awareness of the duties of the functional committee, improvement of quality of decisions, makeup of the functional committee and election of its members and internal control. 2. The Company's Compensation Committee establishes and regularly reviews Director and manager performance as well as compensation policies, systems, standards, and structures. It also submits recommendations to the Board of Directors for discussion. (4) The Company's Board of Directors periodically evaluates the independence and competency of CPAs and obtain the CPAs' Statement of Independence. The Company verifies that the contents include compliance of all CPA personnel with the independence policy and prohibits any personnel from conducting insider trading and disseminating internal information. The evaluation standards are provided in Note 1 and was reported to the Board of Directors on February 24, 2020.	No deviation
4. Does the Company have a suitable number of competent corporate governance personnel, and has it appointed a corporate governance supervisor responsible for corporate governance matters (including but not limited toproviding	v		The Board has approved the appointment of a dedicated corporate governance supervisor, whose qualifications meet the regulations of Paragraph 1 of Article 3-1 of the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies. The main duties of the corporate governance supervisor include providing information required byDirectors and Supervisors,assisting	No deviation

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Assessment Item	Implementation status	Implementation status	Implementation status	Deviations from Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies and Reasons
	Yes	No	Summary
information for directors and supervisors to perform their duties, assisting directors and supervisors with regulatory compliance, handling matters related to Board meetings and shareholders' meetings, and preparing proceedings for Board meetings and shareholders' meetings)?			Directors in complying with regulations and their continuing education, and to convene Board meetings and shareholders' meetings in compliance with the law.
5. Does the Company set up channels of communication for stakeholders, dedicate a section of the Company's website for stakeholder affairs and adequately respond to stakeholders' inquiries on significant corporate social responsibilityissues?	v		The Company has established a spokesperson system and a dedicated Stakeholders Section on the Company's website to provide the Company's latest information and important corporate social responsibility issues.	No deviation
6. Does the Company commission a professional stock affair agency to manage shareholders' meetings and other relevant affairs?	v		The Company has appointed the Shareholder Service Department of Taishin International Bank as the Company's stock affair agency to manage affairs related to shareholders' meetings.	No deviation
7. Information disclosure (1) Does the Company establish a website to disclose information on financial operations and corporate governance? (2) Does the Company adopt other means of information disclosure (such as establishing an English language website, delegating a professional to collect and disclose company information, implement a spokesperson system, and disclosing the process of investor conferences on the company website)? (3) Does the company announce and report annual financial statements within two months after the end of each fiscal year, and announce and report Q1, Q2, and Q3 financial statements,as well as monthly	v v v		(1) The Company has established a website in Chinese and English and regularly updates the financial, business, and corporate governance information. (2) The Company has assigned dedicated personnel to serve as the contact window for investors. Investors can download financial information from previous years and audio recordings of investor conferences from the website. The Company's website also discloses company information through links to the Market Observation Post System. (3) The Company has announced 2019 consolidated and parent financial statements on February 27, 2019. 2019 Q1, Q2, and Q3 financial statements, as well as monthly sales results have all been announced before the prescribed time limit.	No deviation No deviation No deviation

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Assessment Item	Implementation status	Implementation status	Implementation status	Deviations from Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies and Reasons
	Yes	No	Summary
sales results, before the prescribed time limit?
8. Does the Company disclose other information to facilitate a better understanding of its corporate governance (including but not limited to employee's rights, employee care, investor relations, supplier relations, stakeholders' rights, further studies of directors and supervisors, implementation of risk management policies and measurement standards, implementation of customer policies and purchase of liability insurance for the directors and supervisors of the Company)?	v		1. The Company has established various benefit measures and formed an Employee Welfare Committee which provides benefits, allowances, and emergency relief funds for employees. 2. The Company provides the Directors and Supervisors with necessary legal information at all times. 3. The attendance of the Directors and Supervisors at the Company's Board of Directors meetings is satisfactory and they provide opinions on business operations when required. 4. The Company takes out liability insurance for the Directors and Supervisors each year. 5. The Company has set up an Investor Relations section and regularly updates related information for investors' reference. 6. The Company has a spokesperson, website, and established multiple channels to communicate and provide the Company's latest information.	No deviation
9. Improvements made in the most recent fiscal year in response to the results of corporate governance evaluation conducted by the Corporate Governance Center of the Taiwan Stock Exchange Corporation, and improvement measures and plans for items yet to be improved.	v		The Company has disclosed the Chinese and English Shareholders’ Meeting Agenda Handbook and Annual Report, as well as the English financial report earlier than the prescribed time limit. The Company has also disclosed carbon dioxide and other greenhouse gas emission levels for the past two years, as well as established a policy on information risk management.	Executed in accordance with related regulations of the competent authority

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Note 1:

Note 1:
Evaluation item for the independence of CPAs	Evaluation results	Meet independence criteria
1. Direct or indirect material financial interests between the CPAs and the Company?	No	Yes
2. Financingor endorsements with the Company's Directors?	No	Yes
3. Close business relations with the Company?	No	Yes
4. Provide Non-audit services that maydirectlyimpact auditingtasks?	No	Yes
5. Serve as the Company's defense counsel or represent the Company in mediating conflicts with thirdparties?	No	Yes
6. Are family members or relatives of the Company's Directors, Supervisors, or other individuals inpositions that could seriouslyimpact the audit?	No	Yes
7. Employed bythe Companyor the Company's affiliated companies?	No	Yes

3.3.5 If the Company has set up a compensation committee, its composition, responsibilities and operations should be disclosed:
Information on the members of the Compensation Committee

Title	Criteria Name	Meet the following professional qualification requirements, together with at least 5 years of work experience	Meet the following professional qualification requirements, together with at least 5 years of work experience	Meet the following professional qualification requirements, together with at least 5 years of work experience	Compliance of independence (Note)	Compliance of independence (Note)	Compliance of independence (Note)	Compliance of independence (Note)	Compliance of independence (Note)	Compliance of independence (Note)	Compliance of independence (Note)	Compliance of independence (Note)	Compliance of independence (Note)	Compliance of independence (Note)	Number of other public companies in which the member is also serving as a member of their compensation committee	Note
		Instructor or above in department of commerce/law/ finance/accounti ng or other company affairs related subjects at public/private university/colleg e	Judge, prosecutor, lawyer, accountant, or other professional practice or technician that must undergo national examinations and specialized license	Work experience in commerce, law, finance, accounting or other areas relevant to the business of the Company	1	2	3	4	5	6	7	8	9	10
Independent Director	Shan-Chieh Yen			v	v	v	v	v	v	v	v	v	v	v	0	Re-elected
Independent Director	Ming-Hua Peng			v	v	v	v	v	v	v	v	v	v	v	0	Re-elected
Others	Sun-Yuan Chien			v	v	v	v	v	v	v	v	v	v	v	0	Re-elected

Note: For any committee member who fulfills the relevant condition(s) 2 years before being elected or during the term of office, please tick in the appropriate corresponding boxes.
(1) Not an employee of the Company or any of its affiliates.
(2) Not a director or supervisor of the Company or any of its affiliates (not applicable in cases where the person is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
(3) Not a natural-person shareholder who holds shares, together with those held by the person's spouse, minor children, or held by the person under others' names, in an aggregate amount of one percent or more of the total number of issued shares of the company or ranks as one of its top ten shareholders.
(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship of a manager in (1) or personnel in (2) and (3).
(5) Not a director, supervisor, or employee of a corporate shareholder that directly holders 5% or more of the Company's outstanding shares, is a top five shareholder, or appointed a representative as the Company's director or supervisor in accordance with Article 27, Paragraph 1 or 2 of the Company Act (not applicable in cases where the person is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
(6) Not a director, supervisor, or employee of other companies controlled by the same person with over half of the Company's director seats or shares with voting rights (not applicable in cases where the person is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
(7) Not a director, supervisor, or employee of another company or institution who is the same person or spouse of the Company's chairperson, president or equivalent position (not applicable in cases where the person is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
(8) Shareholders (not applicable in cases where the specific company or institution holds 20% or more but less than 50% of the Company's outstanding shares, and is an independent director of the Company, its parent company, subsidiary, or the subsidiary of the same parent company in accordance with the Act or with local laws).
(9) Not a professional individual who, or an owner, partner, director, supervisor, or manager of a sole

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proprietorship, partnership, company, or institution that audited or provided commercial, legal, financial, or accounting services for total compensation not exceeding NT$500,000 in the most recent two years to the company or to any affiliate of the company, or a spouse thereof, This does not apply to members of the Compensation Committee, Public Tender Offer Review Committee, or Merger and Acquisition Special Committee performing duties in accordance with the Securities and Exchange Act or laws and regulations related to mergers and acquisitions.

(10) Not having any of the situations set forth in Article 30 of the Company Act of the R.O.C.

Operations of the Compensation Committee
(1) The Company's Compensation Committee consists of 3 members.
(2) Term of office for the current members of the Compensation Committee: July 22, 2019 to June 11, 2022. A total of two meetings were convened in 2019 and the attendance of the members was as follows:

Title	Name	Attendance in Person	Attendance by Proxy	Attendance Rate (%)	Note
Convener	Shan-Chieh Yen	2	0	100%	Re-elected
Member	Ming-Hua Peng	2	0	100%	Re-elected
Member	Sun-Yuan Chien	2	0	100%	Re-elected
Annotations: 1. If the Board of Directors chooses not to adopt or amend the recommendations made by the Compnesation Committee, the date and session of the Board of Directors' meeting, resolutions, voting results and handling of opinions of the Compensation Committee by the Company should be disclosed (if the compensation approved by the Board of Directors is better than that of the Compensation Committee, the discrepancies and related reasons should be stated): None. 2. If the members of the Compensation Committee have any dissenting or qualified opinions on the resolutions of the Compensation Committee, where such opinions are documented or issued through written statements, the date and session of the meeting of the Compensation Committee, resolutions, all the members' opinions and handling of these opinions should be stated: None. 3. Discussions and results of resolutions of the Compensation Committee and the Company's handling of opinions of the committee members: First meeting of the Compensation Committee on February 11, 2019: (1) Reviewed the Company's proposal for compensation distribution for employees, Directors, and Supervisors for 2018. The chair of the Compensation Committee consulted all committee members in attendance. The proposal was passed unanimously and submitted for discussion in the Board meeting where it was approved by all Directors in attendance. (2) Reviewed the Company's salary and remuneration for Directors, Supervisors, and managerial officers and the distribution of compensation to Directors and Supervisors in 2018. The chair of the Compensation Committee consulted all committee members in attendance. The proposal was passed unanimously and submitted for discussion in the Board meeting where it was approved by all Directors in attendance. Second meeting of the Compensation Committee on July 22, 2019: (1) Reviewed the Company's proposal for compensation distribution for managerial officers for 2018. The chair of the Compensation Committee consulted all committee members in attendance. The proposal was passed unanimously and submitted for discussion in the Board meeting where it was approved by all Directors in attendance.

If the Board of Directors chooses not to adopt or amend the recommendations made by the Compnesation Committee, the date and session of the Board of Directors' meeting, resolutions, voting results and handling of opinions of the Compensation Committee by the Company should be disclosed (if the compensation approved by the Board of Directors is better than that of the Compensation Committee, the discrepancies and related reasons should be stated): None.
If the members of the Compensation Committee have any dissenting or qualified opinions on the resolutions of the Compensation Committee, where such opinions are documented or issued through written statements, the date and session of the meeting of the Compensation Committee, resolutions, all the members' opinions and handling of these opinions should be stated: None.
(1) Reviewed the Company's proposal for compensation distribution for employees, Directors, and Supervisors for 2018. The chair of the Compensation Committee consulted all committee members in attendance. The proposal was passed unanimously and submitted for discussion in the Board meeting where it was approved by all Directors in attendance.
(2) Reviewed the Company's salary and remuneration for Directors, Supervisors, and managerial officers and the distribution of compensation to Directors and Supervisors in 2018. The chair of the Compensation Committee consulted all committee members in attendance. The proposal was passed unanimously and submitted for discussion in the Board meeting where it was approved by all Directors in attendance.
Second meeting of the Compensation Committee on July 22, 2019:
(1) Reviewed the Company's proposal for compensation distribution for managerial officers for 2018. The chair of the Compensation Committee consulted all committee members in attendance. The proposal was passed unanimously and submitted for discussion in the Board meeting where it was approved by all Directors in attendance.

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3.3.6 CSR implementation, deviations from the "Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies" and reasons: The Company's CSR practices, such as environmental protection, social engagement, social contribution, community service, community welfare, consumer rights, human rights, safety and health, the system and methods used to plan and organize CSR activities and the status of implementation:

implementation:
Assessment Item	Implementation status			Deviation from Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies and Reasons for Deviation
	Yes	No	Summary
1. Implementing corporate governance Dies the company assess ESG risks associated with its operations based on the principle of materiality, and establish related risk management policies or strategies?	v		The Company has established the "Corporate Governance Best Practice Principles" and management policies in accordance with impacts to stakeholders associated with its operations, which has been approved by the Board. Adjustments are made according to company operations. For details please refer to the Company’s CSR Report.	No deviation
2. Does the Company set up a dedicated (part-time) unit for promoting CSR? Is the unit empowered by the Board of Directors to implement CSR activities at the senior management level? Does the unit report the progress of such activities to the Board of Directors?	v		The Company has established a Corporate Social Responsibility Committee which has set out the "Corporate Governance Best Practice Principles". The Company's Vice President of Administration leads the Corporate Social Responsibility Committee and assembles representatives from each department to determine and carry out corporate social responsibility issues and annual objectives. Each department can report issues of concern to the Vice President and follow up on the effectiveness of response measures every six months. A report is submitted to the Board of Directors at the end of each fiscal year. For details please refer to the Company’s CSR Report.	No deviation
3. Environmental issues (1) Does the Company establish a suitable environmental management system based on the nature of its industry? (2) Does the Company endeavor to improve the efficiency of resource utilization and use recycled materials which have a low impact on the environment?	v v		(1) The Company has obtained ISO 14001:2015 certification and aims to reduce pollution and improve on environmental management to lower negative impacts to the environment. The Company has also obtained the OHSAS 18001 occupational health and safety certification, and carries out occupational hazard control to minimize the risk of accidents and to protect worker safety. The Company has established an environmental management system suitable for the industry and set up a dedicated team responsible for environmental management and protection. (2) The Company continues to improve upon recycling of resources, and through biological system processing, recycles around 80% of water used. Raw materials and waste from	No deviation No deviation

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Assessment Item	Implementation status	Implementation status	Implementation status	Deviation from Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies and Reasons for Deviation
	Yes	No	Summary
(3) Does the Company evaluate potential risks and opportunities brought by climate change, and take response measures to climate-related issues? (4) Does the Company collect data for greenhouse gas emissions, water usage and waste quantity in the past two years, and set energy conservation, greenhouse gas emissions reduction, water usage reduction and other waste management policies?	v v		manufacturing are reused to reduce waste of resources and improve recycling. (3) In response to climate change, the Company has evaluated risks brought by climate change (eg. fire, typhoons, electricity outage, etc), and continues to control risks that may negatively impact operations. Active measures are taken and policy adjustments made in response to climate risk. (4) Water management: through recycling, separating water by quality, preventing pollution and increasing water usage efficiency, up to 90% of water can be recycled every year. Carbon emissions: Total carbon emissions in 2018 and 2019 were 170617.4MT and 198671.8MT respectively. The Company aims to reduce energy consumption by 1% every year through improving greenery and improving equipment (eg. sensor lights, LED lighting) to control carbon emissions. Waste management: the Company recycles waste from manufacturing, and requests suppliers to recycle reusable products to reduce resource waste. For details please refer to the Company’s CSR Report.	No deviation No deviation
3. Social issues (1) Does the Company set up management policy and procedures according to related laws and regulations and the International Bill of Human Rights? (2) Does the Company establish appropriately managed employee welfare measures (include salary and compensation, leave and others), and link operationalperformance or	v v		(1) The Company has established "Prevention of Non-Voluntary Labor", "Occupational Maternity Protection", "Sexual Harassment Prevention", “Prevention of Unlawful Violation in the Perfomance of Duties” and "Complaint Management Procedures" in accordance with the International Bill of Human Rights, the RBA and Taiwan labor regulations. The contents include working hours, wages, humanitarian treatment, non-discrimination, freedom of association, and anti-bullying regulations. (2) Employees are the Company’s important assets, and employee salary is determined based on the employee’s educational background, professional knowledge,skills,and working	No deviation No deviation

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Assessment Item	Implementation status	Implementation status	Implementation status	Deviation from Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies and Reasons for Deviation
	Yes	No	Summary
achievements with employee salary and compensation? (3) Does the Company provide employees with a safe and healthy work environment as well as regular classes on health and safety? (4) Does the Company establish an effective competency development career training program for employees? (5) Does the Ccompany comply with relevant regulations and international standards in customer health and safety, customer privacy, marketing and labeling of products and services, and does it establish consumer rights protection policies and complaint procedures? (6) Does the Company establish a supplier management policy, does it require suppliers to comply with regulations on environmental protection, occupational safety and health, and labor rights, and what is its implementation status?	v v v v		experience. The Company offers competitive compensation packages compared to industry players (1%-30% of profits are allocated to employee bonus), and also provides diverse benefits and a retirement plan in accordance with government regulations to attract and retain talent. (3) The Company provides employees with a safe and healthy work environment and administers regular safety education for all employees. Regular health examinations are organized and professional doctors are available to provide employees with psychological and health consultancy services. (4) The Company provides multiple internal and external education and training programs and appoint professional instructors to give lectures from time to time on professional skills and technology. (5) All of the Company’s products comply with relevant regulations and international standards, and the Company has established protection policies and a channel for complaints to protect customers’ or other stakeholders’ rights, health and safety. The Company processes and provides feedback internally regarding any complaints received. (6) The Company has established a supplier code of conduct, requiring suppliers to pass product quality certification, and to comply with “RBA Principles”, “Anti-Slavery Agreement”, “Prohibit Use of Conflict Minerals”, “Regulations on the Safety Management of Hazardous Chemicals”, and “Ethical Management Principles. The Company requires major suppliers to provide self evalution on its implementation of corporate social responsibility. For details please refer to the Company’s CSR Report.	No deviation No deviation No deviation No deviation
5. Does the Company refer to international reporting rules or guidelines to publish a CSR Report to disclose non-financial	v		The Company has published a CSR Report which discloses non-financial information, and is available on the Company’s website.	No deviation

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Assessment Item	Implementation status	Implementation status	Implementation status
	Yes	No	Summary
information of the Company? Has the said Report acquired third party verification?			The Company will work towards acquiring third party verification in the future.
5. If the Company has established corporate social responsibility principles based on "Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies", please describe any deviations between the principles and their implementation: The Company has established a CSR policy that encompasses ethics, labor, and other related regulations. The Company fulfills its social responsibilities in accordance with its business philosophy and vision for development.
6. Other key information useful for explaining status of corporate social responsibility practices: (1) CSR governance framework: The highest-level manager of the Administration Department serves as the representative of the CSR organization and serves concurrently as the management representative. The officer shall convene a meeting at least once every six months with representatives assigned by the Human Resources, Sales, Procurement, Maintenance, Finance, R&D, Manufacturing, and Quality Management Departments to jointly promote and implement corporate social responsibility issues, and report the results of the implementation to the Board of Directors. (2) CSR operations and status of implementation: Industrial and academic collaboration: The Company donates equipment and regularly provides scholarships to improve students’ practical skills.. The Company also arranges corporate lecturers to communicate with teachers and students in schools to enhance interactions and connections between the industry and academia. Social welfare: The Company provides donations for disaster relief or necessary resources for major disasters. Occupational training and job matching: The Company organizes related professional courses with the Taichung-Changhua-Nantou Regional Branch of the Workforce Development Agency and courses include training for unemployed laborers, youth occupational training, and on-the-job training for employees. After completion of training, the Company may employ these students through job matching mechanisms. (3) CSR implementation results: 1. The Company organized 21 campus seminars in 2019 for 1,865 participants. 2. 2018-2019 donation details: 2018March TsingHua UniversitySponsorshipProgram(3rdyear) Cash: NT$1 million Project sponsorship for the Department of Mechanical Engineering, National ChengKungUniversity Cash: NT$4 million Hualien Earthquake Disaster Relief Donation Cash: NT$5 million July 2018 National ChungHsingUniversityScholarship Cash: NT$100,000 October AED Equipment donation: Fire Bureau of Taichung City Government Equipment: 22 units DecemberEquipment donation: National Taiwan University Hospital (Eye Measurement) Equipment: 1 unit 2019 July National ChungHsingUniversityScholarship Cash: NT$100,000 August, October National Cheng Kung University Sponsorship Program Cash: NT$1.15 million November Second Hand Household Items Donation 67 Boxes 3. Number ofpeople employed in 2019 throughprofessional trainingandjob matching: 51 accepted.

Other key information useful for explaining status of corporate social responsibility practices: (1) CSR governance framework: The highest-level manager of the Administration Department serves as the representative of the CSR organization and serves concurrently as the management representative. The officer shall convene a meeting at least once every six months with representatives assigned by the Human Resources, Sales, Procurement, Maintenance, Finance, R&D, Manufacturing, and Quality Management Departments to jointly promote and implement corporate social responsibility issues, and report the results of the implementation to the Board of Directors. (2) CSR operations and status of implementation: Industrial and academic collaboration: The Company donates equipment and regularly provides scholarships to improve students’ practical skills.. The Company also arranges corporate lecturers to communicate with teachers and students in schools to enhance interactions and connections between the industry and academia. Social welfare: The Company provides donations for disaster relief or necessary resources for major disasters. Occupational training and job matching: The Company organizes related professional courses with the Taichung-Changhua-Nantou Regional Branch of the Workforce Development Agency and courses include training for unemployed laborers, youth occupational training, and on-the-job training for employees. After completion of training, the Company may employ these students through job matching mechanisms.

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3.3.7 Compliance with ethical corporate management and measures implemented:

Assessment Item	Implementation status	Implementation status	Implementation status	Deviation from the "Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies" and Reasons for Deviation
	Yes	No	Summary
1. Stipulating policies and plans for ethical corporate management (1) Does the company establish an ethical corporate management policy approved by the Board of Directors, and declare its ethical corporate management policy and measures in its regulations and external documents, as well as the commitment of its Board and management to implementing the management policies? (2) Does the company establish mechanisms for assessing the risk of unethical conduct, periodically analyze and assess operating activities within the scope of business with relatively high risk of unethical conduct, and formulate an unethical conduct prevention plan on this basis, which at least includes preventive measures for conduct specified in Article 7, Paragraph 2 of the Ethical Corporate Management BestPractice Principles for TWSE/TPEx Listed Companies? (3) Does the company specify operating procedures, guidelines for conduct, punishments for violation, rules of appeal in the unethical conduct prevention plan, and does it implement and periodically review and revise the plan?	v v v		(1) The Company has established a "Ethical Corporate Management Best Practice Principles and Reporting and Complaint Policy", which sets out unethical behavior, scope, reporting and disciplinary systems. The policy covers the Board of Directors, management, and employees, and requires all members to act ethically as a basic principle, and strictly prohibits any unethical conduct such as offering or receiving bribes. (2) The Company has set out internal policies regarding unethical conduct, and has disclosed the "Ethical Corporate Management Best Practice Principles and Reporting and Complaint Policy" on the Company website. To prevent unethical behavior, new recruit training includes protection of intellectual property and industry secrets. The Company requires suppliers, contractors, and other partners to sign written statements that they shall not conduct any illegal business activities or provide inappropriate benefits or bribes to the Company's employees. The Company has established a whistleblower system to provide personnel with channels to report any inappropriate conduct. (3) The Company’s "Ethical Corporate Management Best Practice Principles and Reporting and Complaint Policy" sets out procedures, guidelines for conduct for directors and employees. The Company has set up an internal complaint mailbox and a dedicated section to report unethical conduct. A dedicated	No deviation No deviation No deviation

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Assessment Item	Implementation status	Implementation status	Implementation status	Deviation from the "Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies" and Reasons for Deviation
	Yes	No	Summary
			team is responsible for investigating the truth of allegations. Incentives are given to whistleblowers, and identities are kept confidential to prevent inappropriate treatment. For details please refer to the Company’s CSR Report.
2. Implementing ethical corporate management (1) Does the Company assess the integrity records of its business partners, and specify ethical business policy in contracts with the partners? (2) Does the Company establish a dedicated (part-time) unit under the Board of Directors for promoting ethical corporate management? Does the said unit regularly report (at least once a year) to the Board of Directors on the state of its activities? (3) Does the Company establish policies preventing conflict of interests, provide proper channels of appeal, and enforce these policies and channels accordingly? (4) To implement relevant policies on ethical conducts, does the company establish effective accounting and internal control systems, audit plans based on the assessment of unethical conduct, and have its ethical conductprogram audited	v v v v		(1) The Company requires all stakeholders with business transactions with the Company such as suppliers, contractors, and other partners to abide by the same ethical standards as the Company’s employees, and submit written agreements that they shall not provide inappropriate interest or bribes. The Company also promotes relevant ethical guidelines to them periodically. The Board of Directors and management implement the ethical business principles in internal management and external business activities. (2) The Company's Board of Directors and management actively uphold the business principle for ethical management in both internal management and external business activities. The Company has formed audit and legal affairs units to ensure the legality of business activities, implement supervision mechanisms, and control various risks, and the state of these activities are reported to the Board of Directors regularly. (3) The Company has established an internal complaint mailbox and provides a report section on the Company's website. (4) The Company has established effective accounting and internal control systems to ensure the implementation of ethical management. The audit unit establishes annual auditplans for	No deviation No deviation No deviation No deviation

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Assessment Item	Implementation status	Implementation status	Implementation status	Deviation from the "Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies" and Reasons for Deviation
	Yes	No	Summary
by internal auditors or CPA periodically? (5) Does the Company regularly organize internal and external training for ethical corporate management?	v		inspections based on risk assessment results. It also prepares an audit report for the Board of Directors. (5) New recruits are required to sign the Integrity Rules and Guideline to ensure they understand the Company's integrity policies and available channels to report inappropriate conduct. For details please refer to the Company’s CSR Report.	No deviation
3. Status for enforcing whistleblowing systems in the Company (1) Does the Company establish a specific whistleblowing and reward system, set up convenient whistleblowing channels, and designate appropriate personnel to handle the investigations, depending on the identity of the person being reported? (2) Does the Company establish standard investigation operation and procedure for whistleblowing matters and relevant protective mechanisms? (3) Does the Company adopt protection against inappropriate disciplinary actions for the whistleblower?	v v v		The Company has established work rules and requires employees and partners to sign written statements regarding ethics, and has also established a whistleblowing system to provide employees or related personnel with channels for reporting any inappropriate conduct. The reports are processed personally by senior management designated by the Company. The Company has also established confidentiality and protection systems for whistleblowers to protect them from inappropriate treatment for their reports. Any violation of the Company's professional ethical standards are punished in accordance with the Rewards and Penalties Regulations. For details please refer to the Company’s CSR Report.	No deviation
4. Enhancing information disclosure (1) Does the Company disclose the contents of its best practices for ethical corporate management and the effectiveness of relevant activities on its official website or Market Observation Post System?	v		The Company has disclosed related contents of the "Ethical Corporate Management Best Practice Principles and Reporting and Complaint Regulations" on the companywebsite.	No deviation
5. If the Company has established Ethical Corporate Management Principles in accordance with the "Ethical Corporate Management Best Practice Principles for TWSE/TPEX-Listed Companies", describe any deviations between theprinciples and their implementation: None.
6. Other important information that facilitates the understanding of the implementation of ethical corporate management (such as review and amendment of the Company's Ethical Corporate Management Best Practice Principles): None.

3.3.8 Corporate governance principles, related guidelines, and the means of accessing this information: The Company's website http://www.largan.com.tw.

3.3.9 Other material information that can enhance the understanding of the state of corporate governance at the Company: None.

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3.3.10 The following matters regarding the internal control system implementation status shall be disclosed:
Internal Control Statement

Largan Precision, Co., Ltd.

Internal Control System Statement

Date: February 24, 2020

This Internal Control System Statement is issued based on the self-assessment results of the Company for 2019:

(1) The Company acknowledges that the Company's Board of Directors and managers are responsible for the implementation and maintenance of the internal control system, and that the Company has already established such a system. The objectives of internal control system include obtaining business benefits and efficiency (including profitability, performance, and protection of assets and safety); ensuring the reliability, timeliness, transparency, and regulatory compliance of reporting; and providing reasonable assurance.
(2) The internal control system has inherent constraints, and no matter how comprehensive its design may be, an effective internal control system is only capable of providing adequate assurance for achieving the above-mentioned objectives. In addition, the effectiveness of the internal control system may change with the environment and different situations. Nevertheless, the Company's internal control system contains self-monitoring mechanisms and the Company takes immediate remedial actions in response to any identified deficiencies.
(3) The Company determines the effectiveness of the design and implementation of its internal control system in accordance with the items in "Regulations Governing Establishment of Internal Control Systems by Public Companies" (hereinafter referred to as the "Governing Regulations") that are related to the effectiveness of internal control systems. The criteria adopted by the Governing Regulations are divided into 5 components in accordance with the procedure s of management control: 1. Control Environment; 2. Risk Assessment; 3. Control Activities; 4. Information and Communication; and 5. Monitoring Activities. Each constituent element includes a number of categories. Please refer to "Governing Regulations" for details.
(4) The Company has already adopted the aforementioned internal control system assessment items to evaluate the effectiveness of internal control system design and implementation.
(5) Based on the above assessment results, the Company determined that the internal control system (covering monitoring and management of its subsidiaries) as of December 31, 2018 has been effectively designed and implemented and sufficient to ensure that the objectives below are achieved, including understanding the degree of achievement of operational effectiveness and efficiency objectives, reliable, timely and transparent reporting and compliance of applicable rules, laws, regulations and bylaws.
(6) This statement of declaration shall be the primary content of the Company's Annual Report and prospectus, and shall be made available to the public. Falsehood, concealment, or other illegality in the content made public will entail legal liability under Articles 20, 32, 171, and 174 of the Securities and Exchange Act.
(7) This Statement was approved by the Board on February 24, 2020 where 0 of the 6 attending directors expressed dissenting opinions, and the remainder all affirmed the content of this Statement.

Largan Precision, Co., Ltd. Chairman: En-Chou Lin President: En-Ping Lin

Where CPAs are commissioned to audit the Company's internal control systems, the audit report prepared by the CPAs shall be disclosed: None.

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3.3.11 From the most recent fiscal year up until the date of publication of the Annual Report, explain any legal penalty against the company or its internal personnel, or any disciplinary actions by the company against its personnel for violation of the internal control system, where the result of such penalty could have a material effect on shareholder equity or securities prices, the penalty, material deficiencies, and condition of improvement shall be disclosed: None.
3.3.12 Material resolutions adopted by the Shareholders' Meetings and the Board meetings in the most recent fiscal year up to the publication date of this Annual Report:
Material resolutions adopted in the 2019 Shareholders' Meeting and implementation status � Adoption of the 2018 Business Report and Financial Statements Implementation status: Resolution passed.
- Adoption of 2018 earnings distribution proposal
- Implementation status: August 12, 2019 was set as the ex-dividend record date and dividends were distributed on September 4, 2019. (Cash dividend per share was NT$68. )
- Amendment to the "Articles of Incorporation"
- Implementation status: Approved for registration by the competent authority on June 28, 2019.
- Amendment to the "Procedures for the Acquisition or Disposal of Assets" and
- "Procedures for Engaging in Derivatives Trading" and "Rules for Loaning of Funds" and "Rules for Endorsements/Guarantees".

Implementation status: Resolution passed, and effective from June 12, 2019.

Election of the Company's 17th-term of Directors and Supervisors

Implementation status: Elected Directors Mao Yu Commemorate Co., Ltd. Representative En-Chou Lin, Representative En-Ping Lin, Representative Yao-Ying Lin, Shih-Ching Chen, Ming-Yuan Hsieh, Shan-Chieh Yen (Independent Director), Ming-Hua Peng (Independent Director). Elected Supervisors Chung-Jen Liang, Tsui-Ying Chiang. The term of office is from June 12, 2019 to June 11, 2022.

Release of newly appointed Directors from non-compete restrictions

Implementation status: Resolution passed to release Mao Yu Commemorate Co., Ltd. representatives En-Chou Lin, En-Ping Lin, Yao-Ying Ling and Shi-Ching Chen from non-compete restrictions.

Important resolutions of the Board of Directors

Date of Meeting	Material Resolutions
2019.2.25	� Approved matters related to the convening of the 2019 General Shareholders' Meeting. � Approved the compensation distribution for employees, Directors, and Supervisors for 2018.

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Date of Meeting	Material Resolutions
	� Approved the Company's salary and remuneration for Directors, Supervisors, and managerial officers and the distribution of compensation to Directors and Supervisors for 2018. � Approved the 2018 Business Report and Financial Statements. � Approved amendment to the Company's " Articles of Incorporation ". � Approved amendment to the "Procedures for the Acquisition or Disposal of Assets". � Approved amendment to the "Procedures for Engaging in Derivatives Trading". � Election of the Company's 17th-term of Directors and Supervisors. � Approved the Internal Control System Statement. � Evaluated the independence of CPAs. � Approved amendment of the "Corporate Governance Best Practice Principles". � Established the Company's "Standard Operating Procedures for Requests Filed byDirectors".
2019.4.22	� Approved the 2018 earnings distribution proposal. � Approved amendment to the "Rules for Loaning of Funds" and "Rules for Endorsements/Guarantees". � Approved nomination of Directors (including Independent Directors) and Supervisors. � Approved change of CPAs due to internal adjustments of duties in the certifyingaccountingfirm.
2019.6.12	� Election of Chairman and Vice Chairman.
2019.7.22	� Appointed members of the Compensation Committee. � Determined the ex-dividend date for the distribution of cash dividends. � Approved the 2018 compensation distribution proposal for managerial officers reviewed bythe Compensation Committee.
2019.10.28	� Approved the 2020 Business Plan. � Approved the 2020 Audit Plan. � Established “Rules for Board of Directors Performance Assessments". � Appointed a Head of Internal Audit.
2020.2.24	� Election of Chairman and Vice Chairman. � Approved matters related to the convening of the 2020 General Shareholders' Meeting. � Approved the compensation distribution for employees, Directors, and Supervisors for 2019.

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Date of Meeting	Material Resolutions
	� Approved the Company's salary and remuneration for managerial officers for 2019. � Approved the 2019 Business Report and Financial Statements. � Approved the Internal Control System Statement. � Evaluation of the independence of CPAs. � Approved release of managerial officer from non-compete restrictions. � Appointed a Head of Corporate Governance. � Amended the Company’s “Rules and Procedures for Board of Directors’ Meeting”. � Approved change of CPAs due to internal adjustments of duties in the certifying accounting firm.

Date of
Meeting

Material Resolutions

�
Approved the Company's salary and remuneration for managerial officers
for 2019.
�
Approved the 2019 Business Report and Financial Statements.
�
Approved the Internal Control System Statement.
�
Evaluation of the independence of CPAs.
�
Approved release of managerial officer from non-compete restrictions.
�
Appointed a Head of Corporate Governance.
�
Amended the Company’s “Rules and Procedures for Board of Directors’
Meeting”.
�
Approved change of CPAs due to internal adjustments of duties in the
certifying accounting firm.

3.3.13 Major contents of any dissenting opinions on record or stated in a written statement made by Directors or Supervisors regarding key resolutions of the Board of Directors’ meeting in the most recent year up to the publication date of the Annual Report: None.
3.3.14 Summary of the resignation and dismissal of the Company's Chairman, President, Accounting Manager, Finance Manager, Head of Internal Audit and Head of Research and Development in the most recent fiscal year up to the publication date of the Annual Report:

			April 12,2020	April 12,2020
Title	Name	Date of Appointment	Date of Discharge	Reason
Head of Internal Audit	Yi-Ping Yu	December 23, 2011	October 28, 2019	Position adjustment

3.4 Information on CPA fees

3.4.1 Information on the CPA’s professional fees

	Name of the CPA Firm	Name of the CPA Firm	Name of CPA	Name of CPA	Audit period	Audit period	Notes
	KPMG Taiwan		Tzu-Hsin Chang	Shyhhuar Kuo	January 1, 2019 to December 31, 2019		-

Amount range				Professional fee	Audit fees	Non-audit fees	Total
1		Less than NT$2,000,000				v
2		NT$2,000,000(inclusive)to NT$4,000,000			v		v
3		NT$4,000,000(inclusive)to NT$6,000,000
4		NT$6,000,000(inclusive)to NT$8,000,000
5		NT$8,000,000(inclusive)to NT$10,000,000
6		More than NT$10,000,000(inclusive)

4 0

3.4.2 Amount of non-audit fees and details of non-audit services:

Unit: NT$thousands

									Unit: NT$thousands
Name of the CPA Firm	Name of CPA	Audit fees	Non-audit fees					Audit period	Notes
			System design	Business registration	Human resources	Others	Subtotal
KPMG Taiwan	Tzu-Hsin Chang	3,180	0	8	0	550	558	January 1, 2019 to December 31, 2019	TP Report, tax consultancy, review of annual report for Shareholders' Meeting totaling NT$558 thousand.
	Shyhhuar Kuo

3.4.3 Replacement of accounting firms and the annual audit expenses are less than that of the year prior to the change: None.
3.4.4 Audit expenses have decreased by 15% or more from the previous period: None.
3.5 Replacement of CPAs:

3.5.1 Former CPA

3.5.1 Former CPA
Date of Change	January 31, 2020 and February 20, 2019
Replacement reasons and explanations	January 31, 2020: Due to internal adjustments of duties in the certifying accounting firm, CPAs Tzu-Hsin Chang and Shyhhuar Kuo are replaced by CPAs Shyhhuar Kuo and Chun-Yuan Wu. February 20, 2019: Due to internal adjustments of duties in the certifying accounting firm, CPAs Tzu-Hsin Chang and Chun-Man Chen are replaced byCPAs Tzu-Hsin Changand Shyhhuar Kuo.
~~S~~tate whether the client or the CPAs have terminated the engagement or whether the client or ~~t~~he CPAs have rejected the engagement	Principal Status		CPA		Client
	Termination initiated by the client		Not applicable.
	CPA declined to accept (continue) the engagement
Opinion and reason for the issuance of audit reports containing opinions other than unqualified opinions in the most recent two fiscal years	Not applicable.
~~D~~ifferent opinions from the issuer	Yes			Accounting principles or practices
				Disclosure of financial statements
				Audit scope orprocedures
				Others

	None	v
	Description
Other disclosures (Matters that should be disclosed in accordance with Item 1-4 to 1-7, Subparagraph 6, Article 10 of the Regulations)	Not applicable.

4 1

3.5.2 Succeeding CPA

3.5.2 SucceedingCPA
Name of CPA Firm	KPMG Taiwan
Name of CPA	January 31, 2020: CPAs Shyhhuar Kuo and Chun-Yuan Wu February 20, 2019: CPAs Tzu-Hsin Chang and Shyhhuar Kuo
Date of appointment	January 31, 2020 and February20,2019
Subjects and outcomes of consultation on the accounting treatment of or application of accounting principles to specific transactions, or opinions that maybe included on financial statements before the appointment of new CPAs	Not applicable.
The succeeding accountant’s opinions in written form in response to the former accountant’s opinions	Not applicable.

3.5.3 The former CPA's response for items specified in Article 10, Subparagraph 6, Item 1 and Item 2-3 of the Accounting Standards: Not applicable.

3.6 Company's Chairman, President, or any managerial officer in charge of finance or accounting matters who has, in the most recent year, held a position at the accounting firm of its CPA or at an affiliated company: None.

4 2

3.7 Equity transfer or changes in equity pledged by the Company's Directors, Supervisors, managerial officers or shareholders with shareholding percentage exceeding 10% in the most recent fiscal year up to the publication date of the Annual Report:
3.7.1 Changes to shares held by Directors, managerial officers, and shareholders holding more than 10% of shares:

Title	Name	2019	2019	As of April 12,2020	As of April 12,2020
		Increase (decrease) in number of shares held	Increase (decrease) in number of shares pledged	Increase (decrease) in number of shares held	Increase (decrease) in number of sharespledged
Corporate Director/ Major Shareholder	Mao Yu Commemorate Co., Ltd.	0	0	8,672,968	0
Chairman Representative	En-Chou Lin	(2,860,602)	0	0	0
Vice Chairman Representative (CEO)	En-Ping Lin	(3,371,506)	0	0	0
Director Representative	Yao-Ying Lin	(1,526,036)	0	0	0
Director	Shih-Ching Chen	0	0	0	0
Director	Ming-Yuan Hsieh	0	0	0	0
Independent Director	Shan-Chieh Yen	0	0	0	0
Independent Director	Ming-Hua Peng	0	0	0	0
Supervisor	Chung-Jen Liang	0	0	0	0
Supervisor	Tsui-Ying Chiang	0	0	0	0
Vice President	Chung-Shih Lin	0	0	0	0
Chief Technology Officer/Vice President	Yu-Chih Huang	0	0	0	0
Assistant Vice President	Sheng-Lien Wang	0	0	0	0
Finance/ Accounting Director	Hsing-Ju Tsao	0	0	0	0

4 3

3.7.2 Where the counterparty in the transfer of shares is a related party:

Name	Reason for transfer	Date of transaction	Counterparty	Relationship between the counterparty and the Company, its Directors, Supervisors, managerial officers and shareholders with shareholding percentage of over 10%	Number of shares	Transactio n price
En-Chou Lin	Disposal (Note 1)	2019.9.24	Mao Yu Commemorate Co.,Ltd.(Note 2)	Shares held by a Director in the name of otherpersons	2,860,602	-
En-Ping Lin	Disposal (Note 1)	2019.9.24	Mao Yu Commemorate Co.,Ltd.(Note 2)	Shares held by a Director in the name of otherpersons	3,371,506	-
Yao-Ying Lin	Disposal (Note 1)	2019.9.24	Mao Yu Commemorate Co.,Ltd.(Note 2)	Shares held by a Director in the name of otherpersons	1,526,036	-

Note 1: Provided as capital contribution to new company Shih-An Co., Ltd. Note 2: Company name was Shih-An Co., Ltd prior to name change.

3.7.3 Where the counterparty in the pledge of shares is a related party: None.

3.8 Information on the relationship between the top 10 shareholders of the Company:

Name	Personal shareholding	Personal shareholding	Shares held by spouse and minor children	Shares held by spouse and minor children	Shares held in the name of other persons	Shares held in the name of other persons	Familial relationships between top 10 shareholders who are either related parties, spouses, or relatives within the second degree of kinship, his/her/its title (or name) and relationships	Familial relationships between top 10 shareholders who are either related parties, spouses, or relatives within the second degree of kinship, his/her/its title (or name) and relationships	Note
	Number of shares	%	Number of shares	%	Number of shares	%	Title (or name)	Relationship
Mao Yu Commemorate Co., Ltd. Representative: Yao-YingLin	18,910,616	14.10%	-	-	-	-
Shih-Ching Chen	6,756,831	5.04%	6,625,569	4.94%	-	-	Tsui-Ying Chiang	Spouse	-
Tsui-Ying Chiang	6,625,569	4.94%	6,756,831	5.04%	-	-	Shih-Ching Chen	Spouse	-
Government of Singapore Investment Corp. under the custody of Citibank (Taiwan)Limited	3,650,952	2.72%	-	-	-	-	-	-
Ming-Yuan Hsieh	3,606,585	2.69%	-	-	-	-	-	-	-
New Labor Pension Fund	2,697,776	2.01%	-	-	-	-	-	-	-
Cathay Life Insurance Co., Ltd. Representative: Tiao-Kuei Huang	2,250,154	1.68%	-	-	-	-	-	-	-
Nanshan Life Insurance Co., Ltd. Representative: Ying-TzyongTu	2,242,000	1.67%
T.Rowe Price New EmergingMarkets	2,179,000	1.62%	-	-	-	-	-	-	-

4 4

Name	Personal shareholding	Personal shareholding	Shares held by spouse and minor children	Shares held by spouse and minor children	Shares held in the name of other persons	Shares held in the name of other persons	Familial relationships between top 10 shareholders who are either related parties, spouses, or relatives within the second degree of kinship, his/her/its title (or name) and relationships	Familial relationships between top 10 shareholders who are either related parties, spouses, or relatives within the second degree of kinship, his/her/its title (or name) and relationships	Note
	Number of shares	%	Number of shares	%	Number of shares	%	Title (or name)	Relationship
Fund under the custody of JP Morgan Chase Bank Taipei Branch
Chung-Jen Liang	2,091,721	1.56%	924	0%	8,000	0.01%	-	-	-

3.9 Information on the number of shares of the companies invested by the Company, its Directors, Supervisors and managerial officers or a company directly or indirectly controlled by the Company and consolidated percentage of shareholding:

	December 31, 2019 Units: 1,000 shares; % Investment by the Company Investments of Directors, Supervisors, managerial officers and directly or indirectlycontrolled businesses Combined investment Number of shares % Number of shares % Number of shares % 26,636 49.37 5,334 9.88 31,970 59.25	December 31, 2019 Units: 1,000 shares; % Investment by the Company Investments of Directors, Supervisors, managerial officers and directly or indirectlycontrolled businesses Combined investment Number of shares % Number of shares % Number of shares % 26,636 49.37 5,334 9.88 31,970 59.25	December 31, 2019 Units: 1,000 shares; % Investment by the Company Investments of Directors, Supervisors, managerial officers and directly or indirectlycontrolled businesses Combined investment Number of shares % Number of shares % Number of shares % 26,636 49.37 5,334 9.88 31,970 59.25	December 31, 2019 Units: 1,000 shares; % Investment by the Company Investments of Directors, Supervisors, managerial officers and directly or indirectlycontrolled businesses Combined investment Number of shares % Number of shares % Number of shares % 26,636 49.37 5,334 9.88 31,970 59.25	December 31, 2019 Units: 1,000 shares; % Investment by the Company Investments of Directors, Supervisors, managerial officers and directly or indirectlycontrolled businesses Combined investment Number of shares % Number of shares % Number of shares % 26,636 49.37 5,334 9.88 31,970 59.25	December 31, 2019 Units: 1,000 shares; % Investment by the Company Investments of Directors, Supervisors, managerial officers and directly or indirectlycontrolled businesses Combined investment Number of shares % Number of shares % Number of shares % 26,636 49.37 5,334 9.88 31,970 59.25
Investee	Investment by the Company		Investments of Directors, Supervisors, managerial officers and directly or indirectlycontrolled businesses		Combined investment
	Number of shares	%	Number of shares	%	Number of shares	%
Largan Digital Co.,Ltd.	26,636	49.37	5,334	9.88	31,970	59.25

4 5

4. Funding Status

4.1 Company capital and issuance of shares

4.1.1 Sources of shares

Unit: Share; NT$

						Unit: Share; NT$	Unit: Share; NT$	Unit: Share; NT$
Year/month	Issuance price	Authorized capital		Paid-in capital		Note
		Number of shares	amount	Number of shares	amount	Sources of capital	Subscriptions paid with property other than cash	Others
98.7	10	200,000,000	2,000,000,000	134,140,197	1,341,401,970	Capital increase by earnings 2,602,665 shares Capital increase by employee bonus 1,404,251 shares Total new shares issued 4,006,916 shares	None	Note

Note: Jin-Guan-Zheng-I No. 0980034271 dated July 9, 2009

April 12,2020;Unit: Share	April 12,2020;Unit: Share	April 12,2020;Unit: Share	April 12,2020;Unit: Share	April 12,2020;Unit: Share
Shares Type	Authorized capital			Note
	Outstanding shares	Unissued shares	Total
Registered common shares	134,140,197	65,859,803	200,000,000	-

4 6

4.1.2 Shareholder structure

April 12, 2020

Shareholder structure Number	Government institutions	Financial institutions	Other legal persons	Individuals	Foreign institutions and foreigners	Total
Number of people	6	188	93	12,371	1,450	14,108
Number of shares held	4,655,766	8,156,623	20,087,668	31,247,459	69,992,681	134,140,197
Shareholding ratio	3.47%	6.08%	14.98%	23.29%	52.18%	100%

4.1.3 Distribution of equity ownership

The nominal value is NT$10 per share

April 12, 2020

			April 12, 2020
Shareholdingclassification	Number of shareholders	Number of shares held	Shareholdingratio
1 to 999	10,609	334,028	0.25%
1,000 to 5,000	2,355	4,210,860	3.14%
5,001 to 10,000	307	2,314,996	1.73%
10,001 to 15,000	171	2,153,269	1.61%
15,001 to 20,000	103	1,833,905	1.37%
20,001 to 30,000	134	3,317,293	2.47%
30,001 to 40,000	71	2,533,228	1.89%
40,001 to 50,000	50	2,265,009	1.69%
50,001 to 100,000	123	8,285,726	6.18%
100,001 to 200,000	92	13,246,682	9.88%
200,001 to 400,000	38	10,433,390	7.78%
400,001 to 600,000	31	15,386,130	11.47%
600,001 to 800,000	4	2,736,436	2.04%
800,001 to 1,000,000	2	1,674,390	1.25%
1,000,001 to 999,999,999	18	63,414,855	47.28%
Total	14,108	134,140,197	100.00%

4.1.4 List of major shareholders: Please refer to page 44 of the Annual Report.

4 7

4.1.5 Market price, net value, earnings, and dividends per share in the past two years

Item	Year	Year	2018	2019	As of April 12, 2020
Market value per share (Note 1)	Highest		5,330	5,200	5,210
	Lowest		2,875	2,880	3,240
	Average		3,939.76	4,224.13	4,326.95
Net asset value per share (Note 2)	Before distribution		802.14	942.25	992.57
	After distribution		734.14	863.25(Note 8)	-
Earnings per share	Weighted average shares		134,140,197	134,140,197	134,140,197
	Earnings Per Share (Note 3)	Before adjustment	181.67	210.70	50.10
		After adjustment	181.67	210.70	-
Dividends per share	Cash dividends		68	79(Note 8)	-
	Stock dividends	Stock dividends from retained earnings	-	-	-
		Stock dividends from capital surplus	-	-	-
	Cumulative undistributed dividends(Note 4)		-	-	-
Return on investment analysis	Price-to-earnings ratio(Note 5)		21.69	20.05	-
	Price-to-dividend ratio(Note 6)		57.94	53.47	-
	Cash dividendyield(Note 7)		1.73%	1.87%	-

Note 1: The highest and lowest market price of the shares for each fiscal year are listed and the average market price for each fiscal year is calculated based on trading value and volume in each fiscal year.
Note 2: Please fill these rows based on the number of shares issued at the end of the fiscal year and the distribution plan approved at the shareholders' meeting in the subsequent fiscal year.
Note 3: If there are any retroactive adjustments needed due to stock grants, earnings per share before and after the adjustment should be listed.
Note 4: If there are any conditions in issuing equity securities that allow for unpaid dividends for the year to be accumulated to subsequent years in which there is profit, the Company should separately disclose the accumulated unpaid dividends up to that year.
Note 5: Price/earnings ratio = Average closing price per share for the current fiscal year / earnings per share.
Note 6: Price/dividend ratio = Average closing price per share of the year/Cash dividends per share. Note 7: Cash dividend yield = cash dividend per share / current year average per share closing price.
Note 8: 2019 dividends distribution determined by resolution of Board of Directors on April 22, 2020.

4 8

4.1.6 Dividend policy and implementation status
Current Articles of Incorporation:

As the Company experiences constant changes in the business environment and is at a stage of stable growth, the Company’s dividend policy depends on factors such as future fund requirements, long-term financial plans, future capital expenditures and maximization of shareholder interests. The Company may retain a portion of earnings based on operational requirements and the remaining amount shall be distributed in cash and stock dividends. The amount of dividends distributed to shareholders shall be no less than 10% of distributable earnings of the current year, and no less than 30% of the shareholders’ dividends shall be in the form of cash.

The proposal for dividends distribution at the Shareholders’ Meeting this year

Unit: NT$ thousands

Shareholder dividends (cash) 10,597,076

4.1.7 The impacts of issuing stock grants in this shareholder’s meeting on the Company’s operational performance and earnings per share: Not applicable.
4.1.8 Compensation of employees, Directors and Supervisors:
Quantity or scope of compensation for employees, Directors, and Supervisors as stipulated by the Articles of Incorporation:
- In the event the Company makes profits (i.e. profit before tax and before compensation distribution to the employees, Directors, and Supervisors) in any fiscal year, it shall set aside 1% to 30% of the profits as employee compensation and no higher than 5% of the profits as Directors and Supervisors compensation. If there are cumulative losses, the Company shall reserve a sufficient amount to offset such losses.

Employees and Directors and Supervisors compensation shall be resolved by a majority vote at a Board of Director meeting attended by two thirds of the total number of Directors and shall be reported to the Shareholders' Meeting. The Board of Directors may resolve to distribute employee compensation in stocks or cash and the recipients may include employees of subsidiaries of the Company meeting certain requirements set by the Board of Directors.

The basis for estimating the amount of employees, Directors, and Supervisors compensation, for calculating the number of shares to be distributed as employees' compensation, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period:
The Company's compensation for employees and Directors and Supervisors for 2019 are NT$5,087,917 thousand and NT$381,594 thousand, respectively. The amounts are calculated based on the profit before tax, net the compensation for employees, Directors and Supervisors, and multiplied by the percentage set for employee and Directors and Supervisors compensation in the Articles of Incorporation. They are listed as operating cost or operating expenses for 2019. The appropriated employees' compensation and remuneration for Directors and Supervisors determined in the resolution of the Board Meeting are consistent with the recognized amount in the Company's 2019 Consolidated Financial Report.
Compensation proposal approved by the Board of Directors
(1) Information on the distribution of compensation for employees and Directors and

4 9

Supervisors passed by the Board of Directors on February 24, 2020:

Distribution status (Unit: NT$ thousands) Employee compensation - cash $5,087,917 Director and Supervisor compensation - cash $381,594

The aforementioned estimate is the same as the expenses recognized for the year.

(2) The amount of employees' compensation to be paid in stocks out of the current parent company only or individual financial report in terms of the sum of net profit after tax and employee compensation: Not applicable.
Actual distribution of compensation for employees, Directors, and Supervisors and where there were discrepancies the recognized compensations for employees and Directors, the difference, cause, and treatment of the discrepancy shall be described:
(1) Distribution status

(Unit: NT$ thousands) Employee compensation - cash $4,383,828 Director and Supervisor compensation - cash $328,787

(2) No discrepancy between the actual distribution and the recognized amount
4.1.9 Company share repurchase status: None.
4.2 Issuance of corporate bonds: None.
4.3 Preferred shares: None.
4.4 Overseas depository receipt: None.
4.5 Issuance of employee stock options: None.
4.6 Restrictions on employee shares and status of New Share Issuance in Connection with Mergers and Acquisitions: None.
4.7 The following items are required for the implementation status of the capital utilization plan:
(1) Plan: As of one quarter before the publication date of this Annual Report, previous issuance or private placement of marketable securities that have not been completed or completed but are yet to record any benefit within the past three fiscal years: None.
(2) Implementation status: The implementation status of previous plans as of one quarter before the publication date of this Annual Report: Not applicable.

5 0

5. Operational Highlights

5.1 Business activities

5.1.1 Business scope

The Company's businesses include the research and development, design, production, sales and after-sales technical services for various optical lens modules and optoelectronic components. Products include the design, production, processing, and sales of lenses and optoelectronic components for multifunction printers, scanners, smartphones, 3D structured light, ToF, in-display optical fingerprint recognition, drones, tablets, IP cameras, smart TVs, wearable devices, iris recognition lenses, optical mouse lenses, medical instruments, and automobile lenses.

5.1.2 Main businesses
(1) CE01010 Photographic and optical equipment manufacturing.
(2) CQ01010 Die manufacturing.
(3) F601010 Intellectual property
(4) F113030 Wholesale of precision instruments
(5) F401010 International trade.
(6) I501010 Product designing
(7) CF01011 Medical materials and equipment manufacturing.
(8) ZZ99999 All business items that are not prohibited or restricted by law, except those that are subject to special approval.
5.1.3 Major product lines and their breakdown

Unit: NT$ thousands

					Unit: NT$thousands	Unit: NT$thousands
Year Product	2017		2018		2019
	Amount	Percentage	Amount	Percentage	Amount	Percentage
Optical components	53,127,510	100.00%	49,952,158	100.00%	60,745,008	100.00%

5.1.4 Current products

Mainproducts	Usage/functions
Optical lenses	Mainly used in scanners, multifunction printers, mobile phone lenses, drone camera lenses, mobile 3D structured light lenses, tablets, motion-controlled gaming systems, laptop computer lenses, smart TV lenses, IP camera lenses, and automobile lenses.

5 1

5.1.5 New products planned and under development The Company shall invest approximately 5% to 10% of revenue in R&D expenditures for 2019. However, spending shall be adjusted based on global market conditions and the Company's actual operations.

Future research and development will focus on improving the specifications of existing products, as well as actively developing the following mainstream products:

(1) Automobile imaging lenses
(2) Lenses for medical use
(3) Security surveillance lenses
(4) Large aperture/wide angle lenses
(5) Full-focus lenses
(6) Iris recognition lenses
(7) Lenses for sports cameras
(8) Lenses for drones
(9) Low-pixel size lenses
(10) Lenses with lower Z height
(11) ToF lenses
(12) In-display optical fingerprint recognition lenses
(13) Freeform lenses
5.1.6 Industry overview

Current status and development of the industry: In the past, the optical components industry had maintained stable growth due to the development of products such as cameras, telescopes, and microscopes. However, the development of digital cameras and mobile phones in recent years has now led to rapid growth of optical components and lenses. This mainly began with the global digital camera market which took off in 2000 and led a new wave of imaging revolution. Growth exceeded market expectations and caused a continuous shortage of supply for optical components such as lenses over many years. The introduction and popularity of camera phones further intensified the need for lenses, and the development of multiple lenses on handheld devices has escalated this demand. Besides this imaging market, the optical industry has also expanded to automobiles and drones and as such, the industry is expected to continue to expand in the next few years.

Correlation with upstream, midstream, and downstream sections of the industry:

	Industry	Product
Optical materials (Upstream industries)	Opticalglass industry	Opticalglass blocks andpressed blanks
	Optical plastic industry	Plastic pellets such as PC, CR-39, and PMMA
Optical components (Midstream industries)	Optical components industry	Lenses, prisms, mirrors, filters, absorbing glass, and various lenses
Optical application products (Downstream industries)	Traditional optical equipment	Glasses, cameras, telescopes, microscopes, projectors, vehicle lights
	Traditional imaging products	Photocopiers, fax machines, cameras
	Consumer digital products	Digital cameras, digital video cameras, projectors, camera phones, tablet computers,wearable devices,sports cameras,drone cameras
	Consumer optical storage	CDplayers,DVDplayers

5 2

	Industry	Product
	products
	Computer peripheral digital products	Laser printers, image scanners, PC cameras, data projectors
	Computer peripheral optical storage devices	DVD-ROM drives
	Optical equipment industry	Spectrometers,optical spectrometers,interferometers
	Measurement equipment industry	Range finders, theodolites, tachymeter
	Medical, industrial, and commercialproducts	Medical lasers, laser processors, barcode scanners
	Others	Exposure equipment, ultraviolet curing equipment, lighting equipment, militarynight visiongoggles
Peripheral industries	Coating materials industry, coating equipment industry, vacuum equipment industry, abrasive materials industry, grinding equipment industry, mold manufacturing industry, molding equipment industry, inspection equipment industry, photographic equipment industry, photographicprocessingindustry

Source: PIDA

Trends in product development: Optical products require a wide range of optical components including glass lenses, plastic lenses, spheric lenses, and aspheric lenses for different levels of precision and product applications. Due to requirements for smaller photoelectric imaging products, optical lenses have become increasingly miniaturized and moved toward mass production, higher quality, and lower prices. Meanwhile, consumer demand for high-resolution, wide angle, large aperture, and more lens pieces per camera have risen.

Competition: Consumer optical component manufacturers are mostly concentrated in Asia such as Japan, Korea, Mainland China, and Taiwan. Competitors differ in their product application and production technology. The Company believes that the only way to maintain long-term competitiveness is to continue to invest in research and development and expand production capacity.

5.1.7 Overview of technology and R&D

Research and development (R&D) expense in the most recent year as of the publication date of the Annual Report

Unit: NT$ thousands

f the Annual Report		Unit: NT$thousand
	2019	2020 Q1
R&D expense	3,764,448	959,470
Revenue	60,745,008	13,214,517
Percentage of expense to revenue	6.20%	7.26%

Successfully developed technologies and products

Technology and products successfully developed by the Company in the most recent year and as of the printing of the Annual Report

Item

Successfullydeveloped technologyandproducts

Phone Camera

Development of new 6P 21M AF mobile phone lens
Development of new 6P 23M AF mobile phone lens
Development of new 4P 13M AF mobile phone lens
Development of new 6P 8M AF mobile phone lens
Development of new 6P 24M AF mobile phone lens
Development of new 5P 24M AF mobile phone lens
Development of new 5P 20M AF mobile phone lens
Development of new 5P 32M AF mobile phone lens
Development of new 6P 48M AF mobile phone lens
Developmentof new 7P 40M AF mobile phonelens

5 3

Item	Successfully developedtechnologyand products
	Developmentof new 8P 108M AF mobile phonelens
Automobile rear view imaging lenses	Development of new 3P3G VGA wide angle design Development of new 6G 1.3M AF wide angle design Development of new 6G VGA wide angle design Development of new 8G VGA narrow angle design Development of the new 1G4P wide angle design Development of the new 2G2P wide angle design

5.1.8 Long-term and short-term business development plans

1. Short-term plans

(1) Production strategies
- A. Use existing production equipment to improve manufacturing technologies and yield to maximize output.
- B. Control and manage raw materials and finished products to prevent waste and loss.
- C. Fully implement ISO 9001 and 14000 and achieve quality goals.
- D. Use the Taiwan headquarters as a base to effectively use the advantages on both sides of the strait to provide customers with flexibility in applications, reduce costs, and strengthen market mobility and competitiveness
(2) Sales strategies
- A. Existing customers: Provide more competitive products and services and continue to cultivate key existing customers while developing and establishing long-term partnerships to increase market share in existing customers.
- B. Potential new customers: Use existing optical technology as the basis to actively develop potential customers for optical applications. Introduce and collaborate with customers' new product development projects to expand the market value of optical products, diversify operations, and avoid risks of excessive concentration in certain products.
- C. Product end-customers: Connect directly with end-customers to encourage system manufacturers to use the Company's products.
(3) Research and Development strategies
- A. Gain insight into future product development trends and jointly develop product specifications and participate in customers' preliminary product R&D plans. Respond to customers product demands to gain opportunities in the market.
- B. Actively invest in R&D of the latest optical/mechanical designs and expand development for all product applications.
(4) Business strategies
- A. Streamline the organization and strengthen project based organizational structure to improve efficiency of decision-making and operating performance.
- B. Talents are the foundation of the Company's competitiveness. The Company actively recruits outstanding talent, and conducts on-the-job training for employees internally to enhance the Company’s competitive advantage
- C. Strengthen internal information systems to manage use and timeliness of information .
(5) Finance strategies
- A. Maintain a healthy financial structure to provide strong support for sales, production, and R&D.
- B. Plan long-term and short-term capital utilization to maximize returns with minimal risk.

2. Long-term plans

(1) Production strategies
A. Implement the international division of labor and a flexible production to enhance business performance.
B. Strengthen management by objectives and reduce inventory to improve the inventory turnover rate.

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  - C. Continue to enhance production technology to reduce production cost and improve yield rate and competitiveness.

  - D. Continue to invest in automation and expand production capacity to alleviate rising labor costs and stabilize product quality.

  - E. Continue to expand production capacity to satisfy market and customer demands.

  - F. Enter different markets and obtain TS16949 certification.

(2) Sales strategies
- A. Consolidate marketing advantages and grasp opportunities in the market. Expand niche competitiveness and promote global marketing strategies and international market expansion.
- B. Seek major international manufacturers and form upstream and downstream strategic alliances. Commit to using the Company's strengths to satisfy customer demands and form partnerships to prevent destructive competition.
- C. Actively obtain long-term orders from international companies and stabilize revenue growth. Leverage opportunities to obtain key technology cooperation and new product development.
(3) R&D strategies
- A. Collaborate with major international companies in new technology to gain experience, develop talents, and strengthen R&D capacity.
- B. Monitor market product development trends and develop various miniature optoelectronic components and strengthen capabilities to improve product appearances and various mechanical designs.
- C. Actively seek out applications for the development of new materials for optoelectronic components to expand end applications and reduce costs.
- D. Apply for domestic and foreign patents in new technology to protect intellectual property rights and widen the technological lead.
- E. Actively develop new products for different sectors.
(4) Business strategies
- A. Monitor international business development trends and establish cross-border management organizations and structures to ensure the Company is more competitive internationally.
- B. Consolidate upstream and downstream information systems and connect closely with upstream suppliers and downstream customers so that all three parties benefit.
(5) Finance strategies
- A. Strengthen capital risk management.
- B. Execute sound financial planning and conform with the Company's business objectives and development plans to strengthen business performance and improve overall competitiveness.
5.2 Overview of market, production and sales
5.2.1 Market analysis
Sales regions for major products

Unit: NT$ thousands

Year Region	2018	2018	2019	2019
	Amount	Percentage	Amount	Percentage
Asia	49,886,010	99.87%	60,573,486	99.72%
Americas	61,936	0.12%	171,288	0.28%
Europe	4,212	0.01%	234	-
Total	49,952,158	100.00%	60,745,008	100.00%

Market supply and demand and market growth in the future
(1) With continuous innovation in information technology, essentially all image output/input requires the use of various types of optical lenses or modules. These include digital cameras, telescopes, microscopes, photocopiers, fax machines, laser printers, scanners, barcode scanners, computer cameras, video cameras, surveillance cameras, televisions, projectors and video phones. Disc drives (CD/DVD players and CD/DVD-ROM drives) and optical communication components also require optical lenses. The products with the largest volume

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in 2018 are high-end lenses for mobile phones while the products with the highest growth are automotive imaging lenses, while demand for micro projector lenses, and drones will continue to grow.

(2) Optical components are mainly used in products such as disc drives, digital cameras, and mobile phones. According to various market research, mobile phones is one product with the largest need for optical components. As demand for mobile phone cameras has increased, lens specifications have also continued to migrate while getting smaller at the same time. The key to success for manufacturers will depend on their ability to improve product precision and take advantage of opportunities in the market.
Competitive niches, favorable and unfavorable factors for long-term growth and countermeasures

Item	Competitive Niches and FavorableFactors	Unfavorable Factors	Countermeasures
1. Main businesses and development outlook	Our current products encompass new optical products and the continuous migration of consumer optoelectronic products helps the Company's development and expansion into a broader market.	The Company faces competition from other related industries, and competitors in the optical industry are now producing low-end products with quality similar to that of the Company’s products.	The Company shall adopt pricing strategies based on the characteristic of different markets and products to reduce the price disparity for low-end products and provide customers with added value to improve competitiveness in the low-end market.
2. Position in the industry	The Company's fully-staffed and experienced R&D team and production quality have received wide acclaim from customers. The Company offers comprehensive product lines and provide customized lenses based on customers' demands.	Low-price competition from Mainland China and competitors have gradually reduced product cycles.	The Company shall develop the most advanced technologies, improve existing quality control, and maintain strong relationships with customers to maintain leadership. The Company shall also develop a wide portfolio of lenses to satisfy customer demands at various price points and accelerate the speed of development to gain market opportunities.
3. Supply situation of main raw materials	The Company maintains long-term relationships with raw materials suppliers which consist entirely of major domestic and foreign manufacturers, and as such have maintained stable relationships and regular supplies.	Market prices are controlled by major international manufacturers.	The Company invests in diverse materials for product development to meet changing demands in the market and reduce the supply risks of individual materials.
4. Status of sales of main products	The Company's main products are lenses for mobile phones, followed by lenses for tablet computers. Customers consist entirely	Shipment of mobile phone lenses account for a high proportion of shipments and it is	The Company shall focus on the design and development of new products and expand into new sectors and

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Item	Competitive Niches and Favorable Factors	Unfavorable Factors	Countermeasures
	of major domestic and international companies and the Company has thus achieved stable growth in sales orders.	difficult to diversify market and product risks.	applications for other optical products to increase product range and reduce risks.
5. Labor status of main production	Highly automated production equipment.	Labor cost has increased along with citizens' income, economic structure, and wages and benefits for entry-level workers in recent years.	The Company hires foreign workers to replenish manpower. The Company shall increase the level of automation to reduce demand for labor, and transfer labor-intensive and low-value-added products and processes to overseas regions with low labor costs.

5.2.2 Major applications and production process of primary products

Major applications of primary products
(1) Optical lenses
- Main applications: Scanners, multifunction printers, mobile phones, drones, wearable devices, tablet computers, and smart TVs.
(2) Optical lens products

Main applications: DVD readers and optical mouse.

Manufacturing process of main products
(1) Optical lenses

==> picture [435 x 296] intentionally omitted <==

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

Raw materials Assembly Inspection
Functionality check Finished product
(2) Optical lenses
A. Plastics
Raw materials Mold injection Cutting Coating
Inspection Finished product
B. Glass products
Blanks Cutting Polishing Centering
Coating Inspection Finished product
----- End of picture text -----

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5.2.3 Supply status of main materials

Material	Supplier	Country	Supplierstatus
Engineering plastic	110185 100181 110059	Taiwan Taiwan Taiwan	All suppliers are renowned world-class companies with high quality, large volume and stable supply.

5.2.4 A list of customers accounting for more than 10% of sales for any given year within the last two years, their purchase amount and percentage, and explanation for changes (increase or decrease) in sales.
Information on customers accounting for 10% or more of the Company's total sales in either of the 2 most recent years:

Unit: NT$ thousands

	of the 2 most recent years:	of the 2 most recent years:	of the 2 most recent years:	of the 2 most recent years:					Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
	2018				2019				2020 up to the end of the first quarter
Item	Name	Amount	Percentage of net sales for the entire year (%)	Relationship with the Company	Name	Amount	Percentage of net sales for the entire year (%)	Relationship with the Company	Name	Amount	Percentage of net sales up to the previous quarter (%)	Relationship with the Company
1	653003	9,848,693	20	-	623020	13,020,188	21	-	623020	2,131,490	16	-
2	623119	9,108,365	18	-	623045	11,371,169	19	-	623045	2,094,708	16	-
3	623028	7,486,036	15	-	653003	7,915,412	13	-	-	-	-	-
4	653021	6,928,370	14	-	-	-	-	-	-	-	-	-
	Others	16,580,694	33	-	Others	28,438,239	47	-	Others	8,988,319	68	-
	Net sales	49,952,158	100	-	Net sales	60,745,008	100	-	Net sales	13,214,517	100	-

Reasons for change: Mainly due to an increase in revenue in 2019.

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Information on suppliers accounting for 10% or more of the Company's total purchases in either of the 2 most recent years:

Unit: NT$ thousands

									Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
	2018				2019				2020 up to the end of the first quarter
Item	Name	Amount	Percentage of annual net purchase (%)	Relationship with the Company	Name	Amount	Percentage of annual net purchase (%)	Relationship with the Company	Name	Amount	Percentage of net purchase up to the previous quarter (%)	Relationship with the Company
1	110185	1,555,231	24	-	110185	1,433,377	22	-	110185	547,573	31	-
2	100236	1,198,005	19	-	100236	899,313	14	-	100236	188,106	11	-
3	100230	965,379	15	-	100230	724,295	11	-	110181	168,538	10	-
4	-	-	-	-	110181	617,843	10	-	-	-	-	-

Reasons for change: Mainly due to a decrease in purchases in 2019.

5.2.5 Table of production volume in the two most recent years

Unit: 1,000 units; NT$ thousands

				Unit: 1,000 units;NT$thousands	Unit: 1,000 units;NT$thousands	Unit: 1,000 units;NT$thousands
Year Production Quantity and Value of PrimaryProducts	2018			2019
	Production Capacity	Production Volume	Production Value	Production Capacity	Production Volume	Production Value
Optical Components	22,726,640	21,411,376	23,351,560	27,433,136	26,364,077	28,433,204

Note: Substitutable production capacity may be included in the production capacity.

5.2.6 Table of sales volume in the two most recent years

Unit: 1,000 units; NT$ thousands

					Unit: 1,000 units;NT$thousands	Unit: 1,000 units;NT$thousands	Unit: 1,000 units;NT$thousands	Unit: 1,000 units;NT$thousands
Year Sales Volume and Value of Mainproducts	2018				2019
	Domestic Sales		Export Sales		Domestic Sales		Export Sales
	Volume	Value	Volume	Value	Volume	Value	Volume	Value
Optical Components	140,362	145,565	7,368,844	49,806,593	231,890	601,162	8,946,499	60,143,846

5.3 Number of employees during the two most recent years

Y		2018	2019	A f Ail 12 2020
ear				s o pr ,
Number of employees	Production	5,357	5,364	5,268
	Management	1,188	1,362	1,371
	R&D	871	993	1,020
	Total	7,416	7,719	7,659
Averageage		30.04	30.05	30.30
Average years ofservices		3.61	3.94	4.15
Educational background distribution %	PhD	0.11%	0.12%	0.10%
	Masters	4.92%	5.13%	5.27%
	Bachelors	36.01%	37.06%	37.73%
	Senior highschool	49.62%	49.98%	49.51%
	Below senior high school	9.34%	7.71%	7.39%

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5.4 Environmental protection expenditures Any losses suffered by the company in the most recent fiscal year and up to the Annual Report publication date due to environmental pollution incidents (including any compensation paid and any violations of environmental protection laws or regulations found in environmental inspection, specifying the disposition dates, disposition reference numbers, the articles of law violated, and the content of the dispositions), and disclose an estimate of possible expenses that could be incurred currently and in the future and measures being or to be taken. If a reasonable estimation cannot be made, provide the explanation: None.
5.5 Labor relations
(1) The Company's employee benefits for studying, training, pension systems and its implementation status as well as labor agreements and measures for preserving employee rights and interests
1. Benefits and implementation
  - 1.1 The Company established the Employee Welfare Committee on April 1, 2000 in accordance with the "Employee Welfare Fund Act" to be responsible for allocating employee welfare funds and benefits.
  - 1.2 The Company has subscribed to labor insurance and health insurance in accordance with relevant regulations and added group insurance to provide employees with various insurance payment privileges.
  - 1.3 Where the Company generates profits at the end of the year, the Company shall pay taxes, make up for losses, and set aside dividends and surplus reserve. The Company shall distribute year-end bonuses to employees who have not committed acts of negligence in the entire year.
2. Allowances: Benefits and subsidies for meals, weddings, pregnancy, funerals, hospitalization, travel, birthday, Labor Day, family day, and group insurance.
3. Social childcare measures:
  - 3.1. In addition to distributing maternity benefits, the Company has established breastfeeding (breast milk collection) rooms in all plants and set up dedicated parking spaces for pregnant employees for prioritized use.
  - 3.2. The Company has signed special contracts with nearby childcare centers to provide diverse options for employees.
  - 3.3. In 2019, 108 employees had applied for unpaid parental leave.
4. Healthcare:

In addition to arranging professional nursing staff and appointing doctors to provide consultation services onsite each week, the Company has also supported rehabilitation evaluations for injured employees. In addition, the Company has exceeded regulatory labor requirements and provided annual health checks free of charge to employees.

Emergency aid:
5.1. The Company has established emergency relief guidelines to allow employees to apply for an emergency relief fund to maintain basic needs in the event of a major illness, long-term care required in the family, or damage to real estate that prevents the employee from attending work and family difficulties.
5.2. In 2019, the Company had provided financial aid amounting to NT$500,000 for up to four employees who could not attend work due to major injuries and experienced family difficulties.
Pension system and implementation status
The Company's employees enjoy pension payment in accordance with labor insurance regulations. The Company has also established pension regulations in accordance with the Labor Standards Act and the Labor Pension Act. According to the Regulations for the Allocation and Management of the Workers' Retirement Reserve Funds, the Company

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sets aside a certain ratio of the employees' salaries as retirement reserve each month in accordance with applicable laws and deposit the funds into the employees' dedicated personal pension account in the Bank of Taiwan or the Bureau of Labor Insurance.

6.1. An employee may apply for voluntary retirement in the event of any of the following conditions:
6.1.1 The employee has provided services for more than 15 years and is 55 years old or older.
6.1.2 The employee has provided services for 25 years or more.
6.1.3 The employee has provided more than 10 years of services and is 60 years old or older.
6.2. The Company may subject an employee to compulsory retirement in the event of any of the following conditions:
6.2.1 The employee is 65 years old or older.
6.2.2 The employee is mentally incapable or physically disabled and cannot continue to work.
6.3. Employee pension payment standards are as follows:
6.3.1 Employees who have provided services for less than 15 years are given two base points for every full year of service.
6.3.2 Employees who have provided services for more than 15 years are given one base points for every full year of service. The total number of base units shall be limited to 45. Less than half a year of service is considered half a year and less than a full year but more than half a year of service is considered a full year.
6.3.3 Where the employee subject to compulsory retirement is mentally incapable or physically disabled due to the performance of duties, the employee shall receive an additional 20% of pension in accordance with the two preceding subparagraphs.
6.3.4 The payment, collection, and calculation method for pension of employees who elect to adopt the "Labor Pension Act" system starting from July 1, 2005 are as follows:
- a. The Company appropriates 6% of the employee's salary to the dedicated personal pension account at the Bureau of Labor Insurance in accordance with the personal salary appropriation classification table.
- b. Pension collection and calculation methods shall be pursuant to the "Labor Pension Act".
6.4. The monthly average salary of an employee authorized for retirement shall be adopted as the standards for calculating employee pension base unit.
6.5. Voluntary retirees shall be required to fill out a retirement application which shall be implemented after approval.
6.6. For employees subject to compulsory retirement, the units shall report to obtain approval and notify the retiree to complete procedures.
6.7. Where a retiree meets requirements for voluntary retirement, the Company shall pay the total pension within 30 days of his/her retirement. Where the pension cannot be paid in full, the Company may report to the competent authority for approval and pay in installments.
6.8. Employees' right to request pension shall start in the month after retirement and it shall be extinguished if not exercised within five years.
6.9. Number of employees who have applied for retirement in 2019: 1.
Work environment and employees' personal safety

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The Company's production, management, information, and safety and health units conduct safety and health risk assessments before building a new plant or refurbishing certain areas of a plant.

The Company achieves more with less if safety and health features are incorporated into the planning and design stage. The Company completes planning, design, and construction in accordance with various regulations, international regulations, and company standards for the audit unit to administer safety and health management. With regard to operation safety and safety and health management, in addition to high-risk operation control, contractor management and construction safety management, chemical safety management, and occupational disaster analysis statistics, the Company also plans the operating environment evaluation, disaster emergency response procedures, and regular fire safety drills. In the event of a disaster, these measures shall be implemented to minimize damage and impact on the Company's property, people, society, and the environment.

Safety and Health Committee

The Company has established the Safety and Health Committee which convenes meetings each quarter to discuss environmental protection, safety, and health. The Company has also elected labor representatives in accordance with laws and provided managers and employees with official channels for communicating environmental protection, safety, and health issues. In response to the increase in scale of new plants, unit supervisors organize monthly meetings to discuss environmental protection, safety, and health issues to fulfill environmental protection, safety, and health management.

9. Fire safety

The Company organizes two self-defense fire safety group drills and an annual fire safety inspection each year to control operation safety risks and implement emergency response. The Company has also arranged firefighting teams in the districts to conduct employee education and training to promote awareness of fire safety. Potential disaster scenarios that may occur during the Company's operations are simulated and the effectiveness of emergency response measures are observed so that employees learn the basic skills for emergency evacuation and preliminary firefighting. The Company has established an effective system to assign disaster prevention tasks to minimize the damage caused by disasters to the lives and property of employees.

Safety and health management

The Company assigns unit supervisors or designated personnel to conduct safety and health hazard identification and risk assessment for related activities, products, and services. The Company also considers scale, nature, and other factors and has assigned management representatives to recommend occupational safety and health management plans as the basis for setting and reviewing policy goals and subjects. The plan is delivered to all company personnel and administered, maintained, and periodically reviewed to ensure its appropriateness. The Company also uses verification mechanisms in the ISO 14001 and OSHAS 18001 management systems and implement plan-do-check-action (PDCA) cycle to continue to improve the Company's environmental protection, safety and health management performance.

Emergency response center

The Company's plants have set up self-defense fire safety organizations and the emergency response center conducts immediate broadcasts in the event of irregularities or accidents and notify response teams to take instant action.

The emergency response center is equipped with the following facilities:

11.1. Emergency response information: Including the layout of the plant, layout of the equipment, and response procedure diagrams.
11.2. Fire safety and life preservation monitoring: The system includes the fire safety system, gas monitoring system, emergency smoke ventilation system, key area surveillance and video recording system, gas and chemical supply emergency

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cut-off system, and broadcast systems.

11.3. Response equipment: The equipment includes various protective clothing, personal protective equipment, portable personal air breathing apparatus, portable detector, leakage treatment equipment, and warning equipment. In addition, as the emergency response center may be affected by disasters, the plants have established secondary emergency response centers at appropriate locations on the periphery. They are equipped with simpler response equipment with access to adequate information for continuing response operations where necessary.
11.4. Emergency aid equipment: The Company has set up AEDs, emergency shower equipment, eyewash equipment, and emergency backpacks and chemical disaster response packs at work sites in accordance with emergency aid practices.

The Company has set up infirmaries in all plants. The Company has assigned health professionals and specialist doctors to provide 24-hour emergency care and promote a wide range of healthcare services. In addition, the Company is committed to implementing hazard assessments, maternity protection plans as well as management plans that are committed to preventing cardiovascular diseases that may be caused by long working hours, night shifts, and rotating shifts with the aim to protect and promote employees' physical and mental health. Multiple physical and health promotion resources and related activities are organized to protect employees from workplace hazards and actively promote their health.

Occupational injury statistics and analysis The occupational injury statistics and analysis data are based on the indicators for critical disabling injuries announced by the Ministry of Labor and Global Reporting Initiative G4 (GRI G4). The Company selects the disabling injury frequency rate (FR, number of injuries per million manhours worked), disabling injury severity rate (SR, number of work days lost per million manhours worked), and absenteeism rate (AR) as the basis for main statistics (statistical count excludes traffic accidents outside production plants). The Company continues to establish a culture of safety to provide a safe and comfortable work environment. All individual occupational hazard cases are analyzed and the Company formulates and executes improvement solutions. Statistics on occupational hazard occurrence rates are compiled periodically and units with higher rates of occupational hazards and the categories of occupational hazards are analyzed. Incidents with higher severity, incidents across different units, or incidents that occur repeatedly are listed as key points for education and training.

Chemicals in the plants are managed based on their different characteristics. The Company has implemented management and control from storage to transportation, usage, and disposal such as classified storage, supply system security protection, process machinery and auxiliary equipment safety protection, hazard labeling and general knowledge rules, and personal protective equipment usage to effectively prevent exposure of personnel to chemicals.

The Company sets priorities for disaster rescue in accordance with emergency response strategies. The primary goal is to ensure the safety of the Company's employees, nearby plants, and residents and to prevent contaminating the environment. The second goal is to reduce property loss. Restoration of the Company's operations is the third priority. The Company believes that immediate response measures implemented in the event of a natural disaster or accident will not only minimize harm to personnel and environmental pollution but also greatly reduce loss of equipment and difficulties in recovering production. The Company values emergency response measures and conducts overall planning, execution, appraisal, and evaluation for improvements from the purchase of equipment and establishment of response procedures to strengthening personnel training and actual drills.

Human-factor hazards assessment and management

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The Company provides employees training and education on engineering to establish correct safety awareness with regards to moving and designing machinery on the production lines. The Company has also implemented human-factor assessment and improvements for machinery maintenance and repairs that include cranes, lifting trolleys, and jigs for replacing components.

To prevent repetitive tasks from causing sores and pains, health service staff plan annual health checks and issue questionnaires to all employees regarding their discomforts and how it may affect their work. High-risk groups are identified and management measures are carried out. They also report to occupational safety and environmental protection units to implement human-factor identification and formulate improvement solutions.

Maternity health protection and management To prevent the exposure of female employees to workplaces that may cause health hazards to mothers, the health center has established maternity health protection and management procedures. In addition to providing qualitative and quantitative risk assessments for operations that may pose health risks to mothers, the Company considers the different conditions of individuals and assign contracted specialist doctors to conduct comprehensive assessments. The Company then implements tiered management and onsite improvement measures to ensure the health of pregnant employees. In addition to this, the Company has provided parking spaces for pregnant women and signed contracts with related stores for maternity needs. Questionnaires are distributed regularly and information provided regarding pregnancy and childrearing before pregnant employees take their maternity leave.
Implementing employee health examinations and management The Company provides regular health examinations and special health examinations for employees that conduct special and hazardous operations. Health service staff and unit supervisors are responsible for providing lists of personnel that conduct such operations. The costs of health examinations are borne by the Company, and the frequency and items in the health check exceed minimum regulatory requirements. Employees can also carry out additional health checks at their own cost (such as: endocrine systems, cardiovascular diseases). The Company aims to protect employee health, and prevent high risk diseases.
Corporate disease prevention plans for new contagious diseases The Company believes employee health to be the foundation of sustaining normal corporate operations and it is the Company's responsibility to look after the physical and mental health of employees. Faced with potential threats of emerging diseases in the workplace, the Company's dedicated unit continues to monitor the occurrence of new contagious diseases across the world, evaluate their subsequent development, and formulate response plans for disease prevention in the workplace. For instance, Covid-19 has been a crucial target for prevention this year. Not only does the Company provide alcohol based hand santizers at appropriate locations, seating in the employee cafeteria has also been partitioned. All persons (including visitors) are required to wear masks when entering the factory, in order to reduce the risk of virus transmission. During this virus outbreak, the Company monitors the health status of employees and visitors by issuing questionnaires. A dedicated mailbox is used so that employees can report any sickness or discomfort, and health service staff follow up on employees with potential exposure to the virus (travel, fever), to prevent risks of infection. The Company also provides 14 days of paid leave for employees who are required to self quarantine at home, which exceeds regulatory requirements.
Continuous focus on seasonal influenza and other contagious diseases The Company carefully responds to risks of outbreaks of seasonal influenza (H1N1, H3N2, A virus or B virus) each year and continue to manage occupational risks for various contagious diseases (e.g. tuberculosis and typhoid fever). Experience is accumulated from measures taken to avoid overreacting or insufficient preparation. Disease prevention information is announced on bulletin boards in every plant for

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employee reference and disease prevention.

(2) Losses suffered by the company in the most recent fiscal year and up to the annual report publication date due to labor disputes (including any violations of the Labor Standards Act found in labor inspection, specifying the disposition dates, disposition reference numbers, the articles of law violated, the substance of the legal violations, and the content of the dispositions), and disclose an estimate of possible expenses that could be incurred currently and in the future and measures being or to be taken:

The Company has adopted a people-centric management, and harmonious relations between labor and management have been established. There were no labor disputes or losses in the most recent year and up to the publication date of the Annual Report.

5.6 Important contracts:

Nature of Contract	Principal	Contract Start/End Date	Main Contents	Restrictive Terms
Construction contract	Te Chang Construction Co.,Ltd.	2020.1	New Plant Construction Project of Plant 3 in Taichung Industrial Park.	-

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6. Financial Highlights

6.1 Condensed Balance Sheet and Condensed Consolidated Income Statement for the Last Five Years 6.1.1 International Financial Reporting Standards

Condensed Consolidated Balance Sheet

Unit: NT$ thousands

Year	Year						Financial
		Financial data for the last five years (Note 1)
							data in the

Item							current year,
		2019	2018	2017	2016	2015	as of March
							31,2020
Current assets		111,630,060	101,306,345	88,136,397	74,342,664	61,500,008	117,337,351
Equity-accounted
investments		229,512	209,445	160,594	92,224	105,391	220,545
Property, plant, and
equipment		32,573,230	27,850,051	24,861,461	20,246,851	20,114,909	32,730,603
Intangible assets		101,741	80,566	84,159	34,828	27,747	92,766
Other assets		9,287,055	3,202,017	2,658,622	2,357,893	2,238,521	12,716,216
Total assets		153,821,598	132,648,424	115,901,233	97,074,460	83,986,576	163,097,481
	Before
Current	distribution	27,150,157	24,930,979	23,409,706	20,141,260	20,527,062	29,686,565
liabilities	After	37,747,233
	distribution	(Note 2)	34,052,512	33,134,870	28,659,163	29,044,965	Note 3
Non-current
liabilities		277,530	117,874	94,296	90,685	73,215	267,597
	Before
Total	distribution	27,427,687	25,048,853	23,504,002	20,231,945	20,600,277	29,954,162
liabilities	After	38,024,763
	distribution	(Note 2)	34,170,386	33,229,166	28,749,848	29,118,180	Note 3
Equity attributable to
owners of the parent
company		126,393,911	107,599,571	92,397,231	76,842,515	63,386,299	133,143,319
Capital stock		1,341,402	1,341,402	1,341,402	1,341,402	1,341,402	1,341,402
Capital surplus		1,558,058	1,557,011	1,556,388	1,555,729	1,555,729	1,558,058
	Before
Retained	distribution	125,636,027	106,503,622	91,870,266	74,432,221	60,226,867	132,356,300
earnings	After	115,038,951	97,382,089
	distribution	(Note 2)		82,145,102	65,914,318	51,708,964	Note 3
Other equity		(2,141,576)	(1,802,464)	(2,370,825)	(486,837)	262,301	(2,112,441)
Total	Before
equity	distribution	126,393,911	107,599,571	92,397,231	76,842,515	63,386,299	133,143,319
	After	115,796,835
	distribution	(Note 2)	98,478,038	82,672,067	68,324,612	54,868,396	Note 3

Note 1: The financial data for the last five years have been audited and certified by CPAs. Note 2: The 2019 earnings distribution has been approved by the Board of Directors. Note 3: Earnings distribution is subject to the approval of the Board of Directors.

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Condensed Consolidated Statement of Comprehensive Income

Condensed Consolidated Statement of Comprehensive Income	Condensed Consolidated Statement of Comprehensive Income	Condensed Consolidated Statement of Comprehensive Income	Condensed Consolidated Statement of Comprehensive Income	Condensed Consolidated Statement of Comprehensive Income	Condensed Consolidated Statement of Comprehensive Income	Condensed Consolidated Statement of Comprehensive Income
Unit: NT$thousands
						Financial data in
						the current year,
Year	Financial data for the last five years (Note)
						as of March 31,

						2020
Item	2019	2018	2017	2016	2015
Operating revenue
	60,745,008	49,952,158	53,127,510	48,351,791	55,868,893	13,214,517

Gross profit
	41,940,620	34,351,475	36,855,930	32,421,250	32,056,785	9,224,285

Operating profit
(loss)	36,499,337	29,611,940	32,093,302	27,913,957	27,654,632	7,857,838
Non-operating
income and expenses	79,518	1,583,931	(133,781)	337,242	1,505,330	414,639
Profit before tax
	36,578,855	31,195,871	31,959,521	28,251,199	29,159,962	8,272,477

Net profit from
continuing operations
for theperiod	28,263,082	24,369,534	25,975,623	22,733,025	24,156,528	6,720,273
Net profit for the
period	28,263,082	24,369,534	25,975,623	22,733,025	24,156,528	6,720,273
Other comprehensive
income (loss )(net of
tax)for theperiod	(348,256)	557,347	(1,901,763)	(758,906)	(127,248)	29,135
Total comprehensive
income for theperiod	27,914,826	24,926,881	24,073,860	21,974,119	24,029,280	6,749,408
Earnings per share
	210.70	181.67	193.65	169.47	180.08	50.10

Note: The financial data of the last five years have been audited and certified by CPAs.

6 7

Condensed Parent Company Only Balance Sheet

Unit: NT$ thousands


Year		Financial data for the last five years (Note 1)

Item		2019	2018	2017	2016	2015
Current assets
		92,358,323	72,191,515	62,529,852	47,889,108	39,099,042

Equity-accounted
investments		20,309,368	30,107,282	27,482,428	27,117,248	25,199,472
Property, plant and
equipment		32,286,239	27,487,598	24,426,973	19,798,137	19,558,205
Intangible assets
		101,741	80,345	83,718	34,215	26,526

Other assets
		9,271,574	3,175,080	2,643,901	2,333,367	2,209,611

Total assets
		154,327,245	133,041,820	117,166,872	97,172,075	86,092,856

	Before
Current	distribution	27,655,804	25,324,375	24,675,423	20,238,954	22,633,427
liabilities	After	38,252,880
	distribution	Note 2	34,445,908	34,400,587	28,756,857	31,151,330
Non-current liabilities
		277,530	117,874	94,218	90,606	73,130

	Before
Total	distribution	27,933,334	25,442,249	24,769,641	20,329,560	22,706,557
liabilities	After	38,530,410
	distribution	Note 2	34,563,782	34,494,805	28,847,463	31,224,460
Equity attributable to
owners of the parent
company		126,393,911	107,599,571	92,397,231	76,842,515	63,386,299
Capital stock
		1,341,402	1,341,402	1,341,402	1,341,402	1,341,402

Capital surplus
		1,558,058	1,557,011	1,556,388	1,555,729	1,555,729

	Before
Retained	distribution	125,636,027	106,503,622	91,870,266	74,432,221	60,226,867
earnings	After	115,038,951
	distribution	Note 2	97,382,089	82,145,102	65,914,318	51,708,964
Other equity
		(2,141,576)	(1,802,464)	(2,370,825)	(486,837)	262,301

Total	Before
equity	distribution	126,393,911	107,599,571	92,397,231	76,842,515	63,386,299
	After	115,796,835
	distribution	Note 2	98,478,038	82,672,067	68,324,612	54,868,396

Note 1: The financial data of the last five years have been audited and certified by CPAs. Note 2: The 2019 earnings distribution has been approved by the Board of Directors.

6 8

Condensed Parent Company Only Statement of Comprehensive Income

Unit: NT$ thousands

	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands

Year	Financial data for the last five years (Note)

Item	2019	2018	2017	2016	2015
Operating revenue	58,681,535	47,178,620	49,497,163	44,417,341	51,486,015
Gross profit	40,290,118	32,390,727	34,445,454	29,931,865	27,992,948
Operating profit	34,945,825	27,766,406	29,785,722	25,852,059	23,860,671
Non-operating income and expenses	982,583	3,147,331	1,871,196	2,095,816	4,991,241
Profit before tax	35,928,408	30,913,737	31,656,918	27,947,875	28,851,912
Net profit from continuing operations for
	28,263,082	24,369,534	25,975,623	22,733,025	24,156,528
theperiod

Net profit for the period	28,263,082	24,369,534	25,975,623	22,733,025	24,156,528
Other comprehensive income (loss) (net of
	(348,256)	557,347	(1,901,763)	(758,906)	(127,248)
tax)for theperiod

Total comprehensive incomefor the period	27,914,826	24,926,881	24,073,860	21,974,119	24,029,280
Earnings per share	210.70	181.67	193.65	169.47	180.08

Note: The financial data of the last five years have been audited and certified by CPAs.

6.1.2 Names of CPAs for the last five years and their audit opinions

	2019	2018	2017	2016	2015
Certifying CPA	Tzu-Hsin Chang Shyhhuar Kuo	Tzu-Hsin Chang Chun-Man Chen	Tzu-Hsin Chang Chun-Man Chen	Chun-Man Chen Tzu-Hsin Chang	Tzu-Hsin Chang Chun-Man Chen
Audit Opinion	Unmodified opinion	Unmodified opinion	Unmodified opinion	Unmodified opinion	Unmodified opinion

6 9

6.2 Financial Analysis for the Last Five Years International Financial Reporting Standards

Consolidated Financial Analysis

		Consolidated Financial Analysis	Consolidated Financial Analysis	Consolidated Financial Analysis	Consolidated Financial Analysis	Consolidated Financial Analysis
	Year	Financial analysis for the last five years					Financial
							analysis in
							the current
Item		2019	2018	2017	2016	2015	year, as of
							March 31,
							2020
Financial	Debt ratio	17.83	18.88	20.28	20.84	24.53	18.37
structure	Long-term funds to property,	388.88	386.78	372.03	379.98	315.48	407.60
(%)	plant and equipment ratio
	Current ratio (%)	411.16	406.35	376.50	369.11	299.60	395.25

	Quick ratio (%)	396.80	388.33	364.72	355.52	280.68	377.76
Solvency

	Interest coverage ratio	13434.29	-	-	-	-	13674.52

	Receivables turnover rate	4.55	3.75	3.50	3.62	4.49	3.83
	(times)
	Average collection days	80	97	104	101	81	95

	Inventory turnover rate (times)	5.00	4.82	6.31	5.04	6.55	3.88

Operating	Payables turnover rate (times)	11.42	7.84	8.02	6.70	6.06	10.69
performance
	Average inventory turnover	73	76	58	72	56	94

	days
	Property, plant and equipment	2.01	1.90	2.36	2.40	3.30	1.62
	turnover rate(times)
	Total asset turnover (times)	0.42	0.40	0.50	0.53	0.77	0.33

	Return on assets (%)	19.73	19.61	24.39	25.11	33.31	16.97

	Return on equity (%)	24.16	24.37	30.70	32.42	44.09	20.71

	Pre-tax income to paid-in	2726.91	2325.62	2382.55	2106.09	2173.84	2466.82
Profitability
	capital ratio(%)

	Net margin (%)	46.53	48.79	48.89	47.02	43.24	50.86

	Earnings per share (NT$)	210.70	181.67	193.65	169.47	180.08	50.10

	Cash flow ratio	94.40	126.72	134.88	119.15	142.45	38.67
Cash flow	Cash flow adequacy ratio	189.77	206.52	214.64	204.29	202.16	188.59
(%)
	Cash flow reinvestment ratio	11.27	17.60	21.71	17.49	30.78	7.44


	Operating leverage	1.36	1.42	1.32	1.35	1.35	1.44
Leverage
	Financial leverage	1	1	1	1	1	1


The increase in accounts receivable turnover rate was mainly due to an increase in revenue.
The increase in accounts payable turnover rate was mainly due to an increase in cost of goods sold.
The decrease in cash flow ratio was mainly due to a decrease in net cash flow from operating activities.
The decrease in cash flow reinvestment ratio was mainlydue to a decrease in net cash flow from operatingactivities.

7 0

Parent Company Only Financial Analysis

	Year	Financial analysis for the last five years	Financial analysis for the last five years	Financial analysis for the last five years	Financial analysis for the last five years	Financial analysis for the last five years

Item		2019	2018	2017	2016	2015

	Debt ratio	18.10	19.12	21.14	20.92	26.37
Financial structure	Long-term funds to property, plant and	392.34	391.88	378.64	388.59	324.46
(%)	equipment ratio

	Current ratio (%)	333.96	285.07	253.41	236.62	172.75
Solvency	Quick ratio (%)	321.42	269.22	245.13	227.58	159.77
		13195.42	-	-	-	-
	Interest coverage ratio


	Receivables turnover rate (times)	4.71	4.32	4.08	3.94	4.81
	Average collection days	77	84	89	93	76
	Inventory turnover rate (times)	5.63	5.44	8.16	6.53	8.85
Operating	Payables turnover rate (times)	8.08	4.76	4.82	3.87	2.56
performance	Average inventory turnover days	65	67	45	56	41

	Property, plant and equipment turnover rate	1.96	1.82	2.24	2.26	3.16
	(times)
	Total asset turnover (times)	0.41	0.38	0.46	0.48	0.67
	Return on assets (%)	19.67	19.48	24.24	24.81	31.32
	Return on equity (%)	24.16	24.37	30.70	32.42	44.09
Profitability	Pre-tax income to paid-in capital ratio (%)	2678.42	2304.58	2359.99	2083.48	2150.88
	Net margin (%)	48.16	51.65	52.48	51.18	46.92
		210.70	181.67	193.65	169.47	180.08
	Earnings per share (NT$)


	Cash flow ratio	85.03	102.80	127.72	98.06	87.70
Cash flow (%)	Cash flow adequacy ratio	159.87	174.64	181	171.23	170.35
	Cash flow reinvestment ratio	9.91	13.27	21.92	12.99	18.09
	Operating leverage	1.39	1.43	1.37	1.35	1.43
Leverage	Financial leverage	1	1	1	1	1

The increase in accounts payable turnover rate was mainly due to an increase in cost of goods sold.
The decrease in cash flow reinvestment ratio was mainlydue to a decrease in net cash flows from operatingactivities.

7 1

The formula is as follows:

Financial structure
(1) Deb ratio = Total liabilities / total assets.
(2) Ratio of long-term capital to property, plant, and equipment = (Total equities + non-current liabilities) / (Total net value of property, plant, and equipment).
Debt-paying ability
(1) Current ratio = current assets / current liabilities

(2) Quick ratio = (current asset - inventories - prepaid expenses) / current liabilities.

(3) Interest coverage ratio = net profit before tax and interest / interest expenses.

Operation performance
(1) Receivables turnover rate (including bills receivable resulting from accounts receivable and business operations) = Net sales / average accounts receivable in various periods (including bills receivable resulting from accounts receivable and business operations).

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

(3) Inventory turnover rate = cost of sales / average inventory.

(4) Payables turnover rate (including bills payable resulting from accounts payable and business operations) = Cost of sales / Average accounts payable in various periods (including bills payable resulting from accounts payable and business operations).

(5) Average inventory turnover days = 365 / inventory turnover rate.

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

(7) Total asset turnover rate = net sales / average total assets.

Profitability

(1) Return on assets (ROA) = [ gain (loss) after tax + interest expenses x (1 - interest rates)] / average total asset value.

(2) Return on equity = net income after tax / average equity.

(3) Net margin = net income / net sales.

(4) Earnings per share = (profit or loss attributable to owners of the parent company – dividends on preferred stock) / weighted average number of shares issued.

Cash flow

(1) Cash flow ratio = net operating cash flow / current liabilities.

(2) Cash flow adequacy ratio = net cash flow from operating activities for the most recent five years / (capital expenditures + inventory increase + cash dividend) for the most recent five years.

(3) Cash flow reinvestment ratio = (net cash flow from operating activities – cash dividend) / (gross fixed assets value + long-term investment + other assets + working capital).

Degree of leverage: (1) Operating leverage (DOL) = (net operating revenue - variable operating costs and expenses) / operation income.

(2) Financial leverage = operating income / (operating income - interest expenses).

7 2

6.3 2019 Supervisors' Review Report for the Financial Report

Largan Precision Co., Ltd. Supervisors' Review Report

We hereby approve

The Company's 2019 Financial Statements (Parent Company Only Financial Statements and Consolidated Financial Statements) prepared and delivered by the Board of Directors have been audited by KPMG Taiwan who found them to be reasonably expressed to present the financial status, business performance, and cash flow of the Company. The Supervisors have reviewed and verified the Financial Statements along with the Business Report and earnings distribution proposal and found them to be compliant with applicable regulations. We hereby produce this report in accordance with Article 219 of the Company Act for your review.

The above is respectfully submitted to

Largan Precision 2020 Annual General Shareholders' Meeting

Largan Precision, Co., Ltd.

Supervisor: Chung-Jen Liang

Tsui-Ying Chiang Date: April 22[nd] , 2020

7 3

6.4 Consolidated Financial Statements of the Most Recent Year with Independent Auditors’ Report and Notes

Representation Letter

The entities that are required to be included in the combined financial statements of Largan Precision Co., Ltd. as of and for the year ended December 31, 2019 under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with International Financial Reporting Standards No. 10 by the Financial Supervisory Commission, "Consolidated Financial Statements." In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, Largan Precision Co., Ltd. and Subsidiaries do not prepare a separate set of combined financial statements.

Company name: Largan Precision Co., Ltd. Chairman: En-Chou Lin Date: February 24, 2020

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Independent Auditors’ Report

To the Board of Directors of Largan Precision Co., Ltd.:

Opinion

We have audited the consolidated financial statements of Largan Precision Co., Ltd. (the ”Company”) and its subsidiaries (the” Group”), which comprise the consolidated balance sheets as of December 31, 2019 and 2018, the consolidated statement of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards (“IFRSs”), International Accounting Standards (“IASs”), Interpretations developed by the International Financial Reporting Interpretations Committee (“IFRIC”) or the former Standing Interpretations Committee (“SIC”) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. 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. We have determined the matters described below to be the key audit matters to be communicated in our report.

Inventory valuation

Please refer to Note 4(h), Note 5(a), and Note 6(f) for accounting policies, uncertainty of accounting estimates and assumptions, and related disclosures for inventory valuation.

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4-1

Description of key audit matter:

Inventories are stated at the lower of cost or net realizable value. With the rapid development of technology, and significant changes in market demand, the severe volatility to sales may lead to risks, wherein the costs of inventories may exceed its net realizable values. Therefore, the valuation of inventories has been identified as one of the key audit matters.

How the matter was addressed in our audit:

In relation to the key audit matter above, our principal audit procedures include obtaining an inventory aging report, analyzing the movement of inventory aging and evaluating the reasonableness of the Group’ s accounting policies, such as allowance for inventory valuation and obsolescence; performing a retrospective test of the Group’s historical accuracy of judgments with reference to inventory valuation and comparing with the current period to evaluate the appropriateness of the estimation and assumptions used; examining whether the valuation of inventories are in compliance with the accounting policies of the Group; understanding the basis of the selling price the management used to ensure the reasonableness of net realizable value of inventories; reviewing sales in the subsequent period, as well as assessing the basis of the net realizable value the Group used to determine the sufficiency of allowance of inventories and whether the related disclosures are appropriate.

2. Accounts Receivable Valuation

Please refer to Note 4(g), Note 5(b), and Note 6(d) for accounting policies, uncertainty of accounting estimates and assumptions, and related disclosures for accounts receivables valuation, respectively.

Description of key audit matter:

The Group’ s accounts receivable are concentrated within certain customers, and the determination of allowance for accounts receivable relies on the management’s subjective judgment. Therefore, the valuation of accounts receivables is one of the key audit matters.

How the matter was addressed in our audit:

In relation to the key audit matter above, our principal audit procedures include estimating the loss allowance of accounts receivable that is based on the risk of a default occurring and the rate of expected credit loss; reviewing the historical collection records, understanding the industry economic environment and the credit risk of receivables among limited customers to evaluate whether the method of estimation, assumptions, and related disclosures are appropriate.

Other Matter

The Company has additionally prepared its parent company only financial statements as of and for the years ended December 31, 2019 and 2018, on which we have issued an unqualified opinion.

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 Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the IFRSs, IASs, IFRC, SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of 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 Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

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4-2

Those charged with governance (including the supervisors) are responsible for overseeing the Group’s financial reporting process.

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 the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
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 Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the 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 auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, 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 the Group 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.

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4-3

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

The engagement partners on the audit resulting in this independent auditors’ report are Tzu-Hsin, Chang and Shyhhuar, Kuo.

KPMG

Taipei, Taiwan (Republic of China) February 24, 2020

Notes to Readers

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

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

-78-

					December 31, 2018	Amount %		552,868 1	846 -	1,794,692 1	10,469 -	18,266,827 14	540 -	4,241,295 3	- -	63,442 -	24,930,979 19		15,560 -	- -	4,473 -	97,841 -	117,874 -	25,048,853 19			1,341,402 1	1,557,011 1	106,503,622 80	(1,802,464) (1)	107,599,571 81	132,648,424 100
					December 31, 2019	Amount %		$ 218,868 -	702 -	1,484,851 1	4,664 -	20,705,383 14	14,582 -	4,599,350 3	39,801 -	81,956 -	27,150,157 18		2,626 -	164,559 -	4,496 -	105,849 -	277,530 -	27,427,687 18			1,341,402 1	1,558,058 1	125,636,027 81	(2,141,576) (1)	126,393,911 82	$ 153,821,598 100
(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)	LARGAN PRECISION CO., LTD. AND SUBSIDIARIES	Consolidated Balance Sheets	December 31, 2019 and 2018	(Expressed in Thousands of New Taiwan Dollars)	December 31, 2019 December 31, 2018	Assets Amount % Amount % Liabilities and Equity	Current assets: Current liabilities:	Cash and cash equivalents (Note 6(a) and (v)) $ 84,920,560 55 83,403,426 62 2100 Short-term borrowings (Note 6(l) and (v))	Current financial assets at fair value through profit or loss(Note 6(b) and (v)) 7,067,853 5 1,291,809 1 2150 Notes payable (Note 6(v))	Current financial assets at fair value through other comprehensive income 2170 Accounts payable (Note 6(v))	(Note 6(c) and (v)) 113,051 - 139,944 - 2180 Accounts payable to related parties (Note 6(v) and7)	Notes receivable, net (Note 6(d) and (v)) 17,661 - 827,521 1 2200 Other payables (Note 6(p) and (v))	Accounts receivable, net (Note 6(d) and (v)) 15,195,892 10 10,646,493 8 2220 Other payables to related parties (Note 6(v) and7)	Accounts receivable from related parties, net (Note 6(d) and (v) and 7) 7,682 - 12,596 - 2230 Current tax liabilities	Other receivables (Note 6(e) and (v)) 395,506 - 468,095 1 2280 Current lease liabilities (Note 6 (m) and (v))	Other receivables from related parties (Note 6(e) and (v) and7) 13,230 - 15,638 - 2300 Other current liabilities	Current tax assets - - 9,661 -	Inventories (Note 6(f)) 3,631,102 3 3,893,350 2 Non-Current liabilities:	Other current assets (Note 6 (k)、(v) and 8) 267,523 - 597,812 1 2570 Deferred tax liabilities (Note 6(o))	111,630,060 73 101,306,345 76 2580 Non-current lease liabilities (Note 6(m) and (v))	Non-current assets: 2600 Other non-current liabilities (Note 6(v))	Investments accounted for using equity method (Note 6(g)) 229,512 - 209,445 - 2640 Net defined benefit liabilities (Note 6(n))	Property, plant and equipment (Note 6(h)) 32,573,230 21 27,850,051 21	Right-of-use assets (Note 6(i)) 217,758 - - - Total liabilities	Intangible assets (Note 6(j)) 101,741 - 80,566 - Equity:	Deferred tax assets (Note 6(o)) 478,473 - 402,872 1 Equity attributable to owners of parent: (Note 6(q))	Other non-current assets (Note 6(k)、(v) and8) 8,590,824 6 2,799,145 2 3110 Share capital	42,191,538 27 31,342,079 24 3200 Capital surplus	3300 Retained earnings	3400 Other equity interest	Total equity attributable to owners of parent	Total assets $ 153,821,598 100 132,648,424 100 Total liabilities and equity
								1100	1110	1120		1150	1170	1180	1200	1210	1220	1310	1470			1550	1600	1755	1780	1840	1900

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(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) LARGAN PRECISION CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2019 and 2018

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

4000 Operating revenues (Note 6(s) and 7) 5000 Operating costs (Note 6(f)、(n)、(t) and 7) 5910 Realized (unrealized) profit from sales 5900 Gross profit from operations 6000 Operating expenses (Note 6(n)、(t) and 7): 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses Total operating expenses 6900 Operating income 7000 Non-operating income and expenses: 7010 Other income (Note 6(u) and 7) 7020 Other gains and losses (Note 6(u) and 7) 7050 Finance costs (Note 6(m) and (u)) 7060 Share of profit (losses) of associates accounted for using equity method (Note 6(g)) 7900 Profit before income tax 7950 Less: Income tax expenses (Note 6(o)) Profit for the period 8300 Other comprehensive income: 8310 Components of other comprehensive income that will not be reclassified to profit or loss 8311 Remeasurements of defined benefit obligation 8316 Unrealized losses on investments in equity instruments measured at fair value through other comprehensive income 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss 8360 Components of other comprehensive income that will be reclassified to profit or loss 8361 Exchange differences on translation of foreign financial statements 8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss Other comprehensive income (loss) for the period, net of tax 8500 Total comprehensive income for the period Earnings per share (NT dollars) (Note 6(r)) 9750 Basic earnings per share 9850 Diluted earnings per share	2019 Amount % $ 60,745,008 100 18,823,588 31 41,921,420 69 19,200 - 41,940,620 69 407,399 1 1,269,436 2 3,764,448 6 5,441,283 9 36,499,337 60 1,591,936 3 (1,536,000) (3) (2,723) - 26,305 - 79,518 - 36,578,855 60 8,315,773 13 28,263,082 47 (9,144) - (25,084) - - - (34,228) - (314,028) (1) - - (314,028) (1) (348,256) (1) $ 27,914,826 46 $ 210.70 $ 208.79	2018
		Amount % 49,952,158 100 15,594,576 31 34,357,582 69 (6,107) - 34,351,475 69 353,440 1 1,127,650 2 3,258,445 7 4,739,535 10 29,611,940 59 1,192,752 2 343,583 1 - - 47,596 - 1,583,931 3 31,195,871 62 6,826,337 13 24,369,534 49 (12,995) - (51,935) - - - (64,930) - 622,277 1 - - 622,277 1 557,347 1 24,926,881 50 181.67
		180.05

See accompanying notes to consolidated financial statements.

-80-

												Total equity	attributable to	owners of	parent	92,397,231	-	92,397,231		-	-	(9,725,164)	(9,725,164)	623	24,369,534	557,347	24,926,881		-	107,599,571	107,599,571	-	107,599,571		-	-	(9,121,533)	(9,121,533)	1,047	28,263,082	(348,256)	27,914,826	126,393,911
															Total	(2,370,825)	(1,967)	(2,372,792)		-	-	-	-	-	-	570,342	570,342		(14)	(1,802,464)	(1,802,464)	-	(1,802,464)		-	-	-	-	-	-	(339,112)	(339,112)	(2,141,576)
						Other equity interest	Unrealized	gains	(losses) on	financial assets	measured at Unrealized	fair value gains (losses)	through other on available-	comprehensive for-sale	income financial assets	- (945)	(2,912) 945	(2,912) -		- -	- -	- -	- -	- -	- -	(51,935) -	(51,935) -		(14) -	(54,861) -	(54,861) -	- -	(54,861) -		- -	- -	- -	- -	- -	- -	(25,084) -	(25,084) -	(79,945) -
(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)	LARGAN PRECISION CO., LTD. AND SUBSIDIARIES	Consolidated Statements of Changes in Equity	For the years ended December 31, 2019 and 2018	(Expressed in Thousands of New Taiwan Dollars)	Equity attributable to owners of parent		Retained earnings			Exchange	differences on	translation of	Unappropriated foreign	Share Capital Legal Special retained financial	Capital surplus reserve reserve earnings Total statements	1,341,402 1,556,388 10,985,257 486,837 80,398,172 91,870,266 (2,369,880)	- - - - 1,967 1,967 -	1,341,402 1,556,388 10,985,257 486,837 80,400,139 91,872,233 (2,369,880)		- - 2,597,562 - (2,597,562) - -	- - - 1,883,988 (1,883,988) - -	- - - - (9,725,164) (9,725,164) -	- - 2,597,562 1,883,988 (14,206,714) (9,725,164) -	- 623 - - - - -	- - - - 24,369,534 24,369,534 -	- - - - (12,995) (12,995) 622,277	- - - - 24,356,539 24,356,539 622,277		- - - - 14 14 -	1,341,402 1,557,011 13,582,819 2,370,825 90,549,978 106,503,622 (1,747,603)	1,341,402 1,557,011 13,582,819 2,370,825 90,549,978 106,503,622 (1,747,603)	- - - - - - -	1,341,402 1,557,011 13,582,819 2,370,825 90,549,978 106,503,622 (1,747,603)		- - 2,436,954 - (2,436,954) - -	- - - (568,361) 568,361 - -	- - - - (9,121,533) (9,121,533) -	- - 2,436,954 (568,361) (10,990,126) (9,121,533) -	- 1,047 - - - - -	- - - - 28,263,082 28,263,082 -	- - - - (9,144) (9,144) (314,028)	- - - - 28,253,938 28,253,938 (314,028)	1,341,402 1,558,058 16,019,773 1,802,464 107,813,790 125,636,027 (2,061,631)
																$														$	$												$
																Balance at January 1, 2018	Effects of retrospective application	Balance of January 1, 2018 after adjustments	Appropriation and distribution of retained earnings:	Legal reserve	Special reserve	Cash dividends of common stock		Other changes in capital surplus	Profit for the period	Other comprehensive income for the period	Total comprehensive income for the period	Disposal of investments in equity instruments designated at fair	value through other comprehensive income	Balance at December 31, 2018	Balance at January 1, 2019	Effect of retrospective application	Balance of January 1, 2019 after adjustments	Appropriation and distribution of retained earnings:	Legal reserve	Special reserve	Cash dividends of common stock		Other changes in capital surplus	Profit for the period	Other comprehensive income for the period	Total comprehensive income for the period	Balance at December 31, 2019

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(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

(Expressed in Thousands of New Taiwan Dolla	rs)
		2019	2018
Cash flows from operating activities:
Profit before income tax	$	36,578,855	31,195,871
Adjustments:
Adjustments to reconcile profit (loss):
Depreciation expense		3,738,701	2,833,776
Amortization expense		72,220	61,692
Interest expense		2,723	-
Interest income		(1,579,468)	(1,182,871)
Share of profit of associates accounted for using equity method		(26,305)	(47,596)
Losses on disposal of property, plant and equipment		5,176	22,971
Property, plant and equipment transferred to expenses		188	1,072
Losses on disposal of intangible assets		184	-
(Realized) unrealized profit from sales		(19,200)	6,107
Unrealized foreign exchange (profit) loss		(24,751)	38,279
Total adjustments to reconcile profit		2,169,468	1,733,430
Changes in operating assets and liabilities:
Changes in operating assets:
(Increase) decrease in financial assets mandatorily measured at fair value through profit
or loss		(5,776,044)	680,158
Decrease (increase) in notes receivable		809,860	(93,485)
(Increase) decrease in accounts receivable (including from related parties)		(4,544,485)	3,775,233
Decrease (increase) in inventories		262,248	(1,316,518)
Decrease (increase) in other current assets		418,598	(510,642)
Decrease in other operating assets		-	494
Total changes in operating assets		(8,829,823)	2,535,240
Changes in operating liabilities:
Decrease in notes payable		(144)	(1,500)
Decrease in accounts payable (including to related parties)		(315,646)	(366,445)
Increase in other current liabilities		2,700,843	1,911,157
Decrease in net defined benefit liabilities		(1,136)	(5,595)
Total changes in operating liabilities		2,383,917	1,537,617
Total changes in operating assets and liabilities		(6,445,906)	4,072,857
Cash inflow generated from operations		32,302,417	37,002,158
Interest received		1,563,771	1,096,612
Interest paid		(2,723)	-
Income taxes paid		(8,233,755)	(6,507,317)
Net cash flows from operating activities		25,629,710	31,591,453
Cash flows from investing activities:
Acquisition of financial assets at fair value through other comprehensive income		-	(154,386)
Proceeds from disposal of financial assets at fair value through other comprehensive income		-	1,233
Acquisition of investments accounted for using equity method		-	(8,800)
Acquisition of property, plant and equipment		(8,495,683)	(6,412,320)
Proceeds from disposal of property, plant and equipment		3,508	640
Decrease (increase) in refundable deposits		394,369	(395,839)
Increase in other non-current assets		(6,199,706)	(112,983)
Acquisition of intangible assets		(62,280)	(47,712)
Dividends received		26,636	-
Net cash flows used in investing activities		(14,333,156)	(7,130,167)
Cash flows from financing activities:
(Decrease) Increase in short-term borrowings		(318,099)	137,000
Increase in guarantee deposits received		23	1,216
Payment of lease liabilities		(39,133)	-
Cash dividend paid		(9,121,533)	(9,725,164)
Overdue dividend transferred to capital surplus		1,047	623
Net cash flows used in financing activities		(9,477,695)	(9,586,325)
Effect of exchange rate changes on cash and cash equivalents		(301,725)	632,457
Net increase in cash and cash equivalents		1,517,134	15,507,418
Cash and cash equivalents at beginning of period		83,403,426	67,896,008
Cash and cash equivalents at end of period	$	84,920,560	83,403,426

See accompanying notes to consolidated financial statements.

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(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) LARGAN PRECISION CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

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

(1) Company history

Largan Precision Co., Ltd. (the “Company”) was incorporated in April 1987 as a company limited by shares under the Company Act of the Republic of china (R .O. C). The registered address is No.11, Jingke Rd., Nantun Dist., Taichung City 40852, Taiwan (R.O.C.). The major business activities of the Company and subsidiaries (together referred to as the "Group") are the design, manufacture and sale of lens for perspective mirror, camera, single and double binoculars, fax machine, microscope and scanner etc. Please refer to note 14.

The Company's common shares were listed on the Taiwan Stock Exchange (TWSE) in March 2002.

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

These consolidated financial statements were authorized for issue by the Board of Directors on February 24, 2020.

(3) New standards, amendments and interpretations adopted

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

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019.

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
IFRS 16 “Leases”	January 1, 2019
IFRIC 23 “Uncertainty over Income Tax Treatments”	January 1, 2019
Amendments to IFRS 9 “Prepayment features with negative compensation”	January 1, 2019
Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement”	January 1, 2019
Amendments to IAS 28 “Long-term interests in associates and joint ventures”	January 1, 2019
Annual Improvements to IFRS Standards 2015–2017 Cycle	January 1, 2019

Except for the following items, the Group believes that the adoption of the above IFRSs would not have any material impact on its consolidated financial statements. The extent and impact of signification changes are as follows:

(i) IFRS 16“Leases”

IFRS 16 replaces the existing leases guidance, including IAS "17 Leases", IFRIC 4 "Determining whether an Arrangement contains a Lease", SIC-15 "Operating Leases – Incentives" and SIC-27 "Evaluating the Substance of Transactions Involving the Legal Form of a Lease".

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The Group applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognized in retained earnings on January 1, 2019. The details of the changes in accounting policies are disclosed below,

1) Definition of a lease

Previously, the Group determined at contract inception whether an arrangement is or contains a lease under IFRIC 4. Under IFRS 16, the Group assesses whether a contract is or contains a lease based on the definition of a lease, as explained in note 4(j).

On transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Group applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after January 1, 2019.

2) As a lessee

As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Group. Under IFRS 16, the Group recognizes right-of-use assets and lease liabilities for most leases – i.e. these leases are on-balance sheet.

The Group decided to apply recognition exemptions to short-term leases and leases of low-value assets of photocopying equipment and leases of staff dormitory.

Leases classified as operating leases under IAS 17

At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group’s incremental borrowing rate as at January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments – the Group applied this approach to all other lease.

In addition, the Group used the following practical expedients when applying IFRS 16 to leases.

－ Applied a single discount rate to a portfolio of leases with similar characteristics.
－ Adjusted the right-of-use assets by the amount of IAS 37 onerous contract provision, immediately before the date of initial application, as an alternative to an impairment review.
－ Applied the exemption not to recognize right-of-use assets and liabilities to leases with lease term that ends within 12 months of the date of initial application.
－ Excluded initial direct costs from measuring the right-of-use asset at the date

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

of initial application.

－
Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

3) As a lessor

The Group is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor. The Group accounted for its leases in accordance with IFRS 16 from the date of initial application.

4) Impacts on financial statements

On transition to IFRS 16, the Group recognized additional $106,407 thousands of rightof-use assets and $90,364 thousands of lease liabilities. When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 1.232%.

The explanation of differences between operating lease commitments disclosed at the end of the annual reporting period immediately preceding the date of initial application, and lease liabilities recognized in the statement of financial position at the date of initial application disclosed as follows:

Operating lease commitment at December 31, 2018 as disclosed in the Group’s consolidated financial statements Extension and termination options reasonably certain to be exercised Discounted using the incremental borrowing rate at January 1, 2019 Lease liabilities recognized at January 1, 2019	January 1, 2019
	$ 31,950 60,009 91,959 90,364 $ 90,364

(ii) IFRIC 23 “Uncertainty over Income Tax Treatments”

In assessing whether and how an uncertain tax treatment affects the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits, as well as tax rates, an entity shall assume that a taxation authority will examine the amounts it has the right to examine and have a full knowledge on all related information when making those examinations.

If an entity concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the entity shall determine the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits, as well as tax rates consistently with the tax treatment used or planned to be used in its income tax filings. Otherwise, an entity shall reflect the effect of uncertainty for each uncertain tax treatment by using either the most likely amount or the expected value, depending on which method the entity expects to better predict the resolution of the uncertainty.

The adoption of IFRIC23 has no significant impact on the consolidated financial statements of the Group for the year ended December 31, 2019.

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2020 in accordance with Ruling No. 1080323028 issued by the FSC on July 29, 2019:

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 3 “Definition of a Business”	January 1, 2020
Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform”	January 1, 2020
Amendments to IAS 1 and IAS 8 “Definition of Material”	January 1, 2020

The Group assesses that the adoption of the abovementioned standards would not have any material impact on its consolidated financial statements.

As of the date, the following IFRSs that have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between	Effective date to
an Investor and Its Associate or Joint Venture”	be determined
	by IASB
IFRS 17 “Insurance Contracts”	January 1, 2021
Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”	January 1, 2022

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

(4) Summary of significant accounting policies

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

The significant accounting policies presented in the consolidated financial statements are summarized below. Except for those specifically indicated, the following accounting policies were applied consistently throughout the periods presented in the consolidated financial statements.

(Continued)

-86-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as “the Regulations” ) and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations endorsed by the Financial Supervisory Commission, R.O.C.

(b) Basis of preparation

(i) Basis of measurement

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

1) Financial instruments at fair value through profit or loss are measured at fair value;
2) Financial assets at fair value through other comprehensive income are measured at fair value.
(ii) Functional and presentation currency

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

(c) Basis of consolidation

(i) Principle of preparation of the consolidated financial statements

The consolidated financial statements comprised of the Company and its subsidiaries. The Group accounted an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its control over the entity.

The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that the control ceases. Intra-group balances and transactions, and any unrealized income and expenses arising from intra- group transactions, are eliminated in preparing the consolidated financial statements. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

Accounting policies of subsidiaries have been adjusted to ensure consistency with the policies adopted by the Group.

Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Any differences between the Group’s share of net assets before and after the change, and any considerations received or paid, are adjusted to or against the Group reserves.

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) List of subsidiaries in the consolidated financial statements

Name of
investor
Name of subsidiary
Principal activity
The Company
Largan (Hong Kong) Limited.
(Largan Hong Kong)
Investment
The Company
Astro International Ltd.
(Astro)
Investment
Astro
Amtai International Ltd.
(Amtai)
Manufacture and sale of
optical components
Astro
Net International Trading
Ltd. (Net)
Investment
Net
Largan (Dongguan) Optronic
Ltd. (Largan Dongguan)
Manufacture of optical
components
Net
Suzhou Largan Co., Ltd.
(Suzhou Largan)
Manufacture of optical
components
The Company
Ba Fang Co., Ltd.
(Ba Fang)
Investment
Ba Fang
Investment
Fang Yuan Co., Ltd. (Fang
Yuan)
Investment

Percentage of
Ownership
December
31, 2019
December
31, 2018
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
- %
100%
Note 1
100%
100%
100%
100%

Note 1: As of December 31, 2019, Suzhou Largan liquidation process was completed.

(iii) Subsidiaries excluded from consolidation:

Name of investor The Company The Company	Name of subsidiary Principal activity Largan Digital Co., Ltd. (Largan Digital) Manufacture of image capture device, image reader, camera and player Largan Health AI-Tech Co., Ltd. (Largan Health AI-Tech) Sales of medical equipment	Percentage of Ownership
		December 31, 2019 December 31, 2018 49.37% 49.37% 88.00% -%

The Company has the ability to control over Largan Digital and Largan Health. However, based on material consideration the total assets and operating revenue of Largan Digital and Larggn Health account for a small proportion of the total assets and operating revenue of the Group, Largan Digital and Largan Health respectively; therefore, they are excluded from the consolidation.

(Continued)

-88-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(d) Foreign currency

(i) Foreign currency transaction

Transactions in foreign currencies are translated into the respective functional currencies of Group entities at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date.

Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currencies using the exchange rate at the date that the fair value was determined. Non-monetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

Exchange differences are generally recognized in profit or loss, except for an investment in equity securities designated as at fair value through other comprehensive income, which are recognized in other comprehensive income.

(ii) Foreign operations

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

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

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

(Continued)

-89-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(e) Classification of current and non-current assets and liabilities

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

(i) It expected to be realized, or intended to be sold or consumed, in its normal operating cycle;
(ii) It holds primarily for the purpose of trading;
(iii) It expected to be realized within twelve months after the reporting period; or
(iv) The asset is cash or a 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.

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

(i) It is expected to settle in the normal operating cycle;
(ii) It is held primarily for the purpose of trading;
(iii) It is due to be settled within twelve months after the reporting period; or
(iv) The Group 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.

(f) Cash and cash equivalents

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

(g) Financial instruments

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

(i) Financial assets

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

(Continued)

-90-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

On initial recognition, a financial asset is classified as measured at: amortized cost; Fair value through other comprehensive income (FVOCI); or FVTPL.

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

1) Financial assets measured at amortized cost

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

it is held within a business model whose objective is to hold financial assets to collect contractual cash flows; and
it is contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

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

2) Fair value through other comprehensive income (FVOCI)

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

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

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

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

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

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

3) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL. On initial recognition, the Group may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

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

4)

Business model assessment

The Group makes an assessment of the objective of the business model in which a financial asset is held at portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes：

the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’ s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets;
how the performance of the portfolio is evaluated and reported to the Group’ s management;
the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;
how managers of the business are compensated ─ e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and
the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, and are consistent with the Group’s continuing recognition of the assets.

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

5) Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, ‘ principal’ is defined as the fair value of the

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

financial assets on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers：

contingent events that would change the amount or timing of cash flows；
terms that may adjust the contractual coupon rate, including variable rate features；
prepayment and extension features；and
terms that limit the Group’s claim to cash flows from specified assets（ e.g. nonrecourse features）
6) Impairment of financial assets

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

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

debt securities that are determined to have low credit risk at the reporting date；and
other debt securities and bank balances for which the credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

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

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

The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 180 days past due.

The Group considers a financial asset to be in default when the financial asset is more than 360 days past due or the debtor is unlikely to fully pay its credit obligations to the

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Group.

The Group considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘investment grade which is considered to be twA or higher per Taiwan Ratings’.

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

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

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

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

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

significant financial difficulty of the borrower or issuer；
a breach of contract such as a default or being more than 360 days past due；
the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider；
it is probable that the borrower will enter bankruptcy or other financial reorganization；or
the disappearance of an active market for a security because of financial difficulties.

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

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For corporate customers, the Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written off.

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.

7) Derecognition of financial assets

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

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

(ii) Financial liabilities and equity instrument
1) Classification of debt or equity

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

2) Equity instrument

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

3) Financial liabilities

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss.

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

4) Derecognition of financial liabilities

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

On derecognition of a financial liability, the difference between the carrying amount of a

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

financial liability extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

5) Offsetting of financial assets and liabilities

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

(h) Inventories

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

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

(i) Property, plant and equipment

(i) Recognition and measurement

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

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

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

(ii) Subsequent cost

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

(iii) Depreciation

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

Land is not depreciated.

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

1) Buildings 35 ~55years 2) Machinery and equipment 2 ~ 10 years

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Plant constitutes mainly building, electromechanical power engineering and cleanroom air conditioning project. Each such part is depreciated based on its useful life of 35~55 years, 8~ 10 years and 8~10 years, respectively.

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

(j) Leases

Applicable from January 1, 2019

(i) Identifying a lease

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

1) the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and
2) the customer has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
3) the customer has the right to direct the use of the asset throughout the period of use only if either:
－ the customer has the right to direct how and for what purpose the asset is used throughout the period of use; or
－ the relevant decisions about how and for what purpose the asset is used are predetermined and:
- the customer has the right to operate the asset throughout the period of use, without the supplier having the right to change those operating instructions; or
- the customer designed the asset in a way that predetermines how and for what purpose it will be used throughout the period of use.

(ii) As a lessee

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

The right-of-use asset is subsequently depreciated using the straight-line method from the

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

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

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

fixed payments, including in-substance fixed payments;
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
amounts expected to be paid under a residual value guarantee; and
payments for purchase or termination options that are reasonably certain to be exercised.

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

there is a change in future lease payments arising from the change in an index or rate; or
there is a change in the Group’s estimate of the amount expected to be paid under a residual value guarantee; or
there is a change of its assessment on whether it will exercise an option to purchase the underlying asset, or
there is a change in the lease term resulting from a change of its assessment on whether it will exercise an extension or termination option; or
there are any lease modifications.

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

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

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

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

(iii) As a lessor

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

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

Applicable before January 1, 2019

(i) Lessor

Lease income from an operating lease is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the lease asset, and recognized as an expense over the lease term on the same basis as the lease income. Incentives granted to the lessee to enter into the operating lease are spread over the lease term on a straight-line basis so that the lease income received is reduced accordingly.

(ii) Lessee

Leases are operating leases and are not recognized in the Group’ s balance sheets. Payments made under operating leases (excluding insurance and maintenance expenses) are recognized as an expense on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.

(k) Intangible assets

(i) Recognition and measurement

Other intangible assets are acquired by the Group and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

(iii) Amortization

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Amortization is calculated over the cost of the asset, less its residual value, and is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use.

The estimated useful lives for current and comparative periods are as follows:

Computer software cost 1~3 years

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

(l) Impairment of non-financial assets

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

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

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognized in profit or loss.

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

(m) Provisions

A provision is recognized if, as a result of a past event, the Group has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

(n) Revenue

(i) Revenue from contracts with customers

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

1) Sale of goods

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

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

2) Financing components

The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust any of the transaction prices for the time value of money.

(ii) Contract costs

1) Incremental costs of obtaining a contract

The Group recognizes as an asset the incremental costs of obtaining a contract with a customer if the Group expects to recover those costs. The incremental costs of obtaining a contract are those costs that the Group incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained shall be recognized as an expense when incurred, unless those costs are explicitly chargeable to the customer regardless of whether the contract is obtained.

The Group applies the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.

2) Costs to fulfil a contract

If the costs incurred in fulfilling a contract with a customer are not within the scope of another Standard (for example, IAS 2 Inventories, IAS 16 Property, Plant and Equipment or IAS 38 Intangible Assets), the Group recognizes an asset from the costs incurred to fulfil a contract only if those costs meet all of the following criteria:

the costs relate directly to a contract or to an anticipated contract that the Group can specifically identify;
the costs generate or enhance resources of the Group that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and
the costs are expected to be recovered.

For general and administrative costs, costs of wasted materials, labor or other resources

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

to fulfil the contract that were not reflected in the price of the contract, costs that relate to satisfied performance obligations (or partially satisfied performance obligations), and costs for which the Group cannot distinguish whether the costs relate to unsatisfied performance obligations or to satisfied performance obligations(or partially satisfied performance obligations), the Group recognizes these costs as expenses when incurred.

(o) Employee benefits

(i) Defined contribution plans

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

(ii) Defined benefit plans

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

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

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

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

(iii) Short-term employee benefits

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

(p) Income taxes

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

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

deferred taxes are recognized in profit or loss.

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

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

(i) temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction;
(ii) temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

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

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

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

(i) the Group has a legally enforceable right to set off current tax assets against current tax liabilities; and
(ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:
1) the same taxable entity; or
2) different taxable entities which intends to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

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

(q) Earnings per share

The Group discloses the Company’s basic and diluted earnings per share attributable to ordinary shareholders of the Company. Basic earnings per share are calculated as the profit attributable to ordinary shareholders of the Company, divided by the weighted-average number of ordinary shares outstanding. Diluted earnings per share are calculated as the profit attributable to ordinary

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

shareholders of the Company, divided by the weighted-average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as employee bonus.

(r)

Operating segments

An operating segment is a component of the Group that engages in business activities from which it may incur revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Group). Operating results of the operating segment are regularly reviewed by the Group’s chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance. Each operating segment consists of standalone financial information.

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

The preparation of the consolidated financial statements in conformity with the Regulations and the IFRSs endorsed by the FSC requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

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

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is as follows:

(a) Valuation of inventories

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

(b) The loss allowance of accounts receivable

The Group has estimated the loss allowance of accounts receivable that is based on the risk of a default occurring and the rate of expected credit loss. The Group has considered historical experience, current economic conditions and forward-looking information at the reporting date to determine the assumptions to be used in calculating the impairments and the selected inputs. For relevant assumptions and input values, please refer to note 6(d).

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(6) Explanation of significant accounts

(a) Cash and cash equivalents

Petty cash and cash on hand Demand deposits Time deposits Cash and cash equivalents in the consolidated statement of cash flows	December 31, 2019 December 31, 2018 $ 737 2,953 7,217,048 7,162,962 77,702,775 76,237,511 $ 84,920,560 83,403,426

Please refer to note 6(v) for the exchange rate risk and sensitivity analysis of the financial assets and liabilities of the Group.

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

Mandatorily measured at fair value through profit or loss: Non-derivative financial assets Stocks unlisted in domestic markets Beneficiary Certificate-open-end funds Total	December 31, 2019 December 31, 2018 $ - - 7,067,853 1,291,809 $ 7,067,853 1,291,809

For market risk, please refer to note 6(v).

December 31, 2019 Equity investments at fair value through other comprehensive income Listed common shares Domestic Company - AVISION INC. $ 17,609 Hong Kong Company - XIAOMI CORP-CLASS B 95,442 Total $ 113,051	December 31, 2018
	23,389 116,555
	139,944

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

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

On March 12, 2018, the Group has sold 165 thousand of its shares in AVISION INC. due to

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

financial management reason. The shares sold had a fair value of $1,233 thousand, and the Group realized a gain of $14 thousand, which is already included in other comprehensive income. The gain has been transferred to retained earnings.

(ii) For market risk, please refer to note 6(v).
(iii) As of December 31, 2019 and 2018, the financial assets at fair value through other comprehensive income of the Group had not been pledged as collateral for long-term borrowing.

(d) Notes and accounts receivable

Notes receivable from operating activities Notes receivable from non-operating activities Accounts receivable-measured as amortized cost Accounts receivable from related parties-measured as amortized cost Less: Loss allowance	December 31, 2019 December 31, 2018 $ 14,551 827,518 3,110 3 15,199,502 10,650,136 7,682 12,596 (3,610) (3,643) $ 15,221,235 11,486,610

The Group applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, accounts receivable have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information, including macroeconomic and relevant industry information. The loss allowance provision was determined as follows:

Current No more than 180 days past due Current No more than 180 days past due	December 31, 2019 Gross carrying amount Weighted- average loss rate Loss allowance provision $ 14,579,455 - - 645,390 % 0.5594 3,610 $ 15,224,845 3,610 December 31, 2018 Gross carrying amount Weighted- average loss rate Loss allowance provision $ 11,062,037 - - 428,216 % 0.8507 3,643 $ 11,490,253 3,643	December 31, 2019 Gross carrying amount Weighted- average loss rate Loss allowance provision $ 14,579,455 - - 645,390 % 0.5594 3,610 $ 15,224,845 3,610 December 31, 2018 Gross carrying amount Weighted- average loss rate Loss allowance provision $ 11,062,037 - - 428,216 % 0.8507 3,643 $ 11,490,253 3,643
		Gross carrying amount
	$ 11,062,037 428,216 $ 11,490,253

(Continued)

-106-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

Balance at January 1 Foreign exchange gains/(losses) Balance at December 31	For the years ended December 31,
	2019 2018 $ 3,643 3,600 (33) 43 $ 3,610 3,643

The notes and accounts receivable of the Group had not been pledged as collateral as of December 31, 2019 and 2018.

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

(e) Other receivables

Other receivables-Tax receivables Other receivables-Interest receivables Other receivables-Others Other receivables-Related parties	December 31, 2019 $ 143,665 178,127 73,714 13,230 $ 408,736	December 31, 2018
		112,000 162,430 193,665 15,638
		483,733

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

(f) Inventories

Finished goods Work in progress Raw materials Supplies	December 31, 2019 December 31, 2018 $ 2,250,386 1,591,427 358,058 1,387,913 955,777 861,245 66,881 52,765 $ 3,631,102 3,893,350

For the years ended December 31, 2019 and 2018, the amounts of inventories that were charged to cost of sales, and the net of provisions that were charged to cost of sales in the consolidated statement of comprehensive income for inventories written down to net realizable value, were $327,048 thousand and $690,291 thousand, respectively.

As of December 31, 2019 and 2018, the Group did not provide any inventories as collateral for its loans.

(Continued)

-107-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(g) Investments accounted for using equity method

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

Subsidiaries Prepayments for long-term investment	December 31, 2019 December 31, 2018 $ 229,512 200,645 - 8,800 $ 229,512 209,445

The Group’s investments accounted for its subsidiaries were unquoted.

The prepayments for long-term investment were used for the investment in Largan Health AITech Co., Ltd., as of January 31, 2019, wherein the registration of incorporation had been completed.

In 2019 and 2018, the Group’s shares on the net income of its subsidiaries was as follows:

The Group's shares on the net income of its subsidiaries	2019 2018 $ 26,305 47,596

As of December 31, 2019 and 2018, the Group did not provide any investment accounted for using equity method as collaterals for its loans.

(h) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Group in 2019 and 2018, were as follows:

Cost or deemed cost:
Balance on January 1, 2019
Additions
Disposal
Reclassification
Effect of movements
in exchange rates
Balance on December 31, 2019
Balance on January 1,2018
Additions
Disposal
Reclassification
Effect of movements
in exchange rates
Balance on December 31, 2018

Land
Building and
construction
Machinery and
equipment
Transportation
equipment
Office
equipment
and other
facilities
Rental
assets
Construction in
progress and
testing equip
Total
$ 5,481,248
6,324,736
20,663,949
25,904
10,779,650
54,898
1,093,098
44,423,483
2,689,185
145,594
3,584,793
-
1,292,856
-
759,537
8,471,965
-
-
(39,690)
(1,479)
(93,296)
-
-
(134,465)
-
20,569
335,920
-
243,750
-
(631,721)
(31,482)
-
(13,105)
(16,088)
(119)
(3,414)
-
-
(32,726)
$
8,170,433
6,477,794
24,528,884
24,306
12,219,546
54,898
1,220,914
52,696,775
$ 4,709,398
2,245,588
16,714,374
26,642
5,852,171
54,898
9,074,097
38,677,168
771,850
231,464
3,295,718
1,777
976,416
-
588,797
5,866,022
-
-
(18,587)
(2,361)
(64,444)
-
-
(85,392)
-
3,854,971
683,695
-
4,019,632
-
(8,569,796)
(11,498)
-
(7,287)
(11,251)
(154)
(4,125)
-
-
(22,817)
$
5,481,248
6,324,736
20,663,949
25,904
10,779,650
54,898
1,093,098
44,423,483

(Continued)

-108-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Depreciation and impairment loss: Balance on January 1,2019 Depreciation for the year Disposal Reclassification Effect of movements in exchange rates Balance on December 31, 2019 Balance on January 1, 2018 Depreciation for the year Disposal Reclassification Effect of movements in exchange rate Balance on December 31, 2018 Carrying amounts: Balance on December 31, 2019 Balance on January 1, 2018 Balance on December 31,2018	Land		Building and construction	Machinery and equipment		Transportation equipment		Office equipment and other facilities		Rental assets		Construction in progress and testing equip Total - 16,573,432 - 3,697,415 - (125,781) - - - (21,521) - 20,123,545 - 13,815,707 - 2,833,776 - (61,781) - (35) - (14,235) - 16,573,432 1,220,914 32,573,230 9,074,097 24,861,461 1,093,098 27,850,051
	$ - - - - - $ - $ - - - - s - $ - $ 8,170,433 $ 4,709,398 $ 5,481,248									20,836 407 - - -
										21,243
										20,430 406 - - -
										20,836
										33,655
										34,468
										34,062

In 2013, the Company acquired a piece of land, for the expansion of its factory, amounting to $120,086 thousand, which was recognized under property, plant and equipment. The title of the said land cannot be transferred to the Company due to its classification. Therefore, it was registered under the name of a different person. To ensure the right of both parties (including that of the Company’s shareholders), the two parties entered into an agreement, with the notarization of the court. In the future, the Company will file an application to the relevant authorities, and go through proper procedures, for the land to be reclassified in order to make it possible for the deed to be transferred to the Company.

(i) Right-of-use assets

The Group leases many assets including land and buildings. Information about leases for which the Group as a lessee was presented below:

			Buildings and
		Land	construction	Total
Cost:
Balance at January 1, 2019	$	-	-	-
Effects of retrospective application		13,658	92,749	106,407
Additions		-	153,129	153,129
Effect of movement in exchange rate		(510)	-	(510)
Balance at December 31, 2019	$	13,148	245,878	259,026
Accumulated depreciation and impairment
losses:
Balance at January 1, 2019	$	-	-	-
Depreciation for the year		485	40,801	41,286
Effect of movement in exchange rate		(18)	-	(18)
Balance at December 31, 2019	$	467	40,801	41,268
Carrying amount:
Balance at December 31, 2019	$	12,681	205,077	217,758

(Continued)

-109-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(j) Intangible assets

The costs and amortization of the intangible assets of Group in 2019 and 2018 were as follows:

Costs:
Balance at January 1, 2019
Additions
Disposals
Reclassification
Effect of movement in exchange rates
Balance at December 31,2019
Balance at January 1, 2018
Additions
Disposals
Reclassification
Effect of movement in exchange rates
Balance at December 31,2018
Amortization and impairment Loss:
Balance at January 1, 2019
Amortization for the year
Disposals
Effect of movement in exchange rates
Balance at December 31, 2019
Balance at January 1, 2018
Amortization for the year
Disposals
Effect of movement in exchange rates
Balance at December 31, 2018
Carrying value:
Balance at December 31,2019
Balance at December 31, 2018
Balance at January 1,2018

Computer
Software
$ 251,687
62,280
(1,031)
31,294
(12)
$
344,218
$ 194,046
47,712
(483)
10,391
21
$
251,687
$ 171,121
72,220
(847)
(17)
$
242,477
$ 109,887
61,692
(483)
25
$
171,121
$
101,741
$
80,566
$
84,159

The following amortizations of intangible assets are included in the statement of comprehensive income:

Operating cost Operating expense	2019 2018 $ 22,374 21,683 49,846 40,009 $ 72,220 61,692

(Continued)

-110-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(k) Other current assets and other non-current assets

The other current assets and other non-current assets of the Group were as follows:

Other current financial assets Other current assets Other non-current financial assets Refundable deposits Prepayment for equipment Prepayment for land and building Long-term prepaid rents	December 31, 2019 December 31, 2018 $ 9,000 6,000 258,523 591,812 6,422,895 315,296 638,009 1,032,378 1,512,965 1,437,813 16,955 - - 13,658 $ 8,858,347 3,396,957

(i) Other current (non-current) financial assets were restricted deposits and bank account for repatriation of offshore fund, which were pledged as collateral; please refer to note 8.
(ii) Other current assets were prepayment for purchases and temporary payments.
(iii) Refundable deposits had been pledged as collateral; please refer to note 8.
(iv) Long-term prepaid rents

In order to build a factory, the Group and the Ministry of Land and Resources of the People’s Republic of China signed a contract to obtain access of the land in Tutang Management District, Dongwan City. On January 1, 2019, long-term prepaid rents were transferred to rightof-use assets when applying IFRS16.

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

(l) Short-term borrowings

The short-term borrowings were summarized as follows:

Letters of credit Unused credit Lines Range of interest rates	December 31, 2019 December 31, 2018 $ 218,868 552,868 $ 1,081,132 747,132 0.95%~0.96% 0.89%~1.05%

(m) Lease liabilities

The carrying amounts of the Group's lease liabilities were as follows:

Current Non-current	December 31, 2019
	$ 39,801 $ 164,559

(Continued)

-111-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

The amounts recognized in profit or loss was as follows:

Interest on lease liabilities $ Variable lease payments not included in the measurement of lease liabilities $ Expenses relating to short-term leases and leases of low-value assets $	For the year ended December 31, 2019
	2,723 149 1,856

The amounts recognized in the statement of cash flows for the Group was as follows:

Total cash outflow for leases $	For the year ended December 31, 2019
	43,861

(i) Real estate leases

As of December 31, 2019, the Group leases land and buildings for its factory space. The leases of factory space typically run for 3 to 5 years. Some leases include an option to renew the lease for an additional period of the same duration after the end of the contract term.

(ii) Other leases

The Group leases staff dormitory and photocopying equipment with lease terms of one year, these leases are short-term and leases of low-value items. The Group has elected not to recognize right-of-use assets and lease liabilities for these leases.

(n) Employee benefits

(i) Defined benefit plans

Reconciliation of the defined benefit obligations at present value and plan asset at fair value are as follows:

Present value of the defined benefit obligations Fair value of plan assets Net defined benefit liability	December 31, 2019 December 31, 2018 $ 164,467 156,042 (58,618) (58,201) $ 105,849 97,841

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

(Continued)

-112-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

service and average salary for the six months prior to retirement.

1) Composition of plan assets

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

The Company’ s Bank of Taiwan labor pension reserve account balance amounted to $58,240 thousand at the end of the reporting period. For information on the utilization of the labor pension fund assets, including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

2) Movements in present value of the defined benefit obligations

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

Defined benefit obligations at January 1 Benefit paid by the plan Current service costs and interest cost (income) Remeasurements loss (gain): -Financial assumptions Defined benefit obligations at December 31	2019 2018 $ 156,042 143,579 (5,364) (5,030) 2,686 3,056 11,103 14,437 $ 164,467 156,042

3) Movements of the fair value of defined benefit plan assets

The movements in the fair value of the defined benefit plan assets of the Company were as follows:

Fair value of plan assets at January 1 Contributions paid by the employer Benefits paid from plan assets Interest income Remeasurements loss (gain): －Return on plan assets excluding interest income Fair value of plan assets at December 31	2019 2018 $ 58,201 53,138 3,166 7,955 (5,364) (5,030) 656 696 1,959 1,442 $ 58,618 58,201

(Continued)

-113-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

4) Expenses recognized in profit or loss

The expenses recognized in profits or losses for the years ended December 31, 2019 and 2018, were as follows:

Current service costs Net interest of net liabilities for the defined benefit obligations Plan assets interest income Operating Costs Selling expenses Administrative expenses Research and development expenses Return on plan assets	2019 2018 $ 706 916 1,980 2,140 (656) (696) $ 2,030 2,360 2019 2018 $ 1,569 1,806 16 19 90 117 355 418 $ 2,030 2,360 $ 2,615 2,138

5) Remeasurement in net defined benefit liability recognized in other comprehensive income

The Company’s remeasurement in the net defined benefit liability recognized in other comprehensive income for the years ended December 31, 2019 and 2018 were as follows:

Accumulated amount at January 1 Recognized during the period Accumulated amount at December 31	2019 2018 $ 62,440 49,445 9,144 12,995 $ 71,584 62,440

6) Actuarial assumptions

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

Discount rate Increase in future salary rate	December 31, 2019 December 31, 2018 % 1.125 % 1.375 % 2 % 2

The expected allocation payment to be made by the Company to the defined benefit plans for the one-year period after the reporting date is $3,175 thousand.

(Continued)

-114-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The weighted average lifetime of the defined benefit plans is 17.7 years.

7)

Sensitivity analysis

On December 31, 2019 and 2018, if the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

December 31, 2019 Discount rate Future salary increases rate December 31, 2018 Discount rate Future salary increases rate	Influences of defined benefit obligations Increase0.25% Decrease0.25% $ (4,390) 4,578 4,400 (4,240) $ (4,356) 4,548 4,412 (4,248)

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

There were no changes in the method and assumptions used in the preparation of sensitivity analysis for 2019 and 2018.

(ii) Defined contribution plans

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

The pension costs incurred from the contributions to the Bureau of the Labor Insurance amounted to $173,419 thousand and $159,102 thousand for the years ended December 31, 2019 and 2018, respectively.

Except for the Company, other subsidiaries adopted the defined contribution method under their local law, wherein the pension costs amounted to $16,856 thousand and $23,915 thousand for the years ended December 31, 2019 and 2018, respectively.

(iii) Short-term employee benefit

The Company’s employee benefit liabilities were as follows:

			December 31,	December 31,
			2019	2018
Compensated	absences liability	$	94,551	82,213

(Continued)

-115-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(o) Income taxes

(i) Income tax expense

The components of income tax in the years 2019 and 2018 were as follows:

		2019	2018
Current tax expense:
Current period	$	8,175,895	5,731,915
Surtax on unappropriated earnings		435,595	1,174,827
Adjustment for prior periods		(207,182)	(60,007)
Deferred tax expense：
Origination and reversal of temporary differences		(88,535)	44,351
Adjustment in tax rate		-	(64,749)
	$	8,315,773	6,826,337

Reconciliation of income tax and profit before tax 2019 and		2018 is as follows:
		2019	2018
Profit before income tax	$	36,578,855	31,195,871
Income tax using the Company's domestic tax rate		7,315,771	6,239,174
Effect of tax rates in foreign jurisdiction (not applicable
for separate financial statements)		170,345	209,271
Adjustment in tax rate		-	(64,749)
Investment tax credits		(386,000)	(239,818)
Changes in unrecognized temporary differences		(354,757)	(429,859)
Gains on disposal of investment		(1,062)	(2,962)
Income tax for repatriation of overseas earnings		1,233,626	-
Others income tax adjustments		109,182	232
Current-year losses for which no deferred tax asset was
recognized		255	228
Changes in provision in prior periods		(207,182)	(60,007)
Surtax on unappropriated earnings		435,595	1,174,827
Total	$	8,315,773	6,826,337

(Continued)

-116-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Deferred tax assets and liabilities

1) Unrecognized deferred tax liabilities

The consolidated entity is able to control the timing of the reversal of the temporary differences associated with the investments in subsidiaries as of December 31, 2019 and 2018. Also, the management considers it probable that the temporary differences will not reverse in the foreseeable future. Hence, such temporary differences are not recognized under deferred tax liabilities. Details are as follows:

Aggregated amount of temporary differences related to investments in subsidiaries	December 31, 2019 December 31, 2018 $ 24,690,199 30,739,784

2) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2019 and 2018 were as follows:

Deferred Tax Assets:

Unrealized profit from associates Balance at January 1, 2019 $ 287,921 Recognized profit or loss (73,229) Balance at December 31, 2019 $ 214,692 Balance at January 1, 2018 $ 224,749 Recognized profit or loss 63,172 Balance at December 31, 2018 $ 287,921	Others Total 114,951 402,872 148,830 75,601 263,781 478,473 142,762 367,511 (27,811) 35,361 114,951 402,872

Deferred Tax Liabilities:

Unrealized exchange gains Balance at January 1, 2019 $ 13,738 Recognized profit or loss (13,738) Balance at December 31, 2019 $ - Balance at January 1, 2018 $ - Recognized profit or loss 13,738 Balance at December 31, 2018 $ 13,738	Other Total 1,822 15,560 804 (12,934) 2,626 2,626 598 598 1,224 14,962 1,822 15,560

(Continued)

-117-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

3) Assessment of tax

The Company’ s tax returns for the years through 2017 were assessed by the Taipei National Tax Administration.

(p) Other payables

The other payables were summarized as follows:

Payables on remuneration to employees, directors and supervisors Payables for plant and equipment Others	December 31, 2019 December 31, 2018 $ 17,092,301 14,574,957 2,018,019 2,064,523 1,595,063 1,627,347 $ 20,705,383 18,266,827

(q) Capital and other equity

(i) Ordinary Shares

As of December 31, 2019 and 2018, the Company's authorized ordinary shares each amounted to $2,000,000 thousand (including the amount of $100,000 thousand allocated for the exercise of employee stock options), and the outstanding ordinary shares each amounted to $1,341,402 thousand, with a par value of $10 per share.

(ii) Capital Surplus

The balance of capital surplus was as following:

Additional paid-in capital Capital surplus-premium from merger Dividend timeout not received by shareholder	December 31, 2019 December 31, 2018 $ 817,574 817,574 738,155 738,155 2,329 1,282 $ 1,558,058 1,557,011

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

(Continued)

-118-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iii) Retained earnings

The Company's article of incorporation stipulates that Company's net earnings should first be used to offset the prior years' deficits, if any, before paying any income taxes. Of the remaining balance, 10% is to be appropriated as legal reserve until the accumulated legal reserve equals the Company's paid-in capital. In addition, a special reserve, in accordance with applicable laws and regulations, shall also be set aside. Then, any remaining profit, together with any undistributed retained earnings, shall be distributed according to the distribution plan proposed by the Board of Directors and submitted to the stockholders’ meeting for approval.

Before the distribution of dividends, the Company shall first take into consideration its operating environment, industry developments, and the long-term interests of its stockholders, as well as its programs to maintain its operating efficiency and meet its capital expenditure budget and financial goals in determining the stock or cash dividends to be paid. After the above appropriations, dividend to be distributed shall be no less than 10% of the current-year retained earnings available for distribution. The cash dividends shall not be less than 30% of the total dividends.

1) Legal reserve

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

2) Special reserve

In accordance with the regulation set by the Financial Supervisory Commission, a portion of current period earnings and undistributed prior period earnings shall be reclassified as a special earnings reserve during earnings distribution. Amounts of subsequent reversals pertaining to the net reduction of other shareholders’ equity shall qualify for additional distributions. The special reserve for the years ended December 31, 2019 and 2018 were $1,802,464 thousand and $2,370,825 thousand, respectively.

3) Earnings distribution

Earnings distribution for 2018 and 2017 was decided by the resolution adopted, at the general meeting of shareholders held on 12 June 2019 and 12 June 2018, respectively. The relevant dividend distributions to shareholders were as follows:

Dividends distributed to common shareholders: Cash	2018 Amount per share Total amount $ 68 9,121,533	2017
	Amount per share $ 68	Amount per share Total amount 72.5 9,725,164

(Continued)

-119-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

4) Other equity interests (net-of-taxes)

Balance at January 1, 2019 Exchange differences on foreign operations: The Group Subsidiaries Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income: The Group Disposal of investments in equity instruments designated at fair value through other comprehensive income Balance at December 31, 2019 Balance at January 1, 2018 Effects of retrospective application Balance at January 1, 2018 after adjustments Exchange differences on foreign operations: The Group Subsidiaries Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income: The Group Disposal of investments in equity instruments designated at fair value through other comprehensive income Balance at December 31, 2018	Exchange differences on translation of foreign financial statements $ (1,747,603) (314,485) 457 - - $ (2,061,631) $ (2,369,880) - (2,369,880) 623,090 (813) - - $ (1,747,603)	Unrealized gains (losses) on financial assets measured at fair value through other comprehensive income Unrealized gains (losses) on available-for-sale financial assets (54,861) - - - - - (25,084) - - - (79,945) - - (945) (2,912) 945 (2,912) - - - - - (51,935) - (14) - (54,861) -

(Continued)

-120-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(r) Earnings per share

The calculation of basic earnings per share and diluted earnings per share for years 2019 and 2018 were as follows:

				2019	2018
	Basic earnings per share
	Profit of the Company for the year		$	28,263,082	24,369,534
	Weighted-average number of outstanding ordinary shares
	(in thousands)			134,140	134,140
			$	210.70	181.67
	Diluted earnings per share
	Profit of the Company for the year		$	28,263,082	24,369,534
	Weighted-average number of outstanding ordinary shares	(in		134,140	134,140
	thousands)
	Effect of dilutive potential common shares (thousand
	shares)
	Effect of employee share bonus			1,228	1,212
	Weightier-average number of ordinary shares (in thousands)
	(after adjustment of potential diluted ordinary shares)			135,368	135,352
			$	208.79	180.05
(s)	Revenue from contracts with customers
	Disaggregation of revenue
				2019	2018
	Primary geographical markets
	China	$		40,413,938	28,516,473
	Japan			7,915,594	9,849,805
	Korea			7,049,747	7,234,540
	Other			5,365,729	4,351,340
		$		60,745,008	49,952,158
	Major products
	Optical lens	$		60,745,008	49,952,158

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(t) Employee compensation and directors’ and supervisors’ remuneration

According to the Company’ s articles of incorporation, the Company should distribute its remuneration of not less than 1%~30% and not more than 5% of annual profits to its employees and directors respectively, after offsetting accumulated deficits, if any. Employees, including employees of affiliate companies that meet certain conditions, are subject to the abovementioned remuneration, which is to be distributed in stock or cash.

For the year ended December 31, 2019 and 2018, the Company estimated its employee remuneration amounting to $5,087,917 thousand and $4,383,828 thousand, and directors' and supervisors' remuneration amounting to $381,594 thousand and $328,787 thousand, respectively. The estimated amounts mentioned above are calculated based on the net profit before tax, excluding the remuneration to employees, directors and supervisors of each period, multiplied by the percentage of remuneration to employees, directors and supervisors as specified in the Company's articles. These remunerations were expensed under operating costs or operating expenses during 2019 and 2018. The amounts, as stated in the consolidated financial statements, are identical to those of the actual distributions for 2019 and 2018.

(u) Non-operating income and expenses

(i) Other income

The details of other income for the years 2019 and 2018 were as follows:

Interest income－bank deposits Rent income	2019 2018 $ 1,579,468 1,182,871 12,468 9,881 $ 1,591,936 1,192,752

(ii) Other gains and losses

The details of other gains and losses for the years 2019 and 2018 were as follows:

Foreign exchange gains (loss) Losses on disposals of property, plant and equipment Losses on disposals of Intangible assets Gains on financial assets at fair value through profit or loss Others	2019 2018 $ (1,710,349) 237,386 (5,176) (22,971) (184) - 9,352 13,652 170,357 115,516 $ (1,536,000) 343,583

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iii) Finance costs

The details of finance costs for the years 2019 and 2018 were as follows:

Interest expense	2019 2018 $ 2,723 -

(v) Financial Instruments

(i) Credit risk

1) Credit risk exposure

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

2) Concentration of credit risk

To minimize credit risk, the Group periodically evaluates the Company’ s financial positions and the possibility of collecting accounts receivable. Besides, the Group monitors and reviews the recoverable amount of its accounts receivable to ensure the uncollectible amount are recognized appropriately as impairment loss. As of December 31, 2019 and 2018, 75% and 75%, respectively, of accounts receivable were derived from several major customers. Thus, the credit risk is significantly centralized.

3) Receivables securities

For credit risk exposure of notes and accounts receivable, please refer to note 6 (d). Other financial assets at amortized cost includes other receivables, refundable deposits and other financial assets. All of these financial assets are considered to have low risk, and thus, the impairment provision recognized during the period was limited to 12 months expected losses. Regarding how the financial instruments are considered to have low credit risk, please refer to note 4 (g). Other financial assets at amortized cost did not have impairment provision for the years ended December 31, 2019 and 2018.

(ii) Liquidity risk

The following table shows the contractual maturities of financial liabilities, without the impact of netting agreements.

December 31, 2019 Non-derivative financial liabilities Short-term borrowings Accounts and notes payable (including related parties) Other payables (including related parties) Lease liabilities-current and non- current Guarantee deposits received	Carrying amount $ 218,868 1,490,217 2,946,644 204,360 4,496 $ 4,864,585	Contractual cash flows 218,868 1,490,217 2,946,644 210,507 4,496 4,870,732	Within a year Over 1 year 218,868 - 1,490,217 - 2,946,644 - 42,037 168,470 - 4,496 4,697,766 172,966

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

December 31, 2018 Non-derivative financial liabilities Short-term borrowings Accounts and notes payable (including related parties) Other payables (including related parties) Guarantee deposits received	Carrying amount $ 552,868 1,806,007 3,082,982 4,473 $ 5,446,330	Contractual cash flows 552,868 1,806,007 3,082,982 4,473 5,446,330	Within a year Over 1 year 552,868 - 1,806,007 - 3,082,982 - - 4,473 5,441,857 4,473

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

(iii) Currency risk

1) Exposure to foreign currency risk

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

F inancial Assets Monetary items USD JPY CNY F inancial Liabilities M onetary items USD JPY	December 31, 2019 Foreign Currency Exchange Rates New Taiwan Dollars $ 939,747 29.9800 28,173,615 2,901,676 0.2760 800,863 5,758,912 4.3050 24,792,118 68,152 29.9800 2,043,195 3,075,467 0.2760 848,829	December 31, 2019 Foreign Currency Exchange Rates New Taiwan Dollars $ 939,747 29.9800 28,173,615 2,901,676 0.2760 800,863 5,758,912 4.3050 24,792,118 68,152 29.9800 2,043,195 3,075,467 0.2760 848,829	December 31, 2018	December 31, 2018
	Foreign Currency $ 939,747 2,901,676 5,758,912 68,152 3,075,467	Exchange Rates 29.9800 0.2760 4.3050 29.9800 0.2760	Foreign Currency 577,484 4,131,745 3,034,324 69,235 3,503,465	Exchange Rates New Taiwan Dollars 30.7150 17,737,417 0.2782 1,149,451 4.4720 13,569,499 30.7150 2,126,550 0.2782 974,664

2) Sensitivity analysis

The Group’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts and other receivables, and accounts and other payables that are denominated in foreign currency. A strengthening (weakening) 1% of the TWD against the USD, JPY, and CNY as of December 31, 2019 and 2018 would have increased (decreased) the net profit after tax by $406,997 thousand and $234,841 thousand, respectively. The analysis assumes that all other variables remain constant and ignores any impact of forecasted sales and purchases. The analysis is performed on the same basis for both periods.

3) Foreign exchange gain and loss on monetary items

Since the Group has many kinds of functional currency, the information on foreign

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

exchange gain (loss) on monetary items is disclosed by total amount. For the years 2019 and 2018, the foreign exchange gain (loss) (including realized and unrealized portions) amounted to $(1,710,349) thousand and $237,386 thousand, respectively.

(iv) Interest rate analysis

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

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

If the interest rate increases/decreases by 1%, with all other variable factors remaining constant, the Group’ s net income would have decreased/increased by $1,751 thousand and $4,423 thousand for the years ended December 31, 2019 and 2018, respectively. This is mainly due to the Group’s borrowings in variable rates.

(v) Other market price risk

For the years ended December 31, 2019 and 2018, the sensitivity analyses for the changes in the securities price at the reporting date were performed using the same basis for the profit and loss with all other variable factors remaining constant as illustrated below:

Prices of securities at the reporting date Increasing1% Decreasing1%	For theyears ended December 31, 2019 2018 Other comprehensive income after tax Net income Other comprehensive income after tax Net income $ 1,131 70,679 1,399 12,918 $ (1,131) (70,679) (1,399) (12,918)

(vi) Fair value of financial instruments
1) Categories and fair value of financial instruments

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

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

The Group uses observable market data to evaluate its assets and liabilities when it is possible. The different levels have been defined as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the assets or liability that are not based on observable market data (unobservable inputs).

	December 31, 2019	December 31, 2019	December 31, 2019
Book Value		Fair Value
	Level 1 7,067,853 113,051 - - - - - 7,180,904 - - - - - -	Level 2 - - - - - - - - - - - - - -	Level 3 Total - 7,067,853 - 113,051 - - - - - - - - - - - 7,180,904 - - - - - - - - - - - -

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

	December 31, 2018	December 31, 2018	December 31, 2018
Book Value		Fair Value
	Level 1 1,291,809 139,944 - - - - - 1,431,753 - - - - -	Level 2 - - - - - - - - - - - - -	Level 3 Total - 1,291,809 - 139,944 - - - - - - - - - - - 1,431,753 - - - - - - - - - -

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

The Group estimates its financial instruments, that are not measured at fair value, by methods and assumption as follows:

If there is quoted price generated by transactions for financial liabilities at amortized cost, the recent transaction price and quoted price data is used as the basis for fair value measurement. However, if no quoted prices are available, the discounted cash flows are used to estimate fair values. In addition, if the expiration date is approaching, or the future payable or receivable price is similar to the carrying amount, the fair value shall be assumed in the carrying amount in the balance sheets.

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

Non-derivative financial instruments

Financial instruments traded in active markets are based on quoted market prices. The quoted price of a financial instrument obtained from main exchanges and on-the-run bonds from Taipei Exchange can be used as a basis to determine the fair value of the listed companies’ equity instrument and debt instrument of the quoted price in an active market.

If a quoted price of a financial instrument can be obtained in time and often from exchanges, brokers, underwriters, industrial union, pricing institute, or authorities, and such price can reflect those actual trading and frequently happen in the market, then the financial instrument is considered to have a quoted price in an active market. If a financial instrument is not in accord with the definition mentioned above, then it is considered to be without a quoted price in an active market. In general, market with low trading volume or high bid-ask spreads is an indication of a non-active market.

The fair value of the listed common shares and funds held by the Group are determined by reference to the market quotation.

4) Transfer between Level 1 and Level 2

There were no transfers from one level to another level in 2019 and 2018.

(w) Financial risk management

(i) Overview

The Group is exposed to the following risks from its financial instruments:

1) Credit risk
2) Liquidity risk
3) Market risk

In this note expressed the information on risk exposure and objectives, policies and procedures of risk measurement and management. For detailed information, please refer to the related notes of each risk.

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(ii) Structure of risk management

The Group’ s finance management department provides business services for the overall internal department. It sets the objectives, policies and processes for managing the risk and the methods used to measure the risk arising from both the domestic and international financial market operations. The Group minimizes the risk exposure through derivative financial instruments. The Board of Directors regulates the use of derivative financial instruments in accordance with the Group’ s policy on risks arising from financial instruments such as currency risk, interest rate risk, credit risk, the use of derivative and non-derivative financial instruments, and the investments of excess liquidity. The internal auditors of the Group continue to review the amount of the risk exposure in accordance with the Group’s policies and the risk management's policies and procedures. The Group has no transactions in financial instruments (including derivative financial instruments) for the purpose of speculation.

(iii) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities.

1) Accounts receivable and other receivables

The Group's customers is significantly concentrated in a few customers, in order to reduce credit risk, the Group continuously evaluates the financial status of its major customers and their condition, and also regularly assesses the possibility of receivables recovery.

The Group did not have any collateral or other credit enhancement to avoid credit risk of the financial assets.

The Group has losses allowance for bad debts to reflect the estimated losses of its accounts receivable, other receivables and investments. The main components of the allowance account contain specific losses associated with individual major risks. The component, and the component of the combined loss established for the loss of a similar group of assets, has occurred but not yet identified. The loss allowance account is based on the occurring risk of a default and the rate of expected credit loss.

2) Investments

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

3) Guarantees

At December 31, 2019 and 2018, no other guarantees were outstanding.

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iv) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’ s approach to managing liquidity is to ensure, as far as possible, that it always has sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

(v) Market risk

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

1) Currency risk

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Group’s entities, primarily the New Taiwan Dollars (NTD). The currencies used in these transactions are the NTD, USD, CNY and JPY.

2) Interest rate risk

Please refer to note on the liquidity risk for interest rate risk of financial assets and financial liabilities.

3) Other market price risk

Please refer to note 6(v) for the sensitivity analysis of equity price risk.

(x) Capital management

The Group must maintain sufficient capital to establish and expand production capacity and equipment. Because the optical lens industry is highly subject to fluctuations in the booming cycle; the capital management of the Group is to ensure that it has sufficient and necessary financial resources to support its working capital requirements, capital expenditures, research and development activities, dividends and other business needs in the next 12 months.

(y) Investing and financing activities not affecting current cash flow

The Group’s investing and financing activities which did not affect the current cash flow in the years ended December 31, 2019 and 2018, were as follows:

1) To acquire construction and equipment under finance lease.
2) Acquisition of right-of-use assets through lease, please refer to note 6(m).

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

Reconciliation of liabilities arising from financing activities were as follows:

				Non-cash	changes	changes
				Foreign
		January		exchange			December
		1,2019	Cash flows	movement	Acquisition		31,2019
Short-term borrowings	$	552,868	(318,099)	(15,901)		-	218,868
Lease liabilities-current and
non-current		90,364	(39,133)	-		153,129	204,360
Guarantee deposits received		4,473	23	-		-	4,496
Total liabilities from financing
activities	$	647,705	(357,209)	(15,901)		153,129	427,724

				Non-cash changes
				Foreign
		January		exchange		December
		1,2018	Cash flows	movement		31,2018
Short-term borrowings	$	395,774	137,000	20,094		552,868
Guarantee deposits received		3,257	1,216	-		4,473
Total liabilities from financing
activities	$	399,031	138,216	20,094		557,341

(7) Related-party transactions

(a) Names and relationship with related parties

The followings are entities that have had transactions with related party during the periods covered in the consolidated financial statements.

Name of related party	Relationship with the Group
Largan Digital Co., Ltd. (Largan Digital)	Subsidiaries
Largan Medical Co., Ltd. (Largan Medical)	Subsidiaries
Largan Health Technology Inc. (LHT)	Subsidiaries
Nanjing Largan Health Technology Co., Ltd.	Subsidiaries
(Nanjing Largan Health)
Largan Health Technology Co., Ltd.	Subsidiaries
(Largan Health)
Largan Health AI-Tech Co., Ltd.	Subsidiaries
(Largan HealthAI-Tech)

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(b) Significant related-party transactions

(i) Sale of goods to related parties

The amounts of significant sales and receivables by the Group to its related parties were as follows:

Subsidiaries	Sale	Sale	Receivables from related parties
	2019	2018	December 31, 2019 December 31, 2018 7,682 12,596
	$ 67,113	88,283

The sales price of the Group to its related parties is not comparable to other sales due to the differences in the sales of the goods. During 2019 and 2018, the collection terms for sales to related parties were month-end 30 to 60 days, which were not materially different from those of the third parties.

(ii) Purchases from related parties

The amounts of significant purchases and payables by the Group from its related parties were as follows:

Subsidiaries	Purchases Payables to related parties 2019 2018 December 31, 2019 December 31, 2018 $ 110,120 204,949 4,664 10,469
	2019 $ 110,120

The purchases price of the Group to its related parties is not comparable to other purchases due to the differences in the purchases of the goods. During 2019 and 2018, the payment terms for purchases to related parties were month-end 30 to 60 days, which were not materially different from those of the third parties.

(iii) Provides and purchase technical services to related parties

During 2019 and 2018, the Group's income from providing technical services to its related parties were as follows (classified under the other gains):

Subsidiaries-Largan Medical	2019 2018
	$ 33,466 49,865

During 2019 and 2018, the Group's expense from technical services from its related parties were as follows (classified under the other expense):

Subsidiaries-Largan Digital	2019 2018
	$ 3,279 3,168

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iv) Purchases and disposals of property, plant and equipment
1) During 2019 and 2018, the Group's disposals of its equipment to its related parties are summarized as follows:

	2019	2019			Carrying amount
Carrying amount	Disposal price		Gain from disposal
$ 1,277 266 - $ 1,543		1,371 284 -		94 18 -	68 38 35
		1,655		112	141

2) During 2019 and 2018, the Group's purchase of its equipment from its related parties are summarized as follows:

Subsidiaries	2019 2018
	$ 102,225 102,551

3) During 2019 and 2018, the Group assisted its related parties to purchase other facilities as follows:

Subsidiaries-Largan Digital Subsidiaries-Largan Medical	2019	2018
	$ 31,109 56,046 $ 87,155	1,048 7,654 8,702

(v) Rental income

During 2019 and 2018, the Group's rental income on offices to the subsidiaries are summarized as follows:

Subsidiaries-Largan Digital Subsidiaries-Largan Medical	2019	2018
	$ 3,904 4,560 $ 8,464	2,694 3,415 6,109

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(vi) Other

For the years ended December 31, 2019 and 2018, the amounts of receivables and payables 、 from property transactions rental income, technical service and other transactions, which were classified under other receivables from related parties, and other payables to related parties, are summarized as follows:

Subsidiaries: Largan Digital Largan Medical LHT Largan Health AI-Tech	December 31, 2019 December 31, 2018 other receivables from related parties other payables to related parties other receivables from related parties other payables to related parties	December 31, 2019 December 31, 2018 other receivables from related parties other payables to related parties other receivables from related parties other payables to related parties	December 31, 2019 December 31, 2018 other receivables from related parties other payables to related parties other receivables from related parties other payables to related parties
	$ 2,044 11,174 - 12 $ 13,230	14,496 86 - - 14,582	1,961 472 13,617 68 60 - - - 15,638 540

Key management personnel compensation comprised the following:

Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payments	2019 2018 $ 264,243 247,236 270 338 - - - - - - $ 264,513 247,574

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(8) Pledged assets:

The carrying values of pledged assets were as follow:

			December	December
Pledged assets	Object		31, 2019	31, 2018
Time deposit (classified under	Customs office deposit
other current assets)		$	9,000	6,000
Time deposit (classified under	Litigation deposit
other non-current assets)			625,733	1,021,711
Time deposit (classified under	Completion deposit
other non-current assets)			317,708	315,296
		$	952,441	1,343,007

(9) Commitments and contingencies

(i) As of December 31, 2019 and 2018, the Group’s outstanding letters of credit were $33,575 thousand and $40,317 thousand, respectively.
(ii) As of December 31, 2019 and 2018, the Group’s outstanding purchase commitments for construction in progress, property and plant were $2,106,300 thousand and $2,106,300 thousand, respectively； The amount of construction that has not yet occurred were $113,967 thousand and $261,638 thousand, respectively.
(iii) As of December31, 2019, the Group acquired property and plant to meet the needs of future operations amounting to $983,368 thousand; The amount of payable was $49,168 thousand. (2018: none)

(10) Losses Due to Major Disasters: None

(11) Subsequent Events

The outbreak of Coronavirus disease (COVID-19) in early 2020 caused uncertainty in the operating environment of the Group in China. The Group has expanded production and inventory in other regions as a response, but because the relevant information is still unclear, it is impossible to reasonably anticipate the amount of impact to operating results and financial situation, the Group will continue to pay attention to the development of the incident for immediate assessment.

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(12) Other:

The followings are the summary statement of employee benefits, depreciation, depletion, and amortization expenses by function in the current period:

By function By item	2019	2019	2019	2018	2018	2018
	Operating cost	Operating expenses	Total	Operating cost	Operating expenses	Total
Employee benefits
Salary	5,646,546	3,896,422	9,542,968	5,145,992	3,382,845	8,528,837
Labor and health insurance	358,639	113,945	472,584	322,711	100,305	423,016
Pension	143,961	48,344	192,305	142,019	43,358	185,377
Others	158,894	34,815	193,709	153,474	33,059	186,533
Depreciation	3,479,142	259,559	3,738,701	2,644,612	189,164	2,833,776
Amortization	22,374	49,846	72,220	21,683	40,009	61,692

(13) Other disclosures:

(a) Information on significant transactions:

The following is the information on significant transactions, required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, of the Group:

(i) Loans to other parties:

(In Thousands of New Taiwan Dollars)

Number	Name of lender	Name of borrower	Account name	Related party	Highest balance of financing to other parties during the period	Ending balance	Actual usage amount during the period	Range of interest rates during the period	Purposes of fund financing for the borrower	Transaction amount for business between two parties	Reasons for short-term financing	Loss allowance	Collateral	Collateral	Individual funding loan limits	Maximum limit of fund financing
													Item	Value
1	Suzhou Largan Co., Ltd.	Nanjing Fengsheng Yongkang Software Technology Co., Ltd.	other receivables	No	NT$58,118 (RMB$13,500)	NT$- (RMB$-)	NT$- (RMB$-)	4.35%	2	-	Working capital	-		-	-	-
2	Largan (Dongg uan) Op tronic L td	Nanjing Fengsheng Yongkang Software Technology Co., Ltd.	other receivables	No	NT$21,525 (RMB$5,000)	NT$- (RMB$-)	NT$- (RMB$-)	4.35%	2	-	Working capital	-		-	1,321,729	1,321,729

(ii) Guarantees and endorsements for other parties: None

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(iii) Securities held as of December 31, 2019 (excluding those investments in subsidiaries, associates and joint ventures):

				(In Thousands of New Taiwan Dollars) Ending balance Highest balance during the year Shares/Units (thousands) Carrying value Percentage of ownership (%) Fair value Percentage of ownership Note 1.25 - % 20.66 - 20.66% 570 - % 0.33 - 0.33% 125 - % 0.25 - 0.25% 59,770 620,358 - 620,358 - 30,904 500,550 - 500,550 - 30,565 500,345 - 500,345 - 59,866 890,666 - 890,666 - 36,159 400,004 - 400,004 - 32,583 500,570 - 500,570 - 2,626 470,265 - 470,265 - 41,753 570,194 - 570,194 - 17,257 274,074 - 274,074 - 45,287 600,243 - 600,243 - 55,360 564,576 - 564,576 - 34,593 580,405 - 580,405 - 43,845 595,603 - 595,603 - 4,253 17,609 - 17,609 - 2,300 95,442 - 95,442 -	(In Thousands of New Taiwan Dollars) Ending balance Highest balance during the year Shares/Units (thousands) Carrying value Percentage of ownership (%) Fair value Percentage of ownership Note 1.25 - % 20.66 - 20.66% 570 - % 0.33 - 0.33% 125 - % 0.25 - 0.25% 59,770 620,358 - 620,358 - 30,904 500,550 - 500,550 - 30,565 500,345 - 500,345 - 59,866 890,666 - 890,666 - 36,159 400,004 - 400,004 - 32,583 500,570 - 500,570 - 2,626 470,265 - 470,265 - 41,753 570,194 - 570,194 - 17,257 274,074 - 274,074 - 45,287 600,243 - 600,243 - 55,360 564,576 - 564,576 - 34,593 580,405 - 580,405 - 43,845 595,603 - 595,603 - 4,253 17,609 - 17,609 - 2,300 95,442 - 95,442 -	(In Thousands of New Taiwan Dollars) Ending balance Highest balance during the year Shares/Units (thousands) Carrying value Percentage of ownership (%) Fair value Percentage of ownership Note 1.25 - % 20.66 - 20.66% 570 - % 0.33 - 0.33% 125 - % 0.25 - 0.25% 59,770 620,358 - 620,358 - 30,904 500,550 - 500,550 - 30,565 500,345 - 500,345 - 59,866 890,666 - 890,666 - 36,159 400,004 - 400,004 - 32,583 500,570 - 500,570 - 2,626 470,265 - 470,265 - 41,753 570,194 - 570,194 - 17,257 274,074 - 274,074 - 45,287 600,243 - 600,243 - 55,360 564,576 - 564,576 - 34,593 580,405 - 580,405 - 43,845 595,603 - 595,603 - 4,253 17,609 - 17,609 - 2,300 95,442 - 95,442 -	(In Thousands of New Taiwan Dollars) Ending balance Highest balance during the year Shares/Units (thousands) Carrying value Percentage of ownership (%) Fair value Percentage of ownership Note 1.25 - % 20.66 - 20.66% 570 - % 0.33 - 0.33% 125 - % 0.25 - 0.25% 59,770 620,358 - 620,358 - 30,904 500,550 - 500,550 - 30,565 500,345 - 500,345 - 59,866 890,666 - 890,666 - 36,159 400,004 - 400,004 - 32,583 500,570 - 500,570 - 2,626 470,265 - 470,265 - 41,753 570,194 - 570,194 - 17,257 274,074 - 274,074 - 45,287 600,243 - 600,243 - 55,360 564,576 - 564,576 - 34,593 580,405 - 580,405 - 43,845 595,603 - 595,603 - 4,253 17,609 - 17,609 - 2,300 95,442 - 95,442 -	(In Thousands of New Taiwan Dollars) Ending balance Highest balance during the year Shares/Units (thousands) Carrying value Percentage of ownership (%) Fair value Percentage of ownership Note 1.25 - % 20.66 - 20.66% 570 - % 0.33 - 0.33% 125 - % 0.25 - 0.25% 59,770 620,358 - 620,358 - 30,904 500,550 - 500,550 - 30,565 500,345 - 500,345 - 59,866 890,666 - 890,666 - 36,159 400,004 - 400,004 - 32,583 500,570 - 500,570 - 2,626 470,265 - 470,265 - 41,753 570,194 - 570,194 - 17,257 274,074 - 274,074 - 45,287 600,243 - 600,243 - 55,360 564,576 - 564,576 - 34,593 580,405 - 580,405 - 43,845 595,603 - 595,603 - 4,253 17,609 - 17,609 - 2,300 95,442 - 95,442 -	(In Thousands of New Taiwan Dollars) Ending balance Highest balance during the year Shares/Units (thousands) Carrying value Percentage of ownership (%) Fair value Percentage of ownership Note 1.25 - % 20.66 - 20.66% 570 - % 0.33 - 0.33% 125 - % 0.25 - 0.25% 59,770 620,358 - 620,358 - 30,904 500,550 - 500,550 - 30,565 500,345 - 500,345 - 59,866 890,666 - 890,666 - 36,159 400,004 - 400,004 - 32,583 500,570 - 500,570 - 2,626 470,265 - 470,265 - 41,753 570,194 - 570,194 - 17,257 274,074 - 274,074 - 45,287 600,243 - 600,243 - 55,360 564,576 - 564,576 - 34,593 580,405 - 580,405 - 43,845 595,603 - 595,603 - 4,253 17,609 - 17,609 - 2,300 95,442 - 95,442 -
Name of holder	Category and name of security	Relationship with company	Account title	Ending balance				Highest balance during the year	Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value	Percentage of ownership
The Company	Stock -Micro Win Tech Inc.	-	Non-current financial assets designable as at fair value through profit or loss	1.25	-	% 20.66	-	20.66%
The Company	Stock -Kintech Technology Co., Ltd.	-	Non-current financial assets designable as at fair value through profit or loss	570	-	% 0.33	-	0.33%
The Company	Stock-AETAS TECHNOLOGY INCORPORATED	-	Non-current financial assets designable as at fair value through profit or loss	125	-	% 0.25	-	0.25%
The Company	Open-end fund- Franklin Templeton Sinoam Money Market Fund	-	Current financial assets mandatorily measured fair value through profit or loss	59,770	620,358	-	620,358	-
The Company	Open-end fund- Capital Money Market Fund	-	Current financial assets mandatorily measured fair value through profit or loss	30,904	500,550	-	500,550	-
The Company	Open-end fund- Yuanta De-Li Money Market Fund	-	Current financial assets mandatorily measured fair value through profit or loss	30,565	500,345	-	500,345	-
The Company.	Open-end fund- Jih Sun Money Market Fund	-	Current financial assets mandatorily measured fair value through profit or loss	59,866	890,666	-	890,666	-
The Company	Open-end fund- CTBC Hwa-win Money Market Fund	-	Current financial assets mandatorily measured fair value through profit or loss	36,159	400,004	-	400,004	-
The Company	Open-end fund- FSITC Taiwan Money Market Fund	-	Current financial assets mandatorily measured fair value through profit or loss	32,583	500,570	-	500,570	-
The Company	Open-end fund- FSITC Money Market Fund	-	Current financial assets mandatorily measured fair value through profit or loss	2,626	470,265	-	470,265	-
The Company	Open-end fund- Eastspring Investments Well Pool Money Market Fund	-	Current financial assets mandatorily measured fair value through profit or loss	41,753	570,194	-	570,194	-
The Company	Open-end fund- Prudential Financial Money Market Fund	-	Current financial assets mandatorily measured fair value through profit or loss	17,257	274,074	-	274,074	-
The Company	Open-end fund- Union Money Market Fund	-	Current financial assets mandatorily measured fair value through profit or loss	45,287	600,243	-	600,243	-
The Company	Open-end fund- TCB Taiwan Money Market Fund	-	Current financial assets mandatorily measured fair value through profit or loss	55,360	564,576	-	564,576	-
The Company	Open-end fund- UPAMC James Bond Money Market Fund	-	Current financial assets mandatorily measured fair value through profit or loss	34,593	580,405	-	580,405	-
The Company	Open-end fund- Taishin 1699 Money Market Fund	-	Current financial assets mandatorily measured fair value through profit or loss	43,845	595,603	-	595,603	-
The Company	Stock－AVISION INC.	-	Current Equity Investments at fair value through other comprehensive income	4,253	17,609	-	17,609	-
Astro International Ltd.	Stock－XIAOMI CORP-CLASS B	-	Current Equity Investments at fair value through other comprehensive income	2,300	95,442	-	95,442	-

(Continued)

-137-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

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

Name of company	Category and name of security	Category and name of security	Account name	Account name	Account name	Name of counter- party	Relationsh ip with the company	Relationsh ip with the company	Beginning Balance	Beginning Balance	Beginning Balance	Purchases	Purchases	Purchases	Sales	Sales	Sales	Sales	Sales	Sales	Ending Balance	Ending Balance	Ending Balance	Ending Balance	Ending Balance
									Shares (thousands)	Amount		Shares (thousands)		Amount	Shares (thousands)	Price	Cost		Gain (loss) on disposal		Shares (thousands)		Amount
The Company	Open-end fund- Franklin Templeton Sinoam Money Market Fund		Current financial assets mandatorily measured fair value through profit or loss			-	-		38,815	400,605		79,099		820,000	58,144	601,781	600,000		1,781		59,770		620,358
The Company	Open-end fund- Capital Money Market Fund		Current financial assets mandatorily measured fair value through profit or loss			-	-		-	-		30,904		500,000	-	-	-		-		30,904		500,550
The Company	Open-end fund- Yuanta Wan Tai Money Market Fund		Current financial assets mandatorily measured fair value through profit or loss			-	-		23,144	350,067		6,580		100,000	29,724	450,831	450,000		831		-		-
The Company	Open-end fund- Yuanta De-Li Money Market Fund		Current financial assets mandatorily measured fair value through profit or loss			-	-		-	-		30,565		500,000	-	-	-		-		30,565		500,345
The Company	Open-end fund- Jih Sun Money Market Fund		Current financial assets mandatorily measured fair value through profit or loss			-	-		4,799	71,000		89,537		1,330,000	34,740	511,306	511,000		306		59,866		890,666
The Company	Open-end fund- CTBC Hwa-win Money Market Fund		Current financial assets mandatorily measured fair value through profit or loss			-	-		-	-		36,159		400,000	-	-	-		-		36,159		400,004
The Company	Open-end fund- FSITC Taiwan Money Market Fund		Current financial assets mandatorily measured fair value through profit or loss			-	-		-	-		84,739		1,298,000	52,156	798,784	798,000		784		32,583		500,570
The Company	Open-end fund- FSITC Money Market Fund		Current financial assets mandatorily measured fair value through profit or loss			-	-		-	-		2,626		470,000	-	-	-		-		2,626		470,265
The Company	Open-end fund- Eastspring Investments Well Pool Money Market Fund		Current financial assets mandatorily measured fair value through profit or loss			-	-		-	-		41,573		570,000	-	-	-		-		41,753		570,194
The Company	Open-end fund- Prudential Financial Money Market Fund		Current financial assets mandatorily measured fair value through profit or loss			-	-		-	-		17,257		274,000	-	-	-		-		17,257		274,074
The Company	Open-end fund- Union Money Market Fund		Current financial assets mandatorily measured fair value through profit or loss			-	-		-	-		45,287		600,000	-	-	-		-		45,287		600,243
The Company	Open-end fund- TCB Taiwan Money Market Fund		Current financial assets mandatorily measured fair value through profit or loss			-	-		26,620	270,705		55,360		564,000	26,620	270,652	270,000		652		55,360		564,576
The Company	Open-end fund- UPAMC James Bond Money Market Fund		Current financial assets mandatorily measured fair value through profit or loss			-	-		-	-		91,378		1,530,000	56,785	950,140	950,000		140		34,593		580,405
The Company	Open-end fund- Taishin 1699 Money Market Fund		Current financial assets mandatorily measured fair value through profit or loss			-	-		14,811	200,062		88,130		1,195,000	59,096	800,814	800,000		814		43,845		595,603
(v)	Acquisition of individual real es						tate with amount exceeding the lower of
	Name of company	Name of property		Transaction date	Transactio amount		n	Status of payment			Counter-party		Relationship with the Company		If the counter-party is a related party, disclose the previous transfer information							References for determining price		Purpose of acquisition and current condition	Others
															Owner	Relationship with the Company		Date of transfer		Amount
	The Company	Land and buildings		2019.1	1,823,59		0	As of December 31, 2019, $1,823,590 thousand has been paid			LEADWELL CNC MACHINES MFG., CORP.		None							-		Professional Appraisal Report		Future Operational Needs	None
	The Company	Land and buildings		2019.1	983,36		8	As of December 31, 2019, $934,200 thousand has been paid			HOLYCELL ENTERPRISES CO., LTD.		None							-		Professional Appraisal Report		Future Operational Needs	None

(Continued)

-138-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(vi) Disposal of individual real estate with an amount exceeding the lower of NT$300 million or 20% of the capital stock: None
(vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock:

Name of company	Related party	Nature of relationship	Transaction details	Transaction details	Transaction details	Transaction details	Transactio different	ns with terms from others	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)
			Purchase/Sale	Amount	Percentage of total purchases/sales	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
The Company	Amtai International Ltd.	The Company's subsidiary	Purchases	1,882,446	% 24	120Days	-	-	(845,870)	(37)%
The Company	Amtai International Ltd.	The Company's subsidiary	Sale	(11,245,101)	% (19)	30Days	-	-	2,056,436	14%
The Company	Largan Medical Co., Ltd.	The Company's subsidiary	Purchases	103,857	% 1	30Days	-	-	(4,519)	-%
The Company	Largan (Dongguan) Optronic Ltd.	The Company's subsidiary	Sale	(32,383,282)	% (54)	120Days	-	-	9,550,806	66%
Amtai International Ltd.	The Company	The Company's subsidiary	Purchases	11,246,565	% 77	30Days	-	-	(2,056,436)	(88)%
Amtai International Ltd.	The Company	The Company's subsidiary	Sale	(1,880,702)	% (13)	120Days	-	-	849,034	29%
Amtai International Ltd.	Largan (Dongguan) Optronic Ltd.	The Company's subsidiary	Purchases	2,928,484	% 20	30Days	-	-	(234,396)	(10)%
Amtai International Ltd.	Largan (Dongguan) Optronic Ltd.	The Company's subsidiary	Sale	(2,547,911)	% (17)	90Days	-	-	136,759	5%
Largan (Dongguan) Optronic Ltd.	Amtai International Ltd.	The Company's subsidiary	Purchases	2,533,784	% 7	90Days	-	-	(137,040)	(1)%
Largan (Dongguan) Optronic Ltd.	Amtai International Ltd.	The Company's subsidiary	Sale	(2,914,288)	% (8)	30Days	-	-	234,813	2%
Largan (Dongguan) Optronic Ltd.	The Company	The Company's subsidiary	Purchases	32,470,877	% 93	120Days	-	-	(9,550,820)	(99)%

Note： The nature and the amounts of the purchases and sales transaction of the two parties are different due to their different categories of accounts. Therefore, the above transaction has been adjusted.

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

Name of company	Related-party	Nature of relationship	Ending balance (Note2)	Turnover rate	Overdue	Overdue	Amounts received in subsequent period	Loss allowance
					Amount	Action taken
The Company	Amtai International Ltd.	The Company's subsidiary	2,106,863	7.23	-	None	1,143,172 (Note1)	-
The Company	Largan (Dongguan) Optronic Ltd.	The Company's subsidiary	9,550,806	4.00	-	None	3,677,629 (Note1)	-
Amtai International Ltd.	The Company	The Company's subsidiary	849,034	2.39	-	None	217,727 (Note1)	-
Amtai International Ltd.	Largan (Dongguan) Optronic Ltd.	The Company's subsidiary	136,778	14.93	-	None	130,297 (Note1)	-
Largan (Dongguan) Optronic Ltd.	Amtai International Ltd.	The Company's subsidiary	234,813	13.18	-	None	234,578 (Note1)	-

Note1: Until February 7, 2020.

Note2: Including other receivables.

(ix) Trading in derivative instruments: None

(Continued)

-139-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(x) Business relationships and significant intercompany transactions:

No.	Name of company	Name of counter-party	Nature of relationship (Note2)	Intercompany transactions 2019	Intercompany transactions 2019	Intercompany transactions 2019	Intercompany transactions 2019
				Account name	Amount	Trading terms	Percentage of the consolidated net revenue or total assets
0	The Company	Amtai International Ltd.	1	Purchases	1,882,446	The sales prices and payment terms were same as those of sales to third parties.	3%
0	The Company	Amtai International Ltd.	1	Sales	11,245,101	The sales prices and payment terms were same as those of sales to third parties.	19%
0	The Company	Largan Medical Co., Ltd.	1	Purchases	103,857	The sales prices and payment terms were same as those of sales to third parties.	-%
0	The Company	Largan (Dongguan) Optronic Ltd.	1	Sales	32,383,282	The sales prices and payment terms were same as those of sales to third parties.	53%
1	Amtai International Ltd.	The Company	2	Purchases	11,246,565	The sales prices and payment terms were same as those of sales to third parties.	19%
1	Amtai International Ltd.	The Company	2	Sales	1,880,702	The sales prices and payment terms were same as those of sales to third parties.	3%
1	Amtai International Ltd.	Largan (Dongguan) Optronic Ltd.	3	Purchases	2,928,484	The sales prices and payment terms were same as those of sales to third parties.	5%
1	Amtai International Ltd.	Largan (Dongguan) Optronic Ltd.	3	Sales	2,547,911	The sales prices and payment terms were same as those of sales to third parties.	4%
2	Largan (Dongguan) Optronic Ltd.	Amtai International Ltd.	3	Purchases	2,533,784	The sales prices and payment terms were same as those of sales to third parties.	4%
2	Largan (Dongguan) Optronic Ltd.	Amtai International Ltd.	3	Sales	2,914,288	The sales prices and payment terms were same as those of sales to third parties.	5%
2	Largan (Dongguan) Optronic Ltd.	The Company	2	Purchases	32,470,877	The sales prices and payment terms were same as those of sales to third parties.	53%

Note1：The number filled in as follows:

1) 0 represents the company.
2) Subsidiaries are sorted in a numerical order starting from 1.
Note2：Transactions labeled as follows:
1) 1 represents the transactions form parent company to subsidiaries.
2) 2 represents the transactions from subsidiaries to parent company.
3) 3 represents the transactions between subsidiaries.

Note3： The nature and the amounts of the purchase and sales transaction of the two parties are different due to their different categories of accounts. Therefore, the above transaction has been adjusted and offset in the consolidated financial statements.

(Continued)

-140-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(b) Information on investees:

The following is the information on investees (excluding information on investees in Mainland China):

(In Thousands of New Taiwan Dollars)

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of December 31, 2019	Balance as of December 31, 2019	Balance as of December 31, 2019	High balance during the year	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2019	December 31, 2018	Shares (thousands)	Percentage of ownership	Carrying value	Percentage of ownership
The Company	Largan Digital Co., Ltd.	Taichung, Taiwan	Manufacturing of image capture device、image reader、camera and player etc.	411,359	411,359	26,636	% 49.37	192,662	% 49.37	21,299	31,697	The Company's subsidiary
The Company	Largan (Hong Kong) Ltd.	Hong Kong	Investment	658,555	658,555	31,100	% 100	342,121	% 100	8,980	8,980	The Company's subsidiary
The Company	Astro International Ltd.	Samoa	Investment	247,104	247,104	7,600	% 100	19,731,445	% 100	1,737,319	1,736,549	The Company's subsidiary
The Company	Ba Fang Co., Ltd.	Taichung, Taiwan	Investment、 building construction etc.	43,000	28,000	4,300	% 100	36,502	% 100	(1,278)	(1,278)	The Company's subsidiary
The Company	Largan Health AI- Tech Co., Ltd.	Taipei, Taiwan	Sales of medical equipment	8,800	8,800	880	% 88	6,638	% 88	(2,457)	(2,162)	The Company's subsidiary
Largan Digital Co., Ltd.	Largan Medical Co. Ltd.	Taichung, Taiwan	Manufacturing of Optical Instruments、 Medical and Photo instruments sale etc.	428,252	428,252	40,497	% 40.5	291,655	% 40.5	57,981	23,482	The Company's subsidiary
Largan Digital Co., Ltd.	Alpha Holding Inc.	Samoa	Investment	118,415	118,415	3,700	% 100	33,109	% 100	(3,247)	(3,247)	The Company's subsidiary
Astro International Ltd.	Net International Trading Ltd.	British Virgin Islands	Investment	756,599	756,599	24,300	% 100	6,742,008	% 100	697,405	697,405	The Company's subsidiary
Astro International Ltd.	Amtai International Ltd.	Samoa	Manufacturing of Optical part etc.	50,600	50,600	1,500	% 100	12,515,501	% 100	948,980	956,688	The Company's subsidiary
Astro International Ltd.	Largan Health Technology Inc.	Samoa	Investment	110,898	110,898	1,476	% 12	30,212	% 12	(26,914)	(3,230)	The Company's subsidiary
Ba Fang Co., Ltd.	Fang Yuan Co., Ltd.	Taichung, Taiwan	Investment	29,800	14,800	2,980	% 100	23,460	% 100	(1,232)	(1,232)	The Company's subsidiary
Largan Medical Co. Ltd.	Beta International Ltd.	Samoa	investment	120,334	120,334	3,700	% 100	73,389	% 100	(8,630)	(8,630)	The Company's subsidiary
Alpha Holding Inc.	Largan Health Technology Inc.	Samoa	investment	110,898	110,898	1,476	% 12	30,212	% 12	(26,914)	(3,230)	The Company's subsidiary
Beta International Ltd.	Largan Health Technology Inc.	Samoa	investment	110,898	110,898	3,936	% 32	70,492	% 32	(26,914)	(8,612)	The Company's subsidiary
Largan Health Technology Inc.	Dynadx Corporation	U.S.A	Development of the software	11,925	10,629	11,007	% 100	5,722	% 100	(1,995)	(1,995)	The Company's subsidiary
Largan Health Technology Inc.	Largan Health Technology Co., Ltd.	Taichung, Taiwan	Sales of medical equipment	45,797	40,797	801	% 100	5,714	% 100	(6,254)	(6,254)	The Company's subsidiary

(Continued)

-141-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(c) Information on investment in mainland China:

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

						(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
Name of investee		Main businesses and products	Total amount of capital surplus	Method of investment	Accumulated outflow of investment from Taiwan as of January 1, 2019	Investment flows			Accumulated outflow of investment from Taiwan as of December 31, 2019	Net income (losses) of the investee	Percentage of ownership		High balance during the year	Investment income (losses)	Book value	Accumulated remittance of earnings in currentperiod
						Outflow		Inflow					Percentage of ownership
Largan (Dongguan) Optronic Ltd.		Production and sales of camera lenses, scanner lens optoelectroni c devices, viewing windows, digital electronic cameras	HK$ 178,076	Note 1(a)	HK$ 85,986 US$ 7,474	-		-	HK$ 85,986 US$ 7,474	RMB$ 202,949	100.00%		100%	NT$ 900,192	NT$ 3,434,325	-
Suzhou Largan Co., Ltd. (Note2)		Production of digital cameras and key components, optoelectroni c devices	US$ -	Note 1(a)	US$ 5,000	-		-	US$ 5,000	RMB$ 1,321	-%		100%	NT$ 6,061	NT$ -	US$ 5,206
Nanjing Largan Health Technology Co., Ltd.		Health management, computer and medical device technology development, production and sales of medical devices	US$ 3,000	Note 1(b)	-	-		-	-	RMB$ (3,056)	24.32%		24.32%	NT$ (3,326)	NT$ 7,619	-
NEO (Shanghai) Medical Technology Co., Ltd.		Technical development and technical services in the field of medical device technology	RMB$20,000	Note 1(c)	-	-		-	-	RMB$ (382)	9.80%		9.80%	NT$ (168)	NT$ 7,868	-
Limitation on investment in Mainland China: Accumulated Investment in Mainland Chin as of December 31, 2019 NT$704,931 (HK$85,986 and US$12,474)
	Accumulated Investment in Mainland Chin as of December 31, 2019					a	Investment Amounts Authorized by Investment Commission, MOEA					Upper Limit on Investment
	NT$704,931 (HK$85,986 and US$12,474)						NT$862,206 (HK$85,986 and US$17,720)					NT$75,836,347

Note 1(a): Indirectly investment in Mainland China through an existing company registered in the third region.

Note 1(b): An existing company registered in the third region directly invests in Mainland China.

Note 1(c): Directly investment in Mainland China through investment company which uses the equity method.

Note 2: As of December 31, 2019, Suzhou Largan liquidation process was completed. However, the cumulative investment amount remitted from Taiwan has not yet been repatriated.

(iii) Significant transactions:

The significant inter-company transactions with the subsidiary in Mainland China, which were eliminated in the preparation of consolidated financial statements, are disclosed in the “ Information on significant transactions” and “ Business relationships and significant intercompany transactions”.

(Continued)

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(14) Segment information

(a) General information

The Group has only one reportable segment which is optical lens segment. The optical lens segment engages mainly in the designing, manufacturing and selling of lens for perspective mirror, camera, single binoculars, microscope and scanner.

The profit or loss of the reportable segment of the Group includes depreciation, income tax expense, any extraordinary activity and other material non-cash items.

Accounting policies for the operating segments correspond to those stated in note 4. The profit after tax of the operating segment of the Group is measured by earnings after taxes and as the basis for performance measurement.

(b) The Group's operating segment information:

Revenue Revenue from external customers Intersegment revenues Interest revenue Total revenue Depreciation and amortization Reportable segment profit or loss Investments accounted for using equity method Reportable segment assets Reportable segment liabilities	Optical lens segment
	2019 2018 $ 60,745,008 49,952,158 - - 1,579,468 1,182,871 $ 62,324,476 51,135,029 $ 3,810,921 2,895,468 $ 28,263,082 24,369,534 $ 229,512 209,445 $ 153,821,598 132,648,424 $ 27,427,687 25,048,853

Since the main industrial department of Group is the optical lens department, and its operating income, operating interests and the identifiable assets account for more than 90% of operating income and total assets, therefore, the Group is classified as a single product.

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LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(d) Geographical information

In presenting the information on the basis of geography, segment revenue is based on the geographical location of the customers and the segment non-current assets are based on the geographical location of the assets.

Revenue from the external customers:

Region			2019	2018
China		$	40,413,938	28,516,473
Japan			7,915,594	9,849,805
Korea			7,049,747	7,234,540
Other countries			5,365,729	4,351,340
		$	60,745,008	49,952,158
-current assets:
		December 31,		December 31,
Region			2019	2018
Taiwan	$		34,332,651	29,177,071
China			289,298	381,762
Samoa			30,212	32,701
	$		34,652,161	29,591,534

Non-current assets:

Non-current assets include property, plant and equipment, intangible assets, and other assets, excluding financial instruments and deferred tax assets.

(e) Major customers’ information

Customer 623020 623045 Total Customer 653003 623119 Total	2019
	Amount % $ 13,020,188 21 11,371,169 19 $ 24,391,357 40 2018 Amount % $ 9,848,693 20 9,108,365 18 $ 18,957,058 38

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6.5 Parent Company Only Financial Statements of the Most Recent Year with Independent Auditors’ Report and

Notes

Independent Auditors’ Report

To the Board of Directors of Largan Precision Co., Ltd.:

Opinion

We have audited the financial statements of Largan Precision Co., Ltd. (the ”Company”) which comprise the balance sheets as of December 31, 2019 and 2018, the statement of comprehensive income, changes in equity and cash flows for the years ended December 31, 2019 and 2018, and notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audit in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the parent company only Financial Statements section of our report. We are independent of the Company in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the parent company only financial statements of the current period. These matters were addressed in the context of our audit of the parent company only financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Inventory valuation

Please refer to Note 4(g), Note 5(a), and Note 6(f) for accounting policies, uncertainty of accounting estimates and assumptions, and related disclosures for inventory valuation.

Description of key audit matter:

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3-1

How the matter was addressed in our audit:

In relation to the key audit matter above, our principal audit procedures include obtaining an inventory aging report, analyzing the movement of inventory aging and evaluating the reasonableness of the Company’ s accounting policies, such as allowance for inventory valuation and obsolescence; performing a retrospective test of the Company’s historical accuracy of judgments with reference to inventory valuation and comparing with the current period to evaluate the appropriateness of the estimation and assumptions used; examining whether the valuation of inventories are in compliance with the accounting policies of the Company; understanding the basis of the selling price the management used to ensure the reasonableness of net realizable value of inventories; reviewing sales in the subsequent period, as well as assessing the basis of the net realizable value the Company used to determine the sufficiency of allowance of inventories and whether the related disclosures are appropriate.

2. Accounts Receivable Valuation

Please refer to Note 4(f), note 5(b), and Note 6(d) for accounting policies, uncertainty of accounting estimates and assumptions, and related disclosures for accounts receivables valuation, respectively.

Description of key audit matter:

The Company’ s accounts receivable are concentrated within certain customers, and the determination of allowance for accounts receivable relies on the management’s subjective judgment. Therefore, the valuation of accounts receivables is one of the key audit matters.

How the matter was addressed in our audit:

In relation to the key audit matter above, our principal audit procedures include estimating the loss allowance of trade receivables that is based on the risk of a default occurring and the rate of expected credit loss; reviewing the historical collection records, understanding the industry economic environment and the credit risk of receivables among limited customers to evaluate whether the method of estimation, assumptions, and related disclosures are appropriate.

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

Management is responsible for the preparation and fair presentation of the parent company only financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the IFRSs, IASs, IFRC, SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of parent company only financial statements that are free from material misstatement, whether due to fraud or error.

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

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

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3-2

Auditor’s Responsibilities for the Audit of the Parent Company Only Financial Statements

Our objectives are to obtain reasonable assurance about whether the parent company only 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 the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these parent company only financial statements.

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

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3-3

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

The engagement partners on the audit resulting in this independent auditors’ report are Tzu-Hsin, Chang and Shyhhuar, Kuo.

KPMG

Taipei, Taiwan (Republic of China) February 24, 2020

Notes to Readers

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

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

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				December 31, 2018	Amount %		552,868 -	846 -	1,654,392 1	708,418 1	18,147,993 14	2,529 -	4,194,745 3	- -	62,584 -	25,324,375 19		15,560 -	- -	4,473 -	97,841 -	117,874 -	25,442,249 19		1,341,402 1	1,557,011 1	106,503,622 80	(1,802,464) (1)	107,599,571 81	133,041,820 100
				December 31, 2019	Amount %		$ 218,868 -	702 -	1,428,491 1	850,389 1	20,542,234 13	31,023 -	4,463,182 3	39,801 -	81,114 -	27,655,804 18		2,626 -	164,559 -	4,496 -	105,849 -	277,530 -	27,933,334 18		1,341,402 1	1,558,058 1	125,636,027 81	(2,141,576) (1)	126,393,911 82	$ 154,327,245 100
LARGAN PRECISION CO., LTD.	Balance Sheets	December 31, 2019 and 2018	(Expressed in Thousands of New Taiwan Dollars)	December 31, 2019 December 31, 2018	Assets Amount % Amount % Liabilities and Equity	Current assets: Current liabilities:	Cash and cash equivalents (Note6(a) and (v)) $ 62,938,692 41 56,224,190 42 2100 Short-term borrowings (Note6(l) and (v))	Current financial assets at fair value through profit or loss (Note6(b) and (v)) 7,067,853 5 1,291,809 1 2150 Notes payable (Note6(v))	Current financial assets at fair value through other comprehensive income 2170 Accounts payable (Note6(v))	(Note6(c) and (v)) 17,609 - 23,389 - 2180 Accounts payable to related parties (Note6(v) and7)	Notes receivable, net (Note6(d) and (v)) 3,110 - 3 - 2200 Other payables (Note6(p) and (v))	Accounts receivable, net (Note6(d) and (v)) 2,940,690 2 2,639,484 2 2220 Other payables to related parties (Note6(v) and7)	Accounts receivable from related parties, net (Note6(d)、(v) and7) 11,614,923 7 7,716,994 6 2230 Current tax liabilities	Other receivables (Note6(e)、(v)) 293,941 - 213,210 - 2280 Current lease liabilities (Note6(m) and (v))	Other receivables from related parties (Note6(e)、(v) and7) 4,015,469 3 68,234 - 2300 Other current liabilities	Inventories (Note6(f)) 3,200,748 2 3,460,712 3	Other current assets (Note(k)、(v) and8) 265,288 - 553,490 - Non-Current liabilities:	92,358,323 60 72,191,515 54 2570 Deferred tax liabilities (Note6(o))	Non-current assets: 2580 Non-current lease liabilities (Note6(m) and (v))	Investments accounted for using equity method (Note6(g)) 20,309,368 13 30,107,282 23 2600 Other non-current liabilities (Note6(v))	Property, plant and equipment (Note6(h)) 32,286,239 21 27,487,598 21 2640 Net defined benefit liabilities (Note6(n))	Right-of-use assets (Note6(i)) 205,077 - - -	Intangible assets (Note6(j)) 101,741 - 80,345 - Total liabilities	Deferred tax assets (Note6(o)) 478,473 - 402,872 - Equity attributable to owners of parent: (Note6(q))	Other non-current assets (Note6(k)、(v) and 8) 8,588,024 6 2,772,208 2 3110 Share capital	61,968,922 40 60,850,305 46 3200 Capital surplus	3300 Retained earnings	3400 Other equity	Total equity attributable to owners of parent	Total assets $ 154,327,245 100 133,041,820 100 Total liabilities and equity
							1100	1110	1120		1150	1170	1180	1200	1210	1310	1470			1550	1600	1755	1780	1840	1900

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(English Translation of Parent Company Only Financial Statements and Report Originally Issued in Chinese) LARGAN PRECISION CO., LTD.

Statements of Comprehensive Income

For the years ended December 31, 2019 and 2018

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

4000 Operating revenues (Note6(s) and 7) 5000 Operating costs (Note6(f)、(n)、(t) and 7) 5910 Realized (unrealized) profit from sales 5900 Gross profit from operations 6000 Operating expenses (Note6(n)、(t) and 7): 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses Total operating expenses 6900 Operating income 7000 Non-operating income and expenses: 7010 Other income (Note6(u) and 7) 7020 Other gains and losses (Note6(u) and 7) 7050 Finance costs (Note6(m) and (u)) 7060 Share of profit (losses) of associates accounted for using equity method 7900 Profit before income tax 7950 Less: Income tax expenses (Note6(o)) Profit for the period 8300 Other comprehensive income: 8310 Components of other comprehensive income that will not be reclassified to profit or loss 8311 Remeasurements of defined benefit obligation 8316 Unrealized losses on investments in equity instruments measured at fair value through other comprehensive income 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss 8360 Components of other comprehensive income that will be reclassified to profit or loss 8361 Exchange differences on translation of foreign financial statements 8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss Other comprehensive income (loss) for the period, net of tax 8500 Total comprehensive income for the period Earnings per share (NT dollars) (Note6(r)) 9750 Basic earnings per share 9850 Diluted earnings per share	2019 Amount % $ 58,681,535 100 18,755,229 32 39,926,306 68 363,812 1 40,290,118 69 344,301 1 1,240,496 2 3,759,496 6 5,344,293 9 34,945,825 60 815,689 1 (1,604,169) (3) (2,723) - 1,773,786 3 982,583 1 35,928,408 61 7,665,326 13 28,263,082 48 (9,144) - (25,084) - - - (34,228) - (314,028) (1) - - (314,028) (1) (348,256) (1) $ 27,914,826 47 $ 210.70 $ 208.79	2018
		Amount % 47,178,620 100 14,668,012 31 32,510,608 69 (119,881) - 32,390,727 69 287,239 1 1,084,235 2 3,252,847 7 4,624,321 10 27,766,406 59 623,077 1 374,959 1 - - 2,149,295 5 3,147,331 7 30,913,737 66 6,544,203 14 24,369,534 52 (12,995) - (51,935) - - - (64,930) - 622,277 1 - - 622,277 1 557,347 1 24,926,881 53 181.67
		180.05

See accompanying notes to parent company only financial statements.

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														Total equity	92,397,231	-	92,397,231		-	-	(9,725,164)	(9,725,164)	623	24,369,534	557,347	24,926,881		-	107,599,571	107,599,571	-	107,599,571		-	-	(9,121,533)	(9,121,533)	1,047	28,263,082	(348,256)	27,914,826	126,393,911
														Total	(2,370,825)	(1,967)	(2,372,792)		-	-	-	-	-	-	570,342	570,342		(14)	(1,802,464)	(1,802,464)	-	(1,802,464)		-	-	-	-	-	-	(339,112)	(339,112)	(2,141,576)
					Other equity interest	Unrealized	gains	(losses) on	financial assets	measured at Unrealized	fair value gains (losses)	through other on available-	comprehensive for-sale	income financial assets	- (945)	(2,912) 945	(2,912) -		- -	- -	- -	- -	- -	- -	(51,935) -	(51,935) -		(14) -	(54,861) -	(54,861) -	- -	(54,861) -		- -	- -	- -	- -	- -	- -	(25,084) -	(25,084) -	(79,945) -
(English Translation of Parent Company Only Financial Statements and Report Originally Issued in Chinese)	LARGAN PRECISION CO., LTD.	Statements of Changes in Equity	For the years ended December 31, 2019 and 2018	(Expressed in Thousands of New Taiwan Dollars)		Retained earnings			Exchange	differences on	translation of	Unappropriated foreign	Share Capital Legal Special retained financial	Capital surplus reserve reserve earnings Total statements	1,341,402 1,556,388 10,985,257 486,837 80,398,172 91,870,266 (2,369,880)	- - - - 1,967 1,967 -	1,341,402 1,556,388 10,985,257 486,837 80,400,139 91,872,233 (2,369,880)		- - 2,597,562 - (2,597,562) - -	- - - 1,883,988 (1,883,988) - -	- - - - (9,725,164) (9,725,164) -	- - 2,597,562 1,883,988 (14,206,714) (9,725,164) -	- 623 - - - - -	- - - - 24,369,534 24,369,534 -	- - - - (12,995) (12,995) 622,277	- - - - 24,356,539 24,356,539 622,277		- - - - 14 14 -	1,341,402 1,557,011 13,582,819 2,370,825 90,549,978 106,503,622 (1,747,603)	1,341,402 1,557,011 13,582,819 2,370,825 90,549,978 106,503,622 (1,747,603)	- - - - - - -	1,341,402 1,557,011 13,582,819 2,370,825 90,549,978 106,503,622 (1,747,603)		- - 2,436,954 - (2,436,954) - -	- - - (568,361) 568,361 - -	- - - - (9,121,533) (9,121,533) -	- - 2,436,954 (568,361) (10,990,126) (9,121,533) -	- 1,047 - - - - -	- - - - 28,263,082 28,263,082 -	- - - - (9,144) (9,144) (314,028)	- - - - 28,253,938 28,253,938 (314,028)	1,341,402 1,558,058 16,019,773 1,802,464 107,813,790 125,636,027 (2,061,631)
															$														$	$												$
															Balance at January 1, 2018	Effects of retrospective application	Balance of January 1, 2018 after adjustments	Appropriation and distribution of retained earnings:	Legal reserve	Special reserve	Cash dividends of common stock		Other changes in capital surplus	Profit for the period	Other comprehensive income for the period	Total comprehensive income for the period	Disposal of investments in equity instruments designated at fair	value through other comprehensive income	Balance at December 31, 2018	Balance at January 1, 2019	Effect of retrospective application	Balance of January 1, 2019 after adjustments	Appropriation and distribution of retained earnings:	Legal reserve	Special reserve	Cash dividends of common stock		Other changers in capital surplus	Profit for the period	Other comprehensive income for the period	Total comprehensive income for the period	Balance at December 31, 2019

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(English Translation of Parent Company Only Financial Statements and Report Originally Issued in Chinese) LARGAN PRECISION CO., LTD.

Statements of Cash Flows

For the years ended December 31, 2019 and 2018

(Expressed in Thousands of New Taiwan Dollars)

		2019	2018
Cash flows from operating activities:
Profit before income tax	$	35,928,408	30,913,737
Adjustments:
Adjustments to reconcile profit (loss):
Depreciation expense		3,679,906	2,766,307
Amortization expense		72,178	61,476
Interest expense		2,723	-
Interest income		(803,220)	(613,196)
Share of profit of subsidiaries accounted for using equity method		(1,773,786)	(2,149,295)
Losses on disposal of property, plant and equipment		3,050	1,618
Property, plant and equipment transferred to expenses		188	1,072
(Realized) unrealized profit from sales		(363,812)	119,881
Unrealized foreign exchange (profit) loss		(24,751)	38,279
Total adjustments to reconcile profit		792,476	226,142
Changes in operating assets and liabilities:
Changes in operating assets:
(Increase) decrease in financial assets mandatorily measured at fair value through profit
or loss		(5,776,044)	680,158
Increase in notes receivable		(3,107)	(3)
(Increase) decrease in accounts receivable (including from related parties)		(4,199,135)	1,124,669
Decrease (Increase) in inventories:		259,964	(1,527,378)
Decrease (increase) in other current assets		850,468	(409,355)
Total changes in operating assets		(8,867,854)	(131,909)
Changes in operating liabilities:
Decrease notes payable		(144)	(1,500)
Decrease in accounts payable (including to related parties)		(83,930)	(1,436,175)
Increase in other current liabilities		2,643,507	2,108,116
Decrease in net defined benefit liabilities		(1,136)	(5,595)
Total changes in operating liabilities		2,558,297	664,846
Total changes in operating assets and liabilities		(6,309,557)	532,937
Cash inflow generated from operations		30,411,327	31,672,816
Interest received		789,013	567,647
Interest paid		(2,723)	-
Income taxes paid		(7,682,587)	(6,205,748)
Net cash flows from operating activities		23,515,030	26,034,715
Cash flows from investing activities:
Proceeds from disposal of financial assets at fair value through other comprehensive income		-	1,233
Acquisition of investments accounted for using equity method		(15,000)	(8,800)
Acquisition of property, plant and equipment		(8,472,493)	(6,398,078)
Proceeds from disposal of property, plant and equipment		1,655	111
Decrease (increase) in refundable deposits		394,355	(396,100)
Increase in other non-current assets		(6,210,171)	(99,718)
Acquisition of intangible assets		(62,280)	(47,712)
Dividends received		7,041,101	-
Net cash flows used in investing activities		(7,322,833)	(6,949,064)
Cash flows from financing activities:
(Decrease) increase in short-term borrowings		(318,099)	137,000
Increase in guarantee deposits received		23	1,294
Payment of lease liabilities		(39,133)	-
Cash dividend paid		(9,121,533)	(9,725,164)
Overdue dividend transferred to capital surplus		1,047	623
Net cash flows used in financing activities		(9,477,695)	(9,586,247)
Net increase in cash and cash equivalents		6,714,502	9,499,404
Cash and cash equivalents at beginning of period		56,224,190	46,724,786
Cash and cash equivalents at end of period	$	62,938,692	56,224,190

See accompanying notes to parent company only financial statements.

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(English Translation of Parent Company Only Financial Statements and Report Originally Issued in Chinese) LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

For the years ended December 31, 2019 and 2018

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

(1) Company history

Largan Precision Co., Ltd. (the “Company”) was incorporated in April 1987 as a company limited by shares under the Company Act of the Republic of china (R .O. C). The registered address is No.11, Jingke Rd., Nantun Dist., Taichung City 40852, Taiwan (R.O.C.). The major business activities of the Company are the design, manufacture and sale of lens for perspective mirror, camera, single and double binoculars, fax machine, microscope and scanner etc. Please refer to Note 14.

The Company's common shares were listed on the Taiwan Stock Exchange (TWSE) in March, 2002.

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

The accompanying parent company only financial statements were authorized for issue by the Board of Directors on February 24, 2020.

(3) New standards, amendments and interpretations adopted

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

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2019.

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
IFRS 16 “Leases”	January 1, 2019
IFRIC 23 “Uncertainty over Income Tax Treatments”	January 1, 2019
Amendments to IFRS 9 “Prepayment features with negative compensation”	January 1, 2019
Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement”	January 1, 2019
Amendments to IAS 28 “Long-term interests in associates and joint ventures”	January 1, 2019
Annual Improvements to IFRS Standards 2015–2017 Cycle	January 1, 2019

Except for the following items, the Company believes that the adoption of the above IFRSs would not have any material impact on its financial statements. The extent and impact of signification changes are as follows:

(i) IFRS 16“Leases”

IFRS 16 replaces the existing leases guidance, including IAS 17 "Leases", IFRIC 4 "Determining whether an Arrangement contains a Lease", SIC-15 "Operating Leases – Incentives" and SIC-27 "Evaluating the Substance of Transactions Involving the Legal Form of a Lease".

The Company applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognized in retained earnings on January 1, 2019.

(Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

The details of the changes in accounting policies are disclosed below,

1) Definition of a lease

Previously, the Company determined at contract inception whether an arrangement is or contains a lease under IFRIC 4. Under IFRS 16, the Company assesses whether a contract is or contains a lease based on the definition of a lease, as explained in note 4(j).

On transition to IFRS 16, the Company elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Company applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after January 1, 2019.

2) As a lessee

As a lessee, the Company previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Company. Under IFRS 16, the Company recognizes right-of-use assets and lease liabilities for most leases – i.e. these leases are on-balance sheet.

The Company decided to apply recognition exemptions to leases of low-value assets of photocopying equipment.

Leases classified as operating leases under IAS 17

At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Company’ s incremental borrowing rate as at January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments – the Company applied this approach to all other lease.

In addition, the Company used the following practical expedients when applying IFRS 16 to leases.

－ Applied a single discount rate to a portfolio of leases with similar characteristics.
－ Adjusted the right-of-use assets by the amount of IAS 37 onerous contract provision immediately before the date of initial application, as an alternative to an impairment review.
－ Applied the exemption not to recognize right-of-use assets and liabilities to leases with lease term that ends within 12 months of the date of initial application.
－ Excluded initial direct costs from measuring the right-of-use asset at the date of initial application.
－ Used hindsight when determining the lease term if the contract contains (Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

options to extend or terminate the lease.

3) As a lessor

The Company is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor. The Company accounted for its leases in accordance with IFRS 16 from the date of initial application.

4) Impacts on financial statements

On transition to IFRS 16, the Company recognized additional $92,749 thousands of rightof-use assets and $90,364 thousands of lease liabilities. When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average rate applied is 1.232%.

Operating lease commitment at December 31, 2018 as disclosed in the Company’s financial statements Extension and termination options reasonably certain to be exercised Discounted using the incremental borrowing rate at January 1, 2019 Lease liabilities recognized at January 1, 2019	January 1, 2019
	$ 31,950 60,009 91,959 90,364 $ 90,364

(ii) IFRIC 23 “Uncertainty over Income Tax Treatments”

The adoption of IFRIC23 has no significant impact on the parent company only financial statements of the Company for the year ended December 31, 2019.

(Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

(b) The impact of IFRS endorsed by FSC but not yet effective

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 3 “Definition of a Business”	January 1, 2020
Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform”	January 1, 2020
Amendments to IAS 1 and IAS 8 “Definition of Material”	January 1, 2020

The Company assesses that the adoption of the abovementioned standards would not have any material impact on its financial statements.

As of the date, the following IFRSs that have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

	Effective date
New, Revised or Amended Standards and Interpretations	per IASB
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between	Effective date to
an Investor and Its Associate or Joint Venture”	be determined
	by IASB
IFRS 17 “Insurance Contracts”	January 1, 2021
Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”	January 1, 2022

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

(4) Summary of significant accounting policies

The significant accounting policies presented in the financial statements are summarized below. Except for those specifically indicated, the following accounting policies were applied consistently throughout the periods presented in the financial statements.

(a) Statement of compliance

The parent company only financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

(b) Basis of preparation

(i) Basis of measurement

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

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

1) Financial instruments measured at fair value through profit or loss are measured at fair value;
2) Financial assets at fair value through other comprehensive income are measured at fair value.
(ii) Functional and presentation currency

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

(c) Foreign currency

(i) Foreign currency transaction

Transactions in foreign currencies are translated into the respective functional currencies of the Company at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date.

(ii) Foreign operations

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

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

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

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

(i) It expected to be realized, or intended to be sold or consumed, in its normal operating cycle;
(ii) It holds primarily for the purpose of trading;
(iii) It expected to be realized within twelve months after the reporting period; or
(iv) The asset is cash or a 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.

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

(i) It is expected to settle the normal operating cycle;
(ii) It is held primarily for the purpose of trading;
(iii) It is due to be settled within twelve months after the reporting period; or
(iv) The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

(e) Cash and cash equivalents

(f) Financial instruments

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

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(i) Financial assets

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

On initial recognition, a financial asset is classified as measured at: amortized cost; Fair value through other comprehensive income (FVOCI); or FVTPL.

Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

1) Financial assets measured at amortized cost

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

it is held within a business model whose objective is to hold financial assets to collect contractual cash flows; and
it is contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

2) Fair value through other comprehensive income (FVOCI)

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

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

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

(Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

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

3) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL. On initial recognition, the Company may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

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

4) Business model assessment

The Company makes an assessment of the objective of the business model in which a financial asset is held at portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes：

the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’ s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets;
how the performance of the portfolio is evaluated and reported to the Company’s management;
the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;
how managers of the business are compensated ─ e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

(Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, and are consistent with the Company’s continuing recognition of the assets.

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

5) Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, ‘ principal’ is defined as the fair value of the financial assets on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Company considers：

contingent events that would change the amount or timing of cash flows；
terms that may adjust the contractual coupon rate, including variable rate features；
prepayment and extension features；and
terms that limit the Company’s claim to cash flows from specified assets（e.g. nonrecourse features）
6) Impairment of financial assets

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

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

debt securities that are determined to have low credit risk at the reporting date； and
other debt securities and bank balances for which the credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

(Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

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

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

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 180 days past due.

The Company considers a financial asset to be in default when the financial asset is more than 360 days past due or the debtor is unlikely to fully pay its credit obligations to the Company.

The Company considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘ investment grade which is considered to be twA or higher per Taiwan Ratings’.

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

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

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

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

significant financial difficulty of the borrower or issuer；
a breach of contract such as a default or being more than 360 days past due；
the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider；

(Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

it is probable that the borrower will enter bankruptcy or other financial reorganization；or
the disappearance of an active market for a security because of financial difficulties.

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For corporate customers, the Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects no significant recovery from the amount written off.

However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

7) Derecognition of financial assets

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

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

(ii) Financial liabilities and equity instrument
1) Classification of debt or equity

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

2) Equity instrument

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

3) Financial liabilities

4) Derecognition of financial liabilities

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

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

5) Offsetting of financial assets and liabilities

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

(g) Inventories

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

(h) Investment in subsidiaries

The subsidiaries in which the Company holds controlling interest are accounted for under equity method in the non-consolidated financial statements. Under equity method, the net income, other comprehensive income and equity in the non-consolidated financial statement are the same as those attributable to the owners of the parent in the consolidated financial statements.

The changes in ownership of the subsidiaries are recognized as equity transaction.

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(i) Property, plant and equipment

(i) Recognition and measurement

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

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

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

(ii) Subsequent cost

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

(iii) Depreciation

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

Land is not depreciated.

The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:

1)	Buildings	35 ~55years
2)	Machinery and equipment	2 ~ 10 years

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

(j) Leases

Applicable from January 1, 2019

(i) Identifying a lease

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

(Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

1) the contract involves the use of an identified asset – this may be specified explicitly or implicitly, and should be physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a substantive substitution right, then the asset is not identified; and
2) the customer has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
3) the customer has the right to direct the use of the asset throughout the period of use only if either:
- the customer has the right to direct how and for what purpose the asset is used throughout the period of use; or
- the relevant decisions about how and for what purpose the asset is used are predetermined and:
  - the customer has the right to operate the asset throughout the period of use, without the supplier having the right to change those operating instructions; or
  - the customer designed the asset in a way that predetermines how and for what purpose it will be used throughout the period of use.
(ii) As a lessee

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

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

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

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

fixed payments, including in-substance fixed payments;
variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
amounts expected to be paid under a residual value guarantee; and

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

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

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

there is a change in future lease payments arising from the change in an index or rate; or
there is a change in the Company’ s estimate of the amount expected to be paid under a residual value guarantee; or
there is a change of its assessment on whether it will exercise an option to purchase the underlying asset, or
there is a change in the lease term resulting from a change of its assessment on whether it will exercise an extension or termination option; or
there are any lease modifications

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

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

The Company has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets, photocopying equipment. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(iii) As a lessor

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

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

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

Applicable before January 1, 2019

(i) Lessor

Lease income from an operating lease is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the lease asset, and recognized as an expense over the lease term on the same basis as the lease income. Incentives granted to the lessee to enter into an operating lease are spread over the lease term on a straight-line basis so that the lease income received is reduced accordingly.

(ii) Lessee

Leases are operating leases and are not recognized in the Company’s balance sheets. Payments made under operating leases (excluding insurance and maintenance expenses) are recognized as an expense on a straight-line basis over the term of the lease.

Lease incentives received are recognized as an integral part of the total lease expense, over the term of the lease.

(k) Intangible assets

(i) Recognition and measurement

Other intangible assets that are acquired by the Company and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.

(ii) Subsequent expenditure

(iii) Amortization

The estimated useful lives for current and comparative periods are as follows:

Computer software cost 1~3 years

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

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(l) Impairment of non-financial assets

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

(m) Provisions

A provision is recognized if, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.

(n) Revenue

(i) Revenue from contracts with customers

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

1) Sale of goods

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

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

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

2) Financing components

The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Company does not adjust any of the transaction prices for the time value of money.

(ii) Contract costs

1) Incremental costs of obtaining a contract

The Company recognizes as an asset the incremental costs of obtaining a contract with a customer if the Company expects to recover those costs. The incremental costs of obtaining a contract are those costs that the Company incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained shall be recognized as an expense when incurred, unless those costs are explicitly chargeable to the customer regardless of whether the contract is obtained.

The Company applies the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.

2) Costs to fulfil a contract

If the costs incurred in fulfilling a contract with a customer are not within the scope of another Standard (for example, IAS 2 Inventories, IAS 16 Property, Plant and Equipment or IAS 38 Intangible Assets), the Company recognizes an asset from the costs incurred to fulfil a contract only if those costs meet all of the following criteria:

the costs relate directly to a contract or to an anticipated contract that the Company can specifically identify;
the costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and
the costs are expected to be recovered.

For general and administrative costs, costs of wasted materials, labor or other resources to fulfil the contract that were not reflected in the price of the contract, costs that relate to satisfied performance obligations (or partially satisfied performance obligations), and costs for which the Company cannot distinguish whether the costs relate to unsatisfied performance obligations or to satisfied performance obligations(or partially satisfied performance obligations), the Company recognizes these costs as expenses when incurred.

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(o) Employee benefits

(i) Defined contribution plans

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

(ii) Defined benefit plans

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

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

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

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

(iii) Short-term employee benefits

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

(p) Income taxes

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

(Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

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

(i) temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction;
(ii) temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

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

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

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

(i) the Company has a legally enforceable right to set off current tax assets against current tax liabilities; and
(ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:
1) the same taxable entity; or
2) different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

(Continued)

-172-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

(q) Earnings per share

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

(r) Operating segments

The Company has disclosed the information on operating segments in its consolidated financial statements. Hence, no further information is disclosed in the parent company only financial statements.

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

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

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is as follows:

(a) Valuation of inventories

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

(b) The loss allowance of trade receivable

The Company has estimated the loss allowance of trade receivable that is based on the risk of a default occurring and the rate of expected credit loss. The Company has considered historical experience, current economic conditions and forward-looking information at the reporting date to determine the assumptions to be used in calculating the impairments and the selected inputs. For relevant assumptions and input values, please refer to note 6(d).

(Continued)

-173-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

(6) Explanation of significant accounts

(a) Cash and cash equivalents

Petty cash and cash on hand Demand deposits Time deposits Cash and cash equivalents in the consolidated statement of cash flows	December 31, 2019 December 31, 2018 $ 513 536 6,049,498 6,600,393 56,888,681 49,623,261 $ 62,938,692 56,224,190

Please refer to note 6(v) for the exchange rate risk and sensitivity analysis of the financial assets and liabilities of the Company.

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

December 31, 2019 Mandatorily measured at fair value through profit or loss: Non-derivative financial assets Stocks unlisted in domestic markets $ - Beneficiary Certificate-open-end funds 7,067,853 Total $ 7,067,853 market risk, please refer to note 6(v). ncial assets at fair value through other comprehensive income December 31, 2019 Equity investments at fair value through other comprehensive income Listed common shares Domestic Company - AVISION INC. $ 17,609	December 31, 2018
	- 1,291,809
	1,291,809
	December 31, 2018
	23,389

For market risk, please refer to note 6(v).

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

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

(Continued)

-174-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

On March 12, 2018, the Company has sold 165 thousand of its shares in AVISION INC. due to financial management reason. The shares sold had a fair value of $1,233 thousand, and the Company realized a gain of $14 thousand, which is already included in other comprehensive income. The gain has been transferred to retained earnings.

(ii) For market risk, please refer to note 6(v).
(iii) As of December 31, 2019 and 2018, the financial assets at fair value through other comprehensive income of the Company had not been pledged as collateral for long-term borrowing.

(d) Notes and accounts receivable

Notes receivable from non-operating activities Accounts receivable-measured as amortized cost Accounts receivable from related parties-measured as amortized cost Less: Loss allowance	December 31, 2019 December 31, 2018 $ 3,110 3 2,942,940 2,641,734 11,614,923 7,716,994 (2,250) (2,250) $ 14,558,723 10,356,481

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

Current No more than 180 days past due Current No more than 180 days past due			December 31, 2019 Weighted-average loss rate Loss allowance provision
	Gross carrying amount $ 14,371,777 189,196 $ 14,560,973
			- - % 1.1892 2,250 2,250 December 31, 2018 Weighted-average loss rate Loss allowance provision


			- - % 0.7091 2,250 2,250

(Continued)

-175-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

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

Balance at December 31 (Balance at January 1)	For the years ended December 31,
	2019 2018 $ 2,250 2,250

The notes and accounts receivable of the Company had not been pledged as collateral as of December 31, 2019 and 2018.

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

(e) Other receivables

Other receivables-Tax receivables Other receivables-Interest receivables Other receivables-Others Other receivables-Related parties	December 31, 2019 $ 143,665 102,598 47,678 4,015,469 $ 4,309,410	December 31, 2018
		112,000 88,390 12,820 68,234
		281,444

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

(f) Inventories

Finished goods Work in progress Raw materials Supplies	December 31, 2019 December 31, 2018 $ 1,932,423 1,426,036 358,059 1,258,289 849,882 733,783 60,384 42,604 $ 3,200,748 3,460,712

For the years ended December 31, 2019 and 2018, the amounts of inventories that were charged to cost of sales, and the net of provisions that were charged to cost of sales in the consolidated statement of comprehensive income for inventories written down to net realizable value, were $297,624 thousand and $67,982 thousand, respectively.

As of December 31, 2019 and 2018, the Company did not provide any inventories as collateral for its loans.

(g) Investments accounted for using equity method

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

(Continued)

-176-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

Subsidiary-Largan (Hong Kong) Limited. Subsidiary-Astro International Ltd. Subsidiary-Ba Fang Co., Ltd. Subsidiary-Largan Digital Co., Ltd. Subsidiary-Largan Health AI-Tech Co., Ltd. Prepayments for long-term investment	December 31, 2019 December 31, 2018 $ 342,121 341,593 19,731,445 29,566,165 36,502 22,780 192,662 167,944 6,638 - - 8,800 $ 20,309,368 30,107,282

The prepayments for long-term investment were used for the investment in Largan Health AITech Co., Ltd., as of January 31, 2019, wherein the registration of incorporation had been completed.

(i) Subsidiaries

Please refer to the consolidated financial statements of the year 2019.

(ii) Collateral

As of December 31, 2019 and 2018, the Company did not provide any investment accounted for using equity method as collaterals for its loans.

(h) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Company in 2019 and 2018, were as follows:

Cost or deemed cost: Balance on January 1, 2019 Additions Disposal Reclassification Balance on December 31, 2019 Balance on January 1,2018 Additions Disposal Reclassification Balance on December 31, 2018 Depreciation and impairment loss: Balance on January 1,2019 Depreciation for the year Disposal Reclassification Balance on December 31, 2019	Land Building and Construction Machinery and equipment $ 5,481,248 5,973,733 19,567,620 2,689,185 144,685 3,587,856 - - (5,461) - 20,569 335,920 $ 8,170,433 6,138,987 23,485,935 $ 4,709,398 1,887,298 15,613,060 771,850 231,464 3,276,857 - - (5,992) - 3,854,971 683,695 $ 5,481,248 5,973,733 19,567,620 $ - 416,852 10,128,317 - 179,076 2,227,491 - - (3,645) - - - $ - 595,928 12,352,163		Transportation equipment 20,552 - - - 20,552 19,363 1,723 (534) - 20,552 15,129 2,127 - - 17,256	Office equipment and other facilities 10,542,247 1,292,670 (10,096) 243,750 12,068,571 5,556,219 970,015 (3,500) 4,019,513 10,542,247 4,662,090 1,230,004 (7,207) - 5,884,887	Rental assets 54,898 - - - 54,898 54,898 - - - 54,898 20,836 407 - - 21,243	Construction in progress and testing equip Total 1,090,524 42,730,822 759,537 8,473,933 - (15,557) (631,721) (31,482) 1,218,340 51,157,716 9,071,986 36,912,222 588,215 5,840,124 - (10,026) (8,569,677) (11,498) 1,090,524 42,730,822 - 15,243,224 - 3,639,105 - (10,852) - - - 18,871,477

(Continued)

-177-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

Balance on January 1, 2018 Depreciation for the year Disposal Reclassification Balance on December 31, 2018 Carrying amounts: Balance on December 31, 2019 Balance on January 1, 2018 Balance on December 31,2018	Land Building and Construction Machinery and equipment $ - 323,050 8,320,609 - 93,802 1,812,134 - - (4,426) - - - $ - 416,852 10,128,317 $ 8,170,433 5,543,059 11,133,772 $ 4,709,398 1,564,248 7,292,451 $ 5,481,248 5,556,881 9,439,303		Transportation equipment 13,280 2,220 (371) - 15,129 3,296 6,083 5,423	Office equipment and other facilities		Rental assets		Construction in progress and testing equip Total - 12,485,249 - 2,766,307 - (8,297) - (35) - 15,243,224 1,218,340 32,286,239 9,071,986 24,426,973 1,090,524 27,487,598
						20,430 406 - -
						20,836
						33,655
						34,468
						34,062

(i)

Right-of-use assets

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

		Building and
		construction
Cost:
Balance at January 1, 2019	$	-
Effects of retrospective application		92,749
Additions		153,129
Balance at December 31,2019 Accumulated depreciation and impairment losses:	$	245,878
Balance at January 1, 2019	$	-
Depreciation for the year		40,801
Balance at December 31,2019 Carrying amounts:	$	40,801
Balance at December 31, 2019	$	205,077

(Continued)

-178-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

(j) Intangible assets

The costs and amortization of the intangible assets of Company in 2019 and 2018 were as follows:

Costs:
Balance at January 1, 2019
Additions
Disposals
Reclassification
Balance at December 31,2019
Balance at January 1, 2018
Additions
Disposals
Reclassification
Balance at December 31,2018
Amortization and impairment Loss:
Balance at January 1, 2019
Amortization for the year
Disposals
Balance at December 31, 2019
Balance at January 1, 2018
Amortization for the year
Disposals
Balance at December 31, 2018
Carrying value:
Balance at December 31,2019
Balance at December 31, 2018
Balance at January 1, 2018

Computer
Software
$ 249,335
62,280
-
31,294
$
342,909
$ 191,715
47,712
(483)
10,391
$
249,335
$ 168,990
72,178
-
$
241,168
$ 107,997
61,476
(483)
$
168,990
$
101,741
$
80,345
$
83,718

The following amortizations of intangible assets are included in the statement of comprehensive income:

Operating cost Operating expense	2019 2018 $ 22,374 21,515 49,804 39,961 $ 72,178 61,476

(Continued)

-179-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(k) Other current assets and other non-current assets

The other current assets and other non-current assets of the Company were as follows:

Other current financial assets Other current assets Other non-current financial assets Refundable deposits Prepayment for equipment Prepayment for land and building	December 31, 2019 December 31, 2018 $ 9,000 6,000 256,288 547,490 6,422,895 315,296 638,009 1,032,364 1,510,165 1,424,548 16,955 - $ 8,853,312 3,325,698

(i) Other current (non-current) financial assets were restricted deposits and bank account for repatriation of offshore fund, which were pledged as collateral; please refer to note 8.
(ii) Other current assets were prepayment for purchases and temporary payments.
(iii) Refundable deposits had been pledged as collateral; please refer to note 8.
(iv) For further credit risk information, please refer to note6 (v).

(l) Short-term borrowings

The short-term borrowings were summarized as follows:

Letters of credit Unused credit Lines Range of interest rates	December 31, 2019 December 31, 2018 $ 218,868 552,868 $ 1,081,132 747,132 0.95%~0.96% 0.89%~1.05%

(m) Lease liabilities

The carrying amounts of the Company's lease liabilities were as follows:

Current Non-current	December 31, 2019
	$ 39,801 $ 164,559

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

(Continued)

-180-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

The amounts recognized in profit or loss was as follows:

Interest on lease liabilities Variable lease payments not included in the measurement of lease liabilities Expenses relating to short-term leases and leases of low-value assets	For the year ended December 31, 2019
	$ 2,723 $ 149 $ 210

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

Total cash outflow for leases	For the year ended December 31, 2019
	$ 42,215

(i) Real estate leases

As of December 31, 2019, the Company leases buildings for its factory space. The leases of factory space typically run for 3 to 5 years. Some leases include an option to renew the lease for an additional period of the same duration after the end of the contract term.

(ii) Other leases

The Company leases photocopying equipment, these leases are leases of low-value items. The Company has elected not to recognize right-of-use assets and lease liabilities for these leases.

(n) Employee benefits

(i) Defined benefit plans

Reconciliation of the defined benefit obligations at present value and plan asset at fair value are as follows:

Present value of the defined benefit obligations Fair value of plan assets Net defined benefit liability	December 31, 2019 December 31, 2018 $ 164,467 156,042 (58,618) (58,201) $ 105,849 97,841

(Continued)

-181-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

1) Composition of plan assets

2) Movements in present value of the defined benefit obligations

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

Defined benefit obligations at January 1 Benefit paid by the plan Current service costs and interest cost (income) Remeasurements loss (gain): -Financial assumptions Defined benefit obligations at December 31	2019 2018 $ 156,042 143,579 (5,364) (5,030) 2,686 3,056 11,103 14,437 $ 164,467 156,042

3) Movements of the fair value of defined benefit plan assets

The movements in the fair value of the defined benefit plan assets of the Company were as follows:

Fair value of plan assets at January 1 Contributions paid by the employer Benefits paid from plan assets Interest income Remeasurements loss (gain): －Return on plan assets excluding interest income Fair value of plan assets at December 31	2019 2018 $ 58,201 53,138 3,166 7,955 (5,364) (5,030) 656 696 1,959 1,442 $ 58,618 58,201

(Continued)

-182-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

4) Expenses recognized in profit or loss

The expenses recognized in profits or losses for the years ended December 31, 2019 and 2018 were as follows:

Current service costs Net interest of net liabilities for the defined benefit obligations Plan assets interest income Operating Costs Selling expenses Administrative expenses Research and development expenses Return on plan assets	2019 2018 $ 706 916 1,980 2,140 (656) (696) $ 2,030 2,360 2019 2018 $ 1,569 1,806 16 19 90 117 355 418 $ 2,030 2,360 $ 2,615 2,138

5) Remeasurement in net defined benefit liability recognized in other comprehensive income

The Company’s remeasurement in the net defined benefit liability recognized in other comprehensive income for the years ended December 31, 2019 and 2018 were as follows:

Accumulated amount at January 1 Recognized during the period Accumulated amount at December 31	2019 2018 $ 62,440 49,445 9,144 12,995 $ 71,584 62,440

6) Actuarial assumptions

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

Discount rate Increase in future salary rate	December 31, 2019 December 31, 2018 % 1.125 % 1.375 % 2 % 2

(Continued)

-183-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

The expected allocation payment to be made by the Company to the defined benefit plans for the one year - period after the reporting date is $3,175 thousand.

The weighted average lifetime of the defined benefit plans is 17.7 years.

7) Sensitivity analysis

On December 31, 2019 and 2018, if the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

December 31, 2019 Discount rate Future salary increases rate December 31, 2018 Discount rate Future salary increases rate	Influences of defined benefit obligations Increase0.25% Decrease0.25% $ (4,390) 4,578 4,400 (4,240) $ (4,356) 4,548 4,412 (4,248)

There were no changes in the method and assumptions used in the preparation of sensitivity analysis for 2019 and 2018.

(ii) Defined contribution plans

(iii) Short-term employee benefit

The Company’s employee benefit liabilities were as follows:

			December 31,	December 31,
			2019	2018
Compensated	absences liability	$	93,313	81,064

(Continued)

-184-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(o) Income taxes

(i) Income tax expense

The components of income tax in the years 2019 and 2018 were as follows:

Current tax expense: Current period Surtax on unappropriated earnings Adjustment for prior periods Deferred tax expense： Origination and reversal of temporary differences Adjustment in tax rate	2019 2018 $ 7,520,924 5,465,763 435,595 1,174,827 (202,658) (75,989) (88,535) 44,351 - (64,749) $ 7,665,326 6,544,203

Reconciliation of income tax and profit before tax 2019 and 2018 is as follows:

Profit before income tax Income tax using the Company's domestic tax rate Adjustment in tax rate Investment tax credits Changes in unrecognized temporary differences Gains on disposal of investment Others income tax adjustments Changes in provision in prior periods Income tax for repatriation of overseas earnings Surtax on unappropriated earnings Total	2019 2018 $ 35,928,428 30,913,737 7,185,682 6,182,747 - (64,749) (386,000) (239,818) (354,757) (429,859) (1,062) (2,962) 107,824 6 (202,658) (75,989) 880,702 - 435,595 1,174,827 $ 7,665,326 6,544,203

(ii) Deferred tax assets and liabilities

1) Unrecognized deferred tax liabilities

(Continued)

-185-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

Aggregated amount of temporary differences related to investments in subsidiaries	December 31, 2019 December 31, 2018 $ 24,690,199 30,739,784

2) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2019 and 2018 were as follows:

Deferred Tax Assets:

Unrealized profit from associates Balance at January 1, 2019 $ 287,921 Recognized profit or loss (73,229) Balance at December 31, 2019 $ 214,692 Balance at January 1, 2018 $ 224,749 Recognized profit or loss 63,172 Balance at December 31, 2018 $ 287,921	Others Total 114,951 402,872 148,830 75,601 263,781 478,473 142,762 367,511 (27,811) 35,361 114,951 402,872

Deferred Tax Liabilities:

Unrealized exchange gains Balance at January 1, 2019 $ 13,738 Recognized profit or loss (13,738) Balance at December 31, 2019 $ - Balance at January 1, 2018 $ - Recognized profit or loss 13,738 Balance at December 31, 2018 $ 13,738	Other Total 1,822 15,560 804 (12,934) 2,626 2,626 598 598 1,224 14,962 1,822 15,560

3) Assessment of tax

The Company’ s tax returns for the years through 2017 were assessed by the Taipei National Tax Administration.

(Continued)

-186-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(p) Other payables

The other payables were summarized as follows:

Payables on remuneration to employees, directors and supervisors Payables for plant and equipment Others	December 31, 2019 December 31, 2018 $ 17,092,301 14,574,957 2,017,929 2,051,257 1,432,004 1,521,779 $ 20,542,234 18,147,993

(q) Capital and other equity

(i) Ordinary Shares

(ii) Capital Surplus

The balance of capital surplus was as following:

Additional paid-in capital Capital surplus-premium from merger Dividend timeout not received by shareholder	December 31, 2019 December 31, 2018 $ 817,574 817,574 738,155 738,155 2,329 1,282 $ 1,558,058 1,557,011

(Continued)

-187-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(iii) Retained earnings

The Company's article of incorporation stipulates that Company's net earnings should first be used to offset the prior years' deficits, if any, before paying any income taxes. Of the remaining balance, 10% is to be appropriated as legal reserve, until the accumulated legal reserve equals the Company's paid-in capital. In addition, a special, reserve in accordance with applicable laws and regulations shall also be set aside. Then, any remaining profit, together with any undistributed retained earnings, shall be distributed according to the distribution plan proposed by the Board of Directors and submitted to the stockholders’ meeting for approval.

1) Legal reserve

2) Special reserve

3) Earnings distribution

Earnings distribution for 2018 and 2017 was decided by the resolution adopted, at the general meeting of shareholders held on June 12, 2019 and June 12, 2018, respectively.

The relevant dividend distributions to shareholders were as follows:

Dividends distributed to common shareholders: Cash	2018 Amount per share Total amount $ 68 9,121,533	2017
	Amount per share $ 68	Amount per share Total amount 72.5 9,725,164

(Continued)

-188-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

4) Other equity interests (net-of-taxes)

Balance at January 1, 2019 Exchange differences on foreign operations: The Company Subsidiaries Unrealized gains(losses) from financial assets measured at fair value through other comprehensive income: The Company Subsidiaries Disposal of investments in equity instruments designated at fair value through other comprehensive income Balance at December 31, 2019 Balance at January 1, 2018 Effects of retrospective application Balance at January 1, 2018 after adjustments Exchange differences on foreign operations: The Company Subsidiaries Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income: The Company Subsidiaries	Exchange differences on translation of foreign financial statements $ (1,747,603) (314,485) 457 - - - $ (2,061,631) Exchange differences on translation of foreign financial statements $ (2,369,880) - (2,369,880) 623,090 (813) - -	Unrealized gains (losses) on financial assets measured at fair value through other comprehensive income (54,861) - - (5,780) (19,304) - (79,945) Unrealized gains (losses) on financial assets measured at fair value through other comprehensive income Unrealized gains (losses) on available-for-sale financial assets - (945) (2,912) 945 (2,912) - - - - - (13,966) - (37,969) -

(Continued)

-189-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

Disposal of investments in equity instruments designated at fair value through other comprehensive income Balance at December 31, 2018	Exchange differences on translation of foreign financial statements - $ (1,747,603)	Unrealized gains (losses) on financial assets measured at fair value through other comprehensive income Unrealized gains (losses) on available-for-sale financial assets (14) - (54,861) -

(r) Earnings per share

The calculation of basic earnings per share and diluted earnings per share for years 2019 and 2018 were as follows:

Basic earnings per share
Profit of the Company for the year
Weighted-average number of outstanding ordinary shares
(in thousands)
Diluted earnings per share
Profit of the Company for the year
Weighted-average number of outstanding ordinary shares
(in thousands)
Effect of dilutive potential common shares (thousand
shares)
Effect of employee share bonus
Weightier-average number of ordinary shares (in
thousands) (after adjustment of potential diluted
ordinary shares)

2019
2018
$
28,263,082
24,369,534
134,140
134,140
$
210.70
181.67
$
28,263,082
24,369,534
134,140
134,140
1,228
1,212
135,368
135,352
$
208.79
180.05

(Continued)

-190-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(s) Revenue from contracts with customers

Disaggregation of revenue

Primary geographical markets China Japan Korea Other Major products Optical lens	2019 2018 $ 38,308,300 27,081,768 7,462,276 8,599,298 7,048,424 7,234,368 5,862,535 4,263,186 $ 58,681,535 47,178,620 $ 58,681,535 47,178,620

(t) Employee compensation and directors’ and supervisors’ remuneration

(u) Non-operating income and expenses

(i) Other income

The details of other income for the years 2019 and 2018 were as follows:

Interest income－bank deposits Rent income	2019 2018 $ 803,220 613,196 12,469 9,881 $ 815,689 623,077

(Continued)

-191-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(ii) Other gains and losses

The details of other gains and losses for the years 2019 and 2018 were as follows:

Foreign exchange gains (loss) Losses on disposals of property, plant and equipment Gains on financial assets at fair value through profit or loss Others	2019 2018 $ (1,788,793) 239,481 (3,050) (1,618) 9,352 13,652 178,322 123,444 $ (1,604,169) 374,959

(iii) Finance costs

The details of finance costs for the years 2019 and 2018 were as follows:

Interest expenses	2019 2018 $ 2,723 -

(v) Financial Instruments

(i) Credit risk

1) Credit risk exposure

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

2) Concentration of credit risk

To minimize credit risk, the Company periodically evaluates the Company’s financial positions and the possibility of collecting accounts receivable. Besides, the Company monitors and reviews the recoverable amount of its trade receivables to ensure the uncollectible amount are recognized appropriately as impairment loss. As of December 31, 2019 and 2018, 93% and 90%, respectively, of accounts receivable were derived from several major customers. Thus, the credit risk is significantly centralized.

3) Receivables securities

For credit risk exposure of notes and accounts receivable, please refer to note 6 (d). Other financial assets at amortized cost includes other receivables, refundable deposits and other financial assets. All of these financial assets are considered to have low risk, and thus, the impairment provision recognized during the period was limited to 12 months expected losses. Regarding how the financial instruments are considered to have low credit risk, please refer to note 4 (f). Other financial assets at amortized cost did not have impairment provision for the years ended December 31, 2019 and 2018.

(Continued)

-192-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

(ii) Liquidity risk

The following table shows the contractual maturities of financial liabilities, without the impact of netting agreements.

December 31, 2019 Non-derivative financial liabilities Short-term borrowings Accounts and notes payable (including related parties) Other payables (including related parties) Lease liabilities - current and non- current Guarantee deposits received December 31, 2018 Non-derivative financial liabilities Short-term borrowings Accounts and notes payable (including related parties) Other payables (including related parties) Guarantee deposits received	Carrying amount $ 218,868 2,279,582 2,801,174 204,360 4,496 $ 5,508,480 $ 552,868 2,363,656 2,967,286 4,473 $ 5,888,283	Contractual cash flows 218,868 2,279,582 2,801,174 210,507 4,496 5,514,627 552,868 2,363,656 2,967,286 4,473 5,888,283	Within a year Over 1 year 218,868 - 2,279,582 - 2,801,174 - 42,037 168,470 - 4,496 5,341,661 172,966 552,868 - 2,363,656 - 2,967,286 - - 4,473 5,883,810 4,473

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

(iii) Currency risk

1) Exposure to foreign currency risk

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

F inancial Assets Monetary items USD JPY CNY	December 31, 2019 Foreign Currency Exchange Rates New Taiwan Dollars $ 931,122 29.9800 27,915,027 2,847,531 0.2760 785,919 5,724,038 4.3050 24,641,985	December 31, 2019 Foreign Currency Exchange Rates New Taiwan Dollars $ 931,122 29.9800 27,915,027 2,847,531 0.2760 785,919 5,724,038 4.3050 24,641,985	December 31, 2018	December 31, 2018
	Foreign Currency $ 931,122 2,847,531 5,724,038	Exchange Rates 29.9800 0.2760 4.3050	Foreign Currency 569,680 4,074,162 2,962,785	Exchange Rates New Taiwan Dollars 30.7150 17,497,713 0.2782 1,133,432 4.4720 13,249,577

(Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

F inancial Liabilities M onetary items USD JPY	December 31, 2019 Foreign Currency Exchange Rates New Taiwan Dollars 63,590 29.9800 1,906,417 3,073,999 0.2760 848,424	December 31, 2019 Foreign Currency Exchange Rates New Taiwan Dollars 63,590 29.9800 1,906,417 3,073,999 0.2760 848,424	December 31, 2018	December 31, 2018
	Foreign Currency 63,590 3,073,999	Exchange Rates 29.9800 0.2760	Foreign Currency 62,766 3,502,869	Exchange Rates New Taiwan Dollars 30.7150 1,927,843 0.2782 974,498

2) Sensitivity analysis

The Company’ s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts and other receivables, and accounts and other payables that are denominated in foreign currency. A strengthening (weakening) 1% of the TWD against the USD, JPY, and CNY as of December 31, 2019 and 2018 would have increased (decreased) the net profit after tax by $404,705 thousand and $231,827 thousand, respectively. The analysis assumes that all other variables remain constant and ignores any impact of forecasted sales and purchases. The analysis is performed on the same basis for both periods.

3) Foreign exchange gain and loss on monetary items

Since the Company has many kinds of functional currency, the information on foreign exchange gain (loss) on monetary items is disclosed by total amount. For the years 2019 and 2018, the foreign exchange gain (loss) (including realized and unrealized portions) amounted to $(1,788,793) thousand and $239,481 thousand, respectively.

(iv) Interest rate analysis

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

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

If the interest rate increases/decreases by 1%, with all other variable factors that remaining constant, the Company’s net income would have decreased/increased by $1,751 thousand and $4,423 thousand for the years ended December 31, 2019 and 2018, respectively. This is mainly due to the Company’s borrowings in variable rates.

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(v) Other market price risk

For the years ended December 31, 2019 and 2018, the sensitivity analysis for the changes in the securities price at the reporting date were performed using the same basis for the profit and loss with all other variable factors remaining constant as illustrated below:

Prices of securities at the reporting date Increasing1% Decreasing1%	For theyears ended December 31, 2019 2018 Other comprehensive income after tax Net income Other comprehensive income after tax Net income $ 176 70,679 234 12,918 $ (176) (70,679) (234) (12,918)

(vi) Fair value of financial instruments
1) Categories and fair value of financial instruments

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

The Company uses observable market data to evaluate its assets and liabilities when it is possible. The different levels have been defined as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the assets or liability that are not based on observable market data (unobservable inputs).

(Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

	December 31, 2019	December 31, 2019	December 31, 2019
Book Value		Fair Value
	Level 1 7,067,853 17,609 - - - - - 7,085,462 - - - - - -	Level 2 - - - - - - - - - - - - - -	Level 3 Total - 7,067,853 - 17,609 - - - - - - - - - - - 7,085,462 - - - - - - - - - - - -

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

	December 31, 2019	December 31, 2019	December 31, 2019
Book Value		Fair Value
	Level 1 1,291,809 23,389 - - - - - 1,315,198 - - - - -	Level 2 - - - - - - - - - - - - -	Level 3 Total - 1,291,809 - 23,389 - - - - - - - - - - - 1,315,198 - - - - - - - - - -

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

The Company estimates its financial instruments, that are not measured at fair value, by methods and assumption as follows:

(Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

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

Non-derivative financial instruments

The fair value of the listed common shares and funds held by the Company are determined by reference to the market quotation.

4) Transfer between Level 1 and Level 2

There were no transfers from one level to another level in 2019 and 2018.

(w) Financial risk management

(i) Overview

The Company is exposed to the following risks from its financial instruments:

1) Credit risk
2) Liquidity risk
3) Market risk

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(ii) Structure of risk management

The Company’ s finance management department provides business services for the overall internal department. It sets the objectives, policies and processes for managing the risk and the methods used to measure the risk arising from both the domestic and international financial market operations. The Company minimizes the risk exposure through derivative financial instruments. The Board of Directors regulates the use of derivative financial instruments in accordance with the Company’ s policy on risks arising from financial instruments such as currency risk, interest rate risk, credit risk, the use of derivative and non-derivative financial instruments, and the investments of excess liquidity. The internal auditors of the Company continue to review the amount of the risk exposure in accordance with the Company’s policies and the risk management's policies and procedures. The Company has no transactions in financial instruments (including derivative financial instruments) for the purpose of speculation.

(iii) Credit risk

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

1) Accounts receivable and other receivables

The Company's customers is significantly concentrated in a few customers, In order to reduce credit risk, the Company continuously evaluates the financial status of its major customers and their condition, and also regularly assesses the possibility of receivables recovery.

The Company did not have any collateral or other credit enhancement to avoid credit risk of the financial assets.

The Company has losses allowance for bad debts to reflect the estimated losses of its accounts receivable, other receivables and investments. The main components of the allowance account contain specific losses associated with individual major risks. The component, and the component of the combined loss established for the loss of a similar group of assets, has occurred but not yet identified. The loss allowance account is based on the occurring risk of a default and the rate of expected credit loss.

2) Investments

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

3) Guarantees

At December 31, 2019 and 2018, no other guarantees were outstanding.

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(iv) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it always has sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’ s reputation.

(v) Market risk

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

1) Currency risk

The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Company’s entities, primarily the New Taiwan Dollars (NTD). The currencies used in these transactions are the NTD, USD, CNY and JPY.

2) Interest rate risk

Please refer to note on the liquidity risk for interest rate risk of financial assets and financial liabilities.

3) Other market price risk

Please refer to note 6(v) for the sensitivity analysis of equity price risk.

(x) Capital management

The Company must maintain sufficient capital to establish and expand production capacity and equipment. Because the optical lens industry is highly subject to fluctuations in the booming cycle; the capital management of the Company is to ensure that it has sufficient and necessary financial resources to support its working capital requirements, capital expenditures, research and development activities, dividends and other business needs in the next 12 months.

(y) Investing and financing activities not affecting current cash flow

The Company’ s investing and financing activities which did not affect the current cash flow in the years ended December 31, 2019 and 2018, were as follows:

1) To acquire construction and equipment under finance lease.
2) Acquisition of right-of-use assets through lease, please refer to note 6(i).

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

Reconciliation of liabilities arising from financing activities were as follows:

Short-term borrowings lease liabilities - current and non-current Guarantee deposits received Total liabilities from financing activities Short-term borrowings Guarantee deposits received Total liabilities from financing activities	January 1,2019 $ 552,868 90,364 4,473 $ 647,705 January 1,2018 $ 395,774 3,179 $ 398,953	Cash flows		Non-cash changes Foreign exchange movement Acquisition December 31,2019 (15,901) - 218,868 - 153,129 204,360 - - 4,496 (15,901) 153,129 427,724 Non-cash changes Foreign exchange movement December 31,2018 20,094 552,868 - 4,473 20,094 557,341
				Foreign exchange movement
				(15,901) - - (15,901) Non-cash changes
		Cash flows
				Foreign exchange movement
		137,000 1,294		20,094 - 20,094
		138,294

(7) Related-party transactions

(a) For details of subsidiaries of the Company, please refer to note 4 (c) of the year 2019 consolidated financial report.

(b) Names and relationship with related parties

The followings are entities that have had transactions with related party during the periods covered in the parent Company only financial statements.

Name of related party	Relationship with the Company
Amtai International Ltd. (Amtai)	Subsidiaries
Astro International Ltd. (Astro)	Subsidiaries
Largan Digital Co., Ltd. (Largan Digital)	Subsidiaries
Largan Medical Co., Ltd. (Largan Medical)	Subsidiaries
Suzhou Largan Co., Ltd. (Suzhou Largan)	Subsidiaries
Largan (Dongguan) Optronic Ltd.	Subsidiaries
(Largan Dongguan)
Largan Health Technology Inc. (LHT)	Subsidiaries
Largan Health Technology Co., Ltd.	Subsidiaries
(Largan Health)
Largan Health AI-Tech Co., Ltd.	Subsidiaries
(Largan Health AI-Tech)

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(c) Significant related-party transactions

(i) Sale of goods to related parties

The amounts of significant sales and receivables by the Company to its related parties were as follows:

Subsidiaries-Largan Dongguan Subsidiaries-Amtai Subsidiaries-Suzhou Largan Subsidiaries-Others	Sale Receivables from related parties 2019 2018 December 31, 2019 December 31, 2018 $ 32,383,282 13,052,869 9,550,805 6,650,134 11,245,101 11,950,301 2,056,436 1,054,264 - 9,881,631 - - 68,794 137,676 7,682 12,596 $ 43,697,177 35,022,477 11,614,923 7,716,994
	2019 $ 32,383,282 11,245,101 - 68,794 $ 43,697,177

The sales price of the Company to its related parties is not comparable to other sales due to the differences in the sales of the goods. During 2019 and 2018, the collection terms for sales to related parties were month-end 30 to 120 days, which were not materially different from those of the third parties.

(ii) Purchases from related parties

1) The amounts of significant purchases and payables by the Company from its related parties were as follows:

Subsidiaries-Amtai Subsidiaries-Other	Purchases 2019 2018 $ 1,882,446 2,692,182 203,362 116,793 $ 2,085,808 2,808,975	Payables to related parties
	2019 $ 1,882,446 203,362 $ 2,085,808	December 31, 2019 December 31, 2018 845,870 695,917 4,519 12,501 850,389 708,418

The purchases price of the Company to its related parties is not comparable to other purchases due to the differences in the purchases of the goods. During 2019 and 2018, the payment terms for purchases to related parties were month-end 30 to 120 days, which were not materially different from those of the third parties.

2) The disposed amount of both the purchased finished goods from related parties, and the purchased part of raw materials components from the Company, were included in financial statements as follows:

Subsidiaries	2019 2018
	$ 973,850 1,405,291

(Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

(iii) Provides and purchase technical services to related parties

During 2019 and 2018, the Company's income from providing technical services to its related parties were as follows (classified under the other gains):

Subsidiaries-Amtai Subsidiaries-Largan Medical	2019 2018
	$ 26,546 27,311 33,466 49,865 $ 60,012 77,176

During 2019 and 2018, the Company's expense from technical services from its related parties were as follows (classified under the other expense):

Subsidiaries-Largan Digital	2019 2018
	$ 3,279 3,168

(iv) Purchases and disposals of property, plant and equipment
1) During 2019 and 2018, the Company's disposals of its equipment to its related parties are summarized as follows:

	2019	2019			Carrying amount
Carrying amount	Disposal price		Gain from disposal
$ 1,277 266 $ 1,543		1,371 284		94 18	68 38
		1,655		112	106

2) During 2019 and 2018, the Company's purchase of its equipment from its related parties are summarized as follows:

Subsidiaries

	2019	2018
$	103,941	103,696

3) During 2019 and 2018, the Company assisted its related parties to purchase other facilities as follows:

Subsidiaries-Amtai Subsidiaries-Largan Digital Subsidiaries-Largan Medical Subsidiaries-Suzhou Largan Subsidiaries-Largan Dongguan	2019	2018
	$ 889 31,109 56,046 - - $ 88,044	2,720 1,048 7,654 1,038 16 12,476

(Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

(v) Rental income

During 2019 and 2018, the Company's rental income on offices to the subsidiaries are summarized as follows:

Subsidiaries-Largan Digital Subsidiaries-Largan Medical	2019	2018
	$ 3,904 4,560 $ 8,464	2,694 3,415 6,109

(vi) Other

Subsidiaries-Astro Subsidiaries-Amtai Subsidiaries-Largan Digital Subsidiaries-Largan Dongguan Subsidiaries-Other	December 31, 2019 December 31, 2018 other receivables from related parties other payables to related parties other receivables from related parties other payables to related parties $ 3,957,360 - - - 50,427 3,177 52,592 241 2,044 14,496 1,961 472 - 13,264 - 58 5,638 86 13,681 1,758 $ 4,015,469 31,023 68,234 2,529	December 31, 2019 December 31, 2018 other receivables from related parties other payables to related parties other receivables from related parties other payables to related parties $ 3,957,360 - - - 50,427 3,177 52,592 241 2,044 14,496 1,961 472 - 13,264 - 58 5,638 86 13,681 1,758 $ 4,015,469 31,023 68,234 2,529	December 31, 2019 December 31, 2018 other receivables from related parties other payables to related parties other receivables from related parties other payables to related parties $ 3,957,360 - - - 50,427 3,177 52,592 241 2,044 14,496 1,961 472 - 13,264 - 58 5,638 86 13,681 1,758 $ 4,015,469 31,023 68,234 2,529	December 31, 2019 December 31, 2018 other receivables from related parties other payables to related parties other receivables from related parties other payables to related parties $ 3,957,360 - - - 50,427 3,177 52,592 241 2,044 14,496 1,961 472 - 13,264 - 58 5,638 86 13,681 1,758 $ 4,015,469 31,023 68,234 2,529
		other receivables from related parties
		$ 3,957,360 50,427 2,044 - 5,638 $ 4,015,469	- 3,177 14,496 13,264 86 31,023	- - 52,592 241 1,961 472 - 58 13,681 1,758 68,234 2,529

(d) Key management personnel compensation

Key management personnel compensation comprised the following:

Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payments	2019 2018 $ 264,243 247,236 270 338 - - - - - - $ 264,513 247,574

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(8) Pledged assets:

The carrying values of pledged assets were as follow:

Pledged assets Time deposit (classified under other current assets) Time deposit (classified under other non-current assets) Time deposit (classified under other non-current assets)	Object Customs office deposit Litigation deposit Completion deposit	December 31, 2019 December 31, 2018 $ 9,000 6,000 625,733 1,021,711 317,708 315,296 $ 952,441 1,343,007

(9) Commitments and contingencies

(i) As at December 31, 2019 and 2018, the Company’s outstanding letters of credit were $33,575 thousand and $40,317, respectively.
(ii) As at December 31, 2019 and 2018, the Company’s outstanding purchase commitments for construction in progress, property and plant were $2,106,300 thousand and $2,106,300 thousand, respectively； The amount of construction that has not yet occurred were $113,967 thousand and $261,638 thousand, respectively.
(iii) As of December31, 2019, the Company acquired property and plant to meet the needs of future operations amounting to $983,368 thousand; The amount of payable was $49,168 thousand. (2018: none)

(10) Losses Due to Major Disasters: None

(11) Subsequent Events:

The outbreak of Coronavirus disease (COVID-19) in early 2020 caused uncertainty in the operating environment of the Company in China. The Company has expanded production and inventory in other regions as a response, but because the relevant information is still unclear, it is impossible to reasonably anticipate the amount of impact to operating results and financial situation, the Company will continue to pay attention to the development of the incident for immediate assessment.

(Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

(12) Other:

The followings are the summary statement of employee benefits, depreciation, depletion, and amortization expenses by function in the current period:

By function By item	2019	2019	2019	2018	2018	2018
	Operating cost	Operating expenses	Total	Operating cost	Operating expenses	Total
Employee benefits
Salary	5,362,320	3,629,867	8,992,187	4,755,201	3,150,512	7,905,713
Labor and health insurance	353,850	113,892	467,742	314,333	100,010	414,343
Pension	127,208	48,241	175,449	118,679	42,783	161,462
Remuneration directors	-	273,253	273,253	-	230,751	230,751
Others	150,601	33,401	184,002	140,068	30,853	170,921
Depreciation	3,425,387	254,519	3,679,906	2,581,604	184,703	2,766,307
Amortization	22,374	49,804	72,178	21,515	39,961	61,476

Additional information of the number of employees and employee benefits of the Company in 2019 and 2018:

The number of employees The number of directors excluding the employees The average of employees benefits The average of salary The average of salary adjustment

(13) Other disclosures:

(a) Information on significant transactions:

The following is the information on significant transactions, required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, of the Company

(i) Loans to other parties: None
(ii) Guarantees and endorsements for other parties: None

(Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

(iii) Securities held as of December 31, 2019 (excluding those investments in subsidiaries, associates and joint ventures):

(In Thousands of New Taiwan Dollars)

Name of holder	Category and name of security	Relationship with company	Account title	Ending balance	Ending balance	Ending balance	Ending balance
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
The Company	Stock -Micro Win Tech Inc.	-	Non-current financial assets designated as at fair value through profit or loss	1.25	-	% 20.66	-
The Company	Stock -Kintech Technology Co., Ltd.	-	Non-current financial assets designated as at fair value through profit or loss	570	-	% 0.33	-
The Company	Stock-AETAS TECHNOLOGY INCORPORATED	-	Non-current financial assets designated as at fair value through profit or loss	125	-	% 0.25	-
The Company	Open-end fund- Franklin Templeton Sinoam Money Market Fund	-	Current financial assets mandatorily measured fair value throughprofit or loss	59,770	620,358	-	620,358
The Company	Open-end fund- Capital Money Market Fund	-	Current financial assets mandatorily measured fair value throughprofit or loss	30,904	500,550	-	500,550
The Company	Open-end fund- Yuanta De-Li Money Market Fund	-	Current financial assets mandatorily measured fair value throughprofit or loss	30,565	500,345	-	500,345
The Company.	Open-end fund- Jih Sun Money Market Fund	-	Current financial assets mandatorily measured fair value throughprofit or loss	59,866	890,666	-	890,666
The Company	Open-end fund- CTBC Hwa-win Money Market Fund	-	Current financial assets mandatorily measured fair value throughprofit or loss	36,159	400,004	-	400,004
The Company	Open-end fund- FSITC Taiwan Money Market Fund	-	Current financial assets mandatorily measured fair value throughprofit or loss	32,583	500,570	-	500,570
The Company	Open-end fund-FSITC Money Market Fund	-	Current financial assets mandatorily measured fair value throughprofit or loss	2,626	470,265	-	470,265
The Company	Open-end fund- Eastspring Investments Well Pool Money Market Fund	-	Current financial assets mandatorily measured fair value through profit or loss	41,753	570,194	-	570,194
The Company	Open-end fund- Prudential Financial Money Market Fund	-	Current financial assets mandatorily measured fair value throughprofit or loss	17,257	274,074	-	274,074
The Company	Open-end fund-Union Money Market Fund	-	Current financial assets mandatorily measured fair value throughprofit or loss	45,287	600,243	-	600,243
The Company	Open-end fund- TCB Taiwan Money Market Fund	-	Current financial assets mandatorily measured fair value throughprofit or loss	55,360	564,576	-	564,576
The Company	Open-end fund- UPAMC James Bond Money Market Fund	-	Current financial assets mandatorily measured fair value throughprofit or loss	34,593	580,405	-	580,405
The Company	Open-end fund- Taishin 1699 Money Market Fund	-	Current financial assets mandatorily measured fair value throughprofit or loss	43,845	595,603	-	595,603
The Company	Stock－AVISION INC.	-	Current Equity Investments at fair value through other comprehensive income	4,253	17,609	-	17,609

(Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

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

Name of company	Category and name of security	Account name	Name of counter- party	Relationship with the company	BeginningBalance	BeginningBalance	Purchases	Purchases	Sales	Sales	Sales	Sales	Ending Balance	Ending Balance
					Shares (thousands)	Amount	Shares (thousands)	Amount	Shares (thousadns)	Price	Cost	Gain (loss) on disposal	Shares (thousands)	Amount
The Company	Open-end fund- Franklin Templeton Sinoam Money Market Fund	Current financial assets mandatorily measured fair value through profit or loss	-	-	38,815	400,605	79,099	820,000	58,144	601,781	600,000	1,781	59,770	620,358
The Company	Open-end fund- Capital money market fund	Current financial assets mandatorily measured fair value through profit or loss	-	-	-	-	30,904	500,000	-	-	-	-	30,904	500,550
The Company	Open-end fund- Yuanta Wan Tai Money Market Fund	Current financial assets mandatorily measured fair value through profit or loss	-	-	23,144	350,067	6,580	100,000	29,724	450,831	450,000	831	-	-
The Company	Open-end fund- Yuanta De- Li Money Market Fund	Current financial assets mandatorily measured fair value through profit or loss	-	-	-	-	30,565	500,000	-	-	-	-	30,565	500,345
The Company	Open-end fund- Jih Sun Money Market Fund	Current financial assets mandatorily measured fair value through profit or loss	-	-	4,799	71,000	89,537	1,330,000	34,470	511,306	511,000	306	59,866	890,666
The Company	Open-end fund- CTBC Hwa- win Money Market Fund	Current financial assets mandatorily measured fair value through profit or loss	-	-	-	-	36,159	400,000	-	-	-	-	36,159	400,004
The Company	Open-end fund- FSITC Taiwan Money Market Fund	Current financial assets mandatorily measured fair value through profit or loss	-	-	-	-	84,739	1,298,000	52,156	798,784	798,000	784	32,583	500,570
The Company	Open-end fund- FSITC Money Market Fund	Current financial assets mandatorily measured fair value through profit or loss	-	-	-	-	2,626	470,000	-	-	-	-	2,626	470,265
The Company	Open-end fund- Eastspring Investments Well Pool Money Market Fund	Current financial assets mandatorily measured fair value through profit or loss	-	-	-	-	41,753	570,000	-	-	-	-	41,753	570,194
The Company	Open-end fund- Prudential Financial Money Market Fund	Current financial assets mandatorily measured fair value through profit or loss	-	-	-	-	17,257	274,000	-	-	-	-	17,257	274,074

(Continued)

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LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

Name of company	Category and name of security	Account name	Name of counter- party	Relationship with the company	BeginningBalance	BeginningBalance	Purchases	Purchases	Sales	Sales	Sales	Sales	Ending Balance	Ending Balance
					Shares (thousands)	Amount	Shares (thousands)	Amount	Shares (thousadns)	Price	Cost	Gain (loss) on disposal	Shares (thousands)	Amount
The Company	Open-end fund- Union Money Market Fund	Current financial assets mandatorily measured fair value through profit or loss	-	-	-	-	45,287	600,000	-	-	-	-	45,287	600,243
The Company	Open-end fund- TCB Taiwan Money Market Fund	Current financial assets mandatorily measured fair value through profit or loss	-	-	26,620	270,075	55,360	564,000	26,620	270,652	270,000	652	55,360	564,576
The Company	Open-end fund- UPAMC James Bond Money Market Fund	Current financial assets mandatorily measured fair value through profit or loss	-	-	-	-	91,378	1,530,000	56,785	950,140	950,000	140	34,593	580,405
The Company	Open-end fund- Taishin 1699 Money Market Fund	Current financial assets mandatorily measured fair value through profit or loss	-	-	14,811	200,062	88,130	1,195,000	59,096	800,814	800,000	814	43,845	595,603

(v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock:

Name of company	Name of property	Transaction date	Transaction amount	Status of payment	Counter-party	Relationship with the Company	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	References for determining price	Purpose of acquisition and current condition	Others
							Owner	Relationship with the Company	Date of transfer	Amount
The Company	Land and buildings	2019.1	1,823,590	As of December 31, 2019, $1,823,590 thousand has been paid	LEADWELL CNC MACHINES MFG., CORP	. None				-	Professional Appraisal Report	Future Operational Needs	None
The Company	Land and buildings	2019.1	938,368	As of December 31, 2019, $934,200 thousand has been paid	HOLYCELL ENTERPRISES CO., LTD.	None				-	Professional Appraisal Report	Future Operational Needs	None

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

(vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock:

Name of company	Related party	Nature of relationship	Transaction details	Transaction details	Transaction details	Transaction details	Transactions with terms different from others	Transactions with terms different from others	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)
			Purchase/Sale	Amount	Percentage of total purchases/sales	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
The Company	Amtai International Ltd.	The Company's subsidiary	Purchases	1,883,446	% 24	120Days	-	-	(845,870)	(37)%
The Company	Amtai International Ltd.	The Company's subsidiary	Sale	(11,245,101)	% (19)	30Days	-	-	2,056,436	14%
The Company	Largan Medical Co. Ltd.	The Company's subsidiary	Purchases	103,857	% 1	30Days	-	-	(4,519)	-%
The Company	Largan (Dongguan) Optronic Ltd.	The Company's subsidiary	Sale	(32,383,282)	% (54)	120Days	-	-	9,550,806	66%

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

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

Name of company	Related-party	Nature of relationship	Ending balance (Note2)	Turnover rate	Overdue	Overdue	Amounts received in subsequent period	Loss allowance
					Amount	Action taken
The Company	Amtai International Ltd.	The Company's subsidiary	2,106,863	7.23	- N	one	1,143,172 (Note1)	-
The Company	Largan (Dongguan) Optronic Ltd.	The Company's subsidiary	9,550,806	4.00	- N	one	3,677,629 (Note1)	-

Note1: Until February 7, 2020.

Note2: Including other receivables.

(ix) Trading in derivative instruments: None

(b) Information on investees:

The following is the information on investees (excluding information on investees in Mainland China):

(In Thousands of New Taiwan Dollars)

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of December 31, 2019	Balance as of December 31, 2019	Balance as of December 31, 2019	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2019	December 31, 2018	Shares (thousands)	Percentage of ownership	Carrying value
The Company	Largan Digital Co., Ltd.	Taichung, Taiwan	Manufacturing of image capture device、image reader、camera and player etc.	411,359	411,359	26,636	% 49.37	192,662	21,299	31,697	The Company's subsidiary
The Company	Largan (Hong Kong) Ltd.	Hong Kong	Investment	658,555	658,555	31,100	% 100	342,121	8,980	8,980	The Company's subsidiary
The Company	Astro International Ltd.	Samoa	Investment	247,104	247,104	7,600	% 100	19,731,445	1,737,319	1,736,549	The Company's subsidiary
The Company	Ba Fang Co., Ltd.	Taichung, Taiwan	Investment、 building construction etc.	43,000	28,000	4,300	% 100	36,502	(1,278)	(1,278)	The Company's subsidiary
The Company	Largan Health AI-Tech Co., Ltd.	Taipei, Taiwan	Sales of medical equipment	8,800	8,800	880	% 88	6,638	(2,457)	(2,162)	The Company's subsidiary
Largan Digital Co., Ltd.	Largan Medical Co. Ltd.	Taichung, Taiwan	Manufacturing of Optical Instruments、 Medical and Photo instruments sale etc.	428,252	428,252	40,497	% 40.5	291,655	57,981	23,482	The Company's subsidiary
Largan Digital Co., Ltd.	Alpha Holding Inc.	Samoa	Investment	118,415	118,415	3,700	% 100	33,109	(3,247)	(3,247)	The Company's subsidiary
Astro International Ltd.	Net International Trading Ltd.	British Virgin Islands	Investment	756,599	756,599	24,300	% 100	6,742,008	697,405	697,405	The Company's subsidiary
Astro International Ltd.	Amtai International Ltd.	Samoa	Manufacturing of Optical part etc.	50,600	50,600	1,500	% 100	12,515,501	948,980	956,688	The Company's subsidiary
Astro International Ltd.	Largan Health Technology Inc.	Samoa	Investment	110,898	110,898	1,476	% 12	30,212	(26,914)	(3,230)	The Company's subsidiary
Ba Fang Co., Ltd.	Fang Yuan Co., Ltd.	Taichung, Taiwan	Investment	29,800	14,800	2,980	% 100	23,460	(1,232)	(1,232)	The Company's subsidiary
Largan Medical Co. Ltd.	Beta International Ltd.	Samoa	investment	120,334	120,334	3,700	% 100	73,389	(8,630)	(8,630)	The Company's subsidiary
Alpha Holding Inc.	Largan Health Technology Inc.	Samoa	investment	110,898	110,898	1,476	% 12	30,212	(26,914)	(3,230)	The Company's subsidiary
Beta International Ltd.	Largan Health Technology Inc.	Samoa	investment	110,898	110,898	3,936	% 32	70,492	(26,914)	(8,612)	The Company's subsidiary
Largan Health Technology Inc.	Dynadx Corporation	U.S.A	Development of the software	11,925	10,629	11,007	% 100	5,722	(1,995)	(1,995)	The Company's subsidiary
Largan Health Technology Inc.	Largan Health Technology Co., Ltd.	Taichung, Taiwan	Sales of medical equipment	45,797	40,797	801	% 100	5,714	(6,254)	(6,254)	The Company's subsidiary

(Continued)

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LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(c) Information on investment in mainland China:

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

(In Thousands of New Taiwan Dollars)

Name of investee	Main businesses and products	Total amount of capital surplus	Method of investment	Accumulated outflow of investment from Taiwan as of January 1, 2019	Investment flows	Investment flows	Accumulated outflow of investment from Taiwan as of December 31, 2019	Net income (losses) of the investee	Percentage of ownership	Investment income (losses)	Book value	Accumulated remittance of earnings in currentperiod
					Outflow	Inflow
LARGAN (DONGGU AN) OPTR ONIC LTD.	Production and sales of camera lenses, scanner lens optoelectronic devices, viewing windows, digital electronic cameras	HK$ 178,076	Note1(a)	HK$ 85,986 US$ 7,474	-	-	HK$ 85,986 US$ 7,474	RMB$ 202,949	100%	NT$ 900,192	NT$ 3,434,325	-
Suzhou Largan Co., Ltd. (Note 2)	Production of digital cameras and key components, optoelectronic devices	-	Note1(a)	US$ 5,000	-	-	US$ 5,000	RMB$ 1,321	-%	NT$ 6,061	NT$ -	US$ 5,206
Nanjing Largan Health Technology Co., Ltd.	Health management, computer and medical device technology development, production and sales of medical devices	US$ 3,000	Note1(b)	-	-	-	-	RMB$ (3,056)	24.32%	NT$ (3,326)	NT$ 7,619	-
NEO (Shanghai) Medical Technology Co., Ltd.	Technical development and technical services in the field of medical device technology	RMB$20,000	Note1(c)	-	-	-	-	RMB$ (382)	9.80%	NT$ (168)	NT$ 7,868	-

(ii) Limitation on investment in Mainland China:

td. field of medical device technology itation on investment in Mainland China:
Accumulated Investment in Mainland China as of December 31, 2019	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment
NT$704,931 (HK$85,986 and US$12,474)	NT$862,206 (HK$85,986 and US$17,720)	NT$75,836,347

Note 1(a): Indirectly investment in Mainland China through an existing company registered in the third region.

Note 1(b): An existing company registered in the third region directly invests in Mainland China.

Note 1(c): Directly investment in Mainland China through investment company which uses the equity method.

Note 2: As of December 31, 2019, Suzhou Largan liquidation process was completed. However, the cumulative investment amount remitted from Taiwan has not yet been repatriated.

(iii) Significant transactions:

(14) Segment information

Please refer to the 2019 consolidated financial statement.

(Continued)

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LARGAN PRECISION CO., LTD.

Statement of cash on hand and demand

deposits

December 31, 2019

(Expressed in Thousands of NTD; Expressed in Dollars of Foreign Currencies)

Items
Cash
Cash in banks
Total

Description
Amount
Cash
$ 81
Cash on foreign Currency
432
Subtotal
513
Demand deposits
3,745,821
Demand deposit on foreign Currency
(USD37,492,898.31×29.98
GBP42,484.80×39.36
JPY2,727,334,787.33×0.276
EUR3,110,690.39×33.59
HKD2,094.55×3.849
CNY74,475,099.39 ×4.305
CHF3,628.99×30.925)
2,303,677
Time deposits
30,471,150
Time deposits on foreign currency
(USD390,218,000×29.98
CNY3,419,000,000.00×4.305)
26,417,531
Subtotal
62,938,179
$ 62,938,692

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LARGAN PRECISION CO., LTD.

Statement of Current Financial Assets at Fair Value through Profit or Loss

December 31, 2019

(Expressed in Thousands of NTD; Expressed in Dollars of Unit cost and price)

Names of financial investment	Description Open-end fund Open-end fund Open-end fund Open-end fund Open-end fund Open-end fund Open-end fund Open-end fund Open-end fund Open-end fund Open-end fund Open-end fund Open-end fund	Unit in thousands 59,770 55,360 43,845 59,866 30,904 30,565 36,159 32,583 2,626 41,753 17,257 45,287 34,593	Acquisition $ 620,000 564,000 595,000 890,000 500,000 500,000 400,000 500,000 470,000 570,000 274,000 600,000 580,000 $ 7,063,000	Fair Value
				Unit price Total amount 10.38 620,358 10.20 564,576 13.58 595,603 14.88 890,666 16.20 500,550 16.37 500,345 11.06 400,004 15.36 500,570 179.08 470,265 13.66 570,194 15.88 274,074 13.25 600,243 16.78 580,405 7,067,853
Franklin Templeton Sinoam Money Market Fund TCB Taiwan Money Market Fund Taishen 1699 Money Market Fund Jih Sun Money Market Fund Capital Money Market Fund Yuanta De-Li Money Market Fund CTBC Hwa-win Money Market Fund FSITC Taiwan Money Market Fund FSITC Money Market Fund Eastspring Investments Well Pool Money Market Found Prudential Financial Money Market Fund Union Money Market Fund UPAMC James Bond Money Market Fund

Statement of Current Financial Assets at Fair Value through Comprehensive Income

Equity Securities AVISION

Stock

40,280 4.14 17,609

4,253

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LARGAN PRECISION CO., LTD.

Statement of Notes and Accounts

Receivable

December 31, 2019

(Expressed in Thousands of NTD)

Client No. Accounts receivable-unrelated parties 653021 643006 633036 643007 653019 643010 Other (Note) Total Impairment loss on allowance Net amount	Description Amount Operating $ 765,349 Operating 646,623 Operating 591,196 Operating 231,041 Operating 204,754 Operating 156,268 Operating 347,709 2,942,940 (2,250) $ 2,940,690

Note: The amount of each item in others does not exceed 5% of the account balance.

Statement of Other Receivables

Items Tax receivables Interest receivables Others (Note) Total	Description Amount Income tax refund of exercise tax $ 143,665 Income interest of cash in bank 102,598 47,678 $ 293,941

Note: The amount of each item in others does not exceed 5% of the account balance.

-214-

LARGAN PRECISION CO., LTD.

Statement of Inventories

December 31, 2019

(Expressed in Thousands of NTD)

Item Finish goods Work in progress Raw materials Loss on allowance for doubtful accounts Total	Amount Cost Market Value Note $ 2,531,701 6,715,662 Market value of net realizable value 358,058 1,003,423 Market value of net realizable value 934,122 910,266 Market value of net realizable value 3,823,881 8,629,351 (623,133) $ 3,200,748	Amount Cost Market Value Note $ 2,531,701 6,715,662 Market value of net realizable value 358,058 1,003,423 Market value of net realizable value 934,122 910,266 Market value of net realizable value 3,823,881 8,629,351 (623,133) $ 3,200,748
	Cost $ 2,531,701 358,058 934,122 3,823,881 (623,133) $ 3,200,748

Statement of Other Current Assets

Items Other current assets	Description Amount Prepayment for purchases $ 227,397 Temporary payment 20,498 Others (Note) 17,393 $ 265,288

Note: The amount of each item in others does not exceed 5% of the account balance.

-215-

										Pledge of	collateral	None	None	None	None	None
											Amount	342,121	192,662	19,731,445	36,502	6,638	20,309,368
						Ending balance				Percentage	of ownership	100.00	49.37	100.00	100.00	88.00
											Shares	31,100	26,636	7,600	4,300	880
										Other	(Note)	-	19,200	346,943	-	-	366,143
Statement of Changes in Investments Accounted for Equity	Method	January 1, 2019 to December 31, 2019	(Expressed in Thousands of NTD)	Unrealized	Beginning balance Addition Decrease gains (losses) on		Amount of financial assets	exchange on measured at fair	translation of value through other	Percentage of Profit or loss foreign financial comprehensive	Names of Investee Shares ownership Amount Shares Amount Shares Amount of investment statement income	Largan (Hong Kong) Limited 31,100 100.00 341,593 - - - - 8,980 (8,452) -	Largan Digital Co., Ltd. 26,636 49.37 167,944 - - - (26,636) 31,697 457 -	Astro International Ltd. 7,600 100.00 29,566,165 - - - (11,592,875) 1,736,549 (306,033) (19,304)	Ba Fang Co., Ltd. 2,800 100.00 22,780 1,500 15,000 - - (1,278) - -	Largan Health Al-Tech Co., Ltd. 880 88.00 8,800 - - - - (2,162) - -	Total 30,107,282 15,000 (11,619,511) 1,773,786 (314,028) (19,304)	Note: The unrealized gain (loss) is refer to the downstream transactions and upstream transactions.

-216-

LARGAN PRECISION CO., LTD.

Statement of changes in Property, Plant, and Equipment

January 1, 2019 to December 31, 2019

(Expressed in Thousands of NTD)

Please refer to note 6 (h).

Statement of Other Non-current Assets

December 31, 2019

Items Refundable deposits Restricted cash in bank-non-current Restricted cash in bank-non-current Prepayment for equipment Prepayment for land and building Total	Description Amount Litigation deposit $ 625,733 Others (Note) 12,276 638,009 Bank account for repatriation of offshore fund 6,105,187 Completion deposit 317,708 Prepaid machine equipment 1,510,165 Prepaid land and building 16,955 $ 8,588,024

Note: The amount of each item in others does not exceed 5% of the account balance.

-217-

LARGAN PRECISION CO., LTD.

Statement of Bank Loan

December 31, 2019

(Expressed in Thousands of NTD)

Creditor	Type of loan Credit loan	Ending balance	Contract Period	Range of interest rate	Loan Commitment Collateral 1,300,000 None
Mega Bank		$ 218,868	Due within a year	0.95~0.96%

Statement of Notes and Accounts Payable

Vendor Name Notes payable-unrelated parties Accounts payable-unrelated parties 110185 110181 110059 100236 100896 Others (Note) Total	Description Amount non-operating $ 702 operating $ 488,353 operating 218,747 operating 149,567 operating 115,733 operating 75,471 operating 380,620 $ 1,428,491

Note: The amount of each item in others does not exceed 5% of the account balance.

-218-

LARGAN PRECISION CO., LTD.

Statement of Other Payables

December 31, 2019

(Expressed in Thousands of NTD)

Please refer to note 6 (p).

Statement of Other Non-current Liabilities

Items Other non-current liabilities	Description Amount Guarantee deposits received $ 4,496

-219-

LARGAN PRECISION CO., LTD.

Statement of Operating Income

For 2019

(Expressed in Thousands of NTD)

Items Lens Others (Note) Total	Quantity (unit in thousands) Amount 1,467,179 $ 58,248,071 433,464 $ 58,681,535

Note: The amount of each item in others does not exceed 10% of the account balance.

-220-

LARGAN PRECISION CO., LTD.

Statement of Operating Costs

For 2019

(Expressed in Thousands of NTD)

Items		Amount
Goods
Goods, beginning of year	$	-
Goods purchased		72,320
Goods, end of year		-
Cost of goods		72,320
Raw materials and supplies
Raw materials and supplies, beginning of year		807,863
Addition：Raw materials and supplies purchased		5,947,587
Raw materials and supplies surplus		999
Decrease：Raw materials and supplies, end of year		934,122
Sale of raw materials and supplies		3,190
Scrapped		1,643
Others		496,097
Raw materials and supplies used		5,321,397
Direct labor		1,971,931
Manufacturing expense		10,170,476
Manufacturing Cost		17,463,804
Addition：Work in progress, beginning of year		1,258,289
Decrease：Work in progress, end of year		358,058
Cost of finished goods		18,364,035
Addition：Finished goods, beginning of year		1,944,693
Finished goods purchased		920,548
Finished goods surplus		5,187
Other		62
Decrease：Finished goods, end of year		2,531,701
Scrapped		299,480
Other		95,082
Production and marketing costs		18,308,262
Processing cost		73,834
Sale of raw materials and supplies		3,190
Inventory surplus and shortage		(6,186)
Revenue from sale of scraps		(70,309)
Inventory scrap loss		301,123
Inventories related to profit or loss		(5)
Inventory written down		73,000
Operating costs	$	18,755,229

-221-

LARGAN PRECISION CO., LTD. Statement of Operating Expenses For 2019

(Expressed in Thousands of NTD)

Items Payroll Import and export expense Depreciation Consumable expense Others (note)	Selling expenses $ 217,491 65,970 384 - 60,456 $ 344,301	Administrative Expenses Research and development expenses 596,398 2,815,978 - - 63,068 191,067 - 482,495 581,030 269,956 1,240,496 3,759,496

Note: The amount of each item in others does not exceed 5% of the account balance.

6.6 Impact on the Company's financial status due to financial difficulties experienced by the Company and its affiliate companies in the most recent year and as of the publication date of this Annual Report: None.

-222-

7. Review and Analysis of Financial Position and Financial Performance, and Risk Management

7.1 Financial position analysis

7.1 Financial position analysis	7.1 Financial position analysis	7.1 Financial position analysis
			Unit: NT$thousands
Year	2019	2018	Difference
Item			Amount	Proportion of change (%)
Current assets	111,630,060	101,306,345	10,323,715	10.19
Long-term investment	229,512	209,445	20,067	9.58
Property, plant and equipment	32,573,230	27,850,051	4,723,179	16.96
Intangibleassets	101,741	80,566	21,175	26.28
Deferredincometax assets	478,473	402,872	75,601	18.77
Right-of-useassets	217,758	-	217,758	-
Other assets	8,590,824	2,799,145	5,791,679	206.91
Total assets	153,821,598	132,648,424	21,173,174	15.96
Current liabilities	27,150,157	24,930,979	2,219,178	8.90
Non-current liabilities	277,530	117,874	159,656	135.45
Total liabilities	27,427,687	25,048,853	2,378,834	9.50
Capitalstock	1,341,402	1,341,402	-	-
Capitalsurplus	1,558,058	1,557,011	1,047	0.07
Retained earnings	125,636,027	106,503,622	19,132,405	17.96
Otherequity	(2,141,576)	(1,802,464)	(339,112)	18.81
Equity attributable to owners of the parentcompany	126,393,911	107,599,571	18,794,340	17.47
1. The increase in intangible assets from the previous period was due to an increase in cost of computer software. 2. The increase in other assets from the previous period was due to an increase in restricted assets. 3. The increase in non-current liabilities from the previous period was due to an increase in lease liabilities.

7.2 Financial performance

7.2.1 Financial performance analysis

Unit: NT$ thousands

Year Item	2019	2018	Increase (decrease)	Proportion of change (%)
Operating revenue Operating costs Gross profit Operating expenses Operating profit Non-operating income (expenses) Net profit for the period before tax Minus: Income tax expenses Net income	60,745,008 18,823,588 41,940,620 5,441,283 36,499,337 79,518 36,578,855 8,315,773 28,263,082	49,952,158 15,594,576 34,351,475 4,739,535 29,611,940 1,583,931 31,195,871 6,826,337 24,369,534	10,792,850 3,229,012 7,589,145 701,748 6,887,397 (1,504,413) 5,382,984 1,489,436 3,893,548	21.61 20.71 22.09 14.81 23.26 (94.98) 17.26 21.82 15.98

Explanation of major variations: Gross Profit Gross profit increased from the previous year mainly due to an increase in revenue. Operating Profit Operating profit increased from the previous year mainly due to an increase in gross profit. Non-Operating Income

Non-operating income decreased from the previous year mainly due to an increase in foreign exchange loss.

2 23

7.3 Cash flow
7.3.1 Change in cash flow in the most recent fiscal year

Year			Proportion of change
	2019	2018
Item			(%)

Cash flow ratio	94.40%	126.72%	(25.51%)
Cash flow adequacyratio	189.77%	206.52%	(8.11%)
Cash flow reinvestment ratio	11.27%	17.60%	(35.97%)

Analysis:

Cash flow ratio: The decrease in cash flow ratio was mainly due to a decrease in net cash flow from operating activities.
Cash flow reinvestment ratio: The decrease in cash flow reinvestment ratio was mainly due to a decrease in net cash flow from operating activities.
7.3.2 Cash flow projection for the following year: The Company does not provide financial forecasts, including cash flow projections, for the following year.
7.4 Impact of major capital expenditures on the Company’s financial operations for the most recent fiscal year
7.4.1 Use and source of funding of major capital expenditures:

			Unit: NT$ thousands April 12,2020	Unit: NT$ thousands April 12,2020
Plan	Actual or Expected	Total Capital	Actual or Expected Capital
	Source of Capital	Required	Expenditure
			Actual	Expected
			Expenditures	Expenditures
Land and building	Own funds	4,466,759	2,840,780	2,840,780

7.4.2 Expected potential benefits: The Company's capital expenditures are necessary to grow the business and to maintain competitiveness.
7.5 Reinvestment policies, main reasons for profits/losses generated thereby, improvement plans, and investment plans for the coming year:
The Company's reinvestments in the most recent year were related to upstream and downstream industries within the scope of the Company's main business. For reinvestments with weaker business performance, the Company will dedicate efforts to improve product quality and channel distribution in order to improve profitability.
7.6 Risk management and assessment
7.6.1 Impacts of interest and foreign exchange rate fluctuations and inflation on the Company’s profit and loss, and countermeasures:
Interest rate: The Company mainly adopts L/C loans and changes in interest rates have little impact on the Company's profitablity.
Exchange rate: The Company may engage in forward contracts to hedge risks to currency exposure in its net asset positions by using research reports from financial institutions as a reference.
Inflation: The Company's products are used in consumer electronics, which are not significantly impacted by inflation risks.
7.6.2 Policies for high-risk, high-leverage investments, capital lending, endorsements, guarantees, and derivatives transaction, main reasons for the profits or losses generated thereby, and countermeasures:
Engagement in high-risk and high-leverage investments, endorsements, guarantees, or derivatives transactions: None.
Policies for loaning of funds, main reasons, and future countermeasures:

2 24

(1) Policy:

Conducted in accordance with the Company's "Regulations for Loaning of Funds".

(2) Main reasons:
- Loans are provided in response to the counterparties' short-term financing requirements.
(3) Future response measures: Control measures are implemented in accordance with the Company’s “Regulations for Loaning of Funds”.
7.6.3 Research and development (R&D) projects and estimated R&D expenditures: The Company has two development strategies. The first is to continuously refine product precision, and the second is to diversify product application. As such, the Company will continue to invest in R&D, and R&D expenses are expected to grow each year.
7.6.4 Impacts of changes in domestic and foreign government policies and laws on the Company’s financial operations, and future countermeasures:
The Company's financial operations are conducted in accordance with applicable regulations and so far there has been no material impact to the Company due to government policy changes.
7.6.5 Impacts of industry and technology changes to the Company’s financial operations, and future countermeasures:
Improvements in technology help the adoption of new product applications, improve business scale and product design capabilities as well as help to lower production costs, which should all have positive impacts on the Company's operations.
7.6.6 Impacts of changes in corporate image on the company's crisis management and future countermeasures:
The Company’s policy is to disclose financial and business information as required by applicable regulation, and to not make false representations. The Company shall continue to uphold this principle in the future.
7.6.7 Expected benefits and potential risks related to mergers and acquisitions: The Company does not have any recent merger or acquisition plans.
7.6.8 Expected benefits and potential risks of capacity expansion: The Company continues to expand capacity and upgrade equipment with its own funds, and the expected benefits are in line with the Company’s expectations as of the publication date of this Annual Report.
7.6.9 Risk of procurement and sales concentration, and future countermeasures: Sales: The Company's revenues are concentrated in a small number of customers. To lower credit risks, the Company constantly monitors the financial payment status of its main customers and regularly evaluates the collectibility of accounts receivables.
Purchases: The Company has long standing relationships with its raw materials suppliers which consist of major domestic and foreign companies, thus ensuring a stable and sufficient supply of raw materials.
7.6.10 Impacts and risks arising from major transfer or replacement of shares by Directors, Supervisors, or shareholders with over 10% of shares in the Company: None.
7.6.11 Impact of change in Company management and associated risks: None.
7.6.12 Litigious or non-litigious matters: None.
7.6.13 Risk of information security:
Information security policy: the administrative, internal auditing and IT department review various safety management issues to establish the Company’s information security policy, and submits an improvement plan to the Board and the CEO. Specific staff members are appointed to implement policy goals.
Information security management:
Evaluate risk of information security by examining whether the system structure, internet safety, resource management, software and hardware authorization comply with the Company’s use and requirement, and make adjustments or incorporate into the Company’s improvement plans according to related risks.
Promote awareness of confidentiality policy and data protection, manage and track files, manage devices and limit access to data. The Company’s internal audit and legal department tracks and examines irregularities to lower the risk of data leakage and to protect the Company’s important assets and competitiveness.

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Promote understanding of information security in line with current conditions and increase employee awareness to ensure knowledge of security is integrated in employees’ day to day operations.
Cooperate with third party security firms to pinpoint security vulnerabilities, taking preventative measures to investigate and resolve information security issues early on.

Information security and cyber risk control:

Malicious cyber attacks constantly occur, and are ever evolving and changing, and the risks to information systems are increasing. In order to prevent these contantly changing cyber security threats, the Company adopts active information security strengthening procedures: introducing next-generation firewall threat detection, malicious malware and program detection, multi layer mail gateway scanning systems to filter trash, phishing, or malicious emails, deploying antivirus software, monitoring online activity and establishing contingency plans in case of cyber attacks, as well as similuating irregularities to reduce cyber risk.
Risk management structure:
The Company’s internal audit periodically checks on the status of compliance and submits internal audit reports to management to ensure policy implementation and improvements on existing mechanisms.
The Company did not experience any material cyber attack incident that has impacted Company operations in 2019.
7.6.14 Other material risks: None.
7.7 Other Material Matters: None.

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==> picture [366 x 726] intentionally omitted <==

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

88%
Largan Health
AI-Tech Co., Ltd.
100% 100%
As of December 31, 2019
Ltd.
Ba Fang Co., Ltd. Fang Yuan Co.,
100%
Largan (Hong Kong) Limited
100%
100% Net International Trading Limited Largan (Dongguan) Optronic Ltd.
100%
Astro International Limited Limited
an Precision Co., Ltd.
g
Lar 100% Amtai International 12% 100%
Largan Health
Technology Co., Ltd.
49.37%
100% 12% 100%
Inc.
Ltd.
Alpha Holding
Dynadx
Corporation
Largan Digital Co.,
100% 32% Largan Health Technology Inc. 100%
Ltd.
40.50%
Beta International
Nanjing Largan Health Technology Co., Ltd.
49%
Largan Medical Co., Ltd.
Medical Tech-
NEO (Shanghai) nology Co., Ltd.
----- End of picture text -----

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8.1.2 Basic information of affiliated companies:

As of December 31, 2019

Unit: $

				Unit:$
Name of Business	Date of Incorporation	Address	Capital Stock	Business Activities
NET International Trading Ltd.	1998.11.19	TrustNet Limited of TrustNet Chambers, P.O. Box 3444, Road Town, Tortola, British Virgin Islands.	USD 24,300,000	Investment
Largan (Hong Kong) Limited	1993.03.25	Room 912, Champion Building, 301-309 Nathan Road, (Jordan Mtr Station) Kowloon.	HKD 31,100,000	Investment
Largan (Dongguan) Optronic Ltd.	1996.03.22	No. 5, Tutang Gongye Road, Tutang Management Area, Changping Town, Dongguan City, Guandong Province	HKD 178,076,100	Production of lenses and optical components for digital cameras
Largan Digital Co., Ltd.	1997.03.12	No.18, Gongyequ 7th Road, Xitun District, Taichung City	NTD 539,577,500	Production and processing of image capture devices, image readers, cameras, and video cameras
Astro International Ltd.	2004.02.02	Vistra Corporate Services Centre, Ground Floor NPF Building, Beach Road, Apia, Samoa	USD 7,600,000	Investment
Amtai International Ltd.	2004.02.02	Vistra Corporate Services Centre, Ground Floor NPF Building, Beach Road, Apia, Samoa	USD 1,500,000	Trading of lenses and optical components
Largan Medical Co., Ltd.	2004.10.25	2F, No. 14, Gongyequ 23rd Road, Nantun District, Taichung City	NTD 1,000,000,000	Production of optical instruments; wholesale and retail of medical and imaging equipment
Ba Fang Co., Ltd.	2013.4.24	1F, No. 4, Gongyequ 16th Road, Xitun District, Taichung City	NTD 43,000,000	General investment, buildings lease construction and development, and industrial plant development andlease
Fang Yuan Co., Ltd.	2013.4.26	3F-5, No. 210, Gongyequ 38th Road, Xitun District, Taichung City	NTD 29,800,000	General investment, buildings lease construction and development, and industrial

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Name of Business	Date of Incorporation	Address	Capital Stock	Business Activities
				plant development and lease
Alpha Holding Inc.	2017.2.18	2nd Floor, Building B, SNPF Plaza, Savalalo, Apia, Samoa	USD 3,700,000	Investment
Beta International Limited	2017.2.18	2nd Floor, Building B, SNPF Plaza, Savalalo, Apia, Samoa	USD 3,700,000	Investment
Largan Health Technology Inc.	2017.2.18	Vistra Corporate Services Centre, Ground Floor NPF Building, Beach Road, Apia, Samoa	USD 12,300,000	Investment
Largan Health Technology Co., Ltd.	2011.2.17	3F, No. 14, Gongyequ 23rd Road, Nantun District, TaichungCity	NTD 8,004,700	Wholesale and retail of medical equipment
Largan Health AI-Tech Co., Ltd.	2019.1.31	No.52, Ln. 10, Jihu Rd., Neihu Dist., Taipei City	NTD 10,000,000	Wholesale and retail of medical equipment
Nanjing Largan Health Technology Co., Ltd.	2017.7.26	14F, Building 2, Yuhua Salon, No. 109, Software Boulevard, Yuhua District, Nanjing	USD 3,000,000	Health management, computer and medical equipment technology development, production and development of medical equipment
DynaDx Corporation	2005.2.17	406 Tasman Drive, Sunnyvale,CA 94089	USD 1,186,455.91	Software development
NEO (Shanghai) Medical Technology Co., Ltd.	2017.9.12	Room 719, No. 569, Anpuo Road, Yangpu District, Shanghai	RMB 20,000,000	Technology development and technical services for medical equipment technologies

8.1.3 Information on shareholders with deemed control and affiliation: None.
8.1.4 Businesses included in the affiliated companies' overall operations:

The Company and affiliate companies' businesses mainly include the research, development, production, manufacturing, and sales of various photoscopes, video cameras, cameras, telescopes, microscopes, fax machines, scanners, multiple signal reader lenses, lenses, mobile phone lenses and cameras, as well as wholesale and retail of medical equipment.

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8.1.5 Directors, Supervisors and Presidents of all affiliated companies:

	Unit: NT$thousands;shares; %	Unit: NT$thousands;shares; %	Unit: NT$thousands;shares; %	Unit: NT$thousands;shares; %
Name of Business	Title	Name or Representative	Shares Held
			Number of Shares	Shareholding Ratio
NET International Trading Ltd.	Director Representative	Astro International Ltd. Representative: En-Chou Lin	24,300,000	100
			-	-
Largan (Hong Kong) Limited	Director	En-Chou Lin, En-Ping Lin	-	-
Largan (Dongguan) Optronic Ltd.	Chairman/Director	En-Chou Lin/ En-Ping Lin,Chung-Shih Lin	-	-
Largan Digital Co.,Ltd.	Chairman	En-PingLin	1,109,000	2.06
Largan Digital Co.,Ltd.	Director	Shih-ChingChen	1,039,500	1.93
Largan Digital Co.,Ltd.	Supervisor	Chung-Jen Liang	1,428,000	2.65
Astro International Ltd.	Director	En-Chou Lin	-	-
Amtai International Ltd.	Chairman	En-Chou Lin	-	-
Largan Medical Co.,Ltd.	Director	Yao-YingLin	119,434	0.12
Largan Medical Co.,Ltd.	Director	Shih-ChingChen	2,297,417	2.30
Largan Medical Co.,Ltd.	Director	En-Chou Lin	561,184	0.56
Largan Medical Co.,Ltd.	Chairman	En-PingLin	1,078,826	1.08
Largan Medical Co.,Ltd.	Supervisor	Chung-Jen Liang	3,315,959	3.32
Ba Fang Co., Ltd.	Chairman/Director Representative:	Largan Precision Co., Ltd.	4,300,000	100
		Representative: En-ChouLin	-	-
Fang Yuan Co., Ltd.	Chairman/Director Representative:	Ba FangCo.,Ltd.	2,980,000	100
		Representative: Mei-Yu Lin	-	-
Alpha HoldingInc.	Director	En-PingLin	-	-
Beta International Limited	Director	En-PingLin	-	-
Largan Health Technology Inc.	Director	En-Ping Lin, En-Chou Lin, Sheng-Lien Wang, Cheng-Kuo Lai, Chung-Shih Lin, Yu-I Tseng,Chao-LiangYen	-	-
Dynadx Corporation	Chairman	NingHong	-	-
Nanjing Largan Health Technology Co., Ltd.	Chairman/Director	Cheng-Kuo Lai/Chung-Shih Lin, Yen-Hui Liu	-	-
	Supervisor	Ma-Li Lin	-	-
Largan Health Technology Co., Ltd.	Chairman/Director Representative:	Largan Health TechnologyInc.	800,470	100
		Representative: Cheng-Kuo Lai/ En-Ping Lin, Chung-Shih Lin	-	-

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Largan Health Technology Co., Ltd.	Supervisor Representative	Largan Health TechnologyInc.	800,470	100
		Representative: Ma-Li Lin	-	-
Largan Health AI-Tech Co., Ltd.	Chairman/Director	Cheng-Kuo Lai/En-Ping Lin, Yu-I Tseng	-	-
	Supervisor	Ma-Li Lin
NEO (Shanghai) Medical Technology Co., Ltd.	Chairman/Director	Shao-Liang Li/Ping-Chen Chen, En-Chou Lin, Sheng-Lien Wang, Wei-Yuan Chen	-	-
	Supervisor	Hsing-Ju Tsao

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8.1.6 Operational highlight of affiliated companies:

Unit: NT$ thousands

Name of Business	Capital Stock	Assets	Liabilities	Net Worth	Revenue	Operating Income (loss)	Net Income (Loss) for the Period	Earnings Per Share
							(after tax)	(NT$) (after tax)
Largan (Hong Kong)Limited	119,704	342,172	51	342,121	0	(134)	8,980	0.29
Net International Trading Limited	728,514	6,742,015	208	6,741,807	0	(730)	697,405	28.70
Astro - Samoa	227,848	24,504,246	3,957,360	20,546,886	0	(89)	1,737,319	228.59
Amtai - Samoa	44,970	19,307,969	6,368,421	12,939,548	15,024,097	369,999	948,980	632.65
Largan (Dongguan) Optronic Ltd.	685,415	13,408,690	10,104,368	3,304,322	37,137,535	1,163,209	900,161	Note 1
Largan Digital Co.,Ltd.	539,578	887,569	18,992	868,577	130,877	(7,454)	21,299	0.39
Largan Medical Co., Ltd.	1,000,000	755,221	55,490	699,731	386,727	65,918	57,981	0.58
Ba Fang Co., Ltd.	43,000	36,502	0	36,502	0	(102)	(1,278)	(0.30)
Fang Yuan Co.,Ltd.	29,800	23,460	0	23,460	0	(1,240)	(1,232)	(0.41)
Alpha Holding Inc.	110,926	33,109	0	33,109	0	(31)	(3,247)	(0.88)
Beta International Limited	110,926	73,389	0	73,389	0	(31)	(8,630)	(2.33)
Largan Health Technology Inc.	368,754	252,286	520	251,766	0	(677)	(26,914)	(2.19)
Nanjing Largan Health Technology Co.,Ltd.	89,940	32,265	936	31,329	0	(14,225)	(13,678)	Note 1
Largan Health Technology Co.,Ltd.	8,005	6,734	1,028	5,706	3	(6,264)	(6,254)	(7.81)
Dynadx Corporation	35,570	2,965	4	2,961	0	(1,963)	(1,995)	(0.18)
NEO (Shanghai) Medical Technology Co.,Ltd.	86,100	80,894	587	80,307	2493	(2,023)	(1,720)	Note 1
Largan Health AI-Tech Co., Ltd.	10,000	8,837	1,294	7,543	734	(2,506)	(2,457)	(2.46)

Note 1: Not applicable as these companies are not limited by shares

8.1.7 Consolidated financial report of affiliated companies: Description: The companies that should be incorporated in the consolidated financial statements of affiliated companies are the same as those that should be incorporated in the consolidated financial

2 32

statements of parent and subsidiary companies in accordance with IFRS 27 recognized by the Financial Supervisory Commission. In addition, the related information that must be disclosed in the consolidated financial report of affiliated companies has been fully disclosed in the consolidated financial statements of parent and subsidiary companies. Therefore, the Company only issued a statement on the first page of the consolidated financial statements of parent and subsidiary companies and shall not prepare separate consolidated financial statements of affiliated companies or issue a statement for the consolidated financial statements of affiliated companies. (Please refer to page 74 of the Annual Report)

8.1.8 Affiliation report: Not applicable. Description: The Company is not a subordinate company of other affiliated companies and an affiliation report is thus not required.
8.2 Private placement of securities of the past year as of the publication date of this Annual Report: None.
8.3 Holding or disposal of the Company's shares by the subsidiaries of the most recent year as of the publication date of this Annual Report: None.
8.4 Other necessary supplementary items to be included: None.

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9. Any event which has a material impact on the shareholders' equity or securities prices as prescribed in Subparagraph 2, Paragraph 2, Article 36 of the Securities and Exchange Act that has occurred in the most recent year as of the publication date of this Annual Report: None.

2 34

AI assistant

LARGAN — Annual Report 2019

52244_rns_2020-06-19_2461b1c7-143d-4b6b-bfaa-1562693204fd.pdf

Largan Precision Co., Ltd

2019 Annual Report

----Disclaimer----

Largan Precision Co., Ltd.

Company Spokesperson

Deputy Spokesperson

Corporate Headquarters and Factories

Stock Affairs Agent

Certified Public Accountant (CPA) and accounting firm for the financial statements of the

most recent year:

Offshore secondary exchange and disclosure information: Not Applicable

Largan Precision Co., Ltd. Annual Report Contents

1. Letter to Shareholders

2. Company Profile

3. Corporate Governance Report

3.1.2 Responsibilities and functions of major departments

3.3 Implementation of Corporate Governance

3.3.1 Operations of the Board of Directors

3.3.2 Supervisors' participation in Board meetings

3.4 Information on CPA fees

3.4.1 Information on the CPA’s professional fees

3.4.2 Amount of non-audit fees and details of non-audit services:

3.5.1 Former CPA

3.5.2 Succeeding CPA

3.7.2 Where the counterparty in the transfer of shares is a related party:

3.7.3 Where the counterparty in the pledge of shares is a related party: None.

3.8 Information on the relationship between the top 10 shareholders of the Company:

4. Funding Status

4.1 Company capital and issuance of shares

4.1.1 Sources of shares

4.1.2 Shareholder structure

4.1.3 Distribution of equity ownership

5. Operational Highlights

5.1.4 Current products

Source: PIDA

5.1.7 Overview of technology and R&D

2. Long-term plans

5.2.2 Major applications and production process of primary products

9. Fire safety

5.6 Important contracts:

6. Financial Highlights

6.2 Financial Analysis for the Last Five Years International Financial Reporting Standards

We hereby approve

Representation Letter

Independent Auditors’ Report

Opinion

Basis for Opinion

Key Audit Matters

Description of key audit matter:

How the matter was addressed in our audit:

2. Accounts Receivable Valuation

Description of key audit matter:

Other Matter

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

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

KPMG

Notes to Readers

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) LARGAN PRECISION CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2019 and 2018

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2019 and 2018

Notes to the Consolidated Financial Statements

For the years ended December 31, 2019 and 2018

(1) Company history

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

(3) New standards, amendments and interpretations adopted

(i) IFRS 16“Leases”

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

1) Definition of a lease

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

3) As a lessor

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

(4) Summary of significant accounting policies

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated Financial Statements

LARGAN Annual Report 2019