Skip to main content

AI assistant

Sign in to chat with this filing

The assistant answers questions, extracts KPIs, and summarises risk factors directly from the filing text.

Sign up Log in

LARGAN Annual Report 2020

Sep 8, 2021

52244_rns_2021-09-08_3884041a-de19-4375-8bad-82651cea916c.pdf

Annual Report

Open in viewer

Opens in your device viewer

Stock Code: 3008TT http://mops.twse.com.tw http://www.largan.com.tw

Largan Precision Co., Ltd

2020 Annual Report

(Translation)

----Disclaimer----

This is a translation of the 2020 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 27th, 2021

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 Factories: No. 4, Gongyequ 16th Road, Taichung City, Taiwan

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. 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: Shyhhuar Kuo & Chun-Yuan Wu 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 ................................................................................................. 41
3.5. Replacement of CPAs ...................................................................................................... 42
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 ..................................................................... 43
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 .............................................................................................................................. 44
3.8. Information on the relationship between the top 10 shareholders of the Company ........ 45
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 ..................... 46
4. Funding Status ................................................................................................................. 47
4.1. Company capital and issuance of shares ......................................................................... 47
4.2. Issuance of corporate bonds ............................................................................................ 51
4.3. Preferred shares ............................................................................................................... 51
4.4. Overseas depository receipt ............................................................................................. 51
4.5. Issuance of employee stock options ................................................................................ 51
4.6. Restrictions on employee shares and mergers, acquisitions or issuance of new shares
for the acquisition of shares of other companies ............................................................. 51
4.7. Implementation status of the capital utilization plan ....................................................... 51
5. Operational Highlights .................................................................................................... 52
5.1. Business activities ........................................................................................................... 52
5.2. Overview of market, production and sales ...................................................................... 56
5.3. Number of employees during the two most recent years ................................................ 60
5.4. Environmental protection expenditures ........................................................................... 61
5.5. Labor relations ................................................................................................................. 61
5.6. Important contracts .......................................................................................................... 66
6. Financial Highlights ........................................................................................................ 67
6.1. Condensed Balance Sheet and Condensed Consolidated Income Statement for the
Last Five Years ................................................................................................................ 67
6.2. Financial Analysis for the Last Five Years ...................................................................... 67
6.3. 2020 Supervisors' Review Report for the Financial Report ............................................ 74
6.4. Consolidated Financial Statements of the Most Recent Year with Independent
Auditors’ Report and Notes ............................................................................................. 75
6.5. Parent Company Only Financial Statements of the Most Recent Year with
Independent Auditors’ Report and Notes ......................................................................... 144
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 ............................................................................ 219
7. Review and Analysis of Financial Position and Financial Performance, and Risk
Management .................................................................................................................... 220
7.1. Financial position analysis .............................................................................................. 220
7.2. Financial performance ..................................................................................................... 220
7.3. Cash flow ......................................................................................................................... 221
7.4. Impact of major capital expenditures on the Company’s financial operations for the
most recent fiscal year ..................................................................................................... 221
7.5. Reinvestment policies, main reasons for profits/losses generated thereby,
improvement plans, and investment plans for the coming year ...................................... 221
7.6. Risk management and assessment ................................................................................... 221
7.7. Other material matters ..................................................................................................... 223
8. Special Notes ................................................................................................................... 224
8.1. Information on affiliate companies .................................................................................. 224
8.2. Private placement of securities of the past year as of the publication date of this
Annual Report ................................................................................................................. 230
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 ...................................................... 230
8.4. Other necessary supplementary items to be included ...................................................... 230
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 ........................................................................................................... 231

1. Letter to Shareholders

In 2020, with the increasing penetration rate of smartphones, the growth of the market had started to plateau. The Company’s 2020 business results and 2021 business plan are summarized below:

  • 2020 Business Report

  • (1) Business results: Largan Precision's consolidated revenue in 2020 amounted to NT$55,944,489 thousand, which was a 8% decline over NT$60,745,008 thousand in 2019. The net profit after tax was NT$24,534,131 thousand, which was a 13% decline over NT$28,263,082 thousand in 2019. The net profit after tax per share was NT$182.90.

  • (2) Financial performance and profitability: Please refer to the financial statements in the attachment for the financial overview of 2020.

  • (3) Research and development: The Company invested a total of NT$3,794,356 thousand in research and development for the current year, which represented a 1% growth over NT$3,764,448 thousand in the previous year.

  • 2021 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

-1-

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

Taichung City, Taiwan
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
(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.

-2-

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-

3. Corporate Governance Report

3.1 Company organization

3.1.1 Company organization chart

==> picture [415 x 532] 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 -----

-4-

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.

-5-

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

-6-

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

-7-

Note 2 Note 2 None None None Note 1: En-Chou Lin did not serve as a Director from July 3, 1993 to November 11, 1997.
Note 2: Where the chairperson and president or equivalent position (highest level executive officer) is the same person, the spouse, or a first-degree relative, the reason, reasonableness, necessity, and response measures (such as
increasing the number of independent director seats and more than half of all directors not concurrently serving as employees or executive officers) must be disclosed.
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

-8-

Table 1: Major shareholders of the corporate shareholder

April 12, 2021

Name of corporate shareholder Major shareholders of the corporate shareholder
Mao Yu Commemorate Co., Ltd. En-Ping Lin(31.79%)、En-Chou Lin(21.72%)、Feng-Chen
Kao(19.43%)、Yao-Ying Lin(8.73%)、En-Ping Lin Trust
Account(10.96%)、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 -
Mao Yu
Commemorate
Co., Ltd.
Representative:
En-PingLin		 v v v -
Mao Yu
Commemorate
Co., Ltd.
Representative:
Yao-YingLin		 v v v v -
Shih-Ching
Chen		 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 -

-9-

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

-10-

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.

-11-

Note 2 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
%		 4.48% 5.81%
Number
of
Shares		 6,011,652 7,790,106
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

-12-

Note 2 None None None None Note 1: Positions held as of the publication date of the Annual Report
Note 2: Where the chairperson and president or equivalent position (highest level executive officer) is the same person, the spouse, or a first-degree relative, the reason, reasonableness, necessity, and response measures (such as
increasing the number of independent director seats and more than half of all directors not concurrently serving as employees or executive officers) must be disclosed.
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 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		 % - - - -
Number
of
Shares		 - - - -
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

-13-




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		 1.Please describe the policy, system, standard, and structure of compensation to independent directors, and the correlation between duties, risk, and time input with the amount of compensation:
Director compensation is determined by the Compensation Committee and Board of Directors according to each Director's degree of participation and contribution to the Company's operations as authorized by the Company’s
Articles of Incorporation. According to the Articles of Incorporation, if the Company earns a profit, the Board may determine Directors’ and Supervisors’ compensation. Independent Director compensation is determined based
on the risks associated with their duties and time imput.
2. Other than as disclosed in the above table, the compensation earned by Directors providing services (e.g. providing consulting services as a non-employee) to the Company and all consolidated
entities in the latest fiscal year: 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		 1.64% 0.01%
Th e Company 1.64% 0.01%

Compensation earned as an employee
Employees' Compensation (G)		 All
Companies in
the Financial
Report
Stoc
k		 - -

Cash		 149,000 -
The Company Stock - -
Cash 149,000 -

Severance Pay
and Pension (F)		 All Companies in the
Financial Report		 - -
The Company - -

Salary, Bonus and
Allowances (E)		 All Companies in the
Financial Report		 18,879 -
The Company 18,879 -
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		 234,889 2,400
The Company 234,889 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

-14-

Name of 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, Ming-Yuan Hsieh
Shih-Ching Chen		 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

-15-

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		 93,956
The
Company		 93,956
Compensation (A) All Companies in
the Financial Report		 -
The
Company		 -
Name Chung-Jen Liang Tsui-Ying Chiang
Title Supervisor Supervisor

-16-


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

-17-

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		 0.62%
The Company 0.62%
Employees' Compensation
(D)		 All Companies
in the Financial
Report		 Stock -

Cash		 136,067
The
Company		 Stock -
Cash 136,067
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		 16,656
The
Company		 16,656
Name En-Ping Lin En-Chou Lin Chung-Shih Lin Yu-Chih Huang
Title CEO Vice President Vice President Chief Technology
Officer

-18-

Name of the President and Vice Presidents All Companies in the Financial Report - - - - - - - Same as left - - 4 Name of management to which employees' compensation are distributed, and the status of distribution
As of December 31, 2020
Unit: NT$ thousands		 Ratio of total compensations to the
net profit after tax (%)		 0.83% 0.83% 0.83% 0.83% 0.83% 0.83%
The Company - - - - - - - En-Chou Lin, En-Ping Lin, Chung-Shih Lin, Yu-Chih Huang - - 4 Total 204,100
Cash 204,100
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

-19-

  • 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
2020 2019
Director 1.65% 1.53% 0.12%
Supervisor 0.38% 0.38% -
President and Vice
Presidents		 0.62% 0.50% 0.12%

  • 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 increased by 0.12%; Total compensation for Supervisors to net profit after tax was unchanged; Total compensation for the President and Vice Presidents to net profit after tax increased by 0.12%.

  • 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.

-20-

3.3 Implementation of Corporate Governance

3.3.1 Operations of the Board of Directors

The Company convened a total of 4 Board of Directors meetings in 2020.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		 4 0 100% Newly
appointed
Vice
Chairman		 Mao Yu Commemorate
Co., Ltd.
Representative:
En-PingLin		 4 0 100% Newly
appointed
Director Mao Yu Commemorate
Co., Ltd.
Representative:
Yao-YingLin		 4 0 100% Newly
appointed
Director Shih-Ching Chen 4 0 100% Re-elected
Director Ming-Yuan Hsieh 3 0 75% Re-elected
Independent
Director
Shan-Chieh Yen		 4 0 100% Re-elected
Independent
Director
Ming-Hua Peng		 3 1 75% Re-elected

-21-

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 2020 contained no items specified in Article 14-3 of the Securities and Exchange Act.

  2. (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.

    1. Recusals of Directors due to conflicts of interests: The Directors recused themselves from discussion and voting on their salaries and compensation.

  4. Implementation of self-evaluations by the Company's Board of Directors:

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 2020 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 bythe Company's Board of Directors:		 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 2020 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 bythe Company's Board of Directors:		 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 2020 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 bythe Company's Board of Directors:		 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 2020 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 bythe Company's Board of Directors:		 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 2020 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 bythe Company's Board of Directors:
Assessment
Interval		 Assessment
period		 Scope Assessment
Method		 Assessment Content
Annually January 1,
2020 to
December
31, 2020		 Board of
Directors,
their individual
members, and
Functional
Committees
(including
Compensation
Committee)		 Internal self
assessment made
by the Board of
Directors, their
individual
members, and
Functional
Committees
(including
Compensation
Committee)		 The performance assessment of the
Board of Directors includes five
major aspects: the degree of
participation in the Company's
operations, the decision-making
quality of the Board of Directors,
the composition and structure of
the Board of Directors, selection
and appointment of Directors and
continuous education and internal
control.
The performance assessment of the
Board members includes five major
aspects: alignment of the goals and
missions of the company,
awareness of the duties of a
director, participation in the
operation of the company,
management of internal relationship
and
communication, the director's
professionalism and continuing
education and internal control
The performance assessment of the
Functional Committee includes five
major aspects: the degree of
participation in the Company's
operations, the decision-making
quality of the Functional
Committees, the composition and
structure of the Functional
Committee,
selection and appointment of
Committee members and
continuous education and internal
control.
4.
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.
  1. Measures taken to strengthen the functions of the Board and the implementation status during the current and preceding fiscal year: The Company established the 4[th] Compensation 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 compensation policies, systems, standards, and structure.

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

-22-

  • 3.3.2 Supervisors' participation in Board meetings

A total of 4 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 2 50% Re-elected
Supervisor Tsui-Ying Chiang 4 100% Newlyappointed
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.

-23-

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 Company considers Directors'
diversityinprofessional background(including		 No deviation

-24-

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 determining
the compensation and
v
v		 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 an audit committee and 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.
1. Internalperformance evaluations:


The
Supervisors
currently
take on the
duties of the
Audit
Committee
No deviation

-25-

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
nomination of individual
directors?
(4) Does the Company regularly
assess on the independence of
CPAs?		 v Annual internal performance evaluations of the
Board of Directors and the Compensation
Committee are conducted by the Board members,
the Functional Committee members and the
relevant department. The scope
of assessment for the Board of Directors
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 Board
members include five aspects: alignment of the
goals and missions of the Company, awareness of
the duties of a director, participation in the
operation of the Company, management of internal
relationship and communication, the director's
professionalism and continuing education, and
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.
The annual performance evaluations were
completed and reported to the Board on February,
22, 2021. The results were as follows:
(1) The evaluations for the Board of the Directors
and Board members were 100% completed in
2020, and the results were “Good”. Overall, the
performance of the Board of Directors and its
members are effective.
(2) The evaluations for the Compensation
Committee were 100% completed in 2020, and
the results were “Good”. Overall, the
performance of the Compensation Committee is
effective.
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


No deviation

-26-

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
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
February22, 2021.
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 to providing
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)?

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 by Directors and Supervisors, assisting
Directors in complying with regulations, to convene
Board meetings and shareholders' meetings in
compliance with the law, and to assist Directors in
their continuing education. Key corporate governance
implementations include the following:
1.
Four Boards meetings held in 2020.
2.
One Annual General Meeting held in 2020.
3.
Liability insurance filed for its Directors and the
insurance renewal reported to the Board of
Directors.
4.
Assisted the Independent Directors in
completing 6 hours of continuing education.
5.
The corporate governance supervisor completed
18 hours of training in 2020, and the information
disclosed on the Market Observation Post
System. For the complete course information,
please refer to Note 2.
No deviation
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 Companyadopt other		 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 Companyhas assigned dedicatedpersonnel		 No deviation
No deviation

-27-

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
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
sales results, before the
prescribed time limit?
v		 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 2020 consolidated
and parent financial statements on February 23,
2021. 2020 Q1, Q2, and Q3 financial statements,
as well as monthly sales results have all been
announced before the prescribed time limit.		 No deviation
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 itemsyet to be improved.
v		 The Company has established a corporate governance
supervisor, and disclosed the main duties and key
implementations of the supervisor in the Annual
Report and the Company’s website. The Company’s
financial reports have been disclosed within one day
of the approval by the Board of Directors. Further
improvements will be made if necessary, currently no
material weaknesses have been noted.
Executed in
accordance
with related
regulations
of the
competent
authority

-28-

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

Note 2:

Note 2:
Date Course Name Hours Organizer
2020/11/6 Analysis of the Practical Operation and Latest Interpretation and
Implementation of the CompanyAct		 6 The Institute of Internal
Auditors-Taiwan
2020/10/29 The Legal Risks of Business Management and the Role
of Internal Auditors		 6 The Institute of Internal
Auditors-Taiwan
2020/8/12 Analysis of the Latest Corporate Governance Trends and
Implementation of the Control Environment		 6 The Institute of Internal
Auditors-Taiwan

  • 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

-29-

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 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 3 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 3 0 100% Re-elected
Member Ming-Hua Peng 3 0 100% Re-elected
Member Sun-Yuan Chien 3 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, 2020:
(1)
Reviewed the Company's proposal for compensation distribution for employees, Directors, and Supervisors
for 2019. 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 managerial officers in 2019. 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 April 10, 2020:
(1) Reviewed the Company's salary and remuneration for Directors and Supervisors and the distribution of
compensation to Directors and Supervisors in 2019. Besides the individual members who did not participate in
discussion or voting due to conflict of interests, the proposal was passed by the remaning members and
submitted for discussion in the Board meeting where it was approved by all Directors in attendance.
Third meeting of the Compensation Committee on July 13, 2020:
(1)
Reviewed the Company's proposal for compensation distribution for managerial officers for 2019. 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.

-30-

  • 3.3.6 CSR implementation, deviations from the "Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies" and reasons:
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
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

-31-

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 2019 and 2020 (Scope 1
and 2)were 205,429.91MT and
221,788.78MT 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: Total
waste weighed 1,073MT in 2020.
Under the Company’s policy to
recycle resources, the Company aims
to recycle up to 200MT of waste in
2021. In order to achieve this target,
the Company has established
“Procedures for Business Waste
Management”, and set standards for
the procedures to separate, collect,
store and dispose of waste, so that
even under increasing capacity, the
Company can control waste increase
and improve upon the threat to the
environment by using these
management measures. The
Company recycles waste from
manufacturing, and requests suppliers
to recycle reusable products to reduce
resource waste; around 72% of waste
that was incinerated is now recycled
instead. For details please refer
to the Company’s CSR Report.


No deviation
No deviation
4. Social issues
(1) Does the Company set up
management policy and procedures
according to related laws and
regulations and the International Bill		 v (1) The Company has established
"Prevention of Non-Voluntary Labor",
"Occupational Maternity Protection",
"Sexual Harassment Prevention",		 No deviation

-32-

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
of Human Rights?
(2) Does the Company establish
appropriately managed employee
welfare measures (include salary and
compensation, leave and others), and
link operational performance or
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 Companyestablish a
v
v
v
v
v		 “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
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 Companyhas established a



No deviation
No deviation
No deviation
No deviation
No deviation

-33-

Implementation status Deviation from
Corporate Social
Responsibility Best
Assessment Item Yes No Summary Practice Principles for
TWSE/TPEx Listed
Companies and
Reasons for Deviation
supplier management policy, does it supplier code of conduct, requiring
require suppliers to comply with suppliers to pass product quality
regulations on environmental certification, and to comply with “RBA
protection, occupational safety and Principles”, “Anti-Slavery
health, and labor rights, and what is its Agreement”, “Prohibit Use of Conflict
implementation status? 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.
5. Does the Company refer to international v The Company will publish a CSR Report No deviation
reporting rules or guidelines to publish according to GRI standards by June 2021,
a CSR Report to disclose non-financial which will disclose non-financial
information of the Company? Has the information of the Company. Third party
said Report acquired third party verification for the report will be acquired,
verification? and disclosed on the Company’s website.
6. 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.

  1. Other key information useful for explaining status of corporate social responsibility practices:

  2. (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 13 campus seminars in 2020 for 1,125participants (declined by 40% compared to 2019 as many campus seminars were canceled due to COVID-19 concerns.)
2019 as many campus seminars were canceled due to COVID-19 concerns.) 2019 as many campus seminars were canceled due to COVID-19 concerns.) 2019 as many campus seminars were canceled due to COVID-19 concerns.)
2.
2019-2020 donation details:
July National ChungHsingUniversityScholarship Cash: NT$100,000
2019 August,
October		 National Cheng Kung University Sponsorship Program Cash: NT$1.15
million
November Second Hand Household Items Donation 67 Boxes
January National Cheng Kung University Sponsorship Program Cash: NT$1.13
million
2020 August National ChungHsingUniversityScholarship Cash: NT$100,000
September Epidemic donations Cash: NT$100,000

-34-

Assessment Item Assessment Item 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
November National TsingHua UniversitySponsorshipProgram
Cash: NT$1 million
Second Hand Household Items Donation
50 boxes
December National ChengKungUniversityMachineryMaintenance
Cash: NT$1.2 million
3.
Number ofpeople employed in 2020 throughprofessional trainingandjob matching: 30 accepted.		 November National TsingHua UniversitySponsorshipProgram Cash: NT$1 million

Second Hand Household Items Donation		 50 boxes
December National ChengKungUniversityMachineryMaintenance Cash: NT$1.2 million
  • 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?


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

No deviation
No deviation

-35-

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
(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 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
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.

No deviation
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?		 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.
No deviation
No deviation

-36-

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
(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 conduct program audited
by internal auditors or CPA periodically?
(5) Does the Company regularly organize
internal and external training for ethical
corporate management?		 v
v
v		 (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 audit plans for
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
No deviation
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		 v The Company has disclosed related
contents of the "Ethical Corporate
Management Best Practice Principles
and Reportingand Complaint		 No deviation

-37-

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
or Market Observation Post System? Regulations" on the companywebsite.
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.

-38-

  • 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 22, 2021

This Internal Control System Statement is issued based on the self-assessment results of the Company for 2020:

  • (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, 2020 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 22, 2021 where 0 of the 7 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

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

-39-

  • 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 2020 Shareholders' Meeting and implementation status  Adoption of the 2019 Business Report and Financial Statements Implementation status: Resolution passed.

    • Adoption of 2019 earnings distribution proposal

Implementation status: August 17, 2020 was set as the ex-dividend record date and dividends were distributed on September 3, 2020. (Cash dividend per share was NT$79.)

  1. Important resolutions of the Board of Directors
Date of
Meeting		 Material Resolutions
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.

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
certifyingaccountingfirm.
2020.4.22
Amended approved matters related to the convening of the 2020 General
Shareholders' Meeting.

Approved the 2019 cash dividend and earnings distribution proposal.

Approved the Company's salary and remuneration for Directors,

-40-

Date of
Meeting		 Material Resolutions
Supervisors, and the distribution of compensation to Directors and
Supervisors for 2019.
2020.7.22
Determined the ex-dividend date for the distribution of cash dividends.

Approved the 2019 compensation distribution proposal for managerial
officers reviewed bythe Compensation Committee.
2020.10.26
Approved the 2021 Business Plan.

Approved the 2021 Audit Plan.

Approved amendment to the “Management of the Procedures for
Preparation of Financial Statements”.

Established the “Procedures and Methods for Self-Assessment of Internal
Control Systems”.
2021.2.22
Approved matters related to the convening of the 2021 General
Shareholders' Meeting.

Approved the compensation distribution for employees, Directors, and
Supervisors for 2020.

Approved the Company's salary and remuneration for Directors,
Supervisors, and managerial officers and the distribution of
compensation to Directors and Supervisors for 2020.

Approved the 2020 Business Report and Financial Statements.

Approved the 2020 cash dividend and earnings distribution proposal.

Approved the Internal Control System Statement.

Evaluation of the independence of CPAs.

  • 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: None.

3.4 Information on CPA fees

3.4.1 Information on the CPA’s professional fees

Name of the CPA
Firm		 Name of CPA Name of CPA Audit period Notes
KPMG Taiwan Shyhhuar
Kuo		 Chun-Yuan
Wu		 January 1, 2020 to December 31,
2020		 -

-41-

Professional fee
Amount range		 Professional fee
Amount range		 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)

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		 Shyhhuar
Kuo		 3,170
0		 5 0 590 595 January 1,
2020 to
December 31,
2020		 TP Report, Group report by
country, tax consultancy,
review of annual report for
Shareholders' Meeting
totaling NT$590 thousand.
Chun-Yuan
Wu

  • 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
Principa
Status		 l
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.
Different opinions from the issuer Yes Accounting principles or practices
Disclosure of financial statements
Audit scope orprocedures

-42-

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.

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.

-43-

  • 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 2020 2020 As of April 12,2021 As of April 12,2021 Note
Increase
(decrease) in
number of
shares held		 Increase
(decrease) in
number of
sharespledged		 Increase
(decrease) in
number of
shares held		 Increase
(decrease) in
number of
sharespledged
Corporate
Director/
Major
Shareholder		 Mao Yu
Commemorate
Co., Ltd.		 8,672,968 0 0 0
Chairman
Representative		 En-Chou Lin 0 0 0 0
Vice Chairman
Representative
(CEO)
En-Ping Lin		 0 0 0 0
Director
Representative		 Yao-Ying Lin 0 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

-44-

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
Mao Yu
Commemorate
Co.,Ltd.
Merged
(Note 1)		 2020.2.24 Mao Yu Commemorate
Co., Ltd. (Note 2)
Shares held by a Director in
the name of other persons		 8,672,968
-

Note 1: Original Corporate Director Mao Yu Commemorate Co., Ltd. was merged with Shih-An Co., Ltd. and dissolved, with Shih-An succeeding as the Coporate Director, and renamed Mao Yu Commemorate 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
5,530,080
4.12%
-		 - - - - -
Ming-Yuan Hsieh 3,606,585
2.69%
-		 - - - - - -
Cathay Life
Insurance Co., Ltd.
Representative:
Tiao-Kuei Huang		 3,427,154
2.55%
-		 - - - - - -
Nanshan Life
Insurance Co., Ltd.
Representative:
TangChen		 2,644,000
1.97%
Chung-Jen Liang 2,091,721
1.56%
924		 0% 8,000 0.01% - - -
JPMorgan Chase
Bank N.A. Taipei
Branch in Custody
for Saudi Arabian
MonetaryAgency		 1,844,000
1.37%
-		 - - - - - -
The Overlook
Partners Fund LP.
under the custodyof		 1,820,000
1.36%
-		 - - - - - -

-45-

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
HSBC Bank
  • 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, 2020
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, 2020
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, 2020
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, 2020
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, 2020
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, 2020
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

-46-

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 12,2021;Unit: Share April 12,2021;Unit: Share April 12,2021;Unit: Share April 12,2021;Unit: Share April 12,2021;Unit: Share
Shares
Type		 Authorized capital Note
Outstanding shares Unissued shares Total
Registered common shares 134,140,197 65,859,803 200,000,000 -

-47-

4.1.2 Shareholder structure

April 12, 2021

Shareholder
structure
Number

Government
institutions		 Financial
institutions		 Other legal
persons
Individuals		 Foreign
institutions
and
foreigners		 Total
Number of
people		 7 103 234 62,835 1,074 64,253
Number of
shares held		 3,411,516 9,342,536 21,643,746 42,861,541 56,880,858 134,140,197
Shareholding
ratio		 2.54% 6.96% 16.14% 31.96% 42.40% 100%

4.1.3 Distribution of equity ownership

The nominal value is NT$10 per share April 12, 2021

April 12, 2021
Shareholdingclassification Number of shareholders Number of shares held Shareholdingratio
1 to 999 56,795 2,276,638
1.70%
1,000 to 5,000 6,340 10,391,080
7.75%
5,001 to 10,000 407 3,069,859
2.29%
10,001 to 15,000 164 2,081,441
1.55%
15,001 to 20,000 92 1,649,965
1.23%
20,001 to 30,000 88 2,183,245
1.63%
30,001 to 40,000 64 2,210,210
1.65%
40,001 to 50,000 45 1,991,729
1.48%
50,001 to 100,000 90 6,422,587
4.79%
100,001 to 200,000 74 10,733,267
8.00%
200,001 to 400,000 48 12,980,933
9.68%
400,001 to 600,000 21 10,145,860
7.56%
600,001 to 800,000 7 4,899,950
3.65%
800,001 to 1,000,000 3 2,611,819
1.95%
1,000,001 to 999,999,999
15		 60,491,614
45.09%
Total 64,253 134,140,197
100.00%
  • 4.1.4 List of major shareholders: Please refer to page 45 of the Annual Report.

-48-

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

Item Year Year 2019 2020 As of April 12,
2021
Market value
per share
(Note 1)		 Highest 5,200 5,210 3,590
Lowest 2,880 2,945 2,770
Average 4,224.13 3,856.86 3,170.13
Net asset
value per
share (Note
2)		 Before distribution 942.25 1,049.67 1003.75
After distribution 863.25 958.17(Note 8)
-
Earnings per
share		 Weighted average shares 134,140,197 134,140,197 134,140,197
Earnings Per
Share (Note
3)
Before adjustment		 210.70 182.90 39.62
After adjustment 210.70 182.90 -
Dividends
per share		 Cash dividends 79 91.5(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) 20.05 21.09 -
Price-to-dividend ratio(Note 6) 53.47 42.15 -
Cash dividendyield(Note 7) 1.87% 2.37% -

  • 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: 2020 dividends distribution determined by resolution of Board of Directors on February 22, 2021.

-49-

  • 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) 12,273,828

  • 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 2020 are NT$4,416,600 thousand and NT$331,245 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 2020. 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 2020 Consolidated Financial Report.

  • Compensation proposal approved by the Board of Directors

  • (1) Information on the distribution of compensation for employees and Directors and

-50-

Supervisors passed by the Board of Directors on February 22, 2021:

Distribution status (Unit: NT$ thousands) Employee compensation - cash $4,416,600 Director and Supervisor compensation - cash $331,245

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 $5,087,917 Director and Supervisor compensation - cash $381,594

  • (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.

-51-

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 smartphones, 3D structured light, ToF, in-display optical fingerprint recognition, drones, tablets, IP cameras, smart TVs, AR/VR lenses, IoT lenses, wearable devices, iris recognition 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
2018		 2019 2020
Amount Percentage Amount Percentage Amount Percentage
Optical
components		 49,952,158
100.00%		 60,745,008 100.00% 55,944,489
100.00%

5.1.4 Current products

Mainproducts Usage/functions
Optical lenses Mainly used in 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.

-52-

  • 5.1.5 New products planned and under development The Company shall invest approximately 5% to 10% of revenue in R&D expenditures for 2020. 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

  • (14) AR/VR lenses

  • (15) IoT 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		 Traditional optical
equipment		 Glasses, cameras, telescopes, microscopes, projectors, vehicle lights

Traditional imaging
products		 Photocopiers, fax machines, cameras

-53-

Industry Product
industries) Consumer digital products Digital cameras, digital video cameras, projectors, camera phones, tablet
computers,wearable devices,sports cameras,drone cameras
Consumer optical storage
products		 CD players, DVD players
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

  1. Research and development (R&D) expense in the most recent year as of the publication date of the Annual Report
f the Annual Report f the Annual Report f the Annual Report
Unit: NT$thousands
2020
2021Q1
R&D expense
3,794,356
922,375
Revenue
55,944,489
11,819,843
Percentage of expense to
revenue
6.78%
7.8%
2020 2021Q1
R&D expense 3,794,356 922,375
Revenue 55,944,489 11,819,843
Percentage of expense to
revenue		 6.78% 7.8%
  1. 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 mobilephone lens

-54-

Item Successfully developedtechnologyand products
Development of new 5P 32M AF mobile phone lens
Development of new 6P 48M AF mobile phone lens
Development of new 6P 13M freeform mobile phone lens
Development of new 6P 108M AF mobile phone lens
Development of new 7P 40M AF mobile phone lens
Development of new 7P 50M AF mobile phone lens
Development of new 7P 50M freeform mobile phone lens
Development of new 7P 200M AF mobile phone lens
Development of new 8P 108M AF mobile phone lens
Development of new 8P 50M AF mobilephone lens
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.

-55-

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.

    • 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
2019
2019		 2020 2020
Amount Percentage Amount
Percentage
Asia 60,573,486 99.72% 55,698,679 99.56%
Americas 171,288 0.28% 188,533
0.34%
Europe 234 - 57,277 0.10%
Total 60,745,008 100.00% 55,944,489
100.00%

-56-

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

  2. (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 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.

  3. (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.

  4. 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		 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.

-57-

Item Competitive Niches and
Favorable Factors		 Unfavorable
Factors		 Countermeasures
relationships and regular
supplies.
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
of major domestic and
international companies
and the Company has thus
achieved stable growth in
sales orders.
Shipment of mobile
phone lenses
account for a high
proportion of
shipments and it is
difficult to
diversify market
and product risks.
The Company shall focus
on the design and
development of new
products and expand into
new sectors and
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 1. 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 [415 x 311] 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
-58-
----- End of picture text -----

  • 5.2.3 Supply status of main materials
Material Supplier Country Supplierstatus
Engineering plastic 110185
110181
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
2019 2020 2021 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 623020
13,020,188
21		 - 653003 8,147,679 15 - 653021 1,736,065
15		 -
2 623045
11,371,169
19		 - 623045 8,145,645 15 - 623045 1,556,730
13		 -
3 653003
7,915,412
13		 - 623020 6,940,779 12 - - - - -
Others 28,438,239
47		 - Others 32,710,386 58 - Others 8,527,048
72		 -
Net
sales		 60,745,008
100		 - Net
sales		 55,944,489 100 - Net
sales		 11,819,843
100		 -

Reasons for change: Mainly due to a decrease in revenue in 2020.

-59-

  1. 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
2019 2020 2021 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 1,433,377 22 - 110185 1,388,850 22 - 110185 298,427 16 -
2 100236 899,313 14 - 100236 875,166 14 - 110181 247,407 13 -
3 100230 724,295 11 - 110181 686,220 11 - 110059 224,826 12 -
4 110181 617,843 10 - - - - - 100236 201,541 11 -

Reasons for change: Mainly due to a decrease in purchases in 2020.

  • 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		 2019 2020
Production
Capacity		 Production
Volume		 Production
Value		 Production
Capacity		 Production
Volume		 Production
Value
Optical Components 27,433,136
26,364,077		 28,433,204 28,885,993 27,749,559
29,260,181

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		 2019 2020
Domestic Sales Export Sales Domestic Sales Export Sales
Volume Value Volume Value Volume Value Volume Value
Optical
Components		 231,890 601,162
8,946,499		 60,143,846 244,039 519,132 8,952,234 55,425,357
  • 5.3 Number of employees during the two most recent years
Y 2019 2020 A f Ail 12 2021
ear s o pr ,
Number of employees Production 5,364 5,203 5,144
Management 1,362 1,418 1,408
R&D 993 1,082
1,075
Total 7,719 7,703 7,627
Averageage 30.05 31.22
31.23
Average years ofservices 3.94 4.72
4.69
Educational background distribution % PhD 0.12% 0.10% 0.10%
Masters 5.13% 5.49% 5.52%

Bachelors		 37.06% 40.08% 39.81%
Senior highschool 49.98% 48.23% 48.14%
Below senior high school 7.71% 6.10%
6.43%

-60-

  • 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.

  • Allowances: Benefits and subsidies for meals, weddings, pregnancy, funerals, hospitalization, travel, birthday, Labor Day, family day, and group insurance.

  • 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 (a total of 22 childcare centers and nurseries) to provide diverse options for employees.

  • 3.3. In 2020, 107 employees had applied for unpaid parental leave.

  • 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 2020, the Company had provided financial aid amounting to NT$600,000 for up to three 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

-61-

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 2020: 3.

  • Work environment and employees' personal safety

-62-

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.

  1. 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.

  1. Fire safety

  2. 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.

  3. 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.

  1. 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

-63-

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.

  1. 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.

  1. Human-factor hazards assessment and management

-64-

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.

  1. 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.

  2. 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.

  3. 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.

  4. 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

-65-

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.		 -
Construction
contract
Te Chang
Construction
Co.,Ltd.		 2020.11 New Plant Construction Project of Plant 4 in Taichung
Industrial Park.		 -
Construction
contract
Lee Ming
Construction
Co.,Ltd.		 2020.11 New Plant Construction Project of Plant 9 in Taichung
Industrial Park.		 -

-66-

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

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		 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		 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		 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		 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		 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		 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		 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 Financial

Financial data for the last five years (Note 1)
data in the
Item current year,
2020 2019 2018 2017 2016
as of March
31,2021
Current assets 119,399,271
111,630,060		 101,306,345 88,136,397
74,342,664
125,139,003
Equity-accounted 272,601
investments 229,512 209,445 160,594
92,224
269,004
Property, plant, and 33,790,608
equipment 32,573,230 27,850,051 24,861,461
20,246,851
33,755,579
Intangible assets 112,794
101,741		 80,566 84,159
34,828
97,693
Other assets 17,700,956
9,287,055		 3,202,017 2,658,622
2,357,893
19,740,084
Total assets 171,276,230
153,821,598		 132,648,424 115,901,233
97,074,460
179,001,363
Before
Current distribution
30,229,181
27,150,157		 24,930,979 23,409,706
20,141,260
44,116,210
liabilities
After		 42,503,009
distribution
(Note 2)		 37,747,233 34,052,512 33,134,870
28,659,163
Note 3
Non-current
liabilities 244,891
277,530		 117,874 94,296
90,685
241,952
Before
Total distribution
30,474,072
27,427,687		 25,048,853 23,504,002
20,231,945
44,358,162
liabilities
After		 42,747,900
distribution
(Note 2)		 38,024,763 34,170,386 33,229,166
28,749,848
Note 3
Equity attributable to
owners of the parent
company 140,802,158
126,393,911		 107,599,571 92,397,231
76,842,515
134,643,201
Capital stock 1,341,402
1,341,402		 1,341,402 1,341,402
1,341,402
1,341,402
Capital surplus 1,560,586
1,558,058		 1,557,011 1,556,388
1,555,729
1,560,586
Before
Retained distribution
139,645,983
125,636,027		 106,503,622 91,870,266
74,432,221
132,687,400
earnings After 127,372,155 97,382,089
distribution
(Note 2)		 115,038,951 82,145,102
65,914,318
Note 3
Other equity (1,745,813) (2,141,576) (1,802,464) (2,370,825) (486,837) (946,187)
Total Before
equity distribution
140,802,158
126,393,911		 107,599,571 92,397,231
76,842,515
134,643,201
After 128,528,330
distribution
(Note 2)		 115,796,835 98,478,038 82,672,067
68,324,612
Note 3

Note 1: The financial data for the last five years have been audited and certified by CPAs. Note 2: The 2020 earnings distribution has been approved by the Board of Directors.

Note 3: Earnings distribution is subject to the approval of the Board of Directors.

-67-

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,
2021
Item 2020 2019 2018 2017 2016
Operating revenue
55,944,489
60,745,008		 49,952,158 53,127,510 48,351,791
11,819,843
Gross profit
37,472,234
41,940,620		 34,351,475 36,855,930 32,421,250
7,652,192
Operating profit (loss)
32,032,118
36,499,337		 29,611,940 32,093,302 27,913,957
6,346,889
Non-operating income

and expenses		 (338,351) 79,518 1,583,931 (133,781) 337,242
155,771
Profit before tax
31,693,767
36,578,855		 31,195,871 31,959,521 28,251,199
6,502,660
Net profit from
continuing operations

for theperiod		 24,534,131
28,263,082		 24,369,534 25,975,623 22,733,025
5,315,245
Net profit for the

period		 24,534,131
28,263,082		 24,369,534 25,975,623 22,733,025
5,315,245
Other comprehensive
income (loss )(net of
tax)for theperiod 468,664
(348,256)		 557,347 (1,901,763) (758,906) 799,626
Total comprehensive 27,914,8

income for theperiod		 25,002,795
26		 24,926,881 24,073,860 21,974,119
6,114,871
Earnings per share
182.90
210.70		 181.67 193.65 169.47
39.62

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

-68-

Condensed Parent Company Only Balance Sheet

Unit: NT$ thousands

Year
Financial data for the last five years (Note 1)
Item 2019 2019 2018 2017 2016
Current assets
106,462,765
92,358,323		 72,191,515 62,529,852
47,889,108
Equity-accounted

investments		 13,802,157
20,309,368		 30,107,282 27,482,428
27,117,248
Property, plant and
equipment 33,542,417
32,286,239		 27,487,598 24,426,973
19,798,137
Intangible assets
112,794
101,741		 80,345 83,718
34,215
Other assets
17,688,537
9,271,574		 3,175,080 2,643,901
2,333,367
Total assets
171,608,670
154,327,245		 133,041,820 117,166,872
97,172,075
Before
Current distribution 30,561,621
27,655,804		 25,324,375 24,675,423
20,238,954
liabilities
After		 42,835,449
distribution Note 2
38,252,880		 34,445,908 34,400,587
28,756,857
Non-current liabilities
244,891
277,530		 117,874 94,218
90,606
Before
Total distribution 30,806,512
27,933,334		 25,442,249 24,769,641
20,329,560
liabilities
After		 43,080,340
distribution Note 2
38,530,410		 34,563,782 34,494,805
28,847,463
Equity attributable to
owners of the parent

company		 140,802,158
126,393,911		 107,599,571 92,397,231
76,842,515
Capital stock
1,341,402
1,341,402		 1,341,402 1,341,402
1,341,402
Capital surplus
1,560,586
1,558,058		 1,557,011 1,556,388
1,555,729
Before
Retained
distribution		 139,645,983
125,636,027		 106,503,622 91,870,266
74,432,221
earnings After 127,372,155
distribution Note 2
115,038,951		 97,382,089 82,145,102
65,914,318
Other equity
(1,745,813) (2,141,576) (1,802,464) (2,370,825) (486,837)
Total Before
equity distribution 140,802,158
126,393,911		 107,599,571 92,397,231
76,842,515
After 128,528,330
distribution Note 2
115,796,835		 98,478,038 82,672,067
68,324,612

Note 1: The financial data of the last five years have been audited and certified by CPAs. Note 2: The 2020 earnings distribution has been approved by the Board of Directors.

-69-

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 2020 2019 2018 2017 2016
Operating revenue 53,979,503 58,681,535 47,178,620
49,497,163
44,417,341
Gross profit 35,860,393 40,290,118 32,390,727
34,445,454
29,931,865
Operating profit 30,504,120 34,945,825 27,766,406
29,785,722
25,852,059
Non-operating income and expenses 972,592 982,583 3,147,331
1,871,196
2,095,816
Profit before tax 31,476,712 35,928,408 30,913,737
31,656,918
27,947,875
Net profit from continuing operations for
24,534,131 28,263,082 24,369,534
25,975,623
22,733,025
theperiod
Net profit for the period 24,534,131 28,263,082 24,369,534
25,975,623
22,733,025
Other comprehensive income (loss) (net of
468,664 (348,256) 557,347
(1,901,763)
(758,906)
tax)for theperiod
Total comprehensive incomefor the period 25,002,795 27,914,826 24,926,881
24,073,860
21,974,119
Earnings per share 182.90 210.70 181.67
193.65
169.47

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

2020 2019 2018 2017 2016
Certifying CPA Shyhhuar Kuo
Chun-Yuan Wu
Tzu-Hsin Chang
Shyhhuar Kuo		 Tzu-Hsin Chang
Chun-Man Chen		 Tzu-Hsin Chang
Chun-Man Chen

Chun-Man Chen
Tzu-Hsin Chang
Audit Opinion Unmodified
opinion		 Unmodified
opinion		 Unmodified
opinion		 Unmodified
opinion		 Unmodified
opinion

-70-

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 2020 2019 2018 2017 2016 year, as of

March 31,
2021
Financial Debt ratio 17.79 17.83 18.88 20.28
20.84
24.78
structure Long-term funds to property, 417.41 388.88 386.78 372.03
(%)
plant and equipment ratio
379.98
399.59
Current ratio (%) 394.98
411.16 406.35 376.50
369.11
283.66
Quick ratio (%) 378.27
Solvency 396.80 388.33 364.72
355.52
271.76
Interest coverage ratio 13644.46
13434.29 - -
-
13084.82
Receivables turnover rate 4.24
(times) 4.55 3.75 3.50
3.62
4.84
Average collection days 86
80 97 104
101
75
Inventory turnover rate (times) 4.83
5.00 4.82 6.31
5.04
3.75
Operating Payables turnover rate (times) 11.95
11.42 7.84 8.02
6.70
10.72
performance
Average inventory turnover 76

days		 73 76 58
72
97
Property, plant and equipment 1.69
turnover rate(times) 2.01 1.90 2.36
2.40
1.40
Total asset turnover (times) 0.34
0.42 0.40 0.50
0.53
0.27
Return on assets (%) 15.09
19.73 19.61 24.39
25.11
12.14
Return on equity (%) 18.36
24.16 24.37 30.70
32.42
15.44

Pre-tax income to paid-in		 2362.73
Profitability

capital ratio(%)		 2726.91 2325.62 2382.55
2106.09
1939.06
Net margin (%) 43.85
46.53 48.79 48.89
47.02
44.97
Earnings per share (NT$) 182.90
210.70 181.67 193.65
169.47
39.62
Cash flow ratio 96.10
94.40 126.72 134.88
119.15
20.50
Cash flow Cash flow adequacy ratio 176.51
189.77 206.52 214.64
204.29
181.41
(%)
Cash flow reinvestment ratio 11.31
11.27 17.60 21.71
17.49
5.72
Operating leverage 1.43
1.36 1.42 1.32
1.35
1.50
Leverage
Financial leverage 1
1 1 1
1
1
The decrease in return on assets was mainly due to a decrease in net income.
The decrease in return on equitywas mainlydue to a decrease in net income.

-71-

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 2020 2019 2018 2017 2016
Debt ratio 17.95 18.10
19.12
21.14		 20.92
Financial structure Long-term funds to property, plant and 420.50
(%)
equipment ratio
392.34
391.88
378.64		 388.59
Current ratio (%) 348.35 333.96
285.07
253.41		 236.62
Solvency Quick ratio (%) 332.92 321.42
269.22
245.13		 227.58
13551.03
Interest coverage ratio
13195.42
-
-		 -
Receivables turnover rate (times) 4.51 4.71
4.32
4.08		 3.94
Average collection days 81 77
84
89		 93
Inventory turnover rate (times) 5.33 5.63
5.44
8.16		 6.53
Operating
f		 Payables turnover rate (times) 8.26 8.08
4.76
4.82		 3.87
perormance Average inventory turnover days 68 65
67
45		 56
Property, plant and equipment turnover rate 1.64
(times) 1.96
1.82
2.24		 2.26
Total asset turnover (times) 0.33 0.41
0.38
0.46		 0.48
Return on assets (%) 15.06 19.67
19.48
24.24		 24.81
Return on equity (%) 18.36 24.16
24.37
30.70		 32.42
Profitability Pre-tax income to paid-in capital ratio (%) 2346.55 2678.42
2304.58
2359.99		 2083.48
Net margin (%) 45.45 48.16
51.65
52.48		 51.18
182.90
Earnings per share (NT$)
210.70
181.67
193.65		 169.47
Cash flow ratio 93.69 85.03
102.80
127.72		 98.06
Cash flow (%) Cash flow adequacy ratio 160.42 159.87
174.64
181		 171.23
Cash flow reinvestment ratio 11.15 9.91
13.27
21.92		 12.99
Operating leverage 1.46 1.39
1.43
1.37		 1.35
L
everage Financial leverage 1 1
1
1		 1
The decrease in return on assets was mainly due to a decrease in net income.
The decrease in return on equitywas mainlydue to a decrease in net income.

-72-

The formula is as follows:

  1. Financial structure

  2. (1) Deb ratio = Total liabilities / total assets.

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

  4. Debt-paying ability

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

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

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

  8. Operation performance

  9. (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).

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

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

  12. (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).

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

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

  15. (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).

-73-

6.3 2020 Supervisors' Review Report for the Financial Report

Largan Precision Co., Ltd.

Supervisors' Review Report

We hereby approve

The Company's 2020 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 2021 Annual General Shareholders' Meeting

Largan Precision, Co., Ltd.

Supervisor: Chung-Jen Liang

Tsui-Ying Chiang

Date: February 22[nd] , 2021

-74-

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, 2020 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 22, 2021

-75-

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, 2020 and 2019, 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, 2020 and 2019, 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.

1. 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.

-76-

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, 2020 and 2019, 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.

-77-

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:

  1. 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.

  2. 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.

  3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

  4. 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.

  5. 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.

  6. 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.

-78-

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 Shyh-Huar, Kuo and Chun-Yuan, Wu.

KPMG

Taipei, Taiwan (Republic of China) February 22, 2021

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.

-79-

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
-		 2,626
-		 164,559
-		 4,496
-		 105,849
-		 277,530
-		 27,427,687
18		 1,341,402
1		 1,341,402
1		 1,558,058
1		 125,636,027
81		 (2,141,576)
(1)		 (2,141,576)
(1)		 126,393,911
82		 126,393,911
82		 153,821,598
100		 153,821,598
100
December 31, 2020 Amount
%		 $ 249,535
-		 873
-		 1,567,850
1		 32,460
-		 22,024,514
13		 9,331
-		 6,156,182
4		 43,401
-		 145,035
-		 30,229,181
18		 8,692
-		 123,164
-		 3,766
-		 109,269
-		 244,891
-		 30,474,072
18		 1,341,402
1		 1,560,586
1		 139,645,983
81		 (1,745,813)
(1)		 140,802,158
82		 $
171,276,230
100
(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2020 and 2019 (Expressed in Thousands of New Taiwan Dollars) December 31, 2020
December 31, 2019		 Assets
Amount
%
Amount
%
Liabilities and Equity		 Current assets:
Current liabilities:		 Cash and cash equivalents (Note 6(a) and (v))
$ 89,621,272
52
84,920,560
55
2100
Short-term borrowings (Note 6(l) and (v))		 Current financial assets at fair value through profit or loss(Note 6(b) and (v))
13,207,411
8
7,067,853
5
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))
41,470
-
113,051
-
2180
Accounts payable to related parties (Note 6(v) and 7)		 Notes receivable, net (Note 6(d) and (v))
9,345
-
17,661
-
2200
Other payables (Note 6(p) and (v))		 Accounts receivable, net (Note 6(d) and (v))
11,149,800
7
15,195,892
10
2220
Other payables to related parties (Note 6(v) and 7)		 Accounts receivable from related parties, net (Note 6(d) and (v) and 7)
6,960
-
7,682
-
2230
Current tax liabilities		 Other receivables (Note 6(e) and (v))
285,842
-
395,506
-
2280
Current lease liabilities (Note 6 (m) and (v))		 Other receivables from related parties (Note 6(e) and (v) and 7)
26,660
-
13,230
-
2300
Other current liabilities		 Inventories (Note 6(f))
4,026,420
2
3,631,102
3		 Other current assets (Note 6 (k)、(v) and 8)
1,024,091
1
267,523
-
Non-Current liabilities:		 119,399,271
70
111,630,060
73
2570
Deferred tax liabilities (Note 6(o))		 Non-current assets:
2580
Non-current lease liabilities (Note 6(m) and (v))		 Investments accounted for using equity method (Note 6(g))
272,601
-
229,512
-
2600
Other non-current liabilities (Note 6(v))		 Property, plant and equipment (Note 6(h) and 7)
33,790,608
20
32,573,230
21
2640
Net defined benefit liabilities (Note 6(n))		 Right-of-use assets (Note 6(i))
180,185
-
217,758
-		 Intangible assets (Note 6(j))
112,794
-
101,741
-
Total liabilities		 Deferred tax assets (Note 6(o))
509,269
-
478,473
-
Equity:		 Other non-current assets (Note 6(k)、(v) and 8)
1,840,940
1
2,167,929
2
Equity attributable to owners of parent: (Note 6(q))		 Other non-current financial assets (Note 6(k)、(v) and 8)
15,170,562
9
6,422,895
4
3110
Share capital		 51,876,959
30
42,191,538
27
3200
Capital surplus		 3300
Retained earnings		 3400
Other equity interest		 Total assets
$
171,276,230
100
153,821,598
100
Total equity attributable to owners of parent
Total liabilities and equity
1100 1110 1120 1150 1170 1180 1200 1210 1310 1470 1550 1600 1755 1780 1840 1900 1980

-80-

(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, 2020 and 2019

(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 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:
7100
Interest income (Note 6(u))
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,
net (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		 2020
Amount
%
$ 55,944,489
100
18,476,853
33
37,467,636
67
4,598
-
37,472,234
67
399,738
1
1,246,022
2
3,794,356
7
5,440,116
10
32,032,118
57
1,304,977
3
11,633
-
(1,693,226)
(3)
(2,323)
-
40,588
-
(338,351)
-
31,693,767
57
7,159,636
13
24,534,131
44
(6,134)
-
160,404
-
-
-
154,270
-
314,394
1
-
-
314,394
1
468,664
1
$
25,002,795
45
$
182.90
$
180.94		 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
1,579,468
3
12,468
-
(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

See accompanying notes to consolidated financial statements.

-81-

Total equity attributable to owners of parent 107,599,571 - 107,599,571 107,599,571 - - (9,121,533) (9,121,533) (9,121,533) (9,121,533) 1,047 1,047 28,263,082 (348,256) (348,256) 27,914,826 27,914,826 126,393,911 126,393,911 126,393,911 - - (10,597,076) (10,597,076) (10,597,076) (10,597,076) 2,528 2,528 24,534,131 468,664 468,664 25,002,795 25,002,795 - 140,802,158 140,802,158
Total (1,802,464) - (1,802,464) - - - - - - (339,112) (339,112) (2,141,576) (2,141,576) - - - - - - 474,798 474,798 (79,035) (1,745,813)
(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, 2020 and 2019 (Expressed in Thousands of New Taiwan Dollars) Equity attributable to owners of parent Other equity interest Retained earnings
Unrealized		 gains (losses) on Exchange
financial assets		 differences on
measured at		 translation of
fair value		 Unappropriated
foreign
through other		 Share
Capital
Legal
Special
retained
financial
comprehensive		 Capital
surplus
reserve
reserve
earnings
Total
statements
income		 1,341,402
1,557,011
13,582,819
2,370,825
90,549,978
106,503,622
(1,747,603)
(54,861)		 -
-
-
-
-
-
-
-		 1,341,402
1,557,011
13,582,819
2,370,825
90,549,978
106,503,622
(1,747,603)
(54,861)		 -
-
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)
(25,084)		 -
-
-
-
28,253,938
28,253,938
(314,028)
(25,084)		 1,341,402
1,558,058
16,019,773
1,802,464
107,813,790
125,636,027
(2,061,631)
(79,945)		 1,341,402
1,558,058
16,019,773
1,802,464
107,813,790
125,636,027
(2,061,631)
(79,945)		 -
-
2,826,308
-
(2,826,308)
-
-
-		 -
-
-
339,112
(339,112)
-
-
-		 -
-
-
-
(10,597,076)
(10,597,076)
-
-		 -
-
2,826,308
339,112
(13,762,496)
(10,597,076)
-
-		 -
2,528
-
-
-
-
-
-		 -
-
-
-
24,534,131
24,534,131
-
-		 -
-
-
-
(6,134)
(6,134)
314,394
160,404		 -
-
-
-
24,527,997
24,527,997
314,394
160,404		 -
-
-
-
79,035
79,035
-
(79,035)		 1,341,402
1,560,586
18,846,081
2,141,576
118,658,326
139,645,983
(1,747,237)
1,424
$ $ $ $
Balance at January 1, 2019 Effects 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 Balance at January 1, 2020 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 measured at fair value through other comprehensive income Balance at December 31, 2020

-82-

(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, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

2020
Cash flows from operating activities:
Profit before income tax
$ 31,693,767
Adjustments:
Adjustments to reconcile profit (loss):
Depreciation expense
4,258,933
Amortization expense
85,266
Interest expense
2,323
Interest income
(1,304,977)
Share of profit of associates accounted for using equity method
(40,588)
Losses on disposal of property, plant and equipment
6,792
Property, plant and equipment transferred to expenses
-
Losses on disposal of intangible assets
-
Realized profit from sales
(4,598)
Unrealized foreign exchange loss (profit)
10,099
Other
(1,460)
Total adjustments to reconcile profit
3,011,790
Changes in operating assets and liabilities:
Changes in operating assets:
Increase in financial assets mandatorily measured at fair value through profit or loss
(6,139,558)
Decrease in notes receivable
8,316
Decrease (increase) in accounts receivable (including from related parties)
4,046,814
(Increase) decrease in inventories
(395,318)
(Increase) decrease in other current assets
(684,632)
Total changes in operating assets
(3,164,378)
Changes in operating liabilities:
Increase (decrease) in notes payable
171
Increase (decrease) in accounts payable (including to related parties)
110,795
Increase in other current liabilities
1,561,454
Decrease in net defined benefit liabilities
(2,714)
Total changes in operating liabilities
1,669,706
Total changes in operating assets and liabilities
(1,494,672)
Cash inflow generated from operations
33,210,885
Interest received
1,327,922
Interest paid
(2,323)
Income taxes paid
(5,485,787)
Net cash flows from operating activities
29,050,697
Cash flows from investing activities:
Proceeds from disposal of financial assets at fair value through other comprehensive income
223,673
Acquisition of property, plant and equipment
(5,770,667)
Proceeds from disposal of property, plant and equipment
1,672
(Increase) decrease in refundable deposits
(1,841)
Decrease (increase) in other non-current assets
328,830
Acquisition of intangible assets
(91,871)
Increase in other financial assets
(8,747,667)
Dividends received
-
Net cash flows used in investing activities
(14,057,871)
Cash flows from financing activities:
Increase (decrease) in short-term borrowings
23,619
(Decrease) Increase in guarantee deposits received
(730)
Payment of lease liabilities
(40,734)
Cash dividend paid
(10,597,076)
Overdue dividend transferred to capital surplus
2,528
Net cash flows used in financing activities
(10,612,393)
Effect of exchange rate changes on cash and cash equivalents
320,279
Net increase in cash and cash equivalents
4,700,712
Cash and cash equivalents at beginning of period
84,920,560
Cash and cash equivalents at end of period
$
89,621,272		 2019
36,578,855
3,738,701
72,220
2,723
(1,579,468)
(26,305)
5,176
188
184
(19,200)
(24,751)
-
2,169,468
(5,776,044)
809,860
(4,544,485)
262,248
418,598
(8,829,823)
(144)
(315,646)
2,700,843
(1,136)
2,383,917
(6,445,906)
32,302,417
1,563,771
(2,723)
(8,233,755)
25,629,710
-
(8,495,683)
3,508
394,369
(92,107)
(62,280)
(6,107,599)
26,636
(14,333,156)
(318,099)
23
(39,133)
(9,121,533)
1,047
(9,477,695)
(301,725)
1,517,134
83,403,426
84,920,560

See accompanying notes to consolidated financial statements.

-83-

(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, 2020 and 2019

(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 22, 2021.

(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 details of impact on the Group’s adoption of the new amendments beginning January 1, 2020 are as follows:

  • (i) Amendments to IFRS 16 “COVID-19-Related Rent Concessions”

As a practical expedient, a lessee may elect not to assess whether a rent concession that meets certain conditions is a lease modification, rather any changes in lease liability are recognized in profit or loss. The amendments have been endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) in July 2020, earlier application from January 1, 2020 is permitted. Related accounting policy is explained in Note 4(j).

The Group has elected to apply the practical expedient for all rent concessions that meet the criteria beginning January 1, 2020, with early adoption. No adjustment was made upon the initial application of the amendments. The amounts recognized in profit or loss for the year ended December 31, 2020 was $1,460 thousand.

  • (ii) Other amendments

The following new amendments, effective January 1, 2020, do not have a significant impact on the Group’s consolidated financial statements:

  • ●Amendments to IFRS 3 “Definition of a Business”

  • ●Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform”

  • ●Amendments to IAS 1 and IAS 8 “Definition of Material”

(Continued)

-84-

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

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

The Group assesses that the adoption of the new amendments, effective for annual period beginning on January 1, 2021, would not have a significant impact on its consolidated financial statements.

  • (c) The impact of IFRS issued by IASB but not yet endorsed by the FSC

The following new and amended standards, which may be relevant to the Group, have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

Standards or
Interpretations
Amendments to IAS 1
“Classification of Liabilities as
Current or Non-current”
Amendments to IAS 37
“Onerous Contracts－Cost of
Fulfilling a Contract”		 Content of amendment
Effective date per
IASB
The amendments aim to promote consistency
in applying the requirements by helping
companies
determine
whether,
in
the
statement of balance sheet, debt and other
liabilities with an uncertain settlement date
should be classified as current (due or
potentially due to be settled within one year)
or non-current.
The amendments include clarifying the
classification
requirements
for
debt
a
company might settle by converting it into
equity.
January 1, 2023
The amendments clarify that the ‘ costs of
fulfilling a contract’ comprises the costs that
relate directly to the contract as follows:
●the incremental costs – e.g. direct labor
and materials; and
●an allocation of other direct costs – e.g. an
allocation of the depreciation charge for
an item of property, plant and equipment
used in fulfilling the contract.
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.

The Group does not expect the other new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its consolidated financial statements.

(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.

(Continued)

-85-

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

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.

(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.

(Continued)

-86-

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

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.

  • (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)
Sales of optical
components
Astro
Net International Trading
Ltd. (Net)
Investment
Net
Largan (Dongguan) Optronic
Ltd. (Largan Dongguan)
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, 2020
December
31, 2019
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

(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, 2020
December
31, 2019
49.37%
49.37%
88.00%
88.00%

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

(Continued)

-87-

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.

(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

(Continued)

-88-

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

  • (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.

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.

(Continued)

-89-

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

  • 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.

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

(Continued)

-90-

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

  • 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.

(Continued)

-91-

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

  • 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 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.

(Continued)

-92-

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

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 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.

(Continued)

-93-

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

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. 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.

(Continued)

-94-

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

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 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.

(Continued)

-95-

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

(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

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

  • (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

(Continued)

-96-

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

  • 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 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

(Continued)

-97-

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

� 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.

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.

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 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.

As a practical expedient, the Group elects not to assess whether all rent concessions that meets all the following conditions are lease modifications or not:

  • the rent concessions occurring as a direct consequence of the COVID-19 pandemic;

  • the change in lease payments that resulted in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;

  • any reduction in lease payments that affects only those payments originally due on, or before, June 30, 2021; and

  • there is no substantive change in other terms and conditions of the lease.

In accordance with the practical expedient, the effect of the change in the lease liability is reflected in profit or loss in the period in which the event or condition that triggers the rent concession occurs.

(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’.

(Continued)

-98-

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

(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

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.

(Continued)

-99-

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

(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

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.

(Continued)

-100-

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

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 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.

(Continued)

-101-

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

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 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.

(Continued)

-102-

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

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 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.

(Continued)

-103-

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

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 to the carrying amounts of assets and liabilities within the next financial year is as follows. Those assumptions and estimation have been updated to reflect the impact of COVID-19 pandemic:

(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).

(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,
2020
$ 555
4,726,551
84,894,166
$
89,621,272		 December 31,
2019
737
7,217,048
77,702,775
84,920,560

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

(Continued)

-104-

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

  • (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
For market risk, please refer to note 6(v).		 December 31,
2020
$ -
13,207,411
$
13,207,411		 December 31,
2019
-
7,067,853
7,067,853
  • (c) Financial assets at fair value through other comprehensive income
Equity investments at fair value through other
comprehensive income
Listed common shares
Domestic Company - AVISION INC.
Hong Kong Company - XIAOMI CORP-CLASS B
Total		 December 31,
2020
$ 41,470
-
$
41,470		 December 31,
2019
17,609
95,442
113,051
  • (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 November 2020, the Group has sold all of its shares held in XIAOMI CORPCLASS B as a result of financial management. The shares sold had a fair value of $223,673 thousand, resulting in the Group to realize a gain of $79,035 thousand, which had been reclassified from other comprehensive income to retained earnings.

There were no disposals of strategic investments and transfers of any cumulative gain or loss within equity relating to these investments as of December 31, 2019.

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

  • (iii) As of December 31, 2020 and 2019, the financial assets at fair value through other comprehensive income of the Group had not been pledged as collateral for long-term borrowing.

(Continued)

-105-

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

(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,
2020
$ 8,755
590
11,153,342
6,960
(3,542)
$
11,166,105		 December 31,
2019
14,551
3,110
15,199,502
7,682
(3,610)
15,221,235

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, 2020 December 31, 2020 December 31, 2020 Loss allowance
provision
Gross carrying
amount
-
3,542
3,542
Loss allowance
provision
Gross carrying
amount		 Weighted-
average loss rate
-
%
0.5594
$ 14,579,455
645,390
$
15,224,845		 -
3,610
3,610

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

Balance at January 1
Foreign exchange losses
Balance at December 31		 For the years ended December 31,
2020
$ 3,610
(68)
$
3,542		 2019
3,643
(33)
3,610

The notes and accounts receivable of the Group had not been pledged as collateral as of December 31, 2020 and 2019.

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

(Continued)

-106-

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

(e) Other receivables

Other receivables-Tax receivables
Other receivables-Interest receivables
Other receivables-Others
Other receivables-Related parties		 December 31,
2020
$ 106,662
155,182
23,998
26,660
$
312,502		 December 31,
2019
143,665
178,127
73,714
13,230
408,736

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

(f) Inventories

Finished goods
Work in progress
Raw materials
Supplies
Merchandise inventory		 December 31,
2020
$ 2,258,302
480,201
1,188,402
97,829
1,686
$
4,026,420		 December 31,
2019
2,250,386
358,058
955,777
66,881
-
3,631,102

For the years ended December 31, 2020 and 2019, 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 $292,625 thousand and $327,048 thousand, respectively.

As of December 31, 2020 and 2019, the Group did not provide any inventories as collateral for its loans.

(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 December 31,
2020
$
272,601		 December 31,
2019
229,512

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

In 2020 and 2019, 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 2020
$
40,588		 2019
26,305

As of December 31, 2020 and 2019, the Group did not provide any investment accounted for using equity method as collaterals for its loans.

(Continued)

-107-

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

(h) Property, plant and equipment

The cost, depreciation, and impairment of the property, plant and equipment of the Group in 2020 and 2019, were as follows:

Cost or deemed cost:
Balance on January 1, 2020
Additions
Disposal
Reclassification
Effect of movements
in exchange rates
Balance on December 31, 2020
Balance on January 1,2019
Additions
Disposal
Reclassification
Effect of movements
in exchange rates
Balance on December 31, 2019
Depreciation and impairment loss:
Balance on January 1,2020
Depreciation for the year
Disposal
Reclassification
Effect of movements
in exchange rates
Balance on December 31, 2020
Balance on January 1, 2019
Depreciation for the year
Disposal
Effect of movements in exchange rate
Balance on December 31, 2019
Carrying amounts:
Balance on December 31, 2020
Balance on January 1, 2019
Balance on December 31,2019		 Land Building and
construction		 Machinery and
equipment		 Transportation
equipment		 Office
equipment
and other
facilities		 Rental
assets		 Construction in
progress and
testing equip
1,220,914
783,942
-
(586,042)
-
1,418,814
1,093,098
759,537
-
(631,721)
-
1,220,914
-
-
-
-
-
-
-
-
-
-
-
1,418,814
1,093,098
1,220,914		 Total
52,696,775
5,441,374
(1,976,513)
(8,043)
18,700
$ 8,170,433
50,370
-
-
-
$
8,220,803
$ 5,481,248
2,689,185
-
-
-
$
8,170,433
$ -
-
-
-
-
$
-
$ -
-
-
s
-
$
-
$
8,220,803
$
5,481,248
$
8,170,433		 54,898
-
-
-
-
54,898 56,172,293
54,898
-
-
-
-		 44,423,483
8,471,965
(134,465)
(31,482)
(32,726)
54,898 52,696,775
21,243
406
-
-
-		 20,123,545
4,215,405
(1,968,049)
(3,595)
14,379
21,649 22,381,685
20,836
407
-
-		 16,573,432
3,697,415
(125,781)
(21,521)
21,243 20,123,545
33,249 33,790,608
34,062 27,850,051
33,655 32,573,230

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.

(Continued)

-108-

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

(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:

Land
Cost:
Balance at January 1, 2020
$ 13,148
Additions
-
Disposal/Write-off
-
Effect of movement in exchange rate
221
Balance at December 31, 2020
$
13,369
Balance at January 1, 2019
$ 13,658
Additions
-
Effect of movement in exchange rate
(510)
Balance at December 31, 2019
$
13,148
Accumulated depreciation and impairment
losses:
Balance at January 1, 2020
$ 467
Depreciation for the year
465
Effect of movement in exchange rate
18
Balance at December 31, 2020
$
950
Balance at January 1, 2019
$ -
Depreciation for the year
485
Effect of movement in exchange rate
(18)
Balance at December 31, 2019
$
467
Carrying amount:
Balance at December 31, 2020
$
12,419
Balance at January 1, 2019
$
13,658
Balance at December 31, 2019
$
12,681		 Buildings and
construction
245,878
19,328
(13,576)
-
251,630
92,749
153,129
-
245,878
40,801
43,063
-
83,864
-
40,801
-
40,801
167,766
92,749
205,077		 Total
259,026
19,328
(13,576)
221
264,999
106,407
153,129
(510)
259,026
41,268
43,528
18
84,814
-
41,286
(18)
41,268
180,185
106,407
217,758

(j) Intangible assets

The costs and amortization of the intangible assets of Group in 2020 and 2019 were as follows:

Costs:
Balance at January 1, 2020
Additions
Disposal
Reclassification
Effect of movement in exchange rates
Balance at December 31,2020		 Computer
Software
$ 344,218
91,871
(39,064)
4,448
(65)
$
401,408

(Continued)

-109-

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

Balance at January 1, 2019
Additions
Disposal
Reclassification
Effect of movement in exchange rates
Balance at December 31,2019
Amortization and impairment Loss:
Balance at January 1, 2020
Amortization for the year
Disposal
Effect of movement in exchange rates
Balance at December 31, 2020
Balance at January 1, 2019
Amortization for the year
Disposal
Effect of movement in exchange rates
Balance at December 31, 2019
Carrying value:
Balance at December 31,2020
Balance at January 1, 2019
Balance at December 31,2019		 Computer
Software
$ 251,687
62,280
(1,031)
31,294
(12)
$
344,218
$ 242,477
85,266
(39,064)
(65)
$
288,614
$ 171,121
72,220
(847)
(17)
$
242,477
$
112,794
$
80,566
$
101,741

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

Operating cost
Operating expense		 2020
$ 17,924
67,342
$
85,266		 2019
22,374
49,846
72,220

(Continued)

-110-

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

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

The other current assets, other non-current financial 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		 December 31,
2020		 December 31,
2019
9,000
258,523
6,422,895
638,009
1,512,965
16,955
8,858,347
$ 9,000
1,015,091
15,170,562
639,850
1,201,090
-
$
18,035,593

  • (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 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,
2020
$
249,535
$
2,350,465
0.95%~1.10%		 December 31,
2019
218,868
1,081,132
0.95%~0.96%

(m) Lease liabilities

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

carrying amounts of the Group's lease liabilities were as follows:
Current
Non-current		 December 31,
2020
$
43,401
$
123,164		 December 31,
2019
39,801
164,559

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

(Continued)

-111-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES Notes to the Consolidated 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
COVID-19-related rent concessions (recognized as
other income)		 For the year
ended December
31, 2020		 For the year
ended December
31, 2019
$
2,323
$
91
$
287
$
1,460		 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, 2020		 For the year
ended December
31, 2019
$
43,435		 43,861

(i) Real estate leases

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,
2020
$ 167,568
(58,299)
$
109,269		 December 31,
2019
164,467
(58,618)
105,849

(Continued)

-112-

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

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 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 $57,998 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		 2020
$ 164,467
(7,311)
2,416
7,996
$
167,568		 2019
156,042
(5,364)
2,686
11,103
164,467
  • 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		 2020
$ 58,618
4,595
(7,311)
535
1,862
$
58,299		 2019
58,201
3,166
(5,364)
656
1,959
58,618

(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, 2020 and 2019, 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		 2020
$ 708
1,708
(535)
$
1,881
2020
$ 1,432
14
81
354
$
1,881
$
2,397		 2019
706
1,980
(656)
2,030
2019
1,569
16
90
355
2,030
2,615
  • 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, 2020 and 2019 were as follows:

Accumulated amount at January 1
Recognized during the period
Accumulated amount at December 31		 2020
$ 71,584
6,134
$
77,718		 2019
62,440
9,144
71,584

6) Actuarial assumptions

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

Discount rate
Increase in future salary rate		 December 31,
2020
December 31,
2019
%
0.750
%
1.125
%
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 $3,149 thousand.

The weighted average lifetime of the defined benefit plans is 17.32 years.

(Continued)

-114-

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

7) Sensitivity analysis

On December 31, 2020 and 2019, if the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

December 31, 2020
Discount rate
Future salary increases rate
December 31, 2019
Discount rate
Future salary increases rate		 Influences of defined benefit obligations
Increase0.25%
Decrease0.25%
$ (4,470)
4,659
4,434
(4,275)
$ (4,390)
4,578
4,400
(4,240)

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 2020 and 2019.

(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 $190,203 thousand and $173,419 thousand for the years ended December 31, 2020 and 2019, respectively.

Except for the Company, other subsidiaries adopted the defined contribution method under their local law, wherein the pension costs amounted to $1,200 thousand and $16,856 thousand for the years ended December 31, 2020 and 2019, respectively.

(iii) Short-term employee benefit

The Company’s employee benefit liabilities were as follows:

December 31,
2020
Compensated absences liability
$
111,949		 December 31,
2019
94,551

(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 2020 and 2019 were as follows:

2020 2019
Current tax expense:
Current period $ 7,191,599 8,611,490
Adjustment for prior periods (7,233) (207,182)
Deferred tax expense：
Origination and reversal of temporary differences (24,730) (88,535)
$ 7,159,636 8,315,773
Reconciliation of income tax and profit before tax 2020 and
2019 is as follows:
2020 2019
Profit before income tax $ 31,693,767 36,578,855
Income tax using the Company's domestic tax rate 6,338,753 7,315,771
Effect of tax rates in foreign jurisdiction (not applicable
for separate financial statements) 178,863 170,345
Investment tax credits (371,218) (386,000)
Changes in unrecognized temporary differences (320,072) (354,757)
Gains on disposal of investment (2,396) (1,062)
Income tax for repatriation of overseas earnings 648,710 1,233,626
Others income tax adjustments 138,808 109,182
Current-year losses for which no deferred tax asset was
recognized 525 255
Changes in provision in prior periods (7,233) (207,182)
Surtax on unappropriated earnings 554,896 435,595
Total $ 7,159,636 8,315,773

(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, 2020 and 2019. 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,
2020
$
13,614,355		 December 31,
2019
24,690,199
  • 2) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2020 and 2019 were as follows:

Deferred Tax Assets:

Unrealized profit
from associates
Balance at January 1, 2020
$ 214,692
Recognized profit or loss
(50,681)
Balance at December 31, 2020
$
164,011
Balance at January 1, 2019
$ 287,921
Recognized profit or loss
(73,229)
Balance at December 31, 2019
$
214,692		 Others
263,781
81,477
345,258
114,951
148,830
263,781		 Total
478,473
30,796
509,269
402,872
75,601
478,473

Deferred Tax Liabilities:

Unrealized
exchange gains
Balance at January 1, 2020
$ -
Recognized profit or loss
-
Balance at December 31, 2020
$
-
Balance at January 1, 2019
$ 13,738
Recognized profit or loss
(13,738)
Balance at December 31, 2019
$
-		 Other
2,626
6,066
8,692
1,822
804
2,626		 Total
2,626
6,066
8,692
15,560
(12,934)
2,626

(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 2018 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,
2020
$ 18,526,199
1,696,954
1,801,361
$
22,024,514		 December 31,
2019
17,092,301
2,018,019
1,595,063
20,705,383

(q) Capital and other equity

(i) Ordinary Shares

As of December 31, 2020 and 2019, 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,
2020
$ 817,574
738,155
4,857
$
1,560,586		 December 31,
2019
817,574
738,155
2,329
1,558,058

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, 2020 and 2019 were $2,141,576 thousand and $1,802,464 thousand, respectively.

3) Earnings distribution

The amounts of cash dividends on the appropriations of earnings for 2019 and 2018 had been approved during the board meeting and shareholders’ meeting on April 22, 2020 and June 12, 2019, respectively.

The relevant dividend distributions to shareholders were as follows:

Dividends distributed to
common shareholders:
Cash		 2019
Amount
per share
Total
amount
$
79
10,597,076		 2018 2018
Amount
per share
$
79		 Amount
per share
68		 Total
amount
9,121,533

(Continued)

-119-

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

  • 4) Other equity interests (net-of-taxes)
Exchange differences
on translation of
foreign financial
statements
Balance at January 1, 2020
$ (2,061,631)
Exchange differences on foreign operations:
The Group
315,510
Subsidiaries
(1,116)
Unrealized gains (losses) from financial
assets measured at fair value through
other comprehensive income:
The Group
-
Subsidiaries
-
Disposal of investments in equity instruments
designated at fair value through other
comprehensive income
-
Balance at December 31, 2020
$
(1,747,237)
Balance at January 1, 2019
$ (1,747,603)
Exchange differences on foreign operations:
The Group
(314,485)
Subsidiaries
457
Unrealized gains (losses) from financial
assets measured at fair value through other
comprehensive income:
The Group
-
Balance at December 31, 2019
$
(2,061,631)		 Unrealized gains (losses)
on financial assets
measured at fair value
through other
comprehensive income
(79,945)
-
-
160,170
234
(79,035)
1,424
(54,861)
-
-
(25,084)
(79,945)

(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 2020 and 2019 were as follows:

2020
Basic earnings per share
Profit of the Company for the year
$
24,534,131
Weighted-average number of outstanding ordinary shares
(in thousands)
134,140
$
182.90
Diluted earnings per share
Profit of the Company for the year
$
24,534,131
Weighted-average number of outstanding ordinary shares (in
thousands)
134,140
Effect of dilutive potential common shares (thousand
shares)
Effect of employee share bonus
1,456
Weighted-average number of ordinary shares (in thousands)
(after adjustment of potential diluted ordinary shares)
135,596
$
180.94
(s)
Revenue from contracts with customers
Disaggregation of revenue
2020
Sale of goods
$
55,944,489		 2019
28,263,082
134,140
210.70
28,263,082
134,140
1,228
135,368
208.79
2019
60,745,008

(Continued)

-121-

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, 2020 and 2019, the Company estimated its employee remuneration amounting to $4,416,600 thousand and $5,087,917 thousand, and directors' and supervisors' remuneration amounting to $331,245 thousand and $381,594 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 2020 and 2019. The amounts, as stated in the consolidated financial statements, are identical to those of the actual distributions for 2020 and 2019.

(u) Non-operating income and expenses

(i) Interest income

The details of interest income for the years 2020 and 2019 were as follows:

Interest income－bank deposits 2020
$
1,304,977		 2019
1,579,468

(ii) Other income

The details of other income for the years 2020 and 2019 were as follows:

2020 2019
Rent income $ 11,633 12,468
ther gains and losses
he details of other gains and losses for the years 2020 and 2019 were as follows:
2020 2019
Foreign exchange losses $ (1,818,783) (1,710,349)
Losses on disposals of property, plant
and equipment (6,792) (5,176)
Losses on disposals of Intangible assets - (184)
Gains on financial assets at fair value through 39,591 9,352
profit or loss
Others 92,758 170,357
$ (1,693,226) (1,536,000)

(iii) Other gains and losses

The details of other gains and losses for the years 2020 and 2019 were as follows:

(Continued)

-122-

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

(iv) Finance costs

The details of finance costs for the years 2020 and 2019 were as follows:

Interest expense
 2020
$
2,323		 2019
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, 2020 and 2019, 65% 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, 2020 and 2019.

(ii) Liquidity risk

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

Carrying
amount
December 31, 2020
Non-derivative financial liabilities
Short-term borrowings
$ 249,535
Accounts and notes payable (including
related parties)
1,601,183
Other payables
(including related parties)
22,033,845
Lease liabilities-current and non-current
166,565
Guarantee deposits received
3,766
$
24,054,894		 Contractual
cash flows
249,535
1,601,183
22,033,845
170,450
3,766
24,058,779		 Within a
year
249,535
1,601,183
22,033,845
45,148
-
23,929,711		 Over 1
year
-
-
-
125,302
3,766
129,068

(Continued)

-123-

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

Carrying
amount
December 31, 2019
Non-derivative financial liabilities
Short-term borrowings
$ 218,868
Accounts and notes payable (including
related parties)
1,490,217
Other payables
(including related parties)
20,719,965
Lease liabilities-current and non-current
204,360
Guarantee deposits received
4,496
$
22,637,906		 Contractual
cash flows
218,868
1,490,217
20,719,965
210,507
4,496
22,644,053		 Within a
year
218,868
1,490,217
20,719,965
42,037
-
22,471,087		 Over 1
year
-
-
-
168,470
4,496
172,966

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, 2020
Foreign
Currency
Exchange
Rates
New Taiwan
Dollars
$ 1,554,358
28.4800
44,268,119
2,199,342
0.2763
607,678
6,229,338
4.3770
27,265,813
64,252
28.4800
1,829,885
3,057,562
0.2763
844,804		 December 31, 2020
Foreign
Currency
Exchange
Rates
New Taiwan
Dollars
$ 1,554,358
28.4800
44,268,119
2,199,342
0.2763
607,678
6,229,338
4.3770
27,265,813
64,252
28.4800
1,829,885
3,057,562
0.2763
844,804		 December 31, 2019 December 31, 2019
Foreign
Currency
$ 1,554,358
2,199,342
6,229,338
64,252
3,057,562		 Exchange
Rates
28.4800
0.2763
4.3770
28.4800
0.2763		 Foreign
Currency
939,747
2,901,676
5,758,912
68,152
3,075,467		 Exchange
Rates
New Taiwan
Dollars
29.800
28,173,615
0.2760
800,863
4.3050
24,792,118
29.9800
2,043,195
0.2760
848,829

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, 2020 and 2019 would have increased (decreased) the net profit after tax by $555,735 thousand and $406,997 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.

(Continued)

-124-

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

  • 3) Foreign exchange gain and loss on monetary items

Since the Group has many kinds of functional currency, the information on foreign exchange gain (loss) on monetary items is disclosed by total amount. For the years 2020 and 2019, the foreign exchange gain (loss) (including realized and unrealized portions) amounted to $(1,818,783) thousand and $(1,710,349) 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 $1,996 thousand and $1,751 thousand for the years ended December 31, 2020 and 2019, respectively. This is mainly due to the Group’s borrowings in variable rates.

  • (v) Other market price risk

For the years ended December 31, 2020 and 2019, 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,
2020
2019
Other
comprehensive
income after tax
Net income
Other
comprehensive
income after tax
Net income
$
415
132,074
1,131
70,679
$
(415)
(132,074)
(1,131)
(70,679)

  • (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)

-125-

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, 2020

Book Value
Financial assets at fair value through
profit or loss
Non derivative financial assets
mandatorily measured at fair value
through profit or loss
$ 13,207,411
Financial assets at fair value through
other comprehensive income
Stocks listed on domestic markets
41,470
Financial assets measured at amortized
cost
Cash and cash equivalents
89,621,272
Notes and accounts receivable and other
receivables (including related parties
and excluding tax receivable)
11,371,945
Other financial assets-current and
non-current
15,179,562
Refundable deposits
639,850
Subtotal
116,812,629
Total
$
130,061,510
Financial liabilities at amortized cost
Short-term borrowings
$ 249,535
Notes and accounts payable
(including related parties)
1,601,183
Other payables
(including related parties)
22,033,845
Lease liabilities-current and non-current
166,565
Guarantee deposits received
3,766
Total
$
24,054,894		 Book Value Fair Value Fair Value
Level 1
13,207,411
41,470
-
-
-
-
-
13,248,881
-
-
-
-
-
-		 Level 2
-
-
-
-
-
-
-
-
-
-
-
-
-
-		 Level 3
-
-
-
-
-
-
-
-
-
-
-
-
-
-		 Total
13,207,411
41,470
-
-
-
-
-
13,248,881
-
-
-
-
-
-

(Continued)

-126-

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

Book Value
Financial assets at fair value through
profit or loss
Non derivative financial assets
mandatorily measured at fair value
through profit or loss
$ 7,067,853
Financial assets at fair value through
other comprehensive income
Stocks listed on domestic and foreign
markets
113,051
Financial assets measured at amortized
cost
Cash and cash equivalents
84,920,560
Notes and accounts receivable and other
receivables (including related parties
and excluding tax receivable)
15,486,306
Other financial assets-current and
non-current
6,431,895
Refundable deposits
638,009
Subtotal
107,476,770
Total
$
114,657,674
Financial liabilities at amortized cost
Short-term borrowings
$ 218,868
Notes and accounts payable
(including related parties)
1,490,217
Other payables
(including related parties)
20,719,965
Lease liabilities-current and non-current
204,360
Guarantee deposits received
4,496
Total
$
22,637,906		 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
-
-
-
-
-
-

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)

-127-

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 2020 and 2019.

(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)

-128-

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 are 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, 2020 and 2019, no other guarantees were outstanding.

(Continued)

-129-

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, 2020 and 2019, were as follows:

Acquisition of right-of-use assets through lease, please refer to note 6(m).

(Continued)

-130-

LARGAN PRECISION CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated 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
Lease liabilities-current and
non-current
Guarantee deposits received
Total liabilities from
financing activities		 January
1,2020
$ 218,868
204,360
4,496
$ 427,724
January
1,2019
$ 552,868
90,364
4,473
$ 647,705		 Cash flows Non-cash changes Non-cash changes Non-cash changes December
31,2020
Foreign
exchange
movement
Acquisition
7,048
-
-
4,399
-
-
7,048
4,399
Non-cash changes		 Changes in
lease
payments
-
(1,460)
-
(1,460)
December
31,2019
249,535
166,565
3,766
419,866
Foreign
exchange
movement		 Acquisition
-
153,129
-
153,129
(15,901)
-
-
(15,901)		 218,868
204,360
4,496
427,724

(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 AI-Tech Co., Ltd. Subsidiaries
(Largan HealthAI-Tech)
NEO (Shanghai) Medical Technology Co.,Ltd Joint venture

(Continued)

-131-

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 Sale Receivables from related parties Receivables from related parties
2020 2019 December 31,
2020
6,960		 December 31,
2019
$
56,174		 67,113 7,682

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 2020 and 2019, 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 Purchases Purchases Payables to related parties
December 31,
2020
December 31,
2019
32,460
4,664
2020 2019
$
194,848		 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 2020 and 2019, 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 2020 and 2019, the Group's income from providing technical services to its related parties were as follows (classified under the other gains):

Subsidiaries-Largan Medical 2020 2019
$
15,761		 33,466

During 2020 and 2019, the Group's expense from technical services from its related parties were as follows (classified under the other expense):

Subsidiaries-Largan Digital 2020 2019
$
2,527		 3,279

(Continued)

-132-

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

  • (iv) Purchases and disposals of property, plant and equipment

  • 1) During 2020 and 2019, the Group's disposals of its equipment to its related parties are summarized as follows:

Subsidiaries:
Largan Digital
Largan Medical		 2020 2020 Carrying
amount		 Carrying
amount		 2019
Disposal
price
Gain from
disposal
1,371
94
284
18
1,655
112		 2019
Disposal
price
Gain from
disposal
1,371
94
284
18
1,655
112
Carrying
amount		 Disposal
price		 Gain from
disposal
$ 996
38
$
1,034		 1,007
41		 11
3		 1,277
266		 94
18
1,048 14 1,543 112
  • 2) During 2020 and 2019, the Group's purchase of its equipment from its related parties are summarized as follows:
Subsidiaries 2020 2019
$
86,080		 102,225
  • 3) During 2020 and 2019, the Group assisted its related parties to purchase other facilities as follows:
Subsidiaries-Largan Digital
Subsidiaries-Largan Medical		 2020 2019
$ 13,794
3,539
$
17,333		 31,109
56,046
87,155
  • (v) Rental income

During 2020 and 2019, the Group's rental income on offices to the subsidiaries are summarized as follows:

Subsidiaries-Largan Digital
Subsidiaries-Largan Medical		 2020 2019
$ 3,473
4,617
$
8,090		 3,904
4,560
8,464

(Continued)

-133-

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

(vi) Other

For the years ended December 31, 2020 and 2019, 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
Largan Health AI-Tech		 December 31, 2020
December 31, 2019
other
receivables
from related
parties
other
payables
to related
parties
other
receivables
from related
parties
other
payables to
related
parties		 December 31, 2020
December 31, 2019
other
receivables
from related
parties
other
payables
to related
parties
other
receivables
from related
parties
other
payables to
related
parties		 December 31, 2020
December 31, 2019
other
receivables
from related
parties
other
payables
to related
parties
other
receivables
from related
parties
other
payables to
related
parties		 December 31, 2020
December 31, 2019
other
receivables
from related
parties
other
payables
to related
parties
other
receivables
from related
parties
other
payables to
related
parties
$ 17,606
9,054
-
$
26,660		 9,161
170
-
9,331		 2,044
11,174
12
13,230		 14,496
86
-
14,582

(c) 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		 2020
$ 206,995
275
-
-
-
$
207,270		 2019
264,243
270
-
-
-
264,513

(8) Pledged assets:

The carrying values of pledged assets were as follow:

Pledged assets Object
Customs office deposit
Litigation deposit
Completion deposit		 December
31, 2020
$ 9,000
625,733
320,145
$
954,878		 December
31, 2019
Time deposit (classified under other
current assets)
Time deposit (classified under other
non-current assets)
Time deposit (classified under other
non-current financial assets)		 9,000
625,733
317,708
952,441

(Continued)

-134-

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

(9) Commitments and contingencies

  • (i) As of December 31, 2020 and 2019, the Group’s outstanding letters of credit were $0 and $33,575 thousand, respectively.

  • (ii) As of December 31, 2020 and 2019, the Group’s outstanding purchase commitments for construction in progress, property and plant were $12,204,700 thousand and $2,106,300 thousand, respectively； The amount of construction that has not yet occurred were $9,908,276 thousand and $113,967 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. (2020: none)

(10) Losses Due to Major Disasters: None

(11) Subsequent Events: None

(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		 2020 2020 2020 2019 2019 2019
Operating
cost		 Operating
expenses		 Total Operating
cost		 Operating
expenses		 Total
Employee benefits
Salary 5,491,330 3,639,723 9,131,053 5,646,546 3,896,422 9,542,968
Labor and health insurance 380,869 124,945 505,814 358,639 113,945 472,584
Pension 139,291 53,993 193,284 143,961 48,344 192,305
Others 162,763 36,974 199,737 158,894 34,815 193,709
Depreciation 3,931,282 327,651 4,258,933 3,479,142 259,559 3,738,701
Amortization 17,924 67,342 85,266 22,374 49,846 72,220

(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:None

  • (ii) Guarantees and endorsements for other parties: None

(Continued)

-135-

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

(iii) Securities held as of December 31, 2020 (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%
96,281
1,004,061
-
1,004,601
-
113,926
1,853,047
-
1,853,047
-
3,049
50,118
-
50,118
-
96,682
1,445,395
-
1,445,395
-
86,634
962,287
-
962,287
-
55,972
863,851
-
863,851
-
3,100
557,590
-
557,590
-
52,271
716,778
-
716,778
-
47,510
758,017
-
758,017
-
56,586
753,138
-
753,138
-
88,914
910,268
-
910,268
-
18,733
296,052
-
296,052
-
153,386
2,093,093
-
2,093,093
-
3,784
62,000
-
62,000
-
46,243
721,705
-
721,705
-
12,649
160,011
-
160,011
-
4,253
41,470
-
41,470
-		 (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%
96,281
1,004,061
-
1,004,601
-
113,926
1,853,047
-
1,853,047
-
3,049
50,118
-
50,118
-
96,682
1,445,395
-
1,445,395
-
86,634
962,287
-
962,287
-
55,972
863,851
-
863,851
-
3,100
557,590
-
557,590
-
52,271
716,778
-
716,778
-
47,510
758,017
-
758,017
-
56,586
753,138
-
753,138
-
88,914
910,268
-
910,268
-
18,733
296,052
-
296,052
-
153,386
2,093,093
-
2,093,093
-
3,784
62,000
-
62,000
-
46,243
721,705
-
721,705
-
12,649
160,011
-
160,011
-
4,253
41,470
-
41,470
-		 (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%
96,281
1,004,061
-
1,004,601
-
113,926
1,853,047
-
1,853,047
-
3,049
50,118
-
50,118
-
96,682
1,445,395
-
1,445,395
-
86,634
962,287
-
962,287
-
55,972
863,851
-
863,851
-
3,100
557,590
-
557,590
-
52,271
716,778
-
716,778
-
47,510
758,017
-
758,017
-
56,586
753,138
-
753,138
-
88,914
910,268
-
910,268
-
18,733
296,052
-
296,052
-
153,386
2,093,093
-
2,093,093
-
3,784
62,000
-
62,000
-
46,243
721,705
-
721,705
-
12,649
160,011
-
160,011
-
4,253
41,470
-
41,470
-		 (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%
96,281
1,004,061
-
1,004,601
-
113,926
1,853,047
-
1,853,047
-
3,049
50,118
-
50,118
-
96,682
1,445,395
-
1,445,395
-
86,634
962,287
-
962,287
-
55,972
863,851
-
863,851
-
3,100
557,590
-
557,590
-
52,271
716,778
-
716,778
-
47,510
758,017
-
758,017
-
56,586
753,138
-
753,138
-
88,914
910,268
-
910,268
-
18,733
296,052
-
296,052
-
153,386
2,093,093
-
2,093,093
-
3,784
62,000
-
62,000
-
46,243
721,705
-
721,705
-
12,649
160,011
-
160,011
-
4,253
41,470
-
41,470
-		 (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%
96,281
1,004,061
-
1,004,601
-
113,926
1,853,047
-
1,853,047
-
3,049
50,118
-
50,118
-
96,682
1,445,395
-
1,445,395
-
86,634
962,287
-
962,287
-
55,972
863,851
-
863,851
-
3,100
557,590
-
557,590
-
52,271
716,778
-
716,778
-
47,510
758,017
-
758,017
-
56,586
753,138
-
753,138
-
88,914
910,268
-
910,268
-
18,733
296,052
-
296,052
-
153,386
2,093,093
-
2,093,093
-
3,784
62,000
-
62,000
-
46,243
721,705
-
721,705
-
12,649
160,011
-
160,011
-
4,253
41,470
-
41,470
-		 (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%
96,281
1,004,061
-
1,004,601
-
113,926
1,853,047
-
1,853,047
-
3,049
50,118
-
50,118
-
96,682
1,445,395
-
1,445,395
-
86,634
962,287
-
962,287
-
55,972
863,851
-
863,851
-
3,100
557,590
-
557,590
-
52,271
716,778
-
716,778
-
47,510
758,017
-
758,017
-
56,586
753,138
-
753,138
-
88,914
910,268
-
910,268
-
18,733
296,052
-
296,052
-
153,386
2,093,093
-
2,093,093
-
3,784
62,000
-
62,000
-
46,243
721,705
-
721,705
-
12,649
160,011
-
160,011
-
4,253
41,470
-
41,470
-
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		 96,281 1,004,061 - 1,004,601 -
The Company Open-end fund-
Capital Money Market
Fund		 -
Current financial assets
mandatorily measured
fair value through
profit or loss		 113,926 1,853,047 - 1,853,047 -
The Company Open-end fund-
Yuanta De-Li Money
Market Fund		 -
Current financial assets
mandatorily measured
fair value through
profit or loss		 3,049 50,118 - 50,118 -
The Company. Open-end fund-
Jih Sun Money
Market Fund		 -
Current financial assets
mandatorily measured
fair value through
profit or loss		 96,682 1,445,395 - 1,445,395 -
The Company Open-end fund-
CTBC Hwa-win
Money Market Fund		 -
Current financial assets
mandatorily measured
fair value through
profit or loss		 86,634 962,287 - 962,287 -
The Company Open-end fund-
FSITC Taiwan Money
Market Fund		 -
Current financial assets
mandatorily measured
fair value through
profit or loss		 55,972 863,851 - 863,851 -
The Company Open-end fund-
FSITC Money Market
Fund		 -
Current financial assets
mandatorily measured
fair value through
profit or loss		 3,100 557,590 - 557,590 -
The Company Open-end fund-
Eastspring
Investments Well Pool
Money Market Fund		 -
Current financial assets
mandatorily measured
fair value through
profit or loss		 52,271 716,778 - 716,778 -
The Company
Open-end fund-
Prudential Financial
Money Market Fund		 -
Current financial assets
mandatorily measured
fair value through
profit or loss		 47,510 758,017 - 758,017 -
The Company Open-end fund-
Union Money Market
Fund		 -
Current financial assets
mandatorily measured
fair value through
profit or loss		 56,586 753,138 - 753,138 -
The Company Open-end fund-
TCB Taiwan Money
Market Fund		 -
Current financial assets
mandatorily measured
fair value through
profit or loss		 88,914 910,268 - 910,268 -
The Company Open-end fund-
Fubon Chi-Hsiang
Money Market Fund		 -
Current financial assets
mandatorily measured
fair value through
profit or loss		 18,733 296,052 - 296,052 -
The Company Open-end fund-
Taishin 1699 Money
Market Fund		 -
Current financial assets
mandatorily measured
fair value through
profit or loss		 153,386 2,093,093 - 2,093,093 -
The Company Open-end fund-
Hua Nan Phoenix
Money Market Fund		 -
Current financial assets
mandatorily measured
fair value through
profit or loss		 3,784 62,000 - 62,000 -
The Company Open-end fund-
Shin Kong Chi-Shin
Money Market Fund		 -
Current financial assets
mandatorily measured
fair value through
profit or loss		 46,243 721,705 - 721,705 -
The Company Open-end fund-
Mega Diamond
Money Market Fund		 -
Current financial assets
mandatorily measured
fair value through
profit or loss		 12,649 160,011 - 160,011 -
The Company Stock－AVISION
INC.		 -
Current Equity
Investments at fair
value through other
comprehensive income		 4,253 41,470 - 41,470 -

(Continued)

-136-

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		 Account
name		 Name
of
counter-
party		 Relationsh
ip
with the
company		 Beginning Balance Beginning Balance Purchases Purchases Sales Sales Sales Sales 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		 - - 59,770 620,358 36,511 380,000 - - - - 96,281 1,004,061
The
Company		 Open-end fund-
Capital Money
Market Fund		 Current financial
assets mandatorily
measured fair value
through profit or loss		 - - 30,904 500,550 83,022 1,349,000 - - - - 113,926 1,853,047
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 42,682 700,000 70,198 1,152,612 1,150,000 2,612 3,049 50,118
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 36,816 550,000 - - - - 96,682 1,445,395
The
Company		 Open-end fund-
CTBC Hwa-win
Money Market Fund		 Current financial
assets mandatorily
measured fair value
through profit or loss		 - - 36,159 400,004 130,059 1,443,000 79,584 883,491 881,053 2,438 86,634 962,287
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 23,389 360,000 - - - - 55,972 863,851
The
Company		 Open-end fund-
FSITC Money
Market Fund		 Current financial
assets mandatorily
measured fair value
through profit or loss		 - - 2,626 470,265 2,707 486,000 2,233 401,455 400,000 1,455 3,100 557,590
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 60,315 826,000 49,797 682,102 680,000 2,102 52,271 716,778
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 30,253 481,000 - - - - 47,510 758,017
The
Company		 Open-end fund-
TCB Taiwan Money
Market Fund		 Current financial
assets mandatorily
measured fair value
through profit or loss		 - - 55,360 564,576 130,506 1,335,000 96,952 990,553 989,000 1,553 88,914 910,268
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 17,847 300,000 52,440 881,177 880,000 1,177 - -
The
Company		 Open-end fund-
Taishin 1699 Money
Market Fund		 Current financial
assets mandatorily
measured fair value
through profit or loss		 - - 43,845 595,603 109,541 1,493,000 - - - - 153,386 2,093,093
The
Company		 Open-end fund-
Shin Kong Chi-Shin
Money Market Fund		 Current financial
assets mandatorily
measured fair value
through profit or loss		 - - - - 46,243 721,000 - - - - 46,243 721,705
The
Company		 Open-end fund-
Fubon Chi-Hsiang
Money Market Fund		 Current financial
assets mandatorily
measured fair value
through profit or loss		 - - - - 38,259 604,000 19,526 308,290 308,000 290 18,733 296,052

(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		 Buildings
Expansion		 2020.1 1,659,800 As of December 31,
2020, $184,941
thousand has been paid		 TE CHANG
CONSTRUCTI
ON CO., LTD		 None - Public
Bidding		 Extend the
buildings		 None
The
Company		 Buildings
Expansion		 2020.4 1,378,000 As of December 31,
2020, $68,900
thousand has been paid		 CHUNG RUEY
ENGINEERING
CO., LTD.		 None - Public
Bidding		 Extend the
buildings		 None
The
Company		 Buildings
Expansion		 2020.4 1,005,000 As of December 31,
2020, $50,250
thousand has been paid		 YANKEY
ENGINEERING
CO., LTD		 None - Public
Bidding		 Extend the
buildings		 None
The
Company		 Buildings
Expansion		 2020.11 3,816,800 As of December 31,
2020, has not been paid		 TE CHANG
CONSTRUCTI
ON CO., LTD		 None - Public
Bidding		 Extend the
buildings		 None
The
Company		 Buildings
Expansion		 2020.11 2,238,800 As of December 31,
2020, has not been paid		 LEE MING
CONSTRUCTI
ON CO., LTD.		 None - Public
Bidding		 Extend the
buildings		 None

(Continued)

-137-

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 Transactions with terms
different from others		 Transactions with terms
different from others		 Notes/Accounts receivable (payable) Notes/Accounts receivable (payable) Note
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 1,727,506 %
22		 120Days - - (683,081) (31)%
The Company Amtai
International
Ltd.		 The Company's
subsidiary		 Sales (12,828,653) %
(23)		 60Days - - 3,337,315 36%
The Company Largan Medical
Co., Ltd.		 The Company's
subsidiary		 Purchases 188,486 %
2		 30Days - - (32,113) (1)%
The Company Largan
(Dongguan)
Optronic Ltd.		 The Company's
subsidiary		 Sales (22,503,930) %
(41)		 120Days - - 2,859,633 30%
Amtai
International
Ltd.		 The Company The Company's
subsidiary		 Purchases 12,827,470 %
83		 60Days - - (3,337,315) (90)%
Amtai
International
Ltd.		 The Company The Company's
subsidiary		 Sales (1,722,683) %
(11)		 120Days - - 683,340 19%
Amtai
International
Ltd.		 Largan
(Dongguan)
Optronic Ltd.		 The Company's
subsidiary		 Purchases 2,319,662 %
15		 30Days - - (308,829) (8)%
Amtai
International
Ltd.		 Largan
(Dongguan)
Optronic Ltd.		 The Company's
subsidiary		 Sales (1,717,676) %
(10)		 90Days - - - -%
Largan
(Dongguan)
Optronic Ltd.		 Amtai
International
Ltd.		 The Company's
subsidiary		 Purchases 1,713,663 %
7		 90Days - - (25,714) (1)%
Largan
(Dongguan)
Optronic Ltd.		 Amtai
International
Ltd.		 The Company's
subsidiary		 Sales (2,331,597) %
(9)		 30Days - - 335,169 6%
Largan
(Dongguan)
Optronic Ltd.		 The Company The Company's
subsidiary		 Purchases 22,617,232 %
93		 120Days - - (2,833,943) (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 3,370,815 4.76 - None 1,760,109
(Note1)		 -
The Company Largan (Dongguan)
Optronic Ltd.		 The Company's subsidiary 2,859,633 3.63 - None 1,659,180
(Note1)		 -
Amtai International Ltd. The Company The Company's subsidiary 683,340 2.24 - None 129,039
(Note1)		 -
Largan (Dongguan)
Optronic Ltd.		 Amtai International Ltd. The Company's subsidiary 335,169 8.30 - None 248,819
(Note1)		 -

Note1: Until February 2, 2021.

Note2: Including other receivables.

(ix) Trading in derivative instruments: None

(Continued)

-138-

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 2020 Intercompany transactions 2020 Intercompany transactions 2020 Intercompany transactions 2020
Account name Amount Trading terms Percentage of the consolidated
net revenue or total assets
0 The Company Amtai International Ltd. 1 Purchases 1,727,506 The sales prices and
payment terms were
same as those of sales
to third parties.		 3%
0 The Company Amtai International Ltd. 1 Sales 12,828,653 The sales prices and
payment terms were
same as those of sales
to third parties.		 23%
0 The Company Largan Medical Co., Ltd. 1 Purchases 188,486 The sales prices and
payment terms were
same as those of sales
to third parties.		 -%
0 The Company Largan (Dongguan)
Optronic Ltd.		 1 Sales 22,503,930 The sales prices and
payment terms were
same as those of sales
to third parties.		 40%
1 Amtai International
Ltd.		 The Company 2 Purchases 12,827,470 The sales prices and
payment terms were
same as those of sales
to third parties.		 23%
1 Amtai International
Ltd.		 The Company 2 Sales 1,722,683 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 2,319,662 The sales prices and
payment terms were
same as those of sales
to third parties.		 4%
1 Amtai International
Ltd.		 Largan (Dongguan)
Optronic Ltd.		 3 Sales 1,717,676 The sales prices and
payment terms were
same as those of sales
to third parties.		 3%
2 Largan
(Dongguan)
Optronic Ltd.		 Amtai International Ltd. 3 Purchases 1,713,663 The sales prices and
payment terms were
same as those of sales
to third parties.		 3%
2 Largan
(Dongguan)
Optronic Ltd.		 Amtai International Ltd. 3 Sales 2,331,597 The sales prices and
payment terms were
same as those of sales
to third parties.		 4%
2 Largan
(Dongguan)
Optronic Ltd.		 The Company 2 Purchases 22,617,232 The sales prices and
payment terms were
same as those of sales
to third parties.		 40%

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)

-139-

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, 2020 Balance as of December 31, 2020 Balance as of December 31, 2020 High balance
during the year		 Net income
(losses)
of investee		 Share of
profits/losses of
investee		 Note
December 31, 2020 December 31, 2019 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		 240,330 %
49.37		 28,054 43,952 The Company's
subsidiary
The
Company		 Largan
(Hong
Kong) Ltd.		 Hong Kong Investment 658,555 658,555 31,100 %
100		 328,263 %
100		 3,423 3,423 The Company's
subsidiary
The
Company		 Astro
International
Ltd.		 Samoa Investment 247,104 247,104 7,600 %
100		 13,195,093 %
100		 1,449,579 1,557,656 The Company's
subsidiary
The
Company		 Ba Fang Co.,
Ltd.		 Taichung,
Taiwan		 Investment、
building
construction etc.		 43,000 43000 4,300 %
100		 33,878 %
100		 (2,624) (2,624) The Company's
subsidiary
The
Company		 Largan
Health AI-
Tech Co.,
Ltd.		 Taipei,
Taiwan		 Sales of medical
equipment		 8,800 8,800 880 %
88		 4,593 %
88		 (2,324) (2,045) 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		 355,353 %
40.5		 159,239 64,492 The Company's
subsidiary
Largan
Digital Co.,
Ltd.		 Alpha
Holding Inc.		 Samoa Investment 118,415 118,415 3,700 %
100		 30,398 %
100		 (1,353) (1,353) The Company's
subsidiary
Astro
International
Ltd.		 Net
International
Trading Ltd.		 British Virgin
Islands		 Investment 756,599 756,599 24,300 %
100		 7,626,629 %
100		 753,952 753,952 The Company's
subsidiary
Astro
International
Ltd.		 Amtai
International
Ltd.		 Samoa Sales of Optical
part etc.		 50,600 50,600 1,500 %
100		 5,684,815 %
100		 676,432 683,799 The Company's
subsidiary
Astro
International
Ltd.		 Largan
Health
Technology
Inc.		 Samoa Investment 110,898 110,898 1,476 %
12		 27,678 %
12		 (10,989) (1,319) The Company's
subsidiary
Ba Fang Co.,
Ltd.		 Fang Yuan
Co., Ltd.		 Taichung,
Taiwan		 Investment 29,800 29,800 2,980 %
100		 20,792 %
100		 (2,668) (2,668) The Company's
subsidiary
Largan
Medical Co.
Ltd.		 Beta
International
Ltd.		 Samoa investment 120,334 120,334 3,700 %
100		 66,959 %
100		 (3,551) (3,551) The Company's
subsidiary
Alpha
Holding Inc.		 Largan
Health
Technology
Inc.		 Samoa investment 110,898 110,898 1,476 %
12		 27,678 %
12		 (10,989) (1,319) The Company's
subsidiary
Beta
International
Ltd.		 Largan
Health
Technology
Inc.		 Samoa investment 110,898 110,898 3,936 %
32		 64,240 %
32		 (10,989) (3,517) The Company's
subsidiary
Largan
Health
Technology
Inc.		 Dynadx
Corporation		 U.S.A Development of
the software		 12,010 11,925 11,035 %
100		 4,540 %
100		 (1,027) (1,027) The Company's
subsidiary
Largan
Health
Technology
Inc.		 Largan
Health
Technology
Co., Ltd.
 Taichung,
Taiwan		 Sales of medical
equipment		 45,797 45,797 801 %
100		 2,810 %
100		 (2,896) (2,896) The Company's
subsidiary

(Continued)

-140-

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:
(ii) (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, 2020		 Investment flows Accumulated
outflow of
investment from
Taiwan as of
December 31, 2020		 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$ 158,134 100% 100% NT$ 676,303 NT$ 4,184,200 -
Nanjing
Largan
Health
Technology
Co., Ltd.		 Health
management,
computer and
medical
device
technology
development,
consultation
and service		 - Note 1(b) - - - - RMB$ (1,663) -% 24.32% NT$ (1,730) NT$ - -
NEO
(Shanghai)
Medical
Technology
Co., Ltd.		 Technical
development
and technical
services in
the field of
medical
device
technology		 RMB$20,000 Note 1(c) - - - - RMB$ (210) 9.80% 9.80% NT$ (88) NT$ 7,910 -
Limitation on investment in Mainland China:
Accumulated Investment in Mainland Chin
as of December 31, 2020
NT$671,086
(HK$85,986 and US$12,474)
Accumulated Investment in Mainland Chin
as of December 31, 2020		 a Investment
Investme		 Amounts Authorized by
nt Commission, MOEA		 Upper Limit on Investment
NT$671,086
(HK$85,986 and US$12,474)		 NT$820,492
(HK$85,986 and US$17,720)		 NT$84,481,295

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: Since Suzhou Largan had been liquidated, the cumulative investment amount remitted from Taiwan, including the Company’s indirect investment in Suzhou Largan of US$5,000 thousand through Net International Trading Ltd., has yet to be repatriated before the year end of 2020.

Note 3: The liquidation process of Nanjing Largan Health Technology Co., Ltd. had been completed in October 2020.

  • (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”.

(d) Major shareholders:

Major shareholders:
Shareholder’s Name Shares Percentage
Mao Yu Commemorate Co., Ltd. 18,910,616 %
14.09
Shih-ching, Chen 6,756,831 %
5.03

(Continued)

-141-

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 Optical lens segment
2020
$ 55,944,489
-
1,304,977
$
57,249,466
$ 4,344,199
$
24,534,131
$ 272,601
$
171,276,230
$
30,474,072		 2019
60,745,008
-
1,579,468
62,324,476
3,810,921
28,263,082
229,512
153,821,598
27,427,687
  • (c) Production information

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.

-142-

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
China
Japan
Korea
Vietnam
Other countries
-current assets:
Region
Taiwan
China
Samoa		 2020
$ 32,405,079
8,327,699
7,158,829
6,301,395
1,751,487
$
55,944,489
December 31,
2020
$ 35,290,296
245,421
27,678
$
35,563,395		 2020
$ 32,405,079
8,327,699
7,158,829
6,301,395
1,751,487
$
55,944,489
December 31,
2020
$ 35,290,296
245,421
27,678
$
35,563,395		 2019
40,413,938
7,915,594
7,049,747
3,991,717
1,374,012
60,745,008
December 31,
2020
35,290,296
245,421
27,678
35,563,395		 December 31,
2019
34,332,651
289,298
30,312
34,652,261

Non-current assets:

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

  • (e) Major customers’ information
Customer
653003
623045
623020
Total
Customer
623020
623045
653003
Total		 2020 2020
Amount
%
$ 8,147,679
15
8,145,645
15
6,940,779
12
$
23,234,103
42
2019
Amount
%
$ 13,020,188
21
11,371,169
19
7,915,412
13
$
32,306,769
53		 %
15
15
12
42
%
21
19
13
53

-143-

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, 2020 and 2019, the statement of comprehensive income, changes in equity and cash flows for the years ended December 31, 2020 and 2019, 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, 2020 and 2019, 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.

1. 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:

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.

-144-

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.

-145-

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.

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:

  1. 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.

  2. 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.

  3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

  4. 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.

  5. 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.

  6. 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.

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.

-146-

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 Shyh-Huar, Kuo and Chun-Yuan, Wu.

KPMG

Taipei, Taiwan (Republic of China) February 22, 2021

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.

-147-

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
-		 2,626
-		 164,559
-		 4,496
-		 105,849
-		 277,530
-		 27,933,334
18		 1,341,402
1		 1,558,058
1		 1,558,058
1		 125,636,027
81		 (2,141,576)
(1)		 (2,141,576)
(1)		 126,393,911
82		 126,393,911
82		 154,327,245
100		 154,327,245
100
December 31, 2020 Amount
%		 $ 249,535
-		 873
-		 1,454,301
1		 715,194
-		 21,811,109
13		 10,147
-		 6,133,020
4		 43,401
-		 144,041
-		 30,561,621
18		 8,692
-		 123,164
-		 3,766
-		 109,269
-		 244,891
-		 30,806,512
18		 1,341,402
1		 1,560,586
1		 139,645,983
81		 (1,745,813)
(1)		 140,802,158
82		 $
171,608,670
100
Liabilities and Equity Current liabilities: Short-term borrowings (Note 6(l) and (v)) Notes payable (Note 6(v)) Accounts payable (Note 6(v)) Accounts payable to related parties (Note 6(v) and 7) Other payables (Note 6(p) and (v)) Other payables to related parties (Note 6(v) and 7) Current tax liabilities Current lease liabilities (Note 6(m) and (v)) Other current liabilities Non-Current liabilities: Deferred tax liabilities (Note 6(o)) Non-current lease liabilities (Note 6(m) and (v)) Other non-current liabilities (Note 6(v)) Net defined benefit liabilities (Note 6(n)) Total liabilities Equity attributable to owners of parent: (Note 6(q)) Share capital Capital surplus Retained earnings Other equity Total equity attributable to owners of parent
Total liabilities and equity
2100 2150 2170 2180 2200 2220 2230 2280 2300 2570 2580 2600 2640 3110 3200 3300 3400
December 31, 2019 Amount
%		 62,938,692
41		 7,067,853
5		 17,609
-		 3,110
-		 2,940,690
2		 11,614,923
7		 293,941
-		 4,015,469
3		 3,200,748
2		 265,288
-		 92,358,323
60		 20,309,368
13		 32,286,239
21		 205,077
-		 101,741
-		 478,473
-		 2,165,129
2		 6,422,895
4		 61,968,922
40		 154,327,245
100
December 31, 2020 Amount
%		 $ 78,789,365
46		 13,207,411
8		 41,470
-		 590
-		 3,180,333
2		 6,203,908
4		 263,429
-		 59,578
-		 3,694,824
2		 1,021,857
-		 106,462,765
62		 13,802,157
8		 33,542,417
20		 167,766
-		 112,794
-		 509,269
-		 1,840,940
1		 15,170,562
9		 65,145,905
38		 $
171,608,670
100
Assets Current assets: Cash and cash equivalents (Note 6(a) and (v)) Current financial assets at fair value through profit or loss (Note 6(b) and (v)) Current financial assets at fair value through other comprehensive income (Note 6(c) and (v)) Notes receivable, net (Note 6(d) and (v)) Accounts receivable, net (Note 6(d) and (v)) Accounts receivable from related parties, net (Note 6(d)、(v) and 7) Other receivables (Note 6(e)、(v)) Other receivables from related parties (Note 6(e)、(v) and 7) Inventories (Note 6(f)) Other current assets (Note 6(k)、(v) and 8) Non-current assets: Investments accounted for using equity method (Note 6(g)) Property, plant and equipment (Note 6(h) and 7) Right-of-use assets (Note 6(i)) Intangible assets (Note 6(j)) Deferred tax assets (Note 6(o)) Other non-current assets (Note 6(k)、(v) and 8) Other non-current financial assets (Note 6(k)、(v) and 8) Total assets
1100 1110 1120 1150 1170 1180 1200 1210 1310 1470 1550 1600 1755 1780 1840 1900 1980

-148-

(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, 2020 and 2019

(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 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:
7100
Interest income (Note 6(u) and 7)
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
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		 2020
Amount
%
$ 53,979,503
100
18,370,185
34
35,609,318
66
251,075
-
35,860,393
66
336,833
-
1,228,094
2
3,791,346
7
5,356,273
9
30,504,120
57
1,035,231
1
11,633
-
(1,672,311)
(3)
(2,323)
-
1,600,362
3
972,592
1
31,476,712
58
6,942,581
13
24,534,131
45
(6,134)
-
160,404
-
-
-
154,270
-
314,394
1
-
-
314,394
1
468,664
1
$
25,002,795
46
$
182.90
$
180.94		 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
803,220
1
12,469
-
(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

See accompanying notes to parent company only financial statements.

-149-

Total equity 107,599,571 - 107,599,571 107,599,571 - - (9,121,533) (9,121,533) (9,121,533) (9,121,533) 1,047 1,047 28,263,082 (348,256) (348,256) 27,914,826 27,914,826 126,393,911 126,393,911 126,393,911 - - (10,597,076) (10,597,076) (10,597,076) (10,597,076) 2,528 2,528 24,534,131 468,664 468,664 25,002,795 25,002,795 - 140,802,158 140,802,158
Total (1,802,464) - (1,802,464) - - - - - - (339,112) (339,112) (2,141,576) (2,141,576) - - - - - - 474,798 474,798 (79,035) (1,745,813)
(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, 2020 and 2019 (Expressed in Thousands of New Taiwan Dollars) Other equity interest Retained earnings
Unrealized		 gains (losses) on Exchange
financial assets		 differences on
measured at		 translation of
fair value		 Unappropriated
foreign
through other		 Share
Capital
Legal
Special
retained
financial
comprehensive		 Capital
surplus
reserve
reserve
earnings
Total
statements
income		 1,341,402
1,557,011
13,582,819
2,370,825
90,549,978
106,503,622
(1,747,603)
(54,861)		 -
-
-
-
-
-
-
-		 1,341,402
1,557,011
13,582,819
2,370,825
90,549,978
106,503,622
(1,747,603)
(54,861)		 -
-
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)
(25,084)		 -
-
-
-
28,253,938
28,253,938
(314,028)
(25,084)		 1,341,402
1,558,058
16,019,773
1,802,464
107,813,790
125,636,027
(2,061,631)
(79,945)		 1,341,402
1,558,058
16,019,773
1,802,464
107,813,790
125,636,027
(2,061,631)
(79,945)		 -
-
2,826,308
-
(2,826,308)
-
-
-		 -
-
-
339,112
(339,112)
-
-
-		 -
-
-
-
(10,597,076)
(10,597,076)
-
-		 -
-
2,826,308
339,112
(13,762,496)
(10,597,076)
-
-		 -
2,528
-
-
-
-
-
-		 -
-
-
-
24,534,131
24,534,131
-
-		 -
-
-
-
(6,134)
(6,134)
314,394
160,404		 -
-
-
-
24,527,997
24,527,997
314,394
160,404		 -
-
-
-
79,035
79,035
-
(79,035)		 1,341,402
1,560,586
18,846,081
2,141,576
118,658,326
139,645,983
(1,747,237)
1,424
$ $ $ $
Balance at January 1, 2019 Effects 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 Balance at January 1, 2020 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 Subsidiary disposes of investment in equity instruments measured at fair value through other comprehensive income Balance at December 31, 2020

-150-

(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, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from operating activities:
Profit before income tax
Adjustments:
Adjustments to reconcile profit (loss):
Depreciation expense
Amortization expense
Interest expense
Interest income
Share of profit of subsidiaries accounted for using equity method
Losses on disposal of property, plant and equipment
Property, plant and equipment transferred to expenses
Realized profit from sales
Unrealized foreign exchange loss (profit)
Other
Total adjustments to reconcile profit
Changes in operating assets and liabilities:
Changes in operating assets:
Increase in financial assets mandatorily measured at fair value through profit or loss
Decrease (increase) in notes receivable
Decrease (increase) in accounts receivable (including from related parties)
(Increase) decrease in inventories
(Increase) decrease in other current assets
Total changes in operating assets
Changes in operating liabilities:
Increase (decrease) in notes payable
Decrease in accounts payable (including to related parties)
Increase in other current liabilities
Decrease in net defined benefit liabilities
Total changes in operating liabilities
Total changes in operating assets and liabilities
Cash inflow generated from operations
Interest received
Interest paid
Income taxes paid
Net cash flows from operating activities
Cash flows from investing activities:
Acquisition of investments accounted for using equity method
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
(Increase) decrease in refundable deposits
Decrease (increase) in other non-current assets
Acquisition of intangible assets
Increase in other financial assets
Dividends received
Net cash flows used in investing activities
Cash flows from financing activities:
Increase (decrease) in short-term borrowings
(Decrease) increase in guarantee deposits received
Payment of lease liabilities
Cash dividend paid
Overdue dividend transferred to capital surplus
Net cash flows used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period		 2020
$ 31,476,712
4,205,548
85,266
2,323
(1,035,231)
(1,600,362)
6,731
-
(251,075)
10,099
(1,460)
1,421,839
(6,139,558)
2,520
5,171,372
(494,076)
(42,553)
(1,502,295)
171
(109,385)
1,505,945
(2,714)
1,394,017
(108,278)
32,790,273
1,001,121
(2,323)
(5,155,726)
28,633,345
-
(5,773,541)
1,551
(1,841)
326,030
(91,871)
(8,747,667)
12,117,060
(2,170,279)
23,619
(730)
(40,734)
(10,597,076)
2,528
(10,612,393)
15,850,673
62,938,692
$
78,789,365		 2019
35,928,408
3,679,906
72,178
2,723
(803,220)
(1,773,786)
3,050
188
(363,812)
(24,751)
-
792,476
(5,776,044)
(3,107)
(4,199,135)
259,964
850,468
(8,867,854)
(144)
(83,930)
2,643,507
(1,136)
2,558,297
(6,309,557)
30,411,327
789,013
(2,723)
(7,682,587)
23,515,030
(15,000)
(8,472,493)
1,655
394,355
(102,572)
(62,280)
(6,107,599)
7,041,101
(7,322,833)
(318,099)
23
(39,133)
(9,121,533)
1,047
(9,477,695)
6,714,502
56,224,190
62,938,692

See accompanying notes to parent company only financial statements.

-151-

(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, 2020 and 2019

(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 22, 2021.

(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 details of impact on the Company’s adoption of the new amendments beginning January 1, 2020 are as follows:

  • (i) Amendments to IFRS 16 “COVID-19-Related Rent Concessions”

As a practical expedient, a lessee may elect not to assess whether a rent concession that meets certain conditions is a lease modification, rather any changes in lease liability are recognized in profit or loss. The amendments have been endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) in July 2020, earlier application from January 1, 2020 is permitted. Related accounting policy is explained in Note 4(j).

The Company has elected to apply the practical expedient for all rent concessions that meet the criteria beginning January 1, 2020, with early adoption. No adjustment was made upon the initial application of the amendments. The amounts recognized in profit or loss for the year ended December 31, 2020 was $1,460 thousand.

(ii) Other amendments

The following new amendments, effective January 1, 2020, do not have a significant impact on the Company’s parent company only financial statements:

  • ●Amendments to IFRS 3 “Definition of a Business”

  • ●Amendments to IFRS 9, IAS39 and IFRS7 “Interest Rate Benchmark Reform”

  • ●Amendments to IAS 1 and IAS 8 “Definition of Material”

(Continued)

-152-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

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

The Company assesses that the adoption of the new amendments, effective for annual period beginning on January 1, 2021, would not have a significant impact on its parent company only financial statements.

  • (c) The impact of IFRS issued by IASB but not yet endorsed by the FSC

The following new and amended standards, which may be relevant to the Company, have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

Standards or
Interpretations
Amendments to IAS 1
“Classification of Liabilities as
Current or Non-current”
Amendments to IAS 37
“Onerous Contracts－Cost of
Fulfilling a Contract”		 Content of amendment
Effective date per
IASB
The amendments aim to promote consistency
in applying the requirements by helping
companies
determine
whether,
in
the
statement of balance sheet, debt and other
liabilities with an uncertain settlement date
should be classified as current (due or
potentially due to be settled within one year)
or non-current.
The amendments include clarifying the
classification
requirements
for
debt
a
company might settle by converting it into
equity.
January 1, 2023
The amendments clarify that the ‘ costs of
fulfilling a contract’ comprises the costs that
relate directly to the contract as follows:
●the incremental costs – e.g. direct labor
and materials; and
●an allocation of other direct costs – e.g. an
allocation of the depreciation charge for
an item of property, plant and equipment
used in fulfilling the contract.
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.

The Company does not expect the other new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its parent company only financial statements.

(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 parent company only financial statements.

(Continued)

-153-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only 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:

  • 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.

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.

(Continued)

-154-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

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.

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.

(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

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.

(Continued)

-155-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

(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.

(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.

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.

(Continued)

-156-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

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.

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.

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;

(Continued)

-157-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

  • 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 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

(Continued)

-158-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

  • 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 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.

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 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；

(Continued)

-159-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

  • 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 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.

(Continued)

-160-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

  • 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 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

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.

(Continued)

-161-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(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.

(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

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.

(Continued)

-162-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(j) Leases

  • (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:

  • 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.

(Continued)

-163-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

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 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

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.

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.

As a practical expedient, the Company elects not to assess whether all rent concessions that meets all the following conditions are lease modifications or not:

  • the rent concessions occurring as a direct consequence of the COVID-19 pandemic;

(Continued)

-164-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

  • the change in lease payments that resulted in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;

  • any reduction in lease payments that affects only those payments originally due on, or before, June 30, 2021; and

  • there is no substantive change in other terms and conditions of the lease.

In accordance with the practical expedient, the effect of the change in the lease liability is reflected in profit or loss in the period in which the event or condition that triggers the rent concession occurs.

(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.

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’.

(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

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

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.

(Continued)

-165-

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.

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 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)

-166-

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)

-167-

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)

-168-

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.

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 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.

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.

(Continued)

-169-

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.

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 to the carrying amounts of assets and liabilities within the next financial year is as follows. Those assumptions and estimation have been updated to reflect the impact of COVID-19 pandemic:

(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)

-170-

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 Parent Company
Only statement of cash flows		 December 31,
2020
$ 410
3,896,542
74,892,413
$
78,789,365		 December 31,
2019
513
6,049,498
56,888,681
62,938,692

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
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,
2020
$ -
13,207,411
$
13,207,411		 December 31,
2019
-
7,067,853
7,067,853

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

  • (c) Financial assets at fair value through other comprehensive income
Equity investments at fair value through other
comprehensive income
Listed common shares
Domestic Company - AVISION INC.		 December 31,
2020
$
41,470		 December 31,
2019
17,609

(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)

-171-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

For the years ended December 31, 2020 and 2019, the Company did not dispose of strategic investments. The gains and losses have not been transferred in the equity.

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

  • (iii) As of December 31, 2020 and 2019, 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,
2020
$ 590
3,182,583
6,203,908
(2,250)
$
9,384,831		 December 31,
2019
3,110
2,942,940
11,614,923
(2,250)
14,558,723

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, 2020 Loss allowance
provision
Gross carrying
amount
$ 9,332,427
54,654
$
9,387,081		 Weighted-average
loss rate
-
%
4.1168
December 31, 2019		 -
2,250
2,250
Loss allowance
provision
Weighted-average
loss rate
-
%
1.1892		 -
2,250
2,250

(Continued)

-172-

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, For the years ended December 31,
2020
$
2,250		 2019
2,250

The notes and accounts receivable of the Company had not been pledged as collateral as of December 31, 2020 and 2019.

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,
2020
$ 106,662
136,708
20,059
59,578
$
323,007		 December 31,
2019
143,665
102,598
47,678
4,015,469
4,309,410

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

(f) Inventories

Finished goods
Work in progress
Raw materials
Supplies		 December 31,
2020
$ 2,047,495
480,201
1,073,857
93,271
$
3,694,824		 December 31,
2019
1,932,423
358,059
849,882
60,384
3,200,748

For the years ended December 31, 2020 and 2019, 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 parent company only statement of comprehensive income for inventories written down to net realizable value, were$291,659 thousand and $297,624 thousand, respectively.

As of December 31, 2020 and 2019, 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)

-173-

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.		 December 31,
2020
$ 328,263
13,195,093
33,878
240,330
4,593
$
13,802,157		 December 31,
2019
342,121
19,731,445
36,502
192,662
6,638
20,309,368

(i) Subsidiaries

Please refer to the consolidated financial statements of the year 2020.

(ii) Collateral

As of December 31, 2020 and 2019, 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 2020 and 2019, were as follows:

Cost or deemed cost:
Balance on January 1, 2020
Additions
Disposal
Reclassification
Balance on December 31, 2020
Balance on January 1,2019
Additions
Disposal
Reclassification
Balance on December 31, 2019
Depreciation and impairment loss:
Balance on January 1,2020
Depreciation for the year
Disposal
Reclassification
Balance on December 31, 2020		 Land
Building and
Construction
Machinery
and
equipment
$ 8,170,433
6,138,987
23,485,935
50,370
27,513
3,735,154
-
(487)
(1,834,812)
-
119,952
314,183
$
8,220,803
6,285,965
25,700,460
$ 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
$ -
595,928
12,352,163
-
186,465
2,596,863
-
(487)
(1,826,565)
-
(3,584)
-
$
-
778,322
13,122,461		 Transportation
equipment
20,552
3,575
(4,347)
-
19,780
20,552
-
-
-
20,552
17,256
2,223
(4,347)
-
15,132		 Office
equipment
and other
facilities		 Rental
assets		 Construction in
progress and
testing equip
1,218,340
783,942
-
(586,042)
1,416,240
1,090,524
759,537
-
(631,721)
1,218,340
-
-
-
-
-		 Total
51,157,716
5,431,393
(1,974,974)
(8,043)
54,898
-
-
-
54,898 54,606,092
54,898
-
-
-		 42,730,822
8,473,933
(15,557)
(31,482)
54,898 51,157,716
21,243
406
-
-		 18,871,477
4,162,485
(1,966,692)
(3,595)
21,649 21,063,675

(Continued)

-174-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

Balance on January 1, 2019
Depreciation for the year
Disposal
Balance on December 31, 2019
Carrying amounts:
Balance on December 31, 2020
Balance on January 1, 2019
Balance on December 31,2019		 Land
Building and
Construction
Machinery
and
equipment
$ -
416,852
10,128,317
-
179,076
2,227,491
-
-
(3,645)
$
-
595,928
12,352,163
$
8,220,803
5,507,643
12,577,999
$
5,481,248
5,556,881
9,439,303
$
8,170,433
5,543,059
11,133,772		 Transportation
equipment
15,129
2,127
-
17,256
4,648
5,423
3,296		 Office
equipment
and other
facilities		 Rental
assets

20,836
407
-
21,243
33,249
34,062
33,655		 Construction in
progress and
testing equip
-
-
-
-
1,416,240
1,090,524
1,218,340		 Total
15,243,224
3,639,105
(10,852)
18,871,477
33,542,417
27,487,598
32,286,239

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 Company leases buildings. Information about leases for which the Company as a lessee was presented below:

Cost:
Balance at January 1, 2020
Additions
Disposal / Write-off
Balance at December 31,2020
Balance at January 1, 2019
Additions
Balance at December 31,2019
Accumulated depreciation and impairment losses:
Balance at January 1, 2020
Depreciation for the year
Balance at December 31,2020
Balance at January 1, 2019
Depreciation for the year
Balance at December 31,2019
Carrying amounts:
Balance at December 31, 2020
Balance at January 1, 2019
Balance at December 31, 2019		 Building and
construction
$ 245,878
19,328
(13,576)
$
251,630
$ 92,749
153,129
$
245,878
$ 40,801
43,063
$
83,864
$ -
40,801
$
40,801
$
167,766
$
92,749
$
205,077

(Continued)

-175-

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 2020 and 2019 were as follows:

Costs:
Balance at January 1, 2020
Additions
Disposal
Reclassification
Balance at December 31,2020
Balance at January 1, 2019
Additions
Reclassification
Balance at December 31,2019
Amortization and impairment Loss:
Balance at January 1, 2020
Amortization for the year
Disposal
Balance at December 31, 2020
Balance at January 1, 2019
Amortization for the year
Balance at December 31, 2019
Carrying value:
Balance at December 31,2020
Balance at January 1, 2019
Balance at December 31, 2019		 Computer
Software
$ 342,909
91,871
(39,064)
4,448
$
400,164
$ 249,335
62,280
31,294
$
342,909
$ 241,168
85,266
(39,064)
$
287,370
$ 168,990
72,178
$
241,168
$
112,794
$
80,345
$
101,741

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

Operating cost
Operating expense		 2020
$ 17,924
67,342
$
85,266		 2019
22,374
49,804
72,178

(Continued)

-176-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

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

The other current assets, other non-current financial 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,
2020
$ 9,000
1,012,857
15,170,562
639,850
1,201,090
-
$
18,033,359		 December 31,
2019
9,000
256,288
6,422,895
638,009
1,510,165
16,955
8,853,312

  • (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,
2020
$
249,535
$
2,350,465
0.95%~1.10%		 December 31,
2019
218,868
1,081,132
0.95%~0.96%

(m) Lease liabilities

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

carrying amounts of the Company's lease liabilities were as follows:
Current
Non-current		 December 31,
2020
$
43,401
$
123,164		 December 31,
2019
39,801
164,559

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

(Continued)

-177-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

The amounts recognized in profit or loss was as follows:

For the year ended For the year ended For the year ended
December 31, 2020 December 31, 2019
Interest on lease liabilities $ 2,323 2,723
Variable lease payments not included in the
measurement of lease liabilities $ 91 149
Expenses relating to short-term leases and leases of
low-value assets $ 219 210
COVID-19-related rent concessions (recognized as
other income) $ 1,460 -

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, 2020
For the year ended
December 31, 2019
$
43,367
42,215		 For the year ended
December 31, 2020
For the year ended
December 31, 2019
$
43,367
42,215
42,215

(i) Real estate leases

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,
2020
$ 167,568
(58,299)
$
109,269		 December 31,
2019
164,467
(58,618)
105,849

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

(Continued)

-178-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

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 $57,998 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		 2020
$ 164,467
(7,311)
2,416
7,996
$
167,568		 2019
156,042
(5,364)
2,686
11,103
164,467
  • 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		 2020
$ 58,618
4,595
(7,311)
535
1,862
$
58,299		 2019
58,201
3,166
(5,364)
656
1,959
58,618

(Continued)

-179-

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, 2020 and 2019 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		 2020
$ 708
1,708
(535)
$
1,881
2020
$ 1,432
14
81
354
$
1,881
$
2,397		 2019
706
1,980
(656)
2,030
2019
1,569
16
90
355
2,030
2,615
  • 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, 2020 and 2019 were as follows:

Accumulated amount at January 1
Recognized during the period
Accumulated amount at December 31		 2020
$ 71,584
6,134
$
77,718		 2019
62,440
9,144
71,584

6) Actuarial assumptions

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

Discount rate
Increase in future salary rate		 December 31,
2020
December 31,
2019
%
0.750
%
1.125
%
2
%
2

(Continued)

-180-

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 $3,149 thousand.

The weighted average lifetime of the defined benefit plans is 17.32 years.

7) Sensitivity analysis

On December 31, 2020 and 2019, if the actuarial assumptions had changed, the impact on the present value of the defined benefit obligation shall be as follows:

December 31, 2020
Discount rate
Future salary increases rate
December 31, 2019
Discount rate
Future salary increases rate		 Influences of defined benefit obligations
Increase0.25%
Decrease0.25%
$ (4,470)
4,659
4,434
(4,275)
$ (4,390)
4,578
4,400
(4,240)

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 2020 and 2019.

(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 $190,203 thousand and $173,419 thousand for the years ended December 31, 2020 and 2019, respectively.

  • (iii) Short-term employee benefit

The Company’s employee benefit liabilities were as follows:

December 31,
2020
Compensated absences liability
$
110,695		 December 31,
2019
93,313

(Continued)

-181-

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 2020 and 2019 were as follows:

2020 2019
Current tax expense:
Current period $ 6,968,267 7,956,519
Adjustment for prior periods (956) (202,658)
Deferred tax expense：
Origination and reversal of temporary differences (24,730) (88,535)
$ 6,942,581 7,665,326
Reconciliation of income tax and profit before tax 2020 and
2019 is as follows:
2020 2019
Profit before income tax $ 31,476,712 35,928,428
Income tax using the Company's domestic tax rate 6,295,342 7,185,682
Investment tax credits (371,218) (386,000)
Changes in unrecognized temporary differences (320,072) (354,757)
Gains on disposal of investment (2,396) (1,062)
Others income tax adjustments 138,275 107,824
Changes in provision in prior periods (956) (202,658)
Income tax for repatriation of overseas earnings 648,710 880,702
Surtax on unappropriated earnings 554,896 435,595
Total $ 6,942,581 7,665,326

  • (ii) Deferred tax assets and liabilities

  • 1) Unrecognized deferred tax liabilities

The entity is able to control the timing of the reversal of the temporary differences associated with the investments in subsidiaries as of December 31, 2020 and 2019. 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:

(Continued)

-182-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

Aggregated amount of temporary differences
related to investments in subsidiaries		 December 31,
2020
$
13,614,355		 December 31,
2019
24,690,199
  • 2) Recognized deferred tax assets and liabilities

Changes in the amount of deferred tax assets and liabilities for 2020 and 2019 were as follows:

Deferred Tax Assets:

Unrealized profit
from associates
Balance at January 1, 2020
$ 214,692
Recognized profit or loss
(50,681)
Balance at December 31, 2020
$
164,011
Balance at January 1, 2019
$ 287,921
Recognized profit or loss
(73,229)
Balance at December 31, 2019
$
214,692
Deferred Tax Liabilities:
Unrealized
exchange gains
Balance at January 1, 2020
$ -
Recognized profit or loss
-
Balance at December 31, 2020
$
-
Balance at January 1, 2019
$ 13,738
Recognized profit or loss
(13,738)
Balance at December 31, 2019
$
-		 Others
263,781
81,477
345,258
114,951
148,830
263,781
Other
2,626
6,066
8,692
1,822
804
2,626		 Total
478,473
30,796
509,269
402,872
75,601
478,473
Total
2,626
6,066
8,692
15,560
(12,934)
2,626

3) Assessment of tax

The Company’ s tax returns for the years through 2018 were assessed by the Taipei National Tax Administration.

(Continued)

-183-

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,
2020
$ 18,526,199
1,696,862
1,588,048
$
21,811,109		 December 31,
2019
17,092,301
2,017,929
1,432,004
20,542,234

(q) Capital and other equity

(i) Ordinary Shares

As of December 31, 2020 and 2019, 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,
2020
$ 817,574
738,155
4,857
$
1,560,586		 December 31,
2019
817,574
738,155
2,329
1,558,058

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)

-184-

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.

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, 2020 and 2019 were $2,141,576 thousand and $1,802,464 thousand, respectively.

3) Earnings distribution

The amounts of cash dividends on the appropriations of earnings for 2019 and 2018 had been approved during the board meeting and shareholders’ meeting on April 22, 2020 and June 12, 2019, respectively.

The relevant dividend distributions to shareholders were as follows:

Dividends distributed to
common shareholders:
Cash		 2019
Amount
per share
Total
amount
$
79
10,597,076		 2018 2018
Amount
per share
$
79		 Amount
per share
68		 Total
amount
9,121,533

(Continued)

-185-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

  • 4) Other equity interests (net-of-taxes)
Balance at January 1, 2020
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:
Subsidiaries
Balance at December 31, 2020
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
Balance at December 31, 2019		 Exchange
differences on
translation of
foreign financial
statements
$ (2,061,631)
315,510
(1,116)
-
-

-
$
(1,747,237)
Exchange
differences on
translation of
foreign financial
statements
$ (1,747,603)
(314,485)
457
-
-
$
(2,061,631)		 Unrealized gains
(losses) on financial
assets measured at fair
value through other
comprehensive income
(79,945)
-
-
23,861
136,543
(79,035)
1,424
Unrealized gains
(losses) on financial
assets measured at fair
value through other
comprehensive income
(54,861)
-
-
(5,780)
(19,304)
(79,945)

(Continued)

-186-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(r) Earnings per share

The calculation of basic earnings per share and diluted earnings per share for years 2020 and 2019 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
Weighted-average number of ordinary shares (in
thousands) (after adjustment of potential diluted
ordinary shares)
(s)
Revenue from contracts with customers
Disaggregation of revenue
Sale of goods		 2020
$
24,534,131
134,140
$
182.90
$
24,534,131
134,140
1,456
135,596
$
180.94
2020
$
53,979,503		 2019
28,263,082
134,140
210.70
28,263,082
134,140
1,228
135,368
208.79
2019
58,681,535

(Continued)

-187-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only 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, 2020 and 2019, the Company estimated its employee remuneration amounting to $4,416,600 thousand and $5,087,917 thousand, and directors' and supervisors' remuneration amounting to $331,245 thousand and $381,594 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 2020 and 2019. The amounts, as stated in the parent company only financial statements, are identical to those of the actual distributions for 2020 and 2019.

(u) Non-operating income and expenses

(i) Interest income

The details of interest income for the years 2020 and 2019 were as follows:

Interest income－bank deposits 2020
$
1,035,231		 2019
803,220

(ii) Other income

The details of other income for the years 2020 and 2019 were as follows:

Rent income 2020
$
11,633		 2019
12,469

(iii) Other gains and losses

The details of other gains and losses for the years 2020 and 2019 were as follows:

Foreign exchange losses
Losses on disposals of property, plant
and equipment
Gains on financial assets at fair value through
profit or loss
Others		 2020
$ (1,814,805)
(6,731)
39,591
109,634
$
(1,672,311)		 2019
(1,788,793)
(3,050)
9,352
178,322
(1,604,169)

(Continued)

-188-

Notes to the Parent Company Only Financial Statements

LARGAN PRECISION CO., LTD.

(iv) Finance costs

The details of finance costs for the years 2020 and 2019 were as follows:

Interest expenses 2020
$
2,323		 2019
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, 2020 and 2019, 90% and 93%, 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, 2020 and 2019.

(Continued)

-189-

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, 2020
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, 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
$ 249,535
2,170,368
21,821,256
166,565
3,766
$
24,411,490
$ 218,868
2,279,582
20,573,257
204,360
4,496
$
23,280,563		 Contractual
cash flows
249,535
2,170,368
21,821,256
170,450
3,766
24,415,375
218,868
2,279,582
20,573,257
210,507
4,496
23,286,710		 Within a
year
249,535
2,170,368
21,821,256
45,148
-
24,286,307
218,868
2,279,582
20,573,257
42,037
-
23,113,744		 Over 1 year
-
-
-
125,302
3,766
129,068
-
-
-
168,470
4,496
172,966

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

(Continued)

-190-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

(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
F
inancial Liabilities
M
onetary items
USD
JPY		 December 31, 2020
Foreign
Currency
Exchange
Rates
New Taiwan
Dollars
$ 1,541,813
28.4800
43,910,835
2,188,182
0.2763
604,595
6,207,389
4.3770
27,169,743
63,341
28.4800
1,803,964
3,055,631
0.2763
844,271		 December 31, 2020
Foreign
Currency
Exchange
Rates
New Taiwan
Dollars
$ 1,541,813
28.4800
43,910,835
2,188,182
0.2763
604,595
6,207,389
4.3770
27,169,743
63,341
28.4800
1,803,964
3,055,631
0.2763
844,271		 December 31, 2019 December 31, 2019
Foreign
Currency
$ 1,541,813
2,188,182
6,207,389
63,341
3,055,631		 Exchange
Rates
28.4800
0.2763
4.3770
28.4800
0.2763		 Foreign
Currency
931,122
2,847,531
5,724,038
63,590
3,073,999		 Exchange
Rates
New Taiwan
Dollars
29.9800
27,915,027
0.2760
785,919
4.3050
24,641,985
29.9800
1,906,417
0.2760
848,424
  • 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, 2020 and 2019 would have increased (decreased) the net profit after tax by $552,296 thousand and $404,705 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 2020 and 2019, the foreign exchange gain (loss) (including realized and unrealized portions) amounted to $(1,814,805) thousand and $(1,788,793) 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.

(Continued)

-191-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

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 $1,996 thousand and $1,751 thousand for the years ended December 31, 2020 and 2019, respectively. This is mainly due to the Company’s borrowings in variable rates.

(v) Other market price risk

For the years ended December 31, 2020 and 2019, 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,
2020
2019
Other
comprehensive
income after tax
Net income
Other
comprehensive
income after tax
Net income
$
415
132,074
176
70,679
$
(415)
(132,074)
(176)
(70,679)
2020
Other
comprehensive
income after tax
$
415
$
(415)

  • (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)

-192-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

Book Value
Financial assets at fair value through
profit or loss
Non derivative financial assets
mandatorily measured at fair value
through profit or loss
$ 13,207,411
Financial assets at fair value through
other comprehensive income
Stocks listed on domestic markets
41,470
Financial assets measured at amortized
cost
Cash and cash equivalents
78,789,365
Notes and accounts receivable and other
receivables (including related parties
and excluding tax receivable)
9,601,176
Other financial assets-current and
non-current
15,179,562
Refundable deposits
639,850
Subtotal
104,209,953
Total
$ 117,458,834
Financial liabilities at amortized cost
Short-term borrowings
$ 249,535
Notes and accounts payable
(including related parties)
2,170,368
Other payables (including related
parties)
21,821,256
Lease liabilities-current and non-current
166,565
Guarantee deposits received
3,766
Total
$
24,411,490		 December 31, 2020 December 31, 2020 December 31, 2020
Book Value Fair Value
Level 1
13,207,411
41,470
-
-
-
-
-
13,248,881
-
-
-
-
-
-		 Level 2
-
-
-
-
-
-
-
-
-
-
-
-
-
-		 Level 3
-
-
-
-
-
-
-
-
-
-
-
-
-
-		 Total
13,207,411
41,470
-
-
-
-
-
13,248,881
-
-
-
-
-
-

(Continued)

-193-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

Book Value
Financial assets at fair value through
profit or loss
Non derivative financial assets
mandatorily measured at fair value
through profit or loss
$ 7,067,853
Financial assets at fair value through
other comprehensive income
Stocks listed on domestic and foreign
markets
17,609
Financial assets measured at amortized
cost
Cash and cash equivalents
62,938,692
Notes and accounts receivable and other
receivables (including related parties
and excluding tax receivable)
18,724,468
Other financial assets-current and
non-current
6,431,895
Refundable deposits
638,009
Subtotal
88,733,064
Total
$ 95,818,526
Financial liabilities at amortized cost
Short-term borrowings
$ 218,868
Notes and accounts payable
(including related parties)
2,279,582
Other payables
(including related parties)
20,573,257
Lease liabilities-current and non-current
204,360
Guarantee deposits received
4,496
Total
$ 23,280,563		 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
-
-
-
-
-
-

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:

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)

-194-

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

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 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 2020 and 2019.

(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

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)

-195-

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, 2020 and 2019, no other guarantees were outstanding.

(Continued)

-196-

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, 2020 and 2019, were as follows:

Acquisition of right-of-use assets through lease, please refer to note 6(m).

(Continued)

-197-

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
lease liabilities - current and
non-current
Guarantee deposits received
Total liabilities from
financing activities		 January
1,2020
$ 218,868
204,360
4,496
$
427,724
January
1,2019
$ 552,868
90,364
4,473
$
647,705		 Cash flows Non-cash changes Non-cash changes Non-cash changes December
31,2020
Foreign
exchange
movement
Acquisition
7,048
-
-
4,399
-
-
7,048
4,399
Non-cash changes		 Acquisition Changes
in lease
payments
Foreign
exchange
movement		 Acquisition
-
153,129
-
153,129
(15,901)
-
-
(15,901)

(7) Related-party transactions

(a) For details of subsidiaries of the Company, please refer to note 4 (c) of the year 2020 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
Largan (Dongguan) Optronic Ltd. Subsidiaries
(Largan Dongguan)
Largan Health AI-Tech Co., Ltd. Subsidiaries
(Largan Health AI-Tech)

(Continued)

-198-

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-Others		 Sale
2020
2019
$ 22,503,930
32,383,282
12,828,653
11,245,101
58,039
68,794
$
35,390,622
43,697,177		 Receivables from related
parties		 Receivables from related
parties
2020
$ 22,503,930
12,828,653
58,039
$
35,390,622		 December 31,
2020
2,859,633
3,337,315
6,960
6,203,908		 December 31,
2019
9,550,805
2,056,436
7,682
11,614,923

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 2020 and 2019, 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
2020
2019
$ 1,727,506
1,882,446
188,797
203,362
$
1,916,303
2,085,808		 Payables to related parties Payables to related parties
2020
$ 1,727,506
188,797
$
1,916,303		 December 31,
2020
December 31,
2019
683,081
845,870
32,113
4,519
715,194
850,389
845,870
4,519
850,389

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 2020 and 2019, 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-Amtai 2020 2019
$
815,847		 973,850

(Continued)

-199-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(iii) Provides and purchase technical services to related parties

During 2020 and 2019, 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		 2020 2019
$ 19,937
15,761
$
35,698		 26,546
33,466
60,012

During 2020 and 2019, the Company's expense from technical services from its related parties were as follows (classified under the other expense):

Subsidiaries-Largan Digital 2020 2019
$
2,527		 3,279

  • (iv) Purchases and disposals of property, plant and equipment

  • 1) During 2020 and 2019, the Company's disposals of its equipment to its related parties are summarized as follows:

Subsidiaries:
Largan Digital
Largan Medical		 2020 2020 Carrying
amount		 Carrying
amount		 2019
Disposal
price
Gain from
disposal
1,371
94
284
18
1,655
112		 2019
Disposal
price
Gain from
disposal
1,371
94
284
18
1,655
112
Carrying
amount		 Disposal
price		 Gain from
disposal
$ 996
38
$
1,034		 1,007
41		 11
3		 1,277
266		 94
18
1,048 14 1,543 112
  • 2) During 2020 and 2019, the Company's purchase of its equipment from its related parties are summarized as follows:
Subsidiaries 2020 2019
$
100,164		 103,941
  • 3) During 2020 and 2019, the Company assisted its related parties to purchase other facilities as follows:
Subsidiaries-Amtai
Subsidiaries-Largan Digital
Subsidiaries-Largan Medical		 2020 2019
$ 1,165
13,794
3,539
$
18,498		 889
31,109
56,046
88,044

(Continued)

-200-

LARGAN PRECISION CO., LTD.

Notes to the Parent Company Only Financial Statements

(v) Rental income

During 2020 and 2019, the Company's rental income on offices to the subsidiaries are summarized as follows:

Subsidiaries-Largan Digital
Subsidiaries-Largan Medical		 2020 2019
$ 3,473
4,617
$
8,090		 3,904
4,560
8,464

(vi) Other

For the years ended December 31, 2020 and 2019, 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-Astro
Subsidiaries-Amtai
Subsidiaries-Largan Digital
Subsidiaries-Largan Dongguan
Subsidiaries-Other		 December 31, 2020
December 31, 2019
other
receivables
from related
parties
other
payables to
related
parties
other
receivables
from related
parties
other
payables to
related
parties
$ -
-
3,957,360
-
33,501
259
50,427
3,177
17,606
9,161
2,044
14,496
-
557
-
13,264
8,471
170
5,638
86
$
59,578
10,147
4,015,469
31,023		 December 31, 2020
December 31, 2019
other
receivables
from related
parties
other
payables to
related
parties
other
receivables
from related
parties
other
payables to
related
parties
$ -
-
3,957,360
-
33,501
259
50,427
3,177
17,606
9,161
2,044
14,496
-
557
-
13,264
8,471
170
5,638
86
$
59,578
10,147
4,015,469
31,023		 December 31, 2020
December 31, 2019
other
receivables
from related
parties
other
payables to
related
parties
other
receivables
from related
parties
other
payables to
related
parties
$ -
-
3,957,360
-
33,501
259
50,427
3,177
17,606
9,161
2,044
14,496
-
557
-
13,264
8,471
170
5,638
86
$
59,578
10,147
4,015,469
31,023		 December 31, 2020
December 31, 2019
other
receivables
from related
parties
other
payables to
related
parties
other
receivables
from related
parties
other
payables to
related
parties
$ -
-
3,957,360
-
33,501
259
50,427
3,177
17,606
9,161
2,044
14,496
-
557
-
13,264
8,471
170
5,638
86
$
59,578
10,147
4,015,469
31,023		 December 31, 2020
December 31, 2019
other
receivables
from related
parties
other
payables to
related
parties
other
receivables
from related
parties
other
payables to
related
parties
$ -
-
3,957,360
-
33,501
259
50,427
3,177
17,606
9,161
2,044
14,496
-
557
-
13,264
8,471
170
5,638
86
$
59,578
10,147
4,015,469
31,023
$ -
33,501
17,606
-
8,471
$
59,578		 -
259
9,161
557
170
10,147		 3,957,360
50,427
2,044
-
5,638
4,015,469		 -
3,177
14,496
13,264
86
31,023
  • (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		 2020
$ 206,995
275
-
-
-
$
207,270		 2019
264,243
270
-
-
-
264,513

(Continued)

-201-

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 financial
assets)		 Object
Customs office deposit
Litigation deposit
Completion deposit		 December 31,
2020
$ 9,000
625,733
320,145
$
954,878		 December 31,
2019
9,000
625,733
317,708
952,441

(9) Commitments and contingencies

  • (i) As at December 31, 2020 and 2019, the Company’s outstanding letters of credit were $0 and $33,575 thousand, respectively.

  • (ii) As at December 31, 2020 and 2019, the Company’s outstanding purchase commitments for construction in progress, property and plant were $12,204,700 thousand and $2,106,300 thousand, respectively； The amount of construction that has not yet occurred were $9,908,276 thousand and $113,967 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. (2020: none)

(10) Losses Due to Major Disasters: None

(11) Subsequent Events: None

(Continued)

-202-

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		 2020 2020 2020 2019 2019 2019
Operating
cost		 Operating
expenses		 Total Operating
cost		 Operating
expenses		 Total
Employee benefits
Salary 5,293,591 3,408,571 8,702,162 5,362,320 3,629,867 8,992,187
Labor and health insurance 378,050 124,945 502,995 353,850 113,892 467,742
Pension 138,091 53,993 192,084 127,208 48,241 175,449
Remuneration directors - 237,289 237,289 - 273,253 273,253
Others 155,950 36,095 192,045 150,601 33,401 184,002
Depreciation 3,881,533 324,015 4,205,548 3,425,387 254,519 3,679,906
Amortization 17,924 67,342 85,266 22,374 49,804 72,178

Additional information on the numbers of employees and the employee benefits of the Company in 2020 and 2019:

The numbers of employees
The numbers of directors excluding the employees
The average of employees' benefits
The average of salary
The average of salary adjustment
Supervisor's remuneration

The Company's salary and remuneration policy (including directors, supervisors, managers and employees) are as follows:

The remunerations to directors, supervisors, general managers and deputy general managers are in accordance with the Company's articles of incorporation and the managerial salary standards, which are reviewed by the Compensation Committee and approved by the board of directors.

Furthermore, the remuneration of the Company’ s directors and supervisors is determined by reference to the Company’s overall operating performance, future risks and development trends of the industry, as well as the individual’ s performance achievement rate and contribution to the Company; reasonable remuneration is also taken into consideration. Relevant performance appraisal and remuneration reasonableness are reviewed by the Salary and Compensation Committee and the Board of Directors, and the remuneration system is reviewed at any time in accordance with the actual operating conditions and relevant laws and regulations.

Also, the remuneration of the general manager and deputy general managers includes salary and employee remuneration. According to the position held, the responsibilities assumed and the salary standard of the Company’s managers, the payment shall be reviewed by the Salary and Compensation Committee and approved by the board of directors.

(Continued)

-203-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

In addition, the wages of the employees of the Company are paid based on the grade table set according to the complexity of their work, the degree of responsibilities, and the professional skills required.

The remuneration of employee includes salary and employee remuneration, and the distribution of employee remuneration is determined by the board of directors to whether distribute in stock or cash. The recipients may include employees of affiliated companies who meet certain conditions such as rank and performance. The above conditions will have to be approved by the board of directors.

(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

  • (iii) Securities held as of December 31, 2020 (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 Note
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		 96,281 1,004,061 - 1,004,061
The Company Open-end fund-
Capital Money
Market Fund		 - Current financial
assets mandatorily
measured fair value
throughprofit or loss		 113,926 1,853,047 - 1,853,047
The Company Open-end fund-
Yuanta De-Li Money
Market Fund		 - Current financial
assets mandatorily
measured fair value
throughprofit or loss		 3,049 50,118 - 50,118
The Company. Open-end fund-
Jih Sun Money
Market Fund		 - Current financial
assets mandatorily
measured fair value
throughprofit or loss		 96,682 1,445,395 - 1,445,395
The Company Open-end fund-
CTBC Hwa-win
Money Market Fund		 - Current financial
assets mandatorily
measured fair value
throughprofit or loss		 86,634 962,287 - 962,287
The Company Open-end fund-
FSITC Taiwan Money
Market Fund		 - Current financial
assets mandatorily
measured fair value
throughprofit or loss		 55,972 863,851 - 863,851
The Company Open-end fund-FSITC
Money Market Fund		 - Current financial
assets mandatorily
measured fair value
throughprofit or loss		 3,100 557,590 - 557,590
The Company Open-end fund-
Eastspring
Investments Well
Pool Money Market
Fund		 - Current financial
assets mandatorily
measured fair value
through profit or loss		 52,271 716,778 - 716,778
The Company Open-end fund-
Prudential Financial
Money Market Fund		 - Current financial
assets mandatorily
measured fair value
throughprofit or loss		 47,510 758,017 - 758,017
The Company Open-end fund-Union
Money Market Fund		 - Current financial
assets mandatorily
measured fair value
throughprofit or loss		 56,586 753,138 - 753,138
The Company Open-end fund-
TCB Taiwan Money
Market Fund		 - Current financial
assets mandatorily
measured fair value
throughprofit or loss		 88,914 910,268 - 910,268

(Continued)

-204-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

Name of holder Category and
name of security		 Relationship
with company		 Account title Ending balance Ending balance Ending balance Ending balance Note
Shares/Units
(thousands)		 Carrying value Percentage of
ownership (%)		 Fair value
The Company Open-end fund-
Shin Kong Chi-Shin
Money Market Fund		 - Current financial
assets mandatorily
measured fair value
throughprofit or loss		 46,243 721,705 - 721,705
The Company Open-end fund-
Fubon Chi-Hsiang
Money Market Fund		 - Current financial
assets mandatorily
measured fair value
throughprofit or loss		 18,733 296,052 - 296,052
The Company Open-end fund-
Taishin 1699 Money
Market Fund		 - Current financial
assets mandatorily
measured fair value
throughprofit or loss		 153,386 2,093,093 - 2,093,093
The Company Open-end fund-Hua
Nan Phoenix Money
Market Fund		 - Current financial
assets mandatorily
measured fair value
throughprofit or loss		 3,784 62,000 - 62,000
The Company Open-end fund-Mega
Diamond Money
Market Fund		 - Current financial
assets mandatorily
measured fair value
throughprofit or loss		 12,649 160,011 - 160,011
The Company Stock－AVISION
INC.		 - Current Equity
Investments at fair
value through other
comprehensive income		 4,253 41,470 - 41,470

(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
(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		 - - 59,770 620,358 36,511 380,000 - - - - 96,281 1,004,061
The Company Open-end fund-
Capital Money
Market Fund		 Current
financial assets
mandatorily
measured fair
value through
profit or loss		 - - 30,904 500,550 83,022 1,349,000 - - - - 113,926 1,853,047
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 42,682 700,000 70,198 1,152,612 1,150,000 2,612 3,049 50,118
The Company Open-end fund-
CTBC Hwa-win
Money Market
Fund		 Current
financial assets
mandatorily
measured fair
value through
profit or loss		 - - 36,159 400,004 130,059 1,443,000 79,584 883,491 881,053 2,438 86,634 962,287
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 23,389 360,000 - - - - 55,972 863,851
The Company Open-end fund-
FSITC Money
Market Fund		 Current
financial assets
mandatorily
measured fair
value through
profit or loss		 - - 2,626 470,265 2,707 486,000 2,233 401,455 400,000 1,455 3,100 557,590
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 60,315 826,000 47,797 682,102 680,000 2,102 52,271 716,778

(Continued)

-205-

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
(thousands)		 Price Cost Gain (loss)
on disposal		 Shares
(thousands)		 Amount
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 30,253 481,000 - - - - 47,510 758,017
The Company Open-end fund-
TCB Taiwan
Money Market
Fund		 Current
financial assets
mandatorily
measured fair
value through
profit or loss		 - - 55,360 564,576 130,506 1,335,000 96,952 990,553 989,000 1,553 88,914 910,268
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 17,847 300,000 52,440 881,177 880,000 1,177 - -
The Company Open-end fund-
Taishin 1699
Money Market
Fund		 Current
financial assets
mandatorily
measured fair
value through
profit or loss		 - - 43,845 595,603 109,541 1,493,000 - - - - 153,386 2,093,093
The Company Open-end fund-
Shin Kong Chi-
Shin Money
Market Fund		 Current
financial assets
mandatorily
measured fair
value through
profit or loss		 - - - - 46,243 721,000 - - - - 46,243 721,705
The Company Open-end fund-
Jin Sun Money
Market Fund		 Current
financial assets
mandatorily
measured fair
value through
profit or loss		 - - 59,866 890,666 36,816 550,000 - - - - 96,682 1,445,395
The Company Open-end fund-
Fubon Chi-
Hsiang Money
Market Fund		 Current
financial assets
mandatorily
measured fair
value through
profit or loss		 - - - - 38,259 604,000 19,526 308,290 308,000 290 18,733 296,052

(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 Buildings
Expansion		 2020.1 1,659,800 As of
December 31,
2020,
$184,941
thousand has
been paid		 TE CHANG
CONSTRUC
TION CO.,
LTD.		 None - Public
Bidding

 Extend the
buildings		 None
The Company Buildings
Expansion		 2020.4 1,378,000 As of
December 31,
2020,
$68,900
thousand has
been paid		 CHUNG
RUEY
ENGINEERI
NG CO.,
LTD.		 None - Public
Bidding

 Extend the
buildings		 None
The Company Buildings
Expansion		 2020.4 1,005,000 As of
December 31,
2020,
$50,250
thousand has
been paid		 YANKEY
ENGINEERI
NG CO.,
LTD.		 None - Public
Bidding

 Extend the
buildings		 None
The Company Buildings
Expansion		 2020.11 3,816,800 As of
December 31,
2020, hasn’t
been paid		 TE CHANG
CONSTRUC
TION CO.,
LTD.		 None - Public
Bidding

 Extend the
buildings		 None

(Continued)

-206-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

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 Buildings
Expansion		 2020.11 2,238,800 As of
December 31,
2020, hasn’t
been paid
L
C
T
L		 EE MING
ONSTRUC
ION Co.,
td.		 None - Public
Bidding		 Extend the
buildings		 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)		 Note
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 1,727,50 6
%
22		 120Days - - (683,081) (31)%
The Company Amtai International Ltd. The Company's
subsidiary		 Sales (12,828,65 3)
%
(23)		 60Days - - 3,337,315 36%
The Company Largan Medical Co.
Ltd.		 The Company's
subsidiary		 Purchases 188,48 6
%
2		 30Days - - (32,113) (1)%
The Company Largan (Dongguan)
Optronic Ltd.		 The Company's
subsidiary		 Sales (22,503,93 0)
%
(41)		 120Days - - 2,859,633 30%

(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		 3,370,815 4.76 - None 1,760,109
(Note1)		 -
The Company Largan (Dongguan)
Optronic Ltd.

 The Company's
subsidiary		 2,859,633 3.63 - None 1,659,180
(Note1)		 -

Note1: Until February 2, 2021.

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, 2020 Balance as of December 31, 2020 Balance as of December 31, 2020 Net income
(losses)
of investee		 Share of
profits/losses of
investee		 Note
December 31, 2020
 December 31, 2019 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		 240,330 28,054 43,952 The Company's
subsidiary
The Company Largan (Hong Kong) Ltd.
 Hong Kong Investment 658,555 658,555 31,100 %
100		 328,263 3,423 3,423 The Company's
subsidiary
The Company Astro International Ltd.
 Samoa Investment 247,104 247,104 7,600 %
100		 13,195,093 1,449,579 1,557,656 The Company's
subsidiary
The Company Ba Fang Co., Ltd.

 Taichung,
Taiwan		 Investment、building
construction etc.		 43,000 43,000 4,300 %
100		 33,878 (2,624) (2,624) The Company's
subsidiary
The Company Largan Health AI-Tech
Co., Ltd.

 Taipei,
Taiwan		 Sales of medical
equipment		 8,800 8,800 880 %
88		 4,593 (2,324) (2,045) 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		 355,353 159,239 64,492 The Company's
subsidiary
Largan Digital
Co., Ltd.		 Alpha Holding Inc.
 Samoa Investment 118,415 118,415 3,700 %
100		 30,398 (1,353) (1,353) The Company's
subsidiary
Astro
International Ltd.		 Net International Trading
Ltd.

 British Virgin
Islands		 Investment 756,599 756,599 24,300 %
100		 7,626,629 753,952 753,952 The Company's
subsidiary
Astro
International Ltd.		 Amtai International Ltd.
 Samoa Sales of Optical part
etc.		 50,600 50,600 1,500 %
100		 5,684,815 676,432 683,799 The Company's
subsidiary
Astro
International Ltd.		 Largan Health Technology
Inc.
 Samoa Investment 110,898 110,898 1,476 %
12		 27,678 (10,989) (1,319) The Company's
subsidiary
(Continued)

-207-

LARGAN PRECISION CO., LTD. Notes to the Parent Company Only Financial Statements

Name of investor Name of investee Location Main
businesses and
products
 Original investment amount Original investment amount Balance as of December 31, 2020 Balance as of December 31, 2020 Balance as of December 31, 2020 Net income
(losses)
of investee		 Share of
profits/losses of
investee		 Note
December 31, 2020
D		 ecember 31, 2019 Shares
(thousands)		 Percentage of
ownership		 Carrying
value
Ba Fang Co., Ltd. Fang Yuan Co., Ltd. Taichung,
Taiwan		 Investment 29,800 29,800 2,980 %
100		 20,792 (2,668) (2,668) The Company's
subsidiary
Largan Medical
Co. Ltd.		 Beta International Ltd. Samoa investment 120,334 120,334 3,700 %
100		 66,959 (3,551) (3,551) The Company's
subsidiary
Alpha Holding
Inc.		 Largan Health Technology
Inc.		 Samoa investment 110,898 110,898 1,476 %
12		 27,678 (10,989) (1,319) The Company's
subsidiary
Beta International
Ltd.		 Largan Health Technology
Inc.		 Samoa investment 110,898 110,898 3,936 %
32		 64,240 (10,989) (3,517) The Company's
subsidiary
Largan Health
Technology Inc.		 Dynadx Corporation U.S.A Development of the
software		 12,010 11,925 11,035 %
100		 4,540 (1,027) (1,027) The Company's
subsidiary
Largan Health
Technology Inc.		 Largan Health Technology
Co., Ltd.
 Taichung,
Taiwan		 Sales of medical
equipment		 45,797 45,797 801 %
100		 2,810 (2,896) (2,896) The Company's
subsidiary

  • (c) Information on investment in mainland China:

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

(ii) (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, 2020		 Investment flows Accumulated
outflow of
investment from
Taiwan as of
December 31, 2020		 Net
income
(losses)
of the
investee		 Percentage
of
ownership		 Investment
income
(losses)		 Book
value		 Accumulated
remittance of
earnings in
currentperiod
Outflow Inflow
Largan
(Dongguan)
Optronic Ltd.		 Production and sales
of camera lenses,
scanner lens
optoelectronic devices,
viewing windows,
digital electronic
cameras		 HK$ 178,076 Note1(a) HK$ 85,98
US$ 7,47		 6
4
-		 - HK$ 85,986
US$ 7,474		 RMB$ 158,134 100% NT$ 676,303 NT$ 4,184,200 -
Nanjing Largan
Health Technology
Co., Ltd.		 Health management,
computer and medical
device technology
development,
consultation and
service		 - Note1(b) - - - - RMB$ (1,663) -% NT$ (1,730) NT$ - -
NEO (Shanghai)
Medical
Technology Co.,
Ltd.		 Technical development
and technical services
in the field of medical
device technology		 RMB$20,000 Note1(c) - - - - RMB$ (210) 9.80% NT$ (88) NT$ 7,910 -
Limitation on investment in Mainland China:
Accumulated Investment in Mainland China
as of December 31, 2020
Investment Amounts Authorized by
Investment Commission, MOEA
Upper Limit on Investment
NT$671,086
(HK$85,986 and US$12,474)
NT$820,492
(HK$85,986 and US$17,720)
NT$84,481,295
Accumulated Investment in Mainland China
as of December 31, 2020		 Investment Amounts Authorized by
Investment Commission, MOEA		 Upper Limit on Investment
NT$671,086
(HK$85,986 and US$12,474)		 NT$820,492
(HK$85,986 and US$17,720)		 NT$84,481,295

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: Since Suzhou Largan had been liquidated, the cumulative investment amount remitted from Taiwan, including the Company’s indirect investment in Suzhou Largan of US$5,000 thousand through Net International Trading Ltd., has yet to be repatriated before the year end of 2020.

Note 3: The liquidation process of Nanjing Largan Health Technology Co., Ltd. had been completed in October 2020.

(iii) Significant transactions:

The significant inter-company transactions with the subsidiary in Mainland China are disclosed in the “ Information on significant transactions”.

(d) Major shareholders:

Major shareholders:
Shareholder’s Name Shares Percentage
Mao Yu Commemorate Co., Ltd. 18,910,616 %
14.09
Shih-ching, Chen 6,756,831 %
5.03

(14) Segment information

Please refer to the 2020 consolidated financial statement.

(Continued)

-208-

LARGAN PRECISION CO., LTD.

Statement of cash on hand and demand

deposits

December 31, 2020

(Expressed in Thousands of NTD; Expressed in

Dollars of Foreign Currencies)

Items
Cash
Cash in banks
Total		 Description
Amount
Cash
$ 93
Cash on foreign Currency
317
Subtotal
410
Demand deposits
2,815,148
Demand deposit on foreign Currency
(USD11,338,089.93×28.48
GBP42,261.51×38.90
JPY2,187,922,515.33×0.2763
EUR2,345,596.11×35.02
HKD463.05×3.6730
CNY16,030,071.98 ×4.3770
CHF286.39×32.305)
1,081,394
Time deposits
28,558,000
Time deposits on foreign currency
(USD778,866,814×28.48
CNY5,518,000,000×4.3770)
46,334,413
Subtotal
78,788,955
$ 78,789,365

-209-

LARGAN PRECISION CO., LTD.

Statement of Current Financial Assets at Fair Value

through Profit or Loss

December 31, 2020

(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
Open-end fund
Open-end fund
Open-end fund		 Unit in thousands
96,281
88,914
153,386
96,682
113,926
3,049
86,634
55,972
3,100
52,271
47,510
56,586
3,784
46,243
12,649
18,733		 Acquisition
$ 1,000,000
910,000
2,088,000
1,440,000
1,849,000
50,000
961,947
860,000
556,000
716,000
755,000
750,000
62,000
721,000
160,000
296,000
$
13,174,947		 Fair Value Fair Value
Unit price
Total amount
10.43
1,004,061
10.24
910,268
13.65
2,093,093
14.95
1,445,395
16.27
1,853,047
16.44
50,118
11.11
962,287
15.43
863,851
179.85
557,590
13.71
716,778
15.95
758,017
13.31
753,138
16.39
62,000
15.61
721,705
12.65
160,011
15.80
296,052
13,207,411
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
Hua Nan Phoenix Money Market Fund
Shin Kong Chi-Shin Money Market
Fund
Mega Diamond Money Market Fund
Fubon Chi-Hsiang Money Market Fund		 1,004,061
910,268
2,093,093
1,445,395
1,853,047
50,118
962,287
863,851
557,590
716,778
758,017
753,138
62,000
721,705
160,011
296,052
13,207,411

Statement of Current Financial Assets at Fair Value through Comprehensive Income

Equity Securities

AVISION Stock

4,253 $ 40,280 9.75 41,470

-210-

LARGAN PRECISION CO., LTD.

Statement of Notes and Accounts

Receivable

December 31, 2020

(Expressed in Thousands of NTD)

Client No.
Accounts receivable-unrelated parties
653021
633036
643006
643011
Other (Note)
Total
Impairment loss on allowance
Net amount		 Description
Amount
Operating
$ 892,436
Operating
761,550
Operating
568,379
Operating
227,748
Operating
732,470
3,182,583
(2,250)
$
3,180,333

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
$ 106,662
Income interest of cash in bank
136,708
20,059
$
263,429

Note: The amount of each item in others does not exceed 5% of the account balance.

-211-

LARGAN PRECISION CO., LTD.

Statement of Inventories

December 31, 2020

(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
$ 2,789,364
6,113,265
Market value of net realizable value
480,201
1,145,328
Market value of net realizable value
1,196,392
1,167,128
Market value of net realizable value
4,465,957
8,425,721
(771,133)
$
3,694,824		 Amount
Cost
Market Value
Note
$ 2,789,364
6,113,265
Market value of net realizable value
480,201
1,145,328
Market value of net realizable value
1,196,392
1,167,128
Market value of net realizable value
4,465,957
8,425,721
(771,133)
$
3,694,824
Cost
$ 2,789,364
480,201
1,196,392
4,465,957
(771,133)
$
3,694,824

Statement of Other Current Assets

Items
Other current assets		 Description
Amount
Prepayment for purchases
$ 374,058
Temporary payment
630,161
Others (Note)
17,638
$
1,021,857

Note: The amount of each item in others does not exceed 5% of the account balance.

-212-

Pledge of collateral None None None None None
Amount 328,263 240,330 13,195,093 33,878 4,593 13,802,157
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) - 4,598 248,808 - - 253,406
Unrealized gains (losses) on financial assets measured at fair value through other comprehensive income - 234 136,309 - - 136,543
Beginning balance
Addition
Decrease		 Amount of exchange on translation of Percentage of
Profit or loss
foreign financial		 Names of Investee
Shares
ownership
Amount
Shares
Amount
Shares
Amount
of investment
statement		 Largan (Hong Kong) Limited
31,100
100.00
342,121
-
-
-
-
3,423
(17,281)		 Largan Digital Co., Ltd.
26,636
49.37
192,662
-
-
-
-
43,952
(1,116)		 Astro International Ltd.
7,600
100.00
19,731,445
-
-
-
(8,811,916)
1,557,656
332,791		 Ba Fang Co., Ltd.
4,300
100.00
36,502
-
-
-
-
(2,624)
-		 Largan Health Al-Tech Co., Ltd.
880
88.00
6,638
-
-
-
-
(2,045)
-		 Total
20,309,368
-
(8,811,916)
1,600,362
314,394		 Note: The unrealized gain (loss) is refer to the downstream transactions and upstream transactions.

-213-

LARGAN PRECISION CO., LTD.

Statement of changes in Property, Plant, and Equipment

January 1, 2020 to December 31, 2020

(Expressed in Thousands of NTD)

Please refer to note 6 (h).

Statement of Other Non-current Assets

December 31, 2020

Items
Refundable deposits
Restricted cash in bank-non-current
Restricted cash in bank-non-current
Prepayment for equipment
Total		 Description
Amount
Litigation deposit
$ 625,733
Others (Note)
14,117
639,850
Bank account for repatriation of offshore
fund
14,850,417
Completion deposit
320,145
Prepaid machine equipment
1,201,090
$
17,011,502

Note: The amount of each item in others does not exceed 5% of the account balance.

-214-

LARGAN PRECISION CO., LTD.

Statement of Bank Loan

December 31, 2020

(Expressed in Thousands of NTD)

Creditor
Type of
loan
Mega Bank
Credit loan
Mizuho Bank
Credit loan		 Ending
balance
Contract
Period
Range of
interest rate
Loan
Commitment
Collateral
$ 249,535
Due within a year
0.95~1.10%
1,300,000
None
-
Due within a year
-
1,300,000
None
249,535
2,600,000

Statement of Notes and Accounts Payable

Vendor Name Description Amount
Notes payable-unrelated parties non-operating $ 873
Accounts payable-unrelated parties
110185 operating $ 330,937
110059 operating 213,380
100236 operating 176,940
110181 operating 173,636
100896 operating 120,025
110184 operating 104,305
100230 operating 73,985
Others (Note) operating 261,093
Total $ 1,454,301

Note: The amount of each item in others does not exceed 5% of the account balance.

-215-

LARGAN PRECISION CO., LTD.

Statement of Other Payables

December 31, 2020

(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
$
3,766

-216-

LARGAN PRECISION CO., LTD.

Statement of Operating Income

For 2020

(Expressed in Thousands of NTD)

Items
Lens
Others (Note)
Total		 Quantity (unit in thousands)
Amount
1,575,224
$ 53,502,137
477,366
$
53,979,503

Note: The amount of each item in others does not exceed 10% of the account balance.

-217-

LARGAN PRECISION CO., LTD.

Statement of Operating Costs

For 2020

(Expressed in Thousands of NTD)

Items Amount
Goods
Goods, beginning of year $ -
Goods purchased -
Goods, end of year -
Cost of goods -
Raw materials and supplies
Raw materials and supplies, beginning of year 934,122
Addition：Raw materials and supplies purchased 6,100,274
Raw materials and supplies surplus 16
Decrease：Raw materials and supplies, end of year 1,196,392
Sale of raw materials and supplies 3,639
Scrapped 4,020
Others 557,209
Raw materials and supplies used 5,273,152
Direct labor 2,054,949
Manufacturing expense 10,506,250
Manufacturing Cost 17,834,351
Addition：Work in progress, beginning of year 358,058
Decrease：Work in progress, end of year 480,201
Cost of finished goods 17,712,208
Addition：Finished goods, beginning of year 2,531,701
Finished goods purchased 880,900
Finished goods surplus 3,110
Decrease：Finished goods, end of year 2,789,364
Scrapped 231,599
Other 138,907
Production and marketing costs 17,968,049
Other 402,136
Operating costs $ 18,370,185

-218-

LARGAN PRECISION CO., LTD.

Statement of Operating Expenses

For 2020

(Expressed in Thousands of NTD)

Items
Payroll
Import and export expense
Depreciation
Consumable expense
Labor expense
Others (note)		 Selling expenses
$ 194,068
69,776
247
-
-
72,742
$
336,833		 Administrative Expenses
Research and
development expenses
512,684
2,701,819
-
-
88,872
234,896
-
562,666
115,521
52,092
511,017
239,873
1,228,094
3,791,346		 Administrative Expenses
Research and
development expenses
512,684
2,701,819
-
-
88,872
234,896
-
562,666
115,521
52,092
511,017
239,873
1,228,094
3,791,346
2,701,819
-
234,896
562,666
52,092
239,873
3,791,346

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.

-219-

7. Review and Analysis of Financial Position and Financial Performance, and Risk Management

7.1 Financial position analysis

Unit: NT$ thousands

Unit: NT$thousands Unit: NT$thousands
Year 2020 2019 Difference
Item Amount Proportion of
change (%)
Current assets 119,399,271 111,630,060 7,769,211
6.96
Long-term investment 272,601 229,512 43,089 18.77
Property, plant and
equipment		 33,790,608 32,573,230 1,217,378
3.74
Intangibleassets 112,794 101,741 11,053 10.86
Deferred income tax
assets		 509,269 478,473 30,796
6.44
Right-of-useassets 180,185 217,758 (37,573) (17.25)
Other assets 17,011,502 8,590,824 8,420,678 98.02
Total assets 171,276,230 153,821,598 17,454,632
11.35
Current liabilities 30,229,181 27,150,157 3,079,024
11.34
Non-current liabilities 244,891 277,530 (32,639) (11.76)
Total liabilities 30,474,072 27,427,687 3,046,385 11.11
Capitalstock 1,341,402 1,341,402 -
-
Capitalsurplus 1,560,586 1,558,058 2,528 0.16
Retained earnings 139,645,983 125,636,027 14,009,956 11.15
Otherequity (1,745,813) (2,141,576) 395,763 (18.48)
Equity attributable to
owners of the parent
company		 140,802,158 126,393,911 14,408,247
11.40
1. The increase in other assets from thepreviousperiod was due to an increase in restricted assets.

7.2 Financial performance

7.2.1 Financial performance analysis

Unit: NT$ thousands

Year
Item		 2020 2019 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		 55,944,489
18,472,255
37,472,234
5,440,116
32,032,118
(338,351)
31,693,767
7,159,636
24,534,131		 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		 (4,800,519)
(351,333)
(4,468,386)
(1,167)
(4,467,219)
(417,869)
(4,885,088)
(1,156,137)
(3,728,951)		 (7.90)
(1.87)

(10.65)
(0.02)
(12.24)
(525.50)
(13.35)
(13.90)
(13.19)

Explanation of major variations: Non-operating expenses

Non-operating expenses increased from the previous year mainly due to an increase in foreign exchange loss.

-220-

7.3 Cash flow

7.3.1 Change in cash flow in the most recent fiscal year

Year Proportion of change
2020 2019
Item (%)
Cash flowratio 96.10% 94.40% 1.80%
Cash flowadequacyratio 176.51% 189.77% (6.99%)
Cash flow reinvestment ratio 11.31% 11.27% 0.35%

Analysis: No significant change.

  • 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 12,2021		 Unit: NT$ thousands
April 12,2021
Plan Actual or Expected
Total Capital		 Actual or Expected Capital

Source of Capital

Required
Expenditure
Actual Expected
Expenditures
Expenditures
Land and building Own funds 10,098,400 634,988
634,988

  • 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:

  • (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.

-221-

  • (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.

  • 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.

-222-

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.

-223-

==> picture [425 x 726] intentionally omitted <==

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

88%
Largan Health
AI-Tech Co., Ltd.
100% 100%
As of December 31, 2020
Ltd.
Ba Fang Co., Ltd. Fang Yuan Co.,
100%
Largan (Hong Kong) Limited
100%
100%
Net International Trading Limited Largan (Dongguan) Optronic Ltd.
Special Notes 100%
Astro International Limited Limited
8. Largan Precision Co., Ltd. 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.
Ltd.
40.50%
Beta International
Information on affiliate companies Organization chart:
49%
8.1 8.1.1 Largan Medical Co., Ltd.
Medical Tech-
NEO (Shanghai) nology Co., Ltd.
----- End of picture text -----

-224-

8.1.2 Basic information of affiliated companies:

As of December 31, 2020 Unit: $

Unit:$
Name of Business Date of
Incorporation
Address		 Capital Stock Business
Activities
NET International
Trading Ltd.		 1998.11.19 Portcullis Chambers, 4th
Floor, Ellen Skelton
Building, 3076 Sir Francis
Drake Highway, Road Town,
Tortola, British Virgin
Islands VG1110.
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
digitalcameras
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 Sale 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
and lease
Fang Yuan Co., Ltd. 2013.4.26 No. 18, Gongyequ 7th Road,
Xitun District, Taichung
City		 NTD 29,800,000 General
investment,
buildings lease
construction and
development,

-225-

Name of Business Date of
Incorporation
Address		 Capital Stock Business
Activities
and industrial
plant
development
andlease
Alpha Holding Inc. 2017.2.18 Unit 25, 2nd Floor, Nia
Mall, Saleufi Street, Apia,
Samoa		 USD 3,700,000 Investment
Beta International
Limited		 2017.2.18 Unit 25, 2nd Floor, Nia
Mall, Saleufi Street, 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,
Taichung City		 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
DynaDx Corporation 2005.2.17 406 Tasman Drive,
Sunnyvale, CA94089		 USD 1,189,455.91 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.

-226-

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-Chou Lin		 - -
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 - -
Largan Health Technology
Co., Ltd.		 Chairman/Director
Representative:		 Largan Health
TechnologyInc.		 800,470 100
Representative:
Cheng-Kuo Lai/
En-Ping Lin,
Chung-Shih Lin		 - -
Largan Health Technology
Co., Ltd.		 Supervisor
Representative		 Largan Health
TechnologyInc.		 800,470 100
Representative:
Ma-Li Lin		 - -

-227-

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

-228-

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
114,230
328,313
50		 328,263 0 (125)
3,423
0.11
Net
International
Trading
Limited		 692,064
7,626,279
304		 7,625,975 0 (745) 753,952
31.03
Astro - Samoa 216,448
13,653,649
0		 13,653,649 0 (59) 1,449,579
190.73
Amtai -
Samoa		 42,720
9,829,408
3,748,863		 6,080,545 16,223,572 510,590
676,432
450.95
Largan
(Dongguan)
Optronic Ltd.		 654,074
7,179,522
3,127,785		 4,051,737 26,032,535 883,359
676,273
Note 1
Largan Digital
Co.,Ltd.
539,578
930,143
35,299		 894,844 97,087 (45,120) 28,054
0.52
Largan
Medical Co.,
Ltd.		 1,000,000
918,725
61,714		 857,011 506,549 160,418
159,239
1.59
Ba Fang Co.,
Ltd.		 43,000
33,878
0		 33,878 0 (35) (2,624) (0.61)
Fang Yuan
Co.,Ltd.		 29,800
20,853
61		 20,792 0 (2,718)
(2,668)
(0.90)
Alpha Holding
Inc.
105,376
30,398
0		 30,398 0 (38)
(1,353)
(0.37)
Beta
International
Limited		 105,376
66,959
0		 66,959 0 (38) (3,551) (0.96)
Largan Health
Technology
Inc.		 350,304
230,656
2		 230,654 0 (124) (10,989) (0.89)
Largan Health
Technology
Co.,Ltd.		 8,005
3,208
397		 2,811
8
(2,905)
(2,896)
(3.62)
Dynadx
Corporation		 33,876
1,919
2		 1,917 0 (1,004) (1,027) (0.09)
NEO
(Shanghai)
Medical
Technology
Co.,Ltd.		 87,540
81,119
387		 80,732 2224 (899) (899) Note 1
Largan Health
AI-Tech Co.,
Ltd.		 10,000
6,059
840		 5,219 1355 (2,357)
(2,324)
(2.32)

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 statements of parent and subsidiary companies in accordance with IFRS 27 recognized by the

-229-

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 75 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.

-230-

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.

-231-

More from LARGAN

Major Shareholding Notification 2026
May 20
Proxy Solicitation & Information Statement 2026
May 20
Proxy Solicitation & Information Statement 2026
May 20
AGM Information 2026
May 20
AGM Information 2026
May 20
AGM Information 2026
May 20
Annual Report 2026
May 20
Annual Report 2026
May 20
Regulatory Filings 2026
May 18
Share Issue/Capital Change 2026
May 13
View all filings →