LOTES - Annual Report 2019 | FinancialReports.eu

Stock Code: 3533

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Lotes Co., LTD

2019

Annual Report

Notice to readers

This English version annual report is a summary translation of the Chinese version and is not an official document of the shareholders’ meeting. If there is any discrepancy between the English version and Chinese version, the Chinese version shall prevail.

Published on May 10, 2020 Enquiry on the annual report: http://mops.twse.com.tw

Information on the Company's spokesperson and acting spokesperson.

	Name	Title	Telephone Number	E-mail Address	E-mail Address
Spokesperson	Liu, Hsing-Hsia	Financial manager	(02)24331110	[email protected]

Acting Spokesperson	Tsai, Ming-Jui	Sales Vice President	(02)24331110		[email protected]

The name, address, and telephone number of the Company’s headquarters and factories

Name	Address	Telephone Number
Headquarter	No. 15, Wuxun St., Anle Dist., Keelung City	(02)24331110
Factory	No. 15, Wuxun St., Anle Dist., Keelung City	(02)24331110

The name, address, website, and telephone number of the agency handling shares transfer
Name: SinoPac Securities Corporation Stock Registration Division

Address: 3F., No. 17, Bo’ai Rd., Taipei City

Website: http://securities.sinopac.com/

Telephone Number: (02) 2381-6288

The name of the certified public accountant who duly audited the annual financial report for the most recent fiscal year, and the name, address and telephone:

Name of Accountants: Chung, Tan-Tan, Chen, Fu-Wei

Name of Accounting Firm: KPMG Taiwan

Address: 68F., No. 7, Sec. 5, Xinyi Rd., Taipei City

Website: http://www.kpmg.com.tw

Telephone Number: (02) 8101-6666

the name of any exchanges where the company’s securities are traded offshore, and the method by which to access information on said offshore securities: N/A
Company website: http://www.lotes.com.tw

	Contents
I.	LETTERS TO SHAREHOLDERS ......................................................................................................................................... 3
II.	COMPANY PROFILE ....................................................................................................................................................... 6
III.	CORPORATE GOVERNANCE REPORT .............................................................................................................................. 9
1.	ORGANIZATION:.......................................................................................................................................................................... 9
2.	INFORMATION ONDIRECTORS, SUPERVISORS, PRESIDENT, VICEPRESIDENT, ASSOCIATEPRESIDENT, HEADS OF DEPARTMENTS AND BRANCHES... 12
3.	REMUNERATION OFDIRECTORS, SUPERVISORS, PRESIDENTS,ANDVICEPRESIDENTS: ............................................................................. 22
4.	CORPORATE GOVERNANCE OPERATIONS......................................................................................................................................... 30
5.	ACCOUNTANTS’ INFORMATION.................................................................................................................................................... 52
6.	TRANSFER OR PLEDGE OF SHARES BY THE COMPANY'S DIRECTORS,SUPERVISORS,MANAGERS AND STOCKHOLDERS WITH MORE THAN10%OF THE
COMPANY'S SHARES: ..................................................................................................................................................................... 54
7.	RELATIONSHIP AMONG THETOPTENSHAREHOLDERS....................................................................................................................... 57
8.	INFORMATION ON THE NUMBER OF SHARES OF THE COMPANY INVESTED BY THE COMPANY,ANY OF THE COMPANY’S DIRECTORS AND SUPERVISORS
AND EXECUTIVE OFFICERS OR A COMPANY DIRECTLY OR INDIRECTLY CONTROLLED BY THE COMPANY AND CONSOLIDATED PERCENTAGE OF
SHAREHOLDING: ........................................................................................................................................................................... 59
IV.	CAPITAL OVERVIEW .................................................................................................................................................... 60
1.	CAPITAL AND SHARES................................................................................................................................................................. 60
2.	ISSUANCE OF CORPORATE BONDS: NONE....................................................................................................................................... 65
3.	ISSUANCE OF PREFERRED SHARES: NONE....................................................................................................................................... 65
4.	ISSUANCE OF GLOBAL DEPOSITORY RECEIPTS: NONE......................................................................................................................... 65
5.	EMPLOYEE SUBSCRIPTION WARRANTS: ........................................................................................................................................... 65
6.	RESTRICTION ON ISSUNING OF NEW EMPLOYEE OPTION: NONE........................................................................................................... 67
7.	SHARE ISSUANCE OF MERGER COMPANY: NONE. .............................................................................................................................. 67
8.	IMPLEMENTATION OF THE CAPITAL UTILIZATION PLAN: N/A. .............................................................................................................. 67
V.	OVERVIEW OF BUSINESS OPERATIONS ........................................................................................................................ 68
1.DESCRIPTION OF THE BUSINESS..................................................................................................................................................... 68
2.	OVERVIEW OF MARKET,PRODUCTION AND SALES: ............................................................................................................................ 74
3.	EMPLOYEE INFORMATION........................................................................................................................................................... 83
4.	DISBURSEMENTS FOR ENVIRONMENTAL PROTECTION........................................................................................................................ 83
5.	LABOR RELATIONS..................................................................................................................................................................... 83
6.	IMPORTANT CONTRACTS............................................................................................................................................................. 84
VI.	OVERVIEW OF FINANCIAL STATUS ............................................................................................................................... 85
1.	ACONDENSED BALANCE SHEET AND STATEMENT OF COMPREHENSIVE INCOME FOR THE LAST FIVE YEARS..................................................... 85
2.	FIVE-YEAR FINANCIAL ANALYSIS.................................................................................................................................................... 87
3.	2019 AUDITREPORT OFSUPERVISORS FOR THEFINANCIALSTATEMENTS............................................................................................. 91
4.	2019 FINANCIALSTATEMENTS ANDINDEPENDENTAUDITOR’SREPORT............................................................................................... 92
5.	2019 CONSOLIDATEDFINANCIALSTATEMENT ANDINDEPENDENTAUDITOR’SREPORT.......................................................................... 176
VII.	REVIEW ANALYSIS OF FINANCIAL POSITION AND OPERATING PERFORMANCE AND RISK ISSUES .......................... 282
1.	FINANCIAL [email protected]........................................................................................................................ 282
2.	OPERATING PERFORMANCE....................................................................................................................................................... 283
3.	CASH FLOW........................................................................................................................................................................... 284
4.	THE IMPACT OF MAJOR CAPITAL EXPENDITURES IN THE MOST RECENT YEAR ON FINANCIAL OPERATIONS: NONE. ......................................... 285
5.	THE MAIN REASONS FOR THE MOST RECENT ANNUAL REINVESTMENT POLICY AND PROFIT OR LOSS,IMPROVEMENT PLANS AND INVESTMENT PLANS
FOR THE COMING YEAR: ............................................................................................................................................................... 285
6.	ANALYZE AND ASSESS THE FOLLOWING RISKS FOR THE MOST RECENT YEAR AND UP TO THE DATE OF PUBLICATION OF THE ANNUAL REPORT: ...... 286
7.	OTHER IMPORTANT MATTERS: NONE........................................................................................................................................... 288
VIII.	SPECIAL NOTES ..................................................................................................................................................... 289
1.	RELATED INFORMATION OF AFFILIATES......................................................................................................................................... 289

I. Letters to Shareholders

1. 2019 Report on business operations

(1) Operational overview

The Company's consolidated operating revenue for 2019 was NT$15,088 million, up 13.35% from NT$13,311 million in 2018, and consolidated net income after tax was NT$2,076 million, up 29.10% from NT$1,608 million in 2018, translating to an after-tax earnings per share of NT$20.11.

Looking back at fiscal 2019, the global economy continued to be affected by the situation of trade war tensions between the United States and China, which also affected the sales of some of the Company's products. However, due to the gradual increase in the conversion rate of the new generation server CPU platform this year, as well as the results of the Company's active involvement in the development of new customers and new products, the Company has been able to achieve steady growth in revenue in fiscal 2019 and set a new high in revenue since its establishment. On the profitability side, the continued increase in scale of operations, improved penetration of new products and improved production efficiency also contributed to a 29.06% growth in profitability in fiscal 2019 compared to 2018 and a solid profitability performance of $20.11 per share after tax.

(2) Operating plan implementation results and profitability analysis

a. Operating plan implementation results

Unit: NT$ thousands

Item	2019	2018	Increased (decreased) amount	Increased (decreased) proportion
Operating revenues	15,088,872	13,311,518	1,777,354	13.35%
Operatingcosts	9,620,962	8,962,649	658,313	7.35%
Grossprofit	5,467,910	4,348,869	1,119,041	25.73%
Net income after tax for the period	2,076,043	1,608,567	652,266	29.06%

b. Financial income and expenditure and profitability analysis

	Item	Item	2018	2019
Profitability (%)	Return on total assets		12.71	13.92
	Return on total shareholders’ equity		18.08	19.47
	Percentage to capital stock	Operating income to capital	212.08	265.81
		Pre-tax income to capital	230.46	273.65
	Netprofit margin		12.08	13.75
	Earnings per share after tax		17.21	20.11

c. Research and development status

In order to continue to provide customers with high quality products, the Company continues to improve the level of technology and energy in the areas of design, process, quality control and testing, and continues to achieve high growth goals, and has spared no effort in the development of new products to develop small pitch, high density connectors. Recently, in order to meet the future market trend of high-speed connectors, the Company has been actively engaged in high-current and high-frequency connector analysis and development capabilities to meet market demand. In addition, in order to expand our product line and market size, we have successfully developed connectors for high-frequency servers, automobiles, high-speed transmission devices and the latest transmission interface Type-C, etc.

2. 2020 Operating plan and outlook

(1) Management plan

a. Management policy

1) To strengthen market linkages between the three markets on both sides of the Strait and coordinate capacity allocation so as to fully grasp market changes and demand.

2) To strengthen the research and development team, continuously develop new products and improve the technical level to enhance the company's core technical capabilities in order to build a competitive advantage.

3) To integrate the Group's resources and improve production and management capabilities to reduce production costs and enhance operational efficiency.

b. Important marketing and production policies

1) To strengthen customer relationship management to enhance competitive efficiency, and to actively maintain close relationships with major international manufacturers.

2) To provide customers with diversified products and services, the company adopts a customer-oriented approach and stays close to market leading manufacturers.

3) To improve the efficiency of factory management and the division of labor between domestic and overseas factories, and to strengthen the inventory management capability to effectively control production costs and enhance the production and sales mechanism.

(2) Outlook for the future

Looking into the future, the Company will continue to face a highly competitive market and a dynamic economic environment. However, in addition to strengthening close cooperation with customers, the Company will continue to develop and improve its existing products and adopt a diversified strategy to enhance market sensitivity by maintaining good cooperation with international professional manufacturers, in order to fully grasp the development trend of new products and research and develop niche products. The Company aims to enhance its competitive

edge in the industry and to achieve its operating objectives smoothly, thereby continuously creating maximum value for shareholders.

Best wishes,

Chairperson: Chu, Te-Hsiang President: Ho, Te-Yu Accounting Supervisor: Liu, Hsing-Hsia

II. Company Profile

Date of incorporation: August 23, 1986
Company history
1986 The Company was founded in Wugu Dist., New Taipei City; with total capital of 5 million New Taiwan Dollars; engaged in the manufacturing, processing and trading of various terminals and their finished products.
1989 Being aware of the electronics industry’s future, the Company began to manufacture/design electronic connectors and other related electronic products.
1992 Moved to Dawulun Industrial Park, Keelung city.
1997 ISO 9002 certified; Certified and taken effect of UL certification in the same year.
1998 Capital increased by cash, total capital was twenty-five million New Taiwan Dollars (NTD25, 000,000).
2002 ISO 9001:2000 certified.
2003 Invested factory in Guanghou-Lotes Guanghou Co., Ltd 。
2004 Guanghou factory-Lotes Guanghou Co., Ltd was certified and taken effect of ISO 14001. LOTES connectors received ASUS “Environmental Management System “certification. CPU Socket 478 received Intel certification.
。
Invested factory in Suzhou-Lotes Suzhou Co., Ltd
Suzhou factory-Lotes Suzhou Co., Ltd was certified and taken effect of ISO 9000.
The Company increased capital by cash, increasing total capital to four hundred ninety-five million New Taiwan Dollars (NTD 495, 000,000).
2005 Lotes Suzhou Co., Ltd was certified and taken effect of ISO 9001:2000. The Company converted surplus into capital, increasing total capital to five hundred 。
twenty-three million and two hundred thousand New Taiwan Dollars (NTD 523, 200,000)
2006 The Company converted surplus into capital and increased capital by cash, increasing total capital to five hundred ninety-one million and six hundred sixty thousand New Taiwan Dollars (NTD 591, 660,000).
Approved by Securities and Futures Bureau, Financial Supervision Commission of the Executive Yuan to pass public offering.

Approved by Taipei Exchange to register as emerging stock.

2007 The Company converted capital reserves and surplus into capital, increasing total capital to six hundred thirty-eight million and two hundred thousand New Taiwan Dollars (NTD 638,200,000).

Approved by Taiwan Stock Exchange to register as listed company.

The Company increased capital by cash, increasing total capital to seven hundred eleven million and seven hundred forty thousand New Taiwan Dollars (NTD 711, 740,000).

2008 The Company converted surplus into capital, increasing total capital to seven hundred sixty-two million three hundred twenty-seven thousand New Taiwan Dollars (NTD 762, 327,000).
Received Intel’s Preferred Quality Supplier (PQS) award
2009 The Company converted employee stock option certificate to capital, increasing total capital to seven hundred seventy-one million and forty-one thousand New Taiwan Dollars (NTD 771, 041,000).
2010 The Company increased capital by cash, increasing total capital to nine hundred thirty-one million and forty-one thousand New Taiwan Dollars (NTD 931, 041,000).
2011 The Company converted employee stock option certificate to capital, increasing total capital to nine hundred thirty-four million and seven hundred seventy-nine thousand New Taiwan Dollars (NTD 934, 779,000).
2012 The Company’s subsidiary, Lintes Technology, had successfully developed Thunderbolt high-speed active transmission cable series products. By passing Intel and Apple’s techconology qualification, Lintes Techonology became the second professional manufacturer receiving the Intel Thunderbolt technology certification and manfacture Thunderbolt cables.
2013 CPU Socket--LGA 2011Pin R0 socket received Intel certification. CPU Socket-- LGA 2011Pin R1 ILM & BP received Intel certification.
2014 Successfully developed HP Smart Socket ILM Joined USBIF to develop a new generation of high speed transmission device, USB Type C
2015 Developed Intel next generation server product, skt P PHLM Received Sanodenki ’s Quality Supplier award.
Became qualified supplier for Samsung Mobile Communications business division.
2016 CPU Socket--LGA3674 PHLM for the next generation server received Intel certification. Lotes Guanghou was certified AS9100C: Quality Management Standard for Aviation, Space, and Defense Industries.

2018 The Company’s subsidiary, Lintes Technology’s 40Gb Thunderbolt 3 passive 0.7M cable received Intel certification. 2018 The Company’s subsidiary, Lintes Technology was approved by Taipei Exchange to

2019 The Company increased capital by cash, increasing total capital to one thousand thirty-one million and forty-one thousand New Taiwan Dollars (NTD 1,031, 041,000).

The Company’s subsidiary, Lintes Technology was approved by Taiwan Stock Exchange to register as listed company.

III. Corporate Governance Report

1. Organization:

(1) Organizational chart

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Board of
Directors
Auditor’s
Office
General
Manager
General Manager’s
Office
Management Dept. Administration Dept. Finance Dept. Sales Dept. R&D Dept. Manufacturing Dept. QA Dept. IT Dept. Legal Affair Dept.
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(2) Businesses operated by each major department:

Department	Functions
General Manager	1. By the resolution of the Board of Directors, is responsible to all shareholders. 2. Overall planning for the Company and its developing direction. 3. Determine organizational structure. 4. Approve and sign off the Company’s major decisions and contracts. 5. Draw up quality policies/quality goals.
General Manager's Office	1. Assist General Manager in the execution of the overall planning.
Auditing Office	1. Exam and evaluate the integrity, rationality and validity of the Company's internal control system.
Financial & Administrative Department	1. Manage recruitment operations, and personnel information and attendance 2. Plan and execute employee training. 3. Manage miscellaneous affairs. 4. Manage office equipment maintenance and logistics affairs. 5. Human resources management for foreign affiliated companies.

Department	Functions
Finance Department	1. Provide relevant financial and management statements for external users and internal managers 2. Plan and execute annual budget. 3. Raise,operate,and allocate funds.
Finance Department	4. Prepare and analyze daily accounting, tax and financial statements. 5. Reimburse the Company’s various expenses 6. Evaluate the Company’s business performance and perform cost analysis. 7. Raise and allocate funds for foreign affiliated companies.
Sales Department	1. Expand markets. 2. External product quotations, correspondence and customer reception. 3. Operate order receiving, modifying and invoicing. 4. Collaborate with relevant departments to ensure delivery. Consult with clients if delivering on time is unachievable. 5. Customer information organization and customer service.
Research & Development Department	1. Responsible for the design and execution of newly developed products or tooling. 2. Manage and communication design changes. 3. Confirm toolingmade.
Manufacturing Department	1. Production of plastic products: Manufacture products’ plastic parts, design and modify plastic injection tooling and jigs, maintain on-site equipment, and manage material. 2. Production of stamping products: Responsible for the manufacture of terminals, the design and modification of stamping dies and jigs, the maintenance of on-site equipment, and material management. 3. Responsible for leading supplier management: Procure and manage material, equipment and daily consumables; Production planning and control. 4. Stock management of stock materials, semi-finished products and finished product: Manage and optimize production efficiency and process capability. 5. Procurement on behalf of foreign affiliated companies.
Quality Control Department	1. Product quality system control 2. Correction and preventive measures for defective products. 3. Handle customer complaint. 4. Inspect purchased products, self-produced products, finished products and raw material. 5. Counsel suppliers, inspect and monitor the process of incoming materials, manufacturing and shipping.

Department	Functions
IT Department	1. Maintenance of network system 2. Maintenance of software/hardware equipments 3. Maintenance of system 4. Planning and execution of information system.
Legal & Intellectual Property Office	1. Patent affairs 2. Legal affairs 3. Intellectual property affairs
Business Management Department	1. Responsible for oversea production quality control, delivery business expansion, customer services, customer/supplier relationship maintenance and improvement. 2. Operationplanningand analysis ofgroupaffiliated businesses.

Information on Directors, Supervisors, President, Vice President, Associate President, Heads of departments and branches

(1) Information on Directors and Supervisors

																	April 21,2020	April 21,2020	April 21,2020	April 21,2020
Title	Nationalit y/ Country of Origin	Name	Gend er	Date elected	Term (Years)	First Election Date	Shareholding when Elected		Current Shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement		Experience `（`Education~~`）`~~	Other Position	Executives, Directors or Supervisors who are spouses or within two degrees of kinship			Rema rks
							Shares	%	Shares	%	Shares	%	Share s	%			Title	Name	Relation
Chairperson	R.O.C.	Jiaming Investment Co., Ltd. Representative: Chu, Te-Hsiang	Male	June 14, 2019	3	October, 2004	10,040,037	9.70%	9,873,037	9.54%	0	0	0	0	Taishan Senior High School/ Mechanical Department; Lotes Co., Ltd./Chairpers on	Lotes Co., Ltd./Chairperson Jiaming Investment Co., Ltd./Chairperson Jinling Investment Co., Ltd./Supervisor Good Hope Investments Limited/Chairperson LOTES INVESTMENT LTD./Chairperson Lotes Suzhou Co., Ltd/Chairperson Lotes Guanghou Co., Ltd/Vice Chairperson Jiayu Investment Co., Ltd./Chairperson Ememe Robot Co., Ltd/Chairperson Lucemitek Co., Ltd/Legal Representative of a Director Lintes Technology Co., Ltd/Chairperson Radinet Communications Inc./Legal Representative of a Director Dechuan Investment Co., Ltd./Chairperson	Associate President' s office	Chu Chen, Yi-Hui	Spouse
																	President	Ho, Te-Yu	Brothers

Director	R.O.C.	Jiaming Investment Co., Ltd. Representative: Ho, Te-Yu	Male	June 14, 2019	3	October, 2004	10,040,037	9.70%	9,873,037	9.54%	0	0	0	0	Chung-Pu Junior High School Northern Occupational Training Council / Department of Die Molding Panyu Deyi Ltd. /President	Lotes Co., Ltd./President Jinling Investment Co., Ltd./Chairperson Dunlin Investment Co., Ltd./Chairperson Good Hope Investments Limited/Director LOTES INVESTMENT LTD./Director Lotes Guanghou Co., Ltd/Chairperson Lotes-zsdz Co., Ltd/Chairperson Tsongkha Technology (Shenzhen ) Co., Ltd/Director Lotes Suzhou Co., Ltd/Vice Chairperson Lotes Hengnan Co., Ltd./Chairperson Lotes Hengnan Co., Ltd./Chairperson Lintes Technology Co., Ltd/Director Jiayu Investment Co., Ltd./Director Lotes Zhongshan Co.,Ltd/Director	Chairpers on	Chu, Te-Hsiang	Brothers
Director	R.O.C.	Tsai, Ming-Jui	Male	June 14, 2019	3	June, 2010	10,954	0.01%	5,954	0.01%	0	0	0	0	Ming Chuan University/ International Business Lotes Co., Ltd./Sales Assistant Vice President	Lotes Co., Ltd./Sales Vice President LOTES EU GmbH/Director	None	None	None
Director	R.O.C.	Chin, Chang-Min	Male	June 6, 2016	3	June, 2013	0	0	0	0	0	0	0	0	National Taiwan University/Ma ster of Accounting; The First Accounting Firm/Senior Accountant	KenWill United CPAs Firm/Director Yong Shun Chemical Co., Ltd./Independent Director Taiwan Sanyo Electric Co., Ltd/Independent Director Transglobe Capital Management Ltd. (TGCM)/Consultant	None	None	None

Independe nt Director	R.O.C.	Hsieh, Chia-Ying	Male	June 14, 2019	3	June, 2013	0	0	0	0	0	0	0	0	National Taiwan University/ B.S. in Electrical Engineering National Taiwan University/ Business Administratio n Realtek Semiconducto r Corp./ Executive Assistant to the President COMMUNIC ATOR VENTURE MANAGEM ENT INC. /Vice President MIS JOINT INTERNATI ONAL CO., LTD. /Vice President	Leltek INC./Director Total Fortune Capital Limited/ Executive Director	None	None	None

Independe nt Director	R.O.C.	Hu, Jui-Ching	Fema le	June 14, 2019	3	June, 2013	0	0	0	0	0	0	0	0	National Chiao Tung University/Ba chelor of Applied Mathematics Stanford University, USA/Master National Chiao Tung University /EMBA Hermes Microvision Inc./Vice President Metrodyne Microsystem Corp./Vice President Intel Microelectron ics Asia Ltd. Taiwan Branch./ Strategic Investment Officer	Hermes-epitek Corporation./Vice President Gudeng Precision Industrial Co., Ltd./Supervisor	None	None	None
Supervisor	R.O.C.	Jinling Investment Co., Ltd. Representative: Chang,Kun-Yao	Male	June 14, 2019	3	October, 2004	10,956,237	10.59%	10,956,237	10.59%	0	0	0	0	Wugu High School	`－`	None	None	None

Supervisor	R.O.C.	Cheng, Ming-Sung	Male	June 14, 2019	3	June, 2013.	0	0	0	0	0	0	0	0	National Chiao Tung University/ Bachelor of Electrical and Control Engineering Sun Yat-sen University/Ma ster of Business Administratio n GAINS Investment Corporation/I nvestment Assistant Vice President Vincera Capital/ President. Chief Investment Officer IIH Assets Management Group Limited/Chief Investment Officer	Sinorock Capital Co./Chairperson	None	None	None
Supervisor	R.O.C.	Yang, Wen-Ming	Male	June 14, 2019	3	December, 2006	0	0	0	0	0	0	0	0	National Taipei University/Ma ster of Business Administratio n; Entery Industrial Co., Ltd./Chief Financial Officer	Kim Forest Enterprise Co., Ltd/Chief Financial Officer	None	None	None

Director and Supervisor are corporate shareholders' representatives; the major shareholders of the

corporate shareholders are: April 21, 2020

corporate shareholders are:	April 21,2020
Name of Corporate Shareholders (Note 1)	Major Shareholders of Corporate Sharholders (Note 2)
Jiaming Investment Co., Ltd.	Chu, Te-Hsiang (24.44%), Chu Chen, Yi-Hui (28.88%), Chu, Pei-Hsuan (15.56), Chu, Yen-Ni (15.56%), Chu, Ching-Fu (15.56%)
Jinling Investment Co., Ltd.	Ho, Te-Yu (60%), Ho,Shuo-Chieh (20%), Ho, Chu-Yen (20%)

Expertise and independence of the Director and Supervisor:

	April	April	April	April	April	April	April	April	April	April	April	April	April	April	April	21,2020
Terms Name (Note 1)	Have at least five years of work experience and the following professional qualifications			Compliance with independence circumstances (note)												Number of other public companies that the person also served as independe nt directors
	Lecturer or above in a public or private college or university in the relevant field of business, law, finance, accounting or corporate business	Judges, prosecutors, lawyers, accountants or other specialized occupational and technical personnel who have passed national examinations and obtained certificates necessary for the business of the company	Business, law, finance, accounting or corporate business experience required	1	2	3	4	5	6	7	8	9	10	11	12
Jiaming Investment Co., Ltd. Representati ve: Chu, Te-Hsiang	-	-	V	-	-	-	-	-	V	V	-	V	-	V	-	0
Jinling Investment Co., Ltd. Representati ve: Ho, Te-Yu	-	-	V	-	-	-	-	-	V	V	-	V	-	V	-	0
Tsai, Ming-Jui	-	-	V	-	V	V	V	V	V	-	V	V	V	V	V	0
Chin, Chang-Min	-	V	V	V	V	V	V	V	V		V	V	V	V	V	2

Hsieh, Chia-Ying			V	V	V	V	V	V	V	V	V	V	V	V	V
Hu, Jui-Ching			V	V	V	V	V	V	V	V	V	V	V	V	V
Jinling Investment Co., Ltd. Representati ve: Chang, Kun-Yao	-	-	V	V	V	-	V	V	V	V	V	V	V	V	-
Cheng, Ming-Sung			V	V	V	V	V	V	V	V	V	V	V	V	V
Yang, Wen-Ming	-	-	V	V	V	V	V	V	V	V	V	V	V	V	V

(2) Information on President, Vice President, Assistant Vice President, Heads of Departments and Branches

													April 21,2020	April 21,2020	April 21,2020	April 21,2020
Title	Nationality/ Country of Origin	Name	Gender	Date elected	Shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement		Experience (Education)	Other Position	Managers who are spouse or consanguineous within two degrees			Remarks
					Shares	%	Shares	%	Shares	%			Title	Name	Relatio n
President	R.O.C.	Ho, Te-Yu	Male	August 23, 1986	442,555	0.43%	0	0.00%	15,956,237	15.42%	Northern Occupational Training Council/Department of Die Molding; Lotes Co., Ltd./President & Panyu Deyi Ltd./President	Jinling Investment Co., Ltd./Chairperson Dunlin Investment Co., Ltd./Chairperson Good Hope Investments Limited/Director LOTES INVESTMENT LTD./Director Lotes Guanghou Co., Ltd/Chairperson Lotes-zsdz Co., Ltd/Chairperson Tsongkha Technology (Shenzhen ) Co., Ltd/Director Lotes Suzhou Co., Ltd/Vive Chairperson Lotes Hengnan Co., Ltd./Chairperson Lotes Hengnan Co., Ltd./Chairperson Lintes Technology Co., Ltd/Director Lotes Zhongshan Co.,Ltd/Director	Chairp erson and R&D Directo r	Chu, Te-Hsia ng	Brother s
R&D Director	R.O.C.	Chu, Te-Hsiang	Male	November 8, 2017	11,476	0.01%	60	0.00%	12,874,425	12.44%	Taishan Senior High School/ Mechanical Department; Lotes Co., Ltd./Chairperson	Lotes Co., Ltd./Chairperson Jiaming Investment Ltd./Director Jinling Investment Co., Ltd./Supervisor Good Hope Investments Limited/Chairperson LOTES INVESTMENT LTD./Chairperson Lotes Suzhou Co., Ltd/Chairperson Lotes Guanghou Co., Ltd/ViceChairperson Jiayu Investment Co., Ltd./Chairperson Ememe Robot Co., Ltd/Chairperson Lucemitek Co., Ltd/Legal Representative of a Director Lintes Technology Co., Ltd/Chairperson Radinet Communications Inc./Legal Representative of a Director Dechuang Investment Ltd./Chairperson	Associ ate Preside nt's office	Chu Chen, Yi-Hui	Spouse
													Preside nt	Ho, Te-Yu	Brother s
President Office Assistant Vice President	R.O.C.	Chu Chen, Yi-Hui	Female	September 28, 1990	60	0.00%	11,476	0.01%	12,874,425	12.44%	Chinese Culture University/ Department of Political Science Lotes Co., Ltd. Assistant Vice President	Jiaming Investment Ltd./Supervisor Loteson International Investments Limited/Director	Chairp erson and R&D Directo r	Chu, Te-Hsia ng	Spouse
Sales Senior Vice President	R.O.C.	Tsai, Ming-Jui	Male	November 15, 2007	5,954	0.01%	0	0	0	0	Ming Chuan University/ International Business Lotes Suzhou Co., Ltd./Vice President	LOTES EU GmbH /Director	None	None	None
Quality Controll Manager	R.O.C.	Hsieh, Wei-Chen	Female	January 7, 2005	0	0.00%	0	0	0	0	National Chung Hsing University Night School Lotes Co., Ltd./Quality Controll Vice President	None	None	None	None

Finance Manager	R.O.C.	Liu, Hsing-Hsia	Male	June 1, 2006	0	0.00%	Tamkang University/Department of Accounting TCK Technology Co.,Ltd./Financial Manager	LUCEMITEK CO., LTD/Legal Representative of Supervisor Ememe Robot Co., Ltd/Director	None	None	None
Finance Assistant Manager	R.O.C.	Liang, Shih-Yi	Female	September 28, 2005	0	0.00%	Tamkang University/Department of Accounting MAEDEN INTERNATIONAL LIMITED/Chief Accountant	None	None	None	None
Production and Financial & Manageme nt Manager	R.O.C.	Hus, Yu	Male	January 19, 2007	90	0.00%	Kang-Ning Junior College of Medical Care and Management/Department of Information Management SHANG-CHENG Technology Co., Ltd./Warehouse Section Manager	None	None	None	None
Business Manageme nt Vice President	R.O.C.	Lu, Chih-Cheng	Male	January 2, 2007	5,000	0.00%	Tamkang University/Department of Mechanical Engineering HAMBURG INDUSTRIES CO., LTD., Longhua Business Office/Director	None	None	None	None
Business Manageme nt Vice President	R.O.C.	Kung, Yung-Sheng	Male	May 1, 2007	0	0.00%	National Taiwan University/Master of Mechanical Engineering Nan Juen International Co., Ltd./EngineeringManager	None	None	None	None
Business Manageme nt Assistant Vice President	R.O.C.	Lin, Ching-Hao	Male	July 11, 2008	1,500	0.00%	San-Chung Vocational High School/Department of Mechanical Engineering STARLINK ELECTRONICS CORP./Plant Manager	None	None	None	None
Business Manageme nt Assistant Vice President	R.O.C.	Lin, Tsun-Te	Male	January 1, 2010	0	0.00%	Tamkang University/Master of Information Management FOUND FAIR PLASTIC INDUSTRIAL CO., LTD./Information Manager	None	None	None	None
Business Manageme nt Auditing Supervisor	R.O.C.	Wang, Hsi-Hung	Male	October 27, 2011	0	0.00%	National Taiwan University/Master of Business Administration DaChan Food (Asia) Limited/Auditing Office Supervisor	None	None	None	None
Business	R.O.C.	Lin,	Male	January 21,	0	0.00%	St. John's University/	None	None	None	None

Manageme nt Assistant Vice President		Yao-Ching		2016					Department of Electronic Engineering Foxconn Technology Group/Quality Controll Supervisor
Sales Vice President	R.O.C.	Li, Cheng-Wen	Male	January 21, 2016	0	0.00%	0	0	Vanung University/Department of Electronic Engineering Lotes Co., Ltd./Sales B Manager	None	None	None	None
Sales A Assistant Vice President	R.O.C.	Wu, Yi-Chen	Male	December 5, 2016	0	0.00%	1,449	0.00%	Chinese Culture University/ Department of Political Science Lotes Co., Ltd./Sales A Manager	None	None	None	None
Business Manageme nt Sales Assistant Vice President	R.O.C.	Lin, Ko-Lun	Male	December 5, 2016	0	0.00%	0	0	National Taipei University of Technology/Department of Industrial Engineering and Management EMBA LOTES Guangzhou Co., Ltd./Sales Manager	None	None	None	None
Business Manageme nt Cable Assistant Vice President	R.O.C.	Chu, Hsiao-Yi (Note 1)	Male	January 16, 2017	0	0.00%	0	0	Hwa Hsia University of Technology/Deptartment of Mechanical CHENG UEI PRECISION INDUSTRY CO., LTD./Cable Office Assistant Vice President	None	None	None	None
Business Manageme nt Quality Controll Assistant Vice President	R.O.C.	Liu, Chi-Hung	Male	April 11, 2018	2,000	0.00%	0	0	National Taiwan University of Science and Technology/Master of Business Administration Foxconn Interconnect Technology Limited/Central Quality Assuramce Assistant Manager	None	None	None	None

(Note 1) Chu, Hsiao-Yi resigned on March 27, 2020

3. Remuneration of Directors, Supervisors, Presidents, and Vice Presidents:

(1) Remuneration of General and Independent Directors:

Year: 2019; Unit: 1,000 TWD

Titl e	Name			Remuneration of Directors	Remuneration of Directors	Remuneration of Directors	Remuneration of Directors			Total of A, B, C and D as a percentage of net income after tax	Total of A, B, C and D as a percentage of net income after tax			Remuneration for	Remuneration for	part-time staff	part-time staff	part-time staff	part-time staff	A, B, C, D, E, F and G as a percentage of net income after tax	A, B, C, D, E, F and G as a percentage of net income after tax	Remunera tion from non-subsi diary reinvestm ents or parent companies
		Remuneratio n (A)		Severance Pay (B)		Remuneration for the distribution of earnings(C)		Business implementati on expenses (D)				Salaries, bonuses, special allowances, etc (E)		Retirement Pension (F)		Remuneration of employees (G)
		The Co mp any	Conso lidate d	The Co mp any	Conso lidate d	The Com pany	Conso lidate d	The Co mp any	Cons olida ted	The Compa ny	Consoli dated	The Compa ny	Consol idated	The Company	Consolidated	The Company		Consolidated		The Compa ny	Conso lidated
																Cash	Share	Cash	Share
Ch airp ers on	Jiaming Investme nt Co., Ltd. Represent ative: Chu, Te-Hsian g	0	0	0	0	3,480	3,480	21	21	0.17%	0.17%	7,435	7,435	279	279	8,607	0	8,607	0	0.95%	0.95%	None
Dire ctor	Jiaming Investme nt Co., Ltd. Represent ative: Ho, Te-Yu
Dire ctor	Tsai, Ming-Jui
Dire ctor	Chin, Chang- Min
Ind epe nde nt Dir ect or	Hsieh, Chia-Yi ng	0	0	0	0	400	400	42	42	0.02%	0.02%	0	0	0	0	0	0	0	0	0.02%	0.02%	None

Ind epe nde Hu, nt Jui-Chin Dir g ect or

Remuneration Schedule

Range of Remuneration	Name of Directors	Name of Directors	Name of Directors	Name of Directors
	Total of (A+B+C+D)		Total of (A+B+C+D+E+F+G)
	~~The Company~~	~~Companies in the~~ consolidated financial statements	~~The Company~~	~~Companies in the~~ consolidated financial statements
Less than $2,000,000	Chin, Chang-Min, Hsieh, Chia-Ying, Hu, Jui-Ching, Tsai, Ming-Jui, Jiaming Investment Co., Ltd. Representative: Chu, Te-Hsiang, Jiaming Investment Co., Ltd. Representative: Ho, Te-Yu	Chin, Chang-Min, Hsieh, Chia-Ying, Hu, Jui-Ching, Tsai, Ming-Jui, Jiaming Investment Co., Ltd. Representative: Chu, Te-Hsiang, Jiaming Investment Co., Ltd. Representative: Ho, Te-Yu	Chin, Chang-Min, Hsieh, Chia-Ying, Hu, Jui-Ching	Chin, Chang-Min, Hsieh, Chia-Ying, Hu, Jui-Ching
$2,000,000(inclusive)~$5,000,000(exclusive)
$5,000,000 (inclusive) ~ $10,000,000 (exclusive)			Jiaming Investment Co., Ltd. Representative: Chu, Te-Hsiang, Jiaming Investment Co., Ltd. Representative: Ho, Te-Yu, Tsai, Ming-Jui	Jiaming Investment Co., Ltd. Representative: Chu, Te-Hsiang, Jiaming Investment Co., Ltd. Representative: Ho, Te-Yu`、`Tsai, Ming-Jui
$10,000,000(inclusive)~$15,000,000(exclusive)
$15,000,000(inclusive)~$30,000,000(exclusive)
$30,000,000(inclusive)~$50,000,000(exclusive)

$50,000,000(inclusive)~$100,000,000(exclusive)
$100,000,000 or more
Total	6 people	6 people	6 people	6 people

(2) Remuneration of supervisors Year: 2019; Unit: 1,000 TWD

Title	Name	Remuneration of Supervisors	Remuneration of Supervisors	Remuneration of Supervisors	Remuneration of Supervisors			Ratio of total compensation (A+B+C) to net income (%)	Ratio of total compensation (A+B+C) to net income (%)	Remuneration from non-subsidiary reinvestments or parent companies
		Remuneration (A)		Consideration (B)		Business Implementation Expenses (C)
		The company	Consolidated	The company	Consolidated (Note 5)	The Company	Consolidated	The Company	Consolidated
Supervisor	Jinling Investment Ltd.: Chang, Kun-Yao	0	0	600	600	57	57	0.03 %	0.03 %	None
Independent Supervisor	Yang, Wen-Ming
Independent Supervisor	Cheng, Ming-Sung

Table of remuneration ranges

Table of	remuneration ranges	remuneration ranges
Remuneration pay range for each Supervisor of the Company	Name of Supervisors
	Total	of(A+B+C)
	The Company	Consolidated
Less than $2,000,000	Jinling Investment Co., Ltd.: Chang, Kun-Yao, Yang, Wen-Ming,Cheng,Ming-Sung	Jinling Investment Co., Ltd.: Chang, Kun-Yao, Yang, Wen-Ming, Cheng, Ming-Sung
$2,000,000(inclusive)~$5,000,000(exclusive)
$5,000,000 (inclusive)~$10,000,000 (exclusive)
$10,000,000(inclusive)~$15,000,000(exclusive)
$15,000,000 (inclusive)~$30,000,000 (exclusive)
$30,000,000 (inclusive)~$50,000,000 (exclusive)
$50,000,000(inclusive)~$100,000,000(exclusive)
$100,000,000or more
Total	3people	3people

(3) Remuneration of Presidents and Vice Presidents: Year: 2019; Unit: 1,000 TWD

Title	Name	Remuneration (A)	Remuneration (A)	Severance Pay (B)	Severance Pay (B)	Bonuses and Allowances (C)	Bonuses and Allowances (C)	Profit Sharing- Employee Bonus (D)	Profit Sharing- Employee Bonus (D)	Profit Sharing- Employee Bonus (D)	Profit Sharing- Employee Bonus (D)	Ratio of total compensation (A+B+C+D) to net income(%)	Ratio of total compensation (A+B+C+D) to net income(%)	Remunera tion from non-subsi diary reinvestm ents or parent companies
		The Company	Consolidated	The Company	Consolidated	The Company	Consolidated	The Company		Consolidated		The Company	Consolidated
								Cash	Stock	Cash	Stock
Presiden t	Ho, Te-Yu	24,919	24,919	1,570	1,570	4,083	4,083	32,198	0	32,198	0	3.02%	3.02%	None
R&D Director	Chu, Te-Hsiang
Vice Presiden t	Lu, Chih-Che ng
Vice Presiden t	Kung, Yung-She ng
Assistant Vice Presiden t	Chu Chen, Yi-Hui
Senior Vice Presiden t	Tsai, Ming-Jui
Vice Presiden t	Li, Cheng-W en
Assistant Vice Presiden t	Lin, Ching-Ha o
Assistant Vice Presiden t	Lin, Tsun-Te

Assistant Vice Presiden t	Lin, Yao-Chin g
Assistant Vice Presiden t	Wu, Yi-Chen
Assistant Vice Presiden t	Lin, Ko-Lun
Assistant Vice Presiden t	Chu, Hsiao-Yi (Note 1)
Assistant Vice Presiden t	Liu, Chi-Hung

(Note 1) Chu, Hsiao-Yi Resigned on March 27, 2020

Remuneration Schedule

	Remuneration Schedule	Remuneration Schedule
Range of Remuneration	Name of Presidents and Vice Presidents
	The Company	Consolidated
Less than $2,000,000	Chu, Hsiao-Yi	Chu, Hsiao-Yi
$2,000,000 (inclusive) ~ $5,000,000 (exclusive)	Ho, Te-Yu, Chu, Te-Hsiang, Chu Chen, Yi-Hui, Lin, Ching-Hao, Lin, Tsun-Te, Wu, Yi-Chen, Lin, Yao-Ching,Liu,Chi-Hung	Ho, Te-Yu, Chu, Te-Hsiang, Chu Chen, Yi-Hui ,Lin, Ching-Hao, Lin, Tsun-Te, Wu, Yi-Chen,Lin,Yao-Ching,Liu,Chi-Hung
$5,000,000 (inclusive) ~ $10,000,000 (exclusive)	Lu, Chih-Cheng, Kung, Yung-Sheng, Tsai, Ming-Jui,Li,Cheng-Wen,Lin,Ko-Lun	Lu, Chih-Cheng, Kung, Yung-Sheng, Tsai, Ming-Jui,Li,Cheng-Wen,Lin,Ko-Lun
$10,000,000(inclusive)~$15,000,000(exclusive)
$15,000,000(inclusive)~$30,000,000(exclusive)
$30,000,000(inclusive)~$50,000,000(exclusive)
$50,000,000 (inclusive) ~ $100,000,000 (exclusive)
$100,000,000 or more
Total	14people	14people

(4) Name of Managers and circumstances of distribution of employees' remuneration

Year: 2019; Unit: 1,000 TWD

					Year: 2019;	Unit: 1,000 TWD
	Title	Name	Shares	Cash (Note 1)	Total	Ratio of Total Amount to Net Income(%)
Managerial officers	President	Ho, Te-Yu	0	35,002	35,002	1.69%
	R&D Director	Chu, Te-Hsiang
	Business Management Vice President	Lu, Chih-Cheng
	Business Management Vice President	Kung, Yung-Sheng
	Assistant Vice President	Chu Chen, Yi-Hui
	Sales Vice President	Tsai, Ming-Jui
	Business Management Assistant Vice President	Lin, Ching-Hao
	Business Management Assistant Vice President	Lin, Tsun-Te
	Business Management Assistant Vice President	Lin, Yao-Ching
	Business Management Assistant Vice President	Lin, Ko-Lun
	Sales A Assistant Vice President	Wu, Yi-Chen
	Sales B Assistant Vice President	Li, Cheng-Wen
	Finance Manager	Liu, Hsing-Hsia
	Auditing Supervisor	Wang, Hsi-Hung
	Finance Assistant Manager	Liang, Shih-Yi
	Business Management Assistant Vice President	Liu, Chi-Hung

Note 1: Employee remuneration for 2019 is estimated based on the proportion of employee remuneration paid in 2018

(5) Compare and contrast an analysis of the total remuneration paid to the Company's Directors, Supervisors, Presidents and Vice Presidents as a percentage of net income after tax for the most recent two years by the Company and all companies in the Consolidated Statements, respectively, and describe the policies, criteria and combinations of remuneration paid, the procedures used to establish remuneration, and the correlation with operating performance and future risks.

Unit: 1,000 TWD

The Company	The Company	2018	2019
The Company	Total remuneration	68,704	67,370
	Proportion of net profit after tax	4.27%	3.24%
Consolidated	Total remuneration	68,704	67,370
	Proportion of net profit after tax	4.27%	3.24%

The remuneration of the Directors and Supervisors, including travel expenses and remuneration for

the distribution of earnings, is paid in accordance with the Company's Articles of Incorporation, and the remuneration of the Presidents and Vice Presidents is paid in accordance with the Company's approved principles for the payment of seniority.

4. Corporate governance operations

(1) Operations of the Board of Directors

The Board of Directors met 7 times in 2019 (A) and the attendance of Directors was as follows:

Title	Name	Attendance in Person B	Attendance Rate (%)(B/A)	Remarks
Chairperson	Chia Ming Ltd. Representative: Chu, Te-Hsiang	7	100%	June 14, 2019 Shareholders' Meeting re-election; reappointment
Director	Chia Ming Ltd. Representative: Ho, Te-Yu	6	85.71%	June 14, 2019 Shareholders’ Meeting re-election; reappointment
Director	Tsai, Ming-Jui	3	42.86%	June 14, 2019 Shareholders’ Meeting re-election; reappointment
Director	Chin, Chang-Min	7	100%	June 14, 2019 Shareholders’ Meeting re-election; reappointment

Director	Hu, Jui-Ching	7	0	100%	June 14, 2019 Shareholders’ Meeting re-election; reappointment
Independent director	Hsieh, Chia-Ying	7	0	100%	June 14, 2019 Shareholders’ Meeting re-election; reappointment
Independent director	Chia Ming Ltd. Representative: Chu, Te-Hsiang	7	0	100%	June 14, 2019 Shareholders’ Meeting re-election; reappointment
Other notable matters: 1. The matters set forth in Article 14-3 of the Securities and Exchange Act and other matters resolved at Board meetings in which the Independent Directors have objected or reserved an opinion and which are recorded or stated in writing shall state the date of the Board meeting, the period, the content of the motion, all Independent Directors' opinions and the Company's handling of the Independent Directors' opinion: None. 2. In the event that a Director recuses himself or herself from an interest motion, the Director' s name, the content of the motion, the reasons for the recusal and the circumstances of his or her participation in the vote shall be stated: None. 3. Objectives for strengthening the Board's functions (e.g., establishing an audit committee, enhancing information transparency, etc.) and evaluation of implementation status for the current year and the most recentyear: None.

(2) Information on the operation of the Audit Committee: The Company does not have an Audit Committee.
(3) Supervisors' participation in the operation of the Board of Directors

The Board of Directors met 7 times in 2019 (A) and the attendance of Supervisor was as follows:

Title	Name	Attendance in Person B	Attendance Rate (%)(B/A)	Remarks
Legal Representati ve of a Supervisor	Jinling Investment Co., Ltd.: Chang, Kun-Yao	7	100%	June 14, 2019 Shareholders’ Meeting re-election; reappointment
Supervisor	Yang, Wen-Ming	6	85.71%	June 14, 2019 Shareholders’ Meeting re-election; reappointment
Supervisor	Cheng, Ming-Sung	6	85.71%	June 14, 2019 Shareholders’

				Meeting re-election; reappointment
Other noable matters: 1. Composition and duties of the Supervisors. (1) Communication between Supervisors and employees and shareholders: Supervisors may contact employees and shareholders directly if it deems necessary. (2) Communication between Supervisors and the Internal Auditing Supervisors and the Accountants. 1. The audit unit submitted a report on the completed audit project to Supervisors, which Supervisors did not object to. 2. The audit unit attended the Company's Board of Directors and made an audit business report, which Supervisors did not object to. 3. The Supervisors may communicate the financial position with the Accountants, both face-to-face and in writing, if deemed necessary. 2. If Supervisors attend the Board of Directors to make a presentation, the date of the Board of Directors, the period, the content of the motion, the resolutions of the Board of Directors and the Company's handlingof Supervisors'presentation shall be stated: None.

(4) Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”

Evaluation Item			Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Illustration
1. Does the company establish and disclose the Corporate Governance Best-Practice Principles based on “Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”?		V	(1) The Company has not established a Corporate Governance Best Practice Principles.	The Company will establish a Corporate Governance Best Practice Principles in the future as necessary.
2. Shareholding structure & shareholders’ rights (1) Does the company establish an internal operating procedure to deal with shareholders’ suggestions, doubts, disputes and litigations, and implement based on the procedure? (2) Does the company possess the list of its major shareholders as well as the ultimate owners of those shares? (3) Does the company establish and execute the risk management and firewall system within its conglomerate structure? (4) Does the company establish internal rules against insiders trading with undisclosed information?	V V V V		(1) The Company has an internal spokesperson, acting spokesperson, exclusive personnel and email address to handle shareholder proposals or disputes in accordance with the procedures. (2) The company has access to a list of the company's major shareholders and their ultimate controllers, which is regularly disclosed in accordance with the law and regulations. For a list of the relevant major shareholders, see page 41 of this Annual Report. (3) The Company establishes appropriate risk control mechanisms and firewalls in accordance with internal regulations such as control operations of subsidiaries, endorsement and guarantee methods, lending of funds to others, and criteria for acquisition or disposal of assets. All business dealings with affiliates are treated as independent third parties and unconventional transactions are prohibited. (4) The Company has a "Ethical Corporate Management Best Practice Principles", "Procedures for Handling Material Inside Information", and a "Guidelines for the Adoption of Codes of Ethical Conduct" to prohibit insiders from using undisclosed market information to purchase and sell marketable securities for improper gain.	None

Evaluation Item	Evaluation Item			Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
		Yes	No	Abstract Illustration
3. Composition and Responsibilities of the Board of Directors (1) Does the Board develop and implement a diversified policy for the composition of its members? (2) Does the company voluntarily establish other functional committees in addition to the Remuneration Committee and the Audit Committee? (3) Does the company establish a standard to measure the performance of the Board, and implement it annually, and to report the result to the Board? (4) Does the company regularly evaluate the independence of CPAs?		V	V V V	(1) Although the Company does not have a diversified approach to the composition of the Board of Directors, it will consider a wide range of professional backgrounds, including technical, financial and legal backgrounds, when selecting Board members. (2) The Company has no relevant needs or plans at this time. (3) The Company has established the Board of Directors' performance evaluation method and will conduct performance evaluation on a regular annual basis starting in 2020 and report the results of the performance evaluation to the Board of Directors. (4) The Company periodically evaluates the independence of its certified public accountants by making reference to the evaluation criteria set forth in The Bulletin of Norm of Professional Ethics for Certified Public Accountant of the Republic of China No. 10 "Integrity, Objectivity and Independence", and follows the regulations of the competent authorities to periodically adjust the length of a certifiedpublic accountant's license.	The Company has no plans to establish a functional committee other than a remuneration committee. The Company has established the Board of Directors' performance evaluation method and will conduct annual performance evaluation on a regular basis starting in 2020 and will submit the results of the performance evaluation to the Board of Directors.
4.	Are TWSE/GTSM Listed Companies staffed with suitable and appropriate number of corporate governance personneland designated corporate governance officers to be responsible for corporate governance related matters (including, but not limited to, providing directors, supervisors with information necessary for the execution of business,assisting directors, supervisors in complying with lawsand regulations, conducting board and shareholder meeting related matters in accordance with the law, preparing minutes of board and shareholder meetings,etc.)?		V	The Company currently does not have a dedicated corporate governance unit or staff, but there are specific personnel responsible for providing directors and supervisors with information necessary for the execution of their business, handling matters related to the meetings of the Board of Directors and shareholders in accordance with the law, registering companies and registering changes, and preparing minutes of the meetings of the Board of Directors and shareholders, and other related matters.	The Company will evaluate whether to set up a dedicated (part-time) corporate governance unit or personnel in the future, depending on actual needs.
5.	Does the company establish a communication channel and build a designated section on its website for stakeholders(including but not limited to shareholders, employees, customers,and suppliers), as well as handle all the issues they care for in terms of corporate social responsibilities?	V		The Company has appropriate communication channels with its customers, suppliers, correspondent banks, employees, investors and other relevant stakeholders. A special section of our stakeholders' website has been set up in FY2015 as a response to stakeholders' concerns on important CSR issues.	None

6.	Does the company appoint a professional shareholder	V		The Company currently appoints the Stock Agency Department	None

Evaluation Item	Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
		Yes	No	Abstract Illustration
service agency to deal with shareholder affairs?				of SinoPac Securities to handle the relevant shareholders' affairs.
7. Information Disclosure (1) Does the company have a corporate website to disclose both financial standings and the status of corporate governance? (2) Does the company have other information disclosure channels (e.g. building an English website, appointing designated people to handle information collection and disclosure, creating a spokesman system, webcasting investor conferences)? (3) Does the Company announce and report its annual financial report within two months of the end of the fiscal year, and announce and report its first, second and third quarter financial reports and operations for each month well in advance of the required deadline?		V V	V	(1) The Company's website has disclosed information about the Company's profile, business and investor areas and corporate governance, and designated a person to be responsible for disclosing financial, business and corporate governance information about the Company on the MOPS. (2) The Company has a exclusive personnel responsible for the collection and disclosure of company information, and has a spokesperson and acting spokesperson in accordance with the regulations, and holds regular and irregular corporate briefing sessions, and regularly publishes operational and financial information in both English and Chinese to enhance the transparency of company information. (3) The Company has not announced and reported its annual financial report within two months of the end of the fiscal year. However, all of them were announced well in advance of the required deadlines and reported the first, second and third quarterly financial reports and operations for each month.	None

8.	Is there any other important information to facilitate a better understanding of the company’s corporate governance practices (e.g., including but not limited to employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, directors’ and supervisors’ training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing insurance for directors )?	V		1. Employee rights: The Company protects the legitimate rights and interests of its employees in accordance with the Labor Standards Law. 2. Investor relations: The Company's website has set up an investor section for investors to learn more about the Company's investor-related information, and a spokesperson, acting spokesperson and shareholder affairs units are set up to deal with issues such as shareholder proposals or disputes. 3. Rights of interested parties: The Company respects and protects the legal rights and interests of its interested parties. 4. Directors' and supervisors' continuing education: Company directors and supervisors attend continuing education courses in finance, business, etc., as required. 5. The implementation of the directors' recusal of interest motion: The directors of the Company adhere to the principle of a high degree of self-discipline and are not allowed to vote on board meetings when they have an interest in a matter. 6. The company insured US$3 million in liability insurance for directors, supervisors and managers in 2020. 7. Implementation status of customer policy: The Company has	None

Evaluation Item	Implementation Status	Implementation Status	Implementation Status
	Yes	No	Abstract Illustration
			a Quality Assurance Department and a Customer Support Department to provide transparent and effective after-sales services and customer complaints handling.
9. Please explain the improvements which have been made in accordance with the results of the Corporate Governance Evaluation System released by the Corporate Governance Center, Taiwan Stock Exchange, and provide the priority enhancement measures.

(5) The Company's Remuneration Committee shall disclose its composition, duties and operations:
Composition of the Remuneration Committee

The Company has approved the appointment of three Compensation Committee members by the Board of Directors on June 6, 2016, and the term of office shall commence from the date of appointment of three Compensation Committee members by the Board of Directors and end on June 5, 2019, the same date as the term of the current Board of Directors, and shall operate in practice in accordance with the "Remuneration Committee Charter" established by the Company.

The list of remuneration members is as follows.

	Title	Terms Name	Meets One of the Following Professional Qualification Requirements, Together with at Least Five Years’ Work Experience	Independence Criteria			Number of Other Public Companies in Which the Individual is Concurrently

		An instructor or higher position in a department of commerce, law, finance, accounting, or other academic department related to the business needs of the Company in a public or private junior college, college or university	Has work experience in the areas 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	Serving as an Remuneration Committee Member
Independent director	Hu, Jui-Ching		ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	0
Independent director	Hsieh, Chia-Ying		ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	0
Other	Lan, Jing-Yao	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	ˇ	3

2. Responsibilities of the Remuneration Committee

The Committee shall, with the attention of the good manager, faithfully perform the following functions and submit the recommendations to the Board for discussion:
(1) To establish and regularly review the policies, systems, standards and structures for performance evaluation and remuneration of directors, supervisors and managers.
(2) To regularly evaluate and set remuneration for the directors, supervisors and managers.

3. Operation of the Remuneration Committee

(1) The Company's Remuneration Committee consists of three members.
(2) Current term of office: From 14 June 2019 to 13 June 2022, the 2019 Remuneration Committee met 2 times (A) and was attended by the following members:

Title	Name	Attendance in Person(B)	By Proxy	Attendance Rate (%) (`Ｂ`/`Ａ`)(`註`)	Remarks
Convener	Hsieh,Chia-Ying	2	0	100%	Term of office: June 14,

					2019~111.6.13
Committee Member	Lan, Jing-Yao	2	0	100%	Term of office: June 14, 2019~ June 13, 2022
Committee Member	Hu, Jui-Ching	2	0	100%	Term of office: June 14, 2019~111.6.13
Other mentionable items: 1. If the board of directors declines to adopt or modifies a recommendation of the remuneration committee, it should specify the date of the meeting, session, content of the motion, resolution by the board of directors, and the Company’s response to the remuneration committee’s opinion (eg., the remuneration passed by the Board of Directors exceeds the recommendation of the remuneration committee, the circumstances and cause for the difference shall be specified) 2. Resolutions of the remuneration committee objected to by members or subject to a qualified opinion and recorded or declared in writing, the date of the meeting, session, content of the motion, all members’ opinions and the response to members’ opinion should be specified

(3) 2019 Remuneration Committee discussions and resolutions and the Company's handling of members' opinions.

Date	Motion	Remunuration Committee’s Resolution	The Company's handling of the Remuneration Committee's opinion
May 21, 2019 1stRemuneration Committee for 2019	(1) Review of the Company's 2018 employees' remuneration and directors' and supervisors' remuneration and method ofpayment	All members present agreed to approve the motion	N/A
June 26, 2019 2ndRemuneration Committee for 2019	(1) Election of the Chairperson of the Fourth Term Remuneration Commission	All members present agreed to approve the motion	N/A
November 11, 2019 3rdRemuneration Committee for 2019	(1) Review of the 2018 employee remuneration distribution for the Company's Manager (2) Review of the 2019 year-end bonus distribution for the Company's managers (3) Discuss the proposed work plan of the Company's Remuneration Committee for 2020	All members present agreed to approve the motion	N/A

(6) Corporate Social Responsibility:

	(6)Corporate Social Responsibility:	(6)Corporate Social Responsibility:
	Evaluation Item		ImplementationStatus			Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
			Yes	No	Abstract Explanation
1.	Does the Company conduct risk assessments on
	environmental, social and corporate governance
	issues related to the Company's operations and
	formulate relevant risk management policies or
	strategies in accordance with the materiality
	principle? (Note 3)
2.	Does the company establish exclusively (or concurrently) dedicated first-line managers authorized by the board to be in charge of proposing the corporate social responsibility policies and reporting to the board?			V	(3) The Company has not yet established a dedicated (part-time) corporate social responsibility unit.	The Company has not yet formulated a Corporate Social Responsibility Best Practice Principles and set up the relevant specialized units, which will be evaluated in the future dependingon the actual needs.
3. Environmental issues (1) Does the company establish proper environmental management systems based on the characteristics of their industries? (2) Does the company endeavor to utilize all resources more efficiently and use renewable materials which have low impact on the environment? `（`3`）`Does the Company assess the current and future			V V V		(1) The Company has established an environmental management policy and the production plant has been certified to ISO14001. (2) The Company adjusts the temperature of the office and warehouse for the season to achieve energy saving and power saving, and introduces the ISO14064 (GHG greenhouse gas) system certification. In addition, the Company has a waste treatment plan, which classifies waste into different levels and entrusts waste to be removed or recycled by a local government-approved waste treatment organization to reduce the environmental impact of hazardous substances in our products.	None
potential risks and opportunities of climate changes for the business and take measures to address climate related issues? `（`4 `）`Has the Companycompiled statistics on greenhouse gas emissions, water consumption, and total weight of waste in the past two years,		potential risks and opportunities of climate
		changes for the business and take measures to
		and total weight of waste in the past two years,

	Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
		Yes	No	Abstract Explanation
	andformulated policies on energy conservation, carbon reduction, greenhouse gas reduction, water use reduction, or other waste
	management?
4. Social issues (1) Does the company formulate appropriate management policies and procedures according to relevant regulations and the International Bill of Human Rights? (2) Does the Companyestablish and implement reasonable employee benefit measures (including remuneration, vacation and other benefits, etc.) and appropriately reflect operating performance or results in employee remuneration? (3) Does the company provide a healthy and safe working environment and organize training on health and safety for its employees on a regular basis?		V V V		(1) Although the Company has not yet established a management policy, it has been guided by international human rights treaties, including the United Nations "Universal Declaration of Human Rights" and the "International Labour Organization Convention", and supports the United Nations "Protect, Respect and Remedy: A Framework for Business and Human Rights" and its "Guiding Principles". (2) The Company has established relevant employee benefits measures and has reflected its operating performance in employee bonuses in accordance with the Company's Articles of Incorporation: 1. Employee bonuses: To motivate employees by distributing bonuses based on the Company's operation and individual performance. 2. Year-end bonus, holiday bonus (or gifts). 3. Entitled to labour insurance and health insurance. 4. The system of granting leave in accordance with the Labor Standards Act. 5. The pension shall be distributed monthly in accordance with the law. 6. A lactation room is available. 7. Authorize the Welfare Committee to provide employees with: birthday bonus, wedding	None None

Evaluation Item	Implementation Status	Implementation Status	Implementation Status
	Yes	No	Abstract Explanation
(4) Does the company provide its employees with career development and training sessions? (5) Does the Company comply with relevant regulations and international standards on customer health and safety, customer privacy,	V V V		bonus, birth bonus, funeral bonus, etc. 8. The Welfare Committee is authorized to organize communal meals, various domestic and international trips and other benefits from time to time. (3) The Company takes the safety and health of its employees and workers seriously in the working environment, and the related protective measures and their implementation are as follows. 1. The Company has management measures for occupational safety and health, occupational disaster prevention and treatment, as well as various environmental protection measures such as waste storage management, etc., in order to maintain the safety of employees and avoid causing environmental pollution. 2. The Company prepares for any potential impacts and hazards to the environment and safety on a daily basis and respond immediately to any disaster that occurs. An Emergency Response Team was also established to establish the organization and the duties and procedures of each member. 3. In order to provide a safe working environment, prevent occupational hazards and protect the safety and health of workers, the Company has established Safety and Health Work Rules and Management in accordance with the Occupational Safety and Health Act and its implementing regulations and the management requirements of OHSAS 18000, and all employees and non-employees

	Evaluation Item	Evaluation Item	Implementation Status	Implementation Status	Implementation Status
			Yes	No	Abstract Explanation
(6)	marketing and labeling of its products and services,and has it formulated relevant policies and complaint procedures to protect consumer		V		working in the Company's workplaces shall comply with the Safety and Health Work Rules and Management. 4. In order to ensure the safety of employees in the workplace, the Company is equipped with card access control devices at all entrances and exits, and security monitoring equipment at the main entrances and exits to protect the personal safety of employees. The company's electrical and mechanical, elevator and fire-fighting equipment is regularly inspected and maintained in accordance with the laws and regulations or the use of equipment to ensure that it is safe at all times. 5. The Company conducts disaster prevention drills every 6 months to enhance employees' awareness of fire prevention, so that they can take precautionary measures and take correct safety protection measures in the event of an incident. 6. The Company conducts regular employee health examinations, tests drinking water quality, and conducts workplace health promotion to maintain employee health in the workplace. 7. In addition to taking out labour insurance for all our employees, the Company also takes out group accident insurance for our employees to fully protect their rights and interests. (4) The Company arranges internal education training and individual external training for each department's needs as they request each year.
	rights? Does the Companyhavea suppliermanagement policy that requires suppliers to comply with	management
	relevant regulations on environmental
	protection, occupational safety and health, or
	human rights in the workplace, and how is it
	implemented?

		Evaluation Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
			Yes	No	Abstract Explanation
					(5) The Company has established a "Customer Complaint Handling Procedure". The Company's marketing and labeling of its products are in accordance with the relevant laws and international standards. (6) The Company has established "Supplier Choice Management Measures" and requires its suppliers to provide products that comply with international environmental protection standards, and the relevant regulations are stipulated in the contract. And require suppliers to have a sound management structure in personnel,environmental organizations.
5.	Does the Company make reference to international standards or guidelines for the	Does the Company make reference to	V		The Company prepares a Corporate Social Responsibility Report and discloses non-financial information about the Company annually. However, no third-party verification unit has been obtained at this time.	None
	preparation of corporate social responsibility
	reports and other reports that disclose
	non-financial information about the Company?
	Does such report obtain a third-party
	verification unit's assurance or warranty
	opinion?
6. If the Company has its own CSR Best Practice Principles in accordance with the "Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies", please explain the differences between them: Although the Company does not have a CSR Best Practice Principles at the moment, its implementation is consistent with its spirit and there are no significant differences. The Companywill implement them in the future accordingto the actual needs or regulations of the law.
7. Other important information to facilitate better understanding of the company`’`s corporate social responsibility practices`：` The Companywill continue toparticipate in regional donations and communityrelated activities.

(7) The Company's performance and measures to ethical corporate management.

Evaluation Item Implementation Status ( 註 1)

Deviations from “the

		Yes		Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
1. Establishment of ethical corporate management policies and programs (1) Does the Companyhave an ethical corporate management policy that has been approved by the Board of Directors andexpresses its policies and practices on ethical corporate management in its regulations and external documents, as well as the commitment of the Board of Directors and senior management to actively implement the corporate management policy? (2) Has the Companyestablished an assessment mechanism for the risk of unethical conduct, and regularly analyzed and evaluated the business activities in the scope of business with a higher risk of unethical conduct, and formulated a plan to prevent unethical conduct, covering at least the preventive measures under Article 7, paragraph 2 of "Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies"? (3) Does the Company have defined operating procedures, conduct guidelines, disciplinary and complaint systems for non-compliance, and periodically review and correct the foreclosure program in its unethical conduct prevention program?		V V V	(1) The Company has established the "Ethical Corporate Management Best Practice Principles", which are based on the business philosophy of honesty, transparency and accountability, and has formulated policies based on ethical integrity, and established good corporate governance and risk control mechanisms to create a sustainable business environment, which are disclosed on the Company's website. (2) The Company has procedures and conduct guidelines for preventing unethical conduct, and will provide guidance to employees through internal mailings and conduct guidance sessions for directors and supervisors through external instructors. (3) The Company's precautionary measures shall cover, at least, the following preventive measures: 1. Offering and receiving bribes. 2. Providing illegal political contributions. 3. Improper charitable donation or sponsorship. 4. Offering or receiving unreasonable gifts, hospitalityor other improper benefits.	None
	Board of Directors andexpresses its policies and practices on ethical corporate management in its regulations and external documents, as well as the commitment of the Board of Directors and senior management to actively implement the corporate management policy? Has the Companyestablished an assessment mechanism for the risk of unethical conduct, and
	regularly analyzed and evaluated the business
	activities in the scope of business with a higher risk
	of unethical conduct, and formulated a plan to
	prevent unethical conduct, covering at least the
	preventive measures under Article 7, paragraph 2 of
	"Ethical Corporate Management Best Practice
	Principles for TWSE/GTSM Listed Companies"? Does the Company have defined operating procedures, conduct guidelines, disciplinary and complaint systems for non-compliance, and periodically review and correct the foreclosure
	program in its unethical conduct prevention
	program?
2. Fulfill operations integrity policy (1) Does the company evaluate business partners’ ethical records and include ethics-related clauses in business contracts?		V	(1) The Company assesses the legality and integrity of the transactions between companies with which it has business dealings before	(1) Follow the Company's corporate management principles.

		Implementation Status	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
		Yes	No		Abstract Illustration
(3) Does the Company have a dedicated (part-time) unit under the Board of Directors to promote ethical corporate management and report to the Board of Directors on a regular basis (at least once a year) on itsethical corporate policy and program to prevent unethical conduct and monitorits implementation? (3) Does the company establish policies to prevent conflicts of interest and provide appropriate communication channels, and implement it? (4)Hasthe Company established an effective accounting system and internal control system for the implementation of ethical corporate management, and has the internal audit unitdrawn up an audit plan based on the assessment of the risk of unethical conduct, in order to audit compliance with the plan for preventing unethical conduct,or has it engaged an accountant to perform the audit? (5) Does the company regularly hold internal and external educational trainings on operational integrity?		V	V V V	proceeding with subsequent transactions. A ethical conduct clause is also included in the signed commercial contract and is executed after inspection by the legal unit. (2) The Company has not yet established a dedicated (part-time) unit under the Board of Directors to promote ethical corporate management, and will assess the need for such a unit in the future. The Board of Directors of the Company requires its directors, supervisors and managers to exercise a high degree of self-discipline and take the initiative to state whether or not they have a potential conflict of interest with the Company, if they have any interest in themselves or the legal persons they represent, to state their views and answer questions, but not to join in the discussion and voting, and to avoid any discussion and voting. (3) The Company has always avoided the risk of engaging in business activities that involve unethical conduct, and has always maintained a policy of integrating accounting and cash flow. The Company's internal auditors regularly check the legality and reasonableness of the Company's major transactions and the truth and consistency of cash flow, and prepare audit reports to the Board of Directors. (4) In addition to establishing and implementing the Ethical Corporate Management Best Practice		(2) The Company will evaluate whether to establish a dedicated agency in the future depending on the operational needs. Follow the Company's corporate management principles. (3) Follow the Company's corporate management principles. (4) Follow the Company's corporate management principles. (5) The Company will
	conduct, in order to audit compliance with the plan
	for preventing unethical conduct,or has it engaged an accountant to perform the audit? Does the company regularly hold internal and external educational trainings on operational integrity?

	Implementation Status	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No		Abstract Illustration
			Principles that govern the conduct of management levels and employees, the Company keeps the design and implementation of the system under review to ensure its continuous effectiveness. (5) The Company does not regularly conduct internal training on ethical corporate management, but from time to time, it participates in external explanatory meetings on ethical corporate management.		evaluate whether to conduct internal education and training on ethical corporate management on a regular basis in the future.`。`
3. Operation of the integrity channel (1) Does the company establish both a reward/punishment system and an integrity hotline? Can the accused be reached by an appropriate person for follow-up? (2) Does the Company have a standard operating procedure for the investigation of the matters to be investigated, follow-up measures to be taken after the completion of the investigation, and relevant confidentiality mechanisms? (3) Does the company provide proper whistleblower protection?		V V V	The Company has not yet established a reporting channel and a disciplinary and complaint system for violations of the rules of ethical corporate management.		The Company currently conducts the promotion of the Ethical Corporate Management Best Practice Principles and concepts through its internal website. In the future, depending on the effectiveness of the promotion, the Company will evaluate whether it is necessary to establish a reporting channel and a disciplinary and complaint system for violations of the Ethical Corporate Management Best Practice Principles.
4. Strengtheninginformation disclosure			The Companycurrentlyconducts thepromotion of		Follow the Company's

	Implementation Status	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No		Abstract Illustration
Does the company disclose its ethical corporate management policies and the results of its implementation on the company’s website and MOPS?	V		the Ethical Corporate Management Best Practice Principles and concepts through its internal website.		corporate management principles.
5. If the company has established the ethical corporate management policies based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies, please describe any discrepancy between the policies and their implementation.: The Company currently operates in accordance with the spirit of the Ethical Corporate Management Best Practice Principles, except that the Company has not established a dedicated unit and has not established a reporting channel and a disciplinary and complaint system for non-compliance with Ethical Corporate Management Best Practice Principles.
6. Other important information to facilitate a better understanding of the company’s ethical corporate management policies (e.g., review and amend its policies).: None

(8) If the Company has set up corporate governance principles and relevant rules, the Company shall disclose methods for inquiry: None

(9) Other important information to facilitate better understanding of the Company's corporate governance activities may be disclosed here: The Company’s
website.

(10) Implementation status of internal control system
Statement of internal control system

Lotes Co., LTD

Statement of Internal Control System

Date: March 25, 2020

The Company's internal control system for 2019, based on the results of self-assessment, hereby states as follows:

The Company knows that it is the responsibility of the board of directors and managers of the Company to establish, implement and maintain the internal control system.The Company has established such system to reasonably assure the effectiveness and efficiency of operations (including profits, performance and asset security), report reliability, timeliness, transparency and compliance with relevant regulations.
An internal control system has its inherent limitations. No matter how perfect the design is, an effective internal control system can only provide reasonable assurance for the achievement of the above three objectives. Moreover, the effectiveness of internal control system may vary with the change of the environment and situation. However, the Company's internal control system has a self-monitoring mechanism. Once the deficiencies are identified, the Company will take corrective action.
The Company shall judge whether the design and implementation of the internal control system are effective or not according to the assessment items for the effectiveness of the internal control system stipulated in the “Regulations Governing Establishment of Internal Control Systems by Public Companies” (the Regulations). According to the assessment items adopted therein, the internal control system is divided into five elements based on the the process of management control: (1) environment control, (2) risk assessment, (3) control operation, (4) information and communication, and (5) supervision operation. Each component element also includes several items. For the above items, please refer to the provisions of the Regulations.
The Company has adopted the above internal control system to assess the items and evaluate the effectiveness of the design and implementation of the internal control system.
Based on the outcome of the foregoing assessment, the Company considers that the design and implementation of its internal control system (including supervision and management of its subsidiaries) as of December 31, 2019, regarding ther understanding of the effectiveness of operations and the extent to which efficiency objectives have been achieved, report reliability, timeliness, transparency and compliance with relevant regulations, are effective and that the system can reasonably ensure the attainment of the above objectives.

This statement constitutes the main content of the annual report and the prospectus of the Company and is made public. If any of the contents disclosed above is found to be false, have concealment or other illegal matters, it will involve legal liabilities under Articles 20, 32, 171 and 174 of the Securities and Exchange Act.
This statement was approved by the board meeting of the Company on March 25, 2020. Among the directors present, no one held opposing opinions, while the rest agree with the content of this statement.

Lotes Co., LTD

Chairperson: Chu, Te-Hsiang

President: Ho, Te-Yu

Where a certified public accountant is entrusted to examine the internal control system, the audit report shall be disclosed: N/A.
(11) During the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report, the Company and its internal personnel have been punished according to the law or the Company has imposed punishment on its internal personnel for violating the provisions of the internal control system, been found to have major deficiencies and made improvements: none.
(12) During the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report, important resolutions of the shareholders meeting and the Board of Directors meeting:
Contents of important resolutions of the Board of Directors and shareholders meeting

Shareholders / Board of Directors Meeting	Date	Important Resolutions
Board of Directors Meeting	January 17, 2019	The Company’s 100% owned reinvestment business, Lotes Zhongshan Co., Ltd, plans to purchase real estate in Sanjiao Township, Zhongshan City, China.
Board of Directors Meeting	March 21, 2019	1. The Company’s 2018 annual business report, financial statements and consolidated financial statements. 2. The Company’s 2018 surplus distribution. 3. Issued the Company’s “Statement for internal control system” 4. To amend part of the articles of the Company’s “Article of Incorporation” 5. To amend part of the articles of the Company’s “Obtain or dispose of assets control” 6. To amend part of the articles of the Company’s “Fund loan and endorsements and guarantees control” 7. In response to the Company’s reinvestment business in China,Lotes

		Guanghou Co., Ltd’s (hereinafter referred to as Panyudeyi) future planning of expanding operating equipment and the need for a large amount of capital to construct plant in Zhongshan, and to flexibly use the group’s working capital, it is planned to apply for loan of funds from the Company to its subsidiary, Panyudeyi, within the limit of RMB 30 million. 8. The re-election of the Company's Directors and Supervisors. 9. The nomination and consideration of the Company’s candidates for Directors (including independent Directors) and Supervisors. 10. Holdingthe Company’s 2019 regular shareholders’ meeting.
Board of Directors Meeting	May 10, 2019	1. The Company’s financial statement for the first quarter of 2019. 2. The Company plans to apply for a comprehensive credit line of USD6 million to Bank SinoPac Co., Ltd.. 3. The Company’s 100% owned reinvestment business in China, Lotes Guanghou Co., Ltd plans to apply for a credit line of USD 8 million to Bank SinoPac Co., Ltd. (hereinafter referred to as Bank SinoPac)`，`and have the Company provideguarantee for the reinvestment company.
Shareholders Meeting	June 14, 2019	1. 2018 annual business report and financial statement. 2. 2018 surplus distribution. 3. 2018 report on distribution of compensation of employees, directors and supervisiors. 4. Amending part of the articles of the Company’s “Article of Incorporation” 5. Amending part of the articles of the Company’s “Obtain or dispose of assets control” 6. Amending part of the articles of the Company’s “Fund loan and endorsements and guarantees control” 7. The re-election of the Company's Directors and Supervisors.
Board of Directors Meeting	June 14, 2019	1. The election of Chairman.
Board of Directors Meeting	June 26, 2019	1. Setting the Company’s 2018 ex-dividend date for cash dividend 2. The Company plans to hire members for the 4thsalary and remuneration committee. 3. To draw up the Company’s “Standard operating procedure for Directors’ requests”. 4. The Company plans to apply for a comprehensive credit line of NTD 2 billion to Hua Nan Commercial Bank, Ltd. 5. The Company plans to apply for a comprehensive credit line of USD 3 million to Mega International Commercial Bank Co., Ltd. 6. The Company plans to apply for a comprehensive credit line of NTD 3 billion to E.Sun Commercial Bank, Ltd. 7. The Company plans to apply for a short-term comprehensive credit line and a medium to long-term comprehensive credit line in total of NTD 3

		billion to CTBC Bank Co., Ltd.
Board of Directors Meeting	August 12, 2019	1. The Company’s financial statement for the second quarter of 2019.
Board of Directors Meeting	November 11, 2019	1. The company's 2019 year-end bonus distribution for managers. 2. The Company’s 2020 schedule for internal audit plan. 3. The Company’s subsidiary, REKA Technology Co., Ltd. (hereinafter referred to as REKA Tech) plans to have the Company provide guarantee in response to its need forpurchasingmaterials.
Board of Directors Meeting	March 25, 2020	1. The Company plans to pass the Company’s 2020 budgets. 2. The Company’s distribution amount and method for the 2019 compensations of employees and directors and supervisors. 3. The Company’s 2019 annual business report, financial statements and consolidated financial statements. 4. The Company’s 2019 surplus distribution. 5. Issued the Company’s “Statement for internal control system” 6. To amend part of the articles of the Company’s “Management of operating of board meeting” 7. To amend part of the articles of the Company’s “Rules and procedures of operating shareholder’s meeting” 8. To draw up the Company’s “Operating procedures for apply to suspend and resume trading” 9. To amend part of the articles of the Company’s “Ethical corporate management principles” 10. To amend part of the articles of the Company’s “Financial statement preparation process control” 11. In response to the Company’s reinvestment business in China, Lotes Guanghou Co., Ltd’s (hereinafter referred to as Panyudeyi) future planning of needing fund to expand operating equipment, and to flexibly use the group’s working capital, it is planned to apply for loan of funds from the Company to its subsidiary, Panyudeyi, within the limit of RMB 50 million. 12. The company plans to change the auditing certified accountant 13. To hold the Company’s 2020 regular shareholders’’ meeting.

2. Review of the implementation of matters resolved at the 2019 annual general meeting of shareholders

Shareholders MeetingResolutions	Implementation Status
1. 2018 Annual Business Report and Financial Statement.	The Company’s 2017 operating revenue was NT$13,311,518 thousand, net income was NT$1,608,567 thousand and earnings per common stock was NT$17.21.
2. 2018 Surplus Distribution.	In accordance with the resolution, the shareholders allotted a cash dividend of NT$8.7 per share and a total of NT$900,257 thousand in cash.
3. 2018 Annual Report on the Distribution of Employee and Director Remuneration.	In accordance with Article 19 of the Company's Articles of Incorporation, taking into account the shareholders' rights and interests, and with reference to the standards of the industryand the overall

	economic environment, the Company proposes to provide employees' remuneration of NT$56,000,000 and directors' and supervisors' remuneration of NT$4,480,000 for fiscal 2018, and the actual payment is the same.
4. Amendment to some of the provisions of the Company’s “Articles of Incorporation”.	Execute as resolved.
5. Amendment to some of the provisions of the Company’s “Regulations Governing the Acquisition and Disposal of Assets”.	Execute as resolved.
6. Amendment to the Company’s “Procedures for Lending Funds to Others and Management of Endorsement and Guarantees”.	Execute as resolved.
7. Re-election of directors and supervisors of the Company.	The Company elected the following perssonel in accordance with the results of the election at the shareholders meeting Director:Jiaming Investment Co., Ltd. Representative: Chu, Te-Hsiang Director:Jiaming Investment Co., Ltd. Representative: Ho, Te-Yu Director:Chin, Chang-Min Director:Tsai, Ming-Jui Independent Director:Hsieh, Chia-Ying Independent Director:Hu, Jui-Ching Supervisor:Jinling Investment Co., Ltd. Representative: Chang, Kun-Yao Supervisor:Yang, Wen-Ming Supervisor:Cheng,Ming-Sung

(13) During the most recent fiscal year and as of the date of publication of the annual report, the directors or supervisors disagreed with the Board of Directors on the adoption of a significant resolution and there is a record or written statement to the effect: none.
(14) During the most recent year and as of the date of this annual report, the resignations and terminations of the Company's chairperson, president, accounting supervisor, finance supervisor, internal audit supervisor and research and development supervisor were summarized as follows: None.

5. Accountants’ Information

(1) Information on CPA professional fees:

Accounting Firm	Name of CPA	Name of CPA	Audit Period	Remarks
KPMG Taiwan	Chung, Tan-Tan	Chen, Fu-Wei	2019

Unit: NT$ thousand

Professional Charge Class Interval	Professional Charge Class Interval	Audit Fee	Non-audit Fee	Total
1	Less than$2,000
2	$2,000(inclusive)~$4,000
3	$4,000(inclusive)~$6,000	4,200	450	4,650
4	$6,000(inclusive)~$8,000
5	$8,000(inclusive)~$10,000
6	More than$10,000(inclusive)

If the non-audit fee paid to a CPA, the firm of the CPA and its affiliates is more than one-fourth of
the audit fee, the amount of the audit and non-audit fee and the non-audit services shall be disclosed. The Company's non-audit fees were NT$300,000 for the transfer of the pricing audit report and NT$150,000 for the transfer of the pricing principal document.
If the audit fee for the year of replacement of an accounting firm is less than the audit fee for the year before the replacement, the amount of the audit fee before and after the replacement and the reason shall be disclosed and the reason: N/A.
If the audit fee is reduced by more than 15% from the previous year, the amount, proportion and reason for the reduction shall be disclosed: N/A.
(2) Information on replacement of CPA:
Regarding the former CPA:

. Regarding the former CPA:
Replacement Date	February 21, 2020
Replacement reasons and explanations	The Company's original CPAs were Chung, Tan-Tan and Chen, Fu-Wei from KPMG Taiwan, who were rotated to meet the requirements of Statement of Auditing Standards No. 46, the relevant laws and regulations of the competent securities authorities and their risk management. The Company's CPAs have been changed to Lee,Feng-Hui and Chung,Tan-Tan.
Describe whether the Company terminated or the CPA did not accept the appointment	Parties Status			CPA	The Company
	Termination of appointment			`－`	`－`
	No longer accepted (continued) appointment			`－`	`－`
Other issues (except for unqualified issues) in the audit reports within the last twoyears	None
Differences with the company	Yes	`－`	Accounting principles or practices
		`－`	Disclosure of Financial Statements
		`－`	Audit scope or steps
		`－`	Others
		`－`
	None	
	Explanations

Other Revealed Matters (Article 10, Subparagraph 6, Item 1-4 to None 1-7 of this Standard)

Regarding the successor CPA:

egarding the successor CPA:
Name of accounting firm	KPMG Taiwan
Name of CPA	Lee, Feng-Hui
Date of appointment	February 21, 2020
Consultation results and opinions on accounting treatments or principles with respect to specified transactions and the company's financial reports that the CPA might issueprior to the engagement.	None
Succeeding CPA’s written opinion of disagreement toward the former CPA	None

Letter of reply from the former accountants: N/A.
(3) The Company’s Chairperson, CEO, CFO, and Managers in charge of its finance and accounting operations did not hold any positions in the Company’s independent auditing firm or its affiliates during the latest fiscal year :None.
Transfer or pledge of shares by the company's directors, supervisors, managers and stockholders with more than 10% of the company's shares:
(1) Changes in shareholding transfers by directors, supervisors, managers and substantial shareholders

Unit: shares

				Unit: shares	Unit: shares
Title	Name	2019		As of April 21 of the current year
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Chairperson	Chia Ming Investment Ltd. Representative: Chu, Te-Hsiang
		(500,000)	0	(56,000)	0

Legal Representative of the Chairperson	Chu, Te-Hsiang
		10,500	0	0	0

Director	Chia Ming Investment Ltd. Representative: Ho, Te-Yu
		(500,000)	0	(56,000)	0

Legal Representative of the Chairperson	Ho, Te-Yu
		10,500	0	0	0

Director	Tsai, Ming-Jui
		(13,000)	0	0	0

Director	Chin, Chang-Min
		0	0	0	0

Independent director	Hsieh, Chia-Ying
		0	0	0	0

Independent director	Hu, Jui-Ching
		0	0	0	0

Supervisor	Jinling Investment Ltd. Representative: Chang, Kun-Yao
		0	0	0	0

Legal Representative of a Supervisor	Chang, Kun-Yao
		0	0	0	0

Supervisor	Cheng, Ming-Sung
		0	0	0	0

Supervisor	Yang, Wen-Ming
		0	0	0	0

President	Ho, Te-Yu
		10,500	0	0	0

R&D Director	Chu, Te-Hsiang
		10,500	0	0	0

Associate President's office	Chu Chen, Yi-Hui
		0	0	0	0

Sales Senior Vice President	Tsai, Ming-Jui
		(13,000)	0	0	0

Business Management Vice President	Lu, Chih-Cheng
		5,000	0	0	0

Business Management Vice President	Kung, Yung-Sheng
		0	0	0	0

Business Management Assistant Vice President	Lin, Ching-Hao
		(500)	0	0	0

Business Management Assistant Vice President	Lin, Tsun-Te
		0	0	0	0

Business Management Assistant Vice President	Lin, Ko-Lun
		1,000	0	(1,000)	0

Business Management Assistant Vice President	Lin, Yao-Ching
		0	0	0	0

Sales A Assistant Vice President	Wu, Yi-Chen
		0	0	0	0

Sales B Assistant Vice President	Li, Cheng-Wen
		0	0	0	0

Finance Assistant Vice President	Liu, Hsing-Hsia
		1,000	0	(1,000)	0

Finance Assistant Manager	Liang, Shih-Yi
		0	0	0	0

Audit Supervisor	Wang, Hsi-Hung
		0	0	0	0

Business Management Assistant Vice President	Liu, Chi-Hung
		2,000	0	0	0

(2) Information on Relative Persons Related to the Transfer of Equity.

Name	Reasons for Equity Transfer	Date	Counterparties	Relationship of Counterparties to the Company, Directors, Supervisors, Managers and Shareholders Holding More than 10% ofthe Shares	Shares	Transaction Price
None	None	None	None	None	None	None

(3) Information on Relative Persons to the Equity Pledge: None

7. Relationship among the Top Ten Shareholders

April 21, 2020

							April 21, 2020	April 21, 2020
Name	Current Shareholding		Spouse’s/Minor’s Shareholding		Shareholding by Nominee Arrangement		Name and Relationship Between the Company’s Top Ten Shareholders, or Spouses or Relatives Within Two Degrees		Remarks
	Shares	%	Shares	%	Shares	%	Name	Relationship
Jinling Investment Co. Ltd.	10,956,237	10.59%	0	0.00%	0	0.00%	Ho, Te-Yu	Jinling Investment Co., Ltd. Chairperson
							Chu, Te-Hsiang	Jinling Investment Co., Ltd.Supervisor
Chia Ming Investment Ltd.	9,873,037	9.54%	0	0.00%	0	0.00%	Chu, Te-Hsiang	Jiaming Investment Co., Ltd. Chairperson
							Chu Chen, Yi-Hui	Jiaming Investment Co., Ltd.Supervisor
Cathay Life Insurance Company, Ltd.	5,286,000	5.11%	0	0.00%	0	0.00%	None	None
Dun Lin Investment Co.,Ltd.	5,000,000	4.83%	0	0.00%	442,555	0.43%	Ho, Te-Yu	Jinling Investment Co., Ltd. Chairperson
Fubon Life Assurance Co., Ltd.	4,857,047	4.69%	0	0.00%	0	0.00%	None	None
New Labor Pension	4,439,392	4.29%	0	0.00%	0	0.00%	None	None
Dechuan Investment Co.,Ltd.	3,001,388	2.90%	0	0.00%	11,476	0.01%	Chu, Te-Hsiang	Jiaming Investment Co., Ltd. Chairperson
Old Labor Pension	1,799,391	1.74%	0	0.00%	0	0.00%	None	None
Investment account of Deutsche Bank entrusted to Richard's Equity Trust for small companies	1,489,000	1.44%	0	0.00%	0	0.00%	None	None

	Investment account of the Norges Bank entrusted to Citibank Taiwan Ltd.	1,466,712	1.42%	0	0.00%	0	0.00%	None	None

Information on the number of shares of the company invested by the company, any of the company’s directors and supervisors and executive officers or a company directly or indirectly controlled by the company and consolidated percentage of shareholding:

The Company's shareholdings in the investee companies are 100% owned by the Company and no joint shareholding with others or other companies has occurred.

IV. Capital Overview

1. Capital and shares

(1). Source of capital

Unit: thousand shares/ $ thousand

						Unit: thousand shares/$thousand	Unit: thousand shares/$thousand	Unit: thousand shares/$thousand
Date	Insurance Price (NT$)	Authorized Capital		Paid-in Capital		Remarks
		Shares	Amount	Shares	Amount	Sources of Capital (NT$)	Capital Increased by Assets Other than Cash	Other
Dec. 1987	`－`		5,000		5,000	$5 million capital stock of establishment	`－`	Jian-San-Ding-Zi Letter No. 344438 dated December 1, 1987
Sep. 1998	10,000	2.5	25,000	2.5	25,000	Cash capital increase of $20 million	`－`	Jian-San-Ding-Zi Letter No. 230910 dated September 22, 1998
Sep. 2004	10	12,012	120,120	12,012	120,120	Cash capital increase of $95.12 million	`－`	Jing-Zhong-Zi Letter No. 09332670500 dated September 3, 2004
Oct, 2004	10	44,500	445,000	44,500	445,000	Cash capital increase of $324.88 million	`－`	Jing-Zhong-Zi Letter No. 09332928790 dated October 27, 2004
Dec. 2004	18	49,400	494,000	49,400	494,000	Cash capital increase of $49 million	`－`	Jing-Zhong-Zi Letter No. 09333306580 dated January6,2005
Oct. 2005	10	61,000	610,000	52,320	523,200	Capitalization of retained earnings of $29.2 million	`－`	Jing-Zhong-Zi Letter No. 09401205920 dated October 17, 2005
Aug. 2006	10	61,000	610,000	55,686	556,860	Capitalization of retained earnings of $33.66 million	`－`	Jing-Shou-Shang-Zi Letter No. 09501181500 dated August 18,2006
Aug. 2006	16.5	61,000	610,000	59,166	591,660	Cash capital increase of $34.8 million	`－`	Jing-Shou-Shang-Zi Letter No. 09501185810 dated August 23,2006
Mar. 2007	10	61,000	610,000	60,349	603,493	Capitalization of capital reserves of $11.83 million	`－`	Jing-Shou-Shang-Zi Letter No. 09601038990 dated March 1,2007
Aug, 2007	10	105,000	1,050,000	63,820	638,200	Capitalization of retained earnings of $34.71 million	`－`	Jing-Shou-Shang-Zi Letter No. 09601189090 dated August 6,2007
Jan. 2008	41	105,000	1,050,000	71,174	711,740	Cash capital increase of $73.54 million	`－`	Jing-Shou-Shang-Zi Letter No. 09701004250 dated January14,2008

Aug. 2008	10	105,000	1,050,000	76,232	762,327	Capitalization of retained earnings of $50.587 million	`－`	Jing-Shou-Shang-Zi Letter No. 09701196230 dated August 5, 2008
Dec. 2009	14.98	105,000	1,050,000	77,104	771,041	Capitalization of employee stock warrants of $8.714 million	`－`	Jing-Shou-Shang-Zi Letter No. 09801280550 dated December 7, 2009
Feb. 2010	116.5	105,000	1,050,000	83,104	831,041	Cash capital increase of $60 million	`－`	Jing-Shou-Shang-Zi Letter No. 09901038450 dated March 2,2010
Sep. 2010	140	105,000	1,050,000	93.104	931.041	Cash capital increase of $100 million	`－`	Jing-Shou-Shang-Zi Letter No. 09901213910 dated September 23,2010
Jan. 2011	10.98	105,000	1,050,000	93.313	933.139	Capitalization of employee stock warrants of $2.098 million	`－`	Jing-Shou-Shang-Zi Letter No. 10001008880 dated January 17, 2011
Aug. 2011	10.98	105,000	1,050,000	93,477	934,779	Capitalization of employee stock warrants of $1.64 million	`－`	Jing-Shou-Shang-Zi Letter No. 10001184600 dated August 15, 2011
Jan. 2019	140	155,000	1,550,000	103,477	1,034,779	Cash capital increase of $100 million	`－`	Jing-Shou-Shang-Zi Letter No. 10801009430 dated January23,2019

Unit: shares

				Unit: shares
Share Type	Authorized Capital			Remarks
	Issued Shares	Un-issued Shares	Total Shares
Registered Shares	103,477,900	51,522,100	155,000,000

Summary of information related to the reporting system: N/A.

(2). Shareholder structure

Unit: shares April 21, 2020

Shareholder structure Item	Government Agencies	Financial Institutions	Other Juridical Persons	Domestic Natural Persons	Foreign Institutions & Natural Persons	Total
Number of Shareholders	4	173	44	3,584	219	4,024
Shareholding (shares)	7,456,297	29,790,463	31,356,606	11,821,620	23,052,914	103,477,900
Percentage	7.21%	44.94%	30.30%	11.42%	22.28%	100.00%

(3).Diffusion of ownership

ffusion of ownership	ffusion of ownership	ffusion of ownership	ffusion of ownership
April 21,2020
Class of Shareholding (Unit: shares)	Number of Shareholders	Shareholding (Shares)	Percentage
1 ~ 999	922	116,498	0.11%
1,000 ~ 5,000	2,433	4,088,774	3.95%
5,001 ~ 10,000	189	1,409,209	1.36%
10,001 ~ 15,000	79	1,023,803	0.99%
15,001 ~ 20,000	48	857,165	0.83%
20,001 ~ 30,000	64	1,627,623	1.57%
30,001 ~ 50,000	70	2,627,204	2.54%
50,001 ~ 100,000	83	6,311,548	6.10%
100,001 ~ 200,000	53	7,656,488	7.40%
200,001 ~ 400,000	34	9,280,156	8.97%
400,001 ~ 600,000	17	8,511,548	8.23%
600,001 ~ 800,000	5	3,409,917	3.30%
800,001 ~ 1,000,000	0	0	0
Over 1,000,001 (Classified according to actual situation)	17	56,557,967	54.66%
Total	4024	103,477,900	100%

Diversification of shareholding in preference shares: N/A.

(4). List of major shareholders

The names, amounts and percentages of the top ten shareholders with or shareholders holding at least 5% of the shares.

Unit: shares April 21, 2020

Shares Major Shareholders	Shareholding	Shareholding
	Shares	Percentage
Jinling Investment Co., Ltd.	10,956,237	10.59%
Jiaming Investment Co., Ltd.	9,873,037	9.54%
Cathay Life Insurance Company, Ltd.	5,286,000	5.11%
Dun Lin Investment Co., Ltd.	5,000,000	4.83%
Fubon Life Assurance Co., Ltd.	4,857,047	4.69%
New Labor Pension	4,439,392	4.29%

Dechuan Investment Co., Ltd.	3,001,388	2.90%
Old Labor Pension	1,799,391	1.74%
Investment account of Deutsche Bank entrusted to Richard's EquityTrust for small companies	1,489,000	1.44%
Investment account of the Norges Bank entrusted to Citibank Taiwan Ltd.	1,466,712	1.42%

(5). Market Price per share,net worth per share,earnings per share,dividends per share,and related information for the past 2 fiscal years

Unit: NT$

					Unit: NT$
Items	Year		2018	2019	As of March 31, 2020 for the year
Market Price per Share	Highest Mrket Price		251	331	355
	Lowest Market Price		150	191.5	210
	Average Mrket Price		200.5	261	282.5
Net Worth per Share	Before Distribution		101.69	114.18	`－`
	After Distribution		92.06	`－`	`－`
Earnings per Share	Weighted Average Shares (thousand shares)		93,478	103,231	103,478
	Earnings per Share	Before adjustment	17,21	20.11	`－`
		After adjustment	17.15	20.06	`－`
Dividends per Share	Cash Dividends		8.7	10.5	`－`
	Stock Dividends	Dividends from Retained Earnings	`－`	`－`	`－`
		Dividends from Capital Surplus	`－`	`－`	`－`
	Accumulated Undistributed Dividends		`－`	`－`	`－`
Return on Investment	Price / Earnings Ratio		11.65	12.98
	Price / Dividend Ratio		23	24.86	`－`
	Cash Dividend Yield Rate		4.34%	4.02%	`－`

(6). Dividend Policy and Implementation Status

The Company's Articles of Incorporation provide that the Company shall set aside not less than 3% of its annual profits for the remuneration of employees and not more than 3% for the remuneration of directors and supervisors. However, if the company has accumulated losses, it shall retain the amount of compensation in advance and allocate the remuneration of employees and directors and supervisors in proportion to the above. The above-mentioned employees' remuneration may be paid in stock or cash to employees of a subsidiary company who meet certain criteria.

If there is any surplus after the final settlement of each year, the Company shall first complete the tax contribution, make up the deficit of the previous year and set aside 10% of the surplus as

legal reserve, except when the legal reserve has reached the total capital; if there is any surplus and the accumulated undistributed surplus, the Board of Directors shall prepare a proposal for the distribution of the surplus and submit it to the shareholders' meeting for resolution, and the shareholders' bonus to be distributed shall not be less than 20% of the net income after tax less the amount of legal reserve.

The Company will take into account the environment and growth stage of the Company and will expand its business in the future. The distribution of earnings should take into account the Company's future capital expenditure budget and capital requirements, and pay cash dividends of not less than 10% of the dividends distributed in the current year.

  2. Proposed dividend distribution at the shareholders' meeting.

  - To allocate NT$1.086.517 thousand in cash dividends of NT$10.5 per share from the 2019 earnings and authorize the Board of Directors to set another date of payment once the resolution is approved at the regular shareholders' meeting.

(7). Effect upon Business Performance and Earnings per Share of any Stock Dividend Distribution Proposed or Adopted at the Most Recent Shareholders’ Meeting: None.
(8). Employee Bonus and Directors' and Supervisors' Remuneration
Ratio or scope of remuneration for employees, directors and supervisors as set forth in the Articles of Incorporation: please refer to the description in (6) above.
The basis for estimating the amount of employee and directors’compensation, for calculating the number of shares to be distributed as employee compensation, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period:

In accordance with the Ji-Mi-Zi Interpretation Letter No. 052 of the Accounting Research and

Development Foundation (96), the Company estimates the amount of employee remuneration and directors' and supervisors' remuneration since January 1, 2008 and recognizes it as an appropriate accounting item under operating costs or operating expenses based on the nature of the employee remuneration and directors' and supervisors' remuneration. Any difference between the resolution of a subsequent shareholders' meeting and the estimates in the financial statements is treated as a change in estimates and recorded as profit or loss for the period.
Information on any approval by the board of directors of distribution of compensation:
(1) Amount of employee remuneration and directors' and supervisors' remuneration distributed in cash or shares.

The proposed cash bonus to employees is NT$73,100 thousand.

The proposed remuneration for directors and supervisors is NT$4,480 thousand.

(2) The amount of any employee compensation distributed in stocks, and the size of that amount as a percentage of the sum of the after-tax net income stated in the parent company only financial reports or individual financial reports for the current period and total employee

compensation: the Company did not pay any employee stock dividends during the period.

Actual distribution of remuneration to employees, directors and supervisors during the prior year: The Company's net income after tax for 2018 was $1,608,567 thousand, and the Board of Directors resolved to distribute employee remuneration of $56,000 thousand and director and supervisor remuneration of $4,480 thousand for 2018, which is the same as the actual distribution of employee, director and supervisor remuneration totaling $60,480 thousand for 2018 as resolved by the Board of Directors and reported at the 2019 Annual Meeting of Shareholders.
(9). Share repurchases: None
Issuance of corporate bonds: None
Issuance of preferred shares: None
Issuance of global depository receipts: None
Employee subscription warrants:
(1) Employee subscription warrants

oyee subscription warrants: mployee subscription warrants	oyee subscription warrants: mployee subscription warrants
April 14,2018
Types of Employee Stock Option Warrants	First (period) Types of Employee Stock Option Warrants
Date of effective registration	July 30, 2007

Issue date	August 13, 2007

Number of units issued	1,253,000 units
	(1,253,000 common stocks)
Ratio of subscribed shares issued to total number of shares issued(Note 1)	1.34%

Subscription Period	Within fiveyears from the actual issue date
Exercise Method	Issuance of newshares
Period and ratio in which subscription is restricted	70% after 2years;
	100% after 3years
Number of shares obtained	1,245,200
Amount of the shares subscribed	17,157,901
Number of shares that have not been subscribed	7,800
Subscription price per share of the unsubscribed shares	10.98
Ratio of the number of unsubscribed shares to the number of issued and outstanding	0.01%

shares
Effect on shareholders' equity	This Stock Option Warrant shall be
	executed over five years after the
	expiration of two years from the Issue
	Date.
	As of December 31, 2012, the remunerative
	employee stock option plan has expired
	and the outstanding stock options as of the
	expiration date are deemed to be waived,
	therefore the unexecuted portion of the
	stock options no longer has any effect on
	shareholders' equity.

(2) The names of the managers who acquired the employee stock options and the top ten employees who acquired the stock options, the acquisition and subscription status

										April 14,2018/ Unit: shares;Unit: TWD	April 14,2018/ Unit: shares;Unit: TWD	April 14,2018/ Unit: shares;Unit: TWD	April 14,2018/ Unit: shares;Unit: TWD	April 14,2018/ Unit: shares;Unit: TWD	April 14,2018/ Unit: shares;Unit: TWD	April 14,2018/ Unit: shares;Unit: TWD
	Title	Name	Number of shares acquired	Ratio of the number of subscribed acquired shares to the number of issued and outstanding shares		Implemented (by2 years)				Implemented (by 3 years)				Not	implemented
					Number of shares acquired	Price of shares acquired	Amount of shares acquired	Ratio of the number of subscribed shares to the number of issued and outstandingshares	Number of shares acquired	Price of shares acquired	Amount of shares acquired	Ratio of the number of subscribed shares to the number of issued and outstandingshares	Number of shares acquired	Price of shares acquired	Amount of shares acquired	Ratio of the number of subscribed shares to the number of issued and outstandingshares
Managers	Sales Vice President	Tsai, Ming-Jui	371,000	0.40%	259,700	14.98	3,890,306	0.28%	111,300	10.98	1,222,074	0.12%	0	0	0	0
	Business Management Vice President	Lu, Chih-Cheng
	Business Management Vice President	Kung, Yung-Sheng
	Business Management Assistant Vice President	Lin, Ching-Hao
	Finance Manager	Liu, Hsing-Hsia
	Finance Assistant Manager	Liang, Shih-Yi
Employees	--	--	--	--	--	--	--	--	--	--	--	--	--	--	--	--

Restriction on issuning of new employee option: None.
Share issuance of merger company: None.
Implementation of the capital utilization plan: N/A.

V. Overview of Business Operations

1.Description of the business

(1). Scope of business

A. Main business operation and sales ratio
(A) Main operation for businesses
- a. Trading of various hardware parts and tool parts.
- b. Trading, manufacturing and processing various terminals and their finished connectors.
- c. Trading, manufacturing and processing electronic components.
- d. Trading, manufacturing and processing precision tooling.
(B) Main products and their sales ratio

Unit: 1,000 TWD

	2019 Net Operating
Major products		Sales Ratio (%)
	Sales(Note)

Connectors	14,541,968	96.38%
Other Electronic Components	546,904	3.62%
Total	15,088,872	100.00%

B. The Company’s current products and services

The Company’s products are various connectors and components for computers, communications and mobile phones, and consumer electronic.

C. New products and services in planning

In order to continuously provide high quality products to clients, the Company continue to improve comprehensively on its process standard and energy in design, manufacturing process, quality control and testing, and to achieve the goals of high growth. Sparing no effort in developing new products, it keep developing towards fine pitch and high-density connectors. To match the future market trend of high speed connectors, it has recently been further developed into more actively engage in analyzing high-current, high-frequency connectors and developing capability to meet the market demand. In addition, to expand product lines and market scale, the Company had successfully developed the relevant connectors required for high-frequency server, automobiles, high-speed transmission devices and the latest transmission interface Type-C.

(2). Overview of the industry:

A.Status and development trends of the industry

Over the past decade, in response to global PC market saturation, computer and peripheral applied connectors facing fierce pricing competition in global market, and at the same time, in order to lower production cost and be nearby suppling the vast Chinese market, domestic connector (wiring) manufacturers have successively set up production bases in China. As a result, leading the industry’s proportion of export sales showing a gradually decrease by year before 2015.

In 2015, due to the lack of obvious prosperity in global economic, which obviously impacted the demand for consumer electronic products, in addition to the rise of Chinese connector manufacturers forming great competition pressure for domestic suppliers, in turn impacting the export sales of related products, the industry’s proportion of export sales had come down to the lowest of recent years, 70.67%.

In 2016, given that the peripheral PC market demand continue to be weak, and facing severe threats from China’s red supply chain, domestic manufacturers was prompted to expedite the adjustment and optimization of products. In addition to actively invested in the development of smartphones and smart wearable devices related products, they had also step foot in multiple fields such as automotive electronics, aerospace & defense, green energy, medical, industrial internet of things, servers and cloud computing. Moreover, multiple companies had successfully entered the supply chain of internationally renowned manufacturers. Summarizing above statements, benefiting from domestic connectors (wiring) manufacturer’s fruitful achievements in various emerging fields and layouts, the proportion of export sales in this industry reaches 78.46% in 2016. Not only is it a significant improvement comparing to 2015, but also the highest since 2014. After 2017, although the manufacturers of this industry continue to demonstrate sustained results in expanding oversea niche markets in fields such as automotive electronics, USB Type-C, servers and 5G, the ongoing US-China trade friction since the second quarter of 2018 had forced the global electronic product supply chain to reorganize. Since 2019, there are already multiple domestic suppliers of PC, servers and computer boards related products choosing to move their production lines out of China, even coming back to manufacturing in Taiwan for products exporting to the U.S. to avoid the impact of high tariffs on products sold from China to the U.S. Therefore resulting in electronic components including electronic connectors (wiring) manufacturers transferring part of production capacity to supply domestic demand market, which leads to the proportion of export sales of this industry within the country showing a slightly decrease by year since 2017.

Furthermore, given the continuously increasing demand of high-speed transmission and power consumption for mobile devices such as NB and smartphones, USB-IF had officially announced the latest standard for USB, the “USB 3.2” in September, 2017. Its transmission speed could reach 20Gbps, however it must adopt USB Type C interface. This is mainly due to USB Type C could simultaneously support the transmission of information, power and audio and video content, which means having certain advantages in terms of hardware for simplifying ports and connectors. It is anticipated to prompt NB and smartphones’ brand manufacturer to expedite the implementation of Type C interface after the official launch of “USB 3.2”. According to Gartner’s estimation, the penetration rate of Type C specifications in the global notebook market in 2018 will be further increased from 54% in 2017 to 73%. While Strategy Analytics estimated the penetration rate of Type C specifications in the global smartphones market will be further

increased from 16% in 2017 to 29%, hence gradually becoming an important specification for high-end smartphones. With the expediting implementation in NB and smartphones products, prompting significant enlarged market demand for Type C connectors, this has become one of the important forces driving the profitable growth of the domestic connector manufacturers in 2018.

Global NB and Smartphone Type C specification market penetration

==> picture [341 x 152] intentionally omitted <==

Source: compiled by Gartner, Strategy Analytics, Taiwan Industry Economics Services, March 2018

B.Connection between upstream, midstream and downstream industries


Metal Materials			Plastical Materials		Electroplating Materials
`．`Phosphor bronze `．`Brass `．`Beryllium copper `．`Titanium copper `．`Low-resistance copper `．`Stainless Steel `．`SPCC(Steel Plate Cold Commercial)			`．`LCP `．`PPS `．`PBT `．`PCT `．`NYLON `．`PC		`．`Gold plating `．`Tin plating `．`Nickel plating

Computers & Peripherals
			Finished Product


	Computers & Peripherals	Telecommunications	Consumer Electronics	Automobile Industry	Information Technology	Others

C. Various developing trends of products

Connectors are widely used in automobile and computer peripherals application, communication data application, industrial, aerospace & defense, transportation, consumer electronics, medical, instruments, commercial equipment and more. However, with in-depth analysis, the strongest growths are application in automobile, communication equipment, and consumer electronics. Other applications such as computers or instruments are showing signs of saturation.

With the development of technology in the electronics industry, there are more and more diversities. In the trend of requiring high-speed, miniaturized and even energy saving electronic products, some connectors have different performance requirements than before, hence increasing the development difficulties, yet at the same time, it has become the key to whether manufacturers could survive in competitions within the industry. Meanwhile, in response to the trend of developing thinner consumer electronic devices, up to date, the thickness of connectors has been reduced to within one inch. In addition to manufacturers re-layout product designs, changing component types and implementing stronger new components, the connection between components has become significantly important. Thus the connectors in thin equipment do not only need to have the ability of high-speed data transmission, but only the structural design of high pin count and fine pitch to satisfy the dual requirements for thickness and performance of the new generation electronic devices.

D. Competition of the products

Looking at the changes in layout of the connector industry for the past 20 years, the market share of large manufacturers continues to rise. The top ten manufacturers in global connector market are TE Connectivity, Amphenol, Molex, Delphi, Foxconn Technology Group, Yazaki Corporation, JST Mfg., JAE, Hirose Electric and Sumitomo Wiring Systems, Ltd.. The U.S. is the world's largest supplier of connectors, Japan ranks second. And Foxconn Technology Group is the only domestic connector manufacturer included in the top ten connector manufacturers in the world. Domestic connector manufacturers have benefited from the recent year’s transformation of applications in different fields such as electric vehicles, NetCom servers, new high-speed transmission mechanism of Type C and industrial wire harness. And the benefits have gradually shown in profitability. Although with the rise of China’s red supply chain, the status of four major monopolies, namely the U.S., Japan, South Korea and Taiwan have begun to loosen up, international giants are fighting it through expedite consolidation and adopt expansion and saving. However for smaller scaled domestic manufacturers, with technology and production capacity, only by taking advantage of Chinese manufacturers’ advantages in market and channels could they increase their competitiveness.

(3). Overview of technologies and R&D:

A. Technical levels of business operations

There are various types of connectors with continuously innovative products. Its technical development could be summarizing into two major outlines, one is the development of fine pitch and low profile, the other one is the development of high frequency. Under the market demand of high transmission speed and fine, compact, thin structured connectors, high frequency problems such as crosstalk noise, signal attenuation, electromagnetic interference, etc., have become the Company's development focus.

B. R&D Overview

in developing new products, it keeps developing towards fine pitch and high-density connectors. Recently, to further satisfy the market’s demand and cooperate with high-speed connector Type-C, WLAN and automotive connectors, the Company is actively cultivating the ability to analysis and experiment high frequency connectors. In addition, to expand product lines and market scale, the Company had successfully developed the relevant connectors required for NB, servers, mobile communication industry and automotive application industry.

C. Research and development expenses for recent years and as of the publish date of prospectus

Unit: 1,000 TWD

	2019	2020Q1(Note)
R&D Costs	1,104,315	`－`
R&D Costs to Operating Revenues	7.32%	`－`

Note: As of the date of publication of the annual report, the Company has not yet issued financial statements for the first quarter of fiscal year 2020.

D. 2019 R&D Achievements

a	Automotive LightControlChip Connector
b	4 Row Connector for Desktop High-Bandwidth Computer MemoryAccess
c	Intel's latest multi-core, multi-layer, high-speed CPU carrier for servers
d	ServerChipTorque LoadingBuckle
e	NewPCI-E4.0 Connectors

(4). Long- and short-term business development plans:
A. Short-term business development plans
a. Marketing Strategy: Develop products according to customers' individual needs.
b.Production Strategy: Reinforce the efficiency of production bases, reduce costs, improve instrument calibration capabilities, establish a measuring technology system and develop image measuring technology.
c. Development Strategy: Develop towards high-frequency and high-speed transmission connectors fields.
d. Financial Planning: Establish close cooperation with financial institutions, and fully make use of financing channels in capital market.
B. Long-term business development plans
a. Marketing Strategy: Head towards globalization and strengthen the LOTES brand.

     - b. Production Strategy: Reinforce production process and expand automated production equipment.

     - c. Development Strategy: Expand the development of connectors and related modules for the related product markets in communication industry, consumer electronics, and the automotive industry.

     - d. Financial Planning: Finance through multiple channels and fully plan funds, creating a sounded financial structure

Overview of market, production and sales:
(1). Market analysis:
- A. Sales Region:

Market analysis: Sales Region:
			Unit: 1,000 TWD
Year Area	2018		2019
	Amount	%	Amount	%
Domestic	344,516	2.59	717,666	2.59
Export	12,967,002	97.41	14,371,206	97.41
Total	13,311,518	100.00	15,088,872	100,00

B. Market share

Bishop & Associates’ report shows the estimated overall sales in global connector market in 2018 is around 68.8 billion US dollars. Based on the company's 2018 net consolidated operating income of NTD13.3 billion, the company’s market share in global market is approximately 0.64% in 2018.

C. Market supply and demand situation and growth in the future
a.Global market overview

Overviewing the market scales in global and Chinese connector markets, following the transformation since 2016 where the application of electronic connectors gradually develop from applying to 3C to high added value fields such as artificial intelligence, fiber-optic communication, industry 4.0, automobile electronics, medical, green energy, aerospace and 5G, the global and Chinese connector markets have entered a new wave of rapid growth. According to Forward Business and Intelligence Co., Ltd.’s research, in 2018, the global market size of connector industry has reached 68.8 billion US dollars, an annual growth rate 9.21%. The CAGR for 2014 to 2018 is 6.79%. As for China, which has become the world's largest producer and seller in connector industry, has market size of 18 billion US dollars in 2018 with an annual growth rate of 9.09%. The CAGR for 2014 to 2018 is 7.26%.

Among the applications in emerging fields, automobile manufacturers continue to upgrade the specifications / functions of their communication and entertainment system and safety control system. Major connector (wiring) suppliers are optimistic on the development for self-driving, electric and other automobile applications. And along with Advanced Driver

Assistance Systems (ADAS) related products having higher gross margins and major countries recently introduced relevant supporting policies, automobile connectors are the most widely used nowadays. It is estimated that in 018, automobile electronic connectors are account for 22% of the global connector sales. The CAGR for 2014 to 2018 is 8%. Furthermore, it is worth mentioning that in 2018, Chinese connector market size accounts for 26.16% of the global market size. Comparing to the highest of 26.19% in 2016 and 2017, it is shown to be slightly deceasing. At the same time, in 2018, for the first time, its annual growth rate is lower than the global market. This reflects recent expansion of the global connector market has gradually moved from China to emerging countries.

If further divided based on the connectors’ application fields, then according to data from Chinese industrial research institute, in 2018, the automobile field still holds the largest share of the global market (23%). As for 2018, the second to sixth application fields are respectively communications (21%), consumer electronics (15%), industrial(12%), transportation (7%) and military (6%). The consumer electronics market share has significantly increased comparing to 2017 due to the Type-C port being confirmed as the standard of this industry, hence significantly increases the related product demand for converter and integrated docking station. Entering 2019, the global automobile market is obviously decreasing, leading a reduction in demand for connectors (wiring) used in automobtive electronics field. However, it is estimated that communication application will be benefiting from 5G and WiFi 6. Meanwhile in consumer electronics field, all major high-speed transmission interfaces has been expedited in integration, and to effectively increase the end-product market penetration rate for connectors and ports for USB Type-C, which is establied as international standarded specification, therefore increasing the sales of related connector (wiring) products. To summarize above statements, it is estimated in 2019, the global connector industry will decrease its market size in automobile field comparing to 2018. But increase its market size in consumer electronic and communication fields.

b. Market supply and demand situation and growth in the future

Industrial technology research institute estimated connectors being widely used in every electronic product, is gradually becoming a mature industry. Although having continue growth in some of the emerging applications, their low market share will not be of much help to the growth rate for overall connector market, nor will the new product technologies in the coming years. Thus global connector industry will be more closely related to the global economic prosperity. Research from Taiwan Institute of Economic Research reported that in 2016, PC market continue to be weak and the growth of smartphone market has slowed down significantly. In order to seek new business growth, domestic manufacturers has been investing in applications to non-3C fields such as automobile, green energy and internet of things. They have actively strive for entering the supply chain of both domestic and foreign industry giants of automobile brands,

solar power and wind power plants, in order to reduce the negative impact of the lack of growth in PC and other telecommunication product markets, and at the same time to optimize product structure, and improve profitability. Furthermore, as Intel platform starting to support USB3.1 specifications, prompting NB brands like ASUS, Lenovo to gradually introduce t Type C ports, domestic manufacturers have successively invested in producing Type C connectors, and the shipment scale has gradually expand. As a result, following domestic manufacturers accelerating the optimization of product structure, the benefits of investing in non-3C applications, and the continuously expanding of Type C connector’s shipment, the country’s connector industry annual growth rate of output value in 2016 has reached 2.1% displaying a continuous small growth. In 2017, the continuously increasing market demand in various application fields such as communications, automotive electronics, green energy, medical and IOT, and having domestic manufacturers entering the supply chain of major electric vehicle manufacturers in China and the U.S, with Chinese smartphone brands manufacturers for Samsung, Huawei and OPPO implementing Type C specification, Type C port has gradually become the mainstream in global smartphone market.

Global connector industry output value and annual growth rate

==> picture [287 x 172] intentionally omitted <==

Source ： Industrial Technology Research Institute, IEK, ITIS projects, organized by Taiwan Industry Economics Services, Dec., 2017

The global connector market is affected by the decline of notebook computers (NB), and Taiwan’s connector exports are mainly for board connectors, card connectors, and IC sockets. As the demand in end market gradually diversified, in order to strive for new business growth, in addition to continuing to promote USB Type C specification, domestic connector manufacturers have been actively investing and developing in smart mobile end applications and other niche applications in communications, automobiles, and industrial (including aerospace, medical materials, etc.). For IC Socket, despite the impact of weak demand in PC market, because of the flourishing development of applications in the Internet of Things and big data driving cloud server market continue to show a steady growth, the IC Socket shipments in 2015 increase continuously, raising the proportion to 5.2%. With the continuous investment of international

giants in constructing of data centers driving the increasing global server market demand, it is estimated the proportion of IC Socket from 2016 to 2017 to further rise. On the other hand, automotive connectors and connecting harnesses are important components connecting various electronic devices and parts of automobiles. As the information and communication technology improves, domestic and foreign automobile manufacturers have expedite their investment in developing advanced driving assistance systems (ADAS) and electric vehicles. The implementation of a large number of radars, sensors, communications, lenses, detection, navigation and entertainment systems has increased the proportion of automobile electronic parts by year. Under this market trend, the market demand for automotive connectors will expand by year. Although the US-China trade friction has a directly negative impact on domestic connector manufacturers with China’s automobile market as their main sales (automotive connectors are listed in both the U.S and China’s additional tariff lists), and the mid to low-end 3C application businesses facing fierce competition from their Chinese peers, the main domestic connector (wiring) manufacturers, however, had not only prepare production bases globally in advance to soften the impact of unstable international political and economic situation, but also had effectively optimized their products dedicating in increasing the sales proportion of high niche application connector (wiring). Meanwhile, through providing localized and customized solutions and value-added services to local customers to enhance competitiveness, thus making the industry having certain support from production and marketing.

D. Competitive niche

a. Technical capabilities for quick tooling development

Connectors are assemblies of injection molded plastics and terminals. The processing technique of the plastic materials related closely to whether a fine pitch, high density and high temperature resistance semi-finished product can be produced. For the processing of terminals, in addition to considering the contact resistance and high pullout resistance of the metal materials, it has to be bended to a suitable angle per customers’ requests. In order to have connectors meet its required design and specifications and quality stability, the technical capabilities come from the design and development of molds and fixtures. The Company has years of experience in tooling development, terminal stamping and plastic injection molding, which enables us to quickly develop and design various molds and fixtures to cooperate into production. Therefore, despite the rapid market change and the diverse but small in quantity customer needs, the capabilities of new product development allows the Company to make immediate responses to the market change and have better timing.

b. Possession of various and numerous patents

The development of new products and the technological advancement are very important to electronic connector manufacturer, especially in the acquisition of patents to protect the company’s intellectual property rights. The Company, focusing on product research and

development, has an excellent research and development team. Including internal design and development and the products developed in cooperation with customers, the Company would apply for patents for these technologies to protect the Company’s products’ competitive advantages and to avoid plagiarism from other peers within the industry. The Company currently possess over one thousand patents across Taiwan, China, U.S and other areas, and the number of patents is steadily increasing by year.

c. Possessing a solid source of customers that is beneficial to other new product sales

The quality of the connector products has a decisive influence on the signal transmissions between electronic devices, thus the customers having a considerable level of quality requirements and standards for suppliers. The Company's customer base includes international manufacturers of electronic products for information and communications, making the Company’s products more international, which becomes one of the bases for establishing in the industry. Currently, the Company will not only continuing to cooperate with existing clients, but also expecting to establish a more diversified customer source from application product manufacturers in order to create a more substantial source of operating income, to set the product with more international and cross-industrial features, and to enhance strength for future market expansion.

d. Possession of a complete production line, vertically integrating plastic molding, stamping, die and mechanical components.

The Company is fully functional with R&D team designing products, stamping molds, plastic molds, and injection molding, stamping of terminals and other metal structures, electroplating processing, assembling jigs, and finished product processing, and have the Company’s precision laboratory equipment test to ensure the stability of product quality. In response to the developing trend of expediting product innovation and product differentiation, currently the Company’s research and development heads toward the developing of precision connectors with fine pitch, low height, low contact resistance, resistance to high insertion force, high insertion frequency, environmental resistance and high frequency stability. Therefore, in addition to grasping opportunities to meet market demand of having lighter, thinner, shorter and more compacted products, the Company could expand the its connector product application market providing downstream customers services with a complete product line.

e. The Company focuses on self-capacity expansion and development of new products

The Company has a strong R&D team, which can provide supports between the head office and subsidiaries according to project needs. Hence having the capabilities of rapid product development that allows product to be completed in three months from design to having a physical product; at the same time, possess the research and development abilities to design multiple new products at once. The Company also invest in precision experimental equipment to ensure the functional stability of the products. As for production capacities, the company is set

up as a one-stop production; all steps can be completed within the Company, from design, development, manufacturing to shipment and other operations. Based on “Copy exactly”, the Company can also meet the customers’ needs of rapid production capacity expansion.

E. Positive and negative factors for future development
(A) Positive factors
- a. In terms of industry development trend, connectors are critical components of computer and its peripheral, mobile phones, digital cameras, PDAs, and other electronic products. The recovery of global information and communication industries will prompt the growth for demand in electronic component market; therefore, the connector industry still has considerable room to grow in the future.
- b. In terms of business strategy, in response to the pressure of cost competition, and considering the reduction of labor and material costs, the Company has adopted the model of dividing operations cooperating between Taiwan and China, thus maximized benefits by effectively using organization resources and reducing production costs.
- c. In terms of product competitiveness, the Company has complete production lines. The current produced connector products are applicate in multiple electronic industries including information and communication, and the quality of products is recognized by major manufacturers of downstream application products.
(B) Negative factors
- a. As the information industry blooms, the rapid change of related electronic product, in order to satisfy the customers’ need of diversified products; Products need to be constantly innovated, leading to the short life cycles of information products. If a company fails to launch new products in a timely manner, it will not be able to grasp market opportunities, which results in losing market competitiveness.
- b. Global information and communication system manufacturers are becoming larger. The Company’s capital is relatively low comparing to major international manufacturers, making it difficult to carry out large-scaled new product development projects.
- c. The wage cost of domestic labor remains high, increasing the Company's operating costs.
- d. There are many manufacturers in the country engage in connector manufacturing. The profit are getting thinner due to high product homogeneity and the fierce price cut competition from peers.
(C) Response to such factors
- a. Continue to develop and improve existing products, maintain good partnership with major international manufacturer, enhance acuity to the market, fully grasp product trends, follow the growing trend of information and communication products, and to research and develop related niche products.
- b. Strengthen strategic partnership with international manufacturers, in addition to developing

new products, it is to enhance product quality and maintain customer satisfaction, and stabilize market competitiveness. Furthermore, by listing stocks, the Company may raise long-term funds in the capital market, reduce capital costs, and invest in production equipment to expand production capacity and increase research and development funds, expand the scale of operations, making the Company’s products being more competitive.

  - c.Through establishing production bases in China, the Company may engage in manufacturing connector-related products, thus to reduce production costs and reduce the impact of rising domestic wages.

  - d.In terms of design, it is focused on the particularity of products and to achieve competitive advantages in saving materials and labor.

(2). Usage and manufacturing processes for the main products
A. Main usage
- Main products are electronic connectors, providing current and signal transmission for various electronic products.

B. Manufacturing process

==> picture [302 x 221] intentionally omitted <==

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

Product design Plastic and stamping die development Plastic injection, terminal stamping Electroplating assembly Quality inspection and testing Storage and shipping
----- End of picture text -----

C. The Supply Status of the Major Raw Materials

The company's main raw materials for production are copper, plastic pellets and steel. Therefore, the top suppliers with highest procurement amounts are all suppliers for copper, plastic pellets and steel. These suppliers are long-term partners for years with substantial sources. Considering the quality of raw materials, pricing and cooperation may affect the change in suppliers, there is no concentration risk for material outage due to purchasing from a small number of suppliers.

D. A list of any suppliers and clients accounting for 10 percent or more of the company's total procurement (sales) amount in either of the 2 most recent fiscal years, the amounts bought from (sold to) each, the percentage of total procurement (sales) accounted for by each

a. Customers accounting for 10% or more of the Company's total sales in the last two years

Unit: 1,000 TWD

		2018	2018			2019	2019	2019		2020Q1	2020Q1
Item	Company Name	Amount	Percentage of net sales for the year (%)	Relation With Issuer	Company Name	Amount	Percentage of net sales for the year (%)	Relation With Issuer	Company Name	Amount	Percentage of net sales for the year (%)	Relation With Issuer
1	Company A	1,396,516	10.49%	None	Company A	1,971,110	13.06%	None	`－`	`－`	`－`	`－`
2	Company B	936,509	7.04%	None	Company C	1,080,902	7.16%	None	`－`	`－`	`－`	`－`
3	Company C	906,479	6.81%	None	Company B	1,010,642	6.70%	None
	Others	10,072,014	75.665		Others	11,026,218	73.08%		`－`	`－`	`－`	`－`
	Total	13,311,518	100%		Total	15,088,872	100%		`－`	`－`	`－`	`－`

Note: As of the date of publication of the annual report, the Company has not yet issued its financial statements for the first quarter of 2019.

b. Suppliers accounting for 10% of the Company's total shipments for the last two years

Unit: 1,000 TWD

	2018	2018	2018	2018	2019	2019	2019	2019		2020Q1	2020Q1
Item	Company Name	Amount	Percentage of net purchases for the year (%)	Relation With Issuer	Company Name	Amount	Percentage of net purchases for the year (%)	Relation With Issuer	Company Name	Amount	Percentage of net purchases for the year (%)	Relation With Issuer

1	Company A	326.915	6.61	None	Company C	298,653	3.57	None	`－`	`－`	`－`	`－`
2	Company B	222,937	4.51	None	Company D	226,198	2.70	None	`－`	`－`	`－`	`－`
	Others	4,398,007	88.88	`﹣`	Others	7,842,805	93.73	`﹣`	`－`	`－`	`－`	`－`
	Total	4,947,859	100.00	`﹣`	Total	8,367,656	100.00	`﹣`	`－`	`－`	`－`	`－`

Note: As of the date of publication of the annual report, the Company has not yet issued its financial statements for the first quarter of 2019.

E.Production value for the past two years

The Company mainly receive orders while the reinvestment companies at a third area in 。 China, Lotes Guanghou Co., Ltd and Lotes Suzhou Co., Ltd act mainly as production center

F. Sales value for the past two years

Unit: thousand units/ $ thousand

F. Sales value	for the past two years	for the past two years	for the past two years	for the past two years	Unit: thousand units/ $ thousand	Unit: thousand units/ $ thousand	Unit: thousand units/ $ thousand	Unit: thousand units/ $ thousand
Year Sales Volume Major Products	2018				2019
	Domestic Sales		Export		Domestic Sales		Export
	Quantity	Quality	Quantity	Quality	Quantity	Quality	Quantity	Quality
Connectors & Cables	20,723	322,817	1,670,627	12,510,080	20,723	322,817	1,670,627	12,510,080
Others	270	21,699	12,774	456,922	270	21,699	12,774	456,922
Total	20,993	344,516	1,683,401	12,967,002	20,993	717,666	1,683,401	14,371,206

3. Employee information

March 31, 2020

	Year	2018	2019	As of March 31, 2020
Number of Employees	Executive Officer	136	144	141
	General Staff	5,283	5,362	5,423
	Operators	3,692	3,794	4,365`人`
	Total	9,111	9,300	9,929
Average Age		31.56	31.88	32.12
Average Years of Service		3.35	3.45	3.39
Education Levels	Ph.D.	0.04%	0.05%	0.05%
	Masters	1.01%	1.29%	1.18%
	Bachelor’s Degree	17.52%	18.06%	17.11%
	Senior High School	16.57%	18.02%	18.28%
	Below Senior High School	64.86%	62.57%	63.38%

4. Disbursements for environmental protection

In the most recent year and as of the date of publication of the annual report, the Company’s

total amount of losses and punishments due to environmental pollution, and state counter measures for the future and possible expenses: None.

5. Labor relations

A.Various employee welfare measures, education, training, retirement system and implementation. And labor-management agreement and protection of employee rights.

a. Employee welfare measures
(a) Establish an employee welfare committee in accordance with the law and implementing all

employee welfare measures such as subsidy allowance for wedding, funeral, birth, injury and gifts for labor day, Dragon Boat Festival, Mid-Autumn Festival, etc.,.

(b) Insured with labor insurance and national health insurance in accordance with the law to protect employees.

b. Education and training

In order to increase employee quality and working skills, reinforce the working efficiency and quality, the Company implements pre-employment guidance and training for new employees when they arrive, conduct irregular internal education and training for all employees, and select employees for external education and training programs according to their various expertise, with expectation to cultivate outstanding professionals, and then to further increase operational performances and effectively develop and utilize human resources.

c. Retirment system and implementation

The Company has established employee retirement measures in accordance with the “Labor Standards Act”. According to the retirement measures, the pension is calculated based on the employees’ years of service and the average salary of the six months before retirement. In accordance with regulations, the Company set aside a monthly labor retirement reserve and has it managed by the Supervisory Committee of Business Entities’ Labor Retirement Reserve, and deposits it into the Central Trust of China in the name of the committee. Since the implementation of "Labor Pension Act" on July 1st, 2005, the Company also set aside a 6% pension for employees applied to the Act.

d.Labor-management agreement and protection of employee rights

The company has always upheld the concept of labor-management harmony. All operations are conducted in accordance with the regulations of the “Labor Standards Act” with regular labor-management meetings held. Therefore, the internal communication channels are open and so far no labor disputes occurred.

C.In the most recent year and as of the date of publication of the annual report, the Company ’ s losses due to labor disputes, and disclose of current and the possible future estimated amounts and measures: None.

6. Important contracts

Nature	Contracting Parties	Contract start/end date	Major Content	Restrictive Clauses
Borrowing Agreement	E.SUN Commercial Bank Ltd.	2019.08.06~2020.08.06	Credit line	None
Borrowing Agreement	Bank Sinopac Co., Ltd.	2019.03.15~2020.03.31	Credit line	None
Borrowing Agreement	CTBC Bank Co., Ltd.	2019.08.31~2020.08.31	Credit line	None
Borrowing Agreement	Hua Nan Commercial Bank Ltd.	2019.10.04~2020.10.04	Credit line	None
Borrowing Agreement	Mega International Commercial Bank Co.,Ltd.	2020.01.16~2021.01.15	Credit line	None

VI. Overview of Financial Status

A condensed balance sheet and statement of comprehensive income for the last five years
(1) Condensed balance sheet

1. Adoption of International Financial Reporting Standards (IFRS) - Consolidated Statements

Year Item	Year Item	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial information as of March 31, 2020 (Note)
		2015	2016	2017	2018	2019
Current assets		7,562,615	7,080,069	7,863,610	9,566,989	11,400,712	`－`
Property, Plant and Equipment		2,192,674	2,528,461	2,875,657	3,350,160	3,514,714	`－`
Intangible assets		11,679	14,447	25,382	59,527	99,789	`－`
Other assets		652,242	373,560	516,393	473,115	388,701	`－`
Total assets		10,857,004	1,0478,589	11,753,258	13,790,208	16,280,192	`－`
Current liabilities	Before distribution	2,690,672	2,459,993	3,277,487	3,876,478	3,630,746	`－`
	After distribution	3,033,071	2,923,904	3,791615	4,776,736	Notyet distributed	`－`
Non-current liabilities		78,251	43,183	43,982	42,248	104,221	`－`
Total liabilities	Before distribution	2,768,923	2,503,176	3,321,469	3,918,726	3,734,967	`－`
	After distribution	3,111,322	2,877,087	3,835,597	4,818,984	Notyet distributed	`－`
Equity attributable to shareholders of the parent		8,039,081	7,896,919	8,285,616	9,506,158	11,815,326	`－`
Capital stock		934,779	934,779	934,779	934,779	1,034,779	`－`
Capital surplus		2,365,507	2,383,441	2,410,168	2,466,109	3,959,560	`－`
Retained earnings	Before distribution	4,346,089	4,616,312	5,195,871	6,296,652	7,471,519	`－`
	After distribution	3,925,439	4,242,401	4,681,743	5,396,394	Notyet distributed	`－`
Other equity interest		393,561	(37,613)	(255,202)	(317,020)	(650,532)	`－`
Treasury stock		0	0	0	0	0	`－`
Non-controlling interest		48,145	78,494	146,173	365,324	729,899	`－`
Total equity	Before distribution	8,088,081	7,975,413	8,431,789	9,871,482	12,545,225	`－`
	After distribution	7,667,431	7,601,502	7,917,661	8,971,224	Notyet distributed	`－`

Note: Quarterly report for the first quarter has not yet been issued as at the date of publication.

2. Adoption of International Financial Reporting Standards (IFRS) - Individual Statements

Year Item Current assets Property, Plant and Equipment Intangible assets Other assets Total assets Current liabilities Before distribution After distribution Non-current liabilities Total liabilities Before distribution After distribution Equity attributable to shareholders of the parent Capital stock Capital surplus Retained earnings Before distribution After distribution	Financial Information for the Last Five Years	Financial Information for the Last Five Years	Financial Information for the Last Five Years	Financial Information for the Last Five Years	Financial Information for the Last Five Years
	2015	2016	2017	2018	2019
	4,306,308	3,911,304	3,999,731	4,456,296	5,476,170
	52,145	50,874	50,675	51,342	63,428
	4,988	2,424	688	30,628	50,937
	6,027	6,027	97,117	6,027	15,462
	10,907,288	10,720,970	11,306,203	12,734,745	14,830,921
Before distribution	2,790,087	2,781,413	2,977,029	3,187,052	2,972,923
After distribution	3,210,737	3,155,324	3,491,157	4,087,310	Notyet distributed
	83,373	77,265	42,638	41,535	42,672
Before distribution	2,867,352	2,824,051	3,020,587	3,228,587	3,015,595
After distribution	3,288,002	3,197,962	3,534,715	4,128,845	Notyet distributed
	8,039,936	7,896,919	8,285,616	9,506,158	11,815,326
	934,779	934,779	934,779	934,779	1,034,779
	2,365,507	2,383,441	2,410,168	2,466,109	3,959,560
Before distribution	4,346,089	4,616,312	5,195,871	6,296,652	7,471,519
After distribution	3,925,439	4,242,401	4,681,743	5,396,394	Notyet distributed

Other equity interest		393,561	(37,613)	(255,202)	(317,020)	(650,532)
Treasury stock		0	0	0	0	0
Non-controlling interest		0	0	0	0	0
Total equity	Before distribution	8,039,936	7,896,919	8,285,616	9,506,158	11,815,326
	After distribution	7,619,286	7,523,008	7,744,488	8,605,900	Notyet distributed

(2) Condensed statement of comprehensive income

1. Adoption of International Financial Reporting Standards (IFRS) - Consolidated Statements

Year Item	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Information as of March 31, 2020 (Note)
	2015	2016	2017	2018	2019
Operatingrevenue	8,196,917	8,862,577	10,482,763	13,311,518	15,088,872	`－`
Gross profit	2,764,954	2,817457	3,390,515	4,348,869	5,467,910	`－`
Operating profit or loss	780,208	727,760	1,219,583	1,982,440	2,750,624	`－`
Non-operating income and expenses	310,245	166,904	32,820	171,857	81,137	`－`
Profit before income tax	1,090,453	894,664	1,252,403	2,154,297	2,831,761	`－`
Current net profit from continuingoperations	780,382	647,001	982,732	1,708,299	2,144,468	`－`
Loss from discontinued operations	0	0	0	0	0	`－`
Net profit (loss)	780,382	647,001	982,732	1,708,299	2,144,468	`－`
Other comprehensive income (loss) ( income after tax)	(21,557)	(431,005)	(219,943)	(56,310)	(337,918)	`－`
Total comprehensive income (loss)	758,825	215,996	762,789	1,651,989	1,806,550	`－`
Net profit attributable to owners of the company	796,260	690,324	956,301	1,608,567	2,076,043	`－`
Net profit attributable to non-controlling interests	(15,878)	(43,323)	26,907	99,732	68,425	`－`
Comprehensive income attributable to owners of the company	775,171	259,699	735,882	1,553,091	1,741,613	`－`
Comprehensive income attributable to non-controllinginterests	(16,346)	(43,703)	26,907	98,898	64,937	`－`
Earningsper share	8.52	7.38	10.23	17.21	20.11	`－`

Note: Quarterly report for the first quarter has not yet been issued as at the date of publication.

Adoption of International Financial Reporting Standards (IFRS) - Individual Statements

Unit: 1,000 TWD

Year Item	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years	Financial Summary for The Last Five Years
	2015	2016	2017	2018	2019

Operatingrevenue	6,644,447	6,947,169	7,908,666	8,731,882	9,968,334
Grossprofit	886,837	673,269	1,216,311	1,385,837	1,805,548
Operating profit or loss	473,296	211,949	537,905	822,567	1,230,782
Non-operating income and expenses	480,821	544,703	537,215	981,503	1,126,841
Profit before income tax	954,117	756,652	1,075,120	1,804,070	2,357,623
Current net profit from continuingoperations	796,260	690,324	956,301	1,608,567	2,076,043
Loss from discontinued operations	`－`	`－`	`－`	`－`	`－`
Net profit (loss)	796,260	690,324	956,301	1,608,567	2,076,043
Other comprehensive income (loss) ( income after tax)	(21,089)	(430,625)	(220,419)	(55,476)	(334,430)
Total comprehensive income (loss)	775,171	259,699	735,882	1,553,091	1,741,613
Earningsper share	8.52	7.38	10.23	17.21	20.11

(3) Name of the CPAs of the last five years and their audit opinion

Year	AccountingFirm	Names of CPAs	Audit Opinion
2015	KPMG Taiwan	Chen, Fu-Wei, Lee, Feng-Hui	Unqualified opinion
2016	KPMG Taiwan	Chen, Fu-Wei, Chung,Tan-Tan	Unqualified opinion
2017	KPMG Taiwan	Chen, Fu-Wei, Chung,Tan-Tan	Unqualified opinion
2018	KPMG Taiwan	Chen, Fu-Wei, Chung,Tan-Tan	Unqualified opinion
2019	KPMG Taiwan	Chen, Fu-Wei, Chung,Tan-Tan	Unqualified opinion

2. Five-year financial analysis

(1) Adoption of International Financial Reporting Standards (IFRS) - Consolidated Statements

Item	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
		2015	2016	2017	2018	2019
Financial structure%	Debt ratio (%)	25.50	23.38	28.25	28.41	22.94
	Long-term capital to property, plant and equipment ratio(%)	370.24	314.02	289.65	295.91	359.89
Solvency	Current ratio (%)	281.06	287.80	239.92	246.79	314.00

%	Quick ratio (%)	229.95	221.60	183.73	186.98	255.79
	Interest protection multiples(times)	8618.10	28,420.86	21,837.09	11,765.02	12,568.67
Operating Ability	Receivable turnover ratio (times)	2.60	2.52	2.60	2.77	2.67
	Average collectionperiod	140	144	140	132	136
	Inventory turnover ratio (times)	4.01	3.73	3.66	3.94	4.06
	Payable turnover ratio (times)	4.19	4.29	4.48	5.12	5.21
	Average days in sales	91	97	99	93	90
	Property, plant and equipment turnover ratio (times)	3.67	3.75	3.87	4.27	4.39
	Total assets turnover ratio (times)	0.76	0.83	0.94	1.04	1.00
Profitabilit y	Return on assets(%)	7.54	6.49	8.64	12.71	13.92
	Return on equity (%)	10.06	8.66	11.81	18.08	19.47
	Pre-tax income to paid-in capital ratio (%) (`註`7)	116.65	95.70	133.97	230.46	273.65
	Netprofit ratio(%)	9.71	7.78	9.12	12.08	13.75
	Earningsper share(NT$)	8.52	7.38	10.23	17.21	20.11
Cash flow	Cash flow ratio (%)	77.81	35.71	31.30	38.90	92.53
	Cash flow adequacy ratio (%)	78.16	85.48	88.74	93.98	104.28
	Cash reinvestment ratio (%)	16.50	4.68	6.02	7.99	16.14
Leverage	Operating leverage	4.15	4.86	3.61	3.07	2.68
	Financial leverage	1.02	1.00	1.00	1.01	1.01
Please explain the reasons for the changes in the financial ratios in the last two years. (Analysis may be waived if the change is less than 20%) 1. Long-term capital to real estate, plant and equipment ratio: mainly due to the increase in long-term capital due to the cash capital increase at a premium and the increase in profitability in 2019 2. Current ratio: mainly due to the increase in bank deposits and decrease in bank borrowings as a result of the increase in cash flows. 3. Quick ratio: mainly due to the increase in bank deposits and decrease in bank borrowings as a result of the increase in cash flows. 4. Cash flow ratio: mainly due to a significant increase in net cash inflow from operating activities in 2019 compared to 2018 5. Cash flow reinvestment ratio: mainly due to a significant increase in net cash inflows from operating activities in 2019 compared to 2018,which resulted in a significant increase in the cash flow reinvestment ratio.

Note: Quarterly report for the first quarter has not yet been issued as at the date of publication.

(2) Adoption of International Financial Reporting Standards (IFRS) - Individual Statements

Item	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
		2015	2016	2017	2018	2019
Financial structure%	Debt ratio (%)	26.29	26.34	26.72	25.35	20.33
	Long-term capital to property, plant and equipment ratio (%)	15,566.60	15,606.32	16,436.46	18,596.26	18,695.21
Solvency	Current ratio (%)	154.34	140.62	134.35	139.83	184.20

%	Quick ratio (%)	139.22	122.16	118.35	123.37	164.20
	Interest protection multiples (times)	548,443	55,049	109,249	49,964	398,347
Operating Ability	Receivable turnover ratio(times)	2.63	2.46	2.60	2.63	2.68
	Average collectionperiod	138	148	140	139	136
	Inventoryturnover ratio(times)	13.72	12.71	12.80	14.10	14.18
	Payable turnover ratio(times)	2.85	2.65	2.91	3.52	3.80
	Average days in sales	26	28	28	25	26
	Property, plant and equipment turnover ratio(times)	38.16	134.87	155	171	173
	Total assets turnover ratio(times)	0.64	0.64	0.72	0.73	0.73
Profitabilit y	Return on assets(%)	7.65	6.39	8.69	13.41	15.07
	Return on equity (%)	10.07	8.66	11.82	18.08	19.47
	Pre-tax income to paid-in capital ratio (%)	102.07	80.94	115.01	192.99	227.84
	Netprofit ratio(%)	11.98	9.94	12.09	18.42	20.83
	Earningsper share(NT$)	8.52	7.38	10.23	17.21	20.11
Cash flow	Cash flow ratio (%)	27.68	(6.36)	6.05	1.78	32.31
	Cash flow adequacy ratio (%)	92.19	88.13	75.67	60.28	53.40
	Cash reinvestment ratio (%)	3.17	(7.50)	(2.32)	(4.78)	0.51
Leverage	Operating leverage	1.42	1.96	1.40	1.30	1.21
	Financial leverage	1.00	1.01	1.00	1.00	1.00
Please explain the reasons for the changes in the financial ratios in the last two years. (Analysis may be waived if the change is less than 20%) 1. Current ratio: mainly due to the increase in bank deposits and decrease in bank borrowings as a result of the increase in cash flows. 2, Quick ratio: mainly due to the increase in bank deposits and decrease in bank borrowings as a result of the increase in cash flows. 3. Interest guarantee (times): mainly due to a significant increase in interest earned in 2019 compared to 2018 and a significant increase in interest guarantee (times) due to a decrease in bank borrowings and a significant decrease in interest expense. 4. Cash flow ratio: mainly due to a significant increase in net cash inflow from operating activities in 2019 compared to 2018 5. Cash flow reinvestment ratio: mainly due to a significant increase in net cash inflows from operating activities in 2019 compared to 2018,which resulted in a significant increase in the cash flow reinvestment ratio.

1. Financial Structure

(1) Debt ratio = total liabilities / total assets
(2) Long-term capital to property, plant and equipment ratio = (total equity + non-current liabilities)/net property, plant and equipment
Solvency
(1) Current ratio = current assets/current liabilities
(2) Quick ratio = (current assets – inventory – prepaid expense) / current liabilities
(3) Interest protection multiples = net income before income tax and interest expense / current interest expense
Operating Ability
(1) Receivables (including accounts receivable and notes receivable arising from business operations) turnover ratio = net sales / average receivables (including accounts receivable and notes receivable arising from business operations) for each period
(2) Average collection period = 365 / receivables turnover ratio
(3) Inventory turnover ratio = cost of goods sold / average inventory amount
(4) Payable (including accounts payable and business-related notes payable) turnover ratio = cost of goods
- sold / average payable balance of the period (including accounts payable and business-related notes payable)
(5) Average days in sale = 365 / inventory turnover rate

(6) Property, plant, and equipment (PP&E) turnover ratio = net sales/average PP&E
(7) Total asset turnover ratio = net sales / average total assets
Profitability
(1) Return on assets = (net income + interest expense x (1– tax rate)) / average total assets
(2) Return on equity = net income after tax/ average total equity
(3) Net profit ratio = net income / net sales
(4) Earnings (loss) per share = (income or loss attributable to owners of parent company – dividends on Preferred shares) / weighted average number of issued shares (Note 4)
Cash flow
(1) Cash flow ratio = net operating cash flow / current liabilities
(2) Net cash flow adequacy ratio = net operating cash flow in last 5 years / (capital expenditures + Inventory increase + cash dividend) in last 5 years
(3) Cash reinvestment ratio = (Net operating cash flow – cash dividend) / (gross property, plant and equipment + long-term investment + other non-current assets + working capital) (Note 5)
Leverage
(1) Operating leverage = (Net operating revenue - variable operating change cost and expense) / Operating income (Note 6)
(2) Financial leverage = Operating income / (operating income - interest expenses)

2019 Audit Report of Supervisors for the Financial Statements

Lotes Co., Ltd. 2019 Audit Report of Supervisors

The Board of Directors had prepared and delivered the 2019 Business Report, Statement of Earnings Distribution and Financial Statements (including consolidated financial statements). The audit of the financial statements was completed by accountants CHUNG, TAN-TAN and CHEN, FU-WEI at KPMG Taiwan, and a auditor's report was issued. The audit of the aforementioned reports and statements delivered by the Board of Directors were conducted by the supervisors who found no inconsistency. The audit report was issued in accordance with Article 219 of the Company Act.

Yours sincerely,

2019 Shareholders General Meeting of Lotes Co., Ltd.

Supervisor: YANG, WEN-MING

CHENG, MING-SUNG

Jinling Investment Co., Ltd. Representative: CHANG, KUN-YAO

March 25, 2020

4.. 2019 Financial Statements and Independent Auditor’s Report

Independent Auditor’s Report

To the Board of Directors, Lotes Co., Ltd.:

Audit opinion

We have audited the Balance Sheet of Lotes Co., Ltd. (hereinafter referred to as Lotes) as of December 31, 2019 and 2018, the Statement of Comprehensive Income as of January 1 to December 31, 2019 and 2018 as well as the Statement of Changes in Equity, Statement of Cash Flows and the Notes to Parent Company Only Financial Statements (including important accounting policies summary).

In our opinions, the compilation of the above parent company only financial statements present fairly, in all material respects, of the financial status of December 31, 2019 and 2018 in Lotes and the financial performance and consolidated cash flow of January 1 to December 31, 2019 and 2018 prepared in accordance with Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis of the audit opinion

The audit of the parent company only financial statements for the year ended on December 31, 2019 was conducted by us in accordance with "Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants", "CHIN-KUAN-CHENG-SHEN-TZU No. 1090360805 Letter" and Generally Accepted Auditing Standards (GAAS); the audit of the parent company only financial statements for the year ended on December 31, 2018 was conducted by us in accordance with "Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants" and Generally Accepted Auditing Standards (GAAS). Our responsibilities under these standards will be further explained in the responsibility paragraph of the accountant’s audit on the parent company only financial statements. The personnel regulated by independence at the accounting firm that we work with have been managed according to the code of professional ethics to maintain independence from Lotes as well as perform other responsibilities addressed on the regulation. Based on the audit results of us, we believe we have obtained sufficient and appropriate auditing evidence as the basis to express our audit opinions.

Key audit matters

Key audit matters refer to the most important matters on the audits to Lotes’s Parent Company Only financial statements for the year ended on December 31, 2019 based on our professional judgment. The matters have been responded on the whole audited Parent Company Only financial statements and during the process of the expression of the audit opinions. There, we won’t express opinions separately towards the matters. Based on the judgment of the accountants, the following key audit matters that should be communicated on the audit report are as follows: I. Recognition of income

Please refer to Note IV (XV) to the parent company only financial statements for the accounting policy in terms of income recognition. Please refer to Note V (II) to the parent company only financial statements for the refund liability in terms of accounting estimates and assumed uncertainties. Please refer to Note VI (XI) to the parent company only financial statements for the description of refund liability.

Description of the key audit matters:

The operating income is the most critical factor when determining the operational performance of Lotes. Users of the statements are cautiously concerned about the performance of the operating income. In response to the market conditions and business needs, discounts were provided for parts of the sales of goods agreed with the customers. Based on experiences and agreements with the customers, the management would estimate the refund liability and include it as a deduction of operating income. Thus, the income recognition evaluation is one of the fundamental evaluation items for accountants in the execution of financial report audit for Lotes. Corresponding audit procedure:

The primary audit procedure conducted by the accountants for the aforementioned key audit matters included the understanding and evaluation of the relevant control procedures and methods in the estimation of refund liabilities in terms of the sales procedure and the effectiveness of the design and execution of the control procedure. Regarding the sampling testing for sales close to the balance sheet date, external certification documents were reviewed to assess the adequacy of the income recognition timings. The management’s method to estimate and list refund liabilities were also obtained to assess whether the evaluation is based on the agreed conditions with customers and historical experiences. A retrospective test was conducted to analyze the adequacy of the refund liability estimate based on the experiences with historical estimates of differences and the actual situation afterward.

II. Evaluation of inventory

Please refer to Note IV (VII) for the accounting policy of inventory evaluation. Please refer to Note V (I) in the parent company only financial statements for the accounting estimates and assumed uncertainties of the inventory evaluation. Please refer to Note VI (III) in the parent company only financial statements for the information on the losses from the price drop of inventory. Description of the key audit matters:

Due to the impacts of rapid changes in the market demand and the development of production technology, the existing products are at risk to become outdated inventory or non-compliant with market demand. Parts of the inventory may become obsolete or have the market prices dropped. Thus, the inventory evaluation is one of the fundamental evaluation items for the accountants in the execution of financial report audit for Lotes. Corresponding audit procedure:

The primary audit procedure conducted by the accountants for the aforementioned key audit matters included the understanding and evaluation of the basis and methods used by the management to assess the net realizable value of inventory. Review and audit were conducted in terms of the data used by the management as the basis and to estimate the net realizable value, and an evaluation was conducted on the estimated sales price to the latest sales record by sampling. To evaluate the adequacy of the drop in prices, the accuracy of the inventory aging report was checked, and the changes in the inventory aging of each period were analyzed.

Responsibility from the management and governing unit towards the parent company only financial statements

The management’s responsibility is to prepare the parent company only financial statements present fairly according to Regulations Governing the Preparation of Financial Reports by Securities Issuers and to maintain necessary internal control related to the preparation of the parent company only financial statements in order to ensure there is no major untrue expression on the financial statements due to fraud or error.

When preparing the parent company only financial statements, the responsibility of the management also includes evaluating Lotes’s capability of continuous operation, disclosure of relevant matters and the application of continuous operation accounting model unless the the management intends to liquidate Lotes or suspend its business operation or there is no alternative practical and feasible solution other than liquidation or business suspension.

The governing unit (including supervisors) at Lotes is responsible for supervising the process of

financial reports.

Responsibility of accountants’ audit on the parent company only financial statements

The purpose of the parent company only financial statements audited by us is to obtain reasonable assurance on whether the significant untrue expression exists on the whole parent company only financial statements due to fraud or error as well as issue the audit report. The reasonable assurance is the high certainty; however, it won’t be able to guarantee that the significant untrue expression will definitely be able to be detected by generally accepted auditing standards, and the untrue expression might be caused from fraud or error. It is regarded as with significance if the parent company only amount or the aggregation number of the untrue expression can reasonably predict that it will affect the economic decisions made by the users of the parent company only financial statements.

When we conduct the audit according to generally accepted auditing standards, we use professional judgment and maintain our professional suspicion. We also executed the following tasks:

Identifying and evaluating the risk of major untrue expression on the parent company only financial statements due to fraud or error; designing and implementing proper responding strategies towards the risk evaluated; and obtaining sufficient and appropriate audit evidence as the basis of audit opinions. Due to fraud might be involving with collusion, counterfeiting, malicious omission untrue declaration, or going out of the internal control, the risk of not detecting the major untrue expression due to fraud will be higher than that due to error.
Obtaining necessary understanding of internal control related to audit in order to design proper audit procedure under the situation of the case. However, its purpose is not to express opinion toward the effectiveness of the internal control in Lotes.
Evaluating the adequacy of the accounting policies used by the the management and the rationality of the accounting evaluation and relevant disclosure concluded.
Based on the audit evidence obtained, conclusion towards the appropriateness of continuous operation accounting basis that the the management adopts and the existence of major uncertainty on events or situations with major concerns affecting Lotes’s capability in continuous operation are made. If we believe major uncertainty existed on the event or situation, we must remind the users of Parent Company Only financial statements on the audit report to pay attention on the relevant disclosure or modify audit opinion when the disclosure is not appropriate. The conclusion that we made is based on the audit evidence obtained up to the audit report day, but future events or situations might cause Lotes not capable in continuous operation.
Evaluating the overall expression, structure and content of the parent company only financial statements (including relevant notes) as well as whether the parent company only financial statements present fairly, in all material respects, relevant transaction and events.
Obtaining sufficient and appropriated audit evidence of the financial information from the investee companies accounted for using equity method as well as express opinions towards the parent company only financial statements. We are in charge of the directing, supervision and execution on the audit cases as well as concluding audit opinions towards the parent company only financial statements of Lotes.

The communication between us and the governing unit includes the audit scope and time planned and major audit findings (including the significant defects on the internal control identified during the auditing process).

We have also provided information to the governing unit that the personnel of the firm—under which we are working—who are subject to independence requirements have complied with the statement of independence in the CPA code of professional ethics and communicated to the governing unit all relationships and other matters (including relevant safeguards) that may be considered to affect the independence of CPAs.

We determined the key audit matters that we would like to execute on Lotes’s Parent Company Only financial statements for the year ended on December 31, 2019 from the communication with the

governing unit. We clearly stated the related matters on the audit report unless it is the specific matter that is not allowed to be disclosed to the public according to laws, or under a very rare situation that we decided not to communicate specific matters on the audit report because we can reasonably anticipate the negative influence generated by the communication will be greater than the public interests increased.

KPMG Taiwan

CPAs:

[Competent ] ：[(88) TAI-TSAI-CHENG (VI) ] Authority of No. 18311 Securities Approval Certificate No.

[March 25, 2020 ]

Lotes Co., Ltd. Balance Sheet

December 31, 2019 and 2018

Unit: 1,000 TWD

Assets Current assets: 1100 Cash and cash equivalents (Note VI (I) and (XXII)) 1150 Notes receivable (Note VI (II) and (XXII)) 1170 Net accounts receivable (Note VI (II) and (XXII)) 1181 Accounts receivable - related parties (Note VI (II), (XXII) and VII) 1200 Other accounts receivable (Note VI (II) and (XXII)) 1210 Other accounts receivable - related parties (Note VI (II), (XXII) and VII) 130X Inventory (Note VI (III)) 1410 Advance payment Non-current assets: 1550 Investments accounted for using the equity method (Note VI (IV) and XIII) 1600 Property, plant and equipment (Note VI (V) and VIII) 1755 Right-of-use assets (Note VI (VI)) 1760 Investment property (Note VI (VII)) 1780 Intangible assets (Note VI (VIII)) 1840 Deferred tax assets (Note VI (XV)) 1900 Other non-current assets Total of assets	Dec. 31, 2019 Amount ％ $ 842,522 6 1,675 - 3,896,815 27 15,129 - 35,520 - 89,781 1 591,088 4 3,640 -	Dec. 31, 2018 Amount ％ 359,731 3 2,143 - 3,525,688 28 10,370 - 31,394 - 2,640 - 514,966 4 9,364 -
	5,476,170 38	4,456,296 35
	8,873,276 60 63,428 - 59 - 283,002 2 50,937 - 68,587 - 15,462 -	7,862,011 62 51,342 - - - 283,960 3 30,628 - 44,481 - 6,027 -
	9,354,751 62	8,278,449 65
	$ 14,830,921 100	12,734,745 100

Liabilities and equity Current liabilities: 2100 Short-term loan (Note VI (IX), (XXII), (XXV), VIII and IX) 2130 Contract liabilities - current (Note VI (XIX)) 2150 Notes payable (Note VI(XXII)) 2170 Accounts payable (Note VI(XXII)) 2180 Accounts payable - related parties (Note VI(XXII) and VII) 2200 Other payables (Note VI(XXII)) 2220 Other payables - related parties (Note VI(XXII) and VII) 2230 Tax liabilities (Note VI (XV)) 2280 Lease liabilities - current (Note VI (X), (XXII) and (XXV)) 2365 Refund liabilites - current (Note VI (XI)) 2300 Other current liabilities Non-current liabilities: 2550 Provisions - non-current (Note VI (XII)) 2600 Other non-current liabilities Total of liabilities Equity to the owner of parent company: 3110 Ordinary share capital (Note VI (XVI)) 3140 Share capital received in advance (Note VI (XVI)) 3200 Capital reserves (Note VI (XVI)) 3300 Retained earnings (Note VI (XVI) and (XVIII)) 3400 Other equity (Note VI (XVI)) Total of equity Total of liabilities and equity	Dec. 31, 2019 Amount % $ - - 14,998 - 18,934 - 14,499 - 2,264,397 15 245,547 2 5,838 - 244,220 2 59 - 157,256 1 7,175 -	Dec. 31, 2018 Amount % 720,000 6 3,922 - 45,271 - 12,520 - 1,945,001 16 213,627 2 2,758 - 150,611 1 - - 86,883 1 6,459 -
	2,972,923 20	3,187,052 26
	41,729 - 943 -	40,522 - 1,013 -
	42,672 -	41,535 -
	3,015,595 20	3,228,587 26
	1,034,779 7 - - 3,959,560 27 7,471,519 50 (650,532) (4)	934,779 7 125,638 1 2,466,109 19 6,296,652 49 (317,020) (2)
	11,815,326 80	9,506,158 74
	$ 14,830,921 100	12,734,745 100

Lotes Co., Ltd.

Statement of Comprehensive Income

January 1 to December 31, 2019 and 2018

Unit: 1,000 TWD

2019	％ 100 82	2018	％ 100 84
Amount $ 9,968,334 8,162,786		Amount 8,731,882 7,346,045
1,805,548	18	1,385,837	16
278,034 249,095 48,179 (542)	3 2 - -	325,012 187,090 50,287 881	4 2 1 -
574,766	5	563,270	7
1,230,782	13	822,567	9
51,098 (72,584) (592) (2,407) 1,151,326	1 (1) - - 12	52,144 5,701 (3,618) 787 926,489	1 - - - 11
1,126,841	12	981,503	12
2,357,623 281,580	25 3	1,804,070 195,503	21 2
2,076,043	22	1,608,567	19
(1,148) (16,103) 230	- - -	2,187 (2,459) (463)	- - -
(17,021)	-	(735)	-
(317,409) -	(3) -	(54,741) -	(1) -
(317,409)	(3)	(54,741)	(1)
(334,430)	(3)	(55,476)	(1)
$ 1,741,613	19	1,553,091	18
$	20.11		17.21
$	20.06		17.15

Lotes Co., Ltd.

Statement of Changes in Equity

January 1 to December 31, 2019 and 2018

Unit: 1,000 TWD

Share capital		Retained earnings	Retained earnings	Retained earnings
						Exchange difference between foreign operating office’s statement
Ordinary share capital	Share capital received in advance	Capital reserves	Legal reserve	Special reserve	Undistributed earnings
$ 934,779 -	- -	2,410,168 -	835,452 -	37,613 -	4,322,806 4,618
934,779	-	2,410,168	835,452	37,613	4,327,424	(259,820) - -
- -	- -	- -	- -	- -	1,608,567 1,724	- - - (54,741) (2,459) -
-	-	-	-	-	1,610,291	(54,741) (2,459) -
- - - - - -	- - - - - 125,638	- - - 45,248 10,693 -	95,630 - - - - -	- 217,589 - - - -	(95,630) (217,589) (514,128) - - -	- - - - - - - - - - - - - - - - - -
934,779 - -	125,638 - -	2,466,109 - -	931,082 - -	255,202 - -	5,110,368 2,076,043 (918)	(314,561) (2,459) - - - - (317,409) (16,103) -
-	-	-	-	-	2,075,125	(317,409) (16,103) -
- - - - 100,000	- - - - (125,638)	- - - 193,451 1,300,000	160,857 - - - -	- 61,818 - - -	(160,857) (61,818) (900,258) - -	- - - - - - - - - - - - - - -
$ 1,034,779	-	3,959,560	1,091,939	317,020	6,062,560	(631,970) (18,562) -

Lotes Co., Ltd.

Statement of Cash Flows

January 1 to December 31, 2019 and 2018

Unit: 1,000 TWD

Net cash flow from operating activities: Net profit before tax Items of adjustment: Income and expenses Depreciation expense Amortization expense Expected credit losses Depreciation expense Amortization expense Share of profit of subsidiaries, associates and joint ventures accounted for using quity method Losses on the price fall and scraping of inventory Disposition of Property, plant and equipment Compensation cost of employee stock options Total income and expenses Change in assets/liabilities related to operating activities Net change in operating assets: Loss of receivable notes Increase in accounts receivable Decrease (increase) in other accounts receivable Incease in inventory Decrease (increase) in payments in advance Decrease in Other financial assets Total net change in operating assets Net change in operating liabilities: Increase in contract liabilities Increase (decrease) in notes payable Increase (decrease) in accounts payable Other increase (decrease) in accounts payable Increase in provisions Increase (decrease) in Other current liabilities Increase (decrease) in refund liabilities Decrease in other non-current liabilities Total net change in operating liabilities Total net changes in operating assets and liabilities Total adjustments Cash in flow generated by operating activities Interests received Paid interests Income tax paid Net cash inflow from operating activities Net cash flow in investing activities: Acquisition of investments accounted for using equity method Acquisition of real estate, plant and equipment Disposition of Property, plant and equipment Increase in other accounts receivable Acquisition of Intangible assets Decrease (increase) in other non-current liabilities Cash flow of investment activities (Outflow) Cash flows in fundraising activities: Increment/loss of short-term loan Repayment of lease principal Issuance of cash dividends Cash capital increase Net cash outflow in financing activities Increase (decrease) of cash and cash equivalents Balance of cash and cash equivalents at the beginning of the term Balance of cash and cash equivalents at the end of the term	2019 $ 2,357,623 4,102 1,048 1,865 592 (14,173) (1,151,326) 1,193 (17) -	2018 1,804,070 3,723 539 94 3,618 (5,626) (926,489) 2,604 - 10,693
	(1,156,716)	(910,844)
	468 (375,345) (7,399) (77,315) 5,724 -	3,834 (427,674) 1,538 (43,454) (6,951) 3,046
	(453,867)	(469,661)
	11,076 (26,337) 321,375 35,535 59 716 70,373 (70)	3,922 36,026 (207,378) (15,893) 192 (1,703) (12,414) (28)
	412,727	(197,276)
	(41,140)	(666,937)
	(1,197,856)	(1,577,781)
	1,159,767 13,848 (1,125) (211,848)	226,289 5,093 (4,150) (170,527)
	960,642	56,705
	- (15,581) 427 (85,950) (21,357) (9,435)	(123,371) (3,432) - - (30,479) 91,090
	(131,896)	(66,192)
	(720,000) (59) (900,258) 1,274,362	384,000 - (514,128) 125,638
	(345,955)	(4,490)
	482,791 359,731	(13,977) 373,708
	$ 842,522	359,731

Lotes Co., Ltd.

Notes to the Parent Company Only Financial Statements For the Years Ended December 31, 2019 and 2018

(Except as otherwise indicated, the unit for all amounts in this document is NT$1,000))

I. Company History

Lotes Co., Ltd. (hereinafter referred to as the "Company") was incorporated on Aug. 23, 1986 in accordance with the provisions of the Company Law and was approved for registration with its registered office at No.15, Wuxun Street, Anle District, Keelung City. The Company (hereinafter referred to as the "Company") are principally engaged in the sale and purchase of various hardware parts and components, the manufacturing and processing of various terminals and their connectors, the import and export business in connection with the preceding item and the agency of the preceding item in connection with the tender quotation and distribution of products of domestic and foreign manufacturers. Please refer to Note 14 for further details.

II. Date and Procedures of Approval of Financial Statement

The Parent Company Only Financial Statement was approved and released by the Board of Directors on Mar. 25, 2020.

III. Application of New and Revised Standards and Intepretations

(1) Influence of the Adoption of New and Revised Standards and Integrations Approved by the Financial Supervisory Commission

Since 2019, the Company has fully adopted the International Financial Report Standards which is approved by the Financial Supervisory Commission (hereinafter referred to as FSC) to come into effect to compile Parent Company Only Financial Statements, with relevant new, amended and revised standards and interpretations listed as follows:

New release/revision/amendment ofguidelines and interpretations
IFRS 16 "Leases"
IFRIC Interpretation 23 "Uncertainty over Income Tax Treatments"
Amendments to IFRS 9 "Prepayment Features with Negative Compensation"
Amendments to IAS 19 "Plan Amendment, Curtailment or Settlement"
Amendments to IAS 28 "Long-term Interests in Associates and Joint Ventures"
Annual Improvements to IFRS Standards 2015-2017 Cycle

Effective date upon
promulgation by the
IASB

Jan. 1, 2019
Jan. 1, 2019
Jan. 1, 2019
Jan. 1, 2019
Jan. 1, 2019
Jan. 1, 2019

With the exception of the following items, the application of the new IFRS will not cause a material change to the financial statements. The nature and impact of the actors are described as follows:

IFRS 16 leases

International Financial Reporting Standards no. 16 "lease" (hereinafter referred to as

100

the IFRS-16) place of the current International Accounting Standards no. 17 "lease" (hereinafter referred to as the IAS 17), the International Financial Reporting Interpretations Committee no. 4 " Determining Whether an Arrangement Contains a Lease" (hereinafter referred to as the IFRIC-4), SIC-15 "Operating Leases – Incentives", and SIC-27 "Evaluating the Substance of Transactions in the Legal Form of a Lease".

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Lotes Co., Ltd. Parent Company Only Financial Statement

The company adopted the formal retroactive law to transition to IFRS 16, adjusting the cumulative impact of the initial application to the retained earnings on 1 January 2019. The nature and impact of the relevant accounting policy changes are described below:

(1) Definition of lease

The company previously relied on IFRIC 4 to determine whether or not an agreement was or included in a lease on the commencement date of the contract. A change in accounting policy will assess whether a contract is or includes a lease as defined in IFRS 16. Note iv (11) to the accounting policy.

In the transition to IFRS 16, the Company chooses to use the expedient method to waive the assessment of whether the transaction before the initial application is a lease, i.e., to apply IFRS 16 directly to a contract previously identified as a lease. Contracts that are not a lease will not be re-evaluated as a lease if they have previously been interpreted in accordance with IAS 17 and IFRS 4 identification. Therefore, the lease definition set forth in IFRS 16 applies only to contracts entered into or changed after the date of initial application.

(2) The lessee

A transaction in which the Company is a lessee is previously classified according to whether or not the lease agreement has been transferred to the underlying property subject to almost all risks and rewards. Under IFRS 16, lease contracts are identified as right-of-use assets and lease liabilities on the balance sheet.

A. Contracts previously classified as operating leases under IAS 17

During the transition, lease liabilities is measured by the present value of residual lease benefits, and discounted by the incremental borrowing rate of the first applicable day of a company. Lease assets are measured in terms of lease liabilities adjusted for all prepaid or payable lease benefits related to the lease.

In addition, the Company adopted the following expedient for transition to IFRS

16:

a. A single discount rate is applied to a lease portfolio with similar characteristics.

b. As an alternative to the impairment assessment of right-of-use assets, the results of the assessment of the loss-making contracts in accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets,” before the date of the first application.

c. For leases whose Lease term ends within 12 months after the initial application date, right-of-use assets and lease liabilities are not recognized by exemption.

d. The original direct cost is not included in the right-of-use assets measurement on the initial application date.

e. When the lease contract includes an option to extend or terminate the lease, the lease term shall be decided with the benefit of hindsight.

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(3) the lessor

Except for subletting, the Company is not required to make any adjustment in connection with its transaction as a lessor when transitioning to IFRS 16, which applies to its lease transactions from the date of initial application.

Under IFRS 16, the classification shall be based on right-of-use assets rather than on the valuation and sublease of the underlying assets.

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(4) impact on financial statements

When transitioning to IFRS 16, the Company perfomed an evaluation of the date of application and found no effect.

(2) Effects of new and revised standards and interpretation has been approved by FSC but not yet being adopted

In accordance with FSC Order No. 1080323028, dated July 29, 2019, the public offering company should fully adopt the International Financial Reporting Standards (IFRSs) whaich are approved by the FSC and coming into efffective on 2020. The newly issued, amended and revised standards and explanations are set out as follows:

New release/revision/amendment of guidelines and interpretations Amendments to IFRS 3 Definition of a Businesses Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform Amendments to IAS 1 and IAS 8 Definition of Material	Effective date upon promulgation by the IASB
	Jan. 1, 2020 Jan. 1, 2020 Jan. 1, 2020

The Company considers that the application of the aforementioned newly recognized IFRSs will not result in significant changes to the Financial Statements

(3) New and revised standards and interpretations not yet recognized by the FSC

The following table sets out the standards and interpretations that have been issued and revised by the International Accounting Standards Board (hereinafter referred to as the Board) but not yet endorsed by the FSC.

New release/revision/amendment of guidelines and interpretations Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets between an Investor and its Associate or Joint Venture" IFRS 17 "Insurance Contracts" Amendments to IAS 1 "Classification of Liabilities as Current or Non-current"	Effective date upon promulgation by the IASB
	To be determined by the Board Jan. 1, 2021 Jan. 1, 2022

The Company is continuously evaluating the impact of the above criteria and explanations on the Company's financial position and results of operations and will disclose the related impact when the evaluation is completed.

IV. Summary of Major Accounting Policies

The major accounting policies adopted in this Financial Statement are summarised as follows.

Unless otherwise noted, the following accounting policies have been applicable for all presentation period of the Individual Financial Statement.

(1) Compliance statement

The Individual Financial Statement was compiled in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers.

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(2) Compling Basis

1. Measurement Foundation

Except the major items in the following balance sheet, the Individual Financial Statement was complied based on the historical costs:

(1) Financial assets at fair value through profit or loss measured with fair value;
(2) Financial assets measured at fair value through other comprehensive income.
(3) Liabilities for cash-settled share-based benefit agreements that are measured at fair value.
(4) Net defined benefit liability (or asset), is measured according to the fair value of the retirement fund assets deducting present value of the defined benefit obligation and the ceiling influence value listed in Footnotes IV (16)
Functional Currency and Presentation Currency

Each party of the Company takes the currency of major economic environment where its operation is located as its functional currency. The Individual Financial Statement is presented in the functional currency of the Company, TWD. All of the financial information expressed herein in TWD is of one thousand per unit.

(3) Foreign Currency

1. Foreign Currency Trading

Foreign currency is converted into functional currency according to exchange rate on the date of transaction. At the end of each subsequent reporting period (the "Reporting Date"), foreign currency monetary items are translated into functional currency at the exchange rate prevailing on that date. Non-monetary items measured at fair value in foreign currencies are translated into functional currencies using the exchange rates prevailing at the date of fair value measurement, while non-monetary items measured at historical cost in foreign currencies are translated at the exchange rates prevailing at the dates of the transactions.

The foreign currency exchange difference resulting from the conversion is recognized to be other comprehensive Income excepting for the following situations, otherwise, recognized to be gains and losses.

(1) Equity instruments designated as measured at fair value through other comprehensive income.

(2) Financial liabilities designated as a net investment hedge for a foreign operating entity are within the effective range of the hedge; or

(3) Eligible cash flow hedges are within the effective range of the hedge.

2. Foreign Operating Organizations

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Lotes Co., Ltd. Parent Company Only Financial Statement

The assets and liabilities of foreign operating organizations, including the business reputation and fair value adjustment during the acquisition, are converted to be TWD according to exchange rate on the report day; gains and losses are converted into TWD according to exchange rate in the current period, and the resultant conversion difference is recognized to be other comprehensive Income.

In case of the loss of control, joint control or material influences arising from the punishment on foreign operating organizations, the accumulated conversion differences related to the foreign operating organizations shall be fully reclassified as gains and losses. In case of subsidiary company of foreign operating organizations involved in the punishment, the related accumulated conversion differences shall be reclassified as non-controlling interests in proportion. In case of affiliated company or joint ventures of foreign operating organizations involved in some of the punishment, related accumulated conversion differences shall be fully reclassified as gains and losses in proportion.

As to the receivable and payable monetary items of forgien operating organizations, if without the repayment plan or the possibility of repayment in foreseeable future, the resultant gains and losses from foreign currency conversion shall be regarded as a part of net investments to the foreign operating organizations as recognized as other comprehensive income.

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(4) Standards for Classifying Current and Non-current Assets and Liabilities

Assets meeting one of the following conditions are recognized to be current assets, and other assets not belonging to current assets are recognized to be non-current assets:

1.Those that are expected to be realized during the normal operating period of the Company or intended to be sold or consumed.
Those held mainly for the purpose of transaction.
Those expected to be realized with in 12 months after the balance sheet.
Cash or cash equivalents, but not including those used for exchange, liquidation of liabilities or those with other restrictions.

The liabilities meeting any one of the following conditions are current liabilities, and other liabilities not belonging to current liabilities are recognized to be non-current liabilities:

Those expected to be paid off during the normal operating period of the Company.
Those held mainly for the purpose of transaction.
Those expected to be paid off with in 12 months after the balance sheet.
4.Those that shall not allow the Company to unconditionally extend the liquidation period to at least 12 months. Liabilities for liquidation arising from the issuing of equity instruments in accordance with the clauses chosen by the other party of transaction will not affect their classification.
(5) Cash or Cash Equivalents

Cash includes cash on hand and demand deposits. Cash equivalents are the investments which are allowed to be converted into normed cash with few value change risks and short-term high flowability. Certificate of deposit which satisfy the foregoing definition and with the holding purpose of meeting the short-term cash pledges rather than investment or others shall be recognized as cash equivalents.

(6 ) Financial Instrument

Accounts receivable are recognized at the time of generation. All other financial assets and financial liabilities were originally recognized when the company became a party to the terms of the financial instrument agreement. Financial assets that are not measured at fair value through profit or loss (except accounts receivable, which do not contain a significant financial component) or financial liabilities are measured at fair value plus the transaction cost directly attributable to the acquisition or issue. Accounts receivable, which do not contain significant financial components, are originally measured at transaction prices.

1. Financial Assets

The purchase or sale of financial assets by a conventional trader, the company shall treat all purchases and sales of financial assets classified in the same manner in accordance

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Lotes Co., Ltd. Parent Company Only Financial Statement

with the transaction date or the settlement date.

At the time of the original recognition, financial assets were classified as: financial assets measured at amortized cost, debt instrument investments measured at fair value through other comprehensive income, equity instrument investments measured at fair value through other comprehensive income, or financial assets measured at fair value through gains and losses.

The company will only change its business model for managing financial assets from the first day of the next reporting period to classify all affected financial assets.

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Lotes Co., Ltd. Parent Company Only Financial Statement

(1) Financial assets as measured by their amortized costs

Financial assets are measured at post-amortized cost when they simultaneously meet the following conditions and are not specified to be measured at fair value through profit or loss:

· The financial asset is held under a business model for the purpose of collecting contractual cash flow.

· The cash flow generated by the terms of the contract on the financial asset at the specified date is solely for the payment of the principal and the interest on the outstanding principal amount.

The cumulative amortization of such assets is subsequently calculated by the effective interest method plus or minus the original amount recognized, and the amortized cost of any loss allowance is adjusted. Interest income, foreign exchange gains and losses and impairment losses are recognized as gains and losses. When derecognized, the profit or loss shall be included in the profit or loss.

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

When the debt instrument investment simultaneously meets the following conditions and is not specified to be measured at fair value through profit and loss, it is measured at fair value through other consolidated profit and loss:

· the financial asset is held under a business model for the purpose of collecting contractual cash flow and selling.

· the cash flow generated by the terms of the contract on the financial asset at the specified date is solely for the payment of the principal and the interest on the outstanding principal amount.

The company may, at the time of its original recognition, irrevocably choose to report the subsequent changes in the fair value of its non-tradable equity instrument investments to other consolidated profits and losses. The foregoing selection is made on a item-by-item tool basis.

Debt instrument investors are measured by fair value afterwards. Interest income, foreign exchange gains and losses and impairment losses calculated by the effective interest method are recognized as gains and losses, while the remaining net gains or losses are recognized as other comprehensive income. When discounting, the accumulated amount of other comprehensive income shall be reclassified into comprehensive income.

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Lotes Co., Ltd. Parent Company Only Financial Statement

Dividend income from equity investments is recognized on the date (usually ex-dividend date) when the consolidated company becomes entitled to receive dividends.

(3) Financial assets measured at fair value through profit and loss

Financial assets that are not measured at fair value at the above amortized cost or through other comprehensive income are measured at fair value through gains and losses, including derivative financial assets. The company may, at the time of its original recognition, irrevocably designate financial assets that meet the criteria of measuring at fair value according to the amortized cost or through other comprehensive income as financial assets measured at fair value through gains and losses in order to eliminate or substantially reduce improper accounting matching.

Such assets are subsequently measured at fair value and their net gains or losses (including any dividends and interest income) are recognised as gains or losses.

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(4) Business model evaluation

The purpose of the company is to assess the business model of holding financial assets at a portfolio level, which best reflects the way of operation and management and the way of providing information to management. The following information is considered:

· the portfolio policies and objectives described and the operation of such policies. Including whether the management's strategy is to focus on earning contractual cash flow, maintaining a certain portfolio of interest rates, matching the duration of financial assets with the duration of the relevant liabilities or anticipated cash outflows, or achieving cash flow through the sale of financial assets.

· performance of the business model and how the financial assets held under the business model are evaluated and reported to the principal managers of the business.

· risks that affect the performance of the business model (and the financial assets held under the business model) and the manner in which such risks are managed.

· the frequency, amount and timeliness of previous sales of financial assets, the reasons for such sales and the expectation of future sales.

The transfer of a financial asset to a third party for the above business purposes that does not meet the exclusion criteria is not a sale as described above, consistent with the purpose for which the merged company continues to recognize the asset.

Financial assets held for trading and managed and evaluated for performance on a fair value basis are measured at fair value through profit and loss.

(5) Evaluate whether the cash flow of the contract is fully the interest on the

payment of the principal and the amount of outstanding principal

For evaluation purposes, the principal is the fair value of the financial asset at the time of its original recognition, and the interest is made up of the following considerations: the time value of money, the credit risk associated with the amount of outstanding principal in circulation during a particular period, and other basic lending risks and costs and profit margins.

To evaluate whether the contract cash flow is fully interest on the principal and the outstanding principal amount, the company considers the terms of the financial instrument contract, including whether the financial asset contains a contract term that can change the point or amount of the cash flow of the contract, causing it to fail to meet this condition. In the evaluation, the consolidated company considers:

· any contingencies that change the timeliness or amount of the cash flow of the contract;

· the terms of the coupon rate may be adjusted, including the nature of the variable

rate;

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Lotes Co., Ltd. Parent Company Only Financial Statement

the nature of prepayment and extension; and
claims of the consolidated company are limited to cash flow terms derived from
specific assets (e.g. non-recourse nature).

(6) Impairment of financial assets

For the financial assets measured at the amortized cost after (including cash and about when cash, notes receivable, accounts receivable, other receivables, refundable deposit, and other financial assets, etc.), through the other comprehensive income measured at fair value, the debt instruments of investment assets and contract of expected loss, the company recognizes the allowance for credit losses.

The following financial assets are measured against losses according to the expected credit loss amount of 12 months, and the rest are measured according to the expected credit loss amount of the existing period:

‧ determine that the credit risk of the debt securities at the reporting date is low; and

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Lotes Co., Ltd. Parent Company Only Financial Statement

‧ the credit risk of other debt securities and bank deposits (i.e. the risk of default during the expected life of financial instruments) has not increased significantly since the original recognition.

The loss allowance for accounts receivable and contract assets is measured in terms of the expected credit loss during the period of existence.

In determining whether credit risk has increased significantly since the initial recognition, the consolidated company considers reasonable and verifiable information (available at no excessive cost or investment), including qualitative and quantitative information, as well as analysis based on the company's historical experiences, credit assessment and forward-looking information.

The consolidated company shall be deemed to be in default of the financial asset if the debtor of the contract payment is unlikely to meet his credit obligations to make the full payment to the consolidated company.

Expected credit loss during the life of a financial instrument refers to the expected credit loss arising from all possible defaults during the life of the financial instrument.

Twelve-month expected credit loss refers to the expected credit loss arising from the possible default of the financial instrument within twelve months after the date of the report (or a shorter period, if the expected duration of the financial instrument is shorter than twelve months).

The longest contract period during which the expected credit loss is measured is the longest contract period during which the company is exposed to credit risk.

The expected credit loss is the probabilistic weighted estimate of the credit loss during the expected life of the financial instrument. Credit losses are measured in terms of the present value of all cash shortfalls, the difference between the cash flows that the company can collect under the contract and the cash flows that the company expects to collect. The expected credit loss is discounted at the effective interest rate of the financial asset.

On each reporting date, the company evaluates whether there is a credit impairment in the debt securities on which financial assets are measured at after-amortized cost and on which fair value is measured through other comprehensive income. When one or more events have occurred that adversely affect the estimated future cash flow of a financial asset, the financial asset has suffered a credit impairment. Evidence of credit impairment of financial assets includes observable information relating to:

major financial difficulties of the borrower or issuer;
default, such as delay or delay beyond a specified period;

· for economic or contractual reasons related to the borrower's financial difficulties, the merged company gives the borrower concessions that the borrower would not have considered;

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Lotes Co., Ltd. Parent Company Only Financial Statement

the borrower is likely to file for bankruptcy or other financial restructuring; or
the active market for the financial asset disappears due to financial difficulties.

The loss allowance for a financial asset measured at its amortized cost is deducted from the carrying amount of the asset. The allowance for losses on debt instrument investments is measured at fair value through other comprehensive income. It is adjusted and recognized as other comprehensive income (without reducing the carrying amount of the assets).

When the company cannot reasonably expect to recover the financial assets as a whole or in part, it will directly reduce the total book amount of its financial assets. For the company, the company shall analyze the date and amount of the write-off on the basis of whether it is reasonable to expect recovery. The company does not expect a significant reversal of the write-off. However, financial assets that have been written off may still be enforced to comply with the procedures of the consolidated company for recovering overdue amounts.

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Lotes Co., Ltd. Parent Company Only Financial Statement

(7) Financial assets de-recognition

When the Company terminates the contractual rights from the cash flow of such assets or has transferred the financial assets and almost all risks and returns of the asset ownership have been transferred to other enterprises, the financial assets shall be de-recognized.

Transactions in which the Company enters into transfers of financial assets that retain all or substantially all of the risks and rewards of ownership of the transferred assets continue to be recognized on the balance sheet.

2. Financial liabilities

Financial liabilities are classified as amortized costs or measured at fair value through profit or loss. Financial liabilities which are held for trading, derivatives or specified at the time of their original recognition are classified as being measured at fair value through profit or loss. Financial liabilities, measured at fair value through profit and loss, are measured at fair value, and the associated net benefits and losses, including any interest expense, are recognized as profit and loss.

The effective subsequent interest method for other financial liabilities is measured at the amortized cost. Interest expenses and exchange gains and losses are recognized as gains and losses. Any benefit or loss at the time of discounting is also considered as profit or loss.

(1) De-recognition of Financial Libilities

The Company derecognizes financial liabilities when contractual obligations have been fulfilled, cancelled or matured. When the terms of a financial liability are modified and the cash flows of the modified liability differ materially, the original financial liability is derecognized and a new financial liability is recognized at fair value based on the modified terms.

When de-recognizing financial liabilities, the difference between carrying amount and the sum of paid or payable considerations (including any transferred non-cash capital or assumed liabilities) shall be recognized as gains and losses.

(2) Offset between Financial Assets and Liabilities

Financial assets and financial liabilities can be offset with each other and represented on the balance sheet with net value only when the Company has legal rights to offset and has the intention to deliver with net value as well as realize capital and liquidate the liabilities.

3. Derivative Financial Instruments

The Company holds derivative financial instruments to avoid foreign currency and interest rate risks. Embedded derivatives are separated from the main contract when specific conditions are met and the main contract is not a financial asset.

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Lotes Co., Ltd. Parent Company Only Financial Statement

Derivative instruments are initially recognized at fair value and subsequently measured at fair value, and the resulting gain or loss is recognized directly in profit or loss.

(7) Inventory

Inventory shall be measured with the lower of the costs and net realizable value. The costs include the acquisition, production and processing costs enabling them to arrive at the available places and status and other costs, which are calculated according to the standard cost method, and priced at cost transferring according to weighted mean method. The costs of the inventory of finished products and products in process include the manufacturing costs amortized based on normal production capacity according to proper percentage.

Net realizable value refers to the estimated prices under normal operation deducting estimated costs to be needed for estimated completion and estimated costs to be needed for completing selling.

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(8) Investing subsidiary

In preparing individual financial statements, the Company applies the equity method to investees over which it has control. Under the equity method, the share of current profit or loss and other comprehensive income of the individual financial report is the same as the share of current profit or loss and other comprehensive income attributable to the owners of the parent in the financial statements prepared on a consolidated basis, and the interest of the owners of the individual financial report is the same as the interest attributable to the owners of the parent in the financial statements prepared on a consolidated basis.

Changes in the Company's ownership interest in a subsidiary that do not result in a loss of control are treated as equity transactions with owners.

(9) Property, Plant and Equipment

1. Recognition and Measurement

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

Significant components of property, plant and equipment are treated as separate items

(major components) when they have different life cycles.

Gain or loss on disposal of property, plant and equipment is recognized in profit or loss.

2. Subsequent Costs

Subsequent expenses are capitalized only when it is probable that future economic benefits will flow into the Company.

3. Depreciation

Depreciation is calculated based on the cost of the asset less its residual value and is recognized in profit or loss using the straight-line method over the estimated useful life of each component.

The land is not subject to depreciation.

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

(1) Buildings 20-40 years
(2) Machinery 2-10 years
(3) Other equiment 2-10 years

The Company reviews the method of depreciation, durability and residual value at each reporting date and makes appropriate adjustments as necessary.

4. Reclassification to investment real estate

When real property for own use is reclassified to investment property, the real property is reclassified to investment property based on its carrying amount at the time of change of use.

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(10) Investment real estate

Investment real estate means real property held for the purpose of earning rent or asset appreciation, or both, rather than for the purpose of production, provision of goods or services, or for administrative purposes. Investment real estate is originally measured by cost, and later measured by cost minus accumulated depreciation and accumulated impairment. The depreciation method, durable life and residual value shall be treated in accordance with the provisions of real estate, plant and equipment.

The disposal interest or loss of the investment real estate (calculated at the difference between the net disposal price and the account amount of the project) shall be recognized as the profit or loss.

The rental income of investment real estate is recognized as other income in the straight-line method during the lease term. The incentive to lease is recognized as part of the rental income during the lease term.

(11) Leasing

Effective from January 1, 2019

1. Judgment of lease

The company shall assess whether the contract is a lease or includes a lease on the date of formation of the contract. If the contract transfers control over the use of the identified assets for a period of time in exchange for consideration, the contract shall be a lease or includes a lease. To assess whether the contract is a lease, the company evaluates the following items:

(1)the contract relates to the use of an identified asset whose entity may distinguish or represent all of the actual production capacity if it is explicitly specified in the contract or by implication specified at the time of availability. If the supplier has a material right to replace the asset, the asset is not recognized; and
(2) the right to obtain almost all the economic benefits derived from the use of the identified assets throughout the use period; and
(3) acquire the right to dominate the use of the identified assets in one of the following circumstances:
the consolidated company has the right to dominate the use and purpose of the identified assets throughout the use period; or
decisions relating to the manner and purpose of use of the asset are made in advance, and:
-- the consolidated company has the right to operate the assets throughout the use period and the supplier has no right to change the instructions for such

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operations; or

The way in which the assets are designed by the consolidated company has determined in advance how and for what purpose they will be used throughout their lifetime.

2.The lessee

The company recognize the right-of-use assets and lease liabilities on the beginning date of the lease. Right-of-use assets are originally measured in terms of cost, which includes the original measured amount of lease liabilities, adjusts the lease beginning date or before payment of any rent payment, and the initial direct costs, and applied to removing the asset and restoring its location or the estimated cost of the underlying assets. It minuses the charge of any lease incentives at the same time.

Depreciation of right-of-use assets following the commencement of the lease shall be carried out by the straight-line method at the end of the useful life of right-of-use assets or earlier at the end of the lease term. In addition, the company will periodically evaluate whether there is any loss of right-of-use assets and deal with any loss that has occurred, and adjust the right-of-use assets in the case of lease liabilities.

Lease liabilities are defined as the present value of lease benefits not yet paid at lease commencement date. If the implied lease rate is easy to determine, the discount rate will be that rate, and if not, the incremental borrowing rate of the company will be used. Generally speaking, the consolidated company adopts its incremental borrowing rate as the discount rate.

Lease benefits measured in Lease liabilities include:

(1) fixed payments, including substantive fixed payments;
(2) depending on the variation of a certain index or rate of rent payment, the index or rate on the commencement date of the lease shall be used as the original measurement;

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(3) the guaranteed amount of salvage value expected to be paid; and
(4) the price at which the option to exercise the option to purchase or

terminate the lease will be reasonably determined or the penalty to be paid. Lease liabilities is then calculated using effective interest method, and the amount was measured when:

(1) changes in the index or rate used to determine lease payments result in changes in future lease payments;
(2) the guaranteed amount of the residual value expected to be paid has changed;
(3) the evaluation of the underlying asset purchase option has changed;
(4) the estimate of whether to exercise the option of extension or termination has changed, which leads to the change of the assessment of the lease period;

(5) modification of the subject matter, scope or other terms of the lease.

Lease liabilities are remeasured due to the aforementioned changes in the index or rate used to determine lease payments, changes in the residual value guarantee amount, and changes in the evaluation of purchases, extensions or termination options, the book value of right-of-use assets should be adjusted accordingly. When the book value of right-of-use assets is reduced to zero, the remaining re-measured amount is recognized in profit or loss.

For the tease modifications about the reduced coverage, the book amount of right-of-use assets will be reduced to reflect partial or total termination of Lease, and the difference between Lease assets and Lease assets will be included in the profit and loss. The company will express the right-of-use assets and lease liabilities that do not conform to the definition of investment real estate in the form of single line items in the balance sheet.

3. The lessor

The transaction in which the company is a lessor shall be classified as a financial lease or an operating lease on the date of establishment of the lease, depending on whether or not the lease contract is transferred to almost all the risks and rewards attached to the ownership of the underlying asset. In the evaluation, the consolidated company shall consider certain indicators, including whether the lease term covers the principal part of the underlying asset's economic life.

If the company is a sublease lessor, it will handle the master lease and the sublease transaction respectively, and evaluate the sublease transaction classification based on the right-of-use assets generated from the master lease. If the principal lease is a short-term

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lease and a recognition waiver is applicable, the sublease transaction shall be classified as an operating lease.

Applicable before January 1, 2019

1.The lessee

The company leases offices and plants on an operating lease basis, and the rental payments are recognized as current expenses during the lease period on a straight-line basis.

2.The lessor

Operating leases are recognized as income during the lease period on a straight-line basis.

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(12) Intangible assets

1. Recognition and measurement

Computer software acquired by the Company is measured at cost less accumulated amortization and accumulated impairment.

2. Subsequent expenditure

The subsequent expenditure can be capitalized only when they can increase the future economic benefits of relevant specific assets, and all of other expenditures are recognized as gains and losses when they occur, including the expenses for developing reputation and brand establishing.

3. Amortization

Amortization is calculated based on the cost of the asset less its estimated residual value, and is recognized in profit or loss using the straight-line method over the estimated useful lives of the Intangible assets, from one to five years from the time the assets reach a ready-for-use condition.

The Company reviews the amortization method, useful life and residual value of Intangible assets at each reporting date and makes appropriate adjustments as necessary. (13) Non Financial Asset Impairment

At each reporting date, the Company assesses whether there is any indication that the carrying amount of non-financial assets (other than inventories, deferred income tax assets) may be impaired. If any indication exists, the recoverable amount of the asset is estimated.

For the purpose of impairment testing, cash inflows that are largely independent of other individual assets or groups of assets are treated as the smallest identifiable group of assets.

The recoverable amount is the higher of the fair value less costs to dispose of the individual asset or cash-generating unit or its value in use. If the recoverable amount of an individual asset or cash-generating unit is less than its carrying amount, an impairment loss is recognized. An impairment loss is recognized immediately in profit or loss and is reduced first by the carrying amount of goodwill amortized on the cash-generating unit and then by the carrying amount of each other asset in the unit in proportion to its carrying amount.

Non-financial assets other than goodwill are reversed only to the extent that they do not exceed the carrying amount (net of depreciation or amortization) that would have been determined had no impairment loss been recognized for the asset in prior years.

(14 Provisions

Provisions are recognized as present obligations due to past events that make it probable that the Company will need to expend economically efficient resources in the future to settle the obligation and the amount of the obligation can be reliably estimated.

The amount recognized in Provisions takes into account the risks and uncertainties of the obligation and is the best estimate of the payments required to settle the obligation at the

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end of the reporting period. If Provisions is measured at the estimated cash flows to settle this realistic obligation, the carrying amount is the present value of those cash flows.

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Lotes Co., Ltd. Parent Company Only Financial Statement

(15) Income Recognition

Revenue from customer contracts

Income is measured in consideration for the expected entitlement to transfer goods or services. The company recognizes revenue from the transfer of control of goods or services to the customer in order to meet its performance obligations.

The company manufactures electronic components and sells them to manufacturers in the electronics industry. The company recognizes revenue at the time of the transfer of control over the products. Control transfer of the product means that the product has been delivered to the customer and the customer can fully determine the sales channel and price of the product, and there is no failure to fulfill obligations that would affect the customer's acceptance of the product. Delivery occurs when the product is shipped to a specific location, the risk of obsolescence and loss has been transferred to the customer, the customer has accepted the product in accordance with the sales contract, the acceptance terms have expired, or the consolidated company has objective evidence that all acceptance conditions have been met.

The consolidated company recognizes revenue on the basis of the net amount of the estimated discount deducted from the contract price, the amount of which is estimated based on past experiences, and only to the extent that there is a high probability that no significant turnaround will occur. As of the date of the report, the sales will expect to pay the customer for the discount, which is refunded as refund liabilities. The average credit period of sales is one hundred twenty days to one hundred fifty days, which is consistent with the practice of the same trade, so no financing elements are included.

The company shall recognize accounts receivable at the time of delivery of the goods, as the consolidated company shall have the right to receive unconditional consideration at that time.

The time between the transfer of goods or services from all customer contracts to the customer and the time between the customer's payment for the goods or services is expected to be no more than one year, so the company does not adjust the time currency value of the transaction price.

(16) Employee Benefits

1. Defined Contribution Plan

The contribution obligation of the defined contribution pension plan is recognized as an expense in the period in which the employees render service to the Company.

2. Defined benefit plans

The Company's net obligation to a defined benefit plan is measured by discounting the present value of future benefits earned by the employee's current or prior period of service, less the fair value of the plan assets.

The defined benefit obligation is actuated annually by a qualified actuary using the

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projected unit benefit method. When the results of the calculation are probable to be favorable to the Company, an asset is recognized to the extent of the present value of any economic benefits that may be obtained by returning a contribution from the plan or reducing future contributions to the plan. Any minimum funding requirement is taken into account in calculating the present value of economic benefits.

The remeasurement of the net defined benefit obligation, including actuarial gains and losses, compensation for plan assets (excluding interest), and any change in the impact of asset limits (excluding interest) is recognized immediately in other comprehensive income and accumulated in retained earnings. The Company determines net interest expense (income) for net defined benefit liabilities (assets) using the net defined benefit liabilities (assets) and discount rate determined at the beginning of the annual reporting period. Net interest expense and other costs for defined benefit plans are recognized in profit or loss.

When a plan is revised or curtailed, changes in benefits related to prior period service costs or curtailment gains or losses are recognized immediately in profit or loss. The Company recognizes gain or loss on the settlement of defined benefit plans when settlement occurs.

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3. Short-term employee benefits

Short-term employee benefit obligations are recognized as an expense when services are provided. If the Company has a present legal or constructive obligation to pay for services rendered by employees in the past and the obligation can be estimated reliably, the amount is recognized as a liability.

(17) Share-based Payment Transaction

The value of Share-based benefit agreements shall be settled at the fair value on the date of grant, and an expense shall be recognized over the vesting period of the award and the relative equity shall be increased. The amount ultimately recognized is based on the amount of incentive payments made on the vesting date that meet the conditions of service and non-market vesting conditions.

The non vesting conditions of share-based payment rewards have been reflected on the fair value measurement on the grant date of share-based payment, and the difference between the expected and actual results are not required to check and adjust.

The fair value of the right to increase the value of the shares for cash delivery shall be the amount paid to the employee within the period of the employee's unconditional remuneration, and the expenses shall be recognized and the relative liabilities shall be increased. Any change in the liability, which is remeasured at the fair value of the rights to increase in value of the shares on the reporting and closing dates, is recognized as a profit or loss.

(18) Income Tax

Income taxes include current and deferred income tax asset. Except those related to enterprise consolidation and items directly recognized as equities or other comprehensive income, Current tax and deferred income tax asset shall be recognized as gains and losses.

Current taxes include expected payable income taxes or receivable tax rebates of the annual taxation (losses) calculated according to the legal tax rate or substantial legal tax rate on the report day, and any unappropriated retained earnings plus 10% income tax recognized as tax expense in the shareholders meeting resolution year calculated according to the adjustments to the payable income taxes in the previous year and the provisions of income tax laws.

Deferred income tax assets are measured and recognized according to the temporary difference between the carrying amount and taxation basis of assets and liabilities with financial report objectives.

In case of any of the following situations, the temporary differences will not be recognized as deferred income tax assets:

Those not belong to the assets or liabilities originally recognized in the transaction of enterprise consolidation, and not influencing accounting profits and taxation

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incomes (losses) during the transaction.

Those generated due to investment subsidiary company and joint equities and likely to not to be returned in the foreseeable future.
Original recognition of business reputation

Deferred income tax assets are measured according to the tax rate in the current period when the expected capital is realized or liabilities are liquidated, and based on the legal tax rate or substantial legal tax rate on the report day.

Only when the Company shall meet the following conditions at the same time, can the deferred income tax assets and deferred tax liabilities offset with each other:

Having the legal execution right to make the current income tax assets and the current tax liabilities offset with each other: and
Deferred income tax assets and deferred tax liabilities are related to one of the subjects of tax payment from which the same tax authority levies income tax;
(1) Same subject of tax payment; or

(2) Different subjects of tax payment, but all subjects intend to liquidate the current tax liabilities and assets based on net amount or at the same time realize assets and liquidate liabilities in each of the future periods when deferred income tax assets of major amounts are expected to be recovered and deferred tax liabilities expected to be liquidated.

Carry forward of unused taxation losses and unused income tax and deductible temporary differences are recognize as deferred income tax assets within the scope where the possible future taxable incomes are available. They are re-evaluated on each report day and deduct the income tax benefits which are not possible to be realized.

(19) Earnings per share

The Company lists the basic and diluted earnings per share of holders of common stock equity of the Company. The basic earnings per share of the Company shall be calculated with the gains and losses of the holders of common stock equity of the Company divided by the weighted mean of current outstanding common shares. Diluted earnings per share shall be calculated after adjusting the influence of all potential diluted common shares of the gains and losses of the holders of common stock equity of the Company and the weighted mean of current outstanding common shares. The potential diluted common shares of the Company include convertible corporate bonds and stock options for employees.

(20) Segments

The Company has disclosed segment information in the Consolidated Financial Statements and therefore individual financial statements do not disclose segment information.

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V. Primary Sources of Major Accounting Judgment, Estimate and Assumption Uncertainties

Management is required to make judgments, estimates and assumptions in preparing this entity's financial statements in accordance with "Guidelines Governing the Preparation of Financial Reports by Securities Issuers" that will affect the adoption of accounting policies and the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from estimates.

The management authority continuously inspects the estimate and basic assumption, and accounting changes are recognized during the period of changes and the period of future to be influenced.

Accounting policies that involve significant judgment and that have a material effect on the amounts recognized in the financial statements of the Company are as follows:

(1) Inventory evaluation

Since inventory must be measured at the lower of cost or net realizable value, the company estimates the reported amount of inventory due to normal wear and tear, obsolescence, or no market sale value on a daily basis and reduces the cost of inventory to net realizable value. The net realizable value of inventories may change significantly due to rapid changes in the industry and the introduction of new products. Please refer to Note vi (III) for the inventory assessment.

(2) Refund liabilites

The company will estimate refund liabilities according to the nature and conditions of sales transactions, and will recognize them as sales income in the current period when the products are sold and continue to examine the reasonableness of the estimates. However, due to market price competition and product technology development and other factors, it may cause a significant adjustment of the estimated amount. Please refer to Note vi (XI) for Refund liabilities estimates.

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Lotes Co., Ltd. Parent Company Only Financial Statement

VI. Description of Major Accounting Items

(1) Cash and cash equivalents

Petty cash Checks and demand deposits Time deposits Cash and cash equivalents lised on the Statement	Dec. 31, 2019 $ 240 490,112 352,170 $ 842,522	Dec. 31, 2018 281 239,640 119,810 359,731

Disclosures of interest rate risks and sensitivity analysis on financial assets and liabilities of the Company are seen in Note VI (XXII).

(2) Notes, accounts receivable and other receivables

Receivable notes Accounts receivable (including related parties) Other accounts receivable (including related parties) Less: Provisions	Dec. 31, 2019 $ 1,675 3,917,180 128,132 (8,067) $ 4,038,920	Dec. 31, 2018 2,143 3,541,836 34,458 (6,202) 3,572,235

For Changes in Notes and Accounts Receivable Provisions for the years ended December 31, 2019 and 20178, please refer to Note VI (XXII) 1 (3) Statement of Impairment Losses.

(3) Inventroy

Merchandise Finished goods Work in progress Raw materials Goods in transit	Dec. 31, 2019 $ 550,887 1,165 18 - 39,018 $ 591,088	Dec. 31, 2018 495,910 4,224 - 6 14,826 514,966

The Company's inventories at December 31, 2019 and 2018 including allowance for inventory losses are $19,600,000 dollars and $25,969,000 dollars respectively.

The Company recognized inventory-related expenses (gain) as follows:

Cost of goods sold Losses on the price fall and scraping of inventory Total	2019 $ 8,161,593 1,193 $ 8,162,786	2018 7,343,441 2,604 7,346,045

As of December 31, 2019 and 2018, the Company's inventories were not pledged as security.

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(IV) Investments accounted for using the equity method

The investments of the Company accounted for using the equity method are as follows:

[Subsidiaries ]

Dec. 31, 2019 $ 8,873,276		Dec. 31, 2018 7,862,011
$

1.Subsidiaries

Please refer to the consolidated financial statements for the year ended on December 31, 2019.

2.Guarantee

As of December 31, 2019 and 2018, the Company's investments accounted for using the equity method did not provide security for the pledge.

(V) Property, plant and equipment

The changes in the cost, depreciation and impaiment losses of the property, plant and equipment of the Company are as follows:

Land $ 28,250 - -	Buildings 31,568 870 -	Machinery equipment 14,886 28 (614)	Other 35,709 14,683 (2,073)
$ 28,250	32,438	14,300	48,319
$ 28,250 - -	31,568 - -	14,356 530 -	34,324 2,902 (1,517)
$ 28,250	31,568	14,886	35,709
$ - - -	15,268 802 -	13,567 252 (204)	30,236 2,031 (2,073)
$ -	16,070	13,615	30,194
$ - - -	14,502 766 -	13,243 324 -	30,078 1,675 (1,517)
$ -	15,268	13,567	30,236
$ 28,250	16,368	685	18,125
$ 28,250	16,300	1,319	5,473

As of December 31, 2019, and December 31, 2018, property, plant and equipment were used as collateral for short-term loans and financing lines. Please refer to note 8 for details.

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Lotes Co., Ltd. Parent Company Only Financial Statement

(VI) Right-of-use assets

The changes in the costs of the lease of lands, buildings, machinery and other equipment, losses on depreciation and impairment of the consolidated company are as follows:

Cost of the right-of-use assets: Balance on Jan. 1, 2019 Addition Balance on Dec. 31, 2019 Losses on the depreciation and impairment of right-of-use assets: Balance on Jan. 1, 2019 Depreciation in the year Balance on Dec. 31, 2019 Book value: Dec. 31, 2019	Buildings $ - 118
	$ 118
	$ - 59
	$ 59
	$ 59

The Company leased office space under operating leases during 2018; please refer to Note 6(XIII) for details.

(VII) Investment property

The changes in the investment property of the Company are as follows:

Land $ 248,200	Buildings 39,285	Buildings 39,285	Total 287,485
$ 248,200	39,285		287,485
$ 248,200	39,285		287,485
$ 248,200	39,285		287,485
$ - -	3,525 958		3,525 958
$ -	4,483		4,483
$ - -	2,567 958		2,567 958
$ -	3,525		3,525
$ 248,200	34,802		283,002
$ 248,200	35,760		283,960
		$ 322,604
		$ 322,604

As of December 31, 2019 and 2018, none of the Company's investment properties had been pledged as security.

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Lotes Co., Ltd. Parent Company Only Financial Statement

(VIII) Intangible assets

The changes in the cost and amortization of the intangible assets of the Company are as follows:

Cost: Balance on Jan. 1, 2019 Separate acquisition Balance on Dec. 31, 2019 Balance on Jan. 1, 2018 Separate acquisition Balance on Dec. 31, 2018 Losses on amortization and impairment: Balance on Jan. 1, 2019 Amortization in the year Balance on Dec. 31, 2019 Balance on Jan. 1, 2018 Amortization in the year Balance on Dec. 31, 2018 Book value: Balance on Dec. 31, 2019 Balance on Dec. 31, 2018	Computer software $ 63,438 21,357		Other 600 -		Total 64,038 21,357 85,395 33,559 30,479 64,038 33,410 1,048 34,458 32,871 539 33,410 50,937 30,628
	$ 84,795		600
	$ 32,959 30,479		600 -
	$ 63,438		600
	$ 33,410 1,048		- -
	$ 34,458		-
	$ 32,871 539		- -
	$ 33,410		-
	$ 50,337		600
	$ 30,028		600

The amortization expense of the intangible assets of the Company respectively recognized in the Statement of Comprehensive Income:

2019 1,048	2019 1,048	2018 539 Dec. 31, 2018 720,000
Dec. 31, 2019 $ -
$ 1,069,820		102,205
	- %	0.95%

(IX) Short-term loans

Please refer to Note VI (XXII) for more information on the Company's exposure to interest rate and foreign currency risk, Note 8 for information of the Company's assets pledged as collateral for short-term borrowings, and Note 9 for information of the Company's bank loans and financing facilities are pledged as guaranteed notes.

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Lotes Co., Ltd. Parent Company Only Financial Statement

(X) Lease liabilities

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

Current Please refer to Note VI (XXII) for the maturity analysis The amounts recognized in the profit and loss are as follows: Interest expense for lease liabilities	Dec. 31, 2019 $ 59 2019 $ 1

The amounts recognized in the Statement of Cash Flows are as follows:

Total cash outflow for leases efund liabilites - current Refund liabilites - current	Dec. 31, 2019 $ 157,256	2019 $ 60 Dec. 31, 2018 86,883

(XI) Refund liabilites - current

The refund liabilities are mainly the prepayments to customers for the sales discount and defects of electronic components.

(XII) Provisions

Provisions - non-current Employee benefits	Dec. 31, 2019 $ 41,729	Dec. 31, 2018 40,522

Employee benefits are estimated under the Company's defined benefit plan, please refer to Note 6 (XIV) for details.

(XIII) Lease for business operating

1. Lessee lease

For the year ended December 31, 2018, expenses of operating leases were reported at $60,000 dollars.

2. Lessor lease

The company leases its investment real estate, which is classified as an operating lease because almost

all risks and rewards belonging to the ownership of the underlying asset have not been transferred. Please refer to Note VI (VII) for details of the investment real estate.

Due date analysis of lease benefits to report the total amount of undiscounted lease benefits received in

the future is shown in the following table:

Not more than 1 year 1-2 years Total undiscounted lease payment	Dec. 31, 2019 $ 6,037 629 $ 6,666

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The lowest future lease payments receivable for the non-cancelable lease term are as follows:

follows:
Within 1 year 1-5 years	Dec. 31, 2018 $ 5,755 6,098
	$ 11,853

Rental income generated from investment properties was $5,577,000 dollars and $5,791,000 dollars for 2019 and 2017 respectively. The direct operating expenses (including maintenance) incurred by the investment properties that generated rental income during the period were $1,089,000 dollars and $1,052,000 dollars respectively.

(14) Employee benefits

1. Defined benefit plans

The reconciliation between the present value of defined benefit obligations and the fair value of plan assets of the Company is as follows:

Dec. 31, 2019 Dec. 31, 2018 Present value of defined benefit obligations $ 73,681 72,724 Fair value of plan assets (31,952) (32,202) Net defined benefit liabilities $ 41,729 40,522 Details of the employee benefit liabilities of the Company are as follows: Dec. 31, 2019 Dec. 31, 2018 Liabilities from paid leaves $ 3,577 3,492	Dec. 31, 2019 $ 73,681 (31,952)	Dec. 31, 2018 72,724 (32,202)
	$ 41,729	40,522

The defined benefit plan of the Company is contributed to special account of contribution for retirement of Bank of Taiwan. The retirement payment of each employee applicable to Labor Standards Law is calculated in accordance with the base obtained based on the length of service and the average salaries within six months before retirement.

(1) Composition of Plan Assets

The retirement fund contributed by the Consolidated under the Labor Standards Law shall be controlled by the Labor Funds Operation Bureau of the Ministry of Labor (hereinafter referred to as the Labor Funds Bureau), and under the provisions of Measures on the Management and Application of Labor Retirement Funds, the annual minimum return settleed and distributed from the funds operation shall not be lower than the incomes calculated in accordance with the 2-year time certificate of deposit rate of the local banks.

As of the reporting date, the balance of the Company in the special account of contribution for retirement of Bank of Taiwan amounts to TWD 31,952,000 dollars. The data of the application of the labor retirement funds include funds yield and funds asset allocation, with details to be seen in the information released on the website of the Labor Funds Bureau.

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(2) Changes in the present values of defined benefit obligations

Changes in the present values of defined obligations of the Company in 2019 and in 2018 are as follows:

Defined benefit obligation on January 1 Service cost and interest in the year Remeasurement of net defined benefit liabilities (assets) Benefit paid by the plan Defined benefit obligation on December 31	2019 $ 72,724 1,310 2,262 (2,615)	2018 72,626 1,476 (1,378) -
	$ 73,681	72,724

(3) Changes in the fair value of plan assets

The changes in the fair value of defined benefit plan assets of the Company in 2019 and in 2018 are as follows:

Fair value of plan assets on January 1 Interest income Remeasurement of net defined benefit liabilities (assets) Amount contributed to the plan Benefit paid by the plan Fair value of plan assets on December 31	2019 $ 32,202 319 1,114 932 (2,615)	2018 30,109 374 809 910 -
	$ 31,952	32,202

(4) Expenses recognized in profit or loss

The expenses of the Company recognized in profit or loss in 2019 and in 2018 are as follows:

Service cost in the year Net interest of net defined benefit liabilities Operating cost Promotion Expenses Administration Expenses R&D expenses	2019 $ 590 401	2018 576 526
	$ 991	1,102
	$ 117 277 356 241	142 293 388 279
	$ 991	1,102

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Lotes Co., Ltd. Parent Company Only Financial Statement

(5) Remeasurement of the net defined benefit liabilities (assets) recognized in other comprehensive income

Remeasurement of the accumulated net defined benefit liabilities (assets) of the Company recognized in other comprehensive income in 2019 and in 2018 are as follows:

follows:
Accumulated balance on January 1 Amount recognized in the year Accumulated balance on December 31	2019 $ 3,043 (1,148)	2018 856 2,187
	$ 1,895	3,043

(6) Actuarial assumptions

The material actuarial assumptions used by the Company to determine the present	The material actuarial assumptions used by the Company to determine the present
value if defined benefit obligations at the end of the reporting period are	as follows:
Dec. 31, 2019	Dec. 31, 2018
Discount rate 0.75%	1.00%
Increase in future salary 2.00%	2.00%

The amount of appropriation for defined benefit plans within 1 year after the

reporting date for the year ended on Dec. 31, 2019 is 916,000 TWD.

The weghted average duration of defined benefit plans is 11 years.

(7) Sensitivity analysis

The effects of changes in the main actuarial assumptions adopted on Dec. 31, 2019

and 2018 on the present value of defined benefit obligations are as follows:

Dec. 31, 2019 Discount rate Increase in future salary Dec. 31, 2018 Discount rate Increase in future salary	Effects on defined benefit obligations Increased by 0.25% Decreased by 0.25% $ (2,069) 2,151 2,119 (2,049) (2,095) 2,181 2,154 (2,079)
	Increased by 0.25% $ (2,069) 2,119 (2,095) 2,154

The above sensitivity ananlysis refers to the analysis on the influence of single assumption change based on the situation that other assumptions keep unchanged. In practice, many changes to the assumptions may be linked. The calculation method of sensivity ananlysis shall be consistent with that of net defined benefit liabilities of the balance sheet.

The method and assumption applied in current sensivity ananlysis is consistent with those adopted in early stage.

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Lotes Co., Ltd. Parent Company Only Financial Statement

2. Defined Contribution Plan

As to the defined contribution plan, the Company shall contribute the retirement funds of employees to the individual accounts for labor retirement funds of the Bureau of Labor Insurance according to 6% of the monthly salaries of labors under the provisions of Labor Pension Act. Under this plan, after contributing fixed amount to the Bureau of Labor Insurance, the Company will not assume the legal or constructive obligations of paying extra amount.

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Lotes Co., Ltd. Parent Company Only Financial Statement

The pension expense under the defined contribution retirement funds of the Company in the year of 2019 and 2018 are TWD 6,411,000 and TWD 6,193,000 respectively, which have been contributed to the Bureau of Labor Insurance.

(15) Income tax

1. The details of the income tax expenses (profit) of the Company are as follows:

Income tax expense in the year Income tax generated in the year Surtax on undistributed retained earnings Adjustment of the income tax in the previous year Deferred income tax expense Occurence and reversal of temporary difference Change in income tax rate Income tax expense	2019 $ 281,975 23,819 (338)	2018 182,234 6,448 5,840
	305,456	194,522
	(23,876) -	9,111 (8,130)
	(23,876)	981
	$ 281,580	195,503

The income tax expenses (profit) of the Company recognized in other comprehensive income in 2019 and in 2018 are as follows:

Items that will not be reclassified to profit or loss: Remeasurement of defined benefit plan	2019 $ (230)	2018 463

The reconciliation of the relationship between the income tax expense (profit) and the net profit before tax of the Company in 2019 and in 2018 is as follows:

Net profit before tax Income tax calculated based on the tax rate of the place where the Company located Adjustments in accordance with tax laws Underestimate (overestimate) in the previous year Surtax on undistributed retained earnings Change in income tax rate Total	2019 $ 2,357,623	2018 1,804,070
	471,525 (213,426) (338) 23,819 -	360,814 (169,469) 5,840 6,448 (8,130)
	$ 281,580	195,503

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Lotes Co., Ltd. Parent Company Only Financial Statement

2. Deferred income tax assets and liabilities

(1) Recognized deferred income tax assets and liabilities

Losses from inventory price drop and obsolescence Unappropriated pension expenses Losses from the price drop of fixed assets and idle assets Refund liabilites and accounts payable Remeasurement of defined benefit plan Unrealized foreign exchange losses Deferred income tax assets	Dec. 31, 2019 $ 3,920 492 44 43,772 8,238 12,121	Dec. 31, 2018 5,194 480 44 30,613 8,008 142
	$ 68,587	44,481

3. Income Tax Approval

The approval on the filing of final income tax return of the Company has lasted till the year 2017 as required by the taxing authority.

(16) Capital and Other Equity

As of December 31, 2018 and 2019, the total authorized share capital of the Company was $1,550,000,000 dollars and $1,050,000,000 dollars with a par value of $10 per share, and the actual amount issued was $1,034,779,000 dollars and $934,779,000 dollars respectively.

On August 9,2018 and November 19, 2018, the Company's Board of Directors resolved to issue 10,000,000 new shares with a par value of $10 per share and an issue price of $140 per share by cash capital increase, with January 10, 2019 as the base date for the capital increase. This capital increase has been approved by the Financial Supervisory Commission and the statutory registration process was completed on January 23, 2019.

1. Capital reserve

The components of the Company's capital reserve are as follows:

Premium of issued shares Change in the net value of the stock of subsidiaries and associates accounted for using the equity method Employee stock options	Dec. 31, 2019 $ 3,577,768 366,393 15,399 $ 3,959,560	Dec. 31, 2018 2,277,768 172,942 15,399 2,466,109

In accordance with the Companies Act, capital surplus is required to cover losses first before new shares or cash can be issued in proportion to the shareholders' original shares. Realized capital surplus referred to in the preceding paragraph includes premiums from the issuance of shares in excess of par value and proceeds from gifts received. In accordance with the Regulations Governing the Issuer's Offerings and Issuance of Marketable Securities, the aggregate amount of capital surplus that may be capitalized each year shall not exceed 10% of the paid-in capital.

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Lotes Co., Ltd. Parent Company Only Financial Statement

2. Retained earnings

In accordance with the Company's Articles of Incorporation, the Company shall, after the final settlement of each year's earnings, first complete tax contributions, make up for prior years' deficits and set aside 10% as legal reserve, except when the legal reserve has reached the level of total capital; the Company is required by law to set aside or reverse special reserve. In the case of unappropriated earnings for the same period, the Board of Directors shall propose a proposal for the distribution of earnings to the shareholders for resolution, and the dividend to be distributed shall not be less than 20% of the net profit for the year after taxation, after deducting the net income provided for by law.

The Company will take into account the environment and growth of the Company and the distribution of earnings should take into account the Company's future capital expenditure budget and capital requirements, and pay cash dividends of not less than 10% of the dividends distributed in the current year.

(1) Legal reserve

If the Company has no deficit, it may, by resolution of the shareholders in general meeting, issue new shares or cash out of the legal reserve to the extent that such reserve exceeds 25% of the paid-in capital.

(2) Special reserve

When the Company distributes distributable earnings, the Company accounts for other shareholders' equity in the current year and provides a special reserve of the same amount from current period's profit or loss as the prior period's undistributed earnings, and a special reserve of the same amount from prior period's undistributed earnings is not distributed. If there is a subsequent reversal in the amount of other decreases in shareholders' equity, the reversal may be distributed in the form of a surplus.

(3) Earnings distribution

The appropriation of the 2018 and 2017 earnings were approved by the shareholders' meetings held on June 14, 2019 and June 12, 2008, respectively:

==> picture [433 x 80] intentionally omitted <==

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

|||||||
|---|---|---|---|---|---|
|2018|2017|
|[ Payout ratio ]|Amount|Payout ratio|Amount|
|(TWD)|(TWD)|
|[Distributed to the holders ]|
|of ordinary shares:|
|[Cash ]|$|8.70|900,258|5.50|514,128|

----- End of picture text -----

On March 25, 2020, the Company's board of directors proposed the following 2019 earnings distribution:

2019[ Payout ratio ] Amount (TWD)

[Distributed to the holders of ordinary shares: ]

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Lotes Co., Ltd. Parent Company Only Financial Statement

[Cash ]

==> picture [154 x 11] intentionally omitted <==

Information on the distribution of earnings as proposed by the Board of Directors and resolved by the Shareholders' Meeting is available on the "Public Information Observation Post System".

141

Lotes Co., Ltd. Parent Company Only Financial Statement

3. Other equity

Exchange differences on translation of foreign operations Unrealized gain or loss on Financial assets measured at FVTOCI Balance on Jan. 1, 2019 $ (314,561) (2,459) Exchange differences arising from the translation of the net assets of foreign operations (317,409) - Unrealized losses from financial assets measured at FVTOCI - (16,103) Balance on Dec. 31, 2019 $ (631,970) (18,562) Exchange differences on translation of foreign operations Unrealized gain or loss on Financial assets measured at FVTOCI Unrealized gain/loss for financial assets for sale Balance on Jan. 1, 2018 $ (259,820) - 4,618 Adjustments for the retrospective application of new standards - - (4,618) Balance after the restatement on Jan. 1, 2018 (259,820) - - Exchange differences arising from the translation of the net assets of foreign operations (54,741) - - Unrealized losses from financial assets measured at FVTOCI - (2,459) - Balance on Dec. 31, 2018 $ (314,561) (2,459) -	Exchange differences on translation of foreign operations $ (314,561) (317,409) -	Exchange differences on translation of foreign operations $ (314,561) (317,409) -	Unrealized gain or loss on Financial assets measured at FVTOCI (2,459) - (16,103)

	$ (631,970)		(18,562)
		Unrealized gain or loss on Financial assets measured at FVTOCI	Unrealized gain/loss for financial assets for sale
		- -	4,618 (4,618)
(259,820) (54,741) -		- - (2,459)	- - -
$ (314,561)		(2,459)	-

(17) Share-based payment

The Company conducted the following transactions with share-based payment:

Date of offering Amount offered Target of offering

Vesting condition

Cash capital increase reserved for employees to subscribe Nov. 22, 2018 314,500 shares Current employees of the Company Immediate vesting

The fair value of the cash capital stock option was estimated to be $34. The Company recognized $10,693,000 dollars in share-based payment employee compensation cost for the year ended on December 31, 2018.

142

Lotes Co., Ltd. Parent Company Only Financial Statement

(18) Earnings per share

The calculation of basic earnings per share and diluted earnings per share of the Company is as follows:

Net profit attributable to the Company in the year Weighted average shares outstanding (1,000 shares) Dilutive potential ordinary shares Compensation of employees Basic earnings per share Diluted earnings per share	2019 $ 2,076,043	2018 1,608,567
	103,231 278	93,478 322
	103,509	93,800
	$ 20.11	17.21
	$ 20.06	17.15

(19) Revenue from contracts with customers

1. Disaggregation of revenue

Major regional markets: Taiwan Mainland China Other countries Main products/Line of service: A product B product C product D product E product F product G product H product Others	2019 $ 669,848 7,236,980 2,061,506	2018 301,754 6,888,545 1,541,583
	$ 9,968,334	8,731,882
	$ 1,065,053 1,055,851 769,079 672,272 617,061 601,600 561,158 505,160 4,121,100	502,654 909,105 821,475 196,613 809,674 514,133 611,168 392,266 3,974,794
	$ 9,968,334	8,731,882

2. Balance of Contract

Contract liabilities	Dec. 31, 2019	Dec. 31, 2018 3,922	2018.1.1 1,089
	$ 14,998

The opening balances of Contract liabilities were recognized as income of $3,793,000 dollars and $1,057,000 dollars for the years of January 1, 2019 and 2018, respectively.

143

Lotes Co., Ltd. Parent Company Only Financial Statement

(20) Non-operating income and expense

1. Other income

The details of other income of the Company are as follows:

Interest income Income from molding Income from samples Income from rentals Income from compensation Others	2019 $ 14,173 17,206 3,471 5,415 3,297 7,536		2018 5,626 34,360 1,348 5,791 5,019 52,144
	$ 51,098

2. Other income and loss

The details of other income and loss of the Company are as follows:

Foreign exchange gain (loss) Loss from the disposal of investments Net loss from financial assets (liabilities) measured at FVTPL Profit from the disposal of property, plant and equipment Others Total	2019 $ (67,449) - (1,921) 17 (3,231)	2019 $ (67,449) - (1,921) 17 (3,231)	2018 8,528 (287) - - (2,540)
	$ (72,584)		5,701

3. Financial cost

The details of the financial cost of the Company are as follows:

[Interest expense ]

2019 $ 592		2018 3,618

(21) Remuneration for employees and directors, supervisors

In accordance with the Company's Articles of Incorporation, no less than 3% of the Company's annual profits shall be appropriated to the Compensation of Employees and no more than 3% to the Compensation of Directors and Supervisors; however, if the Company has accumulated losses, it shall retain the amount of compensation in advance and appropriate the Compensation of Employees and Supervisors in proportion to the aforementioned. The former Compensation of employees to whom stock or cash is issued may include employees of a subordinate company who meet certain criteria.

144

Lotes Co., Ltd. Parent Company Only Financial Statement

Company's Net profit before issing the compensation of employees and directors and supervisors by the proportion of the Company's compensation distribution to employees and directors and supervisors as provided in the Company's Articles of Incorporation, and is reported as operating costs or expenses for that period. If there is a difference between the actual distribution amount and the estimated amount for the following year, the change in accounting estimate is adjusted and the difference is recognized in profit or loss for the following year. In the event that the Board of Directors resolves to grant a compensation of employees by way of stock, the number of shares of stock-based compensation is calculated based on the closing price of the common stock on the day before the Board of Directors' resolution.

145

Lotes Co., Ltd. Parent Company Only Financial Statement

The actual allotment of compensation to employees, directors and supervisors for the year ended December 31, 2018 did not differ from the amount estimated in the Company's annual financial statements, and was paid in cash. The difference between the amount approved by the Board of Directors for the remuneration of employees, directors and supervisors in 2019 and the estimated amount in the individual financial statements in 2020 was $46,000 dollars.

(22) Financial instruments and fair value information

1. Credit risk

(1) Credit risk exposure

The carrying amount of a financial asset represents the maximum amount of credit risk. The maximum amount of credit risk exposure was $4,881,202,000 dollars and $3,931,685,000 dollars as of December 31, 2019 and 2018 respectively.

(2) Credit risk concentration risk

In order to reduce the credit risk of accounts receivable, the Company continually evaluates the financial position of its customers and adjusts the terms of transactions between them if necessary. As of December 31, 2019 and 2018, the Company had three and six different customers with accounts receivable balances exceeding 5% of total accounts receivable for a single customer respectively. The Company periodically evaluates the probability of recovery of accounts receivable and presents Provisions, and the total loss is always within management's expectations.

(3) Impairment loss

The Company uses a simplified method of estimating expected credit losses for all of its notes and accounts receivable, which is to measure expected credit losses over the life of the notes and accounts receivable, and for this purpose, the notes and accounts receivable are grouped by common credit risk characteristics that represent the ability of customers to pay all amounts due under contractual terms and are included in forward-looking information. The expected credit losses on the Company's notes and accounts receivable are analyzed as follows:

Not past due 1-30 days past due 31-60 days past due 61-120 days past due 121-180 days past due 181-270 days past due		Dec. 31, 2019	Expected credit loss in the duration of provision 416 159 219 21 33 -
	Book value of Notes and accounts receivable $ 3,815,591 86,241 12,098 344 190 -	Weighted average expected credit loss rate 0.01% 0.18% 1.81% 6.10% 17.37% 43.85%

146

Lotes Co., Ltd. Parent Company Only Financial Statement

271-365 days past due More than 365 days past due	16 81.25% 4,375 100.00% $ 3,918,855	13 4,375
		5,236

147

Lotes Co., Ltd. Parent Company Only Financial Statement

	Dec. 31, 2018	Expected credit loss in the duration of provision 437 365 320 283 4 6 86 4,277
Book value of Notes and accounts receivable $ 3,356,304 166,204 14,602 2,463 20 12 97 4,277	Weighted average expected credit loss rate
	0.01% 0.22% 2.19% 11.49% 20.00% 50.00% 88.66% 100.00%
$ 3,543,979		5,778

The changes in the provisions for the notes and accounts receivable of the Company are as follows: :

Opening balance Recognized impairment loss Reversal of impairment loss Closing balance	2019
	$ 5,236 5,778

2. Liquidity risk

The contracts of financial liabilities are sorted by their maturity dates as follows. The

estimated interests are included, but the effect of net value agreement is excluded.

Book Value $ 18,934 14,499 2,264,397 245,547 5,838 59	Cash flow from the contract 18,934 14,499 2,264,397 245,547 5,838 60	Within 6 months 18,934 14,499 2,264,397 245,547 5,838 30	6-12 months - - - - - 30	1-2years - - - - - -	2-5years - - - - - -	More than 5 years - - - - - -
$ 2,549,274	2,549,275	2,549,245	30	-	-	-
$ 720,000 45,271 12,520 1,945,001 213,627 2,758	721,404 45,271 12,520 1,945,001 213,627 2,758	721,404 45,271 12,520 1,945,001 213,627 2,758	- - - - - -	- - - - - -	- - - - - -	- - - - - -
$ 2,939,177	2,940,581	2,940,581	-	-	-	-

The Company does not anticipate that the cash flows analyzed at maturity date will alter significantly or that the actual amounts will vary significantly.

148

Lotes Co., Ltd. Parent Company Only Financial Statement

3. Market risk - exchange rate risk

(1) Exposure to exchange rate risk

The Company's financial assets and liabilities exposed to significant foreign currency exchange rate risk are as follows:

	Financial assets Currency USD RMB HKD EURO INR VND Long-term equity investment accounted for using the equity method USD EURO Financial liabilities Currency USD RMB HKD JPY EURO MOP VND	Dec. 31, 2019	Dec. 31, 2019	TWD 4,310,086 325,809 23,078 80,284 2 22 7,992,737 3,711 2,336,285 160 7,402 49 1,531 3 17
		Foreign Currency (Note) $ 143,765 75,814 5,996 2,390 4 17,980 266,602 110 $ 77,928 37 1,923 178 46 1 14,361	Rate 29.9800 4.2975 3.8490 33.5900 0.4791 0.0012 29.9800 33.5900 29.9800 4.2975 3.8490 0.2760 33.5900 3.8490 0.0012

	Financial assets Currency USD RMB HKD JPY	Dec. 31, 2018	Dec. 31, 2018	TWD 3,528,433 194,144 4,686 36
		Foreign Currency (Note) $ 114,877 43,382 1,195 129	Rate 30.7150 4.4753 3.9210 0.2782

149

Lotes Co., Ltd. Parent Company Only Financial Statement

EURO	986 35.2000	34,710
Long-term equity investment accounted
for using the equity method
USD	236,360 30.7150	7,259,789
EURO	52 35.2000	1,847

150

Lotes Co., Ltd. Parent Company Only Financial Statement

	Financial liabilities Currency USD RMB HKD	Dec. 31, 2018	Dec. 31, 2018	TWD 1,984,987 76 6,351
		Foreign Currency (Note) $ 64,626 17 1,620	Rate 30.7150 4.4753 3.9210

Because the Company has a wide range of functional currencies, it has adopted a consolidated approach to disclose exchange gain or loss on monetary items, with foreign currency exchange gains (realized and unrealized) of $67,449,000 dollars and $8,528,000 dollars for the years ended 2019 and 2018 respectively.

(4) Sensitivity analysis

The Company’s exchange rate risk primarily comes from foreign currency-denominated cash and cash equivalents, accounts receivable and other receivables, loans, accounts payable and other payables, resulting into gains and losses of conversion of foreign currency when exchanging. As of December 31, 2019 and 2018, if TWD had depreciated or appreciated by 1% relative to foreign currencies held by the Company and all other factors remained constant, net income would have increased or decreased by $19,151,000 dollars and $14,165,000 dollars respectively for 2019 and 2018. The same basis is used for both phases of analysis.

4. Market risk - changes in interest rates

The Company's interest rate risk arises primarily from variable rate bank deposits and short-term borrowings, and changes in interest rates will cause future cash flows to fluctuate as the effective interest rates on bank deposits and short-term borrowings change.

The following Sensitivity analysis was determined based on the interest rate risk of the financial instruments on the reporting date. For floating-rate liabilities, the analysis is based on the assumption that the amount of the liability outstanding at the reporting date is outstanding for the entire year. The rate of change used in the Company's internal reporting of interest rates to key management is a 1% increase or decrease in interest rates, which also represents management's assessment of the range of reasonably possible changes in interest rates.

The Company's financial assets with variable interest rates at December 31, 2019 and 2018 were $488,521,000 dollars and $359,383,000 dollars respectively, and its financial liabilities were $0 and $720,000,000 dollars respectively. If interest rates had increased or decreased by 1%, the Company's net income would have increased or decreased by

151

Lotes Co., Ltd. Parent Company Only Financial Statement

$3,908,000 dollars and decreased or increased by $2,885,000 dollars for 2018 and 2019, respectively, with all other variables held constant.

Market risk - fair value
(1) Fair value and carrying amount

The Company's management believes that the fair value of non-derivative short-term financial instruments shall be estimated using their book value on the balance sheet because of the near maturity of such instruments and their book value should be a reasonable basis for estimating fair value. This method is applied to cash and cash equivalents, notes receivable, accounts payable, other receivables and other payables, deposit margin and short-term borrowings.

152

Lotes Co., Ltd. Parent Company Only Financial Statement

In addition to the above financial instruments, the fair value and book value information of the remaining financial instruments and investment real estate of the company on the financial reporting date are as follows:

Not measured at fair value: Non-financial assets: Investment property	Dec. 31, 2019 Book Value Fair value $ 283,002 322,604	Dec. 31, 2018 Book Value Fair value 283,960 322,604
	Book Value $ 283,002	Book Value 283,960

(3) The evaluation techniques used to determine fair value are as follows

The fair value of investment properties is based on independent evaluators with recognized professional qualifications and recent experience in the area and type of investment properties evaluated.

(3) Fair value hierarchy

The following table analyzes the fair value hierarchy of financial instruments and investment property by valuation. Each fair value hierarchy is defined as follows:

A. Level 1: Publicly quoted prices (unadjusted) in an active market for identical assets or liabilities.
B. Level 2: Input parameters for an asset or liability are observable either directly (i.e., prices) or indirectly (i.e., derived from prices), except for publicly quoted prices included in Level 1.
C. Level 3: Input parameters for an asset or liability are not based on observable market information (non-observable parameters).

Dec. 31, 2019 Not measured at fair value: Investment property Dec. 31, 2018 Not measured at fair value: Investment property	Level 1 $ -		Level 2 -		Level 3 322,604		Total 322,604
	Level 1 $ -		Level 2 -		Level 3 322,604		Total 322,604

(23) Financial Risk Management

1.The Company is exposed to the following risks from the engagment of financial instruments:

(1)Credit risk

(2)Liquidity risk

153

Lotes Co., Ltd. Parent Company Only Financial Statement

(3)Market risk

This note presents the Company's risk information for each of these risks and the Company's objectives, policies and procedures for measuring and managing risk. For further quantitative disclosures, please refer to the respective notes to the parent company only financial statements.

2.Risk Management Structure

The Chairman has the sole responsibility for establishing and overseeing the Company's risk management structure and reports regularly to the Board on its operations.

154

Lotes Co., Ltd. Parent Company Only Financial Statement

The Company's risk management policy is designed to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor compliance with the risks and risk limits. The Company develops a disciplined and constructive control environment through training, management guidelines and operating procedures to enable all employees to understand their roles and responsibilities.

The Board of Directors of the Company oversees how management monitors compliance with the Company's risk management policies and procedures and reviews the appropriateness of the Company's risk management framework in relation to the risks it is exposed to. Internal auditors assist the Company's Board of Directors in its oversight role. These personnel conduct regular and exceptional reviews of risk management controls and procedures and report the results of these reviews to the Board of Directors.

3. Credit risk

Credit risk is the risk of financial loss arising from the failure of the Company's customers or counterparties to fulfill their contractual obligations, mainly from the Company's accounts receivable from customers and investments in securities.

(1) Accounts receivable and other receivables

The Company's credit risk exposures are primarily depended on each customer's individual circumstances. However, management also considers statistical information about the Company's customer base, including the risk of default in the customer's industry and country, as these factors may affect credit risk. Approximately 73% and 79% of the Company's revenue for 2018 and 2019, respectively, were derived from sales to customers in Mainland China, which resulted in a significant concentration of regional credit risk.

The Company has established a credit policy whereby the Company is required to analyze the credit rating of each new customer individually before granting standard payment and delivery terms. Credit sales limits are established on an individual customer basis and are reviewed periodically; customers who do not meet the Group's benchmark credit rating may only transact business with the Company on a pre-collection basis.

In monitoring customers' credit risk, customers are grouped according to their credit characteristics, including whether they are individuals or legal entities, age of accounts, maturity dates and pre-existing financial difficulties. The Company maintains a Provisions account to reflect estimates of losses on accounts receivable and other receivables.

(2) Use of funds

The Company's investments in equity securities are placed through a centralized trading market and therefore have no significant credit transaction risk.

155

Lotes Co., Ltd. Parent Company Only Financial Statement

The credit risk of bank deposits, fixed income investments and other financial instruments is measured and reported to the Chairman of the Board of Directors by the Company's finance department. Since the Company's counterparties are creditworthy banks and financial institutions with investment grade or above, there are no significant performance concerns and therefore no significant credit risk.

4. Liquidity risk

Liquidity risk is the risk that the Company will not be able to deliver cash or other financial assets to settle its financial liabilities and will not be able to meet its related obligations. The Company's approach to manage liquidity risk is to ensure that the Company has sufficient liquidity to meet its liabilities as they fall due under normal and stressful circumstances and that there is no risk of unacceptable loss or damage to the Company's reputation. In addition, the Company has entered into unused borrowing lines totaling $1,069,820,000 in 2019 to cover unanticipated payments.

156

Lotes Co., Ltd. Parent Company Only Financial Statement

5. Market risk

Market risk is the risk that changes in market prices, such as changes in exchange rates, interest rates, and prices of equity instruments, will affect the Company's revenue or the value of financial instruments held by the Company. The objective of market risk management is to manage the exposure to market risk to an acceptable level and to optimize investment returns.

The Company engages in derivative transactions in order to manage market risk. All transactions are executed in accordance with the guidelines of the Board of Directors.

(1)Exchange rate risk

The Company uses derivative transactions to hedge exchange rate risk due to its exposure to exchange rate risk arising from sales and purchase transactions that are not denominated in the Company's functional currency. Gains or losses on foreign currency assets and liabilities arising from changes in exchange rates are largely offset against natural hedges. Derivative transactions can help the Company reduce, but still not completely eliminate, the impact of changes in foreign currency exchange rates.

The Company periodically reviews individual foreign currency assets and liabilities for exposures and hedges against such exposures.

(2)Interest rate risk

157

Lotes Co., Ltd. Parent Company Only Financial Statement

(24) Capital management

It is the Board's policy to maintain a sound capital base to maintain the confidence of investors, creditors and the market and to support the development of future operations. Capital consists of the Company's share capital, capital surplus and retained earnings. The Board of Directors controls the rate of return on capital and also controls the level of dividends on ordinary shares.

In order to maintain or adjust its capital structure, the Company may adjust dividends paid to shareholders, reduce capital to refund shareholders, issue new shares or sell assets to settle liabilities.

The Company controls its capital on a debt-to-capital ratio basis. The ratio is calculated by dividing net debt by total capital. Net debt is total liabilities less cash and cash equivalents as shown on the balance sheet. Total capital represents all components of equity (i.e., equity, capital surplus, retained earnings and other equity) plus net debt. The debt-to-capital ratio at the reporting date is as follows:

Total liabilities Less: Cash and cash equivalents Net liabilities Total equity Debt-to-capital ratio	Dec. 31, 2019 $ 3,015,595 (842,522)	Dec. 31, 2019 $ 3,015,595 (842,522)		Dec. 31, 2018 3,228,587 (359,731) 2,868,856 9,506,158 23.18%
	$ 2,173,073
	$ 11,815,326
		15.53%

158

Lotes Co., Ltd. Parent Company Only Financial Statement

Name of related Party

Relationship to the Company

(25) Investment and fund raising activities for non-cash transactions

Please refer to Notes 6(6) and 6(10) for information on the Company's non-cash trading

investments and fundraising activities for Right-of-use assets acquired under leases during 2019.

The reconciliation of the Company's liabilities from fundraising activities for the years ended December 31, 2019 and 2018 was as follows:

Short-term loan Lease liabilities Total liabilities from financing activites Short-term loan Total liabilities from financing activites	2019.1.1 Cash flow $ 720,000 (720,000) - (59)	Non-cash change Other Change in exchange rate Change in fair value Dec. 31, 2019 - - - - 118 - - 59
	$ 720,000 (720,059)	118 - - 59
	107.1.1 Cash flow $ 336,000 384,000	Non-cash change Other Change in exchange rate Change in fair value Dec. 31, 2018 - - - 720,000
	$ 336,000 384,000	- - - 720,000

VII. Related party transactions

(1) Parent company and ultimate controller: The Company is the ultimate controller of the Company and the Company's subsidiaries.
(2) Names and relationships of related parties

The Company's subsidiaries and other related parties that had transactions with the Company during the period covered by these individual financial statements are as follows:

Name of Related Party Relationship with the Company

Lotes Investments Limited A subsidiary of the Company Good Hope Investments Limited A subsidiary of the Company Guansi Development Co., Ltd. A subsidiary of the Company Zhaxi Investment Co., Ltd. A subsidiary of the Company Jiayu Investment Co., Ltd. A subsidiary of the Company Lotes USA, Inc. A subsidiary of the Company LOTES EU GmbH A subsidiary of the Company Loteson International Investments A subsidiary of the Company Limited Lotes Guanghou Co., Ltd A subsidiary of the Company Lotes Hengnan Co., Ltd. A subsidiary of the Company Shenzhen Deyi Automation A subsidiary of the Company Technology Co., Ltd. Lotes Zhongshan Co., Ltd A subsidiary of the Company

159

Lotes Co., Ltd. Parent Company Only Financial Statement

Name of related Party Relationship to the Company Zhongshan Dezhi Metal Surface A subsidiary of the Company Treatment Co., Ltd. Hengnan Deyi Property Development A subsidiary of the Company Co., Ltd. Guangzhou Leside Technology Co., A subsidiary of the Company Ltd. Chongqing Fuxinrui Electronic A subsidiary of the Company Technology Co., Ltd. Xincheng Development Co., Ltd. A subsidiary of the Company REKA Technology Co., Ltd. A subsidiary of the Company Jae You Co., Ltd. A subsidiary of the Company Lotes Suzhou Co., Ltd A subsidiary of the Company Wangden Investments Limited (HK) A subsidiary of the Company Zongka Technology (Shenzhen) Co., A subsidiary of the Company Ltd. Ememe Robot Co., Ltd A subsidiary of the Company Compertum Microsystems Inc. A subsidiary of the Company Lintes Technology Co., Ltd A subsidiary of the Company Pure Fortune Limited (Note) A subsidiary of the Company Jilong Co., Ltd. A subsidiary of the Company Rihui Co., Ltd. A subsidiary of the Company Lintes Technology (Suzhou) Co., Ltd. A subsidiary of the Company Key management personnel Including the directors, supervisors, managers and their families and spouses

Note: Pure Fortune Limited was liquidated in Q2, 2019.

(III) Material transactions with the related parties

1. Operating revenue

The amounts of material sales from the Company to the related parties are as follows:

Subsidiaries	2019 $ 27,085	2018 16,017

The terms of sale of the Company to a subsidiary of the Company are not significantly different from the normal sales price. Their collection periods are all three months. Receivables from related parties are not covered by collateral.

2. Purchase

The amounts of goods purchased by the Company from the related parties are as follows:

Xincheng Development Co., Ltd. REKA Technology Co., Ltd.	2019 $ 1,268,540 6,889,368	2018 1,145,022 6,178,094

160

Lotes Co., Ltd. Parent Company Only Financial Statement

Name of related Party Lintes Technology Co., Ltd. Other subsidiaries	Relationship to the Company 13,798 1,994 - 654 $ 8,171,706 7,325,764

The Company's purchasing prices offered by the above companies are not significantly different from those of the Company's purchasing prices offered by general merchants. Its payment term is three months, which is not significantly different from the average manufacturer.

161

Lotes Co., Ltd. Parent Company Only Financial Statement

3. Accounts receivable - related parties

The details of the accounts receivable - related parties are as follows:

Accounting Item	Type of Related Party	Dec. 31, 2019 $ 2,982 12,129 18 2,272 652 86,308 549	Dec. 31, 2018 2,982 7,388 - 2,401 61 - 178
Accounts receivable Accounts receivable Accounts receivable Other accounts receivable Other accounts receivable Other accounts receivable Other accounts receivable	Ememe Robot Co., Ltd REKA Technology Co., Ltd. Other subsidiaries Ememe Robot Co., Ltd REKA Technology Co., Ltd. Lotes Guanghou Co., Ltd(Note) Other subsidiaries
		$ 104,910	13,010

Note: Other receivables include the Company's loan of $85,950,000 dollars to Lotes Guanghou Co. Interest income was recognized as $1,444,000 dollars and $2,809,000 dollars for the years ended December 31, 2019 and 2018, respectively.

4. Accounts payable - related parties

The details of the accounts payable - related parties are as follows:

Accounting Item	Type of Related Party	Dec. 31, 2019 $ 211,482 2,045,852 7,063 2,756 3,017 65	Dec. 31, 2018 339,245 1,605,756 - 2,673 - 85
Accounts payable Accounts payable Accounts payable Other payables Other payables Other payables	Xincheng Development Co., Ltd. REKA Technology Co., Ltd. Lintes Technology Co., Ltd. REKA Technology Co., Ltd. LOTES EU GmbH Other subsidiaries
		$ 2,270,235	1,947,759

5.Sales of Property, plant and equipment

In February 2019, the Company sold testing equipment to its subsidiary, REKA Technology Co, Ltd. for a total sale price of $427,000 dollars and a disposal gain of $17,000 dollars.

6. Endorsement

The balance and details of the endorsement and guarantee provided by the Company to the related parties are as follows:

Lotes Guanghou Co., Ltd Lintes Technology Co., Ltd. Lotes Guanghou Co., Ltd`及`Lotes Suzhou Co., Ltd Lotes Suzhou Co., Ltd REKA Technology Co., Ltd.	Dec. 31, 2019 $ 899,400 - 449,700 149,900 35,000 $ 1,534,000		Dec. 31, 2018 921,450 100,000 460,725 153,575 35,000 1,670,750

162

Lotes Co., Ltd. Parent Company Only Financial Statement

7. Selling expenses

Subsidiaries Mainly the sundry purchases. 8. Management expenses Subsidiaries Mainly the service fees. 9. R & D Expenses Subsidiaries Mainly the expense for developing molds. 10. Non-operating income Subsidiaries	2019 $ 185	2018 357 2018 14,658 2018 15 2018 857
	2019 $ 28,280 2019 $ - 2019 $ 2,606

Mainly the income from the rentals of offices leased and the interest income from the loans to subsidiaries.

11.Lease

The Company leases warehouses from major management personnel and enters into one-year lease contracts with a total value of $60,000,000 dollars with reference to the neighboring warehouse rental quotes (per year). For the year ended December 31, 2018, rent expense was $60,000 dollars and there was no outstanding balance at December 31, 2018. The lease transaction was evaluated in accordance with IFRS 16 on January 1, 2019. The lease option was extended for one year and right-of-use assets of $118,000 dollars and Lease liabilities of $118,000 dollars were recognized, interest expense of $1,000 dollars was recognized in 2018 and the balance of Lease liabilities as of December 31, 2019 was $59,000 dollars.

(4) Major management personnel transaction

Related compensation includes:

Short-term employee benefits Post-employment benefits Share-based payment	2019 $ 40,372 757 -	2018 33,969 759 1,190
	$ 41,129	35,918

163

Lotes Co., Ltd. Parent Company Only Financial Statement

VIII. Pledged assets

As of 2019 and December 31, 2018, property, plant and equipment to provide financial institutions of financing guarantee loan contracts have expired without a renewal, and they have receive a liquidation proof of the bank. However, the pledged note cancellation procedures have not yet been completed. The book value of the relevant land is $28,250 thousand, and the book value of the housing construction is $16,368 thousand and $16,300 thousand respectively.

IX. Significant contingent liabilities and unrecognized contractual commitments

(1) Significant unrecognized contractual commitments:

The amount of information system related contracts executed and outstanding as of December 31, 2019 was approximately $43,050,000 dollars.

(2) The issuance of guarantee notes for bank loans, financing lines and derivative financial commodity transactions:

[Guaranteed notes ]

Dec. 31, 2019 Dec. 31, 2018 $ 2,358,960 2,304,320

X. Significant Disaster Loss: None.

XI. Significant post-period events: None.

XII. Others

(1) Employee benefits, depreciation, depletion and amortization functions are summarized below:

below:
Function Nature	2019			2018
	Operation cost	Operation expense	Total	Operation cost	Operation expense	Total
Employee benefit expense Salaries expense Labor insurance and health insurance expenses Pension expense Compensation of directors Other employee benefit expenses Depreciation expense Amortization expense	8,427 758 312 - 1,073 867 -	217,661 10,176 7,090 3,734 9,120 3,235 1,048	226,088 10,934 7,402 3,734 10,193 4,102 1,048	13,005 852 333 - 1,066 604 -	197,394 10,829 6,962 3,952 8,296 3,119 539	210,399 11,681 7,295 3,952 9,362 3,723 539

Additional information on the number of employees and employee benefit costs for

164

Lotes Co., Ltd. Parent Company Only Financial Statement

2019 135	2019 135	2018 135
5		5
$ 1,959		1,836
$ 1,739		1,618
	7.48%

165

Lotes Co., Ltd. Parent Company Only Financial Statement

XIII. Disclosing information

(1) Major Transaction Details

In accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, the Company should disclose the following information about significant transactions in 2019:

1. Capital Lending to Others :

Unit: 1,000 TWD ／ 1,000 in foreign currency

No.	Lender	Borrower	Item	Related Party	Max Amount for the term	Balance at the end	Actual Lending Amount	Interest rate	Nature of the lending	Business Amount	Purpose f or the lending	Allowance for bad debt	Collateral	Collateral	Individual Limit (Note)	Overall limit (Note)
													Name	Value
0	The Company	Lotes Guanghou Co., Ltd	intracom pany transacti on	Y	137,748 (RMB30,000)	128,925 (RMB30,000)	85,950	5%	2	-	Working Capital	-	None	-	2,363,065	4,726,130

Note: The amount of the Company's financing to a single party shall not exceed 20% of the Company's net worth.

The total amount of funds lent by the Company to others shall not exceed 40% of the Company's net

worth.

2. Endorsement :

Unit: 1,000 TWD /1,000 in foreign currency

==> picture [460 x 204] intentionally omitted <==

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

Endorsee
Name of the Relatio Ceiling on Balance of the Ending balance Amount Amount of Percentage of the Ceiling on Endorsement Endorsement
No. Company that endorsementprovides the Company Name (Note 1) nship for a enterprise endorsement amount of endorsement fee in the periodceiling endorsement feeof the actually used endorsement backed by assets of endorsement in the accumulated amount net value of current endorsement amount of (Note 2) made by parent company to subsidiary Endorsement made by subsidiary to made to any party in Mainland
(Note 2) financial statement parent company China
(%)
[0 ] The REKA 2 2,363,065 35,000 35,000 - - 0.30% 5,907,663 Y N N
Company Technology
Co., Ltd.
[0 ] " Lotes Suzhou 2 2,363,065 158,000 149,900 - - 1.27% 5,907,663 " " Y
Co., Ltd (USD5,000) (USD5,000)
[0 ] " Lotes 2 2,363,065 474,000 449,700 - - 3.81% 5,907,663 " " "
Guanghou Co., (USD15,000) (USD15,000)
Ltd and Lotes
Suzhou Co.,
Ltd
[0 ] " Lotes 2 2,363,065 948,000 899,400 - - 7.61% 5,907,663 " " "
Guanghou Co., (USD30,000) (USD30,000)
Ltd
[0 ] " Lintes 2 2,363,065 100,000 - - - 0.00% 5,907,663 " " N
Technology
Co., Ltd.
[1 ] Lotes GuREKA 1 905,665 94,800 89,940 - - 1.99% 2,264,164 N " "
Technology (USD3,000) (USD3,000)
Co., Ltd.
[2 ] LintesLintes 2 744,681 252,800 179,880 - - 12.08% 1,489,363 " " Y
Technology Technology (USD8,000) (USD6,000)
Co., Ltd. (Suzhou) Co.,
Ltd.
----- End of picture text -----

Note 1: There are seven types of relationship between the Endorser and Endorsee, which can be marked:

(1) Companies with business dealings.
(2) Companies in which the company directly and indirectly holds more than 50% of the voting

rights.

(3) Companies that hold more than 50% of the voting rights in the company, both directly and indirectly.
(4) The Company owns, directly and indirectly, more than 90 percent of the voting shares.
(5) Company that is mutually insured under a contract between its peers or co-manufacturers based

166

Lotes Co., Ltd. Parent Company Only Financial Statement

on the need to perform the work.

(6) Company in which all of the contributory shareholders have given their endorsement in

proportion to their shareholding in the joint venture.

(7) Intercompany performance guarantees and guarantees for pre-sale contracts in accordance with

the Consumer Protection Act.

Note 2: (1) The amount of the Company's guarantee for a single corporate endorsement shall not exceed
20% of the net worth of the Company 。

The aggregate amount of the Company's guarantees under external endorsement shall not exceed 50% of the net worth of the Company.

167

Lotes Co., Ltd. Parent Company Only Financial Statement

(2) The amount of Lotes Guanghou Co., Ltd's guarantee for a single corporate endorsement is limited

to not more than 20% of the net worth of the company. 。

The aggregate amount of Lotes Guanghou Co., Ltd's external endorsement guarantees is limited to an amount not exceeding 50% of the Company's net worth.

(3)The amount of Lintes Technology Co., Ltd.'s guarantee for a single corporate endorsement is limited to not more than 50% of the net worth of the company.

The aggregate amount of Lintes Technology Co., Ltd.'s external endorsement guarantees is limited to an amount not exceeding 100% of the Company's net worth.

Securities Held at the End of Fiscal Period ( excluding the equity of controlled by subsidiaries, affiliated companies, or joint company ):

Unit: 1,000 TWD

Company which holds securities	Category and name of security	Relationship with the issuer of the security	Listed as	End of the fiscal period	End of the fiscal period	End of the fiscal period	End of the fiscal period	Note
				Shares	Book Value	Shareholding proportion	Fair value
" " " " " "	Grand-Tek Technology Co., Ltd. APAQ Technology Co., Ltd. OtO Photonics Inc. Lucemitek Co., Ltd Radinet Communications Inc. Kuang Ying Computer Equipment Co., Ltd. AICP Technology Corporation	None " " " " " "	Financial assets measured at FVTPL - current " " " " Financial assets measured at FVTOCI -current "	163,980 345,000 1,368,800 1,169,977 600,000 1,500,000 400,000	7,166 13,765 - - - 4,507 1,931	0.67 % 0.41 % 5.35 % 17.33 % 18.37 % 5.73 % 5.33 %	7,166 13,765 - - - 4,507 1,931	Note Note Note

Note: All of them were recognized in losses.

4.The cumulative purchase or sale of the same securities amounted to at least NT$300 million or 20% of the paid-in capital: None.
5.Acquisition of real property amounting to NT$300 million or 20% or more of the paid-in capital:

==> picture [446 x 104] intentionally omitted <==

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

Unit: 1,000 TWD
If the counterparty is a related party, the
information of its previous transfer shall be
provided
The company Amount of Payment Counterpart Relations Owner Relationship Date of Reference Purpose of Other
which acquired Name of Date of Transaction condition y of hip with the transfer Amount for pricing the agreed
the property Asset occurence (Note 2) (Note 2) transaction Issuer acquisition matters
andthe
condition
of use
Lotes Zhongshan Plant (Note Oct. 2017 ~ 782,965 622,147 Chongqing None - - - - Bidding For the None
Co., Ltd. 1) Dec. 2019 Chuangyou constructio
Construction n of a plant
Group, etc
----- End of picture text -----

Note 1: Build the factory by own contracting committee.

Note 2: The conversions were made at the exchange rates prevailing on the balance sheet date.

6.Disposal of real property amounting to NT$300 million or 20% or more of paid-in
capital: None.

168

Lotes Co., Ltd. Parent Company Only Financial Statement

The amount of sales to or from related parties is at least $100 million or 20% of the paid-in capital:

			Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD
The company which purchases (sells) products	Name of Transaction Counterparty	Relationship	Condition of Transaction				Situation and reason for the conditions of transaction to be different from the ordinary ones		Notes and accounts receivable (payable)		Remarks
			Purchase (sales)	Amount	Percentage in total goods purchased (sold)	Credit period	Unit Price	Credit period	Balance	Percentage in the notes and accounts receivable (payable)
Xincheng Development Co., Ltd. " REKA Technology Co., Ltd. " " " " " Lotes Guanghou Co., Ltd " Lintes Technology (Suzhou) Co., Ltd. Lotes Hengnan Co., Ltd.	The Company Lotes Suzhou Co., Ltd The Company Lotes Guanghou Co., Ltd Shenzhen Deyi Automation Technology Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Lotes Hengnan Co., Ltd. " REKA Technology Co., Ltd. Lotes Hengnan Co., Ltd. Lintes Technology Co., Ltd. Zongka Technology (Shenzhen) Co.,Ltd.	Subsidiary The surrogate parent company are the same parent company Subsidiary The surrogate parent company are the same parent company " " " " " " Subsidiary The surrogat	Net revenue from the goods sold Net expense from the goods purchased Net revenue from the goods sold Net expense from the goods purchased Net revenue from the goods sold Net revenue from the goods sold Net expense from the goods purchased Net revenue from the goods sold Net expense from the goods purchased Net expense from the goods purchased Net revenue from the goods sold Net revenue from the goods sold	1,268,540 1,329,762 6,889,368 8,600,315 186,915 484,499 412,163 188,008 2,021,115 306,804 1,898,007 101,724	95.40 % 100.00 % 74.57 % 95.06 % 2.02 % 5.24 % 4.56 % 2.03 % 30.37 % 4.61 % 97.34 % 18.26 %	settled by month at intervals of 90 days " " " " " " " " " " "	- - - - - - - - - - - -	No significant difference " " " " " " " " " " "	211,482 (235,988) 2,045,852 (1,529,888) 57,618 279,910 (69,406) 62,237 (383,871) (23,620) 297,411 37,700	89.14% 100.00% 59.16% (47.64)% 1.67% 8.09% (1.94)% 2.01% (32.23)% (1.98)% 92.90% 23.15%

8.Amounts due from related parties amounting to at least NT$100 million or 20% of

paid-in capital:

					Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD
Related party with accounts receivable by the Company	Name of transaction counterparty	Relationship	Balance of receivalbes from the related party	Turnover Ratio	Past due receivables from the related party		Receivables from the related party Amount received after the period ended	Appropriated Allowance Amount of loss
					Amount	Solution
Xincheng Development Co., Ltd. REKA Technology Co., Ltd.	The Company "	Subsidiary "	211,482 2,045,852	4.61 3.77	- -		120,019 1,214,382	- -

169

Lotes Co., Ltd. Parent Company Only Financial Statement

" " Lotes Suzhou Co., Ltd Good Hope Investments Limited Lotes Guanghou Co., Ltd Lintes Technology (Suzhou) Co., Ltd.	Lotes Guanghou Co., Ltd Zongka Technology (Shenzhen) Co., Ltd. Xincheng Development Co., Ltd. REKA Technology Co., Ltd. " Lintes Technology Co.,Ltd.	The surrogate parent company are the same parent company " " Parent company The surrogate parent company are the same parent company Subsidiary	383,871 279,910 235,988 927,013 1,529,888 297,411	5.51 2.10 4.46 - 7.29 7.09	- - - - - -		374,967 90,369 235,986 - 1,318,337 264,469	- - - - - -

170

Lotes Co., Ltd. Parent Company Only Financial Statement

9. Engagment in derivative transactions:

Engagment in derivative transactions:	Engagment in derivative transactions:	Engagment in derivative transactions:	Engagment in derivative transactions:	Engagment in derivative transactions:	Engagment in derivative transactions:	Engagment in derivative transactions:
Unit: 1,000 TWD /1,000 in foreign currency
Company conducting transaction	Investment target	Transaction date	Maturity date	Contract period	Contract Price	Profit or loss from investment
The Company " " " "	Swap contract of metal products Swap contract of metal products Swap contract of metal products Forward exchange Forward exchange	Aug. 30, 2019 Aug. 30, 2019 Aug. 30, 2019 Nov. 21, 2019 Nov. 21, 2019	Oct. 1, 2019 Oct. 31, 2019 Nov. 29, 2019 Dec. 23, 2019 Dec. 31, 2019	32 62 91 32 40	USD 468 USD 470 USD 471 USD 1,100 USD 900	(876) (537) (1,041) 248 285

(2) Information on Reinvestment Business:

Information on the Company's investees in 2019 was as follows (excluding investees in

China):

China):	China):	China):	China):
				Unit:1,000TWD
Name of the company investing	Name of investee company	Location	Main business	Initial investment amount (Note 1)		Shares held at the end of the fiscal period			Gain/loss of investee company in the fiscal period	Gain/loss in the investment recognized in the fiscal period	Remarks
				End of this period	End of the previous year	Shares	Percentage	Book Value
The Company " " " " The Company " Lotes Investment Ltd. Good Hope Investments Limited " Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co., Ltd.	Lotes Investment Ltd. Good Hope Investments Limited Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co., Ltd. Lotes USA, Inc. LOTES EU GmbH Loteson International Investments Limited Xincheng Development Co., Ltd. REKA Technology Co., Ltd. Jae You Co., Ltd. Wangden Investments Limited (HK) Ememe Robot Co., Ltd	Samoa " " Anguilla, British West 4F, No. 15, Wuxun St., Anle Dist., Keelung City 888 SW 5TH AVE 800 PORTLAND OR 97204 Ulmenstrabe 23- 25 ,60325 Frankfurt am Main, Hong Kong Samoa Unit 51 51F Tower 1 Silvercord Canton RD Tsimshatsui Hong Kong Hong Kong New Taipei City	Holding and investment businesses " " " General investment Market development Market development Holding and investment businesses Telecommunic ation services and sales of connectors for consumer electronics industry Telecommunic ation services and sales of connectors for consumer electronics industry Holding and investment businesses Holding and investment businesses Electric Appliance and Audiovisual Electric Products Manufacturing	780,979 12,030 600,092 14,990 690,000 74,950 3,359 780,979 2,998 3,036 600,102 14,990 69,600	800,126 12,325 614,805 15,358 690,000 76,788 3,520 800,126 3,072 3,111 614,815 15,358 69,600	26,050,000 401,281 20,016,426 500,000 69,000,000 2,500,000 100,000 26,050,000 100,000 101,281 20,016,756 500,000 6,960,000	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 94.37%	4,392,104 1,537,963 1,902,509 111,720 876,828 48,441 3,711 4,528,344 1,737 609,188 1,919,200 111,720 (5,085)	805,171 35,733 227,196 13,707 103,213 (7,389) 2,008 805,171 (38) 35,771 227,196 13,707 653	783,455 35,733 220,478 13,707 103,334 (7,389) 2,008 805,171 (38) 35,771 227,196 13,707 616	Note 2 Note 2

171

Lotes Co., Ltd. Parent Company Only Financial Statement

" " Lintes Technology Co., Ltd. " Jilong Co., Ltd.	Compertum Microsystems Inc. Lintes Technology Co., Ltd. Pure Fortune Limited Jilong Co., Ltd. Rihui Co., Ltd.	New Taipei City New Taipei City Samoa Samoa Samoa	Electronic Parts and Components Manufacturing Electronic Parts, Components, Electrical Machinery, Supplies Manufacturing Sales of connectors for telecommunica tion industry and for consumer electronics industry Holding and investment businesses Holding and investment businesses	13,164 486,926 - 148,401 148,401	- 487,426 3,809 152,039 152,039	1,316,400 29,712,788 - 4,950,000 4,950,000	46.74% 52.13% -% 100.00% 100.00%	12,935 778,420 - 169,589 169,589	(489) 156,114 - 51,537 51,537	(229) 94,931 - 39,325 39,325	Note 2 Note 2 Note 2

Note 1: The original investment amount was converted into New Taiwan dollars using the exchange rate at the balance sheet date.

172

Lotes Co., Ltd. Parent Company Only Financial Statement

Note 2: Investment income recognized in the current period includes adjustments for unrealized gains or losses on intercompany transactions.

(3)Investment in Chiese Company:
Names of investee companies in Mainland China, major business activities, and
other related information:

					Unit:1,000TWD Amount remitted or retrieved Accumulated investment amount remitted from Taiwan at the end of the fiscal period Gain/loss of investee company in the fiscal period Shareholdin g Rati Gain/loss in investment recognized in the fiscal period Carrying amount of investment at the end of the fiscal period ~~Investment~~ income remitted back to Taiwan by the end of the fiscal period Remittance Retrieved (Note 3) (Note 2) - - 764,490 805,171 100.00% 783,454 4,392,083 - - - 599,277 227,196 100.00% 220,478 1,902,452 - - - 14,990 13,707 100.00% 13,707 111,720 - - - - 61,701 100.00% 54,337 503,491 - - - 148,401 79,014 52.13% 34,822 107,047 - - - - 23,766 100.00% 23,766 76,572 - - - - (25,563) 100.00% (25,563) 1,006,897 - - - - - 100.00% - 15,041 - - - - (5) 100.00% (5) 98,838 - - - - (1,743) 100.00% (1,743) 1,338 - - - - (1,085) 51.00% (553) 785 -	Unit:1,000TWD Amount remitted or retrieved Accumulated investment amount remitted from Taiwan at the end of the fiscal period Gain/loss of investee company in the fiscal period Shareholdin g Rati Gain/loss in investment recognized in the fiscal period Carrying amount of investment at the end of the fiscal period ~~Investment~~ income remitted back to Taiwan by the end of the fiscal period Remittance Retrieved (Note 3) (Note 2) - - 764,490 805,171 100.00% 783,454 4,392,083 - - - 599,277 227,196 100.00% 220,478 1,902,452 - - - 14,990 13,707 100.00% 13,707 111,720 - - - - 61,701 100.00% 54,337 503,491 - - - 148,401 79,014 52.13% 34,822 107,047 - - - - 23,766 100.00% 23,766 76,572 - - - - (25,563) 100.00% (25,563) 1,006,897 - - - - - 100.00% - 15,041 - - - - (5) 100.00% (5) 98,838 - - - - (1,743) 100.00% (1,743) 1,338 - - - - (1,085) 51.00% (553) 785 -	Unit:1,000TWD Amount remitted or retrieved Accumulated investment amount remitted from Taiwan at the end of the fiscal period Gain/loss of investee company in the fiscal period Shareholdin g Rati Gain/loss in investment recognized in the fiscal period Carrying amount of investment at the end of the fiscal period ~~Investment~~ income remitted back to Taiwan by the end of the fiscal period Remittance Retrieved (Note 3) (Note 2) - - 764,490 805,171 100.00% 783,454 4,392,083 - - - 599,277 227,196 100.00% 220,478 1,902,452 - - - 14,990 13,707 100.00% 13,707 111,720 - - - - 61,701 100.00% 54,337 503,491 - - - 148,401 79,014 52.13% 34,822 107,047 - - - - 23,766 100.00% 23,766 76,572 - - - - (25,563) 100.00% (25,563) 1,006,897 - - - - - 100.00% - 15,041 - - - - (5) 100.00% (5) 98,838 - - - - (1,743) 100.00% (1,743) 1,338 - - - - (1,085) 51.00% (553) 785 -	Unit:1,000TWD Amount remitted or retrieved Accumulated investment amount remitted from Taiwan at the end of the fiscal period Gain/loss of investee company in the fiscal period Shareholdin g Rati Gain/loss in investment recognized in the fiscal period Carrying amount of investment at the end of the fiscal period ~~Investment~~ income remitted back to Taiwan by the end of the fiscal period Remittance Retrieved (Note 3) (Note 2) - - 764,490 805,171 100.00% 783,454 4,392,083 - - - 599,277 227,196 100.00% 220,478 1,902,452 - - - 14,990 13,707 100.00% 13,707 111,720 - - - - 61,701 100.00% 54,337 503,491 - - - 148,401 79,014 52.13% 34,822 107,047 - - - - 23,766 100.00% 23,766 76,572 - - - - (25,563) 100.00% (25,563) 1,006,897 - - - - - 100.00% - 15,041 - - - - (5) 100.00% (5) 98,838 - - - - (1,743) 100.00% (1,743) 1,338 - - - - (1,085) 51.00% (553) 785 -	Unit:1,000TWD Amount remitted or retrieved Accumulated investment amount remitted from Taiwan at the end of the fiscal period Gain/loss of investee company in the fiscal period Shareholdin g Rati Gain/loss in investment recognized in the fiscal period Carrying amount of investment at the end of the fiscal period ~~Investment~~ income remitted back to Taiwan by the end of the fiscal period Remittance Retrieved (Note 3) (Note 2) - - 764,490 805,171 100.00% 783,454 4,392,083 - - - 599,277 227,196 100.00% 220,478 1,902,452 - - - 14,990 13,707 100.00% 13,707 111,720 - - - - 61,701 100.00% 54,337 503,491 - - - 148,401 79,014 52.13% 34,822 107,047 - - - - 23,766 100.00% 23,766 76,572 - - - - (25,563) 100.00% (25,563) 1,006,897 - - - - - 100.00% - 15,041 - - - - (5) 100.00% (5) 98,838 - - - - (1,743) 100.00% (1,743) 1,338 - - - - (1,085) 51.00% (553) 785 -	Unit:1,000TWD Amount remitted or retrieved Accumulated investment amount remitted from Taiwan at the end of the fiscal period Gain/loss of investee company in the fiscal period Shareholdin g Rati Gain/loss in investment recognized in the fiscal period Carrying amount of investment at the end of the fiscal period ~~Investment~~ income remitted back to Taiwan by the end of the fiscal period Remittance Retrieved (Note 3) (Note 2) - - 764,490 805,171 100.00% 783,454 4,392,083 - - - 599,277 227,196 100.00% 220,478 1,902,452 - - - 14,990 13,707 100.00% 13,707 111,720 - - - - 61,701 100.00% 54,337 503,491 - - - 148,401 79,014 52.13% 34,822 107,047 - - - - 23,766 100.00% 23,766 76,572 - - - - (25,563) 100.00% (25,563) 1,006,897 - - - - - 100.00% - 15,041 - - - - (5) 100.00% (5) 98,838 - - - - (1,743) 100.00% (1,743) 1,338 - - - - (1,085) 51.00% (553) 785 -	Unit:1,000TWD Amount remitted or retrieved Accumulated investment amount remitted from Taiwan at the end of the fiscal period Gain/loss of investee company in the fiscal period Shareholdin g Rati Gain/loss in investment recognized in the fiscal period Carrying amount of investment at the end of the fiscal period ~~Investment~~ income remitted back to Taiwan by the end of the fiscal period Remittance Retrieved (Note 3) (Note 2) - - 764,490 805,171 100.00% 783,454 4,392,083 - - - 599,277 227,196 100.00% 220,478 1,902,452 - - - 14,990 13,707 100.00% 13,707 111,720 - - - - 61,701 100.00% 54,337 503,491 - - - 148,401 79,014 52.13% 34,822 107,047 - - - - 23,766 100.00% 23,766 76,572 - - - - (25,563) 100.00% (25,563) 1,006,897 - - - - - 100.00% - 15,041 - - - - (5) 100.00% (5) 98,838 - - - - (1,743) 100.00% (1,743) 1,338 - - - - (1,085) 51.00% (553) 785 -	Unit:1,000TWD Amount remitted or retrieved Accumulated investment amount remitted from Taiwan at the end of the fiscal period Gain/loss of investee company in the fiscal period Shareholdin g Rati Gain/loss in investment recognized in the fiscal period Carrying amount of investment at the end of the fiscal period ~~Investment~~ income remitted back to Taiwan by the end of the fiscal period Remittance Retrieved (Note 3) (Note 2) - - 764,490 805,171 100.00% 783,454 4,392,083 - - - 599,277 227,196 100.00% 220,478 1,902,452 - - - 14,990 13,707 100.00% 13,707 111,720 - - - - 61,701 100.00% 54,337 503,491 - - - 148,401 79,014 52.13% 34,822 107,047 - - - - 23,766 100.00% 23,766 76,572 - - - - (25,563) 100.00% (25,563) 1,006,897 - - - - - 100.00% - 15,041 - - - - (5) 100.00% (5) 98,838 - - - - (1,743) 100.00% (1,743) 1,338 - - - - (1,085) 51.00% (553) 785 -
Name of investee company in Mainland China	Main business	Paid-in capital (Note 3)	Method of investme nt (Note 1)	Accumulated investment amount remitted from Taiwan at the beginning of the fiscal period (Note 3)	Amount remitted or retrieved		Accumulated investment amount remitted from Taiwan at the end of the fiscal period (Note 3)	Gain/loss of investee company in the fiscal period	Shareholdin g Rati	Gain/loss in investment recognized in the fiscal period (Note 2)	Carrying amount of investment at the end of the fiscal period	~~Investment~~ income remitted back to Taiwan by the end of the fiscal period
					Remittance	Retrieved
Lotes Guanghou Co., Ltd Lotes Suzhou Co., Ltd Zongka Technology (Shenzhen) Co., Ltd. Lotes Hengnan Co., Ltd. Lintes Technology (Suzhou) Co., Ltd. Shenzhen Deyi Automation Technology Co., Ltd. Lotes Zhongshan Co., Ltd Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Hengnan Deyi Property Development Co., Ltd. Guangzhou Leside Technology Co., Ltd. Chongqing Fuxinrui Electronic Technology Co., Ltd.	Manufacturing connectors for telecommunication industry and for consumer electronics industry Manufacturing connectors for telecommunication industry and for consumer electronics industry R&D of electronics, import and export of raw materials of plastic products and plastic products Manufacturing connectors for telecommunication industry and for consumer electronics industry Development and production of the measurement instruments for optical communication, optical transceivers of 10GB/s or above and relevant technical support Manufacturing of robotic arms, automation equipment and relevant components Manufacturing connectors for telecommunication industry and for consumer electronics industry, and Manufacturing of robotic arms, automation equipment and relevant components Surface treatment of metal products and plastic products Development of real estate, lease of premises, landscape design and interior decorating Research, testing and development R&D and sales of electronic components, automobile components and accessories, computers and accessories, development of molds and the import and export of goods and technologies	800,466 599,277 14,990 371,734 148,401 107,438 1,031,400 15,041 98,843 3,008 2,579	(2) (2) (2) (3) (2) (3) (3) (3) (3) (3) (3)	764,490 599,277 14,990 - 148,401 - - - - - -	- - - - - - - - - - -	- - - - - - - - - - -	764,490 599,277 14,990 - 148,401 - - - - - -	805,171 227,196 13,707 61,701 79,014 23,766 (25,563) - (5) (1,743) (1,085)	100.00% 100.00% 100.00% 100.00% 52.13% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00%	783,454 220,478 13,707 54,337 34,822 23,766 (25,563) - (5) (1,743) (553)	4,392,083 1,902,452 111,720 503,491 107,047 76,572 1,006,897 15,041 98,838 1,338 785	- - - - - - - - - - -

Note 1: There are six types of investments:

(1) Investment in Chinese Corporation via Third Region Remittance.
(2) Establishment of a company to reinvest in a continental company through a third regional investment.
(3) Reinvest in Chinese companies by re-investing in existing companies in third regions.
(4) Direct Investment
(5) Others.
(6) NA.

Note 2: The investment gain or loss recognized in the current period has been reconciled with the unrealized gain or loss from intercompany transactions.

Note 3: The balance sheet date exchange rates are used to translate the paid-in capital and remittance of cumulative investment amounts into New Taiwan dollars. 。

Investment ceiling in Mainland China :

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Lotes Co., Ltd. Parent Company Only Financial Statement

Accumulated amount remitted from Taiwan at the end of the fiscal period for investment in Mainland China (Note 1)	Investment amount approved by Investment Commission, MoEA (Note 1)	Investment ceiling in Mainland China according to the regulations made by Investment Commission, MoEA
1,378,757,000	1,524,374,000	7,089,196 ,000

Note 1: The conversions to NTD were made at the exchange rates prevailing on the balance sheet date. Note 2: Accumulative investment made by the Company, excluding Lintes Technology Co., Ltd.at the End of this period is $148,041,000 dollars and the amount approved by MOEA Investment Commission is 148,401,000 dollars.

174

Significant transactions with the investee companies in China:

Please refer to the "Significant Transactions" and "Business relationship and significant transactions between the Company and its subsidiaries" for details of the significant transactions between the Company and its investee companies in Mainland China, directly or indirectly, in 2019.

XIV. Segment Information

Please refer to the consolidated financial statements for the 2019.

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5. 2019 Consolidated Financial Statement and Independent Auditor’s Report

Independent Auditor’s Report

To the Board of Directors, Lotes Co., Ltd.:

Audit opinion

We have audited the Consolidated Balance Sheet of Lotes Co., Ltd. and its subsidiaries (hereinafter referred to as Lotes Group) as of December 31, 2019 and 2018, the Consolidated Statement of Comprehensive Income as of January 1 to December 31, 2019 and 2018 as well as the Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and the Notes to the Consolidated Financial Statements (including important accounting policies summary).

In our opinions, the compilation of the above consolidated financial statements present fairly, in all material respects, of the financial status of December 31, 2019 and 2018 in Lotes Group and the financial performance and consolidated cash flow of January 1 to December 31, 2019 and 2018 prepared in accordance with Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis of the audit opinion

The audit of the consolidated financial statements for the year ended on December 31, 2019 was conducted by us in accordance with "Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants", "CHIN-KUAN-CHENG-SHEN-TZU No. 1090360805 Letter" and Generally Accepted Auditing Standards (GAAS); the audit of the consolidated financial statements for the year ended on December 31, 2018 was conducted by us in accordance with "Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants" and Generally Accepted Auditing Standards (GAAS). Our responsibilities under these standards will be further explained in the responsibility paragraph of the accountant’s audit on the consolidated financial statements. The personnel regulated by independence at the accounting firm that we work with have been managed according to the code of professional ethics to maintain independence from Lotes Group as well as perform other responsibilities addressed on the regulation. Based on the audit results of us, we believe we have obtained sufficient and appropriate auditing evidence as the basis to express our audit opinions.

Key audit matters

Key audit matters refer to the most important matters on the audits to Lotes Group’s consolidated financial statements for the year ended on December 31, 2019 based on our professional judgment. The matters have been responded on the whole audited consolidated financial statements and during the process of the expression of the audit opinions. There, we won’t express opinions separately towards the matters. Based on the judgment of the accountants, the following key audit matters that should be communicated on the audit report are as follows: I. Recognition of income

Please refer to Note IV (XV) to the consolidated financial statements for the accounting policy in terms of income recognition. Please refer to Note V (II) to the consolidated financial statements for the refund liability in terms of accounting estimates and assumed uncertainties. Please refer to Note VI (XIV) to the consolidated financial statements for the description of refund liability.

176

Description of the key audit matters:

The operating income is the most critical factor when determining the operational performance of Lotes Group. Users of the statements are cautiously concerned about the performance of the operating income. In response to the market conditions and business needs, discounts were provided for parts of the sales of goods agreed with the customers. Based on experiences and agreements with the customers, the management would estimate the refund liability and include it as a deduction of operating income. Thus, the income recognition evaluation is one of the fundamental evaluation items for accountants in the execution of financial report audit for Lotes Group.

Corresponding audit procedure:

II. Evaluation of inventory

Please refer to Note IV (VIII) for the accounting policy of inventory evaluation. Please refer to Note V (I) in the consolidated financial statements for the accounting estimates and assumed uncertainties of the inventory evaluation. Please refer to Note VI (IV) in the consolidated financial statements for the information on the losses from the price drop of inventory. Description of the key audit matters:

Other matters

Lotes Co., Ltd. prepared the parent company only financial statements for 2019 and 2018, and we also issued auditor's report with unqualified opinion for the financial statements as reference.

Responsibility from the management and governing unit towards the consolidated financial statements

The management’s responsibility is to prepare the consolidated financial statements present fairly according to Regulations Governing the Preparation of Financial Reports by Securities Issuers and to maintain necessary internal control related to the preparation of the consolidated financial statements in order to ensure there is no major untrue expression on the financial statements due to fraud or error.

When preparing the consolidated financial statements, the responsibility of the management also includes evaluating Lotes Group’s capability of continuous operation, disclosure of relevant matters and the application of continuous operation accounting model unless the the management intends to

177

liquidate Lotes Group or suspend its business operation or there is no alternative practical and feasible solution other than liquidation or business suspension.

The governing unit (including supervisors) at Lotes Group is responsible for supervising the process of financial reports.

Responsibility of accountants’ audit on the consolidated financial statements

The purpose of the consolidated financial statements audited by us is to obtain reasonable assurance on whether the significant untrue expression exists on the whole consolidated financial statements due to fraud or error as well as issue the audit report. The reasonable assurance is the high certainty; however, it won’t be able to guarantee that the significant untrue expression will definitely be able to be detected by generally accepted auditing standards, and the untrue expression might be caused from fraud or error. It is regarded as with significance if the consolidated amount or the aggregation number of the untrue expression can reasonably predict that it will affect the economic decisions made by the users of the consolidated financial statements.

When we conduct the audit according to generally accepted auditing standards, we use professional judgment and maintain our professional suspicion. We also executed the following tasks:

Identifying and evaluating the risk of major untrue expression on the consolidated financial statements due to fraud or error; designing and implementing proper responding strategies towards the risk evaluated; and obtaining sufficient and appropriate audit evidence as the basis of audit opinions. Due to fraud might be involving with collusion, counterfeiting, malicious omission untrue declaration, or going out of the internal control, the risk of not detecting the major untrue expression due to fraud will be higher than that due to error.
Obtaining necessary understanding of internal control related to audit in order to design proper audit procedure under the situation of the case. However, its purpose is not to express opinion toward the effectiveness of the internal control in Lotes Group.
Evaluating the adequacy of the accounting policies used by the the management and the rationality of the accounting evaluation and relevant disclosure concluded.
Based on the audit evidence obtained, conclusion towards the appropriateness of continuous operation accounting basis that the the management adopts and the existence of major uncertainty on events or situations with major concerns affecting Lotes Group’s capability in continuous operation are made. If we believe major uncertainty existed on the event or situation, we must remind the users of Consolidated financial statements on the audit report to pay attention on the relevant disclosure or modify audit opinion when the disclosure is not appropriate. The conclusion that we made is based on the audit evidence obtained up to the audit report day, but future events or situations might cause Lotes Group not capable in continuous operation.
Evaluating the overall expression, structure and content of the consolidated financial statements (including relevant notes) as well as whether the consolidated financial statements present fairly, in all material respects, relevant transaction and events.
Obtaining sufficient and appropriated audit evidence of the financial information from the investee companies accounted for using equity method as well as express opinions towards the consolidated financial statements. We are in charge of the directing, supervision and execution on the audit cases as well as concluding audit opinions towards the consolidated financial statements of Lotes Group.

178

We determined the key audit matters that we would like to execute on Lotes Group’s Consolidated financial statements for the year ended on December 31, 2019 from the communication with the governing unit. We clearly stated the related matters on the audit report unless it is the specific matter that is not allowed to be disclosed to the public according to laws, or under a very rare situation that we decided not to communicate specific matters on the audit report because we can reasonably anticipate the negative influence generated by the communication will be greater than the public interests increased.

KPMG Taiwan

CPAs:

[Competent ] ：[(88) TAI-TSAI-CHENG (VI) ] Authority of No. 18311 Securities Approval Certificate No.

[March 25, 2020 ]

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Lotes Co., Ltd. and Its Subsidiaries

Consolidated Balance Sheet

December 31, 2019 and 2018

Unit: 1,000 TWD

Dec. 31, 2019 Amount `％` $ 2,845,994 17 240,034 1 6,438 - 15,257 - 5,949,268 37 219,031 1 758 - 1,976,021 12 137,348 1 - - 10,563 -	Dec. 31, 2019 Amount % $ 29,980 - 19,947 - 19,000 - 1,885,062 12 964,415 6 436,898 3 94,851 1 157,256 1 23,337 -	Dec. 31, 2018 Amount % 919,643 7 6,160 - 45,396 - 1,743,472 13 830,541 6 226,720 2 - - 86,883 - 17,663 -
	3,630,746 23	3,876,478 28
	41,729 - 60,560 - 1,932 -	40,522 - - - 1,726 -
11,400,712 69
3,514,714 22 383,426 2 283,002 2 99,789 1 123,925 1 85,923 1 388,701 2	104,221 -	42,248 -
	3,734,967 23	3,918,726 28
	1,034,779 6 - - 3,959,560 24 7,471,519 46 (650,532) (4)	934,779 7 125,638 1 2,466,109 18 6,296,652 46 (317,020) (2)
4,879,480 31	11,815,326 72	9,506,158 70
	729,899 5	365,324 2
	12,545,225 77	9,871,482 72
$ 16,280,192 100	$ 16,280,192 100	13,790,208 100

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Lotes Co., Ltd. and Its Subsidiaries

Consolidated Statement of Comprehensive Income January 1 to December 31, 2019 and 2018

Unit: 1,000 TWD

2019	`％` 100 64	2018	`％` 100 67
Amount $ 15,088,872 9,620,962		Amount 13,311,518 8,962,649
5,467,910	36	4,348,869	33
562,701 1,049,810 1,104,315 460	4 7 7 -	585,617 873,990 903,890 2,932	4 7 7 -
2,717,286	18	2,366,429	18
2,750,624	18	1,982,440	15
212,040 (105,785) (22,711) (2,407)	2 (1) - -	201,729 (12,191) (18,468) 787	2 - - -
81,137	1	171,857	2
2,831,761 687,293	19 5	2,154,297 445,998	17 3
2,144,468	14	1,708,299	14
(1,148) (16,103) 230	- - -	2,187 (2,459) (463)	- - -
(17,021)	-	(735)	-
(320,897) -	(2) -	(55,575) -	- -
(320,897)	(2)	(55,575)	-
(337,918)	(2)	(56,310)	-
$ 1,806,550	12	1,651,989	14
2,076,043 68,425	13 1	1,608,567 99,732	13 1
2,144,468	14	1,708,299	14
1,741,613 64,937	12 -	1,553,091 98,898	13 1
1,806,550	12	1,651,989	14
$	20.11		17.21
$	20.06		17.15

181

Unit: 1,000 TWD

Lotes Co., Ltd. and Its Subsidiaries

Consolidated Statement of Changes in Equity January 1 to December 31, 2019 and 2018

			Equity allocated to the owner of the	Equity allocated to the owner of the	Equity allocated to the owner of the	parent company			Non-control equity	Total equity 8,431,789 -
Share capital		Capital reserves	Retained earnings				Other equity items	Equity attributable to owners of the parent
						Exchange difference between foreign operating office’s statement
Ordinary Share Capital	Share capital received in advance		Legal reserve	Special reserve	Undistribute d earnings
$ 934,779 -	- -	2,410,168 -	835,452 -	37,613 -	4,322,806 4,618			8,285,616 -	146,173 -
934,779	-	2,410,168	835,452	37,613	4,327,424	(259,820) - -		8,285,616	146,173	8,431,789
- -	- -	- -	- -	- -	1,608,567 1,724	- - - (54,741) (2,459) -		1,608,567 (55,476)	99,732 (834)	1,708,299 (56,310)
-	-	-	-	-	1,610,291	(54,741) (2,459) -		1,553,091	98,898	1,651,989
- - - - - - -	- - - - - 125,638 -	- - - 45,248 10,693 - -	95,630 - - - - - -	- 217,589 - - - - -	(95,630) (217,589) (514,128) - - - -	- - - - - - - - - - - - - - - - - - - - -		- - (514,128) 45,248 10,693 125,638 -	- - - - - - 120,253	- - (514,128) 45,248 10,693 125,638 120,253
934,779 - -	125,638 - -	2,466,109 - -	931,082 - -	255,202 - -	5,110,368 2,076,043 (918)	(314,561) (2,459) - - - - (317,409) (16,103) -		9,506,158 2,076,043 (334,430)	365,324 68,425 (3,488)	9,871,482 2,144,468 (337,918)
-	-	-	-	-	2,075,125	(317,409) (16,103) -		1,741,613	64,937	1,806,550
- - - - 100,000 - -	- - - - (125,638) - -	- - - 193,451 1,300,000 - -	160,857 - - - - - -	- 61,818 - - - - -	(160,857) (61,818) (900,258) - - - -	- - - - - - - - - - - - - - - - - - - - -		- - (900,258) 193,451 1,274,362 - -	- - - - - 310,257 (10,619)	- - (900,258) 193,451 1,274,362 310,257 (10,619)
$ 1,034,779	-	3,959,560	1,091,939	317,020	6,062,560	(631,970) (18,562) -		11,815,326	729,899	12,545,225

182

Lotes Co., Ltd. and Its Subsidiaries

Consolidated Statement of Cash Flows

January 1 to December 31, 2019 and 2018

Net cash flow from operating activities: Net profit before tax Items of adjustment: Income and expenses Depreciation expense Amortization expense Expected credit losses Interest expense Interest income Profit/loss of Financial assets and liabilities in fair value Losses on the price fall and scraping of inventory Disposition of Property, plant and equipment Compensation cost of employee stock options Total income and expenses Change in assets/liabilities related to operating activities: Net change in operating assets: Gain/loss of receivable notes Increase in accounts receivable Decrease (increase) in other accounts receivable Decrease (increase) in inventory Increase in payments in advance Decrease in Other current assets Decrease in Other financial assets Total net change in operating assets Net change in operating liabilities: Increase in contract liabilities Increase (decrease) in notes payable Increase in accounts payable Other increase in accounts payable Increase in provisions Increase (decrease) in Other current liabilities Increase (decrease) in refund liabilities Increase in other non-current liabilities Total net change in operating liabilities Total net changes in operating assets and liabilities Total adjustments Cash in flow generated by operating activities Interests received Paid interests Income tax paid Net cash inflow from operating activities Net cash flow in investing activities: Acquisition of financial assets measured at FVTOCI Financial assets Acquisition of financial assets measured at FVTPL Disposal of financial assets measured at FVTPL Acquisition of real estate, plant and equipment Disposition of Property, plant and equipment Increase in intangible assets Decrease (increase) in other non-current liabilities Cash flow of investment activities (Outflow) Cash flows in fundraising activities: Increment/loss of short-term loan Repayment of lease principal Issuance of cash dividends Cash dividends issued for non-controlling interests Cash capital increase Capital collected in advance for cash capital increase Variance of non-control equity Changes in subsidiaries, associates and joint ventures accounted for using equity method Net cash inflow (outflow) in financing activities Change of exchange rate effecting Cash and cash equivalents Increase of cash and cash equivalents Balance of cash and cash equivalents at the beginning of the term Balance of cash and cash equivalents at the end of the term	2019 $ 2,831,761 1,023,478 12,368 2,867 22,711 (32,820) (7,267) 39,165 27,655 4,709	Unit: 1,000 TWD 2018 2,154,297 819,154 7,966 2,145 18,468 (14,387) 1,379 48,379 12,193 10,693
	1,092,866	905,990
	858 (657,895) (4,427) 212,641 (46,534) 2,067 48,332	(9,220) (1,001,427) 7,694 (485,727) (39,721) 23,675 134,255
	(444,958)	(1,370,471)
	13,787 (26,396) 141,590 154,112 59 5,674 70,373 206	6,160 35,992 41,733 138,188 192 (1,137) (12,414) 261
	359,405	208,975
	(85,553)	(1,161,496)
	1,007,313	(255,506)
	3,839,074 42,560 (24,089) (497,845)	1,898,791 11,175 (17,870) (383,817)
	3,359,700	1,508,279
	- (313,922) 177,274 (1,127,735) 6,162 (52,630) (181,017)	(25,000) (90,479) - (1,308,667) 8,574 (42,111) 38,095
	(1,491,868)	(1,419,588)
	(889,663) (121,833) (900,258) (10,619) 1,274,362 - 308,003 190,996	318,811 - (514,128) - - 125,638 120,253 45,248
	(149,012)	95,822
	(320,897) 1,397,923 1,448,071	(55,575) 128,938 1,319,133
	$ 2,845,994	1,448,071

183

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements For the Years Ended on December 31, 2019 and 2018

(Except as otherwise indicated, the unit for all amounts in this document is NT$1,000))

I. Company History

Lotes Co., Ltd. (hereinafter referred to as the "Company") was incorporated on Aug. 23, 1986 in accordance with the provisions of the Company Law and was approved for registration with its registered office at No.15, Wuxun Street, Anle District, Keelung City. The Company and its subsidiaries (hereinafter referred to as the "Consolidated company") are principally engaged in the sale and purchase of various hardware parts and components, the manufacturing and processing of various terminals and their connectors, the import and export business in connection with the preceding item and the agency of the preceding item in connection with the tender quotation and distribution of products of domestic and foreign manufacturers. Please refer to Note 14 for further details.

II. Date and Procedures of Approval of Financial Statement

The Consolidated Financial Statement was approved and released by the Board of Directors on Mar. 25, 2020.

III. Application of New and Revised Standards and Intepretations

(1) Influence of the Adoption of New and Revised Standards and Integrations Approved by the Financial Supervisory Commission

Since 2019, the Consolidated company has fully adopted the International Financial Report Standards which is approved by the Financial Supervisory Commission (hereinafter referred to as FSC) to come into effect to compile Consolidated Financial Statements, with relevant new, amended and revised standards and interpretations listed as follows:

New release/revision/amendment of guidelines and
interpretations
IFRS 16 "Leases"
IFRIC Interpretation 23 "Uncertainty over Income Tax
Treatments"
Amendments to IFRS 9 "Prepayment Features with Negative
Compensation"
Amendments to IAS 19 "Plan Amendment, Curtailment or
Settlement"
Amendments to IAS 28 "Long-term Interests in Associates and
Joint Ventures"
Annual Improvements to IFRS Standards 2015-2017 Cycle

Effective date
upon
promulgation by
the IASB

Jan. 1, 2019
Jan. 1, 2019
Jan. 1, 2019
Jan. 1, 2019
Jan. 1, 2019
Jan. 1, 2019

184

With the exception of the following items, the application of the new IFRS will not cause a material change to the consolidated financial statements. The nature and impact of the actors are described as follows:

IFRS 16 leases

International Financial Reporting Standards no. 16 "lease" (hereinafter referred to as the IFRS-16) place of the current International Accounting Standards no. 17 "lease" (hereinafter referred to as the IAS 17), the International Financial Reporting Interpretations Committee no. 4 " Determining Whether an Arrangement Contains a Lease" (hereinafter referred to as the IFRIC-4), SIC-15 "Operating Leases – Incentives", and SIC-27 "Evaluating the Substance of Transactions in the Legal Form of a Lease".

185

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

The consolidated company adopted the formal retroactive law to transition to IFRS 16, adjusting the cumulative impact of the initial application to the retained earnings on 1 January 2019. The nature and impact of the relevant accounting policy changes are described below:

(1) Definition of lease

The consolidated company previously relied on IFRIC 4 to determine whether or not an agreement was or included in a lease on the commencement date of the contract. A change in accounting policy will assess whether a contract is or includes a lease as defined in IFRS 16. Note iv (11) to the accounting policy.

In the transition to IFRS 16, the consolidated company chooses to use the expedient method to waive the assessment of whether the transaction before the initial application is a lease, i.e., to apply IFRS 16 directly to a contract previously identified as a lease. Contracts that are not a lease will not be re-evaluated as a lease if they have previously been interpreted in accordance with IAS 17 and IFRS 4 identification. Therefore, the lease definition set forth in IFRS 16 applies only to contracts entered into or changed after the date of initial application.

(2) the lessee

A transaction in which the consolidated company is a lessee is previously classified according to whether or not the lease agreement has been transferred to the underlying property subject to almost all risks and rewards. Under IFRS 16, lease contracts are identified as right-of-use assets and lease liabilities on the balance sheet.

A. Contracts previously classified as operating leases under IAS 17

During the transition, lease liabilities is measured by the present value of residual lease benefits, and discounted by the incremental borrowing rate of the first applicable day of a consolidated company. Lease assets are measured in terms of lease liabilities adjusted for all prepaid or payable lease benefits related to the lease.

In addition, the consolidated company adopted the following expedient for transition to IFRS 16:

a. A single discount rate is applied to a lease portfolio with similar characteristics.

c. For leases whose Lease term ends within 12 months after the initial application date, right-of-use assets and lease liabilities are not recognized by exemption.

d. The original direct cost is not included in the right-of-use assets measurement on the initial application date.

e. When the lease contract includes an option to extend or terminate the lease, the

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Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

lease term shall be decided with the benefit of hindsight.

(3) the lessor

Except for subletting, the consolidated company is not required to make any adjustment in connection with its transaction as a lessor when transitioning to IFRS 16, which applies to its lease transactions from the date of initial application.

Under IFRS 16, the classification shall be based on right-of-use assets rather than on the valuation and sublease of the underlying assets.

(4) impact on financial statements

When transitioning to IFRS 16, the consolidated company recognized right-of-use assets and lease liabilities as $488,228, $241,482, and other non-current assets as less than $246,746, 000, respectively, on the first date of application. Lease liabilities is discounted by Lease benefits at the increased borrowing rate of the first applicable date of the consolidated company. The weighted average of interest rate used is 6.08%.

The lease commitment amount disclosed in the year before the first applicable date and the lease liabilities recognized in the first applicable date are as follows. The difference number is the discounted effect number.

Amount of commitment for the operating lease disclosed in the consolidated financial statements issued on Dec. 31, 2018 Amount discounted with the incremental borrowing rate announced on Jan. 1, 2019 (Amount of lease liabilities recognized on Jan. 1, 2019)	2019.1.1
	$ 247,997
	$ 241,482

(2) Effects of new and revised standards and interpretation has been approved by FSC but not yet being adopted

nded and revised standards and explanations are set out as follows:
New release/revision/amendment of guidelines and interpretations Amendments to IFRS 3 Definition of a Businesses Amendments to IFRS 9, IAS 39 and IFRS 7 Interest Rate Benchmark Reform Amendments to IAS 1 and IAS 8 Definition of Material	Effective date upon promulgation by the IASB
	Jan. 1, 2020 Jan. 1, 2020 Jan. 1, 2020

The Consolidated company considers that the application of the aforementioned newly recognized IFRSs will not result in significant changes to the Consolidated Financial

187

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

Statements

(3) New and revised standards and interpretations not yet recognized by the FSC

ot yet endorsed by the FSC.
New release/revision/amendment of guidelines and interpretations Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets between an Investor and its Associate or Joint Venture" IFRS 17 "Insurance Contracts" Amendments to IAS 1 "Classification of Liabilities as Current or Non-current"	Effective date upon promulgation by the IASB
	To be determined by the Board Jan. 1, 2021 Jan. 1, 2022

The consolidated company is continuously evaluating the impact of the above criteria and explanations on the consolidated company's financial position and results of operations.

188

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

IV. Summary of Major Accounting Policies

The major accounting policies adopted in this Consolidated Financial Statement are summarised as follows. Unless otherwise noted, the following accounting policies have been applicable for all presentation period of the Consolidated Financial Statement.

(1)Compliance Statement

The Consolidated Financial Statement was compiled in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers (thereinafter referred to as the Guidelines Governing the Preparation), IFRS approved by the Financial Supervisory Commission, and IAS, Interpretations and Interpretation Announcement (hereinafter referred to as IFRS approved by the Financial Supervisory Commission).

(2)Compling Basis

1. Measurement Foundation

Except the major items in the following balance sheet, the Consolidated Financial Statement was complied based on the historical costs:

(1) Financial assets at fair value through profit or loss measured with fair value;
(2) Financial assets carried at fair value through other comprehensive income or loss.
(3) Liabilities for cash settlement Share-based payment agreements that are measured at fair value.
(4) Net defined benefit liabilities (or assets) are measured at the fair value of the pension fund's assets, less the present value of defined benefit obligations and the maximum effect amount as described in Note 4(16).

2. Functional Currency and Presentation Currency

Each party of the Consolidated company takes the currency of major economic environment where its operation is located as its functional currency. The Consolidated Financial Statement is presented in the functional currency of the Company, TWD. All of the financial information expressed herein in TWD is of one thousand per unit.

(3) Consolidation Foundation

1.Compling Principles of the Consolidated Financial Statement

The main compliers of the Consolidated Financial Statement are composed of the Company and the individuals controlled by the Company (subsidiary).

Since the date of being control, subsidiary have started to integrate their financial reports to the Consolidated Financial Statement till the date of the cancelation of the

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control. All trading, balances and any un-realized gains and losses among the consolidated companies have been terminated when the Consolidated Financial Statement is complied. The sum of the integrated gains and losses of subsidiary company are under control of the owner the Company and belong to non-controlling interests, even if when non-controlling interests become losses.

Intercompany transactions, balances and any unrealized gains and expenses were removed from the preparation of the consolidated financial statements.

Changes in the Consolidated company’s ownership interest in a subsidiary that do not result in a loss of control are treated as equity transactions with owners.

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2. Subsidiary listed in the Consolidated Financial Statement

The including subsidiaries listed in the Consolidated Financial Statement are as follows:

Name of Investment Company	Name of Subsidiary Place of Incorporation	Shareholding percentage
		Dec. 31, 2019 Dec. 31, 2018
	Lotes Investments Limited Samoa Good Hope Investments Limited `〞` Guansi Development Co., Ltd. `〞` Zhaxi Investment Co., Ltd. Anguilla, British West Jiayu Investment Co., Ltd. 4F, No. 15, Wuxun St., Anle Dist., Keelung City Lotes USA, Inc 888 SW 5TH AVE 800 PORTLAND OR 97204 U.S.A. LOTES EU GmbH Ulmenstrabe 23-25 ,60325 Frankfurt am Main. Loteson International Investments Limited Hong Kong Lotes Guanghou Co., Ltd No. 526, Jinling N. Rd., Panyu Nansha, Guangzhou City, Guangdong Province, China Lotes Hengnan Co., Ltd. Yunji Avenue, Xinxiancheng Industrial Park, Hengnan County, Hengyang City, Hunan Province, China Shenzhen Deyi Automation Technology Co., Ltd. Suite 2, 4F, Building 1, Dachien Industrial Park, Longchang Rd., Area 67, Baoan Dist., Shenzhen City Lotes Zhongshan Co., Ltd 4F, III of Building 2, No. 8, Gaopingruifeng Rd., Sanjiao Town, Zhongshan City Zhongshan Dezhi Metal Surface Treatment Co., Ltd. 1F, No. 8, Ruifeng Rd., Sanjiao Town, Zhongshan City Hengnan Deyi Property Development Co., Ltd. No. 120, Yunji Avenue, Yunji Township, Hengnan County, Hengyang City, Hunan City Guangzhou Leside Technology Co., Ltd. Suite 603, No. 5, Shuangshan Avenue, Nansha Dist., Guangzhou City Chongqing Fuxinrui Electronic Technology Co., Ltd. No. 6, Yingchun Rd., Nanan Dist., Chongqing City
The Company `〞` `〞` `〞` `〞` `〞` `〞` Lotes Investments Limited Loteson International Investments Limited Lotes Guanghou Co., Ltd `〞` `〞` `〞` `〞` `〞` Guangzhou Leside Technology Co., Ltd.		100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 50.00% 50.00% 100.00% - % 100.00% - % 100.00% - % 51.00% - %

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Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

Lotes Suzhou	Lotes Zhongshan Co., Ltd	4F, III of Building 2, No. 8,	50.00%	50.00%	50.00%	50.00%
Co., Ltd		Gaopingruifeng Rd., Sanjiao
		Town, Zhongshan City
Good Hope	Xincheng Development Co., Ltd.	Samoa	100.00%		100.00%
Investments
Limited
`〞`	REKA Technology Co., Ltd.	Unit 1405-1406 Dominion	100.00%		100.00%
		Centre 43-59 Queen's Road
		East, Wanchai, H.K.
Guansi	Jae You Co., Ltd.	Hong Kong	100.00%		100.00%
Development
Co., Ltd.
Jae You Co.,	Lotes Suzhou Co., Ltd	No. 26, Caohu Avenue,	100.00%		100.00%
Ltd.		Xiangcheng Economic
		Development Zone, Suzhou
		City, Jiangsu Province, China
Zhaxi	Wangden Investments Limited (HK)	Hong Kong	100.00%		100.00%
Investment
Co., Ltd.
Wangden	Zongka Technology (Shenzhen) Co.,	403B, Building 1, Dacheng	100.00%		100.00%
Investments	Ltd.	Industrial Zone, Longchang
Co., Ltd.		Rd., Area 67, Baoan Dist.,
		Shengzhen City
Jiayu	Ememe Robot Co., Ltd	15F, No. 700, Zhongzhen	94.37%		94.37%
Investment		Rd., Zhonghe Dist., New
Co., Ltd.		Taipei City
`〞`	Compertum Microsystems Inc.	13F-1, No. 716, Zhongzhen	46.74%		-	%
		Rd., Zhonghe Dist., New
		Taipei City
`〞`	Lintes Co., Ltd.	9F-1, No. 150, Jianyi Rd.,	52.13%		58.36%
		Zhonghe Dist., New Taipei
		City
Lintes Co.,	Pure Fortune Limited	Samoa	-	%	100.00%
Ltd.
`〞`	Jilong Co., Ltd.	`〞`	100.00%		100.00%
Jilong Co.,	Rihui Co., Ltd.	`〞`	100.00%		100.00%
Ltd.
Rihui Co.,	Lintes Technology (Suzhou) Co., Ltd.	No. 26, Caohu Avenue,	100.00%		100.00%
Ltd.		Xiangcheng Economic
		Development Zone, Suzhou
		City, Jiangsu Province, China

Pure Fortune Limited was liquidated in Q2, 2019.

In Q2, 2018, Lotes Hengnan Co. Ltd. had a merger with Hengnan Dezhi Fine Electornics Co., Ltd.

Subsidiary not listed in the Consolidated Financial Statement: none.

(4) Foreign Currency

Foreign Currency Trading

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Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

(1) Equity instruments designated as measured at fair value through other comprehensive income.

(2) Financial liabilities designated as a net investment hedge for a foreign operating entity are within the effective range of the hedge; or

(3) Eligible cash flow hedges are within the effective range of the hedge.

Foreign Operating Organizations

(5) Standards for Classifying Current and Non-current Assets and Liabilities

Assets meeting one of the following conditions are recognized to be current assets, and

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other assets not belonging to current assets are recognized to be non-current assets:

1.Those that are expected to be realized during the normal operating period of the Consolidated company or intended to be sold or consumed.
Those held mainly for the purpose of transaction.
Those expected to be realized with in 12 months after the balance sheet.
Cash or cash equivalents, but not including those used for exchange, liquidation of liabilities or those with other restrictions.

The liabilities meeting any one of the following conditions are current liabilities, and

other liabilities not belonging to current liabilities are recognized to be non-current liabilities:

Those expected to be paid off during the normal operating period of the Company.
Those held mainly for the purpose of transaction.
Those expected to be paid off with in 12 months after the balance sheet.
4.Those that shall not allow the Consolidated company to unconditionally extend the liquidation period to at least 12 months. Liabilities for liquidation arising from the issuing of equity instruments in accordance with the clauses chosen by the other party of transaction will not affect their classification.
(6) Cash and cash equivalents

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(7) Financial Instrument

Accounts receivable are recognized at the time of generation. All other financial assets and financial liabilities were originally recognized when the consolidated company became a party to the terms of the financial instrument agreement. Financial assets that are not measured at fair value through profit or loss (except accounts receivable, which do not contain a significant financial component) or financial liabilities are measured at fair value plus the transaction cost directly attributable to the acquisition or issue. Accounts receivable, which do not contain significant financial components, are originally measured at transaction prices.

1. Financial assets

The purchase or sale of financial assets by a conventional trader, the consolidated company shall treat all purchases and sales of financial assets classified in the same manner in accordance with the transaction date or the settlement date.

The consolidated company will only change its business model for managing financial assets from the first day of the next reporting period to classify all affected financial assets.

(1) financial assets as measured by their amortized costs

Financial assets are measured at post-amortized cost when they simultaneously meet the following conditions and are not specified to be measured at fair value through profit or loss:

The financial asset is held under a business model for the purpose of collecting
contractual cash flow.

· The cash flow generated by the terms of the contract on the financial asset at the specified date is solely for the payment of the principal and the interest on the outstanding principal amount.

(2) financial assets measured at fair value through other comprehensive income

When the debt instrument investment simultaneously meets the following conditions and is not specified to be measured at fair value through profit and loss, it is

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measured at fair value through other consolidated profit and loss:

· the financial asset is held under a business model for the purpose of collecting contractual cash flow and selling.

· the cash flow generated by the terms of the contract on the financial asset at the specified date is solely for the payment of the principal and the interest on the outstanding principal amount.

The consolidated company may, at the time of its original recognition, irrevocably choose to report the subsequent changes in the fair value of its non-tradable equity instrument investments to other consolidated profits and losses. The foregoing selection is made on a item-by-item tool basis.

Equity instrument investors are measured by fair value afterwards. Dividend income (unless it clearly represents the recovery of a portion of the investment cost) is recognized as a profit or loss. The remaining net benefits or losses are recognized as other comprehensive income and are not reclassified into gains and losses. Dividend income from equity investments is recognized on the date (usually ex-dividend date) when the consolidated company becomes entitled to receive dividends.

(3) financial assets measured at fair value through profit and loss

Financial assets that are not measured at fair value at the above amortized cost or through other comprehensive income are measured at fair value through gains and losses, including derivative financial assets. The consolidated company may, at the time of its original recognition, irrevocably designate financial assets that meet the criteria of measuring at fair value according to the amortized cost or through other comprehensive income as financial assets measured at fair value through gains and losses in order to eliminate or substantially reduce improper accounting matching.

Such assets are subsequently measured at fair value and their net gains or losses (including any dividends and interest income) are recognised as gains or losses.

(4) business model evaluation

The purpose of the consolidated company is to assess the business model of holding financial assets at a portfolio level, which best reflects the way of operation and management and the way of providing information to management. The following information is considered:

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· performance of the business model and how the financial assets held under the business model are evaluated and reported to the principal managers of the business.

· risks that affect the performance of the business model (and the financial assets held under the business model) and the manner in which such risks are managed.

· the frequency, amount and timeliness of previous sales of financial assets, the reasons for such sales and the expectation of future sales.

Financial assets held for trading and managed and evaluated for performance on a fair value basis are measured at fair value through profit and loss.

(5) evaluate whether the cash flow of the contract is fully the interest on the payment of the principal and the amount of outstanding principal

To evaluate whether the contract cash flow is fully interest on the principal and the outstanding principal amount, the consolidated company considers the terms of the financial instrument contract, including whether the financial asset contains a contract term that can change the point or amount of the cash flow of the contract, causing it to fail to meet this condition. In the evaluation, the consolidated company considers:

· any contingencies that change the timeliness or amount of the cash flow of the contract;

· the terms of the coupon rate may be adjusted, including the nature of the variable

rate;

· the nature of prepayment and extension; and

claims of the consolidated company are limited to cash flow terms derived from
specific assets (e.g. non-recourse nature).
(6) impairment of financial assets

For the financial assets measured at the amortized cost after (including cash and about when cash, notes receivable, accounts receivable, other receivables, refundable

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deposit, and other financial assets, etc.), through the other comprehensive income measured at fair value, the debt instruments of investment assets and contract of expected loss, the consolidated company recognizes the allowance for credit losses.

· determine that the credit risk of the debt securities at the reporting date is low;

and

· the credit risk of other debt securities and bank deposits (i.e. the risk of default during the expected life of financial instruments) has not increased significantly since the original recognition.

The loss allowance for accounts receivable and contract assets is measured in terms of the expected credit loss during the period of existence.

In determining whether credit risk has increased significantly since the initial recognition, the consolidated company considers reasonable and verifiable information (available at no excessive cost or investment), including qualitative and quantitative information, as well as analysis based on the consolidated company’s historical experiences, credit assessment and forward-looking information.

Expected credit loss during the life of a financial instrument refers to the expected credit loss arising from all possible defaults during the life of the financial instrument.

The longest contract period during which the expected credit loss is measured is the longest contract period during which the consolidated company is exposed to credit risk.

The expected credit loss is the probabilistic weighted estimate of the credit loss during the expected life of the financial instrument. Credit losses are measured in terms of the present value of all cash shortfalls, the difference between the cash flows that the consolidated company can collect under the contract and the cash flows that the consolidated company expects to collect. The expected credit loss is discounted at the effective interest rate of the financial asset.

On each reporting date, the consolidated company evaluates whether there is a credit impairment in the debt securities on which financial assets are measured at

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after-amortized cost and on which fair value is measured through other comprehensive income. When one or more events have occurred that adversely affect the estimated future cash flow of a financial asset, the financial asset has suffered a credit impairment. Evidence of credit impairment of financial assets includes observable information relating to:

major financial difficulties of the borrower or issuer;
default, such as delay or delay beyond a specified period;
for economic or contractual reasons related to the borrower's financial
difficulties, the consolidated company gives the borrower concessions that the borrower would not have considered;
the borrower is likely to file for bankruptcy or other financial restructuring; or

· the active market for the financial asset disappears due to financial difficulties. The loss allowance for a financial asset measured at its amortized cost is deducted from the carrying amount of the asset. The allowance for losses on debt instrument investments is measured at fair value through other comprehensive income. It is adjusted and recognized as other comprehensive income (without reducing the carrying amount of the assets).

When the consolidated company cannot reasonably expect to recover the financial assets as a whole or in part, it will directly reduce the total book amount of its financial assets. For the company, the consolidated company shall analyze the date and amount of the write-off on the basis of whether it is reasonable to expect recovery. The consolidated company does not expect a significant reversal of the write-off. However, financial assets that have been written off may still be enforced to comply with the procedures of the consolidated company for recovering overdue amounts.

(7) Financial assets de-recognition

When the Consolidated company terminates the contractual rights from the cash flow of such assets or has transferred the financial assets and almost all risks and returns of the asset ownership have been transferred to other enterprises, the financial assets shall be de-recognized.

Transactions in which the Consolidated company enters into transfers of financial assets that retain all or substantially all of the risks and rewards of ownership of the transferred assets continue to be recognized on the balance sheet.

2. Financial liabilities

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

measured at fair value, and the associated net benefits and losses, including any interest expense, are recognized as profit and loss.

(1) De-recognition of Financial Libilities

The Consolidated company derecognizes financial liabilities when contractual obligations have been fulfilled, cancelled or matured. When the terms of a financial liability are modified and the cash flows of the modified liability differ materially, the original financial liability is derecognized and a new financial liability is recognized at fair value based on the modified terms.

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(2) Offset between Financial Assets and Liabilities

3. Derivative Financial Instruments

The Consolidated company holds derivative financial instruments to avoid foreign currency and interest rate risks. Embedded derivatives are separated from the main contract when specific conditions are met and the main contract is not a financial asset.

Derivative instruments are initially recognized at fair value and subsequently measured at fair value, and the resulting gain or loss is recognized directly in profit or loss.

(8) Inventory

Net realizable value refers to the estimated prices under normal operation deducting estimated costs to be needed for estimated completion and estimated costs to be needed for completing selling.

(9) Property, plant and equipment

1. Recognition and Measurement

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

Significant components of property, plant and equipment are treated as separate items (major components) when they have different life cycles.

Gain or loss on disposal of property, plant and equipment is recognized in profit or loss.

2. Subsequent Costs

Subsequent expenses are capitalized only when it is probable that future economic benefits will flow into the Company.

3. Depreciation

Depreciation is calculated based on the cost of the asset less its residual value and is

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

recognized in profit or loss using the straight-line method over the estimated useful life of

each component.

The land is not subject to depreciation.

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

(1) Buildings 20-40 years

(2) Machinery 2-10 years

(3) Other equiment 2-10 years

The Company reviews the method of depreciation, durability and residual value at each reporting date and makes appropriate adjustments as necessary.

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

4. Reclassification to investment real estate

When real property for own use is reclassified to investment property, the real property is reclassified to investment property based on its carrying amount at the time of change of use.

(10) Investment real estate

(11) Leasing

Effective from January 1, 2019

1. Judgment of lease

The consolidated company shall assess whether the contract is a lease or includes a lease on the date of formation of the contract. If the contract transfers control over the use of the identified assets for a period of time in exchange for consideration, the contract shall be a lease or includes a lease. To assess whether the contract is a lease, the consolidated company evaluates the following items:

(1) the contract relates to the use of an identified asset whose entity may distinguish or represent all of the actual production capacity if it is explicitly specified in the contract or by implication specified at the time of availability. If the supplier has a material right to replace the asset, the asset is not recognized; and

(2) the right to obtain almost all the economic benefits derived from the use of the identified assets throughout the use period; and

(3) acquire the right to dominate the use of the identified assets in one of the following circumstances:

· the consolidated company has the right to dominate the use and purpose of the identified assets throughout the use period; or

· decisions relating to the manner and purpose of use of the asset are made in advance, and:

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

The consolidated company has the right to operate the assets throughout the use period and the supplier has no right to change the instructions for such operations; or

The way in which the assets are designed by the consolidated company has determined in advance how and for what purpose they will be used throughout their lifetime.

2. The lessee

The consolidated company recognize the right-of-use assets and lease liabilities on the beginning date of the lease. Right-of-use assets are originally measured in terms of cost, which includes the original measured amount of lease liabilities, adjusts the lease beginning date or before payment of any rent payment, and the initial direct costs, and applied to removing the asset and restoring its location or the estimated cost of the underlying assets. It minuses the charge of any lease incentives at the same time.

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Depreciation of right-of-use assets following the commencement of the lease shall be carried out by the straight-line method at the end of the useful life of right-of-use assets or earlier at the end of the lease term. In addition, the consolidated company will periodically evaluate whether there is any loss of right-of-use assets and deal with any loss that has occurred, and adjust the right-of-use assets in the case of lease liabilities.

Lease liabilities are defined as the present value of lease benefits not yet paid at lease commencement date. If the implied lease rate is easy to determine, the discount rate will be that rate, and if not, the incremental borrowing rate of the consolidated company will be used. Generally speaking, the consolidated company adopts its incremental borrowing rate as the discount rate.

Lease benefits measured in Lease liabilities include:

(1) fixed payments, including substantive fixed payments;

(2) depending on the variation of a certain index or rate of rent payment, the index or rate on the commencement date of the lease shall be used as the original measurement;

(3) the guaranteed amount of salvage value expected to be paid; and

(4) the price at which the option to exercise the option to purchase or terminate the lease will be reasonably determined or the penalty to be paid.

Lease liabilities is then calculated using effective interest method, and the amount was measured when:

(1) changes in the index or rate used to determine lease payments result in changes in future lease payments;

(2) the guaranteed amount of the residual value expected to be paid has changed;

(3) the evaluation of the underlying asset purchase option has changed;

(4) the estimate of whether to exercise the option of extension or termination has changed, which leads to the change of the assessment of the lease period;

(5) modification of the subject matter, scope or other terms of the lease.

The consolidated company will express the right-of-use assets and lease liabilities that do not conform to the definition of investment real estate in the form of single line items in the balance sheet.

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

3. The lessor

The transaction in which the consolidated company is a lessor shall be classified as a financial lease or an operating lease on the date of establishment of the lease, depending on whether or not the lease contract is transferred to almost all the risks and rewards attached to the ownership of the underlying asset. In the evaluation, the consolidated company shall consider certain indicators, including whether the lease term covers the principal part of the underlying asset's economic life.

If the consolidated company is a sublease lessor, it will handle the master lease and the sublease transaction respectively, and evaluate the sublease transaction classification based on the right-of-use assets generated from the master lease. If the principal lease is a short-term lease and a recognition waiver is applicable, the sublease transaction shall be classified as an operating lease.

Applicable before January 1, 2019

The lessee

The consolidated company leases offices and plants on an operating lease basis, and the rental payments are recognized as current expenses during the lease period on a straight-line basis.

2. The lessor

Operating leases are recognized as income during the lease period on a straight-line basis.

(12) Intangible assets

1. Recognition and measurement

Computer software acquired by the Consolidated company is measured at cost less accumulated amortization and accumulated impairment.

2. Subsequent expenditure

3. Amortization

The Consolidated company reviews the amortization method, useful life and residual value of Intangible assets at each reporting date and makes appropriate adjustments as necessary.

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(13 Non Financial Asset Impairment

At each reporting date, the Consolidated company assesses whether there is any indication that the carrying amount of non-financial assets (other than inventories, deferred income tax assets) may be impaired. If any indication exists, the recoverable amount of the asset is estimated.

For the purpose of impairment testing, cash inflows that are largely independent of other individual assets or groups of assets are treated as the smallest identifiable group of assets.

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(14) Provisions

Provisions are recognized as present obligations due to past events that make it probable that the Consolidated company will need to expend economically efficient resources in the future to settle the obligation and the amount of the obligation can be reliably estimated.

The amount recognized in Provisions takes into account the risks and uncertainties of the obligation and is the best estimate of the payments required to settle the obligation at the end of the reporting period. If Provisions is measured at the estimated cash flows to settle this realistic obligation, the carrying amount is the present value of those cash flows.

(15) Income Recognition

Revenue from customer contracts

Income is measured in consideration for the expected entitlement to transfer goods or services. The consolidated company recognizes revenue from the transfer of control of goods or services to the customer in order to meet its performance obligations.

The consolidated company manufactures electronic components and sells them to manufacturers in the electronics industry. The consolidated company recognizes revenue at the time of the transfer of control over the products. Control transfer of the product means that the product has been delivered to the customer and the customer can fully determine the sales channel and price of the product, and there is no failure to fulfill obligations that would affect the customer's acceptance of the product. Delivery occurs when the product is shipped to a specific location, the risk of obsolescence and loss has been transferred to the customer, the customer has accepted the product in accordance with the sales contract, the acceptance terms have expired, or the consolidated company has objective evidence that all acceptance conditions have been met.

The consolidated company shall recognize accounts receivable at the time of delivery of the goods, as the consolidated company shall have the right to receive unconditional consideration at that time.

The time between the transfer of goods or services from all customer contracts to the customer and the time between the customer's payment for the goods or services is

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

expected to be no more than one year, so the consolidated company does not adjust the time currency value of the transaction price.

(16) Employee Benefits

1. Defined Contribution Plan

The contribution obligation of the defined contribution pension plan is recognized as an expense in the period in which the employees render service to the Consolidated company.

2. Defined benefit plans

The Consolidated company’s net obligation to a defined benefit plan is measured by discounting the present value of future benefits earned by the employee's current or prior period of service, less the fair value of the plan assets.

The defined benefit obligation is actuated annually by a qualified actuary using the projected unit benefit method. When the results of the calculation are probable to be favorable to the Company, an asset is recognized to the extent of the present value of any economic benefits that may be obtained by returning a contribution from the plan or reducing future contributions to the plan. Any minimum funding requirement is taken into account in calculating the present value of economic benefits.

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

The remeasurement of the net defined benefit obligation, including actuarial gains and losses, compensation for plan assets (excluding interest), and any change in the impact of asset limits (excluding interest) is recognized immediately in other comprehensive income and accumulated in retained earnings. The Consolidated company determines net interest expense (income) for net defined benefit liabilities (assets) using the net defined benefit liabilities (assets) and discount rate determined at the beginning of the annual reporting period. Net interest expense and other costs for defined benefit plans are recognized in profit or loss.

When a plan is revised or curtailed, changes in benefits related to prior period service costs or curtailment gains or losses are recognized immediately in profit or loss. The Consolidated company recognizes gain or loss on the settlement of defined benefit plans when settlement occurs.

3.Short-term employee benefits

Short-term employee benefit obligations are recognized as an expense when services are provided. If the Consolidated company has a present legal or constructive obligation to pay for services rendered by employees in the past and the obligation can be estimated reliably, the amount is recognized as a liability.

(17) Share-based Payment Transaction

(18) Income Tax

Current income taxes include estimated income taxes payable or refund receivable based on current year taxable income (loss) and any adjustments to prior years' income taxes

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payable or refund receivable. The amounts are measured at the best estimate of the amount expected to be paid or received at the statutory or substantive legislative rates in effect at the reporting date.

Deferred income tax assets are measured and recognized according to the temporary difference between the carrying amount and taxation basis of assets and liabilities with financial report objectives.

In case of any of the following situations, the temporary differences will not be recognized as deferred income tax assets:

Those not belong to the assets or liabilities originally recognized in the transaction of enterprise consolidation, and not influencing accounting profits and taxation incomes (losses) during the transaction.
Those generated due to investment subsidiary company and joint equities and likely to not to be returned in the foreseeable future.
Original recognition of business reputation

Only when the Consolidated company shall meet the following conditions at the same time, can the deferred income tax assets and deferred tax liabilities offset with each other:

Having the legal execution right to make the current income tax assets and the current tax liabilities offset with each other: and
Deferred income tax assets and deferred tax liabilities are related to one of the subjects of tax payment from which the same tax authority levies income tax;
(1) Same subject of tax payment; or
(2) Different subjects of tax payment, but all subjects intend to liquidate the current tax liabilities and assets based on net amount or at the same time realize assets and liquidate liabilities in each of the future periods when deferred income tax assets of major amounts are expected to be recovered and deferred tax liabilities expected to be liquidated.

(19) Earnings per share

The Consolidated company lists the basic and diluted earnings per share of holders of

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common stock equity of the Company. The basic earnings per share of the Consolidated company shall be calculated with the gains and losses of the holders of common stock equity of the Consolidated company divided by the weighted mean of current outstanding common shares. Diluted earnings per share shall be calculated after adjusting the influence of all potential diluted common shares of the gains and losses of the holders of common stock equity of the Company and the weighted mean of current outstanding common shares. The potential diluted common shares of the Consolidated company include convertible corporate bonds and stock options for employees.

(20) Segments

The operating segment is a component of the Consolidated company that engaging in operating activities that may earn income and incur expenses, including income and expenses related to transactions between other components of the Consolidated company. The results of operations of all operating segments are reviewed periodically by the Consolidated company’s chief operating decision maker to make decisions about the allocation of resources to those segments and to measure their performance. Separate financial information is available for each operating segment.

V. Primary Sources of Major Accounting Judgment, Estimate and Assumption Uncertainties

Management is required to make judgments, estimates and assumptions in preparing this consolidated financial statements in accordance with "Guidelines Governing the Preparation of Financial Reports by Securities Issuers" that will affect the adoption of accounting policies and the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from estimates.

The management authority continuously inspects the estimate and basic assumption, and accounting changes are recognized during the period of changes and the period of future to be influenced.

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Accounting policies that involve significant judgment and that have a material effect on the amounts recognized in the consolidated financial statements of the Consolidated company are as follows:

(1) inventory evaluation

Since inventory must be measured at the lower of cost or net realizable value, the consolidated company estimates the reported amount of inventory due to normal wear and tear, obsolescence, or no market sale value on a daily basis and reduces the cost of inventory to net realizable value. The net realizable value of inventories may change significantly due to rapid changes in the industry and the introduction of new products. Please refer to Note vi (IV) for the inventory assessment.

(2) Refund liabilities

The consolidated company will estimate refund liabilities according to the nature and conditions of sales transactions, and will recognize them as sales income in the current period when the products are sold and continue to examine the reasonableness of the estimates. However, due to market price competition and product technology development and other factors, it may cause a significant adjustment of the estimated amount. Please refer to Note vi (XIV) for Refund liabilities estimates.

VI. Descriptions for important accounting items

(1) Cash and cash equivalents

Cash and cash equivalents
Petty cash Demand deposits and check deposits Time deposits Cash and cash equivalents lised on the Statement	Dec. 31, 2019 $ 3,660 1,560,714 1,281,620 $ 2,845,994		Dec. 31, 2018 2,719 1,137,826 307,526 1,448,071

Please refer to Note VI for the disclosure of the interest rate risk and sensitivity analysis of the financial assets of the consolidated company.

(2) Financial assets and liabilities

Financial assets and liabilities measured at FVTPL:

Financial assets measured at FVTPL: Non-derivative financial assets: Listed stocks Linked deposits Total	Dec. 31, 2019 $ 20,931 219,103	Dec. 31, 2018 24,516 71,603
	$ 240,034	96,119

The Consolidated company’s linked deposits are initially recognized on the basis of the principal amount of the deposit contract, and the interest rate is calculated based on the change in the subject matter of the linked deposits, and the Consolidated company

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

receives the Interest income on a regular basis.

Financial assets measured at FVTOCI

Financial assets measured at FVTOCI
Equity instruments measured at FVTOCI: Domestic unlisted stocks`－`Kuang Ying Computer Equipment Co., Ltd. Domestic unlisted stocks`－`AICP Technology Corporation Total	Dec. 31, 2019 $ 4,507 1,931	Dec. 31, 2018 12,541 10,000 22,541
	$ 6,438

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

The Consolidated company’s investments in these equity instruments are held as long-term strategic investments and are not held for trading purposes and therefore have been designated as measured at fair value through other comprehensive income.

The Consolidated company had no dividend income from Equity instruments measured at FVTOCI and no disposal of Equity instruments measured at FVTOCI for the years ended December 31, 2019 and 2018.

As of December 31, 2019 and 2018, the Consolidated company’s financial assets had not been pledged as security.

(3) Notes, accounts receivable and other receivables

Receivable notes Accounts receivable Other accounts receivable Less: Provisions	Dec. 31, 2019 $ 15,257 5,957,860 222,320 (11,881)		Dec. 31, 2018 16,115 5,300,398 227,652 (9,466) 5,534,699
	$ 6,183,556

Please refer to Note VI (XXV)1.(3) Statement of Changes in Notes and Accounts ReceivableProvisions for the years ended December 31, 2019 and 2018 for details.

The Consolidated company assesses that a portion of the accounts receivable and other receivables held by the Consolidated company under the operating model of collecting cash flows and sales are measured at fair value through other comprehensive income as of December 31, 2019 and 2018, of which $497,928,000 dollars and $428,851,000 dollars respectively, and $0 and $50,970,000 dollars respectively, are accounts receivable.

Information of the factoring of accounts receivable of the consolidated company is

provided below: Unit: 1,000 TWD ／ 1,000 in foreign currency

Dec. 31, 2019

Factored to	Amount derecognized $ -	Amount can be provided as advance	Amount provided as advance	Transferred to other receivables	Interest rate range	Other importa nt matters
CTBC Bank		749,500 USD 25,000	-	-	-	None

Unit: 1,000 TWD ／ 1,000 in foreign currency

Dec. 31, 2018

Factored to	Amount derecognized $ 287,511 USD 9,361	Amount can be provided as advance	Amount provided as advance 235,467 USD 7,666	Transferred to other receivables	Interest rate range 3.1%~3.73%	Other importa nt matters
CTBC Bank		480,364 USD 15,639		50,970 USD 1,695		None

The above quota is used in a circular manner, and the outstanding accounts receivable sold by the consolidated company are purchased by China Trust without recourse. In

215

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

accordance with the terms of the sale and surrender contract, losses arising from commercial disputes (such as return of sales or concessions, etc.) shall be borne by the consolidated company and losses arising from credit risk shall be borne by such Banks.

As of December 31, 2018, to 2019, the retained accounts receivable for sale were $0, 000 and $50,970, respectively, and were transferred to other receivables.

216

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(4) Inventory

Merchandise Final goods Work in progress Raw materials Goods in transit	Dec. 31, 2019 $ 494,396 706,097 444,416 292,094 39,018	Dec. 31, 2018 603,894 723,130 468,998 416,979 14,826 2,227,827
	$ 1,976,021

The Consolidated company’s inventories as of December 31, 2019 and 2018 including an allowance for inventory losses are $271,717,000 dollars and $255,887,000 dollars respectively.

The Consolidated company recognized inventory-related expenses and gains as follows:

Cost of goods sold Losses on the price fall and scraping of inventory Income from the sales of scraps and waste Total	2019 $ 9,941,368 39,165 (359,571)	2018 9,213,704 48,379 (299,434)
	$ 9,620,962	8,962,649

As of December 31, 2019 and 2018, the Consolidated company’s inventories were not pledged as security.

(5) Change in ownership interest in a subsidiary

1.Disposal of a portion of the equity interest in a subsidiary without loss of control

In December 2019, the Consolidated company disposed of 10% of the shares of Lintes Technology Co, Ltd. with interest of $3,540,000 dollars.

The Consolidated company disposed of a total of 3.35% of the share of Lintes Technology Co. with interest of $66,890,000 dollars.

The effect of the change in the Consolidated company’s ownership interest in the above subsidiaries on the owners' equity attributable to the Parent Company is as follows:

Book value of disposed shares of subsidiaries Consideration received from non-controlling interests Exchange differences on the translation of foreign financial statements Capital reserve - the difference between the prices of the actual acquired or disposed shares of subsidiaries and their book values	2019 $ (979) 3,540 (1)	2018 (21,537) 66,890 170 45,523
	$ 2,560

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

2. Subsidiary Cash capital increase, the consolidated company did not subscribe in proportion to its shareholding, resulting in no loss of control

Lintes Technology Co., Ltd raised $479,108 from a capital increase of 6,000 new shares on December 10, 2008. The failure of the consolidated company to subscribe reduced its interest in Lintes Technology Co., Ltd by 6.13%.

Lintes Technology Co., Ltd., with a capital increase of $50 per share, issued 5,000 new shares on March 16, 2018, raising a total of $250,000. The number of shares subscribed for by the consolidated company was 3,028 thousand for an amount of $151,391 thousand, which increased the interest of the consolidated company in Lintes Technology Co., Ltd by 0.01% due to the non-subscription of the shares in proportion to its shareholding.

The effects of the changes in the consolidated company’s ownership interests of the subsidiaries mentioned above on the interests attributable to the owners of the parent are as follows:

Increase in equity after new shares were issued by subsidiaries Subscription amount not according to shareholding percentage Exchange differences on the translation of foreign financial statements Capital reserve - the recognition of changes in the ownership interests of subsidiaries	2019	2018
	$ 190,973 151,117 - (151,391) (82) (1) $ 190,891 (275)

(6)Subsidiaries with significant non-controlling interests

The non-controlling interests of subsidiaries that are material to the Consolidated company are as follows:

company are as follows:
Name of Subsidiary Lintes Technology Co., Ltd.	Main business place/ The country where the company registered Taiwan	The percentage of ownership interests and voting interests in all non-controlling interests
		Dec. 31, 2019	Dec. 31, 2018
		47.87%	41.64%

The aggregate financial information of the above subsidiaries is as follows. The financial information has been prepared in accordance with International Financial Reporting Standards (IFRSs) approved by the Financial Supervisory Commission (FSC), and the financial information represents amounts before the elimination of intercompany transactions:

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

1. Comprehensive financial information of Lintes Technology Co., Ltd.:

Current assets Non-current assets Current liabilities Non-current liabilities Net assets Book value of non-controlling interests at the end of the period	Dec. 31, 2019 $ 1,970,182 180,502 (649,878) (11,443)	Dec. 31, 2018 1,439,118 110,428 (666,646) (1,846) 881,054 365,829
	$ 1,489,363
	$ 714,874

219

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Operating revenue Net profit in the year Other comprehensive income Total comprehensive income Net profit in the period attributable to non-controlling interests Total comprehensive income attributable to non-controlling interests Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Effect of change in exchange rate Increase in cash and cash equivalents Dividends paid to non-controlling interests	2019 $ 2,245,138	2018 2,122,938 250,336 (1,165) 249,171 100,182 99,348 2018 38,464 (63,296) 189,038 3,946 168,152 -
	156,114 (6,122)
	$ 149,992
	$ 69,180
	$ 65,759
	2019 $ 417,912 (91,247) 272,043 8,383
	$ 607,091
	$ 10,619

(7) Property, plant and equipment

The changes in the costs of the property, plant and equipment, losses on depreciation and impairment of the consolidated company are as follows:

Land $ 76,980 - - - - (26,800) (525)	Buildings 804,451 870 - - - (15,857) (29,725)	Machinery 2,680,672 182,269 650 10,300 (68,993) - (106,285)	Other 2,430,461 346,673 18,035 576,528 (519,830) - (110,967)	Construction in progress and equipment to be examined
				498,134 877,347 - (586,828) - - (31,922)
$ 49,655	759,739	2,698,613	2,740,900	756,731
$ 76,298 - -	653,902 - -	2,447,016 278,208 -	1,819,753 781,527 5,185	344,797 343,250 -

220

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Completion of construction in progress and acceptance of equipment to be examined Disposal Effect of change in exchange rate Balance on Dec. 31, 2018	- - 682	162,586 - (12,037)	12,497 (24,701) (32,348)	5,813 (140,219) (41,598)	(180,896) - (9,017)	- (164,920) (94,318)
	$ 76,980	804,451	2,680,672	2,430,461	498,134	6,490,698

221

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

$ - - - - -	241,559 36,767 - (1,386) (10,422)	1,455,245 245,556 (42,249) - (62,627)	1,443,734 763,224 (512,757) - (65,720)	- - - - -	3,140,538 1,045,547 (555,006) (1,386) (138,769)
$ -	266,518	1,595,925	1,628,481	-	3,490,924
$ - - - -	215,886 29,538 - (3,865)	1,247,325 237,741 (17,053) (12,768)	1,002,898 592,143 (127,100) (24,207)	- - - -	2,466,109 859,422 (144,153) (40,840)
$ -	241,559	1,455,245	1,443,734	-	3,140,538
$ 49,655	493,221	1,102,688	1,112,419	756,731	3,514,714
$ 76,980	562,892	1,225,427	986,727	498,134	3,350,160

Subsidiary, Lotes Zhongshan Co., Ltd, acquired the land use rights for the construction of the new plant in 2017, and the acquisition cost was $183,934 thousand to list right-of-use assets in the account. As of 2019 and December 31, 2018, the accumulated expenditures (tax included) for the construction of the new plant were $622,147 thousand and $255,126 thousand respectively.

In April, 2019, subsidiary, Lotes Zhongshan Co., Ltd, signed the pre-purchase contract and decoration contract with zhongshan Willie and real estate development co., LTD. and Tianjin Xinhongyuan building decoration engineering co., LTD., respectively. As of December 31, 2019, has to pay the price of RMB 10.881 thousand and RMB 3.285 thousand respectively (account listed as other non-current assets), is expected to transfer the property in December 2020.

As of December 31, 2019, and December 31, 2018, real estate, plant and equipment were used as collateral for short-term loans and financing lines. Please refer to note 8 for details.

(8) Right-of-use assets

The changes in the costs of the lease of lands, buildings, machinery and other equipment, losses on depreciation and impairment of the consolidated company are as follows:

follows:
Cost of the right-of-use assets: Balance on Jan. 1, 2019	Land	Buildings -	Machinery equipment -	Other equipment -	Total -
	$ -

222

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Effects of retrospective application of IFRS 16 Increase Decrease Balance on Dec. 31, 2019	246,746 235,843 243 5,396 488,228 - 35,288 474 - 35,762 (9,838) (16,457) (30) (215) (26,540)
	$ 236,908 254,674 687 5,181 497,450

223

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Land $ - 5,375 (225)	Land $ - 5,375 (225)	Construction - 112,130 (6,287)	Equipment - 717 (30)	Other equipment - 2,446 (102)	Other equipment - 2,446 (102)	Total
						- 120,668 (6,644)
$ 5,150		105,843	687	2,344		114,024
$ 231,758		148,831	-	2,837		383,426
			23,428 15,857
	$ 248,200		39,285		287,485
	$ 221,400		23,428		244,828
	$ 221,400		23,428		244,828
	$ - - -		2,333 764 1,386		2,333 764 1,386
	$ -		4,483		4,483
	$ - -		1,761 572		1,761 572
	$ -		2,333		2,333
	$ 248,200		34,802		283,002
	$ 221,400		21,095		242,495
					$ 322,604
					$ 282,694

The Consolidated company leased plant, offices, warehouses and employee dormitories under operating leases for the year ended December 31, 2018. For more details, please refer to Note VI (16).

(9) Investment property

Hengnan Deyi Property Development Co., Ltd. acquired the land use rights from Hunan Jialide Auction Co. in September 2019 and has paid the price of RMB$22,845,000 dollars

224

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Other Land Construction Equipment equipment Total

(recorded as non-current assets) as of December 31, 2019 and expects to deliver the transfer in 2020.

225

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

As of December 31, 2019 and 2018, the Consolidated company’s investment properties were not pledged as security.

(10) Intangible assets

The changes in the cost and amortization of the intangible assets of the consolidated company are as follows:

Cost: Balance on Jan. 1, 2019 Separate acquisition Derecognition Effect of change in exchange rate Balance on Dec. 31, 2019 Balance on Jan. 1, 2018 Separate acquisition Effect of change in exchange rate Balance on Dec. 31, 2018 Losses on amortization and impairment: Balance on Jan. 1, 2019 Amortization in the year Derecognition Effect of change in exchange rate Balance on Dec. 31, 2019 Balance on Jan. 1, 2018 Amortization in the year Effect of change in exchange rate Balance on Dec. 31, 2018 Book value: Balance on Dec. 31, 2019 Balance on Dec. 31, 2018	Computer software $ 114,181 56,099 (590) (3,469)		Other 600 - - -	Total 114,781 56,099 (590) (3,469) 166,821 72,670 43,052 (941) 114,781 55,254 13,834 (590) (1,466) 67,032 47,288 8,408 (442) 55,254 99,789 59,527
	$ 166,221		600
	$ 72,070 43,052 (941)		600 - -
	$ 114,181		600
	$ 55,254 13,834 (590) (1,466)		- - - -
	$ 67,032		-
	$ 47,288 8,408 (442)		- - -
	$ 55,254		-
	$ 99,189		600
	$ 58,927		600

The amortization expenses of the intangible assets of	the consolidated	company was
recognized in the following items in the Consolidated Statement of Comprehensive Income:
	2019	2018
Operating cost $	1,087	518
Operating expense $	12,747	7,890

226

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(11) Other financial assets

The details of the other financial assets of the consolidated company are as follows:

Other financial assets - current Time deposits Other financial assets - non-current Time deposits	Dec. 31, 2019 $ -		Dec. 31, 2018 134,255
	$ 85,923		-

As of December 31, 2019 and 2018, none of the Consolidated company’s other financial assets had been pledged as security.

(12) Short-term loans

The details, conditions and terms of the short-term loans of the consolidated company are as follows:

	Dec. 31, 2019		Amount $ 29,980
Currency USD	Interest rate range 2.54% Dec. 31, 2018	Maturity year 2020

			$ 3,158,700
			Amount $ 199,643 720,000
Currency USD TWD	Interest rate range 3.86%~3.99% 0.95%	Maturity year 2019 2019

			$ 919,643
			$ 1,998,252

Please refer to Note VI (25) for information on the exposure to interest rate and foreign currency risk. In addition, the Consolidated company has pledged assets as collateral for short-term borrowings. Please refer to Note 8 for details.

Please refer to Note VI (25) for more information on the Consolidated company’s exposure to interest rate and foreign currency risk, Note 8 for information of the Consolidated company’s assets pledged as collateral for short-term borrowings, and Note 9 for information of the Company's bank loans and financing facilities are pledged as guaranteed notes.

(13) Lease liabilities

The book values of the lease liabilities of the consolidated company are as follows:

Current Non-current	Dec. 31, 2019 $ 94,851 $ 60,560

For the maturity analysis, plese refer to Note VI (XXV).

227

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

The amounts recognized in the profit and loss are as follows: Interest expense for lease liabilities Income from the sublease of right-of-use assets Expenses for short-term leases	2019 $ 11,458 $ 14,593 $ 2,443

228

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

The amounts recognized in the Statement of Cash Flows are as follows:

Total cash outflow for leases

		2019
	$	135,734

1. Lease of land, premises and buildings

The consolidated company leases land, premises and buildings for plant, office space and staff quarters. The lease term of the plant and office space is usually one to ten years, and the lease term of the staff quarters is three to eight years. Part of the lease includes an option to extend the lease at the end of the lease term. In cases where it is not reasonably determined to exercise an optional extension of Lease term, the relevant benefits for the period covered by the option are not included in the Lease liabilities.

The consolidated company is a sublease of right-of-use assets by business lease.

2. Other leases

The leasing period of machines and other equipment leased by the consolidated company shall be two to six years. In addition, the Lease term of some Lease contracts of the consolidated company is one year, and these leases are short-term subject leases. The consolidated company chooses to apply the exemption of relevant right-of-use assets and lease liabilities

(14) Refund liabilites - current

Refund liabilites - current

Dec. 31, 2019 $ 157,256	Dec. 31, 2018 86,883

The refund liabilities are mainly the prepayments to customers for the sales discount and defects of electronic components.

(15) Provisions

Dec. 31, 2019 Dec. 31, 2018 Provisions - non-current Employee benefits $ 41,729 40,522

Employee benefits are estimated under the Consolidated company’s defined benefit plan; please refer to Note VI (17) for details.

(16) Operating lease

1. Lessee lease

The rental payments payable under non-cancellable operating leases are as follows:

Within 1 year 1-5 years	Dec. 31, 2018 $ 116,739 131,258

229

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

$ 247,997

The Consolidated company leases its plant, office, warehouse and staff quarters under operating leases for periods of 1-10 years.

For the year ended on December 31, 2018, the Consolidated company reported operating leases at an expense of $70,663,000 dollars.

230

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

2. Lessor lease

The consolidated company leases its investment real estate, which is classified as an operating lease because almost all risks and rewards belonging to the ownership of the underlying asset have not been transferred. Please refer to Note VI (IX) for details of the investment real estate.

Due date analysis of lease benefits to report the total amount of undiscounted lease benefits received in the future is shown in the following table:

Not more than 1 year 1-2 years Total undiscounted lease payment	Dec. 31, 2019 $ 5,821 593
	$ 6,414

The lowest future lease payments receivable for the non-cancelable lease term are as follows:

follows:
Within 1 year 1-5 years	Dec. 31, 2018 $ 5,549 6,025
	$ 11,574

For the years ended on December 31, 2019 and 2018, the income tax generated in the investment property from rentals was $5,408,000 dollars and $5,143,000 dollars respectively, and the direct operating expenses (including maintenance) incurred in the

investment property from rentals were $875,000 dollars and $654,000 dollars respectively. (17) Employee benefits

1. Defined benefit plans

The reconciliation between the present value of defined benefit obligations and the fair value of plan assets of the Company is as follows:

Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities	Dec. 31, 2019 $ 73,681 (31,952)	Dec. 31, 2018 72,724 (32,202)
	$ 41,729	40,522

The details of the employee benefits liability of the consolidated company are as follows:

Liabilities from paid leaves	Dec. 31, 2019 $ 14,674	Dec. 31, 2018 13,119

231

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

retirement.

(1) Composition of Plan Assets

232

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(2) Changes in the present values of defined benefit obligations

Changes in the present values of defined obligations of the Company in 2019 and in 2018 are as follows:

Defined benefit obligation on January 1 Service cost and interest in the year Remeasurement of net defined benefit liabilities (assets) Benefit paid by the plan Defined benefit obligation on December 31	2019 $ 72,724 1,310 2,262 (2,615)	2018 72,626 1,476 (1,378) -
	$ 73,681	72,724

(3) Changes in the fair value of plan assets

The changes in the fair value of defined benefit plan assets of the Company in 2019 and in 2018 are as follows:

Fair value of plan assets on January 1 Interest income Remeasurement of net defined benefit liabilities (assets) Amount contributed to the plan Benefit paid by the plan Fair value of plan assets on December 31	2019 $ 32,202 319 1,114 932 (2,615)	2018 30,109 374 809 910 -
	$ 31,952	32,202

(4) Expenses recognized in profit or loss

The expenses of the Company recognized in profit or loss in 2019 and in 2018 are as follows:

as follows:
Service cost in the year Net interest of net defined benefit liabilities Operating cost Promotion Expenses Administration Expenses R&D expenses	2019 $ 590 401	2018 576 526
	$ 991	1,102
	$ 117 277 356 241	142 293 388 279
	$ 991	1,102

233

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(5) Remeasurement of the net defined benefit liabilities (assets) recognized in other comprehensive income

Remeasurement of the accumulated net defined benefit liabilities (assets) of the Company recognized in other comprehensive income in 2019 and in 2018 are as follows:

follows:
Accumulated balance on January 1 Amount recognized in this period Accumulated balance on December 31	2019 $ 3,043 (1,148)	2018 856 2,187
	$ 1,895	3,043

(6) Actuarial assumptions

The material actuarial assumptions used by the Company to determine the present

value if defined benefit obligations at the end of the reporting period are as follows:

Discount rate Increase in future salary	Dec. 31, 2019 0.75% 2.00%	Dec. 31, 2018
		1.00% 2.00%

The amount of appropriation for defined benefit plans within 1 year after the reporting date for the year ended on Dec. 31, 2019 is 916,000 TWD.

The weghted average duration of defined benefit plans is 11 years.

(7) Sensitivity analysis

The effects of changes in the main actuarial assumptions adopted on Dec. 31, 2019

and 2018 on the present value of defined benefit obligations are as follows:

Dec. 31, 2019 Discount rate Increase in future salary Dec. 31, 2018 Discount rate Increase in future salary	Effects on defined benefit obligations Increased by 0.25% Decreased by 0.25% $ (2,069) 2,151 2,119 (2,049) (2,095) 2,181 2,154 (2,079)
	Increased by 0.25% $ (2,069) 2,119 (2,095) 2,154

The sensitivity analysis above was based on the analysis of the effects of changes in a single hypothesis with other assumptions unchanged. Changes in many assumptions in practice may be interlinked. Sensitivity analysis is consistent with the method used to calculate the net pension liabilities on the balance sheet.

The methodology and assumptions used in the sensitivity analysis are the same.

2. Defined Contribution Plan

234

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

As to the defined contribution plan, the Consolidated company shall contribute the retirement funds of employees to the individual accounts for labor retirement funds of the Bureau of Labor Insurance according to 6% of the monthly salaries of labors under the provisions of Labor Pension Act. Under this plan, after contributing fixed amount to the Bureau of Labor Insurance, the Consolidated company will not assume the legal or constructive obligations of paying extra amount.

235

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

The pension expense under the defined contribution retirement funds of the Company in the year of 2019 and 2018 are TWD 9,032,000 and TWD 8,951,000 respectively, which have been contributed to the Bureau of Labor Insurance.

In accordance with the pension insurance system established by the government of the People's Republic of China, the subsidiaries in Mainland China make monthly contributions to employees' pension insurance based on a certain percentage of their salaries and wages. The monthly pension plan is administered and arranged by the government, and the above-mentioned company has no further obligation other than to make monthly contributions. The related pension expense for the years ended December 31, 2019 and 2018 were $195,676,000 dollars and $188,352,000 dollars respectively. (18) Income tax

1. The details of the income tax expense of the consolidated company are as follows:

Income tax expense in the year Income tax generated in the year Surtax on undistributed retained earnings Adjustment of the income tax in the previous year Deferred income tax expense Change in income tax rate Other deferred income tax expense (benefit) Income tax expense	2019 $ 704,790 27,468 (17,187)	2018 483,727 6,448 (34,340)
	715,071	455,835
	- (27,778)	(8,130) (1,707)
	$ 687,293	445,998

The details of income tax expense (benefit) recognized in the other comprehensive income in 2019 and 2018 are as follows:

Items that will not be reclassified to profit or loss: Remeasurement of defined benefit plan	2019 $ (230)	2018 463

The reconciliation between the income tax expense (benefit) and net profit before tax of the consolidated company in 2019 and 2018 is as follows:

Net profit before tax Income tax calculated based on the tax rate of the place where the Company located Adjustments in accordance with tax laws in different countries and regions Adjustment of income tax rate Underestimate (overestimate) in the previous year Surtax on undistributed retained earnings	2019 $ 2,831,761	2018 2,154,297
	895,013 (218,245) - (17,187) 27,468	662,596 (181,623) (8,130) (34,340) 6,448

236

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Income basic tax Total	244 1,047
	$ 687,293 445,998

237

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Deferred income tax assets and liabilities

(1) Unrecognized deferred income tax assets

The item not recognized as deferred income tax assets by the consolidated company is as follows:

[Tax loss ]

Dec. 31, 2019 $ 15,315	Dec. 31, 2018 15,729

The loss due to taxation is subject to the income tax law, and the net profit of the ten years before the loss is deducted by the tax collection authority. These items are not recognized as deferred income tax assets because it is not likely that the consolidated company will have sufficient tax offices for such temporary differences in the future.

Subsidiary Ememe Robot Co., Ltd., in accordance with the provisions of the income tax law, the losses of the previous ten years can be deducted from the net profits of the current year after being verified by the tax collection authority, and the income tax shall be verified again. As of December 31, 2019, the consolidated company had not yet recognized a loss of tax on its deferred income tax assets. The period of deduction is as follows:

[Ememe Robot Co., Ltd.: ]

Losses occurred in 2011 (approved) 2012 (approved) 2013 (approved) 2014 (approved) 2015 (approved) 2016 (approved) 2017 (approved) 2018 (applied) 2019 (estimated)	Losses to be deducted $ 9,714 14,184 14,550 6,246 8,951 10,166 6,828 3,237 2,697 $ 76,573	The last year for the deduction to be conducted
		2021 2022 2023 2024 2025 2026 2027 2028 2029

(2) Recognized deferred income tax assets

Losses from inventory price drop and obsolescence Unappropriated pension expenses Losses from the price drop of fixed assets and idle assets Refund liabilites Unrealized foreign exchange losses Estimated expenses payable	Dec. 31, 2019 $ 20,587 492 44 43,772 15,423 35,246	Dec. 31, 2018 26,223 480 44 30,613 142 32,284

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Remeasurement of defined benefit plan Bad debt expense Deferred income tax assets	8,238 8,008 123 128
	$ 123,925 97,922

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

2. Income Tax Approval

The approval on the filing of final income tax return of the Company has lasted till the year 2017 as required by the taxing authority.

(19) Capital and Other Equity

1. Capital reserve

The components of the Company's capital reserve are as follows:

Premium of issued shares Change in the net value of the stock of subsidiaries and associates accounted for using the equity method Employee stock options	Dec. 31, 2019 $ 3,577,768 366,393 15,399		Dec. 31, 2018 2,277,768 172,942 15,399 2,466,109
	$ 3,959,560

2. Retained earnings

The Company will take into account the environment and growth of the Company

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

and the distribution of earnings should take into account the Company's future capital expenditure budget and capital requirements, and pay cash dividends of not less than 10% of the dividends distributed in the current year.

(1) Legal reserve

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(2) Special reserve

(3) Earnings distribution

On June 14, 2019 and June 12, 2018, the Company's shareholders resolved to distribute earnings for the years 2018 and 2017, respectively, as follows:

		2018	2018	2017
	Payout	ratio	Amount	Payout ratio	Amount
	(TWD)			(TWD)
Distributed to the
holders of ordinary
shares:
Cash	$	8.70	900,258	5.50	514,128

On March 25, 2020, the Company's Board of Directors proposed a distribution of earnings for the year e2019, and the amount of dividends distributed to owners was as follows:

Distributed to the holders of ordinary shares: Cash

Information on the distribution of earnings as proposed by the Board of Directors and resolved by the Shareholders' Meeting is available on the "Public Information Observation Post System".

3. Other equity

Other equity
Balance on Jan. 1, 2019 Exchange differences arising from the translation of the net assets of foreign operations Unrealized losses from financial assets measured at FVTOCI Balance on Dec. 31, 2019	Exchange difference between foreign operating office’s statement $ (314,561) (317,409) -	Unrealized gain or loss on Financial assets measured at FVTOCI (2,459) - (16,103)	Total (317,020) (317,409) (16,103)
	$ (631,970)	(18,562)	(650,532)

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Exchange difference between foreign operating office’s statement $ (259,820) -	Unrealized gain or loss on Financial assets measured at FVTOCI	Unrealized gain or loss on available-for-s ale financial instruments	Total
	- -	4,618 (4,618)	(255,202) (4,618)
(259,820) (54,741) -	- - (2,459)	- - -	(259,820) (54,741) (2,459)
$ (314,561)	(2,459)	-	(317,020)

(20) Share-based payment

The following share-based payment transactions were performed by the consolidated company:

Date of offering Amount offered Target of offering Vesting condition	Cash capital increase reserved for employees to subscribe	Cash capital increase reserved for employees to subscribe
	Subsidiary	The Company
	Nov. 28, 2019 436,000 shares Current employees of subsidiaries Immediate vesting	Nov. 22, 2018 314,500 shares Current employees of the Company Immediate vesting

Lintes Technology Co., Ltd. estimated the fair value of the above Cash capital increase stock option to be $10.8 and recognized the cost of Share-based paymentCompensation of employees from the Cash capital increase stock option to be $4,709,000 dollars in 2019.

The estimated fair value of the above Cash Capital Increase stock option Date of offering was $34, and the cost of Share-based paymentCompensation of employees arising from the Cash Capital Increase stock option was $10,693,000 dollars in 2018.

(21) Earnings per share

The basic earnings per share and diluted earnings per share of the consolidated company were calculated as follows:

Net profit attributable to the Company in the year Weighted average shares outstanding (1,000 shares) Dilutive potential ordinary shares Compensation of employees	2019 2,076,043		2018 1,608,567
	103,231 278		93,478 322

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Basic earnings per share Diluted earnings per share	103,509	93,800
	20.11	17.21
	20.06	17.15

244

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(22) Revenue from contracts with customers

Please refer to Note XIV (III) and (IV) for the disclosure of disaggregation of revenue for the major products and major regional markets.
Balance of Contract

nce of Contract
Contract liabilities	Dec. 31, 2019	Dec. 31, 2018 6,160	2018.1.1 2,651
	$ 19,947

The amounts of beginning balances of contract liabilities as of Jan. 1, 2019 and Jan. 1, 2018 were respectively recognized as income of 5,825,000 TWD and 2,016,000 TWD for the year ended on Dec. 31, 2019 and 2018.

(23) Non-operating income and expense

1. Other income

The details of other income of the consolidated company are as follows:

Interest income Income from cash dividends Income from molding Compensation from suppliers Income from rentals Income from the sales of developed products Income from subsidies Others	2019 $ 32,820 875 42,802 10,143 28,065 7,131 27,845 62,359	2018 14,387 443 74,342 8,745 12,126 8,642 31,924 51,120 201,729
	$ 212,040

2.Other income and losses

The details of other income and losses of the consolidated company are as follows:

Foreign exchange gain (loss) Net profit or loss from the financial assets (liabilities) meaured at FVTPL Losses from the disposal of Property, plant and equipment Other Total	2019 $ (58,026) 5,346 (27,655) (25,450)	2018 34,358 (1,379) (12,193) (32,977)
	$ (105,785)	(12,191)

3. Financial cost

The details of the financial cost of the consolidated compay are as follows:

Interest expense	2019 $ 22,711	2018 18,468

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(24) Remuneration for employees and directors, supervisors

The estimated amount of compensation of employees for the years ended December 31, 2019 and 2018 was $73,054,000 dollars and $56,000,000 dollars respectively, and the estimated amount of compensation to directors and supervisors was $4,480,000 dollars. The Company's Net profit before tax for the period is estimated by multiplying the amount of the Company's Net profit before issing the compensation of employees and directors and supervisors by the proportion of the Company's compensation distribution to employees and directors and supervisors as provided in the Company's Articles of Incorporation, and is reported as operating costs or expenses for that period. If there is a difference between the actual distribution amount and the estimated amount for the following year, the change in accounting estimate is adjusted and the difference is recognized in profit or loss for the following year. In the event that the Board of Directors resolves to grant a compensation of employees by way of stock, the number of shares of stock-based compensation is calculated based on the closing price of the common stock on the day before the Board of Directors' resolution.

(25) Financial instruments and fair value information

1. Credit risk

(1) Credit risk exposure

The carrying amount of a financial asset represents the maximum amount of credit risk. The maximum amount of credit risk exposure was $9,330,916,000 dollars and $7,185,909,000 dollars as of December 31, 2019 and 2018 respectively.

(2) Credit risk concentration risk

The customers of the consolidated company are concentrated in the high-tech computer industry. In order to reduce the credit risk of accounts receivable, the

246

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

consolidated company continuously evaluates the financial position of the customers and adjusts the transaction terms if necessary. The consolidated company on December 31, 2018, and in 2019, a single customer is more than 5% of the total accounts receivable, accounts receivable balance for five and three different customers, the consolidated company regularly assesses the possibility of accounts receivable collection and allowance for loss, and the total loss of total within the authorities expected.

(3) Impairment loss

The consolidated company for all notes receivable and accounts receivable adopts simplified approach to estimate the expected credit losses, i.e. using the term forecast credit losses measure, measure for this purpose, such as the notes receivable and accounts receivable department press on behalf of clients according to the terms of the contract to pay all amount due ability of credit risk characteristics shall be grouped together, and has set up into a forward-looking information. The expected credit loss analysis of notes receivable and accounts receivable of the consolidated company is as follows:

247

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

	Dec. 31, 2019	Expected credit loss in the duration of provision 983 1,327 538 32 53 - 47 5,612
Book value of notes and accounts receivable $ 5,558,158 328,542 79,760 614 381 - 50 5,612	Weighted average expected credit loss rate
	0.02% 0.39% 0.67% 5.21% 13.91% 50.00% 94.00% 100.00% Dec. 31, 2018
$ 5,973,117		8,592
		Expected credit loss in the duration of provision 1,296 467 386 352 7 5 508 5,544
Book value of notes and accounts receivable $ 4,996,416 275,988 35,081 2,927 28 10 519 5,544	Weighted average expected credit loss rate
	0.03% 0.17% 1.10% 12.03% 25.00% 50.00% 97.88% 100.00%
$ 5,316,513		8,565

The changes in the provisions for notes and accounts receivable of the consolidated company in 2019 and 2018 are as follows::

Opening balance Recognized impairment loss Write-off in the period Effects of exchange rate Closing balance	2019
	$ 8,592 8,565

248

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

2. Liquidity risk

The contracts of financial liabilities are sorted by their maturity dates as follows. The

estimated interests are included, but the effect of net value agreement is excluded.

Book Value $ 29,980 19,000 1,885,062 964,415 155,411	Contract Cash flow 30,172 19,000 1,885,062 964,415 165,242	Within 6 months 30,172 19,000 1,885,062 964,415 54,559	6-12 months - - - - 46,417	1-2years - - - - 41,233	2-5years - - - - 23,033	More than 5 years - - - - -
$ 3,053,868	3,063,891	2,953,208	46,417	41,233	23,033	-
$ 919,643 45,396 1,743,472 830,541	925,206 45,396 1,743,472 830,541	785,736 45,396 1,743,472 830,541	139,470 - - -	- - - -	- - - -	- - - -
$ 3,539,052	3,544,615	3,405,145	139,470	-	-	-

The consolidated company does not anticipate that the cash flows analyzed at maturity date will alter significantly or that the actual amounts will vary significantly.

3. Market risk - exchange rate risk

(1) Exposure to exchange rate risk

The consolidated company’s financial assets and liabilities exposed to significant foreign currency exchange rate risk are as follows:

	Financial assets Currency USD RMB HKD JPY EURO INR VND	Dec. 31, 2019	Dec. 31, 2019	TWD 11,624,983 744,979 27,904 23,054 80,425 2 22
		Foreign Currency (Note) $ 387,757 173,383 7,250 83,529 2,394 4 17,980	Rate 29.9800 4.2975 3.8490 0.2760 33.5900 0.4791 0.0012

249

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

	Financial liabilities Currency USD RMB HKD JPY EURO MOP VND Financial assets Currency USD RMB HKD JPY EURO Financial liabilities Currency USD RMB HKD JPY	Dec. 31, 2019	Dec. 31, 2019	TWD 6,665,126 160 7,793 6,590 1,531 3 17 TWD 9,921,912 437,209 7,790 2,820 34,809 5,712,149 76 8,641 86
		Foreign Currency (Note) Rate $ 222,319 29.9800 37 4.2975 2,025 3.8490 23,878 0.2760 46 33.5900 1 3.8490 14,361 0.0012 Dec. 31, 2018
		Foreign Currency (Note) $ 323,031 97,695 1,987 10,135 989 $ 185,973 17 2,204 308	Rate 30.7150 4.4753 3.9210 0.2782 35.2000 30.7150 4.4753 3.9210 0.2782

Note: The foreign currencies denominated in the non-functional currencies of the consolidated entities include items that have been eliminated in the consolidated financial statements for inter-group transactions.

Because the Consolidated company has a wide range of functional currencies, it has adopted a consolidated approach to disclose exchange gain or loss on monetary items, with foreign currency exchange losses (realized and unrealized) of $58,026,000 dollars and gains of $34,358,000 dollars for the years ended 2019 and 2018

250

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

respectively.

251

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(2) Sensitivity analysis

The Consolidated company’s exchange rate risk primarily comes from foreign currency-denominated cash and cash equivalents, accounts receivable and other receivables, loans, accounts payable and other payables, resulting into gains and losses of conversion of foreign currency when exchanging. As of December 31, 2019 and 2018, if TWD had depreciated or appreciated by 1% relative to foreign currencies held by the Company and all other factors remained constant, net income would have increased or decreased by $46,561,000 dollars and $37,469,000 dollars respectively for 2019 and 2018. The same basis is used for both phases of analysis.

4. Market risk - changes in interest rates

The interest rate risk of the consolidated company mainly comes from the bank deposit and short-term loan of floating rate, so the interest rate change will cause the effective interest rate of bank deposit and short-term loan to change accordingly, and the future cash flow will fluctuate.

The following sensitivity analysis is based on the risk of interest rate shocks reported by financial instruments on the date of coverage. For floating rate liabilities, the analysis is based on the assumption that the reported amount of daily outstanding liabilities is current throughout the year. The rate of change used by the consolidated company in reporting interest rates to the main management is 1% up or down, which represents the management's assessment of the reasonable range of possible interest rate changes.

The Consolidated company’s financial assets with variable interest rates at December 31, 2019 and 2018 were $1,882,046,000 dollars and $1,651,143,000 dollars respectively, and its financial liabilities were $0 and $919,643,000 dollars respectively. If interest rates had increased or decreased by 1%, the Consolidated company’s net income would have increased or decreased by $15,056,000 dollars and decreased or increased by $5,852,000 dollars for 2018 and 2019, respectively, with all other variables held constant.

5. Market risk - fair value

(1) Fair value and carrying amount

The management of the consolidated company believes that non-derivative short-term financial instruments should be estimated at their fair value based on their book value on the balance sheet, and that their book value should be a reasonable basis for the estimated fair value because of the near maturity of such commodities. This method is applied to cash and equivalent cash, notes receivable and payable, accounts receivable and payable, other receivables and payables, deposit margin and short-term borrowings.

In addition to the above financial instruments, the fair value and book value information of the remaining financial instruments and investment real estate of the

252

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

consolidated company on the financial reporting date are as follows:	consolidated company on the financial reporting date are as follows:	consolidated company on the financial reporting date are as follows:	consolidated company on the financial reporting date are as follows:
		Dec. 31, 2019		Dec. 31,	2018
		Book	Fair	Book	Fair
		Value	value	Value	value
The parts measured at fair value:
Financial assets:
Financial assets measured at FVTPL -	$	240,034	240,034	96,119	96,119
current
Financial assets measured at FVTOCI -		6,438	6,438	22,541	22,541
current
Not measured at fair value:
Non-financial assets:
Investment property		283,002	322,604	242,495	282,694

253

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(2)The evaluation techniques used to determine fair value are as follows
A.When financial assets are quoted publicly in an active market, this market price is the fair value. When market prices are not available, estimates are made by reference to quoted counterparties or using valuation techniques. The estimates and assumptions used are consistent with the information used by market participants as estimates and assumptions in pricing financial instruments.
B.The fair value of investment properties is based on the evaluations of independent evaluators with recognized professional qualifications and recent experience in the area and type of investment properties evaluated.
(3) Fair value hierarchy

The following table analyzes the fair value hierarchy of financial instruments and investment property by valuation. Each fair value hierarchy is defined as follows:

D. Level 1: Publicly quoted prices (unadjusted) in an active market for identical assets or liabilities.
E. Level 2: Input parameters for an asset or liability are observable either directly (i.e., prices) or indirectly (i.e., derived from prices), except for publicly quoted prices included in Level 1.
Level 3: Input parameters for an asset or liability are not based on observable market information (non-observable parameters).

Level 1 $ 20,931 -	Level 2 - -	Level 3 219,103 6,438
$ 20,931	-	225,541
$ -	-	322,604
Level 1 $ 24,516	Level 2 -	Level 3 71,603

254

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Financial assets measured at FVTOCI - current Not measured at fair value: Investment property	-	10,000	12,541	22,541 118,660 282,694
	$ 24,516	10,000	84,144
	$ -	-	282,694

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(4) Table of details of the changes in financial assets (liabilities) measured at fair value and classified into level 3

Unit: 1,000 TWD

Nam	e						2019					Closing balance 219,103 6,438
		$	Opening balance 71,603 12,541	Profit an	d	Losses Recognized in other comprehensi ve income - (16,103)	Incr	e	ase Transferred to level 3 - 10,000
				Recognized in profit or loss (9,461) -			Purchase 313,922 -
Financial assets measure Financial assets measure Nam Financial assets measure Financial assets measure Derivative financial asset	d at FVTPL d at FVTOCI e

		$	84,144	(9,461)		(16,103)	313,922		10,000		(156,961)	225,541
							2018					Closing balance 71,603 12,541 -
		$	Opening balance 106,100 - -	Profit a	nd	Losses	Incr	e	ase Transferred to level 3 - - -
				Recognized in profit or loss (1,194) - -		Recognized in other comprehensi ve income - (2,459) -	Purchase 601,820 15,000 -
	d at FVTPL d at FVTOCI s for hedging
		$	106,100	(1,194)		(2,459)	616,820		-	(635,123)		84,144

For the years 2019 and 2018, unrealized gains or losses on assets held at the end of the reporting period amounted to $411,000 dollars and $466,000 dollars respectively.

(5) Quantitative information on the fair value measurement of significant non-observable input values (level 3)

The consolidated company through the profit and loss of fair value as the third level measured at the fair value of financial assets in 2019 and on December 31, 2018, are respectively $219,103 thousand and $71,603 million yuan, because there was no active market public offer reference and counterparties, and because in practice, it can't fully grasp the major unobservable input value and the fair value of the relationship, so it did not reveal the quantitative information. The quantitative information list of the other significant unobservable input values measured at fair value at third level is as follows:

Item	Valuation technique	Significant unobservable inputs	Relationship between significant unobservable inputs and fair value

256

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Financial assets	Comparable	‧The multiple of	‧The higher the
measured at	Company	book-to-Market ratio	multiple, the
FVTOCI`－` investment in equity instruments with no active market	Analysis	0.74-0.80 as of Dec. 31, 2019 and 1.19-1.21 as of Dec. 31, 2018 ‧Discount for lack of marketability: 14.8%~16.8% as of	higher the fair value ‧The higher the discount for lack of marketability, the lower the fair value
		Dec. 31, 2019 and
		Dec. 31, 2018
"	Net asset value	‧Net asset value	‧Positive
	method		correlation with
			fair value

257

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(6) The fair value is classified in the third level of the evaluation process

The fair value of the consolidated company is measured using the unobservable input value, which is classified as the third level. The input value of this level is based on the price provided by the counterparty quotation or the price-to-market ratio multiplier of the market comparable company, etc., and relevant quotation and evaluation data are properly kept. The evaluation results are then checked to ensure consistency with the evaluation sources and to ensure that the evaluation results are reasonable.

(7) The fair value measurement of the third level and the sensitivity analysis of the fair value to the reasonable alternative hypothesis

The fair value measurement of financial instruments by the consolidated company is reasonable, but different evaluation models or evaluation parameters may result in different evaluation results. For financial instruments classified as level 3, if the evaluation parameters change, the impact on current profits and losses or other comprehensive income is as follows:

Dec. 31, 2019 Financial assets measured at FVTOCI investment in equity instruments with no active market Dec. 31, 2018 Financial assets measured at FVTOCI investment in equity instruments with no active market	Input	Rise or Drop	The change of fair value reflected in the profit or loss in the period	The change of fair value reflected in the profit or loss in the period	The change of fair value reflected in other comprehensive income	The change of fair value reflected in other comprehensive income
			Favorable change	Adverse change	Favorable change	Adverse change
	The multiple of book-to-Ma rket ratio Discount for lack of marketabilit y The multiple of book-to-Ma rket ratio Discount for lack of marketabilit y	5% 1% 1% 1%	- - - -	- - - -	171 51 114 172	(178) (58) (115) (115)

Favorable and unfavorable changes in the Consolidated company’s fair value represent fluctuations in fair value, which is calculated by using a valuation technique based on unobservable input parameters of varying degrees. Where the fair value of a financial instrument is affected by more than one input, the above table only reflects the effect of changes in a single input and does not take into account correlation and variability between inputs.

258

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(26) Financial Risk Management

1.The Consolidated company is exposed to the following risks from the engagment of
financial instruments:
(1) Credit risk

(2)Liquidity risk

(3) Market risk

This note presents the Consolidated company’s risk information for each of these risks and the Consolidated company’s objectives, policies and procedures for measuring and managing risk. For further quantitative disclosures, please refer to the respective notes to the consolidated financial statements.

2. Risk Management Structure

The Chairman has the sole responsibility for establishing and overseeing the Consolidated company’s risk management structure and reports regularly to the Board on its operations.

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

The Consolidated company’s risk management policy is designed to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor compliance with the risks and risk limits. The Consolidated company develops a disciplined and constructive control environment through training, management guidelines and operating procedures to enable all employees to understand their roles and responsibilities.

The Board of Directors of the Consolidated company oversees how management monitors compliance with the Consolidated company’s risk management policies and procedures and reviews the appropriateness of the Consolidated company’s risk management framework in relation to the risks it is exposed to. Internal auditors assist the Consolidated company’s Board of Directors in its oversight role. These personnel conduct regular and exceptional reviews of risk management controls and procedures and report the results of these reviews to the Board of Directors.

3. Credit risk

Credit risk is the risk of financial loss arising from the failure of the Consolidated company’s customers or counterparties to fulfill their contractual obligations, mainly from the Company's accounts receivable from customers and investments in securities.

(1) Accounts receivable and other receivables

The Consolidated company’s credit risk exposures are primarily depended on each customer's individual circumstances. However, management also considers statistical information about the Consolidated company’s customer base, including the risk of default in the customer's industry and country, as these factors may affect credit risk. Approximately 78% and 85% of the Consolidated company’s revenue for 2018 and 2019, respectively, were derived from sales to customers in Mainland China, which resulted in a significant concentration of regional credit risk.

The Consolidated company has established a credit policy whereby the Consolidated company is required to analyze the credit rating of each new customer individually before granting standard payment and delivery terms. Credit sales limits are established on an individual customer basis and are reviewed periodically; customers who do not meet the Group's benchmark credit rating may only transact business with the Consolidated company on a pre-collection basis.

In monitoring customers' credit risk, customers are grouped according to their credit characteristics, including whether they are individuals or legal entities, age of accounts, maturity dates and pre-existing financial difficulties. The Consolidated company maintains a Provisions account to reflect estimates of losses on accounts receivable and other receivables.

(2) Use of funds

260

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

The Consolidated company’s investments in equity securities are placed through a centralized trading market and therefore have no significant credit transaction risk.

The credit risk of bank deposits, fixed income investments and other financial instruments is measured and reported to the Chairman of the Board of Directors by the Consolidated company’s finance department. Since the Consolidated company’s counterparties are creditworthy banks and financial institutions with investment grade or above, there are no significant performance concerns and therefore no significant credit risk.

4.Liquidity risk

Liquidity risk is the risk that the Consolidated company will not be able to deliver cash or other financial assets to settle its financial liabilities and will not be able to meet its related obligations. The Consolidated company’s approach to manage liquidity risk is to ensure that the Consolidated company has sufficient liquidity to meet its liabilities as they fall due under normal and stressful circumstances and that there is no risk of unacceptable loss or damage to the Consolidated company’s reputation. In addition, the Company has entered into unused borrowing lines totaling $3,158,840,000 in 2019 to cover unanticipated payments.

5. Market risk

Market risk is the risk that changes in market prices, such as changes in exchange rates, interest rates, and prices of equity instruments, will affect the Consolidated company’s revenue or the value of financial instruments held by the Consolidated company. The objective of market risk management is to manage the exposure to market risk to an acceptable level and to optimize investment returns.

The Consolidated company engages in derivative transactions in order to manage market risk. All transactions are executed in accordance with the guidelines of the Board of Directors.

(1) Exchange rate risk

The Consolidated company uses derivative transactions to hedge exchange rate risk due to its exposure to exchange rate risk arising from sales and purchase transactions that are not denominated in the Consolidated company’s functional currency. Gains or losses on foreign currency assets and liabilities arising from changes in exchange rates are largely offset against natural hedges. Derivative transactions can help the Consolidated company reduce, but still not completely eliminate, the impact of changes in foreign currency exchange rates.

The Consolidated company periodically reviews individual foreign currency assets and liabilities for exposures and hedges against such exposures.

(2) Interest rate risk

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Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

The Consolidated company’s interest rate risk arises primarily from variable rate bank deposits and short-term borrowings, and changes in interest rates will cause future cash flows to fluctuate as the effective interest rates on bank deposits and short-term borrowings change.

(3) Equity instrument price risk

Changes in the price of equity securities at the reporting date (on the same basis for both periods and assuming no change in other factors) would have the following effects on the consolidated income statement:

Security price as of the reporting date
	Other comprehensi ve income after tax $ 64			Other comprehens ive income after tax 225
Increased by 1% Decreased by 1%
	$	(64)	(209)	(225)

(27) Capital management

It is the Board's policy to maintain a sound capital base to maintain the confidence of investors, creditors and the market and to support the development of future operations. Capital consists of the Consolidated company’s share capital, capital surplus and retained earnings. The Board of Directors controls the rate of return on capital and also controls the level of dividends on ordinary shares.

In order to maintain or adjust its capital structure, the Consolidated company may adjust dividends paid to shareholders, reduce capital to refund shareholders, issue new shares or sell assets to settle liabilities.

262

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

The Consolidated company controls its capital on a debt-to-capital ratio basis. The ratio is calculated by dividing net debt by total capital. Net debt is total liabilities less cash and cash equivalents as shown on the balance sheet. Total capital represents all components of equity (i.e., equity, capital surplus, retained earnings and other equity) plus net debt. The debt-to-capital ratio at the reporting date is as follows:

Total liabilities Less: Cash and cash equivalents Net liabilities Total equity Debt-to-capital ratio	Dec. 31, 2019 $ 3,734,967 (2,845,994)	Dec. 31, 2019 $ 3,734,967 (2,845,994)		Dec. 31, 2018 3,918,726 (1,448,071) 2,470,655 9,871,482 20.02%
	$ 888,973
	$ 12,545,225
		6.62%

(28) Investment and fund raising activities for non-cash transactions

Please refer to Notes VI(8) and VI(13) for information on the consolidated company’s non-cash trading investments and fundraising activities for Right-of-use assets acquired under leases during 2019.

The reconciliation of the consolidated company’s liabilities from fundraising activities for the years ended December 31, 2019 and 2018 was as follows:

Short-term loan Lease liabilities Total liabilities from financing activites	2019.1.1 Cash flow $ 919,643 (890,590) 241,482 (115,118)	Non-cash change Other Change in exchange rate Change in fair value Dec. 31, 2019 - 927 - 29,980 35,762 (6,715) - 155,411
	$ 1,161,125 (1,005,708)	35,762 (5,788) - 185,391

Short-term loan Total liabilities from financing activites	2018.1.1 Cash flow $ 600,832 311,641	Non-cash change Other Change in exchange rate Change in fair value Dec. 31, 2018 - 7,170 - 919,643
	$ 600,832 311,641	- 7,170 - 919,643

VII. Related party transactions

(1) Parent company and ultimate controller: The Company is the ultimate controller of the Company and the Company's subsidiaries.
(2) Names and relationships of related parties

The related parties with whom the Company had transactions during the period covered

by these consolidated financial statements are as follows:

Name of Related Party

Relationship with the Company

263

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Key management personnel

Including the directors, supervisors, managers and their families and spouses

264

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(3) Material transactions with the related parties

1. Lease

The Consolidated company leases warehouses from major management personnel and enters into one-year lease contracts with a total value of $60,000,000 dollars with reference to the neighboring warehouse rental quotes (per year). For the year ended December 31, 2018, rent expense was $60,000 dollars and there was no outstanding balance at December 31, 2018. The lease transaction was evaluated in accordance with IFRS 16 on January 1, 2019. The lease option was extended for one year and right-of-use assets of $118,000 dollars and Lease liabilities of $118,000 dollars were recognized, interest expense of $1,000 dollars was recognized in 2018 and the balance of Lease liabilities as of December 31, 2019 was $59,000 dollars.

In January 2018, the Consolidated company leased warehouses from related parties and entered into one-year leases with reference to the neighboring warehouses' rental quotes, with a total contract value of $60,000 dollars. For the year ended December 31, 2018, rent expense was $60,000 dollars and there was no outstanding balance at December 31, 2018.

(4) Major management personnel transaction

Related compensation includes:

Major management personnel transaction Related compensation includes:
Short-term employee benefits Post-employment benefits Share-based payment	2019 $ 50,134 865 432	2018 44,307 867 1,190
	$ 51,431	46,364

VIII. Pledged assets

IX. Significant contingent liabilities and unrecognized contractual commitments

(1) Significant unrecognized contractual commitments:

As of December 31, 2019, The company's subsidiary, Lotes Zhongshan Co., Ltd., had signed and unpaid major plant construction contracts, with the value of approximately RMB 37,421 yuan.

The consolidated company had entered into outstanding information system related

265

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

contracts as of December 31, 2019 for an amount of approximately $43,050.

(2) The issuance of guarantee notes for bank loans, financing lines and derivative financial commodity transactions:

[Guaranteed notes ]

Dec. 31, 2019 Dec. 31, 2018 $ 2,358,960 2,304,320

X. Significant Disaster Loss: None.

XI. Significant post-period events: None.

266

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

XII. Others

(1) Employee benefits, depreciation, depletion and amortization functions are summarized below:

below:
By function By nature	2019			2018
	Operation cost	Operation expense	Total	Operation cost	Operation expense	Total
Employee benefit expense Salaries expense Labor insurance and health insurance expenses Pension expense Compensation of directors Other employee benefit expenses Depreciation expense Amortization expense	1,752,546 312,817 312 - 125,533 851,362 1,087	1,005,440 113,169 9,713 5,584 105,999 315,617 12,747	2,757,986 425,986 10,025 5,584 231,532 1,166,979 13,834	1,762,808 324,911 333 - 91,604 686,205 518	855,281 99,078 9,720 4,457 86,082 173,789 7,890	2,618,089 423,989 10,053 4,457 177,686 859,994 8,408

XIII. Disclosing information

(1) Major Transaction Details

In accordance with the Guidelines Governing the Preparation of Financial Reports by

Securities Issuers, the Company should disclose the following information about significant transactions in 2019:

1. Capital Lending to Others :

Unit: 1,000 TWD ／ 1,000 in foreign currency

No.	Lender	Borrower	Item	Related Party	Max Amount for the term e	Balance at the nd	Actual Lending Amount	Interest rate	Nature of the lending	Business Amount	Purpose f or the lending	Allowance for bad debt	Collateral	Collateral	Individual Limit (Note)	Overall limit (Note)
													Name	Value
0	The Company	Lotes Guanghou Co., Ltd	intracom pany transacti on	Y	137,748 (RMB30,000) (	128,925 RMB30,000)	85,950	5%	2	-	Working Capital	-	None	-	2,363,065	4,726,130

Note: The amount of the Company's financing to a single party shall not exceed 20% of the Company's net worth.

The total amount of funds lent by the Company to others shall not exceed 40% of the Company's net worth.

2. Endorsement :

Unit: 1,000 TWD /1,000 in foreign currency

Endorsee

267

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

No.	Name of the Company that provides the endorsement	Company Name	Relatio nship (Note 1)	Ceiling on amount of endorsement for a enterprise (Note 2)	Balance of the ceiling endorsement fee in the period	Ending balance of the endorsement fee	Amount actually used	Amount of endorsement backed by assets	Percentage of the accumulated amount of endorsement in the net value of current financial statement (%)	Ceiling on amount of endorsement (Note 2)	Endorsement made by parent company to subsidiary	Endorsement made by subsidiary to parent company	Endorsement made to any party in Mainland China
0 0 0 0 0 1 2	The Company " " " " Lotes G Lintes Technology Co., Ltd.	REKA Technology Co., Ltd. Lotes Suzhou Co., Ltd Lotes Guanghou Co., Ltd and Lotes Suzhou Co., Ltd Lotes Guanghou Co., Ltd Lintes Technology Co., Ltd. uREKA Technology Co., Ltd. Lintes Technology (Suzhou) Co., Ltd.	2 2 2 2 2 1 2	2,363,065 2,363,065 2,363,065 2,363,065 2,363,065 905,665 744,681	35,000 158,000 (USD5,000) 474,000 (USD15,000) 948,000 (USD30,000) 100,000 94,800 (USD3,000) 252,800 (USD8,000)	35,000 149,900 (USD5,000) 449,700 (USD15,000) 899,400 (USD30,000) - 89,940 (USD3,000) 179,880 (USD6,000)	- - - - - - -	- - - - - - -	0.30% 1.27% 3.81% 7.61% 0.00% 1.99% 12.08%	5,907,663 5,907,663 5,907,663 5,907,663 5,907,663 2,264,164 1,489,363	Y " " " " N "	N " " " " " "	N Y " " N " Y

Note 1: There are seven types of relationship between the Endorser and Endorsee, which can be marked:
(1) Companies with business dealings.
(2) Companies in which the company directly and indirectly holds more than 50% of the voting rights.
(3) Companies that hold more than 50% of the voting rights in the company, both directly and indirectly.
(4) The Company owns, directly and indirectly, more than 90 percent of the voting shares.
(5) Company that is mutually insured under a contract between its peers or co-manufacturers based

on the need to perform the work.

(6) Company in which all of the contributory shareholders have given their endorsement in proportion to their shareholding in the joint venture.
(7) Intercompany performance guarantees and guarantees for pre-sale contracts in accordance with

the Consumer Protection Act.

Note 2: (1) The amount of the Company's guarantee for a single corporate endorsement shall not exceed
20% of the net worth of the Company 。

The aggregate amount of the Company's guarantees under external endorsement shall not exceed 50% of

the net worth of the Company.

268

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(2) The amount of Lotes Guanghou Co., Ltd's guarantee for a single corporate endorsement is limited

to not more than 20% of the net worth of the company. 。

The aggregate amount of Lotes Guanghou Co., Ltd's external endorsement guarantees is limited to an amount not exceeding 50% of the Company's net worth.

(3)The amount of Lintes Technology Co., Ltd.'s guarantee for a single corporate endorsement is limited to not more than 50% of the net worth of the company.

The aggregate amount of Lintes Technology Co., Ltd.'s external endorsement guarantees is

limited to an amount not exceeding 100% of the Company's net worth.

Securities Held at the End of Fiscal Period ( excluding the equity of controlled by subsidiaries, affiliated companies, or joint company ):

Unit: 1,000 TWD

Company which holds securities	Category and name of security	Relationship with the issuer of the security	Listed as	End of the fiscal period	End of the fiscal period	End of the fiscal period	End of the fiscal period	Note
				Shares	Book Value	Shareholding proportion	Fair value
" " " " " "	Grand-Tek Technology Co., Ltd. APAQ Technology Co., Ltd. OtO Photonics Inc. Lucemitek Co., Ltd Radinet Communications Inc. Kuang Ying Computer Equipment Co., Ltd. AICP Technology Corporation	None " " " " " "	Financial assets measured at FVTPL - current " " " " Financial assets measured at FVTOCI -current "	163,980 345,000 1,368,800 1,169,977 600,000 1,500,000 400,000	7,166 13,765 - - - 4,507 1,931	0.67 % 0.41 % 5.35 % 17.33 % 18.37 % 5.73 % 5.33 %	7,166 13,765 - - - 4,507 1,931	Note Note Note

Note: All of them were recognized in losses.

4.The cumulative purchase or sale of the same securities amounted to at least NT$300 million or 20% of the paid-in capital: None.
5.Acquisition of real property amounting to NT$300 million or 20% or more of the paid-in capital:

==> picture [446 x 104] intentionally omitted <==

Note 1: Build the factory by own contracting committee.

Note 2: The conversions were made at the exchange rates prevailing on the balance sheet date.

6.Disposal of real property amounting to NT$300 million or 20% or more of paid-in
capital: None.

269

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

The amount of sales to or from related parties is at least $100 million or 20% of the paid-in capital:

			Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD
The company which purchases (sells) products	Name of Transaction Counterparty	Relationship	Condition of Transaction				Situation and reason for the conditions of transaction to be different from the ordinary ones		Notes and accounts receivable (payable)		Remarks
			Purchase (sales)	Amount	Percentage in total goods purchased (sold)	Credit period	Unit Price	Credit period	Balance	Percentage in the notes and accounts receivable (payable)
Xincheng Development Co., Ltd. " REKA Technology Co., Ltd. " " " " " Lotes Guanghou Co., Ltd " Lintes Technology (Suzhou) Co., Ltd. Lotes Hengnan Co., Ltd.	The Company Lotes Suzhou Co., Ltd The Company Lotes Guanghou Co., Ltd Shenzhen Deyi Automation Technology Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Lotes Hengnan Co., Ltd. " REKA Technology Co., Ltd. Lotes Hengnan Co., Ltd. Lintes Technology Co., Ltd. Zongka Technology (Shenzhen) Co.,Ltd.	Subsidiary The surrogate parent company are the same parent company Subsidiary The surrogate parent company are the same parent company " " " " " " Subsidiary The surrogat	Net revenue from the goods sold Net expense from the goods purchased Net revenue from the goods sold Net expense from the goods purchased Net revenue from the goods sold Net revenue from the goods sold Net expense from the goods purchased Net revenue from the goods sold Net expense from the goods purchased Net expense from the goods purchased Net revenue from the goods sold Net revenue from the goods sold	1,268,540 1,329,762 6,889,368 8,600,315 186,915 484,499 412,163 188,008 2,021,115 306,804 1,898,007 101,724	95.40 % 100.00 % 74.57 % 95.06 % 2.02 % 5.24 % 4.56 % 2.03 % 30.37 % 4.61 % 97.34 % 18.26 %	settled by month at intervals of 90 days " " " " " " " " " " "	- - - - - - - - - - - -	No significant difference " " " " " " " " " " "	211,482 (235,988) 2,045,852 (1,529,888) 57,618 279,910 (69,406) 62,237 (383,871) (23,620) 297,411 37,700	89.14% 100.00% 59.16% (47.64)% 1.67% 8.09% (1.94)% 2.01% (32.23)% (1.98)% 92.90% 23.15%

Amounts due from related parties amounting to at least NT$100 million or 20% of

paid-in capital:

					Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD
Related party with accounts receivable by the Company	Name of transaction counterparty	Relationship	Balance of receivalbes from the related party	Turnover Ratio	Past due receivables from the related party		Receivables from the related party Amount received after the period ended	Appropriated Allowance Amount of loss
					Amount	Solution
Xincheng Development Co., Ltd. REKA Technology Co., Ltd.	The Company "	Subsidiary "	211,482 2,045,852	4.61 3.77	- -		120,019 1,214,382	- -

270

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

" " Lotes Suzhou Co., Ltd Good Hope Investments Limited Lotes Guanghou Co., Ltd Lintes Technology (Suzhou) Co., Ltd.	Lotes Guanghou Co., Ltd Zongka Technology (Shenzhen) Co., Ltd. Xincheng Development Co., Ltd. REKA Technology Co., Ltd. " Lintes Technology Co.,Ltd.	The surrogate parent company are the same parent company " " Parent company The surrogate parent company are the same parent company Subsidiary	383,871 279,910 235,988 927,013 1,529,888 297,411	5.51 2.10 4.46 - 7.29 7.09	- - - - - -		374,967 90,369 235,986 - 1,318,337 264,469	- - - - - -

271

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

9. Engagment in derivative transactions:

Unit: 1,000 TWD /1,000 in foreign currency

Company conducting transaction	Investment target	Transaction date	Maturity date	Contract period	Contract Price	Profit or loss from investment
The Company " " " "	Swap contract of metal products Swap contract of metal products Swap contract of metal products Forward exchange Forward exchange	Aug. 30, 2019 Aug. 30, 2019 Aug. 30, 2019 Nov. 21, 2019 Nov. 21, 2019	Oct. 1, 2019 Oct. 31, 2019 Nov. 29, 2019 Dec. 23, 2019 Dec. 31, 2019	32 62 91 32 40	USD 468 USD 470 USD 471 USD 1,100 USD 900	(876) (537) (1,041) 248 285

10.Business relationships and material transactions between parent and subsidiaries:

Business relationships and significant intercompany transactions for the year ended December 31, 2019:

Unit: 1,000 TWD

				Unit: 1,000 TWD	Unit: 1,000 TWD	Unit: 1,000 TWD	Unit: 1,000 TWD
No.	Name	Transaction with	Relationship	Transaction in 2019
				Subject	Amount	Term	Operating revenue Accounting for total assets
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0	The Company " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "	Ememe Robot Co., Ltd " " " Lintes Technology Co., Ltd. " " " " Jiayu Investment Co., Ltd. LOTES USA, INC. " LOTES EU GmbH " Xincheng Development Co., Ltd. " " " REKA Technology Co., Ltd. " " " " " " " Lotes Guanghou Co., Ltd " Compertum Microsystems Inc. " Lotes Suzhou Co., Ltd "	1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1	Other income Accounts receivable Administration fee Other accounts receivable Other income Net revenue from the goods sold Net expense from the goods purchased Accounts payable Other accounts receivable Other income Administration fee Other accounts receivable Administration fee Other payables Accounts payable Net expense from the goods purchased Other payables Selling expenses Accounts receivable Accounts payable Sale of fixed assets Net expense from the goods purchased Sales Revenue Other accounts receivable Other payables Other income Other accounts receivable Interest income Other income Other accounts receivable Sales Revenue Accounts receivable	162 2,982 3 2,272 258 118 13,798 7,063 165 34 22,006 169 6,271 3,017 211,482 1,268,540 65 185 12,129 2,045,852 427 6,889,368 26,949 652 2,756 701 86,308 1,444 7 215 18 18	Same as other transactions " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "	-% 0.02% -% 0.01% -% -% 0.09% 0.04% -% -% 0.15% -% 0.04% 0.02% 1.30% 8.41% -% -% 0.07% 12.55% -% 45.66% 0.18% -% 0.02% -% 0.53% -% -% -% -% -%

272

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 . 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2	Lotes Guanghou Co., Ltd " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " Lotes Suzhou Co., Ltd " " " " " " " " " "	REKA Technology Co., Ltd. " " " " " Lotes Suzhou Co., Ltd " " " Lotes Hengnan Co., Ltd. " " " " Zongka Technology (Shenzhen) Co., Ltd. " " " " " Shenzhen Deyi Automation Technology Co., Ltd. " " " " " Lintes Technology (Suzhou) Co., Ltd. " Lotes Zhongshan Co., Ltd " " Guangzhou Leside Technology Co., Ltd. " " " Xincheng Development Co., Ltd. " " " Zongka Technology (Shenzhen) Co., Ltd. " Lintes Technology (Suzhou) Co., Ltd. " " " "	3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3	Accounts receivable Accounts payable Purchasing for the term Sales Revenue Other accounts receivable Other payables Purchasing fixed assets Sales Revenue Purchasing for the term Accounts receivable Accounts payable Mold purchasing Accounts receivable Accounts payable Sale of fixed assets Sales Revenue Administration fee Accounts receivable Accounts payable Other accounts receivable Purchasing for the term Sales Revenue Other income Accounts receivable Accounts payable Other accounts receivable Sales Revenue Purchasing for the term Other income Sales Revenue Accounts receivable Other accounts receivable Purchasing for the term Accounts payable Accounts receivable Other accounts receivable Sales Revenue Other income Sales Revenue Accounts receivable Accounts payable Purchasing for the term Sales Revenue Accounts receivable Sales Revenue Purchasing for the term Accounts payable Other accounts receivable Accounts receivable	1,529,888 383,871 2,021,115 8,600,135 19,950 4,538 14,427 5,582 5,188 2,544 1,401 306,804 100 23,620 4,871 305 710 696 78 17 574 2,215 203 826 314 13 8,811 479 146 87,675 34,765 2,634 33,354 36,125 292 11 323 100 1,329,762 235,988 2,323 3,454 20,562 8,248 17,998 2,030 497 3,477 9,434	Same as others " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "	9.39% 2.36% 13.39% 57.00% 0.12% 0.03% 0.10% 0.04% 0.03% 0.02% -% 2.03% -% 0.14% -% -% -% -% -% -% -% 0.01% -% -% -% -% 0.06% -% -% 0.58% 0.21% 0.02% 0.22% 0.22% -% -% -% -% 8.81% 1.45% 0.01% 0.02% 0.14% 0.05% 0.12% 0.01% -% 0.02% 0.06%

273

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 5 5 5 6 6 6 6	Lotes Suzhou Co., Ltd " " " " " REKA Technology Co., Ltd. " " " " " " " " " " " " " " " Lotes Hengnan Co., Ltd. " " " " " " " " " Lintes Technology (Suzhou) Co., Ltd. " " Zongka Technology (Shenzhen) Co., Ltd. " " "	Lintes Technology (Suzhou) Co., Ltd. " Shenzhen Deyi Automation Technology Co., Ltd. " " Lintes Technology Co., Ltd. Xincheng Development Co., Ltd. " Zongka Technology (Shenzhen) Co., Ltd. " " " Good Hope Investments Limited Ememe Robot Co., Ltd Lotes Hengnan Co., Ltd. " " " Shenzhen Deyi Automation Technology Co., Ltd. " Lotes Zhongshan Co., Ltd " Shenzhen Deyi Automation Technology Co., Ltd. " Zongka Technology (Shenzhen) Co., Ltd. " Lotes Suzhou Co., Ltd " " " Lotes Zhongshan Co., Ltd " Lintes Technology Co., Ltd. " " Shenzhen Deyi Automation Technology Co., Ltd. " Lotes Zhongshan Co., Ltd "	3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3	Other income Sale of fixed assets Sales Revenue Purchasing for the term Accounts receivable Purchasing for the term Purchasing for the term Accounts payable Sales Revenue Purchasing for the term Accounts receivable Accounts payable Accounts payable Accounts receivable Sales Revenue Accounts receivable Purchasing for the term Accounts payable Sales Revenue Accounts receivable Sales Revenue Account receivable Sales Revenue Accounts receivable Sales Revenue Accounts receivable Sales Revenue Purchasing for the term Accounts payable Accounts receivable Sales Revenue Accounts receivable Sales Revenue Accounts payable Accounts receivable Purchasing for the term Sales Revenue Purchasing for the term Accounts payable	9,315 3,319 43,522 1,195 19,865 32 58,582 23,371 484,499 10,810 279,910 412 927,013 8,420 188,008 62,237 412,163 69,406 186,915 57,618 80,541 84,662 16,973 6,975 101,724 37,700 24,336 135 146 1,462 19,858 21,508 1,898,007 6,752 297,411 12 1,533 72,484 78,505	`與一般交易相同` " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "	0.06% -% 0.29% -% 0.12% -% 0.39% 0.14% 3.21% 0.07% 1.72% -% 5.69% 0.05% 1.25% 0.38% 2.73% 0.43% 1.24% 0.35% 0.53% 0.52% 0.11% 0.04% 0.67% 0.23% 0.15% -% -% -% 0.13% 0.13% 12.58% 0.04% 1.82% -% 0.01% 0.48% 0.48%

Note 1: The number should be filled in as follows:

1.0 refer to parent company

2.Subsidiaries are numbered by company, starting with the Arabic numeral 1.

Note 2:The type of relationship with the counterparty is indicated below:

1.Parent company to subsidiaries

Subsidiaries to parent company
3.Subsidiaries to subsidiaries

274

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

(2) Information on Reinvestment Business:

Information on the Company's investees in 2019 was as follows (excluding investees in

China):

China):	China):	China):	China):
				Unit:1,000TWD
Name of the company investing	Name of investee company	Location	Main business	Initial investment amount (Note 1)		Shares held at the end of the fiscal period			Gain/loss of investee company in the fiscal period	Gain/loss in the investment recognized in the fiscal period	Remarks
				End of this period	End of the previous year	Shares	Percentage	Book Value
The Company " " " " The Company " Lotes Investment Ltd. Good Hope Investments Limited " Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co., Ltd. " " Lintes Technology Co., Ltd. " Jilong Co., Ltd.	Lotes Investment Ltd. Good Hope Investments Limited Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co., Ltd. Lotes USA, Inc. LOTES EU GmbH Loteson International Investments Limited Xincheng Development Co., Ltd. REKA Technology Co., Ltd. Jae You Co., Ltd. Wangden Investments Limited (HK) Ememe Robot Co., Ltd Compertum Microsystems Inc. Lintes Technology Co., Ltd. Pure Fortune Limited Jilong Co., Ltd. Rihui Co., Ltd.	Samoa " " Anguilla, British West 4F, No. 15, Wuxun St., Anle Dist., Keelung City 888 SW 5TH AVE 800 PORTLAND OR 97204 Ulmenstrabe 23- 25 ,60325 Frankfurt am Main, Hong Kong Samoa Unit 51 51F Tower 1 Silvercord Canton RD Tsimshatsui Hong Kong Hong Kong New Taipei City New Taipei City New Taipei City Samoa Samoa Samoa	Holding and investment businesses " " " General investment Market development Market development Holding and investment businesses Telecommunic ation services and sales of connectors for consumer electronics industry Telecommunic ation services and sales of connectors for consumer electronics industry Holding and investment businesses Holding and investment businesses Electric Appliance and Audiovisual Electric Products Manufacturing Electronic Parts and Components Manufacturing Electronic Parts, Components, Electrical Machinery, Supplies Manufacturing Sales of connectors for telecommunica tion industry and for consumer electronics industry Holding and investment businesses Holding and investment businesses	780,979 12,030 600,092 14,990 690,000 74,950 3,359 780,979 2,998 3,036 600,102 14,990 69,600 13,164 486,926 - 148,401 148,401	800,126 12,325 614,805 15,358 690,000 76,788 3,520 800,126 3,072 3,111 614,815 15,358 69,600 - 487,426 3,809 152,039 152,039	26,050,000 401,281 20,016,426 500,000 69,000,000 2,500,000 100,000 26,050,000 100,000 101,281 20,016,756 500,000 6,960,000 1,316,400 29,712,788 - 4,950,000 4,950,000	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 94.37% 46.74% 52.13% -% 100.00% 100.00%	4,392,104 1,537,963 1,902,509 111,720 876,828 48,441 3,711 4,528,344 1,737 609,188 1,919,200 111,720 (5,085) 12,935 778,420 - 169,589 169,589	805,171 35,733 227,196 13,707 103,213 (7,389) 2,008 805,171 (38) 35,771 227,196 13,707 653 (489) 156,114 - 51,537 51,537	783,455 35,733 220,478 13,707 103,334 (7,389) 2,008 805,171 (38) 35,771 227,196 13,707 616 (229) 94,931 - 39,325 39,325	Note 2 Note 2 Note 2 Note 2 Note 2

275

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Note 1: The original investment amount was converted into New Taiwan dollars using the exchange rate at the balance sheet date.

276

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Note 2: Investment income recognized in the current period includes adjustments for unrealized gains or losses on intercompany transactions.

(3) Investment in Chiese Company:
Names of investee companies in Mainland China, major business activities, and
other related information:

					Unit:1,000TWD Amount remitted or retrieved Accumulated investment amount remitted from Taiwan at the end of the fiscal period Gain/loss of investee company in the fiscal period Shareholdin g Rati Gain/loss in investment recognized in the fiscal period Carrying amount of investment at the end of the fiscal period ~~Investment~~ income remitted back to Taiwan by the end of the fiscal period Remittance Retrieved (Note 3) (Note 2) - - 764,490 805,171 100.00% 783,454 4,392,083 - - - 599,277 227,196 100.00% 220,478 1,902,452 - - - 14,990 13,707 100.00% 13,707 111,720 - - - - 61,701 100.00% 54,337 503,491 - - - 148,401 79,014 52.13% 34,822 107,047 - - - - 23,766 100.00% 23,766 76,572 - - - - (25,563) 100.00% (25,563) 1,006,897 - - - - - 100.00% - 15,041 - - - - (5) 100.00% (5) 98,838 - - - - (1,743) 100.00% (1,743) 1,338 - - - - (1,085) 51.00% (553) 785 -	Unit:1,000TWD Amount remitted or retrieved Accumulated investment amount remitted from Taiwan at the end of the fiscal period Gain/loss of investee company in the fiscal period Shareholdin g Rati Gain/loss in investment recognized in the fiscal period Carrying amount of investment at the end of the fiscal period ~~Investment~~ income remitted back to Taiwan by the end of the fiscal period Remittance Retrieved (Note 3) (Note 2) - - 764,490 805,171 100.00% 783,454 4,392,083 - - - 599,277 227,196 100.00% 220,478 1,902,452 - - - 14,990 13,707 100.00% 13,707 111,720 - - - - 61,701 100.00% 54,337 503,491 - - - 148,401 79,014 52.13% 34,822 107,047 - - - - 23,766 100.00% 23,766 76,572 - - - - (25,563) 100.00% (25,563) 1,006,897 - - - - - 100.00% - 15,041 - - - - (5) 100.00% (5) 98,838 - - - - (1,743) 100.00% (1,743) 1,338 - - - - (1,085) 51.00% (553) 785 -	Unit:1,000TWD Amount remitted or retrieved Accumulated investment amount remitted from Taiwan at the end of the fiscal period Gain/loss of investee company in the fiscal period Shareholdin g Rati Gain/loss in investment recognized in the fiscal period Carrying amount of investment at the end of the fiscal period ~~Investment~~ income remitted back to Taiwan by the end of the fiscal period Remittance Retrieved (Note 3) (Note 2) - - 764,490 805,171 100.00% 783,454 4,392,083 - - - 599,277 227,196 100.00% 220,478 1,902,452 - - - 14,990 13,707 100.00% 13,707 111,720 - - - - 61,701 100.00% 54,337 503,491 - - - 148,401 79,014 52.13% 34,822 107,047 - - - - 23,766 100.00% 23,766 76,572 - - - - (25,563) 100.00% (25,563) 1,006,897 - - - - - 100.00% - 15,041 - - - - (5) 100.00% (5) 98,838 - - - - (1,743) 100.00% (1,743) 1,338 - - - - (1,085) 51.00% (553) 785 -	Unit:1,000TWD Amount remitted or retrieved Accumulated investment amount remitted from Taiwan at the end of the fiscal period Gain/loss of investee company in the fiscal period Shareholdin g Rati Gain/loss in investment recognized in the fiscal period Carrying amount of investment at the end of the fiscal period ~~Investment~~ income remitted back to Taiwan by the end of the fiscal period Remittance Retrieved (Note 3) (Note 2) - - 764,490 805,171 100.00% 783,454 4,392,083 - - - 599,277 227,196 100.00% 220,478 1,902,452 - - - 14,990 13,707 100.00% 13,707 111,720 - - - - 61,701 100.00% 54,337 503,491 - - - 148,401 79,014 52.13% 34,822 107,047 - - - - 23,766 100.00% 23,766 76,572 - - - - (25,563) 100.00% (25,563) 1,006,897 - - - - - 100.00% - 15,041 - - - - (5) 100.00% (5) 98,838 - - - - (1,743) 100.00% (1,743) 1,338 - - - - (1,085) 51.00% (553) 785 -	Unit:1,000TWD Amount remitted or retrieved Accumulated investment amount remitted from Taiwan at the end of the fiscal period Gain/loss of investee company in the fiscal period Shareholdin g Rati Gain/loss in investment recognized in the fiscal period Carrying amount of investment at the end of the fiscal period ~~Investment~~ income remitted back to Taiwan by the end of the fiscal period Remittance Retrieved (Note 3) (Note 2) - - 764,490 805,171 100.00% 783,454 4,392,083 - - - 599,277 227,196 100.00% 220,478 1,902,452 - - - 14,990 13,707 100.00% 13,707 111,720 - - - - 61,701 100.00% 54,337 503,491 - - - 148,401 79,014 52.13% 34,822 107,047 - - - - 23,766 100.00% 23,766 76,572 - - - - (25,563) 100.00% (25,563) 1,006,897 - - - - - 100.00% - 15,041 - - - - (5) 100.00% (5) 98,838 - - - - (1,743) 100.00% (1,743) 1,338 - - - - (1,085) 51.00% (553) 785 -	Unit:1,000TWD Amount remitted or retrieved Accumulated investment amount remitted from Taiwan at the end of the fiscal period Gain/loss of investee company in the fiscal period Shareholdin g Rati Gain/loss in investment recognized in the fiscal period Carrying amount of investment at the end of the fiscal period ~~Investment~~ income remitted back to Taiwan by the end of the fiscal period Remittance Retrieved (Note 3) (Note 2) - - 764,490 805,171 100.00% 783,454 4,392,083 - - - 599,277 227,196 100.00% 220,478 1,902,452 - - - 14,990 13,707 100.00% 13,707 111,720 - - - - 61,701 100.00% 54,337 503,491 - - - 148,401 79,014 52.13% 34,822 107,047 - - - - 23,766 100.00% 23,766 76,572 - - - - (25,563) 100.00% (25,563) 1,006,897 - - - - - 100.00% - 15,041 - - - - (5) 100.00% (5) 98,838 - - - - (1,743) 100.00% (1,743) 1,338 - - - - (1,085) 51.00% (553) 785 -	Unit:1,000TWD Amount remitted or retrieved Accumulated investment amount remitted from Taiwan at the end of the fiscal period Gain/loss of investee company in the fiscal period Shareholdin g Rati Gain/loss in investment recognized in the fiscal period Carrying amount of investment at the end of the fiscal period ~~Investment~~ income remitted back to Taiwan by the end of the fiscal period Remittance Retrieved (Note 3) (Note 2) - - 764,490 805,171 100.00% 783,454 4,392,083 - - - 599,277 227,196 100.00% 220,478 1,902,452 - - - 14,990 13,707 100.00% 13,707 111,720 - - - - 61,701 100.00% 54,337 503,491 - - - 148,401 79,014 52.13% 34,822 107,047 - - - - 23,766 100.00% 23,766 76,572 - - - - (25,563) 100.00% (25,563) 1,006,897 - - - - - 100.00% - 15,041 - - - - (5) 100.00% (5) 98,838 - - - - (1,743) 100.00% (1,743) 1,338 - - - - (1,085) 51.00% (553) 785 -	Unit:1,000TWD Amount remitted or retrieved Accumulated investment amount remitted from Taiwan at the end of the fiscal period Gain/loss of investee company in the fiscal period Shareholdin g Rati Gain/loss in investment recognized in the fiscal period Carrying amount of investment at the end of the fiscal period ~~Investment~~ income remitted back to Taiwan by the end of the fiscal period Remittance Retrieved (Note 3) (Note 2) - - 764,490 805,171 100.00% 783,454 4,392,083 - - - 599,277 227,196 100.00% 220,478 1,902,452 - - - 14,990 13,707 100.00% 13,707 111,720 - - - - 61,701 100.00% 54,337 503,491 - - - 148,401 79,014 52.13% 34,822 107,047 - - - - 23,766 100.00% 23,766 76,572 - - - - (25,563) 100.00% (25,563) 1,006,897 - - - - - 100.00% - 15,041 - - - - (5) 100.00% (5) 98,838 - - - - (1,743) 100.00% (1,743) 1,338 - - - - (1,085) 51.00% (553) 785 -
Name of investee company in Mainland China	Main business	Paid-in capital (Note 3)	Method of investme nt (Note 1)	Accumulated investment amount remitted from Taiwan at the beginning of the fiscal period (Note 3)	Amount remitted or retrieved		Accumulated investment amount remitted from Taiwan at the end of the fiscal period (Note 3)	Gain/loss of investee company in the fiscal period	Shareholdin g Rati	Gain/loss in investment recognized in the fiscal period (Note 2)	Carrying amount of investment at the end of the fiscal period	~~Investment~~ income remitted back to Taiwan by the end of the fiscal period
					Remittance	Retrieved
Lotes Guanghou Co., Ltd Lotes Suzhou Co., Ltd Zongka Technology (Shenzhen) Co., Ltd. Lotes Hengnan Co., Ltd. Lintes Technology (Suzhou) Co., Ltd. Shenzhen Deyi Automation Technology Co., Ltd. Lotes Zhongshan Co., Ltd Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Hengnan Deyi Property Development Co., Ltd. Guangzhou Leside Technology Co., Ltd. Chongqing Fuxinrui Electronic Technology Co., Ltd.	Manufacturing connectors for telecommunication industry and for consumer electronics industry Manufacturing connectors for telecommunication industry and for consumer electronics industry R&D of electronics, import and export of raw materials of plastic products and plastic products Manufacturing connectors for telecommunication industry and for consumer electronics industry Development and production of the measurement instruments for optical communication, optical transceivers of 10GB/s or above and relevant technical support Manufacturing of robotic arms, automation equipment and relevant components Manufacturing connectors for telecommunication industry and for consumer electronics industry, and Manufacturing of robotic arms, automation equipment and relevant components Surface treatment of metal products and plastic products Development of real estate, lease of premises, landscape design and interior decorating Research, testing and development R&D and sales of electronic components, automobile components and accessories, computers and accessories, development of molds and the import and export of goods and technologies	800,466 599,277 14,990 371,734 148,401 107,438 1,031,400 15,041 98,843 3,008 2,579	(2) (2) (2) (3) (2) (3) (3) (3) (3) (3) (3)	764,490 599,277 14,990 - 148,401 - - - - - -	- - - - - - - - - - -	- - - - - - - - - - -	764,490 599,277 14,990 - 148,401 - - - - - -	805,171 227,196 13,707 61,701 79,014 23,766 (25,563) - (5) (1,743) (1,085)	100.00% 100.00% 100.00% 100.00% 52.13% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00%	783,454 220,478 13,707 54,337 34,822 23,766 (25,563) - (5) (1,743) (553)	4,392,083 1,902,452 111,720 503,491 107,047 76,572 1,006,897 15,041 98,838 1,338 785	- - - - - - - - - - -

Note 1: There are six types of investments:

(1) Investment in Chinese Corporation via Third Region Remittance.
(2) Establishment of a company to reinvest in a continental company through a third regional investment.
(3) Reinvest in Chinese companies by re-investing in existing companies in third regions.
(4) Direct Investment
(5) Others.
(6) NA.

Note 2: The investment gain or loss recognized in the current period has been reconciled with the unrealized gain or loss from intercompany transactions.

Note 3: The balance sheet date exchange rates are used to translate the paid-in capital and remittance of cumulative investment amounts into New Taiwan dollars. 。

Investment ceiling in Mainland China :

277

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Name	Accumulated amount remitted from Taiwan at the end of the fiscal period for investment in Mainland China (Note 1)	Investment amount approved by Investment Commission, MoEA (Note 1)	Investment ceiling in Mainland China according to the regulations made by Investment Commission, MoEA
LotesCo.,Ltd.	1,378,757,000	1,524,374,000	7,089,196 ,000
Lintes Technology Co.,Ltd.	148,401,000	148,401,000	893,618 ,000

Note 1: The conversions to NTD were made at the exchange rates prevailing on the balance sheet date.

278

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

3. Significant transactions with the investee companies in China:

XIV. Segmental Information

(1)General Information

The company's main business is the trading of various hardware and tool parts, the manufacturing, processing and trading of various terminals and their finished connectors, the import and export trade of the preceding items, and the agency of the preceding items related to domestic and foreign manufacturers' products in the tender quotation and distribution business.

(2)Information on reportable segment profit or loss, assets, liabilities and their measurement basis and reconciliation

The Consolidated company’s major decisions are based on the performance appraisal and resource allocation by the production regions. After analysis, the two regions meet the conditions of consolidation into a single operating segment, therefore the Consolidated company as a whole is a single operating segment, and the information of segment profit or loss, segment assets and segment liabilities are consistent with the financial statements.

(3) Product and Labor Provision Information

The Consolidated company’s revenue information from external customers is as

follows:

Product and Labor Provision	2019 $ 1,611,960 1,359,464 931,970 219,055 10,966,423	2018 1,336,332 1,240,513 939,505 937,843 8,857,325
A Product B Product C Product D Product Others Total
	$ 15,088,872	13,311,518

(4) Geographical Information

The Consolidated company’s geographical information is shown below, where revenue

is classified based on the geographic location of customers and non-current assets are classified based on the geographic location of assets.

Area 2019

2018

279

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

External client revenue: Taiwan China Other countries Total	$ 717,666 344,516 11,784,445 11,343,502 2,586,761 1,623,500
	$ 15,088,872 13,311,518

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Area Non-current assets: Taiwan China	Dec. 31, 2019 $ 438,067 4,231,565	Dec. 31, 2018 382,839 3,742,458 4,125,297
	$ 4,669,632

Non-current assets include Property, plant and equipment, Right-of-use assets, Investment property, tangible assets and other assets, but do not include financial instruments, deferred income tax assets, and retirement benefit assets.

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VII. Review Analysis of Financial Position and Operating Performance and Risk Issues

1. Financial position

Unit: NT$ thousand

Year Item	2018	2019	Difference	Difference
			Amount	%
Current assets	9,566,989	11,400,712	1,833,723	19.17%
Property, plant and equipment	3,350,160	3,514,714	164,554	4.91%
Intangible assets	59,527	99,789	40,262	67.64%
Other assets	473,115	388,701	(84,414)	(17.84%)
Total assets	13,790,208	16,280,192	2,489,984	18.06%
Current liabilities	3,876,478	3,630,746	(245,732)	(6.34%)
Non-current liabilities	42,248	104,221	61,973	146.69%
Total liabilities	3,918,726	3,734,967	(183,759)	(4.69%)
Share capital	934,779	1,034,779	100,000	10.70%`－`
Capital reserves	2,466,109	3,959,650	1,493,541	60.56%
Retained earnings	6,296,652	7,471,519	1,174,867	18.66%
Other equity	(317,020)	(650,532)	(333,512)	(105.20%)
Equityto theparent company	9,506,158	11,815,326	2,309,168	24.29%
Non-control equity	365,324	729,899	364,575	99.79%
Total of equity	9,871,482	12,545,225	2,673,743	27.08%
Main causes and effects of changes of more than 20% and amounting to NT$10 million: 1. Intangible assets: The increase in intangible assets was mainly due to the ERP introduction counseling fees. 2. Non-current liabilities: This is due to the provision of lease liabilities in accordance with the IFRS 16 designation. 3. Capital surplus: Mainly as a result of the premium issue of new shares 4. Other equity: This is mainly due to the fluctuation of foreign currency translation differences in the financial statements of foreign operating entities. 5. Total equity attributable to the owners of the parent company: This is mainly due to a significant increase in the Company's profit for 2019.

282

2. Operating performance

(1) Comparative analysis table of operating performance

Unit: NT$ thousand

			Unit: NT$ thousand	Unit: NT$ thousand
Year			Difference
	2018	2019
Item			Amount	%
Net operatingrevenue	13,311,518	15,088,872	1,777,354	13.35%
Operatingcost	8,962,649	9,620,962	658,313	7.35%
Grossprofit	4,348,869	5,467,910	1,119,041	25.73%
Operatingexpense	2,366,429	2,717,286	350,857	14.83%
Operating profit	1,982,440	2,750,624	768,184	38.75%
Non-operating income/expenses	171,857	81,137	(90,720)	-52.79%
Net income before tax for continuingoperations	2,154,297	2,831,763	677,466	31.45%
Income tax (expense) benefit	(445,998)	(687,293)	241,295	54.10%
Netprofit for theperiod	1,708,299	2,144,468	436,169	25.53%
Other comprehensive income	(56,310)	(337,918)	281,608	500.10%
Total comprehensive income	1,651,989	1,806,550	154,561	9.36%
Net income attributed to
owners of the parent	1,608,567	2,076,043	467,476	29.06%
company
Net income attributed to non-controllinginterest	99,732	68,425	(31,307)	-31.39%
EPS	17.21	20.11	2.9	16.85%

Main causes and effects of changes of more than 20% and amounting to NT$10 million:

Gross profit: The increase in gross profit was mainly due to the increase in operating scale and improvement in manufacturing process in 2019.
Operating profit: The increase in operating profit was mainly due to the increase in the scale of operations in 2019, which was higher than the increase in operating expenses, resulting in a significant increase in operating profit.
Non-operating income/expenses: This was mainly due to an exchange loss of NT$58 million in 2019 (exchange gain of approximately NT$34 million in 2018), resulting in a significant decrease in non-operating income and expenses.
Net income before tax for continuing operations: This was mainly due to the increase in the scale of operations in 2019, which resulted in a significant increase in net income before tax.
Income tax (expense) benefit: This was mainly due to the increase in the scale of operations in 2019, which resulted in a significant increase in profitability and a relative increase in the provision for income tax.
Net profit for the period: This was mainly due to the increase in the scale of operations in 2019, which resulted in a significant increase in net profit for the

283

period.

Other comprehensive income for the period: The decrease in other comprehensive loss was mainly due to the foreign currency translation difference of accumulated foreign currency translation in the financial statements of foreign operating companies.
Total comprehensive income for the period: The increase in total comprehensive income for the period was mainly due to the increase in the scale of operations and the significant increase in profitability in 2019.
Net income attributed to owners of the parent company: The increase in net income attributed to owners of the parent company was mainly due to the increase in the scale of operations in 2019 and the significant increase in profitability.
Net income attributed to non-controlling interest: The Company's equity-method investee, Lintes Technology Co., Ltd. for fiscal 2018, has just made up for its loss and is not yet subject to income tax. However, while pretax earnings in 2019 were comparable to 2018, the decline in earnings after tax resulted in a decrease in earnings from non-controlling interests in minority interests.
EPS: The increase in EPS was mainly due to the increase in the scale of operations in 2019 and the significant increase in profitability.

3. Cash flow

(1) Analysis of changes in cash flows for the most recent years

Year			Increas (decrease)
	2018	2019
Item			proportion %


Cash flow ratio	38.90	92.53	137.86%
Cash flow adequacy
	93.98	104.28	10.96%
ratio

Cash flow reinvestment
	7.99	16.14	102.00%
ratio

1) Cash flow ratio (%): The increase in cash flow ratio was mainly due to a significant increase in cash inflows from operating activities in 2019 compared to 2018.
2) Cash flow adequacy ratio (%): The increase in the cash flow adequacy ratio was mainly due to the increase in cash inflows from operating activities in the last five years of 2019, which was greater than the increase in capital expenditures, inventories and cash dividends in the last five years.
3) Cash flow reinvestment ratio (%): The increase in cash flow reinvestment ratio was mainly due to a significant increase in cash inflows from operating activities in 2019 compared to 2018.

(2) Liquidity improvement plan:

The Company's cash from operating activities for 2019 was a net inflow and significantly higher than for 2018, so there was no liquidity deficiency.

(3) Analysis of changes in cash flows in the coming year.

The Company's operating scale and profitability have grown steadily and is expected to maintain a

284

steady net cash inflow from operating activities in the coming year. The Company will adjust its production and sales operations in response to the global economic situation, and take into account the future trend of product development to replace old equipment with new equipment, and expects that capital expenditures and working capital requirements will be met by its own funds; if there is still a need for funds, the Company will take into account market conditions and the cost of raising funds to effectively cover the need by borrowing from existing banks and raising funds through equity issuance.

The impact of major capital expenditures in the most recent year on financial operations: None.
The main reasons for the most recent annual reinvestment policy and profit or loss, improvement plans and investment plans for the coming year:

					Unit: 1,000 TWD	Unit: 1,000 TWD
Name of Investing Company	Investing amount as of 2019/12/31	Investing policy	Investment income recognized during the period	Main reasons for gain or loss	Improvement plans	Other investment plans for the future
Lotes Investment Ltd	780,797	Investment Co.	783,455	Reinvestment companies are steadily growing their clients and expanding their markets	-	-
Good Hope Investments Ltd.	12,030	Investment Co.	35,733	Reinvestment companies are steadily growing their clients and expanding their markets	-	-
Guan Si Development Co, Ltd.	600,092	Investment Co.	220,478	Reinvestment companies are steadily growing their clients and expanding their markets	-	-
Zha Xi Investment Ltd.	14,990	Investment Co.	13,707	Reinvestment companies are steadily growing their clients and expanding their markets	-	-
Jiayou Investment Ltd.	690,000	Investment Co.	103,334	Reinvestment companies are steadily growing their clients and expanding their markets	-	-
LOTES USA ,Inc	74,950	Business maintenance and development	(7,389)	Support in maintaining customer relationships	-	-
LOTES EU Gmbh	3,359	Business maintenance	2,008	Support in maintaining customer relationships

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and
development
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Analyze and assess the following risks for the most recent year and up to the date of publication of the annual report:
(1) Effect of interest rates, exchange rate changes, inflation on the Company's profit or loss and future response measures:
- 1) Effect of interest rate changes on the Company's profit or loss and future response measures
  - Changes in the Company's interest income and expenditure for the last two years

	Unit: 1,000 TWD	Unit: 1,000 TWD	Unit: 1,000 TWD	Unit: 1,000 TWD
Item	2018		2019
	Amount	%	Amount	%
Operating revenue	13,311,518	100.00%	15,088,672	100.00%
Operating profit	1,982,440	14.89%	2,750,624	18.23%
Interest	(4,081)	(0.03%)	10,109	0.07%

The Company's interest income (expense) as a percentage of operating revenue and operating profit was insignificant and had no significant impact on profit or loss.

Future response measures

Although the change in interest income and expenses has little impact on the Company as compared to operating revenue and operating profit, the Company has been working closely with banks to understand the interest rate trend and to obtain the most favorable borrowing and asset allocation reference. In addition, short-term idle funds are mostly invested in low-risk financial products.

2) Effect of exchange rate changes on the Company's profit or loss for the most recent year and up to the date of publication of the prospectus and future response measures:

The Company's products are mainly exported to other countries, and the Company's major suppliers are its overseas subsidiaries Rui Jia Trading Co. and Xin Cheng Ltd. The Company's accounts payable are also denominated in U.S. dollars, therefore exchange rate fluctuations will have a certain impact on the Company's profitability. Therefore, in order to effectively reduce the impact of exchange rate fluctuations on the overall profitability, the Company proposes the following specific response measures:

The Company has exclusive personnel to observe the fluctuation of the exchange rate from time to time, and intends to consider the effect of exchange rate changes when quoting prices; and to appropriately retain the foreign currency portion of sales revenue to meet the foreign currency purchase expenses in order to achieve the automatic hedging

286

function.

The Company will adopt hedging strategies for derivative financial instruments, such as pre-sale or pre-purchase of forward exchange, in order to hedge the related exchange rate risk in order to minimize the impact of exchange rate changes on the Company's profit or loss, depending on the changes in the currency exchange market and currency exchange funds requirements.
3) The effect of inflation on the Company's profit or loss for the most recent year and up to the date of publication of the Company's prospectus and future response measure:
The Company is always aware of market price fluctuations to determine its purchasing policies and maintains good interaction with its suppliers and customers, therefore there are no events that have a significant impact on inflation.
(2) Policies, principal reasons for gains or losses from engaging in high-risk, leveraged investing, lending of funds to others, endorsement guarantees and derivative transactions and future response measures:

The Company's balance of $85,950 thousand as of the end of 2019 was mainly due to the need for short-term financing from LOTES Guangzhou Co, Ltd., a 100% owned mainland reinvestment company, due to the expansion of its operating scale, and interest has been accrued at 5% of the general borrowing rate of local banks.

The remaining balance of $1,534,000 thousand recorded as endorsement and guarantee for the year ended December 31, 2018 was for the bank borrowing line for the working capital needs of the subsidiary, and the related lending and endorsement and guarantee operations were performed in accordance with the "Procedures for Lending Funds to Others and Management of Endorsement and Guarantees" issued by the Company.

(3) Future R&D plans and estimated R&D costs:

Our future product development and design direction: board-to-board connectors will be designed for high-frequency high speed, small pitch, low height, SMT design volume minimization; I/O connectors will be designed for interface connectors Fine Pitch, thin design and high-frequency high speed; memory card connectors will be designed for integration of multi-card all-in-one design, enhance battery connector volume minimization and custom design; wireless network connectors with wireless network product development and design, computer peripheral connectors for consumer electronics (HDMI DVI phones), automotive, server, medical and communication connectors will also be the development focus.

In the coming year, the Company will not only continue to increase the investment in R&D expenses, but will also continue to improve the production efficiency with the accumulated R&D results in the long term in order to gain a competitive advantage in the market; in 2020, the Group's R&D expenses are expected to be approximately NT$1.1 million, which is expected to account for 6.80% of the current year's operating revenue.

(4) Effect of significant domestic and international policy and legal changes on the Company's financial operations and response measures:

287

The Company is always aware of important policy and legal changes in domestic and foreign countries, and takes the initiative to take appropriate measures in a timely manner. In recent years, the Company has not been subject to significant policy and legal changes both domestically and internationally that have materially affected its financial operations.

(5) Effect of technological and industrial changes on the Company's financial operations and response measures:

The Company has always been committed to technology research and development to improve yield and continues to innovate high value-added connector products, therefore, technology changes have a positive effect on the Company's financial business and the Company will continue to maintain its leading position in R&D and technology.

(6) Effect of corporate image changes on corporate risk management and response measures:

The Company adheres to the business philosophy of "teamwork, enthusiasm, efficiency, innovation" and has a good corporate image, and became a listed company in 2007 which is expected to attract more outstanding talents to enter the company's service, strengthen the strength of the operating team, and then return the operating results to the shareholders and fulfill the corporate social responsibility. So far, no incidents that damage the corporate image have occurred.

(7) Expected benefits and possible risks of mergers and acquisitions: None.

(8) Expected benefits and possible risks of plant expansion: None.
(9) Risk of concentration of imports or sales: None.
(10) Effects or risks on the issue that large numbers of shares are transferred or replaced by directors, supervisors or major shareholders holding more than 10% of company shares: None.
(11) The effects and risks of changes in management on the Company: None.

(12) In the event of litigation or non-litigation, the Company and its Directors, Supervisors, Presidents, substantially responsible persons, majority shareholders holding more than 10% of the shares and affiliated companies shall disclose the material litigation, non-litigation or administrative dispute that has been adjudicated or is still pending, the outcome of which may have a material impact on shareholders' interests or the price of securities, the facts in dispute, the amount of the subject matter, the date of commencement of the litigation, the principal parties involved and the disposition of the matter as of the date of publication of this annual report: None.

(13) Other significant risks: None.

Other important matters: None.

288

VIII. Special Notes

1. Related information of affiliates

(1) Affiliates' organizational chart

==> picture [753 x 444] intentionally omitted <==

289

(2) Basic information of each affiliates:

Unit: 1,000 TWD

				Unit: 1,000 TWD
Name of Company	Incorpora tingdate	Address	Paid-in Capital	Major operations or production items
LOTES INVESTMENT S LIMITED	2003/9/5	Offshore Chambers, P.O. Box217, Apia, Samoa	780,979	Engaged in holding and reinvestment activities
Good Hope Investments Limited	2003/3/21	Offshore Chambers, P.O. Box217, Apia, Samoa	12,030	Engaged in holding and reinvestment activities
Guan Si Development Co,Ltd.	2003/11/18	Offshore Chambers, P.O. Box217, Apia, Samoa	600,092	Engaged in holding and reinvestment activities
Zha Xi Investments Ltd.	2005/12/22	P.O.BOX850, Offshore Incorporation Centre, The Valley, Anguilla, British West Indies	14,990	Engaged in holding and reinvestment activities
Jiayu Investment Co., Ltd.	2008/7/4	4F., No. 15, Wuxun St., Anle Dist., Keelung City	690,000	Engaged in holding and reinvestment activities
LOTES USA,INC.	2012/4/1	888SW Fifty Avenus, Suite 800,Portland,OR97204 U.S.A	74,950	Market development
LOTES EU,GmbH	2018/2/27	Hessenring 119-121, 61348 Bad Homburg	3,359	Market development
Loteson International Investments Limited	2007/10/15	Unit 1405-1406, Dominion Centre, 43-59 Queen's Road East, Wanchai, H.K	780,979	Engaged in holding and reinvestment activities
Lotes Guanghou Co., Ltd	1993/1/28	No. 526, Jinling North Road, Bantu Management Zone, Nansha Economic and Technological Development Zone, Guangzhou	800,466	Manufacturing of connectors for the information industry, communications industry and consumer electronics industry
Lotes Hengnan Co., Ltd.	2010/5/17	Yunji Avenue, New County Industrial Park, Henan County, Hengyang City, Hunan Province	371,734	Manufacturing and selling of connectors for the information industry, communications industry and consumer electronics industry
Shenzhen Deyi Automation Technology Co., Ltd.	2014/5/13	No. 522, Block C, Section D, Industrial Plant, Area 71, South Side of East Second Road, Xin'an Street, Bao'an District, Shenzhen City	107,438	Production of industrial robots, automation equipment and their components.
Lotes Zhongshan Co., Ltd	2016/05/12	No.12, Jinhui Road, Triangle Town, Zhongshan City	1,031,400	R&D, production and management of electronic components and assemblies, calculator parts, molds, industrial robots, intelligent floor sweeping robots and components, intelligent industrial cameras; engaged in electronic, communication and automatic control technologyR&D
Xin ChengLtd.	2003/10/16	Offshore Chambers,P.O. Box217,	2,998	Sellingof connectors for

290

		Apia, Samoa		the information industry, communications industry and consumer electronics industry
Rui Jia Trading Co.	2007/11/13	Unit 1405-1406, Dominion Centre, 43-59 Queen's Road East, Wanchai, H.K	3,036	Selling of connectors for the information industry, communications industry and consumer electronics industry
Jae You Co., Ltd.	2007/10/29	Unit 1405-1406, Dominion Centre, 43-59 Queen's Road East, Wanchai,H.K	600,102	Engaged in holding and reinvestment activities
Lotes Suzhou Co., Ltd	2003/7/10	No.26, Caohu Avenue, Xiangcheng Economic Development Zone, Suzhou, Jiangsu Province	599,277	Manufacturing of connectors for the information industry, communications industry and consumer electronics industry
Wangden Investments (HK)Limited	2007/10/12	Unit 1405-1406, Dominion Centre, 43-59 Queen's Road East, Wanchai,H.K	14,990	Engaged in holding and reinvestment activities
Tsongkha Technology (Shen Zhen) Co., Ltd.	2006/5/15	No. 528, Block C, Section D, Industrial Plant, Area 71, South Side of East Second Road, Xinan Street Office, Baoan District, Shenzhen City	14,990	Engaged in R&D of electronic products, plastic raw materials and their products, import and export business
Ememe Robot Co., Ltd	2010/6/22	13F.-1, No. 716, Zhongzheng Rd., Zhonghe Dist., New Taipei City	69,600	Engaged in the manufacturing of electrical and audio-visual electronic products
Lintes Technology Co., Ltd	2011/8/22	2F.-1, No. 268, Liancheng Rd., Zhonghe Dist., New Taipei City	486,926	Engaged in the manufacturing of electronic components, other electrical and electronic mechanical equipment
Jilong Co., Ltd.	2011/6/16	Offshore Chambers,P.O.Box 217,Apia,Samoa	148,401	Engaged in holding and reinvestment activities
Sunmax Technology Co., Ltd.	2011/11/8	Offshore Chambers,P.O.Box 217 ,Apia ,Samoa	148,401	Engaged in holding and reinvestment activities
Lintes Technology (Suzhou) Co., Ltd.	2012/3/14	No.26, Caohu Avenue, Xiangcheng Economic Development Zone, Suzhou	148,401	Development and production of optical communication measuring instruments and optical transceivers with speeds of 10GB/S and above and technical services for the aboveproducts
Guangzhou Leside Technology Co., Ltd.	2015/2/27	Room 603, No.5, Shuang Shan Avenue, Nansha District, Guangzhou	3,008	Research and experimental development
Chongqing Fuxinrui Techmology Co., Ltd.	2018/12/27	No. 6, Yingchun Road, Nanan District, Chongqing City	2,579	Development and sale of electronic components, automotive parts and components, calculators and components, mold development and import and export of goods and technologies
Hengnan Deyi Property Development	2018/5/18	No. 120, Yunji Avenue, Yunji Town, Henan County, Hengyang City,Hunan Province	98,843	Property development, home rental, landscaping and interior decoration

291

Co.,Ltd.
Laida Technology Co., Ltd.	2019/11/5	13F.-1, No. 716, Zhongzheng Rd., Zhonghe Dist., New Taipei City	13,164	Engaged in the manufacturing of electronic components
Zhongshan Dezhi Metal Surface Treatment Co., Ltd.	2016/3/24	1F., No.8, Ruifeng Road, Triangle Town, Zhongshan	15,041	Surface treatment for all kinds of hardware and plastic products

(3) Same shareholder information as those presumed to have a controlling and subordinate relationship: None.
(4) Information on Directors, Supervisors and Presidents of affiliates

Unit: shares

				Unit: shares	Unit: shares
Nature	Name of Company	Title	Name or representative	Shareholding
				Shares	Shareholding %
Controlling Company	Lotes Co., Ltd.	Chairperson	Jiaming Investment Co., Ltd. Legal Representative: Chu,Te-Hsiang	10,956,237	10.59
		Director	Jiaming Investment Co., Ltd. Legal Representative: Ho,Te-Yu	10,956,237	10.59
		Director	Zheng, Zhung-Ren(Note)	0	0
		Director	Tsai,Ming-Jui	18,954	0.02
		Director	Hsieh,Chia-Ying	0	0
		Director	Hu,Jui-Ching	0	0
		Director	Jin,Cjang-Ming	0
		Supervisor	Cheng, Ming-Sung	0	0
		Supervisor	Yang, Wen-Ming	0	0
		Supervisor	Jinling Investment Co., Ltd. Representative: Chang, Kun-Yao	10,040,037	9.70
		President	Ho,Te-Yu	442,555	0.43
Subordinate Company	LOTES INVESTMENTS LIMITED	Director	Lotes Co., Ltd. Legal Representative: Chu, Te-Hsiang,Ho,Te-Yu	26,050,000	100
	Good Hope Investments Limited	Director	Lotes Co., Ltd. Legal Representative: Chu, Te-Hsiang,Ho,Te-Yu	401,281	100
	Guan Si Development Co, Ltd.	Director	Lotes Co., Ltd. Legal Representative: Hsu, Li-Ping	20,016,426	100
	Zha Xi Investments Ltd.	Director	Lotes Co., Ltd. Legal Representative: Huang,Li-Yueh	500,000	100
	Jiayu Investment Co., Ltd.	Chairperson	Lotes Co., Ltd. Legal Representative: Chu, Te-Hsiang	69,000,000	100
		Director	Lotes Co.,Ltd.	69,000,000	100

292

		Legal Representative: Ho, Te-Yu
	Director	Lotes Co., Ltd. Legal Representative: Ho, Kun-Shan	69,000,000	100
	Supervisor	Lotes Co., Ltd. Legal Representative: Ho, Jian-Sheng	69,000,000	100
Loteson International Investments Limited	Director	LOTES INVESTMENTS LIMITED Legal Representative: Chu Chen,Yi-Hui	26,050,000	100
Lotes Guanghou Co., Ltd	Chairperson	Loteson International Investments Limited Legal Representative: Ho, Te-Yu	26,700,000	100
	Director (Vice Chairperson)	Loteson International Investments Limited Legal Representative: Chu, Te-Hsiang	26,700,000	100
	Director	Loteson International Investments Limited Legal Representative: Chu Chen,Yi-Hui	26,700,000	100
	Supervisor	Loteson International Investments Limited Legal Representative: Ho, Kun-Shan	26,700,000	100
Xin Cheng Ltd.	Director	Good Hope Investments Ltd. Legal Representative: Ho, Mei-Yu	100,000	100
Rui Jia Trading Co.	Director	Good Hope Investments Ltd. Legal Representative: Bao,Yu-Yi	101,281	100
Jae You Co., Ltd.	Director	Guan Si Development Co, Ltd. Legal Representative: Ho,Jian-Sheng	20,016,756	100
Lotes Suzhou Co., Ltd	Chairperson	Jae You Co., Ltd.Legal Representative: Chu, Te-Hsiang	19,989,221	100
	Director (Vice Chairperson)	Jae You Co., Ltd.Legal Representative: Ho, Te-Yu	19,989,221	100
	Director	Jae You Co., Ltd.Legal Representative: Kung, Yung-Sheng	19,989,221	100
	Supervisor	Jae You Co., Ltd.Legal Representative: Chen, Ya-Yuan	19,989,221	100
Wangden Investments Co., Ltd.	Director	Zha Xi Investments Ltd. Legal Representative: Lin, Yi-Jun	500,000	100
Tsongkha Technology (Shen Zhen) Co., Ltd.	Director	Wangden Investments Co., Ltd. Legal Representative: Wang, Ying-Ping, Ho, Te-Yu,Lin,Ko-Lun	500,000	100

293

Lotes Hengnan Co., Ltd.	Director	Lotes Guanghou Co., Ltd. Legal Representative: Ho, Te-Yu, Chen, Zhi-Yu, Lin, Ko-Lun	48,000,000	100
Lotes Hengnan Co., Ltd.	Supervisor	Lotes Guanghou Co., Ltd. Legal Representative: Lu, Chih-Cheng	48,000,000
Shenzhen Deyi Automation Technology Co., Ltd.	Director	Lotes Guanghou Co., Ltd. Legal Representative: Wang, Ying-Ping	25,000,000	100
Shenzhen Deyi Automation Technology Co., Ltd.	Supervisor	Lotes Guanghou Co., Ltd. Legal Representative: Wang, Hsi-Hung	25,000,000
Ememe Robot Co., Ltd	Chairperson	Jiayu Investment Co., Ltd. Legal Representative: Chu, Te-Hsiang	6,960,000	94.37
	Director	Jiayu Investment Co., Ltd. Legal Representative: Hui, Wen	6,960,000	94.37
	Director	Jiayu Investment Co., Ltd. Legal Representative: Liu, Hsing-Hsia	6,960,000	94.37
	Supervisor	Hsu, Feng-Yu	0	94.37
Lintes Technology Co., Ltd	Chairperson	Jiayu Investment Co., Ltd. Legal Representative: Chu, Te-Hsiang	29,712,788	61.71
	Director	Jiayu Investment Co., Ltd. Legal Representative: Ho, Te-Yu	29,712,788	61.71
	Director	Jiayu Investment Co., Ltd. Legal Representative: Luo, Wei-Ren	29,712,788	61.71
	Director	Lai, Wei-Ru	0	-
	Director	Ye, Jing-Zhong	0	-
	Director	Ling, Ge	0	-
	Director	Yang, Zhi-Qing	0	-
Laida Technology Co., Ltd.	Director	Jiayu Investment Co., Ltd. Legal Representative: Chu, Te-Hsiang	1,316,400	46.74
	Director	Ho, Te-Yu	600,000	21.30
	Director	Luo, Wei-Ren	300,000	10.65
	Director	Chen, Ya-Yuan	0	-
	Director	Wen, Biao	0	-
	Supervisor	Hsu, Feng-Yu	0	-
LOTES USA, INC	Director	Lotes Co., Ltd. Legal Representative: Wang,	2,500,000	100

294

		Ying-Lin
	Director	Lotes Co., Ltd. Legal Representative: Huang, Rui-Jin	2,500,000	100
	Director	Lotes Co., Ltd. Legal Representative:Lin,Yi-Jun	2,500,000	100
LOTES EU,GmbH	Director	Lotes Co., Ltd. Legal Representative: Tsai, Ming-Jui	100,000	100
	Director	Lotes Co., Ltd. Legal Representative: Hsieh, Chia-Hsing	100,000	100
Jilong Co., Ltd.	Director	Lintes Technology Co., Ltd Legal Representative: Chen, Ya-Yuan	4,950,000	100
Sunmax Technology Co., Ltd.	Director	Jilong Co., Ltd.Legal Representative: Liao, Hui-Ying	4,950,000	100
Lintes Technology (Suzhou) Co., Ltd.	Chairperson	Sunmax Technology Co., Ltd.Legal Representative: Ho,Te-Yu	4,950,000	100
	Director and President	Sunmax Technology Co., Ltd.Legal Representative: Luo,Wei-Ren	4,950,000	100
	Director	Sunmax Technology Co., Ltd.Legal Representative: Chu,Te-Hsiang	4,950,000	100
	Supervisor	Sunmax Technology Co., Ltd.Legal Representative: Bao,Yu-Yi	4,950,000	100
Lotes Zhongshan Co., Ltd	Chairperson	Lotes Guanghou Co., Ltd. Legal Representative: Ho, Te-Yu	11,500,000	100
	Director	Lotes Guanghou Co., Ltd. Legal Representative: Chu Chen,Yi-Hui	11,500,000	100
	Director	Lotes Guanghou Co., Ltd. Legal Representative: Ho, Hung-Yu	11,500,000	100
	Supervisor	Lotes Guanghou Co., Ltd. Legal Representative: Ling, Ya-Chi	11,500,000	100
Guangzhou Leside Technology Co., Ltd.	Chairperson	Lotes Guanghou Co., Ltd. Legal Representative: Wang,Ying-Chu	700,000	100
	Supervisor	Lotes Guanghou Co., Ltd. Legal Representative: Deng,Li-Ming	700,000	100
Chongqing Fuxinrui Techmology Co., Ltd.	Chairperson	Guangzhou Leside Technology Co., Ltd.Legal Representative: He, Yonh-Hong	306,000	51
	Director	Guangzhou Leside Technology Co., Ltd.Legal Representative: Deng, Li-Ming	306,000	51
	Supervisor	Guangzhou Leside Technology Co.,Ltd.Legal	306,000	51

295

			Representative: Wang, Xue-Liang
	Hengnan Deyi Property Development Co., Ltd.	Chairperson	Lotes Guanghou Co., Ltd. Legal Representative: Ho, Te-Yu	23,000,000	100
		Supervisor	Lotes Guanghou Co., Ltd. Legal Representative: Lu, Chih-Cheng	23,000,000	100

(5) Operating overview of affiliates

		Unit: 1,000 TWD	Unit: 1,000 TWD	Unit: 1,000 TWD	Unit: 1,000 TWD	Unit: 1,000 TWD	Unit: 1,000 TWD	Unit: 1,000 TWD	Unit: 1,000 TWD
	Name of Company	Capital	Total Assets	Liabilities	Net Worth	Operating Revenue	Operating (Loss)Gain	After tax (Loss)Gain	EPS
1	LOTES INVESTMENT Ltd.	780,979	4,392,104	0	4,392,104	0	0	805,171	30.91
2	Good Hope Investments Limited	12,030	1,537,963	0	1,537,963	0	0	35,733	89.05
3	Guan Si Development Co, Ltd.	600,092	1,902,509	0	1,902,509	0	0	227,196	11.35
4	Zha Xi Investments Ltd.	14,990	111,720	0	111,720	0	0	13,707	27.41
5	Jiayu Investment Co.,Ltd.	690,000	877,143	315	876,828	103,472	103,279	103,213	1.50
6	LOTES USA Inc.	74,950	54,338	5,897	48,441	0	(29,126)	(7,389)	(2.96)
7	LOTES EU Gmbh	3,359	4,981	1,270	3,711	509	(5,714)	2,008	20.09
8	Loteson International Investments Limited	780,979	4,528,344	0	4,528,344	0	0	805,171	30.91
9	Xin ChengLtd.	2,998	237,725	235,988	1,737	1,329,766	(44)	(38)	(0.38)
10	Rui Jia TradingCo.	3,036	3,869,542	3,260,354	609,188	9,239,134	17,208	35,771	353.18
11	Jae You Co.,Ltd.	600,102	1,919,200	0	1,919,200	0	0	227,196	11.35
12	Wangden Investments Co., Ltd.	14,990	111,720	0	111,720	0	0	13,707	27.41
13	Ememe Robot Co., Ltd	73,750	5,526	13,856	(8,329)	2,101	142	653	0.09
14	Laida Technology Co.,Ltd.	28,164	27,976	301	27,675	0	(490)	(489)	(0.17)
15	Lintes Technology Co.,Ltd	570,000	1,925,753	436,390	1,489,363	2,191,726	181,686	156,114	3.04
16	JilongCo.,Ltd.	148,401	169,589	0	169,589	0	0	51,537	10.41
17	Sunmax Technology Co., Ltd.	148,401	196,241	26,652	169,589	0	(27,476)	51,537	10.41
18	Lotes Guanghou Co.,Ltd	800,466	6,293,824	1,901,741	4,392,083	9,088,698	926,751	805,171	30.16
19	Lotes Suzhou Co., Ltd	599,277	2,102,171	199,720	1,902,452	1,688,858	261,019	227,196	11.37
20	Tsongkha Technology (Shen Zhen)Co.,Ltd.	14,990	515,286	403,566	111,720	711,420	18,181	13,707	27.41

296

21	Lotes Hengnan Co., Ltd.	371,734	667,631	164,140	503,491	887,065	84,619	61,701	0.71
22	Lintes Technology (Suzhou)Co.,Ltd.	148,401	693,711	497,470	196,241	1,952,058	116,276	79,014	15.96
	Name of Company	Capital	Total Assets	Liabilities	Net Worth	Operating Revenue	Operating (Loss)Gain	After tax (Loss)Gain	EPS
23	Shenzhen Deyi Automation Technology Co., Ltd.	107,438	167,317	90,746	76,572	288,065	23,619	23,766	0.95
24	Lotes Zhongshan Co.,Ltd	1,031,400	1,167,831	160,934	1,006,897	105,838	(29,156)	(25,563)	(0.11)
25	Zhongshan Dezhi Metal Surface Treatment Co.,Ltd.	15,041	15,042	1	15,041	0	0	0	0.00
26	Hengnan Deyi Property Development Co., Ltd.	98,843	98,838	0	98,838	0	(10)	(5)	(0.00)
27	Guangzhou Leside Technology Co., Ltd.	3,008	1,744	406	1,338	330	(1,587)	(1,743)	(2.49)
28	Chongqing Fuxinrui Techmology Co., Ltd.	2,579	1,539	0	1,539	0	(1,090)	(1,085)	(1.81)

297

(6) Consolidated financial statements of affiliates:

Declaration

For the fiscal year 2019 (January 1, 2019 through December 31, 2019), the companies that should be included in the preparation of the consolidated financial statements of affiliated enterprises in accordance with the "Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises" are the same companies that should be included in the preparation of the consolidated financial statements of their parent and subsidiaries in accordance with IAS 10 approved by the Financial Supervisory Commission, and the information that should be disclosed in the consolidated financial statements of affiliated enterprises has been disclosed in the consolidated financial statements of the parent and subsidiaries previously disclosed, the Company hereby does not prepare separate consolidated financial statements of affiliated enterprises.

Company Name: Lotes Co., Ltd.

Chairperson: Chu, Te-Hsiang Date: March 25, 2020

(7) Affiliates Report: None.

Private placements of marketable securities as of the date of publication of the most recent year and as of the date of the annual report: None.
Shareholdings or dispositions of the Company's shares by subsidiaries for the most recent year and as of the date of the annual report: None.
Other necessary additions: None.
For the most recent year and as of the date of the annual report, if any event occurred that had a significant impact on shareholders' equity or the price of securities as defined in Article 36, paragraph 2, subparagraph 2, of the Securities and Exchange Act: None

298

Lotes Co., Ltd.

Chairperson: Chu, Te-Hsiang

President: Ho, Te-Yu

299

AI assistant

LOTES — Annual Report 2019

52339_rns_2020-07-22_a56d3335-dfe0-4b41-98da-7ea9b49a38f9.pdf

Lotes Co., LTD

2019

Annual Report

Notice to readers

Contents

I. Letters to Shareholders

1. 2019 Report on business operations

(1) Operational overview

(2) Operating plan implementation results and profitability analysis

b. Financial income and expenditure and profitability analysis

c. Research and development status

2. 2020 Operating plan and outlook

a. Management policy

(2) Outlook for the future

II. Company Profile

III. Corporate Governance Report

1. Organization:

(2) Businesses operated by each major department:

(1) Information on Directors and Supervisors

(2) Information on President, Vice President, Assistant Vice President, Heads of Departments and Branches

3. Remuneration of Directors, Supervisors, Presidents, and Vice Presidents:

(1) Remuneration of General and Independent Directors:

Year: 2019; Unit: 1,000 TWD

Remuneration Schedule

Table of remuneration ranges

Remuneration Schedule

(4) Name of Managers and circumstances of distribution of employees' remuneration

4. Corporate governance operations

2. Responsibilities of the Remuneration Committee

3. Operation of the Remuneration Committee

(3) 2019 Remuneration Committee discussions and resolutions and the Company's handling of members' opinions.

Lotes Co., LTD

Chairperson: Chu, Te-Hsiang

President: Ho, Te-Yu

2. Review of the implementation of matters resolved at the 2019 annual general meeting of shareholders

5. Accountants’ Information

(1) Information on CPA professional fees:

7. Relationship among the Top Ten Shareholders

IV. Capital Overview

1. Capital and shares

(4). List of major shareholders

V. Overview of Business Operations

1.Description of the business

B. The Company’s current products and services

(2). Overview of the industry:

A.Status and development trends of the industry

Global NB and Smartphone Type C specification market penetration

B.Connection between upstream, midstream and downstream industries

C. Various developing trends of products

D. Competition of the products

(3). Overview of technologies and R&D:

A. Technical levels of business operations

B. R&D Overview

D. 2019 R&D Achievements

B. Market share

D. Competitive niche

b. Possession of various and numerous patents

B. Manufacturing process

C. The Supply Status of the Major Raw Materials

E.Production value for the past two years

3. Employee information

4. Disbursements for environmental protection

5. Labor relations

b. Education and training

6. Important contracts

VI. Overview of Financial Status

1. Adoption of International Financial Reporting Standards (IFRS) - Consolidated Statements

2. Adoption of International Financial Reporting Standards (IFRS) - Individual Statements

(2) Condensed statement of comprehensive income

1. Adoption of International Financial Reporting Standards (IFRS) - Consolidated Statements

2. Five-year financial analysis

(2) Adoption of International Financial Reporting Standards (IFRS) - Individual Statements

1. Financial Structure

Lotes Co., Ltd. 2019 Audit Report of Supervisors

4.. 2019 Financial Statements and Independent Auditor’s Report

Independent Auditor’s Report

Audit opinion

LOTES Annual Report 2019