LOTES - Annual Report 2020 | FinancialReports.eu

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Stock Symbol: 3533

Lotes Co., LTD

2020 Annual Report

Notice to readers

This English version annual report is a translation of the Chinese version. If there is any inconsistency or discrepancy between the English version and Chinese version, the Chinese version shall prevail for all intents and purposes.

Published on May 17, 2021 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: Li, Fung-Hui, Chung, Tan-Tan

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

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............................................................................................................................... 31
5. ACCOUNTANTS’ INFORMATION............................................................................................................................................. 58
6.	TRANSFER OR PLEDGE OF SHARES BY THE COMPANY'S DIRECTORS,SUPERVISORS,MANAGERS AND STOCKHOLDERS WITH
MORE THAN10%OF THE COMPANY'S SHARES: ......................................................................................................................... 59
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 ................................................................................................................................................... 66
1.	CAPITAL AND SHARES........................................................................................................................................................... 66
2.	ISSUANCE OF CORPORATE BONDS: NONE.............................................................................................................................. 71
3.	ISSUANCE OF PREFERRED SHARES: NONE............................................................................................................................. 71
4.	ISSUANCE OF GLOBAL DEPOSITORY RECEIPTS: NONE............................................................................................................ 71
5.	EEMPLOYEE SUBSCRIPTION WARRANTS: ............................................................................................................................... 71
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 ................................................................................................................ 69
1.DESCRIPTION OF THE BUSINESS............................................................................................................................................. 69
2.	OVERVIEW OF MARKET,PRODUCTION AND SALES: ................................................................................................................ 80
3.	EMPLOYEE INFORMATION..................................................................................................................................................... 89
4.	DISBURSEMENTS FOR ENVIRONMENTAL PROTECTION........................................................................................................... 89
5.	LABOR RELATIONS................................................................................................................................................................ 89
6.	IMPORTANT CONTRACTS....................................................................................................................................................... 90
VI.	OVERVIEW OF FINANCIAL STATUS ........................................................................................................................ 90
1. ACONDENSED BALANCE SHEET AND STATEMENT OF COMPREHENSIVE INCOME FOR THE LAST FIVE YEARS WITH THE NAME OF
THE ACCOUNTANT AND HIS OR HER AUDIT OPINION.................................................................................................................. 90
2.	FIVE-YEAR FINANCIAL ANALYSIS.......................................................................................................................................... 87
3.	2019 AUDITREPORT OFSUPERVISORS FOR THEFINANCIALSTATEMENTS............................................................................. 97
4.	2019 FINANCIALSTATEMENTS ANDINDEPENDENTAUDITOR’SREPORT............................................................................... 97
5.	2019 CONSOLIDATEDFINANCIALSTATEMENT ANDINDEPENDENTAUDITOR’SREPORT.....................錯誤! 尚未定義書籤。
VII.	REVIEW ANALYSIS OF FINANCIAL POSITION AND OPERATING PERFORMANCE AND RISK ISSUES
	261
1.	FINANCIAL POSITION.......................................................................................................................................................... 261
2.	OPERATING PERFORMANCE................................................................................................................................................. 262
3.	CASH FLOW........................................................................................................................................................................ 263
4.	THE IMPACT OF MAJOR CAPITAL EXPENDITURES IN THE MOST RECENT YEAR ON FINANCIAL OPERATIONS: NONE. ............... 264
5.	THE MAIN REASONS FOR THE MOST RECENT ANNUAL REINVESTMENT POLICY AND PROFIT OR LOSS,IMPROVEMENT PLANS
AND INVESTMENT PLANS FOR THE COMING YEAR: .................................................................................................................. 264
6. ANALYZE AND ASSESS THE FOLLOWING RISKS FOR THE MOST RECENT YEAR AND UP TO THE DATE OF PUBLICATION OF THE
ANNUAL REPORT: .................................................................................................................................................................... 265
7.	OTHER IMPORTANT MATTERS: NONE. .................................................................................................................................. 268
VIII.	SPECIAL NOTES ...................................................................................................................................................... 269
1.	RELATED INFORMATION OF AFFILIATES............................................................................................................................... 269

I. Letters to Shareholders

1. 2020 Report on business operations

(1) Operational overview

Consolidated revenue for 2020 was NT$17,291 million, a 14.60% increase over revenue of NT$15,088 million for 2008. Consolidated net income was NT$2,732 million, a 31.60% increase over net income of NT$2,076 million for 2019, translating into earnings per share of NT$26.41.

In 2020, the global economy continued to be affected by the tense trade war between the U.S. and China, and the outbreak of COVID-19 caused extreme uncertainty in the global economic outlook, which also impacted the operations of the Company's industry. However, due to the gradual increase in the conversion rate of new-generation server and desktop CPU platforms and the results of the Company's active investment in new products and new customer development, the Company was able to achieve stable revenue growth in 2020 and set a new revenue record since its establishment. In terms of profitability, due to the continuous increase in the scale of operations, new product penetration and improved production efficiency, the Company's profitability in 2020 increased by 31.60% compared to 2019, and the earnings per share after tax reached a high level of $26.41.

(2) Operating plan implementation results and profitability analysis

a. Operating plan implementation results

Unit: NT$ thousands

Item	2020	2019	Increased (decreased) amount	Increased (decreased) proportion
Operating revenues	17,291,332	15,088,872	2,202,460	14.60%
Operatingcosts	10,361,137	9,620,962	746,175	7.76%
Grossprofit	6,930,195	5,467,910	1,462,285	26.74%
Net income after tax for the period	2,732,361	2,076,043	652,266	31.60%

b. Financial income and expenditure and profitability analysis

	Item	Item	2019	2020
Profitability (%)	Return on total assets		13.92	15.44
	Return on total shareholders’ equity		19.47	21.58
	Percentage to capital stock	265.81	212.08	358.30
		273.65	230.46	354.66
	Netprofit margin		13.75	15.80
	Earnings per share after tax		20.11	26.41

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

register as listed emerging stock company. 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 2020 register as listed company. The Company implemented the Enterprise Resource Management (ERP) system, SAP ERP, and went live on 1/7. DDR5 certified by DETEC Association. USB4.0 & Thunderbolt Jan4 certified by USB-IF Association.

III. Corporate Governance Report

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
Chairperso n	R.O.C.	Jiaming Investment Co., Ltd. Representative: Chu, Te-Hsiang	Male	June 14, 2019	3	October, 2004	10,040,037	9.70%	9,797,037	9.47%	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%	9,797,037	9.47%	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 23, 2021

corporate shareholders are:	April 23,2021
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	23,2021
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	3

Hsieh, Chia-Ying			V	V	V	V	V	V	V	V	V	V	V	V	V	0
Hu, Jui-Ching			V	V	V	V	V	V	V	V	V	V	V	V	V	1
Jinling Investment Co., Ltd. Representati ve: Chang, Kun-Yao	-	-	V	V	V	-	V	V	V	V	V	V	V	V	-	0
Cheng, Ming-Sung			V	V	V	V	V	V	V	V	V	V	V	V	V	1
Yang, Wen-Ming	-	-	V	V	V	V	V	V	V	V	V	V	V	V	V	0

Note: For each director or supervisor who has met each of the following criteria during the two years. prior to and during his or her term of office, please place a " V " in the box below each criteria code.

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

													April 23,2021	April 23,2021	April 23,2021	April 23,2021
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			Rema rks
					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 & Management 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 Management 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 Management 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 Management 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 Management 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 Management 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 Management Assistant Vice	R.O.C.	Lin, Yao-Ching	Male	January 21, 2016	0	0.00%	St. John's University/ Department of Electronic Engineering Foxconn Technology	None	None	None	None

President									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 Management 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 Management 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 Management 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: 2020; 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	2,980	2,980	18	18	0.11%	0.11%	7,054	7,054	279	279	8,892	0	8,892	0	0.68%	0.68%	0
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	100	100	0	0	600	600	42	42	0.03%	0.03%	0	0	0	0	0	0	0	0	0.03%	0.03%	0

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 $1,000,000	Chin, Chang-Min, Hsieh, Chia-Ying, Hu, Jui-Ching, Tsai, Ming-Jui. 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
$1,000,000 (inclusive) ~ $2,000,000 (exclusive)	Ju, Te-Hsiang, Ho, Te-Yu
$2,000,000 (inclusive) ~ $3,500,000 (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
$3,500,000(inclusive)~$5,000,000(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

Range of Remuneration	Name of	Name of	Directors	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 $1,000,000	Chin, Chang-Min, Hsieh, Chia-Ying, Hu, Jui-Ching, Tsai, Ming-Jui. Ho, Te-Yu	Chin, Chang-Min, Hsieh, Chia-Ying, Hu, Jui-Ching, Tsai, Ming-Jui. Ho,Te-Yu	Chin, Chang-Min, Hsieh, Chia-Ying, Hu, Jui-Ching	Chin, Chang-Min, Hsieh, Chia-Ying, Hu, Jui-Ching
$1,000,000 (inclusive) ~ $2,000,000 (exclusive)	Ju, Te-Hsiang, Ho, Te-Yu	Ju, Te-Hsiang, Ho, Te-Yu
$2,000,000(inclusive)~$3,500,000(exclusive)
$3,500,000(inclusive)~$5,000,000(exclusive)			Ju, Te-Hsiang	Ju, Te-Hsiang
$5,000,000 (inclusive) ~ $10,000,000 (exclusive)			Ho, Te -Yu, Tsai, Ming-Jui	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	6	6	6

(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	900	900	48	48	0.03 %	0.03 %	0
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 $1,000,000	Chang, Kun-Yao, Yang, Wen-Ming,Cheng,Ming-Sung	Chang, Kun-Yao, Yang, Wen-Ming, Cheng,Ming-Sung
$1,000,000(inclusive)~$2,000,000(exclusive)
$2,000,000(inclusive)~$3,500,000(exclusive)
$3,500,000(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)
Total

(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	28,519	28,519	1,602	1,602	4,807	4,807	35,139	0	35,139	0	2..47%	2.47%	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	Ho, Chi-Hsian g
Assistant Vice Presiden t	Liu, Chi-Hung
Assistant Vice Presiden t	Wu, Yu-Wei

Remuneration Schedule

	Remuneration Schedule	Remuneration Schedule
Range of Remuneration	Name of Presidents and Vice Presidents
	The Company	Consolidated
Less than$1,000,000	Wu, Yu-Wei	Wu, Yu-Wei
$1,000,000(inclusive)~$2,000,000(exclusive)
$2,000,000 (inclusive) ~ $3,500,000 (exclusive)	Chu Chen, Yi-Hui, Lin, Ching-Hao, Lin, Tsun-Te, Lin,Yao-Ching,Liu,Chi-Hung	Chu Chen, Yi-Hui, Lin, Ching-Hao, Lin, Tsun-Te, Lin,Yao-Ching,Liu,Chi-Hung
$3,500,000 (inclusive) ~ $5,000,000 (exclusive)	Ho, Te-Yu, Chu, Te-Hsiang, Wu, Yi-Chen, Lin, Yao-Ching,Liu,Chi-Hung	Ho, Te-Yu, Chu, Te-Hsiang, 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)
Total	15people	15people

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

Year: 2020; Unit: 1,000 TWD

					Year: 2020;	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	38,330	38,330	1.35%
	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
	Business Management Assistant Vice President	Ho, Chi-Hsiang
	Business Management Assistant Vice President	Liu, Chi-Hung
	Business Management Assistant Vice President	Wu, Yu-Wei
	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 2020 is estimated based on the proportion of employee remuneration paid in 2019.

(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	2019	2020
The Company	Total remuneration	67,370	90,980
	Proportion of net profit after tax	3.24%	3.32%
Consolidated	Total remuneration	67,370	90,980
	Proportion of net profit after tax	3.24%	3.32%

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.

Corporate governance operations
(1) Operations of the Board of Directors

The Board of Directors met 5 times in 2020 (A) and the attendance of Directors was as follows:

Title	Name	Attendance in Person B	By Proxy	Attendance Rate (%)(B/A)	Remarks
Chairperson	Chia Ming Ltd. Representative: Chu, Te-Hsiang	5	0	100%	June 14, 2019 Shareholders' Meeting re-election; reappointment

Director	Chia Ming Ltd. Representative: Ho, Te-Yu	5	0	100%	June 14, 2019 Shareholders’ Meeting re-election; reappointment
Director	Tsai, Ming-Jui	4	0	80%	June 14, 2019 Shareholders’ Meeting re-election; reappointment
Director	Chin, Chang-Min	5	0	100%	June 14, 2019 Shareholders’ Meeting re-election; reappointment
Director	Hu, Jui-Ching	4	0	80%	June 14, 2019 Shareholders’ Meeting re-election; reappointment
Independent director	Hsieh, Chia-Ying	5	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 5 times in 2020 (A) and the attendance of Supervisor was as follows:

Title	Name	Attendance in Person B	Attendance Rate (%)(B/A)	Remarks
Legal Representati	Jinling Investment Co., Ltd.: Chang,Kun-Yao	5	100%	June 14, 2019 Shareholders’

ve of a Supervisor				Meeting re-election; reappointment
Supervisor	Yang, Wen-Ming	5	100%	June 14, 2019 Shareholders’ Meeting re-election; reappointment
Supervisor	Cheng, Ming-Sung	5	100%	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		The Code of Corporate Governance was approved by the Board of Directors and is posted on the Company's website and the Market Observation Post System.	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	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
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?	V		(1) The Company has established the "Code of Corporate Governance Practices" in accordance with the law, and Article 20 stipulates that the composition of the Board of Directors shall take into account diversity. In addition to the fact that the number of directors who are also managers of the Company should not exceed one-third of the seats of the Board of Directors, the Company shall formulate an appropriate diversity policy with respect to its own operation, business model and development needs, which shall include but not be limited to the following two major criteria. Basic qualifications and values: gender, age, nationality, and culture, etc. Professional knowledge and skills: professional background (e.g., law, accounting, industry, finance, marketing or technology), professional skills and industry experience, etc. Board members should generally possess the knowledge, skills and qualities necessary to perform their duties. In order to achieve the desired goals of corporate governance, the Board of Directors as a whole should possess the following competencies: a. Operational judgment. b. Accounting and financial analysis ability. c. Management skills. d. Crisis management ability. e. Industry knowledge. f. International market perspective. g. Leadership skills. h. Decision-making ability. The six directors are all from the Republic of China, five are male and one is female, including two independent directors. The directors come from different professional backgrounds or fields of work, including engineering, finance, marketing, and operations management. They have the necessary knowledge, skills and qualities to carry out their duties and responsibilities, which enable them to develop the Company's board of directors.	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.

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
(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	(2) The Company intends to re-elect the members of the Board of Directors and establish an Audit Committee to replace the supervisory system in 2021. There are no plans to establish other functional committees. (3) The Company intends to re-elect the members of the Board of Directors and establish an Audit Committee to replace the supervisory system in 2021. There are no plans to establish other functional committees. (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.
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's Board of Directors appointed Liu Xingxia, Finance Manager, to also serve as Head of Corporate Governance on August 11, 2020, 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 service agency to deal with shareholder affairs?	V		The Company currently appoints the Stock Agency Department of SinoPac Securities to handle the relevant shareholders' affairs.	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
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 a Quality Assurance Department and a Customer Support Department to provide transparent and effective after-sales	None

Evaluation Item	Implementation Status	Implementation Status	Implementation Status
	Yes	No	Abstract Illustration
			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. In order to continue to strengthen corporate governance, the Company will make the followingimprovements in accordance with the 2020 evaluation index: 109 `年評鑑指標` `改善情形` Does the company not have a government agency or a single legal entity and its subsidiaries occupying at least one-third of the board of directors? Currently, two of the six directors of the Company are corporations, and it is expected that seven directors will be re-elected at the 2021 Annual General Meeting of Shareholders to reduce theproportion of corporate directors. Is the number of directors who are employees of the Company, its parent, child or sister company less than one-third of the total number of directors? Currently, two of the Company's six directors are corporate representatives and one natural person director is an employee of the Company. It is expected that seven directors will be re-elected at the 2021 Annual General Meeting of Shareholders, and none of the natural person directors will be employees of the Company, its parent, subsidiaries or sister companies, in order to reduce the proportion of corporate directors. Does the company have an audit committee that meets the requirements? The Company expects to elect three independent directors at the 2021 Annual General Meeting of Shareholders and to establish an audit committee in compliance with the regulations. The Company also intends to disclose the annual highlights and operations of the audit committee in the 2021 Annual Report. Does the company have a corporate governance officer in charge of corporate governance-related matters, and does he/she explain on the company's website and in the annual report the terms of reference, business execution priorities for the year, and the status of training? On August 11, 2020, the Board of Directors appointed Finance Manager Liu Hsinghsia as the Head of Corporate Governance, who is responsible for providing information necessary for directors and supervisors to carry out their business, handling matters related to the meetings of the Board of Directors and shareholders' meetings, registering companies and registering changes, and preparing minutes of the Board of Directors and shareholders' meetings in accordance with the law. However, as the annual report of the 2020 Annual General Meeting of Shareholders was not yet

		Implementation Status
Yes	No	Abstract Illustration
		assigned at the time of printing, it could not be included in the annual report.

(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
March 23, 2020 1stRemuneration Committee for 2020	(1) The Company's annual compensation for employees for 2019 (2) The Company's annual remuneration for directors and supervisors for 2019	All members present agreed to approve the motion	Submitted to the Company's Board of Directors for approval
November 12, 2020 2ndRemuneration Committee for 2020	(1) The Company's managers' bonus for FY108 and special bonus for 2020 (2) Year-end bonuses for the Company's managers for 2020	All members present agreed to approve the motion	Submitted to the Company's Board of Directors for approval

(6) Corporate Social Responsibility:

Evaluation Item Implementation Status

Deviations from “the Corporate Social

			Yes	No	Abstract Explanation	Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
1.	Does the Company conduct risk assessments on			V	The Company has not conducted risk assessment on environmental, social and corporate governance issues related to the Company's operations in accordance with the materiality principle, and has formulated relevant risk management policies or strategies.	Although the Company has not yet conducted the relevant risk assessment based on the materiality principle, in terms of practical actions, the Company has implemented the relevant laws, international standards and conventions on environmental protection, labor rights, social care and important issues of corporate governance to ensure the interests of stakeholders.
	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?				(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 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?

Evaluation	Evaluation	Item			Implementation Status	Implementation Status	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
`（`4 `）`Has the Companycompiled statistics on greenhouse gas emissions, water consumption, and total weight of waste in the past two years, andformulated policies on energy conservation, carbon reduction, greenhouse gas reduction, water use reduction, or other waste management?		compiled statistics on			(3) The Company has not yet evaluated the potential risks and opportunities of climate change on its business now and in the future. However, the Company has placed emphasis on the control of exhaust and wastewater emissions to reduce its impact on climate change. (4) In the past two years, our Guangzhou and Suzhou plants have increased their hydroelectricity and carbon dioxide emissions due to the increase in production capacity. We have also actively adopted energy-saving and carbon-reducing measures by installing solar power generation facilities in our plants and dormitories to achieve no noise and no pollution, and to reduce emissions of haze, carbon dioxide, sulfur dioxide, carbon dust and nitrogen oxides from coal generation, which is conducive to energysavingand carbon reduction.
	and total weight of waste in the past two years,
	andformulated policies on energy conservation, carbon reduction, greenhouse gas reduction, water use reduction, or other waste
	management?
						Water consum ption (tons)	Electricity consumption (Kwh)	Greenhou se gas emissions (tons of CO2 equivalen t/year)	Other wastes (tons)
					2019 `年`	376,978	60,526,496	50,926	8,263
					2020 `年`	359,769	44,520,671	36,298	7,781
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			V V		(1) The Company recognizes and complies with international human rights conventions, including the United Nations Universal Declaration of Human Rights and the International Labor Organization Convention, and supports the United Nations "Protect,					None

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
reasonable employee benefits (including compensation, vacation and other benefits) and appropriately reflect operating performance or results in employee compensation? Are reasonable employee benefits measures (including compensation, leave and other benefits, etc.) in place and appropriately reflected in employee compensation? (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		Respect and Remedy: A Framework for Business and Human Rights" and its "Guiding Principles". We actively comply with human rights and labor rights laws and regulations in all of our locations, the Responsible Business Alliance Code of Conduct (RBA), and the requirements of our customers, and have established relevant management systems and policies on working hours, wages, anti-discrimination and harassment, gender equality at work, etc. to ensure the implementation of our commitments. In addition to explaining the company's policy and position to employees through announcements, events, literature and meetings, we also educate employees on the importance of human rights protection and labor rights and related information through various channels, such as new employee training and employee training. (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.	None

Evaluation Item	Evaluation Item	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, marketing and labeling of its products and services,and has it formulated relevant policies and complaint procedures to protect consumer rights? (6) Does the Companyhavea suppliermanagement policy that requires suppliers to comply with relevant regulations on environmental protection, occupational safety and health, or human rights in the workplace, and how is it implemented?			V V V		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 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 Companyhas established Safetyand
	marketing and labeling of its products and services,and has it formulated relevant policies and complaint procedures to protect consumer
	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
			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 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 groupaccident insurance for our employees to

		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
					fully protect their rights and interests. (4) Our company has set up the corresponding annual training plan according to each function and level, and arranged internal and external training or OJT (On Job Training) to enable employees to maximize their performance in their positions, so that the company and individuals can develop and grow together. (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.

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
7. Other important information to facilitate better understanding of the company’s corporate social responsibility practices`：` The Company will continue to participate in regional donations and community related activities, - In Taiwan: donated to the Keelung City government for the poor families and sponsored the meal together for the elderly in Zhonglun Li, Keelung City; jointly sponsored the rehabilitation bus of the New Taipei City government, sponsored the activities of the disabled groups and the life education promotion with the Christian Church; jointly sponsored the Hope Primary School in India with the Christian Church. - In Mainland China: Sponsored more than 30 poor college students to complete their studies; combined with relevant government resources to participate in long-term support of disadvantaged groups, actively organized staff to participate in community activities, and donated materials and funds to orphanages. Organized blood donation activities,with more than 220peopleparticipating.

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

		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
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		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 in 2020. (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		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

		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)	preventive measures under Article 7, paragraph 2 of	V		instructors. (3) The Company's dedicated unit shall hold an annual internal promotion and arrange for the chairman, president or senior management to convey the importance of integrity to directors, employees and appointees. The Company shall incorporate integrity management into employee performance appraisal and human resources policies, and establish a clear and effective system of rewards, penalties and grievances. The Company shall dismiss or terminate the employment of the Company's employees in accordance with relevant laws and regulations or in accordance with the Company's personnel policy in the event of a significant breach of integrity. The Company shall disclose on the Company's internal website the title, name, date of violation, content of the violation, and the circumstances under which the violation was handled.
	"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? (2) Has the company established a special (part-time) unit under the Board of Directors to promote corporate integritymanagement,and regularly (at		V V		(1) The Company assesses the legality and integrity of the transactions between companies with which it has business dealings before proceeding with subsequent transactions. A ethical conduct clause is also included in the signed commercial contract and is executed		(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
least once a year) reports to the Board of Directors on its integrity management policies and plans to prevent dishonest practices and monitor their 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	after inspection by the legal unit. (2) The Company has designated the Management Department as a dedicated unit to promote corporate integrity management. The Company did not find any significant breach of integrity management during 2020 and the Board of Directors reported the implementation of the Company's integrity management policy on March 24, 2021. (3) The Company establishes and publishes an internal independent whistleblower or statement mailbox [email protected] and a hotline on the Company's website and intranet site, or commissions other external independent organizations to provide a whistleblower mailbox or hotline for use by internal and external personnel of the Company. (4) The Company has established "Procedures and Conduct Guidelines for Integrity Management" as the basis for compliance with the Company's internal control system, but has not yet established an audit plan for this purpose. (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.		(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 evaluate whether to conduct internal education and training
	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
					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 established a specific reporting and reward system, but encourages internal and external personnel to report dishonest conduct or misconduct. The Company has established and announced an internal independent whistleblower mailbox [email protected] and a dedicated hotline on the Company's website and intranet site for the use of internal personnel. The Company's personnel who handle reports shall declare in writing that the identity of the whistleblower and the content of the report shall be kept confidential, and undertake to protect the whistleblower from being improperly dealt with as a result of the report.		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. Strengthening information disclosure Does the company disclose its ethical corporate management policies and the results of its implementation on the company’s website and MOPS?	V		The Company currently conducts the promotion of the Ethical Corporate Management Best Practice Principles and concepts through its internal website.		Follow the Company's 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 Companycurrentlyoperates in accordance with the spirit of the Ethical Corporate Management Best Practice Principles,except that the Companyhas

	Implementation Status	Implementation Status	Implementation Status
	Yes	No	Abstract Illustration
not established a dedicated unit and has not established a Corporate Management Best Practice Principles.	reporting channel and a disciplinary and complaint system for non-compliance with Ethical
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 24, 2021

The Company's internal control system for 2020, 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, 2020, 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 24, 2021. 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	March 25, 2020	1. The Company’s 2019 amount and method of compensation for employees and directors and supervisors. 2. The Company’s 2019 annual business report, financial statements and consolidated financial statements. 3. The Company’s 2019 surplus distribution. 4. Issued the Company’s “Statement for internal control system” 5. To amend part of the articles of the Company’s “Directors' Meeting Control” 6. To amend part of the articles of the Company’s “Rules of Procedure of Shareholders' Meeting” 7. To amend part of the articles of the Company’s “Application for suspension and resumption of trading procedures” 9. To amend part of the articles of the Company’s “Code of Ethics” 10. To amend part of the articles of the Company’s “Financial statement preparation process control operations” 11. In order to meet the capital needs of the Company's subsidiary in mainland China, Lotes Guangzhou Co., Ltd. for the future expansion of its operating facilities and the flexible use of the Group's working capital, the Company intends to apply for a loan of funds to its subsidiary, Lotes Guangzhou, within a limit of RMB50 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 11, 2020	1. The Company intends to apply for a consolidated credit line of US$6 million from Bank SinoPac Co., Ltd. 2. The Company intends to apply for a credit line of US$8 million from Bank SinoPac Co., Ltd., and the Company will provide a guarantee to the investee company. 3. The Company intends to establish a "Board of Directors' Self-Assessment Plan".
Shareholders Meeting	June 19, 2020	1. 2019 Annual Business Report and Financial Statements. 2. Distribution plan of earnings for 2019. 3. Amendment to certainprovisions of the "Rules of Procedure of the

		Shareholders' Meeting" of the Company.
Board of Directors Meeting	June 24, 2020	1. To set the ex-dividend date for the 2019 cash dividends. 2. The "Regulations for Prevention of Insider Trading" of the Company are proposed to be formulated. 3. The Company intends to apply for a consolidated credit line of NT$200 million from Hua Nan Commercial Bank. 4. The Company intends to apply for a consolidated credit line of US$3,000,000 from Mega International Commercial Bank. 5. The Company intends to apply for a credit line of NT$300 million from E.SUN Bank. 6. The Company intends to apply for a credit line of NT$300 million from ChinaTrust.
Board of Directors Meeting	August 11, 2020	1. The Company intends to invest in the establishment of a Vietnam subsidiary to strengthen the flexibility of the Group's capacity adjustment, to reduce the risk of over-concentration of the Group's production capacity, and to expand the Group's business layout in the Southeast Asian market. 2. The Company intends to apply for a consolidated credit line of NT$800 million from Hua Nan Commercial Bank for 2019 dividend project. 3. The Company intends to establish an additional "Code of Corporate Governance Practices". 4. The Company intends to establish additional "Operating Procedures and Conduct Guidelines for Integrity Management". 5. The appointment of the head of corporategovernance of the Company.
Board of Directors Meeting	November 12, 2020	1. The Company's managers' year-end bonuses for 2020. 2. The schedule of the Company's 2021 internal audit plan.
Board of Directors Meeting	March 24, 2021	1. To approve the Company's 2021 annual budget. 2. To approve the amendment to the "Regulations Governing the Remuneration of Directors and Supervisors" of the Company. 3. The amount and method of compensation for employees, directors and supervisors for the year ended December 31, 2020. 4. The Company's operating report, financial statements and consolidated financial statements for the year ended December 31, 2020. 5. Distribution of the Company's earnings for the year ended December 31, 2020. 6. To issue the "Statement of Internal Control System" of the Company. 7. To establish the "Organizational Rules and Regulations of the Audit Committee" of the Company. 8. To revise certain provisions of the "Articles of Incorporation" of the Company.

To revise certain provisions of the Company's "Control over the Acquisition or Disposal of Assets". 10. To revise the Company's "control over the lending of funds and endorsement and guarantee". 11. to revise the "Election of Directors and Supervisors" of the Company. 12. To amend certain provisions of the Company's "Rules of Procedure for Shareholders' Meetings". 13 To revise certain provisions of the Company's "Code of Business Conduct with Integrity". 14. Proposed amendments to certain provisions of the Company's "Procedures and Conduct Guidelines for Integrity Management". 15. To repeal the "Rules Governing the Authority of Corporate Supervisors". 16. To amend the Company's internal regulations. 17. To revise certain provisions of the "Seal Control Procedures" of the Company. 18. The Company intends to invest NT$37,935,340 in LeRain Technology Co., Ltd. (hereinafter referred to as "LeRain Technology"), a transferring company merged into the Company's consolidated financial statements. 19. To re-elect directors of the Company. 20. The Board of Directors nominated and considered the list of candidates for director (including independent director). 21. The Company proposed to apply for a comprehensive credit line of NT$600 million from South China Bank. 22. To convene the 2021 Annual General Meeting of Shareholders of the Company.
Review of the implementation of matters resolved at the 2020 annual general meeting of shareholders

Shareholders MeetingResolutions	Implementation Status
1. 2019 Annual Business Report and Financial Statement.	The Company’s 2019 operating revenue was NT$15,088,872 thousand, net income was NT$2,076,043 thousand and earnings per common stock was NT$20.11.
2. 2019 Surplus Distribution.	In accordance with the resolution, the shareholders allotted a cash dividend of NT$10.5 per share and a total of NT$1,086,517 thousand in cash.
3. Amendment to the Company’s “The Rules of Procedure of the Shareholders' Meeting.”.	Execute as resolved.

(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	Accounting Firm	Name of CPA	Name of CPA	Audit Period	Remarks
KPMG Taiwan		Li, Fung-Hui	Chung, Tan-Tan	2020
					Unit: NT$thousand
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 1-7 of this Standard)	None

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
Title	Name	2020	As of March 31 of 2021

		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Chairperson	Chia Ming Investment Ltd. Representative: Chu, Te-Hsiang
		(132,000)	0	0	0

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

Director	Chia Ming Investment Ltd. Representative: Ho, Te-Yu
		(132,000)	0	0	0

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

Director	Tsai, Ming-Jui
		0	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 and major Shareholder	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
		0	0	0	0

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

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

Sales Senior Vice President	Tsai, Ming-Jui
		0	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
		(1,000)	0	0	0

Business Management Assistant Vice President	Lin, Tsun-Te
		1,000	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
		0	0	0	0

Business Management Assistant Vice President	Hou, Chi-Hsiang
		1,000	0	(2,000)	0

Business Management Assistant Vice President	Wu, Yu-Wei
		0	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 23, 2021

							April 23, 2021	April 23, 2021
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.	9,797,037	9.47%	0	0.00%	0	0.00%	Chu, Te-Hsiang	Jiaming Investment Co., Ltd. Chairperson
							Chu Chen, Yi-Hui	Jiaming Investment Co., Ltd.Supervisor
New Labor Pension	6,994,775	6.76%	0	0.00%	0	0.00%	None	None
Cathay Life Insurance Company, Ltd.	5,306,000	5.13%	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.	3,810,047	3.68%	0	0.00%	0	0.00%	None	None
Dechuan Investment Co., Ltd.	2,951,388	2.85%	0	0.00%	11,476	0.01%	Chu, Te-Hsiang	Jiaming Investment Co., Ltd. Chairperson
Deutsche Bank to manage Swedbank's Robo Technology Investment Account	2,500,000	2.42%	0	0.00%	0	0.00%	None	None

Investment account of Deutsche Bank entrusted to Richard's Equity Trust for small companies	2,000,000	1.93%	0	0.00%	0	0.00%	None	None
Old Labor Pension	1,979,768	1.91%	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 23, 2021

Shareholder structure Item	Government Agencies	Financial Institutions	Other Juridical Persons	Domestic Natural Persons	Foreign Institutions & Natural Persons	Total
Number of Shareholders	4	111	56	5,542	260	5,973
Shareholding (shares)	9,631,543	17,297,265	31,381,852	15,534,009	29,633,231	103,477,900
Percentage	9.31%	16.72%	30.33%	15.01%	28.64%	100.00%

(3).Diffusion of ownership

ffusion of ownership	ffusion of ownership	ffusion of ownership	ffusion of ownership
April 23,2021
Class of Shareholding (Unit: shares)	Number of Shareholders	Shareholding (Shares)	Percentage
1 ~ 999	1,981	235,645	0.23%
1,000 ~ 5,000	3,252	5,433,332	5.25%
5,001 ~ 10,000	251	1,885,012	1.82%
10,001 ~ 15,000	109	1,403,342	1.36%
15,001 ~ 20,000	50	891,892	0.86%
20,001 ~ 30,000	80	1,993,694	1.93%
30,001 ~ 50,000	68	2,638,319	2.55%
50,001 ~ 100,000	75	5,172,126	5.00%
100,001 ~ 200,000	41	5,750,026	5.56%
200,001 ~ 400,000	33	8,892,778	8.59%
400,001 ~ 600,000	10	4,768,790	4.61%
600,001 ~ 800,000	3	1,998,986	1.93%
800,001 ~ 1,000,000	5	4,657,490	4.50%
Over 1,000,001	15	57,756,468	55.82%
Total	5,973	103,477,900	100.00%

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.

least 5% of the shares.	least 5% of the shares.	least 5% of the shares.
Unit: shares April 21,2020
Shares Major Shareholders	Shareholding
	Shares	Percentage
Jinling Investment Co., Ltd.	10,956,237	10.59%
Jiaming Investment Co., Ltd.	9,797,037	9.47%
New Labor Pension	6,994,775	6.76%
Cathay Life Insurance Company, Ltd.	5,306,000	5.13%
Dun Lin Investment Co., Ltd.	5,000,000	4.83%
Fubon Life Assurance Co., Ltd.	3,810,047	3.68%
Dechuan Investment Co., Ltd.	2,951,388	2.85%

Deutsche Bank to manage Swedbank's Robo Technology Investment Account	2,500,000	2.42%
Investment account of Deutsche Bank entrusted to Richard's EquityTrust for small companies	2,000,000	1.93%
Old Labor Pension	1,979,768	1.91%

(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		2019	2020	As of March 31, 2021 for the year
Market Price per Share	Highest Mrket Price		331	488	587
	Lowest Market Price		191.5	231.5	468
	Average Mrket Price		261	359	527.5
Net Worth per Share	Before Distribution		114.18	130.45	`－`
	After Distribution		103.68	`－`	`－`
Earnings per Share	Weighted Average Shares (thousand shares)		103,231	103,478	103,478
	Earnings per Share	Before adjustment	20.11	26.41	`－`
		After adjustment	20.06	26.34	`－`
Dividends per Share	Cash Dividends		10.5	13.3	`－`
	Stock Dividends	Dividends from Retained Earnings	`－`	`－`	`－`
		Dividends from Capital Surplus	`－`	`－`	`－`
	Accumulated Undistributed Dividends		`－`	`－`	`－`
Return on Investment	Price / Earnings Ratio		12.98	13.59
	Price / Dividend Ratio		24.86	26.99	`－`
	Cash Dividend Yield Rate		4.02%	3.70%	`－`

(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$1,376,256 thousand in cash dividends of NT$13.30 per share from the 2020 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$97,235 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 2019 was $2,076,043 thousand, and the Board of Directors resolved to distribute employee remuneration of $73,100 thousand and director and supervisor remuneration of $4,480 thousand for 2019, which is the same as the actual distribution of employee, director and supervisor remuneration totaling $77,580 thousand for 2019 as resolved by the Board of Directors and reported at the 2019 Annual Meeting of Shareholders.

(9). Share repurchases: None

2. Issuance of corporate bonds: None

Issuance of preferred shares: None
Issuance of global depository receipts: None
Eemployee subscription warrants:
(1) Eemployee subscription warrants

loyee subscription warrants: employee subscription warrants	loyee subscription warrants: employee 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
	(1,253,000common 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%after3 years
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 shares	0.01%

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
Share issuance of merger company
Implementation of the capital utilization plan: N/A.

V. Overview of Business Operations

A.Description of the business

(1). Scope of business

Main business operation and sales ratio
(1) 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.
(2) Main products and their sales ratio

Unit: 1,000 TWD

	2020 Net Operating
Major products		Sales Ratio (%)
	Sales(Note)

Connectors (with cables)	16,764,112	96.95%
Other Electronic Components	527,220	3.05%
Total	17,291,332	100.00%

2. 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.

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:

(1)Status and development trends of the industry

The growth of global market demand for consumer electronics products such as smartphones, personal computers and their peripherals has been declining since 2006, which has significantly depressed the sales momentum of related connector (cable) products. However, not only in terms of technology development, in response to the launch of diversified wearable electronic products,

the demand for fine pitch (pin) and SMT (Surface Mount Technology) connectors with low contact impedance, high insertion and removal frequency, high environmental tolerance and high frequency stability has increased; and In terms of application development, the major international connector (cable) manufacturers have been focusing on niche areas such as optical communication, artificial intelligence network of things (AIoT), automotive aerospace, green energy, industrial control, and medical care, etc. In addition, some connector (cable) specifications are already interoperable (e.g. Thunderbolt 3 can support Type-C) and are becoming more consistent. The market size of the global connector industry continues to grow moderately with the steady growth of the economy and the introduction of new electrified products. Therefore, according to the data from ITRI (see Figure 3-1).

In recent years, new technologies such as 5G are expected to bring industrial revolutions in the industrial, automotive, medical, and defense markets, and the Internet of Things (IoT) is currently connected globally, with transmission rate being a major technical requirement. In this era of big data in the Internet of Things, it is inevitable that the technology of connectors will face the requirements of miniaturization, high precision, and high reliability, as well as the challenge of relative cost considerations. The main technical requirements of 5G include large bandwidth, high network data transmission, large number of connected devices, high reliability, and low power consumption. The global connector market is expected to continue to grow in response to future technological developments. According to the data from ITRI (see the table below), the global connector market size reached US$58 billion in 2008, with an annual growth rate of 2.20%, showing a slight expansion compared to 2018.

==> picture [462 x 267] intentionally omitted <==

With the saturation of these markets, many connector companies are now moving to other electronic product markets. In recent years, the connector companies have stepped up their operations in the fields of 8 electric vehicles, 5G infrastructure and high-current connectors for smart grid.

(a) High Frequency and High Speed Technology The future is the generation of 5G high-speed and high data capacity communication network, and the network world is everywhere. Compared with the previous generation of mobile networks, 5G communication will carry the technology of large data and high transmission efficiency, so in the era of 5G Internet, the connector technology also needs to enhance the "speed" function. The number of 5G users will multiply rapidly in the future, and 2020 is also a critical time for deployment.
(b) Higher accuracy and lower cost In the future smart era, connectors will require more accuracy, such as car safety in the car network. The automotive connector market is a very large market, and with the trend toward electric vehicles, connectors will be more accurate and the market will become more popular than ever.
(c) More compact design technology In the era of high speed transmission of big data, a fiber optic equipment device may have multiple very small connectors to achieve higher performance transmission connections.
(d) Automated production technology With the move toward automated industrial production, connectors will become an important force in the development of modern industry with the support of precision machining technology, advanced mold design, and advanced CAD.
(2)Connection between upstream, midstream and downstream industries

Raw Materials Industry


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

	Product Design + Mold Development

==> picture [504 x 364] intentionally omitted <==

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

Connector Metal Plated Metal Plastic
Industry
Stamping/Die Casting Molding Injection
Molding
Electroplating
Erection + Testing
Finished Product
End-use
Applications
Peripherals Computers & Telecommunications Electronics Consumer Industry Automobile Technology Information Others
----- End of picture text -----

(3) 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.

(4) 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:

(1) 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.

(2) R&D Overview

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 efforts 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.

(3) Research and development expenses for recent years and as of the publish date of prospectus

Unit: 1,000 TWD

	2020	2021Q1(Note)
R&D Costs	1,459,647	`－`
R&D Costs to Operating	8.44%	`－`

Revenues

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 2021.

(4) 2019 R&D Achievements

A	The new generation of multi-functional USB4.0 broadband transmission connector
B	The new generation of multi-core high speed computing server chassis(Socket E)
C	The new generation of supercomputing 1700 desktop CPU chassis
D	The new generation of PCIE5.0 high speed efficiency data transfer bus interface connector
E	The new generation high speed transmission multi-protocol connector
F	The new generation of GenZ 5.0 High Density, High BandwidthCoplanarCard EdgeConnector

(4). Long- and short-term business development plans:
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.
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

B. Overview of market, production and sales:

(1). Market analysis:

1. Sales Region:

Unit: 1,000 TWD

rview of market, production Market analysis: Sales Region:	and sales:	and sales:	Unit: 1,000 TWD	Unit: 1,000 TWD
Year Area	2019		2020
	Amount	%	Amount	%
Domestic	717,666	2.59	1,155,725	6.68
Export	14,371,206	97.41	16,135,607	93.32
Total	15,088,872	100.00	17,291,332	100,00

2. Market share

According to the data from ITRI's International Institute of Industrial Science , Bishop & Associates’ report shows the estimated overall sales in global connector market in 2020 is around 580 billion US dollars. Based on the company's 2020 net consolidated operating income of NTD150 billion, the company’s market share in global market is approximately 0.86% in 2019.

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

(1)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.

(2) 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.

With new technologies such as 5G expected to bring industrial revolution, including industrial, automotive, medical and defense markets, the Internet of Things is now connected globally, and transmission rate is a major technical requirement. In this era of big data in the Internet of Things, it is inevitable that the technology of connectors will face the requirements of miniaturization, high precision, and high reliability, as well as the challenge of relative cost considerations. The main technical requirements of 5G include large bandwidth, high network data transmission, large number of connected devices, high reliability, and low power consumption. The global connector market is expected to continue to grow in response to future technological developments. According to Bishop, the global connector market is expected to exceed US$90 billion by 2023, and China's connector market reached US$20.9 billion in 2018, accounting for 31.4% of the global market, making it the largest connector consumer market, more than Europe and the U.S., with Europe and North America accounting for 21.1% and 20.8% respectively. The overall growth of connectors has been stable, and competition among companies is fierce. According to Bishop & Associates, the global connector market size was US$66.8 billion in 2018, up 11% from 2017, maintaining double-digit growth for two consecutive years and a compound growth rate of about 5% since 2012. The main applications of connectors are: automotive 23.6%, communication 22%, consumer electronics 13.5%, industrial 12.3%, and rail transportation 7%.

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.

4. 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.

Positive and negative factors for future development
(1) 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.

(2) 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.

  - (3) 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
Main usage

Main products are electronic connectors, providing current and signal transmission for various electronic products.

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 -----

3. 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.

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

(1) Customers accounting for 10% or more of the Company's total sales in the last two years

Unit: 1,000 TWD

		2019	2019			2020	2020	2020		2021Q1	2021Q1
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	1,971,110	13.06%	None	Company A	1,860,627	10.76%	None	`－`	`－`	`－`	`－`
2	Company B	1,080,902	7.16%	None	Company C	1,179,680	6.82%	None	`－`	`－`	`－`	`－`
3	Company C	1,010,642	6.70%	None	Company B	1,132,292	6.55%	None
	Others	11,026,218	73.08%		Others	13,118,733	75.87%		`－`	`－`	`－`	`－`
	Total	15,088,872	100%		Total	17,291,332	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.

(2) Suppliers accounting for 10% of the Company's total shipments for the last two years

Unit: 1,000 TWD

	2019	2019	2019	2019	2020	2020	2020	2020		2021Q1	2021Q1
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	298,653	6.59	None	Company A	197,915	4.06	None	`－`	`－`	`－`	`－`
2	Company B	226,198	4.99	None	Company D	155,100	3.18	None	`－`	`－`	`－`	`－`
3	Company C	143,417	3.16	None	Company B	151,774	3.11	None
	Others	3,862,314	85.26	`﹣`	Others	4,370,409	93.73	`﹣`	`－`	`－`	`－`	`－`
	Total	4,530,582	100.00	`﹣`	Total	4,875,198	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 2020.

5.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

Sales value for the past two years

Unit: thousand units/ $ thousand

					Unit: thousand units/ $ thousand	Unit: thousand units/ $ thousand	Unit: thousand units/ $ thousand	Unit: thousand units/ $ thousand
Year Sales Volume Major Products	2019				2020
	Domestic Sales		Export		Domestic Sales		Export
	Quantity	Quality	Quantity	Quality	Quantity	Quality	Quantity	Quality
Connectors & Cables	40,763	668,557	1,792,760	13,872,811	64,137	1,071,142	2,542,563	15,692,970
Others	651	48,509	14,906	498,395	1,546	84,583	10,768	442,637
Total	41,414	717,066	1,807,666	14,371,206	65,683	1,155,725	2,553,331	16,135,607

C. Employee information

	April 30,2021	April 30,2021	April 30,2021	April 30,2021
	Year	2019	2020	As of April 30, 2021
Number of Employees	Executive Officer	144	99	105
	General Staff	5,362	5,653	5,511
	Operators	3,794	4,647	4,666
	Total	9,300	10,399	10,282
Average Age		31.56	31.88	31.86
Average Years of Service		3.35	3.45	3.36
Education Levels	Ph.D.	0.05%	0.05%	0.05%
	Masters	1.29%	1.08%	1.02%
	Bachelor’s Degree	18.06%	18.75%	20.21%
	Senior High School	18.02%	19.82%	21.16%
	Below Senior High School	62.57%	60.82%	57.56%

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.

E. Labor relations

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

Employee welfare measures
(1) 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.,.

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

2. 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.

3. 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.

4.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.

(2)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.

F. Important contracts

Nature	Contracting Parties	Contract start/end date	Major Content	Restrictive Clauses
Borrowing Agreement	E.SUN Commercial Bank Ltd.	2020.08.04~2021.08.04	Credit line	None
Borrowing Agreement	Bank Sinopac Co., Ltd.	2020.6.15~2021.06.30	Credit line	None
Borrowing Agreement	CTBC Bank Co., Ltd.	2020.08.31~2021.08.31	Credit line	None
Borrowing Agreement	Hua Nan Commercial Bank Ltd.	2020.10.23~2021.10.23	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. A condensed balance sheet and statement of comprehensive income for the last five years with the name

of the accountant and his or her audit opinion

(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)
		2016	2017	2018	2019	2020
Current assets		7,080,069	7,863,610	9,566,989	11,400,712	13,054,559	`－`
Property, Plant and Equipment		2,528,461	2,875,657	3,350,160	3,514,714	4,495,974	`－`
Intangible assets		14,447	25,382	59,527	99,789	155,510	`－`
Other assets		373,560	516,393	473,115	388,701	661,820	`－`
Total assets		1,0478,589	11,753,258	13,790,208	16,280,192	19,282,895	`－`
Current liabilities	Before distribution	2,459,993	3,277,487	3,876,478	3,630,746	4,580,880	`－`
	After distribution	2,923,904	3,791615	4,776,736	4,717,264	Not yet distributed	`－`
Non-current liabilities		43,183	43,982	42,248	104,221	222,456	`－`

Total liabilities	Before distribution	2,503,176	3,321,469	3,918,726	3,734,967	4,803,336	`－`
	After distribution	2,877,087	3,835,597	4,818,984	4,821,485	Not yet distributed	`－`
Equity attributable to shareholders of the parent		7,896,919	8,285,616	9,506,158	11,815,326	13,499,198	`－`
Capital stock		934,779	934,779	934,779	1,034,779	1,034,779	`－`
Capital surplus		2,383,441	2,410,168	2,466,109	3,959,560	3,958,247	`－`
Retained earnings	Before distribution	4,616,312	5,195,871	6,296,652	7,471,519	9,101,144	`－`
	After distribution	4,242,401	4,681,743	5,396,394	6,385,001	Not yet distributed	`－`
Other equity interest		(37,613)	(255,202)	(317,020)	(650,532)	(594,972)	`－`
Treasury stock		0	0	0	0	0	`－`
Non-controlling interest		78,494	146,173	365,324	729,899	980,361	`－`
Total equity	Before distribution	7,975,413	8,431,789	9,871,482	12,545,225	14,479,559	`－`
	After distribution	7,601,502	7,917,661	8,971,224	11,458,707	Not yet 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	Year Item	Financial Information for the Last Five Years 2016 2017 2018 2019 2020 3,911,304 3,999,731 4,456,296 5,476,170 5,643,845 50,874 50,675 51,342 63,428 58,276 2,424 688 30,628 50,937 97,583 6,027 97,117 6,027 15,462 6,027 10,720,970 11,306,203 12,734,745 14,830,921 16,395,041 2,781,413 2,977,029 3,187,052 2,972,923 2,845,841 3,155,324 3,491,157 4,087,310 4,059,441 Not yet distributed 77,265 42,638 41,535 42,672 50,002 2,824,051 3,020,587 3,228,587 3,015,595 2,895,843 3,197,962 3,534,715 4,128,845 4,102,113 Not yet distributed	Financial Information for the Last Five Years 2016 2017 2018 2019 2020 3,911,304 3,999,731 4,456,296 5,476,170 5,643,845 50,874 50,675 51,342 63,428 58,276 2,424 688 30,628 50,937 97,583 6,027 97,117 6,027 15,462 6,027 10,720,970 11,306,203 12,734,745 14,830,921 16,395,041 2,781,413 2,977,029 3,187,052 2,972,923 2,845,841 3,155,324 3,491,157 4,087,310 4,059,441 Not yet distributed 77,265 42,638 41,535 42,672 50,002 2,824,051 3,020,587 3,228,587 3,015,595 2,895,843 3,197,962 3,534,715 4,128,845 4,102,113 Not yet distributed	Financial Information for the Last Five Years 2016 2017 2018 2019 2020 3,911,304 3,999,731 4,456,296 5,476,170 5,643,845 50,874 50,675 51,342 63,428 58,276 2,424 688 30,628 50,937 97,583 6,027 97,117 6,027 15,462 6,027 10,720,970 11,306,203 12,734,745 14,830,921 16,395,041 2,781,413 2,977,029 3,187,052 2,972,923 2,845,841 3,155,324 3,491,157 4,087,310 4,059,441 Not yet distributed 77,265 42,638 41,535 42,672 50,002 2,824,051 3,020,587 3,228,587 3,015,595 2,895,843 3,197,962 3,534,715 4,128,845 4,102,113 Not yet distributed	Financial Information for the Last Five Years 2016 2017 2018 2019 2020 3,911,304 3,999,731 4,456,296 5,476,170 5,643,845 50,874 50,675 51,342 63,428 58,276 2,424 688 30,628 50,937 97,583 6,027 97,117 6,027 15,462 6,027 10,720,970 11,306,203 12,734,745 14,830,921 16,395,041 2,781,413 2,977,029 3,187,052 2,972,923 2,845,841 3,155,324 3,491,157 4,087,310 4,059,441 Not yet distributed 77,265 42,638 41,535 42,672 50,002 2,824,051 3,020,587 3,228,587 3,015,595 2,895,843 3,197,962 3,534,715 4,128,845 4,102,113 Not yet distributed
		2016	2017	2018	2019
Current assets		3,911,304	3,999,731	4,456,296	5,476,170
Property, Plant and Equipment		50,874	50,675	51,342	63,428
Intangible assets		2,424	688	30,628	50,937
Other assets		6,027	97,117	6,027	15,462
Total assets		10,720,970	11,306,203	12,734,745	14,830,921
Current liabilities	Before distribution	2,781,413	2,977,029	3,187,052	2,972,923
	After distribution	3,155,324	3,491,157	4,087,310	4,059,441
Non-current liabilities		77,265	42,638	41,535	42,672
Total liabilities	Before distribution	2,824,051	3,020,587	3,228,587	3,015,595
	After distribution	3,197,962	3,534,715	4,128,845	4,102,113

Equity attributable to shareholders of the parent	Equity attributable to shareholders of the parent	7,896,919	8,285,616	9,506,158	11,815,326	13,499,198
parent
Capital stock		934,779	934,779	934,779	1,034,779	1,034,779
Capital surplus		2,383,441	2,410,168	2,466,109	3,959,560	3,958,247
Retained earnings	Before distribution	4,616,312	5,195,871	6,296,652	7,471,519	9,101,144
	After distribution	4,242,401	4,681,743	5,396,394	6,385,001	Not yet distributed
Other equity interest		(37,613)	(255,202)	(317,020)	(650,532)	(594,972)
Treasury stock		0	0	0	0	0
Non-controlling interest		0	0	0	0	0
Total equity	Before distribution	7,896,919	8,285,616	9,506,158	11,815,326	13,499,198
	After distribution	7,523,008	7,744,488	8,605,900	10,728,808	Not yet 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, 2021 (Note)
	2016	2017	2018	2019	2020
Operatingrevenue	8,862,577	10,482,763	13,311,518	15,088,872	17,291,332	`－`
Gross profit	2,817457	3,390,515	4,348,869	5,467,910	6,930,195	`－`
Operating profit or loss	727,760	1,219,583	1,982,440	2,750,624	3,707,652	`－`
Non-operating income and expenses	166,904	32,820	171,857	81,137	(37,650)	`－`
Profit before income tax	894,664	1,252,403	2,154,297	2,831,761	3,670,002	`－`
Current net profit from continuingoperations	647,001	982,732	1,708,299	2,144,468	2,835,589	`－`
Loss from discontinued operations	0	0	0	0	0	`－`
Net profit (loss)	647,001	982,732	1,708,299	2,144,468	2,835,589	`－`
Other comprehensive income (loss) ( income after tax)	(431,005)	(219,943)	(56,310)	(337,918)	42,913	`－`
Total comprehensive income (loss)	215,996	762,789	1,651,989	1,806,550	2,878,502	`－`
Net profit attributable to owners of the company	690,324	956,301	1,608,567	2,076,043	2,732,361	`－`
Net profit attributable to non-controlling interests	(43,323)	26,907	99,732	68,425	103,228	`－`
Comprehensive income attributable to owners of the company	259,699	735,882	1,553,091	1,741,613	2,771,703	`－`
Comprehensive income attributable to non-controllinginterests	(43,703)	26,907	98,898	64,937	106,799	`－`
Earningsper share	7.38	10.23	17.21	20.11	26.41	`－`

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
	2016	2017	2018	2019	2020
Operatingrevenue	6,947,169	7,908,666	8,731,882	9,968,334	11,362,435
Grossprofit	673,269	1,216,311	1,385,837	1,805,548	2,544,800
Operating profit or loss	211,949	537,905	822,567	1,230,782	1,884,003
Non-operating income and expenses	544,703	537,215	981,503	1,126,841	1,255,369
Profit before income tax	756,652	1,075,120	1,804,070	2,357,623	3,139,372
Current net profit from continuingoperations	690,324	956,301	1,608,567	2,076,043	2,732,361
Loss from discontinued operations	`－`	`－`	`－`	`－`	`－`
Net profit (loss)	690,324	956,301	1,608,567	2,076,043	2,732,361
Other comprehensive income (loss) ( income after tax)	(430,625)	(220,419)	(55,476)	(334,430)	39,342
Total comprehensive income (loss)	259,699	735,882	1,553,091	1,741,613	2,771,703
Earningsper share	7.38	10.23	17.21	20.11	26.41

(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
2020	KMPG Taiwan	Li Fung-Hui, Chung, Tan-Tan	Unqualified opinion

B. Five-year financial analysis

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
		2016	2017	2018	2019	2020
Financial structure%	Debt ratio (%)	23.38	28.25	28.41	22.94	24.90
	Long-term capital to property, plant and equipment ratio(%)	314.02	289.65	295.91	359.89	327.00
Solvency %	Current ratio (%)	287.80	239.92	246.79	314.00	284.97
	Quick ratio (%)	221.60	183.73	186.98	255.79	227.75
	Interest protection multiples(times)	28,420.86	21,837.09	11,765.02	12,568.67	19,821.65
Operating Ability	Receivable turnover ratio (times)	2.52	2.60	2.77	2.67	2.68
	Average collectionperiod	144	140	132	136	136
	Inventory turnover ratio (times)	3.73	3.66	3.94	4.06	4.06
	Payable turnover ratio (times)	4.29	4.48	5.12	5.21	4.70
	Average days in sales	97	99	93	90	90
	Property, plant and equipment turnover ratio (times)	3.75	3.87	4.27	4.39	4.31
	Total assets turnover ratio (times)	0.83	0.94	1.04	1.00	0.97
Profitabilit y	Return on assets(%)	6.49	8.64	12.71	13.92	15.44
	Return on equity (%)	8.66	11.81	18.08	19.47	21.58
	Pre-tax income to paid-in capital ratio (%) (`註`7)	95.70	133.97	230.46	273.65	354.66
	Netprofit ratio(%)	7.78	9.12	12.08	13.75	15.80
	Earningsper share(NT$)	7.38	10.23	17.21	20.11	26.41
Cash flow	Cash flow ratio (%)	35.71	31.30	38.90	92.53	75.72
	Cash flow adequacy ratio (%)	85.48	88.74	93.98	104.28	95.50
	Cash reinvestment ratio (%)	4.68	6.02	7.99	16.14	14.16
Leverage	Operating leverage	4.86	3.61	3.07	2.68	2.49
	Financial leverage	1.00	1.00	1.01	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. Ratio of long-term capital to property, plant and equipment: The increase in the ratio of long-term capital to property, plant and equipment was mainly due to the significant increase in profitability in 2020, which resulted in the increase in long-term capital being greater than the increase in property, plant and equipment. 2. Interest coverage ratio: The decrease in interest coverage ratio was mainly due to the increase in interest expense exceeding the increase in profitability. 3. Net income before tax to paid-in capital ratio: The significant increase in net income before tax to paid-in capital ratio was mainly due to the significant increase in earnings but no change in paid-in capital. 4. Earnings per share: The significant increase in earnings per share was mainly due to the significant increase in earnings but no change in paid-in capital. 5. Cash reinvestment ratio: The negative cash reinvestment ratio was mainly due to the fact that the net cash inflow from operating activities was less than the cash dividendspaid in 2020.

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
		2016	2017	2018	2019	2020
Financial structure%	Debt ratio (%)	26.34	26.72	25.35	20.33	17.66
	Long-term capital to property, plant and equipment ratio (%)	15,606.32	16,436.46	18,596.26	18,695.21	23,250.05
Solvency %	Current ratio (%)	140.62	134.35	139.83	184.20	198.32
	Quick ratio (%)	122.16	118.35	123.37	164.20	173.19
	Interest protection multiples (times)	55,049	109,249	49,964	398,347	221,183
Operating Ability	Receivable turnover ratio(times)	2.46	2.60	2.63	2.68	2.76
	Average collectionperiod	148	140	139	136	132
	Inventoryturnover ratio(times)	12.71	12.80	14.10	14.18	12.90
	Payable turnover ratio(times)	2.65	2.91	3.52	3.80	4.06
	Average days in sales	28	28	25	26	28
	Property, plant and equipment turnover ratio(times)	134.87	155	171	173	173
	Total assets turnover ratio(times)	0.64	0.72	0.73	0.73	0.73
Profitabilit y	Return on assets(%)	6.39	8.69	13.41	15.07	17.51
	Return on equity (%)	8.66	11.82	18.08	19.47	21.59
	Pre-tax income to paid-in capital ratio (%)	80.94	115.01	192.99	227.84	303.39
	Netprofit ratio(%)	9.94	12.09	18.42	20.83	24.05
	Earningsper share(NT$)	7.38	10.23	17.21	20.11	26.41
Cash flow	Cash flow ratio (%)	(6.36)	6.05	1.78	32.31	28.97
	Cash flow adequacy ratio (%)	88.13	75.67	60.28	53.40	46.51
	Cash reinvestment ratio (%)	(7.50)	(2.32)	(4.78)	0.51	(1.93)
Leverage	Operating leverage	1.96	1.40	1.30	1.21	1.16
	Financial leverage	1.01	1.00	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. Ratio of long-term capital to property, plant and equipment: The increase in the ratio of long-term capital to property, plant and equipment was mainly due to the significant increase in profitability in fiscal 2020, which resulted in the increase in long-term capital being greater than the increase in property, plant and equipment. 2. Interest coverage ratio: The decrease in interest coverage ratio was mainly due to the increase in interest expense exceeding the increase in profitability. 3. Net income before tax to paid-in capital ratio: The significant increase in net income before tax to paid-in capital ratio was mainly due to the significant increase in earnings but no change in paid-in capital. Earnings per share: The significant increase in earnings per share was mainly due to the significant increase in earnings but no change in paid-in capital. 5. Cash reinvestment ratio: The cash reinvestment ratio turned negative in 2020 mainly because the net cash inflow from operatingactivities was smaller than the cash dividendspaid in 2020.

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)

C. 2020 Audit Report of Supervisors for the Financial Statements

Lotes Co., Ltd. 2020 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 LI, FUNG-HUI and CHUNG, TAN-TAN 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,

2021 Shareholders General Meeting of Lotes Co., Ltd.

Supervisor: YANG, WEN-MING

CHENG, MING-SUNG

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

March24, 2021

D. 2020 Financial Statements and Independent Auditor’s Report

Stock Code: 3533

Lotes Co., Ltd.

Parent Company Only Financial Statement and Independent Auditor’s Report

2020 & 2019

Address: No. 15, Wuxun St., Anle Dist., Keelung City 204 Tel: (02)2433 1110

Table of Contents

Item
I.
Cover Page
II.
Table of Contents
III.Independent Auditor’s Report
IV.Balance Sheet
V.
Statement of Comprehensive Income
VI.Statement of Change in Equity
VII.Statement of Cash Flows
VIII. Notes to the Parent Company Only Financial Statements
(1) Company history
(2) The date when the financial reports were authorized for issuance and the
process involved
(3) Application of new issuing & revised standards and interpretation
(4) Summary and explanation of material accounting policies
(5) Primary sources of uncertainty in major accounting judgments, estimates,
and assumptions
(6) Descriptions of Material Accounting Items
(7) Transaction with related parties
(8) Pledged Assets
(9) Significant contingent liabilities and unrecognized contractual
commitments
(10)
Significant Disaster Loss
(11)
Significant Events after the End of the Financial Reporting Period
(12)
Other
(13)
Supplementary Disclosures
1. Information on Significant Transactions
2. Information on Investment Business
3. Information of investment from Mainland China
4. Information of Major Shareholders
(14)
Operating Segments
IX. Tables of Significant Accounting Items

Page

1
2
3
4
5
6
7
8
8
8～9
9～21
21～22
22～44
44～47
48
48
48
48
48～49
49～52
52～53
53～54
54
54
55～66

Independent Auditor’s Report

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

Audit opinion

We have audited the Statement of Financial Position of Lotes Co., Ltd. (hereinafter referred to as Lotes) as of December 31, 2020 and 2019, the Statement of Comprehensive Income as of January 1 to December 31, 2020 and 2019 as well as the Statement of Changes in Equity, Statement of Cash Flows and the Notes to Individual Financial Statement (including important accounting policies summary).

In our opinions, the compilation of the above individual financial statements present fairly, in all material respects, of the financial status of December 31, 2020 and 2019 in Lotes and the financial performance and consolidated cash flow of January 1 to December 31, 2020 and 2019 prepared according to Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis of the audit opinions

The audit of the parent company only financial statements for fiscal year 2020 was conducted by us in accordance with the Rules Governing Auditing and Certification of Financial Statements by Certified Public Accountants and Generally Accepted Auditing Standards (GAAS); The audit of the parent company only financial statements for fiscal year 2019 was conducted by us in accordance with the Rules Governing Auditing and Certification of Financial Statements by Certified Public Accountants, CHIN-KUAN-CHENG-SHEN-TZU No. 1090360805 Letter 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 our accountants 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 of fiscal year 2020 based on the professional judgment of our accountants. 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, our accountants will not 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 4 (15) to the parent company only financial statements for the accounting policy in terms of income recognition. Please refer to Note 6 (11) to the parent company only financial statements for the refund liability. Please refer to Note 6 (18) to the parent company only financial statements for details about income.

Description of the key audit matters:

100

discounts were provided for parts of the sales of goods agreed with the customers. Based on the 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 Co., Ltd.

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. The adequacy of the refund liability estimate was analyzed with the actual situation afterward.

II. Evaluation of inventory

Please refer to Note 4 (7) for the accounting policy of inventory evaluation. Please refer to Note 5 (1) in the parent company only financial statements for the accounting estimates and assumed uncertainties of the inventory evaluation. Please refer to Note 6 (4) in the parent company only financial statements for the information on the losses from the falling price 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 Co., Ltd. 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 adequacy of the inventory aging report was checked, and the changes in the inventory aging of each period were analyzed.

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

Management level’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 management level also includes evaluating Lotes’s capability of continuous operation, disclosure of relevant matters and the application of continuous operation accounting model unless the management level 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.

101

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

The purpose of the parent company only financial statements audited by our accountants 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 will not 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 individual 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 management level 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 management level 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 our CPAs 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.

102

We determined the key audit matters that we would like to execute on Lotes’s parent company only financial statements for fiscal year 2020 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 ：[CHIN-KUAN-CHENG-SHEN-] Authority of TZU No. 1000011652 Securities (88) TAI-TSAI-CHENG (VI) Approval No. 18311 Certificate No. March 24, 2021

103

Lotes Co., Ltd. Statement of Financial Position

Dec. 31, 2020 and 2019

Unit: NT$ thousands

Assets Current assets: 1100 Cash and cash equivalents (Note 6 (1) and (21)) 1110 Financial assets measured at FVTPL – current (Note 6 (2) and (21)) 1150 Net notes receivable (Note 6 (3) and (21)) 1170 Net accounts receivable (Note 6 (3) and (21)) 1181 Accounts receivable`－`related parties (Note 6 (3), (21) and Note 7) 1200 Other accounts receivable (Note 6 (3) and (21)) 1210 Other accounts receivable`－`related parties (Note 6 (3), (21) and Note 7) 130X Net inventory (Note 6 (4)) 1410 Advance payment Non-current assets: 1550 Investments accounted for using the equity method (Note 6 (4) and 13) 1600 Property, plant and equipment (Note 6 (6) and 8) 1755 Right-of-use assets (Note 6 (7)) 1760 Net worth of investment property (Note 6 (8)) 1780 Intangible assets (Note 6 (9)) 1840 Deferred tax assets (Note 6 (15)) 1900 Other non-current assets Total of assets	Dec. 31, 2020 Amount % $ 497,302 3 2,080 - 2,485 - 4,304,076 26 13,012 - 19,702 - 90,161 1 710,477 4 4,550 -	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 - 5,476,170 38 8,873,276 60 63,428 - 59 - 283,002 2 50,937 - 68,587 - 15,462 - 9,354,751 62 14,830,921 100 2170 Accounts payable (Note 6 (21)) 2180 Accounts payable - related parties (Note 6 (21) and 7) 2200 Other payables (Note 6 (21)) 2220 Other payables - related parties (Note 6 (21) and 7) 2230 Tax liabilities (Note 6 (15)) 2280 Lease liabilities - current (Note 6 (10), (21) and (24)) 2365 Refund liabilities - current (Note 6 (11)) 2300 Other current liabilities Non-current liabilities: 2550 Provisions - non-current (Note 6 (12)) 2600 Other non-current liabilities Total of liabilities Equity to the owner of parent company: 3110 Share capital for ordinary shares (Note 6 (16)) 3200 Capital reserves (Note 6 (16)) 3300 Retained earnings (Note 6 (16)) 3400 Other equity (Note 6 (16)) Total of equity Total of liabilities and equity	11,421 - 14,499 - 2,034,411 12 2,264,397 15 299,122 2 245,547 2 2,092 - 5,838 - 305,058 2 244,220 2 - - 59 - 161,767 1 157,256 1 7,866 - 7,175 -
			2,845,841 17 2,972,923 20
			49,258 - 41,729 - 744 - 943 -
	5,643,845 34
			50,002 - 42,672 -
	10,225,811 63 58,276 - - - 299,927 2 97,583 1 63,572 - 6,027 -
			2,895,843 17 3,015,595 20
			1,034,779 6 1,034,779 7 3,958,247 24 3,959,560 27 9,101,144 56 7,471,519 50 (594,972) (3) (650,532) (4)
			13,499,198 83 11,815,326 80
			$ 16,395,041 100 14,830,921 100
	10,751,196 66

	$ 16,395,041 100

Liabilities and equity Current liabilities: 2130 Contract liabilities - current (Note 6 (18)) 2150 Notes payable (Note 6 (21))	Dec. 31, 2020 Amount % 21,392 - 2,712 -	Dec. 31, 2019
		Amount % 14,998 - 18,934 -

Chairperson: CHU, TE-HSIANG

(Please read the Notes to the Parent Company Only Financial Statements.) Manager: HO, TE-YU

Accounting manager: LIU, HSIN-HSIA

104

Lotes Co., Ltd.

Statement of Comprehensive Income

From Jan. 1 to Dec. 31, 2020 and from Jan. 1 to Dec. 31, 2019

Unit: NT$ thousands

2020	％ 100 78	2019	％ 100 82
Amount $ 11,362,435 8,817,635		Amount 9,968,334 8,162,786
2,544,800	22	1,805,548	18
312,675 295,923 53,509 (1,310)	3 3 - -	278,034 249,095 48,179 (542)	3 2 - -
660,797	6	574,766	5
1,884,003	16	1,230,782	13
10,165 62,514 (111,250) (1,420) 1,317 1,294,043	- 1 (1) - - 11	14,173 36,925 (72,584) (592) (2,407) 1,151,326	- 1 (1) - - 12
1,255,369	11	1,126,841	12
3,139,372 407,011	27 4	2,357,623 281,580	25 3
2,732,361	23	2,076,043	22
(7,598) 403 1,520	- - -	(1,148) (16,103) 230	- - -
(5,675)	-	(17,021)	-
45,017 -	- -	(317,409) -	(3) -
45,017	-	(317,409)	(3)
39,342	-	(334,430)	(3)
$ 2,771,703	23	1,741,613	19
$	26.41		20.11
$	26.34		20.06

(Please read the Notes to the Parent Company Only Financial Statements.)

Chairperson: CHU, TE-HSIANG

Accounting manager: LIU, HSIN-HSIA

Manager: HO, TE-YU

105

Unit: NT$ thousands

Lotes Co., Ltd. and Its Subsidiaries Statement of Change in Equity

From Jan. 1 to Dec. 31, 2020 and from Jan. 1 to Dec. 31, 2019

Share capital	Share capital	Capital reserve		Retained earnings		Other equity items	Other equity items	Total equity 9,506,158 2,076,043 (334,430)
						Exchange difference between foreign operating office’s statement	Unrealized gain or loss on financial assets measured at FVTOCI
Share capital for ordinary shares	Share capital collected in advance		Legal reserve	Special reserve	Undistributed earnings
$ 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)		1,741,613
- - - - 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
1,034,779 - -	- - -	3,959,560 - -	1,091,939 - -	317,020 - -	6,062,560 2,732,361 (6,078)	(631,970) (18,562) - - 45,017 403		11,815,326 2,732,361 39,342
-	-	-	-	-	2,726,283	45,017 403		2,771,703
- - - - -	- - - - -	- - - (1,313) -	207,604 - - - -	- 333,513 - - -	(207,604) (333,513) (1,086,518) - (10,140)	- - - - - - - - - 10,140		- - (1,086,518) (1,313) -
$ 1,034,779	-	3,958,247	1,299,543	650,533	7,151,068	(586,953) (8,019)		13,499,198

(Please read the Notes to the Parent Company Only Financial Statements.)

Chairperson: CHU, TE-HSIANG

Accounting manager: LIU, HSIN-HSIA

Manager: HO, TE-YU

106

Lotes Co., Ltd.

Statement of Cash Flows

From Jan. 1 to Dec. 31, 2020 and from Jan. 1 to Dec. 31, 2019

Unit: NT$ thousands

Cash flows from operating activities: Net profit before tax Items of adjustment: Items of income and expenses Depreciation expense Amortization expense Expected credit loss Interest expense Interest income Share of the profit from subsidiaries, associates and joint ventures accounted for using equity method Net loss (gain) on financial assets (liabilities) measured at FVTPL Losses from the price drop and obsolescence of inventory Profit from the disposal and scaping of property, plant and equipment Total of the items of income and expenses Change in assets/liabilities related to operating activities: Net change in the assets related to operating activities: Decrease (increase) in notes receivable Increase in accounts receivable Decrease (increase) in other accounts receivable Increase in inventory Increase in payments in advance Total net change in the assets related to operating activities Net change in the liabilities related to operating activities: Increase in contract liabilities Decrease in notes payable Increase (decrease) in accounts payable Increase in other accounts payable Increase (decrease) in provisions Decrease in other current liabilities Increase in refund liabilities Increase in other non-current liabilities Total net change in the liabilities related to operating activities Total net change in the assets and liabilities related to operating activities Total of the adjustment items Cash inflow generated from operating activities Interests received Dividends received Interests paid Income tax paid Cash flows in investing activities: Acquisition of investment accounted for using equity method Acquisition of property, plant and equipment Disposal of property, plant and equipment Increase in other accounts receivable Increase in intangible assets Acquisition of investment property Decrease in other non-current assets Net cash outflow from investment activities Cash flows in financing activities: Increase in short-term loans Repayment of lease principal Issuance of cash dividends Capital increase by cash Net cash outflow from financing activities Increase (decrease) in cash and cash equivalents Beginning balance of cash and cash equivalents Ending balance of cash and cash equivalents	2020 $ 3,139,372 7,274 11,778 (2,627) 1,420 (10,165) (1,294,043) (2,080) 29,666 (136)	2019 2,357,623 4,102 1,048 1,865 592 (14,173) (1,151,326) - 1,193 (17)
	(1,258,913)	(1,156,716)
	(810) (403,834) 17,123 (149,055) (910)	468 (375,345) (7,399) (77,315) 5,724
	(537,486)	(453,867)
	6,394 (16,222) (233,064) 49,829 (69) 691 4,511 (199)	11,076 (26,337) 321,375 35,535 59 716 70,373 (70)
	(188,129)	412,727
	(725,615)	(41,140)
	(1,984,528)	(1,197,856)
	1,154,844 10,763 (1,420) (339,638)	1,159,767 13,848 (1,125) (211,848)
	824,549	960,642
	(14,385) (1,181) 252 (966) (58,424) (17,923) 9,435	- (15,581) 427 (85,950) (21,357) - (9,435)
	(83,192)	(131,896)
	- (59) (1,086,518) -	(720,000) (59) (900,258) 1,274,362
	(1,086,577)	(345,955)
	(345,220) 842,522	482,791 359,731
	$ 497,302	842,522

(Please read the Notes to the Parent Company Only Financial Statements.) Chairperson: CHU, TE-HSIANG Manager: HO, TE-YU

Accounting manager: LIU, HSIN-HSIA

107

Lotes Co., Ltd.

Notes to the Parent Company Only Financial Statements For the Years Ended December 31, 2020 and 2019

(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 March 24, 2021.

III. Application of New and Revised Standards and Inte r pretations

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

Since Jan. 1, 2019, the Company has adopted the amended International Financial Report Standards, and this did not cause material impact on the parent company only financial statements:

‧Amendments to IFRS 3, "Definition of a Business".

‧Amendments to IFRS 9, IAS 39 and IFRS 7, "Changes in Interest Rate Indicators".

‧Amendments to IAS 1 and IAS 8, "Definition of Significant".

‧Amendments to IFRS 16, "Rent Deductions Related to Emerging Coronavirus Pneumonia".

(2) Effects of new and revised standards and interpretation has been approved by FSC but

not yet being adopted

The Company assesses that the application of the following newly amended IFRSs effective January 1, 2021 will not have a significant impact on individual financial statements.

‧Amendments to IFRS 4 "Temporary Exemption from the Extension of IFRS 9

‧Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, "Changes in Interest Rate Indicators - Phase 2

108

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

(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, and they may be material to the Company.

New Release/Amendment of Guidelines Amendments to IAS 1 "Classification of Liabilities as Current or Noncurrent	Major Amendment The amendments are intended to improve consistency in the application of the standard to assist enterprises in determining whether debt or other liabilities with an indefinite maturity date should be classified as current (due or likely to be due within one year) or non-current on the balance sheet. The amendments also clarify the requirements for classifying debt that an entity may be able to settle by conversion to equity.	Effective date upon promulgation by the IASB
		2023.1.1

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.

The Company does not expect the following other newly issued and amended standards, which have not yet been endorsed, to have a material impact on the parent company only financial statements.

‧Amendments to IFRS 10 and IAS 28, "Disposal of or Contribution to Assets between an Investor and its Affiliate or Joint Venture".

‧Amendments to IFRS 17, "Insurance Contracts" and IFRS 17

‧Amendments to IAS 16, "Property, Plant and Equipment - Price before reaching Intended Use".

‧Amendments to IAS 37, "Loss-making Contracts - Costs of Fulfillment of Contracts".

‧Annual Improvements to IFRSs for the 2018-2020 Cycle

‧Amendments to IFRS 3, "References to Conceptual Framework".

‧Amendments to IAS 1, "Disclosure of Accounting Policies".

‧Amendments to IAS 8, "Definition of Accounting Estimates".

IV. Summary of Major Accounting Policies

The major accounting policies adopted in this Financial Statement are summarized 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.

109

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

(2) Compiling Basis

1. Measurement Foundation

Except the major items in the following balance sheet, the Individual Financial Statement was compiled 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 (14).

2. 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

110

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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 foreign 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.

(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 within 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 within 12 months after the balance sheet.
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

111

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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

The 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 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.

(1) Financial assets as measured by their amortized cost

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

112

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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.

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 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

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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 recognized as gains or losses.

(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

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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 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
‧ 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.

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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;
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.

(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

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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 Liabilities

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.

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

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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.

(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 equipment 2-10 years

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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

(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

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

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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 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;
(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

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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

(12) Intangible assets

1. Recognition and measurement

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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 end of the reporting period. If Provisions is measured at the estimated cash flows to settle

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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 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

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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.

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.

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) 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

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

differences will not be recognized as deferred income tax assets:

Those do 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
Deferred income tax assets are recognized for unused tax losses and unused income
tax credits in subsequent periods to the extent that it is probable that future taxable income will be available against which the temporary differences can be deducted. Deferred income tax assets are reassessed at each reporting date and reduced to the extent that it is not probable that the related income tax benefit will be realized, or to the extent that it becomes probable that sufficient taxable income will be available to allow the reversal of the original reduction.

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.

(18) 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

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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.

(19) Segments

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

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, revenue 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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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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: 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 daily 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.

VI. Description of Major Accounting Items

(1) Cash and cash equivalents

Petty cash Checks and demand deposits Time deposits Cash and cash equivalents listed on the Statement	Dec. 31, 2020 $ 99 497,153 50		Dec. 31, 2019 240 490,112 352,170
	$ 497,302		842,522

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

(2) Financial assets measured at fair value through profit or loss (FVTPL)

Dec. 31, 2020 Dec. 31, 2019 Financial assets mandatorily measured at fair value through profit or loss: Non-hedging derivatives Forward exchange contracts $ 2,080 -

Please refer to Note VI (XXI) for the amount recognized in profit or loss based on fair value remeasurement.

The Company engages in derivative financial instruments to hedge its exposure to exchange rate risk arising from operating activities. The breakdown of derivative instruments reported as financial assets at fair value through profit or loss for non-applicable hedge accounting is as follows:

instruments reported as financial assets at non-applicable hedge accounting is as follows:		fair value through profit or loss for	fair value through profit or loss for
Financial Assets		Dec. 31, 2020
	Contract Principal (NT$ thousand) USD 4,000		Maturity Jan. 11, 2021 Jan. 12, 2021 Jan. 22, 2021 Feb. 9, 2021 Feb. 18, 2021 Feb. 19, 2021 Feb. 23, 2021 March 10, 2021 March 23, 2021
Forward exchange contracts " " " " " " " "
	USD 2,000
	USD 2,000
	USD 2,000
	USD 2,000
	USD 2,000
	USD 2,000
	USD 6,000
	USD 2,000

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

As of December 31, 2020 and 2019, none of the Company's financial assets at fair value through profit or loss were pledged as collateral.

(3) Notes, accounts receivable and other receivables

Notes receivable Accounts receivable (including related parties) Other accounts receivable (including related parties) Less: Provisions	Dec. 31, 2020 $ 2,485 4,320,998 111,377 (5,424) $ 4,429,436	Dec. 31, 2019 1,675 3,917,180 128,132 (8,067) 4,038,920

For the changes in the provisions for notes and accounts receivable for the years ended December 31, 2020 and 2019, please refer to Note VI (XXI) 1. (3) Statement of Impairment Losses.

(4) Inventory

Merchandise Finished goods Work in progress Raw materials Goods in transit	Dec. 31, 2020 $ 710,364 108 - 5 - $ 710,477	Dec. 31, 2019 550,887 1,165 18 - 39,018 591,088

The Company's inventory as of December 31, 2020 and 2019 including allowance for inventory losses are NT$45,507 thousand dollars and NT$19,600 thousand 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	2020 $ 8,787,969 29,666 $ 8,817,635	2019 8,161,593 1,193 8,162,786

As of December 31, 2020 and 2019, the Company's inventories were not pledged as security.

(V) Investments accounted for using the equity method

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

[Subsidiaries ]

Dec. 31, 2020 $ 10,225,811	Dec. 31, 2019 8,873,276

1. Subsidiaries

Please refer to the consolidated financial statements for the year ended on December 31, 2020.

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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

2. Guarantee

As of December 31, 2020 and 2019, the Company's investments accounted for using the equity method did not provide security for the pledge.

(6) Property, plant and equipment

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

Land $ 28,250 - -	Buildings 32,438 - -	Machinery equipment 14,300 - (1,820)	Other 48,319 1,181 (202)	Total 123,307 1,181 (2,022)
$ 28,250	32,438	12,480	49,298	122,466
$ 28,250 - -	31,568 870 -	14,886 28 (614)	35,709 14,683 (2,073)	110,413 15,581 (2,687)
$ 28,250	32,438	14,300	48,319	123,307
$ - - -	16,070 903 -	13,615 377 (1,704)	30,194 4,937 (202)	59,879 6,217 (1,906)
$ -	16,973	12,288	34,929	64,190
$ - - -	15,268 802 -	13,567 252 (204)	30,236 2,031 (2,073)	59,071 3,085 (2,277)
$ -	16,070	13,615	30,194	59,879
$ 28,250	15,465	192	14,369	58,276
$ 28,250	16,368	685	18,125	63,428

As of December 31, 2020, and December 31, 2019, property, plant and equipment were used as collateral for short-term loans and financing lines. Please refer to Note VIII for details.

(VII) 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 as of Jan. 1, 2020 Decrease Balance as of Dec. 31, 2020 Balance on Jan. 1, 2019 Addition Balance on Dec. 31, 2019	Buildings $ 118 (118) $ - $ - 118 $ 118

129

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

Depreciation and impairment losses of right-of-use assets: Balance as of Jan. 1, 2020 Depreciation Decrease Balance as of Dec. 31, 2020 Balance as of Jan. 1, 2019 Depreciation Balance as of Dec. 31, 2019 Book value: Dec. 31, 2020 Dec. 31, 2019	Buildings $ 59 59 (118) $ - $ - 59 $ 59 $ - $ 59

(VIII) Investment property

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

Cost or deemed cost: Balance as of Jan. 1, 2020 Addition Balance as of Dec. 31, 2020 Balance as of Jan. 1, 2019 Balance as of Dec. 31, 2019 Losses on depreciation and impairment: Balance as of Jan. 1, 2020 Depreciation Balance as of Dec. 31, 2020 Balance as of Jan. 1, 2019 Depreciation Balance as of Dec. 31, 2019 Book value: Dec. 31, 2020 Jan. 1, 2019 Dec. 31, 2019 Fair value: Dec. 31, 2020 Dec. 31, 2019	Land $ 248,200 12,376	Buildings 39,285 5,547
	$ 260,576	44,832
	$ 248,200	39,285
	$ 248,200	39,285
	$ - -	4,483 998
	$ -	5,481
	$ - -	3,525 958
	$ -	4,483
	$ 260,576	39,351
	$ 248,200	35,760
	$ 248,200	34,802

130

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

As of December 31, 2020 and 2019, none of the Company's investment properties had been pledged as security.

(IX) Intangible assets

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

$	Computer software 84,795 58,424	Other 600 -	Total 85,395 58,424

$	143,219	600	143,819
$	63,438 21,357	600 -	64,038 21,357
$	84,795	600	85,395
$	34,458 11,778	- -	34,458 11,778
$	46,236	-	46,236
$	33,410 1,048	- -	33,410 1,048
$	34,458	-	34,458
$	96,983	600	97,583
$	50,337	600	50,937

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

2020 Operating expense $ 11,778 Lease liabilities The carrying amounts of the Company's lease liabilities are as follows: Dec. 31, 2020 Current $ - Please refer to Note VI (XXI) for the maturity analysis. The amounts recognized in the profit and loss are as follows: 2020 Interest expense for lease liabilities $ 1	2020 Operating expense $ 11,778 Lease liabilities The carrying amounts of the Company's lease liabilities are as follows: Dec. 31, 2020 Current $ - Please refer to Note VI (XXI) for the maturity analysis. The amounts recognized in the profit and loss are as follows: 2020 Interest expense for lease liabilities $ 1	2019 1,048 Dec. 31, 2019 59 2019 1
	$ 1

(X) Lease liabilities

131

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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

Total cash outflow for leases	2020 $ 60	2019 60

(XI) Refund liabilities - current

Refund liabilities - current	Dec. 31, 2020 $ 161,767	Dec. 31, 2019 157,256

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, 2020 $ 49,258	Dec. 31, 2019 41,729

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

(XIII) Lease for business operating

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 (VIII) 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:

received in the future is shown in the following table:
Not more than 1 year 1-2 years Total undiscounted lease payment	Dec. 31, 2020 $ 4,544 523	Dec. 31, 2019 6,037 629
	$ 5,067	6,666

Rental income generated from investment properties was NT$4,896,000 dollars and NT$5,577,000 dollars for 2020 and 2019 respectively. The direct operating expenses (including maintenance) incurred by the investment properties that generated rental income during the period were NT$1,028,000 dollars and NT$1,089,000 dollars respectively.

(XIV) 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, 2020 Present value of defined benefit obligations $ 83,499 Fair value of plan assets (34,241) Net defined benefit liabilities $ 49,258 Details of the employee benefit liabilities of the Company are as follows: Dec. 31, 2020 Liabilities from paid leaves $ 3,394	Dec. 31, 2020 $ 83,499 (34,241)	Dec. 31, 2019 73,681 (31,952)
	$ 49,258	41,729
		Dec. 31, 2019 3,577

132

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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 settled 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 NT$ 34,241,000 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.

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

Changes in the present values of defined obligations of the Company in 2020 and in 2019 are as follows:

in 2019 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	2020 $ 73,681 1,168 8,650 -	2019 72,724 1,310 2,262 (2,615)
	$ 83,499	73,681

(3) Changes in the fair value of plan assets

The changes in the fair value of defined benefit plan assets of the Company in 2020 and in 2019 are as follows:

and in 2019 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	2020 $ 31,952 238 1,052 999 -	2019 32,202 319 1,114 932 (2,615)
	$ 34,241	31,952

133

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

(4) Expenses recognized in profit or loss

The expenses of the Company recognized in profit or loss in 2020 and in 2019 are as follows:

Service cost in the year Net interest of net defined benefit liabilities Operating cost Promotion Expenses Administration Expenses R&D expenses	2020 $ 621 309	2019 590 401
	$ 930	991
	$ 115 290 337 188	117 277 356 241
	$ 930	991

(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 2020 and in 2019 are as follows:

Accumulated balance on January 1 Amount recognized in the year Accumulated balance on December 31	2020 $ 1,895 (7,598)	2019 3,043 (1,148)
	$ (5,703)	1,895

(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, 2020 0.35% 2.00%	Dec. 31, 2019
		0.75% 2.00%

The amount of appropriation for defined benefit plans within 1 year after the reporting date for the year ended on Dec. 31, 2020 is NT$1,038,000.

The weighted 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, 2020 and 2019 on the present value of defined benefit obligations are as follows:

Dec. 31, 2020 Discount rate Increase in future salary	Effects on defined benefit obligations Increased by 0.25% Decreased by 0.25% (2,278) 2,367 2,322 (2,247)
	Increased by 0.25% (2,278) 2,322

134

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

Dec. 31, 2019 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)
	Increased by 0.25% (2,069) 2,119

The above sensitivity analysis 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 sensitivity analysis shall be consistent with that of net defined benefit liabilities of the balance sheet.

The method and assumption applied in current sensitivity analysis is consistent with those adopted in early stage.

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.

The pension expense under the defined contribution retirement funds of the Company in the year of 2020 and 2019 are NT$6,664,000 and NT$6,411,000 respectively, which have been contributed to the Bureau of Labor Insurance.

(XV) Income tax

1. The details of the income tax expenses 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 Occurrence and reversal of temporary difference Income tax expense	2020 $ 380,186 22,374 (2,084)	2019 281,975 23,819 (338)
	400,476	305,456
	6,535	(23,876)
	$ 407,011	281,580

The income tax expenses (profit) of the Company recognized in other comprehensive income in 2020 and in 2019 are as follows:

Items that will not be reclassified to profit or loss: Remeasurement of defined benefit plan	2020 $ (1,520)	2019 (230)

135

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

The reconciliation of the relationship between the income tax expense (profit) and the net profit before tax of the Company in 2020 and in 2019 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 Total	2020 $ 3,139,372	2019 2,357,623
	627,875 (241,154) (2,084) 22,374	471,525 (213,426) (338) 23,819
	$ 407,011	281,580

2. Deferred income tax assets

(1) Recognized deferred income tax assets

eferred income tax assets ) 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 liabilities and accounts payable Unrealized foreign exchange losses Remeasurement of defined benefit plan Deferred income tax assets	Dec. 31, 2020	Dec. 31, 2019 3,920 492 44 43,772 12,121 8,238
	$ 9,101 478 44 43,368 823 9,758
	$ 63,572	68,587

3. Income Tax Approval

The approval on the filing of final income tax return of the Company has lasted till the year 2018 as required by the taxing authority.

(XVI) Capital and Other Equity

As of December 31, 2020 and 2019, the total authorized share capital of the Company was $1,550,000,000 dollars with a par value of $10 per share, and the actual amount issued was $1,034,779,000 dollars.

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, 2020 $ 3,577,768 365,080 15,399 $ 3,958,247		Dec. 31, 2019 3,577,768 366,393 15,399 3,959,560

136

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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. 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 number of other decreases in shareholders' equity, the reversal may be distributed in the form of a surplus.

(3) Earnings distribution

The appropriation of the 2019 and 2018 earnings was approved by the shareholders' meetings held on June 19, 2020 and June 14, 2019, respectively:

Distributed to the holders of ordinary shares: Cash		2019	2019	Amount 1,086,518	2018	2018	Amount 900,258
	Payout ratio (TWD) $ 10.50				Payout ratio (TWD) 8.70

On March 24, 2021, the Company's board of directors proposed the following 2020 earnings distribution:

earnings distribution:
Distributed to the holders of ordinary shares: Cash		2020		Amount 1,376,256
	Payout ratio (TWD) $ 13.30

137

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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".

Other equity

Balance as of Jan. 1, 2020 Exchange differences arising from the translation of the net assets of foreign operations Unrealized losses from financial assets measured at FVTOCI Disposal of equity instruments measured at FVTOCI Balance as of Dec. 31, 2020 Balance as of 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 as of Dec. 31, 2019	Exchange differences on translation of foreign operations $ (631,970) 45,017 - -	Unrealized gain or loss on financial assets measured at FVTOCI (18,562) - 403 10,140	Total (650,532) 45,017 403 10,140 (594,972) (317,020) (317,409) (16,103) (650,532)
	$ (586,953)	(8,019)
	$ (314,561) (317,409) -	(2,459) - (16,103)
	$ (631,970)	(18,562)

(XVII) 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 Bonuses for employees Basic earnings per share Diluted earnings per share	2020 $ 2,732,361	2019 2,076,043
	103,478 272	103,231 278
	103,750	103,509
	$ 26.41	20.11
	$ 26.34	20.06

138

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

(XVIII) Revenue from contracts with customers

1. Disaggregation of revenue

Major regional markets: Taiwan Mainland China Other countries Main products/Line of service: DT Server NB Automotive Other	2020 $ 1,044,006 8,481,405 1,837,024	2019 669,848 7,236,980 2,061,506
	$ 11,362,435	9,968,334
	$ 4,019,735 3,039,814 2,529,275 80,338 1,693,273	3,823,353 2,489,216 1,976,577 116,870 1,562,318
	$ 11,362,435	9,968,334

2. Balance of Contract

Contract liabilities	Dec. 31, 2020	Dec. 31, 2019 14,998	108.1.1 3,922
	$ 21,392

The beginning balances of contract liabilities as of Jan. 1, 2020 and 2019 were recognized as income of NT$13,710,000 dollars and NT$3,793,000 dollars respectively.

(XIX) Non-operating income and expenses

1. Interest income

Interest income	2020 $ 10,165	2019 14,173

2. Other income

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

Income from molding Income from samples Income from rentals Income from compensation Others	2020 $ 34,952 5,844 4,956 8,630 8,132 $ 62,514	2019 17,206 3,471 5,415 3,297 7,536 36,925

139

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

3. Other income and loss

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

Foreign exchange gain loss Net profit or loss from financial assets (liabilities) measured at FVTPL: Derivatives: Forward exchange contracts Metal Product Swap Contracts Profit from the disposal of property, plant and equipment Other Total	2020	2019 (67,449) (1,921) - 17 (3,231)
	$ (114,795) 7,620 4,346 136 (8,557)
	$ (111,250)	(72,584)

4. Financial cost

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

. Financial cost The details of the financial cost of the Company are as	follows:
Interest expense	2020	2019 592
	$ 1,420

(XX) Remuneration for employees, directors, and 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.

The estimated amount of compensation of employees for the years ended December 31, 2020 and 2019 was $97,235,000 dollars and $73,054,000 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 issuing 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.

The difference of $46 thousand between the actual allotment of employees', directors' and supervisors' remuneration in 2019 and the estimated amount in the financial statements for the year ended December 31, 2019 has been accounted for as a change in accounting estimate and recognized as profit or loss for the year ended December 31, 2020. There was no difference between the amount resolved by the board of directors for employees' and directors' and supervisors' remuneration in 2020 and the amount estimated in the individual financial statements for the year ended December 31, 2020. The related information is available on the Market Observation Post System (MOPS).

140

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

(XXI) 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 $4,894,002,000 dollars and $4,881,202,000 dollars as of December 31, 2020 and 2019 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, 2020 and 2019, the Company had 4 and 3 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:

	Dec. 31, 2020	Expected credit loss in the duration of provision 524 19 1,287 385 318 1 1,376
Book value of Notes and accounts receivable $ 4,275,318 7,353 35,232 3,363 839 2 1,376	Weighted average expected credit loss rate
	0.01% 0.26% 3.65% 12.53% 37.90% 50.00% 100.00%
$ 4,323,483		3,910

141

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

	Dec. 31, 2019		Expected credit loss in the duration of provision 416 159 219 21 33 - 13 4,375
Book value of Notes and accounts receivable
$ 3,815,591 86,241 12,098 344 190 - 16 4,375
$ 3,918,855			5,236
		a	re as follows: 2019 5,778 (542) -
	$ 5,236 (1,310) (16)
	$ 3,910		5,236

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 $ 2,712 11,421 2,034,411 299,122 2,092	Cash flow from the contract 2,712 11,421 2,034,411 299,122 2,092	Within 6 months 2,712 11,421 2,034,411 299,122 2,092	6-12 months - - - - -	1-2years - - - - -	2-5years - - - - -	More than 5 years - - - - -
$ 2,349,758	2,349,758	2,349,758	-	-	-	-
$ 18,934 14,499 2,264,397 245,547 5,838 59	18,934 14,499 2,264,397 245,547 5,838 60	18,934 14,499 2,264,397 245,547 5,838 30	- - - - - 30	- - - - - -	- - - - - -	- - - - - -
$ 2,549,274	2,549,275	2,549,245	30	-	-	-

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

142

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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 JPY EURO INR VND Long-term equity investment accounted for using the equity method USD EURO Financial liabilities Currency USD RMB HKD EURO	Dec.	31, 2020	TWD 4,423,109 397,051 16,187 2 37,367 2 4,394 9,169,934 4,059 2,200,090 312 7,033 105
		Foreign Currency $ 155,306 90,966 4,407 8 1,067 4 3,662,009 321,978 116 $ 77,250 71 1,915 3	Rate 28.4800 4.3648 3.6730 0.2763 35.0200 0.4791 0.0012 28.4800 35.0200 28.4800 4.3648 3.6730 35.0200

143

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

	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	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 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

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 $114,795,000 dollars and $67,449,000 dollars for the years ended 2020 and 2019 respectively.

(2) 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, 2020 and 2019, 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 $21,365,000 dollars and $19,151,000 dollars respectively for 2020 and 2019. The same basis is used for both phases of analysis.

144

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

4. Market risk - changes in interest rates

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

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 as of December 31, 2020 and 2019 were $496,950,000 dollars and $488,521,000 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 $3,976,000 dollars and decreased or increased by $3,908,000 dollars for 2020 and 2019, respectively, with all other variables held constant.

5. 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.

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:

reporting date are as follows:
Measured at fair value: Financial assets: Financial assets measured at FVTPL Not measured at fair value: Non-financial assets: Investment property	Dec. 31, 2020 Book Value Fair value $ 2,080 2,080 299,927 372,159	Dec. 31, 2019 Book Value Fair value - - 283,002 322,604
	Book Value $ 2,080 299,927	Book Value - 283,002

(2) The evaluation techniques used to determine fair value are as follows:
A. If there is an active market for a financial asset, the fair value is based on the market price. If market prices are not available, quoted prices from counterparties or estimates using valuation techniques are used. The estimates and assumptions used are consistent with those used by market participants in pricing financial instruments.
B. 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.

145

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

(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, 2020 Measured at fair value: Financial assets measured at FVTPL Not measured at fair value: Investment property Dec. 31, 2019 Not measured at fair value: Investment property	Level 1 $ -		Level 2 -		Level 3 2,080		Total 2,080
	$ -		-		372,159		372,159
	$ -		-		322,604		322,604

(4) Changes in the financial assets (liabilities) measured at fair value and classified into Level 3

Unit: NT$ thousands

Name					2020
	Beginning $ -	Profit an	d	Losses Recognized in other comprehensi ve income -	Increase in	th	e period Turned into Level 3 -	Decrease in the period Sale, disposal or settlement -
		Recognized in profit or losses 2,080			Purchase -
Financial assets measured at FVTPL

The above included gains and losses are reported in "Other gains and losses", which relate to assets still held as of December 31, 2020 and 2019 as follows:

[Recognized in profit (losses) ]

2020 $ 2,080	2019 -

(5) Quantitative information on fair value measurements of significant unobservable inputs (Level 3)

The Company's financial assets at fair value through profit or loss, which are classified as Level 3, amounted to $2,080 thousand and $0 thousand as of December 31, 2020 and 2019, respectively. The Company does not disclose quantitative information because there is no active market for publicly quoted prices with reference to counter-party quotes and because it is not practicable to fully grasp the relationship

146

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

between significant unobservable inputs and fair values.

147

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

(XXII) Financial Risk Management

The Company is exposed to the following risks from the engagement of financial instruments:
(1) Credit risk
(2) Liquidity risk
(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.

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 75% and 73% of the Company's revenue for 2020 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.

148

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

(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.

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 $1,456,320,000 as of Dec. 31, 2020 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 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

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.

(XXIII) 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.

149

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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:

follows:
Total liabilities Less: Cash and cash equivalents Net liabilities Total equity Debt-to-capital ratio	Dec. 31, 2020 $ 2,895,843 (497,302)		Dec. 31, 2019 3,015,595 (842,522) 2,173,073 11,815,326 15.53%
	$ 2,398,541
	$ 13,499,198
		15.09%

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

Please refer to Notes VI (VII) and VI (X) for information on the Company's non-cash trading investments and fundraising activities for Right-of-use assets acquired under leases in 2020 and 2019.

The reconciliation of the Company's liabilities from fundraising activities for the years ended December 31, 2020 and 2019 was as follows:

Lease liabilities Total liabilities from financing activities	Jan. 1, 2020 Cash flow $ 59 (60)	Non-cash change Other Change in exchange rate Change in fair value Dec. 31, 2020 1 - - -
	$ 59 (60)	1 - - -

Short-term loan Lease liabilities Total liabilities from financing activities	108.1.1 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

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

150

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

Name of Related Party Relationship with the Company LOTES EU GmbH A subsidiary of the Company Lerain Technology Co., Ltd. A subsidiary of the Company Mikronpoint Co., Ltd. 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 Zhongshan Dezhi Metal Surface A subsidiary of the Company Treatment Co., Ltd. Guangzhou Leside Technology Co., A subsidiary of the Company Ltd. Hengnan Deyi Property Development A subsidiary of the Company Co., 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 Good News Medical Co., Ltd. A subsidiary of the Company Lintes Technology Co., Ltd. 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 Chia-Chun Investment Co., Ltd. A subsidiary of the Company Genie Precision Machine Co., Ltd. A subsidiary of the Company Key management personnel Including the directors, supervisors, managers and their families and spouses

(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:

2020 2019 Subsidiaries $ 26,270 27,085

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.

151

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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. Lintes Technology Co., Ltd.	2020 $ 1,257,559 7,574,556 42,463	2019 1,268,540 6,889,368 13,798 8,171,706
	$ 8,874,578

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.

3. Accounts receivable - related parties

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

Accounting Item	Type of Related Party	Dec. 31, 2020 $ - 12,077 935 - 2,272 87,623 266	Dec. 31, 2019 2,982 12,129 18 652 2,272 86,308 549 104,910
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 REKA Technology Co., Ltd. Ememe Robot Co., Ltd. Lotes Guanghou Co., Ltd (Note) Other subsidiaries
		$ 103,173

Note: Other receivables include the Company's loan of $87,296,000 and $85,950,000 dollars to Lotes Guanghou Co., Ltd. The Company's funds lent to subsidiaries bear interest at 4.5% and 5%, respectively, based on the interest rates of the subsidiaries' loans from financial institutions in the year of appropriation. Interest income was recognized as $4,122,000 dollars and $1,444,000 dollars for the years ended December 31, 2020 and 2019, 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, 2020 $ 288,985 1,728,149 17,277 - - 2,092 -	Dec. 31, 2019 211,482 2,045,852 7,063 2,756 3,017 - 65 2,270,235
Accounts payable Accounts payable Accounts payable Other payables 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 LOTES USA Other subsidiaries
		$ 2,036,503

152

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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 and Lotes Suzhou Co., Ltd Lotes Suzhou Co., Ltd REKA Technology Co., Ltd.	Dec. 31, 2020 $ 227,840 - - - 35,000 $ 262,840		Dec. 31, 2019 899,400 - 449,700 149,900 35,000 1,534,000

7. Selling expenses

Subsidiaries Mainly the sundry purchases. . Management expenses Subsidiaries Mainly the service fees. . Non-operating income Subsidiaries	Dec. 31, 2020		Dec. 31, 2019 185
	$ 237
	Dec. 31, 2020 $ 59,674 Dec. 31, 2020 $ 4,567		Dec. 31, 2019 28,280 Dec. 31, 2019 2,606

8. Management expenses

9. Non-operating income

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

10. Lease

The Company leases warehouses from major management personnel and enters into one-year lease contracts with a total value of $60,000,000 with reference to the neighboring warehouse rental quotes. The interest expenses of $1,000 and $1,000 were respectively recognized in 2020 and 2019, and the balance of Lease liabilities as of December 31, 2020 and December 31, 2019 were respectively $0 and $59,000.

(IV) Major management personnel transactions

Related compensation includes:

) Major management personnel transactions Related compensation includes:
Short-term employee benefits Post-employment benefits	2020 $ 48,136 1,082	2019 40,372 757 41,129
	$ 49,218

153

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

VIII. Pledged assets

As of December 31, 2020 and December 31, 2019, 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 $15,465 thousand and $16,368 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, 2020 was approximately $31,566,000 dollars.

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

Guaranteed notes

Dec. 31, 2020 Dec. 31, 2019 $ 1,570,240 2,358,960

X. Significant Disaster Loss: None.

XI. Significant post-period events: None.

XII. Others

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

Function Nature	2020	2020	2020	2019	2019	2019
	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	9,700 447 378 - 745 41 -	238,773 10,020 7,216 3,940 10,069 7,233 11,778	248,473 10,467 7,594 3,940 10,814 7,274 11,778	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

Additional information on the number of employees and employee benefit costs for 2020 and 2019 is as follows:

2020 135	2020 135	2019 135
5		5
$ 2,133		1,959
$ 1,911		1,739
9.89% $ 657	9.89%	645

154

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

Information on the Company's remuneration policy (including the policy for the remuneration of directors, supervisors, managers and employees) is as follows.

Remuneration for directors and supervisors is paid in accordance with the Company's remuneration policy for directors and supervisors.
The bonuses and dividends for managers and employees are based on the Company's operating conditions, personal duties and performance.
The salaries of the directors and supervisors are adjusted in a timely manner to

meet their responsibilities.

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 2020:

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 (Note 1)	Business Amount	Purpose f or the lending	Allowance for bad debt	Collateral	Collateral	Individual Limit (Note 2)	Overall limit (Note 2)
													Name	Value
0 0	The Company 〞	Lotes Guanghou Co., Ltd 〞	intracom pany transacti on 〞	Yes Yes	131,496 (RMB30,000) 218,980 (RMB50,000)	- 218,240 (RMB50,000)	- 87,296	5.0% 4.5%	2 2	- -	Working Capital 〞	- -	None "	- -	2,699,840 2,699,840	5,399,679 5,399,679

Note 1: The following are the descriptions of the funds lending.

(1) Those who have business dealings.
(2) When there is a need for short-term financing.
Note 2: 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

No.	Name of the Company that provides the endorsement	Endorse	e	Ceiling on amount of endorsement for an 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
		Company Name	Relations hip (Note 1)
0 0 0 0 1 2 2	The Company " " " Lotes Guanghou Co., Ltd. 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 REKA Technology Co., Ltd. Lintes Technology (Suzhou) Co., Ltd. Genie Precision Machine Co.,	2 2 2 2 1 2 2	2,699,840 2,699,840 2,699,840 2,699,840 1,073,480 831,350 831,350	35,000 151,250 (USD5,000) 453,750 (USD15,000) 907,500 (USD30,000) 90,750 (USD3,000) 181,500 (USD6,000) 125,280	35,000 - - 227,840 (USD8,000) 85,440 (USD3,000) 113,920 (USD4,000) 101,260	- - - - - - 19,125	- - - - - - -	0.26% - % - % 1.69% 1.59% 6.85% 6.09%	6,749,599 6,749,599 6,749,599 6,749,599 2,683,700 1,662,701 1,662,701	Yes " " " No " "	No " " " " " "	No Yes " " No Yes No

155

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

Ltd.

156

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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.
- (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 fiscalperiod	End of the fiscalperiod	End of the fiscalperiod	End of the fiscalperiod	Note
				Shares	Book Value	Shareholdin g proportion	Fair value
Chia-Yu Investment Co., Ltd. " " " " " " Lintes Technology Co., Ltd.	Grand-Tek Technology Co., Ltd. Lian Hong Art Company Limited Sitronix Technology Corporation Lucemitek Co., Ltd Radinet Communications Inc. Kuang Ying Computer Equipment Co., Ltd. AICP Technology Corporation Chailease Holding Company Limited Class A preferred shares	None " " " " " " "	Financial assets measured at FVTPL - current " " " " " Financial assets measured at FVTOCI - current Financial assets measured at FVTOCI - non-cur rent	163,980 1,017,000 170,000 1,368,800 1,169,977 600,000 400,000 202,000	5,608 83,547 27,625 - - - 2,016 20,120	0.67 % 2.98 % 0.14 % 4.57 % 17.33 % 26.25 % 5.33 % 0.13 %	5,608 83,547 27,625 - - - 2,016 20,120	Note Note Note

Note: All of them were recognized in losses.

The cumulative purchase or sale of the same securities amounted to at least NT$300 million or 20% of the paid-in capital: None.

157

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

Acquisition of real property amounting to NT$300 million or 20% or more of the paid-in capital:

==> picture [446 x 126] 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 occurrence (Note 2) (Note 2) transaction Issuer acquisition matters
and the
condition
of use
[Lotes Zhongshan ] Plant (Note Oct. 2017 ~ 890,255 787,873 [Chongqing ] None - - - - [Bidding ] For the None
Co., Ltd. 1) Dec. 2020 Chuangyou constructio
Construction n of a plant
Group, etc
Lotes Hengnan " Oct. 2019 340,428 192,369 " " - - - - " " "
Co., Ltd. ~ Dec.
2020
----- 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.

Disposal of real property amounting to NT$300 million or 20% or more of paid-in capital: None.
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. " " " " " "	The Company Lotes Suzhou Co., Ltd The Company Lotes Guanghou Co., Ltd Lotes Automation (Shenzhen) Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Lotes Hengnan Co., Ltd. " Lotes Zhongshan Co., Ltd.	Subsidiary The surrogate parent company are the same parent company Subsidiary The surrogate parent company are the same parent company " " " " "	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	1,257,599 1,308,932 7,574,556 8,386,061 412,265 469,248 555,838 276,160 930,071	95.98 % 99.90 % 75.69 % 85.57 % 4.12 % 4.69 % 5.67 % 2.76 % 9.49 %	Settled in 90 days " " " " " " " "	- - - - - - - - -	No significant difference " " " " " " " "	288,985 307,166 1,728,149 1,150,187 211,505 108,222 78,557 80,149 178,176	94.04% 99.61% 55.31% 39.21% 6.77% 3.46% 2.68% 2.57% 6.07%

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

158
----- End of picture text -----

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

Lotes Guangzhou Co., Ltd " Lintes Technology (Suzhou) Co., Ltd. Lotes Hengnan Co., Ltd. "	REKA Technology Co., Ltd. Lotes Hengnan Co., Ltd. Lintes Technology Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Lotes Automation (Shenzhen) Co.,Ltd.	" " Subsidiary The surrogate parent company are the same parent company "	goods purchased Net expense from the goods purchased Net expense from the goods purchased Net revenue from the goods sold Net revenue from the goods sold Net revenue from the goods sold	2,042,032 303,826 1,634,841 107,468 177,683	30.62 % 4.56 % 94.81 % 12.33 % 20.38 %	" " " "	- - - - -	" " " "	302,436 35,480 372,386 41,634 105,954	21.31% 2.50% 93.32% 14.54% 37.00%

159

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

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

paid-in capital:

paid-in capital:	paid-in capital:	paid-in capital:	paid-in capital:	paid-in capital:
					Unit:1,000TWD
Related party with accounts receivable by the Company	Name of transaction counterpart y	Relationshi p	Balance of receivables from the related party	Turnover Ratio	Past due receivables from the related party		Receivables from the related party Amount received after the period ended	Appropriat ed Allowance Amount of loss
					Amount	Solution
Xincheng Development Co., Ltd. REKA Technology Co., Ltd " " " " Lotes Suzhou Co., Ltd Good Hope Investments Limited Lotes Guanghou Co., Ltd " Lotes Zhongshan Co., Ltd. Lotes Hengnan Co., Ltd. Lintes Technology (Suzhou) Co., Ltd.	The Company The Company Lotes Guanghou Co., Ltd Zongka Technology (Shenzhen) Co., Ltd. Lotes Hengnan Co., Ltd. Lotes Zhongshan Co., Ltd. Lotes Automation (Shenzhen) Co., Ltd. Xincheng Developmen t Co., Ltd. REKA Technology Co., Ltd. " Lotes Zhongshan Co., Ltd. " REKA Technology Co., Ltd. Lotes Automation (Shenzhen) Co., Ltd. Lintes Technology Co.,Ltd.	Subsidiary Subsidiary The surrogate parent company are the same parent company " " " " The surrogate parent company are the same parent company Parent company The surrogate parent company are the same parent company " " " " Subsidiary	288,985 1,728,149 302,436 108,222 80,149 140,452 211,505 307,166 880,631 1,150,187 13,574 339,073 178,176 105,954 372,386	5.03 4.01 5.95 2.42 3.69 - 3.06 4.82 - 6.26 3.52 - 10.44 3.15 4.88	- - - - - - - - - - - - - - -		73,102 1,728,149 298,134 74,564 - 72,684 115,422 82,137 - 1,150,187 - - 178,072 - -	- - - - - - - - - - - - - - -

Engagement in derivative transactions: Please refer to Note VI (II) and (XIX).

160

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

(2) Information on Reinvestment Business:

Information on the Company's investees in 2020 was as follows (excluding investees in China):

				Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	Unit:1,000TWD	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	Remar ks
				End of this period	End of the previous year	Shares	Percentag e	Book Value
The Company " " " " " " " " Lotes Investment Ltd. Good Hope Investments Limited " Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Chia-Yu 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 Lerain Technology Co., Ltd. Mikronpoint Co., Ltd. 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 Taiwan USA Germany Taiwan " Hong Kong Samoa Hong Kong " " Taiwan	Holding and investment businesses " " " General investment Market development Market development Design, test and sale of chips Manufacturing and trading of mechanical equipment and electronic parts 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	741,904 11,428 570,068 14,240 690,000 71,200 3,502 9,385 5,000 741,904 2,848 2,884 570,077 14,240 69,600	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	26,050,000 401,281 20,016,426 500,000 69,000,000 2,500,000 100,000 938,525 500,000 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% 33.92% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 94.37%	5,201,468 1,531,999 2,239,442 121,209 1,044,195 75,816 4,059 2,687 4,936 5,367,416 1,619 649,725 2,259,208 121,209 (7,776)	753,814 73,651 303,052 7,595 164,471 30,917 183 (6,698) (64) 753,814 (32) 73,682 303,052 7,595 89	724,108 73,651 299,979 7,595 164,372 30,917 183 (6,698) (64) 753,814 (32) 73,682 303,052 7,595 (2,691)	Note 2 Note 2
Chia-Yu Investment Co., Ltd. " "	Compertum Microsystems Inc. Good News Medical Co., Ltd. Lintes Technology Co., Ltd.	Taiwan " "	Electronic Parts and Components Manufacturing Manufacturing and trading of mechanical equipment, electronic parts and components, and optical instruments. Sales of connectors for telecommunicatio	26,328 250 486,926	13,164 - 486,926	2,632,800 25,000 29,712,788	35.34% 5.00% 52.13%	31,152 191 866,728	(29,260) (1,179) 271,870	(11,434) (59) 138,170	Note 2

161

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

Lintes Technology Co., Ltd. " " " Chi-Lung Co., Ltd.	Chia-Chun Investment Co., Ltd. Genie Precision Machine Co., Ltd. Compertum Microsystems Inc. Chi-Lung Co., Ltd. Ru-Hui Co., Ltd.	" " " Samoa "	n industry and for consumer electronics industry General investment Manufacturing and trading of the molds optical products Manufacturing of electronic parts and components Holding and reinvestment business Holding and reinvestment business	15,000 164,833 14,620 140,976 140,976	- - - 148,401 148,401	1,500,000 14,671,000 877,200 4,950,000 4,950,000	100.00% 60.00% 11.77% 100.00% 100.00%	15,001 193,404 10,379 260,223 260,223	1 31,205 (29,260) 64,085 64,085	1 13,121 (1,394) 84,902 84,902	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.

Note 2: Investment income recognized in the current period includes adjustments for unrealized gains or losses on intercompany transactions.
(3) Investment in China
Names of investee companies in Mainland China, major business activities, and other related information:

information:	information:	information:	information:	information:
					Unit: 1,000 TWD
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	Shareholding Ratio	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	760,416 569,293 14,240 517,229 140,976 109,120 1,440,384 130,944 100,390 3,055 4,365	(2) (2) (2) (3) (2) (3) (3) (3) (3) (3) (3)	726,240 569,293 14,240 - 140,976 - - - - - -	- - - - - - - - - - -	- - - - - - - - - - -	726,240 569,293 14,240 - 140,976 - - - - - -	753,81 303,05 7,59 113,68 75,09 32,67 72,15 (15,116 (88 (1,255 (1,484	100.00% 100.00% 100.00% 100.00% 52.13% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00%	724,083 299,978 7,595 99,195 49,997 32,670 72,157 (15,116) (1,137) (1,255) (757)	5,201,424 2,239,989 121,209 752,131 165,997 111,062 1,489,027 115,540 99,227 80 916	- - - - - - - - - - -

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.

162

Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

  - (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 :

Company 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
Lotes Co.,Ltd.	1,309,773,000	1,453,750,000	8,099,519,000
Lintes Technology Co.,Ltd.	140,976,000	140,976,000	997,621 ,000

Note 1: The conversions to NTD were made at the exchange rates prevailing on the balance sheet date.

3. Significant transactions with the investee companies in China:

Please refer to the "Significant Transactions" for details of the significant transactions between the Company and its investee companies in Mainland China, directly or indirectly, in 2020.

(4) Major Shareholders:

2020. r Shareholders:
Share Name of Major Shareholder	Number of Shares Held	Shareholding Ratio
Chin-Ling Investment Co., Ltd.	10,956,237	10.58%
Chia-Ming Investment Co., Ltd.	9,797,037	9.46%

Note: (1) The information of major shareholders in this table is based on the last business day of each quarter and is calculated based on the total number of common shares and preferred shares held by shareholders who have completed the delivery of unregistered shares (including treasury shares) of the Company of at least 5%. The number of shares recorded in the Company's financial statements and the actual number of shares delivered without physical registration may differ depending on the basis of computation.

(2) The above information is revealed by the trustee's opening of a trust account with individual subaccounts of the principal if the shareholder has delivered his or her shares to the trust. As for any shareholder holding more than 10% of the shares of the Company in accordance with the Securities and Exchange Act, the shareholdings include its own shares plus the shares it has delivered to the trust and has the right to decide on the use of the trust property, etc. Please refer to the Market Observation Post System for information on insider shareholdings.

XIV. Segment Information

Please refer to the consolidated financial statements for 2020.

163

Lotes Co., Ltd.

Details of Cash and Cash Equivalents

Dec. 31, 2020 Unit: NT$ thousands

Item	Summary	Amount $ 99 21,304 475,849 497,153 50 $ 497,302
Cash and cash equivalents: Petty Cash Checks and demand deposits: Time deposit: Total	TWD Foreign currencies (USD12,740,701.97, HKD4,405,601.17, JPY8,251、 EUR318,706.63, RMB18,615,871.22, THB1.67 and VND3,662,008,793) TWD Due date: Feb. 19, 2021 Interest rate collar: 1.045%

Details of Notes Receivables

Item	Summary	Amount $ 970 612 420 187 296 $ 2,485
Non-related parties: A company B company C company D company Other (Note)

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

164

Lotes Co., Ltd.

Details of Accounts Receivable

Dec. 31, 2020

Unit: NT$ thousands

Item	Summary	Amount $ 13,012
Accounts receivable – related parties Non-related parties: E company F company G company H company Other (Note) Less: Allowance for losses
		$ 408,175 388,256 267,902 244,599 2,999,054
		4,307,986 (3,910)
		$ 4,304,076

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

Details of Other Receivables

Item	Summary	Amount $ 90,161 $ 20,416 800 21,216 (1,514) $ 19,702
Other receivables – related parties Non-related parties: Business tax credit and tax refund Other Subtotal Less: Allowance for losses	Mainly service income and capital loans to subsidiaries Mainly receivables from mold development revenue

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

165

Lotes Co., Ltd.

Details of Inventory

Dec. 31, 2020

Unit: NT$ thousands

Item Products Finished Products In-process products Raw materials Subtotal Less: Allowance for decline in value of inventories and doubtful losses	Amount $ 755,770 191 - 23	Market Price 710,364 108 - 5
	755,984 (45,507)	710,477

	$ 710,477

Note: Allowance for decline in value of inventories and allowance for doubtful accounts is based on the lower of cost or net realizable value and the ageing of inventories, respectively.

Details of Prepayments

Item	Summary	Amount $ 1,268 1,250 712 1,320 $ 4,550
Prepayment of member fee Prepayment Prepayment of import fees Other (Note) Total	Mainly prepayment of annual association fee Mainly prepayment of product certification fee Prepayment of sales tax Mainly prepayment of miscellaneous expenses, etc.

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

166

Lotes Co., Ltd.

Details of the Changes in Investments Accounted for Using Equity Method

Jan. 1 to Dec. 31, 2020

Unit: NT$ thousands

Name	Beginning Balance	Beginning Balance	Increase in the Period (Note)	Increase in the Period (Note)	Decrease in the Period (Note)	Decrease in the Period (Note)	Ending Balance	Ending Balance	Ending Balance	Net Market Value or Equity	Net Market Value or Equity	Provision for collateral or pledge
	Shares Amount						Shares	Shareholding ratio	Amount 5,201,468 1,531,999 2,239,442 121,209 1,044,195 75,816 4,059 2,687 4,936
			Shares	Amount 809,364 - 336,933 9,489 167,367 27,375 348 2,687 4,936	Shares	Amount - 5,964 - - - - - - -				Unit Price	Total Price 5,201,468 1,531,999 2,239,442 121,209 1,044,195 75,816 4,059 2,687 4,936
Lotes Investment Limited Chia-Wan Investment Co., Ltd. Topmind Technology Development Co., Ltd. Zaxi Investment Co., Ltd. Jiayu Investment Co., Ltd. Lotes USA. Inc. LOTES EU Gmbh Lerain Technology Co., Ltd. Mikronpoint Co., Ltd.	2,605,000 $ 4,392,104 401,281 1,537,963 20,016,426 1,902,509 500,000 111,720 69,000,000 876,828 2,500,000 48,441 100,000 3,711 - - - - $ 8,873,276		- - - - - - - 938,525 500,000		- - - - - - - - -		2,605,000 401,281 20,016,426 500,000 69,000,000 2,500,000 100,000 938,525 500,000			- - - - - - - - -		No " " " " " " " "
								100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 33.92% 100.00%
		$ 8,873,276		1,358,499		5,964			10,225,811		10,225,811

Note: The amount includes the increase in investment amount of $14,385 thousand, the recognition of investment income of $1,294,043 thousand, the recognition of cumulative translation adjustment increase of $45,017 thousand, the decrease in capital surplus of $1,313 thousand recognized under the equity method and the recognition of unrealized gain on financial assets of $403 thousand accounted for using the equity method.

167

Lotes Co., Ltd.

Details of Deferred Tax Assets

Item Deferred tax assets	Dec. 31, 2020 Unit: NT$ thousands Summary Amount $ 63,572

Details of Other Non-current Assets

Item Refundable deposit	Summary	Amount $ 6,027

Details of Notes Payable

Item Non-related parties: I company J company K company L company M company Other (Note)	Summary	Amount $ 1,012 233 201 190 143 933 $ 2,712

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

168

Lotes Co., Ltd.

Details of Accounts Payable

Dec. 31, 2020

Unit: NT$ thousands

Item	Summary	Amount $ 288,985 1,728,149 17,277 $ 2,034,411 $ 6,278 4,856 287 $ 11,421
Related parties: Hsincheng Development Co., Ltd. Reka Technology Co., Ltd. Lintes Technology Co., Ltd. Non-related parties: N company O company Other (Note)

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

Details of Other Payables

Item	Summary	Amount $ 2,092
Other payables – related parties Non-related parties: Salary payable Royalties payable Compensation payable to employees and directors and supervisors Marketing expenses payable Freight and import/export expenses payable Consulting fees payable Commissions payable Other Total Tax liabilities	Salaries and year-end bonuses are mainly payable. The main component is royalties payable. The main component is the estimated compensation to employees and directors and supervisors for 2020. Mainly marketing expenses payable Shipping and customs fees for import and export of goods Mainly attributable to system consulting fees Mainly commissions payable
		$ 26,209 50,817 101,715 19,938 21,449 35,325 17,649 26,020
		$ 299,122
		$ 305,058

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

169

Lotes Co., Ltd.

Details of Refund liabilities - Current

Dec. 31, 2020 Unit: NT$ thousands

Item	Summary	Amount $ 161,767
		Amount $ 7,866

Item	Summary	Amount $ 49,258
Provision for liabilities - non-current	Provision for employee benefit liabilities

170

Lotes Co., Ltd.

Details of Other Non-current Liabilities

	Dec.	31, 2020	Unit:	Unit:	NT$ thousands
Item		Summary			Amount
Deposit received				$	744
	Details of Operating Revenue
	Jan. 1 to Dec. 31, 2020
Item			Number		Amount
Sales Revenue:
Common			660,893KPCS	$	6,963,259
Triangular Trade			713,298KPCS		4,585,643
Less: Return of sales					(21,764)
Discount on sales					(164,703)
Net operating income				$	11,362,435

171

Lotes Co., Ltd.

Details of Operating Cost

Jan. 1 to Dec. 31, 2020

Unit: NT$ thousands

Item
Direct raw materials
Opening Inventory
Add: Incoming materials for the period
Other
Less: Raw materials at the end of the period
Transfer to merchandise inventory sales
Other
Raw material consumption
Manufacturing Costs
Processing Costs
Transfer of finished goods and merchandise
Products in process at the beginning of the period
Total manufacturing costs
Add: Opening finished goods
Goods imported during the period
Transferred to work-in-progress
Finished goods at the end of the period
Other
Cost of finished goods
Add: Opening goods
Current period imports
Transfer of raw materials to sales
Other
Less: Ending goods
Transferred to production
Other
Cost of goods sold
Loss on decline in value of inventories, slump and obsolescence
Operating Costs

Amount
$ 150
462
301
(23)
(26)
(176)
688
6,474
1,952
(706)
37
8,445
2,228
18,191
1,020
(191)
(1,732)
27,961
608,273
8,895,134
26
16,258
(755,770)
(314)
(3,599)
8,760,008
29,666
$
8,817,635

172

Lotes Co., Ltd.

Details of Marketing Fee

Jan. 1 to Dec. 31, 2020

Unit: NT$ thousands

Item	Summary	Amount $ 58,959 57,444 58,364 51,437 15,798 70,673 $ 312,675
Import and export expenses Payroll Freight fee Royalties Commission Other (Note) Total

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

Details of Management Fees

Item	Summary	Amount $ 148,938 17,848 15,127 114,010 $ 295,923
Salary Expenses Labor Costs Patent expenses Other (Note) Total

Note: The balance of each account does not exceed 5% of the amount in this accounting item and is not shown separately.

173

Lotes Co., Ltd.

Details of Other Net Gains and Losses

Jan. 1 to Dec. 31, 2020

Unit: NT$ thousands

Item	Summary	Amount $ 10,165 1,294,043 136 5,844 34,952 167,054 4,956 8,630 12,205 1,317 8,132 $ 1,547,434 $ (1,420) (281,849) (239) (8,557) $ (292,065)
Non-operating income and benefits. Interest income Investment income recognized under the equity method Gain on disposal of property, plant and equipment Sample revenue Mold revenue Exchange gain Rental income Compensation income Gain on financial assets (liabilities) at fair value through profit or loss Gain on reversal of expected credit impairment Other Total Non-operating expenses and losses. Interest expense Exchange loss Losses on financial assets (liabilities) at fair value through profit or loss Other Total

174

Lotes Co., Ltd.

Dec. 31, 2020

Please refer to the following notes for the remaining information on the schedule of significant accounting items:

(1) Details of property, plant and equipment and changes in accumulated depreciation, Note VI (VI).

(2) Details of right-of-use assets and changes in accumulated depreciation, Note VI (VII).

(3) Details of investment property and accumulated depreciation, Note VI (VIII).

(4) Details of changes in intangible assets, Note VI (IX).

175

Stock Code: 3533

Lotes Co., Ltd. And Its Subsidiaries

Consolidated Financial Statement and Independent Auditor’s Report

2020 & 2019

Address: No. 15, Wuxun St., Anle Dist., Keelung City 204 Tel: (02)2433 1110

176

Table of Contents

Item
I.
Cover Page
II.
Table of Contents
III. Declaration of Consolidated Financial Statements
IV. Independent Auditor’s Report
V.
Consolidated Balance Sheet
VI.Consolidated Statement of Comprehensive Income
VII.Consolidated Statement of Change in Equity
VIII.Consolidated Statement of Cash Flows
IX.Notes to the Consolidated Financial Statements
(1) Company history
(2) The date when the financial reports were authorized for issuance and the
process involved
(3) Application of new issuing & revised standards and interpretation
(4) Summary and explanation of material accounting policies
(5) Primary sources of uncertainty in major accounting judgments, estimates,
and assumptions
(6) Descriptions of Material Accounting Items
(7) Transaction with related parties
(8) Pledged Assets
(9) Significant contingent liabilities and unrecognized contractual
commitments
(10) Significant Disaster Loss
(11) Significant Events after the End of the Financial Reporting Period
(12) Other
(13) Supplementary Disclosures
1. Information on Significant Transactions
2. Information on Investment Business
3. Information of investment from Mainland China
4. Information of Major Shareholders
(14) Operating Segments

Page

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68～69
69～70
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Declaration of Consolidated Financial Statements

The information of the companies that should be included when preparing the consolidated financial statements for the affiliated enterprises according to “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” and the companies that should be included when preparing the consolidated financial statements for the parent and subsidiary companies according to International Financial Reporting Standards No. 10 for the year ended December 31, 2020 (from Jan. 1, 2020 to Dec. 31, 2020) for our company are the same. The relevant information required to be disclosed on the consolidated financial statements of the affiliated company has been disclosed on the consolidated financial statements for the parent and subsidiary companies. Therefore, the consolidated financial statements will not be prepared separately.

Name of Company: Lotes Co., Ltd.

Chairman: Zhu De-xiang Date: March 24, 2021

178

Independent Auditor’s Report

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

Audit opinion

We have audited the Statement of Financial Position of Lotes Co., Ltd. (hereinafter referred to as Lotes) as of December 31, 2020 and 2019, the Statement of Comprehensive Income as of January 1 to December 31, 2020 and 2019 as well as the Statement of Changes in Equity, Statement of Cash Flows and the Notes to Consolidated financial statement (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, 2020 and 2019 in Lotes and the financial performance and consolidated cash flow of January 1 to December 31, 2020 and 2019 prepared according to Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis of the audit opinions

The audit of the consolidated financial statements for fiscal year 2020 was conducted by us in accordance with the Rules Governing Auditing and Certification of Financial Statements by Certified Public Accountants and Generally Accepted Auditing Standards (GAAS); The audit of the consolidated financial statements for fiscal year 2019 was conducted by us in accordance with the Rules Governing Auditing and Certification of Financial Statements by Certified Public Accountants, CHIN-KUAN-CHENG-SHEN-TZU No. 1090360805 Letter 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 our accountants 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 consolidated financial statements of fiscal year 2020 based on the professional judgment of our accountants. The matters have been responded on the whole audited consolidated financial statements and during the process of the expression of the audit opinions. There, our accountants will not 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 VI (XV) to the consolidated financial statements for the refund liability. Please refer to Note VI (XXIII) to the consolidated financial statements for details about income. Description of the key audit matters:

The operating income is the most critical factor when determining the operational performance of Lotes Co., Ltd. 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 the 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 Co., Ltd. Corresponding audit procedure:

179

refund liability estimate was analyzed with the actual situation afterward.

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 falling price of inventory.

Description of the key audit matters:

Other matters

Lotes Co., Ltd. has prepared the parent company only financial statements of 2020 and 2019, and we have provided the audit reports with unqualified opinions which were registered for regerence.

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

Management level’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 management level also includes evaluating Lotes’s capability of continuous operation, disclosure of relevant matters and the application of continuous operation accounting model unless the management level 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 consolidated financial statements

The purpose of the consolidated financial statements audited by our accountants 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 will not 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 individual 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.
Evaluating the adequacy of the accounting policies used by the management level and the rationality of the accounting evaluation and relevant disclosure concluded.

180

Based on the audit evidence obtained, conclusion towards the appropriateness of continuous operation accounting basis that the management level 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 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 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.

We determined the key audit matters that we would like to execute on Lotes’s consolidated financial statements for fiscal year 2020 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

CPA:

Competent ：[CHIN-KUAN-CHENG-SHEN-] Authority of TZU No. 1000011652 Securities (88) TAI-TSAI-CHENG (VI) Approval No. 18311 Certificate No.[March 24, 2021 ]

181

Lotes Co., Ltd. and Its Subsidiaries

Consolidated Statement of Financial Position

Dec. 31, 2020 and 2019

Assets Current assets: 1100 Cash and cash equivalents (Note 6 (1) and (26)) 1110 Financial assets measured at FVTPL – current (Note 6 (2) and (26)) 1120 Financial assets measured at FVTOCI – current (Note 6 (2) and (26)) 1150 Net notes receivable (Note 6 (3) and (26)) 1170 Net accounts receivable (Note 6 (3) and (26)) 1200 Other accounts receivable (Note 6 (3) and (22)) 1220 Tax assets (Note 6 (19)) 130X Net inventory (Note 6 (4)) 1410 Advance payment 1476 Other financial assets – current (Note 6 (11) and (26)) 1479 Other current assets – other Non-current assets: 1517 Financial assets measured at FVTOCI – non-current (Note 6 (2) and (26)) 1600 Property, plant and equipment (Note 6 (7) and 8) 1755 Right-of-use assets (Note 6 (8)) 1760 Net worth of investment property (Note 6 (9)) 1780 Intangible assets (Note 6 (10)) 1840 Deferred tax assets (Note 6 (19)) 1980 Other financial assets – non-current (Note 6 (11) and (26)) 1900 Other non-current assets Total of assets	Dec. 31, 2020 Amount % $ 2,949,412 15 122,960 1 2,016 - 54,105 - 6,840,879 35 357,029 2 12,937 - 2,559,028 13 62,208 1 87,320 1 6,665 -	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 - 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 4,879,480 31 16,280,192 100 2150 Notes payable (Note 6 (26)) 2170 Accounts payable (Note 6 (26)) 2200 Other payables (Note 6 (26)) 2230 Tax liabilities - current (Note 6 (19)) 2280 Lease liabilities - current (Note 6 (14), (26) and (29)) 2365 Refund liabilities - current (Note 6 (15)) 2300 Other current liabilities 2322 Long-term loans of which the maturity was within 1 year or 1 operating cycle (Note 6 (13), (26), (29) and Note 8) Non-current liabilities: 2540 Long-term loans (Note 6 (13), (26), (29) and Note 8) 2550 Provisions - non-current (Note 6 (16)) 2560 Tax liabilities – non-current (Note 6 (19)) 2570 Deferred tax liabilities (Note 6 (19)) 2580 Lease liabilities – non-current (Note 6 (14) and (26) and (29)) 2600 Other non-current liabilities Total of liabilities Equity to the owner of parent company: 3110 Share capital for ordinary shares (Note 6 (20)) 3200 Capital reserves (Note 6 (20)) 3300 Retained earnings (Note 6 (20)) 3400 Other equity (Note 6 (20)) Total of equity attributable to the owners of parent company 36XX Non-controlling interests (Note 6 (6)) Total of equity Total of liabilities and equity	3,574 - 19,000 - 2,501,155 13 1,885,062 12 1,206,695 6 964,415 6 505,527 3 436,898 3 71,971 - 94,851 1 161,767 1 157,256 1 33,197 - 23,337 - 5,335 - - -
			4,580,880 24 3,630,746 23
			18,661 - - - 49,258 - 41,729 - 21,037 - - - 27,054 - - - 104,279 1 60,560 - 2,167 - 1,932 -
	13,054,559 68
	20,120 - 4,495,974 23 399,749 2 368,019 2 155,510 1 127,144 1 - - 661,820 3
			222,456 1 104,221 -
			4,803,336 25 3,734,967 23
			1,034,779 5 1,034,779 6 3,958,247 21 3,959,560 24 9,101,144 47 7,471,519 46 (594,972) (3) (650,532) (4)
	6,228,336 32
			13,499,198 70 11,815,326 72
			980,361 5 729,899 5
			14,479,559 75 12,545,225 77
			$ 19,282,895 100 16,280,192 100

	$ 19,282,895 100

(Please read the Notes to the Consolidated Financial Statements.) Chairperson: CHU, TE-HSIANG Manager: HO, TE-YU Accounting manager: LIU, HSIN-HSIA

Liabilities and equity Current liabilities: 2100 Short-term loans (Note 6 (12), (26), (29), 8 and 9) 2130 Contract liabilities - current (Note 6 (23))	Dec. 31, 2020 Amount % $ - - 91,659 1	Dec. 31, 2019
		Amount % 29,980 - 19,947 -

182

Lotes Co., Ltd. and Its Subsidiaries

Consolidated Statement of Comprehensive Income

From Jan. 1 to Dec. 31, 2020 and from Jan. 1 to Dec. 31, 2019

Unit: NT$ thousands

2020	% 100 60	2019	% 100 64 36 4 7 7 - 18 18 - - 2 (1) - - 1 19 5
Amount $ 17,291,332 10,361,137		Amount 15,088,872 9,620,962
6,930,195	40	5,467,910
642,420 1,117,631 1,459,647 2,845	4 6 8 -	562,701 1,049,810 1,104,315 460
3,222,543	18	2,717,286
3,707,652	22	2,750,624
28,789 13,055 214,267 (276,469) (18,609) 1,317	- - 1 (2) - -	32,820 - 179,220 (105,785) (22,711) (2,407)
(37,650)	(1)	81,137
3,670,002 834,413	21 5	2,831,761 687,293
2,835,589	16	2,144,468	14 - - - - (2) - (2) (2) 12 13 1 14 12 - 12 20.11 20.06
(7,598) 372 1,520	- - -	(1,148) (16,103) 230
(5,706)	-	(17,021)
50,352 1,733	- -	(320,897) -
48,619	-	(320,897)
42,913	-	(337,918)
$ 2,878,502	16	1,806,550
$ 2,732,361 103,228	15 1	2,076,043 68,425
$ 2,835,589	16	2,144,468
$ 2,771,703 106,799	16 -	1,741,613 64,937
$ 2,878,502	16	1,806,550
$	26.41
$	26.34

(Please read the Notes to the Consolidated Financial Statements.) Chairperson: CHU, TE-HSIANG Manager: HO, TE-YU Accounting manager: LIU, HSIN-HSIA

183

Lotes Co., Ltd. and Its Subsidiaries

Consolidated Statement of Change in Equity From Jan. 1 to Dec. 31, 2020 and from Jan. 1 to Dec. 31, 2019

Unit: NT$ thousands

		Equity attributable to the owners of the parent company	Equity attributable to the owners of the parent company	Equity attributable to the owners of the parent company	Equity attributable to the owners of the parent company	Equity attributable to the owners of the parent company	Equity attributable to the owners of the parent company		Non-controlli ng interests	Total equity 9,871,482 2,144,468 (337,918)
Share capital		Capital reserve	Retained earnings			Other equity items		Total equity attributable to the owners of the parent company
						Exchange difference between foreign operating office’s statement	Unrealized gain or loss on financial assets measured at FVTOCI
Share capital for ordinary shares	Share capital collected in advance		Legal reserve	Special reserve	Undistributed earnings
$ 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)
-	-	-	-	-	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 2,732,361 (6,078)	(631,970) (18,562) - - 45,017 403		11,815,326 2,732,361 39,342	729,899 103,228 3,571	12,545,225 2,835,589 42,913
-	-	-	-	-	2,726,283	45,017 403		2,771,703	106,799	2,878,502
- - - - - - -	- - - - - - -	- - - (1,313) - - -	207,604 - - - - - -	- 333,513 - - - - -	(207,604) (333,513) (1,086,518) - - (10,140) -	- - - - - - - - - - - 10,140 - -		- - (1,086,518) (1,313) - - -	- - - - 192,780 - (49,117)	- - (1,086,518) (1,313) 192,780 - (49,117)
$ 1,034,779	-	3,958,247	1,299,543	650,533	7,151,068	(586,953) (8,019)		13,499,198	980,361	14,479,559

(Please read the Notes to the Consolidated Financial Statements.) Chairperson: CHU, TE-HSIANG Manager: HO, TE-YU Accounting manager: LIU, HSIN-HSIA

184

Lotes Co., Ltd. and Its Subsidiaries

Consolidated Statement of Cash Flows

From Jan. 1 to Dec. 31, 2020 and from Jan. 1 to Dec. 31, 2019

Unit: NT$ thousands

Cash flows from operating activities: Net profit before tax Items of adjustment: Items of income and expenses Depreciation expense Amortization expense Expected credit loss Interest expense Interest income Income from dividends Loss (gain) on the disposal and obsolescence of property, plant and equipment Net loss (gain) on financial assets (liabilities) measured at FVTPL Losses from the price drop and obsolescence of inventory Profit from bargain purchase Compensation costs of employee stock options Other items Total of the items of income and expenses Change in assets/liabilities related to operating activities: Net change in the assets related to operating activities: Decrease (increase) in notes receivable Increase in accounts receivable Increase in other accounts receivable Decrease (increase) in inventory Increase in payments in advance Decrease (increase) in other current assets Decrease in other financial assets Total net change in the assets related to operating activities Net change in the liabilities related to operating activities: Increase (decrease) in contract liabilities Decrease in notes payable Increase in accounts payable Increase in other accounts payable Increase (decrease) in provisions Decrease in other current liabilities Increase in refund liabilities Increase in other non-current liabilities Total net change in the liabilities related to operating activities Total net change in the assets and liabilities related to operating activities Total of the adjustment items Cash inflow generated from operating activities Interests received Dividends received Interests paid Income tax paid Net cash inflow from operating activities Cash flows in investing activities: Acquisition of financial assets measured at FVTOCI Disposal of financial assets measured at FVTOCI Acquisition of financial assets measured at FVTPL Disposal of financial assets measured at FVTPL Acquisition of property, plant and equipment Disposal of property, plant and equipment Increase in intangible assets acquired Cash outflow generated from merger Acquisition of investment property Increase in other non-current assets Net cash outflow from investment activities Cash flows in financing activities: Increase (decrease) in short-term loans Borrowing of long-term loans Repayment of long-term loans Repayment of lease principal Decrease in other non-current liabilities Issuance of cash dividends Issuance of cash dividends for non-controlling interests Capital increase by cash Changes in non-controlling interests Changes in subsidiaries, associates and joint ventures accounted for using equity method Net cash outflow from financing activities Effect of changes in exchange rates on cash and cash equivalents Increase in cash and cash equivalents Beginning balance of cash and cash equivalents Ending balance of cash and cash equivalents	2020 $ 3,670,002 1,115,332 26,245 1,528 18,609 (28,789) (1,341) (2,446) (55,053) 48,028 (13,055) 7,795 19	2019 2,831,761 1,023,478 12,368 2,867 22,711 (32,820) (875) 27,655 (7,267) 39,165 - 4,709 -
	1,116,872	1,091,991
	(30,249) (788,350) (133,684) (486,885) 87,437 3,898 4,960	858 (657,895) (4,427) 212,641 (46,534) 2,067 48,332
	(1,342,873)	(444,958)
	37,431 (23,091) 539,618 203,974 (69) 9,860 4,511 -	13,787 (26,396) 141,590 154,112 59 5,674 70,373 206
	772,234	359,405
	(570,639)	(85,553)
	546,233	1,006,438
	4,216,235 26,790 1,341 (18,616) (756,926)	3,838,199 42,560 875 (24,089) (497,845)
	3,468,824	3,359,700
	(20,186) 4,860 (125,418) 297,545 (1,774,297) 38,123 (80,912) (59,647) (17,923) (310,189)	- - (313,922) 177,274 (1,127,735) 6,162 (52,630) - - (181,017)
	(2,048,044)	(1,491,868)
	(66,660) 20,035 (125,583) (114,174) (75,956) (1,086,518) (49,117) - 137,365 (5,377)	(889,663) - - (121,833) - (900,258) (10,619) 1,274,362 308,003 190,996
	(1,365,985)	(149,012)
	48,623 103,418 2,845,994	(320,897) 1,397,923 1,448,071
	$ 2,949,412	2,845,994

(Please read the Notes to the Consolidated Financial Statements.) Chairperson: CHU, TE-HSIANG Manager: HO, TE-YU

Accounting manager: LIU, HSIN-HSIA

185

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements For the Years Ended on December 31, 2020 and 2019

(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. 24, 2021.

III. Application of New and Revised Standards and Interpretations

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

The Consolidated Company adopted the following newly revised IFRSs effective January 1, 2020, and there was no significant impact on the consolidated financial statements.

Amendments to IFRS 3, "Definition of a Business".

Amendments to IFRS 9, IAS 39 and IFRS 7, "Changes in Interest Rate Indicators". Amendments to IAS 1 and IAS 8, "Definition of Significant".

Amendments to IFRS 16, "Rent Deductions Related to Emerging Coronavirus Pneumonia".

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

The application of the following newly revised IFRSs, effective January 1, 2021, to the Consolidated Company's evaluation will not have a material impact on the consolidated financial statements.

Amendments to IFRS 4, "Temporary Exemption from the Extension of IFRS 9

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, "Changes in Interest Rate Indicators - Phase 2

186

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

(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 but not yet endorsed by the FSC. The following may be relevant to the consolidated company:

New release/amendment of guidelines Amendments to IAS 1 “Classification of Liabilities as Current or Noncurrent”	Major Amendments The amendment was made to enhance consistency in the application of the standard to assist companies in determining whether debts or other liabilities with an indefinite maturity date should be classified as current (due or likely to be due within one year) or non-current on the balance sheet. The amendment also clarifies the classification of debt that may be settled by conversion into equity.	Effective date upon promulgation by the IASB
		Jan. 1, 2023

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.

The Consolidated Company does not expect the following other newly issued and amended standards, which have not yet been endorsed, to have a material impact on the consolidated financial statements.

Amendments to IFRS 10 and IAS 28, "Disposal of or Contribution to Assets between an Investor and its Affiliate or Joint Venture".

Amendments to IFRS 17, "Insurance Contracts" and IFRS 17

Amendments to IAS 16, "Property, Plant and Equipment - Price before reaching Intended Use". Amendments to IAS 37, "Loss-making Contracts - Costs of Fulfillment of Contracts". Annual Improvements to IFRSs for the 2018 2020 Cycle Amendments to IFRS 3, "References to Conceptual Framework". Amendments to IAS 1, "Disclosure of Accounting Policies". Amendments to IAS 8, "Definition of Accounting Estimates".

IV. Summary of Major Accounting Policies

The major accounting policies adopted in this Consolidated Financial Statement are summarized 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).

187

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

(2) Compiling Basis

1. Measurement Foundation

Except the major items in the following balance sheet, the Consolidated Financial Statement was compiled 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 IV (XVI).
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

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 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.

1. Subsidiary listed in the Consolidated Financial Statement

The including subsidiaries listed in the Consolidated Financial Statement are as follows:

follows:
Investment of Company	Name of Subsidiary Place of Incorporation	Shareholding percentage Dec. 31, 2020 Dec. 31, 2019 Descrip tion
The Company 〞〞〞〞〞〞〞〞 Lotes Investments Limited
	Lotes Investments Limited Samoa Good Hope Investments Limited 〞 Guansi Development Co., Ltd. 〞 Zhaxi Investment Co., Ltd. Anguilla Jiayu Investment Co., Ltd. Taiwan Lotes USA, Inc USA LOTES EU GmbH Germany Lerain Technology Co., Ltd. Taiwan Mikronpoint Co., Ltd. 〞 Loteson International Investments Limited Hong Kong	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% 33.92% - % (Note 1) 100.00% - % 100.00% 100.00%

188

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

189

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

Loteson International	Lotes Guanghou Co., Ltd.	China	100.00%	100.00%
Investments Limited
Lotes Guanghou Co.,	Lotes Hengnan Co., Ltd.	〞	100.00%	100.00%
Ltd.
〞	Lotes Shenzhen Automation	〞	100.00%	100.00%
	Technology Co., Ltd.
〞	Lotes Zhongshan Co., Ltd.	〞	50.00%	50.00%
〞	Zhongshan Dezhi Metal Surface	〞	100.00%	100.00%
	Treatment Co., Ltd.
〞	Hengnan Deyi Property	〞	100.00%	100.00%
	Development Co., Ltd.
〞	Guangzhou Leside Technology Co.,	〞	100.00%	100.00%
	Ltd.
Guangzhou Leside	Chongqing Fuxinrui Electronic	China	51.00%	51.00%
Technology Co., Ltd.	Technology Co., Ltd.
Lotes Suzhou Co., Ltd.	Lotes Zhongshan Co., Ltd.	〞	50.00%	50.00%
Good Hope Investments	Xincheng Development Co., Ltd.	Samoa	100.00%	100.00%
Limited
〞	REKA Technology Co., Ltd.	Hong Kong	100.00%	100.00%
Guansi Development	Jae You Co., Ltd.	〞	100.00%	100.00%
Co., Ltd.
Jae You Co., Ltd.	Lotes Suzhou Co., Ltd.	China	100.00%	100.00%
Zhaxi Investment Co.,	Wangden Investments Limited	Hong Kong	100.00%	100.00%
Ltd.
Wangden Investments	Zongka Technology (Shenzhen) Co.,	China	100.00%	100.00%
Limited	Ltd.
Jiayu Investment Co.,	Ememe Robot Co., Ltd.	Taiwan	94.37%	94.37%
Ltd.
〞	Compertum Microsystems Inc.	〞	35.34%	46.74% (Note 1)
〞	Good News Medical Co., Ltd.	〞	5.00%	- % (Note 1)
〞	Lintes Technology Co., Ltd.	〞	52.13%	52.13%
Lintes Technology Co.,	Chia-Chun Investment Co., Ltd.	〞	100.00%	- %
Ltd.
〞	Genie Precision Machining Co., Ltd.	〞	60.00%	- % (Note 2)
〞	Compertum Microsystems Inc.	〞	11.77%	- % (Note 1)
〞	Jilong Co., Ltd.	Samoa	100.00%	100.00%
Jilong Co., Ltd.	Rihui Co., Ltd.	Samoa	100.00%	100.00%
Rihui Co., Ltd.	Lintes Technology (Suzhou) Co.,	China	100.00%	100.00%
	Ltd.

Note 1: Although the Consolidated Company does not hold more than half of the voting shares of this company, it is included in the consolidated financial statements as a subsidiary because the Consolidated Company has control over its major operating activities and other decisions.

Note 2: Please refer to Note 6 (5) for details of the Consolidated Company's acquisition of control over the Company.

Subsidiary not listed in the Consolidated Financial Statement: none.

190

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

(4) Foreign Currency

1. Foreign Currency Trading

(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

191

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

comprehensive income.

(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 other assets not belonging to current assets are recognized to be non-current assets:

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 within 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 within 12 months after the balance sheet.
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

(7) Financial Instruments

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

192

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

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.

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

· 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

193

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

is made on an item-by-item tool basis.

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 recognized 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:

‧ 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

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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 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

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‧ 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.

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.

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 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.

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adjusted and recognized as other comprehensive income (without reducing the carrying amount of the assets).

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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

(1) De-recognition of financial liabilities

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.

(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.

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(8) 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.

(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 equipment 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.

(10) Investment real estate

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(11) Leasing

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:
- 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.
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.

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

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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.

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.

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.

(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

Amortization is calculated based on the cost of the asset less its estimated residual value and

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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.

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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.

(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.

(14) Provisions

Provisions for liabilities are recognized when the Consolidated Company has a present obligation as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation in the future, and the amount of the obligation can be reliably estimated.

The amount recognized as a provision for liabilities is the best estimate of the amount that will be required to settle the obligation at the end of the reporting period, taking into account the risks and uncertainties of the obligation. If the liability provision is measured by the estimated cash flows to settle the present 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

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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 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 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 remeasurement of the net defined benefit obligation, including actuarial gains and losses, compensation for plan assets (excluding interest), and any change in the impact

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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

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

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 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

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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.

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.

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) Business Combination

The Consolidated Company first gained control of another company through an acquisition in the second quarter of 2020, and therefore, the accounting policy related to business combinations was applied starting from January 1, 2020.

Goodwill is measured at the fair value of the consideration transferred at the date of acquisition, including the amount attributable to any noncontrolling interest in the acquiree, less the net amount of the identifiable assets acquired and liabilities assumed (usually the fair value). If the resulting balance is negative, the Consolidated Company reassesses whether all assets acquired and liabilities assumed have been correctly recognized before recognizing the benefit of the bargain purchase in profit or loss.

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Except for those related to the issuance of debt or equity instruments, transaction costs associated with a business combination should be recognized as expenses of the combining company immediately when incurred.

For non-controlling interests in the acquiree that are currently owned and whose holders are entitled to a proportionate share of the net assets of the enterprise at the time of liquidation, the Consolidated Company elects, on a transaction-by-transaction basis, to measure them at their acquisition-date fair value or at the current ownership instrument's proportionate share of the recognized amount of the acquiree's identifiable net assets. Other non-controlling interests are measured at their fair values at the acquisition date or on other bases in accordance with IFRSs recognized by the FSC.

(20) Earnings per share

The Consolidated 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 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.

(21) 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 the 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.

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.

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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 listed on the Statement	Dec. 31, 2020 $ 2,139 2,169,311 777,962 $ 2,949,412		Dec. 31, 2019 3,660 1,560,714 1,281,620 2,845,994

Please refer to Note VI (XXVI) for the disclosure of the interest rate risk and sensitivity analysis of the financial assets of the Consolidated Company.

(2) Financial assets

1. Financial assets measured at FVTPL:

Financial assets measured at FVTPL: Non-hedging derivatives Forward exchange contracts Non-derivative financial assets: Listed stocks Linked deposits Total	Dec. 31, 2020 $ 6,180 116,780 -	Dec. 31, 2019 - 20,931 219,103
	$ 122,960	240,034

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 receives the Interest income on a regular basis.

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The Consolidated Company engages in derivative financial instruments to hedge the exposure to exchange rate and raw material price risk arising from operating activities. The breakdown of derivative instruments reported as financial assets at fair value through profit or loss by the Consolidated Company for which hedge accounting is not applicable is as follows.

.	Financial Assets
		Principal of the Contract (thousand) USD 3,000
		USD	4,000
		USD	2,000
		USD	9,000
		USD	2,000
		USD	4,000
		USD	5,000
		USD	2,000
		USD	2,000
		USD	2,000
		USD	9,000
		USD	4,000
		USD	6,000
		USD	4,400
		USD	2,000

2. Financial assets measured at FVTOCI

The Consolidated Company’s investments in these equity instruments are not held for trading purposes and therefore have been designated as measured at fair value through other comprehensive income.

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The Consolidated Company had no dividend income from equity instruments measured at FVTOCI for the years ended December 31, 2020 and 2019.

On May 8, 2020, the Consolidated Company sold Kuang Ying Computer Equipment Co., Ltd., which was designated to be measured at fair value through other comprehensive income and the fair value at the time of disposal was $4,860 thousand and the cumulative loss on disposal was $10,140 thousand, therefore, the aforementioned cumulative loss on disposal was transferred from other equity to retained earnings.

As of December 31, 2020 and 2019, the Consolidated Company’s financial assets had not been pledged as security.

(3) Notes, accounts receivable and other receivables

Notes, accounts receivable and other receivables
Receivable notes Accounts receivable Other accounts receivable Less: Provisions	Dec. 31, 2020 $ 54,105 6,852,928 359,009 (14,029)		Dec. 31, 2019 15,257 5,957,860 222,320 (11,881) 6,183,556
	$ 7,252,013

Please refer to Note VI (XXVI) 1. (3) Statement of Changes in Notes and Accounts Receivable Provisions for the years ended December 31, 2020 and 2019 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, 2020 and 2019, of which $0 dollars and $497,928,000 dollars respectively.

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	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

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 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, 2019, to 2020, no retained accounts receivable for sale were transferred to other receivables.

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(4) Inventory

Merchandise Final goods Work in progress Raw materials Goods in transit	Dec. 31, 2020 $ 773,548 676,044 695,361 414,075 - $ 2,559,028	Dec. 31, 2019 494,396 706,097 444,416 292,094 39,018 1,976,021

The Consolidated Company’s inventories as of December 31, 2020 and 2019 including an allowance for inventory losses are $295,528,000 dollars and $271,717,000 dollars respectively.

The Consolidated Company recognized inventory-related expenses and gains as follows:

Cost of goods sold Downtime cost Losses on the price fall and scraping of inventory (gain on reversal) Total	2020 $ 10,222,310 90,799 48,028	2019 9,941,368 39,165 (359,571) 9,620,962
	$ 10,361,137

As of December 31, 2020 and 2019, the Consolidated Company’s inventories were not pledged as security.

(5) Change in ownership interest in a subsidiary

1. Acquisition of Subsidiary

On May 13, 2020, the Consolidated Company acquired the control of Genie Precision Machining Co., Ltd. (Genie Precision Machining) by purchasing 63.93% of its shares. Genie Precision Machining is an ultra-precision optical and automation equipment manufacturer, and the acquisition of control over the company will enable the Consolidated Company to expand its automotive electronics operations.

For the period from the acquisition date to December 31, 2020, Genie Precision Machining contributed revenue and net income of $220,334,000 and $21,514,000 respectively. If the acquisition had occurred on January 1, 2020, the management estimates that the Consolidated Company would have had revenues of $17,390,647,000 and net income of $2,845,280,000 for the period from January 1, 2012 to December 31, 2012. These amounts do not reflect the actual revenue and operating results of the Consolidated Company that could have been generated if the business combination had been completed on the commencement date of the year of acquisition and should not be used as a forecast of future operating results.

The costs associated with this acquisition transaction were recognized in the consolidated statement of income under the heading "Management fee".

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The major categories of the consideration transferred, the assets acquired and liabilities assumed at the date of acquisition and the amounts recognized are as follows:

(1) Net cash outflows from acquired subsidiaries

Consideration paid in cash Less: acquired cash and cash equivalents	$ 78,533 (18,886)
	$ 59,647

(2) Identifiable assets acquired and liabilities assumed

) Identifiable assets acquired and liabilities assumed
The fair values of the recognized assets and liabilities acquired	and	assumed at the
date of acquisition are as follows.
Current Assets
Cash and cash equivalents	$	18,886
Financial assets measured at amortized cost		5,009
Notes receivable, accounts receivable and other receivables		116,145
Inventories		144,150
Other current assets		12,297
Non-current assets
Property, plant and equipment		214,258
Intangible assets		1,054
Deferred income tax assets		6,190
Other non-current assets		53,033
Current liabilities
Short-term borrowings		(36,680)
Contractual liabilities - current		(34,282)
Notes payable, Accounts payable and Other payables		(142,001)
Current income tax liabilities - current		(7,955)
Long-term loans due within one year		(29,491)
Other non-current liabilities - other		(1,097)
Non-current liabilities
Long-term loans		(100,053)
Other non-current liabilities		(76,191)
Fair value of identifiable net assets	$	143,272

The fair value of receivables (mainly accounts receivable) and the total contract amount were both $116,145,000, and there were no uncollectible contractual cash flows expected at the acquisition date.

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Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

The Consolidated Company will review the above matters on an ongoing basis during the measurement period. If, within one year of the acquisition date, new information becomes available regarding facts and circumstances existing at the acquisition date that would identify an adjustment to the provisional amount described above or any additional provision for liabilities existing at the acquisition date, the accounting for the acquisition will be modified.

(3) Cheap purchase benefits

The bargain purchase benefits recognized as a result of the acquisition were as follows:

llows:
Transfer Consideration Add: Non-controlling interests Less: Fair value of identifiable net assets Gain on bargain purchase	$ 78,533 51,684 (143,272)
	$ (13,055)

The gain of $13,055,000 resulting from the acquisition of Genie Precision Machining was reported as "Gain on bargain purchase" in the consolidated statement of income.

2. Subsidiary cash capital increase, the Consolidated Company did not subscribe in proportion to its shareholding, resulting in no loss of control

On December 16, 2020, Compertum Microsystems Inc. issued 3,255,000 new shares, raising $75,950,000 in total. The Consolidated Company subscribed 1,755,000 shares for $40,950,000, which increased the Consolidated Company's equity interest in Compertum Microsystems Inc. by 4.64% due to the unrealized shareholding.

On July 8, 2020, Genie Precision Machining Co., Ltd. issued 15,000,000 new shares, raising $150,000,000 in total. The Consolidated Company subscribed 8,630,000 shares for $86,300,000, and the Consolidated Company's interest in Genie Precision Machining Co., Ltd. was reduced by 3.93% due to the failure to subscribe in proportion to its shareholding.

Compertum Microsystems Inc. issued 1,379,000 new shares on April 30, 2020, raising total proceeds of $13,786,000. The Consolidated Company reduced its interest in Compertum Microsystems Inc. by 9.91% due to non-subscription.

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%.

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:

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Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

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	2020 $ 125,937 (127,250) -	2019 190,973 - (82)
	$ (1,313)	190,891

(6) Subsidiaries with significant non-controlling interests

The non-controlling interests of subsidiaries that are material to the Consolidated 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	The percentage of ownership interests and voting interests in all non-controlling interests
		Dec. 31, 2020	Dec. 31, 2019
		47.87%	47.87%

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:

1. Comprehensive financial information of Lintes Technology Co., Ltd.:

Current assets Non-current assets Current liabilities Non-current liabilities Less: Non-controlling interests Equity attributable to owners of Lintes Technology Ending balance of non-controlling interest attributable to the Consolidated Company Operating income Net income for the period Attributable to owners of Lintes Technology	Dec. 31, 2020 $ 2,297,917 503,237 (954,458) (75,631) 128,484	Dec. 31, 2019 1,985,182 165,502 (649,878) (11,443) -
	$ 1,642,581	1,489,363
	$ 795,973	714,874
	2020 $ 2,404,160	2019 2,245,138
	$ 271,870	156,114

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Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

Non-controlling interests attributable to Lintes Technology Other comprehensive income Attributable to owners of Lintes Technology Non-controlling interest attributable to Lintes Technology Total comprehensive income Attributable to owners of Lintes Technology Non-controlling interest attributable to Lintes Technology Net income of the Consolidated Company for the period attributable to noncontrolling interests Comprehensive income for the period attributable to noncontrolling interests Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Effect of exchange rate changes Increase (decrease) in cash and cash equivalents Dividends paid to noncontrolling interests	$ 7,660	- (6,122) - 149,992 - 69,180 65,759 2019 417,912 (91,247) 272,043 8,383 607,091 10,619
	$ 4,544
	$ -
	$ 276,414
	$ 7,660
	$ 126,891
	$ 130,604
	2020 $ 468,996 (201,405) (307,339) (535)
	$ (40,283)
	$ 49,117

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Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

(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 $ 49,655 - - - - - - (1,071)	Buildings 759,739 - - - - - - 9,674	Machinery 2,698,613 236,776 10,959 211,567 - (232,957) - 26,339	Other 2,740,900 221,896 11,887 105,389 759,336 (607,611) - 44,055	Construction in progress and equipment to be examined 756,731 1,315,625 - - (759,336) - (169) 21,725	Total 7,005,638 1,774,297 22,846 316,956 - (840,568) (169) 100,722
$ 48,584	769,413	2,951,297	3,275,852	1,334,576	8,379,722
$ 76,980 - - - - (26,800) (525)	804,451 870 - - - (15,857) (29,725)	2,680,672 182,269 650 10,300 (68,993) - (106,285)	2,430,461 346,673 18,035 576,528 (519,830) - (110,967)	498,134 877,347 - (586,828) - - (31,922)	6,490,698 1,407,159 18,685 - (588,823) (42,657) (279,424)
$ 49,655	759,739	2,698,613	2,740,900	756,731	7,005,638
$ - - - - -	266,518 38,748 - - 4,449	1,595,925 237,015 62,001 (203,679) 9,272	1,628,481 782,468 40,697 (601,212) 23,065	- - - - -	3,490,924 1,058,231 102,698 (804,891) 36,786
$ -	309,715	1,700,534	1,873,499	-	3,883,748
$ - - - - -	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
$ 48,584	459,698	1,250,763	1,402,353	1,334,576	4,495,974
$ 49,655	493,221	1,102,688	1,112,419	756,731	3,514,714

217

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

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 2020 and December 31, 2019, the accumulated expenditures (tax included) for the construction of the new plant were $787,873 thousand and $622,147 thousand respectively.

The subsidiary, Lotes Hengnan Co., Ltd. (Lotes Hengnan), acquired land use rights for the construction of a new factory in 2016 at a cost of $9,878 thousand, which was recorded as a right-to-use asset. As of December 31, 2020 and 2019, the accumulated expenditures (including tax) for the construction of new plants were $192,369 thousand and $54,149 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, 2020, must 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 2021.

As of December 31, 2020, and December 31, 2019, 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:

Land $ 236,908 - - 3,782	Buildings 254,674 136,339 (48,337) 5,011	Machinery equipment 687 - (685) (2)	Other equipment 5,181 397 (1,507) 60	Total 497,450 136,736 (50,529) 8,851
$ 240,690	347,687	-	4,131	592,508
$ - 246,746 - (9,838)	- 235,843 35,288 (16,457)	- 243 474 (30)	- 5,396 - (215)	- 488,228 35,762 (26,540)
$ 236,908	254,674	687	5,181	497,450
$ 5,150 5,135 - 180	105,843 117,728 (48,186) 4,374	687 - (685) (2)	2,344 1,658 (1,507) 40	114,024 124,521 (50,378) 4,592
$ 10,465	179,759	-	2,535	192,759
$ - 5,375 (225)	- 112,130 (6,287)	- 717 (30)	- 2,446 (102)	- 120,668 (6,644)
$ 5,150	105,843	687	2,344	114,024

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Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

Book value: Dec. 31, 2020 Dec. 31, 2019	Land $ 230,225	Buildings 167,928	Machinery equipment -	Other equipment 1,596	Total 399,749
	$ 231,758	148,831	-	2,837	383,426

(9) Investment property

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

Owned Assets Land Buildings $ 248,200 39,285 12,376 5,547 - -	Owned Assets Land Buildings $ 248,200 39,285 12,376 5,547 - -	Right-of-use assets Land - 67,869 1,291
Land $ 248,200 12,376 -
$ 260,576	44,832	69,160
$ 221,400 26,800	23,428 15,857	- -
$ 248,200	39,285	-
$ - - -	4,483 998 -	- 1,048 20
$ -	5,481	1,068
$ - - -	2,333 764 1,386	- - -
$ -	4,483	-
$ 260,576	39,351	68,092
$ 221,400	21,095	-
$ 248,200	34,802	-

As of December 31, 2020 and 2019, the Consolidated Company’s investment properties were not pledged as security.

219

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

(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, 2020 Separate acquisition Merger acquisition Derecognition Effect of change in exchange rate Balance on Dec. 31, 2020 Balance on Jan. 1, 2019 Separate acquisition Derecognition Effect of change in exchange rate Balance on Dec. 31, 2019 Losses on amortization and impairment: Balance on Jan. 1, 2020 Amortization in the year Merger acquisition Derecognition Effect of change in exchange rate Balance on Dec. 31, 2020 Balance on Jan. 1, 2019 Amortization in the year Derecognition Effect of change in exchange rate Balance on Dec. 31, 2019 Book value: Balance on Dec. 31, 2020 Balance on Dec. 31, 2019	Computer software $ 166,221 80,912 5,054 (412) 1,640		Other 600 - - - -	Total 166,821 80,912 5,054 (412) 1,640 254,015 114,781 56,099 (590) (3,469) 166,821 67,032 27,071 4,000 (412) 814 98,505 55,254 13,834 (590) (1,466) 67,032 155,510 99,789
	$ 253,415		600
	$ 114,181 56,099 (590) (3,469)		600 - - -
	$ 166,221		600
	$ 67,032 27,071 4,000 (412) 814		- - - - -
	$ 98,505		-
	$ 55,254 13,834 (590) (1,466)		- - - -
	$ 67,032		-
	$ 154,910		600
	$ 99,189		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:
2020	2019
Operating cost $ 3,390	1,087
Operating expense $ 23,681	12,747

220

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

(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, 2020 $ 87,320 $ -	Dec. 31, 2019 - 85,923

As of December 31, 2020 and 2019, none of the Consolidated Company’s other financial assets had been pledged as security, please refer to Note VIII.

(12) Short-term loans

The details, conditions and terms of the short-term loans of the Consolidated Company are as follows:

	Dec. 31, 2020
Currency	Interest rate range Dec. 31, 2019	Maturity year

Currency Interest rate range USD 2.54%		Maturity year 109

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) Long-term loan

The breakdown of the Consolidated Company's long-term loans is as follows:

Bank Loans-Credit Loans (2023.7) Bank loans - Guaranteed loans (2022.5~2023.7) Subtotal Less: portion due within one year Total Unutilized Interest Rate Range	Dec. 31, 2020 $ 974 23,022 23,996 5,335 $ 18,661 $ 51,907 1.31%~1.83%

The Consolidated Company pledged assets as collaterals for bank loans as described in Note 8.

221

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

(14) Lease liabilities

The book values of the lease liabilities of the Consolidated Company are as follows:

Current Non-current	Dec. 31, 2020 $ 71,971	Dec. 31, 2019 94,851
	$ 104,279	60,560

For the maturity analysis, please refer to Note VI (XXV). 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	2020 $ 9,689 $ 12,523 $ 1,738	2019 11,458 14,593 2,443

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

Total cash outflow for leases	2020 $ 125,601	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.

(15) Refund liabilities - current

Refund liabilities - current	Dec. 31, 2020 $ 161,767	Dec. 31, 2019 157,256

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

(16) Provisions

Provisions - non-current Employee benefits	Dec. 31, 2020 $ 49,258

41,729

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Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

Employee benefits are estimated under the Consolidated Company’s defined benefit plan; please refer to Note VI (18) for details.

(17) Operating lease

The Consolidated Company leases out its investment properties, which are classified as operating leases because almost all the risks and rewards attributable to the ownership of the subject assets have not been transferred, as described in Note 6(ix) Investment properties.

The maturity analysis of lease payments to report the total undiscounted lease payments to be received in the future is presented in the following table.

Within 1 year 1-2 years Total undiscounted lease payments	Dec. 31, 2020 $ 4,330 350	Dec. 31, 2019 5,821 593
	$ 4,680	6,414

The rental income from investment properties amounted to $4,727 thousand and $5,408 thousand for the years ended December 31, 2020 and 2019, respectively. The direct operating expenses (including maintenance) of the investment properties that generated rental income were $861 thousand and $875 thousand, respectively.

(18) 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:

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, 2020 $ 83,499 (34,241)	Dec. 31, 2019 73,681 (31,952)
	$ 49,258	41,729

The details of the employee benefits liability of the Consolidated Company are as follows:

Liabilities from paid leaves	Dec. 31, 2020 $ 17,861	Dec. 31, 2019 14,674

(1) Composition of Plan Assets

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 34,241,000 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.

223

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

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

Changes in the present values of defined obligations of the Company in 2020 and in 2019 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	2020 $ 73,681 1,168 8,650 -	2019 72,724 1,310 2,262 (2,615)
	$ 83,499	73,681

(3) Changes in the fair value of plan assets

The changes in the fair value of defined benefit plan assets of the Company in 2020

and in 2019 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	2020 $ 31,952 238 1,052 999 -	2019 32,202 319 1,114 932 (2,615)
	$ 34,241	31,952

(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	2020 $ 621 309	2019 590 401
	$ 930	991
	$ 115 290 337 188	117 277 356 241
	$ 930	991

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Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

(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 2020 and in 2019 are as follows:

follows:
Accumulated balance on January 1 Amount recognized in this period Accumulated balance on December 31	2020 $ 1,895 (7,598)	2019 3,043 (1,148)
	$ (5,703)	1,895

(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, 2020 0.35% 2.00%	Dec. 31, 2019
		0.75% 2.00%

The amount of appropriation for defined benefit plans within 1 year after the reporting date for the year ended on Dec. 31, 2020 is 1,038,000 TWD.

The weighted 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, 2020

and 2019 on the present value of defined benefit obligations are as follows:

Dec. 31, 2020 Discount rate Increase in future salary Dec. 31, 2019 Discount rate Increase in future salary	Effects on defined benefit obligations Increased by 0.25% Decreased by 0.25% $ (2,278) 2,367 2,322 (2,247) (2,069) 2,151 2,119 (2,049)
	Increased by 0.25% $ (2,278) 2,322 (2,069) 2,119

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

225

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

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.

The pension expense under the defined contribution retirement funds of the Company in the year of 2020 and 2019 are TWD 12,635,000 and TWD 9,032,000 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, 2020 and 2019 were $137,267,000 dollars and $195,676,000 dollars respectively. (19) 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 Other deferred income tax expense (benefit) Income tax expense	2020 $ 824,517 23,276 (47,498)	2019 704,790 27,468 (17,187)
	800,295	715,071
	34,118	(27,778)
	$ 834,413	687,293

The details of income tax expense (benefit) recognized in the other comprehensive income in 2020 and 2019 are as follows:

income in 2020 and 2019 are as follows:
Items that will not be reclassified to profit or loss: Remeasurement of defined benefit plan Items that may be reclassified subsequently to profit or loss. Exchange differences on translation of financial statements of foreign operating entities	2020 $ (1,520)	2019 (230)
	$ (1,733)	-

The reconciliation between the income tax expense (benefit) and net profit before tax of the Consolidated Company in 2020 and 2019 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 Underestimate (overestimate) in the previous year Surtax on undistributed retained earnings Income basic tax Total	2020 $ 3,670,002	2019 2,831,761
	1,108,837 (250,202) (47,498) 23,276 -	895,013 (218,245) (17,187) 27,468 244
	$ 834,413	687,293

226

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

227

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

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 ]

==> picture [173 x 27] intentionally omitted <==

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, 2020, 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 (approved) 2019 (applied) 2020 (estimated)	Losses to be deducted $ 9,714 14,184 14,550 6,246 8,951 10,166 6,828 3,237 2,609 660 $ 77,145	The last year for the deduction to be conducted
		2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

228

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

(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 liabilities Unrealized foreign exchange losses Estimated expenses payable Remeasurement of defined benefit plan Bad debt expense Exchange differences on translation of financial statements of foreign operating companies Employee Benefits Deferred income tax assets	Dec. 31, 2020 $ 29,513 478 44 43,368 1,049 39,927 9,757 663 1,733 612 $ 127,144	Dec. 31, 2019 20,587 492 44 43,772 15,423 35,246 8,238 123 - - 123,925

(3) Deferred income tax liabilities recognized Unrealized exchange gain Investment income recognized by the equity method Gain on bargain purchase Deferred income tax liabilities	Dec. 31,2020 $ 1,176 23,789 2,089 $ 27,054	Dec. 31,2019 - - - -

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.

Jiayu Investment Co., Ltd., a domestic subsidiary of the Company, has been approved for its income tax in 2019, and Ememe Robot Co. Ltd. have been approved for its income tax in 2018.

(20) Capital and Other Equity

As of December 31, 2020 and 2019, the total authorized share capital of the Company was $1,550,000,000 with a par value of $10 per share, and the actual amount issued was $1,034,779,000 dollars.

229

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

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, 2020 $ 3,577,768 365,080 15,399		Dec. 31, 2019 3,577,768 366,393 15,399 3,959,560
	$ 3,958,247

2. Retained earnings

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

(2) Special reserve

230

Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

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

On June 19, 2020 and June 14, 2019, the Company's shareholders resolved to distribute earnings for the years 2019 and 2018, respectively, as follows:

	2019 Payout ratio (NTD) Amount 10.50 1,086,518	2018 Payout ratio (NTD) Amount 8.70 900,258
$	Payout ratio (NTD) 10.50	Payout ratio (NTD) 8.70

On March 24, 2021, the Company's Board of Directors proposed a distribution of earnings for the year 2020, and the amount of dividends distributed to owners was as follows:

Distributed to the holders of ordinary shares: Cash $		2020 Payout ratio (NTD) Amount 13.30 1,376,256	2020 Payout ratio (NTD) Amount 13.30 1,376,256
		Payout ratio (NTD) 13.30

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:

3. Other equity

Exchange difference between foreign operating office’s statement $ (631,970) 45,017 - -	Unrealized gain or loss on Financial assets measured at FVTOCI (18,562) - 403 10,140	Total (650,532) 45,017 403 10,140
$ (586,953)	(8,019)	(594,972)
$ (314,561) (317,409) -	(2,459) - (16,103)	(317,020) (317,409) (16,103)
$ (631,970)	(18,562)	(650,532)

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(21) 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
	Genie Precision Machining	Lintes Technology
		Nov. 28, 2019 436,000 shares Current employees of subsidiaries Immediate vesting
	July 23, 2020 1,500,000 shares Current employees of subsidiaries Immediate vesting

Genie Precision Machining Co., Ltd. estimated the fair value of the above cash capital increase stock option to be $15.87 and recognized the cost of share-based payment compensation of employees from the cash capital increase stock option to be $7,795,000 dollars in 2020.

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 payment compensation of employees from the cash capital increase stock option to be $4,709,000 dollars in 2019.

(22) Earnings per share

The basic earnings per share and diluted earnings per share of the Consolidated Company were calculated as follows:

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 Basic earnings per share Diluted earnings per share	2020 $ 2,732,361	2019 2,076,043
	103,478 272	103,231 278
	103,750	103,509
	$ 26.41	20.11
	$ 26.34	20.06

(23) 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

Contract liabilities	Dec. 31, 2020 $ 91,659	Dec. 31, 2019 19,947

The amounts of beginning balances of contract liabilities as of Jan. 1, 2020 and Jan. 1,

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2019 were respectively recognized as income of 18,642,000 TWD and 5,825,000 TWD for the year ended on Dec. 31, 2019 and 2018.

(24) Non-operating income and expense

1. Interest income

The details of interest income of the Consolidated Company are as follows:

[Bank Deposit Interest ]

2020 $ 28,789	2019 32,820

2. Other income

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

Income from cash dividends Income from molding Compensation from suppliers Income from rentals Income from the sales of developed products Income from subsidies Others	2020 $ 1,341 52,604 12,579 37,708 4,516 39,806 65,713 $ 214,267	2019 875 42,802 10,143 28,065 7,131 27,845 62,359 179,220

3. Other income and losses

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

2020 Foreign exchange gain (loss) $ (308,515) Net profit or loss from the financial assets (liabilities) measured at FVTPL Derivative Commodities. Forward Foreign Exchange Contracts 11,644 Metal commodity swap contracts 4,346 Non-Derivative Commodities 39,063 (Profits) Losses from the disposal of Property, plant and equipment 2,446 Other (25,453) Total $ (276,469)	2020	2019
		(58,026) (1,921) - 7,267 (27,655) (25,450)
	$ (276,469)	(105,785)

4. Financial cost

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

Interest expense	2020	2019
	$ 18,609	22,711

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(25) Remuneration for employees and directors, supervisors

The estimated amount of compensation of employees for the years ended December 31, 2020 and 2019 was $97,235,000 dollars and $73,054,000 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 issuing 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.

The difference of $46 thousand between the actual allotment of employees', directors' and supervisors' remuneration in 2019 and the estimated amount in the consolidated financial statements for the year ended December 31, 2019 has been treated as a change in accounting estimate and recognized as profit or loss for the year ended December 31, 2020. There was no difference between the amount approved by the board of directors for employees' and directors' and supervisors' remuneration and the amount estimated in the consolidated financial statements for the year ended December 31, 2020. The related information is available on the Market Observation Post System (MOPS).

(26) 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 $10,286,606,000 dollars and $9,330,916,000 dollars as of December 31, 2020 and 2019 respectively.

(2) Credit risk concentration risk

The customers of the Consolidated Company are concentrated in the high-tech

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computer industry. In order to reduce the credit risk of accounts receivable, the Consolidated Company continuously evaluates the financial position of the customers and adjusts the transaction terms if necessary. The Consolidated Company on December 31, 2020, and in 2019, a single customer is more than 5% of the total accounts receivable, accounts receivable balance for 4 and 5 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:

	Dec. 31, 2020	Expected credit loss in the duration of provision 750 1,698 1,992 572 489 1 6,547
Book value of notes and accounts receivable $ 6,413,813 363,005 116,197 5,698 1,771 2 6,547	Weighted average expected credit loss rate
	0.01% 0.47% 1.71% 10.04% 27.61% 50.00% 100.00% Dec. 31, 2019
$ 6,907,033		12,049
		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%
$ 5,973,117		8,592

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

pany are as follows:
Opening balance Corporate Mergers and Acquisitions Recognized impairment loss Write-off in the period Effects of exchange rate Closing balance	2020
	$ 12,049 8,592

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 $ 23,996 3,574 2,501,155 1,206,695 176,250	Contract Cash flow 24,680 3,574 2,501,155 1,206,695 193,213	Within 6 months 2,303 3,574 2,501,155 1,206,695 49,038	6-12 months 3,318 - - - 30,274	1-2years 6,973 - - - 43,091	2-5years 12,086 - - - 70,810	More than 5 years - - - - -
$ 3,911,670	3,929,317	3,762,765	33,592	50,064	82,896	-
$ 29,980 19,000 1,885,062 964,415 155,411	30,172 19,000 1,885,062 964,415 165,242	30,172 19,000 1,885,062 964,415 54,559	- - - - 46,417	- - - - 41,233	- - - - 23,033	- - - - -
$ 3,053,868	3,063,891	2,953,208	46,417	41,233	23,033	-

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.

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Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

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 MOP VND Financial assets Currency USD RMB HKD JPY EURO	Dec. 31, 2020	Dec. 31, 2020	NTD 11,831,263 773,189 27,918 37,153 38,696 2 4,394 6,179,073 308,691 10,202 20,772 1,157
		Foreign Currency (Note) $ 364,728 177,119 7,601 134,465 1,105 4 3,662,009 $ 200,582 10,899 2,778 75,180 33	Rate 28.4800 4.3648 3.6730 0.2763 35.0200 0.4791 0.0012 28.4800 4.3648 3.6730 0.2763 35.0200

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Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

	Financial assets Currency USD RMB HKD JPY EURO MOP VND Financial assets Currency USD RMB HKD JPY EURO MOP VND	Dec. 31, 2019	Dec. 31, 2019	NTD 11,624,983 744,979 27,904 23,054 80,425 2 22 6,665,126 160 7,793 6,590 1,531 3 17
		Foreign Currency (Note) $ 387,757 173,383 7,250 83,529 2,394 4 17,980 $ 222,319 37 2,025 23,878 46 1 14,361	Rate 29.9800 4.2975 3.8490 0.2760 33.5900 0.4791 0.0012 29.9800 4.2975 3.8490 0.2760 33.5900 3.8490 0.0012

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 $308,515,000 dollars and $58,026,000 dollars for the years ended 2020 and 2019 respectively.

(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, 2020 and 2019, 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 $49,542,000 dollars and $46,561,000 dollars respectively for 2020 and 2019. 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

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Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

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, 2020 and 2019 were $2,262,409,000 dollars and $1,882,046,000 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 $17,907,000 dollars and by $15,056,000 dollars for 2020 and 2019, respectively, with all other variables held constant.

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 Consolidated Company on the financial reporting date are as follows:

The parts measured at fair value: Financial assets: Financial assets measured at FVTPL - current Financial assets measured at FVTOCI - current Financial liabilities Not measured at fair value: Non-financial assets: Investment property	Dec. 31, 2020	Dec. 31, 2020		Dec. 31, 2019 Book Value Fair value 240,034 240,034 6,438 6,438 283,002 322,604
	Book Value	Fair value		Book Value
	$ 122,960 122,960 22,136 22,136 368,019 467,325

(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.

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(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).

Level 1 $ 116,780 20,120	Level 2 - -	Level 3 6,180 2,016	Total 122,960 22,136
$ 136,900	-	8,196	145,096
$ -	-	467,325	467,325
$ 20,931 -	- -	219,103 6,438	240,034 6,438
$ 20,931	-	225,541	246,472
$ -	-	322,604	322,604

(4) Table of details of the changes in financial assets (liabilities) measured at fair value and classified into level 3

Unit: NT$ thousands

					2020			Closing balance 6,180 2,016
$	Opening balance - 6,438 6,438	Profit an Recognized in profit or loss 6,180 -	d Losses Recognized in other comprehensi ve income - 438		Incr	ease Transferred to level 3 - - -	Decrease Sales, disposal or clearing - (4,860)
					Purchase - -


$		6,180		438	-		(4,860)	8,196

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Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

				2019				Closing balance 219,103 6,438
$	Opening balance 71,603 12,541 84,144	Profit an Recognized in profit or loss (9,461) -	d Losses Recognized in other comprehensive income - (16,103)	Incr	ease Transferred to level 3 - 10,000	Decrease Sales, disposal or clearing (156,961) -
				Purchase 313,922 -

$		(9,461)	(16,103)	313,922	10,000		(156,961)	225,541

The above included gains and losses are reported in "Other gains and losses", which relate to assets still held as of December 31, 2020 and 2019 as follows.

Recognized as (loss) income	2020 $ 6,180	2019 411

(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 at December 31, 2020 and 2019, are respectively $6,180 thousand and $219,103 thousand, 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 Financial assets measured at FVTOCI－ investment in equity instruments with no active market "	Valuation technique Comparable Company Analysis Net asset value method	Significant unobservable inputs ‧The multiple of book-to-Market ratio : 0.74~0.80 as of Dec. 31, 2019 ‧Discount for lack of marketability: 14.8%~16.8% as of Dec. 31, 2020 and Dec. 31, 2019 ‧Net asset value	Relationship between significant unobservable inputs and fair value
			‧The higher the multiple, the higher the fair value ‧The higher the discount for lack of marketability, the lower the fair value ‧Positive correlation with fair value

(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

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reasonable.

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Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

(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	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	5% 1%	- -	- -	171 51	(178) (58)

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.

(27) 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 Notes to the Consolidated Financial Statements (Continued)

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 `及` 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 80% and 78`% of the Consolidated Company’s revenue for 2020 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

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Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

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 $1,556,320,000 in 2020 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 Notes to the Consolidated Financial Statements (Continued)

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 $ 221			Other comprehens ive income after tax 64
Increased by 1% Decreased by 1%
	$	(221)	(1,168)		(64)	(209)

(28) 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.

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:

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, 2020 $ 4,803,336 (2,949,412)		Dec. 31, 2019 3,734,967 (2,845,994) 888,973 12,545,225 6.62%
	$ 1,853,924
	$ 14,479,559
		11.35%

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Lotes Co., Ltd. and Its Subsidiaries Notes to the Consolidated Financial Statements (Continued)

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

Please refer to Notes VI (8) and VI (14) for information on the Consolidated Company’s non-cash trading investments and fundraising activities for Right-of-use assets acquired under leases during 2020 and 2019.

The reconciliation of the Consolidated Company’s liabilities from fundraising activities for the years ended December 31, 2020 and 2019 was as follows:

Short-term loan Long-term loans (including long-term loans due within one year or one business cycle) Lease liabilities Total liabilities from financing activities Short-term loan Lease liabilities Total liabilities from financing activities	Jan. 1, 2020 Cash flow $ 29,980 (67,145) - (105,548) 155,411 (116,630)	Non-cash change Other Change in exchange rate Change in fair value Dec. 31, 2020 36,680 485 - - 129,544 - - 23,996 135,013 2,456 - 176,250
	$ 185,391 (289,323)	301,237 2,941 - 200,246
	Jan. 1, 2019 Cash flow $ 919,643 (890,590) 241,482 (115,118)	Non-cash change Other Change in exchange rate Change in fair value Dec. 31, 2020 - 927 - 29,980 35,762 (6,715) - 155,411
	$ 1,161,125 (1,005,708)	35,762 (5,788) - 185,391

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 Key management personnel Including the directors, supervisors, managers and their families and spouses

(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). The interest expenses of $1,000 and $1,000 were recognized for the years ended December 31, 2020 and 2019, respectively, and the balance of lease liabilities was $0 and $59,000 as of December 31, 2020 and 2019, respectively.

(4) Major management personnel transaction

Related compensation includes:

2020 and 2019, respectively. Major management personnel transaction Related compensation includes:
Short-term employee benefits Post-employment benefits Share-based payment	2020 $ 60,584 1,271 -	2019 50,134 865 432
	$ 61,855	51,431

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Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Its Subsidiaries

VIII. Pledged assets

The carrying value of the assets pledged as collateral by the Consolidated Company was as follows:

Name of Asset Property, plant and equipment	Dec. 31, 2020 $ 66,669	Dec. 31, 2019 44,618

IX. Significant contingent liabilities and unrecognized contractual commitments

(1) Significant unrecognized contractual commitments:

As of December 31, 2020, the consolidated company had signed and has not paid major plant construction contracts with the value of approximately RMB 52,795,000 yuan.

The consolidated company had entered into outstanding information system related contracts as of December 31, 2020 for an amount of approximately NT$31,566,000.

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

Guaranteed notes

	Dec.	31, 2020	Dec. 31, 2019
	$	1,570,240	2,358,960

X. Significant Disaster Loss: None.

XI. Significant post-period events: None.

XII. Others

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

By function By nature	2020	2020	2020	2019	2019	2019
	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	2,431,417 293,430 2,346 - 230,010 809,329 3,390	1,131,903 93,414 11,219 5,934 113,636 375,469 23,681	3,563,320 386,844 13,565 5,934 343,646 1,184,798 27,071	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

(2) Seasonality of Operation:

The Company's operations are subject to seasonal fluctuations due to the downstream computer industry.

248

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Its Subsidiaries

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 2020:

Capital Lending to Others:

Unit: NT$ thousands ／ 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 (Note 1)	Business Amount	Purpose f or the lending	Allowance for bad debt	Collateral	Collateral	Individual Limit (Note 2)	Overall limit (Note 2)
													Name	Value
0 0	The Company 〞	Lotes Guanghou Co., Ltd. 〞	Intracom pany transacti on 〞	Yes Yes	131,496 (RMB30,000) 218,980 (RMB50,000)	- 218,240 (RMB50,000)	- 87,296	5.0% 4.5%	2 2	- -	Working Capital 〞	- -	No "	- -	2,699,840 2,699,840	5,399,679 5,399,679

Note 1: The lending of funds is described as follows.

(1) Those who have business dealings.
(2) Those who have the need for short-term financing.

Note 2: 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: NT$ thousands/1,000 in foreign currency

No.	Name of the Company that provides the endorsement	Endorsee	Endorsee	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.
		Company Name	Relatio nship (Note 1)
0 0 0 0 1 2 2	The Company " " " Lotes Guanghou Co., Ltd. Lintes Technology Co., Ltd. "	REKA Technology Co., Ltd. Lotes Suzhou Co., Ltd. Lotes Guanghou Co., Ltd.及Lotes Suzhou Co., Ltd. Lotes Guanghou Co., Ltd. REKA Technology Co., Ltd. Lintes Technology (Suzhou) Co., Ltd. Genie Precision Machining Co., Ltd.	2 2 2 2 1 2 2	2,699,840 2,699,840 2,699,840 2,699,840 1,073,480 831,350 831,350	35,000 151,250 (USD5,000) 453,750 (USD15,000) 907,500 (USD30,000) 90,750 (USD3,000) 181,500 (USD6,000) 125,280	35,000 - - 227,840 (USD8,000) 85,440 (USD3,000) 113,920 (USD4,000) 101,260	- - - - - - 19,125	- - - - - - -	0.26% - % - % 1.69% 1.59% 6.85% 6.09%	6,749,599 6,749,599 6,749,599 6,749,599 2,683,700 1,662,701 1,662,701	Yes " " " No " "	No " " " " " "	No Yes " " No Yes No

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.

249

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Its Subsidiaries

(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.

(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: NT$ thousands

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	Highest shareholding status in the period	Note
				Shares	Book Value	Shareholding proportion	Fair value
Jiayu Investment Co., Ltd. " " " " " " Lintes Technology Co., Ltd.	Grand-Tek Technology Co., Ltd. Lian Hong Art Co., Ltd. Sitronix Technology Corporation OtO Photonics Inc. Lucemitek Co., Ltd Radinet Communications Inc. AICP Technology Corporation Class A preferred shares of Chailease Holding Co., Ltd.	None " " " " " " "	Financial assets measured at FVTPL - current " " " " " Financial assets measured at FVTOCI - curren t Financial assets measured at FVTOCI – non-current	163,980 1,017,000 170,000 1,368,800 1,169,977 600,000 400,000 202,000	5,608 83,547 27,625 - - - 2,016 20,120	0.67 % 2.98 % 0.14 % 4.57 % 17.33 % 26.25 % 5.33 % 0.13 %	5,608 83,547 27,625 - - - 2,016 20,120	0.67% 2.98% 0.14% 5.35% 17.33% 26.25% 5.33% 0.13%	註註註

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:

Unit: NT$ thousands

The company which acquired the property	Name of Asset	Date of occurrence	Amount of Transaction (Note 2)	Payment condition (Note 2)	Counterpart y of transaction	Relations hip	If the counterparty is a related party, the information of its previous transfer shall be provided	If the counterparty is a related party, the information of its previous transfer shall be provided	If the counterparty is a related party, the information of its previous transfer shall be provided	If the counterparty is a related party, the information of its previous transfer shall be provided	Reference for pricing	Purpose of the acquisition and the condition of use	Other agreed matters
							Owner	Relationship with the Issuer	Date of transfer	Amount
Lotes Zhongshan Co., Ltd. Lotes Hengnan Co.,Ltd.	Plant (Note 1) "	106.10 ~ 109.12 108.10 ~ 109.12	890,255 340,428	787,873 192,369	Chongqing Chuangyou Construction Group, etc "	None "	- -	- -	- -	- -	Bidding "	For the constructio n of a plant "	None "

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.

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

250

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Its Subsidiaries

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

Unit: NT$ thousands

The company which purchases (sells) products	Name of Transaction Counterparty	Relationship	Condition of Transaction	Condition of Transaction	Condition of Transaction	Condition of Transaction	Situation and reason for the conditions of transaction to be different from the ordinary ones	Situation and reason for the conditions of transaction to be different from the ordinary ones	Notes and accounts receivable (payable)	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. " Lotes Zhongshan Co., Ltd. REKA Technology Co., Ltd. Lotes Hengnan Co., Ltd. Lintes Technology Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Shenzhen Deyi Automation Technology Co.,Ltd.	Subsidiary The surrogate parent company are the same parent company Subsidiary The surrogate parent company are the same parent company " " " " " " " Subsidiary The surrogate parent company are the same parent company "	Net revenue from the goods sold Net amount of purchase Net revenue from the goods sold Net amount of purchase Net revenue from the goods sold Net revenue from the goods sold Net amount of purchase Net revenue from the goods sold Net amount of purchase Net amount of purchase Net amount of purchase Net revenue from the goods sold Net revenue from the goods sold Net revenue from the goods sold	1,257,599 1,308,932 7,574,556 8,386,061 412,265 469,248 555,838 276,160 930,071 2,042,032 303,826 1,634,841 107,468 177,683	95.98 % 99.90 % 75.69 % 85.57 % 4.12 % 4.69 % 5.67 % 2.76 % 9.49 % 30.62 % 4.56 % 94.81 % 12.33 % 20.38 %	settled by month at intervals of 90 days " " " " " " " " " " " "	- - - - - - - - - - - - - -	No significant difference " " " " " " " " " " " "	288,985 307,166 1,728,149 1,150,187 211,505 108,222 78,557 80,149 178,176 302,436 35,480 372,386 41,634 105,954	94.04% 99.61% 55.31% 39.21% 6.77% 3.46% 2.68% 2.57% 6.07% 21.31% 2.50% 93.32% 14.54% 37.00%

251

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Its Subsidiaries

Amounts due from related parties amounting to at least NT$100 million or 20% of paid-in capital:

Unit: NT$ thousands

							Unit: NT$	thousands
Related party with accounts receivable by the Company	Name of transaction counterpart y	Relationshi p	Balance of receivables from the related party	Turnover Ratio	Past due receivables from the related party		Receivables from the related party Amount received after the period ended	Appropriat ed Allowance Amount of loss
					Amount	Solution
Xincheng Development Co., Ltd. REKA Technology Co., Ltd. " " " " Lotes Suzhou Co., Ltd. Good Hope Investments Limited Lotes Guanghou Co., Ltd. " " Lotes Zhongshan Co., Ltd. Lotes Hengnan Co., Ltd.	The Company The Company Lotes Guanghou Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Lotes Hengnan Co., Ltd. Lotes Zhongshan Co., Ltd. Lotes Shenzhen Automation Technology Co., Ltd. Xincheng Developmen t Co., Ltd. REKA Technology Co., Ltd. " Lotes Zhongshan Co., Ltd. " REKA Technology Co., Ltd. Lotes Shenzhen Automation Technology Co.,Ltd.	Subsidiary Subsidiary The surrogate parent company are the same parent company " " " " The surrogate parent company are the same company Parent company The surrogate parent company are the same company " " " "	288,985 1,728,149 302,436 108,222 80,149 140,452 211,505 307,166 880,631 1,150,187 13,574 339,073 178,176 105,954	5.03 4.01 5.95 2.42 3.69 - 3.06 4.82 - 6.26 3.52 - 10.44 3.15	- - - - - - - - - - - - - -		73,102 1,728,149 298,134 74,564 - 72,684 115,422 82,137 - 1,150,187 - - 178,072 -	- - - - - - - - - - - - - -

252

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Its Subsidiaries

Related party with accounts receivable by the Company	Name of transaction counterparty	Relationship	Balance of receivables from the relatedparty	P Turnover Ratio	ast due receivable	s from the related party	Receivables from the related party Amount received after the period ended	Appropriated Allowance Amount of loss
					Amount	Solution
Lintes Technology (Suzhou) Co., Ltd.	Lintes Technology Co.,Ltd.	Subsidiary	372,386	4.88	-		-	-

Engagement in derivative transactions: Please refer to Note VI (II) and (XXIV).
Business relationships and material transactions between parent and subsidiaries:

Business relationships and significant intercompany transactions for the year ended December 31, 2019:

Unit: NT$ thousands

No.	Name	Transaction with	Relationship		Transaction in 2020	Transaction in 2020
				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 1 1 1 1 1 1 1 1 1 1 1 1	The Company " " " " " " " " " " " " " " " " " " " " " " " " " " " Lotes Guanghou Co., Ltd. " " " " " " " " " " "	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. " " " Good News Medical Co., Ltd. Lotes Guanghou Co., Ltd. " Compertum Microsystems Inc. Lerain Technology Co., Ltd. Mikronpoint Co., Ltd. Lotes Suzhou Co., Ltd. " REKA Technology Co., Ltd. " " " " " Lotes Suzhou Co., Ltd. " " " " Lotes Hengnan 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 3 3 3 3 3 3 3 3 3 3 3 3	Other receivables Other income Net revenue from the goods sold Net amount of purchase Accounts receivable Accounts payable Other income Other receivables Management fee Other payables Management fee Accounts receivable Accounts payable Net amount of purchase Sales revenue Selling expenses Accounts receivable Accounts payable Net amount of purchase Sales revenue Other income Other receivables Interest income Other income Other income Other receivables Sales revenue Other receivables Accounts receivable Accounts payable Purchase in the period Sales revenue Purchase of fixed assets Other receivables Sales revenue Purchase in the period Sale of molds Accounts receivable Accounts payable Accounts receivable	2,272 155 72 42,463 11 17,277 34 18 56,328 2,092 3,346 924 288,985 1,257,559 947 237 12,077 1,728,149 7,574,556 25,284 26 87,624 4,122 3 166 118 26 130 1,150,187 302,436 2,042,032 8,386,061 66,846 7,253 4,175 5,891 123 682 2,256 3,293	Same as common transactions " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "	0.01% -% -% 0.25% -% 0.09% -% -% 0.33% 0.01% 0.02% -% 1.50% 7.27% -% -% 0.06% 8.96% 43.81% 0.15% -% 0.45% 0.02% -% -% -% -% -% 5.96% 1.57% 11.81% 48.50% 0.35% 1.57% 0.02% 0.03% -% -% 0.01% 0.02%

253

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Its Subsidiaries

No.	Name	Transaction with	Relation ship		Transa	ction in 2020
				Subject	Amount	Term	Operating revenue Accounting for total assets
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 2 2 2 2 2	Lotes Guanghou Co., Ltd. " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " Lotes Suzhou Co., Ltd. " " " " " " " " " " " " " " "	Lotes Hengnan Co., Ltd. " " " " " Zongka Technology (Shenzhen) Co., Ltd. " " " " " Lotes Shenzhen Automation Technology Co., Ltd. " " " " Lintes Technology (Suzhou) Co., Ltd. " " Lotes Zhongshan Co., Ltd. " " " " " " " Guangzhou Leside Technology Co., Ltd. " " " Zhongshan Dezhi Metal Surface Treatment Co., Ltd. " Xincheng Development Co., Ltd. " " " Zongka Technology (Shenzhen) Co., Ltd. " " " Lintes Technology (Suzhou) Co., Ltd. " " " " Lotes Shenzhen 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 1 3 1 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3	Accounts payable Sale of fixed assets Other receivables Purchase in the period Sales revenue Purchase of fixed assets Management fee Accounts receivable Other payables Purchase in the period Sales revenue Other income Accounts receivable Accounts payable Sales revenue Purchase in the period Other income Sales revenue Accounts receivable Purchase in the period Other payables Accounts receivable Other receivables Sales revenue Purchase in the period Sale of fixed assets Purchase of fixed assets Accounts payable Accounts receivable Sales revenue Other income Other receivables Purchase in the period Accounts receivable Sales revenue Accounts receivable Accounts payable Purchase in the period Sales revenue Net amount of purchase Accounts receivable Accounts payable Sales revenue Other receivables Accounts receivable Other income Sale of fixed assets Sales revenue Accounts receivable Purchase in the period	35,480 1,996 2,299 303,826 3,098 2,286 834 567 109 162 1,232 194 3,943 18 4,448 262 145 60,702 35,034 15 4,752 13,574 339,073 24,228 90,616 292,919 9 89,616 25 3,049 118 22 38,440 10,823 1,308,932 307,166 1,196 1,896 34,248 218 8,827 229 14,901 6,525 6,184 15,235 21,127 90,286 41,313 137	Same as common transactions " " " " " " " " " " " " " " " " " " " " " " ' " " " " " " " " " " " " " " " " " " " " " " " " "	0.18% 0.01% 0.01% 1.76% 0.02% 0.01% -% -% -% -% -% -% 0.02% -% 0.03% -% -% 0.35% 0.18% -% 0.02% 0.07% 1.76% 0.14% 0.52% 1.52% -% 0.46% -% 0.02% -% -% 0.22% 0.06% 7.57% 1.59% -% 0.01% 0.20% -% 0.05% -% 0.09% 0.03% 0.03% 0.09% 0.11% 0.52% 0.21% -%

254

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Its Subsidiaries

No.	Name	Transaction with	Relation ship		Transa	ction in 2020
				Subject	Amount	Term	Operating revenue Accounting for total assets
2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 5 5 5 5 5 6 7 7 7 8 8 8 8 8	Lotes Suzhou Co., Ltd. " " REKA Technology Co., Ltd. " " " " " " " " " " " " " " " " " " " Lotes Hengnan Co., Ltd. " " " " " " " " Lintes Technology (Suzhou) Co., Ltd. " " " " Lintes Technology Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. " " Lotes Zhongshan Co., Ltd. " " " "	Lotes Zhongshan Co., Ltd. " " Xincheng Development Co., Ltd. " " " Zongka Technology (Shenzhen) Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Good Hope Investments Limited Ememe Robot Co., Ltd. Lotes Hengnan Co., Ltd. " " " " Lotes Shenzhen Automation Technology Co., Ltd. " Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Lotes Zhongshan Co., Ltd. " " " Lotes Shenzhen Automation Technology Co., Ltd. " Zongka Technology (Shenzhen) Co., Ltd. " Lotes Suzhou Co., Ltd. " Lotes Zhongshan Co., Ltd. " " Lintes Technology Co., Ltd. " " " " Genie Precision Machining Co., Ltd. Lotes Shenzhen Automation Technology Co., Ltd. Lotes Zhongshan Co., Ltd. " Guangzhou Leside Technology Co., Ltd. " Lotes Shenzhen Automation Technology Co., Ltd. " Zhongshan Dezhi Metal Surface Treatment 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	Accounts payable Sales revenue Accounts receivable Sales revenue Purchase in the period Accounts receivable Accounts payable Sales revenue Accounts receivable Accounts payable Accounts receivable Sales revenue Accounts receivable Purchase in the period Accounts payable Sale of fixed assets Sales revenue Accounts receivable Accounts receivable Sales revenue Purchase in the period Accounts receivable Accounts payable Sales revenue Accounts receivable Sales revenue Accounts receivable Sales revenue Accounts receivable Sales revenue Accounts receivable Sale of fixed assets Sales revenue Net amount of purchase Accounts payable Accounts receivable Other receivables Management fee Sales revenue Purchase in the period Accounts payable Sales revenue Accounts receivable Sales revenue Accounts receivable Accounts payable	24 406 467 300 49,485 290 17,424 469,248 108,222 880,631 7,800 276,160 80,149 555,838 78,557 512 412,265 211,505 2,526 1,834 930,071 140,452 178,176 177,683 105,954 107,468 41,634 4,543 2,032 16,264 5,073 14 1,634,841 36,915 6,500 372,386 831 184 18 28 32 23,545 27,112 209 207 2,808	" " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "	-% -% -% -% 0.29% -% 0.09% 2.71% 0.56% 4.57% 0.04% 1.60% 0.42% 3.21% 0.41% -% 2.38% 1.10% 0.01% 0.01% 5.38% 0.73% 0.92% 1.03% 0.55% 0.62% 0.22% 0.03% 0.01% 0.09% 0.03% -% 9.45% 0.21% 0.03% 1.93% -% -% -% -% -% 0.14% 0.14% -% -% 0.01%

255

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and Its Subsidiaries

No.	Name	Transaction with	Relation ship		Transa	ction in 2020
				Subject	Amount	Term	Operating revenue Accounting for total assets
8 8 8	Lotes Zhongshan Co., Ltd. " "	Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Lintes Technology (Suzhou) Co., Ltd. "	3 3 3	Purchase Sales revenue Accounts receivable	7,159 21 24	Same as ordinary transactions "	0.04% -% -%

Note 1: The number should be filled in as follows:

0 refer to parent company.
Subsidiaries are numbered by company, starting with the Arabic numeral 1. Note 2: The type of relationship with the counterparty is indicated below:
Parent company to subsidiaries
Subsidiaries to parent company
Subsidiaries to subsidiaries

(2) Information on Reinvestment Business:

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

Unit: NT$ thousands

Name of the company investing	Name of investee company	Location	Main business	Initial investme	nt amount (Note 1)	Shares held at the e	nd of the fisca	l period	Highest Shareholding Status in the period	Gain/loss of investee company in the fiscalperiod	Gain/loss in the investment recognized in the fiscalperiod	Remark
				End of this period	End of the previous year	Shares	Percentage	Book Value
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.	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 Lerain Technology Co., Ltd. Mikronpoint Co., Ltd. Loteson International Investments Limited Xincheng Development Co., Ltd. REKA Technology Co., Ltd. Jae You Co., Ltd. Wangden Investments Limited Ememe Robot Co., Ltd. Compertum Microsystems Inc. Good News Medical Co., Ltd. Lintes Technology Co., Ltd. Chia-Chun Investment Co., Ltd.	Samoa " " Anguilla Taiwan USA Germany Taiwan " Hong Kong Samoa Hong Kong " " Taiwan " " " "	Holding and investment businesses " " " General investment Market development Market development Design, testing and sale of chips Manufacturing and trading of mechanical equipment, electronic parts and components Holding and investment businesses Telecommunication services and sales of connectors for consumer electronics industry Telecommunication 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 Manufacturing and trading of mechanical equipment, electronic parts and components, optical instruments Electronic Parts, Components, Electrical Machinery, Supplies Manufacturing General investment	741,904 11,428 570,068 14,240 690,000 71,200 3,502 9,385 5,000 741,904 2,848 2,884 570,077 14,240 69,600 26,328 250 486,926 15,000	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 -	26,050,000 401,281 20,016,426 500,000 69,000,000 2,500,000 100,000 938,525 500,000 26,050,000 100,000 101,281 20,016,756 500,000 6,960,000 2,632,800 25,000 29,712,788 1,500,000	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 33.92% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 94.37% 35.34% 5.00% 52.13% 100.00%	5,201,46 1,531,99 2,239,44 121,20 1,044,19 75,81 4,05 2,68 4,93 5,367,41 1,61 649,72 2,259,20 121,20 (7,776 31,15 191 866,72 15,00	8 100.00% 9 100.00% 2 100.00% 9 100.00% 5 100.00% 6 100.00% 9 100.00% 7 33.92% 6 100.00% 6 100.00% 9 100.00% 5 100.00% 8 100.00% 9 100.00% ) 94.37% 2 35.34% 5.00% 8 52.13% 1 100.00%	753,814 73,651 303,052 7,595 164,471 30,917 183 (6,698) (64) 753,814 (32) 73,682 303,052 7,595 89 (29,260) (1,179) 271,870 1	724,108 73,651 299,979 7,595 164,372 30,917 183 (6,698) (64) 753,814 (32) 73,682 303,052 7,595 (2,691) (11,434) (59) 138,170 1	Note 2 Note 2 註2

256

Lintes Technology Co., Ltd. " " Jilong Co., Ltd.	Genie Precision Machining Co., Ltd. Compertum Microsystems Inc. Jilong Co., Ltd. Rihui Co., Ltd.	Taiwan " Samoa "	Manufacturing and trading of optical molds Electronic Parts and Components Manufacturing Holding and investment businesses Holding and investment businesses	164,833 14,620 140,976 140,976	- - 148,401 148,401	14,671,000 877,200 4,950,000 4,950,000	60.00% 11.77% 100.00% 100.00%	193,404 10,379 260,223 260,223	63.93% 11.77% 100.00% 100.00%	31,205 (29,260) 64,085 64,085	13,121 (1,394) 84,902 84,902	註2 註2

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

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

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

Unit: NT$ thousands

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	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	Name of investee company in Mainland China
					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	760,416 569,293 14,240 517,229 140,976 109,120 1,440,384 130,944 100,390 3,055 4,365	(2) (2) (2) (3) (2) (3) (3) (3) (3) (3) (3)	726,240 569,293 14,240 - 140,976 - - - - - -	- - - - - - - - - - -	- - - - - - - - - - -	726,240 569,293 14,240 - 140,976 - - - - - -	753,814 303,052 7,595 113,681 75,095 32,670 72,157 (15,116) (88) (1,255) (1,484)	100.00% 100.00% 100.00% 100.00% 52.13% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00%	100.00% 100.00% 100.00% 100.00% 52.13% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00%	724,083 299,978 7,595 99,195 49,997 32,670 72,157 (15,116) (1,137) (1,255) (757)	5,201,424 2,239,989 121,209 752,131 165,997 111,062 1,489,027 115,540 99,227 80 916	- - - - - - - - - - -

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

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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.

2. Investment ceiling in Mainland China :

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.	1,309,773,000	1,453,750,000	8,099,519 ,000
Lintes Technology Co.,Ltd.	140,976,000	140,976,000	997,621 ,000

Note 1: The conversions to NTD were made at the exchange rates prevailing on the balance sheet date.

3. 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 2020.

(4) Major Shareholders:

directly, in 2020. r Shareholders:
Share Name of Major Shareholder	Number of Shares Held	Shareholding Ratio
Chin-Ling Investment Co., Ltd.	10,956,237	10.58%
Chia-Ming Investment Co., Ltd.	9,797,037	9.46%

Note: (1) The information on major shareholders in this table is based on the last business day of each quarter, and is calculated based on the total number of common shares and preferred shares held by shareholders who have completed the delivery of unregistered shares (including treasury shares) of the Company of at least 5%. The number of shares recorded in the Company's financial statements and the actual number of shares delivered without physical registration may differ depending on the basis of computation.
(2) The above information is revealed by the trustee's opening of a trust account with individual subaccounts of the principal if the shareholder has delivered his or her shares to the trust. As for the shareholder's shareholding of more than 10% of the shares held by the Company in accordance with the Securities and Exchange Act, the shareholding of the shareholder includes the shareholding of the shareholder plus the shareholding of the shareholder who delivered the shares to the trust and has the right to decide the use of the trust property.

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

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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

assets and segment liabilities are consistent with the financial statements. Product and Labor Provision Information	assets and segment liabilities are consistent with the financial statements. Product and Labor Provision Information	assets and segment liabilities are consistent with the financial statements. Product and Labor Provision Information
The Consolidated company’s revenue information from external customers is as follows: Product and Labor Provision 2020 2019 DT 4,740,378 4,472,439 Server 4,371,102 3,646,810 NB 2,779,981 2,147,446 LINTES (High Speed Cable) 2,131,004 2,219,041 Automotive 119,130 131,205 Other 3,149,737 2,471,931 Total 17,291,332 15,088,872
DT Server NB LINTES (High Speed Cable) Automotive Other Total
	17,291,332	15,088,872

(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 External client revenue: Taiwan Mainland China Other countries Total Non-current assets: Taiwan Mainland China Other countries Total		2020 1,155,725 13,867,897 2,267,710	2019 717,066 11,784,445 2,586,761
		17,291,332	15,088,272
		776,383 5,258,620 46,069	438,067 4,181,610 49,955
		6,081,072	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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260

VII. Review Analysis of Financial Position and Operating Performance and Risk Issues

1. Financial position

Unit: NT$ thousand

Year Item	2019	2020	Difference	Difference
			Amount	%
Current assets	11,400,712	13,054,559	1,653,847	14.51%
Property, plant and equipment	3,514,714	4,495,974	981,260	27.92%
Intangible assets	99,789	155,510	55,721	55.84%
Other assets	388,701	661,820	273,119	70.26%
Total assets	16,280,192	19,282,895	3,002,703	18.44%
Current liabilities	3,630,746	4,580,880	950,134	26.17%
Non-current liabilities	104,221	222,456	118,235	113.45%
Total liabilities	3,734,967	4,803,336	1,068,369	28.60%
Share capital	1,034,779	1,034,779	0	0.00%`－`
Capital reserves	3,959,650	3,958,247	(1,403)	-0.04%
Retained earnings	7,471,519	9,101,114	1,629,595	21.81%
Other equity	(650,532)	(594,972)	55,560	8.54%
Equityto theparent company	11,815,326	13,499,198	1,683,872	14.25%
Non-control equity	729,899	980,361	250,462	34.31%
Total of equity	12,545,225	14,479,559	1,934,334	15.42%
Main causes and effects of changes of more than 20% and amounting to NT$10 million: 1. Property, plant and equipment: The property, plant and equipment was added mainly for the expansion of the scale of operations. 2. Intangible assets: The increase in intangible assets was mainly due to SAP ERP import coaching fees. 3. Other assets: The increase in other assets was mainly due to the increase in prepayments for equipment due to the expansion of operations of our mainland subsidiary. 4. Current liabilities: The increase in current liabilities is mainly due to the continuous growth of operation scale, increase in labor cost and the increase in demand of customers for spare parts before the Chinese New Year, resulting in the increase in accounts payable and other payables. 5. Non-current liabilities: This is due to the provision of lease liabilities in accordance with the IFRS 16 designation. 6. Retained earnings: The increase in net income was mainly due to the growth in profitability. 7. Non-controlling interest: The increase in non-controlling interest was mainly due to the increase in profit and asset size of the investee company.

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2. Operating performance

(1) Comparative analysis table of operating performance

Unit: NT$ thousand

			Unit: NT$ thousand	Unit: NT$ thousand
Year			Difference
	2019	2020
Item			Amount	%
Net operatingrevenue	15,088,872	17,921,332	2,832,460	18.77%
Operatingcost	9,620,962	10,361,137	740,175	7.69%
Grossprofit	5,467,910	6,930,195	1,462,285	26.74%
Operatingexpense	2,717,286	3,222,543	505,257	18.59%
Operating profit	2,750,624	3,707,652	957,028	34.79%
Non-operating income/expenses	81,137	37,650	-43,487	-53.60%
Net income before tax for continuingoperations	2,831,763	3,670,002	838,239	29.60%
Income tax (expense) benefit	(687,293)	(834,413)	-147,120	21.41%
Netprofit for theperiod	2,144,468	2,835,589	691,121	32.23%
Other comprehensive income	(337,918)	42,903	380,821	-112.70%
Total comprehensive income	1,806,550	2,878,502	1,071,952	59.34%
Net income attributed to
owners of the parent	2,076,043	2,732,361	656,318	31.61%
company
Net income attributed to non-controllinginterest	68,425	103,228	34,803	50.86%
EPS	20.11	26.41	6.30	31.33%

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 2020.
Operating profit: The increase in operating profit was mainly due to the increase in the scale of operations in 2020, 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$3.08 billion in 2020 (exchange gain of approximately NT$58,000 thousand in 2019), 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 2020, 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 2020, which resulted in a significant increase in profitability and a relative increase in the provision for income tax.

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Net profit for the period: This was mainly due to the increase in the scale of operations in 2020, which resulted in a significant increase in net profit for the 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 2020.
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 2020 and the significant increase in profitability.
Net income attributed to non-controlling interest: The Company's equity-method investee, Lintes Technology Co., Ltd. for 2019, has just made up for its loss and is not yet subject to income tax. However, while pretax earnings in 2020 were comparable to 2019, 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 2020 and the significant increase in profitability.

3. Cash flow

(1) Analysis of changes in cash flows for the most recent years

Year			Increas (decrease)
	2019	2020
Item			proportion %


Cash flow ratio
	92.53	75.72	-18.17%

Cash flow adequacy

ratio			-8.42%
	104.28	95.50

Cash flow reinvestment

ratio			-12.27%
	16.14	14.16

1) Cash flow ratio (%): The increase in cash flow ratio was mainly due to a significant increase in cash inflows from operating activities in 2020.
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 2020, 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 2020 compared to 2019.

(2) Liquidity improvement plan:

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The Company's cash from operating activities for 2020 was a net inflow and significantly higher than for 2019, 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 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

Name of Investing Company	Investing amount as of 2020/12/31	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	741,904	Investment Co.	724,108	Reinvestment companies are steadily growing their clients and expanding their markets	-	-
Good Hope Investments Ltd.	11,428	Investment Co.	73,651	Reinvestment companies are steadily growing their clients and expanding their markets	-	-
Guan Si Development Co, Ltd.	570,068	Investment Co.	299,979	Reinvestment companies are steadily growing their clients and expanding their markets	-	-
Zha Xi Investment Ltd.	14,240	Investment Co.	7,595	Reinvestment companies are steadily growing their clients and expanding their markets	-	-
Jiayou Investment Ltd.	690,000	Investment Co.	164,372	Reinvestment companies are steadily growing their clients and expanding their markets	-	-

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==> picture [502 x 271] intentionally omitted <==

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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
Item	2019		2020
	Amount	%	Amount	%
Operating revenue	15,088,672	100.00%	17,291,332	100.00%
Operating profit	2,750,624	18.23%	3,707,652	21.44%
Interest	10,109	0.07%	10,180	0.06%

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

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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 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

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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 2021, the Group's R&D expenses are expected to be approximately NT$1,500,000 thousand, which is expected to account for 7.80% 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:

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

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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.

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VIII. Special Notes

1. Related information of affiliates

(1) Affiliates' organizational chart

==> picture [753 x 424] intentionally omitted <==

269

(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	741,904	Engaged in holding and reinvestment activities
Good Hope Investments Limited	2003/3/21	Offshore Chambers, P.O. Box217, Apia, Samoa	11,428	Engaged in holding and reinvestment activities
Guan Si Development Co,Ltd.	2003/11/18	Offshore Chambers, P.O. Box217, Apia, Samoa	570,068	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	14,240	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	71,200	Market development
LOTES EU,GmbH	2018/2/27	Hessenring 119-121, 61348 Bad Homburg	3,502	Market development
Loteson International Investments Limited	2007/10/15	Unit 1405-1406, Dominion Centre, 43-59 Queen's Road East, Wanchai, H.K	741,904	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	760,416	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	517,229	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	109,120	Production of industrial robots, automation equipment and their components.
Lotes Zhongshan Co., Ltd	2016/05/12	No.12, Jinhui Road, Triangle Town, Zhongshan City	1,440,384	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,	3,959	Sellingof connectors for

270

		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	2,884	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	570,077	Engaged in holding and reinvestment activities
Lotes Suzhou Co., Ltd	2003/7/10	No.26, Caohu Avenue, Xiangcheng Economic Development Zone, Suzhou, Jiangsu Province	569,293	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	14,240	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	14,240	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	570,000	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	140,976	Engaged in holding and reinvestment activities
Sunmax Technology Co., Ltd.	2011/11/8	Offshore Chambers,P.O.Box 217 ,Apia ,Samoa	140,976	Engaged in holding and reinvestment activities
Lintes Technology (Suzhou) Co., Ltd.	2012/3/14	No.26, Caohu Avenue, Xiangcheng Economic Development Zone, Suzhou	140,976	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	3,055	Research and experimental development
Chongqing Fuxinrui Techmology Co., Ltd.	2018/12/27	No. 6, Yingchun Road, Nanan District, Chongqing City	4,365	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	100,390	Property development, home rental, landscaping and interior decoration

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Co.,Ltd.
Laida Technology Co., Ltd.	2019/11/5	13F.-1, No. 716, Zhongzheng Rd., Zhonghe Dist., New Taipei City	74,500	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	130,944	Surface treatment for all kinds of hardware and plastic products
Lerain Technology Co., Ltd.	2020/1/2	13F-1, No.716, Zhongzheng Rd., Zhonghe Dist., New Taipei City	27,668	Chip design, testing and sales
Karlum Investment Ltd.	2020/2/3	2F-1, No.268, Liencheng Rd., Zhonghe Dist., New Taipei City	15,000	General Investment
Genie Precision Machining Co., Ltd.	1986/10/3	No.4 Alley 704, Heping Rd., Bade Dist., Taoyuan City, Taiwan R.O.C.	244,500	Engagement in optical mold manufacturing and trading
Good News Medical Co., Ltd.	2020/4/22	4F No.15 Wuhsun St., Anle Dist., Keelung City	5,000	Manufacture and sale of machinery and equipment, electronic parts and components, and optical instruments
Micropoint Co., Ltd.	2020/12/21	9F No. 87-5, Kuangming 6thRd., Zhubei City, Hsinchu County	5,000	Manufacture and sale of machinery and equipment, electronic parts and components, and optical instruments

(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

Nature	Name of Company	Title	Name or representative	Shareholding	Shareholding
				Shares	Shareholding %
Controlling	Lotes Co., Ltd.	Chairperson	Jiaming Investment Co., Ltd. Legal Representative: Chu,Te-Hsiang	9,797,037	9.47%
		Director	Jiaming Investment Co., Ltd. Legal Representative: Ho,Te-Yu	10,040,037	9.47%
		Director	Tsai,Ming-Jui	5,954	0.01%
		Director	Hsieh,Chia-Ying	0	-
		Director	Hu, Jui-Ching	0	-

272

		Director	Jin, Cjang-Ming	0	-
		Supervisor	Cheng, Ming-Sung	0	-
		Supervisor	Yang,Wen-Ming	0	-
		Supervisor	Jinling Investment Co., Ltd. Representative: Chang, Kun-Yao	10,956,237	10.59%
		President	Ho, Te-Yu	442,555	0.43
Subsidiary	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. Legal Representative: Ho,Te-Yu	69,000,000	100
		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	Guan Si Development Co, Ltd. Legal Representative: Bao, Yu-Yi Ho,Jian-Sheng	101,281	100
	Jae You Co., Ltd.	Director	Jae You 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
	Lotes Hengnan Co., Ltd.	Director	Lotes Guanghou Co., Ltd. Legal Representative: Ho, Te-Yu, Chen,Zhi-Yu,Lin,Ko-Lun	118,500,000	100
	Lotes Hengnan Co., Ltd.	Supervisor	Lotes Guanghou Co., Ltd. Legal Representative: Lu, Chih-Cheng	118,500,000	100
	Shenzhen Deyi Automation Technology Co.,Ltd.	Director	Lotes Guanghou Co., Ltd. Legal Representative: Wang, Ying-Ping	25,000,000	100

273

	Shenzhen Deyi Automation Technology Co.,Ltd.	Supervisor	Jiayu Investment Co., Ltd. Legal Representative: Chu,Te-Hsiang	25,000,000	100
	Ememe Robot Co., Ltd.	Chairperson	Jiayu Investment Co., Ltd. Legal Representative: Tsai,Hui-Wen	6,960,000	94.37
		Director	Jiayu Investment Co., Ltd. Legal Representative: Liu, Xing-Hsia	6,960,000	94.37
		Director	Hsu, Feng-Yu	6,960,000	94.37
		Supervisor	Jiayu Investment Co., Ltd. Legal Representative: Chu, Te-Hsiang	0	-
	Lintes Technology Co., Ltd.	Chairperson	Jiayu Investment Co., Ltd. Legal Representative: Ho, Te-Yu	29,712,788	52.13
		Director	Jiayu Investment Co., Ltd. Legal Representative: Lo, Wei-Ren	29,712,788	52.13
		Director	Lai, Wei-Ru	29,712,788	52.13
		Director	Ye, Jing-Zhong	0	-
		Director	Ling, Ge	0	-
		Director	Yang, Zhi-Qing	0	-
	LOTES USA, INC	Director	Lotes Co., Ltd. Legal Representative: Wang, Ying-Lin	2,500,000	100
		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	Chairperson	Lotes Co., Ltd. Legal Representative: Chu, Te-Hsiang	100,000	100
		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	Jilong Co., Ltd.Legal Representative: Chen, Ya-Yuan	4,950,000	100
	Sunmax Technology Co., Ltd.	Director	Sunmax Technology 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 (Vice Chairperson)	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	Lotes Guanghou Co., Ltd. Legal Representative: Bao, Yu-Yi	4,950,000	100
Subsidiary	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	330,000,000	100
		Director	Lotes Guanghou Co., Ltd. Legal Representative: Ho, Hung-YU	330,000,000	100
		Supervisor	Lotes Guanghou Co., Ltd. Legal Representative: Lin, Ya-Chi	330,000,000	100
	Guangzhou Leside Technology Co., Ltd.	Chairperson	Lotes Guanghou Co., Ltd. Legal Representative: Wang, Ying-Ju	700,000	100
		Supervisor	Guangzhou Leside Technology Co., Ltd.Legal Representative: Deng, Li-Ming	700,000	100

274

	Chongqing Fuxinrui Techmology Co., Ltd.	Chairperson	Guangzhou Leside Technology Co., Ltd.Legal Representative: He, Yong-Hong	600,000	51
		Director	Guangzhou Leside Technology Co., Ltd.Legal Representative: Deng, Li-Ming	600,000	51
		Supervisor	Lotes Guanghou Co., Ltd. Legal Representative: Wang, Xue-Liang	600,000	51
	Hengnan Deyi Property Development Co., Ltd.	Chairperson	Lotes Guanghou Co., Ltd. Legal Representative: Ho, Te-Yu	118,500,000	100
		Supervisor	Lotes Guanghou Co., Ltd. Legal Representative: Lu, Chih-Cheng	118,500,000	100
	Compertum Microsystems Inc.	Chairperson	Lotes Guanghou Co., Ltd. Legal Representative: Chu,Te-Hsiang	1,316,400	31.38
		Director	Ho,Te-Yu	600,000	14.30
		Director	Luo,Wei-Ren	300,000	7.15
		Director	Chen,Ya-Yuan	0	-
		Director	Man Francis Piu	235,000	5.60
		Supervisor	Hsu,Feng-Yu	0	-
Subsidiary	Zhongshan Dezhi Artificial Co., Ltd.	Director	Lotes Guanghou Co., Ltd. Legal Representative: Wang, Ying-Ping	3,000,000	100
	Lerain Technology Co., Ltd.	Director	Lotes Co., Ltd. Legal Representative: Chu,Te-Hsiang	938,525	33.92%
		Director	Kao,Miao-Bin	124,775	4.51%
		Director	Hsu,Feng-Yu	0	-
		Supervisor	Chen,Ya-Yuan	0	-
	Karlum Investment Co., Ltd.	Director	Lintes Technology Legal Representative: Chu, Te-Hsiang	1,500,000	100
		Director	Lintes Technology Legal Representative: Luo, Wei-Ren	1,500,000	100
	Genie Precision Machining Co., Ltd.	Chairperson	Lintes Technology Legal Representative: Chu, Te-Hsiang	14,671,000	60
		Director (Vice Chairperson)	Lintes Technology Legal Representative: Chu, Te-Hsiang	14,671,000	60
		Director	Lintes Technology Legal Representative: Wang, Tzu-Wei	14,671,000	60
		Supervisor	Chu, Tzu-Chi	201,571	0.82
	Good News Medical Co., Ltd.	Chairperson	Chu, Te-Hsiang	0	-
		Supervisor	Ho, Te-Yu	0	-
	Micropoint Co., Ltd.	Chairperson	Lotes Co., Ltd Legal Representative: Chu, Te-Hsiang	500,000	100
		Director	Lotes Co., Ltd Legal Representative: Ho, Te-Yu	500,000	100
		Director	Lotes Co., Ltd Legal Representative: Chen, Ya-Yuan	500,000	100
		Supervisor	Lotes Co., Ltd Legal Representative: Hsu-Feng-Yu	500,000	100

(5) Operating overview of affiliates

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.	741,904	5,201,468	0	5,201,468		0 0	741,904	5,201,468
2	Good Hope Investments Limited	11,428	1,531,999	0	1,531,999		0 0	11,428	1,531,999

275

3	Guan Si Development Co, Ltd. Zha Xi Investments Ltd.	570,068	2,239,442	0	2,239,442	0	0	570,068	2,239,442
4		14,240	121,209	0	121,209	0	0	14,240	121,209
5	Jiayu Investment Co.,Ltd.	690,000	1,046,512	2,824	1,043,688	164,390	164,234	690,000	1,046,512
6	LOTES USA Inc.	71,200	78,281	2,465	75,816	0	(26,698)	71,200	78,281
7	LOTES EU Gmbh	3,502	5,184	1,125	4,059	0	(4,316)	3,502	5,184
8	Lerain Technology Co.,Ltd.	27,668	10,990	3,067	7,923	0	(19,549)	27,668	10,990
9	Micropoint Co., Ltd.	5,000	5,071	135	4,936	0	(64)	5,000	5,071
10	LOTES INVESTMENT Ltd.	741,904	5,367,416	0	5,367,416	0	0	741,904	5,367,416
11	Xin ChengLtd.	2,848	309,999	308,380	1,619	1,310,201	(53)	2,848	309,999
12	Rui Jia TradingCo.	2,884	3,624,560	2,974,835	649,725	10,007,917	12,307	2,884	3,624,560
13	Jae You Co.,Ltd.	570,077	2,259,208	0	2,259,208	0	0	570,077	2,259,208
14	Wangden Investments Co., Ltd.	14,240	121,209	0	121,209	0	0	14,240	121,209
15	Ememe Robot Co., Ltd	73,750	2,581	10,821	(8,240)	92	(76)	73,750	2,581
16	Laida Technology Co.,Ltd.	74,500	91,700	3,549	88,151	0	(29,265)	74,500	91,700
17	Good News Medical Co.,Ltd.	5,000	3,987	166	3,821	0	(1,184)	5,000	3,987
18	Lintes Co.,Ltd.	570,000	2,217,017	554,316	1,662,701	2,100,878	261,703	570,000	2,217,017
19	Karlum Investment Ltd.	15,000	15,001	0	15,001	0	0	15,000	15,001
20	Genie Precision Machining Co., Ltd.	244,500	549,484	234,197	315,287	319,649	59,527	244,500	549,484
21	JilongCo.,Ltd.	140,976	260,223	0	260,223	0	0	140,976	260,223
22	Sunmax Technology Co., Ltd.	140,976	296,153	35,930	260,223	0	(11,010)	140,976	296,153
23	Lotes Guanghou Co.,Ltd	760,416	7,359,616	2,158,192	5,201,424	9,400,989	858,219	760,416	7,359,616
24	Lotes Suzhou Co., Ltd	569,293	2,439,635	199,646	2,239,989	1,540,367	309,626	569,293	2,439,635
25	Tsongkha Technology (Shen Zhen)Co.,Ltd.	14,240	286,008	164,799	121,209	658,673	11,441	14,240	286,008
26	Lotes Hengnan Co., Ltd.	517,229	969,123	216,992	752,131	1,195,090	146,083	517,229	969,123
27	Lintes Technology (Suzhou)Co.,Ltd.	140,976	881,559	585,405	296,154	1,725,397	98,353	140,976	881,559
28	Shenzhen Deyi Automation Technology Co., Ltd.	109,120	483,941	372,879	111,062	685,225	33,317	109,120	483,941
29	Lotes Zhongshan Co.,Ltd	1,440,384	2,308,379	819,352	1,489,027	1,045,037	111,032	1,440,384	2,308,379

276

30	Zhongshan Dezhi Metal Surface Treatment Co.,Ltd.	130,944	130,575	15,034	115,540	45,669	(14,904)	130,944	130,575
31	Hengnan Deyi Property Development Co., Ltd.	100,390	99,229	2	99,227	0	(101)	100,390	99,229
32	Guangzhou Leside Technology Co., Ltd.	3,055	27,884	27,804	80	28,107	(510)	3,055	27,884
33	Chongqing Fuxinrui Techmology Co., Ltd.	4,365	1,812	16	1,796	0	(1,487)	4,365	1,812

(6) Consolidated financial statements of affiliates:

Declaration

277

For the fiscal year 2020 (January 1, 2020 through December 31, 2020), 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.

4. 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

278

Lotes Co., Ltd.

Chairperson: Chu, Te-Hsiang

President: Ho, Te-Yu

279

AI assistant

LOTES — Annual Report 2020

52339_rns_2021-08-02_e54aa97e-150e-43a8-b000-540968fc8d31.pdf

Lotes Co., LTD

2020 Annual Report

Notice to readers

Contents

I. Letters to Shareholders

1. 2020 Report on business operations

(1) Operational overview

(2) Operating plan implementation results and profitability analysis

a. Operating plan implementation results

b. Financial income and expenditure and profitability analysis

c. Research and development status

2. 2020 Operating plan and outlook

a. Management policy

II. Company Profile

III. Corporate Governance Report

(1) Organizational chart

(2) Businesses operated by each major department:

(1) Information on Directors and Supervisors

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

(1) Remuneration of General and Independent Directors:

Year: 2020; Unit: 1,000 TWD

Remuneration Schedule

Table of remuneration ranges

Remuneration Schedule

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.

(6) Corporate Social Responsibility:

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

Statement of Internal Control System

Chairperson: Chu, Te-Hsiang

5. Accountants’ Information

7. Relationship among the Top Ten Shareholders

IV. Capital Overview

1. Capital and shares

(4). List of major shareholders

2. Issuance of corporate bonds: None

V. Overview of Business Operations

A.Description of the business

2. The Company’s current products and services

(2). Overview of the industry:

(3) Various developing trends of products

(4) Competition of the products

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

(2) R&D Overview

(4) 2019 R&D Achievements

B. Overview of market, production and sales:

1. Sales Region:

2. Market share

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

estimated

4. Competitive niche

A. Technical capabilities for quick tooling development

B. Possession of various and numerous patents

3. The Supply Status of the Major Raw Materials

(2) Suppliers accounting for 10% of the Company's total shipments for the last two years

5.Production value for the past two years

C. Employee information

Disbursements for environmental protection

2. Education and training

3. Retirment system and implementation

4.Labor-management agreement and protection of employee rights

F. Important contracts

of the accountant and his or her audit opinion

(1) Condensed balance sheet

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

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

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

1. Financial Structure

Lotes Co., Ltd. 2020 Audit Report of Supervisors

Lotes Co., Ltd.

2020 & 2019

Table of Contents

Independent Auditor’s Report

LOTES Annual Report 2020