LOTES — Annual Report 2022

Jun 19, 2023

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Stock Code: 3533

Lotes Co., LTD

2022

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, 2023 Enquiry on the annual report: http://mops.twse.com.tw

1. 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		samliu@lotestech.com
Acting Spokesperson	Tsai, Ming-Jui	Sales Vice President	(02)24331110			ray@lotestech.com

1. 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

1. 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

1. 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:

2. Name of Accountants: Li, Fung-Hui, TSAI PEI-RU

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

1. 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

2. Company website: http://www.lotes.com.tw

Table of Contents

I.	Letters to Shareholders	1
II.	Company Profile	3
III.	Corporate Governance Report	5
	1. Organization	5
	2. Information on Directors, Supervisors, President, Vice President, Associate President, Heads of departments and branches	7
	3. Remuneration of Presidents and Vice Presidents	15
	4. Corporate governance operations	20
	5. Accountants’ Information	45
	6. Transfer or pledge of shares by the company's directors,
	supervisors, managers and stockholders with more than 10% of the
	company's shares	46
	7. Relationship among the Top Ten Shareholders	48
IV.	Capital Overview	46
	1. Capital and shares	49
	2. Issuance of corporate bonds	52
	3. Issuance of preferred shares	54
	4. Issuance of global depository receipts	54
	5. Employee subscription warrants	54
	6. Restriction on issuing of new employee option	56
	7. Share issuance of merger company	56
	8. Implementation of the capital utilization plan	57
V.	Overview of Business Operations	62
	1. Description of the business	62
	2. Overview of market, production and sales	66
	3. Employee information	72
	4. Disbursements for environmental protection	72
	5. Labor relations	73
	6. Information Security Management	73
	7. Important contracts	74
VI.	Overview of Financial Status	75
	1. A condensed balance sheet and statement of comprehensive	75

	income for the last five years with the name of the accountant and
	his or her audit opinion
	2. Five-year financial analysis	78
	3. Audit Report of Supervisors for the Financial Statements	83
	4. Financial Statements and Independent Auditor’s Report	84
	5. Consolidated Financial Statement and Independent Auditor’s Report	176
VII.	Review Analysis of Financial Position and Operating Performance and Risk Issues	262
	1. Financial position	262
	2. Operating performance	263
	3. Cash flow	263
	4. The impact of major capital expenditures in the most recent year
	on financial operations	264
	5. The main reasons for the most recent annual reinvestment policy
	and profit or loss, improvement plans and investment plans for the	264
	coming year
	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	266
VIII.	Special Disclosure	267
	1. Related information of affiliates	267
	2. Private Placement Securities in the Most Recent Years	273
	3. The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years	273
	4. Other items of description which needs to be supplemented	273
	Any event that had a material impact on the rights of shareholders
IX.	or the prices of securities provided in Clause 2, Paragraph 3,	273
	Article 36 of the Securities and Exchange Act occurred

I. Letters to Shareholders

1. 2022 Report on business operations

(1) Letters to Shareholders

For 2022, the Company's consolidated operating revenue was NT$ 21.391 billion, a growth of 23.71% compared to the 2021 operating revenue of NT$ 17.291 billion. The consolidated after-tax net profit was NT$ 3.472 billion, an increase of 27.08% compared to the after-tax net profit of NT$ 2.732 billion in 2021, translating to earnings per share (EPS) of NT$ 33.32.

Reflecting on 2022, the global economy continued to be influenced by the COVID-19 pandemic, leading to extreme uncertainties in the global economic outlook, which also impacted the operations of the industries our company belongs to. However, due to the gradual increase in the transition rate of the new generation server and desktop computer CPU platforms this year, and the progressive achievements in the active development of new products and new customers by our company, the 2022 annual revenue was able to grow steadily, creating a record high since the establishment of the company. In terms of profit, although the international raw material prices continued to rise, due to factors such as the continuous expansion of the operation scale, the improved penetration rate of new products, and the enhanced production efficiency, the 2022 annual profit grew by 27.08% compared to 2021, achieving high-quality profit performance with an EPS of NT$33.32.

• (2) Operating plan implementation results and profitability analysis

• a. Operating plan implementation results

Unit: NT$ thousands

Item	2022	2021	Increased (decreased) amount	Increased (decreased) proportion
Operating revenues	27,099,134	21,391,916	5,707,218	26.68%
Operating costs	15,161,454	12,834,611	2,326,843	18.13%
Gross profit	11,937,680	8,557,305	3,380,375	35.90%
Net income after tax for the period	6,254,264	3,472,201	2,782,063	80.13%

• b. Financial income and expenditure and profitability analysis

	Item	Item	2022	201
Profitability (%)	Return on total assets		19.34	15.29
	Return on total shareholders’ equity		28.49	22.87
	Percentage to the paid-in capital	Operating income	674.10	411.33
		Net income before tax	759.39	428.40
	Net profit margin		23.07	16.23
	Earnings per share after tax		58.70	33.32

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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. 2022 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 Manager: Liu, Hsing-Hsia

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II. Company Profile

1. Date of incorporation: August 23, 1986

2. 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 finishedproducts.
1989	Being aware of the electronics industry’s future, the Company began to manufacture/design electronic connectors and other related electronicproducts.
1992	Moved to Dawulun Industrial Park,Keelungcity.
1997	ISO9002 certified;Certified and taken effect of UL certification in the sameyear.
1998	Capital increased by cash, total capital was twenty-five million New Taiwan Dollars (NT$25,000,000).
2002	ISO9001:2000 certified.
2003	Invested factoryin 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(NT$495,000,000).
2005	Lotes Suzhou Co., Ltd was certified and taken effect of ISO 9001:2000. The Company converted surplus into capital, increasing total capital to five hundred twenty-three million and two hundred thousand New Taiwan Dollars(NT$ 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 (NT$ 591, 660,000). Approved by Securities and Futures Bureau, Financial Supervision Commission of the Executive Yuan to pass public offering. Approved byTaipei Exchange to register as emergingstock.
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 (NT$ 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 fortythousand New Taiwan Dollars(NT$711,740,000).
2008	The Company converted surplus into capital, increasing total capital to seven hundred sixty-two million three hundred twenty-seven thousand New Taiwan Dollars (NT$ 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 (NT$ 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(NT$ 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(NT$934,779,000).

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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. Becamequalified supplier for SamsungMobile Communications business division.
2016	CPU Socket--LGA3674 PHLM for the next generation servers 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.
2019	The Company’s subsidiary, Lintes Technology was approved by Taipei Exchange to register as listed emerging stock company. The Company increased capital by cash, increasing total capital to one thousand thirty-one million and forty-one thousand New Taiwan Dollars(NT$1,031,041,000).
2020	The Company’s subsidiary, Lintes Technology was approved by Taiwan Stock Exchange to register as listed company. The Company implemented the Enterprise Resource Management (ERP) system, SAP ERP, and went live on 1/7. DDR5 certified by DETEC Association. USB4.0 & Thunderbolt Jan4 certified by USB-IF Association.
2021	CPU Socket-Whitley Socket for the next generation servers received Intel certification. The company carries out a cash capital increase and issues domestic convertible corporate bonds for the first time, increasing the total capital to NT$ 1.059 billion 77 million 9 thousand. Establish a subsidiary in Vietnam.
2022	The new generation server CPU Socket-Eagle Stream Socket has passed INTEL's certification. The new generation server CPU Socket-AM5(Ginoa) Socket has passed AMD's certification.

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III. Corporate Governance Report

1. Organization

(1) Organizational chart

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Board of
Directors
Auditor’s
Office
General
Manager
General Manager’s
Office
Management Dept. Administration Dept Finance Dept. Sales Dept. R&D Dept. Manufacturing Dept. QA Dept. IT Dept. Legal Affair Dept.
----- End of picture text -----

(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 resourcesmanagementfor foreignaffiliated companies.
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.

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Department	Functions
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.
IT Department	1. Maintenance of network system 2. Maintenance of software/hardware equipments 3. Maintenance of system 4.Planning and executionof informationsystem.
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.

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

(1). Information on Directors and Supervisors

																	April 18,2023	April 18,2023	April 18,2023
Title	Nationality / Country of Origin	Name	Gender Age	Date elected	Term (year)	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			Remarks
							Shares	%	Shares	%	Share s	%	Share s	%			Title	Name	Relation
Chairperson	R.O.C.	Jiaming Investment Co., Ltd. Representa tive: Chu, Te-Hsiang	Male 51-60	July 16, 2021	3	93.10	10,040,037	9.70%	9,797,037	8.80%	0	0	0	0	Taishan Senior High School/ Mechanical Department; Lotes Co., Ltd./Chairperson	Lotes Co., Ltd./Chairperson Jiaming Investment Co., Ltd./Chairperson Jinling Investment Co., Ltd./Supervisor LOTES INVESTMENT LTD./Chairperson Lotes Suzhou Co., Ltd./Chairperson Lotes Guangzhou Co., Ltd./Vice Chairperson Jiayu Investment Co., Ltd./Chairperson Ememe Robot Co., Ltd./Chairperson Lintes Technology Co., Ltd./Chairperson Dechuan Investment Co., Ltd./Chairperson	Associate President's office	Chu Chen, Yi-Hui	Spouse
																	President	Ho, Te-Yu	Brother
Director	R.O.C.	Jiaming Investment Co., Ltd. Representa tive: Ho, Te-Yu	Male 51-60	July 16, 2021	3	October, 2004	10,040,037	9.70%	9,797,037	8.80%	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 LOTES INVESTMENT LTD./Director Lotes Guangzhou Co., Ltd./Chairperson Lotes Guangzhou Dezhi Co., Ltd./Chairperson Tsongkha Technology (Shenzhen ) Co., Ltd./Director Lotes Suzhou Co., Ltd./Vice Chairperson Lotes Hengnan Co., Ltd./Chairperson Lotes Hengnan Dezhi Co., Ltd./Chairperson Lintes Technology Co., Ltd./Director Jiayu Investment Co., Ltd./Director Lotes Zhongshan Co., Ltd./Director	Chairperso n	Chu, Te-Hsiang	Brothers
Director	R.O.C.	Hsieh, Chia-Ying	Male 41-50	July 16, 2021	3	June, 2013	0	0	0	0	0	0	0	0	National Taiwan University/Master of Business Administration National Taiwan University/B.S. in Electrical Engineering Realtek Semiconductor Corp./Executive Assistant to the President Communicator Venture Management Inc./Vice President MIS Joint International Co., Ltd./Vice President	Leltek Inc./Director Total Fortune Capital Limited/Executive Director Sunplus Innovation Technology Inc./Independent Director Tyntek Corporation/Independent Director	None	None	None

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Director	R.O.C.	Chu, Chien-Chu ng	Male 41-50	July 16, 2021	3	July 16, 2021	0	0	0	0	0	0	0	0	National Taiwan University/PhD in Electrical Engineering Mega Venture Capital Co., Ltd./Investment Review Committee Member Department of Electronic and Computer Engineering, National Taiwan University of Science and Technology/Adjunct Associate Professor TWSE/Listed Company Review Committee Member Department of Business Administration, NTU/Adjunt Practice Teacher Texas Instruments Taiwan Ltd./Senior Application Engineer NTU School of Professional Education and Continuing Studies/Adjunct Chair Professor	Ansforce Inc./Founder and CEO Graduate Institute of Technology, Innovation & Intellectual Property Management, National Chengchi University/Adjunct Assistant Professor	None	None	None
Independent Director	R.O.C.	Wang, Jen-Chun	Female 41-50	July 16, 2021	3	July 16, 2021	0	0	0	0	0	0	0	0	University of Pennsylvania/PhD in Law Clerk Division for the Grand Justices at the Judicial Yuan/Assistant to the Grand Justices	Tsar and Tsai Law Firm/Partner	None	None	None
Independent Director	R.O.C.	Chiang, I-Cheng	Male 51-60	July 16, 2021	3	July 16, 2021	0	0	0	0	0	0	0	0	University of Delaware/PhD in Mechanical Engineering Taiwan Aerospace Corp./Senior Engineer Taiwan High Speed Rail Corporation/Project Manager Department of Mechanical Engineering, Chinese Culture University/Assistant Professor, Associate Professor, Professor and Department Director Chinese Culture University/University Affairs Development Committee Member	Department of Mechanical Engineering, Chinese Culture University/Professor	None	None	None

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Drexel Deashine CPA Firm/CPA
University/MBA High-Tek Harness Enterprise Co.,
Ltd./Independent Director
Ding Shuo Certified Nanoplus Limited (Cayman) Taiwan
Public Accountants Branch/Independent Director
Taipei Branch/Chief Innovation Incubation Center, National
CPA Taipei University of
Ding Shuo Certified Technology/Counselor
Public Academia-Industry Collaboration and
Accountants/Partner Technology Licensing Center, National
CPA Taiwan Ocean University/Counselor
Department of
International Business,
National Taipei
University of Business
/Adjunct Lecturer
Public Service Pension
Independent Director R.O.C. Chang-HsiWu, Female 41-50 July 16, 2021 3 July 16, 2021 0 0 0 0 0 0 0 0 Fund Management Board/ Clerk of
u Department of Foreign
Affairs
National Taxation
Bureau of the Southern
Area Minxiong
Office/Clerk of Tax
Affairs
Department of
Accounting and
Information
Technology, National
Chung Cheng
University/Adjunct
Lecturer
Deloitte Taiwan/Deputy
Group Leader
KPMG Taiwan/Auditor
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Director and Supervisor are corporate shareholders' representatives; the major shareholders of the corporate shareholders are: April 18, 2023

	are:	are:	April 18,2023	April 18,2023	April 18,2023
	Name of Corporate Shareholder (Note 1)		Major Shareholders of Corporate Sharholder (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%)
Term Name		Professional qualifications and experiences		Compliance with independence circumstances	Number of other public companies that the person also served as independent directors
Chairperson Chu, Te-Hsiang		With more than 30 years of experiences in the R&D and manufacturing of connectors, and business administration. No circumstances specified in Article 30 of the CompanyAct.			No
Director Ho, Te-Yu		With more than 30 years of experiences in the R&D and manufacturing of connectors, and business administration. No circumstances specified in Article 30 of the CompanyAct.			No
Director Hsieh, Chia-Ying		With the profession and experiences in engineering and business administration. Worked as an independent director of the Company. Currently serves as a director of Leltek Inc, the Executive Director Total Fortune Capital Limited, and an independent director of Sunplus Innovation Technology Inc. No circumstances specified in Article 30 of the Company Act.			2
Director Chu, Chien-Chung		With the profession and experiences in engineering and business administration. Currently serves as the Founder and CEO of Ansforce Inc., and the Adjunct Assistant Professor, Graduate Institute of Technology, Innovation & Intellectual Property Management, National Chengchi University. No circumstances specified in Article 30 of the Company Act.			No
Independent Director Wang, Jen-Chun		With the educational attainment and profession of law. A lawyer and patent attorney in R.O.C. and a lawyer in New York, U.S. Currently serves as a Partner at Tsar and Tsai Law Firm. No circumstances specified in Article 30 of the Company Act.		Being independent as an independent director. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, is not a director, supervisor or employee of the Company or any of its affiliates. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, does not hold any share of the Company and is not a director, supervisor or employee of company that has certain relationship with the Company. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, does not receive any remuneration for business, legal, financial and accounting services provided for the Company or its affiliates in the last two years.	No

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Independent Director Chiang, I-Cheng	With the educational attainment and profession of mechanical engineering. Currently serves as a professor at the Department of Mechanical Engineering, Chinese Culture University. Serves as the covenor of the Remuneration Committee of the Company. No circumstances specified in Article 30 of the Company Act.	Being independent as an independent director. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, is not a director, supervisor or employee of the Company or any of its affiliates. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, does not hold any share of the Company and is not a director, supervisor or employee of company that has certain relationship with the Company. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, does not receive any remuneration for business, legal, financial and accounting services provided for the Company or its affiliates in the last two years.	No
Wu, Chang-Hsiu	With the educational attainment and profession of accounting. A CPA in R.O.C., a CPA, agent ad litem for tax affairs, patent and trademark affairs, a corporate sustainability manager, Accredited in Business Valuation in Pennsylvania, U.S. Currently serves as a CPA at Deashine CPA Firm. Serves as the covenor of the Audit Committee of the Company. No circumstances specified in Article 30 of the Company Act.	Being independent as an independent director. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, is not a director, supervisor or employee of the Company or any of its affiliates. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, does not hold any share of the Company and is not a director, supervisor or employee of company that has certain relationship with the Company. The said person, including but not limited to the spouse and/or the second degree relatives of the said person, does not receive any remuneration for business, legal, financial and accounting services provided for the Company or its affiliates in the last two years.	2

Board Diversity and Independence:

1. Board Diversity:

In accordance with Rule 20 of the Company's Code of Corporate Governance Practices, the composition of the Board of Directors shall take into account diversity, except that the number of directors who are also managers of the Company shall not exceed one-third of the total number of directors, and that the Company shall develop an appropriate diversity approach with regard to its operation, business model and development needs, which shall include but not be limited to the following two major criteria.

• (1) Basic qualifications and values: gender, age, nationality and culture, etc.

• (2) 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 carry out their duties. To achieve the desired objectives of corporate governance, the Board as a whole should possess the following competencies.

• (1) Ability to make operational judgments.

• (2) Ability to perform accounting and financial analysis.

• (3) Ability to conduct business administration.

• (4) Ability to conduct crisis management.

• (5) Knowledge of the industry.

• (6) International market perspective.

• (7) Ability to lead.

• (8) Ability to make policy decisions.

The composition of the Board of Directors should take into account the diversity of its membership and develop an appropriate diversity approach in relation to its operations, business model and development needs. The Company will re-elect its directors and independent directors and establish an audit committee at the 2021 Annual General Meeting. The current seven Board members, three of whom are independent, possess the knowledge, skills and qualities necessary to carry out their duties and have the necessary experience and expertise in accounting, legal, financial, commercial or corporate business respectively.

The Company also places emphasis on gender parity in the composition of the Board, with a target of 25% or more female directors, and currently has 7 directors, including 2 female directors, representing 29%.

The diversity of the Board is shown in the table below: The Board conducts regular performance reviews annually and recognises the diversity and suitability of its members.

[Background of Diversification]

Basic Information Background Experience

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Item Name	Gender	Employee of the Company	Age	Age	Accounting	Law	Finance	Technology	Profession al (Professor / lawyer/ CPA)	Business Administrat ion	R&D, Manufaturi ng	Investing
			41-50	51-60
Chairperson Chu, Te-Hsiang	M	◎		◎				◎		◎	◎
Director Ho, Te-Yu	M	◎		◎				◎		◎	◎
Director Hsieh, Chia-Ying	M		◎				◎	◎		◎		◎
Director Chu, Chien-Chung	M		◎					◎	◎	◎		◎
Independent Director Wang, Jen-Chun	F		◎			◎			◎	◎
Independent Director Chiang, I-Cheng	M			◎				◎	◎	◎	◎
Independent Director Wu, Chang-Hsiu	F		◎		◎				◎	◎

[Diversity Core Items]

[Diversity Core	Items]
Item Name				Diversity Core	Items
	Operational judgment	Accounting and financial analysis	Business administration	Crisis management	Knowledge of the industry	International market perspective	Ability to lead	Ability to make policy decisions
Chairperson Chu, Te-Hsiang	V		V	V	V	V	V	V
Director Ho, Te-Yu	V		V	V	V	V	V	V
Director Hsieh, Chia-Ying	V	V	V	V	V	V	V	V
Director Chu, Chien-Chung	V	V	V	V	V	V	V	V
Independent Director Wang, Jen-Chun	V		V	V	V	V	V	V
Independent Director Chiang, I-Cheng	V		V	V	V	V	V	V
Independent Director Wu, Chang-Hsiu	V	V	V	V	V	V	V	V

2.Independence of the Board.

• (1) The Company has 3 independent directors, accounting for 42.86% of the total 7 seats on the Board. The independent directors are independent in the following circumstances.

• None of them, including but not limited to himself/herself, his/her spouse, his/her second degree of kinship, etc., is a director, supervisor or employee of the Company or its affiliated companies.

• Neither the person, nor the spouse, nor a relative within the second degree of consanguinity, etc., holds shares in the Company (or uses the name of another person).

• None of them is a director, supervisor or employee of a company with a specific relationship with the Company (as stipulated in Article 3, Paragraph 1, Paragraphs 5 to 8 of the Regulations Governing the Establishment and Compliance of Independent Directors of Public Companies).

• In the last two years, the Company or its affiliates have not provided business, legal, financial or accounting services for which the Company was paid.

• (2) There are no spousal relationships among the Directors; Chu, Te-Hsiang, Chairman, and Ho, Te-Yu, Director, are brothers in two degrees of consanguinity. In accordance with Article 26-3, Paragraph 3 of the Securities and Exchange Act, no more than half of the Board of Directors of the Company shall be spouses or second degree relatives of the Directors.

• (3) he Company's Board of Directors was re-elected in 2021 and the Audit Committee replaced the function of the Supervisors and there are no more Supervisors. Therefore, there shall be no relationship between the supervisors or between the supervisors and the directors as described in Article 26-3, Paragraph 4 of the Securities and Exchange Act, and at least one of them shall be a spouse or a relative within two degrees of consanguinity.

12

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

April 19, 2022

													April 19,2022	April 19,2022	April 19,2022
Title	Natio nality / Coun try of Origi n	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			Remark s
					Shares	%	Shares	%	Shares	%			Title	Name	Relation
President	R.O. C.	Ho, Te-Yu	Male	August 23, 1986	473,899	0.43%	0	0.00%	15,956,237	14.33%	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 LOTES INVESTMENT LTD./Director Lotes Guangzhou Co., Ltd./Chairperson Lotes Guangzhou Dezhi Co., Ltd/Chairperson Tsongkha Technology (Shenzhen ) Co., Ltd./Director Lotes Suzhou Co., Ltd./Vice Chairperson Lotes Hengnan Co., Ltd./Chairperson Lotes Hengnan Dezhi Co., Ltd./Chairperson Lintes Technology Co., Ltd./Director Jiayu Investment Co., Ltd./Director Lotes Zhongshan Co., Ltd./Director	Chairpe rson and R&D Director	Chu, Te-Hsian g	Brother
R&D Director	R.O. C.	Chu, Te-Hsiang	Male	November 8, 2017	27,920	0.03%	0	0.00%	12,748,425	11.45%	Taishan Senior High School/ Mechanical Department; Lotes Co., Ltd./Chairperson	Lotes Co., Ltd./Chairperson Jiaming Investment Co., Ltd./Chairperson Jinling Investment Co., Ltd./Supervisor LOTES INVESTMENT LTD./Chairperson Lotes Suzhou Co., Ltd./Chairperson Lotes Guangzhou Co., Ltd./Vice Chairperson Jiayu Investment Co., Ltd./Chairperson Ememe Robot Co., Ltd./Chairperson Lintes Technology Co., Ltd./Chairperson Dechuan Investment Co., Ltd./Chairperson	Associat e Presiden t's office	Chu-Che n, Yi-Hui	Spouse
													Presiden t	Ho, Te-Yu	Brother
President Office Assistant deputy manager	R.O. C.	Chu-Chen, Yi-Hui	Female	November 8, 2017	11,192	0.01%	0	0.00%	0	0	Chinese Culture University/ Department of Political Science Lotes Co., Ltd./ Assistant deputy manager	Jiaming Investment Ltd./Supervisor	Chairpe rson and R&D Director	Chu, Te-Hsian g	Spouse
Department of Sales Senior deputy manager	R.O. C.	Tsai, Ming-Jui	Male	November 15, 2007	7,051	0.00%	3,000	0.00%	0	0	Ming Chuan University/Graduate Institute of International Business Lotes Suzhou Co., Ltd. /Vice President	LOTES EU GmbH /Director	No	No	No
Department of Finance Manager	R.O. C.	Liu, Hsing-Hsia	Male	June 1, 2006	3,000	0.00%	0	0	0	0	Tamkang University/Department of Accounting TCK Technology Co., Ltd./ Financial Manager	Ememe Robot Co., Ltd. /Director	No	No	No
Department of Finance Deputy Manager	R.O. C.	Liang, Shih-Yi	Female	June 1, 2006	0	0.00%	0	0	0	0	Tamkang University/Department of Accounting MAEDEN INTERNATIONAL LIMITED/Chief Accountant	None	No	No	No
Business Management Deputy Manager	R.O. C.	Kung, Yung-Sheng	Male	May 1, 2007	21,155	0.02%	0	0	0	0	National Taiwan University/Master of Mechanical Engineering Nan Juen International Co., Ltd./Engineering Manager	None	No	No	No
Business Management Assistant Manager	R.O. C.	Lin, Ching-Hao	Male	July 11, 2008	5,009	0.00%	0	0	0	0	San-Chung Vocational High School/Department of Mechanical Engineering STARLINK ELECTRONICS CORP./Plant Manager	None	No	No	No
Business Management Assistant Manager	R.O. C.	Lin, Tsun-Te	Male	January 1, 2010	4,500	0.00%	0	0	0	0	Tamkang University/Master of Information Management FOUND FAIR PLASTIC INDUSTRIAL CO., LTD./Information Manager	None	No	No	No

13

Business Management Auditing Supervisor	R.O. C.	WENG, KUN-TANG	Male	May 12, 2022	0	0.00%	0	0	0	0	National Taiwan University/Master of Business Administration DaChan Food (Asia) Limited/Auditing Office Supervisor	None	No	No	No
Business Management Assistant Manager	R.O. C.	Lin, Yao-Ching	Male	January 21, 2016	100	0.00%	0	0	0	0	St. John's University/ Department of Electronic Engineering Foxconn Technology Group/Quality Controll Supervisor	None	No	No	No
Sales Deputy Manager	R.O. C.	Li, Cheng-Wen	Male	January 21, 2016	6,000	0.01%	0	0	0	0	Vanung University/Department of Electronic Engineering Lotes Co., Ltd./Sales B Manager	None	No	No	No
Business Management Assistant Manager	R.O. C.	Wu, Yi-Chen	Male	December 5, 2016	3,577	0.00%	203	0.00%	0	0	Chinese Culture University/ Department of Political Science Lotes Co., Ltd./Sales A Manager	None	No	No	No
Business Management Sales Assistant Manager	R.O. C.	Lin, Ko-Lun	Male	December 5, 2016	6,000	0.01%	0	0	0	0	National Taipei University of Technology/Department of Industrial Engineering and Management EMBA LOTES Guangzhou Co., Ltd./Sales Manager	None	No	No	No
Management Department QR Associate Manager	R.O. C.	LIU, CHIN-HONG	Male	April 11, 2018	8,500	0.01%	0	0	0	0	National Taiwan University of Science and Technology/ FIT Vice Manager	None	No	No	No
Management Department Associate Manager	R.O. C.	HO, CHI-HSIANG	Male	April 1, 2020	4,750	0.00%	0	0	0	0	University of Michigan - Ann Arbor/MS FOXCONN/Engineer Touch Micro-system / Engineer	None	No	No	No

14

3, Remuneration of Presidents and Vice Presidents:

1. Remuneration of Directors (including Independent Directors)

2022 ； Unit: NT$ thousands

Title	Name	Directors' remuneration	Directors' remuneration	Directors' remuneration	Directors' remuneration	Directors' remuneration	Directors' remuneration	Directors' remuneration	Directors' remuneration	Ratio of total compensation (A+B+C+D) to net income (%)	Ratio of total compensation (A+B+C+D) to net income (%)	Sstaff receive relev	Sstaff receive relev	Sstaff receive relev	Sstaff receive relev	ant remuneration	ant remuneration	ant remuneration	ant remuneration	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	Remun eration from non-sub sidiary reinvest ments or parent compan ies
		Remuneration (A)		Severance Pay (B)		Bonuses and Allowances (C)		Profit Sharing- Employee Bonus (D)				Salaries, bonuses, special allowances, etc (E)		Retirement Pension (F)		Remuneration of employees (G)
		The Comp any	Cons olidat ed	The Comp any	Cons olidat ed	The Comp any	Cons olidat ed	The Comp any	Cons olidat ed	The Compan y	Consoli dated	The Compan y	Consoli dated	The Company	Consolidated	The Company		Consolidated		The Compan y	Consoli dated
																Cash	Share	Cash	Share
Chairp erson	Jiaming Investment Ltd. Rept.: Chu, Te-Hsiang	0	0	0	0	3430	3430	51	51	0.06%	0.06%	4,390	4,390	78	78	5,862	0	5,862	0	0.22%	0.22%	0
Director	Jiaming Investment Ltd. Rept.: Ho, Te-Yu
Director	XIE, JIA-YING
Director	QU, JIEN-ZHO NG
Independ ent Director	WANG, REN-CHU N	150	150	0	0	1,050	1,050	162	162	0.03%	0.03%	0	0	0	0	0	0	0	0	0.03%	0.03%	0
Indepe ndent Directo r	JIANG, YI-CHEN
Indepe ndent Directo r	WU, CHANG- XIU
1.Please describe the policy, system, criteria and structure for the remuneration of independent directors, and the relevance of the amount of remuneration to the responsibilities, risks and Association, the remuneration of the Company's directors and independent directors shall not exceed 3% of the Company's profits and the Board of Directors is authorized to determine th of involvement in the Company's operations. 2.Except as disclosed in the table above, remuneration received by the directors of the Company for services rendered to all companies included in the financial statements (e.g., as consultan																time commitment involved: In accordance with Article 19 of the Company's Articles of e remuneration of the directors and independent directors in accordance with their level ts to non-employees) in the most recent year: None.

15

Remuneration Schedule

Range of Remuneration	Name	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
Below 1,000,000	XIE, JIA-YING, QU, JIEN-ZHONG, WANG, REN-CHUN, JIANG, YI-CHEN, WU, CHANG-XIU	XIE, JIA-YING, QU, JIEN-ZHONG, WANG, REN-CHUN, JIANG, YI-CHEN,WU,CHANG-XIU	XIE, JIA-YING, QU, JIEN-ZHONG, WANG, REN-CHUN, JIANG, YI-CHEN, WU,CHANG-XIU	XIE, JIA-YING, QU, JIEN-ZHONG, WANG, REN-CHUN, JIANG, YI-CHEN,WU,CHANG-XIU
1,000,000～2,000,000	Chu, Te-Hsiang, Ho, Te-Yu	Chu, Te-Hsiang, Ho, Te-Yu
2,000,000～3,500,000
3,500,000～5,000,000
5,000,000～10,000,000			Chu, Te-Hsiang, Ho, Te-Yu	Chu, Te-Hsiang, Ho, Te-Yu
10,000,000～15,000,000
15,000,000～30,000,000
30,000,000～50,000,000
50,000,000～100,000,000
Over 100,000,000
Total	7	7	7	7

16

(2) Remuneration of Presidents and Vice Presidents: 2021 ； Unit: NT$ thousands

	Title	Name		Remunera	tion (A)	Severanc	e Pay (B)	Bonuses and Al	lowances (C)	lowances (C)	Profit Sharing- Employee Bonus	Profit Sharing- Employee Bonus	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 (%)	Remuneration from non-subsidiary reinvestments or parent companies
				The Company	Consolidated	The Company	Consolidated	The Company	Consolidated		The Company		Conso	lidated	The Company	Consolidated
											Cash	Stock	Cash	Stock
	President	Ho, Te-Yu		36,677	36,677	1,634	1,634	0	0		39,027	0	39,027	0	1.24%	1.24%	No
	R&DChief	Chu,Te-Hsiang
	Vice President	Kung, Yung-Sheng
	Associate Manager	Chu-Chen, Yi-Hui
	Vice President	Tsai, Ming-Jui
	Vice President	Li, Cheng-Wen
	Associate Manager	Lin, Ching-Hao
	Associate Manager	Lin, Tsun-Te
	Associate Manager	Lin, Yao-Ching
	Associate Manager	Wu, Yi-Chen
	Associate Manager	Lin, Ko-Lun
	Associate Manager	HO, CHI-HSIANG
	Associate Manager	LIU, CHI-HONG
								RemunerationSchedule
	Range of Remuneration							Name of Presidents and Vice Presidents
						The Company				Companies in the consolidated financial statements
	Below 1,000,000
	1,000,000～2,000,000
	2,000,000～3,500,000		LIN, TSUN-DE, LIN, YAO-CHIN							LIN, TSUN-DE, LIN, YAO-CHIN
	3,500,000～5,000,000		CHU CHEN, YI-HUI, LIN, CHIN-HAO, LIU, CHI-HONG							CHU CHEN, YI-HUI, LIN, CHIN-HAO, LIU, CHI-HONG
	5,000,000～10,000,000		CHU, TE-HSIANG, HE, TE-YU, GONG, YONG-SHEN, TSAI, MING-REI, LEE, ZHENG-WEN, LIN, KE-LUN, WU, YI-CHEN, HO, CHI-HSIANG							CHU, TE-HSIANG, HE, TE-YU, GONG, YONG-SHEN, TSAI, MING-REI, LEE, ZHENG-WEN, LIN, KE-LUN, WU, YI-CHEN, HO, CHI-HSIANG
	10,000,000～15,000,000
	15,000,000～30,000,000
	30,000,000～50,000,000
	50,000,000～100,000,000
	Over 100,000,000
	Total		13							13

17

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

2022 ； Unit: NT$ thousands

	Title	Name	Shares	Cash (Note 1)	Total	Ratio of Total Amount to Net Income (%)
Managerial officers	President	Ho, Te-Yu	0	41,518	41,518	0.66%
	R&D Chief	Chu, Te-Hsiang
	Management Department Vice President	Kung, Yung-Sheng
	Associate Manager	Chu-Chen, Yi-Hui
	Sales Div. VP	Tsai, Ming-Jui
	Management Department Associate Manager	Lin, Ching-Hao
	Management Department Associate Manager	Lin, Tsun-Te
	Management Department Associate Manager	Lin, Yao-Ching
	Management Department Associate Manager	Lin, Ko-Lun
	Management Department Associate Manager	HO, CHI-HSIANG
	Management Department Associate Manager	LIU, CHI-HONG
	Sales Div.1 Associate Manager	Wu, Yi-Chen
	Sales Div.2 Associate Manager	Li, Cheng-Wen
	Financing Dept. Manager	Liu, Hsing-Hsia
	Audit Director	WENG, KUN-TANG
	Financing Dept. Vice Manager	Liang, Shih-Yi

Note 1: The 2022 employees remuneration is based on the proportion of 2021 employee remuneration.

(4) 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: NT$ thousands

		Unit: NT$	thousands
The Company		2021	2022
The Company	Total remuneration	84,635	92,511
	Proportion of netprofit after tax	2.44%	1.49
Consolidated	Total remuneration	84,635	92,511
	Proportion of netprofit after tax	2.44%	1.49

The remuneration of the Directors and Supervisors, including travel expenses and remuneration for the distribution of earnings, is paid in accordance with the Company's Articles of Incorporation, and the remuneration of the Presidents and Vice Presidents is paid in accordance with the Company's approved principles for the payment of seniority. 4. Corporate governance operations

18

(1). Operations of the Board of Directors

The Board met 8 times in 2022, and the attendance of the Directors was as follows.

Title	Name	Attendance in Person B	By Proxy	Attendance Rate (%)(B/A)	Remarks
Chairperson	JIAMING CO. Rept.: CHU, TE-HSIANG	8	0	100%
Director	JIAMING CO. Rept.: HE, TE-YU	6	0	75%
Director	XIE, JIA-YING	8	0	100%	In the shareholder meeting on 2021.7.26, a new board of directors was elected.
Director	QU, JIEN-ZHONG	7	0	87.50%
Independent Director	WANG, REN-CHUN	7	0	87.50%	In the shareholder meeting on 2021.7.26, a new board of directors was elected.
Independent Director	JIANG, YI-CHEN	8	0	100%
Independent Director	WU, CHANG-XIU	8	0	100%
Other matters to be recorded. 1. The operation of the board of directors' meeting shall state the date, period, content of the motion, opinions of all independent directors and the Company's handling of the opinions of the independent directors if any of the following circumstances apply. (1)The matters listed in Article 14-3 of the Securities and Exchange Act. (2) Other than the matters listed above, any other matters resolved by the Board of Directors at a meeting of the Board of Directors at which the independent directors objected to or reserved their opinions and for which records or written statements are available. 2. The recusal of a director from the implementation of an interest motion shall include the name of the director, the content of the motion, the reasons for the recusal and the circumstances of the participation in the vote. 3. Listed companies should disclose information on the periodicity and duration of self- (or peer) evaluation by the board of directors, the scope, manner and content of the evaluation, and fill in Schedule 2(2) on the implementation of the board evaluation. An assessment of the current and most recent year's objectives for enhancing the functions of the board of directors (e.g. establishingan audit committee,enhancinginformation transparency,etc.)and their implementation.

(2) Information on the operation of the Audit Committee

Information on the operation of the Audit Committee

The Audit Committee met 7 times (A) in the most recent year and the attendance of the independent directors was as follows

Title	Name	Attendance in Person B	By Proxy	Attendance Rate (%)(B/A)	Remarks
Independent a	Wang, Jen-Chun	6	0	85.71%	Elected on 2021.07.26
Independent b	Chiang, I-Cheng	7	0	100%	Elected on 2021.07.26
Independent c	Wu, Chang-Hsiu	7	0	100%	Elected on 2021.07.26
Other matters to be recorded. 1. The operation of the Audit Committee shall include the date and period of the Audit Committee meeting, the content of the resolution, the content of the objections, reservations or material recommendations of the independent directors, the results of the Audit Committee's resolution and the Company's handling of the Audit Committee's opinion if any of the following circumstances apply (1)The matters listed in Article 14-5 of the Securities and Exchange Act. (2)Matters other than those listed above which have not been approved by the Audit Committee and which have been approved by at least two-thirds of all directors. 2. The recusal of an independent director from the implementation of an interest motion shall include the name of the independent director, the content of the motion, the reasons for the recusal and the circumstances of the participation in the vote. 3.Communication between the independent directors and the internal Audit Director and the accountant (including the major issues,mannerandresults ofcommunication regarding the Company'sfinancialand business conditions).

19

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

Evaluation Item	ImplementationStatus	ImplementationStatus	ImplementationStatus	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Y	N	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”?	ˇ		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.	None
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?	ˇ ˇ ˇ ˇ		(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 47 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
3.Composition and Responsibilities of the Board of Directors (1) Does the Board have a diversity policy, specific management objectives and implementation?	ˇ		(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 shouldnot exceed one-third ofthe seats ofthe	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

20

Evaluation Item	ImplementationStatus	ImplementationStatus	ImplementationStatus	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Y	N	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?	ˇ ˇ	ˇ	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. a.Basic qualifications and values: gender, age, nationality, and culture, etc. b.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 Company re-elected its directors in 2021. The current term (10th) has seven directors, all of whom are R.O.C., five of whom are male and two are female, including three independent directors. The directors come from a variety of professional backgrounds or fields of work, including accountants, lawyers, university professors and engineering, finance and operations management. They have the knowledge, skills and qualities required to carry out their duties and responsibilities, which enable them to form the Board of Directors of the Company. (2) In addition to the Remuneration Committee, the Company re-elected the members of the Board of Directors and established an Audit Committee in 2021 to replace the Supervisory Committee. There are no plans to establish any other functional committees. (3) The Company has established a performance appraisal system for the Board of Directors and has been conducting regularperformance appraisals and reportingthe results of	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.

21

Evaluation Item	Evaluation Item	ImplementationStatus	ImplementationStatus	ImplementationStatus	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
		Y	N	Abstract Illustration
				these appraisals to the Board of Directors on an annual basis since 2020. (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 certified public accountant'slicense.
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.)?		ˇ		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 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.	None
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?	ˇ		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?	ˇ		The Company currently appoints the Stock Agency Department of SinoPac Securities to handle the relevant shareholders' affairs.	None
7.	Information Disclosure Does the company have a corporate website to disclose both financial standings and the status of corporate governance? 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)? Does the Company announce and report its annual financial report within two months of the end of the	ˇ ˇ		(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 briefingsessions,and regularly publishes operational and	None
(1) (2) (3)

22

	Evaluation Item	ImplementationStatus	ImplementationStatus	ImplementationStatus	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
		Y	N	Abstract Illustration
	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?		ˇ	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.
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 )?		ˇ		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 2022. 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 services and customer complaints handling.	None
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 evaluation index:

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Evaluation Item	ImplementationStatus	ImplementationStatus	ImplementationStatus	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Y	N	Abstract Illustration
The Company's corporate governance rating for 2022 is 21%~35% of the previous year, and the improvement situation according to the rating index is as follows: Criteria Improvement Did the company have a majority of directors (including at least one independent director) and the convenor of the audit committee (or at least one supervisor) personally attend the regular shareholders' meeting, and did it disclose the attendance list in the minutes? At the regular shareholders' meeting in 2022, 5 directors attended, accounting for 71.4% of all directors; among them, 2 independent directors attended (one of whom is the convenor of the audit committee), accounting for 66.7% of all independent directors. Does each board meeting of the company have at least two independent directors in person? Our company re-elected the directors on July 26, 2021, and the number of independent directors increased from 2 to 3. In 2022, at least two directors personally attended each board meeting. Have all the independent directors of the company completed their training according to the "Implementation Points for the Continuing Education of Directors and Supervisors of Listed Companies"? All independent directors of our company completed the statutory training hours by the end of 2022. Does the company's internal audit staff have at least one person with an international internal auditor, international computer auditor or certified public accountant certificate? In May 2022, our company's board of directors approved the new audit supervisor, Mr. Weng Kuntang, who holds dual certifications of international internalauditorand computerauditor.

• (5) Where the Company has a remuneration committee, it shall disclose its composition, duties and operations.

1.Composition of the Remuneration Committee

On July 26, 2021, the Company's Board of Directors approved the appointment of three members of the Compensation Committee, whose terms of office shall commence upon the appointment of the three members of the Compensation Committee by the Board of Directors and end on July 25, 2024, the same date as the term of office of the current Board of Directors, and shall operate in accordance with the "Compensation Committee Organization Regulations" established by the Company.

The membership of the Compensation Committee is set out in the table below.

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April 18, 2023

				April 18,2023
Qualification ID (Note 1) Name		Qualification (Note 2)	Independence (Note 3)	Number of members of remuneration committees of other public companies
Convener	Chiang, I-Cheng	Mechanical Engineering Professional Learning Experience Department of Mechanical Engineering, Chinese Culture UniversityProfessor。 Convener of Remuneration Committee No circumstances specified in Article 30 of the Company Act.	An independent director and meets the criteria for independence, including but not limited to not being a director, supervisor or employee of the Company or its affiliated companies, and not being a spouse, second degree relative, etc. not holding a number of shares in the Company; not being a director, supervisor or servant of a company with which the Company has a specified relationship.	None
Independent Director	Wang, Jen-Chun	Law Professional Experience R.O.C.Lawyer, Patent Attorney and United States Attorney for the State of New York Tsar and Tsai Law FirmPartner。 No circumstances specified in Article 30 of the Company Act.	An independent director and meets the criteria for independence, including but not limited to not being a director, supervisor or employee of the Company or its affiliated companies, and not being a spouse, second degree relative, etc. not holding a number of shares in the Company; not being a director, supervisor or servant of a company with which the Company has a specified relationship.	None
Independent Director	Wu, Chang-Hsiu	Background in Accounting Studies R.O.C.CPA Pennsylvania accountants, tax litigation agents, patent attorneys, corporate sustainability managers, corporate valuers Deashine CPA Firm/CPA。 Convener of Audit Committee No circumstances specified in Article 30 of the CompanyAct.	An independent director and meets the criteria for independence, including but not limited to not being a director, supervisor or employee of the Company or its affiliated companies, and not being a spouse, second degree relative, etc. not holding a number of shares in the Company; not being a director, supervisor or servant of a company with which the Company has a specified relationship.	2

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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 Aug. 3, 2021 to Jul. 25, 2024, the 2022 Remuneration Committee met 3 times (A) and was attended by the following members:

Title	Name	Attendance in Person(B)	By Proxy	Attendance Rate (%) (Ｂ/Ａ)(Note)	Remarks
Convener	Chiang,I-Cheng	3	0	100%	Term: 110.8.3~113.7.25
Committee Member	Wang, Jen-Chun	3	0	100%	Term: 110.8.3~113.7.25
Committee Member	Wu, Chang-Hsiu	3	0	100%	Term: 110.8.3~113.7.25
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) The resolution of 2022 Remuneration Committee

Time Content Resolution and The Company’s Response

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2022.3.21	(1) The company's 2021 employee and director/supervisor remuneration.	All members present agreed that the motion be approved as presented to the Board of Directors of the Company for resolution
2022.6.24	(1) The revision of the title and some articles of the company's "Director and Supervisor Remuneration Method".	All members present agreed that the motion be approved as presented to the Board of Directors of the Company for resolution
2022.12.15	(1) To review the payment of compensation to employees of the Company's managers for 2021. (2) To review the payment of year-end bonuses to the Manager for 2022.	All members present agreed that the motion be approved as presented to the Board of Directors of the Company for resolution

(6)Implementation of sustainable development and how and why it differs from the Code of Practice on Sustainable Development.

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
1. Has the company established a governance structure to promote sustainable development and set up a dedicated (part-time) unit to promote sustainable development, which is delegated by the Board of Directors to senior management and supervised by the Board of Directors?		ˇ	1. Our company has not yet established a governance structure to promote sustainable development. 2. In October 2022, our company established the "ESG Development Department" in the Guangzhou factory, which is under the jurisdiction of the general manager's office. To ensure that the sustainable development direction covers aspects such as environment, society, and corporate governance, the ESG Development Department has set up specialized groups to collect stakeholders' concerns about environmental protection, job safety, supply chain management, labor human rights, operational performance, and corporate governance. Respecting the rights and interests of stakeholders, a dedicated area for stakeholders is set up on the company website to appropriately respond to their key sustainable issues.	1.In October 2022, our company established the "ESG Development Department" in the Guangzhou factory, which is under the jurisdiction of the general manager's office. To ensure that the sustainable development direction covers aspects such as environment, society, and corporate governance, the ESG Development Department has set up

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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
				specialized groups to collect stakeholders' concerns about environmental protection, job safety, supply chain management, labor human rights, operational performance, and corporate governance. Respecting the rights and interests of stakeholders, a dedicated area for stakeholders is set up on the company website to appropriately respond to their key sustainable issues. 2.In the future, we will also plan to report the ESG implementation results to the board of directors every year to strengthen the board's involvement in the company's ESG results.
2. Does the Company conduct risk assessments on environmental, social and corporate governance issues related to the Company's operations and formulate relevant risk management policies or strategies in accordance with the materiality principle? (Note 3)	ˇ		1. The boundary of our company's risk assessment includes the Taiwan head office and the mainland factories (Guangzhou factory, Zhongshan factory, Suzhou factory). 2. Our company's "ESG Development Department" confirms significant issues through steps such as "identifying stakeholders", "collecting sustainable issues", "surveying stakeholders' concerns", "investigatingimpacts on the companyand outside",	None

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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
			"analyzingmajor topics".
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 potential risks and opportunities of climate changes for the business and take measures to address climate related issues? (4) Has the Company compiled statistics on greenhouse gas emissions, water consumption, and total weight of waste in the past two years, and formulated policies on energy conservation, carbon reduction, greenhouse gas reduction, water use reduction, or other waste management?	ˇ ˇ ˇ	ˇ	(1) 1. Our company is mainly engaged in the research and development, production and sales of electronic connectors. Under the premise of pursuing balanced development and sustainable operation, the safety, health and environmental protection policy is formulated and signed by the general manager. Externally, we pledge our determination to protect the environment and maintain community safety, and internally, we require employees to enrich their professionalism, continue to create environmentally friendly products that benefit the public, and take safety, health and environmental protection as the basic considerations for the company's sustainable operation. 2.As of the printing of this annual report, our company's factories (Guangzhou, Suzhou, and Zhongshan) have continuously maintained the effective operation of the ISO 14001 Environmental Management System. They undergo regular audits by certification bodies and the Environmental Health and Safety Committee every year. Any deficiencies identified during these audits are marked for improvement and are addressed through continuous improvements under the PDCA cycle. This is done to ensure that the Environmental Health and Safety Management System complies with regulations and continues to improve.	(1) None (2) None. (3)The company has yet to assess the potential risks and opportunities climate change may pose to the business now and in the future. As per the Task Force on Climate-related Financial Disclosures(TCFD)

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Evaluation Item	Implementation Status	Implementation Status	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
			(2) Our factories in China have been increasing energy efficiency by progressively replacing light fixtures with LED lights, installing solar power for street lights, and regularly maintaining the electrical system to reduce power losses. These measures are expected to decrease power usage by 1.53 million kWh. The Zhongshan and Suzhou factories in China have installed solar power generation equipment, which generated a total of 1.37 million kWh in 2022. (3) The company plans to assess the risks and opportunities climate change presents for the business by the end of 2023, using the framework suggested in the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. A comprehensive reassessment will be done every three years, with annual reviews and updates. (4)Our factories in Guangzhou, Suzhou, and Zhongshan actively promote energy conservation and carbon reduction measures, which has improved greenhouse gas emissions. Solar power facilities have been installed in our factories and dormitories to achieve noiseless and pollution-free power generation. This reduces the emission of smog, carbon dioxide, sulfur dioxide, carbon dust, and nitrogen oxides produced by coal-fired power plants and is beneficial for energy conservation and carbon reduction.					recommendations, the company will assess these risks and opportunities by the end of 2023, undertaking a comprehensive reassessment every three years, and conducting annual reviews and updates. (4)None.
				Water	Electricity	Greenhousegas	Waste

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Evaluation Item				Implementation Status	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
				usage (tons)	usage (Kwh)	emissions (tons CO2 equivalent/year)
						Scope 1	Scope 2	Scope 3	Hazardous	Non-hazardous
			2021	539,154	64,001,760		158,047
						7,712	62,018	88,317	26	10,489
			2022	584,123	69,010,794		130,335
						3,434	39,435	87,466	50	12,644
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 Company establish and implement 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?	ˇ ˇ		(1)The Company recognises and adheres to international human rights conventions including the United Nations Universal Declaration of Human Rights, the International Labour Organisation Convention and supports the United Nations Framework for Protection, Respect and Remedy: Business and Human Rights and its Guiding Principles. We actively comply with human rights and labour rights legislation in all our locations, the Responsible Business Alliance Code of Conduct (RBA) and the requirements of our customers, and have established policies on management systems, working hours, wages, anti-discrimination and harassment, gender equality at work...etc. to ensure that our commitments are met. In addition to explaining the Company's policy and position to employees through announcements, events, literature, meetings, etc., the Company also educates employees on the importance of human rights protection and labour rights and related information through various channels, such as training for new employees and training for current employees.								None None

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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
(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?	ˇ		(2) The Company has established relevant employee welfare measures and reflected its operating performance in the employee bonus in accordance with the Company's Articles of Association. 1.Employee bonus: The bonus will be distributed according to the company's operation and individual performance as an incentive. 2.Year-end bonuses, gifts (or presents) for the three festivals. 3.Labour insurance and health insurance. 4.Leave system in accordance with the Labour Standards Law. 5.Monthly pension in accordance with the law. 6.Nursing room available. 7.The Welfare Committee is authorized to provide birthday gifts, wedding gifts, childbirth gifts, funeral benefits, etc. to employees. 8.The Welfare Committee is authorized to provide birthday gifts, wedding gifts, childbirth gifts, funeral benefits, etc. to employees. (3)The Company attaches great importance to the safety and health of its employees in the workplace, and the relevant protective measures and their implementation are as follows. (1)The Company has established management measures for occupational safety and health, prevention and treatment of occupational hazards, and various environmental protection measures such as waste storage management, in order to protect the safety of employees and avoid environmental pollution. (2)All items that may have an impact on the environment and safety are prepared on a daily basis, and we are able to respond immediatelyin the event

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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
(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 Company have a supplier management 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?	ˇ ˇ ˇ		of a disaster. An emergency response team has been set up to establish the duties and procedures of the organisation and its staff. (3)In order to provide a safe working environment, prevent the occurrence of occupational disasters and protect the safety and health of workers, the Company has established a safety and health code of practice and management regulations in accordance with the Occupational Safety and Health Act and its implementing regulations and the management requirements of OHSAS 18000. (4) In order to ensure the safety and health of all employees and non-employees working in the Company's workplace, the Company shall comply with the Code of Practice and the Management Regulations. (4)To ensure the safety of our employees in the workplace, all entrances and exits of our company are equipped with access control devices and main entrances and exits are equipped with security surveillance devices to ensure the safety of our employees. Our electrical, mechanical, lift and fire-fighting equipment are regularly inspected and maintained in accordance with the regulations or equipment usage rules to ensure their safety at all times. (5)To hold disaster prevention drills every six months to enhance staff awareness of fire prevention, so that they can take precautionary measures and take the correct safety measures immediately in the event of an incident. (6)To conduct regular staff health checks, testing of drinking water quality, and workplace health promotion to maintain the health of staff in the

33

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
			workplace. (7)In addition to health insurance for all employees, the Company also provides group accident insurance to protect the rights and interests of employees. (4)The Company has established an 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 respective positions, so that the Company and individuals can develop and grow together. (5)The Company has established a "Customer Complaint Handling Operation Procedure". The marketing and labelling of our products are in accordance with relevant laws and international standards. (5) The Company has established the "Supplier Selection Management System" and requires all suppliers to provide products that comply with international environmental regulations, and has established relevant regulations in the contract. We also require our suppliers to have a sound management structure in terms of personnel and environmental organizations. In addition, factory audits were conducted on suppliers. In 2022, 59 suppliers were audited and none were found to have significant actual or potential negative impacts on the environment, human rights, or labor practices.
5. Does the company make reference to internationally accepted standards or guidelines for the preparation of reports, such as perpetual reports, which disclose non-financial information about the company?	ˇ		1. In 2021, our company compiled a corporate sustainability report based on the GRI Standards, which shows the company's sustainable development performance. The public and stakeholders can access and download this	None

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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
Has a third party assurance or assurance opinion been obtained on the previously disclosed report?			information from our website (https://www.lotes.cc/zh-tw/responsibility.php#governan ce). 2. Third-party verification body: Grer International Certification Co., Ltd. Applied standard: AA1000 Type 1 Moderate Assurance.
6. If the Company has its own CSR Best Practice Principles in accordance with the "Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies", please explain the differences between them: Although the Company does not have a CSR Best Practice Principles at the moment, its implementation is consistent with its spirit and there are no significant differences. The Companywill implement them in the future accordingto the actual needs or regulations of the law.
7. Other important information to help understand the implementation of sustainable development. The Company's plants in Taiwan and China continue to focus on the needs of the local community  In Taiwan: Donations to low-income households in Keelung City (NT$ 160,000), sponsorship of elderly community meals by the Keelung City Zhonglun Volunteer Service Association (NT$ 20,000), and a contribution to a charity for Hope Primary School in India (NT$ 100,000).  In mainland China: We support impoverished university students to complete their studies by establishing the "Poverty Student Donation Aid Study Plan". From 2021 to 2022, more than 1 million RMB has been allocated to aid over 30 poor students in completing their university studies. By integrating with government resources, we continuously support disadvantaged groups, actively organize employees to participate in community activities, donate supplies and funds to welfare institutions; participate in pandemic prevention and public welfare activities in Guangdong Zhongshan City, where our factory is located, with a total donation of 500,000 RMB; donate to charity-related activities in Suzhou XiangchengDistrict,where our factoryis located,a total of 12,000 RMB.

1. 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:

2. 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

3. significant differences. The Company will implement them in the future according to the actual needs or regulations of the law.

( 七 ) Climate-related information for listed companies:

1. Implementation status of climate-related information.

1. Implementation status of climate-related information.
Item	Implementation status
1. Describe how the Board of Directors and management supervise and govern climate-related risks and opportunities. 2. Explain how identified climate risks and opportunities affect the company's business, strategy, and finance (short-term, medium-term, long-term). 3. Describe the financial impact of extreme climate events and transition actions. 4. Explain how the identification, assessment, and management of climate risks are integrated into the overall risk management system.	1. The company will assess the risks and opportunities of climate change for the company according to the TCFD recommendations announced by the Financial Stability Committee before the end of 2023, and restart a full assessment every three years and review it every year. 2. The company's actual capital is less than 5 billion

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1. If scenario analysis is used to assess resilience to climate change risks, explain the scenarios used, parameters, assumptions, analysis factors, and major financial impacts.

2. If there are plans to manage climate-related risks, explain the plan's content, and indicators and targets for identifying and managing physical risks and transition risks.

3. If internal carbon pricing is used as a planning tool, explain the basis for price setting. 8. If climate-related goals have been set, explain the activities covered, the scope of greenhouse gas emissions, the planning period, annual progress, etc. If carbon offset or Renewable Energy Certificates (RECs) are used to achieve related goals, explain the source and quantity of the offset carbon amount or the quantity of RECs.

4. Greenhouse gas inventory and assurance situation (fill in separately in 1-1).

yuan and will comply with the law to complete the carbon inventory of individual companies by 2026 and the merged report subsidiary's carbon inventory by 2027.

1. Mainland subsidiaries have independently conducted carbon inventory and obtained ISO14064 certificates: including Guangzhou Factory (Panyu Deyi Precision Co., Ltd.), Zhongshan Factory (Zhongshan Deyi Electronics Co., Ltd.) and Suzhou Factory (Deyi Precision Electronics (Suzhou) Co., Ltd.). Mainland subsidiaries have factory production lines, so they have independently carried out carbon inventory; two factories have obtained third-party assurance.

2. Greenhouse Gas Inventory and Confirmation Situation

Basic company information □ Companies with a capital of more than NTD 10 billion, steel industry, cement industry □ Companies with a capital of more than NTD 5 billion but less than NTD 10 billion ■ Parent companyindividual assurance	According to the sustainable development roadmap regulations for listed companies, at least the following should be disclosed: □ Parent company individual investigation ■ Consolidated financial report subsidiary assurance □ Parent company individual investigation ■ Consolidated financial report subsidiary investigation

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S 1	Ttl ii t CO2	Intensity (tonnes CO2e/million	A bd	Diti f itti Nt 3
cope	oa emssons (onnes e)	NTD) (Note 2)	ssurance oy	escrpon o assurance suaon (oe )
Parent Company	N/A	N/A	N/A	The mainland subsidiary has carried out its own carbon investigation because of its factory production line; two factory areas have obtained third-party assurance.
(Subsidiary) Panyu Deyi Precision Electronics IndustryCo.	1,747.17	0.06	SGS
(Subsidiary) Zhongshan Deyi Electronics Co.	695.45	0.02	SGS
(Subsidiary) Deyi Precision Electronics (Suzhou) Co.	991.1	0.03	N/A
Total	3,433.72	0.11
Scope 2	Total emissions (tonnes CO2e)	Intensity (tonnes CO2e/million NTD Nt 2	Assurance body	Description of assurance situation (Note 3)
		) (oe )
Parent Company	N/A	N/A	N/A	The mainland subsidiary has carried out its own carbon investigation because of its factory production line; two factory areas have obtained third-party assurance.
(Subsidiary) Panyu Deyi Precision Electronics IndustryCo.	19,307.21	0.71	SGS
(Subsidiary) Zhongshan Deyi Electronics Co.	15,106.96	0.55	SGS
(Subsidiary) Deyi Precision Electronics (Suzhou) Co.	5,021.07	0.18	N/A
Total	39,435.24	1.44
Scope 3	Total emissions (tonnes CO2e)	Intensity (tonnes CO2e/million NTD Nt 2	Assurance body	Description of assurance situation (Note 3)
		) (oe )
Parent Company	N/A	N/A	N/A	The mainland subsidiary has carried out its own carbon investigation because of its factory production line; two factory areas have obtained third-party assurance.
(Subsidiary) Panyu Deyi Precision Electronics IndustryCo.	44,133.31	1.62	SGS
(Subsidiary) Zhongshan Deyi Electronics Co.	42,493.54	1.56	SGS
(Subsidiary) Deyi Precision Electronics (Suzhou) Co.	839.02	0.03	N/A
Total	87,465.87	3.21

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

	Evaluation Item	ImplementationStatus	ImplementationStatus	ImplementationStatus	ImplementationStatus	(Note 1)	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 Company have an ethical corporate management policy that has been approved by the Board of Directors and expresses 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 Company established an assessment mechanism for the risk of unethical conduct, and regularly analyzed and evaluated the business activities in the scope of business with a higher risk of unethical conduct, and formulated a plan to prevent unethical conduct, covering at least the preventive measures under Article 7, paragraph 2 of "Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies"? (3) Does the Company have defined operating procedures, conduct guidelines, disciplinary and complaint systems for non-compliance, and periodically review and correct the foreclosure program in its unethical conduct prevention program?		V ˇ 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 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.			Follow the Company's corporate management principles. Follow the Company's corporate management principles.
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 integrity management,and regularly (at least once ayear)reports to the		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 after			(1) Follow the Company's corporate management principles.

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		Evaluation Item	ImplementationStatus	ImplementationStatus	ImplementationStatus	ImplementationStatus	(Note 1)	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” andReasons
			Yes	No		Abstract Illustration
(3) (4) (5)	Board of Directors on its integrity management policies and plans to prevent dishonest practices and monitor their implementation? Does the company establish policies to prevent conflicts of interest and provide appropriate communication channels, and implement it? 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		V V	V	inspection by the legal unit. (2) The Company has designated the Management Department as a dedicated unit to promote corporate integrity management. No material breaches of integrity were identified during 2022 and a report on the implementation of the Company's integrity policy was reported by the Board of Directors on March 21 2023. (3) The Company establishes and publishes an internal independent whistleblower or statement mailbox hr@lotestech.com 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) 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 on ethical corporate management on a regularbasisinthefuture.。
	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?
3. (1) (2) (3)	Operation of the integrity channel 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? 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? 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 hr@lotestech.com 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.

39

	Evaluation Item	ImplementationStatus	ImplementationStatus	ImplementationStatus	ImplementationStatus	(Note 1)	Deviations from “the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies” andReasons
		Yes	No		Abstract Illustration
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 Company currently operates in accordance with the spirit of the Ethical Corporate Management Best Practice Principles, except that the Company has not established a dedicated unit and has not established a reportingchannel and a disciplinaryand complaint system for non-compliance with Ethical Corporate Management Best Practice Principles.
6. Other important information to facilitate a better understandingof the company’s ethical corporate managementpolicies(e.g.,review and amend itspolicies).: None

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

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

40

(10) Implementation status of internal control system

1.Statement of internal control system

Statement of internal control system

Date: March 21, 2023

The Company's internal control system for 2022, based on the results of self-assessment, hereby states as follows:

1. 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.

2. 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.

3. 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.

4. 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.

5. 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, 2022, 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.

6. 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.

7. This statement was approved by the board meeting of the Company on March 21, 2023. Among the 5 directors present, no one held opposing opinions, while the rest agree with the content o f this statement.

Lotes Co., LTD

Chairperson: Chu, Te-Hsiang

President: Ho, Te-Yu

41

• 2.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	2022.01.27	The company intends to give up subscribing to the cash capital increase and stock subscription case of the subsidiary LeRain Technology Co., Ltd.
	2022.03.03	The company plans to purchase real estate - factory land.
Board of Directors Meeting	2022.03.21	1. The amount and method of employee remuneration and director and supervisor remuneration for the company in 2021. 2. The company's 2021 business report, financial statements, and consolidated financial statements. 3. The company's 2021 profit distribution plan. 4. The proposed issuance of the company's "Internal Control System Statement". 5. Proposal to amend some provisions of the company's "Articles of Association". 6. Proposal to amend some provisions of the company's "Shareholders' Meeting Rules". 7. Proposal to amend some provisions of the company's "Acquisition or Disposal of Assets Control Procedures". 8. The company's 2021 cash capital increase and new share issue, and the first unsecured convertible corporate bond issue plan in Taiwan. 9. The company plans to apply for a credit limit from the SinoPac Commercial Bank. 10. The company proposes to change the signing accountant. 11. The company regularly evaluates the independence and suitability of the signing accountant. 12. For the company's wholly-owned investment company in mainland China, Panyu Deyi Precision Electronics Industrial Co., Ltd., to apply for a credit limit of US$2 million from Citibank, the company provides a guarantee for the mainland investment company. 13. The company's first unsecured convertible corporate bond conversion capital increase and new share issuance in Taiwan. 14. Convene the company's 2022 regular shareholders meeting.
Board of Directors Meeting	2022.05.12	1. The company's 2022 Q1 financial report. 2. The company's first unsecured convertible corporate bond conversion capital increase and new share issuance in Taiwan. 3. Proposed to appoint Mr. WENG,KUN-TANG as the company's

42

Shareholders / Board of Directors Meeting	Date	Important Resolutions
		internal audit director. 4. The company passed a resolution at the board of directors meeting on March 3, 2022, to purchase the Zhubei factory land. For the partial funding required, it plans to apply for a medium- and long-term credit limit of NT$130 million from Hua Nan Bank.
Board of Directors Meeting	2022.06.24	Determine the company's 2021 cash dividend ex-dividend date.
Shareholders Meeting	2022.06.17	1. 2021 Annual Business Report and Final Account Book. 2. 2021 Profit Distribution Plan. 3. Plan to change the 2021 cash capital increase and issue new shares and the first domestic unsecured convertible bond case. 4. Revision of some clauses of the company's "Shareholders' Meeting Rules". 5. Revision of some clauses of the company's "Articles of Incorporation". 6. Revision of some clauses of the company's "Acquisition or Disposal of Assets Control Procedures".
Board of Directors Meeting	2022.08.11	1. The company's Q2 2022 financial report. 2. The company intends to apply for a credit limit of NT$ 500 million from China Trust (renewal). 3. The company's subsidiary Swiss Good Enterprises Limited intends to apply for a credit limit of USD 650,000 from Mega International Commercial Bank, and is endorsed by the parent company LOTES CO.,LTD.. 4. The company intends to apply for a comprehensive credit limit of NTD 300 million (renewal) and a short-term credit limit of NT$ 1 billion (new application) from E.SUN Bank. 5. The company's plan to cancel the guarantee for its subsidiary LeRain Technology Co., Ltd.. 6. The company intends to apply for a comprehensive credit limit of NT$ 600 million from Hua Nan Bank. 7. The company intends to handle the cash capital increase, issue new shares, and issue the second unsecured convertible bond case domestically. 8. The company's first domestic unsecured convertible corporate bond conversion capital increase and new share issuance matters.
Board of Directors Meeting	2022.08.27	1. It is proposed to set up the company's 2021 cash capital increase employee stock option method and the distribution of new share grant for managers and employees. 2. The company's wholly-owned subsidiary, JiaYu Investment Co., Ltd., intends to abandon the subscription of the cash capital increase case of its subsidiary Lai Da Technology Co., Ltd.

43

Shareholders / Board of Directors Meeting	Date	Important Resolutions
Board of Directors Meeting	2022.11.10	1. The company's Q3 2022 financial report. 2. The company's first domestic unsecured convertible corporate bond conversion capital increase and new share issuance matters. 3. The company intends to handle the cash capital increase, issue new shares, and issue the second unsecured convertible bond case domestically.
Board of Directors Meeting	2022.12.15	1. The company's 2022 employee remuneration and 2023 year-end bonus distribution plan for managers. 2. Proposed amendment to the company's "Major Internal Information Handling and Control Procedures". 3. The company's 2023 internal audit plan schedule. 4. The company intends to rent a house from Mr. Chu Te-Hsiang, a relatedperson of the company.
Board of Directors Meeting	2023.03.01	It is proposed to establish the company's 2023 cash capital increase employee stock option plan and distribution of new share grants to managers and employees.
Board of Directors Meeting	2023.03.21	1. The company's 2022 employee and director remuneration amount and method. 2. The company's 2022 business report, financial statements, and consolidated financial statements. 3. The company's 2022 profit distribution plan. 4. Proposal to issue the company's "Internal Control System Statement". 5. Proposed amendment to some articles of the company's "Corporate Governance Practice Guidelines". 6. The company's regular assessment of the independence and suitability of the signing auditor. 7. The company intends to apply to Taipei Fubon Commercial Bank for a comprehensive credit limit of USD 25 million (renewal) and a derivative financial product transaction limit of USD 5 million (renewal). 8. The company's first domestic unsecured convertible corporate bond conversion capital increase and new share issuance matters. 9. The company intends to invest in a Vietnamese subsidiary to enhance the group's capacity adjustment flexibility, reduce the risk of excessive concentration of the group's capacity, and expand the group's business layout in the Southeast Asian market. 10. Conveningthe company's 2022 annual shareholder meeting.

2.Review of the implementation of matters resolved at the 2022 annual general meeting of shareholders

Shareholders MeetingResolutions	Implementation Status
1. 2021 Annual Business Report and Final Account Book.	The company's 2021 operating income was NT$ 21,391,917 thousand, net profit was NT$ 3,472,202 thousand, and earningsper ordinaryshare was NT$33.32.
2. 2021 Profit Distribution Plan.	Accordingto the resolution,a cash dividend of NT$ 16per

44

share is distributed, and a cash dividend of NT$ 1,695,646 thousand is distributed. 3. Revision of some clauses of the company's Execute as resolved. "Shareholders' Meeting Rules". 4. Revision of some clauses of the company's "Articles Execute as resolved. of Incorporation". 5. Revision of some clauses of the company's Execute as resolved. "Acquisition or Disposal of Assets Control Procedures".

• (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:

			Unit: NT$ thousand Audit Fee Non-audit Fee Total Remarks 6,425 0 6,425 Non-audit fee for accountants to review CB's submission ─ 450 450Transfer Pricing and Master File Reporting	Unit: NT$ thousand Audit Fee Non-audit Fee Total Remarks 6,425 0 6,425 Non-audit fee for accountants to review CB's submission ─ 450 450Transfer Pricing and Master File Reporting	Unit: NT$ thousand Audit Fee Non-audit Fee Total Remarks 6,425 0 6,425 Non-audit fee for accountants to review CB's submission ─ 450 450Transfer Pricing and Master File Reporting	Unit: NT$ thousand Audit Fee Non-audit Fee Total Remarks 6,425 0 6,425 Non-audit fee for accountants to review CB's submission ─ 450 450Transfer Pricing and Master File Reporting
Accounting Firm	Name of CPA	Audit Period	Audit Fee	Non-audit Fee	Total	Remarks
KPMG Taiwan	Li,Fung-Hui	2022	6,425	0	6,425	Non-audit fee for accountants to review CB's submission
	TSAI PEI-RU	2022
KPMG Taiwan	CHANG, ZHI	2022	─	450	450	Transfer Pricing and Master File Reporting

1. 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.

2. 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.

3. (2) Information on replacement of CPA:

4. Regarding the former CPA:

Replacement Date	March 21, 2022	March 21, 2022	March 21, 2022	March 21, 2022	March 21, 2022
Replacement reasons and explanations	The Company's original CPAs were Chung, Tan-Tan and LEE, FENG-HUI 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 TSAI PEI-RU
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 two years			None
Differences with the company	Yes	－	Accounting principles or practices
		－	Disclosure of Financial Statements
		－	Audit scope or steps
		－	Others
		－

45

Replacement Date	March 21, 2022	March 21, 2022
	None	
	Explanations
Other Revealed Matters (Article 10, Subparagraph 6, Item 1-4 to 1-7 of this Standard)	None

1. Regarding the successor CPA:

garding the successor CPA:
Name of accountingfirm	KPMG Taiwan
Name ofCPA	TSAI PEI-RU
Date ofappointment	March 21,2022
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

1. Letter of reply from the former accountants: N/A.

2. (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.

3. Transfer or pledge of shares by the company's directors, supervisors, managers and stockholders with more than 10% of the company's shares:

4. (1) Changes in shareholding transfers by directors, supervisors, managers and substantial shareholders

Unit: shares

Title	Name	2022	2022	As of April 18 of 2023	As of April 18 of 2023
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Chairman	JIAMING INVESTMENT CO. Rept.: CHU, TE-HSIANG
		0	0	0	0
Chairman's Corporate Representative	CHU, TE-HSIANG
		0	0	11,994	0
Director	JIAMING INVESTMENT CO. Rept.: HE, TE-YU
		0	0	0	0
Chairman's Corporate Representative	HE, TE-YU
		0	0	19,791	0
Director	XIE,JIA-YING(Note 2)	0	0	0	0
Director	QU,JIEN-ZHONG(Note 2)	0	0	0	0
Independent Director	WANG, REN-CHUN (Note 4)
		0	0	0	0
Independent Director	JIANG, YI-CHEN (Note 4)	0	0	0	0
Independent Director	WU, CHANG-XIU (Note 4)
		0	0	0	0
Major Shareholder	JINLING INVESTMENTCO.
		0	0	0	0
President	HE,TE-YU	0	0	19,791	0
Director of Research and Development Department	CHU, TE-HSIANG
		0	0	11,994	0
Assistant Manager of President's Office	CHU CHEN, YI-HUI
		0	0	6,131	0
Sales Department Senior Vice President	TSAI, MING-REI
		(3,000)	0	5,051	0

46

Title	Name	2022	2022	As of April 18 of 2023	As of April 18 of 2023
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Business Management Department DeputyGeneral Manager	GONG, YONG-SHEN
		0	0	15,155	0
Business Management Department Assistant Manager	LIN, CHIN-HAO
		0	0	4,500	0
Business Management Department Assistant Manager	LIN, TSUN-DE
		0	0	4,500	0
Business Management Department Assistant Manager	LIN, KE-LUN
		0	0	6,000	0
Business Management Department Assistant Manager	LIN, YAO-CHIN
		0	0	100	0
Assistant Manager of Sales Division One Sales Department	WU, YI-CHEN
		0	0	2,577	0
Assistant Manager of Sales Division Two Sales Department	LEE, ZHENG-WEN
		0	0	6,000	0
Finance Department Manager	LIU, XIN-XIA
		0	0	3,000	0
Finance Department Deputy Manager	LIANG, SHI-YI
		0	0	0	0
Audit Supervisor	WENG, KUN-TANG
		0	0	0	0
Business Management Department Assistant Manager	LIU, CHI-HONG
		0	0	4,500	0
Business Management Department Assistant Manager	HO, CHI-HSIANG
		(2,000)	0	4,750	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% of the Shares	Shares	Transactio n Price
None	None	None	None	None	None	None

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

47

7. Relationship among the Top Ten Shareholders ：

April 18, 2023

							April 18,2023	April 18,2023
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		Remark s
	Shares	%	Shares	%	Shares	%	Name	Relationship
JINLING INVESTMENT CO.	10,956,237	9.84%	0	0.00%	0	0.00%	HE, TE-YU	JINLING INVESTMENT CO. Chairman
							CHU, TE-HSIANG	JINLING INVESTMENT CO. Supervisor
JIAMING INVESTMENT CO.	9,797,037	8.80%	0	0.00%	0	0.00%	CHU, TE-HSIANG	JIAMING INVESTMENT CO. Chairman
							CHU CHEN, YI-HUI	JIAMING INVESTMENT CO. Supervisor
New System Labor Retirement Fund	8,174,759	7.34%	0	0.00%	0	0.00%	None	None
DUNLING INVESTMENT CO.	5,000,000	4.49%	0	0.00%	473,899	0.43%	HE, TE-YU	JINLING INVESTMENT CO. Chairman
Cathay Life Insurance Co.	3,374,977	3.03%	0	0.00%	0	0.00%	None	None
DECHUANG INVESTMENT CO.	2,951,388	2.65%	0	0.00%	27,920	0.03%	CHU, TE-HSIANG	JIAMING INVESTMENT CO. Chairman
Deutsche Bank custodian Robb Technology Investment Account at Swedbank	2,462,320	2.21%	0	0.00%	0	0.00%	None	None
Old Labor Retirement Fund	2,389,226	2.15%	0	0.00%	0	0.00%	None	None
Standard Chartered Swayde Bank Robb Global Fund	1,949,337	1.75%	0	0.00%	0	0.00%	None	None
Allianz Taiwan Technology Investment Trust (TSTIT) under the trusteeship of South China Commercial Bank	1,746,871	1.57%	0	0.00%	0	0.00%	None	None

1. 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.

48

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/$thousand
Date	Insuranc e Price (NT$)	Authorized Capital		Paid-in Capital		Remarks
		Shares	Amount	Shares	Amount	Sources of Capital (NT$)	Capital Increased by Assets Other than Cash	Other
1987.12	－		5,000		5,000	$5 million capital stock of establishment	－	Jian-San-Ding-Zi Letter No. 344438 dated December 1,1987
1998.09	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
2004.09	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
2004.10	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
2004.12	18	49,400	494,000	49,400	494,000	Cash capital increase of $49 million	－	Jing-Zhong-Zi Letter No. 09333306580 dated January6,2005
2005.10	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
2006.08	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
2006.08	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
2007.03	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
2007.08	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
2008.01	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
2008.08	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
2009.12	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
2010.02	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
2010.09	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
2011.01	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 January17,2011
2011.08	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
2019.01	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
2021.12	432	155,000	1,550,000	105,977	1,059,779	Capital increase in cash NT$25 million		Jing-Shou-Shang-Zi Letter No. 11001182950 dated Oct. 8,2021

49

2022.04	－	155,000	1,550,000	106,095	1,060,946	CB Conversion Shares		Jing-Shou-Shang-Zi Letter No. 11101057920 dated Apr. 19,2022
2022.06	－	155,000	1,550,00 0	106,181	1,061,80 6	CB Conversion Shares	－	Jing-Shou-Shang-Zi Letter No. 11101091040 dated 2022.6.2
2022.09	－	155,000	1,550,00 0	106.487	1,064,87 1	CB Conversion Shares	－	Jing-Shou-Shang-Zi Letter No. 11101168760 dated 2022.9.12
2022.12		155,000	1,550,00 0	106.876	1,068,76 2	CB Conversion Shares	－	Jing-Shou-Shang-Zi Letter No. 11101229790 dated 2022.9.12
2023.04	－	155,000	1,550,00 0	107,829	1,078,29 8	CB Conversion Shares	－	Jing-Shou-Shang-Zi Letter No. 11230061040 dated 2023.4.12
2023.04	660	155,000	1,550,00 0	111,329	1,113,29 8	Cash Capital Increase NT$ 35 million	－	Change of registration notyet completed

Unit: shares

				Unit: shares
Share Type	Authorized Capital			Remarks
	Issued Shares	Un-issued Shares	Total Shares
Registered Shares	111,329,813	43.670,187	155,000,000

Summary of information related to the reporting system: N/A. (1). Shareholder structure

(1). Shareholder structure	(1). Shareholder structure
Unit: shares					April 18,2023
Shareholder structure Item	Government Agencies	Financial Institutions	Other Juridical Persons	Domestic Natural Persons	Foreign Institutions & Natural Persons	Total
Number of Shareholders	4	193	73	5,601	457	6,238
Shareholding (shares)	11,240,495	22,987,595	31,854,962	9,590,770	35,655,991	111,329,813
Percentage	10.10%	20.65%	28.61%	8.61%	32.03%	100%

(2) Diffusion of ownership

April 18, 2023

Class of Shareholding (Unit: shares)	Number of Shareholders	Shareholding (Shares)	Percentage
1- 999	3716	322,730	0.29%
1,000- 5,000	1869	3,052,676	2.74%
5,001- 10,000	187	1,317,643	1.18%
10,001- 15,000	95	1,171,722	1.05%
15,001- 20,000	69	1,190,396	1.07%
20,001- 30,000	84	2,113,842	1.90%
30,001- 40,000	50	1,690,808	1.52%
40,001- 50,000	35	1,577,320	1.42%
50,001- 100,000	81	5,656,208	5.08%
100,001- 200,000	62	8,677,199	7.79%
200,001- 400,000	34	9,759,205	8.77%
400,001-600,000	17	8,033,697	7.22%
600,001-800,000	6	3,906,324	3.51%
800,001-,000,000	6	5,485,395	4.93%
Over 1,000,001	17	57,374,648	51.54%
Total	6,328	111,329,813	100%

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Diversification of shareholding in preference shares: N/A. (4). List of major shareholders

Unit: shares April 18, 2023

Shares Major Shareholders	Shares	Percentage
Jinling Investment Co., Ltd.	10,956,237	10.32%
JiamingInvestment Co.,Ltd.	9,797,037	9.23%
New System Labour Retirement Fund	7,444,367	7.01%
Dunlin Investment Co.,Ltd.	5,000,000	4.71%
CathayLifeInsurance Co.	4,930,640	4.64%
Fubon LifeInsurance Co.	4,770,937	4.49%
Dechuan Investment Co.,Ltd.	2,951,388	2.78%
Deutsche Bank Custody of Swedbank Robb Technology Investment Account	2,600,000	2.45%
SCB Custodianshipof Swedbank Robb Global Fund	2,100,000	1.98%
Old System Labour Retirement Fund	2,029,882	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$

s						Unit: NT$
Item	Year			2021	2022	As of March 31, 2023 for the year
Market Price per Share	HighestMrketPrice			774	924	956
	Lowest Market Price			476	556	749
	Average Mrket Price			625	745	833
Net Worth per Share	Before Distribution			130.45	130.45	－
	After Distribution			－	－	－
Earnings per Share	Weighted Average Shares (thousand shares)			104,204	106,539	－
	Earnings per Share		Before adjustment	33.32	58.70	－
			After adjustment	32.69	57.87	－
Dividends per Share	Cash Dividends			16	26	－
	Stock Divid ends	Dividends from Retained Earnings		－	－	－
		Dividends from Capital Surplus		－	－	－
	Accumulated Undistributed Dividends			－	－	－
Return on Investment	Price / Earnings Ratio			18.76	12.69
	Price / Dividend Ratio			38.58	28.65	－
	Cash Dividend Yield Rate			2.56%	3.48%	－

• (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

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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 appropriate a cash dividend of NT$2,803,575,138 out of the 2022 surplus, to be allotted at NT$26 per share, and to authorize the Board of Directors to fix another dividend distribution base date upon the approval of the 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. Proposed employee cash bonus of NT$221,300,000.

Proposed remuneration for directors and supervisors is NT$4,480,000.

• (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 2021 was $3,472,201 thousand, and the Board of Directors resolved to distribute employee remuneration of $122,062 thousand and director and supervisor remuneration of $4,480 thousand for 2022, which is the same as the actual distribution of employee, director and supervisor remuneration totaling $126,542 thousand for 2022 as resolved by the Board of Directors and reported at the 2021 Annual Meeting of Shareholders.

(9). Share repurchases: None

2. Issuance of corporate bonds:

(1)Corporate Bond

Issuance of corporate bonds: rporate Bond
Type of corporate bond (Note 2)	Second Unsecured Convertible Corporate Bond
Issue(Processing)Date	March 9,2023
Nominal value	NT$100,000
Place of issue and transaction(Note 3)	─
Issue Price	Issued at 108.14% ofpar value
Total Amount	Total denomination of the issue is NT$1 billion
Interest Rate	Coupon rate 0%per annum
Term	Issued for a period of three years; from March 9, 2023, to March 9, 2026.
Guaranteed Institution	None
Trustee	Hua Nan Commercial Bank
Underwriter	Yuanta Securities Co.
SignatorySolicitors	Far East United Law Firm,CHIU,YA-WEN LAWYER
CPA	KPMG Li FungFai,CPA and TSAI,PEI-RU,CPA
Repayment Method	In addition to the holder of this convertible corporate bond converting it into ordinary shares of the company according to Article 10 of this method, or the company redeeming in advance according to Article 17 of this method or the companybuyingback from the securities

52

	dealer's business place to cancel, the company will within seven business days from the day after the maturity date of this convertible corporate bond repay in cash at once the bond held by the bondholder at the face value of the bond.
Unredeemedprincipal	NT$1,000,000,000
Terms of redemption or early settlement	If the closing price of the Company's common stock on the TWSE exceeds the then current conversion price of the Bonds by more than 30% (inclusive) for 30 consecutive business days from the day after the expiration of three months from the date of issuance (June 10, 2023) until 40 days prior to the expiration of the issuance period (January 28, 2026), the Company may, within 30 business days thereafter, send the Bonds by registered mail to (the holder of the Bonds (as stated in the Register of Bondholders on the fifth business day prior to the date of mailing, or by way of announcement for holders who subsequently acquire the Bonds through trading or otherwise) a "Notice of Call" for the expiry of the 30-day period (the aforesaid period shall be counted from the date of mailing by the Company and the expiry date of such period shall be the reference date for the call of the Bonds, and the aforesaid period shall not be the period of cessation of conversion under Article 9) The Company shall, upon the expiry of such period, send a letter to the Counterparty and request the Counterparty to announce and collect the Bonds from the Bondholders in cash at their face value within five business days after the Bond Collection Date. 2. From the day following three months after the bond issuance (June 10, 2023) until 40 days before the maturity date (January 28, 2026), if the outstanding amount of this convertible bond is less than 10% of the total issuance amount, the company may, at any time thereafter, send a registered letter to the bondholders (based on the register of bondholders five business days before the dispatch date, and for those who subsequently acquired the bonds due to purchase or other reasons, it will be done by announcement), a "Bond Recall Notice" that expires in thirty days (the aforementioned period starts from the date of dispatch by the company and ends on the bond recall benchmark date, this period must not be during the conversion suspension period stated in Article 9), and request the counter purchase center to announce it. The company will recall the bonds from the bondholders by cash according to the face value of the bond within five business days after the bond recall benchmark date. 3. If the bondholder does not reply in writing to the company's stock affairs agency before the bond recall benchmark date stated in the "Bond Recall Notice" (effective upon receipt, if sent by mail, the postmark date will be the proof), the company will redeem the bonds in cash according to the face value of the bond within five business days after the bond recall benchmark date. 4. If the company executes a recall request, the last date for the bondholder to request conversion is the second business day after the termination of the over-the-counter trading of this convertible corporate bond.
Restricted Terms	None
Name of credit rating agency, rating date, corporate bond ratingresult	NA

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Other Rights	Amount of ordinary shares, overseas depositary receipts or other marketable securities converted (exchanged or warrants) as at the date of printing of the annual report	As of April 30, 2023, no conversions have been completed, with each bond having a face value of one hundred thousand New Taiwan dollars, the bond conversion amount is zero New Taiwan dollars, and zero ordinary shares have been converted.
	Method of issue and conversion (exchange or share option)	Please refer to the domestic second unsecured convertible corporate bond issuance and conversion method of our company.
Te method of issue and conversion, exchange or subscription, the possible dilution of shareholdings by the terms of issue and the effect on the interests of existingshareholders		Based on the existing conversion price, if all remaining corporate bonds are fully converted into ordinary shares, the company needs to issue an additional 1,166,181 shares. The dilution rate of the share capital is 1.07%, and the impact on shareholder's equity is limited.
Name of the custodian for the exchange of the subject		NA

(2) Converted Corporate Bonds Information

Type of corporate debt (Note 1)	Type of corporate debt (Note 1)	Second unsecured conversion of corporate bonds
Item	Year	Up to April 30, 2023
Convertible Corporate Bond Market Price	Highest	NT$124.85(to be renewed)
	Lowest	NT$111.00(to be renewed)
	Average	NT$117.99 (to be renewed)
Conversion	Price	NT$ 857.5
Issue (processing) date and conversion price on issue		Issued on March 9, 2023, the conversion price at the time of issuance was NT$ 862.1.
Manner of fulfilling conversion obligations (Note 3)		Issue of New Shares

(3)Reporting of corporate bonds issued: None.

1. Issuance of preferred shares: None

2. Issuance of global depository receipts: None

3. Eemployee subscription warrants:

4. (1) Eemployee subscription warrants

Eemployee subscription warrants: 1) Eemployee subscription warrants	Eemployee subscription warrants: 1) Eemployee subscription warrants
April 14,2018
Types of Employee Stock Option Warrants	First (period) Types of Employee Stock Option Warrants
Date ofeffectiveregistrationand total units	2007.07.30/1,253,000 units
Issue date	2007.08.13
Number of units issued	1,253,000 units
	(1,253,000 common stocks)
Remaining Units Available for Issue	0
Ratio of subscribed shares issued to total number of shares issued (Note 1)	1.34%
Subscription Period
	Within five years from the actual issue date
ExerciseMethod	Issuance of new shares

54

Period and ratio in which subscription is restricted	70% after 2years;
	100% after3 years
Numberofshares 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%
Date of effective registration	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 anyeffect on shareholders' equity.

55

(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

													Unit: shares;Unit: NT$	Unit: shares;Unit: NT$	Unit: shares;Unit: NT$	Unit: shares;Unit: NT$
	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 outstanding shares	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 outstanding shares	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 outstanding shares
Manager	Vice President, Sales Dept.	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
	Management DepartmentVice President	Lu, Chih-Cheng
	Management DepartmentVice President	Kung, Yung-Sheng
	Management Department Associate Manager	Lin, Ching-Hao
	Financing Dept. Manager	Liu, Hsing-Hsia
	Financing Dept. Vice Manager	Liang, Shih-Yi
Staff	--	--	--	--	--	--	--	--	--	--	--	--	--	--	--	--

1. Restriction on issuning of new employee option: None

2. Share issuance of merger company: None

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8. Implementation of the capital utilization plan:

• 1, Analysis of previous cash capital increases, mergers and acquisitions or the issuance of new shares or corporate bonds in acquiring other companies' shares should be recorded:

The company has never handled mergers and acquisitions or issued new shares and private securities. The actual completion dates of the company's previous cash capital increases and corporate bond issuances have not exceeded three years from the date of declaration, which was handled in 2021 for the cash capital increase and the issuance of the first domestic unsecured convertible corporate bond. The related plan contents, implementation situation, and benefits are described as follows:

(1) Project Detail and Projected Benefits

• 1.Approval date and reference number of the competent authority: The letter No. 1100349428 and No. 11003494281 issued by the Financial Supervisory Commission on July 23, 2021.

• 2.The total amount of funds needed for this plan: NT$ 2,234,473 thousand.

• 3.Source of funds:

• (1)A cash capital increase in Taiwan to issue 2,500 thousand new shares, each with a face value of NT$10 and an issue price of NT$ 432. The total amount of funds expected to be raised is NT$ 1,080,000 thousand.

• (2)The company issued the first domestic unsecured convertible corporate bond, 10,000 in number, each with a face value of NT$ 100,000. The face interest rate is 0%, the issuance period is 3 years, and they were issued at 115.45% of the face value, raising an actual fund amount of NT$1,154,473 thousand.

4. Project Plan and Fund Usage Progress

Unit: NT$1,000

			Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000
Project	Scheduled Completion Date	Total Amount of Funds Needed	Scheduled Progress of Fund Utilization
			2021		2022				Total
			Q3	Q4	Q1	Q2	Q3	Q4
Replenishing Operating Funds	2021 Q4	1,754,473	870,935	883,538	-	-		-	1,754,473
Building office buildings and storage	2022 Q4	480,000	-	48,000	96,000	120,000	120,000	96,000	480,000
Total		2,234,473	870,935	931,538	96,000	120,000	120,000	96,000	2,234,473

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5.Expected Benefits

(1)Replenishing Operating Capital

Of the funds raised this time, NT$1,754,473 thousand is planned to be used to replenish operating capital, to cater to the company's future development needs. Based on the interest rate of the company's bank loan, which is about 1%, it is estimated that it can save an interest expense of NT$17,545 thousand each year.

(2) Construction of Office Building and Warehouse

The company plans to use NT$480,000 thousand for the construction of an office building and warehouse, to cater to the company's future operating needs and development, and to enhance overall operational management efficiency. The construction of the office building and warehouse is expected to be completed in the 4th quarter of 2022. Based on the rent price per ping in that area, it is estimated that from 2023 and onwards it can save an annual rent expenditure of about NT$41,299 thousand, which should reasonably alleviate financial burden.

• 6.Changes to Project Content, Reasons for Change, and Expected Benefits Before and After the Change:

(1) The Board of Directors resolved to change the plan on March 21, 2022: Change of plan content and reason

The original plan was to invest NT$480,000 thousand in the construction of an office building and warehouse. However, as it was unforeseen that the construction land is on a slope, and the Keelung City Government has strict regulations on the development of sloping land, especially in terms of soil and water conservation review, it is difficult to estimate when the Keelung City Government will issue the construction permit. To make effective use of the funds, therefore, it was decided at the Board of Directors' meeting on March 21, 2022, to change the plan for using the funds raised from the issuance of new shares and the first domestic unsecured convertible corporate bond in 2021, and it is planned to use the unused NT$480,000 thousand all for replenishing operating capital, to support the company's daily operating capital needs.

Unit: NT$1,000

Project	Scheduled Completion Date	Total Amount of Funds Needed	Scheduled Progress of Fund Utilization	Scheduled Progress of Fund Utilization	Scheduled Progress of Fund Utilization	Scheduled Progress of Fund Utilization	Scheduled Progress of Fund Utilization	Scheduled Progress of Fund Utilization	Scheduled Progress of Fund Utilization
			2021		2022				Total
			Q3	Q4	Q1	Q2	Q3	Q4
Replenishing Operating Funds	2022 Q2	2,234,473	870,935	883,538	-	480,000	-	-	2,234,473
Total		2,234,473	870,935	883,538	-	480,000	-	-	2,234,473

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(2) Expected Benefits after the Change in the Plan

The funds raised this time, 2,234,473 thousand Yuan, are planned to be used entirely to replenish operating capital, to cater to the company's future development needs. Based on the interest rate of the company's bank loan, which is about 1%, it is estimated that it can save an interest expense of 22,345 thousand Yuan each year.

1. Dates of Submission to the Information Reporting Website Specified by the Securities and Futures Bureau: July 23, 2021, and March 21, 2022.

(2)Execution Status, Causes of Delay, and Improvement Plan

				Unit: NT$1,000
Project	Performance as of the second quarter of 2022			Reasons for advancement or lagging situation and improvementplan
Replenishing Operating Funds	Amount spent	Anticipated	2,234,473	The implementation has been completed in accordance with the revised plan.
		Actual	2,234,473
	Actual Progress	Anticipated	100.00%
		Actual	100.00%

(3)Expected Benefit Achievement

To keep pace with revenue growth, our company carried out a cash capital increase, issued new shares and issued the first unsecured convertible corporate bond domestically in 2021. The fundraising was completed in the third quarter of 2021, with a total fundraising amount of NT$ 2,234,473,000, all of which was used to bolster operational capital. After the fundraising was completed, our company's own funds were further supplemented, enabling the company to promote operations without worry. This resulted in a total operating income of NT$ 8,330,867,000 in the first two quarters of 2022, a growth of 29.05% compared to the first two quarters of 2021, and an increase in earnings per share to NT$ 27.25.

	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000
Item	Year	First two quarters of 2021 (before capital raising)	First two quarters of 2022 (before capital raising)
Basic Financial Information	Current Assets	6,153,269	8,617,929
	Current liabilities	4,433,123	4,612,806
	Total Liabilities	4,485,637	5,524,727
	OperatingIncome	6,455,618	8,330,867
	Net Income	795,800	1,434,893
	Interest expense - bank loans	743	2,921
	Earningsper share(NT$)	14.91	27.25

59

Item	Year	First two quarters of 2021 (before capital raising)	First two quarters of 2022 (before capital raising)
Financial Structure	Debtratio (%)	24.91	22.87
	Long-term capital toproperty, plant and equipment(%)	23,304.14	6,515.91
Solvency	Current Ratio(%)	138.80	186.83
	Quick Ratio(%)	116.48	160.40

Note: These are self-calculated numbers by our company

After the fundraising was completed, regardless of the company's financial structure or debt repayment capability, both improved compared to before the fundraising. Furthermore, business income also saw significant growth, indicating the benefits of the cash capital increase, new share issuance, and issuance of the first unsecured convertible corporate bond domestically by the company in 2021 have already been realized.

• 2, The following matters should be recorded for this cash capital increase, corporate bond issuance, issuance of employee stock ownership certificates or restricted employee rights new shares plan:

• (1)Details of this fundraising and securities issuance plan

  • 1.Total amount of funds required for this plan: NT$ 3,391,377,000.

  • 2.Sources of funds:

    • (1)To carry out a domestic cash capital increase, issuing 350,000 new shares, each share with a face value of NT$ 10, each share issuance price is NT$ 660, and the total fundraising amount is NT$ 2,310,000,000.

    • (2)Issuing the second unsecured convertible corporate bonds domestically, with 10,000 bonds, each bond has a face value of NT$ 100,000, a coupon rate of 0%, a issuance period of 3 years, this convertible corporate bond adopts a competitive auction method for public offering, issued at 108.14% of the face amount, the total issuance amount is NT$ 1,081,377,000.

  • Plan project and progress of utilization

Plan project and progress of utilization	Plan project and progress of utilization	Plan project and progress of utilization
			Unit: NT$1,000 Progress 2023 Q2 3,391,377
Project	Scheduled Completion Date	Total Funds Required	Progress
			2023
			Q2
ReplenishingOperatingFunds	2023Q2	3,391,377	3,391,377

This company plans to carry out a cash capital increase, issuing 350,000 new shares, fundraising NT$ 2,310,000,000, and issuing the

60

second unsecured convertible corporate bonds domestically, with an issuance amount of NT$ 1,081,377,000. The total fundraising amount of the two combined is NT$ 3,391,377,000. The report was submitted to the Financial Supervisory Commission at the end of December 2022. According to the planned plan, after the completion of fundraising, it will start to bolster operational capital from the second quarter of 2023, and the use of funds and the expected progress should be reasonable.

4. Expected potential benefits

The total fundraising of NT$ 3,391,377,000 from this time is intended to be used entirely to bolster operational capital, to cater for the future development needs of the company. As this fundraising and the use of funds are intended for supplementing operational capital, it can reduce the amount of bank loans. Thus, based on the company's bank loan interest rate of about 1.5%, it is expected that it can save an interest expenditure of NT$ 50,871,000 each year.

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V. Overview of Business Operations

• 1.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 NT$

	2022 Net Operating Sales
Major products		Sales Ratio (%)
	(Note)
Connectors (with cables)	26,414,003	97.47%
Other Electronic Components	685,131	2.53%
Total	27,099,134	100.00%

2. The Company’s current products and services

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

3. 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

Electronic connectors (cables) refers to all the connecting elements and accessories used for electronic signals and power supplies, whose main function is to provide a separable interface between two subsystems within an electronic system to enable the smooth transmission of signals or power. As electronic connectors (wires) are considered to be the bridge for all signals and are used to connect components to each other, the quality of the product is clearly related to the reliability of the signal transmission, which in turn affects the operation of the entire electronic machine. The downstream market for electronic connector (wire) products is very broad. They are used in a wide range of applications, including chip and component connections, PCB (Printed Circuit Board) board-to-board connections, host and I/O (Input/Output) connections, external power supply and external signal connections, etc. Currently, they are mainly used in personal computer (PC) and peripheral, network communications, automotive electronics (AE), green energy, consumer electronics, etc. Peripherals, network communications, automotive electronics, green energy, consumer electronics, etc.

According to Bishop's 2021 statistics, after the easing of the COVID-19 pandemic, the global value of connector production in 2021 was 77.8 billion US dollars, an increase of 24.1% from the 62.7 billion US dollars in 2020. In 2021, all market sectors experienced significant growth, with the industrial sector showing the largest increase, up 29.9%, followed by the communications and transportation industries, which grew by 26.2%.

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==> picture [422 x 256] intentionally omitted <==

Source: Bishop

Domestic connector factories have long been deeply reliant on the 3C industry such as NB/PC. With the recent softening of the NB/PC market, many manufacturers have not only been developing automation to reduce costs, but in recent years they have also been actively positioning themselves, beginning diversified operations and cross-industry layouts. From the perspective of terminal applications, efforts of Taiwanese manufacturers can be seen in electric vehicles, servers, industrial automation, medical, etc. With the efforts of Taiwanese manufacturers, they have gradually begun to see results, progressively shaking off the dependence on the 3C industry.

The Asia-Pacific region is the largest producer of 3C electronics and also the largest consumer of wire-to-board connectors in the world. It is estimated that the demand will be even more vigorous. In the future, 3C electronics will be characterized by miniaturization, integrated functions, and low energy consumption. Currently, the material selection, product design, and size of wire-to-board connectors are still continuously improving. In the future, enterprises with strong innovation capabilities in wire-to-board connectors will have more developmental advantages. With the rapid development of the Internet of Things and smart manufacturing, it is expected that the global market size of wire-to-board connectors will grow at an average compound annual growth rate of 4.8% from 2022 to 2026.

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.

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(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

==> picture [449 x 364] intentionally omitted <==

(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 equipm ent 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

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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: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
	2022	2023 Q1 (Note)
R&D Costs	2,300,779	－
R&D Costs to Operating Revenues	8.52%	－

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 2023.

(4) 2022 R&D Achievements

A	Intel's new generation multi-core high-frequency server CPU carrier (LGA 4710)
B	Carrier for Intel's new generation of high-speed desktop CPU processors (LGA 1851 SOCKET)
C	Super high-speed random access memory (SO DDR5 (NB))
D	The new generation high-speed serial bus M.2 (PCIE GEN 5 specification)

• (4). Long- and 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

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financial structure

2. Overview of market, production and sales:

(1). Market analysis:

1. Sales Region:

Market analysis: . Sales Region:
			Unit: 1,000 NT$
Year Area	2021		2022
	Amount	%	Amount	%
Domestic	2,370,643	11.08	4,182,196	11.08
Export	19,021,274	88.92	22,916,938	88.92
Total	21,391,917	100,00	27,099,134	100,00

2. Market share

The global connector industry is on a steady rise. With the development of downstream industries and the progress of the connector industry itself, connectors have become a bridge for the stable circulation of energy and information in equipment, and the overall market size maintains a stable growth trend. According to Bishop's statistics, LOTES ranks fourth globally among computer and peripheral connector manufacturers, and nineteenth globally without considering specific industries. As the company and its subsidiaries continue to expand their business, the overall operation and market share should grow steadily.

• (1)Global market overview

An analysis of the value trend of the global connector industry, according to data from the IEK of the Industrial Technology Research Institute (see Figure 3-1), shows that the value of the global connector industry in 109 (2020) was 57.9 billion US dollars, a year-on-year decrease of 2.2%. This is the first time a recession has occurred since 106 (2017), due to the global pandemic of COVID-19. Despite the turning of the home economy opportunities from the second half of the year 109 (2020), as production bases of international leading manufacturers like TE Connectivity, Molex, Amphenol were successively shut down under the more stringent lockdown management in China and Western countries, coupled with the global market demand for some consumer products being relatively sluggish, the momentum of the production and sales of connectors for smartphones and general vehicles significantly weakened.

Going into 2021, despite the cooling of the home economy opportunities in the second half of the year due to the obvious increase in the vaccination coverage in Western countries and China, causing the growth momentum of some 3C connector production and sales to be insufficient, the gradual recovery of economic activities in various countries and the initiation of infrastructure policies has prompted a clear rebound in the production and sales of niche application connectors or wire harness products such as network communications (for example, 5G infrastructure), semiconductor equipment, household appliances, green energy, etc. In addition, the contactless opportunities brought about by the pandemic have noticeably accelerated the development of application fields such as medical care and industrial automation, and the market penetration rate of electric vehicles and automotive electronics has also risen in phases. Therefore, it is estimated that the global connector industry's value in 2021 will reach 60 billion US dollars, a year-on-year growth rate of 3.6%, second only to 108 (2019).

==> picture [337 x 175] intentionally omitted <==

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Data Source: Industrial Technology Research Institute (ITRI) IEK, Taiwan Economic Research Institute's Economic Database Compilation (2021.12)

Figure 3-1 Trends in the Global Connector Industry's Production Value (2)Market supply and demand situation and growth in the future

The connector market will exceed US$60 billion in 2019 and GMI estimates that it will exceed US$75 billion by 2026, representing a compound annual growth rate (CAGR) of 7.2%. Growing demand for high-speed data transmission will drive the growth of the connector industry. The global connector industry has undergone significant changes in the last decade, mainly due to the growing use of several types of connected devices. Booming telecoms, cloud computing and automotive sectors significantly increase global connector market demand, as the new pandemic, global economic slowdown and GDP declines in major economies in the first half of 2020 hinder industry growth.

Global Connectors Market Size and Annual Growth

==> picture [473 x 255] intentionally omitted <==

Resource: Global Market Insights

The connector industry has successfully penetrated the supply chains of major international companies such as NVIDIA, Amazon and Tesla in smart manufacturing, smart grid, cloud and Internet of Things, smart car, fiber optic and smart wearable applications, and has gained a significant position. In response to the surge in artificial intelligence (AI), high-definition video and audio streaming and online live streaming, and high-speed data computing and transmission applications, major manufacturers are actively launching new products that will drive a wave of server replacements in enterprises and data centres. As IOT applications such as automotive, industrial and medical applications continue to grow, Taiwanese manufacturers are actively developing connectors for AI artificial intelligence, e-sports market, smart manufacturing, Internet of Things, optical fiber, smart wear, self-driving cars, drones and other device applications. The continued evolution of various high frequency transmission interface technologies, the new trend of connector/sensor integration and the move towards soft electronics in connectors are expected to provide new drivers for the connector industry and bring a new wave of market growth.

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.

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1. Competitive niche

2. 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.

1. Positive and negative factors for future development

2. (1) Positive factors

3. 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.

4. 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.

5. 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.

6. (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.

7. B. Global information and communication system manufacturers are becoming larger. The Company’s capital is

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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.

2. Manufacturing process

==> picture [302 x 127] intentionally omitted <==

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

Product design Plastic and stamping die Plastic injection, Electroplating Quality inspection Storage and
----- End of picture text -----

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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.

1. 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

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

Unit: NT$ thousands

												Unit: NT$t
		2021				2022				2023Q1
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	2,135,875	9.98%	None	Company A	2,679,643	9.89%	None	－	－	－	－
2	Company B	1,572,919	7.35%	None	Company B	2,360,149	8.71%	None	－	－	－	－
3	Company C	1,368,583	6.40%	None	Company C	1,754,896	6.48%	None
	Others	16,314,540	76.27%		Others	16,314,540	74.92%		－	－	－	－
	Total	17,291,332	100%		Total	27,099,134	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 2023.

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

Unit: NT$ thousands

		2021	2021			2022	2022	2022		2023Q1	2023Q1
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	267,064	3.37	None	Company D	270,056	3.22%	None	－	－	－	－
2	Company B	261,088	3.29	None	Company A	239,376	2.85%	None	－	－	－	－
3	Company C	253,416	3.20	None	Company E	223,217	2.66%	None
	Others	4,370,409	90.14%	﹣	Others	7,811,026	91.27%	﹣	－	－	－	－
	Total	7,927,626	100%	﹣	Total	8,396,303	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 2023.

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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 。 6. 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	2021 Domestic Sales Export Quantity Quality Quantity Quality				2022
			Export		Domestic Sales		Export
		Quality	Quantity	Quality	Quantity	Quality	Quantity	Quality
Connectors & Cables	122,783	2,170,817	3,327,377	18,660,632	128,260	3,898,416	3,559,003	22,515,587
Others	3,223	199,826	10,543	360,642	3,579	283,780	9,621	401,351
Total	126,006	2,370,643	3,337,920	19,021,274	131,839	4,182,196	3,568,624	22,916,938

3. Employee information

	As of March 31,2023	As of March 31,2023	As of March 31,2023	As of March 31,2023
	Year	2021	2022	As of March 31, 2023
Staff Number	Management	104	127	130
	General staff	7,021	7333	7027
	Operators	5,561	4681	3371
	Total	12,686	12141	10528
	Average Age	32.06	32.76	33.53
	Average Seniority	3.24	3.82	4.40
Education	PhD	0.07%	0.08%	0.11%
	Master	0.86%	0.94%	1.07%
	Bachelor	17.87%	21.32%	23.73%
	High School	19.27%	15.39%	16.03%
	Below	61.92%	62.26%	59.05%

4.Disbursements for environmental protection

In the most recent year and as of the date of publication of the annual report, the Company’s total amount of losses and punishments due to environmental pollution, and state counter measures for the future and possible expenses: None.

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5. 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.

• 1. 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.

1. 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.

6. Information security management

• (1)Describe the risk management framework for IT and communications security, IT and communications security policies, specific management plans and resources devoted to IT and communications security management. 1.Risk management framework for IT security

The IT security department of the Company has four IT supervisors and several professional IT personnel, who are responsible for formulating internal IT security policies, planning and implementing IT security operations and promoting and implementing IT security policies, and reporting regularly to the Board of Directors on the Company's IT security governance.

The Company has an auditor to oversee the supervision of IT security, who is responsible for auditing and supervising the implementation of internal IT security. If deficiencies are found, the audited unit is immediately requested to propose relevant improvement plans and specific actions, and the effectiveness of the improvements is regularly tracked to reduce internal IT security risks.

Organizational operation mode - PDCA (Plan-Do-Check-Act) cycle management is adopted to ensure the achievement of reliability targets and continuous improvement.

• 2.IT Security Policy

To enhance IT security management, the Company's IT Technology Department promotes internal control of IT security risks and is responsible for the management, supervision and verification of the Company's IT security operations...etc. The audit reports regularly to the Board of Directors on the status of IT security governance review. It covers the following four areas.

• (1)IT Security Technology: Introduction of IT security management equipment and deepening of multi-level and in-depth defence.

(2)Systems and practices: To establish company IT security policies and IT security procedures, and to regulate the IT security behaviour of personnel.

• (3)Employee Awareness: Conduct IT security education and drills to raise the awareness of all employees on IT security.

(4)Data backup management: Respect the 3-2-1 backup principle for data backup.

3.Specific Management Solutions

• (1)IT Security Technology: In order to prevent various external IT security threats, we have built various IT security systems to enhance the overall security of our IT environment. In addition, regular vulnerability scans are conducted on hosts and personnel IT security management measures are implemented.

• (2)Systems: The company's IT security policy must be followed, and necessary system updates, anti-virus software installation, password non-sharing and regular updates must be carried out to effectively block computer viruses, Trojan horses and malicious programs to provide first-line security protection.

• (3)Staff training: Regular and irregular training/drills on IT security, creation of rewards and punishments for internal control of risk behaviours, and periodic announcements according to current events to promote awareness of IT security among all staff.

• (4)Data backup management: at least 3 copies of important data are backed up; 2 different backup methods are

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used, one of which is stored in an off-site server room.

4.Investing resources in IT security management

In order to implement the four major IT security policies, the following resources are invested.

• (1)Network hardware equipment such as firewall, mail anti-virus, spam filtering, Internet behaviour analysis, network managed hubs, etc.

• (2)Software systems such as endpoint protection system, backup management software, VPN authentication and encryption software, etc.

• (3)Invest in Human resources such as: daily system status checks, weekly backups and off-site storage of backup media, at least two IT security education courses per year, annual system disaster recovery exercises, annual internal audits of IT cycles, audits by accountants, etc.

• (4)Invest in IT security personnel: One IT security supervisor and two IT security personnel, responsible for IT security structure design, IT security maintenance and monitoring, IT security incident response and investigation, IT security policy review and revision, the IT security supervisor reports to the board of directors at least once a year.

• (2)To set out the losses suffered, the possible impact and the measures taken in response to major information and communications security incidents in the most recent year and up to the date of printing of the annual report, and to state the facts that cannot be reasonably estimated if they cannot be reasonably estimated.

• The Company has not suffered any loss as a result of an information and communications security incident up to the date of publication of the annual report.

7. Important contracts

Nature	Contracting Parties	Contract start/end date	Major Content	Restrictive Clauses
Borrowing Agreement	E.SUN Commercial Bank Ltd.	2022.06.28~2023.06.28	Credit line	None
Borrowing Agreement	E.SUN Commercial Bank Ltd.	2022.08.09~2023.08.09	Dividend Project	None
Borrowing Agreement	Bank Sinopac Co., Ltd.	2022.06.10~2023.06.30	Credit line	None
Borrowing Agreement	CTBC Bank Co., Ltd.	2022.08.31~2023.08.31	Credit line	None
Borrowing Agreement	Hua Nan Commercial Bank Ltd.	2021.10.29~2022.10.29	Credit line	None
Borrowing Agreement	Taipei Fubon Commercial Bank Co., Ltd.	2022.03.08~2023.03.08	Credit line	None

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VI. Overview of Financial Status

1. 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, 2022 (Note)
		2018	2019	2020	2021	2022
Current assets		11,400,712	13,054,559	13,054,559	16,959,937	22,090,479	－
Property, Plant and Equipment		3,514,714	4,495,974	4,495,974	6,882,186	8,871,880	－
Intangible assets		99,789	155,510	155,510	205,584	182,069	－
Other assets		388,701	661,820	661,820	822,486	775,192	－
Total assets		16,280,192	19,282,895	19,282,895	26,419,391	33,295,640	－
Current liabilities	Before distribution	3,876,478	3,630,746	4,580,880	7,004,306	8,097,597	－
	After distribution	4,776,736	4,717,264	5,957,136	8,699,952	Not yet distributed	－
Non-current liabilities		104,221	222,456	222,456	1,360,381	869,430	－
Total liabilities	Before distribution	3,918,726	3,734,967	4,803,336	8,364,687	8,364,687	－
	After distribution	4,818,984	4,821,485	6,179,952	6,669,041	Not yet distributed	－
Equity attributable to shareholders of the parent		11,815,326	13,499,198	13,499,198	16,682,481	22,807,309	－
Capital stock		1,034,779	1,034,779	1,034,779	1,059,779	1,068,762	－
Capital surplus		3,959,560	3,958,247	3,958,247	5,283,698	6,307,022	－
Retained earnings	Before distribution	6,296,652	7,471,519	9,101,144	11,200,170	15,761,019	－
	After distribution	5,396,394	6,385,001	7,724,888	9,504,524	Not yet distributed	－
Other equity interest		(650,532)	(594,972)	(594,972)	(682,333)	(339,030)	－
Treasury stock		0	0	0	0	0	－
Non-controlling interest		729,899	980,361	980,361	1,192,223	1,701,304	－
Total equity	Before distribution	9,871,482	12,545,225	14,479,559	18,054,704	24,508,613	－
	After distribution	8,971,224	11,458,707	13,103,303	16,359,058	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

Item	Year	Financial Information for the Last Five Years	Financial Information for the Last Five Years	Financial Information for the Last Five Years	Financial Information for the Last Five Years	Financial Information for the Last Five Years
		2018	2019	2020	2021	2022
Current assets		4,456,296	5,476,170	5,643,845	7,648,068	11,060,372
Property, Plant and	Equipment	51,342	63,428	58,276	58,354	296,550
Intangible assets		30,628	50,937	97,583	82,534	59,895
Other assets		6,027	15,462	6,027	9,349	13,661
Total assets		12,734,745	14,830,921	16,395,041	20,802,281	28,706,679
Current liabilities	Before distribution	3,187,052	2,972,923	2,845,841	2,975,871	5,738,166
	After distribution	4,087,310	4,059,441	4,222,097	4,671,517	Not yet allocated
Non-current liabilities		41,535	42,672	50,002	963,929	161,222
Total liabilities	Before distribution	3,228,587	3,015,595	2,895,843	3,939,800	5,899,388

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Item	Year	Financial Information for the Last Five Years	Financial Information for the Last Five Years	Financial Information for the Last Five Years	Financial Information for the Last Five Years	Financial Information for the Last Five Years
		2018	2019	2020	2021	2022
	After distribution	4,128,845	4,102,113	4,272,099	2,244,154	Not yet allocated
Equity attributable t	o shareholders	9,506,158	11,815,326	13,499,198	16,862,481	22,807,309
of the parent
Capitalstock		934,779	1,034,779	1,034,779	1,059,779	1,068,762
Capital surplus		2,466,109	3,959,560	3,958,247	5,283,698	6,307,022
Retained earnings	Before distribution	6,296,652	7,471,519	9,101,144	11,200,170	15,761,019
	After distribution	5,396,394	6,385,001	7,724,888	9,504,524	Not yet allocated
Other equity interest		(317,020)	(650,532)	(594,972)	(682,333)	(339,030)
Treasury stock		0	0	0	0	0
Non-controlling interest		0	0	0	0	0
Total equity	Before distribution	9,506,158	11,815,326	13,499,198	16,862,481	22,807,309
	After distribution	8,605,900	10,728,808	12,122,942	15,166,835	Not yet allocated

(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, 2022 (Note)
	2018	2019	2020	2021	2022
Operatingrevenue	13,311,518	15,088,872	17,291,332	21,391,917	27,099,134	－
Gross profit	4,348,869	5,467,910	6,930,195	8,557,306	15,161,454	－
Operating profit or loss	1,982,440	2,750,624	3,707,652	4,359,267	7.268.886	－
Non-operating income and expenses	171,857	81,137	(37,650)	180,931	919,681	－
Profit before income tax	2,154,297	2,831,761	3,670,002	4,540,158	8,188,567	－
Current net profit from continuing operations	1,708,299	2,144,468	2,835,589	3,519,031	6,406,412	－
Loss from discontinued operations	0	0	0	0	0	－
Net profit (loss)	1,708,299	2,144,468	2,835,589	3,519,031	6,406,412	－
Other comprehensive income (loss) ( income after tax)	(56,310)	(337,918)	42,913	(84,179)	345,772	－
Total comprehensive income (loss)	1,651,989	1,806,550	2,878,502	3,434,852	6,752,184	－
Net profit attributable to owners of the company	1,608,567	2,076,043	2,732,361	3,472,201	6,254,263	－
Net profit attributable to non-controlling interests	99,732	68,425	103,228	46,830	153,149	－
Comprehensive income attributable to owners of the company	1,553,091	1,741,613	2,771,703	3,387,921	6,599,798	－
Comprehensive income attributable to non-controllinginterests	98,898	64,937	106,799	46,931	152,386	－
Earningsper share	17.21	20.11	26.41	33.32	58.70	－

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

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

Unit: NT$ thousands

	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
Year Item	Financial Summary for The Last Five Years
	2018	2019	2020	2021	2022
Operating revenue	8,731,882	9,968,334	11,362,435	14,151,210	17,440,172
Gross profit	1,385,837	1,805,548	2,544,800	2,739,782	4,294,516
Operating profit or loss	822,567	1,230,782	1,884,003	1,986,941	3,431,537
Non-operating income and expenses	981,503	1,126,841	1,255,369	1,953,510	3,703,836
Profit before income tax	1,804,070	2,357,623	3,139,372	3,940,451	7,135,373
Current net profit from continuing operations	1,608,567	2,076,043	2,732,361	3,472,201	6,254,263
Loss from discontinued operations	－	－	－	－	－
Net profit (loss)	1,608,567	2,076,043	2,732,361	3,472,201	6,254,263
Other comprehensive income (loss) ( income after tax)	(55,476)	(334,430)	39,342	(84,280	345,535
Total comprehensive income (loss)	1,553,091	1,741,613	2,771,703	3,387,921	6,599,798
Earnings per share	17.21	20.11	26.41	33.32	58.70

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

Year	Accounting Firm	Names of CPAs	Audit Opinion
2018	KPMG Taiwan	Chen, Fu-Wei, Chung, Tan-Tan	Unqualified opinion
2019	KPMG Taiwan	Chen, Fu-Wei, Chung, Tan-Tan	Unqualified opinion
2020	KPMG Taiwan	Li Fung-Hui, Chung, Tan-Tan	Unqualified opinion
2021	KPMG Taiwan	Li Fung-Hui, Chung, Tan-Tan	Unqualified opinion
2022	KPMG Taiwan	Li Fung-Hui, TSAI, PEI-RU	Unqualified opinion

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2. Five-year financial analysis

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

Item	Year	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years	Financial Analysis for the Last Five Years		Financial Analysis as of March 31, 2022 (Note)
		2018	2019	2020	2021	2022
Financial structure%	Debt ratio (%)	28.41	22.94	24.90	31,66	26.39
	Long-term capital to property, plant and equipment ratio (%)	295.91	359.89	327.00	282.10	284.02
Solvency%	Current ratio (%)	246.79	314.00	284.97	242.13	272.80
	Quick ratio (%)	186.98	255.79	227.75	181.67	225.61
	Interest protection multiples(times)	11,765.02	12,568.67	19,821.65	16,140.83	14,958.85
Operating Ability	Receivable turnover ratio(times)	2.77	2.67	2.68	2.72	2.77
	Average collection period	132	136	136	134	131
	Inventory turnover ratio (times)	3.94	4.06	4.06	3.50	3.50
	Payable turnover ratio (times)	5.12	5.21	4.70	4.99	6.07
	Average days in sales	93	90	90	104	101
	Property, plant and equipment turnover ratio(times)	4.27	4.39	4.31	3.76	3.44
	Total assets turnover ratio(times)	1.04	1.00	0.97	0.93	0.90
Profitability	Return on assets (%)	12.71	13.92	15.44	15.29	21.09
	Return on equity (%)	18.08	19.47	21.58	22.87	31.53
	Pre-tax income to paid-in capital ratio (%)	230.46	273.65	354.66	428.40	759.39
	(note 7)
	Net profit ratio (%)	12.08	13.75	15.80	16.23	23.07
	Earnings per share (NT$)	17.21	20.11	26.41	33.32	58.70
Cash flow	Cash flow ratio (%)	31.30	38.90	92.53	75.72	95.50
	Cash flow adequacy ratio(%)	88.74	93.98	104.28	95.50	95.45
	Cash reinvestment ratio (%)	6.02	7.99	16.14	14.16	20.62
Leverage	Operating leverage	3.61	3.07	2.68	2.49	2.41
	Financial leverage	1.00	1.01	1.01	1.01	1.01

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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. Quick Ratio: The quick ratio rose in 2022, mainly due to the increase in the scale of liquid revenue and profit growth, which led to an increase in cash and equivalent cash and accounts receivable, resulting in a greater increase in current assets than current liabilities.

2. Return on Assets: The return on assets rose primarily due to profit growth in 2022.

3. Return on Equity: The return on equity rose primarily due to profit growth in 2022.

4. Pre-tax Net Profit to Paid-in Capital Ratio: The ratio of pre-tax net profit to paid-in capital increased significantly in 2022, mainly because profits increased significantly in 2022, but paid-in capital only increased slightly.

5. Net Profit Margin: Earnings per share increased significantly in 2022, mainly due to the growth in revenue scale and profit in 2022.

6. Earnings Per Share: Earnings per share increased significantly in 2022, mainly due to a significant increase in profits in 2022, but only a slight increase in paid-in capital.

7. Cash Flow Ratio: The cash flow ratio rose in 2022, mainly due to an increase in cash flow from operating activities and a significant increase in current liabilities.

8. Both the Cash Flow Adequacy Ratio and the Cash Reinvestment Ratio rose in 2022, mainly due to an increase in cash flow from operating activities.

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

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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
		2018	2019	2020	2021	2022
Financial structure%	Debt ratio (%)	25.35	20.33	17.66	18.94	20.55
	Long-term capital to property, plant and equipment ratio (%)	18,596.26	18,695.21	23,250.05	30,548.74	7,745.25
Solvency%	Current ratio (%)	139.83	184.20	198.32	257.00	192.75
	Quick ratio (%)	123.37	164.20	173.19	223.45	175.31
	Interest protection multiples (times)	49,964	398,347	221,183	58,503	35,041
Operating Ability	Receivable turnover ratio (times)	2.63	2.68	2.76	2.78	2.74
	Average collectionperiod	139	136	132	131.29	133.21
	Inventoryturnover ratio(times)	14.10	14.18	12.90	12.56	12.20
	Payable turnover ratio(times)	3.52	3.80	4.06	6.37	6.96
	Average days in sales	25	26	28	29	30
	Property, plant and equipment turnover ratio(times)	171	173	186	242	98.28
	Total assets turnover ratio (times)	0.73	0.72	0.73	0.76	0.70
Profitabilit y	Return on assets(%)	13.41	15.07	17.51	18.70	25.33
	Return on equity (%)	18.08	19.47	21.59	22.87	31.53
	Pre-tax income to paid-in capital ratio (%)	192.99	227.84	303.39	371.82	661.73
	Netprofit ratio(%)	18.42	20.83	24.05	24.54	35.86
	Earningsper share(NT$)	17.21	20.11	26.41	33.32	58.70
Cash flow	Cash flow ratio (%)	1.78	32.31	28.97	(21.20)	63.90
	Cash flow adequacy ratio (%)	60.28	53.40	46.51	24.69	63.08
	Cash reinvestment ratio (%)	(4.78)	0.51	(1.93)	(11.26)	8.59
Leverage	Operating leverage	1.30	1.21	1.16	1.18	1.13
	Financial leverage	1.00	1.00	1.00	1.00	1.01

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Please explain the reasons for the changes in the financial ratios in the last two years. (Analysis may be waived if the change is less than 20%)

1. Long-term Capital to Property, Plant, and Equipment Ratio: In 2022, the long-term capital to property, plant, and equipment ratio decreased, mainly due to the full conversion of the convertible corporate bonds in 2022, resulting in a decrease in long-term capital and an increase in property, plant, and equipment due to the acquisition of additional land.

2. Current Ratio: The current ratio in 2022 increased mainly due to an increase in the scale of operating revenue and profit growth, which increased cash and cash equivalents and receivables, leading to a larger increase in current assets than current liabilities.

3. Quick Ratio: The quick ratio in 2022 increased mainly due to an increase in the scale of operating revenue and profit growth, which increased cash and cash equivalents and receivables, leading to a larger increase in quick assets than current liabilities.

4. Interest Coverage Ratio: The interest coverage ratio in 2022 decreased, mainly because the increase in interest expense was greater than the increase in profit.

5. Turnover Rate of Property, Plant, and Equipment: The increase in property, plant, and equipment in 2022 was greater than the increase in sales income.

6. Return on Assets: The return on assets increased in 2022 mainly due to profit growth.

7. Return on Equity: The return on equity increased in 2022 mainly due to profit growth.

8. Pretax Net Profit to Paid-In Capital Ratio: The pretax net profit to paid-in capital ratio in 2022 significantly increased mainly due to a substantial increase in profit in 2021, while paid-in capital remained the same.

9. Earnings Per Share: Earnings per share in 2022 significantly increased, mainly due to a significant increase in profit in 2022, while paid-in capital only slightly increased.

10. Cash Flow Ratio: The cash flow ratio in 2022 increased mainly due to an increase in cash flow from operating activities and a significant increase in current liabilities.

11. Both the Cash Flow Adequacy Ratio and the Cash Reinvestment Ratio increased in 2022, primarily due to an increase in cash flow from operating activities.

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1. Financial Structure

2. (1) Debt ratio = total liabilities / total assets

3. (2) Long-term capital to property, plant and equipment ratio = (total equity + non-current liabilities)/net property, plant and equipment

4. Solvency

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

6. (2) Quick ratio = (current assets – inventory – prepaid expense) / current liabilities

7. (3) Interest protection multiples = net income before income tax and interest expense / current interest expense

8. Operating Ability

9. (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

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

11. (3) Inventory turnover ratio = cost of goods sold / average inventory amount

12. (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)

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

14. (6) Property, plant, and equipment (PP&E) turnover ratio = net sales/average PP&E

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

16. Profitability

17. (1) Return on assets = (net income + interest expense x (1– tax rate)) / average total assets

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

19. (3) Net profit ratio = net income / net sales

20. (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)

21. Cash flow

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

23. (2) Net cash flow adequacy ratio = net operating cash flow in last 5 years / (capital expenditures + Inventory increase + cash dividend) in last 5 years

24. (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)

25. Leverage

26. (1) Operating leverage = (Net operating revenue - variable operating change cost and expense) / Operating income (Note 6)

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3.2022 Audit Report of Supervisors for the Financial Statements

Lotes Co., Ltd. Audit Report of Supervisors

The Board of Directors had prepared and delivered the 2022 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 TSAI, PEI-RU 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 and Article 14-4 of Security Transaction Act.

Yours sincerely,

2023 Shareholders General Meeting of Lotes Co., Ltd.

Audit Committee Convenor: WU, CHANG-HSIU

March 21, 2023

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4. 2022 Financial Statements and Independent Auditor’s Report

Independent Auditor’s Report

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

Audit opinion

We have audited the Balance Sheet of Lotes Co., Ltd. (hereinafter referred to as Lotes) as of December 31, 2022 and 2021, the Statement of Comprehensive Income as of January 1 to December 31, 2022 and 2021 as well as the Statement of Changes in Equity, Statement of Cash Flows and the Notes to Parent Company Only Financial Statement (including important accounting policies summary).

In our opinions, the compilation of the above parent company only financial statements present fairly, in all material respects, of the financial status of December 31, 2022 and 2021 in Lotes and the financial performance and consolidated cash flow of January 1 to December 31, 2022 and 2021 prepared according to Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis of the audit opinions

The audit 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). 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 2022 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 IV (15) to the parent company only financial statements for the accounting policy in terms of income recognition. Please refer to Note VI (14) to the parent company only financial statements for the refund liability. Please refer to Note VI (22) to the parent company only 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 procedures:

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 the

84

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 IV (7) for the accounting policy of inventory evaluation. Please refer to Note V in the parent company only financial statements for the accounting estimates and assumed uncertainties of the inventory evaluation. Please refer to Note VI (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 the audit committee) at Lotes is responsible for supervising the process of financial reports.

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

The purpose of the parent company only financial statements audited by 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: 1. 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

85

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.

1. 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.

2. Evaluating the adequacy of the accounting policies used by the management level and the rationality of the accounting evaluation and relevant disclosure concluded.

3. 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.

4. 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.

5. 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.

We determined the key audit matters that we would like to execute on Lotes’s parent company only financial statements for fiscal year 2022 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 Authority of Securities CHIN-KUAN-CHENG-SHEN-T Approval Certificate No. : ZU No. 1000011652 CHIN-KUAN-CHENG-SHEN-T ZU No. 1110333933

March 21, 2023

86

Unit: NT$ 1,000

Lotes Co., Ltd.

Balance Sheet

December 31, 2022 and 2021

Assets Current assets: 1100 Cash and cash equivalents(Note VI (1) and (25)) 1110 Financial assets measured at FVTPL - current (Note VI (2) and (25)) 1150 Net notes receivable(Note VI (3) and (25)) 1170 Net accounts receivable(Note VI (3) and (25)) 1181 Accounts receivable - related parties (Note VI (3), (25) and VII) 1200 Other receivables(Note VI (3) and (25)) 1210 Other accounts receivable - related parties (Note VI (3), (25) and VII) 1220 Income tax assets for the current period (Note VI (18)) 130X Net inventory(Note VI (4)) 1410 Advance payment Non-current assets: 1510 Financial assets measured at FVTPL - non-current (Note VI (2), (12) and (25)) 1517 Financial assets measured at FVTOCI - non-current (Note VI (2) and (25)) 1550 Investments accounted for using the equity method (Note VI (5) and XIII) 1600 Property, plant and equipment(Note VI (6) and VIII) 1755 Right-of-use assets(Note VI (7)) 1760 Net investment property(Note VI (8) and (25)) 1780 Intangible assets(Note VI (9)) 1840 Deferred tax assets(Note VI (18)) 1900 Other non-current assets Total of assets	Dec. 31, 2022 Amount % $ 3,127,767 11 16,531 - 1,394 - 6,852,416 24 22,514 - 38,176 - 420 - 135 - 995,827 4 5,192 -	Dec. 31, 2021 Amount % 779,913 4 - - 1,911 - 5,812,399 28 32,627 - 22,484 - 160 - - - 995,854 5 2,720 - 7,648,068 37 3,370 - 9,500 - 12,624,489 61 58,354 - 59 - 300,256 2 82,534 - 66,302 - 9,349 - 13,154,213 63 20,802,281 100 Liabilities and equity Current liabilities: 2100 Short-term loans (Note VI (10), (25), (28), VIII and IX) 2130 Contract liabilities - current (Note VI (22)) 2150 Notes payable(Note VI (25)) 2170 Accounts payable(Note VI (25)) 2180 Accounts payable - related parties (Note VI (25) and VII) 2200 Other payables(Note VI (25)) 2220 Other payables - related parties (Note VI (25) and VII) 2230 Income tax liabilities for the period(Note VI (18)) 2280 Lease liabilities - current(Note VI (13), (25) and (28)) 2365 Refund liabilities - current (Note VI (14)) 2300 Other current liabilities 2322 Long-term loans maturing within one year or one operating cycle (Note VI (11), (25), (28), and VIII) Non-current liabilities: 2530 Bonds payable(Note VI (12), (25) and (28)) 2540 Long-term loans (Note VI (11), (25), (28), and VIII) 2550 Provisions - non-current (Note VI (15) and (17)) 2570 Deferred income tax liabilities (Note VI (18)) 2600 Other non-current liabilities Total of liabilities Equity attributable to owners of parent: Share capital: 3110 Capital – common stock (Note VI (19)) 3130 Certificates of bond-to-stock conversion (Note VI (19)) 3200 Capital reserves(Note VI (19)) 3300 Retained earnings(Note VI (19)) 3400 Other equity (Note VI (19)) Total of equity Total of liabilities and equity	Dec. 31, 2022 Amount % $ 1,830,000 6 29,321 - 8,390 - 18,359 - 2,218,939 8 428,315 2 6,377 - 795,052 3 - - 384,044 1 11,008 - 8,361 -	Dec. 31, 2021 Amount % 552,240 3 41,541 - 13,402 - 8,391 - 1,512,055 7 293,440 1 2,166 - 350,031 2 59 - 195,105 1 7,441 - - -
	11,060,372 39
	- - 4,595 - 16,939,519 59 296,550 1 - - 226,041 1 59,895 - 106,064 - 13,661 -		5,738,166 20	2,975,871 14
			- - 117,814 - 41,410 - 1,955 - 43 -	911,927 5 - - 45,220 - 6,038 - 744 -
			161,222 -	963,929 5
			5,899,388 20	3,939,800 19
			1,068,762 4 9,536 - 6,307,022 22 15,761,019 55 (339,030) (1)	1,059,779 5 1,167 - 5,283,698 25 11,200,170 54 (682,333) (3)
	17,646,325 61
			22807309 80	16862481 81
	$ 28,706,697 100		,, $ 28706697 100	,, 20802281 100

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

Chairperson: CHU, TE-HSIANG

Accounting Manager: LIU, HSIN-HSIA

87

Lotes Co., Ltd.

Statement of Comprehensive Income

From January 1 to December 31, 2022 and 2021

Unit: NT$ 1,000

4000 Operating revenue (Note VI (14), (22) and XIV) 5000 Operating cost (Note VI (4) and XII) Gross profit Operating expense (Note VI (13), (16), (17). (24), (25), VII and XII): 6100 Promotion expense 6200 Administration expense 6300 R&D expense 6450 Expected credit impairment profit/loss Total operating expense Net operating profit Non-operating revenue/expense (Note VI (12) and (23)): 7100 Interest income 7010 Other income 7020 Other gains and losses 7050 Financial costs 7055 Expected credit gain (loss) 7070 Share of profit or loss of subsidiaries, associates and joint ventures accounted for using equity method Total non-operating revenue/expense Net profit before tax from continuing operations 7950 Less: Income tax expense(Note VI (18)) Net profit for the period 8300 Other comprehensive income: 8310 Components of other comprehensive income that will not be reclassified to profit or loss 8311 Remeasurement of defined benefit plans 8316 Unrealized gains (losses) from investments in equity instruments measured at FVTOCI 8330 Share of the other comprehensive income of subsidiaries, associates and joint ventures accounted for using equity method - items which were not reclassified into profit or loss 8349 Less: Income tax related to components of other comprehensive income that will not be reclassified to profit or loss Total components of other comprehensive income that will not be reclassified to profit or loss 8360 Components of other comprehensive income that will be reclassified to profit or loss 8361 Exchange differences on translation 8399 Less: Income tax related to components of other comprehensive income that will be reclassified to profit or loss Total components of other comprehensive income that will be reclassified to profit or loss 8300 Other comprehensive income for the period (net) Total other comprehensive income for the period Basic earnings per share (Unit: NT$) (Note VI (21)) Diluted earnings per share (Unit: NT$) (Note VI (21))	2022	% 100 75	2021	% 100 81
	Amount $ 17,440,172 13,145,656		Amount 14,151,210 11,411,428
	4,294,516	25	2,739,782	19
	420,304 378,064 62,879 1,732	2 2 - -	389,708 308,977 55,862 (1,706)	3 2 - -
	862,979	4	752,841	5
	3,431,537	21	1,986,941	14
	25,756 194,240 507,645 (20,421) - 2,996,616	- 1 3 - - 17	1,746 99,908 (45,618) (6,747) (1,037) 1,905,258	- 1 - - - 13
	3,703,836	21	1,953,510	14
	7,135,373 881,110	42 5	3,940,451 468,250	28 3
	6,254,263	37	3,472,201	25
	2,790 (3,483) (2,997) 558	- - - -	3,851 (4,900) (359) 770	- - - -
	(4,248)	-	(2,178)	-
	349,783 -	2 -	(82,102) -	(1) -
	349,783	2	(82,102)	(1)
	345,535	2	(84,280)	(1)
	$ 6,599,798	39	3,387,921	24
	$	58.70		33.32
	$	57.87		32.69

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

Accounting Manager: LIU, HSIN-HSIA

88

Lotes Co., Ltd.

Statement of Change in Equity

From January 1 to December 31, 2022 and 2021

Unit: NT$ 1,000

Balance on January 1, 2021 Net profit for the period Other comprehensive income for the period Total other comprehensive income for the period Appropriation and distribution of retained earnings: Legal reserve appropriated Special reserve appropriated Cash dividends of common stock Other changes in capital reserves: Issuance of stock options for convertible bonds Changes in equity of subsidiaries, associates and joint ventures accounted for using equity method Compensation expense for employee stock options Cash capital increase Conversion of convertible bonds Balance on December 31, 2021 Net profit for the period Other comprehensive income for the period Total other comprehensive income for the period Appropriation and distribution of retained earnings: Legal reserve appropriated Special reserve appropriated Cash dividends of common stock Other changes in capital reserves: Changes in equity of subsidiaries, associates and joint ventures accounted for using equity method Redemption of convertible corporate bonds Conversion of convertible bonds Balance on December 31, 2022		Share capital		Capital reserves		Retained earnings		Other equity items	Other equity items	Total equity 13,499,198 3,472,201 (84,280) 3,387,921 - - (1,376,256) 183,236 5,460 24,931 1,075,971 62,020 16,862,481 6,254,263 345,535 6,599,798 - - (1,695,646) 127,583 (90) 913,183 22,807,309
								Exchange difference between foreign operating office’s statement	Unrealized gain or loss on financial assets measured at FVTOCI
	Share capital for ordinary shares	Certificates of bond-to-stock conversion	Total		Legal reserve	Special reserve	Undistributed earnings
	$ 1,034,779 - -	- - -	1,034,779 - -	3,958,247 - -	1,299,543 - -	650,533 - -	7,151,068 3,472,201 3,081	(586,953) (8,019) - - (82,102) (5,259)
	-	-	-	-	-	-	3,475,282	(82,102) (5,259)
	- - - - - - 25,000 -	- - - - - - - 1,167	- - - - - - 25,000 1,167	- - - 183,236 5,460 24,931 1,050,971 60,853	271,615 - - - - - - -	- (55,561) - - - - - -	(271,615) 55,561 (1,376,256) - - - - -	- - - - - - - - - - - - - - - -
	1,059,779 - -	1,167 - -	1,060,946 - -	5,283,698 - -	1,571,158 - -	594,972 - -	9,034,040 6,254,263 2,232	(669,055) (13,278) - - 349,783 (6,480)
	-	-	-	-	-	-	6,256,495	349,783 (6,480)
	- - - - - 8,983	- - - - - 8,369	- - - - - 17,352	- - - 127,583 (90) 895,831	347,528 - - - - -	- 87,361 - - - -	(347,528) (87,361) (1,695,646) - - -	- - - - - - - - - - - -
	$ 1,068,762	9,536	1,078,298	6,307,022	1,918,686	682,333	13,160,000	(319,272) (19,758)

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

Chairperson: CHU, TE-HSIANG

Accounting Manager: LIU, HSIN-HSIA

89

Lotes Co., Ltd.

Statement of Cash Flows

From January 1 to December 31, 2022 and 2021

Cash flows from (used in) operating activities: Net profit before tax Items of adjustment: Adjustments to reconcile profit (loss) Depreciation expense Amortization expense Expected credit loss (gain) Interest expense Interest income Dividend income Share of the profit from subsidiaries, associates and joint ventures accounted for using equity method Net loss on financial assets measured at FVTPL Profit from repurchase of corporate bonds Inventory valuation and disposal loss Loss (profit) from the disposal and scaping of property, plant and equipment Compensation expense for employee stock options Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Changes in operating assets: Decrease in notes receivable Increase in accounts receivable Increase in other receivables Increase in inventory Decrease (increase) in advance payment Total net change in the assets related to operating activities Net change in the liabilities related to operating activities: Increase (decrease) in contract liabilities Increase (decrease) in notes payable Increase (decrease) in accounts payable Increase (decrease) in other payables Decrease in provision for liabilities Increase (decrease) in other current liabilities Increase in refund liabilities Decrease 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 Interest received Dividends received Interest paid Income taxes paid Cash flows from (used in) 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 investment accounted for using equity method Acquisition of property, plant and equipment Disposal of property, plant and equipment Decrease in other receivables 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 Issuance of corporate bonds Raising long-term loans Repayment of long-term loans Repayment of lease principal Issuance of cash dividends Cash capital increase Repurchase of corporate bonds Cash flows from (used in) financing activities Increase in cash and cash equivalents Beginning balance of cash and cash equivalents Ending balance of cash and cash equivalents	2022 $ 7,135,373 10,192 22,639 1,732 20,421 (25,756) (300) (2,996,616) (12,990) (35) 36,076 34 -	Unit: NT$ 1,000 2021 3,940,451 7,020 25,901 (669) 6,747 (1,746) - (1,905,258) (28,565) - 21,612 (467) 24,931
	(2,944,603)	(1,850,494)
	517 (1,031,636) (6,651) (36,049) (2,472)	574 (1,526,232) (527) (306,989) 1,830
	(1,076,291)	(1,831,344)
	(12,220) (5,012) 716,852 138,661 (1,020) 3,567 188,939 (701)	20,149 10,690 (525,386) (5,760) (187) (425) 33,338 -
	1,029,066	(467,581)
	(47,225)	(2,298,925)
	(2,991,828)	(4,149,419)
	4,143,545 16,455 300 (13,201) (480,627)	(208,968) 1,987 - (3,065) (420,739)
	3,666,472	(630,785)
	- 1,422 (8,000) 5,035 (844,045) (4,654) 40 - - (169,534) (4,312)	(14,400) - - 27,945 (570,421) (5,852) 467 86,468 (10,852) (1,516) (3,322)
	(1,024,048)	(491,483)
	1,277,760 - 130,000 (3,825) (59) (1,695,646) - (2,800)	552,240 1,152,983 - - (59) (1,376,256) 1,075,971 -
	(294,570)	1,404,879
	2,347,854 779,913	282,611 497,302
	$ 3,127,767	779,913

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

90

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

Lotes Co., Ltd. Notes to the Parent Company Only Financial Statements 2022 & 2021

(All amounts are in NT$ thousands unless otherwise stated)

I. Company History

Lotes Co., Ltd. (hereinafter referred to as the “Company”) was incorporated on August 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 XIV 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 21, 2023.

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

Since January 1, 2022, 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 IAS 16 – “Property, Plant and Equipment: Proceeds before Intended Use”

‧Amendments to IAS 37 – “Onerous Contracts—Cost of Fulfilling a Contract”

‧Annual Improvements to IFRS Standards 2018–2020

‧Amendments to IFRS 3 – “Reference to the Conceptual Framework”

• (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, 2023, will not have a significant impact on parent company only financial statements.

‧Amendments to IAS 1 – “Disclosure of Accounting Policies”

91

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

‧Amendments to IAS 8 – “Definition of Accounting Estimates”

• ‧Amendments to IAS 12 – “Deferred Tax related to Assets and Liabilities arising from a Single Transaction”

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

The Company does not expect the following 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 1 – “Classification of Liabilities as Current or Non-Current”

‧Amendments to IAS 1, "Non-Current Liabilities with Contractual Terms"

• ‧Amendments to IFRS 17, "First-time Application of IFRS 17 and IFRS 9 Comparative Information"

‧Amendments to IFRS 16, "Regulations on Sale and Leaseback Transactions"

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 Parent Company Only Financial Statement.

(1) Compliance statement

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

(2) Compiling Basis

1. Measurement foundation

Except the major items in the following balance sheet, the Parent Company Only 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 (16).

2. Functional Currency and Presentation Currency

92

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

Each party of the Company takes the currency of major economic environment where its operation is located as its functional currency. The Parent Company Only 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

The assets and liabilities of foreign operating organizations, including the business reputation and fair value adjustment during the acquisition, are converted to be NTD according to exchange rate on the report day; gains and losses are converted into NTD 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 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,

93

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

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 or intended to be sold or consumed.

2. Those held mainly for the purpose of transaction.

3. Those expected to be realized within 12 months after the reporting period.

4. The asset is cash or cash equivalents, unless the asset is otherwise restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

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:

1. Those expected to be paid off during the normal operating period.

2. Those held mainly for the purpose of transaction.

3. Those expected to be paid off within 12 months after the reporting period.

4. Liabilities that do not have an unconditional right to extend the maturity period to at least 12 months after the reporting period. The terms of the liability may, at the option of the counterparty, not affect its classification if the issuance of equity instruments results in its settlement.

(5) Cash and cash equivalents

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

(6) Financial instrument

Accounts receivable and the original debt securities issued are recognized when they are incurred. 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

94

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

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 measured at 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 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 FVTOCI

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

95

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

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 an 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 FVTPL

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

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

96

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

considered:

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

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

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

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

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

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

• (5) Evaluate whether the cash flow of the contract is fully the interest on the payment of the principal and the amount of outstanding principal

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

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

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

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

• ·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).

97

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

(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.

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

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

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 derecognition

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 derecognized.

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

2. Financial liabilities and equity instruments

99

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

(1) Classification of liabilities or equity

Debt and equity instruments issued by the Company are classified as financial liabilities or equity based on the substance of the contractual agreements and the definitions of financial liabilities and equity instruments.

(2) Equity transactions

An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the amount of the consideration received less direct issue costs.

(3) Compound financial instruments

The number of shares issued does not vary with the change in fair value of the compound financial instruments, which are convertible bonds (denominated in New Taiwan dollars) that the holders have the option to convert to equity.

The original recognition amount of the liability component of a compound financial instrument is measured at the fair value of a similar liability excluding the equity conversion rights. The original recognition amount of the equity component is measured as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to the carrying amounts of the original liability and equity.

After initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not remeasured after initial recognition.

Interest related to financial liabilities is recognized as profit or loss. Financial liabilities are reclassified to equity upon conversion, and no gain or loss is recognized upon conversion.

(4) 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

100

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

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.

(5) Derecognition 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 derecognizing 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.

(6) 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

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.

(8) Investing subsidiary

In preparing parent company only financial statements, the Company applies the equity

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

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 parent company only 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 parent company only 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) Investment property

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.

(10) Property, plant and equipment

1. Recognition and measurement

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

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

(major components) when they have different life cycles.

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

2. Subsequent costs

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

3. Depreciation

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

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

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 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.

(11) Leasing

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.

1. 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.

103

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

Lease benefits measured in Lease liabilities include:

• (1) fixed payments, including substantive fixed payments;

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

• (3) the guaranteed amount of salvage value expected to be paid; and

• (4) the price at which the option to exercise the option to purchase or terminate the lease will be reasonably determined or the penalty to be paid.

• Lease liabilities is then calculated using effective interest method, and the amount

• was measured when:

• (1) changes in the index or rate used to determine lease payments result in changes in future lease payments;

• (2) the guaranteed amount of the residual value expected to be paid has changed;

• (3) the evaluation of the underlying asset purchase option has changed;

• (4) the estimate of whether to exercise the option of extension or termination has changed, which leads to the change of the assessment of the lease period;

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

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.

In relation to short-term leases and leases of low-value assets, the Company has chosen not to recognize right-of-use assets and lease liabilities, but rather to recognize

104

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

lease payments on a straight-line basis as an expense during the lease term.

2. 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

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

105

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

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) Provision for liabilities

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 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

106

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

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 plan

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

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

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

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) Share-based payment transactions

Equity-settled share-based payment agreements recognize an expense and increase relative equity over the vesting period of the award at the grant date fair value. The expense recognized is adjusted for the number of awards that are expected to qualify for the service condition and the non-market vesting condition, and the final amount recognized is measured based on the number of awards that qualify for the service condition and the non-market vesting condition on the vesting date.

The non-vested conditions regarding share-based payment awards are reflected in the measurement of the fair value of the share-based payment awards at the date of grant and no adjustment is required to be made to verify the difference between the expected and actual results.

The fair value amount of the share appreciation rights payable to employees for cash settlement is recognized as an expense and an increase in the relative liability in the period in which the employees reach the point where they can receive unconditional compensation. The liability is remeasured at the fair value of the share appreciation rights at each reporting date and settlement date, and any change is recognized in profit or loss.

(18) Income tax

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

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

Deferred income tax assets are measured and recognized according to the temporary difference between the carrying amount and taxation basis of assets and liabilities with financial report objectives. In case of any of the following situations, the temporary differences will not be recognized as deferred income tax assets:

108

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

1. 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.

2. Those generated due to investment subsidiary company and joint equities and likely to not to be returned in the foreseeable future.

3. 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:

1. Having the legal execution right to make the current income tax assets and the current tax liabilities offset with each other: and

2. 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;

3. (1) Same subject of tax payment; or

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

(19) Earnings per share

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

109

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

(20) Segmental information

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

110

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

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 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.

The following assumptions and estimates are subject to significant risks of material adjustments to the carrying amounts of assets and liabilities in the next financial year, and the related information is 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 (4) for the inventory assessment.

VI. Descriptions for Important Accounting Items

(1) Cash and cash equivalents

Cash and cash equivalents
Petty cash Checks and demand deposits Time deposits Cash and cash equivalents listed on the Statement	Dec. 31, 2022 $ 59 698,497 2,429,211		Dec. 31, 2021 52 725,472 54,389 779,913
	$ 3,127,767

Disclosures of interest rate risks and sensitivity analysis on financial assets and liabilities of the Company are seen in Note VI (25).

(2) Financial assets

1. Financial assets measured at FVTPL

Financial assets mandatorily measured at FVTPL: Current: Non-derivative financial assets Over-the-counter company stocks Non-current Non-hedging derivatives	Dec. 31, 2022 $ 16,531	Dec. 31, 2021 -

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

Embedded derivatives—right of redemption Total	- 3,370
	$ 16,531 3,370

Please refer to Note VI (12) for the disclosure of embedded derivatives of the convertible bonds issued by the Company.

Please refer to Note VI (25) for the amount recognized in profit or loss based on fair value remeasurement.

2. Financial assets measured at FVTOCI

Financial assets measured at FVTOCI
Equity instruments measured at fair value through other comprehensive income: Non-current: Domestic unlisted (or OTC) stocks—SteadyBeat Technology Corporation Domestic unlisted (or OTC) stocks—G-sau Co., Ltd Total	Dec. 31, 2022 $ 4,426 169	Dec. 31, 2021 8,545 955
	$ 4,595	9,500

The Company’s investments in these equity instruments are not held for trading purposes and have been designated as measured at FVTOCI.

The Company has no dividend income from equity instruments measured at FVTOCI as listed above for the year 2022 and 2021.

Due to considerations of asset allocation, the Company adjusted its investment portfolio to diversify risk and sold designated SteadyBeat Technology Corporation measured at fair value through other comprehensive income on September 30, 2022. The fair value at the time of disposal was NT$1,422,000, and the cumulative disposal loss was NT$0.

As of December 31, 2022 and 2021, none of the Company’s financial assets had been pledged as collateral.

(3) Notes receivable, accounts receivable and other receivables

Notes receivable Accounts receivable Other receivables Less: provisions	Dec. 31, 2022 $ 1,394 6,878,866 41,147 (6,487)		Dec. 31, 2021 1,911 5,847,230 25,195 (4,755) 5,869,581
	$ 6,914,920

For the changes in the provisions for notes and accounts receivable for the years 2022 and 2021, please refer to Note VI (25) 1. (3) Statement of Impairment Losses.

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

(4) Inventory

Merchandises Finished goods Raw materials	Dec. 31, 2022 $ 992,396 3,430 1 $ 995,827	Dec. 31, 2021 993,764 2,061 29 995,854

The Company’s inventory as of December 31, 2022 and 2021 including allowance for inventory losses are NT$98,280 thousand dollars and NT$64,856 thousand dollars respectively.

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

Cost of goods sold Inventory valuation and disposal loss Total	2022 $ 13,109,580 36,076 $ 13,145,656	2021 11,389,816 21,612 11,411,428

As of December 31, 2022 and 2021, the Company’s inventories were not pledged as security.

• (5) Investment accounted for using the equity method

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

Subsidiaries	Dec. 31, 2022 $ 16,939,519	Dec. 31, 2021 12,624,489

1. Subsidiaries

Please refer to the consolidated financial statements for year 2022.

2. Guarantee

As of December 31, 2022 and 2021, 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:

Cost or deemed cost: Balance on January 1, 2022 Addition Investment property transferred in Disposal Balance on December 31, 2022	Land $ 28,250 - 221,400 -	Buildings	Machinery equipment 11,920 - - (1,229)		Other 51,455 4,654 - (763)		Total 124,063 4,654 244,828 (1,992) 371,553
		32,438 - 23,428 -
	$ 249,650	55,866	10,691		55,346

113

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

Balance on January 1, 2021 Addition Disposal Balance on December 31, 2021 Losses on depreciation and impairment: Balance on January 1, 2022 Depreciation in the year Disposal Investment property transferred in Balance on December 31, 2022 Balance on January 1, 2021 Depreciation in the year Disposal Balance on December 31, 2021 Book value: December 31, 2022 December 31, 2021	$ 28,250 - -	32,438 - -	12,480 155 (715)	49,298 5,697 (3,540)	122,466 5,852 (4,255)
	$ 28,250	32,438	11,920	51,455	124,063
	$ - - - -	17,876 1,304 - 4,178	11,633 74 (1,194) -	36,200 5,656 (724) -	65,709 7,034 (1,918) 4,178
	$ -	23,358	10,513	41,132	75,003
	$ - - -	16,973 903 -	12,288 60 (715)	34,929 4,811 (3,540)	64,190 5,774 (4,255)
	$ -	17,876	11,633	36,200	65,709
	$ 249,650	32,508	178	14,214	296,550
	$ 28,250	14,562	287	15,255	58,354

As of December 31, 2022, and December 31, 2021, property, plant and equipment were used as collateral for short-term loans and financing lines. Please refer to Note VIII for details.

(7) Right-of-use assets

The costs and depreciation of the leased buildings of the Company are as follows:

Cost of right-of-use assets: Balance on January 1, 2022 Derecognition upon maturity Balance on December 31, 2022 Balance on January 1, 2021 Addition Balance on December 31, 2021 Depreciation of right-of-use assets: Balance on January 1, 2022 Depreciation for the period Derecognition upon maturity Balance on December 31, 2022 Balance on January 1, 2021 Depreciation for the period Balance on December 31, 2021 Book value: December 31, 2022 December 31, 2021

Buildings $ 118 (118) $ - $ - 118 $ 118 $ 59 59 (118) $ - $ - 59 $ 59 $ - $ 59

114

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

(8) Investment property

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

Cost or deemed cost: Balance on January 1, 2022 Addition Reclassified to property, plant, and equipment Balance on December 31, 2022 Balance on January 1, 2021 Addition Balance on December 31, 2021 Losses on depreciation and impairment: Balance on January 1, 2022 Depreciation Reclassified to property, plant, and equipment Balance on December 31, 2022 Balance on January 1, 2021 Depreciation Balance on December 31, 2021 Book value: December 31, 2022 December 31, 2021 Fair value: December 31, 2022 December 31, 2021	Land $ 260,576 90,210 (221,400)	Buildings 46,348 79,324 (23,428)
	$ 129,386	102,244
	$ 260,576 -	44,832 1,516
	$ 260,576	46,348
	$ - - -	6,668 3,099 (4,178)
	$ -	5,589
	$ - -	5,481 1,187
	$ -	6,668
	$ 129,386	96,655
	$ 260,576	39,680

As of December 31, 2022, and 2021, for details of investment properties serving as collateral for long-term borrowings and financing, please refer to note VIII.

(9) Intangible assets

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

follows:

Cost: Balance on January 1, 2022	$	Computer software 111,084		Other 600		Total 111,684

115

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

Balance on December 31, 2022 Balance on January 1, 2021 Separate acquisition Derecognization Balance on December 31, 2021 Losses on amortization and impairment: Balance on January 1, 2022 Amortization for the period Balance on December 31, 2022 Balance on January 1, 2021 Amortization for the period Derecognization Balance on December 31, 2021 Book value: Balance on December 31, 2022 Balance on December 31, 2021	$ 111,084	600 600 - - 600 - - - - - - - 600 600	111,684 143,819 10,852 (42,987) 111,684 29,150 22,639 51,789 46,236 25,901 (42,987) 29,150 59,895 82,534
	$ 143,219 10,852 (42,987)
	$ 111,084
	$ 29,150 22,639
	$ 51,789
	$ 46,236 25,901 (42,987)
	$ 29,150
	$ 59,295
	$ 81,934

(10) Short-term loans

The details of the Company’s short-term loans are as follows:

Unsecured bank loan Unused line of credit Interest rate range	Dec. 31, 2022 $ 1,830,000	Dec. 31, 2021 552,240
	$ 1,922,010	1,207,600
	1.55%~1.80%	0.70%~0.85%

For information on the Company’s interest rate and foreign currency risk, please refer to Note VI (25). In addition, please refer to Note VIII for the Company’s pledge of assets for short-term loans and Note IX for the Company’s guarantee notes for bank loans and financing lines.

(11) Long-term loans

The details of the Company's long-term loans are as follows:

Bank loan—Secured loan (due in May 2037) Less: Portion due within a year Total Unused limit Interest rate range	Dec. 31, 2022 $ 126,175 8,361 $ 117,814 $ - 1.75%		Dec. 31, 2021 - -
			-
			-
			-

116

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

Please refer to Note VIII for details of the Company's collateralization of assets for bank loans.

• (12) Bonds payable

Information on the Company’s issuance of unsecured Total amount of convertible bonds issued Cumulative buyback amount Cumulative amount converted Unamortized balance of discount on bonds payable Balance of bonds payable at the end of the period Embedded derivatives—right of redemption (reported as financial assets measured at FVTPL) Equity component - conversion rights (reported as capital reserves - stock options) Embedded derivatives—Redemption benefits (losses) (reported as other gains and losses) Interest expense	convertible bonds Dec. 31, 2022 $ 1,000,000 (2,800) (997,200) -	is as follows: Dec. 31, 2021 1,000,000 - (63,900) (24,173) 911,927 3,370 171,527 2021 2,700 3,530
	$ -
	$ -
	$ -
	2022 $ (576)
	$ 6,795

1. Issuance details

On August 19, 2021, the Company issued 10,000 domestic first three-year unsecured convertible bonds with a coupon rate of 0%, which are repayable in cash at par on maturity.

The conversion price was set at $563.2 per share at the time of issuance, and the conversion price will be adjusted according to the formula specified in the terms of the issuance if the conversion price of the Company’s common shares is adjusted in accordance with the terms of the issuance. The conversion price on December 31, 2022 and 2021 was $535 and $547.5, respectively. There is no reset clause for the bonds.

The Company redeems the outstanding bonds at par value in cash if one of the following conditions is met:

• (1) If the closing price of the Company’s common stock on the Taiwan Stock Exchange exceeds the conversion price of the Bonds by more than 30% for 30 consecutive business days from the day after the third month of the issuance of the Bonds to the 40th day before the expiration of the issuance period.

• (2) The outstanding balance of the bonds is less than 10% of the original issue amount from the day after the third month of issuance to the 40th day before the expiration of the issuance period.

117

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

2. Conversion details

In 2022 and 2021, bondholders have requested the conversion of 9,333 and 639 of the Company's first three-year unsecured convertible corporate bonds, respectively. The book amount at the time of conversion totals NT$915,969,000 and NT$62,550,000. The net change in capital surplus generated by the bond conversion during the current period is NT$895,831,000 and NT$60,853,000. Also, the share capital generated by the bond conversion is NT$17,352,000 and NT$1,167,000. Please refer to note VI (19) for details on the share conversion.

3. Repurchase details

The Company repurchased 28 of its first convertible corporate bonds in 2022 for a total of NT$2,800,000. The book value of the bonds at the time of repurchase was NT$2,753,000. The net gain from the bond repurchase recognized in 2022 was NT$35,000, which is included in other gains and losses. The original capital surplus recognized from the initial issue of share options was transferred to the capital surplus of treasury shares transaction, amounting to NT$423,000. Furthermore, the Company exercised its redemption right and terminated over-the-counter trading on December 9, 2022.

(13) Lease liabilities

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

Current	Dec. 31, 2022 $ -	Dec. 31, 2021 59

Please refer to Note VI (25) for the maturity analysis. The amounts recognized in the profit and loss are as follows:

Please refer to Note VI (25) for the maturity analysis. The amounts recognized in the profit and loss are as follows:	ollows:
2022 Interest expense for lease liabilities $ 1 Short-term lease expense $ 47 The amounts recognized in the Statement of Cash Flows are as follows: 2022 Total cash outflow for leases $ 107 (14) Refund liabilities - current Dec. 31, 2022 Refund liabilities - current $ 384,044	2022 $ 1	2021 1
	$ 47	896
		2021 956
	Dec. 31, 2022 $ 384,044	Dec. 31, 2021 195,105

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

(15) Provision for liabilities

Dec. 31, 2022 Dec. 31, 2021

118

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

Provision for liabilities - non-current Employee benefits $ 41,410 45,220

Employee benefits are estimated under the Company’s defined benefit plan, please refer to Note VI (17) for details.

(16) Operating leasing

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 (8) 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:

Less than 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Total undiscounted lease payments	Dec. 31, 2022 $ 2,816 1,176 126 88 -	Dec. 31, 2021 1,183 264 126 126 89
	$ 4,206	1,788

Rental income generated from investment properties was NT$1,464,000 dollars and NT$4,609,000 dollars for 2022 and 2021 respectively. The direct operating expenses (including maintenance) incurred by the investment properties that generated rental income during the period were NT$3,332,000 dollars and NT$1,367,000 dollars respectively.

(17) Employee benefits

1. Defined benefit plans

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

Dec. 31, 2022 Dec. 31, 2021 Present value of defined benefit obligations $ 78,993 78,057 Fair value of plan assets (37,583) (32,837) Net defined benefit liability $ 41,410 45,220 Details of the employee benefit liabilities of the Company are as follows: Dec. 31, 2022 Dec. 31, 2021 Liabilities from paid leaves $ 5,354 5,108	Dec. 31, 2022 $ 78,993 (37,583)	Dec. 31, 2021 78,057 (32,837)
	$ 41,410	45,220

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

119

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

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$ 37,583,000 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 2022 and in 2021 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 ) Changes in fair value of plan assets The changes in the fair value of defined benefit and in 2021 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	2022 $ 78,057 1,128 (192) -	2021 83,499 951 (3,373) (3,020)
	$ 78,993	78,057
	plan assets of the Company in 2022 2022 2021 $ 32,837 34,241 228 119 2,598 477 1,920 1,020 - (3,020)

(3) Changes in fair value of plan assets

The changes in the fair value of defined benefit plan assets of the Company in 2022 and in 2021 are as follows:

120

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

[Fair value of plan assets on December 31 ] $ 37,583 32,837

(4) Expenses recognized in profit or loss

The expenses of the Company recognized in profit or loss in 2022 and in 2021 are as follows:

Service cost for the period Net interest of net defined benefit liabilities Operating cost Promotion expense Administration expense R&D expense	2022 $ 587 313	2021 662 170
	$ 900	832
	$ 106 362 295 137	110 286 277 159
	$ 900	832

(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 2022 and 2021 are as follows:

Accumulated balance on January 1 Amount recognized in the year Accumulated balance on December 31	2022 $ (1,852) 2,790	2021 (5,703) 3,851
	$ 938	(1,852)

(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, 2022 1.30% 2.00%	Dec. 31, 2021
		0.70% 2.00%

The amount of appropriation for defined benefit plans within 1 year after the reporting date for the year ended on December 31, 2022 is NT$1,149,000.

The weighted average duration of defined benefit plans is 9 years.

(7) Sensitivity analysis

The effects of changes in the main actuarial assumptions adopted on December 31,

2022 and 2021 on the present value of defined benefit obligations are as follows:

Effects on defined benefit obligations

121

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

December 31, 2022 Discount rate Increase in future salary December 31, 2021 Discount rate Increase in future salary	Increased by 0.25% Decreased by 0.25% $ (1,918) 1,987 1,968 (1,909) Effects on defined benefit obligations Increased by 0.25% Decreased by 0.25% (2,023) 2,099 2,066 (2,022)
	Increased by 0.25% (2,023) 2,066

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 2022 and 2021 are NT$7,383,000 and NT$7,003,000 respectively, which have been contributed to the Bureau of Labor Insurance.

(18) Income tax

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

Income tax expense for the period Income tax generated in the current period Surtax on undistributed retained earnings Adjustment of the income tax in the previous year	2022 $ 884,732 67,237 (26,456)	2021 423,624 56,192 (14,104)

122

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

Deferred income tax expense Occurrence and reversal of temporary difference Income tax expense	925,513 465,712
	(44,403) 2,538
	$ 881,110 468,250

The income tax expenses (profit) of the Company recognized in other comprehensive income in 2022 and in 2021 are as follows:

Components of other comprehensive income that will not be reclassified to profit or loss: Remeasurement of defined benefit plan	2022 $ 558	2021 770

The reconciliation of the relationship between the	income tax expense	income tax expense	income tax expense	(profit) and the
net profit before tax of the Company in 2022 and in 2021			is as follows:
			2022	2021
Net profit before tax	$		7,135,373	3,940,451
Income tax calculated based on the tax rate of the place			1,427,075	788,090
where the Company located
Adjustments in accordance with local tax laws			(586,746)	(361,928)
Adjustment of current income tax for the prior period			(26,456)	(14,104)
Surtax on undistributed retained earnings			67,237	56,192
Total	$		881,110	468,250
2. Deferred tax assets and liabilities
(1) Recognized deferred tax assets
		Dec. 31, 2022		Dec. 31, 2021
Losses from inventory price drop and obsolescence	$		19,656	12,971
Unappropriated pension expenses			237	441
Losses from the price drop of fixed assets and idle			44	44
assets
Refund liabilities and accounts payable			76,809	43,860
Unrealized foreign exchange losses			890	-
Remeasurement of defined benefit plan			8,428	8,986
Deferred tax assets	$		106,064	66,302
(2) Recognized deferred income tax liabilities
			Dec. 31, 2022	Dec. 31, 2021
Recognized deferred income tax liabilities	$		-	6,038

123

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

Fair value profit Deferred income tax liabilities	1,955 - $ 1,955 6,038

3. Income tax approval

The approval on the filing of final income tax return of the Company has lasted till the year 2020 as required by the taxing authority.

(19) Capital and other equity

As of December 31, 2022 and 2021, 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 $1,068,762,000 and $1,059,779,000 dollars, separately.

In 2022, the Company issued 1,735 thousand new shares due to convertible bondholders exercising their conversion rights. Some of these shares are still being processed due to legal registration procedures and hence are listed under convertible bond certificates amounting to NT$9,536,000. The remaining procedures were completed in April, June, September, and December 2022.

In 2021, the Company issued 117 thousand new shares due to convertible bondholders exercising their conversion rights, and following a board resolution on March 21, 2022, the base date for issuing new common shares was set as March 22, 2022. The legal registration process was duly handled by April 19, 2022.

On May 13, 2021, the Board of Directors resolved to issue 2,500 thousand shares at a par value of $10 per share at an issue price of $432 per share through cash capital increase, with September 17, 2021 as the base date for the capital increase. The capital increase was approved by the Financial Supervisory Commission and the legal registration procedures were completed on October 8, 2021.

1. Capital reserves

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

Premium of issued shares Convertible bond conversion premium Treasury stock transactions Change in the net value of the stock of subsidiaries and associates accounted for using the equity method Employee stock options Convertible bond stock options	Dec. 31, 2022 $ 4,628,739 1,139,407 423 498,123 40,330 -		Dec. 31, 2021 4,628,739 72,562 - 370,540 40,330 171,527 5,283,698
	$ 6,307,022

In accordance with the Company Act, capital surplus is required to cover losses first

124

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

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 the distributable profit, the net decrease in other equity items occurring in the year is added to the undistributed profit of the current period along with other items beyond the net profit after tax. A special reserve is set aside from the undistributed profit of the previous period. For accumulated decrease in other equity items of previous periods, an equal amount of special reserve shall be set aside from the undistributed profit of previous periods and cannot be distributed. When there is a reversal of other decreases in equity, profits can be distributed for the reversed part.

(3) Profit distribution

The Company's 2021 profit distribution was resolved at the annual shareholders

125

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

meeting on June 17, 2022. The 2020 profit distribution was resolved through electronic voting on June 19, 2021, and at the annual shareholders meeting on July 26, 2021. The dividends distributed to shareholders are as follows:

			2021				2020
	Payout ratio			Amount	Payout ratio			Amount
		(NT$)			(NT$)
Distributed to the
holders of ordinary
shares:
Cash	$	15.92		1,695,646		13.30		1,376,256

On March 21, 2023, the Company’s board of directors proposed the following 2022 earnings distribution:

		2022
	Payout ratio		Amount
		(NT$)
Distributed to the holders of ordinary shares:
Cash	$	26.00	2,803,575

Information on the distribution of earnings as proposed by the Board of Directors and resolved by the Shareholders’ Meeting is available on the “Market Observation Post System (MOPS)”

3. Other equity

Balance on January 1, 2022 Exchange differences arising from the translation of the net assets of foreign operations Unrealized losses from financial assets measured at FVTOCI Balance on December 31, 2022 Balance on January 1, 2021 Exchange differences arising from	Exchange differences on translation of foreign operations $ (669,055) 349,783 -	Unrealized gain (loss) on financial assets measured at FVTOCI (13,278) - (6,480)	Total (682,333) 349,783 (6,480)
	$ (319,272)	(19,758)	(339,030)
	Exchange differences on translation of foreign operations $ (586,953) (82,102)	Unrealized gain (loss) on financial assets measured at FVTOCI (8,019) -	Total (594,972) (82,102)

126

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

the translation of the net assets

of foreign operations

Unrealized losses from financial assets measured at FVTOCI Balance on December 31, 2021	- (5,259) (5,259) $ (669,055) (13,278) (682,333)

(20) Share-based payment

The Company has the following share-based benefit transactions:

Date of grant Number of grants Granted to Vesting conditions Fair value at the grant date	Cash capital increase reserved for employee **subscription **
	The Company
	2021.08.23 233 thousand shares Current employees of the Company Immediate vesting $107

The Company recognized a share-based employee compensation cost of NT$24,931 thousand from cash capital increase for employee stock options in 2021.

(21) Earnings per share

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

Basic earnings per share: Net profit attributable to the Company in the year Weighted average shares outstanding (1,000 shares) Basic earnings per share Diluted earnings per share: Net profit attributable to the Company in the year Dilutive potential ordinary shares: Convertible bond Net income attributable to equity holders of the Company’s common stock (adjusted for the effect of dilutive potential common stock) Weighted average shares outstanding (1,000 shares)	2022 $ 6,254,263	2021 3,472,201
	106,539	104,204
	$ 58.70	33.32
	$ 6,254,263 5,897	3,472,201 664
	$ 6,260,160	3,472,865
	2022 106,539	2021 104,204

127

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

Dilutive potential ordinary shares: Employee compensation Convertible bond Weighted average common shares outstanding (adjusted for the effect of dilutive potential common stock) Diluted earnings per share	309 204 1,337 1,820
	108,185 106,228
	$ 57.87 32.69

(22) Revenue from contracts with customers

1. Segmentation of main regional markets and main product revenue:

Major regional markets Taiwan Mainland China Other countries Main products/line of service: Server DT NB Strategic Projects Automotive Other	2022 $ 2,872,643 12,104,361 2,463,168	2021 1,997,810 10,340,036 1,813,364
	$ 17,440,172	14,151,210
	$ 5,913,259 5,591,228 2,938,068 2,481,727 148,379 367,511	3,762,716 4,637,237 2,885,202 2,069,644 152,983 643,428
	$ 17,440,172	14,151,210

2. Balance of contract

ance of contract
Contract liabilities	Dec. 31, 2022	Dec. 31, 2021 41,541	110.1.1 21,932
	$ 29,321

The beginning balances of contract liabilities as of January 1, 2022 and 2021 were recognized as income of NT$24,750,000 dollars and NT$18,072,000 dollars respectively.

(23) Non-operating revenue/expense

1. Interest income

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

Bank deposit interest	2022 $ 25,756	2021 1,746

2. Other income

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

2022

2021

128

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

Income from dividend Income from molding Income from compensation Income from samples Income from rentals Income from subsidies Other	$ 300 170,481 5,008 9,172 1,584 896 6,799 $ 194,240	- 73,063 12,765 7,142 4,687 120 2,131 99,908

3. Other gains and losses

The details of other gains and losses 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 Embedded derivatives Non-derivative products Net profit from bond repurchases Profit (loss) from the disposal of property, plant and equipment Profit from disposal of investment Other Total	2022	2021 (72,885) 4,787 21,078 2,700 - - 467 - (1,765)
	$ 495,993 - - (576) 10,349 35 (34) 3,217 (1,339)
	$ 507,645	(45,618)

4. Financial costs

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

Bank loans Lease liabilities Conversion of corporate bonds	2022	2021 3,216 1 3,530
	$ 13,625 1 6,795
	$ 20,421	6,747

(24) Compensation to 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

129

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

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, 2022 and 2021 was $221,300,000 dollars and $122,062,000 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 compensation of employees and directors resolved by the board of directors for the fiscal year 2022 was consistent with the estimated amount in the parent company only financial statements for 2022; the actual distribution of compensation to employees, directors, and supervisors for 2021 was consistent with the estimated amount in the parent company only financial statements for 2021. The related information can be found on the MOPS.

(25) Information on financial instruments and fair value

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 $10,042,628,000 dollars and $6,649,442,000 dollars as of December 31, 2022 and 2021 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, 2022 and 2021, the Company had 6 and 5 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

130

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

is always within management’s expectations.

(3) Impairment loss

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

Not past due 1-60 days past due 61-120 days past due 121-180 days past due 181-270 days past due More than 271 days past due Not past due 1-60 days past due 61-120 days past due 121-180 days past due 181-270 days past due More than 271 days past due		Dec. 31, 2022		Expected credit loss in the duration of provision 91 595 247 183 - 2,820
	Book value of notes and accounts receivable $ 6,808,724 63,705 4,407 604 - 2,820	Weighted average expected credit loss rate
		0.00% 0.93% 5.60% 30.30% 75.16% 100.00% Dec. 31, 2021
	$ 6,880,260			3,936
				Expected credit loss in the duration of provision 203 504 110 - 13 1,374
	Book value of notes and accounts receivable $ 5,766,741 79,162 1,847 - 17 1,374	Weighted average expected credit loss rate
		0.00% 0.64% 5.96% 26.64% 76.47% 100.00%
	$ 5,849,141			2,204

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

2022 2021 $ 2,204 3,910

Opening balance

131

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

Impairment loss (reversal of impairment loss) recognized Closing balance	1,732 (1,706)
	$ 3,936 2,204

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.

December 31, 2022 Non-derivative financial liabilities: Short-term loans Long-term loans (including long-term loans due within one year or one operating cycle) Notes payable Accounts payable Accounts payable—related parties Other payables Other payables—related parties December 31, 2021 Non-derivative financial liabilities: Short-term loans Bonds payable Notes payable Accounts payable Accounts payable—related parties Other payables Other payables—related parties Lease liabilities	Book value $ 1,830,000 126,175 8,390 18,359 2,218,939 428,315 6,377	Cash flow from the contract 1,842,205 142,952 8,390 18,359 2,218,939 428,315 6,377	Within 6 months 839,827 5,751 8,390 18,359 2,218,939 428,315 6,377	6 12 months 1,002,378 4,929 - - - - -	1-2years - 9,859 - - - - -	2-5years - 29,576 - - - - -	More than 5 years - 92,837 - - - - -
	$ 4,636,555	4,665,537	3,525,958	1,007,307	9,859	29,576	92,837
	$ 552,240 911,927 13,402 8,391 1,512,055 293,440 2,166 59	552,433 936,100 13,402 8,391 1,512,055 293,440 2,166 60	552,433 - 13,402 8,391 1,512,055 293,440 2,166 30	- - - - - - - 30	- - - - - - - -	- 936,100 - - - - - -	- - - - - - - -
	$ 3,293,680	3,318,047	2,381,917	30	-	936,100	-

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

3. Market risk—exchange rate risk

(1) Exposure to exchange rate risk

The financial assets and liabilities exposed to significant foreign exchange risk for each entity of the Company are as follows:

	Financial assets Currency USD RMB HKD		Dec. 31, 2022	Dec. 31, 2022
		$	Foreign currency 306,170 113,317 25	Exchange rate NTD 30.7100 9,402,472 4.4094 499,662 3.9380 100

132

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

	JPY EUR INR Long-term equity investment accounted for using the equity method USD EUR VND Financial liabilities Currency USD RMB EUR MOP Financial assets Currency USD RMB HKD JPY EUR INR Long-term equity investment accounted for using the equity method USD EUR VND Financial liabilities Currency USD RMB EUR		77 0.2324 917 32.7200 4 0.4791 459,551 30.7100 127 32.7200 925,143,585 0.0013 Dec. 31, 2022
		$
		Foreign currency $ 205,370 108,146 25 92 2,264 4 396,692 117 392,189,386 $ 66,341 25 60

Because the Company has a wide range of functional currencies, it has adopted a

133

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

consolidated approach to disclose exchange gain or loss on monetary items, with foreign currency exchange profit and loss (realized and unrealized) of profit of $495,993,000 dollars and loss of $72,885,000 dollars for the years ended 2022 and 2021 respectively.

(2) Sensitivity analysis

The Company’s exchange rate risk primarily comes from foreign currency-denominated cash and cash equivalents, financial assets measured at FVTPL, 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, 2022 and 2021, if NTD 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 $60,074,000 dollars and $35,100,000 dollars respectively for 2022 and 2021. The same basis is used for both phases of analysis.

4. Market risk—changes in interest rates

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

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, 2022 and 2021 were $698,195,000 dollars and $725,290,000 dollars respectively, and financial liabilities were $126,175 and $0 respectively. If interest rates had increased or decreased by 1%, the Company’s net income would have increased or decreased by $4,576,000 dollars and decreased or increased by $5,802,000 dollars for 2022 and 2021, 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

134

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

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 loans.

In addition to the aforementioned financial instruments, the fair value and book value of the remaining financial instruments, investment property, and payable corporate bonds of the Company as of the reporting date are as follows:

Measured at fair value: Financial assets: Financial assets measured at FVTPL Financial assets measured at FVTOCI Not measured at fair value: Non-financial assets: Investment property Financial liabilities Corporate bonds payable	Dec. 31, 2022	Dec. 31, 2022		Dec. 31, 2021 Book value Fairvalue 3,370 3,370 9,500 9,500 300,256 390,082 911,927 907,643
	Book value $ 16,531 4,595 226,041 -	Fairvalue		Book value 3,370 9,500 300,256 911,927
		16,531 4,595 233,945 -

135

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

• (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.

• (3) Fair value hierarchy:

The following table analyzes the fair value levels of financial instruments, investment properties, and payable corporate bonds by valuation method. Each fair value level is defined as follows:

• A. Level 1: Publicly quoted prices (unadjusted) in an active market for identical assets or liabilities.

• B. Level 3: Input parameters for an asset or liability are not based on observable market information (non-observable parameters).

December 31, 2022 Measured at fair value: Financial assets measured at FVTPL Financial assets measured at FVTOCI Not measured at fair value: Investment property December 31, 2021 Measured at fair value: Financial assets measured at FVTPL Financial assets measured at FVTOCI Not measured at fair value:	Level 1 $ - -		Level 2 16,531 -		Level 3 - 4,595		Total 16,531 4,595 21,126 233,945 3,370 9,500 12,870
	$ -		16,531		4,595
	$ -		-		233,945
	$ - -		- -		3,370 9,500
	$ -		-		12,870

136

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

Investment property Corporate bonds payable	$ -	-	390,082	390,082
	$ -	-	907,643	907,643

(4) Transfers between Level 1 and Level 2

The Company did not have any transfers in 2022 and 2021.

• (5) Table of changes in financial assets (liabilities) classified as Level 3 at FVTPL

Unit: NT$ 1,000

Name Financial assets measured at FVTPL Financial assets measured at FVTOCI Name Financial assets measured at FVTPL Financial assets measured at FVTOCI						2022				Closing balance
	$	Opening balance 3,370 9,500 12,870	Total profit or loss Recognized in profit or loss Recognized in other comprehensive income (576) - - (3,483) (576) (3,483)			Increase in	the period Transfers into Level 3 - -	Decrease in the period Sale, disposal or
						Issuance or purchase - -
				income - (3,483)					settlement (2,794) (1,422)
										- 4,595
	$		(576)	(3,483)		-	-		(4,216)	4,595
						2021				Closing balance
	$	Opening balance 2,080 - 2,080	Total profit or loss Recognized in profit or loss Recognized in other comprehensive income 2,700 - - (4,900) 2,700 (4,900)			Increase in	the period Transfers into Level 3 - -	Decrease in the period Sale, disposal or
						Issuance or purchase 900 14,400
				income - (4,900)					settlement (2,310) -
										3,370 9,500
	$		2,700	(4,900)		15,300	-		(2,310)	12,870

The above included gains and losses are reported in “other gains and losses” and “unrealized valuation gains (losses) on financial assets at FVTOCI”, which relate to assets still held as of December 31, 2022 and 2021 as follows:

Total gain or loss Recognized in profit (losses) (reported in “other gains and losses”) Recognized in other comprehensive income (reported in “unrealized valuation gains (losses) on financial assets at FVTOCI”)	2022 $ - (3,839)	2021
		2,527 (4,900)

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

The list of quantitative information about significant unobservable inputs is as follows:

Item Financial assets measured at FVTPL -	Valuation techniques Binary tree method for pricing	Significant unobservable inputs ‧Volatility on Dec. 31, 2022 and 2021: 41.43%	Relationship between significant unobservable inputs and fair value ‧The higher the volatility, the higher the fair

137

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

Embedded convertible bond and 38.95% value derivatives - right of redemption Financial assets Comparable ‧Net market value ‧The higher the measured at company analysis multiplier on Dec. 31, multiplier, the FVTOCI - 2022 and 2021: 1.475 higher the fair investment in and 2.05 value equity instruments ‧Lack of marketability ‧The higher the with no active discount on Dec. 31, discount for lack of market 2022 and 2021: both marketability, the 15.80% lower the fair value Financial assets Net asset value ‧Net asset value ‧The fair value is measured at approach positively FVTOCI - correlated investment in equity instruments with no active market

(7) Valuation process for fair value classified in Level 3

The Company uses unobservable inputs for its fair value measurements and classifies its fair value in Level 3. The source of the input value for this level is the price provided by reference to counterparty quotations or market comparable companies’ net market value multipliers, etc., and the relevant quotations and valuation information are appropriately maintained. The results are subsequently reviewed to ensure consistency with the valuation sources and the reasonableness of the valuation results.

(8) Sensitivity analysis of fair value to reasonably possible alternative assumptions for Level 3 fair value measurements

The Company’s fair value measurements of financial instruments are reasonable, but the use of different valuation models or valuation parameters may result in different valuation results. For financial instruments classified in Level 3, if the valuation parameters are changed, the impact on the profit or loss or other comprehensive income for the period is as follows:

138

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

December 31, 2022 Financial assets measured at FVTOCI Investments in equity instruments with no active market December 31, 2021 Financial assets measured at FVTPL Embedded derivatives - right of redemption Financial assets measured at FVTOCI Investments in equity instruments with no active market	Input value	Upward or downward changes	Fair value changes reflected in profit or loss for the period Fair value changes reflected in other comprehensive income
			Favorable changes Unfavorable changes Favorable changes Unfavorable changes
	Net market value multiplier Lack of marketability discount Volatility Stock price Net market value multiplier Lack of marketability discount	4% 4% 5% 10% 8% 8%	$ - - 12 (12) - - 12 (12) 2,527 (936) - - 1,030 (1,030) - - - - 136 (137) - - 136 (137)

Favorable and unfavorable changes in fair value represent fluctuations in fair value,

which are calculated using valuation techniques based on various degrees of unobservable input parameters. If the fair value of a financial instrument is affected by more than one input, the above table reflects only the effect of changes in a single input and does not take into account the correlation and variability among the inputs.

(26) Financial risk management

1. 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

139

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

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 Audit Committee 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 Audit Committee 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 Audit Committee.

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 69% and 73% of the Company’s revenue for 2022 and 2021, respectively, were derived from sales to customers in Mainland China, which resulted in a significant concentration of regional credit risk.

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

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

(2) Use of funds

The Company’s investments in equity securities are placed through a centralized

140

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

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 $1,922,010,000 as of December 31, 2022 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 loans, and changes in interest rates will cause future cash flows to fluctuate as the effective interest rates on bank deposits and short-term loans change.

141

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

(3) Equity instrument price risk

If the price of equity securities changes at the reporting date (the same basis is used for both periods of analysis and other changes are assumed to be constant), the effect on the consolidated profit and loss items would be as follows:

			2022	2022	2021	2021
		Other			Other
	comprehensive				comprehensi
Price of securities on		income after		Profit or loss	ve income	Profit or loss
reporting date		tax		after tax	after tax	after tax
Up by 1%	$		46	165	95	-
Down by1%	$		(46)	(165)	(95)	-

(27) Capital management

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

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

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

Total liabilities Less: Cash and cash equivalents Net liabilities Total equity Debt-to-capital ratio	Dec. 31, 2022 $ 5,899,388 (3,127,767)	Dec. 31, 2022 $ 5,899,388 (3,127,767)		Dec. 31, 2021 3,939,800 (779,913) 3,159,887 16,862,589 15.78%
	$ 2,771,621
	$ 22,807,309
		10.84%

(28) Non-cash investment and financing activities

The information on non-cash investment and financing activities of the Company in 2022 and 2021 is as follows:

1. For the conversion of corporate bonds into common shares, see Note VI (12).

2. For obtaining right-of-use assets through leasing, see Note VI (7) and (13).

142

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

The Company's adjustments to liabilities from financing activities in 2022 and 2021 are as shown in the following table:

Short-term loans Bonds payable Long-term loans (including long-term loans due within one year or one operating cycle) Lease liabilities Total liabilities from financing activities	Jan. 1, 2022 Cash flow	Non-cash changes Other Changes in exchange rate Changes in fair value Dec. 31, 2022
	$ 552,240 1,239,209 911,927 (2,800) - 126,175 59 (60)	- 38,551 - 1,830,000 (909,127) - - - - - - 126,175 1 - - -
	$ 1,464,226 1,362,524	(909,126) 38,551 - 1,956,175

Short-term loans Bonds payable Lease liabilities Total liabilities from financing activities	Jan. 1, 2021 Cash flow	Non-cash changes Other Changes in exchange rate Changes in fair value Dec. 31, 2021
	$ - 553,065 - 1,152,983 - (60)	- (825) - 552,240 (241,056) - - 911,927 119 - - 59
	$ - 1,705,988	(240,937) (825) - 1,464,226

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 that had transactions with the Company during the period covered by these parent company only financial statements are as follows:

Name of related parties Relationship with the Company Lotes Investments Limited A subsidiary of the Company Good Hope Investments Limited A subsidiary of the Company Guansi Development Co., Ltd. A subsidiary of the Company Zhaxi Investment Co., Ltd. A subsidiary of the Company Jiayu Investment Co., Ltd. A subsidiary of the Company Lotes USA, Inc A subsidiary of the Company LOTES EU GmbH A subsidiary of the Company Lerain Technology Co., Ltd. A subsidiary of the Company Lomites Co., Ltd (Note) A subsidiary of the Company

143

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

LOTES VIET NAM COMPANY LIMITED Loteson International Investments Limited Lotes Guangzhou Co., Ltd. Lotes Hengnan Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Lotes Zhongshan Co., Ltd. Zhongshan DeZhi Real Estate Development Co., Ltd. Zhongshan Dezhi Metal Surface Treatment Co., Ltd.

A subsidiary of the Company A subsidiary of the Company A subsidiary of the Company A subsidiary of the Company A subsidiary of the Company A subsidiary of the Company A subsidiary of the Company

A subsidiary of the Company

Zhongshan Jinmeida Metal Surface Treatment Co., A subsidiary of the Company Ltd. Guangzhou Leside Technology Co., Ltd. A subsidiary of the Company Hengnan Deyi Property Development Co., Ltd. A subsidiary of the Company Chongqing Fuxinrui Electronic Technology Co., A subsidiary of the Company 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 A subsidiary of the Company Zongka Technology (Shenzhen) Co., Ltd. A subsidiary of the Company Zongka Technology (Shenzhen) 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 Genie Precision Machine Co., Ltd. A subsidiary of the Company LINTES TECHNOLOGY (THAILAND) A subsidiary of the Company CO.,LTD Key management personnel Including the directors, supervisors, managers and their families and spouses

Note: Mikronpoint Co., Ltd. changed its name to Lomites Co., Ltd. on May 18, 2022.

144

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

(3) Material transactions with the related parties

1. Operating revenue

aterial transactions with the related parties Operating revenue	aterial transactions with the related parties Operating revenue	aterial transactions with the related parties Operating revenue	aterial transactions with the related parties Operating revenue
The amounts of material sales from the Company to the related parties are as follows:
		2022	2021
Other subsidiaries	$	90,271	58,659

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

2. Purchase

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

Xincheng Development Co., Ltd. REKA Technology Co., Ltd. Other subsidiaries	2022 $ 1,397,497 11,627,683 73,949	2021 1,379,153 10,140,753 122,694 11,642,600
	$ 13,099,129

The Company’s purchase price to the above company is not significantly different from the Company’s purchase price to general suppliers. The payment terms are three months, which are not significantly different from those of general suppliers.

3. Accounts receivable from related parties

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

Accounting item	Type of related party	Dec. 31, 2022 $ 21,364 1,150 210 2,272 210 (2,272)	Dec. 31, 2021 30,353 2,274 160 2,272 - (2,272) 32,787
Accounts receivable Accounts receivable Other receivables Other receivables Other receivables Allowance for losses	REKA Technology Co., Ltd. Other subsidiaries Lerain Technology Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Lomites Co., Ltd Zongka Technology (Shenzhen) Co., Ltd.
		$ 22,934

4. Accounts payable from related parties

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

Accounting item	Type of related party	Dec. 31, 2022 $ 314,136 1,887,801	Dec. 31, 2021 383,959 1,060,674
Accounts payable Accounts payable	Xincheng Development Co., Ltd. REKA Technology Co., Ltd.

145

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

Accounts payable Other subsidiaries Other payables LOTES USA Other payables Lerain Technology Co., Ltd.	17,002 67,422 4,399 2,166 1,978 - $ 2,225,316 1,514,221

5. Endorsement

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

==> picture [464 x 396] intentionally omitted <==

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

Dec. 31, 2022 Dec. 31, 2021
Lerain Technology Co., Ltd. $ - 100,000
Lotes Guangzhou Co., Ltd. 614,200 498,240
REKA Technology Co., Ltd. 541,715 311,800
$ 1,155,915 910,040
6. Promotion expense
2022 2021
Other subsidiaries $ 2,304 3,436
Mainly the sample fees.
7. Administration expense
2022 2021
Other subsidiaries $ 51,311 37,419
Mainly the service fees.
8. R&D expense
2022 2021
[Other subsidiaries ] $ 47 -
Mainly for research and development materials.
9. Non-operating income
2022 2021
[Other subsidiaries ] $ 4,639 2,184
----- End of picture text -----

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 2022 and 2021, and the balance of Lease liabilities as of

146

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

December 31, 2022 and 2021 were respectively $0 and $59,000.

• (4) Major management personnel transactions

Related compensation includes:

Short-term employee benefits Post-employment benefits Share-based payment	2022 $ 50,606 896 -	2021 41,554 1,029 2,087
	$ 51,502	44,670

VIII. Pledged Assets

The details of the book value of the assets provided as collateral by the Company are as follows:

Asset name Property, plant, and equipment (Note) Investment property	Collateral subject	Dec. 31, 2022 $ 41,909 167,220		Dec. 31, 2021 42,812 - 42,812
	Bank loan Bank loan
		$ 209,129

Note: Some loan contracts have expired and are no longer renewed. The Company has obtained bank repayment certificates but has not yet cancelled the collateral registration procedures.

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, 2022 was approximately $1,070,000 dollars.

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

[Guaranteed notes ]

Dec. 31, 2022 Dec. 31, 2021 $ 4,796,150 2,197,360

X. Significant Disaster Loss: None.

XI. Significant Post-Period Events:

The Company, following a board resolution on November 10, 2022, approved the issuance of up to 3,500 thousand common shares in a cash capital increase, with a face value of NT$10 per share. The Financial Supervisory Commission approved the issuance with effect from its letter Jin-Guan-Zheng-Fa-Zi No. 1110368023 dated January 16, 2023.

147

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

The Company, following a board resolution on November 10, 2022, issued an upper limit of 10,000 domestic unsecured convertible corporate bonds on March 9, 2023, each with a face value of NT$100 thousand, for a maximum issue amount of NT$1,000,000 thousand. The bonds have a term of three years and a coupon rate of 0%.

XII. Others

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

Employee benefits, summarized below:	depreciation, depletion, and	depreciation, depletion, and	depreciation, depletion, and	amortization functions are	amortization functions are	amortization functions are
Function Nature	2022			2021
	Operation cost	Operation expense	Total	Operation cost	Operation expense	Total
Employee benefit expense Salary expenses Labor insurance and health insurance expenses Pension expenses Compensation of directors Other employee benefit expenses Depreciation expense Amortization expense	29,628 1,780 577 - 2,293 105 11	349,679 14,631 7,706 4,261 14,100 10,087 22,628	379,307 16,411 8,283 4,261 16,393 10,192 22,639	17,167 1,194 470 - 1,780 79 12	274,228 12,352 7,365 4,425 11,943 6,941 25,889	291,395 13,546 7,835 4,425 13,723 7,020 25,901

Additional information on the number of employees and employee benefit costs for 2021 and 2020 is as follows:

and 2020 is as follows:
Number of employees Number of directors who were not employees of the Company Average employee benefit expenses Average employee salary expenses Adjustment of average employee salary expenses Remuneration for supervisors	2022 153		2021 146
	5		5
	$ 2,841		2,316
	$ 2,563		2,067
		24.00%	483
		-

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

1. Remuneration for directors is paid in accordance with the Company’s remuneration policy for directors.

148

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

1. The bonuses and dividends for managers and employees are based on the Company’s

operating conditions, personal duties and performance.

1. 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 2022:

1. Capital lending to others:

. Capital lending to others:	. Capital lending to others:	. Capital lending to others:	. Capital lending to others:	. Capital lending to others:	. Capital lending to others:	. Capital lending to others:	. Capital lending to others:	. Capital lending to others:	. Capital lending to others:	. Capital lending to others:	. Capital lending to others:	. Capital lending to others:	. Capital lending to others:	. Capital lending to others:	. Capital lending to others:	. Capital lending to others:
Unit: NT$/Foreigncurrency1,000
No.	Lender	Borrower	Item	Related party	Max amount for the period	Closing balance	Actual amount	Interest rate	Nature of the lending (Note 1)	Transaction amount	Purpose for lending	Allowance for bad debt	Collateral		Lending limit for single party (Note 2)	Overall lending limit (Note 2)
													Name	Value
0	The Company	Lotes Guangzhou Co.,Ltd.	Internal transaction	Yes	225,495 (RMB50,000)	220,470 (RMB50,000)	-	5%	2	-	Working capital	-	None	-	4,561,46	9,122,924

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: NT$/Foreigncurrency1,000	Unit: NT$/Foreigncurrency1,000	Unit: NT$/Foreigncurrency1,000	Unit: NT$/Foreigncurrency1,000	Unit: NT$/Foreigncurrency1,000	Unit: NT$/Foreigncurrency1,000	Unit: NT$/Foreigncurrency1,000	Unit: NT$/Foreigncurrency1,000	Unit: NT$/Foreigncurrency1,000	Unit: NT$/Foreigncurrency1,000	Unit: NT$/Foreigncurrency1,000	Unit: NT$/Foreigncurrency1,000
No.	Endorsement provider	Endorsee		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	Relationship (Note 1)
0 0 0 1 2	本公司 " " Lotes Guangzhou Co., Ltd. Lintes Technology Co., Ltd.	REKA Technology Co., Ltd. Lotes Guangzhou Co., Ltd. Lerain Technology Co., Ltd. REKA Technology Co., Ltd. Genie Precision Machine Co.,Ltd.	2 2 2 1 2	4,561,462 4,561,462 4,561,462 1,778,520 1,356,632	566,548 825,300 (USD28,000) 100,000 96,645 (USD3,000) 176,600	541,715 614,200 (USD20,000) - 92,130 (USD3,000) 146,600	- - - - 39,455	- - - - -	2.38% 2.69% - % 1.04% 5.40%	11,403,655 11,403,655 11,403,655 4,446,300 2,713,265	Yes " " No Yes	No " " " "	No Yes No " "

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

149

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

(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.

150

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

1. Securities held at the end of fiscal period (excluding the equity of controlled by subsidiaries, affiliated companies, or joint company):

Unit: NT$ 1,000

Holding company	Category and name of security	Relationship with the issuer of the security	Accounting item	End of the period	End of the period	End of the period	End of the period	Remark
				Shares	Book value	Shareholding ratio	Fairvalue
Lotes Co., Ltd. " " Jiayu Investment Co., Ltd. " " " " " " Lintes Technology Co., Ltd. "	VSO ELECTRONICS CO., LTD. SteadyBeat Technology Corporation G-sau Co., Ltd Grand-Tek Technology Co., Ltd. LIAN HONG ART CO., LTD. Patec Precision Industry Co., Ltd. OTO PHOTONICS, INC. LUCEMITEK CO., LTD. RADINET COMMUNICATIONS INC. AICP Technology Corporation Chailease Holding Company Limited Class A Preferred Shares Hotai Finance Co., Ltd. Class A Preferred Shares	" " " " " " " " " " " "	Financial assets measured at FVTPL - current Financial assets measured at FVTOCI - non-current " Financial assets measured at FVTPL - current " " " " " Financial assets measured at FVTOCI - current Financial assets measured at FVTOCI - non-current "	170,000 831,470 300,000 321,980 1,057,310 477,000 1,368,800 1,169,977 420,000 400,000 512,000 300,000	16,531 4,426 169 17,902 32,058 12,354 - - - - 50,125 28,800	0.50 % 8.53 % 12.10 % 1.31 % 2.91 % 1.04 % 4.10 % 17.33 % 18.37 % 5.33 % 0.34 % 0.60 %	16,531 4,426 169 17,902 32,057 12,354 - - - - 50,125 28,800	Note Note Note

Note: All of them were recognized in losses.

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

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

==> picture [454 x 256] intentionally omitted <==

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Unit: NT$ 1,000
The company Name of asset Date of Amount of Payment Counterparty Relation If the counterparty is a related party, the Reference Purpose of Other
which acquired occurrence transaction condition of transaction information of its previous transfer shall be for pricing the agreed
the property (Note 2) (Note 2) provided acquisition matters
and the
condition
of use
Owner Relationship Date of Amount
with the transfer
issuer
Lotes Zhongshan Plant (Note 1) 2017.10 ~ 1,794,486 1,614,359 Chongqing None - - - - Tendering Constructio None
Co., Ltd. 2022.12 Chuangyou n of
Construction self-use
Group, etc. plant
Lotes Hengnan " 2019.10 ~ 355,535 347,224 " " - - - - " " "
Co., Ltd. 2022.12
LOTES VIET Land use rights 2021.01.11 324,914 324,914 GREEN " - - - - Negotiation " "
NAM i-PARK
COMPANY CORPORATI
LIMITED ON
Lintes Land No. 1581, 2022.4.15 173,500 173,500 HONGJIE " - - - - Referring to Used as a "
Technology Co., 1583, 1584, BIOTECH market factory
Ltd. 1587, 1589, CO., LTD. price and
1591, 1615, professional
1617, 1618, appraisal
1914, 1955, reports
1960 in the
Longtan
District,
Taoyuan City
LINTES Land No. 675 2022.10.17 THB THB MAK-THAI " - - - - " " "
TECHNOLOGY and 2 other 170,000 40,000 INDUSTRIAL
(THAILAND) plots in CO., LTD.
CO.,LTD Thailand, and
the buildings
on them,
----- End of picture text -----

151

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

==> picture [454 x 99] intentionally omitted <==

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

located in
Klong Tamru
Sub district,
Mueang Chon
Buri District,
Chon Buri
Province
LOTES VIET Plant (Note 1) 2022.03~ 476,626 399,060 VITECCONS " - - - - Tendering " "
NAM 2022.12 CONSTRUCT
COMPANY ION
LIMITED INVESTMEN
T JOINT
STOCK
COMPANY
----- 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.

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

2. The amount of sales to or from related parties is at least $100 million or 20% of the

paid-in capital:

capital: None. The amount of sales to or paid-in capital:	capital: None. The amount of sales to or paid-in capital:	capital: None. The amount of sales to or paid-in capital:	from related parties is at least $100 million or 20% of the	from related parties is at least $100 million or 20% of the	from related parties is at least $100 million or 20% of the	from related parties is at least $100 million or 20% of the	from related parties is at least $100 million or 20% of the	from related parties is at least $100 million or 20% of the	from related parties is at least $100 million or 20% of the	from related parties is at least $100 million or 20% of the	from related parties is at least $100 million or 20% of the
			Unit: NT$1,000
The company which purchases (sells) products	Name of transaction counterparty	Relationship	Transaction status				Situation and reason for the conditions of transaction to be different from the ordinary ones		Notes and accounts receivable (payable)		Remark
			Purchases (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 Guangzhou Co., Ltd. " " " Lintes Technology (Suzhou) Co., Ltd. Lotes Hengnan Co., Ltd. Guangzhou Leside Technology Co., Ltd. " "	The Company Lotes Suzhou Co., Ltd. The Company Lotes Guangzhou Co., Ltd. Lotes Hengnan Co., Ltd. " Lotes Zhongshan Co., Ltd. Guangzhou Leside Technology Co., Ltd. REKA Technology Co., Ltd. Lotes Hengnan Co., Ltd. Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Lotes Zhongshan Co., Ltd. Lintes Technology Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Lotes Zhongshan Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Shenzhen DeYi	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 sales Net purchases Net sales Net purchases " Net sales Net purchases Net sales Net purchases " " " Net sales Net sales Net purchases Net sales "	1,397,497 1,474,724 11,627,683 10,267,683 1,049,563 146,404 4,577,242 1,458,174 1,148,439 263,476 297,648 549,481 2,338,904 147,481 354,241 770,824 730,896	94.17 % 99.37 % 70.67 % 63.82 % 6.50 % 0.89 % 28.36 % 8.86 % 15.04 % 3.45 % 3.90 % 7.20 % 95.54 % 10.72 % 19.74 % 40.86 % 38.74 %	EOM 90 days " " " " " " " " " " " " " " " "	- - - - - - - - - - - - - - - - -	No significant difference " " " " " " " " " " " " " " " "	314,136 (343,482) 1,887,801 (725,599) (157,022) 27,089 (1,287,635) 435,935 (213,904) (27,674) (46,744) (337,081) 600,283 55,709 (216,177) 124,065 292,509	91.22% (99.82)% 43.93% (26.60)% (5.64)% 0.63% (46.25)% 10.14% (20.93)% (2.71)% (4.57)% (32.99)% 98.27% 16.60% (33.15)% 17.11% 40.35%

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152
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Notes to the Parent Company Only Financial Statements of Lotes Co., Ltd.

Automation Equipment Co., Ltd.

8. 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: NT$1,000
Related party with accounts receivable by the Company	Name of transaction counterparty	Relationship	Balance of receivables from the related party	Turnover ratio	Past due receivables from the related party		Amounts due from related parties recovered after the period	Allowance for losses
					Amount	Handling
Xincheng Development Co., Ltd. REKA Technology Co., Ltd. " " " Lotes Suzhou Co., Ltd. Good Hope Investments Limited Lotes Guangzhou Co., Ltd. " " Lotes Zhongshan Co., Ltd. " " Lotes Hengnan Co., Ltd. Guangzhou Leside Technology Co., Ltd. " Lintes Technology (Suzhou) Co., Ltd.	The Company " Lotes Guangzhou Co., Ltd. Lotes Zhongshan Co., Ltd. Guangzhou Leside Technology Co., Ltd. Xincheng Development Co., Ltd. REKA Technology Co., Ltd. " Lotes Zhongshan Co., Ltd. " REKA Technology Co., Ltd. Lotes Guangzhou Co., Ltd. Guangzhou Leside Technology Co., Ltd. REKA Technology Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Lintes Technology Co.,Ltd.	Subsidiary " The surrogate parent company are the same parent company " " " Parent company The surrogate parent company are the same parent company " " " " " " " " Subsidiary	314,316 1,887,801 213,904 553,409 435,935 343,482 949,585 725,599 155,070 1,542,014 1,287,635 337,081 216,177 157,022 124,065 292,509 600,283	4.00 7.89 2.36 - 2.90 3.94 - 10.35 (0.29) - 5.45 2.81 2.38 9.00 3.05 3.35 4.96	- - - - - - - - - - - - - - - - -		314,316 1,516,736 141,350 63,472 18,502 343,482 - 717,040 80,995 9,221 890,590 163,810 - 181,356 44,910 135,367 398,818	- - - - - - - - - - - - - - - - -

1. Engagement in derivative transactions: Please refer to Note VI (2) and (25).

153

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

(2) Information on reinvestment business:

Information on the Company’s investees in 2022 was as follows (excluding investees in China):

China):	China):	China):	China):
				Unit: NT$1,000
Name of the company investing	Name of investee company	Location	Main business	Original investment amount (Note 1)		Shares held at the end of the period			Gain/loss of investee company in the fiscal period	Gain/loss in the investment recognized in the fiscal period	Remark
				End of the period	End of the **previous year **	Shares	Ratio	Book value
The Company " " " " " " " " " Lotes Investment Ltd. Good Hope Investments Limited " Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co., Ltd. " "	Lotes Investment Ltd. Good Hope Investments Limited Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co., Ltd. Lotes USA, Inc. LOTES EU GmbH Lerain Technology Co., Ltd. Lomites Co., Ltd LOTES VIET NAM COMPANY LIMITED Loteson International Investments Limited Xincheng Development Co., Ltd. REKA Technology Co., Ltd. Jae You Co., Ltd. Wangden Investments Limited Zongka Technology (Shenzhen) Co., Ltd. Compertum Microsystems Inc. Good News Medical Co., Ltd.	Samoa " " Anguilla Taiwan America Germany Taiwan " Vietnam Hong Kong Samoa Hong Kong " " Taiwan " "	Holding and investment " " " General investment Market development Market development Design, test and sale of chips Manufacturing and trading of mechanical equipment and electronic parts Manufacturing of connectors for the information industry, communications industry, and consumer electronics industry Holding and investment Sales of connectors for the information industry, communications industry, and consumer electronics industry Sales of connectors for the information industry, communications industry, and consumer electronics industry Holding and investment Holding and reinvestment Manufacturing of electrical and audio-visual electronic products Manufacturing of electronic components Manufacturing and sales of machinery and equipment, electronic components, and optical	799,996 12,323 614,704 15,355 690,000 76,775 3,272 47,321 124,900 1,295,962 799,996 3,071 3,110 614,715 15,355 69,600 60,866 6,360	721,064 11,107 554,055 13,840 690,000 69,200 3,132 47,321 25,000 497,825 721,064 2,768 2,803 554,064 13,840 69,600 43,880 6,360	26,050,000 401,281 20,016,426 500,000 69,000,000 2,500,000 100,000 4,732,059 12,490,000 42,200,000 26,050,000 100,000 101,281 20,016,756 500,000 6,960,000 4,331,380 636,000	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 15.74% 99.92% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 94.37% 31.78% 25.44%	8,437,726 1,847,445 3,560,292 181,559 1,483,589 85,782 4,162 29,205 107,072 1,202,687 8,892,618 1,375 896,459 3,588,371 181,559 (8,170) 20,909 3,938	2,066,102 94,224 869,517 19,619 255,562 (1,298) 110 (137,312) (12,736) (48,498) 2,066,102 (65) 94,289 869,517 19,619 (75) (44,533) (4,570)	1,838,979 94,224 869,646 19,619 256,306 (1,298) 110 (20,352) (12,120) (48,498) 2,066,102 (65) 94,289 869,517 19,619 (71) (13,932) (1,163)	Note 2 Note 2 Note 2

154

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

" Lintes Technology Co., Ltd. " " " " Jilong Co., Ltd.	Lintes Technology Co., Ltd. Genie Precision Machine Co., Ltd. Compertum Microsystems Inc. Lerain Technology Co., Ltd. Jilong Co., Ltd. LINTES TECHNOLOGY (THAILAND) CO., LTD. Rihui Co., Ltd.	" " " " Samoa Thailand Samoa	instruments Manufacturing of electronic parts and components, other electrical and electronic machinery and equipment Manufacturing and sales of optical molds Manufacturing of electronic components Design, test and sale of chips Holding and reinvestment Trading of electronic components Holding and reinvestment	616,919 164,833 20,279 5,471 152,015 57,222 152,015	486,926 164,833 14,620 5,471 137,016 - 137,016	31,081,140 14,671,000 1,443,135 547,059 4,950,000 6,400,000 4,950,000	50.24% 60.00% 10.59% 1.82% 100.00% 100.00% 100.00%	1,367,117 219,258 6,966 3,412 479,631 56,988 479,631	570,248 36,102 (44,533) (137,312) 228,056 (224) 228,056	289,750 21,035 (4,642) (2,494) 219,063 (224) 219,063	Note 2 Note 2 Note 2

Note 1: The original investment amount was converted into New Taiwan dollars using the exchange rate at the balance sheet date. Note 2: The investment income or loss recognized in the current period includes adjustments for unrealized gains or losses from intercompany transactions.

155

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

• (3) Investment in China:

• Names of investee companies in Mainland China, major business activities, and other related information:

					Unit: NT$1,000 Amount remitted or recovered 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 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 Remitted Recovered - - 783,105 2,066,102 100.00% 1,838,974 8,437,677 - - - 613,869 869,517 100.00% 869,647 3,560,253 - - - 15,355 19,619 100.00% 19,619 181,559 - - - - 31,167 100.00% 50,725 1,533,690 - - - 152,015 213,545 50.24% 102,764 274,571 - - - - 17,444 100.00% 17,444 153,544 - - - - 1,047,138 100.00% 1,047,138 3,889,209 - - - - 19,848 100.00% 19,848 272,603 - - - - 911 100.00% 379 100,033 - - - - (5,588) 100.00% (8,409) 95,678 - - - - (77) 100.00% (77) 251,259 - - - - 56,986 100.00% 56,986 114,596 - - - - 441 51.00% 225 1,693 -	Unit: NT$1,000 Amount remitted or recovered 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 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 Remitted Recovered - - 783,105 2,066,102 100.00% 1,838,974 8,437,677 - - - 613,869 869,517 100.00% 869,647 3,560,253 - - - 15,355 19,619 100.00% 19,619 181,559 - - - - 31,167 100.00% 50,725 1,533,690 - - - 152,015 213,545 50.24% 102,764 274,571 - - - - 17,444 100.00% 17,444 153,544 - - - - 1,047,138 100.00% 1,047,138 3,889,209 - - - - 19,848 100.00% 19,848 272,603 - - - - 911 100.00% 379 100,033 - - - - (5,588) 100.00% (8,409) 95,678 - - - - (77) 100.00% (77) 251,259 - - - - 56,986 100.00% 56,986 114,596 - - - - 441 51.00% 225 1,693 -	Unit: NT$1,000 Amount remitted or recovered 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 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 Remitted Recovered - - 783,105 2,066,102 100.00% 1,838,974 8,437,677 - - - 613,869 869,517 100.00% 869,647 3,560,253 - - - 15,355 19,619 100.00% 19,619 181,559 - - - - 31,167 100.00% 50,725 1,533,690 - - - 152,015 213,545 50.24% 102,764 274,571 - - - - 17,444 100.00% 17,444 153,544 - - - - 1,047,138 100.00% 1,047,138 3,889,209 - - - - 19,848 100.00% 19,848 272,603 - - - - 911 100.00% 379 100,033 - - - - (5,588) 100.00% (8,409) 95,678 - - - - (77) 100.00% (77) 251,259 - - - - 56,986 100.00% 56,986 114,596 - - - - 441 51.00% 225 1,693 -	Unit: NT$1,000 Amount remitted or recovered 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 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 Remitted Recovered - - 783,105 2,066,102 100.00% 1,838,974 8,437,677 - - - 613,869 869,517 100.00% 869,647 3,560,253 - - - 15,355 19,619 100.00% 19,619 181,559 - - - - 31,167 100.00% 50,725 1,533,690 - - - 152,015 213,545 50.24% 102,764 274,571 - - - - 17,444 100.00% 17,444 153,544 - - - - 1,047,138 100.00% 1,047,138 3,889,209 - - - - 19,848 100.00% 19,848 272,603 - - - - 911 100.00% 379 100,033 - - - - (5,588) 100.00% (8,409) 95,678 - - - - (77) 100.00% (77) 251,259 - - - - 56,986 100.00% 56,986 114,596 - - - - 441 51.00% 225 1,693 -	Unit: NT$1,000 Amount remitted or recovered 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 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 Remitted Recovered - - 783,105 2,066,102 100.00% 1,838,974 8,437,677 - - - 613,869 869,517 100.00% 869,647 3,560,253 - - - 15,355 19,619 100.00% 19,619 181,559 - - - - 31,167 100.00% 50,725 1,533,690 - - - 152,015 213,545 50.24% 102,764 274,571 - - - - 17,444 100.00% 17,444 153,544 - - - - 1,047,138 100.00% 1,047,138 3,889,209 - - - - 19,848 100.00% 19,848 272,603 - - - - 911 100.00% 379 100,033 - - - - (5,588) 100.00% (8,409) 95,678 - - - - (77) 100.00% (77) 251,259 - - - - 56,986 100.00% 56,986 114,596 - - - - 441 51.00% 225 1,693 -	Unit: NT$1,000 Amount remitted or recovered 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 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 Remitted Recovered - - 783,105 2,066,102 100.00% 1,838,974 8,437,677 - - - 613,869 869,517 100.00% 869,647 3,560,253 - - - 15,355 19,619 100.00% 19,619 181,559 - - - - 31,167 100.00% 50,725 1,533,690 - - - 152,015 213,545 50.24% 102,764 274,571 - - - - 17,444 100.00% 17,444 153,544 - - - - 1,047,138 100.00% 1,047,138 3,889,209 - - - - 19,848 100.00% 19,848 272,603 - - - - 911 100.00% 379 100,033 - - - - (5,588) 100.00% (8,409) 95,678 - - - - (77) 100.00% (77) 251,259 - - - - 56,986 100.00% 56,986 114,596 - - - - 441 51.00% 225 1,693 -	Unit: NT$1,000 Amount remitted or recovered 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 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 Remitted Recovered - - 783,105 2,066,102 100.00% 1,838,974 8,437,677 - - - 613,869 869,517 100.00% 869,647 3,560,253 - - - 15,355 19,619 100.00% 19,619 181,559 - - - - 31,167 100.00% 50,725 1,533,690 - - - 152,015 213,545 50.24% 102,764 274,571 - - - - 17,444 100.00% 17,444 153,544 - - - - 1,047,138 100.00% 1,047,138 3,889,209 - - - - 19,848 100.00% 19,848 272,603 - - - - 911 100.00% 379 100,033 - - - - (5,588) 100.00% (8,409) 95,678 - - - - (77) 100.00% (77) 251,259 - - - - 56,986 100.00% 56,986 114,596 - - - - 441 51.00% 225 1,693 -	Unit: NT$1,000 Amount remitted or recovered 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 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 Remitted Recovered - - 783,105 2,066,102 100.00% 1,838,974 8,437,677 - - - 613,869 869,517 100.00% 869,647 3,560,253 - - - 15,355 19,619 100.00% 19,619 181,559 - - - - 31,167 100.00% 50,725 1,533,690 - - - 152,015 213,545 50.24% 102,764 274,571 - - - - 17,444 100.00% 17,444 153,544 - - - - 1,047,138 100.00% 1,047,138 3,889,209 - - - - 19,848 100.00% 19,848 272,603 - - - - 911 100.00% 379 100,033 - - - - (5,588) 100.00% (8,409) 95,678 - - - - (77) 100.00% (77) 251,259 - - - - 56,986 100.00% 56,986 114,596 - - - - 441 51.00% 225 1,693 -
Name of investee company in Mainland China	Main business	Paid-in capital (Note 3)	Investme nt method (Note 1)	Accumulated investment amount remitted from Taiwan at the beginning of the fiscal period (Note 3)	Amount remitted or recovered		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 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
					Remitted	Recovered
Lotes Guangzhou Co., Ltd. Lotes Suzhou Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Lotes Hengnan Co., Ltd. Lintes Technology (Suzhou) Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Lotes Zhongshan Co., Ltd. Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Hengnan Deyi Property Development Co., Ltd. Zhongshan Jinmeida Metal Surface Treatment Co., Ltd. Zhongshan DeZhi Real Estate Development Co., Ltd. Guangzhou Leside Technology Co., Ltd. Chongqing Fuxinrui Electronic Technology Co., Ltd.	Manufacturing of connectors for the information industry, communications industry, and consumer electronics industry Manufacturing of connectors for the information industry, communications industry, and consumer electronics industry R&D of electronics, import and export of raw materials of plastic products and plastic products Manufacturing of connectors for the information industry, communications industry, and 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 Surface treatment of metal products and plastic products Real estate development, house rental, landscape design, and interior decoration 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	819,957 613,869 15,355 1,153,058 152,015 110,235 2,557,452 268,973 101,416 36,510 251,336 20,724 7,055	(2) (2) (2) (3) (2) (3) (3) (3) (3) (3) (3) (3) (3)	783,105 613,869 15,355 - 152,015 - - - - - - - -	- - - - - - - - - - - - -	- - - - - - - - - - - - -	783,105 613,869 15,355 - 152,015 - - - - - - - -	2,066,102 869,517 19,619 31,167 213,545 17,444 1,047,138 19,848 911 (5,588) (77) 56,986 441	100.00% 100.00% 100.00% 100.00% 50.24% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00%	1,838,974 869,647 19,619 50,725 102,764 17,444 1,047,138 19,848 379 (8,409) (77) 56,986 225	8,437,677 3,560,253 181,559 1,533,690 274,571 153,544 3,889,209 272,603 100,033 95,678 251,259 114,596 1,693	- - - - - - - - - - - - -

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) N/A.

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.

2. Investment ceiling in Mainland China:

156

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

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.	$1,412,329,000	$1,561,637,000	$13,684,385,000
Lintes Technology Co.,Ltd.	$152,015,000	$152,015,000	$1,627,959,000

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 “Information on Significant Transactions” and “Business Relationships and Significant Transactions between Subsidiaries and Parents” for details of significant direct or indirect transactions between the Company and its investees in Mainland China in fiscal 2022, which have been eliminated in the preparation of the consolidated financial statements.

• (4) Information on Major Shareholders:

Shares **Name of Major Shareholder **	Shares held	Shareholding %
Chin-Ling Investment Co., Ltd.	10,956,237	10.16%
Jiaming Investment Co., Ltd.	9,797,037	9.08%
Cathay Life Insurance Co., Ltd.	5,488,640	5.09%
New Labor Pension Fund 1st Fubon Discretionary Investment Account in 2021	7,497,959	6.95%

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 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. Segmental Information

Please refer to the consolidated financial statements for 2022.

157

Lotes Co., Ltd.

Statement of Cash and Cash Equivalents

December 31, 2022

Unit: NT$ 1,000

Item	Summary	Amount $ 59 62,258 636,239 698,497 50 2,429,161 2,429,211 $ 3,127,767
Cash and cash equivalents: Petty cash Checks and demand deposits: Time deposit: Total	NTD Foreign currency (USD20,373,523.51, HKD23,905.46, JPY77,075, EUR222,010.63, RMB723,789.64 and THB1.67) NTD Due date: 2023.02.19 Interest rate range: 0.795% Foreign currency (USD79,100,000) Due date: 2023.01.04~2023.03.03 Interest rate range: 3.90%~4.60%

158

Statement of Financial Assets Measured at

FVTPL - Current

Unit: 1,000 Shares/NT$ 1,000

Financial Instrument	Summary	Number of Shares or Bonds	Fac	e Value	Total Amount	Interest Rate	Acquisition Cost 6,182	Fair	Value	F	air Value Change Attributable to Credit Risk Change Remarks - Unit: NT$ 1,000 Amount $ 500 168 142 126 110 89 259 $ 1,394
								Unit Price	Total Amount 16,531
			$		1,700,000

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

159

Lotes Co., Ltd.

Statement of Accounts Receivable

December 31, 2022

Unit: NT$ 1,000

Item	Summary	Amount $ 22,514 $ 830,798 702,258 609,017 573,531 507,347 373,446 3,259,955 6,856,352 (3,936) $ 6,852,416
Accounts receivable - related parties Non-related parties: G company H company I company J company K company L company Other (Note) Less: allowance for losses

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

160

Lotes Co., Ltd.

Statement of Other Receivables

December 31, 2022

Unit: NT$ 1,000

Item	Summary	Amount $ 2,692 (2,272) $ 420 $ 28,740 9,715 38,455 (279) $ 38,176
Related-parties Less: allowance for losses Non-related parties: Business tax credit and tax refund Other Subtotal Less: allowance for losses	Mainly receivables from mold development and estimated interest receivable

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

161

Lotes Co., Ltd.

Statement of Inventories

December 31, 2022

Unit: NT$ 1,000

Item Merchandises Finished goods Raw materials Subtotal Less: Allowance for decline in value of inventories and doubtful losses	Amount $ 1,089,869 4,220 18	Market price 992,396 3,430 1
	1,094,107 (98,280)	995,827
	$ 995,827

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.

Statement of Prepayments

Item Prepayment of membership fee Prepayment Prepayment of insurance Other (Note) Total	Summary	Amount $ 776 2,500 582 1,334 $ 5,192
	Mainly prepayment of annual association fee Mainly prepayment of product certification fee Mainly prepayment of insurance 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.

162

Lotes Co., Ltd.

Statement of Changes in Financial Assets Measured at FVTPL - Non-Current From January 1 to December 31, 2022 Unit: NT$ 1,000

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Beginning of the period Increase in the period Decrease in the period Ending of the period
Provision of
Name of financial guarantees
instruments Shares Fair value Shares Amount Shares Amount Shares Fair value or pledges Remark
Redemption rights of - $ 3,370 - - - 3,370 - - None
convertible bonds
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Statement of Changes in Financial Assets Measured at FVTOCI - Non-Current From January 1 to December 31, 2022 Unit: 1,000 Shares/NT$ 1,000

Name	Beginning of theperiod	Beginning of theperiod	Increase	in theperiod	Decrease in the period (Note)	Decrease in the period (Note)	Ending	of theperiod	Accumulated impairment	Provision of guarantees orpledges	Remark
	Shares	Fair value	Shares	Amount - -	Shares	Amount 4,119 786	Shares	Fair value 4,426 169
SteadyBeat Technology Corporation G-sau Co., Ltd	950 300	$ 8,545 955	- -		119 -		831 300		- -	None None
		$ 9,500		-		4,905		4,595	-

Note: This amount includes a disposal of NT$1,422 thousand in this period and unrealized losses of NT$3,483 thousand on financial assets measured at fair value through other comprehensive income.

163

Lotes Co., Ltd.

Statement of Changes in Investment Accounted for Using the

Equity Method

From January 1 to December 31, 2022

Unit: NT$ 1,000

Name	Opening balance	Opening balance	Increase in the period (Note 1)	Increase in the period (Note 1)	Decrease in the period (Note 1)	Decrease in the period (Note 1)	Closing balance	Closing balance	Closing balance	Market value or net equity	Market value or net equity	Provision of guarantees orpledges	Remark
	Shares Amount		Shares Amount		Shares	Amount	Shares	Shareholdin g %	Amount 8,437,726 1,847,445 3,560,292 181,559 1,483,589 85,782 4,162 29,205 107,072 1,202,687	Unitprice	Total price - - - - - - - - - -
Lotes Investment Limited Good Hope Investments Limited Guansi Development Co., Ltd. Zaxi Investment Co., Ltd. Jiayu Investment Co., Ltd. Lotes USA. Inc. LOTES EU Gmbh Lerain Technology Co., Ltd. Lomites Co., Ltd(註2) LOTES VIET NAM COMPANY LIMITED	26,050,000 $ 6,513,504 401,281 1,575,778 20,016,426 2,656,135 500,000 159,758 69,000,000 1,112,641 2,500,000 75,270 100,000 3,674 4,732,059 37,790 2,500,000 19,312 17,985,000 470,627 $ 12,624,489		- 1,924,222 - 271,667 - 904,157 - 21,801 - 370,948 - 10,512 - 488 - - 9,990,000 87,760 24,215,000 732,060 4,323,615		- - - - - - - - - -	- - - - - - - 8,585 - -	26,050,000 401,281 20,016,426 500,000 69,000,000 2,500,000 100,000 4,732,059 12,490,000 42,200,000	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 16.40% 100.00% 100.00%		- - - - - - - - - -		None " " " " " " " " "
		$ 12,624,489		4,323,615		8,585			16,939,519		-

Note 1: This amount includes an increase of NT$844,045 thousand in investment funds in this period, recognition of investment income of NT$2,996,616 thousand, recognition of an increase in accumulated conversion adjustments of NT$349,783 thousand, recognition of an increase in capital surplus of the investee company of NT$127,583 thousand in accordance with the equity method, and recognition of unrealized losses on financial assets of NT$2,997 thousand in accordance with the equity method.

Note 2: Mikronpoint Co., Ltd. changed its name to Lomites Co., Ltd. on May 18, 2022.

164

Lotes Co., Ltd.

Statement of Deferred Tax Assets

December 31, 2022

Unit: NT$ 1,000

Item Deferred tax assets	Summary	Amount $ 106,064

Statement of Other Non-Current Assets

Item Refundable deposits Deferred expenses Prepayment for construction work	Summary	Amount $ 6,027 386 7,248
		$ 13,661

165

Lotes Co., Ltd.

Statement of Short-Term Borrowings

December 31, 2022

Unit: NT$ 1,000

Type Credit loan Credit loan Credit loan Credit loan Credit loan Dividend project loan	Description	Closing balance Period $ - 2022.06.28~ 2023.06.28 500,000 2022.11.25~ 2023.02.24 330,000 2022.11.21~ 2023.02.20 - 2021.10.29~ 2022.10.29 - 2022.03.08~ 2023.03.08 1,000,000 2022.08.25~ 2023.08.25 $ 1,830,000	Interest rate 0% 1.74% 1.80% 0% 0% 1.55%		Financing line Collateral or guarantee 300,000 Guaranteed notes of $300,000 thousand 500,000 Guaranteed notes of $500,000 thousand 584,260 Guaranteed notes of $584,260 thousand (Note 1) 600,000 Guaranteed notes of $600,000 thousand 767,750 Guaranteed notes of $767,750 thousand (Note 2) 1,000,000 Guaranteed notes of $1,000,000 thousand 3,752,010	Remark
	E.SUN Bank CTBC Bank Bank SinoPac Hua Nan Bank Fubon Bank E.SUN Bank

Note 1: The financing amount is NT$400,000 thousand and US$6,000 thousand. Note 2: The financing amount is US$25,000 thousand.

166

Statement of Notes Payable

Item	Summary	Amount $ 4,541 1,313 926 488 1,122 $ 8,390
Non-related parties: M company N company O company P 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.

167

Lotes Co., Ltd.

Statement of Accounts Payable

December 31, 2022

Unit: NT$ 1,000

Item	Summary	Amount $ 3,948 6,955 314,136 1,887,801 6,099 $ 2,218,939 $ 14,839 3,147 373 $ 18,359
Related parties: Lerain Technology Co., Ltd. LOTES VIET NAM COMPANY LIMITED Xincheng Development Co., Ltd. REKA Technology Co., Ltd. Lintes Technology Co., Ltd. Non-related parties: Q company R 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.

168

Statement of Other Payables

Item	Summary	Amount $ 6,377
Other payables - related parties Non-related parties: Salary payable Royalties payable Compensation payable to employees and directors and supervisors Promotion expenses payable Other Total Income tax liabilities for the period	Mainly salary and year-end bonuses payable Mainly royalties payable Mainly compensation for employees and directors and supervisors in 2022 Mainly promotion expenses payable
		$ 31,774 32,653 225,780 60,374 77,734
		$ 428,315
		$ 795,052

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. Statement of Refund Liabilities - Current December 31, 2022 Item Summary Refund liabilities - current Amount expected to be paid to customers as a result of discounts Statement of Other Current Liabilities Item Summary Other current liabilities Collection on behalf of others Statement of Long-term Loans	Unit: NT$ 1,000 Amount $ 384,044
	Amount $ 11,008

Creditor Hua Nan Bank Less: Portions due within one year	Summary Long-term secured loans	Loan Amount $ 126,175 8,361	Contract Term 2022.05.31 ~ 2037.05.31	Interest Rate 1.75% - %	Collateral or Guarantee	Remarks
					Investment property
		$ 117,814

170

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

Lotes Co., Ltd.
Statement of Deferred Income Tax
Liabilities
December 31, 2022 Unit: NT$ 1,000
Item Summary Amount
Deferred income tax liabilities $ 1,955
Statement of Provision for Liabilities -
Non-Current
Item Summary Amount
Provision for liabilities - Provision for employee benefit liabilities $ 41,410
non-current
Statement of Other Non-Current Liabilities
Item Summary Amount
Deposits received $ 43
----- End of picture text -----

171

Lotes Co., Ltd.

Statement of Operating Revenue

From January 1 to December 31, 2022

Unit: NT$ 1,000

Item Sales revenue: General Triangular trade Less: Return of sales Discount on sales Net operating revenue	Quantity 829,199KPCS 1,592,221KPCS	Amount $ 10,157,739 7,488,167 (49,144) (156,590)
		$ 17,440,172

172

Unit: NT$ 1,000

Lotes Co., Ltd.

Statement of Operating Cost

From January 1 to December 31, 2022

Item Direct raw materials Opening inventory Add: Incoming materials for the period 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 Total manufacturing costs Add: Opening finished goods Less: Transfer 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 Other Cost of goods sold Loss on decline in value of inventories, slump and obsolescence Operating cost

Amount $ 43 128 (18) (11) (4) 138 4,568 84 3,008 7,798 3,379 (3,008) (4,220) (628) 3,321 1,057,288 13,109,453 11 32,028 (1,089,869) (2,652) 13,106,259 36,076 $ 13,145,656

173

Lotes Co., Ltd.

Statement of Promotion Expense

From January 1 to December 31, 2022

Unit: NT$ 1,000

Item	Summary	Amount $ 108,177 48,770 84,467 38,609 36,173 104,108
Import and export expenses Royalties Payroll Freight fee Commission Other (Note) Total
		$ 420,304

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

Statement of Administration Expense

Item	Summary	Amount $ 224,026 25,953 22,088 105,997
Salary expenses Labor expenses Amortizations Other (Note) Total
		$ 378,064

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

174

Lotes Co., Ltd.

December 31, 2022

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

(1) Statement of property, plant and equipment and changes in accumulated depreciation, Note VI (6).

(2) Statement of right-of-use assets and changes in accumulated depreciation, Note VI (7).

(3) Statement of investment property and accumulated depreciation, Note VI (8).

(4) Statement of changes in intangible assets, Note VI (9).

(5) Statement of the net amount of other revenues and gains and expenses and losses, Note VI (23)

175

5. Consolidated Financial Statement and Independent Auditor’s Report

Independent Auditor’s Report

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

Audit opinion

We have audited the Consolidated Balance Sheet of Lotes Co., Ltd. and subsidiaries (Lotes Group) as of December 31, 2022 and 2021, the Consolidated Statement of Comprehensive Income as of January 1 to December 31, 2022 and 2021 as well as the Consolidated Statement of Changes in Equity, Consolidated 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, 2022 and 2021 in Lotes Group and the consolidated financial performance and consolidated cash flow of January 1 to December 31, 2022 and 2021 prepared according to Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations approved by the Financial Supervisory Commission and issued into effect. Basis of the audit opinions

The audit 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). 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 Group as well as perform other responsibilities addressed on the regulation. Based on the audit results of us, we believe we have obtained sufficient and appropriate auditing evidence as the basis to express our audit opinions.

Key audit matters

Key audit matters refer to the most important matters on the audits to Lotes Group’s consolidated financial statements of fiscal year 2022 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 (15) to the consolidated financial statements for the accounting policy in terms of income recognition. Please refer to Note VI (15) to the consolidated financial statements for the refund liability. Please refer to Note VI (23) 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 Group. Users of the statements are cautiously concerned about the performance of the operating income. In response to the market conditions and business needs, discounts were provided for parts of the sales of goods agreed with the customers. Based on 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 Group.

Corresponding audit procedures:

176

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 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 IV (8) for the accounting policy of inventory evaluation. Please refer to Note V in the consolidated financial statements for the accounting estimates and assumed uncertainties of the inventory evaluation. Please refer to Note VI (4) in the consolidated 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 Group. 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.

Other Matters

Lotes Co., Ltd. has prepared its parent company only financial statements for fiscal years 2022 and 2021, and we have issued an unqualified audit report thereon for your information. 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 International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations approved by the Financial Supervisory Commission and issued into effect 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 Group’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 Group or suspend its business operation or there is no alternative practical and feasible solution other than liquidation or business suspension.

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

Responsibility of accountants’ audit on the consolidated financial statements

The purpose of the consolidated financial statements audited by 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

177

decisions made by the users of the consolidated financial statements.

• When we conduct the audit according to generally accepted auditing standards, we use

• professional judgment and maintain our professional suspicion. We also executed the following tasks:

• Identifying and evaluating the risk of major untrue expression on the consolidated financial statements due to fraud or error; designing and implementing proper responding strategies towards the risk evaluated; and obtaining sufficient and appropriate audit evidence as the basis of audit opinions. Due to fraud might be involving with collusion, counterfeiting, malicious omission untrue declaration, or going out of the internal control, the risk of not detecting the major untrue expression due to fraud will be higher than that due to error.

• Obtaining necessary understanding of internal control related to audit in order to design proper audit procedure under the situation of the case. However, its purpose is not to express opinion toward the effectiveness of the internal control in Lotes Group.

• Evaluating the adequacy of the accounting policies used by the 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 Group’s capability in continuous operation are made. If we believe major uncertainty existed on the event or situation, we must remind the users of consolidated financial statements on the audit report to pay attention on the relevant disclosure or modify audit opinion when the disclosure is not appropriate. The conclusion that we made is based on the audit evidence obtained up to the audit report day, but future events or situations might cause Lotes Group not capable in continuous operation.

• Evaluating the overall expression, structure and content of the consolidated financial statements (including relevant notes) as well as whether the consolidated financial statements present fairly, in all material respects, relevant transaction and events.

• We obtained sufficient and appropriate audit evidence about the financial information of the constituent entities of the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and execution of the Group's audits and for forming an opinion on the Group's audits.

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.

We determined the key audit matters that we would like to execute on Lotes Group’s consolidated financial statements for fiscal year 2022 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 Authority of Securities CHIN-KUAN-CHENG-SHEN-T Approval Certificate No. : ZU No. 1000011652 CHIN-KUAN-CHENG-SHEN-T ZU No. 1110333933

March 21, 2023

178

Lotes Co., Ltd. And Subsidiaries

Consolidated Balance Sheet

December 31, 2022 and 2021

Unit: NT$ 1,000

Assets Current assets: 1100 Cash and cash equivalents (Note VI (1) and (26)) 1110 Financial assets measured at FVTPL - current (Note VI (2), (13) and (26)) 1120 Financial assets measured at FVTOCI - current (Note VI (2) and (26)) 1150 Net notes receivable (Note VI (3) and (26)) 1170 Net accounts receivable (Note VI (3) and (26)) 1200 Other receivables (Note VI (3) and (26)) 1220 Income tax assets for the period (Note VI (19)) 130X Net inventory (Note VI (4)) 1410 Advance payment 1479 Other current assets - other Non-current assets: 1510 Financial assets measured at FVTPL - non-current (Note VI (2), (13) and (26)) 1517 Financial assets measured at FVTOCI - non-current (Note VI (2) and (26)) 1600 Property, plant and equipment (Note VI (7) and 8) 1755 Right-of-use assets (Note VI (8)) 1760 Net investment property(Note VI (9) and (26)) 1780 Intangible assets (Note VI (10)) 1840 Deferred tax assets (Note VI (19)) 1900 Other non-current assets Total of assets	Dec. 31, 2022 Amount % $ 7,090,304 21 79,007 - - - 203,501 1 10,507,021 32 384,111 1 739 - 3,561,132 10 260,014 1 4,650 -	Dec. 31, 2021 Amount % 3,303,062 12 154,124 1 1,456 - 61,292 - 8,736,734 33 459,211 2 362 - 4,091,387 15 143,291 1 9,018 - 16,959,937 64 3,370 - 30,003 - 6,882,186 26 1,028,489 4 335,869 1 205,584 1 151,467 1 822,486 3 9,459,454 36 26,419,391 100 Liabilities and equity Current liabilities: 2100 Short-term loans (Note VI (11), (26), (29) VIII and IX) 2130 Contract liabilities - current (Note VI (23)) 2150 Notes payable (Note VI (26)) 2170 Accounts payable (Note VI (26)) 2200 Other payables (Note VI (26)) 2230 Income tax liabilities for the period - current (Note VI (19)) 2280 Lease liabilities - current (Note VI (14), (26), (29) and VII) 2365 Refund liabilities - current (Note VI (15)) 2300 Other current liabilities 2322 Long-term loans - current portion (Note VI (12), (26), (29), and VIII) Non-current liabilities: 2530 Bonds payable (Note VI (13), (26) and (29)) 2540 Long-term loans (Note VI (12), (26), (29) and VIII) 2550 Provisions – non-current (Note VI (16) and (18)) 2560 Income tax liabilities for the period - non-current (Note VI (19)) 2570 Deferred income tax liabilities (Note VI (19)) 2580 Lease liabilities - non-current (Note VI (14), (26), (29) and VII) 2600 Other non-current liabilities Total of liabilities Equity attributable to owners of parent: Share capital: 3110 Capital – common stock (Note VI (20)) 3130 Certificates of bond-to-stock conversion (Note VI (20)) 3200 Capital reserves (Note VI (20)) 3300 Retained earnings (Note VI (20)) 3400 Other equity (Note VI (20)) Total equity attributable to owners of parent 36XX Non-controlling interest (Note VI (6)) Total of equity Total of liabilities and equity	Dec. 31, 2022 Amount % $ 1,906,775 6 54,427 - 8,504 - 2,351,503 7 1,937,095 6 1,296,939 4 110,281 - 384,044 1 32,168 - 15,861 -	Dec. 31, 2021 Amount % 1,142,178 4 97,494 - 16,402 - 2,613,359 10 1,998,938 8 670,568 3 220,742 1 195,105 1 34,715 - 14,805 -
			8,097,597 24	7,004,306 27
	22,090,479 66		132,449 - 149,769 1 41,410 - 6,928 - 73,393 1 260,380 1 25,101 -	911,927 4 29,600 - 45,220 - 31,342 - 33,906 - 285,847 1 22,539 -
	- - 83,520 - 8,871,880 27 982,871 3 97,817 - 182,069 1 211,812 1 775,192 2
			689,430 3	1,360,381 5
			8,787,027 27	8,364,687 32
			1,068,762 3 9,536 - 6,307,022 19 15,761,019 47 (339,030) (1)	1,059,779 4 1,167 - 5,283,698 20 11,200,170 42 (682,333) (3)
	11,205,161 34
			22,807,309 68	16,862,481 63
			1,701,304 5	1,192,223 5
	$ 33,295,640 100
			24,508,613 73	18,054,704 68
			$ 33,295,640 100	26,419,391 100

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

Chairperson: CHU, TE-HSIANG

Accounting Manager: LIU, HSIN-HSIA

179

Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Comprehensive Income

From January 1 to December 31, 2022 and 2021

Unit: NT$ 1,000

4000 Operating revenue (Note VI (15), (23) and XIV) 5000 Operating cost (Note VI (4) and XII) Gross profit Operating expense (Note VI (14), (17), (18), (25), (26), VII and XII): 6100 Promotion expense 6200 Administration expense 6300 R&D expense 6450 Expected credit loss (gain) Total operating expense Net operating profit Non-operating revenue/expense(Note VI (13) and (24)): 7100 Interest income 7010 Other income 7020 Other gains and losses 7050 Financial costs 7055 Expected credit loss Total non-operating revenue/expense Net profit before tax from continuing operations 7950 Less: Income tax expense(Note VI (19)) Net profit for the period 8300 Other comprehensive income: 8310 Components of other comprehensive income that will not be reclassified to profit or loss 8311 Remeasurements of defined benefit plan 8316 Unrealized gains (losses) from investments in equity instruments measured at FVTOCI 8349 Less: Income tax related to components of other comprehensive income that will not be reclassified to profit or loss Total components of other comprehensive income that will not be reclassified to profit or loss 8360 Components of other comprehensive income that will be reclassified to profit or loss 8361 Exchange differences on translation 8399 Less: Income tax related to components of other comprehensive income that will be reclassified to profit or loss Total components of other comprehensive income that will not be reclassified to profit or loss 8300 Other comprehensive income for the period (net) Total other comprehensive income for the period Net profit for the period attributable to: 8610 Owners of parent 8620 Non-controlling interest Total comprehensive income attributable to: 8710 Owners of parent 8720 Non-controlling interest Basic earnings per share (Unit: NT$) (Note VI (22)) Diluted earnings per share (Unit: NT$) (Note VI (22))	2022	% 100 56	2021
	Amount $ 27,099,134 15,161,454 11,937,680 828,044 1,532,956 2,300,779 7,015 4,668,794 7,268,886 46,801 367,702 560,287 (55,109) - 919,681 8,188,567 1,782,155 6,406,412		Amount 21,391,917 12,834,611	%
				100 60
		44	8,557,306	40
		3 6 8 -	748,932 1,409,600 2,030,576 8,931	4 7 9 -
		17	4,198,039	20
		27	4,359,267	20
		- 1 2 - -	13,994 324,926 (128,648) (28,304) (1,037)	- 2 (1) - -
		3	180,931	1
		30 7	4,540,198 1,021,167	21 5
		23	3,519,031	16
	2,790 (7,981) 558	- - -	3,851 (5,077) 770	- - -
	(5,749)	-	(1,996)	-
	352,351 830	1 -	(82,222) (39)	- -
	351,521	1	(82,183)	-
	345,772	1	(84,179)	-
	$ 6,752,184	24	3,434,852	16
	$ 6,254,263 152,149	22 1	3,472,201 46,830	16 -
	$ 6,406,412	23	3,519,031	16
	$ 6,599,798 152,386	23 1	3,387,921 46,931	16 -
	$ 6,752,184	24	3,434,852	16
	$ $	58.70		33.32
		57.87		32.69

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

Accounting Manager: LIU, HSIN-HSIA

180

Unit: NT$ 1,000

Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Changes in Equity

From January 1 to December 31, 2022 and 2021

Balance on January 1, 2021 Net profit for the period Other comprehensive income for the period Total other comprehensive income for the period Appropriation and distribution of retained earnings: Legal reserve appropriated Reversal on special reserve Cash dividends of common stock Other changes in capital reserves: Issuance of stock options for convertible bonds Changes in equity of subsidiaries, associates and joint ventures accounted for using equity method Compensation expense for employee stock options Cash capital increase Conversion of convertible bonds Changes in non-controlling interests Cash dividends paid by subsidiaries to non-controlling interests Balance on December 31, 2021 Net profit for the period Other comprehensive income for the period Total other comprehensive income for the period Appropriation and distribution of retained earnings: Legal reserve appropriated Reversal on special reserve Cash dividends of common stock Other changes in capital reserves: Changes in equity of subsidiaries, associates and joint ventures accounted for using equity method Redemption of convertible corporate bonds Conversion of convertible bonds Changes in non-controlling interests Cash dividends paid by subsidiaries to non-controlling interests Balance on December 31, 2022				Equity attributable to owners ofparent	Equity attributable to owners ofparent	Equity attributable to owners ofparent	Equity attributable to owners ofparent				Non-controlling interests	Total equity
		Share capital		Capital reserves		**Retained earnings **		Other equity		Total equity attributable to owners of parent
								Exchange differences on translation of foreign financial statements	Unrealized gains (losses) on financial assets measured at FVTOCI
	Share capital for ordinary shares	Certificates of bond-to-stock conversion	Total		Legal reserve	Special reserve	Unappropriated retained **earnings **
	$ 1,034,779 - -	- - -	1,034,779 - -	3,958,247 - -	1,299,543 - -	650,533 - -	7,151,068 3,472,201 3,081	(586,953) (8,019) - - (82,102) (5,259)		13,499,198 3,472,201 (84,280)	980,361 46,830 101	14,479,559 3,519,031 (84,179)
	-	-	-	-	-	-	3,475,282	(82,102) (5,259)		3,387,921	46,931	3,434,852
	- - - - - - 25,000 - - -	- - - - - - - 1,167 - -	- - - - - - 25,000 1,167 - -	- - - 183,236 5,460 24,931 1,050,971 60,853 - -	271,615 - - - - - - - - -	- (55,561) - - - - - - - -	(271,615) 55,561 (1,376,256) - - - - - - -	- - - - - - - - - - - - - - - - - - - -		- - (1,376,256) 183,236 5,460 24,931 1,075,971 62,020 - -	- - - - - - - - 237,061 (72,130)	- - (1,376,256) 183,236 5,460 24,931 1,075,971 62,020 237,061 (72,130)
	1,059,779 - -	1,167 - -	1,060,946 - -	5,283,698 - -	1,571,158 - -	594,972 - -	9,034,040 6,254,263 2,232	(669,055) (13,278) - - 349,783 (6,480)		16,862,481 6,254,263 345,535	1,192,223 152,149 237	18,054,704 6,406,412 345,772
	-	-	-	-	-	-	6,256,495	349,783 (6,480)		6,599,798	152,386	6,752,184
	- - - - - 8,983 - -	- - - - - 8,369 - -	- - - - - 17,352 - -	- - - 127,583 (90) 895,831 - -	347,528 - - - - - - -	- 87,361 - - - - - -	(347,528) (87,361) (1,695,646) - - - - -	- - - - - - - - - - - - - - - -		- - (1,695,646) 127,583 (90) 913,183 - -	- - - - - - 413,561 (56,866)	- - (1,695,646) 127,583 (90) 913,183 413,561 (56,866)
	$ 1,068,762	9,536	1,078,298	6,307,022	1,918,686	682,333	13,160,000	(319,272) (19,758)		22,807,309	1,701,304	24,508,613

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

Chairperson: CHU, TE-HSIANG

Accounting Manager: LIU, HSIN-HSIA

181

Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Cash Flows

From January 1 to December 31, 2022 and 2021

Cash flows from (used in) operating activities: Net profit before tax Adjustments: Adjustments to reconcile profit (loss) Depreciation expense Amortization expense Expected credit loss (gain) Net loss (gain) on financial assets or liabilities at FVTPL Interest expense Interest income Dividend income Compensation expense for share-based payment Loss (gain) on disposal of property, plant and equipment Inventory valuation and disposal loss Profit from the repurchase of corporate bonds Other adjustments Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Changes in operating assets: Increase in notes receivable Increase in accounts receivable Decrease (increase) in other receivables Decrease (increase) in inventory Increase in advance payment Decrease (increase) in other current assets Decrease in other financial assets Total changes in operating assets Changes in operating liabilities: Increase (decrease) in contract liabilities Increase (decrease) in notes payable Increase (decrease) in accounts payable Increase (decrease) in other payables Decrease in provisions Increase (decrease) in other current liabilities Increase in refund liabilities Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash inflow generated from operations Interest received Dividends received Interest paid Income taxes paid Net cash flows from operating activities Cash flows from (used in) investing activities : Disposal of financial assets measured at FVTOCI Acquisition 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 Acquisition of intangible assets Net cash inflows from business combination Disposal of investment property Decrease (increase) in other non-current assets Net cash flows from (used in) investing activities Cash flows from (used in) financing activities Increase (decrease) in short-term loans Issuance of corporate bonds Borrowings of long-term loans Repayments of long-term loans Payments of lease liabilities Increase in other non-current liabilities Cash dividends paid Cash dividends paid to non-controlling interests Cash capital increase Subsidiary issuing corporate bonds Repurchase of corporate bonds Changes in non-controlling interests Changes in subsidiaries, associates and joint ventures accounted for using equity method Net cash flows from (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	Unit: NT$ 1,000 2022 2021 $ 8,188,567 4,540,198 2,212,956 1,503,974 55,711 51,307 7,015 9,968 14,301 (25,795) 55,109 28,304 (46,801) (13,994) (5,535) (6,119) 10,825 25,077 28,364 3,728 97,602 92,408 (35) - 23,779 (2,472)	Unit: NT$ 1,000 2022 2021 $ 8,188,567 4,540,198 2,212,956 1,503,974 55,711 51,307 7,015 9,968 14,301 (25,795) 55,109 28,304 (46,801) (13,994) (5,535) (6,119) 10,825 25,077 28,364 3,728 97,602 92,408 (35) - 23,779 (2,472)
	2,453,291	1,666,386
	(142,209) (1,777,302) 85,564 432,653 (116,723) 4,368 -	(7,187) (1,904,786) (107,813) (1,624,767) (81,083) (2,353) 87,320
	(1,513,649)	(3,640,669)
	(43,067) (7,898) (261,856) (62,876) (1,020) (2,547) 188,939	5,835 12,828 112,204 809,880 (187) 1,518 33,338
	(190,325)	975,416
	(1,703,974)	(2,665,253)
	749,317	(998,867)
	8,937,884 36,337 5,535 (45,171) (1,201,299)	3,541,331 18,588 6,119 (24,622) (851,646)
	7,733,286	2,689,770
	1,422 (61,465) (8,000) 69,302 (3,677,619) 2,392 (30,457) - - 18,314	- (14,400) (174,504) 166,435 (3,631,931) 18,589 (101,381) (96,793) 30,446 (284,138)
	(3,686,111)	(4,087,677)
	714,342 - 130,000 (8,775) (237,460) 2,562 (1,695,646) (56,866) - 346,268 (2,800) 246,344 67,445	1,142,178 1,152,983 29,600 (9,191) (356,459) 4,669 (1,376,256) (72,130) 1,075,971 - - 236,940 5,435
	(494,586)	1,833,740
	234,653 3,787,242 3,303,062	(82,183) 353,650 2,949,412
	$ 7,090,304	3,303,062

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

Accounting Manager: LIU, HSIN-HSIA

182

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

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

2022 & 2021

(All amounts are in NT$ thousands unless otherwise stated)

I. Company History

Lotes Co., Ltd. (hereinafter referred to as the “Company”) was incorporated on August 23, 1986 in accordance with the provisions of the Company Act and was approved for registration with its registered office at No.15, Wuxun Street, Anle District, Keelung City. The Company and 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 XIV 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 March 21, 2023.

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

Since January 1, 2022, the Consolidated Company has adopted the amended International Financial Report Standards, and this did not cause material impact on the consolidated financial statements:

‧Amendments to IAS 16 – “Property, Plant and Equipment: Proceeds before Intended Use”

‧Amendments to IAS 37 – “Onerous Contracts—Cost of Fulfilling a Contract”

‧Annual Improvements to IFRS Standards 2018–2020

‧Amendments to IFRS 3 – “Reference to the Conceptual Framework”

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

The Consolidated Company assesses that the application of the following newly amended IFRSs, effective January 1, 2023, will not have a significant impact on consolidated financial statements.

‧Amendments to IAS 1 – “Disclosure of Accounting Policies”

‧Amendments to IAS 8 – “Definition of Accounting Estimates”

184

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

• ‧Amendments to IAS 12 – “Deferred Tax related to Assets and Liabilities arising from a Single Transaction”

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

The Consolidated Company does not expect the following 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 1 – “Classification of Liabilities as Current or Non-Current”

‧Amendments to IAS 1, "Non-Current Liabilities with Contractual Terms"

• ‧Amendments to IFRS 17, "First-time Application of IFRS 17 and IFRS 9 Comparative Information"

‧Amendments to IFRS 16, "Regulations on Sale and Leaseback Transactions"

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 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 and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations approved by the Financial Supervisory Commission.

(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 measured at fair value through other comprehensive income.

• (3) Liabilities for cash-settled share-based benefit agreements that are measured at fair value.

• (4) Net defined benefit liability (or asset) is measured according to the fair value of the retirement fund assets deducting present value of the defined benefit obligation and the ceiling influence value listed in Footnotes IV (16).

2. Functional currency and presentation currency

Each party of the Consolidated Company takes the currency of major economic

185

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

environment where each operation is located as its functional currency. The Consolidated Financial Statement is presented in the functional currency of the Company, NTD. All of the financial information expressed herein in NTD is of one thousand per unit.

(3) Consolidation basis

The main entity for the preparation of consolidated financial statements consists of the Company and the entity controlled by the Company (i.e., the subsidiaries).

The financial statements of subsidiaries are included in the consolidated financial statements from the date that control is obtained until the date that control is lost. Gains or losses attributable to the subsidiary's non-controlling interest are attributed to the non-controlling interest, even if the non-controlling interest becomes a loss balance as a result.

Inter-company transactions, balances and any unrealized gains and losses are eliminated in the preparation of the consolidated financial statements.

Changes in ownership interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions with owners.

1. Subsidiaries included in the consolidated financial statements

The subsidiaries included in the consolidated financial statements are:

Investing company Subsidiary **Location **

Shareholding % Dec. 31, 2022 Dec. 31, 2021 Note

The Company Lotes Investments Limited Samoa 〞 Good Hope Investments Limited 〞 〞 Guansi Development Co., Ltd. 〞 〞 Zhaxi Investment Co., Ltd. Anguilla 〞 Zhaxi Investment Co., Ltd. Taiwan 〞 Lotes USA, Inc America 〞 LOTES EU GmbH Germany 〞 Lerain Technology Co., Ltd. Taiwan 〞 Lomites Co., Ltd. 〞 〞 LOTES VIET NAM COMPANY LIMITED Vietnam Lotes Investments Limited Loteson International Investments Limited Hong Kong Loteson International Investments Limited Lotes Guangzhou Co., Ltd. China Lotes Guangzhou Co., Ltd. Lotes Hengnan Co., Ltd. 〞

100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 15.74% 16.40% (Note 1) 99.92% 100.00% (Note 4) 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

186

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

〞	Shenzhen DeYi Automation	〞	100.00%	100.00%
	Equipment 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.
〞	Zhongshan Jinmeida Metal	〞	- %	- %	(Note 1)
	Surface Treatment Co., Ltd.				& (Note
					2)
〞	Guangzhou Leside Technology	〞	100.00%	100.00%
	Co., Ltd.
Lotes	Zhongshan DeZhi Real Estate	China	100.00%	- %
Zhongshan	Development Co., Ltd.
Co., Ltd.
Guangzhou	Chongqing Fuxinrui Electronic	〞	51.00%	51.00%
Leside	Technology Co., Ltd.
Technology
Co., Ltd.
Good Hope	Xincheng Development Co.,	Samoa	100.00%	100.00%
Investments	Ltd.
Limited
〞	REKA Technology Co., Ltd.	Hong Kong	100.00%	100.00%
Guansi	Jae You Co., Ltd.	Hong Kong	100.00%	100.00%
Development
Co., Ltd.
Jae You Co.,	Lotes Suzhou Co., Ltd.	China	100.00%	100.00%
Ltd.
Lotes Suzhou	Lotes Zhongshan Co., Ltd.	〞	50.00%	50.00%
Co., Ltd.
Zhaxi	Wangden Investments Limited	Hong Kong	100.00%	100.00%
Investment
Co., Ltd.
Wangden	Zongka Technology (Shenzhen)	China	100.00%	100.00%
Investments	Co., Ltd.
Limited
Zhaxi	Ememe Robot Co., Ltd.	Taiwan	94.37%	94.37%
Investment
Co., Ltd.
〞	Compertum Microsystems Inc.	〞	31.78%	35.34%	(Note 1)
〞	Good News Medical Co., Ltd.	〞	25.44%	25.44%	(Note 1)
〞	Lintes Technology Co., Ltd.	〞	50.24%	52.13%
Lintes	Jiajun Investment Co., Ltd.	〞	- %	100.00%	(Note 3)
Technology
Co., Ltd.
〞	Genie Precision Machine Co.,	〞	60.00%	60.00%
	Ltd.

187

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

〞	Compertum Microsystems Inc.	〞	10.59%	10.41% (Note 1)
〞	Lerain Technology Co., Ltd.	〞	1.82%	1.90% (Note 1)
〞	Jilong Co., Ltd.	Samoa	100.00%	100.00%
〞	LINTES TECHNOLOGY	Thailand	100.00%	- %
	(THAILAND) CO. , LTD.
Jilong Co.,	Rihui Co., Ltd.	Samoa	100.00%	100.00%
Ltd.
Rihui Co.,	Lintes Technology (Suzhou)	China	100.00%	100.00%
Ltd.	Co., Ltd.

• Note 1: Although the Consolidated Company does not hold more than half of the voting shares of this

• company, it is included as a subsidiary in the consolidated financial statements because the Consolidated Company has control over its major operating activities and other decisions.

• Note 2: Please refer to Note VI (5) for the Consolidated Company's acquisition of control over this company.

• Note 3: Liquidation eliminated in the fourth quarter of 2021.

• Note 4: Mikronpoint Co., Ltd. changed its name to Lomites Co., Ltd. on May 18, 2022.

2. Subsidiaries not included in the consolidated financial statements: None.

(4) 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

The assets and liabilities of foreign operating organizations, including the business

188

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

reputation and fair value adjustment during the acquisition, are converted to be NTD according to exchange rate on the report day; gains and losses are converted into NTD 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. Upon partial disposal of a subsidiary with foreign operations, the related accumulated exchange differences are reattributed to non-controlling interest on a pro rata basis. 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.

• (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:

1. Those that are expected to be realized during the normal operating period or intended to be sold or consumed.

2. Those held mainly for the purpose of transaction.

3. Those expected to be realized within 12 months after the reporting period.

4. The asset is cash or cash equivalents, unless the asset is otherwise restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

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:

1. Those expected to be paid off during the normal operating period.

2. Those held mainly for the purpose of transaction.

3. Those expected to be paid off within 12 months after the reporting period.

4. Liabilities that do not have an unconditional right to extend the maturity period to at least 12 months after the reporting period. The terms of the liability may, at the option of the counterparty, not affect its classification if the issuance of equity instruments results in its settlement.

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

(6) Cash and 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.

(7) Financial instrument

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

1. Financial assets

The purchase or sale of financial assets by a conventional trader, the Consolidated Company shall treat all purchases and sales of financial assets classified in the same manner in accordance with the transaction date or the settlement date.

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 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 measured at 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

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

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 FVTOCI

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 Consolidated Company may, at the time of its original recognition, irrevocably choose to report the subsequent changes in the fair value of its non-tradable equity instrument investments to other consolidated profits and losses. The foregoing selection is made on an 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 FVTPL

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

191

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

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 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 Consolidated 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 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

192

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

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.

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 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.

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 Consolidated Company is exposed to credit risk.

The expected credit loss is the probabilistic weighted estimate of the credit loss

193

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

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 merged Consolidated Company gives the borrower concessions that the borrower would not have considered;

• ·The borrower is likely to file for bankruptcy or other financial restructuring; or

• ·The active market for the financial asset disappears due to financial difficulties.

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

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

(7) Financial assets derecognition

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 derecognized.

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

194

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

transferred assets continue to be recognized on the balance sheet.

2. Financial liabilities and equity instruments

(1) Classification of liabilities or equity

Debt and equity instruments issued by the Consolidated Company are classified as financial liabilities or equity based on the substance of the contractual agreements and the definitions of financial liabilities and equity instruments.

(2) Equity transactions

An equity instrument is any contract that evidences a residual interest in the assets of the Consolidated Company after deducting all of its liabilities. Equity instruments issued by the Consolidated Company are recognized at the amount of the consideration received less direct issue costs.

(3) Compound financial instruments

The number of shares issued does not vary with the change in fair value of the compound financial instruments, which are convertible bonds (denominated in New Taiwan dollars) that the holders have the option to convert to equity.

The original recognition amount of the liability component of a compound financial instrument is measured at the fair value of a similar liability excluding the equity conversion rights. The original recognition amount of the equity component is measured as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to the carrying amounts of the original liability and equity.

After initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not remeasured after initial recognition.

Interest related to financial liabilities is recognized as profit or loss. Financial liabilities are reclassified to equity upon conversion, and no gain or loss is recognized upon conversion.

(4) 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

195

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

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.

(5) Derecognition 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.

When derecognizing 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.

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

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

(8) Inventory

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) Investment property

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,

196

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

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.

(10) 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 Consolidated 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 Consolidated 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.

(11) Leasing

The Consolidated Company shall assess whether the contract is a lease or includes a

197

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

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.

1. 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 the commencement date of the lease shall be used as the original measurement;

• (3) the guaranteed amount of salvage value expected to be paid; and

• (4) the price at which the option to exercise the option to purchase or terminate the lease will be reasonably determined or the penalty to be paid.

• Lease liabilities is then calculated using effective interest method, and the amount

• was measured when:

• (1) changes in the index or rate used to determine lease payments result in changes in future lease payments;

• (2) the guaranteed amount of the residual value expected to be paid has changed;

• (3) the evaluation of the underlying asset purchase option has changed;

• (4) the estimate of whether to exercise the option of extension or termination

198

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

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 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.

In relation to short-term leases and leases of low-value assets, the Consolidated Company has chosen not to recognize right-of-use assets and lease liabilities, but rather to recognize lease payments on a straight-line basis as an expense during the lease term.

2. 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

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

199

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

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 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.

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) Provision for liabilities

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

The amount recognized in Provisions takes into account the risks and uncertainties of the obligation and is the best estimate of the payments required to settle the obligation at the end of the reporting period. If Provisions is measured at the estimated cash flows to settle this realistic obligation, the carrying amount is the present value of those cash flows.

(15) Income recognition

Revenue from customer contracts

Income is measured in consideration for the expected entitlement to transfer goods or

200

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

services. The Consolidated Company recognizes revenue from the transfer of control of goods or services to the customer in order to meet its performance obligations.

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

The Consolidated Company 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 payments 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 Company.

2. Defined benefit plan

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

The defined benefit obligation is actuated annually by a qualified actuary using the projected unit benefit method. When the results of the calculation are probable to be favorable to the Consolidated 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

201

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

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 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 transactions

Equity-settled share-based payment agreements recognize an expense and increase relative equity over the vesting period of the award at the grant date fair value. The expense recognized is adjusted for the number of awards that are expected to qualify for the service condition and the non-market vesting condition, and the final amount recognized is measured based on the number of awards that qualify for the service condition and the non-market vesting condition on the vesting date.

The non-vested conditions regarding share-based payment awards are reflected in the measurement of the fair value of the share-based payment awards at the date of grant and no adjustment is required to be made to verify the difference between the expected and actual results.

The fair value amount of the share appreciation rights payable to employees for cash settlement is recognized as an expense and an increase in the relative liability in the period in which the employees reach the point where they can receive unconditional compensation. The liability is remeasured at the fair value of the share appreciation rights at each reporting date and settlement date, and any change is recognized in profit or loss.

• (18) Income tax

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

202

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

income, Current tax and deferred income tax asset shall be recognized as gains and losses.

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

Deferred income tax assets are measured and recognized according to the temporary difference between the carrying amount and taxation basis of assets and liabilities with financial report objectives. In case of any of the following situations, the temporary differences will not be recognized as deferred income tax assets:

1. 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.

2. Those generated due to investment subsidiary company and joint equities and likely to not to be returned in the foreseeable future.

3. 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 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:

1. Having the legal execution right to make the current income tax assets and the current tax liabilities offset with each other: and

2. 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.

3. (19) Business combination

203

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

Goodwill is measured at the fair value of the consideration transferred at the date of acquisition, including the amount of any non-controlling interest attributable to the acquiree, less the net amount of 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 identified before recognizing gain recognized in bargain purchase transaction in profit or loss.

Transaction costs associated with a business combination, except for those related to the issuance of debt or equity instruments, are recognized as expenses of the Consolidated Company immediately upon incurrence.

Non-controlling interest of the acquiree, which is a present ownership interest and the holder of which is entitled to a proportionate share of the net assets of the enterprise at the time of liquidation, is measured at fair value at the acquisition date or at the present ownership instrument's proportionate share of the recognized amount of the acquiree's identifiable net assets, at the option of the Consolidated Company, on a transaction by transaction basis. Other non-controlling interests are measured at their fair values on the acquisition date or on other bases as prescribed by 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 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) Segmental Information

An operating segment is a component of the Consolidated Company that engages in operating activities that may earn revenues and incur expenses, including revenues and expenses related to transactions with other components of the Consolidated Company. The operating results of all operating segments are reviewed regularly by the Consolidated Company's chief operating decision maker to make decisions about the allocation of resources to the segment and to evaluate its 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 that will affect the adoption of accounting policies and the

204

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

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.

The following assumptions and estimates are subject to significant risks of material adjustments to the carrying amounts of assets and liabilities in the next financial year, and the related information is as follows:

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 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 (4) for the inventory assessment.

VI. Descriptions for Important Accounting Items

• (1) Cash and cash equivalents

Cash and cash equivalents
Petty cash Checks and demand deposits Time deposits Cash and cash equivalents listed on the Statement of Cash Flows	Dec. 31, 2022 $ 6,331 3,662,736 3,421,237 $ 7,090,304		Dec. 31, 2021 5,227 2,554,367 743,468 3,303,062

Disclosures of interest rate risks and sensitivity analysis on financial assets and liabilities of the Consolidated Company are seen in Note VI (26).

(2) Financial assets

1. Financial assets measured at FVTPL

Financial assets mandatorily measured at FVTPL: Current: Non-hedging derivative financial assets Forward exchange contracts Financial products Embedded derivative instruments - redemption right Non-derivative financial assets Shares of listed ("OTC") companies Subtotal	Dec. 31, 2022 $ - - 163 78,844	Dec. 31, 2021 223 62,164 - 91,737
	79,007	154,124

205

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

Non-current Non-hedging derivatives Embedded derivatives—right of redemption Total	- 3,370 $ 79,007 157,494

Please refer to Note VI (13) for the disclosure of embedded derivatives of the convertible bonds issued by the Consolidated Company.

The Consolidated Company accounts for the financial products it undertakes on the basis of the subscription amount at the time of original recognition. The revenue is calculated on a daily basis based on the balance of the financial products account and the applicable performance basis, and the revenue is recognized as a quarterly dividend.

Please refer to Note VI (26) for the amount recognized in profit or loss based on fair value remeasurement.

The Consolidated 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 measured at FVTPL for non-applicable hedge accounting is as follows:

Financial assets Forward exchange contracts 2. Financial assets measured at FVTOCI Equity instruments measured at FVTOCI: Current: Domestic unlisted (or OTC) stock - AICP Technology Corporation Non-current: Domestic listed stock - Chailease Finance Co., Ltd. Domestic listed stock - Hotai Finance Co., Ltd. Domestic unlisted (or OTC) stock—SteadyBeat Technology Corporation Domestic unlisted (or OTC) stock—G-sau Co., Ltd Subtotal Total	Financial assets			Dec. 31,	Dec. 31,	2021
		Contract principal (NT$ 1,000) USD 2,000				Maturity
						2022.02.09 Dec. 31, 2021 1,456 20,503 - 8,545 955 30,003 31,459
			Dec. 31, 2022
			83,520
			$ 83,520

The Consolidated Company’s investments in these equity instruments are not held for

206

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

trading purposes and have been designated as measured at FVTOCI.

Due to the above investments in equity instruments measured at fair value through other comprehensive income, the consolidated company recognized dividend income of NT$1,946 thousand and NT$0 thousand in 2022 and 2021 respectively.

On September 30, 2022, the consolidated company adjusted its investment portfolio to diversify risk due to considerations of asset allocation and sold the designated equity instruments measured at fair value through other comprehensive income of SteadyBeat Technology Corporation. The fair value at the time of disposal was NT$1,422 thousand, with an accumulated disposal loss of NT$0 thousand.

As of December 31, 2022 and 2021, none of the Consolidated Company’s financial assets had been pledged as collateral.

(3) Notes receivable, accounts receivable and other receivables

Notes receivable Accounts receivable Other receivables Less: provisions	Dec. 31, 2022 $ 203,501 10,532,266 387,133 (28,267) $ 11,094,633	Dec. 31, 2021 61,292 8,754,191 462,226 (20,472) 9,257,237

For the changes in the provisions for notes and accounts receivable for the years 2021 and 2020, please refer to Note VI (26) 1. (3) Statement of Impairment Losses.

(4) Inventory

Merchandises Finished goods Work in process Raw materials	Dec. 31, 2022 $ 777,610 1,334,030 843,056 606,436 $ 3,561,132	Dec. 31, 2021 1,053,144 1,287,744 1,008,724 741,775 4,091,387

The Consolidated Company’s inventory as of December 31, 2022 and 2021 including allowance for inventory losses are NT$438,732 thousand dollars and NT$372,177 thousand dollars respectively.

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

Cost of goods sold Inventory valuation and disposal loss Total	2022 $ 15,063,852 97,602 $ 15,161,454	2021 12,742,203 92,408 12,834,611

As of December 31, 2022 and 2021, the Consolidated Company’s inventories were not pledged as security.

207

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

(5) Changes in ownership interests in subsidiaries

1. Acquisition of subsidiaries

The Consolidated Company acquired substantive control over Zhongshan Jinmeida Metal Surface Treatment Co. ("Jinmeida"), a surface treatment company for hardware and plastic parts. The acquisition of control over Jinmeida will enable the Consolidated Company to expand its plating capacity for the production of connectors.

For the period from the acquisition date to December 31, 2021, the revenue and net loss contributed by Jinmeida were $0 thousand and $889 thousand, respectively. If this acquisition had occurred on January 1, 2021, management estimates that the revenue and net income of the Consolidated Company would have been $21,391,917 thousand and $3,518,267 thousand, respectively, for the period. These amounts do not reflect the actual revenue and operating results that the Consolidated Company would have generated if the business combination had been completed at the beginning of the year in which the acquisition occurred, and should not be used as a forecast of future operating results.

Costs incurred in connection with this acquisition transaction were recognized in the consolidated statement of income under the heading "administration expense".

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 outflow from acquisition of subsidiaries

[Consideration paid in cash ]

==> picture [86 x 12] intentionally omitted <==

(2) Identifiable assets acquired and liabilities assumed

The fair values of the identifiable assets acquired and liabilities assumed at the date of acquisition were as follows:

of acquisition were as follows:
Right-of-use assets Other payables Fair value of identifiable net assets	$ 96,875 (82)
	$ 96,793

The Consolidated Company will keep the above matters under review during the measurement period. If new information becomes available within one year of the acquisition date regarding facts and circumstances existing at the acquisition date that would identify adjustments to the provisional amounts described above or any additional provisions for liabilities existing at the acquisition date, the accounting for the acquisition will be modified.

2. Acquisition of additional equity interests in subsidiaries

On November 7, 2022, the consolidated company increased its stake in Lomites Co., Ltd. by NT$600 thousand in cash, resulting in an increase in its stake in Lomites Co., Ltd. by 0.32%.

208

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

On July 23, 2021, the Consolidated Company invested $5,471 thousand in cash in Lerain Technology Co., Ltd., increasing its interest in Lerain Technology Co., Ltd. by 1.62%.

The effect of the change in the Consolidated Company's ownership interest in the subsidiaries listed above on the equity attributable to the owners of parent is as follows:

Carrying amount of non-controlling interests acquired Consideration paid to non-controlling interests Capital reserves - the difference between the actual acquisition or disposal price and the carrying amount of the subsidiary	2022 $ 548 (600)	2021 4,513 (5,471) (958)
	$ (52)

1. The Consolidated Company did not subscribe to the subsidiary's cash capital increase in proportion to its shareholding, which did not result in a loss of control.

On December 15, 2022, Compertum Microsystems Inc. issued 5,206 thousand new shares in a capital increase, raising a total of NT$52,060 thousand. The consolidated company subscribed to 2,265 thousand shares, with a subscription amount of NT$22,645 thousand. As a result, the consolidated company increased its stake in Compertum Microsystems Inc. by 0.61% because it did not subscribe in proportion to its shareholding.

On April 29, 2022, Lomites Co., Ltd. issued 10,000 thousand new shares in a capital increase, raising a total of NT$100,000 thousand. The consolidated company subscribed to 9,950 thousand shares, with a subscription amount of NT$99,500 thousand. As a result, the consolidated company's stake in Lomites Co., Ltd. decreased by 0.4% because it did not subscribe in proportion to its shareholding.

On April 15, 2022, Lerain Technology Co., Ltd. issued 1,215 thousand new shares in a capital increase, raising a total of NT$85,050 thousand. Because the consolidated company did not subscribe, its stake in Lerain Technology Co., Ltd. decreased by 0.70%.

On February 25, 2022, Lintes Technology Co., Ltd. issued 3,500 thousand new shares in a capital increase, raising a total of NT$332,500 thousand. The consolidated company subscribed to 1,368 thousand shares, with a subscription amount of NT$129,993 thousand. As a result, the consolidated company's stake in Lintes Technology Co., Ltd. decreased by 0.76% because it did not subscribe in proportion to its shareholding.

On October 20, 2021, Compertum Microsystems Inc. issued 975 thousand new shares for total proceeds of $9,750 thousand and the Consolidated Company reduced its interest in Compertum Microsystems Inc. by 4.80% due to no subscription.

On September 15, 2021, Lerain Technology Co., Ltd. issued 11,193 thousand new shares with total funds raised of NT$111,929 thousand. The Consolidated Company's interest in Lerain Technology Co., Ltd. decreased by 11.03% as the Consolidated Company did not subscribe.

209

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

On May 14, 2021, Lerain Technology Co., Ltd. issued 12,683 thousand new shares with total funds raised of NT$126,832 thousand. The Consolidated Company subscribed 3,794 thousand shares for NT$37,935 thousand, and the Consolidated Company's interest in Lerain Technology Co., Ltd. increased by 7.94% because the shares were not subscribed in proportion to its shareholding.

On April 8, 2021, Good News Medical Co., Ltd. issued 2,000 thousand new shares with total funds raised of NT$20,000 thousand. The Consolidated Company subscribed 611 thousand shares for NT$6,110 thousand, and the Consolidated Company's interest in Good News Medical Co., Ltd. increased by 20.44% because the shares were not subscribed in proportion to its shareholding.

On January 31, 2021, Lerain Technology Co., Ltd. issued 2,210 thousand new shares with total funds raised of NT$22,100 thousand. The Consolidated Company's interest in Lerain Technology Co., Ltd. decreased by 15.06% as the Consolidated Company did not subscribe.

The effect of changes in the Consolidated Company's ownership interest in the subsidiaries listed above on the equity attributable to owners of parent was as follows:

Increase in equity after issuance of new shares by subsidiaries Exchange differences on translation Amount not subscribed in proportion to shareholding Capital reserves - recognition of changes in ownership interests in subsidiaries	2022 $ 325,020 41 (252,138)	2021 50,463 - (44,045) 6,418
	$ 72,923

1. The exercise of the conversion right of the unsecured convertible corporate bonds of the subsidiary did not result in a loss of control.

The subsidiary, Lintes Technology Co., Ltd., issued 1,367 thousand new shares in 2022 due to the bondholders exercising their conversion rights, resulting in a decrease of 1.13% in the consolidated company's stake in Lintes Technology Co., Ltd.

The effect on the equity attributable to the parent company due to the changes in the ownership interest in the aforementioned subsidiary is as follows:

Increase in the rights enjoyed after the conversion of new shares by the subsidiary's bondholders exercising their conversion rights Exchange differences on translation Capital surplus - recognized changes in ownership interest in the subsidiary	2022 Lintes Technology $ 54,640 72 $ 54,712

• (6) Subsidiaries with significant non-controlling interests

210

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

The non-controlling interests of subsidiaries that are material to the Consolidated Company are as follows:

Name of subsidiary Lintes Technology Co., Ltd.	Principal place of business/country of incorporation 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, 2022	Dec. 31, 2021
		49.76%	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 Co., Ltd. Closing balance of non-controlling interests attributable to the Consolidated Company Operating revenue Net profit for the period Attributable to owners of Lintes Technology Co., Ltd. Attributable to non-controlling interests of Lintes Technology Co., Ltd. Other comprehensive income Attributable to owners of Lintes Technology Co., Ltd. Total of comprehensive income Attributable to owners of Lintes Technology Co., Ltd. Attributable to non-controlling interests of Lintes Technology Co., Ltd. Net income of the Consolidated Company for the period attributable to non-controlling interests	Dec. 31, 2022 $ 3,115,748 1,062,281 (1,060,878) (258,033) 145,853	Dec. 31, 2021 2,345,154 778,760 (1,191,923) (102,650) 135,679
	$ 2,713,265	1,693,662
	$ 1,350,148	810,795
	2022 $ 3,369,201	2021 2,473,397
	$ 570,248	174,032
	$ 14,084	11,107
	$ 277	228
	$ 570,525	174,260
	$ 14,084	11,107
	$ 280,498	83,313

211

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

Comprehensive income of the Consolidated Company for the period attributable to non-controlling 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 non-controlling interests	$ 280,715	83,422 2021 59,731 (368,009) 169,527 1,473 (137,278) 68,218
	2022 $ 500,397 (420,111) 296,556 (3,102)
	$ 373,740
	$ 52,954

(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:

Cost or deemed cost: Balance on January 1, 2022 Addition Prepayment for equipment transferred in Completion of construction in progress and acceptance of equipment to be examined Investment properties transferred in Disposal Transferred to expenses Effect of change in exchange rate Balance on December 31, 2022 Balance on January 1, 2021 Addition Prepayment for equipment transferred in Completion of construction in progress and acceptance of	Land $ 241,919 131,296 - 173,500 218,230 - - 2,163	Buildings		Machinery equipment 3,721,293 425,575 17,095 167,558 - (316,536) - 71,625		Other 4,811,867 613,038 11,096 1,123,013 - (352,971) - 58,430	Outstanding work and equipment to be inspected		Total 11,554,527 3,677,619 28,980 - 241,868 (669,507) (23,925) 207,974
		1,646,343 469,162 789 330,115 23,638 - - 53,897					1,133,105 2,038,548 - (1,794,186) - - (23,925) 21,859
	$ 767,108	2,523,944		4,086,610		6,264,473	1,375,401		15,017,536
	$ 48,584 162,671 - 31,235	769,413 72,864 58,504 748,568		2,951,297 787,812 41,990 11,037		3,275,852 1,708,481 23,195 342,814	1,334,576 938,022 - (1,133,871)		8,379,722 3,669,850 123,689 (217)

212

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

equipment to be examined Disposal Effect of change in exchange rate Balance on December 31, 2021 Losses on depreciation and impairment: Balance on January 1, 2022 Depreciation in the year Disposal Investment properties transferred in Effect of change in exchange rate Balance on December 31, 2022 Balance on January 1, 2021 Depreciation in the year Disposal Effect of change in exchange rate Balance on December 31, 2021 Book value: December 31, 2022 December 31, 2021	- (571)	- (3,006)	(54,588) (16,255)	(526,010) (12,465)	- (5,622)	(580,598) (37,919)
	$ 241,919	1,646,343	3,721,293	4,811,867	1,133,105	11,554,527
	$ - - - - -	366,833 83,432 - 4,352 5,126	1,893,006 314,184 (295,539) - 41,541	2,412,502 1,638,289 (343,212) - 25,142	- - - - -	4,672,341 2,035,905 (638,751) 4,352 71,809
	$ -	459,743	1,953,192	3,732,721	-	6,145,656
	$ - - - -	309,715 58,462 - (1,344)	1,700,534 246,571 (43,059) (11,040)	1,873,499 1,060,855 (515,222) (6,630)	- - - -	3,883,748 1,365,888 (558,281) (19,014)
	$ -	366,833	1,893,006	2,412,502	-	4,672,341
	$ 767,108	2,064,201	2,133,418	2,531,752	1,375,401	8,871,880
	$ 241,919	1,279,510	1,828,287	2,399,365	1,133,105	6,882,186

The subsidiary, LOTES VIET NAM COMPANY LIMITED (LOTES VIET NAM), acquired land use rights in 2021 for the construction of a new factory, with an acquisition cost of NT$299,921 thousand recorded as right-of-use assets. LOTES VIET NAM has begun construction of the new factory, with cumulative expenditures for factory construction amounting to NT$399,060 thousand by 2022.

The subsidiary, Lotes Zhongshan Co., Ltd, acquired the land use rights for the construction of the new plant in 2017, and the acquisition cost was NT$183,934 thousand to list right-of-use assets in the account. As of December 31, 2022 and December 31, 2021, the accumulated expenditures (tax included) for the construction of the new plant were NT$1,614,359 thousand and NT$1,081,382 thousand, respectively.

The subsidiary, Lotes Hengnan Co., Ltd., acquired the land use rights for the construction of the new plant in 2016, and the acquisition cost was NT$9,878 thousand to list

213

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

right-of-use assets in the account. As of December 31, 2022 and December 31, 2021, the accumulated expenditures (tax included) for the construction of the new plant were NT$347,224 thousand and NT$307,045 thousand, respectively.

The subsidiary Lotes Zhongshan in April 2019 signed a contract for pre-purchase of building construction and a decoration contract with Zhongshan City Weili Real Estate Development Co., Ltd. and Tianjin Xinhongyuanchuang Architectural Decoration Engineering Co., Ltd. respectively. As of 2022, it has paid RMB 10,881 thousand and RMB 3,285 thousand respectively (recorded as buildings and constructions), and obtained the property certificate in 2022.

As of December 31, 2021 and December 31, 2020, property, plant and equipment were used as collateral for short-term loans and financing lines. Please refer to Note VIII for details.

(8) Right-of-use assets

The changes in the cost and depreciation of the right-of-use assets recognized by the consolidated company for leasing land, buildings, and other equipment are as follows:

Cost of right-of-use assets: Balance on January 1, 2022 Addition Decrease Effect of change in exchange rate Balance on December 31, 2022 Balance on January 1, 2021 Acquisition by business combinations Addition Decrease Effect of change in exchange rate Balance on December 31, 2021 Depreciation of right-of-use assets: Balance on January 1, 2022 Depreciation for the period Decrease Effect of change in exchange rate Balance on December 31, 2022 Balance on January 1, 2021 Depreciation for the period Decrease Effect of change in exchange rate Balance on December 31, 2021 Book value: December 31, 2022 December 31, 2021	Land $ 636,586 4,707 - 25,149	Buildings 552,848 133,405 (83,774) 1,877	Other equipment 403 12,848 (411) (24)	Total 1,189,837 150,960 (84,185) 27,002
	$ 666,442	604,356	12,816	1,283,614
	$ 240,690 96,875 299,921 - (900)	347,687 - 426,533 (220,289) (1,083)	4,131 - - (3,706) (22)	592,508 96,875 726,454 (223,995) (2,005)
	$ 636,586	552,848	403	1,189,837
	$ 21,033 17,711 - (1,678)	140,064 154,929 (32,786) (1,874)	251 3,363 (257) (13)	161,348 176,003 (33,043) (3,565)
	$ 37,066	260,333	3,344	300,743
	$ 10,465 10,606 - (38)	179,759 144,200 (183,101) (794)	2,535 1,436 (3,706) (14)	192,759 156,242 (186,807) (846)
	$ 21,033	140,064	251	161,348
	$ 629,376	344,023	9,472	982,871
	$ 615,553	412,784	152	1,028,489

214

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

(9) Investment property

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

Cost or deemed cost: Balance on January 1, 2022 Reclassified to property, plant, and equipment Effect of change in exchange rate Balance on December 31, 2022 Balance on January 1, 2021 Addition Other Effect of change in exchange rate Balance on December 31, 2021 Losses on depreciation and impairment: Balance on January 1, 2022 Depreciation Reclassified to property, plant, and equipment Effect of change in exchange rate Balance on December 31, 2022 Balance on January 1, 2021 Depreciation Effect of change in exchange rate Balance on December 31, 2021 Book value: December 31, 2022 December 31, 2021 Fair value: December 31, 2022 December 31, 2021	Self-owned assets Land Buildings $ 260,576 46,348 (218,230) (23,638) - -	Self-owned assets Land Buildings $ 260,576 46,348 (218,230) (23,638) - -	Right-of-use assets Land 37,198 - 533	Right-of-use assets Land 37,198 - 533	Total 344,122 (241,868) 533
	Land $ 260,576 (218,230) -
	$ 42,346	22,710	37,731		102,787
	$ 260,576 - - -	44,832 1,516 - -	69,160 - (31,634) (328)		374,568 1,516 (31,634) (328)
	$ 260,576	46,348	37,198		344,122
	$ - - - -	6,668 516 (4,352) -	1,585 532 - 21		8,253 1,048 (4,352) 21
	$ -	2,832	2,138		4,970
	$ - - -	5,481 1,187 -	1,068 521 (4)		6,549 1,708 (4)
	$ -	6,668	1,585		8,253
	$ 42,346	19,878	35,593		97,817
	$ 260,576	39,680	35,613		335,869
				$ 162,684
				$ 466,940

As of December 31, 2022 and December 31, 2021, the Consolidated Company’s investment properties were not pledged as security.

(10) Intangible assets

The changes in the cost and amortization of the intangible assets of the Consolidated

215

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

Company are as follows:

Cost: Balance on January 1, 2022 Acquired separately Derecognition Effect of change in exchange rate Balance on December 31, 2022 Balance on January 1, 2021 Acquired separately Derecognition Effect of change in exchange rate Balance on December 31, 2021 Losses on amortization and impairment: Balance on January 1, 2022 Amortization for the period Derecognition Effect of change in exchange rate Balance on December 31, 2022 Balance on January 1, 2021 Amortization for the period Derecognition Effect of change in exchange rate Balance on December 31, 2021 Book value: Balance on December 31, 2022 Balance on December 31, 2021	$	Computer Software 306,888 30,457 (17,005) 2,633	Computer Software 306,888 30,457 (17,005) 2,633		Other 600 - - -		Total 307,488 30,457 (17,005) 2,633 323,573 254,015 101,755 (47,908) (374) 307,488 101,904 55,711 (17,005) 894 141,504 98,505 51,497 (47,908) (190) 101,904 182,069 205,584
	$		322,973		600
	$		253,415 101,755 (47,908) (374)		600 - - -
	$		306,888		600
	$		101,904 55,711 (17,005) 894		- - - -
	$		141,504		-
	$		98,505 51,497 (47,908) (190)		- - - -
	$		101,904		-
	$		181,469		600
	$		204,984		600

(11) Short-term loans

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

Bank loans - credit loans Total Remaining credit		Dec. 31, 2022		Amount $ 76,775 1,830,000
	Currency USD NTD	Interest rate range	Maturity 112 112
		5.55% 1.55%~1.80%
				$ 1,906,775
				$ 3,634,405

Dec. 31, 2021

216

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

Bank loans - credit loans Total Remaining credit	Currency USD NTD	Interest rate range	Maturity 111 111	Amount $ 742,178 400,000 $ 1,142,178 $ 2,261,906
		0.70%~0.88% 0.85%

Please refer to Note VI (26) for more information on the Consolidated Company’s exposure to interest rate and foreign currency risk, Note VIII for information of the Consolidated Company’s assets pledged as collateral for short-term loans, and Note IX for information of the guaranteed notes opened due to bank loans and financing facilities.

(12) Long-term loans

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

Bank loans—credit loans (The expiry date is May 2025 and May 2022, respectively) Bank loans—guaranteed loans (The expiry date is December 2036 to May 2037 and December 2036, respectively) Subtotal Less: portion due within one year Total Remaining credit Interest rate range	Dec. 31, 2022 $ 9,855 155,775 165,630 15,861		Dec. 31, 2021 14,805 29,600 44,405 14,805
	$ 149,769		29,600
	$ 6,845		1,895
	1.75%~2.11%		1.25%~1.36%

For details of the guarantees provided by the Consolidated Company for bank loans using assets pledged as collateral, please refer to Note VIII.

(13) Bonds payable

Information on the issuance of unsecured convertible bonds by the Consolidated Company is as follows:

Total amount of convertible bonds issued Cumulative amount of redemptions Accumulated converted amount Unamortized balance of discount on bonds payable Bonds payable at the end of the period Embedded derivative - right of redemption(reported as financial assets measured at FVTPL) Equity components - conversion rights (reported in capital reserves - stock options) Equity component - Conversion rights (listed under the changes in the net value of the subsidiary's equity recognized using the equity method and non-controlling interests)	Dec. 31, 2022 $ 1,300,000 (2,800) (1,161,600) (3,151)		Dec. 31, 2021 1,000,000 - (63,900) (24,173) 911,927 3,370 171,527 -
	$ 132,449
	$ 163
	$ -
	$ 25,680

217

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

Right of redemption valuation benefit (loss) (reported in other gains and losses) Interest expense	2022 $ (323)	2021 2,700 3,530
	$ 9,513

1. The Company's first domestic unsecured convertible corporate bonds.

(1) Issuance details

On August 19, 2021, the Company issued 10,000 domestic first three-year unsecured convertible bonds with a coupon rate of 0%, which are repayable in cash at par on maturity.

The conversion price was set at $563.2 per share at the time of issuance, and the conversion price will be adjusted according to the formula specified in the terms of the issuance if the conversion price of the Company’s common shares is adjusted in accordance with the terms of the issuance. The conversion price on December 31, 2022 and 2021 was $535 and $547.5, respectively. There is no reset clause for the bonds.

The Company redeems the outstanding bonds at par value in cash if one of the following conditions is met:

• A. The closing price of the Company's common stock on the Taiwan Stock Exchange exceeds the conversion price of the bonds by 30% or more for 30 consecutive business days from the day after the third month of the issuance of the bonds to the 40th day prior to the expiration of the issuance period.

• B. If the closing price of the Company's common stock on the Taiwan Stock Exchange exceeds the conversion price of the bonds by 30% or more for 30 consecutive business days from the day after the third month of the issuance of the bonds to the 40th day prior to the expiration of the issuance period.

(2) Conversion details

In 2022 and 2021, bondholders have requested the conversion of 9,333 and 639 of the Company's first three-year unsecured convertible corporate bonds, respectively. The book amount at the time of conversion totals $915,969 thousand and $62,550 thousand. The net change in capital surplus generated by the bond conversion during the current period is $895,831 thousand and $60,853 thousand. Also, the share capital generated by the bond conversion is $17,352 thousand and $1,167 thousand. Please refer to note VI (20) for details on the share conversion.

(3) Repurchase details

The Company repurchased 28 of its first convertible corporate bonds in 2022 for a total of NT$2,800 thousand. The book value of the bonds at the time of repurchase was NT$2,753 thousand. The net gain from the bond repurchase recognized in 2022 was

218

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

NT$35 thousand, which is included in other gains and losses. The original capital surplus recognized from the initial issue of share options was transferred to the capital surplus of treasury shares transaction, amounting to NT$423 thousand. Furthermore, the Company exercised its redemption right and terminated over-the-counter trading on December 9, 2022.

1. The first domestic unsecured convertible corporate bonds of the subsidiary, Lintes Technology Co., Ltd.

(1) Issuance details

The subsidiary, Lintes Technology Co., Ltd., issued 3,000 domestic first unsecured convertible corporate bonds with a coupon rate of 0% on January 19, 2022. These bonds are due for a one-time cash repayment at maturity according to the bond par value.

At the time of issuance, the conversion price was set at $123.4 per share. If there is an adjustment to the conversion price in line with the terms of the issuance of common shares of the subsidiary, Lintes Technology Co., Ltd., the conversion price will be adjusted according to the formula stipulated in the terms of issuance. The conversion price in 2022 is $120.3. There are no reset provisions for this bond.

If any of the following conditions regarding the redemption rights are met, the subsidiary, Lintes Technology Co., Ltd., will recover the outstanding bonds in cash at face value:

• A. From the day after three months after the issuance of the bond until forty days before the end of the issuance period, if the closing price of the common shares of the subsidiary, Lintes Technology Co., Ltd., on the Taiwan Stock Exchange, exceeds the current conversion price of the bond by 30% (inclusive) or more for thirty consecutive business days.

• B. From the day after three months after the issuance of the bond until forty days before the end of the issuance period, if the outstanding balance of the bond is less than 10% of the original total issuance amount.

• (2) Conversion details

In 2022, bondholders have requested the conversion of 1,644 three-year unsecured convertible corporate bonds of the subsidiary, Lintes Technology Co., Ltd.. The net change in the net value of the subsidiary's equity and non-controlling interests due to bond conversion for the period is $177,102 thousand.

(14) Lease liabilities

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

Dec. 31, 2022 Dec. 31, 2021 $ 110,281 220,742

Current

219

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

Non-current

$ 260,380 285,847

For the maturity analysis, please refer to Note VI (26). The amounts recognized in profit or loss are as follows: 2022 Interest expense for lease liabilities $ 22,673 Changes in lease payments not included in the measurement of lease liabilities $ 13,394 Income from the sublease of right-of-use assets $ 28,417 Expenses for short-term leases $ 6,753 Cost of low-value leased assets (excluding low-value leases under short-term leases) $ 345	2021 18,824
	4,390
	23,982
	21,493
	307

The amounts recognized in the Statement of Cash Flows are as follows: 2022 Total cash outflow from leases $ 280,625	2021 401,473

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, 2022 $ 384,044	Dec. 31, 2021 195,105

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

(16) Provision for liabilities

Provision for liabilities - non-current Employee benefits	Dec. 31, 2022 $ 41,410	Dec. 31, 2021 45,220

220

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

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

(17) Operating lease

The Consolidated Company leases its investment real estate, which is classified as an operating lease because almost all risks and rewards belonging to the ownership of the underlying asset have not been transferred. Please refer to Note VI (9) for details of the investment real estate.

The maturity analysis of lease payments is presented in the following table for the total undiscounted lease payments to be received after the reporting date:

Not more than 1 year 1-2 years Total undiscounted lease payment	Dec. 31, 2022 $ 130 -	Dec. 31, 2021 609 130
	$ 130	739

In year 2022 and 2021, the income tax generated in the investment property from rentals were NT$580 thousand and NT$4,247 thousand, respectively, and the direct operating expenses (including maintenance) incurred in the investment property from rentals were NT$408 thousand and NT$860 thousand, respectively.

(18) Employee benefits

1. Defined benefit plans

A reconciliation of the present value of the Company's defined benefit obligation to the fair value of plan assets is as follows:

Present value of defined benefit obligation Fair value of plan assets Net defined benefit liability	Dec. 31, 2022 $ 78,993 (37,583)	Dec. 31, 2021 78,057 (32,837)
	$ 41,410	45,220

The Consolidated Company's employee benefit liabilities are as follows:

Paid leave liability	Dec. 31, 2022 $ 27,802	Dec. 31, 2021 22,347

The Company's defined benefit plan is contributed to the Bank of Taiwan's Labor Retirement Reserve Fund. Retirement payments to each employee under the Labor Standards Act are based on the basis of the number of years of service and the average salary for the six months prior to retirement.

(1) Composition of plan assets

The Company's pension fund under the Labor Standards Act is managed by the Bureau of Labor Funds, Ministry of Labor (hereinafter referred to as the Bureau of

221

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

Labor Funds). According to the "Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund", the minimum annual earnings to be distributed to the fund shall not be less than the earnings calculated based on the two-year time deposit interest rate of the local bank.

As of the date of this report, the balance of the Bank of Taiwan's Labor Retirement Reserve Fund was $37,583 thousand. For information on the use of the Labor Pension Fund assets, including the fund yield and fund asset allocation, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

(2) Changes in the present value of the defined benefit obligation

The changes in the present value of the Company's defined benefit obligation for fiscal 2022 and 2021 are as follows:

2022 Defined benefit obligation at January 1 $ 78,057 Current service cost and interest 1,128 Remeasurement of net defined benefit liability (asset) (192) Benefits planned to be paid - Defined benefit obligation at December 31 $ 78,993	2022 Defined benefit obligation at January 1 $ 78,057 Current service cost and interest 1,128 Remeasurement of net defined benefit liability (asset) (192) Benefits planned to be paid - Defined benefit obligation at December 31 $ 78,993	2021 83,499 951 (3,373) (3,020)
	$ 78,993	78,057

(3) Changes in the fair value of plan assets

The changes in the fair value of the Company's defined benefit plan assets for fiscal 2022 and 2021 are as follows:

2022 Fair value of plan assets as of January 1 $ 32,837 Interest income 228 Remeasurement of net defined benefit liability (asset) 2,598 Amount contributed to the plan 1,920 Benefits paid under the plan - Fair value of plan assets at December 31 $ 37,583	2022 Fair value of plan assets as of January 1 $ 32,837 Interest income 228 Remeasurement of net defined benefit liability (asset) 2,598 Amount contributed to the plan 1,920 Benefits paid under the plan - Fair value of plan assets at December 31 $ 37,583	2021 34,241 119 477 1,020 (3,020)
	$ 37,583	32,837

(4) Expenses recognized in profit or loss

The expenses recognized in profit or loss in fiscal 2022 and 2021 were as follows:

Current service cost Net interest on net defined benefit liability Operating cost Promotion expense Administration expense R&D expense	2022 $ 587 313	2021 662 170
	$ 900	832
	$ 106 362 295 137	110 286 277 159

222

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

$ 900 832

• (5) Remeasurement of net defined benefit liability (asset) recognized as other comprehensive income

The remeasurements of net defined benefit liability (asset) recognized as other comprehensive income in fiscal 2022 and 2021 are as follows:

Accumulated balance as of January 1 Recognized in the current period Accumulated balance as of December 31	2022 $ (1,852) 2,790	2021 (5,703) 3,851
	$ 938	(1,852)

(6) Actuarial assumptions

The significant actuarial assumptions used to determine the present value of the Company's defined benefit obligation at the end of the financial reporting period are as follows:

follows:
Discount rate Future salary increases	Dec. 31, 2022 1.30% 2.00%	Dec. 31, 2021
		0.70% 2.00%

The Company expects to make a contribution of $1,149 thousand to the defined benefit plan in the year following the fiscal 2022 reporting date.

The weighted-average duration of the defined benefit plan is 9 years.

(7) Sensitivity analysis

The effect of changes in key actuarial assumptions on the present value of the

defined benefit obligation as of December 31, 2022 and 2021 are as follows:

December 31, 2022 Discount rate Future salary increases December 31, 2021 Discount rate Future salary increases	Effect on the defined benefit obligation Increase of 0.25% Decrease of 0.25% $ (1,918) 1,987 1,968 (1,909) (2,023) 2,099 2,066 (2,002)
	Increase of 0.25% $ (1,918) 1,968 (2,023) 2,066

The sensitivity analysis above analyzes the effect of changes in a single assumption with other assumptions held constant. In practice, changes in many assumptions may be linked. The sensitivity analysis is consistent with the methodology used to calculate the net pension liability on the balance sheet.

The methodology and assumptions used in preparing the sensitivity analysis are the

223

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

same as those used in the previous period.

2. Defined contribution plan

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 Consolidated Company for year 2022 and 2021 were NT$16,866 thousand and NT$15,071 thousand 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 2022 and 2021 were NT$351,027 thousand and NT$279,510 thousand, respectively.

(19) Income tax

1. The details of the income tax expense of the Consolidated Company are as follows:

Income tax expense for the period Current income tax Tax on unappropriated retained earnings Prior period current income tax adjustment Deferred income tax expense Other deferred income tax expense (benefit) Recognition of unrecognized tax losses in prior periods Income tax expense	2022 $ 1,860,954 70,405 (128,480)	2021 1,084,673 57,107 (102,213)
	1,802,879	1,039,567
	(20,039) (685)	(18,499) 99
	$ 1,782,155	1,021,167

A breakdown of the Consolidated Company's income tax expense (benefit) recognized under other comprehensive income is as follows:

Components of other comprehensive income that will not be reclassified to profit or loss: Remeasurements of defined benefit plan Components of other comprehensive income that will be reclassified to profit or loss:	2022 $ 558	2021 770

224

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

Exchange differences on translation Net profit before tax Income tax based on domestic tax rate Adjustments based on local tax laws Unrecognized deferred tax assets from current taxable losses Adjustments to current income taxes for prior periods Additional tax levied on unappropriated retained earnings Basic income tax Total	$ 830	(39)
	2022 $ 8,188,567	2021 4,540,198
	2,853,679 (1,039,805) 27,041 (129,165) 70,405 -	1,524,040 (459,463) - (102,114) 57,107 1,597
	$ 1,782,155	1,021,167

Deferred tax assets and liabilities

(1) Unrecognized deferred tax assets

The items not recognized as deferred tax assets of the Consolidated Company are as follows:

Inventory devaluation losses Tax losses	Dec. 31, 2022 $ 2,886 47,457	Dec. 31, 2021 - 15,454
	$ 50,343	15,454

In accordance with the Income Tax Act, losses for the previous ten years may be deducted from net income before income tax is assessed. These items are not recognized as deferred tax assets because it is not probable that the Consolidated Company will have sufficient taxable income in the future to utilize the temporary differences.

In accordance with the Income Tax Act, Ememe Robot Co., Ltd. and Lerain Technology Co., Ltd. are allowed to deduct the net income of the year from the loss for the previous ten years as approved by the tax authorities for income tax purposes. As of December 31, 2022, the Consolidated Company has not recognized tax losses as deferred tax assets, which are deducted as follows:

[Ememe Robot Co., Ltd.: ]

Year of loss 2012 (Approved) 2013 (Approved) 2014 (Approved) 2015 (Approved) 2016 (Approved) 2017 (Approved)	Losses not yet deducted $ 14,184 14,550 6,246 8,951 10,166 6,828	Last year to be deducted
		2022 2023 2024 2025 2026 2027

225

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

2018 (Approved) 2019 (Approved) 2020 (Approved) 2021 (Declared) 2022 (Estimated) Lerain Technology Co., Ltd.: Year of loss 2020 (Approved) 2021 (Declared) 2022 (Estimated)	3,237 2,609 629 158 78 $ 67,636 Losses not yet deducted $ 19,678 29,199 123,408 $ 172,285	2028 2029 2030 2031 2032 Last year to be deducted
		2030 2031 2032

226

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

(2) Deferred tax assets recognized

Inventory valuation and obsolescence losses Undistributed pension costs Loss on decline in value of fixed assets and idle assets Refund liabilities Unrealized exchange loss Estimated payables Remeasurement of defined benefit plans Taxable losses Exchange differences on translation Derivative valuation losses Other Deferred tax assets (3) Deferred income tax liabilities recognized Unrealized exchange gain Investment income recognized by the equity method Gain recognized in bargain purchase transaction Fair value gain Other Deferred income tax liabilities	Dec. 31, 2022 $ 66,843 237 44 76,809 890 55,234 8,428 527 942 1,693 165	Dec. 31, 2021 38,999 441 44 43,860 - 56,831 8,986 - 1,772 - 534 151,467 Dec. 31, 2021 8,297 24,019 1,567 - 23 33,906
	$ 211,812
	Dec. 31, 2022
	$ 2,606 67,787 1,045 1,955 - $ 73,393

2. Income tax assessment

The Company's income tax returns have been assessed by the tax authorities through fiscal 2020.

The domestic subsidiaries, Zhaxi Investment Co., Ltd., Ememe Robot Co., Ltd., Compertum Microsystems Inc., Good News Medical Co., Ltd., Lomites Co., Ltd., Lerain Technology Co., Ltd., Lintes Technology Co., Ltd., and Genie Precision Machine Co., Ltd., have completed the settlement of corporate income tax returns up to the 2020 fiscal year as approved by the tax authorities.

227

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

(20) Capital and other equity

As of December 31, 2022 and 2021, the total authorized capital stock of the Company were all NT$1,550,000 thousand with a par value of $10 per share, and the actual amount issued were NT$1,068,762 and NT$1,059,779 thousand respectively.

In the 2022 fiscal year, the Company issued 1,735 thousand new shares due to the convertible bondholders exercising their conversion rights. Apart from a part of the issued shares that are still being processed due to the relevant legal registration procedures, listed as convertible bond certificates worth $9,536 thousand, the rest were completed in April, June, September, and December of 2022.

In the 2021 fiscal year, the Company issued 117 thousand new shares due to the convertible bondholders exercising their conversion rights, and on March 21, 2022, the board of directors resolved that the base date for the issuance of new common shares would be March 22, 2022. The related legal registration procedures were completed on April 19, 2022.

On May 13, 2021, the Board of Directors resolved to issue 2,500 thousand shares at a par value of $10 per share at an issue price of $432 per share through a cash capital increase, with September 17, 2021 as the base date. The capital increase was approved by the Financial Supervisory Commission and the legal registration was completed on October 8, 2021.

1. Capital reserves

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

. Capital reserves The components of the Company’s capital reserve	are as follows:
Premium of issued shares Convertible bond conversion premium Treasury stock transactions Change in the net value of the stock of subsidiaries and associates accounted for using the equity method Employee stock options Convertible bond stock options	Dec. 31, 2022 $ 4,628,739 1,139,407 423 498,123 40,330 -		Dec. 31, 2021 4,628,739 72,562 - 370,540 40,330 171,527 5,283,698
	$ 6,307,022

In accordance with the Companies Act, capital reserves are required to cover losses first before new shares or cash can be issued in proportion to the shareholders’ original shares. Realized capital reserves referred to in the preceding paragraph include 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 reserves 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,

228

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

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 retained 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 the distributable profit, the net decrease in other equity items occurring in the year is added to the undistributed profit of the current period along with other items beyond the net profit after tax. A special reserve is set aside from the undistributed profit of the previous period. For accumulated decrease in other equity items of previous periods, an equal amount of special reserve shall be set aside from the undistributed profit of previous periods and cannot be distributed. When there is a reversal of other decreases in equity, profits can be distributed for the reversed part.

(3) Earnings distribution

The Company passed a resolution on the 2021 profit distribution plan at the regular shareholders' meeting on June 17, 2022. The 2021 profit distribution plan was passed by electronic voting on June 19, 2021, having reached the legal resolution threshold, and was further resolved at the regular shareholders' meeting on July 26, 2021. The dividends distributed to the owners are as follows:

			2021				2020
	Payout ratio				Payout ratio
		(NT$)		Amount	(NT$)			Amount
Distributed to the
holders of ordinary
shares:
Cash	$	15.92		1,695,646		13.30		1,376,256

229

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

On March 21, 2023, the Company’s board of directors proposed the following 2022 earnings distribution:

2022 earnings distribution:
		2022
	Payout ratio
		(NT$)	Amount
Distributed to the holders of ordinary shares:
Cash	$	26.00	2,803,575

Information on the distribution of earnings as proposed by the Board of Directors and resolved by the Shareholders’ Meeting is available on the “Market Observation Post System (MOPS)”.

3. Other equity

Balance on January 1, 2022 Exchange differences arising from the translation of the net assets of foreign operations Unrealized losses from financial assets measured at FVTOCI Balance on December 31, 2022 Balance on January 1, 2021 Exchange differences arising from the translation of the net assets of foreign operations Unrealized losses from financial assets measured at FVTOCI Balance on December 31, 2021	Exchange differences on translation of foreign operations $ (669,055) 349,783 -	Unrealized gain (loss) on financial assets measured at FVTOCI (13,278) - (6,480)	Total (682,333) 349,783 (6,480)
	$ (319,272)	(19,758)	(339,030)
	$ (586,953) (82,102) -	(8,019) - (5,259)	(594,972) (82,102) (5,259)
	$ (669,055)	(13,278)	(682,333)

230

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

(21) Share-based payment

The Consolidated Company has the following share-based payment transactions:

Cash capital increase reserved for employee stock options

Date of grant Number of grants Granted to Vesting conditions Fair value at the date of grant	TheCompany Lintes Technology	Lerain Technology
	2021.08.23 2022.01.31 233 thousand shares 431 thousand shares Current employees of the Company Current employees of the subsidiary Immediate vesting Immediate vesting $107.00 $25.02	2022.03.29 2021.08.19 2021.03.02 122 thousand shares 1,119 thousand shares 1,268 thousand shares Current employees of the subsidiary Current employees of the subsidiary Current employees of the subsidiary Immediate vesting Immediate vesting Immediate vesting $0.30 $0.13 $0.00

The Company’s cost of employee compensation based on the shares generated from the cash capital increase retained for employee stock options was $24,931 thousand recognized in fiscal 2021.

In 2022, the subsidiary, Lintes Technology Co., Ltd., recognized a cost of $10,789 thousand for share-based employee compensation arising from the cash capital increase reserved for employees to subscribe for shares.

The costs recognized by the subsidiary, Lerain Technology Co., Ltd., for share-based employee compensation arising from the cash capital increase reserved for employees to subscribe for shares in 2022 and 2021 were $36 thousand and $146 thousand, respectively.

(22) Earnings per share

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

Basic earnings per share: Net profit attributable to the Company in the year Weighted average shares outstanding (1,000 shares) Basic earnings per share Diluted earnings per share: Net profit attributable to the Company in the year Dilutive potential ordinary shares: Convertible bond Net income attributable to equity holders of the Company’s common stock (adjusted for the effect of dilutive potential common stock) Weighted average shares outstanding (1,000 shares) Dilutive potential ordinary shares: Employees compensation Convertible bond	2022 $ 6,254,263	2021 3,472,201
	106,539	104,204
	$ 58.70	33.32
	$ 6,254,263 5,897	3,472,201 664
	$ 6,260,160	3,472,865
	106,539 309 1,337	104,204 204 1,820

231

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

Weighted average common shares outstanding (adjusted for the effect of dilutive potential common stock) Diluted earnings per share	108,185 106,228
	$ 57.87 32.69

• (23) Revenue from contracts with customers

• Please refer to Note XIV (3) and (4) for the disclosure of disaggregation of revenue for the major products and major regional markets.

• Balance of contract

Contract liabilities	Dec. 31, 2022 $ 54,427	Dec. 31, 2021 97,494

The beginning balances of contract liabilities as of January 1, 2022 and 2021 were recognized as income of NT$80,636 thousand dollars and NT$80,527 thousand dollars respectively.

(24) Non-operating revenue/expense

1. Interest income

The breakdown of interest income of the Consolidated Company is as follows:

Interest on bank deposits	2022 $ 46,801	2021 13,994

2. Other income

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

		2022	2021
Dividend income	$	5,535	6,119
Income from molding		170,481	73,063
Income from compensation		5,189	12,938
Income from rentals		35,076	35,964
Income from subsidies		59,899	103,327
Others		91,522	93,515
	$	367,702	324,926
. Other gains and losses
The details of other gains and losses of the Consolidated		Company are as follows:
		2022	2021
Foreign exchange gain (loss)	$	613,970	(148,338)
Net profit or loss from financial assets (liabilities)
measured at FVTPL:
Derivatives:
Forward foreign exchange contracts		(8,390)	11,382
Metal commodity swap contracts		-	21,077

3. Other gains and losses

232

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

Embedded derivative		(323)	2,700
Financial products		1,296	-
Non-derivatives		(6,884)	(9,364)
Net gain from bond buyback		35	-
Loss from the disposal of property, plant and equipment		(28,364)	(3,728)
Lease modification interest		146	2,472
Other		(11,199)	(4,849)
Total	$	560,287	(128,648)

4. Financial costs

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

Bank loans Lease liabilities Conversion of corporate bonds	2022	2021 5,950 18,824 3,530
	$ 22,923 22,673 9,513
	$ 55,109	28,304

(25) Compensation to 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, 2022 and 2021 was $221,300 thousand and $122,062 thousand respectively, and the estimated amount of compensation to directors and supervisors was $4,480 thousand. 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.

233

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

The amount of employee and director compensation resolved by the board of directors for the 2022 fiscal year was consistent with the estimated amount in the 2022 consolidated financial report. The actual distribution of employee, director, and supervisor compensation in the 2021 fiscal year was consistent with the estimated amount in the 2021 consolidated financial report. Related information can be found on the MOPS.

(26) Information on financial instruments and fair value

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 $18,178,606 thousand and $12,617,236 thousand as of December 31, 2022 and 2021 respectively.

(2) Credit risk concentration risk

In order to reduce the credit risk of accounts receivable, the Consolidated Company continually evaluates the financial position of its customers and adjusts the terms of transactions between them if necessary. As of December 31, 2022 and 2021, the Consolidated Company had 5 and 4 different customers, respectively with accounts receivable balances exceeding 5% of total accounts receivable for a single customer. The Consolidated 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 Consolidated 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 Consolidated Company’s notes and accounts receivable are analyzed as follows:

234

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

Not past due 1-60 days past due 61-120 days past due 121-180 days past due 181-270 days past due More than 271 days past due Not past due 1-60 days past due 61-120 days past due 121-180 days past due 181-270 days past due More than 271 days past due		Dec. 31, 2022		Expected credit loss in the duration of provision 369 1,119 6,380 6,222 466 10,689
	Book value of notes and accounts receivable $ 10,343,048 293,326 71,344 16,285 936 10,828	Weighted average expected credit loss rate
		0.00% 0.38% 8.94% 38.21% 49.79% 98.72% Dec. 31, 2021
	$ 10,735,767			25,245
				Expected credit loss in the duration of provision 882 504 7,562 3,935 184 4,390
	Book value of notes and accounts receivable $ 8,268,615 481,878 47,553 12,646 401 4,390	Weighted average expected credit loss rate
		0.01% 0.10% 15.90% 31.12% 45.89% 100.00%
	$ 8,815,483			17,457

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

Opening balance Impairment loss recognized Write-offs for the period Foreign currency translation (gains) losses Closing balance	2022
	$ 25,245 17,457

235

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

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.

December 31, 2022 Non-derivative financial liabilities Short-term loans Bonds payable Long-term loans(including long-term loans – current portion) Notes payable Accounts payable Other payables Lease liabilities December 31, 2021 Non-derivative financial liabilities Short-term loans Bonds payable Long-term loans(including long-term loans – current portion) Notes payable Accounts payable Other payables Lease liabilities	Book value $ 1,906,775 132,449 165,630 8,504 2,351,503 1,937,095 370,661	Cash flow from the contract 1,920,045 135,600 187,005 8,504 2,351,503 1,937,095 412,713	Within 6 months 917,667 - 9,890 8,504 2,351,503 1,937,095 69,614	6 12 months 1,002,378 - 9,032 - - - 58,102	1-2years - - 17,011 - - - 103,420	2-5years - 135,600 37,288 - - - 181,577	More than 5 years - - 113,784 - - - -
	$ 6,872,617	6,952,465	5,294,273	1,069,512	120,431	354,465	113,784
	$ 1,142,178 911,927 44,405 16,402 2,613,359 1,998,938 506,589	1,145,255 936,100 47,515 16,402 2,613,359 1,998,938 559,221	870,126 - 2,436 16,402 2,613,359 1,998,938 164,713	275,129 - 12,857 - - - 75,695	- - 2,458 - - - 105,309	- 936,100 7,216 - - - 190,028	- - 22,548 - - - 23,476
	$ 7,233,798	7,316,790	5,665,974	363,681	107,767	1,133,344	46,024

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

3. Market risk—exchange rate risk

(1) Exposure to exchange rate risk

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

	Financial assets Currency USD RMB HKD JPY EUR INR		Dec. 31, 2022
		$	Foreign currency (Note) 642,058 236,085 45 305,602 1,160 4

236

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

	Financial liabilities Currency USD $ 267,351 30.7100 8,210,352 RMB 1,173 4.4094 5,170 EUR 272 32.7200 8,906 MOP 8 3.9380 32

	Financial assets Currency USD RMB HKD JPY EUR INR Financial liabilities Currency USD RMB JPY EUR		Dec. 31, 2021
		$ $	Foreign currency (Note) 527,458 284,552 37 310,511 2,404 4 296,289 379 58,000 103

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.

Due to the variety of functional currencies of the Consolidated Company, information on exchange gains and losses on monetary items is presented on a consolidated basis. Foreign currency exchange gains and losses (including realized and unrealized) amounted to a gain of $613,970 thousand and a loss of $148,338 thousand in fiscal 2022 and 2021, respectively.

(2) Sensitivity analysis

The Consolidated Company's exchange rate risk arises mainly from cash and cash equivalents denominated in foreign currencies, financial assets at FVTPL, accounts receivable and other receivables, short-term loans, accounts payable and other payables, which generate foreign currency exchange gains or losses upon translation. As of

237

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

December 31, 2022 and 2021, when NTD depreciates or appreciates by 1% against the foreign currencies held by the Consolidated Company, with all other factors held constant, net income after tax would increase or decrease by $101,146 thousand and $62,134 thousand for year 2022 and 2021, respectively. The same basis was used for the analysis of both periods.

4. Market risk—changes in interest rates

The interest rate risk of the Consolidated Company mainly comes from the bank deposit and loan of floating rate, so the interest rate change will cause the effective interest rate of bank deposit and 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’ financial assets with variable interest rates as of December 31, 2022 and 2021 were NT$3,744,810 thousand and NT$2,472,303 thousand, respectively, and its financial liabilities were NT$242,405 thousand and NT$14,805 thousand, respectively. If interest rates had increased or decreased by 1%, the Consolidated Company’ net income would have increased or decreased by NT$28,019 thousand and NT$19,660 thousand for year 2022 and 2021, respectively, with all other variables held constant.

5. Market risk—fair value

(1) Fair value and carrying amount

The management of the Consolidated Company believes that non-derivative short-term financial instruments should be estimated at their fair value based on their book value on the balance sheet, and that their book value should be a reasonable basis for the estimated fair value because of the near expiry date 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 borrowings.

In addition to the above financial instruments, the fair value and book value information of the remaining financial instruments, investment properties and corporate bonds payable of the Consolidated Company on the financial reporting date are as follows:

238

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

Measured at fair value: Financial assets: Financial assets measured at FVTPL Financial assets measured at FVTOCI Not measured at fair value Non-financial assets: Investment property Financial liabilities Bonds payable	Dec. 31, 2022	Dec. 31, 2022		Dec. 31, 2021 Book value Fairvalue 157,494 157,494 31,459 31,459 335,869 466,940 911,927 907,643
	Book value $ 79,007 83,520 97,817 132,449	Fairvalue		Book value 157,494 31,459 335,869 911,927
		79,007 83,520 162,684 131,573

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

• A. When financial assets are quoted publicly in an active market, this market price is the fair value. When market prices are not available, estimates are made by reference to quoted counterparties or using valuation techniques. The estimates and assumptions used are consistent with the information used by market participants as estimates and assumptions in pricing financial instruments.

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

• (3) Fair value hierarchy

The following table analyzes the fair value hierarchy of financial instruments, investment properties and corporate bonds payable 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: Inputs for the asset or liability that are not based on observable market data (unobservable parameters).

239

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

December 31, 2022 Measured at fair value: Financial assets measured at FVTPL Financial assets measured at FVTOCI Not measured at fair value: Investment property Bonds payable December 31, 2021 Measured at fair value: Financial assets measured at FVTPL Financial assets measured at FVTOCI Not measured at fair value: Investment property Bonds payable	Level 1 $ 62,313 78,925		Level 2 16,531 -		Level 3 163 4,595		Total 79,007 83,520 162,527 162,684 131,573 157,494 31,459 188,953 466,940 907,643
	$ 141,238		16,531		4,758
	$ -		-		162,684
	$ -		-		131,573
	$ 91,737 20,503		- -		65,757 10,956
	$ 112,240		-		76,713
	$ -		-		466,940
	$ -		-		907,643

(4) Transfer between the Level 1 and the Level 2

The Consolidated Company does not have any transfers between 2022 and 2021.

240

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

• (5) Statement of changes in financial assets (liabilities) classified as Level 3 at fair value

Unit: NT$1,000

Name Financial assets measured at FVTPL Financial assets measured at FVTOCI Name Financial assets measured at FVTPL Financial assets measured at FVTOCI							2022								Closing balance 163 4,595
	$	Opening balance 65,757 10,956		Total profit or loss Recognized in profit or loss Recognized in other comprehensive income (323) - - (4,939) (323) (4,939)			Incr	ea	s	e ransferred to level 3 - -			Decrease Sales, disposal or settlement (65,421) (1,422)
				Recognized in profit or loss (323) -			Issuance or purchase 150 -		T
					income - (4,939)
	$	76,713		(323)	(4,939)		150			-			(66,843)		4,758
							2021								Closing balance 65,757 10,956
	$	Opening balance 6,180 2,016		Total profit or loss Recognized in profit or loss Recognized in other comprehensive income 2,923 - - (5,460) 2,923 (5,460)			Incr	ea	s	e ransferred to level 3 - -			Decrease Sales, disposal or settlement (6,410) -
				Recognized in profit or loss 2,923 -			Issuance or purchase 63,064 14,400		T
					income - (5,460)
	$	8,196		2,923	(5,460)		77,464			-			(6,410)		76,713

The above included gains and losses are reported in “other gains and losses” and “unrealized valuation gains (losses) on financial assets at FVTOCI”, which relate to assets still held as of December 31, 2022 and 2021 as follows:

Total gain or loss Recognized in profit (losses) (reported in “other gains and losses”) Recognized in other comprehensive income (reported in “unrealized valuation gains (losses) on financial assets at FVTOCI”)	2022 $ 253 (5,295)	2021 2,750 (5,460)

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

The Consolidated Company's financial assets measured at FVTPL classified as Level 3 fair value were NT$0 thousand and NT$62,387 thousand as of December 31, 2022 and 2021, respectively. Quantitative information is not disclosed because there is no active market for quoted prices but reference to counter-parties' quotes, and the relationship between significant non-observable inputs and fair values cannot be fully obtained in practice. The remaining quantitative information of significant non-observable inputs measured at fair value for Level 3 is listed below:

241

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

Item Financial assets measured at FVTPL - Embedded derivatives - right of redemption Financial assets measured at FVTOCI - investment in equity instruments with no active market Financial assets measured at FVTOCI - investment in equity instruments with no active market	Valuation techniques Binary tree method for pricing convertible bond Comparable company analysis Net asset value approach	Significant unobservable inputs ‧Volatility on Dec. 31, 2022 and 2021: 41.43% and 38.95% ‧Net market value multiplier on Dec. 31, 2022 and 2021: 1.475 and 2.05 ‧Lack of marketability discount on Dec. 31, 2022 and 2021: both 15.80% ‧Net asset value	Relationship between significant unobservable inputs and fair value
			‧The higher the volatility, the higher the fair value ‧The higher the multiplier, the higher the fair value ‧The higher the discount for lack of marketability, the lower the fair value ‧The fair value is positively correlated

(7) Valuation process for fair value classified in Level 3

The Company uses unobservable inputs for its fair value measurements and classifies its fair value in Level 3. The source of the input value for this level is the price provided by reference to counterparty quotations or market comparable companies’ net market value multipliers, etc., and the relevant quotations and valuation information are appropriately maintained. The results are subsequently reviewed to ensure consistency with the valuation sources and the reasonableness of the valuation results.

(8) Sensitivity analysis of fair value to reasonably possible alternative assumptions

for Level 3 fair value measurements

The Company’s fair value measurements of financial instruments are reasonable, but the use of different valuation models or valuation parameters may result in different valuation results. For financial instruments classified in Level 3, if the valuation parameters are changed, the impact on the profit or loss or other comprehensive income for the period is as follows:

242

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

December 31, 2022 Financial assets measured at FVTPL Embedded derivatives - right of redemption Financial assets measured at FVTOCI Investments in equity instruments with no active market December 31, 2021 Financial assets measured at FVTPL Embedded derivatives - right of redemption Investments in equity instruments with no active market	Input value	Upward or downward changes	Fair value changes reflected in profit or loss for the period Fair value changes reflected in other comprehensive income
			Favorable changes Unfavorable changes Favorable changes Unfavorable changes
	Volatility Stock price Net market value multiplier Lack of marketability discount Volatility Stock price Net market value multiplier Lack of marketability discount	5% 10% 4% 4% 5% 10% 8% 8%	$ 68 (68) - - 81 (54) - - - - 12 (12) - - 12 (12) 2,527 (936) - - 1,030 (1,030) - - - - 136 (137) - - 136 (137)

Favorable and unfavorable changes in fair value represent fluctuations in fair value, which are calculated using valuation techniques based on various degrees of unobservable input parameters. If the fair value of a financial instrument is affected by more than one input, the above table reflects only the effect of changes in a single input and does not take into account the correlation and variability among the inputs.

(27) Financial risk management

1. The Consolidated 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 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.

243

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

The Consolidated Company’s risk management policy is designed to identify and analyze the risks faced by the Consolidated 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 Audit Committee 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 Audit Committee 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 Audit Committee.

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 Consolidated Company’s accounts receivable from customers and investments in securities.

(1) Accounts receivable and other receivables

The Consolidated Company’s credit risk exposures are primarily depended on each customer’s individual circumstances. However, management also considers statistical information about the Consolidated Company’s customer base, including the risk of default in the customer’s industry and country, as these factors may affect credit risk. Approximately 72% and 76% of the Consolidated Company’s revenue for 2022 and 2021, 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.

244

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

(2) Use of funds

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

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

4. Liquidity risk

Liquidity risk is the risk that the Consolidated Company will not be able to deliver cash or other financial assets to settle its financial liabilities and will not be able to meet its related obligations. The Consolidated Company’s approach to manage liquidity risk is to ensure that the Consolidated Company has sufficient liquidity to meet its liabilities as they fall due under normal and stressful circumstances and that there is no risk of unacceptable loss or damage to the Consolidated Company’s reputation. In addition, the Company has entered into unused borrowing lines totaling $3,641,250 thousand as of December 31, 2022 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 each Group Enterprise’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 Consolidated Company periodically reviews individual foreign currency assets and liabilities for exposures and hedges against such exposures.

245

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

(2) Interest rate risk

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

(3) Equity instrument price risk

If the price of equity securities changes at the reporting date (the same basis is used for both periods of analysis and other changes are assumed to be constant), the effect on the consolidated profit and loss items would be as follows:

Price of securities on reporting date Up by 1% Down by 1%
	Other comprehensive income after tax $ 835						Other comprehensi ve income after tax 315
	$ (835)			(788)					(315)		(917)

(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, 2022 $ 8,787,027 (7,090,304)			Dec. 31, 2021 8,364,687 (3,303,062) 5,061,625 18,054,704 21.90%
	$ 1,696,723
	$ 24,508,613
		6.47%

246

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

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

The information on non-cash investment and financing activities of the consolidated company for the 2022 and 2021 fiscal years is as follows:

1. For details on the conversion of convertible corporate bonds into common shares, please refer to Note VI (13).

2. For details on obtaining right-of-use assets through leasing, please refer to Note VI (8) and (14).

The adjustments of liabilities arising from financing activities of the consolidated company in 2022 and 2021 are as follows:

Short-term loans Bonds payable Long-term loans (including long-term loans – current portion) Lease liabilities Total liabilities from financing activities	2022.1.1 Cash flow $ 1,142,178 714,342 911,927 343,468 44,405 121,225 506,589 (260,133)	Non-cash changes Other Changes in exchange rate Changes in fair value Dec. 31, 2022 - 50,255 - 1,906,775 (1,122,946) - - 132,449 - - - 165,630 118,081 6,124 - 370,661
	$ 2,605,099 918,902	(1,004,865) 56,379 - 2,575,515

Short-term loans Bonds payable Long-term loans (including long-term loans – current portion) Lease liabilities Total liabilities from financing activities	2021.1.1 Cash flow $ - 1,147,192 - 1,152,983 23,996 20,409 176,250 (374,960)	Non-cash changes Other Changes in exchange rate Changes in fair value Dec. 31, 2021 - (5,014) - 1,142,178 (241,056) - - 911,927 - - - 44,405 705,622 (323) - 506,589
	$ 200,246 1,945,624	464,566 (5,337) - 2,605,099

247

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

VII. Related Party Transactions

• (1) Parent company and ultimate controller: The Company is the ultimate controller of the Consolidated Company and the Consolidated Company’s subsidiaries.

(2) Names and relationships of related parties

The related parties that had transactions with the Company during the period covered by these consolidated financial statements are as follows:

Name of related parties Relationship with the Company

De Chuang Investment Co., Ltd. Substantial related party 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 thousand with reference to the neighboring warehouse rental quotes. The interest expenses of $1 thousand and $1 thousand were respectively recognized in 2022 and 2021, and the balance of lease liabilities as of December 31, 2022 and 2021 were respectively $0 and $59 thousand.

2. Acquisition of subsidiary shares

Type/name of related party Major management He, Xiu-lan	Subject of transaction Lerain Technology Co., Ltd.	Number of shares 547,059	Acquisition price 2021 $ 5,471

3. Loans from related parties

The Consolidated Company's loans from related parties bear interest at 2% per annum on pledges of fixed deposits with financial institutions in the year in which each such related party appropriated funds, and were fully repaid as of December 31, 2021, with interest expense of $128 thousand recognized from January 1 to December 31, 2021.

(4) Major management personnel transactions

Related compensation includes:

Short-term employee benefits Post-employment benefits Share-based payment	2022 $ 211,794 1,328 430	2021 98,944 1,191 2,087 102,222
	$ 213,552

248

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and 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, 2022 $ 246,448		Dec. 31, 2021 80,278

IX. Significant Contingent Liabilities and Unrecognized Contractual Commitments

(1) Significant unrecognised contract commitments:

As of December 31, 2022, the consolidated company has signed major factory construction contracts yet to be paid of approximately RMB 42,736 thousand and VND 59,665,495 thousand.

As of December 31, 2022, the consolidated company has signed information system-related contracts yet to be paid of approximately $1,070 thousand.

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

Guaranteed notes

Dec. 31, 2022 Dec. 31, 2021 $ 5,020,405 2,268,620

X. Significant Disaster Loss: None.

XI. Significant Post-Period Events:

On November 10, 2022, the Company passed a resolution at a Board of Directors meeting to propose a cash capital increase to issue up to 3,500 thousand common shares, each with a par value of $10. This was officially recorded by the Financial Supervisory Commission (FSC) under the letter Jing-Guan-Zheng-Fa-Zi No.1110368023 dated January 16, 2024 year of the Republic of China (2024).

On November 10, 2022, the Company's Board of Directors passed a resolution, and on March 9, 2024 year of the Republic of China (2024), issued the second round of domestic unsecured convertible corporate bonds with an upper limit of 10,000 bonds. Each bond has a face value of $100 thousand, and the total issuance face value is up to $1,000,000 thousand. The issuance period is three years, with a coupon rate of 0%.

249

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

XII. Others

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

below:
Function Nature	2022			2021
	Operation cost	Operation expense	Total	Operation cost	Operation expense	Total
Employee benefit expense Salary expenses Labor insurance and health insurance expenses Pension expenses Compensation of directors Other employee benefit expenses Depreciation expense Amortization expense	4,960,411 619,006 3,157 - 237,096 1,679,313 2,254	1,820,365 159,252 14,609 8,817 150,098 533,643 53,457	6,780,776 778,258 17,766 8,817 387,194 2,212,956 55,711	4,215,950 513,460 3,000 - 221,901 1,061,293 1,815	1,456,287 124,617 12,903 6,425 123,735 462,545 49,682	5,672,237 638,077 15,903 6,425 345,636 1,523,838 51,497

(2) Seasonality of operations:

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

250

Notes to the Consolidated Financial Statements of Lotes Co., Ltd. and 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 major transactions for year 2022:

1. Capital lending to others:

Unit: NT$1,000/1,000 in foreign currency

No.	Lender	Borrower	Item	Related party	Max amount for the period	Closing balance	Actual amount	Interest rate	Nature of the lending (Note 1)	Transaction amount	Purpose for lending	Allowanc for bad debt	e Collateral	e Collateral	Lending limit for single party (Note 2)	Overall lending limit (Note 2)
													Name	Value
0	The Company	Lotes Guangzhou Co.,Ltd.	Internal transaction	Yes	225,495 (RMB50,000)	220,470 (RMB50,000)	-	5%	2	-	Working capital	-	None	-	4,561,462	9,122,924

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: NT$1,000/1,000 in foreign currency

No.	Endorsement provider	Endorsee	Endorsee	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 endorsemen t 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	Endorseme nt made to any party in Mainland China
		Company Name	Relatio nship (Note 1)
0 0 0 1 2	The Company " " Lotes Guangzhou Co., Ltd. Lintes Technology Co., Ltd.	REKA Technology Co., Ltd. Lotes Guangzhou Co., Ltd. Lerain Technology Co., Ltd. REKA Technology Co., Ltd. Genie Precision Machine Co., Ltd.	2 2 2 1 2	4,561,462 4,561,462 4,561,462 1,778,520 1,356,632	566,548 825,300 (USD28,000) 100,000 96,645 (USD3,000) 176,600	541,715 614,200 (USD20,000) - 92,130 (USD3,000) 146,600	- - - - 39,455	- - - - -	2.38% 2.69% - % 1.04% 5.40%	11,403,655 11,403,655 11,403,655 4,446,300 2,713,265	Y " " N Y	N " " " "	N Y N " "

• 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.

251

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

• 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$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000
Holding company	Category and name of security	Relationship with the issuer of the security	Accounting item	End of the period				Maximum shareholding or capitalization in the period	Remark
				Shares	Book value	Shareholding ratio	Fair value
Lotes Co., Ltd. " " Zhaxi Investment Co., Ltd. " " " " " " Lintes Technology Co., Ltd. "	VSO ELECTRONICS CO., LTD. SteadyBeat Technology Corporation G-sau Co., Ltd. Grand-Tek Technology Co., Ltd. LIAN HONG ART CO., LTD. Patec Precision Industry Co., Ltd. OTO PHOTONICS, INC. LUCEMITEK CO., LTD. RADINET COMMUNICATIONS INC. AICP Technology Corporation Chailease Holding Company Limited Class A Preferred Shares Hotai Finance Co., Ltd. Class A Preferred Shares	None " " " " " " " " " None "	Financial assets measured at FVTPL - current Financial assets measured at FVTOCI - non-current " Financial assets measured at FVTPL - current " " " " " Financial assets measured at FVTOCI - current Financial assets measured at FVTOCI - non-current "	170,000 831,470 300,000 321,980 1,057,310 477,000 1,368,800 1,169,977 420,000 400,000 512,000 300,000	16,531 4,426 169 17,902 32,058 12,354 - - - - 50,125 28,800	0.50 % 8.53 % 12.10 % 1.31 % 2.91 % 1.04 % 4.10 % 17.33 % 18.37 % 5.33 % 0.34 % 0.60 %	16,531 4,426 169 17,902 32,057 12,354 - - - - 50,125 28,800	0.66% 9.90% 12.50% 1.31% 2.94% 1.04% 4.57% 17.33% 26.25% 5.33% 0.34% 0.60%	Note Note Note

Note: All of them were recognized in losses.

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

252

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

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

paid-in capital:	paid-in capital:	paid-in capital:	paid-in capital:	paid-in capital:	paid-in capital:	paid-in capital:
							Unit: NT$1,000
The company which acquired the property	Name of asset	Date of occurrence	Amount of transaction (Note 2)	Payment condition (Note 2)	Counterparty of transaction	Relation	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. LOTES VIET NAM COMPANY LIMITED Lintes Technology Co., Ltd. LINTES TECHNOLOGY (THAILAND) CO., LTD LOTES VIET NAM COMPANY LIMITED	Plant (Note 1) " Land use rights Land No. 1581, 1583, 1584, 1587, 1589, 1591, 1615, 1617, 1618, 1914, 1955, 1960 in the Longtan District, Taoyuan City Land No. 675 and 2 other plots in Thailand, and the buildings on them, located in Klong Tamru Sub district, Mueang Chon Buri District, Chon Buri Province Plant (Note 1)	106.10 ~ 2022.12 108.10 ~ 2022.12 2021.01.11 2022.4.15 2022.10.17 2022.03~ 2022.12	1,794,486 355,535 324,914 173,500 THB 170,000 476,626	1,614,359 347,224 324,914 173,500 THB 40,000 399,060	Chongqing Chuangyou Construction Group, etc. " GREEN i-PARK CORPORATI ON HONGJIE BIOTECH CO., LTD. MAK-THAI INDUSTRIAL CO., LTD VITECCONS CONSTRUCT ION INVESTMEN T JOINT STOCK COMPANY	None " " " " "	- - - - - -	- - - - - -	- - - - - -	- - - - - -	Tendering " Negotiation Referring to market price and professional appraisal reports " Tendering	Construction of self-use plant " " Used as a factory " "	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.

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

253

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

1. The amount of sales to or from related parties is at least $100 million or 20% of the

paid-in capital:

The amount of sales to or paid-in capital:	The amount of sales to or paid-in capital:	The amount of sales to or paid-in capital:	from related parties is at least $100 million or 20% of the	from related parties is at least $100 million or 20% of the	from related parties is at least $100 million or 20% of the	from related parties is at least $100 million or 20% of the	from related parties is at least $100 million or 20% of the	from related parties is at least $100 million or 20% of the	from related parties is at least $100 million or 20% of the	from related parties is at least $100 million or 20% of the	from related parties is at least $100 million or 20% of the
			Unit: NT$1,000
The company which purchases (sells) products	Name of transaction counterparty	Relationship	Transaction status				Situation and reason for the conditions of transaction to be different from the ordinary ones		Notes and accounts receivable (payable)		Remark
			Purchases (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. " REKA Technology Co., Ltd. " " " Lotes Guangzhou Co., Ltd. " " " Lintes Technology (Suzhou) Co., Ltd. Lotes Hengnan Co., Ltd. Guangzhou Leside Technology Co., Ltd. " "	The Company Lotes Suzhou Co., Ltd. The Company Lotes Guangzhou Co., Ltd. Lotes Hengnan Co., Ltd. " Lotes Zhongshan Co., Ltd. Guangzhou Leside Technology Co., Ltd. REKA Technology Co., Ltd. Lotes Hengnan Co., Ltd. Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Lotes Zhongshan Co., Ltd. Lintes Technology Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Lotes Zhongshan Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd.	Subsidiary The surrogate parent company are the same parent company Subsidiary The surrogate parent company are the same parent company The surrogate parent company are the same parent company " " " " " " " Subsidiary The surrogate parent company are the same parent company " " "	Net sales Net purchases Net sales Net purchases Net purchases Net sales Net purchases Net sales Net purchases " " " Net sales " Net purchases Net sales Net sales	1,397,497 1,474,724 11,627,683 10,267,683 1,049,563 146,404 4,577,242 1,458,174 1,148,439 263,476 297,648 549,481 2,338,904 147,481 354,241 770,824 730,896	94.17 % 99.37 % 70.67 % 63.82 % 6.50 % 0.89 % 28.36 % 8.86 % 15.04 % 3.45 % 3.90 % 7.20 % 95.54 % 10.72 % 19.74 % 40.86 % 38.74 %	EOM 90 days " " " EOM 90 days " " " " " " " " " " " "	- - - - - - - - - - - - - - - - -	No significant difference " " " No significant difference " " " " " " " " " " " "	314,136 (343,482) 1,887,801 (725,599) (157,022) 27,089 (1,287,635) 435,935 (213,904) (27,674) (46,744) (337,081) 600,283 55,709 (216,177) 124,065 292,509	91.22% (99.82)% 43.93% (26.60)% (5.64)% 0.63% (46.25)% 10.14% (20.93)% (2.71)% (4.57)% (32.99)% 98.27% 16.60% (33.15)% 17.11% 40.35%

254

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

1. 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: NT$1,000
Related party with accounts receivable by the Company	Name of transaction counterparty	Relationship	Balance of receivables from the related party	Turnover ratio	Past due receivables from the related party		Amounts due from related parties recovered after the period	Allowance for losses
					Amount	Handling
Xincheng Development Co., Ltd. REKA Technology Co., Ltd. " " " Lotes Suzhou Co., Ltd. Good Hope Investments Limited Lotes Guangzhou Co., Ltd. " " Lotes Zhongshan Co., Ltd. " " Lotes Hengnan Co., Ltd. Guangzhou Leside Technology Co., Ltd. " Lintes Technology (Suzhou) Co., Ltd.	Parent company " Lotes Guangzhou Co., Ltd. Lotes Zhongshan Co., Ltd. Guangzhou Leside Technology Co., Ltd. Xincheng Development Co., Ltd. REKA Technology Co., Ltd. " Lotes Zhongshan Co., Ltd. " REKA Technology Co., Ltd. Lotes Guangzhou Co., Ltd. Guangzhou Leside Technology Co., Ltd. REKA Technology Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Lintes Technology Co., Ltd.	Subsidiary " The surrogate parent company are the same parent company " " " Parent company The surrogate parent company are the same company " " " " " " " " Subsidiary	314,316 1,887,801 213,904 553,409 435,935 343,482 949,585 725,599 155,070 1,542,014 1,287,635 337,081 216,177 157,022 124,065 292,509 600,283	4.00 7.89 2.36 - 2.90 3.94 - 10.35 (0.29) - 5.45 2.81 2.38 9.00 3.05 3.35 4.96	- - - - - - - - - - - - - - - - -		314,316 1,516,736 141,350 63,472 18,502 343,482 - 717,040 80,955 9,221 890,590 163,810 - 181,356 44,910 135,367 398,818	- - - - - - - - - - - - - - - - -

1. Engagement in derivative transactions: Please refer to Note VI (2) and (26).

255

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

1. Business relationships and material transactions between parent and subsidiaries: Business relationships and significant intercompany transactions in 2022:

Unit: NT$ 1,000

				Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000
No.	Name	Transaction with	Relationsh ip	Transaction in 2022
				Subject	Amount	Term	Operating revenue Accounting for total assets
0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 2 2 3 3 3 3 3 3 3 3 3 4 4 5 5 6 6 7 7 8	The Company " " " Lotes Guangzhou Co., Ltd. " " " " " " " " " " " Lotes Suzhou Co., Ltd. " REKA Technology Co., Ltd. " " " " " " " " Lintes Technology (Suzhou) Co., Ltd. " Zongka Technology (Shenzhen) Co., Ltd. " Lotes Zhongshan Co., Ltd. " Guangzhou Leside Technology Co., Ltd. " Lotes Hengnan Co., Ltd.	Xincheng Development Co., Ltd. " REKA Technology Co., Ltd. " " " " " " Lotes Hengnan Co., Ltd. Lotes Zhongshan Co., Ltd. " " " " Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Xincheng Development Co., Ltd. " Good Hope Investments Limited Lotes Hengnan Co., Ltd. " " Lotes Zhongshan Co., Ltd. " " Guangzhou Leside Technology Co., Ltd. " Lintes Technology Co., Ltd. " Guangzhou Leside Technology Co., Ltd. " " " Shenzhen DeYi Automation Equipment Co., Ltd. " Zongka Technology (Shenzhen) Co., Ltd.	1 1 1 1 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 2 2 3 3 3 3 3 3 3	Net purchases Accounts payable Net purchases Accounts payable Sales revenue Purchases for the period Accounts receivable Accounts payable Purchases of fixed asset Purchases for the period Purchases for the period Accounts payable Sales of fixed asset Other receivables Accounts receivable Purchases for the period Sales revenue Accounts receivable Other payables Purchases for the period Sales revenue Accounts payable Purchases for the period Accounts payable Accounts receivable Sales revenue Accounts receivable Sales revenue Accounts receivable Purchases for the period Accounts payable Sales revenue Accounts receivable Sales revenue Accounts receivable Sales revenue	1,397,497 314,135 11,627,683 1,887,801 10,267,852 1,148,439 725,599 213,904 128,141 263,476 549,481 337,081 508,146 1,542,014 155,070 297,648 1,474,724 343,482 949,585 1,049,563 146,404 181,356 4,577,242 1,287,635 553,409 1,458,174 949,585 2,338,904 600,283 770,824 124,005 354,241 216,177 730,896 292,509 147,481	Same as general transactions " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "	5.16% 0.95% 42.91% 5.68% 37.89% 4.24% 2.18% 0.64% 0.39% 0.97% 2.03% 1.01% 1.53% 4.64% 0.47% 1.10% 1.03% 5.44% 2.86% 3.87% 0.54% 0.55% 16.89% 3.88% 1.67% 5.38% 2.86% 95.54% 98.27% 2.84% 0.37% 1.31% 0.65% 2.70% 0.88% 0.54%

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

1. 0 refer to parent company

2. Subsidiaries are numbered by company, starting with the Arabic numeral 1.

Note 2: The type of relationship with the counterparty is indicated below:

1. Parent company to subsidiaries

2. Subsidiaries to parent company

3. Subsidiaries to subsidiaries

256

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

(2) Information on Reinvestment Business:

Information on the Company’s investees in 2022 was as follows (excluding investees in China):

China):	China):	China):	China):
				Unit: NT$1,000
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			Maximum shareholding or capitalization in the period	Gain/loss of investee company in the fiscal period	Gain/loss in the investment recognized in the fiscal period	Remarks
				End of this period	End of the previous year	Shares	Percentage	Book value
The Company " " " " " " " " " Lotes Investment Ltd. Good Hope Investments Limited " Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co., Ltd. " "	Lotes Investment Ltd. Good Hope Investments Limited Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co., Ltd. Lotes USA, Inc. LOTES EU GmbH Lerain Technology Co., Ltd. Lomites Co., Ltd. LOTES VIET NAM COMPANY LIMITED 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.	Samoa " " Anguilla Taiwan America Germany Taiwan " Vietnam Hong Kong Samoa Hong Kong " " Taiwan " "	Holding and investment " " " General investment Market development Market development Design, test and sale of chips Manufacturing and trading of mechanical equipment and electronic parts Manufacturing of connectors for the information industry, communications industry, and consumer electronics industry Holding and investment Sales of connectors for the information industry, communications industry, and consumer electronics industry Sales of connectors for the information industry, communications industry, and consumer electronics industry Holding and investment Holding and reinvestment Manufacturing of electrical and audio-visual electronic products Manufacturing of electronic components Manufacturing and sales of machinery and equipment, electronic components, and optical instruments	799,996 12,323 614,704 15,355 690,000 76,775 3,272 47,321 124,900 1,295,962 799,996 3,071 3,110 614,715 15,355 69,600 60,866 6,360	721,064 11,107 554,055 13,840 690,000 69,200 3,132 47,321 25,000 497,825 721,064 2,768 2,803 554,064 13,840 69,600 43,880 6,360	26,050,000 401,281 20,016,426 500,000 69,000,000 2,500,000 100,000 4,732,059 12,490,000 42,200,000 26,050,000 100,000 101,281 20,016,756 500,000 6,960,000 4,331,380 636,000	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 15.74% 99.92% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 94.37% 31.78% 25.44%	8,437,726 1,847,445 3,560,292 181,559 1,483,589 85,782 4,162 29,205 107,072 1,202,687 8,892,618 1,375 896,459 3,588,371 181,559 (8,170) 20,909 3,938	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 16.40% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 94.37% 31.78% 25.44%	2,066,102 94,224 869,517 19,619 255,562 (1,298) 110 (137,312) (12,736) (48,498) 2,066,102 (65) 94,289 869,517 19,619 (75) (44,533) (4,570)	1,838,979 94,224 869,646 19,619 256,306 (1,298) 110 (20,352) (12,120) (48,498) 2,066,102 (65) 94,289 869,517 19,619 (71) (13,932) (1,163)	Note 2 Note 2 Note 2

257

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

Jiayu Investment Co., Ltd. Lintes Technology Co., Ltd. " " Lintes Technology Co., Ltd. " Jilong Co., Ltd.	Lintes Technology Co., Ltd. Genie Precision Machine Co., Ltd. Compertum Microsystems Inc. Lerain Technology Co., Ltd. Jilong Co., Ltd. LINTES TECHNOLOGY (THAILAND) CO., LTD. Rihui Co., Ltd.	Taiwan " " " Samoa Thailand Samoa	Manufacturing of electronic parts and components, other electrical and electronic machinery and equipment Manufacturing and sales of optical molds Manufacturing of electronic components Design, test and sale of chips Holding and reinvestment Trading of electronic components Holding and reinvestment	616,919 164,833 20,279 5,471 152,015 57,222 152,015	486,926 164,833 14,620 5,471 137,016 - 137,016	31,081,140 14,671,000 1,443,135 547,059 4,950,000 6,400,000 4,950,000	50.24% 60.00% 10.59% 1.82% 100.00% 100.00% 100.00%	1,363,117 219,258 6,966 3,412 479,631 56,988 479,631	52.13% 60.00% 10.59% 1.90% 100.00% 100.00% 100.00%	570,248 36,102 (44,533) (137,312) 228,056 (224) 228,056	289,750 21,035 (4,642) (2,494) 219,063 (224) 219,063	Note 2 Note 2 Note 2

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

Note 2: The investment income or loss recognized in the current period includes adjustments for unrealized gains or losses from intercompany transactions.

258

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

• (3) Investment in China:

• Names of investee companies in Mainland China, major business activities, and other related information:

other related information:	other related information:	other related information:	other related information:	other related information:
					Unit: NT$1,000
Name of investee company in Mainland China	Main business	Paid-in capital (Note 3)	Investme nt method (Note 1)	Accumulated investment amount remitted from Taiwan at the beginning of the fiscal period (Note 3)	Amount remitted or recovered		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 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	Amount remitted or recovered
					Remitted	Recovered
Lotes Guangzhou Co., Ltd. Lotes Suzhou Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Lotes Hengnan Co., Ltd. Lintes Technology (Suzhou) Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Lotes Zhongshan Co., Ltd. Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Hengnan Deyi Property Development Co., Ltd. Zhongshan Jinmeida Metal Surface Treatment Co., Ltd. Zhongshan DeZhi Real Estate Development Co., Ltd. Guangzhou Leside Technology Co., Ltd. Chongqing Fuxinrui Electronic Technology Co., Ltd.	Manufacturing of connectors for the information industry, communications industry, and consumer electronics industry Manufacturing of connectors for the information industry, communications industry, and consumer electronics industry R&D of electronics, import and export of raw materials of plastic products and plastic products Manufacturing of connectors for the information industry, communications industry, and 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 Surface treatment of metal products and plastic products Real estate development, house rental, landscape design, and interior decoration 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	819,957 613,869 15,355 1,153,058 152,015 110,235 2,557,452 268,973 101,416 36,510 251,336 20,724 7,055	(2) (2) (2) (3) (2) (3) (3) (3) (3) (3) (3) (3) (3)	783,105 613,869 15,355 - 152,015 - - - - - - - -	- - - - - - - - - - - - -	- - - - - - - - - - - - -	783,105 613,869 15,355 - 152,015 - - - - - - - -	2,066,102 869,517 19,619 31,167 213,545 17,444 1,047,138 19,848 911 (5,588) (77) 56,986 441	100.00% 100.00% 100.00% 100.00% 50.24% 100.00% 100.00% 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% 100.00% 100.00% 51.00%	1,838,974 869,647 19,619 50,725 102,764 17,444 1,047,138 19,848 379 (8,409) (77) 56,986 225	8,437,677 3,560,253 181,559 1,533,690 274,571 153,544 3,889,209 272,603 100,033 95,678 251,259 114,596 1,693	- - - - - - - - - - - - -

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) N/A.

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.

259

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

2. 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
LotesCo.,Ltd.	$1,412,329thousand	$1,561,637 thousand	$13,684,385thousand
Lintes Technology Co.,Ltd.	$152,015 thousand	$152,015 thousand	$1,627,959 thousand

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 “Information on Significant Transactions” and “Business Relationships and Significant Transactions between Subsidiaries and Parents” for details of significant direct or indirect transactions between the Company and its investees in Mainland China in fiscal 2022, which have been eliminated in the preparation of the consolidated financial statements.

(4) Information on Major Shareholders:

nsolidated financial statements. mation on Major Shareholders:
Shares **Name of Major Shareholder **	Shares held	Shareholding %
Chin-Ling Investment Co., Ltd.	10,956,237	10.16%
Jiaming Investment Co., Ltd.	9,797,037	9.08%
Cathay Life Insurance Co., Ltd.	5,488,640	5.09%
New Labor Pension Fund 1st Fubon Discretionary Investment Account in 2021	7,497,959	6.95%

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 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.

260

XIV. Segmental Information

(1) General information

The Company’s main business is the trading of various hardware and tool parts, the manufacturing, processing and trading of various terminals and their finished connectors, the import and export trade of the preceding items, and the agency of the preceding items related to domestic and foreign manufacturers’ products in the tender quotation and distribution business.

(2) Information on reportable segment profit or loss, assets, liabilities and their measurement basis and reconciliation

The Consolidated Company’s major decisions are based on the performance appraisal and resource allocation by the production regions. After analysis, the two regions meet the conditions of consolidation into a single operating segment, therefore the Consolidated Company as a whole is a single operating segment, and the information of segment profit or loss, segment assets and segment liabilities are consistent with the financial statements.

(3) Product and labor provision information

The Consolidated Company’s revenue information from external customers is as follows:

Product and labor	2022 $ 8,145,108 7,211,569 3,565,682 3,487,379 2,961,513 931,868 796,015	2021 5,715,874 5,643,188 3,195,511 2,991,448 2,162,309 310,135 1,373,452 21,391,917
Server DT NB Strategic Projects LINTES(High Speed Cable) Automotive Other Total
	$ 27,099,134

(4) Geographical information

The geographical information of the consolidated company is as follows, categorized based on the geographic location of the customers.

on the geographic location of the customers.
Area Revenue from external customers: Taiwan Mainland China Other Total Non-current assets Taiwan Mainland China Other Total	2022 $ 4,182,196 19,633,031 3,283,907	2021 2,370,643 16,171,822 2,849,452 21,391,917 1,011,079 7,842,858 420,677 9,274,614
	27,099,134
	$ 1,464,157 8,365,737 1,079,935
	$ 10,909,829

261

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

1. Financial position

ancial position
				Unit: NT$ thousand
Item	Year	2021	2022	Difference Amount %
Current assets		16,959,937	22,090,479	5,130,542	30.25%
Property, plant and equipment		6,882,186	8,871,880	1,989,694	28.91%
Intangible assets		205,584	182,069	-23,515	(11.44% )
Other assets		822,486	775,192	-47,294	(5.75% )
Total assets		26,419,391	33,295,640	6,876,249	26.03%
Current liabilities		7,004,306	8,097,597	1,093,291	15.61%
Non-current liabilities		1,360,381	689.430	-1,359,692	(99.95%)
Total liabilities		8,364,687	8,787,027	422,340	5.05%
Share capital		1,059,779	1,068,762	8,983	0.85%－
Capital reserves		5,283,698	6,307,022	1,023,324	19.37%
Retained earnings		11,200,170	15,761,019	4,560,849	40.72%
Other equity		(682,333)	(339,030)	343,303	50.31%
Equityto theparent company		16,862,481	22,807,309	5,944,828	35.25%
Non-control equity		1,192,223	1,701,304	509,081	42.74%
Total of equity		18,054,704	24,508,613	6,453,909	35.75%

Main causes and effects of changes of more than 20% and amounting to NT$10 million:

1. Current Assets: The increase in current assets was mainly due to an increase in the scale of operations, leading to an increase in cash and cash equivalents as well as receivables.

2. Property, Plant, and Equipment: The increase in property, plant, and equipment was mainly due to expanding operations, leading to the addition of equipment and expansion of factories.

3. Total Assets: The total assets increased primarily due to the expansion of business scale, increasing both current and fixed assets.

4. Non-Current Liabilities: The non-current liabilities primarily decreased in 2022 due to the conversion of corporate bonds into equity.

5. Other Equity: Changes in foreign operating entities' conversion adjustments led to changes in other equity due to exchange rate fluctuations.

6. Retained Earnings: The main reason for the increase was profit growth, leading to an increase in net income for the period.

7. Equity Attributable to Owners of Parent Company: The main reasons were profit growth and an increase in net income for the period, as well as the issuance of new shares through negotiated cash capital increase.

8. Non-controlling Interests: Non-controlling interests increased primarily due to profit and asset scale improvements in invested companies.

9. Total Equity: The main reasons were company profit growth and an increase in the scale of assets.

262

2. Operating performance

(1) Comparative analysis table of operating performance

Unit: NT$ thousand

Year			Difference	Difference
	2021	2022
Item			Amount	%
Net operating revenue	21,391,917	27,099,134	5,707,217	26.68%
Operating cost	12,834,611	15,161,454	2,326,843	18.13%
Gross profit	8,557,306	11,937,680	3,380,374	39.50%
Operating expense	4,198,039	4,668,794	470,755	11.21%
Operating profit	4,359,267	7.268.886	2,909,619	66.75%
Non-operating income/expenses	180,931	919,681	738,750	408.30%
Net income before tax for continuingoperations	4,540,198	8,188,567	3,648,369	80.36%
Income tax (expense) benefit	-1,021,167	-1,782,155	(760,988)	74.52%
Net profit for the period	3,519,031	6,406,412	2,887,381	82.05%
Other comprehensive income	-84,179	345,772	429,951	510.76%
Total comprehensive income	3,434,852	6,752,184	3,317,332	96.58%
Net income attributed to owners of theparent company	3,472,201	6,254,263	2,782,062	80.12%
Net income attributed to non-controllinginterest	46,830	153,149	106,319	227.03%
EPS	33.32	58.70	25.38	76.17%

Main causes and effects of changes of more than 20% and amounting to NT$10 million:

1. Operating Revenue: The operating revenue increased, mainly due to the expansion of operations and a higher penetration rate of new products in 2022.

2. Gross Operating Profit: The gross operating profit increased, primarily due to the expansion of operations and higher penetration rate of high-margin new products in 2022, leading to growth in the gross operating profit.

3. Net Operating Profit: The net operating profit increased, mainly because the scale of operations increased in 2022 and the increase in gross profit was greater than the increase in operating expenses, resulting in significant growth in net operating profit.

4. Non-operating Income and Expenses: The main reason is the significant increase in foreign exchange gains in 2022, leading to a significant increase in non-operating income and expenses.

5. Pre-tax Net Profit from Continuing Operations: The primary reason is the increase in the scale of operations and gross profit margin in 2022, leading to a significant increase in pre-tax net profit. 6. Income Tax (Expense) Benefit: Mainly due to the rise in operational scale in 2022, leading to a significant increase in profits and a corresponding increase in income tax provisions.

6. Net Profit for the Period: The main reason is the increase in the scale of operations in 2021, leading to a significant increase in net profit for the period.

7. Total Comprehensive Income for the Period: The total comprehensive income for the period increased mainly due to the rise in the scale of operations and significant profit increase in 2022. 9. Net Profit Attributable to Owners of the Parent: The net profit attributable to owners of the parent increased mainly due to the rise in the scale of operations and significant profit increase in 2022. 10. Net Profit Attributable to Non-controlling Interests: Mainly due to the significant profit of the investee company Jiabase using the equity method in 2022 compared to 2021, leading to an increase in profit attributable to non-controlling interests.

8. Earnings per Share: Mainly due to the rise in the scale of operations and gross profit margin in 2022, leading to a significant profit increase.

3. Cash flow

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

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

Year Increase (decrease)
2021 2022
Item
proportion %
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263

Cash Flow Ratios
	38.40	95.50	148.70%
Cash flow fair value ratios
	75.53	95.45	26.37%
Cash reinvestment ratio
	5.89	20.62	250.08%

(1) Cash Flow Ratio (%): The cash flow ratio significantly increased in 2022, mainly due to a significant increase in cash flow from operating activities and a noticeable increase in current liabilities.

(2) Cash Flow Adequacy Ratio (%): The cash flow adequacy ratio increased in 2022, primarily due to an increase in cash flow from operating activities over the past five years.

(3) Cash Reinvestment Ratio (%): Mainly because the cash flow adequacy ratio significantly increased in 2022, primarily due to a significant increase in cash flow from operating activities and a noticeable increase in capital expenditure for property, plant, and equipment.

(2) Liquidity improvement plan:

The Company had a net cash inflow from operating activities in 2022 and therefore did not have a liquidity deficit that affected operating activities.

• (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.

4. The impact of major capital expenditures in the most recent year on financial operations: None.

5. The main reasons for the most recent annual reinvestment policy and profit or loss, improvement plans and investment plans for the coming year:

Unit: NT$ thousands

Name of Investing Company	Investing amount as of 2022/12/31	Investing policy	Investment income recognized during the period	Main reasons for gain or loss	Improvement plans	Other investme nt plans for the future
Lotes Investment Ltd	799,996	Investment	1,838,979	Deepening and Expanding Markets byinvesting	-	-
JIA WANG Investment INC.	12,323	Investment	94,224	Deepening and Expanding Markets byinvesting	-	-
Guan Si Development INC.	614,701	Investment	869,646	Deepening and Expanding Markets byinvesting	-	-
JA XI Investment INC.	15,355	Investment	19,619	Deepening and Expanding Markets byinvesting	-	-
JIA YU Investment INC.	690,000	Investment	256,306	Deepening and Expanding Markets byinvesting	-	-
LOTES USA ,Inc	76,775	Business Maintenance and Development	(1,298)	Maintain customer relationships	-	-
LOTES EU Gmbh	3,272	Business Maintenance and Development	110	Maintain customer relationships
Lerain Technology Co., Ltd.	47,321	IC design, testing and sales	(20,352)	Still in its early stage of establishment, the operational benefits are notyet visible

264

Lomites Co., Ltd	124,900	Manufacture and sale of machinery and electronic components	(12,120)	Still in its early stage of establishment, the operational benefits are not yet visible
LOTES Viet Nam Co,Ltd	1,295,962	Connector manufacturin g for the information industry, communicati ons industry and consumer electronics industry	(48,498)	Still in its early stage of establishment, the operational benefits are not yet visible

6. 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: NT$ thousands

			Unit: NT$ thousands	Unit: NT$ thousands
Item	2021		2022
	Amount	%	Amount	%
Operatingrevenue	21,391,917	100.00%	27.099,134	100.00%
Operating profit	4,359,267	21.47%	7,268,886	26.82%
Interest	(14,310)	(0.07%)	(8,308)	(0.03%)

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

• 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:

• As of the end of 2022, the Company had loaned $0 thousand to others.

The Company recorded $1,394,645 thousand of guarantees for others at the end of 2022, which was to endorse bank loans for the working capital needs of its subsidiaries. The related loans and guarantees were performed in accordance with the "Control over Loans and Endorsements of Funds" established by the Company.

• (3) Future R&D plans and estimated R&D costs:

Our future product development and design direction: board-to-board connectors will be designed for high-frequency high speed, small pitch, low height, SMT design volume minimization; I/O connectors will be designed for interface connectors Fine Pitch, thin design and high-frequency high speed; memory card connectors will be designed for integration of multi-card all-in-one design, enhance battery connector volume minimization and custom design; wireless network connectors with wireless network product development and design, computer peripheral connectors for consumer electronics (HDMI DVI phones), automotive, server, medical and communication connectors will also be the development focus.

265

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 2022, the Group's R&D expenses are expected to be approximately NT$2,300,000 thousand, which is expected to account for 8% 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 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.

7. Other important matters: None

266

VIII. Special Notes

1. Related information of affiliates

(1) Affiliates' organizational chart

==> picture [760 x 422] intentionally omitted <==

267

(2) Basic information of each affiliates:

Name of Company	Incorporatin g date	Address	Paid-in **Capital **	Major operations or production items
LOTES INVESTMENTS LIMITED	2003/9/5	Offshore Chambers, P.O. Box217, Apia, Samoa	799,996	Engaged in holding and reinvestment activities
Good Hope InvestmentsLimited	2003/3/21	Offshore Chambers, P.O. Box217, Apia, Samoa	12,323	Engaged in holding and reinvestment activities
Guan Si Development Co,Ltd.	2003/11/18	Offshore Chambers, P.O. Box217, Apia, Samoa	614,704	Engaged in holding and reinvestment activities
Zha Xi Investments Ltd.	2005/12/22	P.O.BOX850, Offshore Incorporation Centre, The Valley,Anguilla,BritishWestIndies	15,355	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, OR 97204U.S.A	76,775	Market development
LOTESEU,GmbH	2018/2/27	Hessenring119-121, 61348BadHomburg	3,272	Market development
LOTES VIETNAM COMPANY LIMITED	2021/4/23	LOT E1, LIEN HA THAI INDUSTRIAL PARK, THUY LIEN COMMUNE, THAI THUY DISTRICT, THAI BINH PROVINCE, VIETNAM Công ty TNHH Lotes Việt Nam	1,295,96 2	Manufacturing of connectors for the information industry, communications industry and consumer electronics industry
LOTES INVESTMENT Ltd.	2007/10/15	Unit 1405-1406, Dominion Centre, 43-59 Queen'sRoadEast, Wanchai,H.K	799,996	Engaged in holding and reinvestment activities
Lotes Guangzhou Co., Ltd.	1993/1/28	No. 526, Jinling North Road, Bantu Management Zone, Nansha Economic and Technological DevelopmentZone, Guangzhou	819,957	Manufacturing of connectors for the information industry, communications industry and consumerelectronicsindustry
Lotes Hengnan Co., Ltd.	2010/5/17	Yunji Avenue, New County Industrial Park, Henan County, Hengyang City, Hunan Province	1,153,05 8	Manufacturing and selling of connectors for the information industry, communications industry and consumer electronicsindustry
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, ShenzhenCity	110,235	Production of industrial robots, automation equipment and their components.
Lotes Zhongshan Co., Ltd.	2016/05/12	No.12, Jinhui Road, Triangle Town, Zhongshan City	2,557,45 2	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 controltechnologyR&D
Xin Cheng Ltd.	2003/10/16	Offshore Chambers, P.O. Box217, Apia, Samoa	3,071	Selling of connectors for the information industry, communications industry and consumerelectronicsindustry
Rui Jia Trading Co.	2007/11/13	Unit 1405-1406, Dominion Centre, 43-59 Queen's Road East, Wanchai, H.K	3,110	Selling of connectors for the information industry, communications industry and consumerelectronicsindustry
Jae You Co., Ltd.	2007/10/29	Unit 1405-1406, Dominion Centre, 43-59 Queen'sRoadEast, Wanchai,H.K	614,715	Engaged in holding and reinvestment activities
Lotes Suzhou Co., Ltd.	2003/7/10	No.26, Caohu Avenue, Xiangcheng Economic Development Zone, Suzhou, Jiangsu Province	613,869	Manufacturing of connectors for the information industry, communications industryand consumer electronics industry
Wangden Investments Co.,Ltd.(HK)	2007/10/12	Unit 1405-1406, Dominion Centre, 43-59 Queen'sRoadEast, Wanchai,H.K	15,355	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, ShenzhenCity	15,355	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., NewTaipeiCity	69,600	Engaged in the manufacturing of electrical and audio-visualelectronic products
Lintes Technology Co., Ltd.	2011/8/22	2F.-1, No. 268, Liancheng Rd., Zhonghe Dist., New Taipei City	616,919	Engaged in the manufacturing of electronic components, other electrical and electronic mechanicalequipment
Jilong Co., Ltd.	2011/6/16	Offshore Chambers,P.O.Box 217 ,Apia ,Samoa	152,015	Engaged in holding and reinvestment activities
Sunmax Technology Co.,Ltd.	2011/11/8	Offshore Chambers,P.O.Box 217 ,Apia ,Samoa	152,015	Engaged in holding and reinvestment activities
Lintes Technology (Suzhou) Co., Ltd.	2012/3/14	No.26, Caohu Avenue, Xiangcheng Economic Development Zone, Suzhou	152,015	Development and production of optical communication measuring instruments and optical transceivers with speeds of 10GB/S and above and technical services for the above products
Guangzhou Leside Technology Co.,Ltd.	2015/2/27	Room 603, No.5, Shuang Shan Avenue, Nansha District, Guangzhou	20,724	Research and experimental development
Chongqing Fuxinrui Techmology Co., Ltd.	2018/12/27	No. 6, Yingchun Road, Nanan District, Chongqing City	7,055	Development and sale of electronic components, automotive parts and components, calculators and components, mold development and import and export ofgoods and technologies
Hengnan Deyi PropertyDevelopment	2018/5/18	No. 120, Yunji Avenue, Yunji Town, Henan County,Hengyang City,Hunan Province	101,416	Property development, home rental, landscaping andinteriordecoration

268

Co.,Ltd.
Compertum MicrosystemsInc.	2019/11/5	13F.-1, No. 716, Zhongzheng Rd., Zhonghe Dist., NewTaipeiCity	136,310	Engaged in the manufacturing of electronic components
Zhongshan Dezhi ArtificialCo.,Ltd.	2016/3/24	1F., No.8, Ruifeng Road, Triangle Town, Zhongshan	268,973	Surface treatment for all kinds of hardware and plastic products
Zhongshan Jinmeida Metal Surface Treatment Co.	2002/7/11	1, No. 2, Ruifeng Road, Zhongshan City, Guangdong Province	36,510	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., NewTaipeiCity	300,679	Chip design, testing and sales
Genie Precision Machining Co.,Ltd.	1986/10/3	No.4 Alley 704, Heping Rd., Bade Dist., TaoyuanCity,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	25,000	Manufacture and sale of machinery and equipment, electronic parts and components, and optical instruments
Lomites Co., Ltd.	2020/12/21	9F No. 87-5, Kuangming 6th Rd., Zhubei City, Hsinchu County	125,000	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 Ltd. Legal Representative: Chu, Te-Hsiang	9,797,037	9.23
		Director	Jiaming Investment Ltd. Legal Representative: Ho, Te-Yu	9,797,037	9.23
		Director	Hsieh, Chia-Ying	0	0
		Director	Chu, Chien-Chung	0	0
		Director	Wang, Jen-Chun	0	0
		Director	Chiang, I-Cheng	0	0
		Director	Wu, Chang-Hsiu	0	0
		President	Ho, Te-Yu	473,899	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
	LOTES INVESTMENT Ltd.	Director	LOTES INVESTMENTS LIMITEDLegal Representative: Chu-Chen, Yi-Hui	26,050,000	100
	Lotes Guangzhou Co., Ltd.	Chairperson	LOTES INVESTMENT Ltd.Legal Representative: Ho, Te-Yu	26,700,000	100
		Director (Vice Chairperson)	LOTES INVESTMENT Ltd.Legal Representative: Chu, Te-Hsiang	26,700,000	100
		Director	LOTES INVESTMENT Ltd.Legal Representative: Chu-Chen, Yi-Hui	26,700,000	100
		Supervisor	LOTES INVESTMENT Ltd.Legal Representative: Ho, Kun-Shan	26,700,000	100
	Xin Cheng Ltd.	Director	Good Hope Investments Ltd. Legal Representative: Ho, Mei-Yu	100,000	100
	Rui Jia Trading Co.	Director	Good Hope Investments Ltd. Legal Representative: Bao, Yu-Yi	101,281	100

269

	Jae You Co., Ltd.	Director	Guan Si Development Co, Ltd.Legal Representative: Ho, Jian-Sheng	20,016,756	100
	Lotes Suzhou Co., Ltd.	Chairperson	Jae You Co., Ltd.Legal Representative: Chu, Te-Hsiang	19,989,221	100
		Director (Vice Chairperson)	Jae You Co., Ltd.Legal Representative: Ho, Te-Yu	19,989,221	100
		Director	Jae You Co., Ltd.Legal Representative: Kung, Yung-Sheng	19,989,221	100
		Supervisor	Jae You Co., Ltd.Legal Representative: Chen, Ya-Yuan	19,989,221	100
	Wangden Investments Co., Ltd.	Director	Zha Xi Investments Ltd.Legal Representative: Lin, Yi-Jun	500,000	100
	Tsongkha Technology (Shen Zhen) Co., Ltd.	Director	Wangden Investments Co., Ltd.Legal Representative: Wang, Ying-Ping, Ho, Te-Yu, Lin, Ko-Lun	500,000	100
	Lotes Hengnan Co., Ltd.	Director	Lotes Guangzhou Co., Ltd.Legal Representative: Ho, Te-Yu, Chen, Zhi-Yu, Lin, Ko-Lun	261,500,000	100
	Lotes Hengnan Co., Ltd.	Supervisor	Lotes Guangzhou Co., Ltd.Legal Representative: Lu, Chih-Cheng	261,500,000	100
	Shenzhen Deyi Automation Technology Co., Ltd.	Director	Lotes Guangzhou Co., Ltd.Legal Representative: Wang, Ying-Ping	25,000,000	100
	Shenzhen Deyi Automation Technology Co., Ltd.	Supervisor	Lotes Guangzhou Co., Ltd.Legal Representative: Wang, Hsi-Hung	25,000,000	100
	Ememe Robot Co., Ltd.	Chairperson	Jiayu Investment Co., Ltd.Legal Representative: Chu, Te-Hsiang	6,960,000	94.37
		Director	Jiayu Investment Co., Ltd.Legal Representative: Tsai, Hui-Wen	6,960,000	94.37
		Director	Jiayu Investment Co., Ltd.Legal Representative: Liu,Hsing-Hsia	6,960,000	94.37
		Supervisor	Hsu, Feng-Yu	0	0
	Lintes Technology Co., Ltd.	Chairperson	Jiayu Investment Co., Ltd.Legal Representative: Chu, Te-Hsiang	31,075,140	51.37
		Director	Jiayu Investment Co., Ltd.Legal Representative: Ho, Te-Yu	31,075,140	51.37
		Director	Jiayu Investment Co., Ltd.Legal Representative: Lo, Wei-Ren	31,075,140	51.37
		Director	Lai, Wei-Ru	0	-
		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, JIA-XIN	100,000	100
	Jilong Co., Ltd.	Director	Lintes Technology Legal Representative: Chen, Ya-Yuan	4,950,000	100
	Sunmax Technology Co., Ltd.	Director	Jilong Co., Ltd.Legal Representative: LIAO, HUI-YING	4,950,000	100
	Lintes Technology (Suzhou) Co., Ltd.	Chairperson	Sunmax Technology Co., Ltd.Legal Representative: Ho, Te-Yu	4,950,000	100
		Director and President	Sunmax Technology Co., Ltd.Legal Representative: Lo, Wei-Ren	4,950,000	100
		Director	Sunmax Technology Co., Ltd.Legal Representative: Chu, Te-Hsiang	4,950,000	100
		Supervisor	Sunmax Technology Co., Ltd.Legal Representative: Bao, Yu-Yi	4,950,000	100
	Lotes Zhongshan Co., Ltd.	Chairperson	Legal Representative: Ho, Te-Yu	600,000,000	100
		Director	Legal Representative: Chu-Chen, Yi-Hui	600,000,000	100
		Director	Legal Representative: Ho, Hung-YU	600,000,000	100
		Supervisor	Legal Representative: Lin, Ya-Chi	600,000,000	100
	Guangzhou Leside Technology Co., Ltd.	Chairperson	Lotes Guangzhou Co., Ltd.Legal Representative: Wang, Ying-Ju	4,700,000	100
		Supervisor	Lotes Guangzhou Co., Ltd.Legal Representative: Deng, Li-Ming	4,700,000	100
	Chongqing Fuxinrui Techmology Co., Ltd.	Chairperson	Guangzhou Leside Technology Co., Ltd.Legal Representative: He, Yong-Hong	1,600,000	51
		Director	Guangzhou Leside Technology Co., Ltd.Legal Representative: Deng,	1,600,000	51

270

			Li-Ming
		Supervisor	Guangzhou Leside Technology Co., Ltd.Legal Representative: WANG, HSUEH-LIANG	1,600,000	51
	Hengnan Deyi Property Development Co., Ltd.	Chairperson	Lotes Guangzhou Co., Ltd.Legal Representative: Ho, Te-Yu	23,000,000	100
		Supervisor	Lotes Guangzhou Co., Ltd.Legal Representative: Lu, Chih-Cheng	23,000,000	100
	Compertum Microsystems Inc.	Chairperson	Jiayu Investment Co., Ltd.Legal Representative: Chu, Te-Hsiang	4,331,380	31.78
		Director	Ho, Te-Yu	600,000	4.40
		Director	Lo, Wei-Ren	987,095	7.24
		Director	LIU, JIEN-CHAN	1,210,500	8.88
		Director	Man Francis Piu	1,425,500	10.46
		Supervisor	Hsu, Feng-Yu
	Zhongshan Dezhi Artificial Co., Ltd.	Director	Lotes Guangzhou Co., Ltd.Legal Representative: Wang, Ying-Ping	6,100,000	100
	Zhongshan Jinmeida Metal Surface Treatment Co.	Director	Lotes Guangzhou Co., Ltd.Legal Representative: Wang, Ying-Ping	6,780,000	100
	Lerain Technology Co., Ltd.	Director	Lotes Co., Ltd.Legal Representative: Chu, Te-Hsiang	4,732,059	15.74
		Director	Kao, Miao-Bin	4,607,941	15.33
			HO, CHU-YEN	2,237,692	7.44
			Chu, Pei-Hsuan	1,682,128	5.59
		Director	Hsu, Feng-Yu	25,947	0.09
		Supervisor	Chen, Ya-Yuan	5,000	0.02
	Karlum Investment Co., Ltd.	Director	Lintes Technology Co., Ltd.Legal Representative: Chu, Te-Hsiang	0
		Director	Lintes Technology Co., Ltd.Legal Representative: Lo, Wei-Ren	0
	Genie Precision Machining Co., Ltd.	Chairperson	Lintes Technology Co., Ltd.Legal Representative: Lo, Wei-Ren	14,671,000	60%
		Vice Chairperson	Lintes Technology Co., Ltd.Legal Representative: Chu, Te-Hsiang	14,671,000	60%
		Director	Lintes Technology Co., Ltd.Legal Representative: Wang, Tzu-Wei	14,671,000	60%
		Supervisor	Chu, Tzu-Chi	201,571	0.8%
	Good News Medical Co., Ltd.	Chairperson	Chu, Te-Hsiang	0
		Supervisor	Ho, Te-Yu	0
	Lomites Co., Ltd.	Chairperson	Lotes Co., Ltd.Legal Representative: Chu, Te-Hsiang	12,490,000
		Director	Lotes Co., Ltd.Legal Representative: Ho, Te-Yu	12,490,000
		Director	Lotes Co., Ltd.Legal Representative: Chen, Ya-Yuan	12,490,000
		Supervisor	Lotes Co., Ltd.Legal Representative: Hsu, Feng-Yu	12,490,000
	LOTES VIET NAM COMPANY LIMITED	Chairperson	Lotes Co., Ltd.Legal Representative: Kung, Yung-Sheng	42,200,000	100

(5) Operating overview of affiliates

Unit: 1,000 NT$

	Name ofCompany	Capital	Total Assets	Liabilities	Net Worth	Operating Revenue	Operating (Loss) Gain	After tax (Loss) Gain	EPS
1	Lotes Guangzhou Co.,Ltd.	819,957	10,493,775	2,056,098	8,437,677	11,472,196	1,608,007	2,066,102	77.38
2	Lotes Suzhou Co.,Ltd.	613,869	3,790,309	230,057	3,560,253	1,757,780	383,911	869,517	43.50
3	Good Hope Investments Limited	12,323	1,847,445	0	1,847,445	0	0	94,224	234.81
4	LOTES INVESTMENT Ltd.	799,996	8,437,727	0	8,437,727	0	0	2,066,103	79.31
5	Xin ChengLtd.	3,071	345,959	344,585	1,375	1,484,051	(83)	(65)	(0.65)
6	Guan Si Development Co, Ltd.	614,704	3,560,291	0	3,560,291	0	0	869,517	43.44
7	Zha Xi Investments Ltd.	15,355	181,559	0	181,559	0	0	19,619	39.24
8	Tsongkha Technology (Shen Zhen)Co.,Ltd.	15,355	384,822	203,264	181,559	1,075,360	26,446	19,619	39.24
9	LOTES INVESTMENT Ltd.	799,996	8,892,618	0	8,892,618	0	0	2,066,103	79.31

271

10	Wangden Investments Co., Ltd.	15,355	181,559	0	181,559	0	0	19,619	39.24
11	Jae You Co.,Ltd.	614,715	3,588,371	0	3,588,371	0	0	869,517	43.44
12	Rui Jia TradingCo.	3,110	4,676,944	3,780,484	896,459	16,467,434	175,798	94,289	930.96
13	Jiayu Investment Co.,Ltd.	690,000	1,484,062	3,662	1,480,400	279,444	279,267	252,373	3.66
14	Ememe Robot Co.,Ltd.	69,600	2,124	10,781	(8,657)	0	(81)	(75)	(0.01)
15	Lotes Hengnan Co.,Ltd.	1,153,058	1,829,154	295,464	1,533,690	1,829,061	(25,495)	31,167	0.12
16	Lintes Technology Co., Ltd.	618,666	3,784,088	1,070,824	2,713,265	2,913,277	419,917	570,248	9.42
17	JilongCo.,Ltd.	152,015	479,631	0	479,631	0	0	228,057	46.07
18	Sunmax Technology Co., Ltd.	152,015	516,118	36,487	479,631	0	14,512	228,057	46.07
19	Lintes Technology (Suzhou)Co.,Ltd.	152,015	1,203,450	687,332	516,118	2,458,671	223,377	213,544	43.14
20	LOTES USA Inc.	76,775	91,278	5,495	85,783	0	(46,785)	(1,298)	(0.52)
21	Shenzhen Deyi Automation TechnologyCo.,Ltd.	110,235	520,023	366,480	153,544	943,672	21,591	17,444	0.70
22	Lotes Zhongshan Co.,Ltd.	2,557,452	7,504,151	3,614,941	3,889,209	5,764,267	1,302,221	1,047,138	1.81
23	LOTES EU Gmbh	3,272	5,459	1,297	4,162	0	(8,352)	110	1.10
24	Guangzhou LeRain Technology Co., Ltd.	20,724	776,872	662,276	114,596	1,886,487	87,488	56,986	12.12
25	Chongqing Fuxinrui Electronic Technology Co., Ltd.	7,055	24,951	21,632	3,319	21,404	406	441	0.28
26	Hengnan De Yi Property Development Co., Ltd.	101,416	100,234	200	100,034	0	(206)	911	0.04
27	Lai Da Technology Co., Ltd.	136,310	78,340	12,540	65,800	0	(49,357)	(44,533)	(3.27)
28	Zhongshan Dezhi Metal Surface Treatment Co., Ltd.	268,973	300,933	28,329	272,603	372,891	18,643	19,848	0.33
29	LeRain Technology Co., Ltd.	300,679	199,400	11,859	187,540	55,208	(144,744)	(137,312)	(4.57)
30	Jia Yin Medical Equipment Co., Ltd.	25,000	16,203	726	15,478	0	(80)	(4,570)	(1.83)
31	Micro Point Co., Ltd.	124,900	121,099	16,633	104,466	0	(13,092)	(14,846)	(1.19)
32	Lomites Co.,Ltd.	244,500	506,606	145,985	360,621	380,350	41,249	36,102	1.48
33	Zhongshan Jinmeida Metal Surface Treatment Co., Ltd.	36,510	96,638	960	95,678	0	(3,653)	(5,588)	(0.67)
34	LOTES VIET NAM COMPANY LIMITED	1,295,962	1,303,425	100,738	1,202,687	12,286	(51,540)	(48,498)	(11.49)
35	Zhongshan DeZhi Real Estate Development and Management Co.,Ltd.	251,336	251,352	93	251,259	0	(109)	(77)	(0.00)
36	Lintes Technology (Thailand)Co.,Ltd.,	57,222	57,084	95	56,988	0	(230)	(224)	(0.03)

272

(6) Consolidated financial statements of affiliates:

Declaration

For the fiscal year 2022 (January 1, 2022 through December 31, 2022), 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 21, 2023

(7) Affiliates Report: None.

2. 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.

3. 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.

IX. 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

273

Lotes Co., Ltd.

Chairperson: Chu, Te-Hsiang

President: Ho, Te-Yu

274