LOTES - Audit Report / Information 2019

Stock Code: 3533

Lotes Co., LTD

PARENT COMPANY ONLY FINANCIAL STATEMENTS With Independent Auditors’ Report For the Years Ended December 31, 2019 and 2018

Notice to Readers

For the convenience of readers, the independent auditors ’ report and the accompanying parent company only financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors ’ report and financial statements shall prevail.

Independent Auditor’s Report

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

Audit opinion

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

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

Basis of the audit opinion

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

Key audit matters

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

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

Description of the key audit matters:

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

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

II. Evaluation of inventory

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

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

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

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

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

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

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

financial reports.

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

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

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

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

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

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

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

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

KPMG Taiwan

CPAs:

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

[March 25, 2020 ]

Notes to Readers

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

Lotes Co., Ltd. Balance Sheet

December 31, 2019 and 2018

Unit: 1,000 TWD

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

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

Lotes Co., Ltd.

Statement of Comprehensive Income

January 1 to December 31, 2019 and 2018

Unit: 1,000 TWD

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

Lotes Co., Ltd.

Statement of Changes in Equity

January 1 to December 31, 2019 and 2018

Unit: 1,000 TWD

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

Lotes Co., Ltd.

Statement of Cash Flows

January 1 to December 31, 2019 and 2018

Unit: 1,000 TWD

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

Lotes Co., Ltd.

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

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

I. Company History

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

II. Date and Procedures of Approval of Financial Statement

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

III. Application of New and Revised Standards and Intepretations

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

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

New release/revision/amendment ofguidelines and interpretations IFRS 16 "Leases" IFRIC Interpretation 23 "Uncertainty over Income Tax Treatments" Amendments to IFRS 9 "Prepayment Features with Negative Compensation" Amendments to IAS 19 "Plan Amendment, Curtailment or Settlement" Amendments to IAS 28 "Long-term Interests in Associates and Joint Ventures" Annual Improvements to IFRS Standards 2015-2017 Cycle	Effective date upon promulgation by the IASB
	Jan. 1, 2019 Jan. 1, 2019 Jan. 1, 2019 Jan. 1, 2019 Jan. 1, 2019 Jan. 1, 2019

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

Effective date upon
promulgation by the
IASB

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

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

IFRS 16 leases

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

(1) Definition of lease

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

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

(2) The lessee

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

A. Contracts previously classified as operating leases under IAS 17

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

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

16:

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

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

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

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

(3) the lessor

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

(4) impact on financial statements

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

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

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

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

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

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

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

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

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

IV. Summary of Major Accounting Policies

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

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

(1) Compliance statement

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

Lotes Co., Ltd. Parent Company Only Financial Statement

(2) Compling Basis

1. Measurement Foundation

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

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

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

(3) Foreign Currency

1. Foreign Currency Trading

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

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

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

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

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

2. Foreign Operating Organizations

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

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

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

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

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

(6 ) Financial Instrument

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

1. Financial Assets

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

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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.

Lotes Co., Ltd. Parent Company Only Financial Statement

(1) Financial assets as measured by their amortized costs

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

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

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

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

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

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

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

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

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

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

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.

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

(4) Business model evaluation

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

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

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

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

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

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

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

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

payment of the principal and the amount of outstanding principal

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

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

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

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

rate;

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

(6) Impairment of financial assets

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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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.

Lotes Co., Ltd. Parent Company Only Financial Statement

(7) Financial assets de-recognition

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

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

2. Financial liabilities

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

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

(1) De-recognition of Financial Libilities

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

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

(2) Offset between Financial Assets and Liabilities

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

3. Derivative Financial Instruments

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

(7) Inventory

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

(8) Investing subsidiary

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

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

(9) Property, Plant and Equipment

1. Recognition and Measurement

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

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

(major components) when they have different life cycles.

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

2. Subsequent Costs

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

3. Depreciation

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

The land is not subject to depreciation.

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

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

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

4. Reclassification to investment real estate

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

Lotes Co., Ltd. Parent Company Only Financial Statement

(10) Investment real estate

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

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

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

(11) Leasing

Effective from January 1, 2019

1. Judgment of lease

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

operations; or

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

2.The lessee

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

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

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

Lease benefits measured in Lease liabilities include:

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

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

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

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

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

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

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

3. The lessor

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

Applicable before January 1, 2019

1.The lessee

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

2.The lessor

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

Lotes Co., Ltd. Parent Company Only Financial Statement

(12) Intangible assets

1. Recognition and measurement

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

2. Subsequent expenditure

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

3. Amortization

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

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

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

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

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

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

(14 Provisions

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

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

(15) Income Recognition

Revenue from customer contracts

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

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

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

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

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

(16) Employee Benefits

1. Defined Contribution Plan

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

2. Defined benefit plans

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

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

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

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

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

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3. Short-term employee benefits

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

(17) Share-based Payment Transaction

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

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

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

(18) Income Tax

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

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

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

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

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

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incomes (losses) during the transaction.

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

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

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

Having the legal execution right to make the current income tax assets and the current tax liabilities offset with each other: and
Deferred income tax assets and deferred tax liabilities are related to one of the subjects of tax payment from which the same tax authority levies income tax;
(1) Same subject of tax payment; or
(2) Different subjects of tax payment, but all subjects intend to liquidate the current tax liabilities and assets based on net amount or at the same time realize assets and liquidate liabilities in each of the future periods when deferred income tax assets of major amounts are expected to be recovered and deferred tax liabilities expected to be liquidated.

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

(19) Earnings per share

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

(20) Segments

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

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

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

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

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

(1) Inventory evaluation

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

(2) Refund liabilites

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

Lotes Co., Ltd. Parent Company Only Financial Statement

VI. Description of Major Accounting Items

(1) Cash and cash equivalents

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

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

(2) Notes, accounts receivable and other receivables

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

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

(3) Inventroy

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

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

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

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

(IV) Investments accounted for using the equity method

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

[Subsidiaries ]

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

1.Subsidiaries

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

2.Guarantee

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

(V) Property, plant and equipment

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

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

(VI) Right-of-use assets

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

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

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

(VII) Investment property

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

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

(VIII) Intangible assets

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

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

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

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

(IX) Short-term loans

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

Lotes Co., Ltd. Parent Company Only Financial Statement

(X) Lease liabilities

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

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

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

Total cash outflow for leases	2019 $ 60

(XI) Refund liabilites - current

Refund liabilites - current	Dec. 31, 2019 $ 157,256	Dec. 31, 2018 86,883

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

(XII) Provisions

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

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

(XIII) Lease for business operating

1. Lessee lease

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

2. Lessor lease

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

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

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

the future is shown in the following table:

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

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

(14) Employee benefits

1. Defined benefit plans

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

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

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

(1) Composition of Plan Assets

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

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

(3) Changes in the fair value of plan assets

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

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

(4) Expenses recognized in profit or loss

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

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

(6) Actuarial assumptions

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

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

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

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

(7) Sensitivity analysis

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

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

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

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

2. Defined Contribution Plan

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

(15) Income tax

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

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

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

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

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

2. Deferred income tax assets and liabilities

(1) Recognized deferred income tax assets and liabilities

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

3. Income Tax Approval

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

(16) Capital and Other Equity

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

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

1. Capital reserve

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

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

2. Retained earnings

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

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

(1) Legal reserve

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

(2) Special reserve

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

(3) Earnings distribution

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

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

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

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

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

2019[ Payout ratio ] Amount (TWD)

[Distributed to the holders of ordinary shares: ]

Lotes Co., Ltd. Parent Company Only Financial Statement

[Cash ]

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

3. Other equity

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

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

(17) Share-based payment

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

Date of offering Amount offered Target of offering

Vesting condition

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

(18) Earnings per share

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

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

(19) Revenue from contracts with customers

1. Disaggregation of revenue

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

2. Balance of Contract

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

(20) Non-operating income and expense

1. Other income

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

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

2. Other income and loss

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

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

3. Financial cost

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

[Interest expense ]

2019 $ 592		2018 3,618

(21) Remuneration for employees and directors, supervisors

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

The estimated amount of compensation of employees for the years ended December 31, 2019 and 2018 was $73,054,000 dollars and $56,000,000 dollars respectively, and the estimated amount of compensation to directors and supervisors was $4,480,000 dollars. The Company's Net profit before tax for the period is estimated by multiplying the amount of the

Lotes Co., Ltd. Parent Company Only Financial Statement

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

(22) Financial instruments and fair value information

1. Credit risk

(1) Credit risk exposure

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

(2) Credit risk concentration risk

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

(3) Impairment loss

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

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

2. Liquidity risk

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

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

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

3. Market risk - exchange rate risk

(1) Exposure to exchange rate risk

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

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

(4) Sensitivity analysis

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

4. Market risk - changes in interest rates

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

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

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

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

(3) Fair value hierarchy

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

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

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

(23) Financial Risk Management

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

(1)Credit risk

(2)Liquidity risk

Lotes Co., Ltd. Parent Company Only Financial Statement

(3)Market risk

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

2.Risk Management Structure

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

3. Credit risk

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

(1) Accounts receivable and other receivables

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

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

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

(2) Use of funds

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

4. Liquidity risk

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

Lotes Co., Ltd. Parent Company Only Financial Statement

5. Market risk

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

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

(1)Exchange rate risk

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

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

(2)Interest rate risk

Lotes Co., Ltd. Parent Company Only Financial Statement

(24) Capital management

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

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

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

Name of related Party

Relationship to the Company

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

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

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

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

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

VII. Related party transactions

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

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

Name of Related Party Relationship with the Company

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

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

A subsidiary of the Company

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

(III) Material transactions with the related parties

1. Operating revenue

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

Subsidiaries	2019 $ 27,085	2018 16,017

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

2. Purchase

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

3. Accounts receivable - related parties

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

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

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

4. Accounts payable - related parties

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

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

5.Sales of Property, plant and equipment

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

6. Endorsement

The balance and details of the endorsement and guarantee provided by the Company

to the related parties are as follows:

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

Lotes Co., Ltd. Parent Company Only Financial Statement

7. Selling expenses

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

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

11.Lease

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

(4) Major management personnel transaction

Related compensation includes:

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

Lotes Co., Ltd. Parent Company Only Financial Statement

VIII. Pledged assets

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

IX. Significant contingent liabilities and unrecognized contractual commitments

(1) Significant unrecognized contractual commitments:

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

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

[Guaranteed notes ]

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

X. Significant Disaster Loss: None.

XI. Significant post-period events: None.

XII. Others

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

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

Lotes Co., Ltd. Parent Company Only Financial Statement

XIII. Disclosing information

(1) Major Transaction Details

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

1. Capital Lending to Others :

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

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

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

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

worth.

2. Endorsement :

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

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

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

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

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

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

rights.

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

Lotes Co., Ltd. Parent Company Only Financial Statement

on the need to perform the work.

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

proportion to their shareholding in the joint venture.

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

the Consumer Protection Act.

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

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

the net worth of the Company.

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

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

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

The aggregate amount of Lintes Technology Co., Ltd.'s external endorsement guarantees is

limited to an amount not exceeding 100% of the Company's net worth.

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

Unit: 1,000 TWD

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

Note: All of them were recognized in losses.

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

Unit: 1,000 TWD

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

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

Note 1: Build the factory by own contracting committee.

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

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

paid-in capital:

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

Lotes Co., Ltd. Parent Company Only Financial Statement

9. Engagment in derivative transactions:

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

(2) Information on Reinvestment Business:

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

China):

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

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

Note 1: There are six types of investments:

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

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

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

Investment ceiling in Mainland China :

Lotes Co., Ltd. Parent Company Only Financial Statement

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

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

Lotes Co., Ltd. and Its Subsidiaries Consolidated Financial Statement

Significant transactions with the investee companies in China:

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

XIV. Segment Information

Please refer to the consolidated financial statements for the 2019.

AI assistant

LOTES — Audit Report / Information 2019

52339_rns_2019-11-12_54b4dd42-fe21-4c0f-bf2e-3766bffbf8a1.pdf

Lotes Co., LTD

Notice to Readers

Independent Auditor’s Report

Audit opinion

Basis of the audit opinion

Key audit matters

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

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

Notes to Readers

December 31, 2019 and 2018

Unit: 1,000 TWD

Lotes Co., Ltd.

Statement of Comprehensive Income

January 1 to December 31, 2019 and 2018

Unit: 1,000 TWD

Lotes Co., Ltd.

Statement of Changes in Equity

January 1 to December 31, 2019 and 2018

Unit: 1,000 TWD

Lotes Co., Ltd.

Statement of Cash Flows

January 1 to December 31, 2019 and 2018

Unit: 1,000 TWD

Lotes Co., Ltd.

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

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

I. Company History

II. Date and Procedures of Approval of Financial Statement

III. Application of New and Revised Standards and Intepretations

(1) Definition of lease

(2) The lessee

(3) the lessor

(4) impact on financial statements

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

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

IV. Summary of Major Accounting Policies

(1) Compliance statement

(2) Compling Basis

1. Measurement Foundation

(3) Foreign Currency

1. Foreign Currency Trading

2. Foreign Operating Organizations

(6 ) Financial Instrument

1. Financial Assets

(1) Financial assets as measured by their amortized costs

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

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

(4) Business model evaluation

payment of the principal and the amount of outstanding principal

(6) Impairment of financial assets

(7) Financial assets de-recognition

2. Financial liabilities

(1) De-recognition of Financial Libilities

(2) Offset between Financial Assets and Liabilities

3. Derivative Financial Instruments

(7) Inventory

(8) Investing subsidiary

(9) Property, Plant and Equipment

1. Recognition and Measurement

2. Subsequent Costs

3. Depreciation

4. Reclassification to investment real estate

Lotes Co., Ltd. Parent Company Only Financial Statement

(10) Investment real estate

Effective from January 1, 2019

1. Judgment of lease

2.The lessee

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

3. The lessor

Applicable before January 1, 2019

1.The lessee

2.The lessor

(12) Intangible assets

1. Recognition and measurement

2. Subsequent expenditure

3. Amortization

(15) Income Recognition

LOTES Audit Report / Information 2019