Stock Symbol: 3533

Lotes Co., Ltd. and Subsidiaries

Consolidated Financial Statements and Accountant’s Audit Report

2021 & 2020

Notice to Readers

For the convenience of readers, the Consolidated Financial Statements and Accountant’s Audit Report 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 consolidated financial statements shall prevail.

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

Contents I. Cover Page II. Table of Content III. Declaration IV. Independent Auditor’ s Report V. Consolidated Balance Sheet VI. Consolidated Statement of Comprehensive Income VII. Consolidated Statement of Changes in Equity VIII. Consolidated Statement of Cash Flows IX. Notes to the Consolidated Financial Statements (I) Company History (II) Date and Procedures of Approval of Financial Statement (III) Application of New and Revised Standards and Interpretations (IV) Summary of Major Accounting Policies (V) Primary Sources of Major Accounting Judgment, Estimate and Assumption Uncertainties (VI) Descriptions for Important Accounting Items (VII) Related Party Transactions (VIII) Pledged Assets (IX) Significant Contingent Liabilities and Unrecognized Contractual Commitments (X) Significant Disaster Loss (XI) Significant Post-Period Events (XII) Others (XIII) Disclosing Information (1) Major Transaction Details (2) Information on Reinvestment Business (3) Investment in Chinese Company (4) Information on Major Shareholders (XIV) Segmental Information	Page
	1 2 3 4 9 10 11 12 13 13 13~14 14~35 35 35~78 79 80 80 80 80 81 81~90 91~92 93~94 94~95 95~96

Contents
I.
Cover Page
II.
Table of Content
III.
Declaration
IV.
Independent Auditor’ s Report
V.
Consolidated Balance Sheet
VI.
Consolidated Statement of Comprehensive Income
VII.
Consolidated Statement of Changes in Equity
VIII. Consolidated Statement of Cash Flows
IX.
Notes to the Consolidated Financial Statements
(I)
Company History
(II)
Date and Procedures of Approval of Financial Statement
(III) Application of New and Revised Standards and Interpretations
(IV) Summary of Major Accounting Policies
(V)
Primary Sources of Major Accounting Judgment, Estimate and
Assumption Uncertainties
(VI) Descriptions for Important Accounting Items
(VII) Related Party Transactions
(VIII) Pledged Assets
(IX) Significant Contingent Liabilities and Unrecognized Contractual
Commitments
(X)
Significant Disaster Loss
(XI) Significant Post-Period Events
(XII) Others
(XIII) Disclosing Information
(1) Major Transaction Details
(2) Information on Reinvestment Business
(3) Investment in Chinese Company
(4) Information on Major Shareholders
(XIV) Segmental Information

Page

1
2
3
4
9
10
11
12
13
13
13~14
14~35
35
35~78
79
80
80
80
80
81
81~90
91~92
93~94
94~95
95~96

Declaration

For the year 2021 (from January 1, 2021 to December 31, 2021), the companies that should be included in the consolidated financial statements of affiliated enterprises in accordance with the "Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises" are the same as those that should be included in the consolidated financial statements of parent and subsidiary companies in accordance with IFRS 10 approved by the Financial Supervisory Commission, and the information required to be disclosed in the consolidated financial statements of affiliated enterprises has been disclosed in the previous consolidated financial statements of parent and subsidiary companies, therefore, no further consolidated financial statements of affiliated enterprises will be prepared.

Company: Lotes Co., Ltd.

Chairperson: CHU, TE-HSIANG Date: March 21, 2022

Independent Auditor’s Report

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

Audit opinion

We have audited the Consolidated Balance Sheet of Lotes Co., Ltd. and subsidiaries (Lotes Group) as of December 31, 2021 and 2020, the Consolidated Statement of Comprehensive Income as of January 1 to December 31, 2021 and 2020 as well as the Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and the Notes to Consolidated Financial Statement (including important accounting policies summary).

In our opinions, the compilation of the above consolidated financial statements present fairly, in all material respects, of the financial status of December 31, 2021 and 2020 in Lotes Group and the consolidated financial performance and consolidated cash flow of January 1 to December 31, 2021 and 2020 prepared according to Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations approved by the Financial Supervisory Commission and issued into effect.

Basis of the audit opinions

The audit was conducted by us in accordance with the Rules Governing Auditing and Certification of Financial Statements by Certified Public Accountants and Generally Accepted Auditing Standards (GAAS). Our responsibilities under these standards will be further explained in the responsibility paragraph of the accountant’s audit on the consolidated financial statements. The personnel regulated by independence at the accounting firm that our accountants work with have been managed according to the code of professional ethics to maintain independence from Lotes Group as well as perform other responsibilities addressed on the regulation. Based on the audit results of us, we believe we have obtained sufficient and appropriate auditing evidence as the basis to express our audit opinions.

Key audit matters

Key audit matters refer to the most important matters on the audits to Lotes Group’s consolidated financial statements of fiscal year 2021 based on the professional judgment of our accountants. The matters have been responded on the whole audited consolidated financial statements and during the process of the expression of the audit opinions. There, our accountants will not express opinions separately towards the matters. Based on the judgment of the accountants, the following key audit matters that should be communicated on the audit report are as follows: I. Recognition of income

Please refer to Note IV (15) to the consolidated financial statements for the accounting policy in

terms of income recognition. Please refer to Note VI (16) to the consolidated financial statements for the refund liability. Please refer to Note VI (24) to the consolidated financial statements for details about income.

Description of the key audit matters:

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

Corresponding audit procedures:

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

II. Evaluation of inventory

Please refer to Note IV (8) for the accounting policy of inventory evaluation. Please refer to Note V in the consolidated financial statements for the accounting estimates and assumed uncertainties of the inventory evaluation. Please refer to Note VI (4) in the consolidated financial statements for the information on the losses from the falling price of inventory. Description of the key audit matters:

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

The primary audit procedure conducted by the accountants for the aforementioned key audit matters included the understanding and evaluation of the basis and methods used by the management to assess the net realizable value of inventory. Review and audit were conducted in

terms of the data used by the management as the basis and to estimate the net realizable value, and an evaluation was conducted on the estimated sales price to the latest sales record by sampling. To evaluate the adequacy of the drop in prices, the adequacy of the inventory aging report was checked, and the changes in the inventory aging of each period were analyzed.

Other Matters

Lotes Co., Ltd. has prepared its parent company only financial statements for fiscal years 2021 and 2020, and we have issued an unqualified audit report thereon for your information.

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

Management level’s responsibility is to prepare the consolidated financial statements present fairly according to Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations approved by the Financial Supervisory Commission and issued into effect and to maintain necessary internal control related to the preparation of the consolidated financial statements in order to ensure there is no major untrue expression on the financial statements due to fraud or error.

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

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

Responsibility of accountants’ audit on the consolidated financial statements

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

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

Identifying and evaluating the risk of major untrue expression on the consolidated financial statements due to fraud or error; designing and implementing proper responding strategies towards the risk evaluated; and obtaining sufficient and appropriate audit evidence as the basis of audit opinions. Due to fraud might be involving with collusion, counterfeiting, malicious omission untrue

declaration, or going out of the internal control, the risk of not detecting the major untrue expression due to fraud will be higher than that due to error.

Obtaining necessary understanding of internal control related to audit in order to design proper audit procedure under the situation of the case. However, its purpose is not to express opinion toward the effectiveness of the internal control in Lotes Group.
Evaluating the adequacy of the accounting policies used by the management level and the rationality of the accounting evaluation and relevant disclosure concluded.
Based on the audit evidence obtained, conclusion towards the appropriateness of continuous operation accounting basis that the management level adopts and the existence of major uncertainty on events or situations with major concerns affecting Lotes Group’s capability in continuous operation are made. If we believe major uncertainty existed on the event or situation, we must remind the users of consolidated financial statements on the audit report to pay attention on the relevant disclosure or modify audit opinion when the disclosure is not appropriate. The conclusion that we made is based on the audit evidence obtained up to the audit report day, but future events or situations might cause Lotes Group not capable in continuous operation.
Evaluating the overall expression, structure and content of the consolidated financial statements (including relevant notes) as well as whether the consolidated financial statements present fairly, in all material respects, relevant transaction and events.
We obtained sufficient and appropriate audit evidence about the financial information of the constituent entities of the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and execution of the Group's audits and for forming an opinion on the Group's audits.

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

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

We determined the key audit matters that we would like to execute on Lotes Group’s consolidated financial statements for fiscal year 2021 from the communication with the governing unit. We clearly stated the related matters on the audit report unless it is the specific matter that is not allowed to be disclosed to the public according to laws, or under a very rare situation that we decided not to communicate specific matters on the audit report because we can reasonably anticipate the negative influence generated by the communication will be greater than the public interests increased.

KPMG Taiwan

CPAs:

Competent Authority of Securities CHIN-KUAN-CHENG-SHENApproval Certificate No. : TZU No. 1000011652 (88) TAI-TSAI-CHENG (VI) No. 18311 March 21, 2022

Lotes Co., Ltd. And Subsidiaries

Consolidated Balance Sheet

December 31, 2021 and 2020

Unit: NT$ 1,000

Dec. 31, 2021	Dec. 31, 2021	Dec. 31, 2020 Amount % - - 91,659 1 3,574 - 2,501,155 13 1,206,695 6 505,527 3 71,971 - 161,767 1 33,197 - 5,335 -
	7,004,306 27	4,580,880 24
	911,927 4 29,600 - 45,220 - 31,342 - 33,906 - 285,847 1 22,539 -	- - 18,661 - 49,258 - 21,037 - 27,054 - 104,279 1 2,167 -
16,959,937 64
3,370 - 30,003 - 6,882,186 26 1,028,489 4 335,869 1 205,584 1 151,467 1 822,486 3
	1,360,381 5	222,456 1
	8,364,687 32	4,803,336 25
	1,059,779 4 1,167 - 5,283,698 20 11,200,170 42 (682,333) (3)	1,034,779 5 - - 3,958,247 21 9,101,144 (594,972) (3)
9,459,454 36
	16,862,481 63	13,499,198 70
	1,192,223 5	980,361 5
$ 26,419,391 100	18,054,704 68	14,479,559 75
	$ 26,419,391 100	19,282,895 100

Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Comprehensive Income

From January 1 to December 31, 2021 and 2020

Unit: NT$ 1,000

2021	% 100 60	2020	% 100 60
Amount $ 21,391,917 12,834,611		Amount 17,291,332 10,361,137
8,557,306	40	6,930,195	40
748,932 1,409,600 2,030,576 8,931	4 7 9 -	642,420 1,117,631 1,459,647 2,845	4 6 8 -
4,198,039	20	3,222,543	18
4,359,267	20	3,707,652	22
13,994 - 324,926 (128,648) (28,304) (1,037)	- - 2 (1) - -	28,789 13,055 214,267 (276,469) (18,609) 1,317	- - 1 (2) - -
180,931	1	(37,650)	(1)
4,540,198 1,021,167	21 5	3,670,002 834,413	21 5
3,519,031	16	2,835,589	16
3,851 (5,077) 770	- - -	(7,598) 372 (1,520)	- - -
(1,996)	-	(5,706)	-
(82,222) (39)	- -	46,886 (1,733)	- -
(82,183)	-	48,619	-
(84,179)	-	42,913	-
$ 3,434,852	16	2,878,502	16
$ 3,472,201 46,830	16 -	2,732,361 103,228	15 1
$ 3,519,031	16	2,835,589	16
$ 3,387,921 46,931	16 -	2,771,703 106,799	16 -
$ 3,434,852	16	2,878,502	16
$	33.32		26.41
$	32.69		26.34

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

Accounting Manager: LIU, HSIN-HSIA

Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Changes in Equity

From January 1 to December 31, 2021 and 2020

Unit: NT$ 1,000

			Equity attributable to owners ofparent	Equity attributable to owners ofparent	Equity attributable to owners ofparent	Equity attributable to owners ofparent				Non-controlling interests	Total equity 12,545,22 2,835,58 42,91
	Share capital		Capital reserves		Retained earnings		Other equity		Total equity attributable to owners of parent
							Exchange differences on translation of foreign financial statements	Unrealized gains (losses) on financial assets measured at FVTOCI
Share capital for ordinary shares	Certificates of bond-to-stock conversion	Total		Legal reserve	Special reserve	Unappropriated retained earnings
$ 1,034,779 - -	- - -	1,034,779 - -	3,959,560 - -	1,091,939 - -	317,020 - -	6,062,560 2,732,361 (6,078)	(631,970) (18,562) - - 45,017 403		11,815,326 2,732,361 39,342	729,899 103,228 3,571 106,799 - - - - 192,780 (49,117) - 980,361 46,830 101 46,931 - - - - - - - - 237,061 (72,130) 1,192,223
-	-	-	-	-	-	2,726,283	45,017 403		2,771,703		2,878,50
- - - - - - -	- - - - - - -	- - - - - - -	- - - (1,313) - - -	207,604 - - - - - -	- 333,513 - - - - -	(207,604) (333,513) (1,086,518) - - - (10,140)	- - - - - - - - - - - - - 10,140		- - (1,086,518) (1,313) - - -		- - (1,086,518 (1,313 192,78 (49,117 -
1,034,779 - -	- - -	1,034,779 - -	3,958,247 - -	1,299,543 - -	650,533 - -	7,151,068 3,472,201 3,081	(586,953) (8,019) - - (82,102) (5,259)		13,499,198 3,472,201 (84,280)		14,479,55 3,519,03 (84,179
-	-	-	-	-	-	3,475,282	(82,102) (5,259)		3,387,921		3,434,85
- - - - - - 25,000 - - -	- - - - - - - 1,167 - -	- - - - - - 25,000 1,167 - -	- - - 183,236 5,460 24,931 1,050,971 60,853 - -	271,615 - - - - - - - - -	- (55,561) - - - - - - - -	(271,615) 55,561 (1,376,256) - - - - - - -	- - - - - - - - - - - - - - - - - - - -		- - (1,376,256) 183,236 5,460 24,931 1,075,971 62,020 - -		- - (1,376,256 183,23 5,46 24,93 1,075,97 62,02 237,06 (72,130
$ 1,059,779	1,167	1,060,946	5,283,698	1,571,158	594,972	9,034,040	(669,055) (13,278)		16,862,481		18,054,70

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

Chairperson: CHU, TE-HSIANG

Accounting Manager: LIU, HSIN-HSIA

Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Cash Flows

From January 1 to December 31, 2021 and 2020

Cash flows from (used in) operating activities: Net profit before tax Adjustments: Adjustments to reconcile profit (loss) Depreciation expense Amortization expense Expected credit loss (gain) Net loss (gain) on financial assets or liabilities at FVTPL Interest expense Interest income Dividend income Compensation expense for share-based payment Loss (gain) on disposal of property, plant and equipment Inventory valuation and disposal loss Gain recognized in bargain purchase transaction Other adjustments Total adjustments to reconcile profit (loss) Changes in operating assets and liabilities: Changes in operating assets: Increase in notes receivable Increase in accounts receivable Increase in other receivables Increase in inventory Increase in advance payment Decrease (increase) in other current assets Decrease in other financial assets Total changes in operating assets Changes in operating liabilities: Increase (decrease) in contract liabilities Decrease in notes payable Increase in accounts payable Increase in other payables Decrease in provisions Decrease in other current liabilities Increase in Refund liabilities Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash inflow generated from operations Interest received Dividends received Interest paid Income taxes paid Net cash flows from operating activities Cash flows from (used in) investing activities : Disposal of financial assets measured at FVTOCI Acquisition of financial assets measured at FVTOCI Acquisition of financial assets measured at FVTPL Disposal of financial assets measured at FVTPL Acquisition of property, plant and equipment Disposal of property, plant and equipment Acquisition of intangible assets Net cash inflows from business combination Acquisition of investment property Disposal of investment property Increase in other non-current assets Net cash flows from (used in) investing activities Cash flows from (used in) financing activities Increase (decrease) in short-term loans Issuance of corporate bonds Borrowings of long-term loans Repayments of long-term loans Payments of lease liabilities Increase in other non-current liabilities Cash dividends paid Cash dividends paid to non-controlling interests Cash capital increase Changes in non-controlling interests Changes in subsidiaries, associates and joint ventures accounted for using equity method Net cash flows from (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	Unit: NT$ 1,000 2021 2020 $ 4,540,198 3,670,002 1,503,974 1,115,332 51,307 26,245 9,968 1,528 (25,795) (55,053) 28,304 18,609 (13,994) (28,789) (6,119) (1,341) 25,077 7,795 3,728 (2,446) 92,408 48,028 - (13,055) (2,472) 19	Unit: NT$ 1,000 2021 2020 $ 4,540,198 3,670,002 1,503,974 1,115,332 51,307 26,245 9,968 1,528 (25,795) (55,053) 28,304 18,609 (13,994) (28,789) (6,119) (1,341) 25,077 7,795 3,728 (2,446) 92,408 48,028 - (13,055) (2,472) 19
	1,666,386	1,116,872
	(7,187) (1,904,786) (107,813) (1,624,767) (81,083) (2,353) 87,320	(30,249) (788,350) (133,684) (486,885) 87,437 3,898 4,960
	(3,640,669)	(1,342,873)
	5,835 12,828 112,204 809,880 (187) 1,518 33,338	37,431 (23,091) 539,618 203,974 (69) 9,860 4,511
	975,416	772,234
	(2,665,253)	(570,639)
	(998,867)	546,233
	3,541,331 18,588 6,119 (24,622) (851,646)	4,216,235 26,790 1,341 (18,616) (756,926)
	2,689,770	3,468,824
	- (14,400) (174,504) 166,435 (3,631,931) 18,589 (101,381) (96,793) - 30,446 (284,138)	4,860 (20,186) (125,418) 297,545 (1,774,297) 38,123 (80,912) (59,647) (17,923) - (310,189)
	(4,087,677)	(2,048,044)
	1,142,178 1,152,983 29,600 (9,191) (356,459) 4,669 (1,376,256) (72,130) 1,075,971 236,940 5,435	(66,660) - 20,035 (125,583) (114,174) (75,956) (1,086,518) (49,117) - 137,365 (5,377)
	1,833,740	(1,365,985)
	(82,183) 353,650 2,949,412	48,623 103,418 2,845,994
	$ 3,303,062	2,949,412

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

Accounting Manager: LIU, HSIN-HSIA

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

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

2021 & 2020

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

I. Company History

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

II. Date and Procedures of Approval of Financial Statement

The Consolidated Financial Statement was approved and released by the Board of Directors on March 21, 2022.

III. Application of New and Revised Standards and Interpretations

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

Since January 1, 2021, the Consolidated Company has adopted the amended International Financial Report Standards, and this did not cause material impact on the consolidated financial statements:

‧Amendments to IFRS 4 “Temporary Exemption from the Extension of IFRS 9”
‧Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16, “Changes in Interest Rate Indicators - Phase 2”

The Consolidated Company adopted the following newly amended IFRSs effective April 1, 2021, with no significant impact on consolidated financial statements.

‧Amendment to IFRS 16 – “Covid-19-Related Rent Concessions beyond 30 June 2021”

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

The Consolidated Company assesses that the application of the following newly

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

amended IFRSs, effective January 1, 2022, will not have a significant impact on consolidated financial statements.

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

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

‧Annual Improvements to IFRS Standards 2018–2020

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

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

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

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

‧Amendments to IFRS 17, “Insurance Contracts” and IFRS 17

‧Amendments to IAS 1 – “Classification of Liabilities as Current or Non-Current”

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

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

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

IV. Summary of Major Accounting Policies

The major accounting policies adopted in this Financial Statement are summarized as follows. Unless otherwise noted, the following accounting policies have been applicable for all presentation period of the Consolidated Financial Statement.

(1) Compliance statement

The Consolidated Financial Statement was compiled in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), and Interpretations approved by the Financial Supervisory Commission.

(2) Compiling basis
Measurement foundation

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

(1) Financial assets at fair value through profit or loss measured with fair value.
(2) Financial assets measured at fair value through other comprehensive income.
(3) Liabilities for cash-settled share-based benefit agreements that are measured at fair value.

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

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

(3) Consolidation basis

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

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

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

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

Subsidiaries included in the consolidated financial statements

The subsidiaries included in the consolidated financial statements are:

Investing company Subsidiary Location	Shareholding % Dec. 31, 2021 Dec. 31, 2020 Note
The Company Lotes Investments Limited Samoa `〞` Good Hope Investments Limited `〞` `〞` Guansi Development Co., Ltd. `〞` `〞` Zhaxi Investment Co., Ltd. Anguilla `〞` Jiayu Investment Co., Ltd. Taiwan `〞` Lotes USA, Inc America `〞` LOTES EU GmbH Germany `〞` Lerain Technology Co., Ltd. Taiwan `〞` Mikronpoint Co., Ltd. `〞` `〞` Lotes Viet Nam CO., Ltd. Vietnam	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 16.40% 33.92% (Note 1) 100.00% 100.00% 100.00% - %

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

Lotes	Loteson International	Hong Kong	100.00%	100.00%
Investments	Investments Limited
Limited
Loteson	Lotes Guangzhou Co., Ltd.	China	100.00%	100.00%
International
Investments
Limited
Lotes	Lotes Hengnan Co., Ltd.	`〞`	100.00%	100.00%
Guangzhou
Co., Ltd.
`〞`	Shenzhen DeYi Automation	`〞`	100.00%	100.00%
	Equipment Co., Ltd.
`〞`	Lotes Zhongshan Co., Ltd.	`〞`	50.00%	50.00%
`〞`	Zhongshan Dezhi Metal Surface	`〞`	100.00%	100.00%
	Treatment Co., Ltd.
`〞`	Hengnan Deyi Property	`〞`	100.00%	100.00%
	Development Co., Ltd.
`〞`	Zhongshan Jinmeida Metal	`〞`	- %	- %	(Note 1)
	Surface Treatment Co., Ltd.				and
					(Note 2)
`〞`	Guangzhou Leside Technology	`〞`	100.00%	100.00%
	Co., Ltd.
Guangzhou	Chongqing Fuxinrui Electronic	`〞`	51.00%	51.00%
Leside	Technology Co., Ltd.
Technology
Co., Ltd.
Good Hope	Xincheng Development Co.,	Samoa	100.00%	100.00%
Investments	Ltd.
Limited
`〞`	REKA Technology Co., Ltd.	Hong Kong	100.00%	100.00%
Guansi	Jae You Co., Ltd.	`〞`	100.00%	100.00%
Development
Co., Ltd.
Jae You Co.,	Lotes Suzhou Co., Ltd.	China	100.00%	100.00%
Ltd.
Lotes Suzhou	Lotes Zhongshan Co., Ltd.	`〞`	50.00%	50.00%
Co., Ltd.
Zhaxi	Wangden Investments Limited	Hong Kong	100.00%	100.00%
Investment
Co., Ltd.
Wangden	Zongka Technology (Shenzhen)	China	100.00%	100.00%
Investments	Co., Ltd.
Limited
Jiayu	Ememe Robot Co., Ltd.	Taiwan	94.37%	94.37%
Investment
Co., Ltd.

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

`〞`	Compertum Microsystems Inc.	`〞`	31.25%	35.34% (Note 1)
`〞`	Good News Medical Co., Ltd.	`〞`	25.44%	5.00% (Note 1)
`〞`	Lintes Technology Co., Ltd.	`〞`	52.13%	52.13%
Lintes	Jiajun Investment Co., Ltd.	`〞`	- %	100.00% (Note 3)
Technology
Co., Ltd.
`〞`	Genie Precision Machine Co.,	`〞`	60.00%	60.00% (Note 2)
	Ltd.
`〞`	Compertum Microsystems Inc.	`〞`	10.41%	11.77% (Note 1)
`〞`	Lerain Technology Co., Ltd.	`〞`	1.90%	- % (Note 1)
`〞`	Jilong Co., Ltd.	Samoa	100.00%	100.00%
Jilong Co.,	Rihui Co., Ltd.	`〞`	100.00%	100.00%
Ltd.
Rihui Co.,	Lintes Technology (Suzhou)	China	100.00%	100.00%
Ltd.	Co., Ltd.

Note 1: Although the Consolidated Company does not hold more than half of the voting shares of this company, it is included as a subsidiary in the consolidated financial statements because the Consolidated Company has control over its major operating activities and other decisions.
Note 2: Please refer to Note VI (5) for the Consolidated Company's acquisition of control over this company.

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

Subsidiaries not included in the consolidated financial statements: None.

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

(4) Foreign currency

1. Foreign currency trading

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

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

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

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

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

2. Foreign operating organizations

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

In case of the loss of control, joint control or material influences arising from the punishment on foreign operating organizations, the accumulated conversion differences related to the foreign operating organizations shall be fully reclassified as gains and losses. Upon partial disposal of a subsidiary with foreign operations, the related accumulated exchange differences are reattributed to non-controlling interest on a pro rata basis. In case of affiliated company or joint ventures of foreign operating organizations involved in some of the punishment, related accumulated conversion differences shall be fully reclassified as gains and losses in proportion.

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

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

net investments to the foreign operating organizations as recognized as other comprehensive income.

(5) Standards for classifying current and non-current assets and liabilities

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

Those that are expected to be realized during the normal operating period or intended to be sold or consumed.
Those held mainly for the purpose of transaction.
Those expected to be realized within 12 months after the reporting period.
The asset is cash or cash equivalents, unless the asset is otherwise restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. The liabilities meeting any one of the following conditions are current liabilities, and

other liabilities not belonging to current liabilities are recognized to be non-current liabilities:

Those expected to be paid off during the normal operating period.
Those held mainly for the purpose of transaction.
Those expected to be paid off within 12 months after the reporting period.
Liabilities that do not have an unconditional right to extend the maturity period to at least 12 months after the reporting period. The terms of the liability may, at the option of the counterparty, not affect its classification if the issuance of equity instruments results in its settlement.
(6) Cash and cash equivalents

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

(7) Financial instrument

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

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

1. Financial assets

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

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

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

(1) Financial assets measured at amortized cost

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

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

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

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

(2)Financial assets measured at FVTOCI

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

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

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

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

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

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

Equity instrument investors are measured by fair value afterwards. Dividend income (unless it clearly represents the recovery of a portion of the investment cost) is recognized as a profit or loss. The remaining net benefits or losses are recognized as other comprehensive income and are not reclassified into gains and losses.

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

(3) Financial assets measured at FVTPL

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

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

(4) Business model evaluation

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

·The portfolio policies and objectives described and the operation of such policies. Including whether the management’s strategy is to focus on earning contractual cash flow, maintaining a certain portfolio of interest rates, matching the duration of

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

financial assets with the duration of the relevant liabilities or anticipated cash outflows, or achieving cash flow through the sale of financial assets.

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

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

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

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

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

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

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

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

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

·The terms of the coupon rate may be adjusted, including the nature of the variable rate; ·The nature of prepayment and extension; and
·Claims of the Consolidated Company are limited to cash flow terms derived from specific assets (e.g. non-recourse nature).
(6) Impairment of financial assets

For the financial assets measured at the amortized cost after (including cash and about when cash, notes receivable, accounts receivable, other receivables, refundable

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

deposit, and other financial assets, etc.), through the other comprehensive income measured at fair value, the debt instruments of investment assets and contract of expected loss, the Consolidated Company recognizes the allowance for credit losses.

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

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

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

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

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

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

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

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

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

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

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

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

·Major financial difficulties of the borrower or issuer;
·Default, such as delay or delay beyond a specified period;

·For economic or contractual reasons related to the borrower’s financial difficulties, the merged Consolidated Company gives the borrower concessions that the borrower would not have considered;

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

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

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

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

(7) Financial assets derecognition

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

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

Financial liabilities and equity instruments

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

(1) Classification of liabilities or equity

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

(2) Equity transactions

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

(3) Compound financial instruments

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

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

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

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

(4) Financial liabilities

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

The effective subsequent interest method for other financial liabilities is measured

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

at the amortized cost. Interest expenses and exchange gains and losses are recognized as gains and losses. Any benefit or loss at the time of discounting is also considered as profit or loss.

(5) Derecognition of financial liabilities

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

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

(6) Offset between financial assets and liabilities

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

3. Derivative financial instruments

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

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

(8) Inventory

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

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

(9) Property, plant and equipment

Recognition and measurement

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

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

Significant components of property, plant and equipment are treated as separate items (major components) when they have different life cycles.

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

2. Subsequent costs

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

Depreciation

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

The land is not subject to depreciation.

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

(1) Buildings 20-40 years

(2) Machinery 2-10 years
(3) Other equipment 2-10 years

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

Reclassification to investment real estate

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

(10) Investment property

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

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

The rental income of investment real estate is recognized as other income in the

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

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

The Consolidated Company shall assess whether the contract is a lease or includes a lease on the date of formation of the contract. If the contract transfers control over the use of the identified assets for a period of time in exchange for consideration, the contract shall be a lease or includes a lease.

The lessee

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

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

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

Lease benefits measured in lease liabilities include:

(1) fixed payments, including substantive fixed payments;
(2) depending on the variation of a certain index or rate of rent payment, the index or rate on the commencement date of the lease shall be used as the original measurement;
(3) the guaranteed amount of salvage value expected to be paid; and
(4) the price at which the option to exercise the option to purchase or terminate the lease will be reasonably determined or the penalty to be paid.

Lease liabilities is then calculated using effective interest method, and the amount was measured when:

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

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

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 Consolidated Company will express the right-of-use assets and lease liabilities that do not conform to the definition of investment real estate in the form of single line items in the balance sheet.

2. The lessor

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

If the Consolidated Company is a sublease lessor, it will handle the master lease and the sublease transaction respectively and evaluate the sublease transaction classification based on the right-of-use assets generated from the master lease. If the principal lease is a short-term lease and a recognition waiver is applicable, the sublease transaction shall be classified as an operating lease.

(12) Intangible assets

1. Recognition and measurement

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

Subsequent expenditure

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

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 Consolidated Company reviews the amortization method, useful life and residual value of Intangible assets at each reporting date and makes appropriate adjustments as necessary.

(13) Non-financial asset impairment

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

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

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

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

(14) Provision for liabilities

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

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

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

end of the reporting period. If Provisions is measured at the estimated cash flows to settle this realistic obligation, the carrying amount is the present value of those cash flows. (15) Income recognition

Revenue from customer contracts

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

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

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

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

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

(16) Employee benefits

1. Defined contribution plan

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

Defined benefit plan

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

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

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

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

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

Short-term employee benefits

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

(17) Share-based payment transactions

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

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

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

results.

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

(18) Income tax

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

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

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

Those do not belong to the assets or liabilities originally recognized in the transaction of enterprise consolidation, and not influencing accounting profits and taxation incomes (losses) during the transaction.
Those generated due to investment subsidiary company and joint equities and likely to not to be returned in the foreseeable future.
Original recognition of business reputation

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

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

Only when the Consolidated Company shall meet the following conditions at the same

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

time, can the deferred income tax assets and deferred tax liabilities offset with each other:

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

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

Transaction costs associated with a business combination, except for those related to the issuance of debt or equity instruments, are recognized as expenses of the Consolidated Company immediately upon incurrence.

Non-controlling interest of the acquiree, which is a present ownership interest and the holder of which is entitled to a proportionate share of the net assets of the enterprise at the time of liquidation, is measured at fair value at the acquisition date or at the present ownership instrument's proportionate share of the recognized amount of the acquiree's identifiable net assets, at the option of the Consolidated Company, on a transaction by transaction basis. Other non-controlling interests are measured at their fair values on the acquisition date or on other bases as prescribed by IFRSs recognized by the FSC.

(20) Earnings per share

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

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

diluted common shares of the Consolidated Company include convertible corporate bonds and stock options for employees.

(21) Segmental Information

An operating segment is a component of the Consolidated Company that engages in operating activities that may earn revenues and incur expenses, including revenues and expenses related to transactions with other components of the Consolidated Company. The operating results of all operating segments are reviewed regularly by the Consolidated Company's chief operating decision maker to make decisions about the allocation of resources to the segment and to evaluate its performance. Separate financial information is available for each operating segment.

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

Management is required to make judgments, estimates and assumptions in preparing the Consolidated Financial Statements in accordance with Guidelines Governing the Preparation of Financial Reports by Securities Issuers and IFRSs approved by the FSC that will affect the adoption of accounting policies and the reported amounts of assets, liabilities, revenue and expenses. Actual results may differ from estimates.

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

The following assumptions and estimates are subject to significant risks of material adjustments to the carrying amounts of assets and liabilities in the next financial year, and the related information is as follows:

Inventory evaluation

Since inventory must be measured at the lower of cost or net realizable value, the Consolidated Company estimates the reported amount of inventory due to normal wear and tear, obsolescence, or no market sale value daily and reduces the cost of inventory to net realizable value. The net realizable value of inventories may change significantly due to rapid changes in the industry and the introduction of new products. Please refer to Note VI (4) for the inventory assessment.

VI. Descriptions for Important Accounting Items

(1) Cash and cash equivalents

Petty cash Checks and demand deposits Time deposits	Dec. 31, 2021 $ 5,227 2,554,367 743,468		Dec. 31, 2020 2,139 2,169,311 777,962

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

Cash and cash equivalents listed on the Statement of Cash $ 3,303,062 2,949,412 Flows

Disclosures of interest rate risks and sensitivity analysis on financial assets and liabilities of the Consolidated Company are seen in Note VI (27).

(2) Financial assets

1. Financial assets measured at FVTPL

Financial assets mandatorily measured at FVTPL: Current: Non-hedging derivatives Forward exchange contracts Financial products Non-derivative financial assets Shares of listed ("OTC") companies Subtotal Non-current Non-hedging derivatives Embedded derivatives—right of redemption Total	Dec. 31, 2021 $ 223 62,164 91,737	Dec. 31, 2020 6,180 - 116,780 122,960 - 122,960
	154,124
	3,370
	$ 157,494

Please refer to Note VI (14) for the disclosure of embedded derivatives of the convertible bonds issued by the Consolidated Company.

The Consolidated Company accounts for the financial products it undertakes on the basis of the subscription amount at the time of original recognition. The revenue is calculated on a daily basis based on the balance of the financial products account and the applicable performance basis, and the revenue is recognized as a quarterly dividend.

Please refer to Note VI (27) for the amount recognized in profit or loss based on fair value remeasurement.

The Consolidated Company engages in derivative financial instruments to hedge its exposure to exchange rate risk arising from operating activities. The breakdown of derivative instruments reported as financial assets measured at FVTPL for non-applicable hedge accounting is as follows:

Financial assets Forward exchange contracts	Dec. 31, 2021	Dec. 31, 2021
	Contract principal	Maturity
	(NT$ 1,000) USD 2,000	2022.02.09

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

		Dec. 31, 2020	Dec. 31, 2020
Financial assets	Contract	principal	Maturity
	(NT$	1,000)
Forward exchange contracts	USD	3,000	2021.01.08
"	USD	4,000	2021.01.11
"	USD	2,000	2021.01.12
"	USD	9,000	2021.01.20
"	USD	2,000	2021.01.22
"	USD	4,000	2021.01.28
"	USD	5,000	2021.02.09
"	USD	2,000	2021.02.18
"	USD	2,000	2021.02.19
"	USD	2,000	2021.02.23
"	USD	9,000	2021.02.24
"	USD	4,000	2021.02.26
"	USD	6,000	2021.03.10
"	USD	4,400	2021.03.15
"	USD	2,000	2021.03.23
2. Financial assets measured at FVTOCI
		Dec. 31, 2021	Dec. 31, 2020
Equity instruments measured at FVTOCI:
Current:
Domestic unlisted (or OTC) stock - AICP	$	1,456	2,016
Technology Corporation
Non-current:
Domestic listed stock - Chailease Finance Co.,
Ltd.		20,503	20,120
Domestic unlisted (or OTC) stock—SteadyBeat
Technology Corporation		8,545	-
Domestic unlisted (or OTC) stock—G-sau Co.,
Ltd		955	-
Subtotal		30,003	20,120
Total	$	31,459	22,136

The Consolidated Company’s investments in these equity instruments are not held for

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

trading purposes and have been designated as measured at FVTOCI.

The Consolidated Company has no dividend income from equity instruments measured at FVTOCI as listed above for the year 2021 and 2020.

On May 8, 2020, due to the consideration of asset allocation and adjustment of investment portfolio to diversify risks, the Consolidated Company sold KUANG YING COMPUTER EQUIPMENT CO., LTD. which was designated to be measured at fair value through other comprehensive income, and the fair value at the time of disposal was $4,860 thousand and the accumulated loss on disposal was $10,140 thousand, therefore, the aforementioned accumulated loss on disposal was transferred from other equity to retained earnings.

As of December 31, 2021 and 2020, none of the Consolidated Company’s financial assets had been pledged as collateral.

(3) Notes receivable, accounts receivable and other receivables

Notes receivable Accounts receivable Other receivables Less: provisions	Dec. 31, 2021 $ 61,292 8,754,191 462,226 (20,472) $ 9,257,237	Dec. 31, 2020 54,105 6,852,928 359,009 (14,029) 7,252,013

For the changes in the provisions for notes and accounts receivable for the years 2021 and 2020, please refer to Note VI (24) 1. (3) Statement of Impairment Losses.

(4) Inventory

Merchandises Finished goods Work in process Raw materials	Dec. 31, 2021 $ 1,053,144 1,287,744 1,008,724 741,775 $ 4,091,387	Dec. 31, 2020 773,548 676,044 695,361 414,075 2,559,028

The Consolidated Company’s inventory as of December 31, 2021 and 2020 including allowance for inventory losses are NT$372,177 thousand dollars and NT$295,528 thousand dollars respectively.

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

Cost of goods sold Downtime costs	2021 $ 12,742,203 -	2020 10,222,310 90,799

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

Inventory valuation and disposal loss Total	92,408	48,028
	$ 12,834,611	10,361,137

As of December 31, 2021 and 2020, the Consolidated Company’s inventories were not pledged as security.

(5) Changes in ownership interests in subsidiaries
Acquisition of subsidiaries
(1) Zhongshan Jinmeida Metal Surface Treatment Co., Ltd.

The Consolidated Company acquired substantive control over Zhongshan Jinmeida Metal Surface Treatment Co. ("Jinmeida"), a surface treatment company for hardware and plastic parts. The acquisition of control over Jinmeida will enable the Consolidated Company to expand its plating capacity for the production of connectors.

For the period from the acquisition date to December 31, 2021, the revenue and net loss contributed by Jinmeida were $0 thousand and $889 thousand, respectively. If this acquisition had occurred on January 1, 2021, management estimates that the revenue and net income of the Consolidated Company would have been $21,391,917 thousand and $3,518,267 thousand, respectively, for the period. These amounts do not reflect the actual revenue and operating results that the Consolidated Company would have generated if the business combination had been completed at the beginning of the year in which the acquisition occurred, and should not be used as a forecast of future operating results.

Costs incurred in connection with this acquisition transaction were recognized in the consolidated statement of income under the heading "administration expense".

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

A. Net cash outflow from acquisition of subsidiaries

Consideration paid in cash $ 96,793

B. Identifiable assets acquired and liabilities assumed

The fair values of the identifiable assets acquired and liabilities assumed at the date of acquisition were as follows:

Right-of-use assets Other payables Fair value of identifiable net assets	$ 96,875 (82) $ 96,793

The Consolidated Company will keep the above matters under review during the measurement period. If new information becomes available within one year of the

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

acquisition date regarding facts and circumstances existing at the acquisition date that would identify adjustments to the provisional amounts described above or any additional provisions for liabilities existing at the acquisition date, the accounting for the acquisition will be modified.

(2) Genie Precision Machine Co., Ltd.

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

For the period from the acquisition date to December 31, 2020, the revenue and net income contributed by GPM were NT$220,334 thousand and NT$21,514 thousand, respectively. If the acquisition had occurred on January 1, 2020, management estimates that the Consolidated Company's revenue from January 1, 2020 to December 31, 2020 would have been NT$17,390,647 thousand and net income would have been NT$2,845,280 thousand. These amounts do not reflect the actual revenue and results of operations of the Consolidated Company if the business combination were to be completed on the commencement date of the year of acquisition and shall not be used as a forecast of future results of operations.

Costs incurred in connection with this acquisition transaction were recognized under “administrative expenses” in the Consolidated Statement of Comprehensive Income.

The major categories of the consideration transferred, the assets acquired, and liabilities assumed at the date of acquisition and the amounts recognized are as follows: A. Net cash used in acquisition of subsidiaries

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

B. Identifiable assets acquired and liabilities assumed

The fair values of the identified assets acquired and liabilities assumed at the date of acquisition are as follows:

date of acquisition are as follows:
Current assets
Cash and cash equivalents	$	18,886
Financial assets measured at amortized cost		5,009
Notes receivable, accounts receivable and other receivables		116,145

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

Inventory Other current assets Non-current assets Property, plant and equipment Intangible assets Deferred tax assets Other non-current assets Current liabilities Short-term loans Contract liabilities - current Notes payable, accounts payable and other payables Income tax liabilities for the period - current Long-term loans due within one year Other non-current liabilities - other Non-current liabilities Long-term loans Other non-current liabilities Fair value of identifiable net assets	144,150 12,297 214,258 1,054 6,190 53,033 (36,680) (34,282) (142,001) (7,955) (29,491) (1,097) (100,053) (76,191)
	$ 143,272

Inventory
Other current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other non-current assets
Current liabilities
Short-term loans
Contract liabilities - current
Notes payable, accounts payable and other payables
Income tax liabilities for the period - current
Long-term loans due within one year
Other non-current liabilities - other
Non-current liabilities
Long-term loans
Other non-current liabilities
Fair value of identifiable net assets

144,150
12,297
214,258
1,054
6,190
53,033
(36,680)
(34,282)
(142,001)
(7,955)
(29,491)
(1,097)
(100,053)
(76,191)

$
143,272

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

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

C. Gain recognized in bargain purchase transaction

The gain recognized in bargain purchase transaction for follows: Consideration transferred Add: Non-controlling interests Less: Fair value of identifiable net assets Gain recognized in bargain purchase transaction	acquisition is as $ 78,533 51,684 (143,272)
	$ (13,055)

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

The Consolidated Company's gain of NT$13,055 thousand from the acquisition of GPM is reported in “gain recognized in bargain purchase transaction” in the Consolidated Statement of Comprehensive Income.

Acquisition of additional equity interests in subsidiaries

On July 23, 2021, the Consolidated Company invested $5,471 thousand in cash in Lerain Technology Co., Ltd., increasing its interest in Lerain Technology Co., Ltd. by 1.62%.

The effect of the change in the Consolidated Company's ownership interest in the subsidiaries listed above on the equity attributable to the owners of parent is as follows:

Carrying amount of non-controlling interests acquired Consideration paid to non-controlling interests Capital reserves - the difference between the actual acquisition or disposal price and the carrying amount of the subsidiary	2021 $ 4,513 (5,471) $ (958)

The Consolidated Company did not subscribe to the subsidiary's cash capital increase in proportion to its shareholding, which did not result in a loss of control

On October 20, 2021, Compertum Microsystems Inc. issued 975 thousand new shares for total proceeds of $9,750 thousand and the Consolidated Company reduced its interest in Compertum Microsystems Inc. by 4.80% due to no subscription.

On September 15, 2021, Lerain Technology Co., Ltd. issued 11,193 thousand new shares with total funds raised of NT$111,929 thousand. The Consolidated Company's interest in Lerain Technology Co., Ltd. decreased by 11.03% as the Consolidated Company did not subscribe.

On May 14, 2021, Lerain Technology Co., Ltd. issued 12,683 thousand new shares with total funds raised of NT$126,832 thousand. The Consolidated Company subscribed 3,794 thousand shares for NT$37,935 thousand, and the Consolidated Company's interest in Lerain Technology Co., Ltd. increased by 7.94% because the shares were not subscribed in proportion to its shareholding.

On April 8, 2021, Good News Medical Co., Ltd. issued 2,000 thousand new shares with total funds raised of NT$20,000 thousand. The Consolidated Company subscribed 611 thousand shares for NT$6,110 thousand, and the Consolidated Company's interest in Good News Medical Co., Ltd. increased by 20.44% because the shares were not subscribed in proportion to its shareholding.

On January 31, 2021, Lerain Technology Co., Ltd. issued 2,210 thousand new shares with total funds raised of NT$22,100 thousand. The Consolidated Company's interest in

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

Lerain Technology Co., Ltd. decreased by 15.06% as the Consolidated Company did not subscribe.

On December 16, 2020, Compertum Microsystems Inc. issued 3,255 thousand new shares for total proceeds of $75,950 thousand. The Consolidated Company subscribed 1,755 thousand shares for $40,950 thousand, which increased the Consolidated Company's interest in Compertum Microsystems Inc. by 4.64% because the subscription was not proportional to its shareholding.

On July 8, 2020, Genie Precision Machine Co., Ltd. issued 15,000 thousand new shares with total funds raised of NT$150,000 thousand. The Consolidated Company subscribed 8,630 thousand shares for NT$86,300 thousand, and the Consolidated Company's interest in Genie Precision Machine Co., Ltd. decreased by 3.93% because the shares were not subscribed in proportion to its shareholding.

On April 30, 2020, Compertum Microsystems Inc. issued 1,379 thousand new shares with total funds raised of NT$13,786 thousand. The Consolidated Company's interest in Compertum Microsystems Inc. decreased by 9.91% as the Consolidated Company did not subscribe.

The effect of changes in the Consolidated Company's ownership interest in the subsidiaries listed above on the equity attributable to owners of parent was as follows:

Increase in equity after issuance of new shares by subsidiaries Amount not subscribed in proportion to shareholding Capital reserves - recognition of changes in ownership interests in subsidiaries	2021 $ 50,463 (44,045)	2020 125,937 (127,250)
	$ 6,418	(1,313)

(6) Subsidiaries with significant non-controlling interests

The non-controlling interests of subsidiaries that are material to the Consolidated Company are as follows:

Company are as follows:
Name of subsidiary Lintes Technology Co., Ltd.	Principal place of business/country of incorporation Taiwan	The percentage of ownership interests and voting interests in all non-controlling interests
		Dec. 31, 2021	Dec. 31, 2020
		47.87%	47.87%

The aggregate financial information of the above subsidiaries is as follows. The

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

financial information has been prepared in accordance with International Financial Reporting Standards (IFRSs) approved by the Financial Supervisory Commission (FSC), and the financial information represents amounts before the elimination of intercompany transactions:

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

Current assets Non-current assets Current liabilities Non-current liabilities Less: Non-controlling interests Equity attributable to owners of Lintes Technology Co., Ltd. Closing balance of non-controlling interests attributable to the Consolidated Company Operating revenue Net profit for the period Attributable to owners of Lintes Technology Co., Ltd. Attributable to non-controlling interests of Lintes Technology Co., Ltd. Other comprehensive income Attributable to owners of Lintes Technology Co., Ltd. Attributable to non-controlling interests of Lintes Technology Co., Ltd. Total of comprehensive income Attributable to owners of Lintes Technology Co., Ltd. Attributable to non-controlling interests of Lintes Technology Co., Ltd. Net income of the Consolidated Company for the period attributable to non-controlling interests Comprehensive income of the Consolidated Company	Dec. 31, 2021 $ 2,345,154 778,760 (1,191,923) (102,650) 135,679	Dec. 31, 2020 2,297,917 523,357 (954,458) (75,631) 128,484 1,662,701 795,973 2020 2,404,160 271,870 7,660 4,544 - 276,414 7,660 126,891 130,604
	$ 1,693,662
	$ 810,795
	2021 $ 2,473,397
	$ 174,032
	$ 11,107
	$ 228
	$ -
	$ 174,260
	$ 11,107
	$ 83,313
	$ 83,422

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

for the period attributable to non-controlling interests

Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Effect of exchange rate changes Increase (decrease) in cash and cash equivalents Dividends paid to non-controlling interests	2021 $ 59,731 (368,009) 169,527 1,473	2020 468,996 (201,405) (307,339) (535)
	$ (137,278)	(40,283)
	$ 68,218	49,117

(7) Property, plant and equipment

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

Land $ 48,584 162,671 - 31,235 - (571)	Buildings	Machinery equipment 2,951,297 787,812 41,990 11,037 (54,588) (16,255)	Other 3,275,852 1,708,481 23,195 342,814 (526,010) (12,465)	Outstanding work and equipment to be inspected	Total 8,379,722 3,669,850 123,689 (217) (580,598) (37,919)
	769,413 72,864 58,504 748,568 - (3,006)			1,334,576 938,022 - (1,133,871) - (5,622)
$ 241,919	1,646,343	3,721,293	4,811,867	1,133,105	11,554,527
$ 49,655 - - - -	759,739 - - - -	2,698,613 236,776 10,959 211,567 -	2,740,900 221,896 11,887 105,389 759,336	756,731 1,315,625 - - (759,336)	7,005,638 1,774,297 22,846 316,956 -

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

- - (1,071)	- - 9,674	(232,957) - 26,339	(607,611) - 44,055	- (169) 21,725	(840,568) (169) 100,722
$ 48,584	769,413	2,951,297	3,275,852	1,334,576	8,379,722
$ - - - -	309,715 58,462 - (1,344)	1,700,534 246,571 (43,059) (11,040)	1,873,499 1,060,855 (515,222) (6,630)	- - - -	3,883,748 1,365,888 (558,281) (19,014)
$ -	366,833	1,893,006	2,412,502	-	4,672,341
$ - - - - -	266,518 38,748 - - 4,449	1,595,925 237,015 62,001 (203,679) 9,272	1,628,481 782,468 40,697 (601,212) 23,065	- - - - -	3,490,924 1,058,231 102,698 (804,891) 36,786
$ -	309,715	1,700,534	1,873,499	-	3,883,748
$ 241,919	1,279,510	1,828,287	2,399,365	1,133,105	6,882,186
$ 48,584	459,698	1,250,763	1,402,353	1,334,576	4,495,974

The subsidiary, Lotes Zhongshan Co., Ltd, acquired the land use rights for the construction of the new plant in 2017, and the acquisition cost was NT$183,934 thousand to list right-of-use assets in the account. As of December 31, 2021 and December 31, 2020, the accumulated expenditures (tax included) for the construction of the new plant were NT$1,081,382 thousand and NT$787,873 thousand, respectively.

The subsidiary, Lotes Hengnan Co., Ltd., acquired the land use rights for the construction of the new plant in 2016, and the acquisition cost was NT$9,878 thousand to list

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

right-of-use assets in the account. As of December 31, 2021 and December 31, 2020, the accumulated expenditures (tax included) for the construction of the new plant were NT$307,045 thousand and NT$192,369 thousand, respectively.

In April, 2019, subsidiary, Lotes Zhongshan Co., Ltd, signed the pre-purchase contract and decoration contract with Zhongshan Willie Property Development Co., Ltd. and Tianjin Xinhong Yuanchuang Decoration Engineering Co., Ltd., respectively. As of December 31, 2021, has to pay the price of RMB 10,881 thousand and RMB 3,285 thousand respectively (accounted in buildings), which were handed over in December 2021 for application of housing certificates.

As of December 31, 2021 and December 31, 2020, property, plant and equipment were used as collateral for short-term loans and financing lines. Please refer to Note VIII for details.

(8) Right-of-use assets

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

Land $ 240,690 96,875 299,921 - (900)	Buildings 347,687 - 426,533 (220,289) (1,083)	Machinery - - - - -	Other 4,131 - - (3,706) (22)	Total 592,508 96,875 726,454 (223,995) (2,005)
$ 636,586	552,848	-	403	1,189,837
$ 236,908 - - 3,782	254,674 136,339 (48,337) 5,011	687 - (685) (2)	5,181 397 (1,507) 60	497,450 136,736 (50,529) 8,851
$ 240,690	347,687	-	4,131	592,508
$ 10,465 10,606 - (38)	179,759 144,200 (183,101) (794)	- - - -	2,535 1,436 (3,706) (14)	192,759 156,242 (186,807) (846)
$ 21,033	140,064	-	251	161,348
$ 5,150 5,135 -	105,843 117,728 (48,186)	687 - (685)	2,344 1,658 (1,507)	114,024 124,521 (50,378)

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

Effect of change in exchange rate Balance on December 31, 2020 Book value: September 31, 2021 September 31, 2020	180 4,374 (2) 40 4,592
	$ 10,465 179,759 - 2,535 192,759
	$ 615,553 412,784 - 152 1,028,489
	$ 230,225 167,928 - 1,596 399,749

(9) Investment property

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

Self-owned assets Land Buildings $ 260,576 44,832 - 1,516 - - - -	Self-owned assets Land Buildings $ 260,576 44,832 - 1,516 - - - -	Right-of-use assets Land 69,160 - (31,634) (328)
Land $ 260,576 - - -
$ 260,576	46,348	37,198
$ 248,200 12,376 -	39,285 5,547 -	- 67,869 1,291
$ 260,576	44,832	69,160
$ - - -	5,481 1,187 -	1,068 521 (4)
$ -	6,668	1,585
$ -	4,483	-

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

2020 Depreciation Effect of change in exchange rate Balance on December 31, 2020 Book value: September 31, 2021 September 31, 2020 Fair value: September 31, 2021 September 31, 2020	- 998 1,048 2,046 - - 20 20 $ - 5,481 1,068 6,549 $ 260,576 39,680 35,613 335,869 $ 260,576 39,351 68,092 368,019 $ 466,940 $ 467,325

As of December 31, 2021 and December 31, 2020, the Consolidated Company’s investment properties were not pledged as security.

(10) Intangible assets

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

$	Computer Software 253,415 101,755 (47,908) (374)	Other 600 - - -

$	306,888	600
$	166,221 80,912 5,054 (412) 1,640	600 - - - -
$	253,415	600
$	98,505 51,497 (47,908)	- - -

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

Effect of change in exchange rate Balance on December 31, 2021 Balance on January 1, 2020 Amortization for the period Acquired in business combination Derecognition Effect of change in exchange rate Balance on December 31, 2020 Book value: Balance on December 31, 2021 Balance on December 31, 2020	(190) $ 101,904 $ 67,032 27,071 4,000 (412) 814 $ 98,505 $ 204,984 $ 154,910	- - - - - - - - 600 600	(190) 101,904 67,032 27,071 4,000 (412) 814 98,505 205,584 155,510

The amortization expenses of the intangible assets of the Consolidated Company was

recognized in the following items in the Consolidated Statement of Comprehensive Income:

Operating cost Operating expense	110`年度`	109`年度` 3,390 23,681
	$ 1,815 $ 49,682

(11) Other financial assets

The details of the other financial assets of the Consolidated Company are as follows:

Other financial assets - current Time deposits	Dec. 31, 2021 $ -	Dec. 31, 2020 87,320

As of December 31, 2021 and December 31, 2020, the Consolidated Company's other financial assets were not pledged as collateral.

(12) Short-term loans

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

	Dec. 31, 2021
Currency USD NTD	Interest rate range	Maturity 2022 2022
	0.70%~0.88% 0.85% Dec. 31, 2020
Currency	Interest rate range -	Maturity -

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

Remaining credit $ 1,556,320

Please refer to Note VI (27) for more information on the Consolidated Company’s exposure to interest rate and foreign currency risk, Note VIII for information of the Consolidated Company’s assets pledged as collateral for short-term loans, and Note IX for information of the guaranteed notes opened due to bank loans and financing facilities.

(13) Long-term loans

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

Bank loans—credit loans (The expiry date is May 2022 and July 2023, respectively) Bank loans—guaranteed loans (The expiry date is December 2036 and July 2023, respectively) Subtotal Less: portion due within one year Total Remaining credit Interest rate range	Dec. 31, 2021 $ 14,805 29,600
	44,405 14,805
	$ 29,600
	$ 1,895
	1.25%~1.36%

For details of the guarantees provided by the Consolidated Company for bank loans using assets pledged as collateral, please refer to Note VIII.

(14) Bonds payable

Information on the issuance of unsecured convertible bonds by the Consolidated Company is as follows:

Total amount of convertible bonds issued
Accumulated converted amount
Unamortized balance of discount on bonds payable
Bonds payable at the end of the period
Embedded derivative - right of redemption(reported as financial assets
measured at FVTPL)
Equity components - conversion rights (reported in capital reserves - stock
options)
Right of redemption valuation benefit (reported in other gains and losses)
Interest expense

Dec. 31, 2021
$ 1,000,000
(63,900)
(24,173)
$
911,927
$
3,370
$
171,527
2021
$
2,700
$
3,530

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

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

The conversion price was set at NT$563.2 per share at the time of issuance. If the conversion price of the Company's common stock is subject to adjustment in accordance with the terms of the issuance, the conversion price will be adjusted in accordance with the formula stipulated in the terms of the issuance. The conversion price as of December 31, 2021 is $547.5. There is no reset clause in the bonds.

If the right of redemption meets one of the following criteria, the Company will redeem the outstanding bonds at par value in cash:

The closing price of the Company's common stock on the Taiwan Stock Exchange exceeds the conversion price of the bonds by 30% or more for 30 consecutive business days from the day after the third month of the issuance of the bonds to the 40th day prior to the expiration of the issuance period.
If the closing price of the Company's common stock on the Taiwan Stock Exchange exceeds the conversion price of the bonds by 30% or more for 30 consecutive business days from the day after the third month of the issuance of the bonds to the 40th day prior to the expiration of the issuance period.

In fiscal 2021, the bondholders requested to convert 639 of the Company's first three-year domestic unsecured convertible bonds with a total carrying amount of $62,250 thousand, and the net change in capital reserves resulting from the bond conversion was $60,853 and the capital stock resulting from the bond conversion was $1,167 thousand, as described in Note VI (21).

(15) Lease liabilities

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

	31, 2021	Dec. 31, 2020
Current $	220,742	71,971
Non-current $	285,847	104,279
For the maturity analysis, please refer to Note VI (27).
The amounts recognized in profit or loss are as follows:

		2021	2020
Interest expense for lease liabilities	$	18,824	9,689
Changes in lease payments not included in the	$	4,390	-
measurement of lease liabilities
Income from the sublease of right-of-use assets	$	23,982	12,523
Expenses for short-term leases	$	21,493	1,738

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

Cost of low-value leased assets (excluding low-value leases under short-term leases) $ 307 The amounts recognized in the Statement of Cash Flows are as follows: 110`年度` Total cash outflow from leases $ 401,473	-
	109`年度` 125,601

1. Lease of land, premises and buildings

The Consolidated Company leases land, premises and buildings for plant, office space and staff quarters. The lease term of the plant and office space is usually one to ten years, and the lease term of the staff quarters is three to eight years. Part of the lease includes an option to extend the lease at the end of the lease term. In cases where it is not reasonably determined to exercise an optional extension of lease term, the relevant benefits for the period covered by the option are not included in the lease liabilities.

The Consolidated Company is a sublease of right-of-use assets by business lease.

2. Other leases

The leasing period of machines and other equipment leased by the Consolidated Company shall be two to six years. In addition, the lease term of some lease contracts of the Consolidated Company is one year, and these leases are short-term subject leases. The Consolidated Company chooses to apply the exemption of relevant right-of-use assets and lease liabilities.

(16) Refund liabilities - current

Refund liabilities - current	Dec. 31, 2021 $ 195,105	Dec. 31, 2020 161,767

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

(17) Provision for liabilities

Provision for liabilities - non-current Employee benefits	Dec. 31, 2021 $ 45,220	Dec. 31, 2020 49,258

Employee benefits are estimated under the Consolidated Company’s defined benefit plan. Please refer to Note VI (19).

(18) Operating lease

The Consolidated Company leases its investment real estate, which is classified as an operating lease because almost all risks and rewards belonging to the ownership of the underlying asset have not been transferred. Please refer to Note VI (9) for details of the

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

investment real estate.

The maturity analysis of lease payments is presented in the following table for the total undiscounted lease payments to be received after the reporting date:

Not more than 1 year 1-2 years Total undiscounted lease payment	Dec. 31, 2021 $ 609 130	Dec. 31, 2020 4,330 350
	$ 739	4,680

In year 2021 and 2020, the income tax generated in the investment property from rentals were NT$4,247 thousand and NT$4,727 thousand, respectively, and the direct operating expenses (including maintenance) incurred in the investment property from rentals were NT$860 thousand and NT$861 thousand, respectively.

(19) Employee benefits

1. Defined benefit plans

A reconciliation of the present value of the Company's defined benefit obligation to the fair value of plan assets is as follows:

Dec. 31, 2021 Dec. 31, 2020 Present value of defined benefit obligation $ 78,057 83,499 Fair value of plan assets (32,837) (34,241) Net defined benefit liability $ 45,220 49,258 The Consolidated Company's employee benefit liabilities are as follows: Dec. 31, 2021 Dec. 31, 2020 Paid leave liability $ 22,347 17,861	Dec. 31, 2021	Dec. 31, 2020
	$ 78,057	83,499
	(32,837)	(34,241)
	$ 45,220	49,258
	$ 22,347	17,861

The Company's defined benefit plan is contributed to the Bank of Taiwan's Labor Retirement Reserve Fund. Retirement payments to each employee under the Labor Standards Act are based on the basis of the number of years of service and the average salary for the six months prior to retirement.

(1) Composition of plan assets

The Company's pension fund under the Labor Standards Act is managed by the Bureau of Labor Funds, Ministry of Labor (hereinafter referred to as the Bureau of Labor Funds). According to the "Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund", the minimum annual earnings to be distributed to the fund shall not be less than the earnings calculated based on the two-year time deposit interest rate of the local bank.

As of the date of this report, the balance of the Bank of Taiwan's Labor Retirement

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

Reserve Fund was $32,837 thousand. For information on the use of the Labor Pension Fund assets, including the fund yield and fund asset allocation, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

(2) Changes in the present value of the defined benefit obligation

The changes in the present value of the Company's defined benefit obligation for fiscal 2021 and 2020 are as follows:

2021 Defined benefit obligation at January 1 $ 83,499 Current service cost and interest 951 Remeasurement of net defined benefit liability (asset) (3,373) Benefits planned to be paid (3,020) Defined benefit obligation at December 31 $ 78,057	2021	2020
	$ 83,499	73,681
	951	1,168
		8,650
	(3,020)	-
	$ 78,057	83,499

(3) Changes in the fair value of plan assets

The changes in the fair value of the Company's defined benefit plan assets for fiscal 2021 and 2020 are as follows:

2021 Fair value of plan assets as of January 1 $ 34,241 Interest income 119 Remeasurement of net defined benefit liability (asset) 477 Amount contributed to the plan 1,020 Benefits paid under the plan (3,020) Fair value of plan assets at December 31 $ 32,837	2021	2020
	$ 34,241	31,952
	119	238
		1,052
	1,020	999
	(3,020)	-
	$ 32,837	34,241

(4) Expenses recognized in profit or loss

The expenses recognized in profit or loss in fiscal 2021 and 2020 were as follows:

Current service cost Net interest on net defined benefit liability Operating cost Promotion expense Administration expense R&D expense	2021	2020
	$ 662	621
	170	309
	$ 832	930
	$ 110	115
	286	290
	277	337
	159	188
	$ 832	930

(5) Remeasurement of net defined benefit liability (asset) recognized as other comprehensive income

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

The remeasurements of net defined benefit liability (asset) recognized as other comprehensive income in fiscal 2021 and 2020 are as follows:

Accumulated balance as of January 1 Recognized in the current period Accumulated balance as of December 31	2021	2020
	$ (5,703)	1,895
	3,851	(7,598)
	$ (1,852)	(5,703)

(6) Actuarial assumptions

The significant actuarial assumptions used to determine the present value of the Company's defined benefit obligation at the end of the financial reporting period are as follows:

Discount rate Future salary increases	Dec. 31, 2021	Dec. 31, 2020
	0.70% 2.00%	0.35%
		2.00%

The Company expects to make a contribution of $1,002 thousand to the defined benefit plan in the year following the fiscal 2021 reporting date.

The weighted-average duration of the defined benefit plan is 10 years.

(7) Sensitivity analysis

The effect of changes in key actuarial assumptions on the present value of the defined benefit obligation as of December 31, 2021 and 2020 are as follows:

December 31, 2021 Discount rate Future salary increases December 31, 2020 Discount rate Future salary increases	Effect on the defined benefit obligation Increase of 0.25% Decrease of 0.25%	Effect on the defined benefit obligation Increase of 0.25% Decrease of 0.25%
	Increase of 0.25%
	$ (2,023)	2,099
	2,066	(2,002)

	(2,278)	2,367
	2,322	(2,247)

The sensitivity analysis above analyzes the effect of changes in a single assumption with other assumptions held constant. In practice, changes in many assumptions may be linked. The sensitivity analysis is consistent with the methodology used to calculate the net pension liability on the balance sheet.

The methodology and assumptions used in preparing the sensitivity analysis are the same as those used in the previous period.

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

2. Defined contribution plan

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

The pension expense under the defined contribution retirement funds of the Consolidated Company for year 2021 and 2020 were NT$15,071 thousand and NT$12,635 thousand respectively, which have been contributed to the Bureau of Labor Insurance.

In accordance with the pension insurance system established by the government of the People’s Republic of China, the subsidiaries in Mainland China make monthly contributions to employees’ pension insurance based on a certain percentage of their salaries and wages. The monthly pension plan is administered and arranged by the government, and the above-mentioned company has no further obligation other than to make monthly contributions. The related pension expense for 2021 and 2020 were NT$279,510 thousand and NT$137,267 thousand, respectively.

(20) Income tax

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

Income tax expense for the period Current income tax Tax on unappropriated retained earnings Prior period current income tax adjustment Deferred income tax expense Other deferred income tax expense (benefit) Recognition of unrecognized tax losses in prior periods Income tax expense	2021 $ 1,084,673 57,107 (102,213)	2020 824,517 23,276 (47,498)
	1,039,567	800,295
	(18,499) 99	34,118 -
	$ 1,021,167	834,413

A breakdown of the Consolidated Company's income tax expense (benefit) recognized under other comprehensive income for year 2021 and 2020 is as follows: 2021 2020

Components of other comprehensive income that will not be reclassified to profit or loss:

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

Remeasurements of defined benefit plan Components of other comprehensive income that will be reclassified to profit or loss: Exchange differences on translation	$ 770 (1,520)
	$ (39) (1,733)

A reconciliation of Income tax expense (benefit) to net profit before tax for the Consolidated Company for fiscal years 2021 and 2020 is as follows:

Net profit before tax Income tax based on domestic tax rate Adjustments based on local tax laws Adjustments to current income taxes for prior periods Additional tax levied on unappropriated retained earnings Basic income tax Total	2021 $ 4,540,198	2020 3,670,002
	1,524,040 (459,463) (102,114) 57,107 1,597	1,108,837 (250,202) (47,498) 23,276 -
	$ 1,021,167	834,413

Deferred tax assets and liabilities

(1) Unrecognized deferred tax assets

The items not recognized as deferred tax assets of the Consolidated Company are as follows:

Tax losses	Dec. 31, 2021 $ 15,454	Dec. 31, 2020 15,429

In accordance with the Income Tax Act, losses for the previous ten years may be deducted from net income before income tax is assessed. These items are not recognized as deferred tax assets because it is not probable that the Consolidated Company will have sufficient taxable income in the future to utilize the temporary differences.

In accordance with the Income Tax Act, Ememe Robot Co., Ltd. is allowed to deduct the net income of the year from the loss for the previous ten years as approved by the tax authorities for income tax purposes. As of December 31, 2021, the Consolidated Company has not recognized tax losses as deferred tax assets, which are deducted as follows:

Ememe Robot Co., Ltd.:

Year of loss 2011 (Approved) 2012 (Approved)	Losses not yet deducted $ 9,714 14,184	Last year to be deducted
		2021 2022

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

2013 (Approved) 2014 (Approved) 2015 (Approved) 2016 (Approved) 2017 (Approved) 2018 (Approved) 2019 (Approved) 2020 (Declared) 2021 (Estimated)	14,550 2023 6,246 2024 8,951 2025 10,166 2026 6,828 2027 3,237 2028 2,609 2029 629 2030 159 2031 $ 77,273

(2) Deferred tax assets recognized

Inventory valuation and obsolescence losses Undistributed pension costs Loss on decline in value of fixed assets and idle assets Refund liabilities Unrealized exchange loss Estimated payables Remeasurement of defined benefit plans Bad debt expense Exchange differences on translation Employee benefits Deferred tax assets Deferred income tax liabilities recognized Unrealized exchange gain Investment income recognized by the equity method Gain recognized in bargain purchase transaction Other Deferred income tax liabilities	Dec. 31, 2021 $ 38,999 441 44 43,860 - 56,831 8,986 126 1,772 408	Dec. 31, 2020 29,513 478 44 43,368 1,049 39,927 9,757 663 1,733 612 127,144 Dec. 31, 2020 1,176 23,789 2,089 - 27,054
	$ 151,467
	Dec. 31, 2021
	$ 8,297 24,019 1,567 23 $ 33,906

(3)Deferred income tax liabilities recognized

2. Income tax assessment

The Company's income tax returns have been assessed by the tax authorities through fiscal 2018.

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

The income tax of domestic subsidiaries Jiayu Investment Co., Ltd., Ememe Robot Co., Ltd., Compertum Microsystems Inc., Lintes Technology Co., Ltd. and Genie Precision Machine Co., Ltd. has been assessed through fiscal 2019.

(21) Capital and other equity

As of December 31, 2021 and 2020, the total authorized capital stock of the Company were all NT$1,550,000 thousand with a par value of $10 per share, and the actual amount issued were NT$1,059,779 and NT$1,034,779 thousand respectively.

In fiscal 2021, the Company issued 117 thousand shares at par value for a total amount of $1,167 thousand due to the exercise of conversion rights by holders of convertible bonds. The number of shares issued has not yet been completed due to the related legal registration procedures and is therefore included in the certificate of exchange of bonds for stock dividends of $1,167 thousand.

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

1. Capital reserves

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

021. . Capital reserves The components of the Company’s capital reserve	are as follows::
Premium of issued shares Convertible bond conversion premium Change in the net value of the stock of subsidiaries and associates accounted for using the equity method Employee stock options Convertible bond stock options	Dec. 31, 2021 $ 4,628,739 72,562 370,540 40,330 171,527		Dec. 31, 2020 3,577,768 - 365,080 15,399 - 3,958,247
	$ 5,283,698

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

2. Retained earnings

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

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 retained earnings for the same period, the Board of Directors shall propose a proposal for the distribution of earnings to the shareholders for resolution, and the dividend to be distributed shall not be less than 20% of the net profit for the year after taxation, after deducting the net income provided for by law.

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

(1) Legal reserve

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

(2) Special reserve

When the Company distributes distributable earnings, a special reserve of the same amount is provided from current income and prior undistributed earnings for the net decrease in other shareholders’ equity that occurred during the year. When the 2019 earnings were appropriated in fiscal 2020, the appropriated special reserves were added to the current period’s earnings and the prior period’s unappropriated retained earnings, and when the 2020 earnings were appropriated in fiscal 2021, the appropriated special reserves were added to the current period’s profit after tax and the amount of items other than the current period’s profit after tax that were included in the current period’s unappropriated retained earnings and the prior period’s unappropriated retained earnings. If there is a decrease in shareholders’ equity accumulated in prior years, the same amount of special reserve from prior years’ undistributed earnings shall not be distributed. If there is a subsequent reversal in the number of other decreases in shareholders’ equity, the reversal may be distributed in the form of a surplus.

(3) Earnings distribution

The appropriation of the Company’s 2020 earnings reached the legal resolution threshold through electronic voting on June 19, 2021, and was resolved at the shareholders’ meeting held on July 26, 2021. On June 19, 2020, the shareholders’

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

meeting resolved the appropriation of the 2019 earnings, and the dividends to be distributed to owners are as follows:

		2020			2019
	Payout ratio		Amount	Payout ratio		Amount
		(NT$)		(NT$)
Distributed to the
holders of ordinary
shares:
Cash	$	13.30	1,376,256		10.50	1,086,518

On March 21, 2022, the Company’s board of directors proposed the following 2020 earnings distribution:

2020 earnings distribution:
		2021
	Payout ratio		Amount
		(NT$)
Distributed to the holders of ordinary shares:
Cash	$	16.00	1,695,646

Information on the distribution of earnings as proposed by the Board of Directors

and resolved by the Shareholders’ Meeting is available on the “Public Information Observation Post System”.

3. Other equity

Balance on January 1, 2021 Exchange differences arising from the translation of the net assets of foreign operations Unrealized losses from financial assets measured at FVTOCI Balance on December 31, 2021 Balance on January 1, 2020 Exchange differences arising from the translation of the net assets of foreign operations	Exchange differences on translation of foreign operations $ (586,953) (82,102) -	Unrealized gain (loss) on financial assets measured at FVTOCI (8,019) - (5,259)	Total (594,972) (82,102) (5,259)
	$ (669,055)	(13,278)	(682,333)
	$ (631,970) 45,017	(18,562) -	(650,532) 45,017

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

Unrealized gains from financial assets measured at FVTOCI Disposal of equity instruments measured at FVTOCI Balance on December 31, 2020	- 403 403 - 10,140 10,140
	$ (586,953) (8,019) (594,972)

(22) Share-based payment

The Consolidated Company has the following share-based payment transactions:

Date of grant Number of grants Granted to Vesting conditions Fair value at the date of grant	Cash capital increase reserved for employee stock options TheCompany Lerain Technology Genie Precision	Cash capital increase reserved for employee stock options TheCompany Lerain Technology Genie Precision
	TheCompany Lerain Technology
	2021.08.23 2021.08.19 2021.03.02 2020.12.28 233 thousand shares 1,119 thousand shares 1,268 thousand shares 221 thousand shares Current employees of the Company Current employees of the subsidiary Current employees of the subsidiary Current employees of the subsidiary Immediate vesting Immediate vesting Immediate vesting Immediate vesting $107.00 $0.13 $0.00 $0.00	2020.07.23 1,500 thousand shares Current employees of the subsidiary Immediate vesting $15.87

The Company’s cost of employee compensation based on the shares generated from the

cash capital increase retained for employee stock options was $24,931 thousand recognized in fiscal 2021.

The Subsidiary Lerain Technology Co., Ltd.’s cost of employee compensation based on the shares generated from the cash capital increase retained for employee stock options was $146 thousand and $0 thousand recognized in fiscal 2021 and 2020, respectively.

The Subsidiary Genie Precision Machine Co., Ltd.’s cost of employee compensation based on the shares generated from the cash capital increase retained for employee stock options was $7,795 thousand recognized in fiscal 2020.

(23) Earnings per share

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

Basic earnings per share: Net profit attributable to the Company in the year Weighted average shares outstanding (1,000 shares) Basic earnings per share Diluted earnings per share: Net profit attributable to the Company in the year Dilutive potential ordinary shares: Convertible bond	2021 $ 3,472,201	2020 2,732,361
	104,204	103,478
	$ 33.32	26.41
	$ 3,472,201 664	2,732,361 -

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

Net income attributable to equity holders of the Company’s common stock (adjusted for the effect of dilutive potential common stock) Weighted average shares outstanding (1,000 shares) Dilutive potential ordinary shares: Bonuses for employees Convertible bond Weighted average common shares outstanding (adjusted for the effect of dilutive potential common stock) Diluted earnings per share	$ 3,472,865 2,732,361 104,204 103,478 204 272 1,820 - 106,228 103,750 $ 32.69 26.34

(24) Revenue from contracts with customers
Please refer to Note XIV (3) and (4) for the disclosure of disaggregation of revenue for the major products and major regional markets.
Balance of contract

Contract liabilities	Dec. 31, 2021 $ 97,494	Dec. 31, 2020 91,659

The beginning balances of contract liabilities as of January 1, 2021 and 2020 were recognized as income of NT$80,527,000 dollars and NT$18,642,000 dollars respectively.

(25) Non-operating revenue/expense
Interest income

The breakdown of interest income of the Consolidated Company is as follows:

		2021	2020
Interest on bank deposits	$	13,994	28,789
2. Other income
The details of other income of the	Consolidated Company are as follows:

Dividend income Income from molding Income from compensation Income from rentals Income from the sales of R&D products Income from subsidies Others	2021 $ 6,119 73,063 12,938 35,964 - 103,327 93,515 $ 324,926	2020 1,341 52,604 12,579 37,708 4,516 39,806 65,713 214,267

Other gains and losses

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

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

Foreign exchange gain (loss) Net profit or loss from financial assets (liabilities) measured at FVTPL: Derivatives: Forward foreign exchange contracts Metal commodity swap contracts Embedded derivative Non-derivatives Loss from the disposal of property, plant and equipment Lease modification interest Other Total	2021	2020 (308,515) 11,644 4,346 - 39,063 2,446 - (25,453)
	$ (148,338) 11,382 21,077 2,700 (9,364) (3,728) 2,472 (4,849)
	$ (128,648)	(276,469)

4. Financial costs

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

Interest expense Bank loans Lease liabilities Conversion of corporate bonds	2021	2020 8,920 9,689 -
	$ 5,950 18,824 3,530
	$ 28,304	18,609

(26) Compensation to employees, directors, and supervisors

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

The estimated amount of compensation of employees for the years ended December 31, 2021 and 2020 was $122,062,000 dollars and $97,235,000 dollars respectively, and the estimated amount of compensation to directors and supervisors was $4,480,000 dollars. The Company’s net profit before tax for the period is estimated by multiplying the amount of the Company’s net profit before issuing the compensation of employees and directors and

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

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.

There was no difference between the amount resolved by the board of directors for employees’ and directors’ and supervisors’ compensation in 2020 and the amount estimated in the consolidated financial statements for year 2020. There was no difference between the amount resolved by the board of directors for employees’ and directors’ and supervisors’ compensation in 2021 and the amount estimated in the consolidated financial statements for the year 2021. The related information is available on the Market Observation Post System (MOPS).

(27) Information on financial instruments and fair value

1. Credit risk

(1) Credit risk exposure

The carrying amount of a financial asset represents the maximum amount of credit risk. The maximum amount of credit risk exposure was $12,617,236,000 dollars and $10,286,606,000 dollars as of December 31, 2021 and 2020 respectively.

(2) Credit risk concentration risk

In order to reduce the credit risk of accounts receivable, the Consolidated Company continually evaluates the financial position of its customers and adjusts the terms of transactions between them if necessary. As of December 31, 2021 and 2020, the Consolidated Company had each 4 different customers with accounts receivable balances exceeding 5% of total accounts receivable for a single customer. The Consolidated Company periodically evaluates the probability of recovery of accounts receivable and presents Provisions, and the total loss is always within management’s expectations.

(3) Impairment loss

The Consolidated Company uses a simplified method of estimating expected credit losses for all of its notes and accounts receivable, which is to measure expected credit losses over the life of the notes and accounts receivable, and for this purpose, the notes and accounts receivable are grouped by common credit risk characteristics that represent

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

the ability of customers to pay all amounts due under contractual terms and are included in forward-looking information. The expected credit losses on the Consolidated Company’s notes and accounts receivable are analyzed as follows:

	Dec. 31, 2021	Expected credit loss in the duration of provision 882 504 7,562 3,935 184 4,390
Book value of notes and accounts receivable $ 8,268,615 481,878 47,553 12,646 401 4,390	Weighted average expected credit loss rate
	0.01% 0.10% 15.90% 31.12% 45.89% 100.00% Dec. 31, 2020
$ 8,815,483		17,457
		Expected credit loss in the duration of provision 750 3,690 572 489 1 6,547
Book value of notes and accounts receivable $ 6,413,813 479,202 5,698 1,771 2 6,547	Weighted average expected credit loss rate
	0.01% 0.77% 10.04% 27.61% 50.00% 100.00%
$ 6,907,033		12,049

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

Opening balance Acquired in business combination Recognized impairment loss (gain on reversal) Write-offs for the period Foreign currency translation gains and losses Closing balance	2021
	$ 17,457 12,049

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

2. Liquidity risk

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

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

Book value $ 1,142,178 911,927 44,405 16,402 2,613,359 1,998,938 506,589	Cash flow from the contract 1,145,255 936,100 47,515 16,402 2,613,359 1,998,938 559,221	6 12 months 275,129 - 12,857 - - - 75,695	1-2years - - 2,458 - - - 105,309	2-5years - 936,100 7,216 - - - 190,028	More than 5 years - - 22,548 - - - 23,476
$ 7,233,798	7,316,790	363,681	6,755,741	6,844,435	46,024
$ 23,996 3,574 2,501,155 1,206,695 176,250	24,680 3,574 2,501,155 1,206,695 193,213	3,318 - - - 30,274	6,973 - - - 43,091	12,086 - - - 70,810	- - - - -
$ 3,911,670	3,929,317	33,592	50,064	82,896	-

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

3. Market risk—exchange rate risk

(1) Exposure to exchange rate risk

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

	Financial assets Currency USD RMB HKD JPY EURO INR Financial liabilities		Dec. 31, 2021
		$	Foreign currency (Note) 527,458 284,552 37 310,511 2,404 4

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

	Currency USD RMB JPY EURO Financial assets Currency USD RMB HKD JPY EURO INR VND Financial liabilities Currency USD RMB HKD JPY EURO	$	296,289 27.6800 8,201,297 379 4.3471 1,647 58,000 0.2405 13,949 103 31.3200 3,224 Dec. 31, 2020 Foreign currency (Note) Exchange rate NTD 415,424 28.4800 11,831,263 177,119 4.3648 773,189 7,601 3.6730 27,918 134,465 0.2763 37,153 1,105 35.0200 38,696 4 0.4791 2 3,662,009 0.0012 4,394 222,790 28.4800 6,487,452 71 4.3648 312 2,778 3.6730 10,202 75,180 0.2763 20,772 33 35.0200 1,157
		$ $	Foreign currency (Note) 415,424 177,119 7,601 134,465 1,105 4 3,662,009 222,790 71 2,778 75,180 33

Note: The foreign currencies denominated in the non-functional currencies of the consolidated entities include items that have been eliminated in the consolidated financial statements for inter-group transactions.

Due to the variety of functional currencies of the Consolidated Company, information on exchange gains and losses on monetary items is presented on a consolidated basis. Foreign currency exchange gains and losses (including realized and unrealized) amounted to a loss of $148,338 thousand and a loss of $308,515 thousand in fiscal 2021 and 2020, respectively.

(2) Sensitivity analysis

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

The Consolidated Company's exchange rate risk arises mainly from cash and cash equivalents denominated in foreign currencies, financial assets at FVTPL, accounts receivable and other receivables, other financial assets, short-term loans, accounts payable and other payables, which generate foreign currency exchange gains or losses upon translation. As of December 31, 2021 and 2020, when NTD depreciates or appreciates by 1% against the foreign currencies held by the Consolidated Company, with all other factors held constant, net income after tax would increase or decrease by $62,134 thousand and $49,542 thousand for year 2021 and 2020, respectively. The same basis was used for the analysis of both periods.

4. Market risk—changes in interest rates

The interest rate risk of the Consolidated Company mainly comes from the bank deposit and short-term loan of floating rate, so the interest rate change will cause the effective interest rate of bank deposit and short-term loan to change accordingly, and the future cash flow will fluctuate.

The following sensitivity analysis is based on the risk of interest rate shocks reported by financial instruments on the date of coverage. For floating rate liabilities, the analysis is based on the assumption that the reported amount of daily outstanding liabilities is current throughout the year. The rate of change used by the Consolidated Company in reporting interest rates to the main management is 1% up or down, which represents the management’s assessment of the reasonable range of possible interest rate changes.

The Consolidated Company’ financial assets with variable interest rates as of December 31, 2021 and 2020 were NT$2,472,303 thousand and NT$2,262,409 thousand, respectively, and its financial liabilities were NT$14,805 thousand and NT$23,996 thousand, respectively. If interest rates had increased or decreased by 1%, the Consolidated Company’ net income would have increased or decreased by NT$19,660 thousand and NT$17,907 thousand for year 2021 and 2020, respectively, with all other variables held constant.

5. Market risk—fair value

(1) Fair value and carrying amount

The management of the Consolidated Company believes that non-derivative short-term financial instruments should be estimated at their fair value based on their book value on the balance sheet, and that their book value should be a reasonable basis for the estimated fair value because of the near expiry date of such commodities. This method is applied to cash and equivalent cash, notes receivable and payable, accounts receivable and payable, other receivables and payables, deposit margin and short-term

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

borrowings.

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

Measured at fair value: Financial assets: Financial assets measured at FVTPL Financial assets measured at FVTOCI Not measured at fair value Non-financial assets: Investment property	Dec. 31, 2021	Dec. 31, 2021
	Book value $ 157,494 31,459 335,869	Fairvalue

(2) The evaluation techniques used to determine fair value are as follows
A. When financial assets are quoted publicly in an active market, this market price is the fair value. When market prices are not available, estimates are made by reference to quoted counterparties or using valuation techniques. The estimates and assumptions used are consistent with the information used by market participants as estimates and assumptions in pricing financial instruments.
B. The fair value of investment properties is based on the evaluations of independent evaluators with recognized professional qualifications and recent experience in the area and type of investment properties evaluated.
(3) Fair value hierarchy
The following table analyzes the fair value hierarchy of financial instruments and
investment property by valuation. Each fair value hierarchy is defined as follows:
A. Level 1: Publicly quoted prices (unadjusted) in an active market for identical assets or liabilities.
B. Level 2: Input parameters for an asset or liability are observable either directly (i.e., prices) or indirectly (i.e., derived from prices), except for publicly quoted prices included in Level 1.
C. Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable parameters).

Level 1 Level 2 Level 3 Total

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

$ 91,737 20,503	- -	65,757 10,956	157,494 31,459
$ 112,240	-	76,713	188,953
$ -	-	466,940	466,940
$ 116,780 20,120	- -	6,180 2,016	122,960 22,136
$ 136,900	-	8,196	145,096
$ -	-	467,325	467,325

(4) Transfer between the Level 1 and the Level 2

The Consolidated Company does not have any transfers between 2021 and 2020.

(5) Statement of changes in financial assets (liabilities) classified as Level 3 at fair value

Unit: NT$1,000

Name					2021				Closing balance 65,757 10,956
	$	Opening balance 6,180 2,016	Total profit or loss Recognized in profit or loss Recognized in other comprehensive income 2,923 - - (5,460) 2,923 (5,460)		Incr	eas	e Transferred to level 3 - -	Decrease Sales, disposal or settlement (6,410) -
			Recognized in profit or loss 2,923 -		Issuance or purchase 63,064 14,400
Financial assets measured at FVTPL Financial assets measured at FVTOCI Name
				income - (5,460)
	$	8,196	2,923	(5,460)	77,464		-	(6,410)	76,713
					2020				Closing balance 6,180 2,016
	$	Opening balance 219,103 6,438	Profit	or loss Recognized in other comprehensive	Incr	eas	e Transferred to level 3 - -	Decrease Sales, disposal or settlement (219,103) (4,860)
			Recognized in profit or loss 6,180 -		Issuance or purchase - -
Financial assets measured at FVTPL Financial assets measured at FVTOCI
				income - 438
	$	225,541	6,180	438	-		-	(223,963)	8,196

The above included gains and losses are reported in “other gains and losses” and “unrealized valuation gains (losses) on financial assets at FVTOCI”, which relate to

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

assets still held as of December 31, 2021 and 2020 as follows:

Total gain or loss Recognized in profit (losses) (reported in “other gains and losses”) Recognized in other comprehensive income (reported in “unrealized valuation gains (losses) on financial assets at FVTOCI”)	2021 $ 2,750 (5,460)	2020 6,180 85

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

The Consolidated Company's financial assets measured at FVTPL classified as Level 3 fair value were NT$62,387 thousand and NT$6,180 thousand as of December 31, 2021 and 2020, respectively. Quantitative information is not disclosed because there is no active market for quoted prices but reference to counter-parties' quotes, and the relationship between significant non-observable inputs and fair values cannot be fully obtained in practice. The remaining quantitative information of significant non-observable inputs measured at fair value for Level 3 is listed below:

Item Financial assets measured at FVTPL - Embedded derivatives - right of redemption Financial assets measured at FVTOCI - investment in equity instruments with no active market	Valuation techniques Binary tree method for pricing convertible bond Comparable company analysis	Significant unobservable inputs ‧Volatility on Dec. 31, 2021: 38.95% ‧Net market value multiplier on Dec. 31, 2021: 2.05 ‧Lack of marketability discount on Dec. 31, 2021: 15.80%	Relationship between significant unobservable inputs and fair value
			‧The higher the volatility, the higher the fair value ‧The higher the multiplier, the higher the fair value ‧The higher the discount for lack of marketability, the lower the fair value

" Net asset value ‧Net asset value approach

‧The fair value is positively correlated

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

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

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

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

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

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

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

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

(28) Financial risk management

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

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

(3) Market risk

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

2. Risk management structure

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

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

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

3. Credit risk

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

(1) Accounts receivable and other receivables

The Consolidated Company’s credit risk exposures are primarily depended on each customer’s individual circumstances. However, management also considers statistical information about the Consolidated Company’s customer base, including the risk of default in the customer’s industry and country, as these factors may affect credit risk. Approximately 76% and 80% of the Consolidated Company’s revenue for 2021 and 2020, respectively, were derived from sales to customers in Mainland China, which resulted in a significant concentration of regional credit risk.

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

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

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

(2) Use of funds

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

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

4. Liquidity risk

Liquidity risk is the risk that the Consolidated Company will not be able to deliver cash or other financial assets to settle its financial liabilities and will not be able to meet its related obligations. The Consolidated Company’s approach to manage liquidity risk is to ensure that the Consolidated Company has sufficient liquidity to meet its liabilities as they fall due under normal and stressful circumstances and that there is no risk of unacceptable loss or damage to the Consolidated Company’s reputation. In addition, the Company has entered into unused borrowing lines totaling $2,263,801,000 as of December 31, 2021 to cover unanticipated payments.

5. Market risk

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

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

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

(1) Exchange rate risk

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

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

(2) Interest rate risk

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

(3) Equity instrument price risk

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


Other comprehensive income after tax $ 315		Other comprehensi ve income after tax 221

$ (315)	(917)		(221)

(29) Capital management

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

In order to maintain or adjust its capital structure, the Consolidated Company may

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

adjust dividends paid to shareholders, reduce capital to refund shareholders, issue new shares or sell assets to settle liabilities.

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

Total liabilities Less: Cash and cash equivalents Net liabilities Total equity Debt-to-capital ratio	Dec. 31, 2021 $ 8,364,687 (3,303,062)	Dec. 31, 2021 $ 8,364,687 (3,303,062)		Dec. 31, 2020 4,803,336 (2,949,412) 1,853,924 14,479,559 11.35%
	$ 5,061,625
	$ 18,054,704
		21.90%

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

Please refer to Notes VI (8) and VI (15) for information on the Consolidated Company’s non-cash trading investments and fundraising activities for Right-of-use assets acquired under leases in 2021 and 2020.

The reconciliation of the Consolidated Company’s liabilities from fundraising activities for the years ended December 31, 2021 and 2020 was as follows:

Short-term loans Bonds payable Long-term loans (including long-term loans – current portion) Lease liabilities Total liabilities from financing activities	Jan. 1, 2021 Cash flow	Non-cash changes Other Changes in exchange rate Changes in fair value Dec. 31, 2021
	$ - 1,147,192 - 1,152,983 23,996 20,409 176,250 (374,960)	- (5,014) - 1,142,178 (241,056) - - 911,927 - - - 44,405 705,622 (323) - 506,589
	$ 200,246 1,945,624	464,566 (5,337) - 2,605,099

Short-term loans Long-term loans (including long-term loans – current portion) Lease liabilities Total liabilities from financing activities	Jan. 1, 2020 Cash flow	Non-cash changes Other Changes in exchange rate Changes in fair value Dec. 31, 2020
	$ 29,980 (67,145) - (105,548) 155,411 (116,630)	36,680 485 - - 129,544 - - 23,996 135,013 2,456 - 176,250
	$ 185,391 (289,323)	301,237 2,941 - 200,246

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

VII. Related Party Transactions

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

The related parties that had transactions with the Company during the period covered by

these consolidated financial statements are as follows:

Name of related parties Relationship with the Company De Chuang Investment Co., Ltd. Substantial related party Key management personnel Including the directors, supervisors, managers and their families and spouses

(3) Material transactions with the related parties

1. Lease

The Consolidated Company leases warehouses from major management personnel and enters into one-year lease contracts with a total value of $60,000,000 with reference to the neighboring warehouse rental quotes. The interest expenses of $1,000 and $1,000 were respectively recognized in 2021 and 2020, and the balance of Lease liabilities as of December 31, 2021 and 2020 were respectively $59,000 and $0.

Acquisition of equity in subsidiaries

. Acquisition of equity in	subsidiaries
Type/name of related party Major management He, Xiu-lan	Subject of transaction	Number of shares 547,059	Acquisition price 2021 $ 5,471
	Lerain Technology Co., Ltd.

3. Loans from related parties

The Consolidated Company's loans from related parties bear interest at 2% per annum on pledges of fixed deposits with financial institutions in the year in which each such related party appropriated funds, and were fully repaid as of December 31, 2021, with interest expense of $128 thousand recognized from January 1 to December 31, 2021.

(4) Major management personnel transactions

Related compensation includes:

Short-term employee benefits Post-employment benefits Share-based payment	2021	2020 60,584 1,271 -
	$ 98,944 1,191 2,087

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

$ 102,222 61,855

VIII. Pledged Assets

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

Name of asset Dec. 31, 2021 Dec. 31, 2020 Property, plant and equipment $ 80,278 66,669

IX. Significant Contingent Liabilities and Unrecognized Contractual Commitments

(1) Significant unrecognized contractual commitments:

The Consolidated Company had outstanding contracts for significant construction of plants amounting to approximately RMB150,683 thousand as of December 31, 2021.

The Consolidated Company had outstanding contracts for the purchase of land use rights amounting to approximately VND70,227,346 thousand as of December 31, 2021.

The Consolidated Company had outstanding information system related contracts amounting to approximately $10,969 thousand as of December 31, 2021.

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

Guaranteed notes

Dec. 31, 2021 Dec. 31, 2020 $ 2,268,620 1,570,240

X. Significant Disaster Loss: None.

XI. Significant Post-Period Events: None.

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

XII. Others

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

below:
Function Nature	2021			2020
	Operation cost	Operation expense	Total	Operation cost	Operation expense	Total
Employee benefit expense Salary expenses Labor insurance and health insurance expenses Pension expenses Compensation of directors Other employee benefit expenses Depreciation expense Amortization expense	4,215,950 513,460 3,000 - 221,901 1,061,293 1,815	1,456,287 124,617 12,903 6,425 123,735 462,545 49,682	5,672,237 638,077 15,903 6,425 345,636 1,523,838 51,497	2,437,836 293,851 2,346 - 230,646 809,329 3,390	1,131,903 93,414 11,219 5,934 113,636 375,469 23,681	3,569,739 387,265 13,565 5,934 344,282 1,184,798 27,071

(2) Seasonality of operations:

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

XIII. Disclosing Information

(1) Major transaction details

In accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, the Company should disclose the following information about major transactions for year 2021:

1. Capital lending to others:

Unit: NT$1,000/1,000 in foreign currency

No.	Lender	Borrower	Item	Related party	Max amount for the period	Closing balance	Actual amount	Interest rate	Nature of the lending (Note 1)	Transactio n amount	Purpose for lending	Allowance for bad debt	Collateral	Collateral	Lending limit for single party (Note 2)	Overall lending limit (Note 2)
													Name	Value
0	The Company	Lotes Guangzhou Co.,Ltd.	Internal transaction	Yes	219,365 (RMB50,000)	217,35 (RMB50,000)	5 -	5%	2	-	Working capital	-	None	-	3,372,496	6,744,992

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

(1) Those who have business dealings.

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

(2) When there is a need for short-term financing.
Note 2: The amount of the Company’s financing to a single party shall not exceed 20% of the Company’s net worth.
The total amount of funds lent by the Company to others shall not exceed 40% of the Company’s net worth.

2. Endorsement:

Unit: NT$/foreign currency 1,000

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

[No. Endorseme] Endorsee Ceiling on Balance of Ending Amount Amount of Percentage of the Ceiling on Endorsement Endorsement Endorseme
nt provider amount of the ceiling balance of actually endorsemen accumulated amount of made by made by nt made to
endorsement endorsement the used t backed by amount of endorsement parent subsidiary to any party
for an fee in the endorsement assets endorsement in (Note 2) company to parent in
enterprise period fee the net value of subsidiary company Mainland
(Note 2) current financial China
statement (%)
Company Relatio
Name nship
(Note 1)
[0 ] The REKA 2 3,372,496 311,800 311,800 - - 1.85% 8,431,241 Y N N
Company Technology
Co., Ltd.
[0 ] " Lotes 2 3,372,496 501,300 498,240 274,032 - 2.95% 8,431,241 " " Y
Guangzhou (USD18,000) (USD18,000)
Co., Ltd.
[0 ] " Lerain 2 3,372,496 100,000 100,000 - - 0.59% 8,431,241 " " N
Technology
Co., Ltd.
[1 ] Lotes GuaREKA 1 1,348,251 85,605 83,040 - - 1.23% 3,370,628 N " N
Technology (USD3,000) (USD3,000)
Co., Ltd.
[2 ] LintesLintes 2 846,831 114,140 - - - - 1,693,662 " " Y
Technology Technology (USD4,000)
Co., Ltd. (Suzhou) Co.,
Ltd.
[2 ] " Genie 2 846,831 126,600 126,600 44,405 - 7.47% 1,693,662 " " N
Precision
Machine 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 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.

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

(2) The amount of Lotes Guanghou Co., Ltd’s guarantee for a single corporate endorsement is limited to not more than 20% of the net worth of the company.

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

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

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

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

				Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000	Unit: NT$1,000
Holding company	Category and name of security	Relationship with the issuer of the security	Accounting item	End of the period				Maximum shareholding or capitalization in the period	Remark
				Shares	Book value	Shareholding ratio	Fair value
Lotes Co., Ltd. " Jiayu Investment Co., Ltd. " " " " " " " Lintes Technology Co., Ltd.	SteadyBeat Technology Corporation G-sau Co.,Ltd Grand-Tek Technology Co., Ltd. TAIDOC TECHNOLOGY CORP. LIAN HONG ART CO., LTD. Patec Precision Industry Co., Ltd. OTO PHOTONICS, INC. LUCEMITEK CO., LTD. RADINET COMMUNICATIO NS INC. AICP Technology Corporation Chailease Holding Company Limited Class A Preferred Shares	None " " " " " " " " " "	Financial assets measured at FVTOCI - non-current " Financial assets measured at FVTPL - current " " " " " " Financial assets measured at FVTOCI - current Financial assets measured at FVTOCI - non-current	950,000 300,000 382,980 25,000 1,017,000 477,000 1,368,800 1,169,977 600,000 400,000 202,000	8,545 955 22,251 4,538 51,592 13,356 - - - 1,456 20,503	9.90 % 13.64 % 1.56 % 0.03 % 2.94 % 1.04 % 4.57 % 17.33 % 26.25 % 5.33 % 0.13 %	8,545 955 22,251 4,538 51,592 13,356 - - - 1,456 20,503	9.90% 14.29% 1.56% 0.03% 2.98% 1.04% 4.57% 17.33% 26.25% 5.33% 0.13%	Note Note Note

Note: All of them were recognized in losses.

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

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

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

capital:	capital:	capital:
							Unit: NT$1,000
The company which acquired the property	Name of asset	Date of occurrence	Amount of transaction (Note 2)	Payment condition (Note 2)	Counterparty of transaction	Relation	If the counterparty is a related party, the information of its previous transfer shall be provided				Reference for pricing	Purpose of the acquisition and the condition of use	Other agreed matters
							Owner	Relationship with the issuer	Date of transfer	Amount
Lotes Zhongshan Co., Ltd. Lotes Hengnan Co., Ltd. Lotes Viet Nam CO., Ltd. Lintes Technology Co., Ltd.	Plant (Note 1) “ Land use rights Lands and buildings in parcel number 1159, Jiankang Rd., Zhonghe Dist., New Taipei City	2017.10 ~ 2021.12 2019.10 ~ 2021.12 2021.01.11 2020.12.16	1,698,815 344,644 299,921 237,700	1,081,382 307,045 215,648 237,700	Chongqing Chuangyou Construction Group, etc. “ GREEN i-PARK CORPORATION Natural person	None " " "	- - - -	- - - -	- - - -	- - - -	Tendering “ Negotiation Appraisal report from an appraisal firm	Constructio n of self-use plant “ “ Office (Note 3)	None “ “

Note 1: Build the factory by own contracting committee.

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

Note 3: To be used as an office after the decoration is completed.
Disposal of real property amounting to NT$300 million or 20% or more of paid-in capital: None.

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

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

Unit: NT$ 1,000

The company which purchases (sells) products	Name of transaction counterparty	Relationship	Transaction status	Transaction status	Transaction status	Transaction status	Situation and reason for the conditions of transaction to be different from the ordinary ones	Situation and reason for the conditions of transaction to be different from the ordinary ones	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Remark
			Purchases (sales)	Amount	Percentage in total goods purchased (sold)	Credit period	Unit price	Credit period	Balance	Percentage in the notes and accounts receivable (payable)
Xincheng Development Co., Ltd. " REKA Technology Co., Ltd. " " " " " Lotes Guangzhou Co., Ltd. " " " Lintes Technology (Suzhou) Co., Ltd. Lotes HengNan Co., Ltd. " Zongka Technology (Shenzhen) Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd.	The Company Lotes Suzhou Co., Ltd. The Company Lotes Guangzhou Co., Ltd. Lotes HengNan Co., Ltd. " Lotes Zhongshan Co., Ltd. Guangzhou Leside Technology Co., Ltd. REKA Technology Co., Ltd. Lotes Hengnan Co., Ltd. Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Lotes Zhongshan Co., Ltd. Lintes Technology Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Guangzhou Leside Technology Co., Ltd. "	Subsidiary The surrogate parent company are the same parent company Subsidiary The surrogate parent company are the same parent company " " " " " " " " Subsidiary The surrogate parent company are the same parent company " " "	Net revenue from the goods sold Net expense from the goods purchased 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 expense from the goods purchased " " " Net revenue from the goods sold " " Net expense from the goods purchased "	1,379,153 1,436,269 10,140,753 10,115,863 667,963 450,692 2,555,583 1,143,684 2,328,977 377,560 191,278 118,523 1,841,200 371,002 158,660 828,419 365,906	95.70 % 99.67 % 74.41 % 75.65 % 5.00 % 3.31 % 19.11 % 8.55 % 31.67 % 5.13 % 1.81 % 1.12 % 96.35 % 28.40 % 12.15 % 79.75 % 41.26 %	Settled in 90 days " " " " " " " " " " " " " " " "	- - - - - - - - - - - - - - - - -	No significant difference " " " " " " " " " " " " " " " "	383,959 (404,902) 1,060,674 (1,258,218) (76,311) 103,230 (392,990) 570,213 (760,781) (37,829) (36,443) (54,089) 342,051 147,002 75,925 (380,925) (144,442)	94.51% (99.41)% 30.04% (51.39)% (3.12)% 2.92% (16.05)% 16.15% (42.14)% (2.10)% (2.02)% (3.00)% 96.10% 36.51% 18.86% 80.22% (42.37)%

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

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

Unit: NT$ 1,000

Related party with accounts receivable by the Company	Name of transaction counterparty	Relationship	Balance of receivables from the related party	Turnover ratio	Past due receivables from the related party	Past due receivables from the related party	Amounts due from related parties recovered after the period	Allowance for losses
					Amount	Handling
Xincheng Development Co., Ltd. REKA Technology Co., Ltd. " " " " Lotes Suzhou Co., Ltd. Good Hope Investments Limited Lotes Guangzhou Co., Ltd. " Lotes Zhongshan Co., Ltd. Lotes Hengnan Co., Ltd. Guangzhou Leside Technology Co., Ltd. " Lintes Technology (Suzhou) Co., Ltd.	The Company " Lotes Guangzhou Co., Ltd. Lotes Hengnan Co., Ltd. Lotes Zhongshan Co., Ltd. Guangzhou Leside Technology Co., Ltd. Xincheng Development Co., Ltd. REKA Technology Co., Ltd. " Lotes Zhongshan Co., Ltd. REKA Technology Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Lintes Technology Co.,Ltd.	Subsidiary “ The surrogate parent company are the same parent company “ “ “ “ Parent company The surrogate parent company is the same parent company “ The surrogate parent company is the same parent company “ “ “ Subsidiary	383,959 1,060,674 760,781 103,230 161,474 570,213 404,902 855,894 1,258,218 647,560 392,990 147,002 380,925 144,442 342,051	4.10 7.27 4.38 4.92 - 4.01 4.03 - 8.40 - 8.95 2.93 4.35 5.07 5.15	- - - - - - - - - - - - - - -		102,440 1,060,665 194,533 29,101 - - 105,428 - 1,045,129 - 304,480 34,353 79,486 31,809 342,051	- - - - - - - - - - - - - - -

Engagement in derivative transactions: Please refer to Note VI (2) and (27).

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

Business relationships and material transactions between parent and subsidiaries: Business relationships and significant intercompany transactions in 2021:

Unit: NT$ 1,000

No.	Name	Transaction with	Relationship	Transaction in 2021	Transaction in 2021	Transaction in 2021	Transaction in 2021
				Subject	Amount	Term	Operating revenue Accounting for total assets
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1	The Company " " " " " " " " " " " " " " " " " " " " " " " " " " " Lotes Guangzhou Co., Ltd. " " " " " Lotes Guangzhou Co., Ltd. "	Ememe Robot Co., Ltd. Lintes Technology Co., Ltd. " " " " Jiayu Investment Co., Ltd. LOTES USA, INC. " LOTES EU GmbH Xincheng Development Co., Ltd. " " " " REKA Technology Co., Ltd. " " " " Lotes Suzhou Co., Ltd. Good News Medical Co., Ltd. Lotes Guangzhou Co., Ltd. Lerain Technology Co., Ltd. " " " Mikronpoint Co., Ltd. REKA Technology Co., Ltd. " " " " " Lotes Suzhou Co., Ltd. "	1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 3 3 3 3 3 3 3 3	Other receivables Other income Sales revenue Net expense from the goods purchased Accounts receivable Accounts payable Other income Administration expense Other payables Administration expense Sales revenue Net expense from the goods purchased Accounts receivable Accounts payable Promotion expense Sales revenue Net expense from the goods purchased Accounts receivable Accounts payable Promotion expense Other income Other income Interest income Accounts payable Net expense from the goods purchased Other receivables Other income Other income Sales revenue Purchases for the period Accounts receivable Accounts payable Purchases of fixed asset Other receivables Sales revenue Purchases for the period	2,272 174 434 83,291 110 26,825 34 33,086 2,166 4,333 4,556 1,379,153 2,164 383,959 3,435 53,669 10,140,753 30,353 1,060,674 1 103 44 1,306 40,597 39,403 160 325 198 10,115,863 2,328,977 1,258,218 760,781 208,128 53,066 4,624 8,543	Same as general transactions " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " Same as general transactions "	0.01% -% -% 0.39% -% 0.10% -% 0.15% 0.01% 0.02% 0.02% 6.45% 0.01% 1.45% -% 0.25% 47.40% 0.11% 4.01% -% -% -% -% 0.15% 0.18% -% -% -% 47.29% 11.86% 4.76% 2.88% 0.79% 0.20% 0.02% 0.04%

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

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2	" " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " Lotes Suzhou Co., Ltd. " " " " "	" " " Lotes Hengnan Co., Ltd. " " " " " Zongka Technology (Shenzhen) Co., Ltd. " " " " " Shenzhen DeYi Automation Equipment Co., Ltd. " " " " " " Lintes Technology (Suzhou) Co., Ltd. " Lotes Zhongshan Co., Ltd. " " " " " " " Guangzhou Leside Technology Co., Ltd. " Zhongshan Dezhi Metal Surface Treatment Co., Ltd. " " " Xincheng Development Co., Ltd. " " " Zongka Technology (Shenzhen) Co., Ltd. "	3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3	Accounts receivable Accounts payable Sales of fixed asset Sales revenue Purchases for the period Accounts receivable Accounts payable Other receivables Sales of fixed asset Sales revenue Purchases for the period Accounts receivable Administration expense Other income Sales of fixed asset Sales revenue Purchases for the period Accounts receivable Accounts payable Other income Other receivables Sales of fixed asset Sales revenue Accounts receivable Sales revenue Purchases for the period Accounts receivable Accounts payable Sales of fixed asset Purchases of fixed asset Other receivables Other payables Sales revenue Accounts receivable Purchases for the period Accounts payable Sales of fixed asset Other receivables Sales revenue Purchases for the period Accounts receivable Accounts payable Sales revenue Accounts receivable	1,038 5,783 68 16,887 377,560 13,793 37,829 2,763 4,347 25,515 959 10,032 1,152 180 56 30,860 848 19,606 3 135 19 17 36,920 4,842 39,245 118,523 38,716 54,089 182,236 2,597 647,560 3,302 9 1 191,278 36,443 533 1 1,436,269 4,822 404,902 2,384 35,826 7,942	" " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "	-% 0.02% -% 0.08% 1.76% 0.05% 0.14% 0.01% 0.02% 0.12% -% 0.04% -% -% -% 0.14% -% 0.07% -% -% -% -% 0.17% 0.02% 0.18% 0.55% 0.15% 0.20% 0.69% 0.01% 2.45% 0.01% -% -% 0.89% 0.14% -% -% 6.71% 0.02% 1.53% 0.01% 0.17% 0.03%

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

2 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 4 4 4 4	Lotes Suzhou Co., Ltd. " " " " " " " " " " REKA Technology Co., Ltd. " " " " " " " " " " " " " " " " " " " " " " " " " Lotes Hengnan Co., Ltd. " " "	Lintes Technology (Suzhou) Co., Ltd. " " " Shenzhen DeYi Automation Equipment Co., Ltd. " " Lotes Zhongshan Co., Ltd. " " " Xincheng Development Co., Ltd. " " " Zongka Technology (Shenzhen) Co., Ltd. " " Good Hope Investments Limited Ememe Robot Co., Ltd. Lotes Hengnan Co., Ltd. " " " Shenzhen DeYi Automation Equipment Co., Ltd. " Lotes Zhongshan Co., Ltd. " " " " Guangzhou Leside Technology Co., Ltd. " Lotes Viet Nam Co., Ltd " " " Shenzhen DeYi Automation Equipment Co., Ltd. " Zongka Technology (Shenzhen) Co., Ltd. "	3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3	Sales revenue Accounts receivable Other income Other receivables Sales revenue Purchases for the period Accounts receivable Sales revenue Purchases for the period Accounts receivable Accounts payable Sales revenue Purchases for the period Accounts receivable Accounts payable Sales revenue Purchases for the period Other payables Other payables Accounts receivable Sales revenue Purchases for the period Accounts receivable Accounts payable Sales revenue Accounts receivable Sales revenue Purchases for the period Accounts payable Other receivables Other payables Sales revenue Accounts receivable Sales revenue Accounts receivable Purchases for the period Accounts payable Sales revenue Accounts receivable Sales revenue Accounts receivable	8,044 2,310 18,201 6,475 98,469 21 22,249 2,265 1,426 2,347 1,042 265 55,593 220 21,286 30,321 7,103 6,283 855,894 7,581 450,692 667,963 103,230 76,311 23,318 223 10,054 2,555,583 392,990 161,474 11,230 1,143,684 570,213 4,584 45,914 226 223 371,002 147,002 158,660 75,925	Same as general transactions " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " " "	0.04% 0.01% 0.09% 0.02% 0.46% -% 0.08% 0.01% -% 0.01% -% -% 0.26% -% 0.08% 0.14% 0.03% 0.02% 3.24% 0.03% 2.11% 3.12% 0.39% 0.29% 0.11% -% 0.05% 11.95% 1.49% 0.61% 0.04% 5.35% 2.16% 0.02% 0.17% -% -% 1.73% 0.56% 0.74% 0.29%

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

4 4 4 4 4 4 5 5 5 6 7 7 7 7 7 7 7 8 8 8 8 8 8 8 8 8 8 8 8 9 9 9 9	" " " " " " Lintes Technology (Suzhou) Co., Ltd. " " Lintes Technology Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. " " " " " " Lotes Zhongshan Co., Ltd. " " " " " " " " " " " Guangzhou Leside Technology Co., Ltd. " " "	Lotes Suzhou Co., Ltd. " " Lotes Zhongshan Co., Ltd. " " Lintes Technology Co., Ltd. " " Genie Precision Machine Co., Ltd. Lotes Zhongshan Co., Ltd. " " " " Guangzhou Leside Technology Co., Ltd. " " " Shenzhen DeYi Automation Equipment Co., Ltd. " " " " " Zhongshan Dezhi Metal Surface Treatment Co., Ltd. " Lintes Technology (Suzhou) Co., Ltd. " Shenzhen DeYi Automation Equipment Co., Ltd. " Chongqing Fuxinrui Electronic Technology Co., Ltd. "	3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 1 1	Sales revenue Accounts receivable Purchases of fixed asset Sales revenue Accounts receivable Purchases of fixed asset Sales revenue Accounts receivable Accounts payable Operating expense Sales revenue Purchases for the period Accounts payable Administration expense Other payables Purchases for the period Accounts payable Sales revenue Accounts receivable Sales revenue Purchases for the period Accounts receivable Accounts payable Sales of fixed asset Other receivables Accounts payable Purchases for the period Sales revenue Accounts receivable Sales revenue Accounts receivable Sales revenue Accounts receivable	5,027 2,386 4,434 43,282 17,836 8 1,841,200 342,051 11,749 206 36 502 16 136 144 828,419 380,925 81,389 33,729 11,929 543 7,372 293 16 18 10,418 76,398 35,066 33,958 365,906 144,442 939 1,013	" " " " " " " " " Same as general transactions " " " " " " " " " " " " " " " " " " " " " " "	0.02% 0.01% 0.02% 0.20% 0.07% -% 8.61% 1.29% 0.04% -% -% -% -% -% -% 3.87% 1.44% 0.38% 0.13% 0.06% -% 0.03% -% -% -% 0.04% 0.36% 0.16% 0.13% 1.71% 0.55% -% -%

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

0 refer to parent company
Subsidiaries are numbered by company, starting with the Arabic numeral 1.

Note 2: The type of relationship with the counterparty is indicated below:

Parent company to subsidiaries
Subsidiaries to parent company
Subsidiaries to subsidiaries

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

(2) Information on Reinvestment Business:

Information on the Company’s investees in 2021 was as follows (excluding investees in China):

Unit: NT$ 1,000

Name of the company investing	Name of investee company	Location	Main business	Initial investment amount (Note 1)	Initial investment amount (Note 1)	Shares held at the end of the fiscal period	Shares held at the end of the fiscal period	Shares held at the end of the fiscal period	Maximum shareholding or capitalization in the period	Gain/loss of investee company in the fiscal period	Gain/loss in the investment recognized in the fiscal period	Remarks
				End of this period	End of the previous year	Shares	Percentage	Book value
The Company " " " " " " " The Company " Lotes Investment Ltd. Good Hope Investments Limited " Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co. " "	Lotes Investment Ltd. Good Hope Investments Limited Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co. Lotes USA, Inc. LOTES EU GmbH Lerain Technology Co., Ltd. Mikronpoint Co., Ltd. Lotes Viet Nam CO., Ltd. Loteson International Investments Limited Xincheng Development Co., Ltd. REKA Technology Co., Ltd. Jae You Co., Ltd. Wangden Investments Limited Ememe Robot Co., Ltd. Compertum Microsystems Inc. Good News Medical Co., Ltd.	Samoa " " Anguilla Taiwan America Germany Taiwan Taiwan Vietnam Hong Kong Samoa Hong Kong " " Taiwan " "	Holding and investment " " " General investment Market development Market development Chip design, testing and sales Manufacture and sale of machinery and electronic components Manufacture of connectors for the information industry, communications industry, and consumer electronics industry Holding and investment Sales of connectors for the information industry, communications industry, and consumer electronics industry Sales of connectors for the information industry, communications industry, and consumer electronics industry Holding and investment Holding and reinvestment Manufacture of electrical and audio-visual electronic products Manufacture of electronic components Manufacture and sale of machinery and equipment, electronic parts and components, and optical	721,064 11,107 554,055 13,840 690,000 69,200 3,132 47,321 25,000 497,825 721,064 2,768 2,803 554,064 13,840 69,600 43,880 6,360	741,904 11,428 570,068 14,240 690,000 71,200 3,502 9,385 5,000 - 741,904 2,848 2,884 570,077 14,240 69,600 43,880 250	26,050,000 401,281 20,016,426 500,000 69,000,000 2,500,000 100,000 4,732,059 2,500,000 17,985,000 26,050,000 100,000 101,281 20,016,756 500,000 6,960,000 2,632,800 636,000	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 16.40% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 94.37% 31.25% 25.44%	6,513,504 1,575,778 2,656,135 159,758 1,112,641 75,270 3,674 37,790 19,312 470,627 6,741,273 1,300 718,561 2,684,343 159,758 (8,099) 18,210 5,100	100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 33.92% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 94.37% 35.34% 25.44%	1,393,504 82,839 453,193 38,981 70,861 (3,360) (219) (29,164) (5,624) (26,387) 1,393,504 (278) 83,117 435,193 38,981 (341) (39,628) (3,774)	1,331,683 82,839 426,750 38,981 69,007 (3,360) (219) (8,412) (5,624) (26,387) 1,393,504 (278) 83,117 435,193 38,981 (322) (13,766) (673)	Note 2 Note 2 Note 2

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

" Lintes Technology Co., Ltd. " " " " Jilong Co., Ltd.	Lintes Technology Co., Ltd. Jiajun Investment Co., Ltd. Genie Precision Machine Co., Ltd. Compertum Microsystems Inc. Lerain Technology Co., Ltd. Jilong Co., Ltd. Rihui Co., Ltd.	" " " " " Samoa "	instruments Manufacture of electronic parts and components, other electrical and electronic machinery and equipment General investment Manufacture and sale of optical molds Manufacture of electronic components Chip design, testing and sales Holding and reinvestment Holding and reinvestment	486,926 - 164,833 14,620 5,471 137,016 137,016	486,926 15,000 164,833 14,620 - 140,976 140,976	29,712,788 - 14,671,000 877,200 547,059 4,950,000 4,950,000	52.13% -% 60.00% 10.41% 1.90% 100.00% 100.00%	882,867 - 204,091 6,067 4,546 261,176 261,176	52.13% 100.00% 60.00% 11.77% 3.10% 100.00% 100.00%	174,032 (13) 29,024 (39,628) (29,164) 30,332 30,332	90,719 (13) 16,556 (4,587) 149 1,147 1,147	Note 2 Note 2 Note 2

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

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

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

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

Unit: NT$ 1,000


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)	Remitted	Recovered	Accumulated investment amount remitted from Taiwan at the end of the fiscal period (Note 3)	Gain/loss of investee company in the fiscal period	Shareholdin g ratio	Maximum shareholding or capitalization in the period	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
Lotes Guangzhou Co., Ltd. Lotes Suzhou Co., Ltd. Zongka Technology (Shenzhen) Co., Ltd. Lotes HengNan Co., Ltd. Lintes Technology (Suzhou) Co., Ltd. Shenzhen DeYi Automation Equipment Co., Ltd. Lotes Zhongshan Co., Ltd. Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Hengnan Deyi Property Development Co., Ltd. Zhongshan Jinmeida Metal Surface Treatment Co., Ltd. Guangzhou Leside Technology Co., Ltd. Chongqing Fuxinrui Electronic Technology Co., Ltd.	Manufacture of connectors for the information industry, communications industry, and consumer electronics industry Manufacture of connectors for the information industry, communications industry, and consumer electronics industry Research and development of electronic products, plastic materials and products, and import and export business Manufacture of connectors for the information industry, communications industry, and consumer electronics industry Development and production of optical communication measurement instruments, optical transceivers with speed of 10GB/S and above, and provision of technical services for the above products Production of industrial robots, automation equipment and parts Manufacture of connectors for the information industry, communications industry, and consumer electronics industry, and production of industrial robots, automation equipment, and parts thereof Surface treatment for all kinds of hardware and plastic products Real estate development, housing rental, landscape design and interior decoration Surface treatment for all kinds of hardware and plastic products Research and experiment and development Development and sale of electronic components, automotive parts and accessories, computers and accessories, mold development, and import and export ofgoods and technology	739,056 553,302 13,840 962,883 137,016 108,678 1,869,253 265,173 99,983 29,473 20,431 6,955	(2) (2) (2) (3) (2) (3) (3) (3) (3) (3) (3) (3)	705,840 553,302 13,840 - 137,016 - - - - - - -	- - - - - - - - - - - -	- - - - - - - - - - - -	705,840 553,302 13,840 - 137,016 - - - - - - -	1,393,504 435,193 38,981 73,689 41,915 23,623 237,472 (539) (54) (962) 39,577 (1,555)	100.00% 100.00% 100.00% 100.00% 52.13% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00%	100.00% 100.00% 100.00% 100.00% 52.13% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00%	1,331,683 426,750 38,981 91,432 6,636 23,623 234,472 (539) (575) 889 39,577 (793)	6,513,462 2,656,082 159,758 1,288,404 161,083 134,271 2,155,532 249,292 98,249 96,050 57,105 1,448	- - - - - - - - - - - -

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:

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

Name	Accumulated amount remitted from Taiwan at the end of the fiscal period for investment in Mainland China (Note 1)	Investment amount approved by Investment Commission, MoEA (Note 1)	Investment ceiling in Mainland China according to the regulations made by Investment Commission, MoEA
Lotes Co., Ltd.	NT$1,272,982 thousand	NT$1,415,013 thousand	NT$10,117,489 thousand
Lintes Technology Co.,Ltd.	NT$137,016 thousand	NT$137,016 thousand	NT$1,016,197 thousand

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

3. Significant transactions with the investee companies in Mainland China:

Please refer to the “major transaction details” 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, for year 2021.

(4) Information on Major Shareholders:

Shares Major Shareholders	Number of shares held	Shareholding ratio
JinlingInvestment Co.,Ltd.	10,956,237	10.32%
JiamingInvestment Co.,Ltd.	9,797,037	9.23%
2nd discretionary entrustment to investment account of Fuh Hwa Investment for New Labor Pension Fund 2018	7,530,222	7.09%

Note: (1) This table summarizes the principal shareholders’ information for the Company, based on the last business day of each calendar quarter, for the common and preferred shares of the Company for which the stockholders hold at least 5% of the Company’s outstanding common shares and treasury shares. The difference between the number of shares recorded in the financial statements and the number of shares for which the Company has completed the dematerialized shares may be due to differences in the basis of calculation.
(2) If the above information is related to a shareholder’s share held in a trust, it is disclosed in the client’s separate account of the trustee’s trust account. For shareholders who apply for declaration of internal shareholdings of more than 10% according to the Securities and Exchange Act, their shareholdings include their own shares plus shares held by them in the trust and have the right to decide on the use of trust property; please refer to Market Observation Post

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

System for more information on the declaration of internal shareholdings.

XIV. Segmental Information

(1) General information

The Company’s main business is the trading of various hardware and tool parts, the manufacturing, processing and trading of various terminals and their finished connectors, the import and export trade of the preceding items, and the agency of the preceding items related to domestic and foreign manufacturers’ products in the tender quotation and distribution business.

(2) Information on reportable segment profit or loss, assets, liabilities and their measurement basis and reconciliation

The Consolidated Company’s major decisions are based on the performance appraisal and resource allocation by the production regions. After analysis, the two regions meet the conditions of consolidation into a single operating segment, therefore the Consolidated Company as a whole is a single operating segment, and the information of segment profit or loss, segment assets and segment liabilities are consistent with the financial statements.

(3) Product and labor provision information

The Consolidated Company’s revenue information from external customers is as follows:

follows:
Product and labor name	2021 $ 5,715,874 5,643,188 3,195,511 2,991,448 2,162,309 310,135 1,373,452	2020 4,371,102 4,740,378 2,779,981 2,384,341 2,131,004 119,130 765,396 17,291,332
Server DT NB Strategic Projects LINTES(High Speed Cable) Automotive Other Total
	$ 21,391,917

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

(4) Geographical information

The geographical information of the Consolidated Company is as follows, where revenues are categorized based on the geographical location of customers and non-current assets are categorized based on the geographical location of assets.

Area Revenue from external customers: Taiwan Mainland China Other Total Non-current assets Taiwan Mainland China Other Total	2021 $ 2,370,643 16,171,822 2,849,452	2020 1,155,725 13,867,897 2,267,710
	$ 21,391,917	17,291,332
	$ 1,011,079 7,842,858 420,677	776,383 5,258,620 46,069
	$ 9,274,614	6,081,072

Non-current assets include property, plant and equipment, right-of-use assets, investment property, intangible assets and other assets, but exclude financial instruments, deferred tax assets, and assets for retirement benefits.

AI assistant

LOTES — Audit Report / Information 2021

52339_rns_2021-11-15_0c0f1774-a2f2-4ec9-8388-58bd4ba32e60.pdf

Lotes Co., Ltd. and Subsidiaries

Consolidated Financial Statements and Accountant’s Audit Report

Notice to Readers

Table of Contents

Declaration

Independent Auditor’s Report

Audit opinion

Basis of the audit opinions

Key audit matters

Corresponding audit procedures:

Other Matters

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

Responsibility of accountants’ audit on the consolidated financial statements

KPMG Taiwan

Lotes Co., Ltd. And Subsidiaries

Consolidated Balance Sheet

December 31, 2021 and 2020

Unit: NT$ 1,000

Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Comprehensive Income

From January 1 to December 31, 2021 and 2020

Unit: NT$ 1,000

Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Changes in Equity

From January 1 to December 31, 2021 and 2020

Unit: NT$ 1,000

Lotes Co., Ltd. and Subsidiaries

Consolidated Statement of Cash Flows

From January 1 to December 31, 2021 and 2020

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

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

2021 & 2020

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

I. Company History

II. Date and Procedures of Approval of Financial Statement

III. Application of New and Revised Standards and Interpretations

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

IV. Summary of Major Accounting Policies

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

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

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

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

(4) Foreign currency

1. Foreign currency trading

2. Foreign operating organizations

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

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

1. Financial assets

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

(4) Business model evaluation

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

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

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

(1) Classification of liabilities or equity

(2) Equity transactions

(3) Compound financial instruments

(4) Financial liabilities

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

(5) Derecognition of financial liabilities

3. Derivative financial instruments

(9) Property, plant and equipment

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

2. Subsequent costs

(10) Investment property

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

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

2. The lessor

(12) Intangible assets

1. Recognition and measurement

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

3. Amortization

(13) Non-financial asset impairment

(14) Provision for liabilities

(16) Employee benefits

1. Defined contribution plan

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

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

LOTES Audit Report / Information 2021