LOTES - Interim / Quarterly Report 2020

Stock Code: 3533

Lotes Co., Ltd. and its Subsidiaries

Consolidated Financial Statements and Accountant’s Review Report

First Quarter 2020 and First Quarter 2019

`Notice to Readers`

For the convenience of readers, the Consolidated Financial Statements and Accountant ’ s Review 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 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. Independent Auditor’s Report IV. Consolidated Balance Sheet V. Consolidated Statement of Comprehensive Income VI. Consolidated Statement of Changes in Equity VII. Consolidated Statement of Cash Flows VIII. 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 Intepretations (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) Principal Shareholder Information (XIV) Segmental Information	Page
	1 2 3 4 5 6 7 8 8 8～9 9～12 12 12～40 40～41 41 41 41 41 42 42～48 49 50～51 51 52

Contents
I.
Cover page
II.
Table of Content
III.
Independent Auditor’s Report
IV.
Consolidated Balance Sheet
V.
Consolidated Statement of Comprehensive Income
VI.
Consolidated Statement of Changes in Equity
VII.
Consolidated Statement of Cash Flows
VIII. 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 Intepretations
(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) Principal Shareholder Information
(XIV) Segmental Information

Page

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Independent Auditor’s Review Report

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

Foreword

We have reviewed the Consolidated Balance Sheet of Lotes Co., Ltd. and its subsidiaries as of March 31, 2020 and 2019, the Consolidated Statement of Comprehensive Income , the Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows for the three months ended March 31, 2020 and 2019, and the Notes to the Consolidated Financial Statements (including important accounting policies summary). Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34, “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express an conclusion on these consolidated financial statements based on our reviews.

Scope

We conducted our reviews in accordance with Statements on Auditing Standards No. 65, “ Review of Financial Information Performed by the Independent Auditor of the Entity”. A review of the consolidated financial statements consists of inquiries (primarily of persons responsible for financial and accounting matters), analytical procedures and other review procedures. A review is substantially less in scope than an audit, and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of Lotes Co., Ltd. and its subsidiaries as of March 31, 2020 and 2019, and of its consolidated financial performance and its consolidated cash flows for the three months ended March 31, 2020 and 2019 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34, “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

KPMG Taiwan

CPAs:

Competent : CHIN-KUAN-CHENG-SHEN Authority of TZU No. 1000011652 Securities (88) TAI-TSAI-CHENG (VI) Approval No. 18311 Certificate No May 11, 2020

March 31, 2020 and 2019 are reviewed only, not audited in accordance with GAAS Lotes Co., Ltd. and its Subsidiaries

Consolidated Balance Sheet

March 31, 2020, December 31, 2019, and March 31, 2019

Unit: 1,000 TWD

March 31, 2020 Amount ％ $ 3,783,275 23 13,337 - 3,746 - 19,997 - 5,325,654 33 206,949 1 758 - 1,935,143 12 139,840 1 85,295 1 13,824 -	Dec. 31, 2019 Amount ％ 2,845,994 17 240,034 1 6,438 - 15,257 - 5,949,268 37 219,031 1 758 - 1,976,021 12 137,348 1 - - 10,563 -	March 31, 2020 Amount % $ - - 20,367 - 14,734 - 1,655,201 10 928,668 6 406,612 3 88,630 1 172,560 1 17,055 -	Dec. 31, 2019 Amount % 29,980 - 19,947 - 19,000 - 1,885,062 12 964,415 6 436,898 3 94,851 1 157,256 1 23,337 -	March 31, 2019 Amount % 231,140 2 2,887 - 7,437 - 1,562,580 10 877,505 5 251,905 2 109,407 1 94,781 1 5,771 -
		3,303,827 21	3,630,746 23	3,143,413 21
		41,720 - 3,586 - 58,559 - 2,155 -	41,729 - - - 60,560 - 1,932 -	40,533 - 655 - 111,345 1 1,980 -
11,527,818 71	11,400,712 69
3,490,423 21 371,905 2 380,219 2 117,911 1 107,598 1 - - 368,816 2	3,514,714 22 383,426 2 283,002 2 99,789 1 123,925 1 85,923 1 388,701 2
		106,020 -	104,221 -	154,513 1
		3,409,847 21	3,734,967 23	3,297,926 22
		1,034,779 6 3,959,560 24 7,884,417 48 (690,029) (4)	1,034,779 6 3,959,560 24 7,471,519 46 (650,532) (4)	1,034,779 7 3,766,109 25 6,614,026 44 (173,789) (1)
4,836,872 29	4,879,480 31
		12,188,727 74	11,815,326 72	11,241,125 75
$ 16,364,690 100	16,280,192 100	766,116 5	729,899 5	382,339 3
		12,954,843 79	12,545,225 77	11,623,464 78
		$ 16,364,690 100	16,280,192 100	14,921,390 100

Reviewed only, not audited in accordance with GAAS Lotes Co., Ltd. and its Subsidiaries

Consolidated Statement of Comprehensive Income

For the Three Months Ended March 31, 2020 and 2019

Unit: 1,000 TWD

For the Three	Months Ended March	Months Ended March	31, ％ 100 69 31 4 8 7 - 19 12 2 (1) - - 1 13 3
2020	％ 100 64	2019
Amount $ 3,136,840 2,014,402		Amount 3,252,879 2,239,369
1,122,438	36	1,013,510
117,945 245,322 289,752 1,675	4 8 9 -	129,777 254,565 232,898 293
654,694	21	617,533
467,744	15	395,977
43,156 28,917 (2,592) 2,506	1 1 - -	62,171 (29,735) (7,866) 73
71,987	2	24,643
539,731 107,607	17 3	420,620 88,888
432,124	14	331,732	10 - - - 4 - 4 4 14 10 - 10 14 - 14 3.10 3.09
(2,692) -	- -	4,409 -
(2,692)	-	4,409
(38,096) -	(1) -	140,127 -
(38,096)	(1)	140,127
(40,788)	(1)	144,536
$ 391,336	13	476,268
412,898 19,226	13 1	317,374 14,358
432,124	14	331,732
373,401 17,935	12 1	460,605 15,663
391,336	13	476,268
$	3.99
$	3.98

Unit: 1,000 TWD

Reviewed only, not audited in accordance with GAAS Lotes Co., Ltd. and its Subsidiaries

Consolidated Statement of Changes in Equity For the Three Months Ended March 31, 2020 and 2019

		Equity allocated to the owner of the parent	Equity allocated to the owner of the parent	Equity allocated to the owner of the parent	Equity allocated to the owner of the parent	company	company		Non-contro l equity	Total equity 9,871,482 331,732 144,536
Share capital		Capital reserves	Retained earnings			Other equity items		Total equity attributable to owners of the parent
						Exchange difference between foreign operating office’s statement	Unrealized gain or loss on Financial assets measured at FVTOCI
Ordinary share capital	Share capital received in advance		Legal reserve	Special reserve	Undistribut ed earnings
$ 934,779 - -	125,638 - -	2,466,109 - -	931,082 - -	255,202 - -	5,110,368 317,374 -	(314,561) (2,459) - - 138,822 4,409		9,506,158 317,374 143,231	365,324 14,358 1,305
-	-	-	-	-	317,374	138,822 4,409		460,605	15,663	476,268
100,000 -	(125,638) -	1,300,000 -	- -	- -	- -	- - - -		1,274,362 -	- 1,352	1,274,362 1,352
$ 1,034,779	-	3,766,109	931,082	255,202	5,427,742	(175,739) 1,950		11,241,125	382,339	11,623,464
$ 1,034,779 - -	- - -	3,959,560 - -	1,091,939 - -	317,020 - -	6,062,560 412,898 -	(631,970) (18,562) - - (36,805) (2,692)		11,815,326 412,898 (39,497)	729,899 19,226 (1,291)	12,545,225 432,124 (40,788)
-	-	-	-	-	412,898	(36,805) (2,692)		373,401	17,935	391,336
-	-	-	-	-	-	- -		-	18,282	18,282
$ 1,034,779	-	3,959,560	1,091,939	317,020	6,475,458	(668,775) (21,254)		12,188,727	766,116	12,954,843

Reviewed only, not audited in accordance with GAAS Lotes Co., Ltd. and its Subsidiaries

Consolidated Statement of Cash Flows

For the Three Months Ended March 31, 2020 and 2019

Unit: 1,000 TWD

Net cash flow from operating activities: Net profit before tax Items of adjustment: Income and expenses Depreciation expense Amortization expense Expected credit losses (gains) Net loss (gain) on financial assets and liabilities at fair value through profit or loss Depreciation expense Amortization expense Disposition of Property, plant and equipment Losses on the price fall and scraping of inventory Total income and expenses Change in assets/liabilities related to operating activities: Net change in operating assets: Loss (gain) of receivable notes Decrease in accounts receivable Decrease in other accounts receivable Decease in inventory Increase in payments in advance Decrease (increase) in other current assets Increase in Other financial assets Total net change in operating assets Net change in operating liabilities: Increase (decrease) in contract liabilities Decease in notes payable Decease in accounts payable Other increase (decrease) in accounts payable Increase (decrease) in provisions Decease in Other current liabilities Increase in refund liabilities Increase in other non-current liabilities Total net change in operating liabilities Total net changes in operating assets and liabilities Total adjustments Cash in flow generated by operating activities Interests received Paid interests Income tax paid Net cash inflow from operating activities Net cash flow in investing activities: Acquisition of financial assets measured at FVTPL Acquisition of real estate, plant and equipment Disposition of Property, plant and equipment Increase in intangible assets Increase in other non-current liabilities Cash flow of investment activities (Outflow) Cash flows in fundraising activities: Loss of short-term loan Repayment of lease principal Cash capital increase Variance of non-control equity Net cash inflow (outflow) in financing activities Change of exchange rate effecting cash and cash equivalents Increase of cash and cash equivalents Balance of cash and cash equivalents at the beginning of the term Balance of cash and cash equivalents at the end of the term	For the Three Months Ended March 31, 2020 2019 $ 539,731 420,620 274,145 367,389 3,282 3,232 (831) 220 7,694 (663) 2,592 7,866 (8,405) (6,872) 303 9,028 18,760 24,876	For the Three Months Ended March 31, 2020 2019 $ 539,731 420,620 274,145 367,389 3,282 3,232 (831) 220 7,694 (663) 2,592 7,866 (8,405) (6,872) 303 9,028 18,760 24,876
	297,540	405,076
	(4,740) 621,939 15,156 22,118 (2,492) (3,261) -	10,883 481,587 183 166,110 (42,639) 2,471 (3,048)
	648,720	615,547
	420 (4,266) (229,861) (31,554) (9) (6,282) 15,304 223	(3,273) (37,959) (180,892) 46,823 11 (11,892) 7,898 254
	(256,025)	(179,030)
	392,695	436,517
	690,235	841,593
	1,229,966 7,837 (2,655) (117,714)	1,262,213 15,844 (8,611) (69,918)
	1,117,434	1,199,528
	219,003 (240,003) 21,440 (21,404) (79,890)	71,603 (517,470) 2,255 (22,718) (43,598)
	(100,854)	(509,928)
	(29,980) (29,505) - 18,282	(688,503) (24,791) 1,274,362 1,352
	(41,203)	562,420
	(38,096) 937,281 2,845,994	140,127 1,392,147 1,448,071
	$ 3,783,275	2,840,218

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

Reviewed only, not audited in accordance with GAAS

Lotes Co., Ltd. and its Subsidiaries Notes to the Consolidated Financial Statements March 31, 2020 and 2019

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

(I). Company History

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

(II). Date and Procedures of Approval of Financial Statement

The Consolidated Financial Statement was approved and released by the Board of Directors on May 11, 2020.

(III). Application of New and Revised Standards and Intepretations

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

Since 2020, the Consolidated company has fully adopted the International Financial Report Standards which is approved by the Financial Supervisory Commission (hereinafter referred to as FSC) to come into effect to compile Consolidated Financial Statements, with relevant new, amended and revised standards and interpretations listed as follows:

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

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

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

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

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

New release/revision/amendment of guidelines and

interpretations

Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”

IFRS 17 “Insurance Contracts”

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

Effective date upon promulgation

by the IASB

To be determined by the Board Jan. 1, 2021 Jan. 1, 2022

The following may be of interest to the consolidated companies:

Release Date New or Amended Standards Major Amendments January 1, Amendments to IAS 1 The purpose of the amendment is to 2020 “Classification of Liabilities improve the consistency in the as Current or Non-current” application of the standard and to assist enterprises in determining whether a debt or other liability with an indefinite date of settlement should be classified as current (due or likely to be due within one year) or non-current on the balance sheet.

The amendment also clarifies the classification of debts that may be settled by converting them into equity.

The consolidated company is continuously evaluating the impact of the above criteria and explanations on the consolidated company’s financial position and results of operations.

(IV). Summary of Major Accounting Policies

(1) Compling Basis

The Consolidated Financial Statement was compiled in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as the Regulations Governing the Preparation) and IAS 34 “Interim Financial Reporting” which is effective upon endorsement and issuance by the Financial Supervisory Commission. The consolidated financial statements do not include all of the information required to be disclosed in the full annual consolidated financial statements prepared in accordance with the following, as recognized by the Financial Supervisory Commission (FSC): International

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

Financial Reporting Standards (IFRSs), International Accounting Standards (IASs), and Interpretations developed by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC).

Except as described below, the significant accounting policies used in this consolidated financial statement are the same as those used in the 2019 consolidated financial statement; see Note 4 to the 2019 consolidated financial statements for related information.

(2) Consolidation Foundation
Subsidiary listed in the Consolidated Financial Statement

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

Name of Investment Company	Name of Subsidiary	Place of Incorporation	Shareholding percentage
			March 31, 2020 Dec. 31, 2019 March 31, 2019
	Lotes Investments Limited Good Hope Investments Limited Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co., Ltd. Lotes USA, Inc LOTES EU GmbH Lerain Technology Co., Ltd. Loteson International Investments Limited Lotes Guanghou Co., Ltd Lotes Hengnan Co., Ltd. Shenzhen Deyi Automation Technology Co., Ltd. Lotes Zhongshan Co., Ltd Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Hengnan Deyi Property Development Co., Ltd.
			100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 33.92% - % - % 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 50.00% 50.00% 50.00% 100.00% 100.00% - % 100.00% 100.00% - % Shareholding percentage
The Company `〞` `〞` `〞` `〞` `〞` `〞` `〞` Lotes Investments Limited Loteson International Investments Limited Lotes Guanghou Co., Ltd `〞` `〞` `〞` `〞`
		Samoa `〞` `〞` Anguilla Taiwan America Germany Taiwan Hong Kong China China `〞` `〞` `〞` `〞`

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

Name of Investment Company	Name of Subsidiary	Place of Incorporation	March 31, 2020 Dec. 31, 2019 March 31, 2019
	Lotes Investments Limited Guangzhou Leside Technology Co., Ltd. Chongqing Fuxinrui Electronic Technology Co., Ltd. Lotes Zhongshan Co., Ltd Xincheng Development Co., Ltd. REKA Technology Co., Ltd. Jae You Co., Ltd. Lotes Suzhou Co., LTD Wangden Investments Limited Zongka Technology (Shenzhen) Co., Ltd. Ememe Robot Co., Ltd Compertum Microsystems Inc. Lintes Technology Co., Ltd Jiajyun Investment Co., Ltd. Pure Fortune Limited Jilong Co., Ltd. Rihui Co., Ltd. Lintes Technology (Suzhou) Co., Ltd.
			100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00% 51.00% 51.00% 50.00% 50.00% 50.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 94.37% 94.37% 94.37% 46.74% 46.74% - % 52.13% 52.13% 58.36% 100.00% - % - % - % - % 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
The Company `〞` Guangzhou Leside Technology Co., Ltd. Lotes Suzhou Co., LTD Good Hope Investments Limited `〞` Guansi Development Co., Ltd. Jae You Co., Ltd. Zhaxi Investment Co., Ltd. Wangden Investments Limited Jiayu Investment Co., Ltd. `〞` `〞` Lintes Technology Co., Ltd `〞` `〞` Jilong Co., Ltd. Rihui Co., Ltd.
		Samoa `〞` `〞` `〞` Samoa Hong Kong `〞` China Hong Kong China Taiwan `〞` `〞` `〞` Samoa `〞` `〞` China

Pure Fortune Limited was liquidated in Q2, 2019.

Subsidiary not listed in the Consolidated Financial Statement: none.

(3) Employee benefits

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

The defined benefit plan pension for the interim period is calculated based on the actuarial pension cost ratio from the previous year’s reporting date to the end of the current period and adjusted for significant market fluctuations, and significant curtailment, liquidation or other significant one-time events after the reporting date.

(4) Income Tax

The consolidated companies’ income tax expense for the interim period is measured and disclosed in accordance with B12 of IAS No. 34 “Interim Financial Reporting”.

Income tax expense, which is recognized directly in equity or other comprehensive income, is measured as the temporary difference between the carrying amount of the related assets and liabilities for financial reporting purposes and their tax bases at the applicable tax rates that are expected to apply when the related assets and liabilities are realized or settled.

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

The preparation of the consolidated financial statements in conformity with the Regulations Governing the Preparation of Financial Statements and IAS 34 “Interim Financial Reporting” which is approved by the FSC, requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from the estimates.

The significant judgments made by management in the preparation of the consolidated financial statements and the key sources of estimation uncertainty in the adoption of the consolidated companies’ accounting policies are consistent with Note 5 to the 2019 consolidated financial statements.

(VI). Descriptions for important accounting items

Except as noted below, the description of significant accounting items in this consolidated financial statement is not yet materially different from the 2019 consolidated financial statement, see Note 6 to the 2019 consolidated financial statement for related information.

(1) Cash and cash equivalents

Cash and cash equivalents
Petty cash Checks and demand deposits Time deposits Cash and cash equivalents lised on the Statement	$	March 31, 2020 1,884 1,826,464 1,954,927		Dec. 31, 2019 3,660 1,560,714 1,281,620	March 31, 2019 2,093 1,633,178 1,204,947 2,840,218

	$		3,783,275	2,845,994

Please refer to Note VI(24) for the disclosure of the interest rate risk and sensitivity analysis of the financial assets of the consolidated company.

(2) Financial assets and liabilities
Financial assets and liabilities measured at FVTPL

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

Financial assets mandatorily measured at FVTPL: Non-derivative financial assets: Listed stocks Linked deposits Total	March 31, 2020 $ 13,337 -	Dec. 31, 2019 20,931 219,103	March 31, 2019 25,179 - 25,179
	$ 13,337	240,034

The Consolidated company’s linked deposits are initially recognized on the basis of the principal amount of the deposit contract, and the interest rate is calculated based on the change in the subject matter of the linked deposits, and the Consolidated company receives the Interest income on a regular basis.

2. Financial assets measured at FVTOCI

Equity instruments measured at FVTOCI: Domestic unlisted stocks`－`Kuang Ying Computer Equipment Co., Ltd. Domestic unlisted stocks`－`AICP Technology Corporation Total	March 31, 2020 $ 1,981 1,765 $ 3,746	Dec. 31, 2019 4,507 1,931 6,438	March 31, 2019 16,950 10,000 26,950

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

The Consolidated company had no dividend income from Equity instruments measured at FVTOCI and no disposal of Equity instruments measured at FVTOCI in the periods from Jan. 1 to March 31, 2020 and from Jan. 1 to March 31, 2019.

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

(3) Notes, accounts receivable and other receivables

Receivable notes Accounts receivable Other accounts receivable Less: Provisions	$ $	March 31, 2020 19,997 5,335,907 207,729 (11,033)	March 31, 2020 19,997 5,335,907 207,729 (11,033)		Dec. 31, 2019 15,257 5,957,860 222,320 (11,881)		March 31, 2019 5,232 4,819,026 218,362 (9,766) 5,032,854

			5,552,600		6,183,556

Please refer to Note VI (XXIV)1.(3) Statement of Changes in Notes and Accounts

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

Receivable and Provisions as of March 31, 2020, December 31, 2019 and March 31, 2019 for details.

The Consolidated company assesses that a portion of the accounts receivable and other receivables held by the Consolidated company under the operating model of collecting cash flows and sales are measured at fair value through other comprehensive income as of March 31, 2020, December 31, 2019 and March 31, 2019, of which NT$488,025,000, NT$497,928,000 dollars and NT$457,468,000 dollars respectively, and NT$0, NT$0 and $22,619,000 dollars respectively, are accounts receivable.

Information of the factoring of accounts receivable of the consolidated company is

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

March 31, 2020

Factored to	Amount derecognized $ -	Amount can be provided as advance 755,625 USD 25,000	Amount provided as advance	Transferred to other receivables -	Interest rate range	Other importa nt matters
CTBC Bank			-		-	None

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

		Dec. 31, 2019	Dec. 31, 2019
Factored to	Amount derecognized $ -	Amount can be provided as advance 749,500 USD 25,000	Amount provided as advance -	Transferred to other receivables -	Interest rate range -	Other importa nt matters
CTBC Bank						None

Unit: 1,000 TWD ／ 1,000 in

foreign currency

March 31, 2019

Factored to	Amount derecognized $ 237,583 USD 7,709	Amount can be provided as advance 527,431 USD 17,113	Amount provided as advance 213,825 USD 6,938	Transferred to other receivables 22,619 USD 771	Interest rate range 3.22%~3.32%	Other importa nt matters
CTBC Bank						None

The above quota is used in a circular manner, and the outstanding accounts receivable sold by the consolidated company are purchased by China Trust without recourse. In accordance with the terms of the sale and surrender contract, losses arising from commercial disputes (such as return of sales or concessions, etc.) shall be borne by the consolidated company and losses arising from credit risk shall be borne by such Banks.

As of March 31, 2020, December 31, 2019 and March 31, 2019, the retained accounts receivable for sale were NT$0, NT$0 and NT$22,619,000 respectively, and were transferred to other receivables.

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

(4) Inventroy

Merchandise Finished goods Work in progress Raw materials Goods in transit	$	March 31, 2020 429,549 590,219 548,332 321,840 45,203	March 31, 2020 429,549 590,219 548,332 321,840 45,203		Dec. 31, 2019 494,396 706,097 444,416 292,094 39,018		March 31, 2019 508,940 587,556 663,831 271,796 4,718 2,036,841

	$		1,935,143		1,976,021

The Consolidated company’s inventories as of March 31, 2020, December 31, 2019 and March 31, 2019 including an allowance for inventory losses are NT$287,573,000, NT$271,717,000 and NT$277,022,000 dollars respectively.

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

Cost of goods sold Shutdown cost Losses on the price fall and scraping of inventory Income from the sales of scraps and waste Total	For the Three Months Ended March 31, 2020 2019 $ 1,960,801 2,289,628 90,799 - 18,760 24,876 (55,958) (75,135) $ 2,014,402 2,239,369	For the Three Months Ended March 31, 2020 2019 $ 1,960,801 2,289,628 90,799 - 18,760 24,876 (55,958) (75,135) $ 2,014,402 2,239,369
		2020 $ 1,960,801 90,799 18,760 (55,958)
		$ 2,014,402

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

(5) Subsidiaries with significant non-controlling interests

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

Name of Subsidiary Lintes Technology Co., Ltd	Main business place/ The country where the company registered Taiwan	The percentage of ownership interests and voting interests in all non-controlling interests	The percentage of ownership interests and voting interests in all non-controlling interests
		March 31, 2020 Dec. 31, 2019	March 31, 2019
		47.87% 47.87%	41.64%

The aggregate financial information of the above subsidiaries is as follows. The financial information has been prepared in accordance with International Financial Reporting Standards (IFRSs) approved by the Financial Supervisory Commission (FSC), and the financial information represents amounts before the elimination of intercompany transactions:

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

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

March 31, 2020	March 31, 2020	Dec. 31, 2019 1,985,182 165,502 (649,878) (11,443)	March 31, 2019
$ 1,935,610 183,178 (559,518) (17,674)			1,581,567 163,087 (815,355) (11,203) 918,096 381,493
$ 1,541,596		1,489,363
	$ 741,84	6 714,874

Operating revenue Net profit in the year Other comprehensive income Total of comprehensive income Net profit in the period attributable to non-controlling interests Total comprehensive income attributable to non-controlling interests Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Effect of change in exchange rate Increase in cash and cash equivalents	For the Three Months Ended March31, 2020 2019 $ 400,888 552,557 54,384 34,523 (2,151) 2,519 $ 52,233 37,042 $ 28,259 14,352 $ 26,972 15,683 For the Three Months Ended March 31, 2020 2019 $ 105,231 153,580 (20,255) (37,388) (33,776) 27,835 (436) (9,197) $ 50,764 134,830	For the Three Months Ended March31, 2020 2019 $ 400,888 552,557 54,384 34,523 (2,151) 2,519 $ 52,233 37,042 $ 28,259 14,352 $ 26,972 15,683 For the Three Months Ended March 31, 2020 2019 $ 105,231 153,580 (20,255) (37,388) (33,776) 27,835 (436) (9,197) $ 50,764 134,830	For the Three Months Ended March31, 2020 2019 $ 400,888 552,557 54,384 34,523 (2,151) 2,519 $ 52,233 37,042 $ 28,259 14,352 $ 26,972 15,683 For the Three Months Ended March 31, 2020 2019 $ 105,231 153,580 (20,255) (37,388) (33,776) 27,835 (436) (9,197) $ 50,764 134,830
		2020 $ 105,231 (20,255) (33,776) (436)
		$ 50,764	134,830

(7) Property, plant and equipment

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

Cost or deemed cost: Balance on Jan. 1, 2020 Addition Prepayment for equipment transferred in Completion of construction in progress and acceptance of equipment to be examined Disposal	Land $ 49,655 - - - -	Buildings 759,739 - - - -	Machinery 2,698,613 24,398 1,423 - (23,071)	Others 2,740,900 28,959 895 131,839 (479,071)	Construction in progress and equipment to be examined Total 756,731 7,005,63 228,400 281,75 - 2,3 (131,839) - - (502,142)

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

Land 175	Buildings (4,843)	Machinery (15,117)	Others (15,238)	Construction in progress and equipment to be examined (6,731) 846,561 498,134 61,830 - (20,756) - 11,391 550,599 - - - - - - - - - - 756,731 846,561 498,134 550,599

$ 49,830	754,896	2,686,246	2,408,284	846,561
$ 76,980 - - - - 75	804,451 - - - - 16,588	2,680,672 56,019 - 9,180 (16,334) 54,695	2,430,461 263,689 9,586 11,576 (455,958) 53,183	498,134 61,830 - (20,756) - 11,391
$ 77,055	821,039	2,784,232	2,312,537	550,599
$ - - - -	266,518 8,822 - (1,880)	1,595,925 62,970 (3,291) (7,922)	1,628,481 190,529 (477,108) (7,650)	- - - -
$ -	273,460	1,647,682	1,334,252	-
$ - - - -	241,559 9,330 - 5,072	1,455,245 60,240 (8,373) 27,658	1,443,734 203,261 (452,636) 30,929	- - - -
$ -	255,961	1,534,770	1,225,288	-
$ 49,655 $ 49,830 $ 76,980 $ 77,055	493,221 481,436 562,892 565,078	1,102,688 1,038,564 1,225,427 1,249,462	1,112,419 1,074,032 986,727 1,087,249	756,731 846,561 498,134 550,599

Subsidiary, Lotes Zhongshan Co., Ltd, acquired the land use rights for the construction of the new plant in 2017, and the acquisition cost was $183,934 thousand to list right-of-use assets in the account. As of March 31, 2020, December 31, 2019 and March 31, 2019, the accumulated expenditures (tax included) for the construction of the new plant were NT$676,452,000, NT$622,147,000 and NT$311,335,000 respectively.

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

In April, 2019, subsidiary, Lotes Zhongshan Co., Ltd, signed the pre-purchase contract and decoration contract with zhongshan Willie and real estate development co., LTD. and Tianjin Xinhongyuan building decoration engineering co., LTD., respectively. As of March 31, 2020, has to pay the price of RMB 10,881,000 and RMB 3,285,000 respectively (account listed as other non-current assets), is expected to transfer the property in December 2020.

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

(7) Right-of-use assets

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

Land $ 236,908 - - (1,734)	Buildings 254,674 21,283 - (2,007)	Machinery 687 - (691) 4	Others 5,181 - (603) (31)	Total 497,450 21,283 (1,294) (3,768)
$ 235,174	273,950	-	4,547	513,671
$ - 246,746 - - 5,607	- 235,843 2,449 (159) 5,082	- 243 482 - 7	- 5,396 - - 123	- 488,228 2,931 (159) 10,819
$ 252,353	243,215	732	5,519	501,819
$ 5,150 1,294 - (54)	105,843 28,432 - (1,062)	687 - (691) 4	2,344 438 (603) (16)	114,024 30,164 (1,294) (1,128)
$ 6,390	133,213	-	2,163	141,766
$ - 1,370 - 2	- 28,309 (26) 45	- 183 - -	- 846 - 1	- 30,708 (26) 48
$ 1,372	28,328	183	847	30,730
$ 228,784	140,737	-	2,384	371,905
$ 250,981	214,887	549	4,672	471,089

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

(8) Investment property

The changes in the investment property of the consolidated company are as follows:

Self-owned Assets	Self-owned Assets	Right-of-use Assets
Land $ 248,200 - -	Buildings
		Land
		- 98,663 (1,206) 97,457 - - - - - - - - - 97,457 - -
$ 248,200	39,285
$ 221,400	23,428
$ 221,400	23,428
$ - -	4,483 240
$ -	4,723
$ - -	2,333 143
$ -	2,476
$ 248,200	34,802
$ 248,200	34,562
$ 221,400	21,095
$ 221,400	20,952

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

(9) Intangible assets

The changes in the cost and amortization of the intangible assets of the consolidated

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

company are as follows:

$	Computer Software 166,221 22,153 (412) (749)	Others 600 - - -

$	187,213	600
$	114,181 21,493 1,225	600 - -
$	136,899	600
$	67,032 3,574 (412) (292)	- - - -
$	69,902	-
$	55,254 2,674 558	- - -
$	58,486	-
$	99,189	600
$	117,311	600
$	58,927	600
$	78,413	600

The amortization expenses of the intangible assets of the consolidated company was recognized in the following items in the Consolidated Statement of Comprehensive Income:

Operating costs Operating expense	For the Three Months Ended March 31,	For the Three Months Ended March 31,	For the Three Months Ended March 31,
		2020 $ 306	2019 130 2,544
		$ 3,268

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

(10) Other financial assets

The details of the other financial assets of the consolidated company are as follows:

Other financial assets - current Time deposits Other financial assets - non-current Time deposits	$	March 31, 2020 85,295	March 31, 2020 85,295		Dec. 31, 2019 -		March 31, 2019 -	March 31, 2019 -

	$		-		85,923			137,303

As of March 31, 2020, December 31, 2019 and March 31, 2019, none of the Consolidated company’s other financial assets had been pledged as security.

(11) Short-term loans

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

	March 31, 2020	March 31, 2020	Amount $ -
Currency -	Interest rate range	Maturity year -
	- Dec. 31, 2019
			$ 3,053,725
			Amount $ 29,980
Currency USD	Interest rate range
			$ 3,158,700
			Amount $ 231,140
Currency USD	Interest rate range	Maturity year 108
	3.37%～3.99%
			$ 2,692,320

Credit not yet used

Please refer to Note VI (XXIV) 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 borrowings, and Note IX for information of the Company’s bank loans and financing facilities are pledged as guaranteed notes.

(12) Lease liabilities

The book values of the lease liabilities of the consolidated company are as follows:

Current Non-current	March 31, 2020 $ 88,630	Dec. 31, 2019 94,851	March 31, 2019
			109,407
	$ 58,559	60,560	111,345

For the maturity analysis, plese refer to Note VI (XXIV).

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

The amounts recognized in the profit and loss are as follows:

Interest expense for lease liabilities Income from the sublease of right-of-use assets Expenses for short-term leases	For the Three Months Ended March 31,	For the Three Months Ended March 31,
		2020

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

Total cash outflow for leases	For the Three Months Ended March 31,
	2020 2019 $ 32,250 28,881

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.

(13) Refund liabilites - current

Refund liabilites - current	March 31, 2020 $ 172,560	Dec. 31, 2019 157,256	March 31, 2019 94,781

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

(14) Provisions

Provisions - non-current Employee benefits	March 31, 2020 $ 41,720	Dec. 31, 2019 41,729	March 31, 2019 40,533

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

Employee benefits are estimated under the Consolidated company’s defined benefit plan.

(15) Operating lease

1. Lessor lease

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

Due date analysis of lease benefits to report the total amount of undiscounted lease benefits received in the future is shown in the following table:

Not more than 1 year 1-2 years Total undiscounted lease payment	March 31, 2020 $ 4,894 65	Dec. 31, 2019 5,821 593	March 31, 2019 5,562 4,635
	$ 4,959	6,414	10,197

In the periods from Jan. 1 to March 31, 2019 and from Jan. 1 to March 31, 2018, the income tax generated in the investment property from rentals were NT$1,386,000 dollars and $1,311,000 dollars respectively, and the direct operating expenses (including maintenance) incurred in the investment property from rentals were NT$207,000 dollars and NT$143,000 dollars respectively.

(16) Employee benefits

1. Defined benefit plans

The consolidated companies used actuarially determined pension costs as of December 31, 2019 and 2018 to measure and disclose pension costs for the interim period as there were no significant market fluctuations and no significant curtailments, settlements or other significant one-time events subsequent to the prior fiscal year reporting date.

The consolidated companies recognized $233,000 dollars and $248,000 dollars of expense in profit or loss from January 1, 2020 and March 31, 2019, respectively.

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.

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

The pension expense under the defined contribution retirement funds of the Company in the year of 2020 and 2019 are $2,407,000 dollars and $2,230,000 dollars respectively, which have been contributed to the Bureau of Labor Insurance.

In accordance with the pension insurance system established by the government of the People’s Republic of China, the subsidiaries in Mainland China make monthly contributions to employees’ pension insurance based on a certain percentage of their salaries and wages. The monthly pension plan is administered and arranged by the government, and the above-mentioned company has no further obligation other than to make monthly contributions. The related pension expense for the years ended December 31, 2020 and 2019 were $39,341,000 dollars and $44,220,000 dollars, respectively.

(17) Income tax
The details of the income tax expense of the consolidated company are as follows:

Income tax expense in the year Income tax generated in the year Adjustment of the income tax in the previous year Deferred income tax expense Other deferred income tax expense (income) Income tax expense	For the Three Months Ended March 31,	For the Three Months Ended March 31,
	2020 $ 87,963 -	2019 88,146 6,165
	87,963	94,311
	19,644	(5,423)
	$ 107,607	88,888

No income tax benefit or expense was recognized in equity and other comprehensive income for January 1 through March 31, 2020 and 2019.
Income Tax Approval

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

(18) Capital and Other Equity

As of March 31, 2020, December 31, 2019, and March 31, 2019, the total authorized share capital of the Company was $1,550,000,000 dollars, $1,550,000,000 dollars, and $1,050,000,000 dollars with a par value of $10 per share, and the actual amount issued were all $1,034,779,000 dollars.

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

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

1. Capital reserve

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

Premium of issued shares Change in the net value of the stock of subsidiaries and associates accounted for using the equity method Employee stock options	$	March 31, 2020 3,577,768 366,393 15,399	March 31, 2020 3,577,768 366,393 15,399		Dec. 31, 2019 3,577,768 366,393 15,399		March 31, 2019 3,577,768 172,942 15,399 3,766,109

	$		3,959,560		3,959,560

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

2. Retained earnings

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

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

(1) Legal reserve

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

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

(2) Special reserve

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

(3) Earnings distribution

On March 25, 2020 and June 14, 2019, the Company’s shareholders resolved to distribute earnings for the years 2019 and 2018, respectively, as follows:

On March 25, 2020, the Company’s Board of Directors proposed a distribution of earnings for the year e2019, and the amount of dividends distributed to owners was as follows:

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

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

Other Equity

Observation Post System”. Other Equity
Balance on Jan. 1, 2020 Exchange differences arising from the translation of the net assets of foreign operations Unrealized losses from financial assets measured at FVTOCI Balance on March 31, 2020	Exchange differences on translation of foreign operations $ (631,970) (36,805) -	Unrealized gain or loss on Financial assets measured at FVTOCI (18,562) - (2,692)	Total (650,532) (36,805) (2,692)
	$ (668,775)	(21,254)	(690,029)
	Exchange differences on translation of Unrealized gain or loss on Financial assets Total

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

Balance on Jan. 1, 2019 Exchange differences arising from the translation of the net assets of foreign operations Unrealized losses from financial assets measured at FVTOCI Balance on March 31, 2019	foreign operations	measured at FVTOCI (2,459) (317,020) - 138,822 4,409 4,409
	$ (314,561) 138,822 -
	$ (175,739)	1,950 (173,789)

(19) Share-based payment

The following share-based payment transactions were performed by the consolidated company:

Cash capital increase reserved for employees to subscribe Subsidiary Date of offering Nov. 29, 2019 Amount offered 436,000 shares Target of offering Current employees of subsidiaries Vesting condition Immediate vesting

Lintes Technology Co., Ltd. estimated the fair value of the above Cash capital increase stock option to be $10.8 and recognized the cost of Share-based paymentCompensation of employees from the Cash capital increase stock option to be $4,709,000 dollars in 2019.

(20) Earnings per share

The basic earnings per share and diluted earnings per share of the consolidated company were calculated as follows:

Net profit attributable to the Company in the year Weighted average shares outstanding (1,000 shares) Dilutive potential ordinary shares Effect of employee compensation Basic earnings per share Diluted earnings per share	For the Three Months Ended March 31,	For the Three Months Ended March 31,	For the Three Months Ended March 31,
		2020 412,898	2019 317,374
		103,478 348	102,478 258
		103,826	102,736
		3.99	3.10
		3.98	3.09

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

(21) Revenue from contracts with customers
Please refer to Note XIV (III) and (IV) for the disclosure of disaggregation of revenue for the major products and major regional markets.

2. Balance of Contract

Contract liabilities	March 31, 2020 $ 20,367	Dec. 31, 2019 19,947	March 31, 2019 2,887

The amounts of beginning balances of contractual liabilities as of January 1, 2020 and January 1, 2019 were respectively recognized as income of $4,147,000 dollars and $5,840,000 dollars for the years ended on March 31, 2020 and 2019.

(22) Non-operating income and expense

1. Other income

The details of other income of the consolidated company are as follows:

Interest income Income from molding Compensation from suppliers Income from rentals Income from the sales of R&D products Income from subsidies Others	For the Three Months Ended March 31,	For the Three Months Ended March 31,	For the Three Months Ended March 31,
		2020 $ 8,405 4,636 390 7,020 2,483 188 20,034	2019 6,872 22,370 1,316 6,627 4,150 6,834 14,002 62,171
		$ 43,156

2. Other income and losses

The details of other income and losses of the consolidated company are as follows:

Foreign exchange gain (loss) Net loss from financial assets (liabilities) measured at FVTPL Profit from the disposal of property, plant and equipment Others Total	For the Three Months Ended March 31,	For the Three Months Ended March 31,	For the Three Months Ended March 31,
		2020 $ 42,246 (7,694) (303) (5,332)	2019 (12,527) 663 (9,028) (8,843)
		$ 28,917	(29,735)

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

3. Financial cost

The details of the financial cost of the consolidated companies are as follows:

Interest expense	For the Three Months Ended March 31,	For the Three Months Ended March 31,	For the Three Months Ended March 31,
		2020 $ 2,592	2019 7,866

(23) Remuneration for employees and directors, supervisors

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

The estimated amount of compensation of employees for the years ended March 31, 2020 and 2019 was $18,250,000 dollars and $12,500,000 dollars respectively, and the estimated amount of compensation to directors and supervisors was $1,120,000 dollars. The Company’s Net profit before tax for the period is estimated by multiplying the amount of the Company’s Net profit before issuing the compensation of employees and directors and supervisors by the proportion of the Company’s compensation distribution to employees and directors and supervisors as provided in the Company’s Articles of Incorporation, and is reported as operating costs or expenses for that period. If there is a difference between the actual distribution amount and the estimated amount for the following year, the change in accounting estimate is adjusted and the difference is recognized in profit or loss for the following year. In the event that the Board of Directors resolves to grant a compensation of employees by way of stock, the number of shares of stock-based compensation is calculated based on the closing price of the common stock on the day before the Board of Directors’ resolution.

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

(24) Financial instruments and fair value information

1. Credit risk

(1) Credit risk exposure

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

The carrying amount of a financial asset represents the maximum amount of credit risk. The maximum amount of credit risk exposure was $9,419,286,000 dollars, $9,330,916,000 dollars, and $8,008,282,000 dollars as of March 31, 2020, December 31, 2019, and March 31, 2019, respectively.

(2) Credit risk concentration risk

The customers of the consolidated companies are concentrated in the high-tech computer industry. In order to reduce the credit risk of accounts receivable, the consolidated companies continuously evaluates the financial position of the customers and adjusts the transaction terms if necessary. The consolidated companies on March 31, 2020, December 31, 2019, and March 31, 2019, a single customer is more than 5% of the total accounts receivable, accounts receivable balance for 6, 5, and 4 different customers, respectively, the consolidated companies regularly assesses the possibility of accounts receivable collection and allowance for loss, and the total loss of total within the authorities expected.

(3) Impairment loss

The consolidated company for all notes receivable and accounts receivable adopts simplified approach to estimate the expected credit losses, i.e. using the term forecast credit losses measure, measure for this purpose, such as the notes receivable and accounts receivable department press on behalf of clients according to the terms of the contract to pay all amount due ability of credit risk characteristics shall be grouped together, and has set up into a forward-looking information. The expected credit loss analysis of notes receivable and accounts receivable of the consolidated company is as follows:

follows:
Not past due 1-30 days past due 31-60 days past due 61-120 days past due 121-180 days past due 181-270 days past due 271-365 days past due More than 365 days past due	March 31, 2020		Expected credit loss in the duration of provision 812 812 971 647 66 1,363 - 5,582
	Book value of Notes and accounts receivable $ 5,037,078 234,281 70,773 5,229 350 2,611 - 5,582	Weighted average expected credit loss rate
		0.02% 0.35% 1.37% 12.37% 18.86% 52.20% 100.00% 100.00%
	$ 5,355,904		10,253

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

	Dec. 31, 2019	Expected credit loss in the duration of provision 983 1,327 538 32 53 - 47 5,612
Book value of Notes and accounts receivable $ 5,558,158 328,542 79,760 614 381 - 50 5,612	Weighted average expected credit loss rate
$ 5,973,117		8,592
		Expected credit loss in the duration of provision 1,158 351 112 402 78 750 1,108 4,968
Book value of Notes and accounts receivable $ 4,610,664 176,696 26,110 3,012 244 1,456 1,108 4,968	Weighted average expected credit loss rate
	0.03% 0.20% 0.43% 13.35% 31.97% 51.54% 100.00% 100.00%
$ 4,824,258		8,927

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

Opening balance Recognized impairment loss Foreign currency translation gains and losses Closing balance	For the Three Months Ended March 31,
	2020
	$ 10,253 8,927

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

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 $ 14,734 1,655,201 928,668 147,189	Cash flow from the contract 14,734 1,655,201 928,668 154,785	Within 6 months 14,734 1,655,201 928,668 52,761	6-12 months - - - 41,907	1-2years - - - 31,210	2-5years - - - 28,907	More than 5 years - - - -
$ 2,745,792	2,753,388	2,651,364	41,907	31,210	28,907	-
$ 29,980 19,000 1,885,062 964,415 155,411	30,172 19,000 1,885,062 964,415 165,242	30,172 19,000 1,885,062 964,415 54,559	- - - - 46,417	- - - - 41,233	- - - - 23,033	- - - - -
$ 3,053,868	3,063,891	2,953,208	46,417	41,233	23,033	-
$ 231,140 7,437 1,562,580 877,505	233,969 7,437 1,562,580 877,505	172,047 7,437 1,562,580 877,505	61,922 - - -	- - - -	- - - -	- - - -
$ 2,678,662	2,681,491	2,619,569	61,922	-	-	-

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.

Market risk - exchange rate risk
(1) Exposure to exchange rate risk

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

	Financial assets Currency USD RMB HKD JPY EURO INR VND	March 31, 2020 Foreign Currency (Note) Rate TWD $ 345,949 30.2250 10,456,290 148,782 4.2660 634,604 7,701 3.8980 30,019 272,162 0.2788 75,879 1,812 33.2400 60,237 4 0.4791 2 17,980 0.0012 22	March 31, 2020 Foreign Currency (Note) Rate TWD $ 345,949 30.2250 10,456,290 148,782 4.2660 634,604 7,701 3.8980 30,019 272,162 0.2788 75,879 1,812 33.2400 60,237 4 0.4791 2 17,980 0.0012 22
		Foreign Currency (Note) $ 345,949 148,782 7,701 272,162 1,812 4 17,980	Rate 30.2250 4.2660 3.8980 0.2788 33.2400 0.4791 0.0012

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

	Financial liabilities Currency USD RMB HKD JPY Financial assets Currency USD RMB HKD JPY EURO INR VND Financial liabilities Currency USD RMB HKD JPY EURO MOP VND	March 31, 2020 Foreign Currency (Note) Rate TWD $ 166,592 30.2250 5,035,232 48 4.2660 204 2,066 3.8980 8,054 23,700 0.2788 6,608 Dec. 31, 2019 Foreign Currency (Note) Rate TWD $ 387,757 29.9800 11,624,983 173,383 4.2975 744,979 7,250 3.8490 27,904 83,529 0.2760 23,054 2,394 33.5900 80,425 4 0.4791 2 17,980 0.0012 22 $ 222,319 29.9800 6,665,126 37 4.2975 160 2,025 3.8490 7,793 23,878 0.2760 6,590 46 33.5900 1,531 1 3.8490 3 14,361 0.0012 17	March 31, 2020 Foreign Currency (Note) Rate TWD $ 166,592 30.2250 5,035,232 48 4.2660 204 2,066 3.8980 8,054 23,700 0.2788 6,608 Dec. 31, 2019 Foreign Currency (Note) Rate TWD $ 387,757 29.9800 11,624,983 173,383 4.2975 744,979 7,250 3.8490 27,904 83,529 0.2760 23,054 2,394 33.5900 80,425 4 0.4791 2 17,980 0.0012 22 $ 222,319 29.9800 6,665,126 37 4.2975 160 2,025 3.8490 7,793 23,878 0.2760 6,590 46 33.5900 1,531 1 3.8490 3 14,361 0.0012 17
		Foreign Currency (Note) Rate $ 166,592 30.2250 48 4.2660 2,066 3.8980 23,700 0.2788 Dec. 31, 2019
		Foreign Currency (Note) $ 387,757 173,383 7,250 83,529 2,394 4 17,980 $ 222,319 37 2,025 23,878 46 1 14,361	Rate 29.9800 4.2975 3.8490 0.2760 33.5900 0.4791 0.0012 29.9800 4.2975 3.8490 0.2760 33.5900 3.8490 0.0012

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

	Financial assets Currency USD RMB HKD JPY EURO Financial liabilities Currency USD RMB HKD THB	March 31, 2019 Foreign Currency (Note) Rate TWD $ 299,377 30.8200 9,226,782 80,250 4.5771 367,285 6,270 3.9260 24,618 35,559 0.2783 9,896 1,369 34.6100 47,366 $ 155,542 30.8200 4,793,788 18 4.5771 85 2,346 3.9260 9,211 26 0.9740 25	March 31, 2019 Foreign Currency (Note) Rate TWD $ 299,377 30.8200 9,226,782 80,250 4.5771 367,285 6,270 3.9260 24,618 35,559 0.2783 9,896 1,369 34.6100 47,366 $ 155,542 30.8200 4,793,788 18 4.5771 85 2,346 3.9260 9,211 26 0.9740 25
		Foreign Currency (Note) $ 299,377 80,250 6,270 35,559 1,369 $ 155,542 18 2,346 26	Rate 30.8200 4.5771 3.9260 0.2783 34.6100 30.8200 4.5771 3.9260 0.9740

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

Because the consolidated companies has a wide range of functional currencies, it has adopted a consolidated approach to disclose exchange gain or loss on monetary items, with foreign currency exchange gains (realized and unrealized) of $42,246,000 dollars and losses of $12,527,000 dollars for the years ended March 31, 2020 and 2019 respectively.

(2) Sensitivity analysis

The consolidated companies’ exchange rate risk primarily comes from foreign currency-denominated cash and cash equivalents, accounts receivable and other receivables, loans, accounts payable and other payables, resulting into gains and losses of conversion of foreign currency when exchanging. As of December 31, 2020 and 2019, if TWD had depreciated or appreciated by 1% relative to foreign currencies held by the Company and all other factors remained constant, net income would have increased or decreased by $49,656,000 dollars and $38,983,000 dollars respectively for the years ended March 31, 2020 and 2019. The same basis is used for both phases of analysis.

4. Market risk - changes in interest rates

The interest rate risk of the consolidated company mainly comes from the bank

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

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 companies’ financial assets with variable interest rates at March 31, 2020, December 31, 2019, and March 31, 2019 were $1,869,837,000 dollars, $1,882,046,000 dollars and $2,975,267,000 dollars, respectively, and its financial liabilities were $0 dollar, $0 dollar and $231,140,000 dollars, respectively. If interest rates had increased or decreased by 1%, the consolidated companies’ net income would have increased or decreased by $3,740,000 dollars and $5,488,000 dollars for the years ended March 31, 2020 and 2019, respectively, with all other variables held constant.

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

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

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

The parts measured at fair value: Financial assets: Financial assets measured at FVTPL - current Financial assets measured at FVTOCI - current	March 31, 2020 Book Value Fair value $ 13,337 13,337 3,746 3,746	Dec. 31, 2019 Book Value Fair value 240,034 240,034 6,438 6,438	March 31, 2019 Book Value Fair value 25,179 25,179 26,950 26,950
	Book Value $ 13,337 3,746	Book Value 240,034 6,438	Book Value 25,179 26,950

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

Not measured at fair value: Non-financial assets: Investment property	March 31, 2020 Book Value Fair value 380,219 420,061	Dec. 31, 2019 Book Value Fair value 283,002 322,604	March 31, 2019 Book Value Fair value 242,352 282,694
	Book Value 380,219	Book Value 283,002	Book Value 242,352

(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. Input parameters for an asset or liability are not based on observable market information (non-observable parameters).

March 31, 2020 The parts measured at fair value: Financial assets measured at FVTPL Financial assets measured at FVTOCI Not measured at fair value: Investment property	Level 1 $ 13,337 - $ 13,337 $ -		Level 2 - -	Level 3 - 3,746		Total 13,337 3,746 17,083 420,061
			-	3,746
			-	420,061

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

Level 1 $ 20,931 -	Level 2 - -	Level 3 219,103 6,438
$ 20,931	-	225,541
$ -	-	322,604
Level 1 $ 25,179 -	Level 2 - 10,000	Level 3 - 16,950
$ 25,179	10,000	16,950
$ -	-	282,694

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

Unit: 1,000 TWD

Name					F	or th	e	Three Month	s E	nded March 31,	20	20	20
	$	Opening balance 219,103 6,438	Profit Recognized in profit or loss 1,231 -	an	d Losses		P		Inc	rease		Decrease Sales, disposal or clearing (220,334) -		Decrease
					Recognized in other comprehensi ve income - (2,692)			urchase - -		Transferred to level 3 - -
Financial assets measured at FVTPL Financial assets measured at FVTOCI Name


	$	225,541	1,231		(2,692)			-		-				(220,334)
					F	or th	e	Three Month	s E	nded March 31,	20	1	9
	$	Opening balance 71,603 12,541	Profit Recognized in profit or loss 1,521 -	an	d Losses		P		Inc	rease		Decrease Sales, disposal or clearing (73,124) -		Decrease
					Recognized in other comprehensi ve income - 4,409			urchase - -		Transferred to level 3 - -
Financial assets measured at FVTPL Financial assets measured at FVTOCI

	$	84,144	1,521		4,409			-		-			(73,124)

For March 31, 2020, December 31, 2019, and March 31, 2019, unrealized gains or

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

losses on assets held at the end of the reporting period amounted to $0 dollar, $411,000 dollars, and $0 dollar, respectively.

(5) Quantitative information on the fair value measurement of significant non-observable input values (level 3)

The consolidated companies through the profit and loss of fair value as the third level measured at the fair value of financial assets on March 31, 2020, December 31, 2019, and March 31, 2019, are respectively $0 dollar, $219,103,000 dollars, and $0 dollar, because there was no active market public offer reference and counterparties, and because in practice, it can’t fully grasp the major unobservable input value and the fair value of the relationship, so it did not reveal the quantitative information. The quantitative information list of the other significant unobservable input values measured at fair value at third level is as follows:

Relationship between significant unobservable Valuation Significant inputs and fair Item technique unobservable inputs value Financial assets Comparable ‧The multiple of ‧The higher the measured at Company book-to-Market ratio multiple, the higher － FVTOCI Analysis the fair value 0.74-0.80 as of Dec. investment in 31, 2019 and 1.19-1.21 ‧The higher the equity as of Dec. 31, 2018 discount for lack of instruments with marketability, the no active market ‧Discount for lack of lower the fair value marketability: 14.8%~16.8% as of Dec. 31, 2019 and Dec. 31, 2018 " Net asset value ‧Net asset value ‧Positive method correlation with fair value

(6) The fair value is classified in the third level of the evaluation process

The fair value of the consolidated company is measured using the unobservable input value, which is classified as the third level. The input value of this level is based on the price provided by the counterparty quotation or the price-to-market ratio multiplier of the market comparable company, etc., and relevant quotation and evaluation data are properly kept. The evaluation results are then checked to ensure consistency with the evaluation sources and to ensure that the evaluation results are reasonable.

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

(7) The fair value measurement of the third level and the sensitivity analysis of the fair value to the reasonable alternative hypothesis

The fair value measurement of financial instruments by the consolidated company is reasonable, but different evaluation models or evaluation parameters may result in different evaluation results. For financial instruments classified as level 3, if the evaluation parameters change, the impact on current profits and losses or other comprehensive income is as follows:

March 31, 2020 Financial assets measured at FVTOCI Investment in equity instruments with no active market Dec. 31, 2019 Financial assets measured at FVTOCI Investment in equity instruments with no active market Financial assets measured at FVTOCI Investment in equity instruments with no active market Financial assets measured at FVTOCI	Input	Rise or Drop	The change of fair value reflected in the profit or loss in the period	The change of fair value reflected in the profit or loss in the period	The change of fair value reflected in other comprehensive income	The change of fair value reflected in other comprehensive income
			Favorable change	Adverse change	Favorable change	Adverse change
	The multiple of book-to-Mark et ratio Discount for lack of marketability The multiple of book-to-Mark et ratio Discount for lack of marketability The multiple of book-to-Mark et ratio Discount for lack of marketability	5% 1% 5% 1% 1% 1%	- - - - - -	- - - - - -	103 29 171 51 172 172	(97) (23) (178) (58) (172) (229)

Favorable and unfavorable changes in the Consolidated company’s fair value represent fluctuations in fair value, which is calculated by using a valuation technique based on unobservable input parameters of varying degrees. Where the fair value of a financial instrument is affected by more than one input, the above table only reflects the effect of changes in a single input and does not take into account correlation and variability between inputs.

(25) Financial Risk Management

The consolidated companies’ financial risk management objectives and policies are consistent with those disclosed in the 2019 consolidated financial statement; see Note VI(26)

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

to the 2019 consolidated financial statement for related information.

(26) Capital management

The consolidated companies’ capital management objectives, policies and procedures have not changed materially from those disclosed in the 2019 consolidated financial statements; see Note VI(27) of the 2019 consolidated financial statements for related information.

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

Please refer to Notes VI(7) and VI(12) for information on the consolidated companies’ non-cash trading investments and fundraising activities for Right-of-use assets acquired under leases during the years ended March 31, 2020 and 2019.

The reconciliation of the consolidated companies’ liabilities from fundraising activities for the years ended March 31, 2020 and 2019 was as follows:

Short-term loan Lease liabilities Total liabilities from financing activites	109.1.1 Cash flow $ 29,980 (30,465) 155,411 (27,524)	Non-cash change Other Change in exchange rate Change in fair value March 31, 2020 - 485 - - 21,283 (1,981) - 147,189
	$ 185,391 (57,989)	21,283 (1,496) - 147,189

Short-term loan Lease liabilities Total liabilities from financing activites	108.1.1 Cash flow $ 919,643 (689,182) 241,482 (28,247)	Non-cash change Other Change in exchange rate Change in fair value March 31, 2019 - 679 - 231,140 2,931 4,586 - 220,752
	$ 1,161,125 (717,429)	2,931 5,265 - 451,892

(VII). Related party transactions

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

The related parties with whom the Company had transactions during the period covered by these consolidated financial statements are as follows:

Name of Related Party Relationship with the Company

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

(3) Material transactions with the related parties

1. Lease

The consolidated companies leases warehouses from a related party and enters into one-year lease contracts with a total value of $60,000 dollars. Interest expense recognized

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

was $0 dollar for both the years ended March 31, 2020 and 2019, and the balance of lease liabilities was $44,000 dollars, $59,000 dollars, and $103,000 dollars for the years ended March 31, 2020, December 31, 2019, and March 31, 2019, respectively.

(4) Major management personnel transaction

Related compensation includes:

Short-term employee benefits Post-employment benefits	For the Three Months Ended March 31,	For the Three Months Ended March 31,
	2020 $ 14,744 289	2019 11,576 214
	$ 15,033	11,790

(VIII). Pledged assets

As of March 31, 2020, December 31, 2019, and March 31, 2019, property, plant and equipment to provide financial institutions of financing guarantee loan contracts have expired without a renewal, and they have received a liquidation proof of the bank. However, the pledged note cancellation procedures have not yet been completed. The book value of the relevant land is $28,250 thousand, and the book value of the housing construction is $16,368,000 dollars, $16,368,000 dollars, and $16,107,000 dollars, respectively.

(IX). Significant contingent liabilities and unrecognized contractual commitments

(1) Significant unrecognized contractual commitments:

As of March 31, 2020, the consolidated companies, had signed and unpaid major plant construction contracts, with the value of approximately RMB 70,054,000 dollars.

The consolidated companies had entered into outstanding information system related contracts as of March 31, 2020 for an amount of approximately $54,285,000 dollars.

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

Guaranteed notes

March 31, 2020 Dec. 31, 2019 March 31, 2019 $ 2,553,050 2,358,960 2,309,360

(X). Significant Disaster Loss: None.

(XI). Significant post-period events:

In order to diversify the product portfolio and expand the market customers, and for the purpose of expanding the scale of operation, Lintes Technoligy Co., Ltd.’s (Lintes Tech) board of directors resolved on May 5, 2020 to acquire 6,041,000 shares of common stock, amounting to $78,533,000 from Zheng, Liang-Zhong, the chairman of Genie Precision Machining Co., Ltd. (Genie Precision), at $13 per share in May 2020; Lintes Tech expects its shareholding to be 63.93%.

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

(XII). Others

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

below:
Function Item	For the Three Months Ended March 31,2020			For the Three Months Ended March 31,2019
	Operation cost	Operation expense	Total	Operation cost	Operation expense	Total
Employee benefit expense Salaries expense Labor insurance and health insurance expenses Pension expense Compensation of directors Other employee benefit expenses Depreciation expense Amortization expense	342,388 75,809 89 - 25,918 202,421 306	241,568 21,541 2,551 1,355 23,150 90,304 3,268	583,956 97,350 2,640 1,355 49,068 292,725 3,574	367,211 73,971 80 - 27,628 259,194 130	213,320 25,206 2,398 1,475 27,278 44,488 2,544	580,531 99,177 2,478 1,475 54,906 303,682 2,674

(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 significant transactions in 2020:

1. Capital Lending to Others:

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

==> picture [461 x 84] intentionally omitted <==

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

No. Collateral
Lender Borrower Item Related Max Amount Balance at the Actual Interest Nature Business Purpose f or Allowance Name Value Individual Overall limit
Party for the term end Lending Amount rate lending of the Amount the lending for bad debt Limit (Note 2) (Note 2)
(Note
1)
0 Lotes Intracom Y 131,496 127,980 85,320 5% 2 - Working - None - 2,437,745 4,875,491
The Company Guanghou pany (RMB30,000) (RMB30,000) Capital
Co., Ltd transacti
on
0 〞〞〞 Y 213,300 213,300 - 5% 2 - 〞 - None - 2,437,745 4,875,491
(RMB50,000) (RMB50,000)
----- End of picture text -----

Note 1: The description of loaning funds to others are as follow:

(1) Where an business transaction is necessary.
(2) Where an short-term financing facility is necessary.

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.

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

2. Endorsement :

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

No.	Name of the Company that provides the endorsement	Endorsee	Endorsee	Ceiling on amount of endorsement for a enterprise (Note 2)	Balance of the ceiling endorsement fee in the period	Ending balance of the endorsement fee	Amount actually used	Amount of endorsement backed by assets	Percentage of the accumulated amount of endorsement in the net value of current financial statement (%)	Ceiling on amount of endorsement (Note 2)	Endorsement made by parent company to subsidiary	Endorsement made by subsidiary to parent company	Endorsement made to any party in Mainland China
		Company Name	Relations hip (Note 1)
0 0 0 0 1 2	The Company “ “ “ Lotes Guanghou Co., Ltd Lintes Technology Co., Ltd	REKA Technology Co., Ltd. Lotes Suzhou Co., LTD Lotes Guanghou Co., Ltd`及`Lotes Suzhou Co., LTD Lotes Guanghou Co., Ltd REKA Technology Co., Ltd. Lintes Technology (Suzhou) Co., Ltd.	2 2 2 2 1 2	2,437,745 2,437,745 2,437,745 2,437,745 896,489 770,798	35,000 151,250 (USD5,000) 453,750 (USD15,000) 907,500 (USD30,000) 90,750 (USD3,000) 181,500 (USD6,000)	35,000 151,125 (USD5,000) 453,375 (USD15,000) 906,750 (USD30,000) 90,675 (USD3,000) 181,350 (USD6,000)	- - - - - -	- - - - - -	0.29% 1.24% 3.72% 7.43% 2.02% 11.76%	6,094,364 6,094,364 6,094,264 6,094,364 2,241,223 1,541,596	Y “ “ “ N “	N “ “ “ “ “	N Y “ “ N Y

Note 1: There are seven types of relationship between the Endorser and Endorsee, which can be marked:
(1) Companies with business dealings.
(2) Companies in which the company directly and indirectly holds more than 50% of the voting rights.
(3) Companies that hold more than 50% of the voting rights in the company, both directly and indirectly.
(4) The Company owns, directly and indirectly, more than 90 percent of the voting shares.
(5) Company that is mutually insured under a contract between its peers or co-manufacturers based on the need to perform the work.
(6) Company in which all of the contributory shareholders have given their endorsement in proportion to their shareholding in the joint venture.
(7) Intercompany performance guarantees and guarantees for pre-sale contracts in accordance with the Consumer Protection Act.
Note 2: (1) The amount of the Company’s guarantee for a single corporate endorsement shall not exceed 20% of the net worth of the Company 。

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

(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

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

controlled by subsidiaries, affiliated companies, or joint company ):

Unit: 1,000 TWD

				Unit: 1,000	Unit: 1,000	Unit: 1,000	Unit: 1,000	TWD
Company which holds securities	Category and name of security	Relationship with the issuer of the security	Listed as	End of the fiscal period				Note
				Shares	Book Value	Shareholding proportion	Fair value
Jiayu Investment Co., Ltd. “ “ “ “ “ “	Grand-Tek Technology Co., Ltd. APAQ Technology Co., Ltd. OtO Photonics Inc. Lucemitek Co., Ltd Radinet Communications Inc. Kuang Ying Computer Equipment Co., Ltd. AICP Technology Corporation	None “ “ “ “ “ “	Financial assets measured at FVTPL - current “ “ “ “ Financial assets measured at FVTOCI current “	163,980 345,000 1,368,800 1,169,977 600,000 1,500,000 400,000	5,264 8,073 - - - 1,981 1,765	0.67 % 0.41 % 5.35 % 17.33 % 18.37 % 5.73 % 5.33 %	5,264 8,073 - - - 1,981 1,765	Note Note Note

Note: All of them were recognized in losses.

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

Unit: 1,000 TWD

The company which acquired the property	Name of Asset	Date of occurence	Amount of Transaction (Note 2)	Payment condition (Note 2)	Counterpart y of transaction	Relations hip	If the counterparty is a related party, the information of its previous transfer shall be provided	If the counterparty is a related party, the information of its previous transfer shall be provided	If the counterparty is a related party, the information of its previous transfer shall be provided	If the counterparty is a related party, the information of its previous transfer shall be provided	Reference for pricing	Purpose of the acquisition andthe condition of use	Other agreed matters
							Owner	Relationship with the Issuer	Date of transfer	Amount
Lotes Zhongshan Co., Ltd	Plant (Note 1)	106.10 ~ 109.3	849,881	676,452	Chongqing Chuangyou Construction Group, etc	None	-	-	-	-	Bidding	For the constructio n of a plant	None

Note 1: Build the factory by own contracting committee.

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

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

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

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

Unit: 1,000 TWD

The company which purchases (sells) products	Name of Transaction Counterparty	Relationship	Condition of Transaction	Condition of Transaction	Condition of Transaction	Condition of Transaction	Situation and reason for the conditions of transaction to be different from the ordinary ones	Situation and reason for the conditions of transaction to be different from the ordinary ones	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Remarks
			Purchase (sales)	Amount	Percentage in total goods purchased (sold)	Credit period	Unit Price	Credit period	Balance	Percentage in the notes and accounts receivable (payable)
Xincheng Development Co., Ltd. “ REKA Technology Co., Ltd. “ “ Lotes Guanghou Co., Ltd Lintes Technology (Suzhou) Co., Ltd.	The Company Lotes Suzhou Co., LTD The Company Lotes Guanghou Co., Ltd Zongka Technology (Shenzhen) Co., Ltd. REKA Technology Co., Ltd. Lintes Technology Co., Ltd	Subsidiary The surrogate parent company are the same parent company Subsidiary The surrogate parent company are the same parent company “ “ Subsidiary	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 expense from the goods purchased	237,267 248,135 1,260,851 1,564,761 152,678 430,567 272,529	95.62 % 100.00 % 73.85 % 91.80 % 8.94 % 32.35 % 95.37 %	Settled by month at intervals of 90 days “ “ “ “ “ “	- - - - - - -	No significant difference “ “ “ “ “ “	150,313 (168,261) 1,530,003 (879,844) 279,167 (240,322) 243,976	88.56% 100.00% 59.71% 35.68% 10.89% 25.01% 93.86%

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

capital:

Unit: 1,000 TWD

Related party with accounts receivable by the Company	Name of transaction counterparty	Relationship	Balance of receivalbes from the related party	Turnover Ratio	Past due receivables from the relatedparty	Past due receivables from the relatedparty	Receivables from the related party Amount received after the period ended	Appropriated Allowance Amount of loss
					Amount	Solution
Xincheng Development Co., Ltd. REKA Technology Co., Ltd. “ “ Lotes Suzhou Co., LTD Good Hope Investments Limited Lotes Guanghou Co., Ltd Lintes Technology (Suzhou) Co., Ltd.	The Company The Company Lotes Guanghou Co., Ltd Zongka Technology (Shenzhen) Co., Ltd. Xincheng Development Co., Ltd. REKA Technology Co., Ltd. “ Lintes Technology Co., Ltd	Subsidiary Subsidiary The surrogate parent company are the same parent company “ The surrogate parent company are the same parent company Parent company The surrogate parent company are the same parent company Subsidiary	150,313 1,530,003 240,322 279,167 168,261 934,589 879,844 243,976	5.25 2.82 5.52 2.18 4.91 - 5.19 4.03	- - - - - - - -		45,391 380,439 80,710 56,039 50,907 - 594,535 147,031	- - - - - - - -

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

9. Engagement in derivative transactions:

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

Company conducting transaction	Investment target	Transaction date	Maturity date	Contract period	Contract Price	Profit or loss from investment
The Company “ “ “ “	Swap contract of metal products Swap contract of metal products Swap contract of metal products Swap contract of metal products Swap contract of metal products	2020.02.04 2020.02.04 2020.02.04 2020.02.04 2020.02.04	2020.03.04 2020.03.04 2020.03.04 2020.03.09 2020.03.09	29 29 29 34 34	USD 570 USD 570 USD 286 USD 286 USD 572	(48) (64) (42) 18 36

10. Business relationships and material transactions between parent and subsidiaries:

Business relationships and significant intercompany transactions for the three months ended March 31, 2020:

Unit: 1,000 TWD

No.	Name	Transaction with	Relation ship		Transaction in 2020	Transaction in 2020
				Subject	Amount	Term	Operating revenue Accounting for total assets
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0	The Company “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “	Ememe Robot Co., Ltd “ Lintes Technology Co., Ltd “ “ “ “ “ Jiayu Investment Co., Ltd. LOTES USA, INC. “ Xincheng Development Co., Ltd. “ “ “ REKA Technology Co., Ltd. “ “ “ “	1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1	Accounts receivable Other accounts receivable Other income Accounts receivable Net revenue from the goods sold Net expense from the goods purchased Accounts payable Other accounts receivable Other income Administration fee Other accounts receivable Accounts payable Net expense from the goods purchased Other payables Selling expenses Accounts receivable Accounts payable Net expense from the goods purchased Sales Revenue Other accounts receivable	2,982 2,272 155 43 62 4,112 5,217 163 17 37,036 11,545 150,313 237,267 64 70 11,242 1,530,003 1,260,851 6,880 676	Same as other transactions “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “ “	0.02% 0.01% -% -% -% 0.13% 0.03% -% -% 1.18% 0.07% 0.92% 7.56% -% -% 0.07% 9.35% 40.19% 0.22% -%
0	“	“	1	Other payables	3,76 “		0.02%
0	“	Lotes Guanghou Co., Ltd	1	Other accounts receivable	91,57	“	0.56%
0	“	“	1	Interest income	65	“	0.02%

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

N o. Name Transaction with Relat ionsh ip 0 “ Compertum Microsystems Inc. 1 0 “ “ 1 0 “ Lerain Technology Co., Ltd. 1 “ “ 1 1 Lotes Guanghou Co., Ltd REKA Technology Co., Ltd. 3 1 “ “ 3 1 “ “ 3 1 “ “ 3 1 “ “ 3 1 “ Lotes Suzhou Co., LTD 3 1 “ “ 3 1 “ “ 3 1 “ “ 3 1 “ Lotes Hengnan Co., Ltd. 3 1 “ “ 3 1 “ “ 3 1 “ “ 3 1 “ “ 3 1 “ Zongka Technology (Shenzhen) Co., Ltd. 3 1 “ “ 3 1 “ “ 3 1 Lotes Guanghou Co., Ltd Zongka Technology (Shenzhen) Co., Ltd. 3 1 “ “ 3 . “ “ 3 1 “ “ 3 1 “ Shenzhen Deyi Automation Technology Co., Ltd. 3 1 “ “ 3 1 “ “ 3 1 “ “ 3 1 “ “ 3 1 “ “ 3 1 “ Lintes Technology (Suzhou) Co., Ltd. 3 1 “ “ 3 1 “ Lotes Zhongshan Co., Ltd 3 1 “ “ 3 1 “ “ 3 1 “ Guangzhou Leside Technology Co., Ltd. 3 1 “ “ 3 1 “ “ 3 1 “ “ 3 2 Lotes Suzhou Co., LTD Xincheng Development Co., Ltd. 3	Trans	action in 2020	action in 2020
	Subject Amount	Term	Operating revenue Accounting for total assets
	Other income “ -% Other accounts receivable 216 “ -% Other income 3 “ -% Other accounts receivable 44 “ -% Accounts receivable 879,844 “ 5.38% Accounts payable 240,322 “ 1.47% Purchasing for the term 430,657 “ 13.73% Sales Revenue 1,564,76 “ 49.88% Other payables 5,69 “ 0.03% Sales Revenue 1,15 “ 0.04% Purchasing for the term 874 “ 0.03% Accounts receivable 2,38 “ 0.01% Accounts payable 1,53 “ 0.01% Purchase of molds 62,67 “ 2.00% Accounts receivable 8 “ -% Accounts payable 43,86 “ 0.27% Sale of fixed assets 5,35 “ -% Sales Revenue 9 “ -% Administration fee 172 “ -% Accounts receivable 876 “ 0.01% Accounts payable 19 “ -% Other accounts receivable 17 Same as other transactions -% Purchasing for the term 163 “ -% Sales Revenue 200 “ -% Other income 49 “ -% Accounts receivable 659 “ -% Accounts payable 524 “ -% Other accounts receivable 13 “ -% Sales Revenue 339 “ 0.01% Purchasing for the term 233 “ -% Other income 37 “ -% Sales Revenue 9,717 “ 0.31% Accounts receivable 40,186 “ 0.25% Other payables 7,491 “ 0.05% Accounts receivable 2,736 “ 0.02% Other accounts receivable 14,499 “ 0.09% Accounts receivable 1,299 “ 0.01% Other accounts receivable 43 “ -% Sales Revenue 985 “ 0.03% Other income 30 “ -% Sales Revenue 248,135 “ 7.91%

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

2
“
“
3
Accounts receivable
168,261
“
1.03%
2
“
“
3
Accounts payable
827
“
0.01%
2
“
“
3
Purchasing for the
term
160
“
0.01%
2
“
Zongka Technology
(Shenzhen) Co., Ltd.
3
Sales Revenue
11,48
“
0.37%
No.
Name
Transaction with
Rel
ati
ons
hip
Transaction in 2020
Subject
Amount
Term
Operating revenue
Accounting for total
assets

2
2
2
2
2
2
2
2
3
3
3
3
3
3
3
3
3
3
3
3
3

“
“
3
Accounts receivable
18,635
“
0.11%
“
Lintes Technology
(Suzhou) Co., Ltd.
3
Sales Revenue
2,464
“
0.08%
“
“
3
Other accounts
receivable
5,277
“
0.03%
“
“
3
Accounts receivable
27,067
“
0.17%
“
“
3
Other income
3,140
“
0.10%
“
“
3
Sale of fixed assets
21,303
“
0.13%
“
Shenzhen Deyi
Automation Technology
Co., Ltd.
3
Sales Revenue
10,570
“
0.34%
“
“
3
Accounts receivable
17,035
“
0.10%
REKA
Technology Co.,
Ltd.
Xincheng Development
Co., Ltd.
3
Purchasing for the
term
10,688
“
0.34%
“
“
3
Accounts payable
18,529
“
0.11%
“
Zongka Technology
(Shenzhen) Co., Ltd.
3
Sales Revenue
152,678
“
4.87%
“
“
3
Accounts receivable
279,167
“
1.71%
“
Good Hope Investments
Limited
3
Accounts payable
934,589
“
5.71%
“
Ememe Robot Co., Ltd
3
Accounts receivable
8,277
“
0.05%
“
Lotes Hengnan Co., Ltd.
3
Sales Revenue
39,029
“
1.24%
“
“
3
Accounts receivable
45,032
“
0.28%
“
“
3
Purchasing for the
term
233
“
0.01%
“
“
3
Accounts payable
47,920
“
0.29%
“
Shenzhen Deyi
Automation Technology
Co., Ltd.
3
Sales Revenue
34,159
“
1.09%
“
“
3
Accounts receivable
70,530
“
0.43%
“
Lotes Zhongshan Co., Ltd
3
Accounts receivable
23,863
“
0.15%

4
Lotes Hengnan
Co., Ltd.
Shenzhen Deyi
Automation Technology
Co., Ltd.
3
Sales Revenue
5,763
Same as other
transactions
0.18%
4
“
“
3
Accounts receivable
6,579
“
0.04%
4
“
Zongka Technology
(Shenzhen) Co., Ltd.
3
Sales Revenue
18,697
“
0.60%
4
“
“
3
Accounts receivable
47,483
“
0.29%
4
“
Lotes Suzhou Co., LTD
3
Sales Revenue
1,362
“
0.04%
4
“
“
3
Purchasing for the
term
130
“
-%
4
“
“
3
Accounts receivable
1,557
“
0.01%
5
Lintes Technology
(Suzhou) Co., Ltd.
Lintes Technology Co.,
Ltd
3
Sales Revenue
272,529
“
8.69%
5
“
“
3
Accounts payable
21,299
“
0.13%
5
“
“
3
Accounts receivable
243,976
“
1.49%
6
Zongka
Technology
(Shenzhen) Co.,
Ltd.
Lotes Zhongshan Co., Ltd
3
Accounts payable
19,317
“
0.12%

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

0 refer to parent company

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

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

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

(2) Information on Reinvestment Business:

Information on the Company’s investees in the three months ended March 31, 2020 was as follows (excluding investees in China):

Unit: 1,000 TWD

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	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
Lintes Technology Co., Ltd “ Jilong Co., Ltd. The Company “ “ “ “ “ “ “ Lotes Investment Ltd. Good Hope Investments Limited “ Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co., Ltd. “ “	Jiajyun Investment Co., Ltd. Jilong Co., Ltd. Rihui Co., Ltd. Lotes Investment Ltd. Good Hope Investments Limited Guansi Development Co., Ltd. Zhaxi Investment Co., Ltd. Jiayu Investment Co., Ltd. Lotes USA, Inc. LOTES EU GmbH Lerain Technology Co., Ltd. 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. Lintes Technology Co., Ltd	Taiwan Samoa “ Samoa “ “ Anguilla Taiwan America Germany Taiwan Hong Kong Samoa Hong Kong “ “ Taiwan “ “	General investment Holding and investment businesses Holding and investment businesses Holding and investment businesses “ “ “ General investment Market development Market development Chip design, testing and sales Holding and investment businesses Telecommunicati on services and sales of connectors for consumer electronics industry Telecommunicati on services and sales of connectors for consumer electronics industry Holding and investment businesses Holding and investment businesses Electric Appliance and Audiovisual Electric Products Manufacturing Electronic Parts and Components Manufacturing Electronic Parts, Components, Electrical Machinery, Supplies Manufacturing	15,000 149,614 149,614 787,361 12,129 604,996 15,113 690,000 75,563 3,324 9,385 787,361 3,023 3,061 605,006 15,113 69,600 13,164 486,926	- 148,401 148,401 780,979 12,030 600,092 14,990 690,000 74,950 3,359 - 780,979 2,998 3,036 600,102 14,990 69,600 13,164 486,926	1,500,000 4,950,000 4,950,000 26,050,000 401,281 20,016,426 500,000 69,000,000 2,500,000 100,000 938,525 26,050,000 100,000 101,281 20,016,756 500,000 6,960,000 1,316,400 29,712,788	100.00% 100.00% 100.00% 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% 94.37% 46.74% 52.13%	15,000 190,121 190,121 4,386,087 1,521,034 1,924,558 114,827 889,442 79,400 2,871 8,719 4,482,464 1,742 584,678 1,936,569 114,827 (4,968) 6,269 807,789	- 9,340 9,340 (12,846) (29,382) 31,798 3,974 16,711 30,442 (801) (1,964) (12,846) (9) (29,373) 31,798 3,974 124 (14,263) 54,384	- 23,222 23,222 27,018 (29,382) 36,478 3,974 16,710 30,442 (801) (666) (12,846) (9) (29,373) 31,798 3,974 117 (6,667) 30,771	Note 2 Note 2 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.

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

(3) Investment in Chinese Company:

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

related information:	related information:	related information:	related information:	related information:
					Unit: 1,000 TWD
Name of investee company in Mainland China	Main business	Paid-in capital (Note 3)	Method of investme nt (Note 1)	Accumulated investment amount remitted from Taiwan at the beginning of the fiscal period (Note 3)	Amount remitted or retrieved		Accumulated investment amount remitted from Taiwan at the end of the fiscal period (Note 3)	Gain/loss of investee company in the fiscal period	Shareholdin g Rati	Gain/loss in investment recognized in the fiscal period (Note 2)	Carrying amount of investment at the end of the fiscal period	Investment income remitted back to Taiwan by the end of the fiscal period
					Remittance	Retrieved
Lotes Guanghou Co., Ltd Lotes Suzhou Co., LTD Zongka Technology (Shenzhen) Co., Ltd. Lotes Hengnan Co., Ltd. Lintes Technology (Suzhou) Co., Ltd. Shenzhen Deyi Automation Technology Co., Ltd. Lotes Zhongshan Co., Ltd Zhongshan Dezhi Metal Surface Treatment Co., Ltd. Hengnan Deyi Property Development Co., Ltd. Guangzhou Leside Technology Co., Ltd. Chongqing Fuxinrui Electronic Technology Co., Ltd.	Manufacturing connectors for telecommunication industry and for consumer electronics industry Manufacturing connectors for telecommunication industry and for consumer electronics industry R&D of electronics, import and export of raw materials of plastic products and plastic products Manufacturing connectors for telecommunication industry and for consumer electronics industry Development and production of the measurement instruments for optical communication, optical transceivers of 10GB/s or above and relevant technical support Manufacturing of robotic arms, automation equipment and relevant components Manufacturing connectors for telecommunication industry and for consumer electronics industry, and Manufacturing of robotic arms, automation equipment and relevant components Surface treatment of metal products and plastic products Development of real estate, lease of premises, landscape design and interior decorating Research, testing and development R&D and sales of electronic components, automobile components and accessories, computers and accessories, development of molds and the import and export of goods and technologies	807,008 604,174 15,113 369,009 149,614 106,650 1,151,820 31,995 98,118 2,986 2,560	(2) (2) (2) (3) (2) (3) (3) (3) (3) (3) (3)	770,738 604,174 15,113 - 149,614 - - - - - -	- - - - - - - - - - -	- - - - - - - - - - -	770,738 604,174 15,113 - 149,614 - - - - - -	(12,846) 31,798 3,974 7,971 5,405 3,139 (7,753) (2,687) (23) (615) (297)	100.00% 100.00% 100.00% 100.00% 52.13% 100.00% 100.00% 100.00% 100.00% 100.00% 51.00%	27,013 36,478 3,974 13,584 10,054 3,139 (7,753) (2,687) (23) (615) (152)	4,386,061 1,924,501 114,827 513,218 122,602 79,111 1,119,838 29,340 98,090 721 629	- - - - - - - - - - -

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.

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

2. Investment ceiling in Mainland China:

Name	Accumulated amount remitted from Taiwan at the end of the fiscal period for investment in Mainland China (Note 1)	Investment amount approved by Investment Commission, MoEA (Note 1)	Investment ceiling in Mainland China according to the regulations made by Investment Commission, MoEA
LotesCo.,Ltd.	1,390,025,000	1,535,499,000	7,313,236,000
Lintes Technology Co.,Ltd	149,614,000	149,614,000	924,958,000

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

3. Significant transactions with the investee companies in China:

Please refer to the “Significant Transactions” and “Business relationship and significant transactions between the Company and its subsidiaries” for details of the significant transactions between the Company and its investee companies in Mainland China, directly or indirectly, as of March 31, 2020.

(4) Principal shareholder information:

ina, directly or indirectly, as of March 31, 2020. ipal shareholder information:
Shares Major Shareholders	Shareholding
	Shares	Percentage
Jinling Investment Co., Ltd.	10,956,237	10.58%
Jiaming Investment Co., Ltd.	9,873,037	9.54%
Cathay Life Insurance Company, Ltd.	5,925,000	5.11%
2nd discretionary entrustment to investment account of Nomura Asset Management Taiwan for New Labor Pension Fund 2018	5,185,159	5.01%

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 System for more information on the declaration of internal shareholdings.

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

(XIV). Segmental Information

(1) General Information

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

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

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

(3) Product and Labor Provision Information

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

Product and Labor Provision	For the Three Months Ended March 31, 2020 2019 $ 336,677 349,386 293,431 275,265 205,730 221,298 168,805 1,646 156,885 147,427 2,691 185,316 1,972,621 2,072,541	For the Three Months Ended March 31, 2020 2019 $ 336,677 349,386 293,431 275,265 205,730 221,298 168,805 1,646 156,885 147,427 2,691 185,316 1,972,621 2,072,541
A product B product C product D product E product F product Others Total
	$ 3,136,840	3,252,879

(4) Geographical Information

The Consolidated company’s geographical information is shown below, where revenue is classified based on the geographic location of customers and non-current assets are classified based on the geographic location of assets.

classified based on the geographic location of assets.
Area External client revenue: Taiwan Mainland China Other countries Total	For the Three Months Ended March 31, 2020 2019 $ 238,609 109,038 2,275,115 2,701,457 623,116 442,384
	$ 3,136,840 3,252,879

AI assistant

LOTES — Interim / Quarterly Report 2020

52339_rns_2020-11-13_727bcef2-f1a0-468f-a7ad-de21c4ec9c5f.pdf

Lotes Co., Ltd. and its Subsidiaries

Consolidated Financial Statements and Accountant’s Review Report

Notice to Readers

Table of Contents

Independent Auditor’s Review Report

Foreword

Scope

Conclusion

March 31, 2020 and 2019 are reviewed only, not audited in accordance with GAAS Lotes Co., Ltd. and its Subsidiaries

Consolidated Balance Sheet

March 31, 2020, December 31, 2019, and March 31, 2019

Unit: 1,000 TWD

Reviewed only, not audited in accordance with GAAS Lotes Co., Ltd. and its Subsidiaries

Consolidated Statement of Comprehensive Income

For the Three Months Ended March 31, 2020 and 2019

Unit: 1,000 TWD

Reviewed only, not audited in accordance with GAAS Lotes Co., Ltd. and its Subsidiaries

Consolidated Statement of Changes in Equity For the Three Months Ended March 31, 2020 and 2019

Reviewed only, not audited in accordance with GAAS Lotes Co., Ltd. and its Subsidiaries

Consolidated Statement of Cash Flows

For the Three Months Ended March 31, 2020 and 2019

Unit: 1,000 TWD

Reviewed only, not audited in accordance with GAAS

Lotes Co., Ltd. and its Subsidiaries Notes to the Consolidated Financial Statements March 31, 2020 and 2019

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

(I). Company History

(II). Date and Procedures of Approval of Financial Statement

(III). Application of New and Revised Standards and Intepretations

New release/revision/amendment of guidelines and

interpretations

Effective date upon promulgation

by the IASB

(IV). Summary of Major Accounting Policies

(1) Compling Basis

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

(VI). Descriptions for important accounting items

2. Financial assets measured at FVTOCI

(4) Inventroy

(5) Subsidiaries with significant non-controlling interests

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

(7) Property, plant and equipment

(7) Right-of-use assets

(8) Investment property

(10) Other financial assets

(11) Short-term loans

1. Lease of land, premises and buildings

2. Other leases

(13) Refund liabilites - current

(14) Provisions

(15) Operating lease

1. Lessor lease

(16) Employee benefits

1. Defined benefit plans

2. Defined Contribution Plan

1. Capital reserve

2. Retained earnings

(1) Legal reserve

(2) Special reserve

(3) Earnings distribution

(19) Share-based payment

(20) Earnings per share

2. Balance of Contract

1. Other income

2. Other income and losses

3. Financial cost

(23) Remuneration for employees and directors, supervisors

(24) Financial instruments and fair value information

1. Credit risk

(2) Credit risk concentration risk

(3) Impairment loss

2. Liquidity risk

(2) Sensitivity analysis

4. Market risk - changes in interest rates

(25) Financial Risk Management

(26) Capital management

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

(VII). Related party transactions

LOTES Interim / Quarterly Report 2020

`Notice to Readers`