LU HAI - Annual Report 2021 | FinancialReports.eu

Stock Code : 2115

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LU HAI HOLDING CORP.

2020 Annual Report

Taiwan Stock Exchange Market Observation Post System: http://mops.twse.com.tw Company website: http://www.luhai.com.tw

Printed on June 1, 2021

I. Spokesman: Deputy Spokesman: Name: CHANG, CHI-CHI Name: WU, KO-LI Title: Senior Manager, GM Room Title: Manager, Sales Dept. Tel: (04) 874-8122 Tel: (04) 874-8122 E-mail: [email protected] E-mail: [email protected]

II. Address and telephone number of all operation locations:

Head office: LU HAI HOLDING CORP. Add: The Grand Pavilion Commercial Centre, Oleander Way, 802 West Bay Road, P.O. Box 32052, Grand Cayman KY1-1208, Cayman Islands, British West Indies Tel: (04) 874-8122 Taiwan Branch :[British Cayman Islands Merchant LU HAI HOLDING CORP.(Branch in ] Taiwan) Add: No.64, Shing-kong 5th Rd, Tien-Chung Industrial District, Tien-chung, Chang-hua Taiwan. Tel: (04) 874-8122 Subsidiary: LU HAI INDUSTRIAL CORP. Add: No.64, Shing-kong 5th Rd, Tien-Chung Industrial District, Tien-chung, Chang-hua Taiwan. Tel: (04) 874-8122 Subsidiary: Xiamen Xiahui Rubber Metal Ind. Co., Ltd. Add: No.41, Xinyuan Rd, Xing Lin District, Xiamen China. Tel: 0592-6210902-4 Subsidiary: LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. Add: No.586 FengXing Road, HuaQiao Town, Kunshan City, Jiangsu Province, P.R.China. Tel: 0512-57601216 Subsidiary: PT. LUHAI INDUSTRIAL Add: d\a. Jl. Raya Cikande Rangkasbitung Km. 4.5. Desa Junti. Jawilan. Serang, Indonesia Tel: 62-254-8488333 Subsidiary: ALLPRO INTERNATIONAL CORP. Add: Corner Hutson & Eyre Street, Blake Building, Suite 302, Belize City, Belize. Tel: (04) 874-8122 Subsidiary: LU HAI (BVI) INDUSTRIAL CORP. Add: Vistra Corporate Services Centre, Wickhams Cay Ⅱ , Road Town, Tortola, VG1110, British Virgin Islands. Tel: (04) 874-8122 Subsidiary: YUANHUI INTERNATIONAL CO., LTD. Add: Level 3, Alexander House, 35 Cybercity, Ebene Mauritius. Tel: (04) 874-8122

III. Stock Transfer Agent ：

Name: Stock Agent Department, Sinopac Securities Address: 3F., No.17, Bo-Ai Road, Zhongzheng Dist, Taipei City Website: http://www. sinotrade.com.tw Tel: (02) 2381-6288

IV. Contact information of the Certified Public Accountants for the Latest Financial Report: Auditors: LIN, MING-SHOU; SHAO, CHAO-BIN

CPA Firm: Crowe (TW) CPAs

Address: 15F., No.285, Sec.2, Taiwan Boulevard, West Dist., Taichung City Website: https://www.crowe.tw Tel: (04) 3600-5588

V. Overseas Trade Places for Listed Negotiable Securities: None.
VI. Company Website: http://www.luhai.com.tw
VII. Litigation representative in R.O.C.

Name: HSU, LIEN-KAI Title: Chairman E-mail: [email protected] Tel: (04) 874-8122

VIII. Board members:

Title	Name	Nationality	Major education background & experience
Chairman	HSU, LIEN- KAI	R.O.C.	General Manager of LU HAI HOLDING CORP. Department of Law, NationalChengchiUniversity
Director	WU, CHIN- LU	R.O.C.	Chairman of LU HAI HOLDING CORP. Chairman of LU HAI INDUSTRIAL CORP. Graduated from Dah-Chin Commercial & Industrial Vocation High School
Director	WU, CHING-SHU	R.O.C.	Director of LU HAI INDUSTRIAL CORP. Supervisor of LU HAI INDUSTRIAL CORP. Director of LU HAI HOLDING CORP. Master degree of Management, National Chung Hsing University
Director	HSU, YA- TING	R.O.C.	Section Manager of YOKE Industrial Corp. Assistant VP of LU HAI HOLDING CORP. Department of Finance, National Taichung University ofScience andTechnology
Director	HSU, HUAI- YUN	R.O.C.	General Manager of Yun-Yi International Ltd. Information Management,Tamkang University
Director	HSU, HAN- YUAN	R.O.C.	Business Manager of Yuan-Hong Metal Co., Ltd. Assistant VP of LU HAI HOLDING CORP. General Manager ofXiamen Xiahui Rubber Metal Ind. Co., Ltd. Civil Engineering Department, Nanya Institute of Technology
Independent Director	YEN, MEI- YING	R.O.C.	Assistant VP of PONY Leather Corporation Master degree of Accounting, National Taiwan University
Independent Director	CHANG, HORNG- YAN	R.O.C.	Full-time Adjunctive Professor of Department of Communications Management and Department of Business Administration, Shih Hsin University Part-time Professor of Department of Business Administration, Soochow University Enterprise Research Institute and Accounting Institute ofSt. John’s University, NewYork, US
Independent Director	HU, TA- HSIANG	R.O.C.	Associate Professor of Department of Electrical Engineering, Da-Yeh University Doctor of Electrical Engineering, University of Hawaii, US

	Table of Contents
I.	Letter to Shareholders................................................................................................................................1
II.	Company Profile
	2.1 Company and Group Introduction ........................................................................................................ 5
	2.2 Company history ................................................................................................................................... 5
	2.3 Risk Management ................................................................................................................................. 7
III.	Corporate Governance Report
	3.1 Organization system .............................................................................................................................. 8
	3.2 Information of directors, supervisors, General Manager, Vice President, Assistant Vice President,
	and head of each department and branch ............................................................................................ 10
	3.3 Remuneration of Directors, Supervisors, General Manager and Vice Presidents in the Last Year .... 15
	3.4 Corporate governance operation situation .......................................................................................... 19
	3.5 Accountant’s fees information ............................................................................................................ 53
	3.6 Information on change of CPA ........................................................................................................... 54
	3.7 Whether the Chairman, General Manager, and managerial officers responsible for financial or
	accounting affairs of the Company once worked in the affiliated firm or enterprise of the CPA in
	the last year ......................................................................................................................................... 54
	3.8 In the last year and as at the publication date of annual report, stock right transfer and changes in
	pledge of stock right in the directors, supervisors, managerial officers and shareholders with
	shareholding ratio over 10% ............................................................................................................... 54
	3.9 Information that the top ten shareholders in shareholding are of interested party, spouse or relatives
	within second degree relationship mutually ........................................................................................ 55
	3.10 Number of shareholding of the Company, the directors, supervisors, managerial officers of the
	Company, and the enterprise under direct or indirect control of the Company in the same
	reinvestment enterprise, and the consolidated comprehensive shareholding ratio ............................. 58
IV.	Fundraising Situation
	4.1 Capital and stock ................................................................................................................................. 59
	4.2 Status of Corporate bonds ................................................................................................................... 64
	4.3 Status of Preferred Shares ................................................................................................................... 64
	4.4 Issuance of Global Depositary Receipts ............................................................................................. 64
	4.5 Status of Employee Stock Options Plan.............................................................................................. 64
	4.6 Status of New Restricted Employee Shares ........................................................................................ 64
	4.7 Status of New Share Issuance in Connection with Mergers and Acquisitions ................................... 64
	4.8 Financing Plans and Implementation .................................................................................................. 64
V.	Operational Highlights
	5.1 Business content .................................................................................................................................. 65
	5.2 Market, production and marketing overview ...................................................................................... 77
	5.3 Information of service employees in the last 2 years and as at the publication date of annual report .. 86
	5.4 Environmental protection expenditure information ............................................................................ 86
	5.5 Labor relations .................................................................................................................................... 89
	5.6 Important contracts ............................................................................................................................. 91
VI.	Financial Overview
	6.1 Concise financial information in the last five years ............................................................................ 95
	6.2 Financial analysis in the last five years ............................................................................................... 98
	6.3 Audit Committee’s Examination Report of the financial report in the last year ............................... 101
	6.4 Financial statements in the last year.................................................................................................. 102
	6.5 Company’s individual financial statements audited and certified by the accountant in the last year 102
	6.6 In the last year and as at the publication date of annual report, if the company and its affiliated
	enterprise have difficulty in financial turnover, its impact on the financial situation of the Company
	shall be listed ..................................................................................................................................... 102

VII. Review of Financial Conditions, Operating Results, and Risk Management

7.1 Financial situation ............................................................................................................................. 180 7.2 Financial performance ....................................................................................................................... 181 7.3 Cash flow .......................................................................................................................................... 182 7.4 The impact of significant capital expenditure on financial affairs in the last year ........................... 183 7.5 Reinvestment policy in the last year, the main reason for its profit or loss, improvement plan and investment plan in the coming year .................................................................................................. 183
7.6 Risk Management ............................................................................................................................. 184 7.7 Other important matters .................................................................................................................... 188

VIII. Special Recorded Matters

8.1 Relevant information of affiliated enterprise .................................................................................... 189 8.2 In the last year and as at the publication date of annual report, execution situation of private placement of negotiable securities .................................................................................................... 192
8.3 In the last year and as at the publication date of annual report, subsidiaries’ holding or disposal of shares of the Company ...................................................................................................................... 192
8.4 Other necessary supplementary explanations ................................................................................... 192
8.5 In the last year and as at the publication date of annual report, in case of matters having significant impact on the shareholders’ equity or security price as prescribed in Subparagraph 2, Paragraph 3, Article 36 of Securities and Exchange Act, it shall also be specified one by one ............................ 192
8.6 Description on significant difference from the shareholders’ equity protection regulations of our country .............................................................................................................................................. 192

Notes: This Annual Report in English is translation from Chinese version, and it is only for reference by investors. In case of any difference between the Chinese and English version, the Chinese version shall prevail.

I. Letter to Shareholders

Following a worldwide spread of the Covid-19 virus in 2020, the epidemic in mainland China, Europe, the U.S., and Southeast Asia broke out one after another, and most of them continued to implement lock-downs or border controls as essential prevention measures. This, together with impacts from both home quarantines and delays in resuming work, engages the global industry in a hard challenge unprecedented. Mainly affected by the impact of epidemic, the Company's valve shipments dropped tremendously in the first half of 2020, especially in categories of motorcycles, trucks and off-the-road vehicles. Such influences began to slow down with the retaliatory consumption emerged beginning in the third quarter, paving the way for the automobile industry to enjoy a booming and rebounded recovery. The Company increased its shipments in passenger car valves. Regarded as a benefit during the post-epidemic era (due to maintaining of social distancing, people are unwilling to take public transportation and switching to travel with bicycles, electric bicycles and other transportations, the demand on sports and casual purposes increased significantly), the bicycle market has become increasingly hectic, as well as motorcycles, passenger car, and trucks are now in a phase of strong recovery. Thus, the Company's shipments for bicycle and electric vehicle valves have fared well against the trend. Meanwhile, the Company has finished the development of TPMS valves for its new customers and started mass production with stable shipments. Its entire sales volume of valves was up by 2.39% in 2020, compared with 2019, but the sharp appreciation of the New Taiwan dollar led to a decline of 4.22% in revenue, down from NTD2.717 billion to NTD2.602 billion. Beginning in 2020, the Company has spared no efforts to improve its manufacturing processes, enhance efficiency and invest in automation equipment to meet customer orders. Affected by both material procurement cost drop and exchange rate fluctuations, the gross profit rate increased from 22.64% to 24.08%. One thing worth mentioning is that lots of expenses, development projects, and operating expenses are cut down due to the Covid-19 epidemic. This increases the Company’s operating net profit rate from 11.51% to 12.61%. After a strategic moving to new location in 2020, the net benefit in relocation compensation is recognized together with input of subsidies, the Company’s non-operating income increased largely. In summary, the Company's net profit margin increased from 8.90% to 22.86% in 2020 with earnings per share standing at NTD6.58, up from NTD2.68.

In an attempt to cope with challenges in the future, the Company will solicit more customers, to be in coordination with the market demand, to enlarge market share and profitability, and to invest in automation equipment. To this end, it will adopt a solid financial management, and insists on its business motto: "quality is the root, honesty is the essence, customer-oriented, and keeps improving”.

Financial performance

Implementation achievement in the last two years:

			Unit: NTD thousand	Unit: NTD thousand
Year Item	2020	2019	Percent	Change
Operatingrevenue	2,602,257	2,716,889	-114,632	-4.22%
Grossprofit	626,635	615,058	11,577	1.88%
Operating profit	328,035	312,635	15,400	4.93%
Profit before income tax	829,789	345,838	483,951	139.94%
Profit for the Period	594,759	241,910	352,849	145.86%

Budget implementation

The Company has not disclosed financial forecasting to the public in 2020, hence it is not applicable.

Financial revenue and expenditure and profitability analysis

Item	Year	2020	2019
Financial structure (%)	Debt to asset ratio	42.25	44.52
	Long-term fund to property, plant and equipment	233.46	243.85
Liquidity (%)	Current ratio	302.24	203.02
	Quick ratio	222.52	153.18
	Times interest earned(times)	95.89	27.62
Profitability (%)	Return on assets	13.55	6.67
	Return on equity	23.70	10.68
	Pre-tax income topaid-in capital	91.82	40.18
	Netprofit margin	22.86	8.90
	Earningsper share(NTD)	6.58	2.68

Description: To be in line with the Hua Qiao government’s strategic relocation policy, the nonremovable property is transferred during this period. The relocation net income is admitted as a net profit of relocation compensation calculated by deductions of second relocation compensation funds (which are recognized as long term deferred income) and moving expenses. This reduced current liabilities and increased non-business income (other benefits). As a result, the Company’s solvency and profitability are better than the previous period.

Research and development situation

The major R&D projects mapped out for 2020 was proceed according to its annual plan progress, which mainly includes the development of new materials and equipment automation to reduce material costs, upgrade of production automation, improving production efficiency, and saving workforce.

Major results are explained below: the project of EPDM rubber new formula to reduce costs, PVR70 forging process to reduce costs, CR202L, AR, TR13 specification cleaning and cost reduction, VFR60L new transfer cold forging production, BU specification vulcanization time optimization, PVR64 vulcanization efficiency improvement, and vulcanization mold rubber-saving project. In addition, the development of automatic equipment such as PVR70 bending assembly coupled with German machines, high speed valve automatic airtight machine, automatic bending machine with noise reduction project, oval specification automatic grinding machine, PVR64 automatic vulcanized disc inserting machine, CR202L automatic sand blasting machine, and so on, thus moving forward to reduce the overall production cost and upgrade the production efficiency.

As for 2021, the Company expects its R&D focus to promote automation projects, reduce raw material costs, improve quality and save manpower. In primary, these projects include CR202L series of new forging development, high-speed valve cold runner vulcanization process development, truck valve defect and cost reduction project, EPDM rubber low-cost formula re-development, TR4 multiaxis bottom forming design and development, TR4, VFR vulcanized automatic nail inserting plate machine development, RV series cold forging processing technology development, VFR automatic

sandblasting development, truck valve efficiency improvement & development, truck valve vulcanization efficiency improvement & development, truck valve vulcanization time reduction project, BS truck valve post-vulcanization process production line development, and VFR automatic assembly riveting machine projects.

Business plan in 2021

1.Guideline for management

a. Strengthen niche products in marketing: Provide high quality and high efficiency products in conjunction with the increasing needs of the bicycle market and the electric motorcycle markets to meet the needs of the market.
b. Expansion of key clients: Focus on our core business, providing our clients with valve that TPMS uses, and do not compete with our clients by producing electric molds; instead, we become our clients’ best partner.
c. Stay committed to reforming the manufacturing process, increase the levels of automation of equipment, and decrease the risk of human resource costs.
d. Recycle copper materials for reuse: Continue to expand recycling copper materials for reuse, so as to reduce the impact of copper price fluctuation.
2.Sales projection and its basis

The production capacity of our company, including the whole group is 66.6 million sets of valves per month, and it is expected to increase the production capacity to 72million sets of valves in the middle of the year in coordination with the market profile and our company’s development strategy. As for the marketing plan, the production scheduling will be arranged by the clients’ orders. 3.Important policy of production and marketing

China and Indonesia are the two biggest sales territories. Our company have production bases in China and Indonesia, apart from being close to the market, nearing our customers to serve them, it can also diversify the risk of group production bases management.

4.Future development strategy of the company

The industrial order of traditional valve has turned into that winners always win, and the market of TPMS valves maintains a growth momentum. Our company has been the biggest professional manufacture of the traditional valves production capacity, remaining ahead of the pack. The Company always adopts the business model of cooperating with customers to move forward, the strategy is correct and good for obtaining more favorable opportunities in current market situation; the local labor in Indonesia is abundant and stable, and we will increase the production capacity of PT. LUHAI in due time. The novel coronavirus epidemic situation helps to demonstrate the two largest production bases of our company in China and Indonesia, apart from spreading operating risks and increasing responding capacity, it also verifies the leadership of LUHAI among global professional valve manufacturers.

5.Influence of external competition environment, environmental regulation and overall management environment

Due to the influence of COVID-19 and the popularity of sports, the bicycle industry has been prosperous, and it is estimated to maintain its prosperity until 2021. Since China bans motorcycles, it makes the electric motorcycles market in China keeps growing. China announced that they will mandate vehicles must carry TPMS in 2020, increasing the Market penetration rate of the tirepressure monitoring system. However, the car chip shortage may affect the degree of its increase.

Countries adopt Easing Monetary Policy, making funds increase the price of raw material. Compared to early 2020, Copper prices have increased 60%, and due to the launch of vaccine, global

economic activities recovered, the need of a variety of car chips reflects popularity.

The second quarter of 2020 Subsidiary KUNSHAN LUHAI relocated according to local relocation policy, and the new land is expected to be delivered in 2020, which is also expected to start its construction in the next 6 months of 2020.The construction of new plant of subsidiary XIAMEN XIAHUI in Phase Two of Jimei Machinery Industry Concentration Area (at the southeastern side crossroad of Guankou South Road and Nan Tang Road) has completed, expected to relocate in succession in the second quarter.

Facing the challenges of rapid change in the future, the Company will continue to invest in research and development improvement, improve product quality, expand new customers and develop high gross profit products, so as to increase the profits of the Company, and strengthen the automatic manufacturing process and development of copper scrap regeneration technology to maximize the benefits of shareholders. Finally, the Company will take the fulfillment of corporate social responsibility as the ultimate goal, apart from making LU HAI as the leading brand in valve industry, but also becoming the extremely valuable enterprise brand.

Chairman & General Manager

HSU, LIEN-KAI

II. Company Profile

2.1 Company and Group Introduction

2.1.1 Date of incorporation and Group profile:

The Company is originated from the LU HAI INDUSTRIAL CORP. in Chang-hua Taiwan, established in May 1983, the Company has been devoting to the manufacturing, processing and sales of various tire rubber valves and metal bodies of tire valves, with gradual expansion of operation scale, the Company has set manufacturing bases and important operating offices in Xiamen, Kunshan and Indonesia successively, and all reinvestment businesses are engaged in the businesses related to the manufacturing and sales of valves. On October 19, 2009, LU HAI HOLDING CORP. was established in Cayman Islands as the holding parent company of the Group and the application entity to apply for a listing in Taiwan, the Company sticks to the operation philosophy of “Quality Oriented, Integrity, Customer First, Continuous Improvement”, and takes becoming the “Most competitive valve manufacturer of the world” as the target, as the pioneer in global valve industry, the Group has been diligently engaged in valve industry for over 30 years and deeply recognized by customers in terms of product quality, customers are mostly globally well-known tire manufacturers, such as: Bridgestone, Michelin, Goodyear, Cheng Shin Group, Kenda Group, Giti Group etc.

2.1.2 Group structure

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2.2 Company history:

Year	Important events
1980	LIUHO VALVE INDUSTRIAL CO.,LTD. was established in Chang-hua Taiwan
1983	LU HAI INDUSTRIAL CORP. was established in Taiwan
1990	XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO.,LTD. was established.
1995	XIAMEN XIAHUI hadpassed the ISO9002:1994 certification
1997	LU HAI INDUSTRIAL CORP. had passed the ISO9002:1994 quality management system certification byBureau of Standards,Metrologyand Inspection
	Approved to establish LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD

Year	Important events
2000	Approved to establish XIAMEN LU HAI METAL CO.,LTD
2001	KUNSHAN LUHAI had passed the ISO9001: 2000 system certification, and won the “Certificate of Quality Control System Certification ” issued by China Quality Certification Center
	The certificate of quality system certification of XIAMEN XIAHUI was changed into ISO9001:2000 version
2002	LU HAI INDUSTRIAL CORP. had passed the ISO9001:2000 quality management system certification byBureau of Standards,Metrologyand Inspection
	KUNSHAN LUHAI had won the only qualified supplier certified by Michelin Tire in China
	KUNSHAN LUHAI had passed the safety certification of valve products by China Tire Products Certification Committee, and won the “Certificate of Product Quality Certification”.
2003	XIAMEN XIAHUI hadpassed the CQCproduct safety3C certification
	XIAMEN XIAHUI was the member of National Valve Standardization Sub-Technical Committee
2005	XIAMEN XIAHUI had passed the ISO/TS16949:2002 Quality Control System certification
2006	KUNSHAN LUHAI had won the “Certificate of Confirmation for Foreign Invested Advanced TechnologyEnterprise” issued byJiangsu Province
	XIAMEN XIAHUI had won the “AAA Credit Rating” enterprise awarded by the finance consulting& credit ratinginstitution
2007	KUNSHAN LUHAI has been awarded the certificate of “Top 100 Rubber Parts Manufacturers in China” and “Famous Brand for Rubber Parts Manufacturing in China” issued byChina Market MonitoringCenter and China Market Research Center
	XIAMEN XIAHUI had won the title of “Fujian Famous Brand Product”
2009	LU HAI HOLDING CORP. was established in Cayman Islands, the establishment capital was NTD1,200,000 Thousand, and the paid-up capital was NTD420,000 Thousand
	LU HAI HOLDING CORP. carried out cash capital increase of NTD120,000 Thousand, and thepaid-upcapital was NTD540,000 Thousand after capital increase
2010	LU HAI HOLDING CORP. carried out cash capital increase of NTD61,000 Thousand, and thepaid-upcapital was NTD601,000 Thousand after capital increase
	KUNSHAN LUHAI had passed the ISO/TS16949:2009 system certification, and won the “Certificate of Automotive Industry Quality System Certification” issued by China QualityCertification Center
2011	KUNSHAN LUHAI had won the good qualified supplier designated by Japan Bridgestone
	KUNSHAN LUHAI had passed the ISO14001:2004 system certification, and won the “Certificate of Environmental Management System Certification”
	PT. LUHAI INDUSTRIAL was established
	XIAMEN XIAHUI and XIAMEN LU HAI METAL CO.,LTD. were merged.

Year	Important events
2012	The hexagonal logo of the Companyhad won the “China Well-known Trademark”
2013	XIAHUI had won the first section of Top10 HappyEnterprises.
	Officiallylisted in the Taiwan Stock Exchange on December 25,2013
2014	LU HAI HOLDING had won the second section of OutstandingTaiwan Businessmen
2015	Carried out cash capital increase of 3,500 thousand shares and the first unsecured convertible corporate bonds (the total issuing denomination was NTD400 Million Only) in the territoryof Republic of China
2016	XIAMEN XIAHUI had won the certificate of “Xiamen Famous Trademark: Tire Valve”
	XIAMEN XIAHUI had won the certificate of “Xiamen Famous Trademark: Metal Nut”
	XIAMEN XIAHUI had won the “Quality Management Award” issued by China Valve Core Industry
2017	LU HAI HOLDING had won the Outstanding Contribution Award issued by China Valve Core Industry
	KUNSHAN LUHAI had passed the ISO14001:2015 environmental management system certification,and won the Certificate of Management System Certification.
	KUNSHAN LUHAI had won the “TopTen Eco-FriendlyEnterprises”
2018	KUNSHAN LUHAI had passed the IATF16949:2016 system certification, and won the certificate of “Automotive Industry Quality Management System” issued by China QualityCertification Center
2019	LU HAI HOLDING, TAIWAN OFFICE(CAYMAN ISLANDS) had been changed to LU HAI HOLDING ,TAIWAN BRANCH(CAYMAN ISLANDS) XIAMEN XIAHUI had won the certificate of “Work Safety Standardization” KUNSHAN LUHAI had passed the IATF16949:2016 system certification, and won the certificate of “ Manufacturingof inflatingvalves used tire”
2020	XIAMEN XIAHUI had passed the ISO 9001:2015 system certification, and won the certificate of “ Manufacture of tire valves and parts” XIAMEN XIAHUI had passed the IATF 16949:2016 system certification, and won the certificate of “ Manufacture of tire valves”

2.3 Risk Management : Please refer to Page 184 to 188, Seven. Review of Financial Conditions, Operating Results, and Risk Management

III. Corporate Governance Report

3.1 Organization system

3.1.1 Organization chart

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3.1.2 Operating business of major departments

Department	Management affairs

Board of Directors	Make policy directive and formulate objective and guideline accordingto the business operation of the Group
General Manager	Group strategic planning, execute the resolution of Board of Directors,and lead the team of the Companyto achieve the target
Executive VP	Draw up operational objectives, and supervise and manage operatingactivities
GM Room	1. Annually plan the medium and long term business plan of the Group 2. Manage, control and supervise the work of each subsidiaries of the Group 3. Organization of Board of Directors Meeting and Shareholders’ Meeting,and stock affairs related matters
Audit Room	1. Responsible for governing each company of the Group, formulating internal control system, reviewing and approving management regulations and executing internal audit, and proposingimprovementproposal

Department	Management affairs

	2. Promote policies and order of each company of the Group and execute each regulations
Finance Department	1. Manage fund procurement among each company of the Group and contacts with financial institutions 2. Manage accounting transaction and cost analysis of each company of the Group 3. Promote the strategy, integration and budget systems related to financial aspects of the Group
Administration Department	1. In charge of the management of general administrative affairs, as well as patent and certification related matters of the company 2. Human resources management and organization development matters in the Group 3. Application, report and approval of foreign investment
Sales Department	1. Responsible for product marketing, market development and sales business of the company 2. Manage and integrate business promotion of each company of the Group 3. Draw up business policy and set target for the Group
IT Department	1. Planning, establishment, implementation and management of Group computerization 2. Safety control of computer software and hardware, and planning and execution of information security policy 3. Design, maintenance, control, correction and management etc. of each operating management system 4. Planning and assessment etc. on the specifications of industrial 4.0 equipment automation system of the Group

3.2 Information of directors, supervisors, General Manager, Vice President, Assistant Vice President, and head of each department and branch:

3.2.1 Directors and supervisors’ information

3.2.1.1 Directors and supervisor’s information:

							April 30,2021 Unit: share;%	April 30,2021 Unit: share;%	April 30,2021 Unit: share;%	April 30,2021 Unit: share;%	April 30,2021 Unit: share;%	April 30,2021 Unit: share;%	April 30,2021 Unit: share;%	April 30,2021 Unit: share;%	April 30,2021 Unit: share;%	April 30,2021 Unit: share;%	April 30,2021 Unit: share;%	April 30,2021 Unit: share;%	April 30,2021 Unit: share;%	April 30,2021 Unit: share;%
Title	Nationality or place of registration	Name	Gender	Date Elected	Term (Years)	Date first Elected	Shareholding when Elected		Current shareholding		Spouse & Minor children Shareholding		Shareholding in the name of other person		Major experience (education background)	Concurrent title in the Company or other companies currently	Other managers, directors or supervisors of relationship of spouse or within second-degree relatives			Notes
							Shares	%	Shares	%	Shares	%	Shares	%			Title	Name	Relation
Chairman	R.O.C.	HSU, LIEN- KAI	Male	2018.6.25	3	2018.6.25	2,307,387	2.82%	3,016,126	3.34%	69,682	0.08%	-	-	General Manager of LU HAI HOLDING CORP. Department of Law, National Chengchi University	Director of XIAMEN XIAHUI Director of KUNSHAN LUHAI Supervisor of PT. LUHAI Chairman of LU HAI INDUSTRIAL	-	-	-	The Chairman and General Manager are the same person
Director	R.O.C.	WU, CHIN- LU	Male	2018.6.25	3	2012.7.6	675,300	0.82%	381,794	0.42%	243,651	0.27%	2,610,524	2.89%	Chairman of LU HAI HOLDING CORP. Director of LU HAI INDUSTRIAL CORP. Chairman of LU HAI INDUSTRIAL CORP. Dah-Chin Commercial & Industrial Vocation HighSchool	Director of GET JOINT BUSINESS CORP. Director of DAY LIGHT BUSINESS CO., LTD.	Director Sales Manager	WU, CHING- SHU WU, KO-LI	Brother Parent- child
Director	R.O.C.	WU, CHING- SHU	Male	2018.6.25	3	2012.7.6	469,798	0.57%	803,131	0.89%	110,928	0.12%	3,571,594	3.95%	Director of LU HAI INDUSTRIAL CORP. Supervisor of LU HAI INDUSTRIAL CORP. Director of LU HAI HOLDING CORP. Master degree in Management, National Chung Hsing University	Supervisor of XIAMEN XIAHUI Director of KUNSHAN LUHAI Supervisor of PT. LUHAI Supervisor of LU HAI INDUSTRIAL Director of GET JOINT BUSINESS CORP. Director of DAY LIGHT BUSINESS CO., LTD.	Director	WU, CHIN- LU	Brother
Director	R.O.C.	HSU, YA- TING	Female	2018.6.25	3	2018.6.25	565,812	0.69%	623,807	0.69%	-	-	198,210	0.22%	Section Manager of YOKE Industrial Corp. Assistant VP of LU HAI HOLDING CORP. Department of Finance, National Taichung University of Science and Technology	Director of XIAMEN XIAHUI VP of XIAMEN XIAHUI Director of KUNSHAN LUHAI Supervisor of PT. LUHAI Directorof LUHAI INDUSTRIAL	-	-	-
Director	R.O.C.	HSU, HUAI- YUN	Female	2018.6.25	3	2018.6.25	-	-	24,149	0.03%	-	-	-	-	General Manager of Yun-Yi International Ltd. Information Management, Tamkang University	Director of XIAMEN XIAHUI Director of KUNSHAN LUHAI Supervisor of PT. LUHAI Directorof LUHAI INDUSTRIAL	Executive VP	HSU, HSIU- HUA	Sister
Director	R.O.C.	HSU, HAN- YUAN	Male	2018.6.25	3	2018.6.25	1,906,533	2.33%	2,101,951	2.33%	521,810	0.58%	-	-	Business Manager of Yuan-Hong Metal Co., Ltd. Assistant VP of LU HAI HOLDING CORP. General Manager of XIAMEN XIAHUI Civil Engineering Department, Nanya Institute of Technology	Director of XIAMEN XIAHUI Supervisor of KUNSHAN LUHAI Supervisor of PT. LUHAI Director of LU HAI INDUSTRIAL Special Assistant of Chairman,LU HAI HOLDING CORP.	-	-	-
Independent Director	R.O.C.	YEN, MEI- YING	Female	2018.6.25	3	2012.1.13	-	-	-	-	-	-	-	-	Assistant VP of PONY Leather Corporation Master degree of Accounting, National Taiwan University	Director of PONY Leather Corporation Assistant VP of GM Room and Head of Administration Department, PONY Leather Corporation Remuneration Member of LU HAI HOLDING CORP.	-	-	-
Independent Director	R.O.C.	CHANG, HORNG-YAN	Male	2018.6.25	3	2018.6.25	-	-	-	-	-	-	-	-	Full-time Adjunctive Professor of Department of Communications Management and Department of Business Administration, Shih Hsin University Part-time Professor of Department of Business Administration, Soochow University Enterprise Research Institute and Accounting Institute of St. John’s University, New York, US	Independent Director of TPK Holding Co., Ltd. Supervisor of Soft-World International Corporation Professor of Department of Communications Management, Shih Hsin University Remuneration Member of LU HAI HOLDING CORP.	-	-	-
Independent Director	R.O.C.	HU, TA- HSIANG	Male	2018.6.25	3	2018.6.25	-	-	-	-	-	-	-	-	Associate Professor of Department of Electrical Engineering, Da-Yeh University Doctor of Electrical Engineering, University of Hawaii,US	Associate Professor of Department of Electrical Engineering, Da-Yeh University Remuneration Member of LU HAI HOLDING CORP.	-	-	-

3.2.1.2 Major shareholders of the institutional shareholders: Not applicable.
3.2.1.3 Major shareholders of the company’s major institutional shareholders: Not applicable
3.2.1.4 Professional knowledge possessed by directors or supervisors and their independence

April 30, 2021

Criteria Name	Meet the Following Professional Qualification Requirements, TogetherwithatLeastFiveYears Work Experience	Meet the Following Professional Qualification Requirements, TogetherwithatLeastFiveYears Work Experience	Meet the Following Professional Qualification Requirements, TogetherwithatLeastFiveYears Work Experience	Independence Criteria (Notes 1)	Independence Criteria (Notes 1)	Independence Criteria (Notes 1)	Independence Criteria (Notes 1)	Independence Criteria (Notes 1)	Independence Criteria (Notes 1)	Independence Criteria (Notes 1)	Independence Criteria (Notes 1)	Independence Criteria (Notes 1)	Independence Criteria (Notes 1)	Independence Criteria (Notes 1)	Independence Criteria (Notes 1)	Number of other public companies in which concurrently act as independent director
	An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University	A Judge, Public Prosecutor, Attorney, CPA, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company	Have Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8	9	10	11	12
HSU, LIEN-KAI																-
WU, CHIN-LU																-
WU, CHING-SHU																-
HSU, YA-TING																-
HSU, HUAI-YUN																-
HSU, HAN-YUAN																-
YEN, MEI-YING																-
CHANG, HORNG- YAN																1
HU, TA-HSIANG																-

Notes1: If each director or supervisor is conforming to the following conditions two years before appointment and during the term of office, please tick “  ” in the blank below the code of each condition.
(1) Not an employee of the company or any of its affiliates.
(2) Not the director or supervisor of the company or any of its affiliated (except for independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent)
(3) Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings.
(4) Not the spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of the managerial officer listed in Paragraph (1) or any of the persons listed in Paragraph (2) and (3).
(5) Not the director, supervisor or employee of the corporate shareholder that directly holds 5% or more of the total number of issued shares of the company, or that ranks among the top five in shareholdings, or that designates its representative to serve as a director or supervisor of the company under Paragraph 1 or 2, Article 27, of the Company Act (except for independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent).
(6) Not the company’s director seats or voting shares and those of any other company are controlled by the same person: a director, supervisor, or employee of that other company. (except for independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company

and its parent or subsidiary or a subsidiary of the same parent).

(7) Not the person holding an equivalent position of the company and a person in any of those positions at another company or institution are the same person or are spouses: a director (member of a council), supervisor, or employee of that other company or institution (except for independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent).
(8) Not the director (member of a council), supervisor, manager or shareholder holding 5% or more of the shares, of a specified company or institution that has a financial or business relationship with the company (except that such specific company or institution holds 20% or more and no more than 50% of the total number of issued shares of the company, and independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent).
(9) Not the professional individual who, or an owner, partner, director (member of a council), supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides auditing services to the company or any affiliate of the company, or that provides commercial, legal, financial, accounting or related services to the company or any affiliate of the company for which the provider in the past 2 years has received cumulative compensation exceeding NT$500,000, or a spouse thereof; provided, this restriction does not apply to a member of the remuneration committee, public tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to the Act or to the Business Mergers and Acquisitions Act or related laws or regulations.
(10) Not having a marital relationship, or a relative within the second degree of kinship to any other director of the company.
(11) Not been a person of any conditions defined in Article 30 of the Company Act.
(12) Not a governmental, juridical person or its representative as defined in Article 27 of Company Act.

3.2.2 Management Team Information

													April 30,2021 Unit: share;%	April 30,2021 Unit: share;%	April 30,2021 Unit: share;%	April 30,2021 Unit: share;%
Title	Nationality	Name	Gender	Inauguratio n date	Shareholding		Spo us e & Min or chi ldr en Sha reh ol ding		Shareholding in the name of other person		Major experience (education background)	Concurrent title in other companies currently	Managers who are spouse or within second-degree of kinship			Notes
					Shares	%	Shares	%	Shares	%			Title	Name	Relation
General Manager	R.O.C.	HSU, LIEN- KAI	Male	2018.05.09	3,016,126	3.34%	69,682	0.08%	-	-	General Manager of LU HAI HOLDING CORP. Bachelor degree in Law, National Chengchi University	Director of XIAMEN XIAHUI Director of KUNSHAN LUHAI Supervisor of PT. LUHAI Chairman of LU HAI INDUSTRIAL CORP.	None	None	None	The Chairman and General Manager are the same person
Executive VP	R.O.C.	HSU, HSIU- HUA	Female	2010.01.01	387,752	0.43%	-	-	-	-	Salesman of E.C.I. Elastic Co., Ltd. Sales Director of LU HAI INDUSTRIAL CORP. General Manager of LU HAI HOLDING CORP. Department of Computer Science & Information Management, Junior College Division, Hung Kuang Institute of Technology	Director of XIAMEN XIAHUI Director of KUNSHAN LUHAI Chairman of PT. LUHAI General Manager of KUNSHAN LUHAI General Manager of PT. LUHAI Acting General Manager of XIAMEN XIAHUI	None	None	None
Special Assistant of Chairman	R.O.C.	HSU, HAN- YUAN	Male	2014.06.01	2,101,951	2.33%	521,810	0.58%	-	-	Business Manager of Yuan-Hong Metal Co., Ltd. Assistant VP of LU HAI HOLDING CORP. General Manager of Xiamen Xiahui Rubber Metal Ind. Co., Ltd. Civil Engineering Department, Nanya Institute of Technology	Director of XIAMEN XIAHUI General Manager of XIAMEN XIAHUI Supervisor of KUNSHAN LUHAI Supervisor of PT. LUHAI Director of LU HAI INDUSTRIAL CORP.	None	None	None
VP of XIAMEN XIAHUI	R.O.C.	HSU, YA- TING	Female	2012.07.01	623,807	0.69%	-	-	198,210	0.22%	Section Manager of YOKE Industrial Corp. Assistant VP of LU HAI HOLDING CORP. Department of Finance, National Taichung University of Science and Technology	Director of XIAMEN XIAHUI Director of KUNSHAN LUHAI Supervisor of PT. LUHAI Director of LU HAI INDUSTRIAL CORP.	None	None	None
VP of KUNSHAN LUHAI	P.R.C.	HSU, KUANG- WU	Male	2018.03.14	-	-	-	-	-	-	Manager of Manufacturing Department, XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD. Manager of Manufacturing Department, LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. General Manager of Ningbo Powermetal Industrial Co., Ltd. Plant Manager of Manufacturing Department, LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. EMBA,Shanghai Jiao TongUniversity	None	None	None	None
VP of PT. LUHAI	R.O.C.	QIU ZHONG- LIE	Male	2015.08.01	8,711	0.01%	-	-	-	-	Assistant VP of LU HAI HOLDING CORP. Senior Engineer of LU HAI HOLDING CORP. Yuanlin Senior High School	General Manager of PT.DENIKIN INDUSTRI NUSANTARA	None	None	None

Title	Nationality	Name	Gender	Inauguratio n date	Shareholding	Shareholding	Spo us e & Min or chi ldr en Sha reh ol ding	Spo us e & Min or chi ldr en Sha reh ol ding	Shareholding in the name of other person	Shareholding in the name of other person	Major experience (education background)	Concurrent title in other companies currently	Managers who are spouse or within second-degree of kinship	Managers who are spouse or within second-degree of kinship	Managers who are spouse or within second-degree of kinship
					Shares	%	Shares	%	Shares	%			Title	Name	Relation
C.F.O.	R.O.C.	CHANG, SHENG- HUNG	Male	2012.04.01	9,832	0.01%	-	-	-	-	Finance Supervisor and Director of Audit Room, CUB ELECPARTS INC. Manager of Finance Department, LU HAI INDUSTRIAL CORP. Bachelor degree in Accounting, Chung Yuan Christian University	None	None	None	None
Senior Manager of General Manager Room & Corporate Governance Officer	R.O.C.	CHANG, CHI- CHI	Female	2012.07.16	82,030	0.09%	-	-	-	-	Manager of Capital Market Div., Taishin Securities Co., Ltd. Manager of GM Room, LUHAI HOLDING CORP Master degree in Finance, National Chung Cheng University	None	None	None	None
Audit Supervisor	R.O.C.	CHEN, YING- HUEI	Female	2010.05.01	30,167	0.03%	-	-	-	-	Finance Specialist of YEU TYAN MACHINERY MFG. CO., LTD. Finance Manager of TUNG LIH PAPER CO., LTD. Director of Audit Room, LU HAI INDUSTRIAL CORP. Department of Business, National Open University	None	None	None	None
Manager of Administration Department	R.O.C.	CAI XIN- XING	Male	2012.01.01	-	-	-	-	-	-	Manager of Administration Department, LU HAI INDUSTRIAL CORP. Bachelor degree in Accounting, National Chung HsingUniversity	None	None	None	None
Manager of Sales Department	R.O.C.	WU, KO-LI	Male	2015.04.01	1,388,937	1.54%	-	-	-	-	ARM of Institutional Banking, CTBC Bank Co., Ltd. Bachelor degree in Statistical Science, University College London	None	None	None	None

3.2.3.If the Chairman and General Manager or equivalent (top managerial officer) are the same person, or are spouse or first degree relatives, the reasons thereof, rationality, necessity and solutions shall be described.

Reason	Rationality	Necessity	Solutions
1. Complete industry qualifications 2. Understanding the market 3. Family inheritance 4. Leadership skills 5. Communication skills	1. Start from basic training, understand the industry and economic environment 2. Fully master the market trend and fluctuation 3. Capable of leading the team to face and solveproblems together.	1. The bridge for inheritance of family business 2. Understand laws and decrees on transnational enterprises 3. With ability for overall planning for the future of enterprise 4. Cultivate the succession team	1. Dedicated to cultivate professional managerial officer to become the General Manager, separate ownership from management 2. Change family business into business family

3.3 Remuneration of Directors, Supervisors, General Manager and Vice Presidents in the Last Year

3.3.1 Remuneration paid to the Director and Independent Director in 2020

Unit: NTD thousand

Title	Name	Director remuneration	Director remuneration	Director remuneration	Director remuneration	Director remuneration	Director remuneration	Director remuneration	Director remuneration	Proportion of total amount of A, B, C and D in net profit after tax	Proportion of total amount of A, B, C and D in net profit after tax	Relevant remuneration received by part-time employee	Relevant remuneration received by part-time employee	Relevant remuneration received by part-time employee	Relevant remuneration received by part-time employee	Relevant remuneration received by part-time employee	Relevant remuneration received by part-time employee	Relevant remuneration received by part-time employee	Relevant remuneration received by part-time employee	Proportion of total amount of A, B, C, D, E, F and G in net profit after tax	Proportion of total amount of A, B, C, D, E, F and G in net profit after tax	Receiving remuneration from reinvestment enterprise other than the subsidiaries or from the parent company
		Remuneration (A)		Retirement pension (B)		Directors compensation (C)		Business execution expenses (D)				Salary, bonus and special disbursement etc.(E)		Retirement pension (F)		Employee’s compensation (G)
		The Company	All companies in financial report	The Company	All companies in financial report	The Company	All companies in financial report	The Company	All companies in financial report	The Company	All companies in financial report	The Company	All companies in financial report	The Company	All companies in financial report	The Company		All companies in financial report		The Company	All companies in financial report
																Cash amount	Stock amount	Cash amount	Stock amount
Chairman	HSU,LIEN-KAI	0	0	0	0	8,134	8,134	210	210	1.40%	1.40%	5,766	9,446	119	119	2,498	0	2,498	0	2.81%	3.43%	None
Director	WU,CHIN-LU
Director	WU,CHING-SHU
Director	HSU,YA-TING
Director	HSU,HUAI-YUN
Director	HSU,HAN-YUAN
Independent Director	YEN, MEI-YING	0	0	0	0	5,103	5,103	300	300	0.91%	0.91%	0	0	0	0	0	0	0	0	0.91%	0.91%	None
Independent Director	CHANG, HORNG-YAN
Independent Director	HU, TA-HSIANG
1. Please describe the payment policy, system, standard and structure of independent director’s remuneration, and describe the relevance of payment amount according to factors such as the borne responsibility, risk and devotion time etc. The payment of remuneration by the Company to independent director is based on the operating conditions of the company and the Board of Directors’ opinion on director's degree of participation and contribution value to the company operation, and implemented by considering the “Measures for Remuneration Payment to Director and Functional Committee” passed by the industry standard, among them, the professional suggestion and risk control etc. input by the functional member acting as independent director have been considered for remuneration payment, after the Remuneration Committee has reviewed and assessed the independent director's degree of participation in company operation and contribution, the suggestion on remuneration is proposed based on fairness and submitted to the Board of Directors for resolution. 2. Apart from those disclosed in the above table, the remuneration received by company directors (general directors, not independent directors) for providing service to all companies in financial report in the lastyear(such as takingapost as an adviser other than an employee etc.): None.

Range of Remuneration

	Range of Remuneration	Range of Remuneration	Range of Remuneration	Range of Remuneration
Range of remuneration paid to directors	Name of directors
	Total of Remuneration (A+B+C+D)		Total of Remuneration (A+B+C+D+E+F+G)
	The Company	All companies in financial report (H)	The Company	All companies in financial report (I)
Below NTD1,000,000	-	-	-	-
NTD1,000,000(inclusive) ~ NTD2,000,000(exclusive)	HSU, LIEN-KAI; WU, CHIN-LU; WU, CHING-SHU; HSU, YA-TING; HSU, HUAI-YUN; HSU, HAN-YUAN; YEN, MEI-YING; CHANG, HORNG-YAN; HU, TA-HSIANG	HSU, LIEN-KAI; WU, CHIN-LU; WU, CHING-SHU; HSU, YA-TING; HSU, HUAI-YUN; HSU, HAN-YUAN; YEN, MEI-YING; CHANG, HORNG-YAN; HU, TA-HSIANG	WU, CHIN-LU; WU, CHING-SHU; HSU, HUAI-YUN; YEN, MEI-YING; CHANG, HORNG-YAN; HU, TA-HSIANG	WU, CHIN-LU; HSU, HUAI-YUN; YEN, MEI-YING; CHANG, HORNG-YAN; HU, TA-HSIANG
NTD2,000,000(inclusive) ~ NTD3,500,000(exclusive)	-	-	HSU, YA-TING	-
NTD3,500,000(inclusive) ~ NTD5,000,000(exclusive)	-	-	HSU, HAN-YUAN	WU, CHING-SHU; HSU, YA-TING; HSU, HAN-YUAN
NTD5,000,000 (inclusive) ~ NTD10,000,000(exclusive)	-	-	HSU, LIEN-KAI	HSU, LIEN-KAI
NTD10,000,000 (inclusive) ~ NTD15,000,000(exclusive)	-	-	-	-
NTD15,000,000 (inclusive) ~ NTD30,000,000(exclusive)	-	-	-	-
NTD30,000,000 (inclusive) ~ NTD50,000,000(exclusive)	-	-	-	-
NTD50,000,000 (inclusive) ~ NTD100,000,000(exclusive)	-	-	-	-
Over NTD100,000,000	-	-	-	-
Total	9	9	9	9

The contents of remuneration disclosed in this table is different from the concept of income stipulated in Income Tax Ac, hence the purpose of this table is for information disclosure and not for taxation.

Notes 1. All contents of director’s remuneration disclosed are the director’s compensation in 2020 passed by resolution of the Board of Directors on March 12, 2021, and they had not been actually distributed yet.

3.3.2 Remuneration paid to the Supervisors in 2020: The Company sets Audit Committee, hence it is not applicable.

3.3.3 Remuneration paid to General Manager and Vice President in 2020:

								Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand
Title	Name	Salary (A)		Retirement pension (B)		Bonuses and Allowances (C)		Employees’ compensation (D) (Notes)				Proportion of total amount of A, B, C and D in net profit after tax		Receiving remuneration from reinvestment enterprise other than the subsidiaries or from the parent company
		The Company	All companies in financial report	The Company	All companies in financial report	The Company	All companies in financial report	The Company		All companies in financial report		The Company	All companies in financial report
								Cash	Stock	Cash	Stock
General Manager	HSU, LIEN-KAI	4,353	4,353	108	108	1,134	1,134	2,113	0	2,113	0	1.30%	1.30%	None
Executive VP	HSU, HSIU- HUA

Range of Remuneration

Numerical range of remuneration paid to each General Manager and Vice President of the Company	Name of General Manager and Vice President	Name of General Manager and Vice President
	The Company	All companies in financial report (E)
Below NTD1,000,000	-	-
NTD1,000,000 (inclusive) ~NTD2,000,000(exclusive)	-	-
NTD2,000,000 (inclusive) ~NTD3,500,000(exclusive)	-	-
NTD3,500,000 (inclusive) ~NTD5,000,000(exclusive)	HSU, LIEN-KAI; HSU, HSIU-HUA	HSU, LIEN-KAI; HSU, HSIU-HUA
NTD5,000,000 (inclusive) ~ NTD10,000,000(exclusive)	-	-
NTD10,000,000 (inclusive) ~ NTD15,000,000(exclusive)	-	-
NTD15,000,000 (inclusive) ~ NTD30,000,000(exclusive)	-	-
NTD30,000,000 (inclusive) ~ NTD50,000,000(exclusive)	-	-
NTD50,000,000 (inclusive) ~ NTD100,000,000(exclusive)	-	-
Over NTD100,000,000	-	-
Total	2	2

The contents of remuneration disclosed in this table is different from the concept of income stipulated in Income Tax Ac, hence the purpose of this table is for information disclosure and not for taxation.
Notes 1. All contents disclosed are the employee’s compensation in 2020 passed by resolution of the Board of Directors on March 12, 2021, and they had not been actually distributed yet.
3.3.4 Name of managerial officer distributed with employee’s compensation and distribution circumstance:

Unit: NTD thousand

						Unit: NTD thousand
	Title	Name	Stock amount	Cash amount	Total	Proportion of total amount in net profit after tax (%)
Managerial officer	General Manager	HSU, LIEN-KAI	0	5,746	5,746	0.97%
	Executive VP	HSU, HSIU-HUA
	Special Assistant of Chairman	HSU, HAN-YUAN
	VP of XIAMEN XIAHUI	HSU, YA-TING
	VP of PT. LUHAI	QIU, ZHONG-LIE
	VP of KUNSHAN LUHAI	HSU, KUANG-WU
	CFO of Finance Department	CHANG, SHENG-HUNG
	Senior Manager of General Manager Room & Corporate Governance Officer	CHANG, CHI-CHI
	Director of Audit Room	CHEN, YING-HUEI

3.3.5 If the listed company has the circumstances as stated in 1 or 5 of Item 2, Subparagraph 3, Paragraph 1, Article 10 of “Regulations Governing Information to be Published in Annual Reports of Public Companies”, the remuneration of the top 5 supervisors shall be disclosed respectively: Not applicable.
3.3.6 Make respective and comparative description and analysis on the proportion of total remuneration paid to the directors, supervisors, general managers, and vice presidents of the Company in the last two years by the Company and all companies in financial reports in the net profit after tax, and describe the policy, standard and combination of compensation payment, procedures of determining remuneration and relevance between operation performance and future risk

3.3.6.1 Proportion of total remuneration of Directors, Supervisors, General Manager and Vice Presidents in the last two years in the net profit after tax:

NTD: thousand

					NTD: thousand	NTD: thousand	NTD: thousand	NTD: thousand
Item	2019				2020
	Total remuneration		Proportion in the net profit after tax (%)		Total remuneration		Proportion in the net profit after tax (%)
	The Company	All companies in financial report	The Company	All companies in financial report	The Company	All companies in financial report	The Company	All companies in financial report
Directors	10,821	14,721	4.47%	6.08%	22,130	25,810	3.72%	4.34%
General Manager and VP	2,665	2,665	1.10%	1.10%	3,521	3,521	0.59%	0.59%

3.3.6.2 Policy, standard and combination of remuneration payment; remuneration determination procedure; and relevance between operation performance and future risk are described as follows:

 Directors, Supervisors

The Company has set the Remuneration Committee, in which all independent directors act as committee members; the Remuneration Committee is responsible for formulating and regularly reviewing the policies, systems, standards and structures of the performance assessment and remuneration of directors and managerial officers, meanwhile, regularly assessing and referring to the payment standards of counterparts before determining the remuneration of directors and managerial officers.

General Manager and Vice Presidents

The remuneration of General Manager and Vice Presidents include salary, bonus and employee’s compensation; it is determined according to the undertaking responsibilities and contributions to the Company as well as by referring to the standards of counterparts.

3.4 Corporate governance operation situation:

3.4.1 Information of Board of Directors’ operation situation

The Company has convened 8 (A) Board of Directors Meetings from 2020 till the date of annual report publication, attending situations of directors are as follows:

Title	Name	Attendance in Person(B)	By Proxy	Attendance rate(%) [B/A]
Chairman	HSU,LIEN-KAI	8	-	100.00%
Director	WU,CHIN-LU	7	-	87.50%
Director	WU,CHING-SHU	8	-	100.00%
Director	HSU,YA-TING	8	-	100.00%
Director	HSU,HUAI-YUN	8	-	100.00%
Director	HSU,HAN-YUAN	8	-	100.00%
Independent Director	YEN, MEI-YING	8	-	100.00%
Independent Director	CHANG, HORNG- YAN	8	-	100.00%
Independent Director	HU, TA-HSIANG	8	-	100.00%
Other matters should be recorded: 1. If the operation of Board of Directors Meeting has any one of the following circumstances, the date of Board of Directors Meeting, session, proposal content, opinions of all independent directors, and the Company’s handling of independent directors’ opinions shall be specified: (1) Matters listed in Article 14-3 of Securities and Exchange Act: The Company has set the Audit Committee, please refer to the operation situation of Audit Committee in the next page for details, no such circumstances are available. (2) Apart from the matters mentioned above, other board resolution matters on which independent director has objections or modified opinions and with record or written statements: No such circumstances are available. 2. For the directors’ avoidance of proposal with conflict of interest, the name of directors, proposal contents, reasons for conflict of interest and participation in voting shall be specified: (1) The Fifth Session of the 11th Board of Directors Meeting, January 15, 2020 Proposal content and execution situation: a. Discuss the distribution of year-end bonus in 2019 to managerial officers of the Company, Director HSU, LIEN-KAI, HSU, HAN-YUAN and HSU, YA-TING didn’t participate in voting due to the principle of conflict of interests, this case had been passed by the rest attending directors unanimously and as proposed. b. Discuss the distribution of annual performance bonus in 2019 to managerial officers of the Company, Director HSU, LIEN-KAI, HSU, HAN-YUAN and HSU, YA-TING didn’t participate in voting due to the principle of conflict of interests, this case had been passed by the rest attending directors unanimously and as proposed. (2) The Fifth Session of the 14th Board of Directors Meeting, August 7, 2020 Proposal content and execution situation: a. Discuss the distribution of remuneration in 2019 to managerial officers of the Company, Director HSU, LIEN-KAI, HSU, HAN-YUAN and HSU, YA-TING didn’t participate in voting due to the principle of conflict of interests, this case had been passed by the rest attendingdirectors unanimouslyasproposed.

b. Discuss the bonus distribution to managerial officers of the Company，Director HSU, HAN-YUAN and HSU, YA-TING didn ’ t participate in voting due to the principle of conflict of interests, this case had been passed by the rest attending directors unanimously as proposed.
(3) The Fifth Session of the 15th Board of Directors Meeting, November 6, 2020 Proposal content and execution situation: a. Discuss the modification of the salary of managerial officers of the Company, Director HSU, HAN-YUAN, and HSU, YA-TING didn’t participate in voting due to the principle of conflict of interests, this case had been passed by the rest 7 attending directors with 6 votes.
(4) The Fifth Session of the 16th Board of Directors Meeting, January 27, 2021 Proposal content and execution situation: a. Discuss the distribution of year-end bonus in 2020 to managerial officers of the Company, Director HSU, LIEN-KAI, HSU, HAN-YUAN and HSU, YA-TING didn ’ t participate in voting due to the principle of conflict of interests, this case had been passed by the rest attending directors unanimously and as proposed.
b. Discuss the distribution of annual performance bonus in 2020 to managerial officers of the Company, Director HSU, LIEN-KAI, HSU, HAN-YUAN and HSU, YA-TING didn’t participate in voting due to the principle of conflict of interests, this case had been passed by the rest attending directors unanimously and as proposed.
c. Discuss the modification of the salary of managerial officers of the Company, Director HSU, YA-TING didn’t participate in voting due to the principle of conflict of interests, this case had been passed by the rest attending directors unanimously and as proposed.
d. Discuss the bonus distribution to Sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD., Director HSU, YA-TING didn’t participate in voting due to the principle of conflict of interests, this case had been passed by the rest attending directors unanimously and as proposed.
e. Discuss the bonus distribution to the relocation of LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD., Director WU, CHING-SHU didn’t participate in voting due to the principle of conflict of interests, this case had been passed by the rest attending directors unanimously and as proposed.
Listed company shall disclose the evaluation cycle and period, evaluation scope, method and content etc. evaluated by Board of Directors itself (or by peer), and the implementation of Board of Directors’ evaluation is as follows:

Evaluation cycle	Evaluation period	Evaluation scope	Evaluation method	Evaluation content
Once a year	2020/1/1~ 2020/12/31	Board of Directors performance evaluation	Internal self- evaluation	1. Participation in the operation of the company 2. Improvement of the quality of the Board of Directors' decision making 3. Composition and structure of the Board of Directors 4. Election and continuing education of the Directors 5. Internal control
		Individual director’s		1. Alignment of the goals and missions of the company

		performance evaluation		2. Awareness of the duties of a director 3. Participation in the operation of the company 4. Management of internal relationship and communication 5. The Director's professionalism and continuing education 6. Internal control

The objective of strengthening the functions of Board of Directors (such as setting Audit Committee, improving information transparency etc.) in the current and last year and assessment on execution situation: The Company had elected three independent directors and formed the Audit Committee, and convene the meeting at least once a quarter; besides, Remuneration Committee was established on January 21, 2013 in accordance with the regulations, and meetings were convened at least twice a year. The Company has formulated the “Regulations Governing Procedure for Board of Directors Meetings”, “Audit Committee Charter” and “Remuneration Committee Charter” to comply with, and input the attendance situations of Board of Directors Meeting and each committee meeting in company website and MOPS, and disclosed relevant information according to the requirement of laws and decrees to improve information transparency.

3.4.2 Operation situation of Audit Committee or supervisor’s participation in Board of Directors

Audit Committee of the Company comprises of all independent directors, responsible for reviewing fair presentation of company financial statement, appointment and independence and performance (dismissal) of certified public accountant, effective implementation of company internal control, company’s compliance with relevant laws and decrees and rules, and control of existing or potential risks of the company etc., its major powers and authorities are as follows:

(1) Adoption or amendment of an internal control system pursuant to Article 14-1 of Securities and Exchange Act.
(2) Assessment of the effectiveness of the internal control system.
(3) Adoption or amendment, pursuant to Article 36-1 of Securities and Exchange Act, of handling procedures for financial or operational actions of material significance, such as acquisition or disposal of assets, derivatives trading, extension of monetary loans to others, or endorsements or guarantees for others.
(4) A matters bearing on the personal interest of the director.
(5) A material assets or derivatives transaction.
(6) A material monetary loan, endorsement or provision of guarantee.
(7) The offering, issuance, or private placement of any equity-type securities.
(8) The hiring or dismissal of an attesting CPA, or the compensation given thereto.
(9) The appointment or discharge of a financial, accounting, or internal auditing officer.
(10) The financial report and the financial report of the first, second and third quarters that must be audited and attested by a CPA, which are signed or sealed by the Chairman, managerial officer, and accounting officer.
(11) Any other material matters so required by the company or competent authority.

Audit Committee has convened 8 (A) meetings from 2020 till the date of annual report publication, attending situations of independent directors are as follows:

Title	Name	Attendance in Person (B)	By Proxy	Attendance rate (%) [B/A]
Convenor	YEN, MEI-YING	8	-	100.00%
Independent Director	CHANG, HORNG- YAN	8	-	100.00%
Independent Director	HU, TA-HSIANG	8	-	100.00%
Other matters should be recorded: 1. If the operation of Audit Committee has any one of the following circumstances, the date of Board of Directors Meeting, session, proposal content, resolutions of Audit Committee, and the Company’s handling of Audit Committee’ opinions shall be specified. (1) Matters stipulated in Article 14-5 of Securities and Exchange Act: Board of Directors Meeting Proposal contents and subsequent handling Matters stipulated in Article 14-5 of Securities and Exchange Act Resolution item not passed by Audit Committee but agreed by more than two third (2/3) of all directors. The Fifth Session of the 11th meeting 2020.1.15 1. Supplementary budget for the construction of new plant of sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD. of the Company  - 2. Application for purchasing new equipment of the sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD. (plant GUANKOU)of the Company  - 3. Costs of equipment disassembly and assembly for the sub-subsidiary LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. (hereinafter referred to as KUNSHAN LUHAI) of the Companyto relocate to the leasedplant  - 4. Sub-subsidiary LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. (hereinafter referred to as KUNSHAN LUHAI) of the Company plans to indirectly lend RMB22 million to the sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD (hereinafter referred to as XIAMEN XIAHUI) by entrusted loan  - 5. Endorsement guarantee of LU HAI HOLDING CORP.(hereinafter referred to as the Company)  - Resolution of Audit Committee: it is agreed and passed by all attending members. Resolution of Board of Directors: it is agreed and passed by all attending directors.

The Fifth Session of the 12th meeting 2020.3.12	1. 2019 business report and financial statements of the Company		-
	2. The Company’s planning to transfer surplus to capital increase byissuingnew shares		-
	3. Replacement of certified public accountants of the Company, and approval and certification of remuneration in 2020 financial statements		-
	4. Application for purchase of new equipment of the sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD. (plant GUANKOU) in respond to the demand planning for mass production of new products in the second and thirdquarter of 2020		-
	Resolution of Audit Committee: it is agreed and passed by all attending members. Resolution of Board of Directors: it is agreed and passed by all attending directors.
The Fifth Session of the 13th meeting 2020.5.8	1. Consolidated financial statements for the first quarter of 2020 of LU HAI HOLDING CORP. (hereinafter referred to as the Company)		-
	2. Endorsement guarantee of LU HAI HOLDING CORP.(hereinafter referred to as the Company)		-
	3. Transfer of equipment for business use between and amongsubsidiaries of the Company		-
	Resolution of Audit Committee: it is agreed and passed by all attending members. Resolution of Board of Directors: it is agreed and passed by all attending directors.
The Fifth Session of the 14th meeting 2020.8.7	1. Consolidated financial statements for the second quarter of 2020 of LU HAI HOLDING CORP. (hereinafter referred to as the Company)		-
	2. Application for purchase of TPMS brass mouth teeth machining center of the sub-subsidiary XIAMEN XIAHUI(plant GUANKOU)		-
	3. Sub-subsidiary of the Company, LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. (hereinafter referred to as KUNSHAN LUHAI) gained acquisition or disposal of the procedure for marketable securities investment		-
	Resolution of Audit Committee: it is agreed and passed by all attending members. Resolution of Board of Directors: it is agreed and passed by all attending directors.
The Fifth Session of the 15th meeting 2020.11.6	1. Consolidated financial statements for the third quarter of 2020 of LU HAI HOLDING CORP. (hereinafter referred to as the Company)		-
	2. Additional quota for money lending by LU HAI HOLDING COPR. (hereinafter referred to as the Company) and the limit of sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD. (hereinafter referred to as XIAMEN XIAHUI)		-
	3. Application for purchase of CNC equipment of the subsidiaryXIAMEN XIAHUI RUBBER		-

	METAL INDUSTRIAL CO., LTD. (hereinafter referred to as XIAMEN XIAHUI) in respond to the expansion ofproduction capacity
	4. Subsidiary LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. (hereinafter referred to as KUNSHAN LUHAI)’s plan of biddinga new land		-
	Resolution of Audit Committee: it is agreed and passed by all attending members. Resolution of Board of Directors: it is agreed and passed by all attending directors.
The Fifth Session of the 16th meeting 2021.1.27	1. Purchase of German AR-WS machining center for sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO.,LTD.		-
	2. Sub-subsidiary LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. (hereinafter referred to as KUNSHAN LUHAI) of the Company plans to indirectly lend RMB22 million to the sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD (hereinafter referred to as XIAMEN XIAHUI) by entrusted loan		-
	3. Endorsement guarantee of LU HAI HOLDING CORP.(hereinafter referred to as the Company)		-
	Resolution of Audit Committee: it is agreed and passed by all attending members. Resolution of Board of Directors: it is agreed and passed by all attending directors.
The Fifth Session of the 17th meeting 2021.3.12	1. Construction of new plant of sub-subsidiary LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. (hereinafter referred to as KUNSHAN LUHAI)		-
	2. 2020 business report and financial statements of the Company		-
	3. The Company’s planning to transfer surplus to capital increase byissuingnew shares		-
	4. Appointment of certified public accountants of the Company in 2021, review of 2021 financial statements, and examination of certified remuneration		-
	5. Sub-subsidiary LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. (hereinafter referred to as KUNSHAN LUHAI) of the Company plans to indirectly lend RMB22 million to the sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD (hereinafter referred to as XIAMEN XIAHUI) by entrusted loan		-
	6. Amendments to the “Regulations Governing Loaningof Funds” of the Company		-
	Resolution of Audit Committee: it is agreed and passed by all attending members. Resolution of Board of Directors: it is agreed and passed by all attending directors.

The Fifth Session of the 18th meeting 2021.5.7	1. Consolidated financial statements for the first quarter of 2021 of LU HAI HOLDING CORP. (hereinafter referred to as the Company)		-
	2. New endorsement guarantee of LU HAI HOLDING CORP. (hereinafter referred to as the Company)		-
	Resolution of Audit Committee: it is agreed and passed by all attending members. Resolution of Board of Directors: it is agreed and passed by all attending directors.

For the independent directors’ avoidance of proposal with conflict of interest, the name of independent directors, proposal contents, reasons for conflict of interest and participation in voting shall be specified: None.
Communication circumstances (shall include the major matters, method and result etc. of communication regarding financial and business situations of the company) between and among independent directors and internal audit supervisors and accountants.
(1) The audit unit of the Company would regularly provide internal examination audit report to independent directors, and attend the Board of Directors Meeting to report the latest audit situation.
(2) Independent directors may review the financial and business conditions of the Company at any time, in case of any doubt or suggestion on relevant operating contents of the Company, the independent director may immediately communicate with the head of relevant unit for review and improvement.
(3) Independent directors and accountants shall convene a regular meeting quarterly, in which the accountants shall report the financial conditions, overall operation and examination situation of the Company to independent directors; apart from regular review of financial statements, independent directors may convene a meeting to communicate with the accountants at any time when necessary.

3.4.3 Corporate governance implementation status and its difference from the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies and reasons

			Implementation Status	Difference from
		No		Corporate
				Governance Best
Assessment item				Practice Principles
	Yes		Description abstract
				for TWSE/TPEx

				Listed Companies
				and reasons
1. Whether the Company has formulated and disclosed the Corporate Governance Best Practice Principles according to the “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies”?			The Company has formulated “Corporate Governance Best Practice Principles” pursuant to “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” to comply with, and it was disclosed at company’s website and MOPS.	None
2. Shareholding structure and shareholders’ rights (1) Whether the Company has formulated internal operation procedures to handle shareholders’ suggestions, doubts, disputes and litigation matters, and implement it according to such procedures? (2) Whether the Company has mastered the major shareholders actually controlling the company and the ultimate controller list of major shareholders? (3) Whether the Company has established and executed the risk control and firewall mechanism with affiliated enterprises? (4) Whether the Company has formulated internal regulation to prohibit insider of the Company from utilizing undisclosed information for the securities transaction?	   		(1) The Company has appointed dedicated stock affairs agency to handle stock affairs, and set spokesman and deputy spokesman to handle suggestions from shareholders. (2) The Company has set the stock affairs unit and mastered the major shareholders actually controlling the company and the ultimate controller list of major shareholders, and has regularly tracked and understood the changes in shareholding and disclose them on monthly basis pursuant to law. (3) The assets and financial rights and responsibilities between and among each affiliated enterprise are independent respectively, and they are handled according to the internal control system of the Company. (4) The Company has formulated the “Administrative Measures for Insider Trading Prevention”, strictly prohibiting insiders from trading negotiable securities by utilizing undisclosed information.	None
3. Board of Directors’ composition and responsibility (1) Whether the Board of Directors has formulated diversified policy for the member composition and implemented it?			(1) The Company has explicitly stipulated in Article 20 of “Corporate Governance Best Practice Principles” that the composition of director members shall be diversified. Besides, the director seats of directors, who are concurrently serving as managers in the company are not	None

			Implementation Status	Implementation Status	Implementation Status	Implementation Status	Implementation Status	Difference from
		No						Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies and reasons
Assessment item
	Yes		Description abstract


			appropriate to be over one third, the diversified guidance should be formulated by its operation, business model and the development needs, for example, be equipped with different profession backgrounds, different work fields, different genders, and so on; should be equipped universally with the knowledge, skills, and literacy that execution of duties require. Followings are the abilities that the Board of Directors should be equipped to attain the ideal goal of corporate governance. a. Judgment of operation b. Analytical ability of accounting and finance c. Management ability d. Crisis management ability e. Knowledge of industries f. International market views g. Leadership h. Decision-making ability Board of Directors of the Company is comprised of 9 directors (including 3 independent directors), independent directors are accounting for 33%, and 3 female directors are accounting for 33%. The situation of the diversification of Board of Directors:					None
			Name	Gender	Professional Background	Professional Skill	Industry / Academic Experiences
			HSU, LIEN-KAI	Male	tire valve		
			WU, CHIN-LU	Male	tire valve		
			WU, CHING-SHU	Male	tire valve		
			HSU, YA- TING	Female	tire valve		
			HSU, HUAI- YUN	Female	business management		
			HSU, HAN- YUAN	Male	tire valve		
			YEN, MEI- YING	Female	financing	Accountant	
			CHANG, HORNG- YAN	Male	business management		
			HU, TA- HSIANG	Male	electrical machinery		

			Implementation Status	Difference from
		No		Corporate
				Governance Best
Assessment item				Practice Principles
	Yes		Description abstract
				for TWSE/TPEx

				Listed Companies
				and reasons
(2) Apart from setting Remuneration Committee and Audit Committee pursuant to law, whether the Company is willing to set other functional committees? (3) Whether the Company has formulated Board of Directors Performance Assessment Measures and its assessment method, regularly carries out performance assessment every year, hands in the results of performance assessment to Board of Directors, and applies them as the reference for the remuneration, nomination and reappointment of individual directors? (4) Whether the Company has regularly evaluate the independence of CPA?	  		(2) The Company has set the Remuneration Committee pursuant to law, and voluntarily set the Audit Committee, in the future, the Company will set other functional committees according to business demand. (3) Board of Directors of the Company has passed the “Board of Directors Performance Assessment Measures” on August 8, 2019, and carries out internal performance assessment every year according to the assessment procedures stipulated in such Measures since 2020. The results of aforesaid performance assessment will be the reference for selection or nomination of directors, as well as for determining the remuneration of individual directors. The Company has completed the Board of Directors performance assessment in January 2020, and handed in the evaluation results to the Board of Directors meeting convened on March 12, 2020, the overall Board of Directors performance is perfect and conforming to corporate governance; and the overall performance of director members is good. (4) On March 12, 2021, Board of Directors of the Company has passed the assessment on the independence and competency of the appointed certified public accountant. Certified public accountants and their group have not been appointed by the Company or the affiliated enterprise, nor have close commercial relationship with the Company or directors and managerial officers of the Company, nor have any financial interests with the Company or the affiliated enterprise, nor have accepted any gift of great value or improper entertainment or received any payment other than the audit work; besides, certified public accountants and their group have not engaged in the trading of stocks of the Company, and maintain the accountant’s	None None

	Implementation Status	Implementation Status	Implementation Status	Difference from
		No		Corporate
				Governance Best
Assessment item				Practice Principles
	Yes		Description abstract
				for TWSE/TPEx

				Listed Companies
				and reasons
			independence, and their job rotations are following relevant regulations.
4. Whether or not the listed company sets eligible corporate governance personnel of appropriate number, and designates the corporate governance supervisor to be responsible for corporate governance related affairs (including but not limited to provide directors and supervisors necessary materials for business execution, assist directors and supervisors in legal compliance, handle matters related to Board of Directors Meeting and Shareholders' Meeting pursuant to law, and prepare meeting minutes for Board of Directors Meeting and Shareholders' Meeting etc.)?			On January 27, 2021, Board of Directors of the Company appointed CHANG, CHI-CHI, from Senior Manager of General Manager Room to be the corporate governance supervisor, who has been equipped with the work experiences of engaging in finance, stock affairs, meetings, and other management work of publicly owned corporation for over three years. Following are the main job descriptions:  Handle matters related to Board of Directors Meeting and Shareholders' Meeting pursuant to law  Prepare meeting minutes for Board of Directors Meeting and Shareholders' Meeting  Assist directors in assumptions of duty, and continuous training records  Provide directors with necessary information for business execution  Assist directors and supervisors in legal compliance  Implement Board of Directors performance evaluation Followings are the 2020 business execution situations: a. Handle Board of Directors 5 times pursuant to law, noticing meetings and preparing information related to meetings 7 days in advance, and complete meeting minutes for Board of Directors Meeting. b. Handle General Shareholders’ Meeting pursuant to law, and prepare notice of meetings, meeting manuals, annual reports, and meeting minutes within the statutory time. c. Assist directors in running a course in the first and the second half of the year. d. Carry out performance evaluation of the Board of Directors and individual directors every year. The 2020 performance evaluation has been handed to Board of Directors on March 12, 2021. Our company’s corporate governance supervisor will inaugurate in January, 2021, and will finish 18 hours of training records withina year.	None

			Implementation Status	Difference from
		No		Corporate
				Governance Best
Assessment item				Practice Principles
	Yes		Description abstract
				for TWSE/TPEx

				Listed Companies
				and reasons
5. Whether the Company has established communication channels with Stakeholders (including but not limited to shareholders, employees, customers and suppliers etc.), and set up a Stakeholders’ section on the company website, and appropriately respond to the important corporate social responsibilities concerned by Stakeholders?			The website of the Company has set the Stakeholders’ section to provide investors service, customers and suppliers and employees sections respectively, and has left contact information at MOPS and company website, and the Company can respond to the important issues concerned by Stakeholders by the dedicated person, fax and email etc.	None
6. Whether the Company has appointed a professional stock affairs agency to handle the affairs of Shareholders’ Meeting?			The Company has appointed a professional stock affairs agency, the “Stock Agent Department, Sinopac Securities” to handle matters related to stock affairs in Taiwan, and has formulated the “Regulations Governing the Administration of Shareholder Services” toregulaterelevant affairs.	None
7. Information disclosure (1) Whether the Company has set website to disclose financial business and corporate governance information? (2) Whether the Company has adopted other information disclosure methods (such as setting English website, designating dedicated person to be responsible for the collection and disclosure of company information, implementing spokesman system, and webcasting investors conference etc.)?			(1) The Company has set the website: http://www.luhai.com.tw/, and disclose information related to financial business and corporate governance of the Company at MOPS regularly or irregularly as required.
			(2) The Company has set the English website, spokesman or deputy spokesman makes a statement on the issues related to the Company, and each relevant business department is responsible for the collection and disclosure of company information. Besides, relevant information on the investor conference presentation already convened or being invited to attend over the years have been disclosed at	None

	Implementation Status	Implementation Status	Implementation Status	Difference from
		No		Corporate
				Governance Best
Assessment item				Practice Principles
	Yes		Description abstract
				for TWSE/TPEx

				Listed Companies
				and reasons
(3) Whether or not the company announces and declares annual financial report within two months after the end of accounting year, and announces and declares the financial report of the first, second and third quarter and monthly operating situation before the prescribed time limit?			company website and MOPS. (3) The Company declares annual financial report within the prescribed time limit, and announces and declares the financial report of the first, second and third quarter and monthly operating situation before the prescribed time limit.
8. Whether the Company has other important information contributing to the understanding of operation situation of corporate governance (including but not limited to rights and interests of employee, employee caring, investor relations, supplier relations, rights of stakeholders, directors’ and supervisors’ training records, execution situation of risk management policy and risk measurement standards, execution situation of customer policy, the situation in which the Company buys liability insurance for the directors and supervisors etc.)? (1) Rights and interests of employee: The Company and each local subsidiary have formulated the system related to employee welfare, according to the laws and decrees of various countries to safeguard the rights and interests of employee. (2) Employee caring: The Company and its reinvested subsidiaries have set the Employees Union as the communication channel between employees and management of the company, consensus is reached between the Employees Union and employees for all important matters involving in employees to condense centripetal force; besides, internal periodical of the Group “LUHAI’s Windows” has been set to encourage employees to contribute to share their spirits and actively give feedbacks. (3) Investor relations: the website of the Company sets the investor relations section to irregularly update relevant information to provide to the investor for reference. (4) Stakeholder: The Company has set the Stakeholder section on the company website to maintain a smooth communication channel of stakeholders (shareholders, investors, corresponding banks, suppliers, customers, medias and employees etc.), and respect and safeguard their due legal rights and interests. (5) Directors’ training records in 2020: please refer to “Directors’ training records in 2020” (Page 32) in this annual report for details. (6) The Company has formulated the “Administrative Measures for Insider Trading Prevention” and “Administrative Measures for Material Information Announcement” as the basis for handling major information and disclosure mechanism, and irregularly reviews those Measures to conform to current laws and decrees and meet the requirement of practical management, upon amendment, the Company will inform employees by E-mail internally and put the latest measures at internal website of the Company for reference by managerial officers and employees at any time. (7) Situation of the company's buying liability insurance for the director: the Company has bought director liability insurance and announced it at mops.twse.com.tw, the period of liability insurance is from June 20, 2020 to June 20, 2021, and the insuring amount is USD1 million.

Whether the Company has other important information contributing to the understanding of operation situation of corporate governance (including but not limited to rights and interests of employee, employee caring, investor relations, supplier relations, rights of stakeholders, directors’ and supervisors’ training records, execution situation of risk management policy and risk measurement standards, execution situation of customer policy, the situation in which the Company buys liability insurance for the directors and supervisors etc.)?
(1) Rights and interests of employee: The Company and each local subsidiary have formulated the system related to employee welfare, according to the laws and decrees of various countries to safeguard the rights and interests of employee.
(2) Employee caring: The Company and its reinvested subsidiaries have set the Employees Union as the communication channel between employees and management of the company, consensus is reached between the Employees Union and employees for all important matters involving in employees to condense centripetal force; besides, internal periodical of the Group “LUHAI’s Windows” has been set to encourage employees to contribute to share their spirits and actively give feedbacks.
(3) Investor relations: the website of the Company sets the investor relations section to irregularly update relevant information to provide to the investor for reference.
(4) Stakeholder: The Company has set the Stakeholder section on the company website to maintain a smooth communication channel of stakeholders (shareholders, investors, corresponding banks, suppliers, customers, medias and employees etc.), and respect and safeguard their due legal rights and interests.
(5) Directors’ training records in 2020: please refer to “Directors’ training records in 2020” (Page 32) in this annual report for details.
(6) The Company has formulated the “Administrative Measures for Insider Trading Prevention” and “Administrative Measures for Material Information Announcement” as the basis for handling major information and disclosure mechanism, and irregularly reviews those Measures to conform to current laws and decrees and meet the requirement of practical management, upon amendment, the Company will inform employees by E-mail internally and put the latest measures at internal website of the Company for reference by managerial officers and employees at any time.
(7) Situation of the company's buying liability insurance for the director: the Company has bought director liability insurance and announced it at mops.twse.com.tw, the period of liability insurance is from June 20, 2020 to June 20, 2021, and the insuring amount is USD1 million.

		Implementation Status	Implementation Status	Implementation Status	Implementation Status	Difference from
		Yes	No			Corporate
						Governance Best
	Assessment item					Practice Principles
				Description abstract
						for TWSE/TPEx

						Listed Companies
						and reasons
9.	Please describe the improvement of corporate governance evaluation result released by corporate governance center of Taiwan Stock Exchange Corporation in the last year, and propose the prioritized strengthening matters and measures for the unimproved matters. Items already improved by the Company in corporate governance in 2020 are as follows: Evaluation indicators Improved circumstances Whether or not the company discloses the communication circumstances between and among independent director and internal audit supervisor and accountant (e.g. communication method, matter and result etc. regarding financial report and financial business situation of the company) at the company website? The Company has revealed the frequency of the communication between Independent Directors, Internal Audit Director and CPA. Unimproved matters to be prior strengthened are as follows: Evaluation indicators Improvement circumstances Whether or not the company formulates and discloses the implementation of internal regulation of forbidding directors or employees and other insiders using inaccessible information in the market to make a profit? The Company had carried out and disclosed at the company website an education training in preventing insider tradingonDecember 18, 2020. Whether or not the company formulates the policy for diversity of board members, and discloses the implementation situation of diversity policy at company website and annual report? The Company will specifically disclose the management target of the policy for diversity of board members. Whether or not the company employs the governance supervisor, in charge of governing matters related to company governance, and discloses the governance supervisor’s province and training records at the company website? The company has employed a governance supervisor, and specifically disclosed the governance supervisor’s province and training records. Whether or not the company declares significant English information synchronously? The company has uploaded important information in English since fourth quarter of 2020. Whether or not the company website or the annual report discloses the integrity operation policy passed by Board of Directors, and explicitly formulates the mechanism for the risk of dishonest behavior? The company has carried out and disclosed at the company’s website the education training of the Ethical Corporate Management Best Practice Principles.
	Evaluation indicators				Improved circumstances
	Whether or not the company discloses the communication circumstances between and among independent director and internal audit supervisor and accountant (e.g. communication method, matter and result etc. regarding financial report and financial business situation of the company) at the company website?				The Company has revealed the frequency of the communication between Independent Directors, Internal Audit Director and CPA.
	Unimproved matters to be prior strengthened are
	Evaluation indicators				Improvement circumstances
	Whether or not the company formulates and discloses the implementation of internal regulation of forbidding directors or employees and other insiders using inaccessible information in the market to make a profit?				The Company had carried out and disclosed at the company website an education training in preventing insider tradingonDecember 18, 2020.
	Whether or not the company formulates the policy for diversity of board members, and discloses the implementation situation of diversity policy at company website and annual report?				The Company will specifically disclose the management target of the policy for diversity of board members.
	Whether or not the company employs the governance supervisor, in charge of governing matters related to company governance, and discloses the governance supervisor’s province and training records at the company website?				The company has employed a governance supervisor, and specifically disclosed the governance supervisor’s province and training records.
	Whether or not the company declares significant English information synchronously?				The company has uploaded important information in English since fourth quarter of 2020.
	Whether or not the company website or the annual report discloses the integrity operation policy passed by Board of Directors, and explicitly formulates the mechanism for the risk of dishonest behavior?				The company has carried out and disclosed at the company’s website the education training of the Ethical Corporate Management Best Practice Principles.

Directors’ training records in 2020

Title	Name	Date	Host unit	Course name	Hours
Chairman	HSU, LIEN- KAI	2020/5/8	Accounting Research and Development Foundation	Corporate governance and Securities and Exchange Act	3
		2020/11/6	Taiwan Investor Relations Institute	Analysis of domestic and internationalpractical mergers	3
Director	WU, CHIN- LU	2020/5/8	Accounting Research and Development Foundation	Corporate governance and Securities and Exchange Act	3
		2020/7/3	Taiwan Investor Relations Institute	Building up or building down? How to turn crises into turning points	3

Title	Name	Date	Host unit	Course name	Hours
		2020/9/19	Taiwan Investor Relations Institute	Corporate governance—A cure-all for enterprise! An independent director is the double-edged knife of a enterprise?	3
Director	WU, CHING- SHU	2020/5/8	Accounting Research and Development Foundation	Corporate governance and Securities and Exchange Act	3
		2020/11/6	Taiwan Investor Relations Institute	Analysis of domestic and internationalpractical mergers	3
Director	HSU, YA- TING	2020/5/8	Accounting Research and Development Foundation	Corporate governance and Securities and Exchange Act	3
		2020/11/6	Taiwan Investor Relations Institute	Analysis of domestic and internationalpractical mergers	3
Director	HSU, HUAI- YUN	2020/5/8	Accounting Research and Development Foundation	Corporate governance and Securities and Exchange Act	3
		2020/11/6	Taiwan Investor Relations Institute	Analysis of domestic and internationalpractical mergers	3
Director	HSU, HAN- YUAN	2020/5/8	Accounting Research and Development Foundation	Corporate governance and Securities and Exchange Act	3
		2020/11/6	Taiwan Investor Relations Institute	Analysis of domestic and internationalpractical mergers	3
Independent Director	YEN, MEI- YING	2020/5/8	Accounting Research and Development Foundation	Corporate governance and Securities and Exchange Act	3
		2020/11/6	Taiwan Investor Relations Institute	Analysis of domestic and internationalpractical mergers	3
Independent Director	CHANG, HORNG-YAN	2020/5/8	Accounting Research and Development Foundation	Corporate governance and Securities and Exchange Act	3
		2020/5/11	Securities and Futures Institute	New analysis of international tax tendency issues and the practical needs under the blueprint of corporategovernance	3
		2020/8/12	Securities and Futures Institute	Strategy and management of upgradation and transformation of an enterprise	3
		2020/9/22	Taiwan Stock Exchange Corporation	Listed company governance 3.0-the forum of the blueprint of sustainable development	3
		2020/11/6	Taiwan Investor Relations Institute	Analysis of domestic and internationalpractical mergers	3
		2020/11/10	Taiwan Investor Relations Institute	Practical insider trading analysis	3
		2020/11/10	Taiwan Investor Relations Institute	New enterprise digital transformation and competition aspects of 5G	3
Independent Director	HU, TA- HSIANG	2020/5/8	Accounting Research and Development Foundation	Corporate governance and Securities and Exchange Act	3
		2020/11/6	Taiwan Investor Relations Institute	Analysis of domestic and internationalpractical mergers	3

3.4.4. Composition, responsibility and operation situation of the Remuneration Committee

3.4.4.1 Composition of Remuneration Committee

The Company has set the Remuneration Committee by resolution on January 21, 2013, and all independent directors are members of Remuneration Committee.

Title (Notes 1)	Criteria Name	Whether or not with over five years of work experience and the following professional qualifications	Whether or not with over five years of work experience and the following professional qualifications	Whether or not with over five years of work experience and the following professional qualifications	Independence Criteria (notes 2)	Independence Criteria (notes 2)	Independence Criteria (notes 2)	Independence Criteria (notes 2)	Independence Criteria (notes 2)	Independence Criteria (notes 2)	Independence Criteria (notes 2)	Independence Criteria (notes 2)	Independence Criteria (notes 2)	Independence Criteria (notes 2)	Number of other public companies in which concurrently act as Remuneratio n Committee member	Notes (Notes 3)
		An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University	A Judge, Public Prosecutor, Attorney, CPA, or Other Professional or Technical Specialist Who has Passed a National Examination and been Awarded a Certificate in a Profession Necessary for the Business of the Company	Have Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	1	2	3	4	5	6	7	8	9	10
Convenor	CHANG, HORNG-YAN														1	Yes
Independent Director	YEN, MEI- YING														0	Yes
Independent Director	HU, TA- HSIANG														0	Yes

Notes 1. Please fill in director, independent director or other in the column of identity type.

Notes 2. If each member is conforming to the following conditions two years before appointment and during the term of office, please tick "  " in the blank below the code of each condition.

(1) Not an employee of the company or any of its affiliates.
(2) Not the director or supervisor of the company or any of its affiliated (except for independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent)
(3) Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings.
(4) Not the spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of the managerial officer listed in Paragraph (1) or any of the persons listed in Paragraph (2) and (3).
(5) Not the director, supervisor or employee of the corporate shareholder that directly holds 5% or more of the total number of issued shares of the company, or that ranks among the top five in shareholdings, or that designates its representative to serve as a director or supervisor of the company under Paragraph 1 or 2, Article 27, of the Company Act (except for independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent).
(6) Not the company’s director seats or voting shares and those of any other company are controlled by the same person: a director, supervisor, or employee of that other company. (except for independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent).
(7) Not the Chairman, General Manager, or person holding an equivalent position of the company and a person in any of those positions at another company or institution are the same person or are spouses: a director (member of a council), supervisor, or employee of that other company or institution (except for independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary

or a subsidiary of the same parent)

(8) Not the director (member of a council), supervisor, manager or shareholder holding 5% or more of the shares, of a specified company or institution that has a financial or business relationship with the company (except that such specific company or institution holds 20% or more and no more than 50% of the total number of issued shares of the company, and independent directors appointed in accordance with the Act or the laws and regulations of the local country by, and concurrently serving as such at, a public company and its parent or subsidiary or a subsidiary of the same parent).
(9) Not the professional individual who, or an owner, partner, director (member of a council), supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides auditing services to the company or any affiliate of the company, or that provides commercial, legal, financial, accounting or related services to the company or any affiliate of the company for which the provider in the past 2 years has received cumulative compensation exceeding NT$500,000, or a spouse thereof; provided, this restriction does not apply to a member of the remuneration committee, public tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to the Act or to the Business Mergers and Acquisitions Act or related laws or regulations.
(10) Not been a person of any conditions defined in Article 30 of the Company Act.
Notes 3. If the identity type of the member is director, please describe whether it is conforming to the provisions of Paragraph 5, Article 6 of “Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter”

3.4.4.2 Responsibilities of Remuneration Committee

Remuneration Committee shall faithfully perform the following powers and authorities with the attention as a bona fide manager, and submit the recommendations to the Board of Directors for discussion:

(1) Prescribe and periodically review the performance review and remuneration policy, system, standards and structure of directors and managerial officers.
(2) Make sure that the company’s remuneration arrangement is conforming to relevant laws and decrees and sufficient to attract outstanding talents.
(3) With respect to the performance assessment and remuneration of directors, members of Audit Committee and managerial officers of the company, it shall refer to the typical pay levels adopted by peer companies, and take into consideration the reasonableness of the correlation between remuneration and individual performance, the company’s business performance, and future risk exposure.
(4) It shall not produce an incentive for the directors or managerial officers to engage in activity to pursue remuneration exceeding the risk that the company may tolerate.
(5) Periodically evaluate and prescribe the remuneration of directors and managerial officers. The Remuneration Committee Meeting shall be convened by the convener at least twice a year, and meeting may be convened at any time as necessary.

3.4.4.3 Operation situation of Remuneration Committee
(1) There are 3 members in the Remuneration Committee of the Company.

(2) Term of office of members in this session: from June 25, 2018 to June 24, 2021, as at the publication date of 2020 annual report, Remuneration Committee has convened 7(A) meetings, and members’ qualification and attending situation are as follows:

Title	Name	Attendance in Person(B)	By Proxy	Attendance rate (%) (B/A)
Convenor	CHANG, HORNG- YAN	7	-	100.00%
Committee member	YEN, MEI-YING	7	-	100.00%
Committee member	HU, TA-HSIANG	7	-	100.00%
Other matters should be recorded: 1. If Board of Directors refuses to adopt or revises the suggestion of Remuneration Committee, the date of board meeting, session, proposal contents, result of board resolution and handling of Remuneration Committee’s opinion (if the remuneration passed by Board of Directors is superior to the suggestion of Remuneration Committee, the Differences and reason therefor shall be specified) shall be specified: None. 2. For the resolution of Remuneration Committee, if a member opposes or has a qualified opinion and with record or written statement, the date of Remuneration Committee meeting, session, proposal contents, and opinions of all members and handling of members’ opinion shall be specified: None. 3. In 2020,as at thepublication date of annual report,subjects of discussion are as follows: Remuneration Committee Proposal contents and subsequent handling The Third Session of the 6th meeting 2020.1.15 1. The Company’s distribution of year-end bonus to managerial officers in 2019 2. The Company’s distribution of annual performance bonus to managerial officers in 2019 3. Amendments to the Company’s annual allocation proportion of performance bonus 4. Amendments to the "Dispatched Personnel Management Measures” of the Company Resolution result of Remuneration Committee: Case 1, 2 and 3 had been agreed and passed by all attending members, but for Case 3, the undertaking unit needed to be more rigorous to make the definition of “non-recurring” and the item scope more clear; discussion of Case 4 was postponed and would be otherwise discussed and resolved after overall assessment on other personnel related regulations and matters. Resolution of Board of Directors: For Case 1 and 2, Director HSU, LIEN- KAI, HSU, HAN-YUAN and HSU, YA-TING didn’t participate in voting due to the principle of conflict of interests, Case 3 had been agreed and passed by all attending directors; the Chairman instructed the Management Department to make the definition of “non-recurring” more clear accordingto the suggestion of remuneration member,and conduct

		assessment on the performance measurement item and report to Board of Directors; and the discussion of Case 4 was postponed.
	The Third Session of the 7th meeting 2020.3.12	1. The Company’s distribution of director and employee’s remuneration in 2019
		Resolution result of Remuneration Committee: it is agreed and passed by all attending members. Resolution of Board of Directors: it is agreed and passed by all attending directors.
	The Third Session of the 8th meeting 2020.5.8	1. The Company’s salary adjustment (subsequent recognition) for managerial officers
		Resolution result of Remuneration Committee: it is agreed and passed by all attending members. Resolution of Board of Directors: it is agreed and passed by all attending directors.
	The Third Session of the 9th meeting 2020.8.7	1. The Company’s distribution of director’s individual remuneration in 2019 2. The Company’s distribution of managerial officer’s remuneration in 2019 3. The bonus distribution to managerial officers of the Company
		Resolution result of Remuneration Committee: it is agreed and passed by all attending members. Resolution of Board of Directors: For Case 2, Director HSU, LIEN-KAI, HSU, HAN-YUAN and HSU, YA-TING didn’t participate in voting due to the principle of conflict of interests; For Case 3, Director HSU, HAN- YUAN and HSU, YA-TING didn’t participate in voting due to the principle of conflict of interests, and the rest proposals had been agreed andpassed byall attendingdirectors.
	The Third Session of the 10th meeting 2020.11.6	1.The modification of the salary of managerial officers of the Company
		Resolution result of Remuneration Committee: it is agreed and passed by all attending members. Resolution of Board of Directors: Director HSU, HAN-YUAN and Director HSU, YA-TING didn’t participate in voting due to the principle of conflict of interests, this case had been passed by the rest 7 attending directors with 6 votes.
	The Third Session of the 11th meeting 2021.1.27	1. The Company’s distribution of year-end bonus to managerial officers in 2020 2. The Company’s distribution of annual performance bonus to managerial officers in 2020 3. The modification of the salary of managerial officers of the Company 4. The bonus distribution of construction to Sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD. 5. The bonus distribution to the relocation of LUHAI RUBBER METAL INDUSTRIAL(KUNSHAN)CO.,LTD.

		Resolution result of Remuneration Committee: it is agreed and passed by all attending members. Resolution of Board of Directors: For Case 1 and 2, Director HSU, LIEN- KAI, HSU, HAN-YUAN and HSU, YA-TING didn’t participate in voting due to the principle of conflict of interests; Case 3 and 4 Director HSU.YA-TING didn’t’ participate in voting due to the principle of conflict of interests; Case 5 Director WU CHING SHU didn’t participate in voting due to the principle of conflict of interests and passed by the rest attendingdirectors.
	The Third Session of the 12th meeting 2021.3.12	1. The Company’s distribution of director and employee’s remuneration in 2020
		Resolution result of Remuneration Committee: it is agreed and passed by all attending members. Resolution of Board of Directors: it is agreed and passed by all attending directors.

3.4.5 Performance of corporate social responsibility and its difference from the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies and reasons

			Implementation Status	Discrepancy with the
				Corporate Social
				Responsibility Best
Assessment item
	Yes	No	Description abstract	Practice Principles for

				TWSE/TPEx Listed
				Companies and reasons
1. Whether or not the company conducts risk assessment on the environment, society and corporate governance issues related to company operation according to materiality principle, and formulates relevant risk management policy or strategy?			Under the materiality principle, the Company conducts risk assessment on the environment, society and corporate governance according to the situation of company operation and relevant regulations, and adjusts various risk management policies or strategies.	None
2. Whether the Company has set dedicated (part-time) unit to promote corporate social responsibility, and whether the Board of Directors has authorized senior management to handle and report the handling situation to Board of Directors?			The Company is willing to actively participate in community services and public benefit activities, the Administration Department is responsible for looking for and screening appropriate projects and report for approval before input, so as to fulfill the corporate social responsibility.	None
3. Issues of Environment (1) Whether the Company has established appropriate environmental management system according to its industrial characteristics? (2)Whether the Company has been devoting to improve the utilization efficiency of all kinds of resources, and use renewable materials having lower impact on environmental? (3)Whether or not the company assesses potential current and future risk and opportunity brought by climate change to the company, and adopts	  		(1) The Company has passed various ISO certifications, and has complete regulation on quality management, safety, health and environmental protection etc. (2) The Company has been continuously improving the utilization efficiency of all kinds of resources and recycling and reusing raw materials. For example, the Company actively uses the reusable pallets formed by the recycled packaging materials (such as pallet, clapboard etc.) and repair wooden pallets to mitigate the environmental load. The Company and subsidiaries will set dedicated unit or personnel for environmental management as the case may be. (3) The Company continuously pays attention to the information related to potential risk and opportunity brought by climate change, and irregularly discusses	None

			Implementation Status	Discrepancy with the
				Corporate Social
				Responsibility Best
Assessment item
	Yes	No	Description abstract	Practice Principles for

				TWSE/TPEx Listed
				Companies and reasons
solutions to relevant climate issues? (4)Whether or not the company conducts statistics on greenhouse gas emissions, water consumption and total waste weight in the last two years, and formulates policies for energy saving, carbon reduction, reduction of greenhouse gas emissions and water consumption, or management of other waste?			relevant solutions on how to reduce and improve the generation of harmful gas to lower the damage to atmosphere. (4) The Company pays attention to energy saving and carbon reduction at ordinary times, so as to save the power consumption in offices and production units; for general industrial waste and hazardous waste, the company reports to local environmental protection department every year, and implements the control policy as required by environmental protection department; for industrial water consumption and power consumption, Engineering Department will formulate relevant targets every year, and conduct statistics on and examine the completion of targets every month. Each department of the company emphasizes the process of water consumption, and formulates corresponding water saving targets, environmental safety department conducts statistics every month and convene a meeting every quarter to ask the department that fails to meet the target to make improvement. For example, subsidiaries have changed the original heating by the steam generated from heavy oil burning boiler into the current heating by electric energy, so as to gradually implement energy saving and carbon reduction and reduction of greenhouse gas.
4. Issues of Social (1) Whether the Company has formulated relevant management policies and procedures according to relevant laws and regulations and International Covenants on Human Rights?			(1) The Company has formulated personnel management regulations according to Labor Act and relevant personnel laws and the spirit of International Covenants on Human Rights, so as to safeguard legal rights and interests of employees.	None

			Implementation Status	Discrepancy with the
				Corporate Social
				Responsibility Best
Assessment item
	Yes	No	Description abstract	Practice Principles for

				TWSE/TPEx Listed
				Companies and reasons
(2) Whether or not the company formulates and implements rational employee welfare measures (including remuneration, leave and other welfares etc.), and appropriately reflects the operation performance or achievement to employee remuneration? (3) Whether the Company has provided employees a safe and healthy working environment, and has implemented safety and health education to the employees regularly? (4) Whether the Company has set effective occupational ability development training plan for the employees? (5) For the customer health and safety, customer privacy, marketing and marking of product and service, whether or not the Companycomplies	   		(2) Apart from formulating the “Personnel Management Measures” pursuant to Labor Standards Act and setting Employee Welfare Committee to implement various welfare measures, in accordance with “Measures for Employee’s Performance Bonus Assessment and Remuneration Distribution”, the Company also reflects its operation results to thee employee remuneration according to operation performance of the company. (3) The Company has provided employees a safe and healthy working environment according to relevant laws and regulations, and regularly provides health examination and irregularly carries out educational training, and provides appropriate and sufficient protective devices for work. Production bases of the Company carry out safety and health education to employees regularly and irregularly. For example, reduce noise, high temperature and pollution etc. in production workshop environment to provide employees a safer and healthier working environment, and regularly carry out propaganda and educational training on occupational injury prevention, fire safety practical drilling, and regularly provide employees the physical examination. (4) Apart from sparing no efforts to train employees all kinds of professional skills at operating post, the Company has not yet established development training plan for employees’ career competence. (5) The Company takes responsibility for the produced products, and in principle, relevant marking and marketing method of its products will not violate laws and	None

	Implementation Status	Implementation Status	Implementation Status	Discrepancy with the
				Corporate Social
				Responsibility Best
Assessment item
	Yes	No	Description abstract	Practice Principles for

				TWSE/TPEx Listed
				Companies and reasons
with relevant laws and regulations and international standards, and formulates relevant policies and complaint procedures for protecting consumer rights and interests? (6) Whether or not the company formulates supplier management policy, and asks the supplier to comply with relevant regulations on environmental protection, occupational safety and health, or labor rights etc.? And the implementation situation thereof?			regulations and international norms. (6) The Company conducts sampling to ask suppliers whether their products cause significant pollution to the environment, in the future, it will carry out in writing as the case may be, and take it as the key consideration in whether or not listing as the qualified supplier.	None
5. Whether or not the company refers to international report preparation criterion or guidelines to prepare corporate social responsibility report and other reports disclosing non- financial information of the company? Whether or not the aforesaid report has acquired the assurance or guarantee opinion from the third party verification unit?			The Company has prepared basic disclosure report according to the corporate social responsibility report (basic edition) promoted by Industrial Department Bureau, Ministry of Economic Affairs, despite the Company has not officially prepared complete report and acquired the certification from the third party, the Company has been devoting to implement relevant matters prescribed in international (GRI) report preparation criterion or guidelines.	None
6.If the Company has formulated its own Corporate Social Responsibility Best Practice Principles according to the “Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies”, please describe its operation and the difference circumstances therebetween: The Company has formulated the “Corporate Social Responsibility Best Practice Principles” according to the “Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies”, and thereisno significant difference.
7.Other important information good for understanding the operation situation of corporate social responsibility: Environmental aspect: (1) All important operating offices are complying with relevant local environmental protection laws and regulations and have acquired the Pollutant Discharge Permit and paid the pollutant discharge fee; besides, they have also acquired the ISO14001 certification. (2) The Company has been continuously improving the utilization efficiency of all kinds of resources and recycling reusing raw materials; carrying out energy saving and carbon reduction campaign to save the power consumption in offices and production units. (3) Important subsidiaries of the Company actively invest funds to introduce air pollution control equipment to fume emission in the plant to meet standards. (4) Important subsidiaries of the Company actively invest funds to introduce water pollution control equipment to discharge quality of electroplating water to meet standards. (5) Important subsidiaries of the Companyactivelyinvest funds to rectifyand improve oil-burning

6.If the Company has formulated its own Corporate Social Responsibility Best Practice Principles according to the “Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies”, please describe its operation and the difference circumstances therebetween: The Company has formulated the “Corporate Social Responsibility Best Practice Principles” according to the “Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies”, and there is no significant difference.

		Implementation Status	Implementation Status	Implementation Status	Discrepancy with the
					Corporate Social
					Responsibility Best
	Assessment item
		Yes	No	Description abstract	Practice Principles for

					TWSE/TPEx Listed
					Companies and reasons
equipment, and change the original heavy oil burning into electric heat energy to improve the issues of safety and air pollution, so as to meet standards. Social aspect: (1) Subsidiaries of the Company has sponsored NTD110 thousand to the “Tianzhong Marathon” activity, about one hundred colleagues including their spouses enthusiastically participated and assisted in the proceeding of the entire activity; besides, regular donation to Changhua Spinal Cord Injury Reconstruction Association and contribution to villages by adopting street lights. Enthusiastic participation in public benefit activities, and serving fellow villagers or townsmen are the consistency principles of the Company in giving back to the society. Employee aspect: (1) The Company provides a channel for employee’s opinion reflection, and sets internal publication of the Group, namely “LUHAI’s Windows”, and refers to the spirit of International Covenants on Human Rights to amend relevant measures of the Company, and irregularly convene meetings to keep a smoothcommunicationchannel.

3.4.6 Performance of integrity operation and its difference from the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies and reasons

			Implementation Status	Difference from
		No		Ethical Corporate
				Management Best
Assessment item				Practice Principles
	Yes		Description abstract
				for TWSE/TPEx

				Listed Companies
				and reasons
1. Formulate ethical corporate management policy and scheme (1) Whether or not the Company formulates integrity operation policy passed by Board of Directors, and explicitly formulates the policy and practice of integrity operation in the regulations and external documents, and the commitment of Board of Directors and senior management echelon to actively implement the operationpolicy?			(1) The Company formulates prevention regulations on dishonest behaviors in the “Ethical Corporate Management Best Practice Principles” and “Procedures for Ethical Management and Guidelines for Conduct”, and the corporate culture of the Company also emphasizes integrity and ethics.	None

			Implementation Status	Difference from
		No		Ethical Corporate
				Management Best
Assessment item				Practice Principles
	Yes		Description abstract
				for TWSE/TPEx

				Listed Companies
				and reasons
(2) Whether or not the company establishes assessment mechanism for the risk of dishonest behavior, regularly analyzes and assesses the operating activities of higher dishonest behavior risks within the scope of business, and formulates the scheme for preventing dishonest behavior accordingly, and at least covers the prevention measures for various behaviors prescribed in Paragraph 2, Article 7 of “Listed Company Integrity Operation Rules”? (3) Whether or not the company explicitly formulates the operation procedure, behavioral guideline, violation punishment and complaints system in the scheme of preventing dishonest behavior, and regularly review and amend the aforesaid scheme?	 		(2) The Company has formulated the “Ethical Corporate Management Best Practice Principles” and “Procedures for Ethical Management and Guidelines for Conduct”, by adhering to honest, transparent and responsible operation philosophy, the Company has formulated operation policy based on integrity, and established favorable corporate governance and risk control mechanism to create an operation environment of sustainable development. The Company has also set internal control and internal audit systems to be executed by the audit unit, important business activities are the key points in auditing, if fraudulent practices or inappropriate behaviors are found, it will be handled according to relevant regulations immediately. (3) The Company has formulated the “Procedures for Ethical Management and Guidelines for Conduct” to comply with and implement it accordingly.
2. Implementation of ethical corporate management (1) Whether the Company has assessed the ethical records of contacting objects, and explicitly stipulated ethical clauses in the contract signed by and between the Company and trading objects? (2) Whether the company has set dedicated unit subordinated to Board of Directors, and regularly (at least once a year) reports to Board of Directors on the integrity operation policy and scheme of dishonest behavior prevention, and supervises the execution situation?	 		(1) Before trading with important customers, the Company will conduct credit investigation to avoid trading with customers with the record of dishonest behaviors. (2) Due to complete ethical corporate management, theCompany designates Management Department as the dedicated unit for this business matter, in charge of formulating and supervising management of implementation of ethical corporate management and prevention scheme. Fulfilling integrity and ethics values through holding’’ Ethical Corporate Management Policy’’ education training each year and reporting the situation to the Board of Directors regularly. The 2020 implementation situation had been reported to the Board of Directors on January27,2021.	None

			Implementation Status	Difference from
		No		Ethical Corporate
				Management Best
Assessment item				Practice Principles
	Yes		Description abstract
				for TWSE/TPEx

				Listed Companies
				and reasons
(3) Whether the Company has formulated policy to prevent conflict of interest and provided proper statement channel, and implements them? (4) Whether the company has established effective accounting system, internal control system for implementing integrity operation, and has the internal audit unit to draft relevant audit plan according to the assessment results of dishonest behavior risks, and checks the compliance of the scheme for dishonest behavior prevention accordingly, or appoints accountants to execute the auditing? (5) Whether the Company holds internal and external educational training on ethical corporate management regularly?	  		(3) The “Procedures for Ethical Management and Guidelines for Conduct” formulated by the Company is available for providing complete good-practice guidelines to employees. (4) The Company has set accounting system for accounting personnel to comply with upon operation, and internal audit personnel will also carry out all kinds of audit operations regularly and irregularly, and report the results to the Board of Directors. (5) The Company irregularly propagandizes relevant stipulations of Ethical Corporate Management Best Practice Principles to directors, managerial officers, employees and appointees etc. In the future, the Company will regularly convene internal or external educational training after the date of Board of Directors Meeting as the case may be.	None
3. Operation situation of company reporting system (1) Whether the Company has formulated specific reporting and rewarding system and established convenient reporting channel, and assigned appropriate dedicated handling personnel for the object being reported? (2) Whether the company has formulated standard investigation procedure for accepting reporting matters, and subsequent measures and relevant confidentiality mechanism should be adopted after investigation? (3) Whether the Company has taken measures to protect whistleblower from improper treatment due to the reporting?	 		(1) Reporting system of the Company includes employee complaints, customer and supplier exposure, the reporting method is disclosed at the stakeholder section of company website, and dedicated personnel is assigned to be responsible for handling. (2) The Company has stipulated proper reporting and rewarding systems in the “Procedures for Ethical Management and Guidelines for Conduct”. Meanwhile, the Company will establish relevant operation procedures and confidentiality mechanism to ensure proper protection and guarantee of whistleblower.	None.
			(3) In the future, the Company will establish relevant operation procedures and confidentiality mechanism to ensure proper protection and guarantee of whistleblower. In 2020, colleagues of the Company and subsidiaries have not been reported due to the violation of enterprise integrity management.

	Implementation Status	Implementation Status	Implementation Status	Difference from
		No		Ethical Corporate
				Management Best
Assessment item				Practice Principles
	Yes		Description abstract
				for TWSE/TPEx

				Listed Companies
				and reasons
4. Enhanced information disclosure Whether the Company has disclosed the contents of Ethical Corporate Management Best Practice Principles formulated and the promotion effect thereof at the company website and MOPS?			(1) The Company has established the “Ethical Corporate Management Best Practice Principles” on website, in the future, the Company will gradually establish and disclose relevant information on ethical corporate management as necessary. (2) The Company has assigned dedicated personnel to be responsible for information collection, and information will be disclosed at MOPS in the future, striving to disclose complete and instant information to the public.	None
5. If the Company has formulated its own Ethical Corporate Management Best Practice Principles according to the “Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies”, please describe its operation and the difference circumstance therebetween: None.
6. Other important information good for understanding the operation situation of ethical corporate management of the Company (such as the Company reviews and amends the Ethical Corporate Management Best Practice Principles formulated etc.): Upon contacting with manufacturers, the Company always adheres to the principle of ethical and propagandizes the ethical operation philosophy of the Company to contacting manufacturers, and also strengthens education to employees.

3.4.7 If the company has formulated the Corporate Governance Best Practice Principles and relevant regulations, the inquiry method thereof shall be disclosed: The Company has formulated the Corporate Governance Best Practice Principles and disclosed it at the website of the Company in the Corporate Governance under Investors Section http://www.luhai.com.tw.
3.4.8 Other important information sufficient enough to enhance the operation situation of corporate governance shall be disclosed all together: None.

3.4.9 Execution situation of internal control system:

3.4.9.1 Internal Control Statement:

LU HAI HOLDING CORP.

Internal Control System Statement

Date: March 12, 2021

For the internal control system of the Company in 2020, based on the result of self-assessment, it is hereby made the statement as follows:

I. The Company and subsidiaries acknowledge that the establishment, implementation and maintenance of internal control system are the responsibilities of Board of Directors and managerial officers of the Company and subsidiaries, and the Company and subsidiaries have established such system. Its purpose aims at providing a reasonable guarantee for achieving the objectives such as operation effectiveness and efficiency (including profitability, performance and safeguarding of assets etc.), report reliability, timeliness, transparency and the compliance of relevant regulations and relevant laws and decrees etc.
II. The internal control system has its own inherent limitation, no matter how perfect its design is, an effective internal control system can only provide reasonable guarantee for achieving three objectives mentioned above. Moreover, the change of environment and circumstance, the effectiveness of internal control system might be changed accordingly. Nevertheless, the internal control systems of the Company and subsidiaries have set self-monitoring mechanism, once the deficiency has been identified and confirmed, the Company and subsidiaries will take correction action immediately.
III. The Company and subsidiaries stipulate the determination items of internal control system effectiveness according to the “Regulations Governing Establishment of Internal Control Systems by Public Companies” (hereinafter referred to as “Regulations”), so as to determine whether the design and execution of internal control system are effective. The determination items of internal control system adopted in such “Regulations” are the processes of management control, dividing internal control system into five elements: 1. Control environment; 2. Risk assessment; 3. Control activities; 4. Information and communication, and 5. Monitoring activities. Each element further includes several items. Please refer to the provisions of “Regulations” for the preceding items.
IV. The Company and subsidiaries have adopted the determination items of internal control system mentioned above to assess the effectiveness of the design and execution of internal control system.
V. Based on the assessment result in preceding paragraph, the Company and subsidiaries believe that the internal control system of the Company and subsidiaries on December 31, 2020 (including supervision and management of subsidiaries), including that the design and execution of internal control system related to understanding the operation effect and achievement degree of efficiency objective; reliable, timeliness and transparent report; and compliance of relevant regulations and relevant laws and decrees etc. are effective, and it can reasonably guarantee the achievement of above objectives.
VI. This Statement will become major contents of the annual report and public prospectus of the Company, and will be disclosed externally. If the preceding disclosed contents have any false, concealing or illegal circumstance, it will involve in the legal responsibilities as prescribed in Article 20, Article 32, Article 171 and Article 174 etc. of Securities and Exchange Act.
VII. This Statement has been passed by Board of Directors of the Company on March 12, 2021, among 9 attending directors, no one holds opposing opinion and all agree upon the contents of this Statement, it is hereby declared as well.

LU HAI HOLDING CORP.

Chairman/General Manager: HSU, LIEN-KAI

3.4.9.2 If the accountant is appointed to specifically examine the internal control system, the accountant’s examination report shall be disclosed: None.
3.4.10 In the last year and as at the publication date of annual report, the company and its internal personnel are punished according to law, or the company punishes its internal personnel for violating the provisions of internal control system, and the punishment results thereof might cause significant impact on shareholders’ equity or security price, the punishment contents, major deficiencies and improvement situation shall be listed: None.
3.4.11 In the last year and as at the publication date of annual report, important resolutions of General Shareholders’ Meeting and Board of Directors Meeting
3.4.11.1 Important resolutions of 2020 General Shareholders’ Meeting:

Date	Resolution matters	Resolution result and execution situation
2020.05.29	1. Ratification of the 2019 business report and financial statements	1. The weight of approval is accounting for 99.39% of the voting weight of attending shareholders, this case is approved by voting as proposed.
	2. Ratification of 2019 earnings distribution	1. The weight of approval is accounting for 99.39% of the voting weight of attending shareholders, this case is approved by voting as proposed. 2. Distribution of stock dividend to shareholders at NT$0.49999991 per share (namely free allotment of 49.99999129 shares per thousand shares) and cash dividend at NT$2.20000009 per share. The ex-right (ex-dividend) base date is on August 31, 2020, and stock dividend and cash dividend has been issued on September 22, 2020.
	3. Passed the Company’s planning to transfer surplus to capital increase by issuing new shares.	1. The weight of approval is accounting for 99.39% of the voting weight of attending shareholders, this case is approved by voting as proposed. 2. Transfer surplus to capital increase by issuing 4,303,160 new shares, the base date for capital increase is planned on August 31, 2020, and new shares will be listing on the stock market on September 22, 2020.
	4. Passed the amendments to the “Articles of Incorporation” of the Company	1. The weight of approval is accounting for 99.39% of the voting weight of attending shareholders, this case is approved by voting as proposed. 2. Handle according to the amended regulations.
	5. Passed the amendments to the “Rules of Procedure for Shareholders’ Meetings” of the Company.	1. The weight of approval is accounting for 99.39% of the voting weight of attending shareholders, this case is approved by voting as proposed. 2. Handle according to the amended regulations.

Date	Resolution matters	Resolution result and execution situation
	6. Passed the amendments to the “Rules for Election of Directors” of the Company.	1. The weight of approval is accounting for 99.39% of the voting weight of attending shareholders, this case is approved by voting as proposed. 2. Handle according to the amended regulations.
	7. Passed the amendments to the “Regulations Governing Loaning of Funds” of the Company.	1. The weight of approval is accounting for 99.39% of the voting weight of attending shareholders, this case is approved by voting as proposed. 2. Handle according to the amended regulations.
	8. Passed the amendments to the “Regulations Governing Making of Endorsements/Guarantees” of the Company.	1. The weight of approval is accounting for 99.39% of the voting weight of attending shareholders, this case is approved by voting as proposed. 2. Handle according to the amended regulations.

3.4.11.2 Important resolutions of Board of Directors Meeting in 2020:

Date Important resolution matters 1. Business plan and budget of the Company in 2020 2. Supplementary budget for the construction of new plant of sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD. of the Company
1. Application for purchasing new equipment of the sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD. (plant GUANKOU) of the Company
1. Costs of equipment disassembly and assembly for the sub-subsidiary LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. (hereinafter referred to as KUNSHAN LUHAI) of the Company to relocate to the leased plant
1. Sub-subsidiary LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. (hereinafter referred to as KUNSHAN LUHAI) of the Company plans to indirectly lend RMB22 million to the sub-subsidiary XIAMEN XIAHUI
2020.01.15 RUBBER METAL INDUSTRIAL CO., LTD (hereinafter referred to as XIAMEN XIAHUI) by entrusted loan
1. Sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD. (hereinafter referred to as XIAMEN XIAHUI) plans to apply for canceling the financing limit in CTBC Bank
Endorsement guarantee of LU HAI HOLDING CORP. (hereinafter referred to as the Company)
Bank (Mega Bank) financing limit 9. Bank (CTBC Bank) financing limit 10. Amendments to the “Measures for Delegation of Authority” of the Company 11. The Company’s distribution of year-end bonus to managerial officers in 2019 12. The Company’s distribution of annual performance bonus to managerial officers in 2019
Amendments to the Company’s annual allocation proportion of performance bonus.

Date	Important resolution matters
	14. Amendments to the “Dispatched Personnel Management Measures” of the Company 15. Amendments to the“AssetsManagementMeasures”ofthe Company
2020.03.12	1. The Company’s Internal Control System Statement in 2019 2. The Company’s distribution of director and employee’s remuneration in 2019 3. The Company’s regular assessment on the independence and competency of the appointed certified public accountant 4. 2019 business report and financial statements of the Company 5. 2019 earnings distribution of the Company 6. The Company’s planning to transfer surplus to capital increase by issuing new shares 7. Replacement of certified public accountants of the Company, and approval and certification of remuneration in 2020 financial statements 8. Amendments to the “Articles of Incorporation” of the Company 9. Amendments to the “Audit Committee Charter”, “Rules Governing the Scope of Powers of Independent Directors”, “Standard Operation Procedures for Handling Director’s Requirement”, and “Corporate Governance Best Practice Principles” of the Company 10. Amendments to the “Rules for Election of Directors” and "Rules of Procedure for Shareholders Meetings" of the Company 11. Amendments to the “Regulations Governing Procedures for Board of Directors Meetings” of the Company 12. Amendments to the “Remuneration Committee Charter” of the Company 13. Amendments to the “Procedures for Ethical Management and Guidelines for Conduct” of the Company 14. Application for purchase of new equipment of the sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD. (plant GUANKOU) in respond to the demand planning for mass production of new products in the second and third quarter of 2020 15. Relevant matters of convening 2020 General Shareholders’ Meeting of the Company
2020.05.08	1. Consolidated financial statements for the first quarter of 2020 of LU HAI HOLDING CORP. (hereinafter referred to as the Company) 2. Endorsement guarantee of LU HAI HOLDING CORP. (hereinafter referred to as the Company) 3. Bank (Citi Bank) financing limit 4. Bank (CTBC Bank) financing limit 5. Bank (Agricultural Bank) financing limit 6. Bank (Construction Bank) financing limit 7. Amendments to the “Accounting System” of the Company 8. The Company’s salary adjustment (subsequent recognition) for managerial officers 9. Amendments to the “Detailed Statement of Job Grade and Level” of the sub- subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD. 10. Transfer of equipment for business use between and among subsidiaries of the Company
2020.08.07	1. Consolidated financial statements for the second quarter of 2020 of LU HAI HOLDING CORP. (hereinafter referred to as the Company) 2. Determination of the base date for transferring surplus to capital increase by issuingnew shares, and the base dateforcashex-dividend etc.

Date	Important resolution matters
	3. Application for purchase of TPMS brass mouth teeth machining center of the sub-subsidiary XIAMEN XIAHUI (plant GUANKOU) 4. Sub-subsidiary of the Company, LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. (hereinafter referred to as KUNSHAN LUHAI) gained acquisition or disposal of the procedure for marketable securities investment. 5. Subsidiary of the Company, MEGA POWER CO., LTD.(hereinafter referred to as theMega Power) had ended its operation, and handed the cancellation of registration 6. The Company’s distribution of director’s individual remuneration in 2019 7. The Company’s distribution of managerial officer’s remuneration in 2019 8. Thebonus distribution to managerial officers of the Company 9. Bank (Cathay United Bank) financing limit 10. Bank (TaiShin International Bank) financing limit 11. Bank (JihSun Bank) financing limit 12. LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. (hereinafter referred to as KUNSHAN LUHAI) ‘s expected registration of the change in The loan limits and types of Agricultural Bank of China Limited 13. Bank(Industrial Bank)financinglimit
2020.11.06	1. Consolidated financial statements for the third quarter of 2020 of LU HAI HOLDING CORP. (hereinafter referred to as the Company) 2. Business plan and budget of the Company in 2021 3. Audit plan of the Company in 2021 4. Foreign currency (USD and EUR) risk aversion limit of LU HAI HOLDING CORP. (hereinafter referred to as the Company), sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD (hereinafter referred to as XIAMEN XIAHUI), LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. (hereinafter referred to as KUNSHAN LUHAI) and subsidiary PT. LUHAI INDUSTRIAL (hereinafter referred to as PT. LUHAI) 5. Additional quota for money lending by LU HAI HOLDING COPR.(hereinafter referred to as the Company) and the limit of sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD. (hereinafter referred to as XIAMEN XIAHUI) 6. Bank (Bank SinoPac) financing limit 7. Change of bank (Construction Bank) financing limit 8. The Company’s salary adjustment subsequent recognition for managerial officers 9. Application for purchase of CNC equipment of the subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD. (hereinafter referred to as XIAMEN XIAHUI) in respond to the expansion of production capacity 10. Subsidiary LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. (hereinafter referred to asKUNSHANLUHAI)’s planofbidding anewland
2021.01.27	1. Purchase of German AR-WS machining center for sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD. 2. Sub-subsidiary LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. (hereinafter referred to as KUNSHAN LUHAI) of the Company plans to indirectly lend RMB22 million to the sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD (hereinafter referred to as XIAMEN XIAHUI) by entrusted loan 3. Endorsement and guarantee of LU HAI HOLDING CORP. (hereinafter referred

Date	Important resolution matters
	to as the Company) 4. Change of bank (Bank SinoPac) financing limit 5. Bank (CTBC Bank) financing limit 6. Bank (Fubon Bank) financing limit 7. Bank (Mega Bank) financing limit 8. Appointment of the governance supervisor of the company 9. The Company’s distribution of year-end bonus to managerial officers in 2020 10. The Company’s distribution of annual performance bonus to managerial officers in 2020 11. The Company’s salary adjustment subsequent recognition for managerial officers 12. The bonus distribution of construction to Sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD. (hereinafter referred to as XIAMEN XIAHUI) 13. The bonus distribution to the relocation of LUHAI RUBBER METAL INDUSTRIAL(KUNSHAN) CO.,LTD.
2021.03.12	1. Construction of new plant of the sub-subsidiaries LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. (hereinafter referred to as KUNSHAN LUHAI) 2. The Company’s Internal Control System Statement in 2020 3. The Company’s distribution of director and employee’s remuneration in 2020 4. The Company’s regular assessment on the independence and competency of the appointed certified public accountant 5. 2020 business report and financial statements of the Company 6. 2020 earnings distribution of the Company 7. The Company’s planning to transfer surplus to capital increase by issuing new shares 8. Appointment of certified public accountants of the Company in 2021, review of 2021 financial statements, and examination of certified remuneration 9. Sub-subsidiary LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD. (hereinafter referred to as KUNSHAN LUHAI) of the Company plans to indirectly lend RMB22 million to the sub-subsidiary XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD (hereinafter referred to as XIAMEN XIAHUI) by entrusted loan 10. Amendments to the “Regulations Governing Loaning of Funds” of the Company 11. Amendments to the “Regulations Governing Procedures for Board of Directors Meetings” of the Company 12. Amendments to the “Rules for Election of Directors” and “Rules of Procedure for Shareholders Meetings” of the Company 13. Amendments to the “Rules Governing the Scope of Powers of Independent Directors”, “Audit Committee Charter” and “Board of Directors Performance Assessment Measures” of the Company 14. Elect the 6thBoard of Director 15. Formulate the nomination of the directors (including independent directors) 16. Relevant matters of convening 2021 General Shareholders’ Meeting of the Company
2021.05.07	1. Consolidated financial statements for the first quarter of 2020 of LU HAI HOLDING CORP. (hereinafter referred to as the Company) 2. New endorsement guarantee of LU HAI HOLDING CORP. (hereinafter

Date	Important resolution matters
	referred to as the Company) 3. Bank (Mega Bank) financing limit 4. Bank (CTBC Bank) financing limit 5. Bank (Agricultural Bank) financing limit 6. List of director (including independent director) candidates nominated by the General Shareholders’ Meeting of the Company holding more than one percent ofthe totaloutstanding shares

(1) Resolution result: all above proposals were agreed and passed by all attending directors unanimously.
(2) Execution situation: execution according to resolution result.
3.4.12 In the last year and as at the publication date of annual report, if a director or supervisor has different opinion on the important resolution passed in the Board of Directors Meeting and with record and written statement, major contents thereof: None.
3.4.13 In the last year and as at the publication date of annual report, the resignation or dismissal of Chairman, General Manager, Accounting Director, Financial Director, Internal Audit Director, Corporate Governance Executive and R&D Director etc. of the Company:

Title	Name	Date of appointment	Date of dismissal	Reason for resignation or dismissal
General Manager of XIAMEN XIAHUI	HSU, HAN- YUAN	2014/06/01	2020/09/30	Job adjustment Transferred to the Special Assistant of Chairman
accounting / financial officer of KUNSHAN LUHAI	JIA, HAI-YAN	2019/10/01	2020/10/01	Resignation
Chief Internal Auditor of KUNSHAN LUHAI	WANG, FANG	2018/02/01	2021/01/20	Resignation

3.5 Accountant’s fees information

3.5.1 Class interval of accountant’s fees information

Name of accounting firm	Name of accounting firm	Name of accountant	Name of accountant	Examination period	Notes
Crowe (TW) CPAs		LIN, MING- SHOU	SHAO, CHAO-BIN	2020

Range of amount		Fees item	Audit fees	Non-audit fees	Total
1	Below NTD2,000 thousand			
2	NTD2,000 thousand (inclusive) ~ NTD4,000 thousand				
3	NTD4,000 thousand (inclusive) ~ NTD6,000 thousand
4	NTD6,000 thousand (inclusive) ~ NTD8,000 thousand
5	NTD8,000 thousand (inclusive) ~ NTD10,000 thousand
6	Over NTD10,000 thousand(inclusive)

3.5.2 If the non-audit fees paid to the certified public accountant and affiliated firm and enterprise of certified public account are more than one fourth of the audit fees, the amounts of audit and nonaudit fees and the non-audit service contents shall be disclosed.

Unit: NTD thousand

Name of				Non-audit fees	Non-audit fees			Examination
accounting firm	Name of accountant	Audit fees	System design	Business	Human	Other		period of	Notes
				registration	Resources	(Notes)	Total	accountant
Crowe (TW) CPAs	LIN, MING- SHOU SHAO, CHAO-BIN	2,785	-	70	-	15	85	2020	-

Notes: please list the non-audit fees according to service items, if the “Other” non-audit fees reach to 25% of the total non-audit fees, the service contents thereof shall be listed in notes column.

3.5.3 In case of change of accounting firm and the audit fees paid in the year of change is reduced comparing with that in the year before change, amounts of audit fees before and after change and reasons shall be disclosed: None.
3.5.4 If the audit fees are reduced by more than 10% comparing with that in the last year, the reduced amount of audit fees, proportion and reason shall be disclosed: None.
3.6 Information on change of CPA: None.
3.7 Whether the Chairman, General Manager, and managerial officers responsible for financial or accounting affairs of the Company once worked in the affiliated firm or enterprise of the CPA in the last year: None .
3.8 In the last year and as at the publication date of annual report, stock right transfer and changes in pledge of stock right in the directors, supervisors, managerial officers and shareholders with shareholding ratio over 10%:
3.8.1 Changes in stock right in the directors, supervisors, managerial officers and major shareholders:

Unit: share

Title				As at April 30, 2021 in the	As at April 30, 2021 in the
		2020
				currentyear

		Increased	Increased	Increased	Increased
	Name
		(decreased)	(decreased)	(decreased)	(decreased)

		number of	number of	number of	number of
		shareholding	pledged shares	shareholding	pledged shares
Chairman & General Manager	HSU, LIEN-KAI	193,724	(300,000)	-	-
Director	WU, CHIN-LU	18,180	-	-	-
Director	WU, CHIEN-SZU	88,244	-	-	-
Director	HSU, HUAI-YUN	24,149	-	-	-
Director	HSU, HAN-YUAN(Note)	100,092	-	-	-
Director & XIAMEN XIAHUI VP	HSU, YA-TING	29,705	-	-	-
Independent Director	YEN, MEI-YING	-	-	-	-
Independent Director	CHANG, HORNG-YAN	-	-	-	-
Independent Director	HU, TA-HSIANG	-	-	-	-
Executive VP	HSU, HSIU-HUA	56,702	-	(89,000)	-
PT. LUHAI VP	QIU ZHONG-LIE	414	-	-	-

KUNSHAN LUHAI VP	HSU, KUANG-WU	-	-	-	-
CFO of Finance Department	CHANG, SHENG-HUNG	468	-	-	-
Senior Manager of GM Room & Corporate Governance Officer	CHANG, CHI-CHI	3,906	-	-	-
Audit Supervisor	CHEN, YING-HUEI	1,674	-	(5,000)	-
Major shareholder	DAY LIGHT BUSINESS CO., LTD.	462,205	-	-	-
Major shareholder	GET JOINT BUSINESS CORPORATION	462,205	-	-	-

Note: HSU, HAN-YUAN as of XIAMEN XIAHUI transferred to Executive Assistant due to job relocation on September 30, 2020. Executive VP, HSU, HSIU-HUA, has been the Director of XIAMEN XIAHUI by proxy since November 6, 2020.

3.8.2 Shares Trading with Related Parties: None.

3.8.3 Stock Pledge with Related Parties: None.

3.9 Information that the top ten shareholders in shareholding are of interested party, spouse or relatives within second degree relationship mutually:

							April 26,2021;Unit: share;	April 26,2021;Unit: share;	%
Name	Individual shareholding		Spouse & Minor children Shareholding		Total shareholding in the name of other person		Name and relationship between Company’s top ten shareholders, spouse or relatives within second degree.		Notes
	shares	%	shares	%	shares	%	Name	Relation
GET JOINT BUSINESS CORPORATION	9,706,320	10.74	-	-	-	-	-	-
(Representative: HSU, CHIN)	658,598	0.73	416,386	0.46	-	-	DAY LIGHT BUSINESS LARGE RISE HOLDING HIGHMOOR LIMITED HOLD INVESTMENT GROUP NEWS UP ENTERPRISE KEEP GRACE TECHNOLOGY PATTERN FINANCIAL GET TOGETHER	Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree
DAY LIGHT BUSINESS CO.,LTD.	9,706,320	10.74	-	-	-	-	-	-

(Representative: WU, CHIN-LU)	381,794	0.42	243,651	0.27	2,610,524	2.89	GET JOINT BUSINESS LARGE RISE HOLDING HIGHMOOR LIMITED HOLD INVESTMENT GROUP NEWS UP ENTERPRISE KEEP GRACE TECHNOLOGY PATTERN FINANCIAL GET TOGETHER	Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree
Taiwan Life Insurance Co., Ltd.	3,924,141	4.34	-	-	-	-	-	-
(Representative: HUANG,SI-GUO)	-	-	-	-	-	-	-	-
NEWS UP ENTERPRISE LIMITED	3,629,455	4.02	-	-	-	-	-	-
(Representative: HSU, SHOU)	372,315	0.41	-	-	3,629,455	4.02	GET JOINT BUSINESS DAY LIGHT BUSINESS LARGE RISE HOLDING HIGHMOOR LIMITED HOLD INVESTMENT GROUP KEEP GRACE TECHNOLOGY PATTERN FINANCIAL GET TOGETHER	Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree
LARGE RISE HOLDING LIMITED	3,571,594	3.95	-	-	-	-	-	-
(Representative: HSU, HO)	518,875	0.57	14,628	0.02	3,571,594	3.95	GET JOINT BUSINESS DAY LIGHT BUSINESS HIGHMOOR LIMITED HOLD INVESTMENT GROUP NEWS UP ENTERPRISE KEEP GRACE TECHNOLOGY PATTERN FINANCIAL GET TOGETHER	Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree
PATTERN FINANCIAL MANAGEMENT S.A.	3,571,594	3.95	-	-	-	-	-	-

(Representative: WU, CHING-SHU)	803,131	0.89	110,928	0.12	3,571,594	3.95	GET JOINT BUSINESS DAY LIGHT BUSINESS LARGE RISE HOLDING HIGHMOOR LIMITED HOLD INVESTMENT GROUP NEWS UP ENTERPRISE KEEP GRACE TECHNOLOGY GET TOGETHER	Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree
HSU, LIEN-KAI	3,016,126	3.34	69,682	0.08	-	-	HSU, HO	First degree relative
HOLD INVESTMENT GROUP LTD.	2,893,112	3.20	-	-	-	-	-	-
(Representative: HSU, CHIN)	658,598	0.73	416,386	0.46	-	-	GET JOINT BUSINESS DAY LIGHT BUSINESS LARGE RISE HOLDING HIGHMOOR LIMITED HOLD INVESTMENT GROUP NEWS UP ENTERPRISE PATTERN FINANCIAL GET TOGETHER	Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree
KEEP GRACE TECHNOLOGY LIMITED	2,610,524	2.89	-	-	-	-	-	-
(Representative: WU, CHIN-LU)	381,794	0.42	243,651	0.27	2,610,524	2.89	GET JOINT BUSINESS DAY LIGHT BUSINESS LARGE RISE HOLDING HIGHMOOR LIMITED NEWS UP ENTERPRISE KEEP GRACE TECHNOLOGY PATTERN FINANCIAL GET TOGETHER	Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree
GET TOGETHER DEVELOPMENT GROUP S.A.	2,118,179	2.34	-	-	-	-	-	-

(Representative: HSU, HO)	518,875	0.57	14,628	0.02	3,571,594	3.95	GET JOINT BUSINESS DAY LIGHT BUSINESS LARGE RISE HOLDING HIGHMOOR LIMITED HOLD INVESTMENT GROUP NEWS UP ENTERPRISE KEEP GRACE TECHNOLOGY PATTERN FINANCIAL HSU,LIEN-KAI	Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree Representative is the relative within second degree First degree relative

3.10Number of shareholding of the Company, the directors, supervisors, managerial officers of the Company, and the enterprise under direct or indirect control of the Company in the same reinvestment enterprise, and the consolidated comprehensive shareholding ratio

	April 30,2021 Unit: Thousand shares;%	April 30,2021 Unit: Thousand shares;%
	Investment of director,
	supervisor, managerial officer	Comprehensive
	and enterprise under direct or indirect control	investment
	shares %	shares %

			omprehensive shareholding ratio	omprehensive shareholding ratio	omprehensive shareholding ratio	omprehensive shareholding ratio
			April 30,2021 Unit: Thousand shares;%
Reinvestment enterprise	Investment of the Company		Investment of director, supervisor, managerial officer and enterprise under direct or indirect control		Comprehensive investment
	shares	%	shares	%	shares	%
LU HAI (BVI) INDUSTRIAL CORP.	8,857	100	-	-	8,857	100
ALLPRO INTERNATIONAL CORP.	6,643	100	-	-	6,643	100
YUANHUI INTERNATIONAL CO,LTD.	6,500	100	-	-	6,500	100
LU HAI INDUSTRIAL CORP.	3,000	100	-	-	3,000	100
PT. LUHAI INDUSTRIAL	8,000	100	-	-	8,000	100
XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO.,LTD.	-	100	-	-	-	100
LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD.	-	100	-	-	-	100

IV. Fundraising Situation

4.1 Capital and stock

4.1.1 Sources of share capital

4.1.1.1 Stock formation process:

April 26, 2021; Unit: thousand shares; NTD thousand

Month & Year	Issue price (NTD)	Authorized capital	Authorized capital	Paid-in capital	Paid-in capital		Notes	Notes
		shares	Amount	shares	Amount	Sources of share capital	Compensation of shares payment with property other than cash	Other
2009/10	10	120,000	1,200,000	42,000	420,000	Share swap	None	-
2009/10	14.8	120,000	1,200,000	54,000	540,000	Cash capital increase	None	-
2010/11	18	120,000	1,200,000	60,100	601,000	Cash capital increase	None	-
2013/12	23.8	120,000	1,200,000	67,614	676,140	Cash capital increase	None	November 13, 2013 Jin-Guan-Zheng-Fa- Zi No. 1020045461
2014/09	10	120,000	1,200,000	70,995	709,947	Transfer surplus to capital increase	None	September 19, 2014, Document No.: Tai- Zheng-Shang-Er-Zi No. 10300194131
2015/04	50	120,000	1,200,000	74,495	744,947	Cash capital increase	None	April 7, 2015, Document No.: Tai-Zheng-Shang- Er-Zi No. 10400057261
2017/06	57.7	120,000	1,200,000	74,515	745,155	Convertible bonds and conversion of new shares	None	-
2017/09	10	120,000	1,200,000	81,965	819,650	Transfer surplus to capital increase	None	-
2019/08	10	120,000	1,200,000	86,063	860,632,	Transfer surplus to capital increase	None	-
2020/09	10	120,000	1,200,000	90,366	903,664	Transfer surplus to capital increase	None	-

4.1.1.2 Capital and shares:

	April 26,2021;Unit: share	April 26,2021;Unit: share	April 26,2021;Unit: share	April 26,2021;Unit: share
	Authorized capital
Type of shares				Notes
	Issued shares (Listed Stock)	Unissued shares	Total


Registered ordinaryshares	90,366,375	29,633,625	120,000,000

4.1.1.3 Summary of relevant information on reporting system: Not applicable.

4.1.2 Shareholder structure

					April 26,2021;Unit: share	April 26,2021;Unit: share
Shareholder			Other		Foreign
	Government	Financial		Domestic Natural
structure			Jidil		Institutions and	Total
	Agencies	Institutions	urca	Persons
Quantity			Persons		Natural Persons

Number of Shareholders	0	7	27	3,334	38	3,406
Number of shareholding	0	6,340,983	919,954	41,864,756	41,240,682	90,366,375
Shareholding (%)	0.00%	7.02%	1.02%	46.33%	45.63%	100.00%

Notes：Shares held by China’s ownership is 0%.

4.1.3 Dispersion of shares

4.1.3.1 Common shares

April 26, 2021; par value per share: NTD10

Classification of shareholding
	Number of	Number of
			Shareholding (%)
	shareholders	shareholding


1~ 999	940	165,889	0.18%
1,000 ~ 5,000	1,746	3,379,885	3.74%
5,001 ~ 10,000	283	2,105,885	2.33%
10,001 ~ 15,000	149	1,838,309	2.03%
15,001 ~ 20,000	62	1,141,852	1.26%
20,001 ~ 30,000	66	1,636,586	1.81%
30,001 ~ 50,000	55	2,163,789	2.39%
50,001 ~ 100,000	40	2,799,177	3.10%
100,001 ~ 200,000	19	2,694,652	2.98%
200,001 ~ 400,000	14	4,287,537	4.74%
400,001 ~ 600,000	6	3,027,754	3.35%
600,001 ~ 800,000	3	1,971,405	2.18%
800,001 ~ 1,000,000	2	1,773,329	1.96%
Over 1,000,001	21	61,380,326	67.92%
Total	3,406	90,366,375	100.00%

4.1.3.2 Preferred share: Unissued.

4.1.4 List of major shareholders

Name, shareholding amount and proportion of the shareholders with over five percent equity proportion, if less than ten shareholders, the top ten shareholders in equity proportion shall be disclosed:

		April 26,2021; Unit:share	April 26,2021; Unit:share
Name of major shareholders	Share	Number of shareholding	Shareholding (%)
GET JOINT BUSINESS CORPORATION		9,706,320	10.74%
DAY LIGHT BUSINESS CO.,LTD.		9,706,320	10.74%
Taiwan Life Insurance Co. Ltd.		3,924,141	4.34%

Share
	Number of
		Shareholding (%)
	shareholding
Name of major shareholders

NEWS UP ENTERPRISE LIMITED	3,629,455	4.02%
LARGE RISE HOLDING LIMITED	3,571,594	3.95%
PATTERN FINANCIAL MANAGEMENT S.A.	3,571,594	3.95%
HSU, LIEN-KAI	3,016,126	3.34%
HOLD INVESTMENT GROUP LTD.	2,893,112	3.20%
KEEP GRACE TECHNOLOGY LIMITED	2,610,524	2.89%
GET TOGETHER DEVELOPMENT GROUP S.A.	2,118,179	2.34%

4.1.5 Market price, net value, earnings, dividend per share and relevant materials in the last two years

				Unit: NTD/ thousand shares	Unit: NTD/ thousand shares
	Year				As at March 31, 2021 in the
			2019	2020
Item					currentyear(notes 1)

Market price per share	Highest market price		48.00	47.95	52.50
	Lowest market price		32.80	32.55	43.00
	Average market price		38.85	40.98	47.04
Net value per share	Before distribution		26.73	30.09	31.11
	After distribution		23.36	25.99(Notes2)	-
Earnings per share	Weighted-average shares (thousand shares)		86,063	90,366	90,366
	Earnings per share (after tax)		2.81	6.58	1.13
Dividend per share	Cash dividend (Notes 3)		2.20	1.50	-
	Stock Dividends	Stock dividends from retained earnings (Notes 3)	0.50	1.00	-
		Stock dividends from capital surplus	-	-	-
	Accumulated unappropriated dividends		-	-	-
Analysis of return on investment	Price/Earnings ratio (Notes 4)		13.83	6.23	7.48
	Price/Dividend ratio (Notes 5)		17.66	27.32	-
	Cash dividend yield (Notes 6)		5.66	3.66	-

Notes 1. The Company’s financial report of the first quarter of 2021 reviewed by the accountant.

Notes 2. This earnings distribution has not been passed by the General Shareholders’ Meeting. Notes 3. The year in which the dividend is distributed by resolution is the year of disclosure. Notes 4. Price/Earnings ratio = average market price / earnings per share. Notes 5. Price/Dividend ratio = average market price / cash dividend per share.

Notes 6. Cash dividend yield = cash dividend per share / average market price.

4.1.6 Dividend policy and execution status

4.1.6.1 Dividend policy stipulated in Articles of Incorporation:

Article 115(a) If the Company has pre-tax profits in the current year, the Company shall set aside not less than1.5% of the profits as employees’ compensation and not more than 3% of the profits as Directors’ remuneration. When the employees’ compensation is distributed by cash or by issuing new shares, the employees entitled to such compensation may include employees of the Subsidiaries satisfying certain criteria as promulgated and amended by the Board of Directors from time to time. A resolution for employees’ compensation or Directors’ remuneration proposed to the Board of Directors of the Company shall be adopted by a majority vote at a meeting of the Board of Directors attended by two-thirds of the total number of directors and reported to the general meeting. However, before setting aside the profits as employees’ compensation and Directors’ remuneration in accordance with the ratio set forth in this paragraph, the Company’s accumulated losses shall have been covered. A Director who also serves as an executive officer of the Company may receive a bonus in his capacity as a Director and a bonus in his capacity as an employee.

Article 115(b) The Company may distribute profits in accordance with a proposal for distribution of profits prepared by the Directors and approved by the Members by Ordinary Resolution. The Directors shall prepare such proposal as follows: the proposal shall begin with the Company’s Annual Net Income and offset its losses in previous years that have not been previously offset; then set aside a Legal Capital Reserve at 10% of the profits left over, until the accumulated Legal Capital Reserve has equaled the total paid-up capital of the Company; then set aside a Special Capital Reserve if one is required in accordance with the Applicable Public Company Rules or as requested by the authorities in charge. If there is net remainder, the Directors may prepare the proposal for distribution of Dividends, bonus or other benefits accounted together with undistributed profits accrued in previous years and submit to the general meeting for review and approval by a resolution.

Article 115(c) The Company is currently positioned in a growth and development phase. Due to the need for capital expenditure, operation expansion and an integrated financial planned in order to maintain sustainable growth, any balance left over under Article 115(a) and/or (b) may be distributed as Dividends (including cash dividends or stock dividends) or bonuses in accordance with the Statute and the Applicable Public Company Rules, among which the Dividends to be distributed shall not be lower than 10% of the balance left over and the cash Dividends shall not be lower than 10% of the total amount of Dividends distributed to the Members.

4.1.6.2 Situation of dividend distribution planned to be discussed in this year:

The 2020 earnings distribution of the Company has been passed by the resolution of the Board of Directors on March 12, 2021, it is planned to distribute stock dividend to shareholders at NTD1.00000005 per share (namely free allotment of 100.00000553 shares per thousand shares), and cash dividend at NTD1.49999995 per share, this part is still pending for the resolution of General Meeting, relevant earnings distribution statement is as follows:

Unit: NTD

Item	Amount	Amount
Netprofit after tax in 2020		594,758,633
Minus:
Allocation of statutory surplus reserve	59,475,863
Earnings available for distribution in 2020		535,282,770
Plus:
Beginning undistributed earnings	579,218,493
Accumulated earnings available for distribution as at the end of 2020		1,114,501,263
Distribution item:
Shareholder Dividend－share(Notes 1)	90,366,380
Shareholder Dividend－cash(Notes 1)	135,549,558
Endingundistributed earnings		888,585,325

Notes 1. It is planned to distribute stock dividend to shareholders at NTD1.00000005 per share (namely free allotment of 100.00000553 shares per thousand shares) and cash dividend at NTD1.49999995 per share this time, the total distribution of dividend to shareholders is NTD2.50 per share, and total distribution of dividends to shareholders is NTD 225,915,938.
4.1.7 The impact of stock Dividends proposed by General Meeting this time on company’s business performance and earnings per share:

No stock bonus is allotted to employees this time, free allotment of 100.00000553 shares per thousand shares is planned, the dilution of earnings per share is about 9.09%, and it has little impact on the company’s business performance and earnings per share.

4.1.8 Compensation of Employees, directors and supervisors:

4.1.8.1 Percentage or scope of compensation of employees, directors and supervisors stated in Articles of Incorporation:

Article 115(a) of Articles of Incorporation of the Company has stipulated that, if the Company has pre-tax profits in the current year, the Company shall set aside not less than 1.5% of the profits as employees’ compensation and not more than 3% of the profits as Directors’ remuneration. When the employees’ compensation is distributed by cash or by issuing new shares, the employees entitled to such compensation may include employees of the Subsidiaries satisfying certain criteria as promulgated and amended by the Board of Directors from time to time. A resolution for employees’ compensation or Directors’ remuneration proposed to the Board of Directors of the Company shall be adopted by a majority vote at a meeting of the Board of Directors attended by two-thirds of the total number of directors and reported to the general meeting. However, before setting aside the profits as employees’ compensation and Directors’ remuneration in accordance with the ratio set forth in this paragraph, the Company’s accumulated losses shall have been covered. A Director who also serves as an executive officer of the Company may receive a bonus in his capacity as a Director and a bonus in his capacity as an employee.

4.1.8.2 Estimation base of employee, director and supervisor compensation in this estimation, the shares calculation base for employee’s compensation in stock distribution, and accounting treatment when the actual distribution amount is different from and estimated figure:

(1) Estimation base of employee and director’s compensation in this estimation: the 2020 employee and director’s compensation of the Company is subject to the profitability in such year, and it is estimated according to 1.5%~3% of the profitability.
(2) Calculation base for stock bonus distribution: No stock bonus is distributed.
(3) In case of difference with the actual distribution amount according to the resolution of General Meeting and the recorded amount, it will be deemed as the change in accounting estimate, and the difference will be adjusted as the profit and loss of the actual distribution year.
4.1.8.3 Situation of compensation distribution passed by Board of Directors:
(1) Date of board resolution: March 12, 2021
(2) The amount of employee, director and supervisor’s compensation in cash or stock distribution. In case of difference with the annual estimated amount of recognized expenses, the difference, reason and handling situation shall be disclosed:
- A. Proposed employee’s compensation: NTD 13,236,978
- B. Proposed director’s compensation: NTD 13,236,978
- The employees’ compensation and directors’ compensation proposed to be distributed by the Company in 2020 have no difference with the estimated amount.
(3) The amount of employee’s compensation in stock distribution, and the proportion in the net profit after tax in individual financial report of this period and in the total amount of employee’s compensation:
- The 2020 earnings distribution of the Company does not plan to distribute stock bonus to employees, hence it is not applicable.
4.1.8.4 For the actual distribution situation of employee, director and supervisor remuneration in last year, if it is different from the recognized employee, director and supervisor remuneration, the balance, reason and handling situation shall be specified:
(1) Employees’ compensation: NTD3,770,101, it has no difference with the actual distribution.
(2) Directors’ compensation: NTD3,770,101, it has no difference with the actual distribution.

4.1.9 Buyback of Common Stock: None.

4.2 Status of Corporate bonds: There is no outstanding and in process corporate bonds.

4.3 Status of Preferred Shares: None.
4.4 Issuance of Global Depositary Receipts: None.
4.5 Status of Employee Stock Options Plan: None.
4.6 Status of New Restricted Employee Shares: None.
4.7 Status of New Share Issuance in Connection with Mergers and Acquisitions: None.
4.8 Financing Plans and Implementation : None.

V. Operational Highlights

5.1 Business content

5.1.1 Business scope

5.1.1.1 Major contents of operating business

LU HAI Group is the manufacturer specialized in producing all kinds of valves, it has complete product lines and its product quality is deeply trusted by customers. Currently, the valves produced by the Group can be roughly divided into the following four categories according to application use: ① Bicycle class; ② Motorcycle and electric motorcycle class; ③Passenger car, truck and off-the-road vehicles class; ④Accessories and other.

5.1.1.2 Proportion of business

Unit: NTD thousand; %

roportion of business			Unit: NTD thousand;%	Unit: NTD thousand;%
Year Major products	2019		2020
	Sales amount	%	Sales amount	%
Bicycle class	565,702	20.82	628,896	24.17
Motorcycle and electric motorcycle class	967,602	35.62	850,779	32.69
Passenger car, truck and off- the-road vehicles class	698,610	25.71	631,821	24.28
Accessories and other	484,975	17.85	490,761	18.86
Total	2,716,889	100.00	2,602,257	100.00

5.1.1.3 Current commodity (service) items of the company

All kinds of valves produced by the Group are a kind of independent valve body device, the air can enter into tubeless tire or tube space when opening it, then it will be closed and sealed automatically to preserve the air to generate air pressure, so as to prevent the air from flowing out from tire or tube. Apart from solid, all other inflatable tires or tubes need to use such device for inflation.

5.1.1.4 New products and services planned to be developed

Apart from development of new products according to customer’s tire design concept and functional requirements, R&D Team of the Group also continues to invest in projects such as equipment automation, system deployment and research and development of mold and jig etc., so as to improve the Group’s competitiveness in valve industry.

5.1.2 Industry overview

5.1.2.1 Current situation and development of industry:

All kinds of valves produced by the Group can be roughly divided into the following four categories according to application use: ① Bicycle class; ② Motorcycle and electric motorcycle class; ③Passenger car, truck and off-the-road vehicles class; ④Accessories and other; hence the proportion of revenue and future development of company are of high relevance to bicycle industry, motorcycle and electric motorcycle industry, automobile industry and TPMS industry, it is hereby explained the current situation and development of the Group’s industry according to the development of the aforesaid four industries.

A. Bicycle industry

Bicycle is the industry of ten thousand years, with the development of social economy and improvement of living standards, bicycle also marches towards diversified use along with era development; markets in developing countries will take bicycle as the major riding products instead of walk for transport, and markets in developed countries mainly take bicycle as recreational sport products and complementarily as riding products instead of walk. With rising environmental awareness and under the trend of energy saving and carbon reduction, bicyclists have higher and higher requirements in system and configuration, the atmosphere of riding bicycle has been obviously evolved into an expression of life attitude from the merely commuting or sports mode in the past.

Major bicycle consumption markets worldwide include USA, Europe, China and Japan, the year-round sales volume of bicycle worldwide is approximately 120~130 million bicycles, among them, approximately 17 million bicycles in USA, 20~21 million bicycles in Europe, and 25 million bicycles in China. Because of COVID-19 in 2020, its influence effected on the entire economy and people’s social interaction. Taiwan’s bicycle industry almost collapsed after the first quarter, however, bicycles were regarded as great means of transportation again because of the necessity of keeping social distancing, lighting up its prosperity in the following three quarters.

According to the data published by Department of Customs Administration, Ministry of Finance and Taiwan Bicycle Association, the export volume of complete bicycle was approximately 2.12 million bicycles in Taiwan in 2019, reduced by 3.85% year-on-year, mainly due to the gradual popular electric bicycle in European Union countries, causing overall decline of sales volume of regular bicycles; in 2020, the quantity declined and the price increased, the export volume of complete bicycle was 1.699 million bicycles, reduced by 20.05% year-on-year, and the average export unit price was USD646.24, increased by 2.41% year-on-year.

However, the export volume of Taiwan electric bicycle showed an increasing trend year by year, in 2019, the export volume of electric bicycle was approximately 644.3 thousand bicycles, increased by 124.96% year-on-year, and the export volume reached to 760.2 thousand bicycles in 2020, showing a multiple growth. The export unit price of one electric bicycle is approximately equivalent to the unit price of 2 regular bicycles, hence the average unit price of overall bicycle industry still increased.

Export Volume of Taiwan Electric Bicycle

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

76.02
80
64.43
60
40
28.64
18.1
20 13.2
8.3
0
2015 2016 2017 2018 2019 2020
Unit: ten thousand
----- End of picture text -----

Data source: Taiwan Bicycle Association; summarized by LU HAI (2021/03)

Trend of Production Value and Average Unit Price of Taiwan Bicycle in the Last Ten Years

Unit: NTD

	Production quantity	Production value	Average unit price
Year
	(ten thousand)	(one hundred million)	(NTD/bicycle)

2011	452.3	505.2	11,170
2012	450.5	540.4	11,995
2013	397.9	510.7	12,834
2014	375.8	502.3	13,365
2015	383.8	565.3	14,728
2016	269.8	474.1	17,574
2017	199.4	378.4	18,972
2018	189.4	402.3	21,242
2019	188.0	419.3	22,302
2020	161.4	335.8	20,809

Data source: Department of Statistics, Ministry of Economic Affairs

According to the report of market research institution -GII, the market scale of global bicycle industry is expected to increase to 20.7 billion from 2021 to 2025, and it is expected to grow with 7% compound annual growth rate during the expectation. Among them, for the growth of global electric bicycle market, according to Fortune Business Insights, from 2020 to 2026, the compound annual growth rate of global electric bicycle market will reach 24.5% to USD46.04 billion.

B. Motorcycle and electric motorcycle industry

Motorcycle is not only one of the important means of transportation in emerging developing countries, but also one of the components in the compound and modern means of transportation in metropolis of developed countries, and its demand will also continue to increase in the future. In 2019, the motorcycle market in Mainland China and Southeast Asia had both increased, on the other hand, sales in Japan kept dropping. Also, there was a tendency of decreasing in North India, America and Latin America. Sales of global motorcycle industry decreased 1.5%, 57.2 million of motorcycles.

Asia is an important production base for global motorcycle, apart from that India, China and Indonesia are the top 3 in global sales respectively, together with those in Vietnam, Thailand, Pakistan, Malaysia, Philippine and Taiwan etc., the sales volume is accounting for over 90% worldwide, with economic growth in Southeast Asia, it is expected that those markets will continue to grow. But with continuous global economic recovery, it will drive economic upturn in various areas worldwide, consumers are more willing to buy automobiles instead of motorcycles, besides, the promotion of motorcycle sharing also causes market saturation and the demand decline in some areas, but the needs in Southeast Asia are stable, also, because of the rebound of post pandemic influenced by COVID19, it is predicted that the global motorcycle market will be 58.75 million motorcycles in 2022.

Global Motorcycle Market Scale Forecast

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

Sales volume Growth rate
6,000 5,875 20%
5,808
5,800 5,720 15%
5,593
5,600 10%
5,400 8.90% 5%
5,200 5.60% 5,135 5.00% 0%
5,000 -1.50% -5%
4,800 -10%
-10.20%
4,600 -15%
2018 2019 2020(e) 2021(f) 2022(f)
Data source: IEK Consulting (2020)
Unit: ten thousand
----- End of picture text -----

With national governments also have been actively promoting relevant motorcycle electrification policies, the cost of electric motorcycle reduces and the price of gas motorcycle rises due to more rigorous emission standards, according to the data of automotive and motorcycle industry yearbook of the Industrial Technology Research Institute, in 2020, the global sales volume of electric motorcycle has reached 728 thousand motorcycles, and the market share in Asian regions is the highest, recording 73.6%, followed by European regions, recording 11.3%, and 7.9% in American regions, and the rest is accounting for 7.2%, the total sales volume of electric motorcycle worldwide (excluding low speed electric motorcycle and bicycle) will reach to 887 thousand motorcycles.

Global Electric Motorcycle Sales Volume Forecast

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

Sales volume Growth rate
100 35.8% 34.6% 88.7 40%
27.2% 72.8
80 30%
60.7
60 20%
45.1
21.8%
19.9%
40 33.2 10%
26.1
20 0%
-7.4%
0 -10%
2016 2017 2018 2019 2020(e) 2021(f)
Data source: IEK Consulting (2019/07)
Unit: ten thousand
----- End of picture text -----

C. Automobile industry

Among the sales volume of new automobile worldwide, the sales volume in China is approximately accounting for thirty percent, and twenty percent in US, China and US are accounting for approximately half of the automobile market. Because COVID-19 affected the global automobile industry like a black swan. As the pandemic spread in 2020, primary markets such as China, US and Japan all took a hit; the countries with top five sales had tendencies to decline in their sales; therefore, the sales volume of automobile industry worldwide was decreased in 2020. The speed of the sales upturn is expected to have relevance to the vaccine development, the universalization of getting vaccinated, and the speed of getting vaccinated in each country. The drawn-out Sino-US trade war has impact on the upturn of the two primary automobile markets, China and US.

Global Finished Automobile Industry

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Data source: IEK Consulting (2020)

Overview of Automobile Production and Sales in China Mainland in Recent Years

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Data source: China Association of Automobile Manufactures; summarized by LU HAI (2021/03)

In recent years, due to the rising of car sharing service, according to the survey data of IHS Market, from 2018 to 2022, the annual average growth rate in new car market will be 2%, almost declined by a half comparing with 3.7% from 2011 to 2017. Despite shrinking global market scale, the automobile industry still has bright prospects, including ever-growing electric vehicle and

development of automatic driving technology. The global electric vehicle grows continuously, affected by COVID-19 in 2020, global electric vehicle market dropped 13.7%, decreasing the scale of the global electric vehicle down to 3.771 million. But the top three primary markets are still China, US, and Japan. The global sales volume of electric vehicle is 3.299 million vehicles, with the 46.6% annual growth rate, the reason why it still has a significant growth during the pandemic is that the three of main growth impetus in Europe are the countries that had announced forbid selling gas cars in 2030. Countries of the highest growth are German, Israel and Netherlands. France, England, and Norway successively have also announced to stop selling gasoline and diesel vehicles entirely in 2025 and 2040.I t is estimated that the sales volume of electric vehicle will be accounting for 10% of global vehicle market in 2021.

According to the statistics of IEA in 2019, the global sales volume of electric vehicle broke 2.1 million vehicles, surpassing 2018, the year that had already broken the record, making the inventory of global electric increase to 7.2 million. Electric cars accounts for 2.6% of the global sales volume of vehicle in 2019, and about 1% of the inventory of global vehicle, grew by 40% year-onyear. As technological progress in the electrification of two/three-wheelers, buses, and trucks advances and the market for them grows, electric vehicles are expanding significantly.

Electric car deployment in selected countries, 2013-2019

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Data source: IEA (2021/03). Global EV Outlook 2020

D. TPMS Industry

According to market analysis on Tire Pressure Monitoring System (TPMS for short), major function of TPMS is active safety of automobile, apart from avoiding the traffic accident caused by tire burst, it can also improve tire life and reduce oil consumption, and emission of carbon dioxide and exhaust gas, therefore, national governments have been promoting TPMS legislation successively in recent years. US is the country listing TPMS as the standard configuration by legislation at the earliest worldwide, legislation was passed in 2005, and 100% standard configuration was listed in 2007, it is estimated that

there are approximately 280 million tire pressure monitoring systems are under operation currently. Apart from US, EU also started to promote TPMS by legislation in November 2012, and officially stipulated to list tire pressure monitoring system as standard configuration in November 2014. In Asian regions, the timing of TPMS legislation has been mature, currently Korea has followed up the legislation in 2013, and new automobiles delivered in July 2016 in Taiwan also listed TPMS as standard configuration, and starting from 2019, China Mainland, the biggest automobile market worldwide, requires that all newly certified passenger vehicles must install TPMS; and mandatory installation requirement will be implemented for all passenger vehicles under production as of 2020. Other regions including Japan and India etc. are also going through relevant legislative programs. Since China’s mandatory installation, China is expected to become the market with the rapidest growth of TPMS worldwide, or become the third biggest TPMS consumption market worldwide after Europe and America.

On one hand, the major growth momentum of TPMS comes from the demand on original (OE) components of TPMS driven by the increase of finished automobile production, the sales volume of new automobiles has been growing at a stable growth rate, hence the promoting effect on market growth of TPMS is limited; on the other hand, for countries (such as US, EU and China) have passed legislation for mandatory installation of TPMS, the accumulation of automobile holdings will bring strong momentum to the growth of demand on TPMS after market (AM) parts.

a. TPMS - OE market

According to the time of regulations formulation, currently the demand of OEM market mainly focuses on US and EU, and China has implemented requirement of force installment in passenger cars in 2020, major growth point will be in China market in the future. The global TPMS OEM market is mainly dominated by Sensata, Continental, TRW and HUF currently, and the competition among these top five manufacturers are quite fierce, with their technological superiority, their market share worldwide is nearly 90%. And the top two manufactures Sensata and Continental account for two-third of the globe’s amount, and due to earlier entry into the market and having close relations with international car factories, the opportunity of new TPMS manufacturers to enter into the existing supply chain is quite low. According to the investigation and measurement by the Research Department of China CITIC Securities, it is estimated that in 2025, the global penetration rate of direct tire pressure monitoring system will reach 85%, and the global market scale of direct TPMS is RMB7.5 billion approximately.

Measurement of Market Space of Front Loading TPMS in Global Passenger vehicles

		2014	2015	2016	2017	2018	2019E	2020E	2025E
Production quantity of	global
passenger vehicle (ten thousand		6,753	6,856	7,239	7,288	7,057	7,021	7,000	7,000
vehicles)
Production quantity growth of passenger vehicle	global	3.3%	1.5%	5.6%	0.7%	-3.2%	-0.5%	-0.5%	0%
Average price of global TPMS in single vehicle(NTD/vehicle)					173	147	135	128	126
Global penetration rate of TPMS	direct				75%	75%	80%	85%	85%
Global market scale of direct (NTD100 million)	TPMS				94.3	77.6	75.8	76.2	74.7

Data source: CAAM，CITIC Securities’ Special Report on TPMS in Automobile Industry (2019/12)

b. TPMS - After Market (AM)

The life of TPMS battery is approximately 5~10 years, the TPMS mandatorily installed by legislation of US and EU in 2007 and 2014 respectively will enter into the period of battery replacement in 2012 and 2019 successively, and the demand on AM market emerges and becomes bigger and bigger. In 2020, the scale of the global TPMS sales-after market is US 2.7248 billion, and it is expected to reach US 4.1157 billion by the end of 2026. The Compound Annual Growth Rate is expected to be 6.0% in 2021 to 2026.

Also, China has implemented requirement of force installment in passenger cars since 2020, Asia Pacific will be the regions where demand TPMS the most. According to the estimation of China Association of Automobile Manufacturers, the vehicle production capacity in China is 25 million. if 4 tire pressure monitoring systems are configured in each automobile, it is estimated that the market demand on TPMS original OE items in China is approximately 100 million items in one year, the wave of replacement of battery of 5 years of service life will emerge as of 2025, and the demand in AM market will be more obvious.

5.1.2.2 Relevance of upstream, midstream and downstream of industry

Upstream Midstream Downstream

Upstream			Midstream
Rubber material Copper material Valve core Packaging material Other			Valve industry LU HAI GROUP PACIFIC INDUSTRIAL CO., LTD. Schrader International, Inc. Wonder S. p. a. SHANGHAI BAOLONG AUTOMOTIVE CORP.

5.1.2.3 Various development trends of product:

The Group focuses on research and development of the sealing gas of valves and the process technology of jointing rubber materials to metal body and tube. The

developed equipment and process technologies are applied to the production of all kinds of valves, product lines are complete, applying to the tires in industries of bicycle, motorcycle and electric motorcycle, automobile, truck and Off-the-road vehicle etc. The valve industry can be of hundred years, apart from solid tire, all other inflatable tires or tubes need to use such device for inflation. Since the performance of solid tire has great limitations, inflatable tires almost have achieved complete success, valves are almost the indispensable components in tire commodities.

TPMS and valves are relevant to tires, and the sales channels of these two products are almost the same. Currently in international market, major TPMS suppliers include Sensata Technologies, Inc. (hereinafter referred to as Sensata), Continental AG and Pacific Industrial Co., Ltd. (hereinafter referred to as Pacific), and they are also the valve suppliers at the same time. The Group is one of the biggest valve suppliers worldwide, possessing thorough sales channels and customer resources, in the future, in response to the trend of legislation and safety awareness, the growth of TPMS is promising.

R&D team of the Group comprises of multiple senior experts engaging in rubber material, metal processing, machine design, and automation control industries etc., they have been dedicated to respective fields of professional skills for more than ten year, under the coordination with the development trend of tires in bicycle, motorcycle and electric motorcycle, and automobile industries etc., the Group matches up with customer development and performance improvement, and improve the degree of process production automation, so as to reduce costs and enhance product competitiveness.

5.1.2.4 Competition situation:

World-class U.S. company Sensata has sold its traditional valve business to Japanese company Pacific, only keep developing TPMS products; Due to Japanese company Pacific previously failed to effectively reduce the production cost of valve, Pacific is focusing on other products within the Development Group and finding partner to reduce costs; German company Contiental’s major supplier Baolong has formed a joint venture with Huff Group. As the result is bound to replace the valve industry, Luhai Corp. as the industry’s leading enterprise, with obvious marketing channels, quality advantage which is the best of opportunity to undertake the industrial sector adjustment.

For the Group’s major competitors in valve products currently, among domestic listed manufacturers and unlisted practitioners, there are no relevant manufacturers. The Group’s professional manufacturing capabilities of valve products have been deeply recognized by customers in the market, in the future, the Group will attach more attention to the investment in automation equipment and differentiated customer service, so as to get rid of the low price competition with valve manufacturers from mainland.

5.1.3 Technology and research and development overview:

5.1.3.1 Research and development costs input in the last year and as at the publication date of annual report

Unit: NTD thousand	Unit: NTD thousand	Unit: NTD thousand
Year Item	2020	As at March 31, 2021 in current year
Research and development costs	26,063	8,332
Net revenue	2,602,257	868,372
Proportion of research and development costs %	1.00	0.96

5.1.3.2 Technologies or products successfully developed

Year	Product
2008	Part composite valve, light tire valve, improved structure of tire valve, multi-station metalworking combined machine tool, automatic feeder, automatic bendingmachine
2009	Process technique improvement, change manual tapping into automatic threading, truck valve anti-bending testing machine, one-time bending jig,and special valve
2010	Vacuum vulcanizing technique, improvement of green copper process, truck valve with deep end hole, O type assembly machine, assembly machine with rubber mat,valve with rubber mat
2011	Automatic pin removal machine, patent for new valve, patent for improved structure of valve, full-automatic valve marking equipment, two-end type truck valve,extension tube,TPMS airtight machine
2012	Air pressure cover technique development, valve core body development, TPMS rubber base valve development, air-conditioning valve, multi-functional airtight machine, stainless steel sand blasting technique
2013	Development of various rubber bases and aluminum valves for TPMS, multi-axis base cutting equipment, hot forging production technique
2014	Coil material technique development, visual inspection tester, vulcanizing mold cover improvement, hot hammer automation development, automatic tapping machine development, aluminum alloyvalve bodydevelopment
2015	Automatic chamfering machine, communal automatic bending machine, communal visual inspection airtight machine, valve automatic sorting machine, hot forging rotary table and change it to one-shot, change manual feeding into automatic feeding by mechanical arm in hot forging, vulcanizing mold improvement, development of TPMS high speed valve, development of green passivation technique, development of vacuum automatic feeding, development of cost reduction in PVR70 series, green copper technique improvement, development of green copper hollow technique, development of low cost in 87 series

Year	Product
2016	JS2 automatic technique development, development of cut resistance H-SR rubber material, development of tube valve of balance car, development of free cutting copper AR technique, renovation for energy saving in electrothermal vulcanizing machine, change steam vulcanizing machine into electrothermal type, development of various tungsten steel cutting tools in the plant, optimization of aluminum alloy jointingtechnique
2017	Renovation of visual inspection automatic sorting machine, realization of automatic upending and marking process after grinding, development and production of cutting tools for five-axis CNC sharpening equipment, development of PVR series automatic bottom forming machine, VFR riveting machine development, VFR airtight machine development, ITV punching machine development, valve core airtight machine development, development of copper coil winding machine and pay-off machine, development of automatic stock cutter, development of automatic upender, MH series airtight machine development, development of various German tungsten steel cutting tools
2018	Development of TR4 series full-automatic plugging machine and grinding machine, development of CR202 sand blasting automatic discharging machine, development of PVR70 visual airtight machine and automatic bending machine, development of full-automatic copper powder dumping machine, development of VFR visual image airtight testing machine, dual copper rod synchronous automatic stock cutter, four stations all-in-one machine, two-sided processing machine, green automatic sand blasting machine, research and development on the issue of new anti-rust liquid for truck valve, research and development of the new mold of rubber for wastage reduction in high speed valve.
2019	Development of disulfide rubber saving mold, development of smoke- free hot header, development of PVR70 series automatic vulcanized disc inserting machine, development of TR4/AR/CR202 series full- automatic grinding machine, development of TR4 automatic sand blasting machine, development of German processor with VFR/CR202 stem, research and development of annealing flow-line equipment, research and development of new punch equipment, automatic connection of body processing line, and research and development of grinding and feeding robot, automatic grinding machine and V002 gaseous core assemblymachine.
2020	EPDM rubber low-cost formula, improvement of PVR70 forging technology, CR202L, AR, TR13 no-clean process for sand blasting, VFR60L new forging technology, optimization of BU specification curing time, improvement of the efficiency of PVR64 curing time, the project of rubber-saving of curing mold, PVR70 bending assembly German machine,high speed valveautomatic airtight machine, project of noise-canceling automatic bending machine,automatic grinding machine ofoval specification, PVR64 automatic vulcanized disc insertingmachine,CR202L automatic sand blastingmachine

5.1.4 Long-term and short-term business development plan
5.1.4.1 Short-term development plan
① In the aspect of marketing strategy
- A. Provide stable quality and quantity, strengthen after-sales service and establish a perfect system, dedicated to serve existing customers.
- B. Develop potential customers in OE automobile market.
- C. Construct complete production process for subsidiaries in Indonesia, actively develop domestic market of Indonesia.
- D. Continuously develop products of high gross profit to ensure competitive advantage of the company.
② In the aspect of production strategy
- A. Improve procurement efficiency, master the dynamic condition of raw materials, and reduce inventory.
- B. Strengthen cooperation relationship with suppliers to reduce procurement cost.
- C. Strengthen production management to reduce production cost and improve product competitiveness.
③ In the aspect of R&D strategy
- A. Enhance process improvement, and further conduct lean management on production process to reduce wastage and stabilize quality.
- B. Continue to invest in the update of automation equipment and develop technologies actively, and expand the market of high gross profit products.
④ In the aspect of operation management
- A. Construct Enterprise Resource Planning (ERP) system to simplify work process and improve management efficiency.
- B. Regularly hold educational training inside and outside the plant to improve the quality of manpower in terms of technology research and development, business and operation management.
⑤ In the aspect of financial management
- A. Establish close relationship with contacting financial institution to master financial market fluctuation and improve the performance of financial use.
- B. According to the plan on medium and long term fund demand, carry out short term financial planning under safe and steady principles.
5.1.4.2 Long-term development plan
① In the aspect of marketing strategy
- A. Actively develop the market for niche products to acquire higher profits.
- B. Seek for possible strategic partner to give play to the operating efficiency of one plus one is greater than two.
- C. Participate in overseas exhibitions, actively establish cooperation relationship with OE car factories.
② In the aspect of production strategy
- A. Integrate procurement power of the Group to acquire reasonable price to reduce production cost, and maintain a long-term, good and stable cooperation relationship with suppliers.

B. Keep close to major customers and markets, and carry out nearby production to shorten delivery time.
C. Vertical integration, develop copper smelting and rubber refining businesses, and expand the self-production rate of large valve core.
③ In the aspect of R&D strategy
A. Establish system integration capability to provide consulting and technical services to subsidiaries of the Group and customers.
B. Jointly improve products with customers, and improve added value and gross profit of products.
④ In the aspect of operation management
A. Establish the flat organization, thorough objective management system and reasonable employee’s performance appraisal system.
B. Regularly hold educational training for employees of the company, so as to enrich professional technical competence and improve work efficiency.
C. Construct enterprise electronation, information security system and thorough knowledge management system.
D. Initiate global competition and employee’s concept of lifelong learner, and take marching towards an international enterprise as the striving objective.
E. Establish high quality, integrity and innovative corporate culture, so as to condense the centripetal force of the management team and employees of the company.
⑤ In the aspect of financial management
A. Regarding working capitals, apart from supplemented by net profit after tax, collocate with loans and cash capital increase from financial institutions to inject funds necessary for future development.
B. Properly arrange financial planning of the company to reduce operating risks.

5.2 Market, production and marketing overview:

5.2.1 Market analysis

5.2.1.1 Sales (supply) regions of main commodities (services):

Unit: NTD thousand; %

			Unit: NTD thousand;%	Unit: NTD thousand;%
Year Sales region	2019		2020
	Amount	%	Amount	%
China	1,179,262	43.41	1,164,113	44.73
Indonesia	761,096	28.01	691,578	26.58
Other	776,531	28.58	746,566	28.69
Total	2,716,889	100.00	2,602,257	100.00

5.2.1.2 Market share:

The Group is a professional valve manufacturer, currently, there is no professional research institute on making research on global valve industry. According to the “Report on 2012-2016 Valve Market In-depth Research and Future Development Trend Forecast” published by Beijing Junyi Huasheng Technology Co., Ltd., the production capacity of valve industry in China is approximately 3.4~4 billion items, and monthly production capacity of the Group is approximately 66

million items, namely with annual production capacity of at least 700 million items, it is estimated that the Group’s production capacity is approximately accounting for at least 1/10 of the production capacity of global valve market, it can be called as the professional valve supplier with maximum production capacity worldwide.

Professional valve core committee of China Chemical Industrial Equipment Association shows that, the valve manufacturing in China is accounting for eighty percent worldwide, and the output of valve industry in China is approximately 3~4 billion items, the output of the Group in 2020 is approximately 690 million items, it is estimated that the Group’s output is accounting for at least 10% of the output of global valve market, it can be called as the professional valve supplier with maximum output worldwide.

The news of China valve core website in May 2014 indicated that, the valve industry had entered into the era of micro growth, according to the estimate based on the annual sales volume of 5 billion items worldwide, by conservative estimate, the sales volume of the Company in 2020 is accounting for 10% of market share.

5.2.1.3 Future market supply and demand condition and growth:

① Supply and demand aspect

The demand of valve market is mainly divided into OE market and AM market, valve is an important safety item in wheel module, since it is exposed outside for a long time and needs to bear all kinds of severe environments and changes in temperature difference, and it needs to bear strong centrifugal force upon running at high speed, the valve can be easily worn down, upon annual vehicle inspection or tire replacement, generally the valve will be replaced for the sake of “driving safety”, hence the demand on valve in AM market is far higher than that in OE market.

US Tire Business has announced the “Ranking of 2020 Global Tire Companies”, and estimated the total revenue of 75 tire manufacturers worldwide was approximately USD166.97 billion (information of some enterprises are not available), decreased by 1.2% year-on-year.

In 2020, due to the outbreak of COVID-19 in China Mainland, people are going out less and there is less demand on economic activities. Affected by COVID-19, the profits of tire declined dramatically in the first half of 2020, and the business profits of the world’s main tire manufacturers dropped significantly. LMC experts expected it would take three years to get it up to the bar of 2019. For passenger car tires, it would take approximately three years, and approximately two years for truck tires and bus tires.

Michelin is the top ranking of the top ten ranking in 2020, and Bridgestone, which had been ranking No. 1 in the ranking of global tire industry for eleven years, is No.2, followed by Goodyear ranked No.3. And Cheng Shin Group from Taiwan maintains ranking No. 9 from 2012 to 2018, and retreat to the tenth largest in 2019, returning to No.9 in 2020.

	Global TopTen Rankingin Tire Industry	Global TopTen Rankingin Tire Industry	Global TopTen Rankingin Tire Industry
Ranking in 2020	Company/country	Sales volume of tire in 2019 (USD 100 million)	Sales volume of tire in 2018 (USD 100 million)
1	Michelin/France	250.0	232.75
2	Bridgestone/Japan	243.25	249.82
3	Goodyear/USA	136.9	143.92
4	Continental/German	112.75	117.57
5	Sumitomo Rubber Industries/Japan	70.6	69.62
6	Pirelli/Italy	59.35	61.25
7	Hankook Tire/Korea	57.25	58.1
8	Yokohama Rubber/Japan	48.1	47.46
9	Cheng Shin Rubber/Taiwan	39.08	39.07
10	ZC Rubber/China	35.85	39.96

Data source: US Tire Business

② Future market growth

The proportion of global tire production is roughly as follows: Asia (59.8%), Europe (15.5%), North American (11.7%), South America (5.8%) and other (7.2%); and the proportion of consumption in global tire market is roughly as follows: Asia (37.1%), Europe (21.8%), North American (23.6%), South America (7.6%) and other (9.9%); among them, the tire demand in China Mainland is obviously greater than global level, generally speaking, replacement of tire is needed about every 2~3 years, hence it is expected that the AM market in China will grow stably, and the demand on tire replacement will increase gradually. In 2020, despite the market demand reduces due to the impact of COVID-19, in the long run, the demand of valves will return to normal standard and grow steadily.

5.2.1.4 Competition niche:

① Technology aspect
A. With key capability in process and mold
B. Capability of providing output promptly
C. Degree of automation equipment is ahead of the general industry level

In order to ensure to provide customers stable quality and rapid service, the Group continuously increases automation equipment investment and the research and development of process improvement, in recent years, the research and development costs have been rising along with the increase in revenue, the achievements in these process improvement and automation equipment investment will continue to produce benefits in the future, the error generated from manual operation and the impact on the rising wage costs can be reduced substantially.

② Product aspect
A. Rapid delivery
B. The product quality is recognized by major international manufacturers
C. With advantage in scale production

The Group has acquired certification from world’s top three tire manufacturers, namely Bridgestone, Michelin and Goodyear, and the top ten tire manufacturers including Cheng Shin and Kenda are also the customers of the Group, indicating that the product quality of the Group is deeply recognized by major international manufacturers; besides, currently the Group takes a leading position worldwide in terms of overall yield and quality of valves, with advantage in scale production, the Group is able to deploy production line according to the delivery time of customers to achieve rapid delivery and stable quality.

③ Management aspect
A. Degree of mastering cost and inventory
B. The management team has rich experience and have been engaged in valve industry for over thirty years.

Directors and managerial officers of the Company are the professionals engaging in valve industry for many years, they are highly sensitive to industry changes, and are able to promptly adjust raw materials and cost inventory for strict cost control in response to the changes in the upstream, midstream and downstream of the industry.

④ Customer aspect
A. Satisfy special specification requirement of the customer

B. Complete product lines, convenient to provide one-stop service to customers The Group has complete product lines, and products have extensive scope of application to bicycle class, motorcycle and electric motorcycle class, automobile and truck and off-the-road vehicle class, satisfying application requirements of different customers and products have various specifications, which is convenient to provide one-stop service to customers, saving procurement management costs of customers.

5.2.1.5 Favorable and unfavorable factors in development prospect and solutions:
① Favorable factors
- A. Legislation trend

With various countries are attaching importance to the issues of environment friendly and energy saving and driving safety, advanced countries have legislated and implemented regulations on mandatory installation of Tire Pressure Monitoring System (TPMS) successively. For example, US had passed the legislation in 2005 and listed TPMS as standard configuration in 2007, after 2015, over 90% of old automobiles in US were installed with TPMS; EU and Korea also gradually implemented mandatory installation in new automobiles in November 2012 and January 2013 respectively; Taiwan planned to release standard configuration for new automobiles in July 2016; starting from 2019, TPMS must be installed in all newly certified passenger vehicles in China Mainland; and as of 2020, mandatory installation requirement will be implemented for all passenger vehicles under production. And Japan and India have also gone through similar legislative procedures. Due to such

international trend, the valves produced by the Group can be combined with electronic sensor of various electronics developers to TPMS, taking advantages in AM market and future OE regulatory requirements.

B. Restructuring of industrial order is favorable to us

Under the pressure of unable to reduce production cost effectively, the world’s leading manufacturers, namely Schrader from US and Pacific Industrial Co., Ltd. from Japan, who have made their fortune in valve industry, withdraw from the traditional valve market gradually, and focus on developing TPMS valves or other products of the Group instead. Under the background of global sourcing and industrial transfer, with existing advantages in customer resources and market popularity, in the course of undertaking industrial transfer, the Group has the chance to improve the market share of products.

C. Full and complete product lines

The Group possesses full and complete product lines respectively applied to bicycle industry, motorcycle and electric motorcycle industry, automobile industry and tire pressure monitoring system, therefore, the Group has not focused on application to a single industry, and industrial risks are relatively dispersed.

D. Degree of automation is superior to general industry level

The Group’s degree of investment in automation equipment is higher than the general industry level, under the trend of rising wages in Mainland, due to higher investment in automation equipment, the Group’s management efficiency will continue to emerge in the future and widen the gap between the competitors.

② Unfavorable factors
A. Declining product gross profit rate

China Mainland increases the basic salary year by year and implements social insurance system and housing fund, making the costs of human resources in business management increasing continuously, along with the price competition pressure from competitors, it will affect the performance of product gross profit rate of the company.

Solutions

a. The rising wages in mainland dilutes the gross profit, the Group will strengthen automation equipment and make the best of labors in Indonesia plant, so as to shorten manufacturing and production process, reduce defect rate and cost, and provide products of more price competitiveness to customers.
b. Continue technology development and launch niche products, conduct market segmentation to maintain higher gross profit rate.
B. Price competition among competitors

In recent years, the China’s automobile market is booming, driving rapid growth of relevant industry and supply and demand of components, causing gradual increase of investment competitors, and the price competition among

competitors will cause impact on profitability. Solutions

In respond to industrial demand, the Group will focus on the differentiation in product and operation model, actively improve the existing products, and continue to develop niche products to make the differentiation advantage of the company prominent and make market segmentation, so as to improve overall competitiveness of the company.

C. Fluctuations in prices of raw materials

Major procurement raw materials of the Group are copper material and rubber, the rising prices of raw materials will increase the procurement costs and dilute gross profit from sales; and the declining prices of raw materials will make the downstream customers postpone ordering due to expecting price reduction, hence the fluctuations in prices of raw materials will have considerable impact on the profitability of the Group. Solutions

According to CRU, the global copper consumption quantity decreased year-on-year 3.3% in 2020. Other than China’s copper consumption, it dropped 8.8%, while China’s increased 2%, and China is also the major source of growth. The consumption growth of global copper demand will mainly reply on the investment in electric vehicle, battery and power grid (including wind power generation and solar power generation). The importance of the upturn of vehicle market in the next half year of 2020 makes the upward trend of copper price. CRU expected that the global copper consumption will increase 5.2% in 2021.

Rubber tree is a kind of plant in fond of high temperature and humidity, it has obvious regionalism, due to climatic suitability, Southeast Asia is the most important natural rubber production region worldwide, over 90% natural rubbers are produced from Southeast Asia ever year, among them, Thailand and Indonesia are the major place of production, accounting for 60% worldwide. It takes 7 years of planting rubber trees before they start producing rubber, and they can produce 25~30 years, but the production capacity decreases year by year. Due to the pandemic, terrible phenological condition, and labor crunch in 2020, the production capacity in major Southeast natural rubber countries of origin fell year-over-year in different levels. It led to oversupply, making the rubber price skyrocket in the second half year of 2020. Besides, due to the control of the pandemic, the economic upturn, and the expectation of the increase of oil price, the price of butyl rubber will increase as well.

The Group masters market information all the time, reduces the pressure from rising price of raw materials with a stable procurement quantity, prepares reasonable and safe inventory for raw materials, and appropriately reflects the sales price of downstream customers upon price fluctuation, so as to reduce the impact on operation performance.

5.2.2 Important use and production process of major products

5.2.2.1 Important use of major products:

The Group is a professional manufacturer producing all kinds of valves, the valve is a kind of independent valve body device, its main function is to let air enter into tubeless tire or tube space when opening it, then it will be closed and sealed automatically to preserve the air to generate air pressure, so as to prevent the air from flowing out from tire or tube.

5.2.2.2 Production process

The production technique is divided into two parts of process: namely the part for metal piece and the part for rubber piece.

Metal piece production process: after forging raw copper materials into a certain length, it will enter into automatic thread rolling machine for thread rolling, after cutting by multiple processing machining, one-off degreasing will be conducted, then conduct machining such as head refining (deburring), reaming etc. in head refining machine, after further cleaning (removing greasy dirt on the surface) of the processed metal piece, it will enter into plating line for nickel plating, after treatment of the electroplated piece by bottom forming machine (the purpose is to remove cladding material, and make copper material able to set off vulcanization reaction with rubber), it will be taken as the semi-finished product of metal piece and stored for further use. Rubber piece production process: place rubber material into rubber refining machine for mixing processing to make the mixing thickness of rubber meet the requirements of the next working procedure; after forming into piece in mixing machine, apply a layer of powder onto the rubber piece after a while, after cut into certain size by stock cutter, place the cut rubber piece into vulcanizing machine together with metal piece, then go through high-temperature steam by mold, rubber mat will be vulcanized and machine shaping into all kinds of rubber mat valve products, finally, conduct roughening and grinding, after passing manual quality inspection, the product will be packed and stored.

==> picture [382 x 149] intentionally omitted <==

5.2.3 Main raw materials’ supply condition

Main raw materials	Main supplier (domestic)	Supply condition
Copper material	DAECHANG, Ningbo Jintian, Ningbo Boway	Good
Rubber material	Exxon Mobil, Sinopec	Good

5.2.4 List of main trade creditors and debtors

5.2.4.1 Name of the suppliers once accounting for over 10% of total purchase in any year of the last two years and its purchase amount and proportion, and describe the reason for increase or decrease change:

Unit: NTD thousand

			2019	2019						2020	2020				As at the first quarter of 2021	As at the first quarter of 2021	As at the first quarter of 2021	As at the first quarter of 2021	As at the first quarter of 2021	As at the first quarter of 2021	As at the first quarter of 2021
Item	Name		Amount		Proportion of net purchase in the whole year (%)		Relation with the company	Name		Name		Proportion of net purchase in the whole year (%)		Relation with the company	Name			Name		Proportion of net purchase in the whole year (%)	Relation with the company
1	Ningbo Jintian		488,842		31.75		None	Ningbo Jintian		389,282		27.41		None	Ningbo Jintian			189,024		33.27	None
2	DAECHANG		175,991		11.43		None	DAECHANG		154,260		10.86		None	DAECHANG			60,935		10.73	None
	Other		874,714		56.82		-	Other		876,553		61.73		-	Other			318,168		56.00	-
	Net purchase		1,539,547		100.00			Net purchase		1,420,095		100.00			Net purchase			568,127		100.00
	Reason for increase or decrease change: Major supply objects of stable, there is no significant change. 5.2.4.2 Name of the customers once accounting for over 10% of total sales in last two years and its sales amount and proportion, and describe increase or decrease change:
		2019							2020							As at the first quarter of 2021
Item	Name	Amount		Proportion net sales in the whole year (%)		Relation with the company		Name	Amount		Proportion net sales in the whole year (%)		Relation with the company			Name	Amount		Proportion net sales in the whole year (%)		Relation with the company
1	Cheng Shin Group	367,569		13.53		None		Cheng Shin Group	386,211		14.84		None			Cheng Shin Group	139,235		16.03		None
	Other	2,349,320		86.47		-		Other	2,216,046		85.16		-			Other	729,137		83.97		-
	Net sales	2,716,889		100.00				Net sales	2,602,257		100.00					Net sales	868,372		100.00

Reason for increase or decrease change: major sales objects of the Group are stable, there is no significant change, and there is no risk of centralized sales.

5.2.5 Table of production quantity and value in the last two years

Unit: 10 thousand pcs; NTD thousand

Year Major commodity Production quantity and value	2019	2019	2019	2020	2020	2020
	Production capacity	Production quantity (Notes 1)	Production value	Production capacity	Production quantity (Notes 1)	Production value
Bicycle class	30,150	23,157	478,593	30,150	25,835	505,892
Motorcycle and electric motorcycle class	36,800	34,098	889,116	36,800	32,654	804,660
Passenger car, truck and off-the- road vehicles class(Notes 2)	16,587	9,015	672,672	16,587	10,300	628,100
Total	83,537	66,270	2,040,381	83,537	68,789	1,938,652

Notes 1. The production quantity of valves includes the quantity in outsourcing.
Notes 2. Production quantity of valves for passenger car, truck and off-the-road vehicles class includes the values of other classes and quantity of assembly.
Reason for increase or decrease change: The production capacity of major items of our group can be customized by client’s adjustment to the back-end sulfurization process, so that we can produce different scales of products. Our group took a hit of the impact of the 2020 pandemic, the amount of production and the export quantity plummeted, and motorcycle class, truck and off-the-road class were affected even more significant. Revengeful shopping appeared as the pandemic ebbed since quarter 3, the vehicle industry recovered, making the amount of production and the export quantity increased. Also, thanks to the post-pandemic era (to keep social distancing, customers refuse to take public transportation; instead, they choose bicycles, electric bicycles, and the demand in sport climbed.) The bicycle market is popular, and motorcycle, vehicle, truck markets are still at the stages of powerful recover. The valve export quantity of bicycle class and electric motorcycle class grow against the tide. Due to the mass production of new clients, TPMS valves export quantity grow stably.

5.2.6 Table of sales quantity and value in the last two years

Unit: 10 thousand pcs; NTD thousand

Year	2019	2019	2019	2019	2020	2020	2020	2020
Sales quantity and value Major commodity	Domestic sales		Export sales		Domestic sales		Export sales
	Sales quantity	Sales value	Sales quantity	Sales value	Sales quantity	Sales value	Sales quantity	Sales value
Bicycle class	-	-	19,496	565,702	-	-	22,292	628,896
Motorcycle and electric motorcycle class	-	-	28,101	967,602	-	-	26,331	850,779
Passenger car, truck and off-the-road vehicles class	-	-	6,267	698,610	-	-	6,526	631,821
Accessories and other	-	-	-	484,975	-	-	-	490,761
Total	-	-	53,864	2,716,889	-	-	55,149	2,602,257

Notes: For accessories and other items of the Group, due to various product categories and specifications, hence only sales value is included in statistics.

Reason for increase or decrease change: please refer to Item (V), the description on the reason for increase or decrease change stated in the table of production quantity and value in the last two years.

5.3 Information of service employees in the last 2 years and as at the publication date of annual report

Item	Year	2019	2020	As at the end of April 2021
Number of employees	Indirect labor	377	396	414
	Direct labor	758	817	856
	R&D labor	53	55	52
	Sales and Management labor	121	111	107
	Total	1,309	1,379	1,429
	Average age	37	37	38
Average length of service		6	6	6.7
Degree distribution ratio	Doctor degree	-	-	-
	Master degree	0.54%	0.65%	0.70%
	College degree	14.51%	14.65%	14.63%
	Senior high school degree	34.61%	31.11%	27.92%
	Below senior high school degree	50.34%	53.59%	56.75%

5.4 Environmental protection expenditure information

5.4.1 In the last year and as at the publication date of annual report, the loss suffered due to environmental pollution (including compensation and violation of environmental protection regulations according to the inspection results of environmental protection, the date of punishment, punishment number, legal provisions violated, contents of legal provisions violated, and punishment contents shall be listed), and disclosure of estimated amount might occur currently and in the future and the solutions, if it cannot be reasonably estimated, the facts of unable to estimate reasonably shall be described:

In the last year and as at the publication date of annual report, the Group is free of any dispute regarding environmental pollution, hence there is no major punishment and loss due to polluting the environment.

5.4.2 Pursuant to laws and decrees, if pollution facility setting license or pollutant discharge permit shall be applied for, or pollution prevention and control costs shall be paid, or environmental protection dedicated unit and personnel shall be set, description on the application, payment or setting circumstances thereof:

			Pollution prevention
Region	License	Validity date
			and control costs

XIAMEN XIAHUI	Pollutant discharge permit	2020/08/05-2023/08/04	Subject to local regulations, RMB1.5 per ton of water

			Pollution prevention and control costs
Region	License	Validity date

KUNSHAN LUHAI	Pollutant discharge permit	2020/04/24~2025/04/23	RMB100 thousand per year
PT. LUHAI	Waste disposal permit	2020/07/02-2022/07/02	None
PT. LUHAI	Waste temporary disposal permit	2017/11/13-2022/11/13	None
PT. LUHAI	Environmental treatment permit	Permanent validity	None

5.4.3 Investment in major pollution prevention and control equipment, and their use and benefits might be generated:

April 30, 2021

		Date of	Investment	Undepreciated	Use and expected
Equipment name	Quantity
		acquisition	cost	balance	possible benefits

Sewage treatment system	1	2010/12/30	RMB 836 thousand	RMB 69.6 thousand	Supporting measures for environmental protection, reducepollutant discharge.
Sewage treatment system	1	2012/8/31	IDR 218.27 million	IDR 30.92 million	Sewage treatment, reduce pollutant discharge.
Nickel sulfate sewage treatment equipment	1	2014/8/31	RMB 201 thousand	RMB 91.3 thousand	Treatment of nickel- containing wastewater generating from electroplating
Oily fume treatment system	1	2014/12/25	RMB 232.5 thousand	RMB 85.2 thousand	Collect oily fume generated from hot working process, purification treatment to meet emission standard.
Dust remover (filter cartridge included)	1	2015/2/4	RMB 163.8 thousand	RMB 62.8 thousand	1. Collect fume and dust generated from copper melting and casting, and conduct purification treatment to meet emission standard. 2. Benefits: recycle the zinc oxide from exhaust gas, fume and dust.
Vulcanized exhaust gas purification equipment	1	2015/12/7	RMB 837 thousand	RMB 390.9 thousand	Collect exhaust gas generated from vulcanization, and conduct purification treatment to meet emission standard.
Oily fume treatment system (electrostatic dust collector)	1	2016/1/6	RMB 51.2 thousand	RMB 0	Collect oily fume generated from hot working process, purification treatment to meet emission standard.

		Date of	Investment	Undepreciated	Use and expected
Equipment name	Quantity
		acquisition	cost	balance	possible benefits

Environmental protection cleaning wastewater treatment system	1	2017/9/25	RMB 312 thousand	RMB 200.2 thousand	Use for treatment of wastewater from environmental protection cleaning
Hot forging acid fog tower	1	2018/6/7	RMB 76.9thousand	RMB 55.1 thousand	1. Use: treatment of acid fog generating from pickling in hot forging; 2. Benefits: reduce the emission of acid mist.
Environmental emergency pool	1	2018/12/30	RMB 227.3 thousand	RMB 199.8 thousand	Use: treatment of pollutant effluents generated from abrupt environmental accidents;
Dust remover	1	2019/11/11	RMB 18.1 thousand	RMB 15.6 thousand	Dispose dust and purify air at the finishing room of truck valve
Copper-containing wastewater treatment facility	1	2019/12/9	RMB 195.2 thousand	RMB 169.2 thousand	1. Use for treatment of wastewater and high- concentration wastewater from environmental protection cleaning. 2. Ensure up-to-standard discharge of wastewater.
Dust collecting box	1	2019/4/1	RMB 10.8 thousand	RMB 8.6 thousand	1. Collect dusts in grinding shop. 2. Purify air and ensure up- to-standard emission of exhaustgas.
Impulse type filter cartridge dust collector	1	2020/1/8	RMB 22.1 thousand	RMB 19.4 thousand	1. Collect dusts in grinding shop. 2. Purify air and ensure up- to-standard emission of exhaust gas.
Impulse type filter cartridge dust collector	1	2020/1/14	RMB 26.5 thousand	RMB 23.2 thousand	1. Collect dusts in grinding shop. 2. Purify air and ensure up- to-standard emission of exhaustgas.
Impulse type filter cartridge dust collector	3	2020/6/22	RMB 79.6 thousand	RMB 73.0 thousand	1. Collect dusts in grinding shop. 2. Purify air and ensure up- to-standard emission of exhaustgas.
Impulse type filter cartridge dust collector	3	2020/10/27	RMB 79.6 thousand	RMB 73.0 thousand	1. Collect dusts in grinding shop. 2. Purify air and ensure up- to-standard emission of exhaustgas.

		Date of	Investment	Undepreciated	Use and expected
Equipment name	Quantity
		acquisition	cost	balance	possible benefits

Impulse type filter cartridge dust collector	2	2020/12/24	RMB 53.1 thousand	RMB 51.3 thousand	1. Collect dusts in grinding shop. 2. Purify air and ensure up- to-standard emission of exhaustgas.

5.5 Labor relations

5.5.1 Employee welfare measures, further education, training and retirement system of the company and the implementation circumstances thereof, agreement between labor and employer, and management measures for all kinds of employees’ rights and interests
5.5.1.1 Employee welfare measures
The Company and its affiliated reinvested subsidiaries have formulated management measures and regulations regarding employees, such as remuneration, promotion, award and punishment, leave and social insurance etc., which are complying with relevant local laws and decrees.
The Company and its affiliated reinvested subsidiaries provide clean and sanitary foods to employees, and reinvested companies provide dormitory to employees and implement level-to-level management.
Cash gift for important festivals, birthday cash gift, education sponsorship for children of employees and subsidies for weddings and funerals etc., and irregularly hold staff traveling to enhance affective interaction among employees.
Provide employees health examination every year, taking care of employees’ physical and psychological health by active action.
5.5.1.2 Further education and training circumstance

The Company and affiliated reinvested subsidiaries attach importance to employees’ educational training, including orientation training before entry into the plant, in-service training and external professional training, so as to assist employees to improve professional working knowledge and skills.

5.5.1.3 Retirement system

The Company and affiliated reinvested subsidiaries are the companies within the territory of the Republic of China, and adopt defined contribution system pursuant to “Labor Pension Act”, for the payment of pension contribution, the Company and its subsidiaries contribute six percent of monthly salary as the pension on a monthly basis, and deposit it in the special pension account of labors. For affiliated investment companies outside the Republic of China, the pension is contributed according to local laws and decrees of the investment country, and the rates are as follows:

	Xiamen City	Xiamen City	Nonnative of Xiamen City	Nonnative of Xiamen City	Kunshan City and nonnative	Kunshan City and nonnative	Indonesia	Indonesia
	Contribution byenterprise	Personal contribution	Contribution byenterprise	Personal contribution	Contribution byenterprise	Personal contribution	Contribution byenterprise	Personal contribution
XIAMEN XIAHUI	12%	8%	12%	8%

	Xiamen City	Xiamen City	Nonnative of Xiamen City	Nonnative of Xiamen City	Kunshan City and nonnative	Kunshan City and nonnative	Indonesia	Indonesia
	Contribution byenterprise	Personal contribution	Contribution byenterprise	Personal contribution	Contribution byenterprise	Personal contribution	Contribution byenterprise	Personal contribution
KUNSHAN LUHAI					16%	8%
PT. LUHAI							5.7%	3%

5.5.1.4 Agreement between labor and capital and management measures for all kinds of employees' rights and interests
The Company and its reinvested subsidiaries have set the Employees Union as the communication channel between employees and management of the company, consensus is reached between the Employees Union and employees for all important matters involving in employees to condense centripetal force; besides, internal periodical of the Group “LUHAI’s Window” has been set to encourage employees to contribute to share their spirits and actively give feedbacks.
The Group has formulated internal control system and various administrative measures, whose contents explicitly stipulate employees’ rights and obligations and welfare items, and welfare contents are reviewed regularly to safeguard employees’ rights and interests.
5.5.2 In the last year and as at the publication date of annual report, the loss suffered due to labor dispute (including the violation of Labor Standards Act according to labor inspection results, the date of punishment, punishment number, legal provisions violated, contents of legal provisions violated, and punishment contents shall be listed), and disclosure of estimated amount might occur currently and in the future and the solutions, if it cannot be reasonably estimated, the facts of unable to estimate reasonably shall be described: None.

5.6 Important contracts

Contract
	Contracting Parties	Term	Major contents	Restrictions
nature

Credit granting	Mega International Commercial Bank - LU HAI HOLDING	2019/11~2022/11	Medium and long-term borrowing, financing limit of USD5 million, revolving use.	-
Credit granting	Mega International Commercial Bank - LU HAI HOLDING	2018/02~2023/02	Medium and long-term project borrowing, financing limit of USD10 million, non-revolving use. (Amortization period till April 2023)	-
Credit granting	Cathay United Bank - LU HAI HOLDING	2020/08~2022/09	Medium and long-term borrowing, financing limit of USD4 million, revolving use, appropriation period is 2 year (Amortization period till September 2022)	Total limit is controlled at USD6 million.
Credit granting	Cathay United Bank - LU HAI HOLDING (Branch in Taiwan)	2020/08~2022/09	Medium and long-term borrowing, financing limit of NTD60 million, revolving use, appropriation period is 2 year (Amortization period till September 2022)
Credit granting	CTBC Bank - LU HAI HOLDING	2019/01~2020/12	Medium and long-term borrowing, financing limit of USD2 million, revolving use, appropriation period till the end of December 2020. (Repayment date till August 2022)	-
Credit granting	CTBC Bank - LU HAI HOLDING (Branch in Taiwan)	2021/01~2021/12	Short-term borrowing, financing limit of NTD 60 million, revolving use.	-
Credit granting	Taipei Fubon Bank - LU HAI HOLDING	2021/01~2023/01	Medium and long-term borrowing, financing limit of USD5 million, non-revolving use. (Repayment date till January 2023)	-
Credit granting	Far Eastern International Bank - LU HAI HOLDING	2019/11~2021/11	Medium and long-term borrowing, financing limit of USD5 million, revolving use.	-
Financial transaction	Far Eastern International Bank - LU HAI HOLDING	2019/11~2021/11	Financial transaction limit (USD600 thousand for forward exchange, FX swap and foreign exchange option respectively, provided the total shall not exceed USD600 thousand).	-

Contract
	Contracting Parties	Term	Major contents	Restrictions
nature

Credit granting	TaiShin International Bank - LU HAI HOLDING	2019/08~2022/09	Medium and long-term borrowing, financing limit of USD4 million,revolving use, the limit is reduced to USD3.5 million since December 27, 2019, and appropriation period till the end of May 2020.(Repayment date till September 2022)
Credit granting	Bank Sinopac - LU HAI HOLDING	2021/01~2022/11	Medium and long-term borrowing, financing limit of USD2 million,revolving use, appropriation period till the end of November 2022.
Credit granting	Shanghai Commercial & Savings Bank- LU HAI HOLDING	2019/11~2022/11	Medium and long-term borrowing, financing limit of USD1.5 million, non-revolving use. (Amortization period till December 2022)	-
Credit granting	Taichung Commercial Bank - LU HAI HOLDING	2020/08~2022/08	Medium and long-term borrowing, financing limit of USD3 million, revolving use, appropriationperiod is 2year.
Credit granting	Jih Sun International Bank - LU HAI HOLDING	2020/08~2022/07	Medium and long-term borrowing, financing limit of USD2 million, revolving use. (Repayment date till July2022)
Credit granting	Mega International Commercial Bank - XIAMEN XIAHUI	2016/11~2021/11	Medium and long-term borrowing, financing limit of USD6 million. (Appropriation within two years as of the date of approval (before November 2018), it may be appropriated by installment, non-revolving use) (Amortization period till May 2022)	-
Credit granting	Mega International Commercial Bank - XIAMEN XIAHUI	2019/12~2024/11	Medium and long-term borrowing, financing limit of USD6 million. (Appropriation within one year as of the date of approval (before November 20, 2020), it may be appropriated by installment, non-revolving use) (amortization period till January 2025)	-

Contract
	Contracting Parties	Term	Major contents	Restrictions
nature

Credit granting	Mega International Commercial Bank - XIAMEN XIAHUI	2021/01~2021/11	Short-term borrowing, financing limit of USD3 million.
Credit granting	CTBC Bank - XIAMEN XIAHUI	2020/02~2024/12	Medium and long-term borrowing, financing limit of USD5 million. (Non-revolving use, can be appropriated by installment, appropriation period is 1 year (before December 31, 2020))(amortization period till September 2025)	-
Credit granting	CTBC Bank - XIAMEN XIAHUI	2021/02~2025/09	Medium and long-term borrowing, financing limit of USD3 million. (Non-revolving use, can be appropriated by installment, appropriation period is before September 30 2021) (amortization period till September 2025)	-
Credit granting	Industrial Bank Co., Ltd. - XIAMEN XIAHUI	2020/08~2021/08	Short-term borrowing, financing limit of RMB45 million.	-
Financial transaction	Industrial Bank Co., Ltd. - XIAMEN XIAHUI	2020/08~2021/08	Financial transaction limit of RMB5 million.	-
Credit granting	Agricultural Bank of China Limited - XIAMEN XIAHUI	2020/05~2021/03	Short-term borrowing, financing limit of RMB47 million. (Repayment date till February 2022)	-
Financial transaction	Agricultural Bank of China Limited - XIAMEN XIAHUI	2020/05~2021/03	Financial transaction limit of RMB3 million.	-
Credit granting	China Construction Bank - XIAMEN XIAHUI	2020/08~2022/08	Medium and long-term borrowing, financing limit of RMB70 million.	-
Credit granting	CTBC Bank - KUNSHAN LUHAI	2021/02~2021/12	Short-term borrowing, financing limit of USD2 million.	-
Credit granting	Citi Bank - PT. LUHAI	2020/08~2021/07	Short-term borrowing, financing limit of USD3 million, revolving use.	-

Contract
	Contracting Parties	Term	Major contents	Restrictions
nature

Financial transaction	Citi Bank - PT. LUHAI	2020/08~2021/07	Financial transaction limit of USD500 thousand.	-
Credit granting	CTBC Bank - PT. LUHAI	2020/08~2021/05	Short-term borrowing, financing limit of USD2 million.	-

VI. Financial Overview

6.1 Concise financial information in the last five years

6.1.1 Condensed balance sheet and consolidated profit and loss statement

6.1.1.1 Condensed balance sheet - International Financial Reporting Standards:

Unit: NTD thousand

Year Item	Year Item	Financial information in the last fiveyears	Financial information in the last fiveyears	Financial information in the last fiveyears	Financial information in the last fiveyears	Financial information in the last fiveyears	Financial information in current year as at March 31, 2021 (Notes 1)
		2016 (Notes 1)	2017 (Notes 1)	2018 (Notes 1)	2019 (Notes 1)	2020 (Notes 1)
Current assets		2,262,483	2,458,745	2,397,353	2,732,532	2,765,828	2,889,204
Financial assets at fair value through profit or loss - noncurrent (Notes 3)		-	-	930	1,558	1,267	1,350
Financial assets carried at cost - noncurrent (Notes 3)		928	914	-	-	-	-
Property, plant and equipment		621,704	634,053	723,273	1,148,538	1,631,999	1,743,812
Right-of-use assets (Notes 4)		-	-	-	197,862	198,398	192,625
Intangible assets		8,912	8,307	7,449	6,956	13,737	13,122
Other assets		134,474	180,078	254,858	59,210	113,906	135,180
Total assets		3,028,501	3,282,097	3,383,863	4,146,656	4,725,135	4,975,293
Current liabilities	Before distribution	553,529	914,919	565,542	1,345,967	915,111	990,952
	After distribution	628,023	1,037,866	647,507	1,535,306	(Notes 2)	-
Non-current liabilities		430,941	169,785	590,717	499,994	1,090,601	1,173,436
Total liabilities	Before distribution	984,470	1,084,704	1,156,259	1,845,961	2,005,712	2,164,388
	After distribution	1,058,964	1,207,651	1,238,224	2,035,300	(Notes 2)	-
Capital stocks		744,947	819,650	819,650	860,632	903,664	903,664
Capital surplus		442,724	443,701	443,701	443,701	443,701	443,701
Retained earnings	Before distribution	1,034,601	1,162,621	1,246,929	1,365,892	1,728,280	1,830,015
	After distribution	960,107	1,039,674	1,164,964	1,176,553	(Notes 2)	-
Other equity		(178,241)	(228,579)	(282,676)	(369,530)	(356,222)	(366,475)
Treasury shares		-	-	-	-	-	-
Non-controlling interests		-	-	-	-	-	-
Total equity	Before distribution	2,044,031	2,197,393	2,227,604	2,300,695	2,719,423	2,810,905
	After distribution	1,969,537	2,074,446	2,145,639	2,111,356	(Notes 2)	-

Notes 1: Financial information from 2016 to 2020 have been audited and certified by the accountant, the financial report of the first quarter of 2021 has been reviewed by the accountant.
Notes 2: The 2020 earnings distribution has not been passed by General Shareholders’ Meeting.
Notes 3: According to the provisions in the bulletin of IFRS 9 “Financial Instruments”, as of 2018, the title of account “Financial assets carried at cost - non-current” will be adjusted into “Financial assets at fair value through profit or loss - non-current”.
Notes 4: According to the provisions in the bulletin of IFRS 16 “Lease”, as of 2019, newly added the title of “Right-of-use assets”.

6.1.1.2 Condensed consolidated statement of comprehensive income - International Financial Reporting Standards:

Unit: NTD thousand

Year Item	Financial information in the last five years	Financial information in the last five years	Financial information in the last five years	Financial information in the last five years	Financial information in the last five years	Financial information in current year as at March 31, 2021 (Notes 1)
	2016 (Notes 1)	2017 (Notes 1)	2018 (Notes 1)	2019 (Notes 1)	2020 (Notes 1)
Net revenue	2,606,582	2,647,010	2,628,778	2,716,889	2,602,257	868,372
Gross Profit	682,178	681,005	561,055	615,058	626,635	224,488
Operatingincome(loss)	406,043	395,201	269,342	312,635	328,035	139,476
Non-operating income and expenses	28,870	329	27,827	33,203	501,754	3,244
Income (loss) before tax from continuing operations	434,913	395,530	297,169	345,838	829,789	142,720
Net income (loss) from continuing operations	318,406	274,152	208,463	241,910	594,759	101,735
Loss from discontinued operations	-	-	-	-	-	-
Net income(loss)	318,406	274,152	208,463	241,910	594,759	101,735
Other comprehensive income (loss) for the year, net of income tax	(170,757)	(47,481)	(55,552)	(86,854)	13,308	(10,253)
Total comprehensive income (loss) for the year	147,649	226,671	152,911	155,056	608,067	91,482
Net income (loss) attributable to: Shareholders of the parent	318,406	274,152	208,463	241,910	594,759	101,735
Net income attributable to non-controlling interests	-	-	-	-	-	-
Total comprehensive income (loss) attributable to: shareholders of the parent	147,649	226,671	152,911	155,056	608,067	91,482
Comprehensive income attributable to non- controlling interests	-	-	-	-	-	-
Earningsper share	4.27	3.35	2.54	2.81	6.58	1.13

Notes 1: Financial information from 2016 to 2020 have been audited and certified by the accountant,

the financial report of the first quarter of 2021 has been reviewed by the accountant.

6.1.2 Name and audit opinion of certified public accountants in the last five years

Year	Accounting firm	Name of CPA	Audit opinion
2016	Crowe (TW) CPAs	SHAO, CHAO-BIN HUANG,SU-CHUAN	Unmodified Opinion
2017	Crowe (TW) CPAs	LIN, MING-SHOU HUANG,SU-CHUAN	Unmodified Opinion
2018	Crowe (TW) CPAs	LIN, MING-SHOU HUANG,SU-CHUAN	Unmodified Opinion
2019	Crowe (TW) CPAs	LIN, MING-SHOU HUANG,SU-CHUAN	Unmodified Opinion
2020	Crowe (TW) CPAs	LIN, MING-SHOU SHAO,CHAO-BIN	Unmodified Opinion

6.2 Financial analysis in the last five years

6.2.1 Financial analysis - International Financial Reporting Standards

Year Analysisitem	Year Analysisitem	Financial analysis in the last five years	Financial analysis in the last five years	Financial analysis in the last five years	Financial analysis in the last five years	Financial analysis in the last five years	As at March 31 in 2021 (Notes 1)
		2016 (Notes1)	2017 (Notes1)	2018 (Notes1)	2019 (Notes1)	2020 (Notes1)
Financial structure	Debt to assets ratio (%)	32.51	33.05	34.17	44.52	42.45	43.50
	Long-term funds to property, plant and equipment(%)	398.09	373.34	389.66	243.85	233.46	228.48
Liquidity	Current ratio (%)	408.74	268.74	423.90	203.02	302.24	291.56
	Quick ratio (%)	324.89	196.85	316.68	153.18	222.52	207.42
	Times interest earned (times)	44.57	34.92	25.77	27.62	95.89	78.02
Operating Performance	Accounts receivables turnover (times)	3.84	3.89	3.97	4.10	3.60	4.25
	Average collection days	95	94	92	89	101	86
	Average inventory turnover (times)	4.24	3.57	3.35	3.44	2.97	3.43
	Accounts payable turnover (times)	9.09	7.88	7.63	7.53	6.70	7.35
	Average inventory turnover period	86	102	109	106	123	106
	Property, plant and equipment turnover(times)	4.22	4.22	3.87	2.90	1.87	2.06
	Total assets turnover (times)	0.87	0.84	0.79	0.72	0.59	0.72
Profitability	Return on assets (%)	10.93	8.94	6.51	6.67	13.55	8.50
	Return on equity (%)	15.52	12.93	9.42	10.68	23.70	14.72
	Pre-tax income to paid-in capital (%)	58.38	48.26	36.26	40.18	91.82	63.17
	Net profit margin (%)	12.22	10.36	7.93	8.90	22.86	11.72
	Earnings per share (NTD)	4.27	3.35	2.54	2.81	6.58	1.13
Cash flow	Cash flow ratio(%)	69.28	26.70	57.10	21.06	28.80	1.62
	Cash flow adequacyratio(%)	91.19	85.38	84.26	76.15	53.82	41.02
	Cash reinvestment ratio (%)	6.91	5.44	5.53	5.53	1.63	0.34
Leverage	Operatingleverage	2.41	2.39	3.24	2.91	2.78	2.12
	Financial leverage	1.03	1.03	1.05	1.04	1.03	1.01

If the increase or decrease change in various financial ratios reaches to 20% in the last two years, descriptions are as follows:

The increase of current ratio (%) and quick ratio (%), times interest earned(times), return on assets (%), return on equity (%), proportion of net profit before tax in paid-in capital (%), net profit margin (%), earnings per share (dollar), are mainly due to the relocation by coordinating with the policy of Huaqiao municipal government, and will deliver immovable items in this term. The relocation income deducts twice compensations for relocation (listed as long-term deferred-profits) and the relocation expense, listed as net profits of relocation, making the increase of current liabilities and non-operating earnings(other profits), and the debt-paying ability and profitability are better than the last term.
The decrease of property, plant and equipment turnover (times) is mainly to the construction of new plant in Xiamen, and the construction in progress increases.
The increase of cash flow ratio (%) is mainly due to the relocation by coordinating with the policy of Huaqiao municipal government, which will deliver immovable items in this term. The relocation income deducts the twice compensations for relocation (listed as long-term deferred-profits) and the relocation expense, are listed as net profits of relocation, increasing the current liabilities.
The decrease of cash flow adequacy ratio (%) is mainly due to the construction of new plant in Xiamen, and the construction in progress increases.
The decrease of cash reinvestment ratio (%) is mainly due to the construction of new plant in Xiamen, and the construction in progress increases, and the increase of issuing cash dividend.
Notes 1. Financial information from 2016 to 2020 have been audited and certified by the accountant, the financial report of the first quarter of 2021 has been reviewed by the accountant.

Calculation formulas of financial analysis are listed as follows:

Financial structure
(1) Debt to assets ratio = total liabilities / total assets
(2) Long-term funds to property, plant and equipment = (total equity + long-term liabilities (non-current liabilities)) / net property, plant and equipment
Liquidity
(1) Current ratio = current assets / current liabilities
(2) Quick ratio = (current assets-inventory-prepaid expenses) / current liabilities
(3) Times interest earned = income tax and net profit before interest expense/ interest expenses
Operating Performance
(1) Accounts receivables (including accounts receivable and notes receivable arising from business) turnover = net sales/ average account receivable (including accounts receivable and notes receivable arising from business) balance
(2) Average collection days=365/ accounts receivables turnover
(3) Average inventory turnover = cost of goods sold /average inventory
(4) Accounts payables (including accounts payable and notes payable arising from business) turnover = cost of goods sold / average account payable (including accounts payable and notes payable arising from business) balance
(5) Average inventory turnover period =365/inventory turnover
(6) Property, plant and equipment turnover = net sales / average net property, plant and equipment
(7) Total assets turnover = net sales/average total assets
Profitability
(1) Return on assets =[post-tax profit or loss + interest expense  (1-tax rate)]/average total assets
(2) Return on equity= post-tax profit or loss / average total equity
(3) Proportion of net profit before tax in paid-in capital = pretax profit / amount of paidin capital

(4) Net profit margin = post-tax profit or loss/net sales
(5) Earnings per share = (net profit attributable to owners of parent company - preferred share dividend) / weighted average number of outstanding shares
Cash flow
(1) Cash flow ratio = net cash flow in operating activities/current liabilities
(2) Cash flow adequacy ratio = net cash flow in operating activities in the last 5 years/ (capital expenditure + inventory increment + cash dividend) in the last five years
(3) Cash reinvestment ratio= (net cash flow in operating activity-cash dividend) / (gross amount of property, plant and equipment + long-term investment + other non-current assets + working capital)
Leverage
(1) Operating leverage = (net revenue - changes in operating costs and expenses)/operating income
(2) Financial leverage = operating income / (operating income - interest expense)

100

6.3 Audit Committee’s Examination Report of the financial report in the last year

LU HAI HOLDING CORP.

Audit Committee’s Review Report

The Board of Directors has prepared 2020 business report, financial statements and earning distribution proposal etc. of the Company; among them, the financial statements have been audited by accountants LIN, MING-SHOU and SHAO, CHAO-BIN from Crowe (TW) CPAs, and the audit report of unmodified opinion has been issued. The above business report, financial statements and earnings distribution proposal have been reviewed and determined to be correct and accurate by the Audit Committee members of the Company, we hereby submit this report.

To the 2021 General Shareholders’ Meeting

Audit Committee：

YEN, MEI-YING CHANG, HORNG-YAN HU, TA-HSIANG

March 12, 2021

101

6.4 Financial statements in the last year: Please refer to page 103 to 179 for details.
6.5 Company’s individual financial statements audited and certified by the accountant in the last year: Not applicable.
6.6 In the last year and as at the publication date of annual report, if the company and its affiliated enterprise have difficulty in financial turnover, its impact on the financial situation of the Company shall be listed: None.

102

103

104

105

106

107

108

LUHAI HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2020 AND 2019

(In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents Financial assets at fair value through profit or loss - current Financial assets at fair value through other comprehensive income - current Financial assets at amortized cost-current Notes receivable, net Accounts receivable, net Other receivables Income tax assets Inventories, net Prepaid expenses Other current assets Total current assets NONCURRENT ASSETS Financial assets at fair value through other comprehensive income - noncurrent Property, plant and equipment Right-of-use assets Intangible assets Deferred income tax assets Other noncurrent assets Total noncurrent assets TOTAL ASSETS LIABILITIES AND EQUITIES CURRENT LIABILITIES Short-term loans Contract liabilities - current Accounts payable Other payables Income tax liabilities Current lease liabilities Advanced receipts Deferred income Long-term loan due within a year Other current liabilities Total current liabilities NONCURRENT LIABILITIES Long-term loans Deferred income tax liabilities Noncurrent lease liabilities Deferred income - noncurrent Total noncurrent liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF PARENT Capital stocks Capital surplus Retained earnings Legal reserve Special reserve Unappropriated retained earnings Other equities Equity attributable to owners of parent Total equity TOTAL LIABILITIES AND EQUITIES	NOTES	December 31,2020	December 31,2019
		% $ 789,600 17 418,388 9 16,554 - - - 76,973 2 720,552 15 13,597 - - - 674,065 14 55,501 1 598 - 2,765,828 58 1,267 - 1,631,999 35 198,398 4 13,737 - 22,212 1 91,694 2 1,959,307 42 $ 4,725,135 100 $ 85,440 2 3,500 - 325,376 7 296,568 6 49,811 1 18,448 - 154 - - - 130,755 3 5,059 - 915,111 19 794,664 17 133,646 3 18,899 - 143,392 3 1,090,601 23 2,005,712 42 903,664 19 443,701 9 184,773 4 369,530 8 1,173,977 25 (356,222) (7) 2,719,423 58 2,719,423 58 $ 4,725,135 100 Amount	% $ 1,122,302 27 202,684 5 - - 86,105 2 46,999 1 587,682 14 10,750 - 4,643 - 615,928 15 54,909 1 530 - 2,732,532 65 1,558 - 1,148,538 28 197,862 5 6,956 - 26,262 1 32,948 1 1,414,124 35 $ 4,146,656 100 $ - - 477 - 264,374 6 219,317 5 22,942 1 4,376 - 2,626 - 619,044 15 207,419 5 5,392 - 1,345,967 32 471,313 11 19,336 1 9,345 - - - 499,994 12 1,845,961 44 860,632 21 443,701 11 160,582 4 282,676 7 922,634 22 (369,530) (9) 2,300,695 56 2,300,695 56 $ 4,146,656 100 Amount
	5,6(1) 5,6(2) 5,6(3) 5,6(4) 5,6(5) 5,6(6) 5,6(7) 6(3) 5,6(8) 5,6(9) 5,6(10) 5,6(28) 6(11) 6(12) 6(22) 6(13) 5,6(9) 5,6(14) 6(15) 6(17) 6(15) 6(28) 5,6(9) 5,6(14) 6(18) 6(19) 6(20) 6(21)

The accompanying notes are an integral part of the consolidated financial statements.

(Concluded)

109

LUHAI HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR YEARS ENDED DECEMBER 31, 2020 AND 2019

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

NOTES	2020		2019
	Amount	%	Amount	%
6(22) 6(7,23) 6(23),7 6(24) 6(25) 6(14,26) 6(27) 6(28) 6(29) 6(28) 6(28) 6(30)	$ 2,602,257 (1,975,622)	100 (76)	$ 2,716,889 (2,101,831)	100 (77)
	626,635	24	615,058	23
	(87,341) (184,245) (26,063) (951)	(3) (7) (1) -	(101,729) (182,235) (29,410) 10,951	(4) (6) (1) -
	(298,600)	(11)	(302,423)	(11)
	328,035	13	312,635	12
	8,859 31,250 470,390 (8,745)	- 1 18 -	14,906 13,462 17,829 (12,994)	1 - 1 (1)
	501,754	19	33,203	1
	829,789 (235,030)	32 (9)	345,838 (103,928)	13 (4)
	594,759	23	241,910	9
	(304) - 13,794 (228) 46	- - 1 - -	688 - (87,542) - -	- - (3) - -
	13,308	1	(86,854)	(3)
	$ 608,067	24	$ 155,056	6
	$ 594,759	23	$ 241,910	9
	$ 608,067	24	$ 155,056	6
	$ 6.58		$ 2.68
	$ 6.56		$ 2.67

The accompanying notes are an integral part of the consolidated financial statements.

(Concluded)

110

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR YEARS ENDED DECEMBER 31, 2020 AND 2019
(In Thousands of New Taiwan Dollars, Except Dividends Per Share)

BALANCE, JANUARY 1, 2019
$ 819,650
$ 443,701
$ 139,736
$ 228,579
$ 878,614
$ (282,714)
$ 38
$ 2,227,604
Appropriations of earnings
Legal reserve
-
-
20,846
-
(20,846)
-
-
-
Special reserve
-
-
-
54,097
(54,097)
-
-
-
Cash dividends to shareholders - NT$1.00 per share
-
-
-
-
(81,965)
-
-
(81,965)
Stock dividends to shareholders - NT$0.50 per share
40,982
-
-
-
(40,982)
-
-
-
Net income in 2019
-
-
-
-
241,910
-
-
241,910
Other comprehensive income (loss) in 2019, net of tax
-
-
-
-
-
(87,542)
688
(86,854)
BALANCE, DECEMBER 31, 2019
860,632
443,701
160,582
282,676
922,634
(370,256)
726
2,300,695
Appropriations of earnings
Legal reserve
-
-
24,191
-
(24,191)
-
-
-
Special reserve
-
-
-
86,854
(86,854)
-
-
-
Cash dividends to shareholders - NT$2.20 per share
-
-
-
-
(189,339)
-
-
(189,339)
Stock dividends to shareholders - NT$0.50 per share
43,032
-
-
-
(43,032)
-
-
-
Net income in 2020
-
-
-
-
594,759
-
-
594,759
Other comprehensive income (loss) in 2020, net of tax
-
-
-
-
-
13,794
(486)
13,308
BALANCE, DECEMBER 31, 2020
$ 903,664
$ 443,701
$ 184,773
$ 369,530
$ 1,173,977
$ (356,462)
$ 240
$ 2,719,423
The accompanying notes are an integral part of the consolidated financial statements.
(Concluded)
Total
Capital Surplus
Capital Stocks
Legal Reserve
Exchange
Differences Arising
on Translation of
Foreign Operations
Retained Earnings
Special Reserve
Unappropriated
Retained Earnings
Other Equities
Unrealized Profit (Loss)
on Financial Assets at Fair
Value Through Other
Comprehensive Income
Equity Attributable to Shareholders of the Parent
111

LUHAI HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR YEARS ENDED DECEMBER 31, 2020 AND 2019

(In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Adjustments to reconcile profit (loss) Depreciation Amortization Expected credit loss (reversal) Gains on financial assets at fair value through profit or loss Interest expense Interest income Dividend income Losses from disposal of subsidiaries Losses (Gains) on disposal of property, plant and equipment Impairment loss of property, plant and equipment Net profit on relocaion compensation Net changes in operating assets and liabilities Notes receivable Accounts receivable Other receivables Inventories Prepaid expenses Other current assets Conrtract liabilities Accounts payable Other payables Other current liabilities Net defined benefit liability Cash generated from operations Interest received Dividend received Interest paid Income taxes paid Net cash provided by operating activities	$ 829,789 121,465 2,664 951 (14,094) 8,745 (8,859) (122) 1,273 2,783 5,803 (475,587) (29,901) (131,768) (3,028) (61,078) (6,008) (94) 3,020 57,722 45,105 190 - 348,971 9,185 122 (8,391) (86,357) 263,530 2020		2019
		$	345,838 111,077 2,027 (10,951) (1,906) 12,994 (14,906) (85) - 2,617 5,288 - 18,551 6,032 (3,425) (67,015) (15,907) (8) (3,236) (19,970) 16,707 (368) (5,134)
			378,220 16,913 85 (12,623) (99,154)
			283,441
			(Continued)

112

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial assets at fair value through profit or loss Proceeds from disposal of financial assets at fair value through profit or loss Acquisition of financial assets at fair value through other comprehensive income Acquisition of financial assets at amortized cost Proceeds from disposal of financial assets at amortized cost Acquisition of property, plant and equipment Proceeds from disposal of Property, plant and equipment Increase in advanced receipts Acquisition of intangible assets Increase in prepaid equipment Prepaid of land use right Refundable deposits (paid) refunded Increase in other noncurrent assets Proceeds from relocation compensation Payments of relocation expenses Net cash provided by (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term loans Increase in guarantee deposits received Proceeds from long-term debt Repayment of long-term debt Cash dividends paid Repayments of the principal portion of lease liabilities Net cash used in financing activities EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEAR	$ (1,192,080) 996,495 (16,782) - 85,607 (547,301) 890 - (4,691) (115,527) (5,008) (10,063) (238) 158,483 (80,495) (730,710) 83,970 (428) 589,109 (348,208) (189,339) (10,064) 125,040 9,438 (332,702) 1,122,302 $ 789,600 2020	2019
		$ (312,976) 149,302 - (849,507) 974,697 (449,819) 10,713 2,727 (1,779) (71,851) - 24,455 (4,353) 662,180 (12,540)
		121,249
		(30,226) 5,365 306,715 (257,109) (81,965) (4,558)
		(61,778)
		(44,831)
		298,081 824,221
		$ 1,122,302

The accompanying notes are an integral part of the consolidated financial statement (Concluded)

113

LUHAI HOLDING CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (Expressed in Thousands of New Taiwan Dollars, Except Stated Otherwise)

1. GENERAL INFORMATION

Luhai Holding Corp. (the “Company”) was incorporated in the Cayman Islands in October 19, 2009. The main purpose of establishment, which resulted from organizational restructuring, was to apply for emerging stock registration on the Taiwan Stock Exchange (“TWSE”). The Company had established a Taiwan branch in consideration of the Group’s business operation and development. The Company and its subsidiaries (collectively referred herein as the “Group”) mainly engage in the production and sale of tire valves and accessories. The Company’s shares have been listed on the TWSE since December 25, 2013. The principal operating activities of the subsidiaries are described in Note 4(3) B.

2. THE AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying consolidated financial statements were approved and authorized for issue by the Board of Directors on March 12, 2021.

3. APPLICATION OF NEW, AMENDED STANDARDS AND INTERPRETATIONS

1. Effect of the adoption of the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC) ：

New standards, interpretations and amendments endorsed by the FSC effective from 2020 are as follows:

are as follows:
New Standards, Interpretations and Amendments Amendments to IFRS 3 “Definition of a business” Amendments to IAS 1 and IAS 8 ”Definition of Material” Amendments to IFRS 9, IAS 39 and IFRS 7 “Interest Rate Benchmark Reform” Amendment to IFRS 16 ”Covid-19-related rent concessions”	Effective Date Issued by IASB
	January 1,2020 January 1,2020 January 1, 2020 June 1,2020 (Note)

Note: Earlier application from January 1, 2020 is allowed by the FSC.

Except for the following, whenever applied, the initial application of the IFRSs endorsed and

issued into effect by the FSC would not have any material impact on the Group’s accounting policies:

1.Amendments to IAS 1 and IAS 8 ”Definition of Material”

114

The main amendment is to clarify new definition of material. It states that "'information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The Group adopted the amendments starting from January 1, 2020. The threshold of materiality that could influence users has been changed to “could reasonably be expected to influence”. Accordingly, disclosures in the consolidated financial statements do not include immaterial information that may obscure material information.

2.Amendment to IFRS 16 ”Covid-19-related rent concessions”

The Group applied the amendment from January 1, 2020. The Group elected to apply the practical expedient provided in the amendment to IFRS 16 with respect to rent concessions negotiated with the lessor as a direct consequence of the COVID-19. The related accounting policies are stated in Note 4(10). Retrospective application of the amendment has no impact on the retained earnings as of January 1, 2020. Before the application of the amendment, the Group shall determine whether the abovementioned rent concessions shall be accounted for as lease modifications.

2. Effect of the new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Group:

New standards, interpretations and amendments as endorsed by the FSC effective from 2021 are as follows:

are as follows:
New Standards, Interpretations and Amendments Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying IFRS 9” Amendments to IFRS 9, IAS 39 and IFRS 7 “Interest Rate Benchmark Reform—Phase 2”	Effective Date Issued by IASB
	June 25, 2020`（`Effective immediately upon promulgation by the IASB`）` January 1, 2021 (Note)

Note:The Group shall apply these amendments retrospectively for annual reporting periods beginning on or after January 1, 2021.

Except for the following, whenever applied, the initial application of the IFRSs endorsed and issued into effect by the FSC would not have any material impact on the Group’s accounting policies:

1.Amendments to IFRS 9, IAS 39 and IFRS 7 “Interest Rate Benchmark Reform—Phase 2” Interest Rate Benchmark Reform—Phase 2 amends several standards. Among which, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 provide a practical expedient for contract modifications resulting from interest rate benchmark reform. If a change in the basis for determining the contractual cash flows of a financial asset, financial liability, or lease modification is required by and is a direct consequence of interest rate benchmark

115

reform, and the new basis for determining the contractual cash flows is economically equivalent to the previous basis, then the Group shall account for such contract modifications as a change in the effective interest rate. The amendments to IFRS 9 and IAS 39 also provide additional temporary exceptions for hedging relationship affected by interest rate benchmark reform.

3. The IFRSs issued by IASB but not yet endorsed and issued into effect by the FSC:

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs as endorsed by the FSC are as follows:

IFRSs as endorsed by the FSC are as follows:

New Standards, Interpretations and Amendments
Amendments to IFRS 10 and IAS 28 “Sales or Contribution of Assets
between an Investor and its Associate or Joint Venture”

IFRS 17 “Insurance Contracts”
Amendments to IFRS 17
Amendments to IAS 1 “Classification of Liabilities as Current or Non-
current”
Amendments to IAS 16 “Property, Plant and Equipment – Proceeds
before Intended Use”

Amendments to IAS 37 “Onerous Contracts - Cost of Fulfilling a
Contract”

Amendments to IFRS 3 “Reference to the conceptual framework”
Annual improvements to IFRS Standards 2018-2020
Amendments to IAS 1 “Disclosure of Accounting Policies”
Amendments to IAS 8 “Definition of Accounting Estimates”

Effective Date Issued by
IASB(Note 1)

To be determined by IASB
January 1, 2023
January 1, 2023
January 1, 2023
January 1, 2022 (Note 2)
January 1, 2022 (Note 3)
January 1, 2022 (Note 4)
January 1, 2022 (Note 5)
January 1, 2023
January 1, 2023

Note 1: Unless stated otherwise, the above new, amended and revised standards and interpretations are effective for annual periods beginning on or after the respective effective dates.
Note 2:An entity shall apply those amendments retrospectively, but only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after the beginning of the earliest period presented, January 1, 2021, in the financial statements in which the entity first applies the amendments.
Note 3: The amendments are applicable to contracts for which the entity has not yet fulfilled all its obligations on January 1, 2022.
Note 4: The amendments are applicable to business combinations for which the acquisition date is on or after the beginning of the annual reporting period beginning on or after January 1, 2022.
Note 5: The amendments to IFRS 9 will be applied prospectively to modifications and exchanges of financial liabilities that occur on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IAS 41 will be applied prospectively to the fair value measurements on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IFRS 1 will be applied retrospectively for annual reporting periods beginning on or after January 1, 2022.

116

1.Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” The amendments clarify that for a liability to be classified as non-current, the Group shall assess whether it has the right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. If such rights are in existence at the end of the reporting period, the liability is classified as non-current regardless of whether the Group will exercise that right. If the right to defer settlement is subject to compliance with specified conditions, the Group must comply with those conditions at the end of the reporting period even if the lender does not test compliance until a later date. For the purpose of liability classification, the aforementioned settlement refers to a transfer of cash, other economic resources or the Group’s own equity instruments to the counterparty that results in the extinguishment of the liability. However, if the terms of a liability that could, at the option of the counterparty, result in its settlement by a transfer of the Group’s own equity instruments, and if such option is recognized separately as equity in accordance with IAS 32: Financial Instruments: Presentation, the aforementioned terms would not affect the classification of the liability.
2.Amendments to IAS 16 “Property, Plant and Equipment – Proceeds before Intended Use” The amendments prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. The cost of those items is measured in accordance with IAS 2 “Inventories”. Any proceeds from selling those items and the cost of those items are recognized in profit or loss in accordance with applicable standards.
Those amendments apply only to items of property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after the beginning of the earliest period presented, January 1, 2021. in the financial statements in which the entity first applies the amendments. At the initial application of those amendments, the Group shall recognize the cumulative effect of initially applying the amendments as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the beginning of that earliest period presented and restate the comparative information for the earlier period presented.
3.Amendments to IAS 37 “Onerous Contracts - Cost of Fulfilling a Contract”
The amendments specify that when assessing whether a contract is onerous, the “cost of fulfilling a contract” includes both the incremental costs of fulfilling that contract (for example, direct labor and materials) and an allocation of other costs that relate directly to fulfilling contracts (for example, an allocation of depreciation for an item of property, plant and equipment used in fulfilling the contract).

The Group will recognize the cumulative effect of the initial application of the aforementioned amendments in the retained earnings at the date of the initial application.

4.Amendments to IFRS 3 “Reference to the conceptual framework”

117

The amendments replace the references to the Conceptual Framework of IFRS 3 and specify that the acquirer shall apply IFRIC 21 “Levies” to determine whether the event that gives rise to a liability for a levy has occurred at the acquisition date.

5.Annual improvements to IFRS Standards 2018-2020
Several standards, including IFRS 9 “Financial Instruments”, were amended in the annual improvements to IFRS Standards 2018-2020. IFRS 9 requires to compare the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received, with that of the cash flows under the original financial liability when there is an exchange or modification of debt instruments. The new terms and the original terms are substantially different if the difference between those discounted present values is at least 10 per cent. The amendments to IFRS 9 clarify that the only fees that should be included in the above assessment are those fees paid or received between the borrower and the lender.
6.Amendments to IAS 1 “Disclosure of Accounting Policies” The amendments improve accounting policy disclosures that to provide more useful information to primary users of the financial statements.
7.Amendments to IAS 8 “Definition of Accounting Estimates”
These Amendments define accounting estimates as monetary amounts in financial statements that are subject to measurement uncertainty and provide further explanations and examples to help entities distinguish changes in accounting policies from changes in accounting estimates.

As of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of above standards and interpretations will have on the Group’s financial position and financial performance, and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Statement of Compliance

The accompanying consolidated financial statements have been prepared in conformity with the Regulation Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs as endorsed by the FSC.

(2) Basis of Preparation

A. The accompanying consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values. Historical cost is generally based on the fair value of the consideration given in exchange for the assets.
B. The preparation of consolidated financial statements in compliance with IFRSs requires

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the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

(3) Basis of consolidation

A. Basis for preparation of consolidated financial statements:
(a) All subsidiaries are included in the Group's consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.
(b) Inter-company transactions, balances and unrealized gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
(c) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
(d) Changes in a parent's ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary are accounted for as equity transactions. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity.
(e) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognized in profit or loss. All amounts previously recognized in other comprehensive income in relation to the subsidiary are reclassified to profit or loss or transferred directly to retained earnings as appropriate, on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognized in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.
B. Subsidiaries included in the consolidated financial statements:

Name of investor The Company	Name of subsidiary LU HAI`（`BVI`）`	Main business activities Investing activities	Percentage of ownership	Percentage of ownership
			December 31, 2020 100.00%	December 31, 2019
				100.00%

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Name of investor The Company The Company The Company The Company The Company YUANHUI LU HAI BVI ALLPRO LU HAI IND.	Name of subsidiary INDUSTRIAL CORP. `（`LU HAI BVI`）` YUANHUI INTERNATIONAL CO., LTD. `（`YUANHUI`）` ALLPRO INTERNATIONAL CORP. `（`ALLPRO`）` LU HAI INDUSTRIAL CORP. `（`LU HAI IND.`）` MEGA POWER CO., LTD. `（`MEGA`）` PT.LUHAI INDUSTRIAL `（`PT.LUHAI`）` LUHAI RUBBER METAL INDUSTRIAL `（`KUNSHAN`）`CO., LTD. `（`LUHAI KUNSHAN`）` XIAMEN XIAHUI RUBBER METAL IND. CO., LTD. `（`XIAHUI`）` XIAHUI PT.LUHAI	Main business activities Investing activities Investing activities Leasing and selling various kinds of valves and accessories Selling activities Manufacturing and selling various kinds of valves and accessories Manufacturing and selling various kinds of valves and accessories Manufacturing and selling various kinds of valves and accessories Manufacturing and selling various kinds of valves and accessories Manufacturing and selling various kinds of valves and accessories	Percentage of ownership	Percentage of ownership
			December 31, 2020 100.00% 100.00% 100.00% Note 1 85.00% 100.00% 57.14% 42.86% 15.00%	December 31, 2019
				100.00% 100.00% 100.00% 100.00% 85.00% 100.00% 57.14% 42.86% 15.00%

Note 1:MEGA will has no operating activities under the group’s business plan. On August 7,2020, the Group board of Directors resolved to close MEGA’s operations, and completed the procedures in October 28,2020.

The financial statements of the subsidiaries included in the consolidated financial statements for the years ended December 31, 2020 and 2019 are audited by certified public accountants.

C. The subsidiaries that were not included in the consolidated financial statements: None.

(4) Foreign Currencies

A. Items included in the financial statements of each of the Group’s entities were expressed in the currency which reflected its primary economic environment (functional currency). The consolidated financial statements are presented in New Taiwan Dollars, which is the Company's functional currency.
B. In preparing the financial statements of each individual consolidated entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences are recognized in profit or loss for the period. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are retranslated at the exchange rates

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prevailing at the balance sheet date; their translation differences are recognized in profit or loss as part of the fair value gain or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income is retranslated at the exchange rates prevailing at the balance sheet date; their translation differences are recognized in other comprehensive income. However, nonmonetary assets and liabilities denominated in foreign currencies that are not measured at fair value are measured using the historical exchange rates at the dates of the initial transactions.

C. For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into NTD using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity.

(5) Classification of Current and Noncurrent Items

A. Assets that meet one of the following criteria are classified as current assets:
(a) Assets arising from operating activities that are expected to be realized, or are intended to be sold or consumed within the normal operating cycle;
(b) Assets held mainly for trading purposes;
(c) Assets that are expected to be realized within twelve months from the end of reporting period.
(d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the end of reporting period.

The Group classifies all assets that do not meet the above criteria as non-current.

B. Liabilities that meet one of the following criteria are classified as current liabilities:
(a) Liabilities that are expected to be paid off within the normal operating cycle;
(b) Liabilities arising mainly from trading activities;
(c) Liabilities due to be settled within 12 months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the consolidated financial statements are authorized for issue; and
(d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the end of reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

The Group classifies all liabilities that do not meet the above conditions as non-current.

(6) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

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(7) Financial instruments

Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are recognized initially at fair value plus or minus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

A. Financial assets

A regular way purchase or sale of financial assets shall be recognized and derecognized using trade date accounting.

(a) Measurement category
Financial assets are classified into the following categories: financial assets at fair value through profit or loss, financial assets at amortized cost, debt investments measured at fair value through other comprehensive income and equity instruments at fair value through other comprehensive income.
- i. Financial assets at fair value through profit or loss
- Financial assets at FVTPL includes financial assets mandatorily classified as at FVTPL and financial assets designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments that are not designated as at fair value through other comprehensive income (FVOCI) and debt instruments that do not meet the amortized cost criteria or the FVOCI criteria.

Financial assets of the Group were designated as at fair value through profit or loss on initial recognition when they meet either of the following criteria:

(a)being a hybrid contract; or

(b)eliminating or significantly reducing a measurement or recognition inconsistency;
(c)being managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. Fair value is determined in the manner described in Note 12.

ii. Financial assets at amortized cost

Financial assets that meet the following 2 conditions are subsequently measured at amortized cost:

(i.) The financial asset is held within a business model whose objective is collecting contractual cash flows; and
(ii.) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal

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amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost are measured at amortized cost which equals gross carrying amount determined by the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

iii. Debt investments measured at fair value through other comprehensive income Debt instruments that meet both of the following conditions are measured at FVTOCI:

(i.) The debt instrument is held within a business model whose objective is achieved by both collecting of contractual cash flows and selling of such financial assets; and
(ii.) The contractual terms of the debt instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Debt investments at FVTOCI are subsequently measured at fair value. Changes in the carrying amounts of these debt investments relating to interest income calculated using the effective interest method, changes in foreign currency exchange rates, and impairment losses or reversals are recognized in profit or loss. Other changes in the carrying amount of these debt investments are recognized in other comprehensive income and will be reclassified to profit or loss when such investment is disposed of.

iv. Investments in equity instruments at fair value through other comprehensive income

On initial recognition, the Group may make an irrevocable election to designate investments in equity instruments, which are not held for trading or not contingent consideration recognized by an acquirer in a business combination, as at FVTOCI.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments, instead, they will be transferred to retained earnings.

Dividends on these investments in equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

(b) Impairment of financial assets

At the end of each reporting period, an impairment of expected credit loss is recognized for financial assets at amortized cost (including accounts receivable), investment of debt instruments at fair value through other comprehensive income, lease receivable and contract assets.

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The Group always recognizes lifetime expected credit loss for trade receivables, contract receivables and lease receivables. For all other financial instruments, the Group recognizes lifetime expected credit loss when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk of the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit loss.

Expected credit losses reflect the weighted average credit losses with the respective risks of a default occurring as the weights. Lifetime expected credit loss represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month expected credit loss represents the portion of lifetime expected credit loss that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

The Group recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognized in other comprehensive income and does not reduce the carrying amount of such financial asset.

(c) Derecognition of financial assets
- The Group derecognizes a financial asset when one of the following conditions is met: i. The contractual rights to receive cash flows from the financial asset expire.
- ii. The contractual rights to receive cash flows from the financial asset have been transferred and the Group has transferred substantially all risks and rewards of ownership of the financial asset.
- iii. The Group neither retains nor transfers substantially all risks and rewards of ownership of the financial asset.
  - On derecognition of a financial asset at amortized cost in its entirely, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in debt instrument at fair value through other comprehensive income, the difference between the asset’s carrying amount and the sum of the consideration received and receivable as well as the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss. However, on derecognition of an investment in an equity instrument at fair value through other comprehensive income, the cumulative gain or loss that had been recognized in other comprehensive income is transferred directly to retained earnings, without reclassifying to profit or loss.
B. Financial liabilities and equity instruments
(a) Classification of financial liabilities and equity instruments

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Debt and equity instruments issued by the Group are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

(b) Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs.

(c) Financial liabilities
Except for the following circumstances, all financial liabilities are measure at amortized cost under effective interest method:
i. Financial liabilities at fair value through profit or loss are financial liabilities held for trading or designated as financial liabilities at fair value through profit or loss on initial recognition. Financial liabilities are classified as held for trading if the principal purpose of acquisition is repurchasing in the short term. Derivatives are also categorized as financial liabilities held for trading unless they are designated as hedges.
ii. Financial liabilities at fair value through profit or loss are initially recognized at fair value. Related transaction costs are expensed in profit or loss. These financial liabilities are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial liabilities are recognized in profit or loss.
(d) Derecognition of financial liabilities
The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or expired.
On derecognition of financial liabilities, the difference between the carrying amount of the financial liability derecognized and the consideration paid and payable (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

(8) Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined using the weighted average method. The cost of finished goods and work in progress comprises raw materials, direct labor, other direct costs and related production overheads (allocated based on normal operating capacity). It excludes borrowing costs. The item by item approach is used in applying the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses.

(9) Property, plant and equipment

A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalized.
B. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated

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with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each end of reporting year. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change.

The estimated useful lives of property, plant and equipment are as follows:

Buildings	5~35 years
Machinery	3~20 years
Other equipment	2~20 years

D. An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the assets. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

(10) Leases

The Group assesses whether the contract is (or includes) a lease at the date of the contract. The Group as lessee

Except for payments for low-value asset leases and short-term leases which are recognized as expenses on a straight-line basis, the Group recognized right-of-use assets and lease liabilities for all leases at the commencement date of lease.

Right-of-use assets are measured at cost. The cost of right-of-use assets comprises the initial measurement of lease liabilities adjusted for lease payments made at or before the commencement date, plus an estimate of costs needed to restore the underlying assets. Subsequent measurement is calculated as cost less accumulated depreciation and accumulated impairment loss and adjusted for changes in lease liabilities as a result of lease term modification or other related factors. Right-of-use assets are presented separately in the consolidated balance sheets.

Right-of-use assets are depreciated using the straight-line method from the commencement dates to the earlier of the end of the useful lives of the right-of-use assets or the end of the lease terms.

Lease liabilities are measured at the present value of the lease payments. If the implied interest rate on the lease is easy to determine, the lease payment is discounted using that

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interest rate. If the interest rate is not easy to determine, the lessee’s increase borrowing rate is used.

Subsequently, lease liabilities are measured at amortized cost using the effective interest method with interest expense recognized over the lease terms. When there is a change in future lease payments resulting from a change in a lease term, the Group remeasures the lease liabilities with a corresponding adjustment to the right-of-use assets. If the carrying amount has been reduced to zero, the remaining amount will recognize in the profit and loss. Lease liabilities are presented separately in consolidated balance sheets.

The Group negotiates with the lessor for rent concessions as a direct consequence of the Covid-19 to change the lease payments originally due by June 30, 2021, that results in the reduction in lease payment. There is no substantive change to other terms and conditions. The Group elects to apply the practical expedient to rent concessions for the abovementioned lease contracts, and therefore, does not assess whether the rent concessions are lease modifications. Instead, the Group recognizes the reduction in lease payment in profit or loss presented in other income in the period in which the events or conditions that trigger the concession occurs, and makes a corresponding adjustment to the lease liability.

(11) Intangible Assets

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis over the following estimated lives: 3 to 10 years for computer software; trademarks and patents based on the economic benefit or contract period. The estimated useful life and amortization method are reviewed at each end of reporting year, with the effect of any changes in estimate being accounted for on a prospective basis.

An item of intangible assets is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the assets. Any gain or loss arising on the disposal or retirement of an item of intangible assets is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

(12) Impairment of non-financial assets

The Group assesses at the end of reporting period the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. When the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist, the impairment loss shall be reversed to the extent of the loss previously recognized in profit or loss. When an impairment loss subsequently reverses, the carrying amount of the asset or a cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would

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have been determined had no impairment loss been recognized for the asset or cashgenerating unit in prior years.

(13) Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date. The discount rate shall be a pre-tax rate that reflect(s) current market assessments of the time value of money and the risks specific to the liability. Where discounting is used, the carrying amount of a provision increases in each period to reflect the passage of time. This increase is recognised as interest expense. Provisions are not recognised for future operating losses.

(14) Employee benefits

A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognized as expenses in that period when the employees render service.

B. Pensions
(a) Defined contribution plans

For defined contribution plans, the contributions are recognized as pension expenses when they are due on an accrual basis. Prepaid contributions are recognized as an asset to the extent of a cash refund or a reduction in the future payments.

(b) Defined benefit plans
i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Group in current period or prior period. The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit net obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability; when there is no deep market in high-quality corporate bonds, the Group uses interest rates of government bonds (at the end of the reporting period) instead.
ii. Remeasurement arising on defined benefit plans are recognized in other comprehensive income in the period in which they arise and are recorded as retained earnings.

iii. Past service costs are recognized immediately in profit or loss.

C. Employees’ compensation and directors’ and supervisors’ remuneration

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Employees’ compensation and directors’ and supervisors’ remuneration are recognized as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. However, if the accrued amounts for employees’ compensation and directors’ and supervisors’ remuneration are different from the actual distributed amounts as resolved by board of directors meeting subsequently, the differences should be recognized based on the accounting for changes in estimates.

D. Termination benefits
Termination benefits are employee benefits provided in exchange for the termination of employment as a result from either the Group’s decision to terminate an employee’s employment before the normal retirement date, or an employee’s decision to accept an offer of redundancy benefits in exchange for the termination of employment. The Group recognizes expense when it can no longer withdraw an offer of termination benefits or it recognizes related restructuring costs, whichever is earlier. Benefits that are expected to be due more than 12 months after balance sheet date shall be discounted to their present value.

(15) Capital stock

Capital stock is classified as equity. Incremental costs directly attributable to the issuance of stock or options are deducted from the capital issued.

(16) Income tax
A. The tax expense for the year comprises current and deferred tax. Tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or items recognized directly in equity, in which cases the tax is recognized in other comprehensive income or equity.
B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the end of the financial reporting period in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense when the actual appropriation of earnings is resolved by the shareholders meeting held in the next year.
C. Deferred income tax is recognized, using the balance sheet method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of

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the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

D. Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences, deductible loss, and unused tax credit can be utilized. At each balance sheet date, unrecognized and recognized deferred income tax assets are reassessed.
E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. Deferred income tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realize the asset and settle the liability simultaneously.

(17) Revenue recognition

When applying IFRS 15, the Group shall recognize revenue by applying the following steps:

A. Identify the contract with the customer;
B. Identify the performance obligations in the contract;
C. Determine the transaction price;
D. Allocate the transaction price to the performance obligations in the contract; and
E. Recognize revenue when the entity satisfies a performance obligation.

The Group identifies performance obligations in a contract with the customer, allocates the transaction price to the performance obligations and recognizes revenue when performance obligations are satisfied.

For contracts where the period between the date the Group transfers a promised good or service to a customer and the date on which the customer pays for that good or service is within one year, the Group does not adjust the consideration for the effects of a significant financing component.

A. Sale of goods

The Group sells various valve and accessory products. Sales are recognized when control of the products has been transferred to the customers since the customers obtain the rights to list price, use the products and assure the obligation to resale them as well as to bear the risk of obsolescence. The Group recognizes revenue and accounts receivable on transferring the control of the products. Revenue is presented net of sales return, quantity discounts and sales allowance.

The Group does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of control of materials.

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B. Service income

Service income is recognized when services are provided.

(18) Government grants

Government grants are recognized at fair value when the Group will comply with the conditions attached to them and will receive the grants. Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate. Government grants related to property, plant and equipment are recognized as liabilities and are amortized to profit or loss over the estimated useful lives of the related assets using to straight-line method.

(19) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

Other than stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND UNCERTAINTY

The Group considers the economic implications of the COVID-19 when making its critical accounting estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revisions affect only that period or in the period of the revisions and future periods if the revisions affect both current and future periods.

The preparation of the Group's consolidated financial statements is adopting accounting policies based on the following significant judgements, significant accounting estimates and assumptions:

(1) Key judgments for accounting policy application

A. Business model assessment for financial assets

The Group determines the business model at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. This assessment includes judgment about all relevant evidence including how the performance of the assets is evaluated, the risks that affect the performance, and how the managers are compensated. The Group continuously assesses whether the business model for the remaining financial assets held continues to be appropriate and monitors financial assets at amortized cost or at fair value through other comprehensive income. When assets are derecognized prior to their maturity, the Group analyzes the reasons for their disposal

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and assesses whether the reasons are consistent with the objective of the business model. If there has been a change in the business model, the Group adjusts the classifications of financial assets obtained afterwards.

B. Lease terms

In determining the lease term, the Group considers all the facts and circumstances that create an economic incentive to exercise (or not exercise) the option, including all expected change in facts and circumstances from the commencement date until the exercise date of the option. Factors considered include the contractual terms and conditions for the optional period, the significant leasehold improvements made (or expected) during the contract period, and the importance of the underlying assets to the Group’s operations, etc. The lease term is reassessed if a significant change in circumstance that are within the control of the Group occurs.

(2) Key accounting estimates and assumptions
A. Estimated impairment of financial assets

The provision for impairment of trade receivables and investments in debt instruments is based on assumptions about risk of default and expected loss rates. The Group uses judgment in making these assumptions and in selecting the inputs to the impairment assessment based on the Group’s historical experience, existing market conditions as well as forward looking estimates as of the end of each reporting period. Where the actual future cash flows are less than expected, a material impairment loss may arise.

B. Impairment of Tangible and Intangible Assets

In the process of evaluating the potential impairment of tangible and intangible assets, the Group is required to make subjective judgments in determining the independent cash flows, useful lives, expected future revenue and expenses related to the specific asset groups with the consideration of the way assets are used and nature of the industry. Any changes in these estimates based on changed economic conditions or business strategies could result in significant impairment charges in future years.

C. Realization of Deferred Income Tax Assets

Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which those deferred tax assets can be utilized. Assessment of the realization of the deferred tax assets requires the Group’s subjective judgment and estimate, including the future revenue growth and profitability, tax holidays, the amount of tax credits can be utilized and feasible tax planning strategies. Any changes in the global economic environment, the industry trends and relevant laws and regulations could result in significant adjustments to the deferred tax assets.

D. Evaluation of inventories

As inventories are stated at the lower of cost and net realizable value, the Group must determine the net realizable value of inventories on balance sheet date based on judgments and estimates. The Group evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on

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balance sheet date, and writes down the cost of inventories to the net realizable value. The net realizable value of inventory is mainly determined based on assumptions of future demand within a specific period, the assumptions might change in the future and may result in significant differences in its realizable value.

E. Lessee’s incremental borrowing rates

In determining a lessee’s incremental borrowing rate used in discounting lease payment, the risk-free interest rate of the same currency and period is used as the reference rate, and the estimated lessee’s credit risk spread and lease specific adjustment (such as asset status and secured factors) are taken into account.

F. Deferred income

The compensation from relocation received according to the agreement and the expense spend related to the relocation is recognized as deferred income. Since identificating of the immovable items including land use right, buildings and some equipment, the related relocation expenses, and determining the time of the compensation recognized in profit or loss or deffered income from relocation involve estimates and judgement, any changes in economic environment and relevant laws and regulations may lead to significant adjustments in deferred income.

6. CONTENTS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

Item Cash on hand Checking accounts and demand deposits Time deposits Total	December 31	December 31
	2020 $ 308 582,015 207,277 $ 789,600	2019
		$ 657 352,425 769,220
		$ 1,122,302

A. The Group has no cash and cash equivalents pledged to others.

B. Please refer to Note 12 for relating credit risk management and assessment.

(2) Financial assets at fair value through profit or loss - current

Item Mandatorily measured at FVTPL Nonderivative financial assets Financial instruments with guaranteed principle and floating yield	December 31	December 31
	2020 $ 418,388	2019
		$ 202,684

The Group has no financial assets at fair value through profit or loss pledged to others.

(3) Financial assets at fair value through other comprehensive income

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Item Current Debt instruments Foreign corporate bonds Noncurrent Equity instruments Foreign unlisted stocks	December 31	December 31
	2020 $ 16,554 $ 1,267	2019
		$ -
		$ 1,558

A.The foreign corporate bond of The Group held for collecting principal and interests and for selling of such financial assets are measure at fair value through other comprehensive income.
B. These investments in equity instruments are held for medium-to-long term strategic purposes and were thus classified as financial assets at fair value through other comprehensive income.
C.The Group has no financial assets at fair value through other comprehensive income pledged to others.

(4) Financial assets at amortized cost - current

Item Financial instruments with guaranteed principle and defined yield	December 31	December 31
	2020 $ -	2019
		$ 86,105

A. The Group has no financial assets at amortized cost pledged to others.
B. Please refer to Note 12 for relating credit risk management and assessment.

(5) Notes receivable, net

Notes receivable, net
Item At amortized cost Notes receivable Less: Loss allowance Notes receivable, net	December 31
	2019 $ 79,363 (2,390) $ 76,973	2019
		$ 48,383 (1,384)
		$ 46,999

A. The Group has no notes receivable pledged to others.
B. As of December 31, 2020 and 2019, notes receivable being accepted by banks were $55,707 thousand and $31,384 thousand, respectively.
C. Please refer to Note 6(6) for the information on loss allowance for notes receivable.

(6) Accounts receivable, net

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Item At amortized cost Accounts receivable Less: Loss allowance Accounts receivable, net	December 31	December 31
	2019 $ 724,302 (3,750) $ 720,552	2019
		$ 593,001 (5,319)
		$ 587,682

A. The Group has no accounts receivable pledged to others.
B. The average credit period of sales of goods ranges from 14 to 120 days, which is determined by reference to the credit granting policy based on the counterparties’ industrial characteristics, operation scales and profitability. Where appropriate ask customers to pay in advance, as a means of mitigatingthe risk of financial loss from defaults.
C. The Group applies the simplified approach to providing expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date. As the Group’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Group’s different customer base. The Group takes into account the future prospect of market and assess the loss allowance for notes and accounts receivable using loss ratio established based on historical and timely information plus forwarding-looking adjustments.
D. The loss allowance for the Group’s notes and accounts receivables based on the provision matrix is as follows:

December 31, 2020

December 31, 2020
Aginginterval Not past due Past due within 30 days Past due 31-60 days Past due 61-90 days Past due 91-180 days Past due over 181 days Total	Rate of expected credit loss	Gross carrying amount	Loss allowance (lifetime expected credit loss)	Amortized cost
	0.18% 3.38% 6.21% 11.03% 24.07% 100%	$ 769,840 31,546 824 6 168 1,281	$ (3,701) (1,066) (51) (1) (40) (1,281)	$ 766,139 30,480 773 5 128 -
		$ 803,665	$ (6,140)	$ 797,525

December 31, 2019

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Aginginterval Not past due Past due within 30 days Past due 31-60 days Past due 61-90 days Past due 91-180 days Past due over 181 days Total	Rate of expected credit loss	Gross carrying amount	Loss allowance (lifetime expected credit loss)	Amortized cost
	0.18% 3.38% 6.21% 11.03% 24.07% 100%	$ 598,961 28,373 4,163 5,842 2,152 1,893	$ (2,430) (959) (259) (644) (518) (1,893)	$ 596,531 27,414 3,904 5,198 1,634 -
		$ 641,384	$ (6,703)	$ 634,681

The Group has not held any collateral or other credit enhancement for these notes and accounts receivable.

E. Movements of loss allowance for notes and accounts receivable are as follows:

Item	Years ended December 31	Years ended December 31
	2020 $ 6,703 1,022 (71) (1,419) (95) $ 6,140	2019
Balance, January 1 Provision for impairment Reversal of impairment Write-offs Effect of exchange rate changes Balance, December 31		$ 18,347 1,200 (12,151) (511) (182)
		$ 6,703

The Group has recognized an appropriate amount of loss allowance complying with the

Group’s policies as of December 31, 2020 and December 31, 2019.

F. Please refer to Note 12 for relating credit risk management and assessment.

(7) Inventories and cost of goods sold

Item Merchandise Finished goods Work in process Raw materials Supplies Inventory in transit Total	December 31	December 31
	2020 $ 89,339 81,777 220,620 155,637 33,233 93,459 $ 674,065	2019
		$ 74,335 84,115 218,908 136,660 32,118 69,792
		$ 615,928

A. The cost of inventories recognized as expense for the period:

Item Unallocated overhead Loss on decline (gain on reversal) in market value of inventories	Years Ended December 31	Years Ended December 31
	2020 $ 13,331 1,641	2019
		$ 21,158 (370)

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Item Gain on inventory taking Loss on inventory disposed Total	Years Ended December 31	Years Ended December 31
	2020 $ (411) 610 $ 15,171	2019
		$ (704) 200
		$ 20,284

The reversal in market value of the Group’s inventories as for 2019 is mainly due to decline in the amount of slow-moving inventory and increase in the copper price.

B. The Group has no inventory pledged to others.

(8) Property, plant and equipment

Property, plant and equipment
Item Land Buildings Machinery Other equipment Equipment to be inspected and construction in progress Total cost Less: Accumulated depreciation and impairment Property, plant and equipment, net	December 31
	2020 $ 7,567 265,110 1,019,779 124,751 954,596 2,371,803 (739,804) $ 1,631,999	2019
		$ 7,567 327,983 1,043,913 134,657 476,727
		1,990,847 (842,309)
		$ 1,148,538

Cost	Land $ 7,567 - - - - $ 7,567 $ - - - - - - $ - $ 7,567 - -	Buildings $ 327,983 1,081 (68,120) 8,965 (4,799) $ 265,110 $ (180,417) (15,217) - 47,597 - 938 $ (147,099) $ 323,247 2,642 -	Machinery $ 1,043,913 50,279 (121,135) 42,258 4,464 $ 1,019,779 $ (571,583) (76,130) (5,803) 112,232 36,504 (2,594) $ (507,374) $ 978,565 39,448 (38,539)	Other equipment $ 134,657 4,212 (17,684) 4,009 (443) $ 124,751 $ (90,309) (10,287) - 12,761 2,383 121 $ (85,331) $ 125,773 13,830 (9,693)	Equipment to be inspected and construction in progress $ 476,727 497,393 - (32,699) 13,175 $ 954,596 $ - - - - - - $ - $ 85,538 446,165 -	Total
						$ 1,990,847 552,965 (206,939) 22,533 12,397
Balance, January 1, 2020 Additions Disposals Reclassification Effect of exchange rate difference Balance, December 31, 2020 Accumulated depreciation and impairment
						$ 2,371,803
						$ (842,309) (101,634) (5,803) 172,590 38,887 (1,535)
Balance, January 1, 2020 Depreciation expense Impairment loss Disposal Reclassification Effect of exchange rate difference Balance, December 31, 2020 Cost
						$ (739,804)
						$ 1,520,690 502,085 (48,232)
Balance, January 1, 2019 Additions Disposals

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Reclassification Effect of exchange rate difference Balance, December 31, 2019 Accumulated depreciation and impairment	Land $ - - $ 7,567 $ - - - - - $ -	Buildings $ 9,427 (7,333) $ 327,983 $ (168,539) (16,838) - - 4,960 $ (180,417)	Machinery $ 100,104 (35,665) $ 1,043,913 $ (540,298) (74,108) (5,288) 27,635 20,476 $ (571,583)	Other equipment $ 8,723 (3,976) $ 134,657 $ (88,580) (11,757) - 7,267 2,761 $ (90,309)	Equipment to be inspected and construction in progress $ (36,858) (18,118) $ 476,727 $ - - - - - $ -	Total
						$ 81,396 (65,092)
						$ 1,990,847
						$ (797,417) (102,703) (5,288) 34,902 28,197
Balance, January 1, 2019 Depreciation expense Impairment loss Disposal Effect of exchange rate difference Balance, December 31, 2019
						$ (842,309)

A. In response to the growth of sales and the planning to expand the plant, the Group engaged China City Investment Construction Group to build plants and an administration building on the land of Jeimei District, Xiamen. The price of the contract and supplementary agreements is RMB 160,231 thousand. The construction began in December, 2018 and is expected to complete in the first half of year 2021.
B. The Group has no property, plant and equipment pledged to others.
C. Please refer to Note 6(27) for the information on interest capitalization.
D. Please refer to Note 6(14) for the relocation of LUHAI KUNSHAN.

(9) Lease agreement

A. Right-of-use assets

Right-of-use assets	Right-of-use assets
Item Land Buildings Total cost Less: Accumulated depreciation and impairment Right-of-use assets, net Cost Balance, January 1, 2020 $ Additions Disposals Effect of exchange rate difference Balance, December 31, 2020 $ Accumulated depreciation and impairment		December 31
		2020 $ 166,088 $ 59,592 225,680 (27,282) $ 198,398 $ Land Buildings 187,307 $ 18,618 - 40,057 (21,320) - 101 917 166,088$ 59,592		2019
		$	$	187,307 18,618
				205,925 (8,063)
		$	$	197,862
		Land 187,307 - (21,320) 101 166,088		Total
	$			$ 205,925 40,057 (21,320) 1,018
	$			$ 225,680

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Balance, January 1, 2020 Depreciation expense Disposals Effect of exchange rate difference Balance, December 31, 2020 Cost Balance, January 1, 2019 Adjustments arising from initial application of IFRS 16 Balance, January 1, 2019 (Adjusted) Effect of exchange rate difference Balance, December 31, 2019 Accumulated depreciation and impairment Balance, January 1, 2019 Adjustments arising from initial application of IFRS 16 Balance, January 1,2019 (Adjusted) Depreciation expense Effect of exchange rate difference Balance, December 31, 2019	Land $ (3,926) (3,478) 1,035 (89) $ (6,458) $ - 193,407 193,407 (6,100) $ 187,307 $ - - - (4,077) 151 $ (3,926)	Buildings $ (4,137) (16,353) - (334) $ (20,824) $ - 19,332 19,332 (714) $ 18,618 $ - - - (4,297) 160 $ (4,137)	Total
			$ (8,063) (19,831) 1,035 (423)
			$ (27,282)
			$ - 212,739
			212,739 (6,814)
			$ 205,925
			$ - -
			- (8,374) 311
			$ (8,063)

The Group has no right-of-use assets pledged to others.

B. Lease liabilities

Lease liabilities
Item Current lease liabilities Noncurrent lease liabilities	December 31
	2020 $ 18,448 $ 18,899	2019
		$ 4,376
		$ 9,345

Ranges of discount rates for lease liabilities are as follows:

Item Buildings	December 31	December 31
	2020 3.20%~3.65%	2019
		3.65%

Please refer to Note 6(27) for interest on lease liabilities.

C. Material lease-in activities and terms

Right-of-use assets include building leased by XIAHUI, LUHAI KUNSHAN and the land use rights in China and Indonesia owned by XIAHUI, LUHAI KUNSHAN and PT. LUHAI.

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XIAHUI leased some buildings with the lease terms from 2018 to 2023. ； LUHAI KUNSHAN leased some buildings with the lease terms from 2020 to 2023. XIAHUI and LUHAI KUNSHAN is not allowed to sublease the buildings to others without the permission of the lessor.

In 2020, because the market economy was seriously affected by the Covid-19 pandemic, XIAHUI and the lessor negotiated the plant lease in August, 2020, and the lessor agreed to unconditionally reduce the rent in February 2020 and provided 50% off for rents for March and April 2020. The rent is deducted when the rent is paid from July to September, 2020. The Group recognizes the aforementioned rent concessions in profit or loss. Please refer to Note 6 (25) for details.

LUHAI KUNSHAN and XIAHUI signed land use right contract with Jiangsu government and Xiamen government with the lease terms of 40 to 50 years. PT. LUHAI obtained the land use right of Serang, Indonesia. The aforementioned land is used to build plants, office buildings and employees’ dormitories.

Please refer to Note 6(14) for the relocation of LUHAI KUNSHAN.

D. Other lease information

Other lease information
Item Short-term lease expense Total cash outflow for leases	Year Ended December 31 2020 2019 $ 3,751 $ 1,777 $ 13,815 $ 6,335
		2019
		$ 1,777
		$ 6,335

The Group applied the recognition exemption to short-term leases and low-value asset leases and did not recognized right-of-use assets and lease liabilities for these leases.

(10) Intangible assets

Intangible assets	Intangible assets
Item			December 31
			2020 $ 26,309 413 176 26,898 (13,161) $ 13,737 Year Ended December 2020			2019
Software Trademark Patent Total cost Less: Accumulated amortization Intangible assets, net Software Cost Balance, January 1, 2020 $ 16,754 Additions 4,691 Reclassification 4,561 Effect of exchange rate difference 303 Balance, December 31, 2020 $ 26,309					$	16,754 408 175
						17,337 (10,381)
					$	6,956

	Software $ 16,754 4,691 4,561 303 $ 26,309		Trademark 408 - - 5 413	Patent $ 175 - - 1 $ 176		Total
		$				$ 17,337 4,691 4,561 309
		$				$ 26,898

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	Year Ended December 2020	Year Ended December 2020
Software $ (9,886) (2,610) (109) $ (12,605)	Trademark Patent $ (342) $ (153) (41) (13) (5) (2) $ (388) $ (168) Year Ended December 2019		Total
			$ (10,381) (2,664) (116)
			$ (13,161)

Software $ 16,315 1,779 (876) (464) $ 16,754 $ (9,017) (1,967) 876 222 $ (9,886)	Trademark $ 424 - - (16) $ 408 $ (313) (42) - 13 $ (342)	Patent $ 181 - - (6) $ 175 $ (141) (18) - 6 $ (153)	Total
			$ 16,920 1,779 (876) (486)
			$ 17,337
			$ (9,471) (2,027) 876 241
			$ (10,381)

The Group has no intangible assets pledged to others.

(11) Other noncurrent assets

Other noncurrent assets
Item Prepaid of equipment Refundable deposits Prepaid of land use right Other noncurrent assets Total	December 31
	2020 $ 67,196 15,154 5,096 4,248 $ 91,694	2019
		$ 19,528 4,864 - 8,556
		$ 32,948

LUHAI KUNSHAN obtained the land use right of 36 acres located in Kunshan City in a public bidding initiated by the Resources and Planning Bureau in December 2020. The consideration given was RMB 5,836 thousand. LUHAI KUNSHAN has paid 20% of the consideration, i.e. RMB 1,170 thousand, as a guarantee for the right to participate in the bidding and the amount was transferred to non-current assets-prepayments for the land use right as of December 31, 2020.

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Additionally, LUHAI KUNSHAN has paid a guarantee for the commencement and completion of the performance and a guarantee for reaching production, totaling RMB 10,191 thousand that are recognized as refundable deposits.

(12) Short-term loans

Short-term loans
The nature of borrowings Unsecured borrowings Interest rates	December 31
	2020 $ 85,440 1.03%~1.04%	2019
		$ -
		-

The Group does not provide any asset as a collateral for short-term borrowings.

(13) Other payables

Item Salaries and bonus payable Consumption expense payable Construction and equipment payable Insurance payable Sales tax payable Outsourced expense payable Compensation payable of employees, directors and supervisors Other Total	December 31	December 31
	2020 $ 107,533 29,863 62,327 13,700 4,575 29,007 26,638 22,925 $ 296,568	2019
		$ 73,289 30,146 56,663 14,173 2,380 11,215 7,713 23,738
		$ 219,317

(14) Deferred Income

Item Current Compensation income for relocation Relocation cost Economic compensation to employees Expenses of moving and installing assets Others Subtotal Deferred income, net Noncurrent Compensation income for relocation	December 31	December 31
	2020 $ - - - - - $ - $ 143,392	2019
		$ 637,618 (9,091) (8,012) (1,471)
		(18,574)
		$ 619,044
		$ -

At the request of the local government for the need of constructing S1 rails, the Board of Directors authorized the chairman to sign the relocation agreement per applicable laws and regulations. The relocation agreement had been signed by Kunshan Huaqiao Weimin House Demolition Limited Company (Weimin Company) and LUHAI KUNSHAN in

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November, 2019. The content includes compensation for the expropriation of the land use right, plant, buildings and equipment (collectively referred to as “the immovable items”), cessation of production and business, termination of labor contracts and expenses related to relocation. Main clauses are as follows:

A. The total compensation amounts to RMB 185,128 thousand.
B. Loss from disposal of the immovable items, termination of labor contracts and related relocation expenses are recognized as a deduction of deferred income on occurrence. Deferred income begins to be recognized in profit or loss upon the transfer of the immovable items and the completion of the second stage of relocation.
C. The agreement also states that Weimin Company shall assist LUHAI KUNSHAN with obtaining 36 mu (approximated to 5.93 acres) of land use right within 2 years once the agreement is signed, or the aforementioned compensation would be increased. The increase in compensation includes defined amount including financial incentive for signing the contract, relocation bonus and compensation for not providing land amounting to RMB 86,661 thousand, plus a compensation of 30% of evaluated price for movable equipment, and an extra compensation based on the actual expenditure or loss from the termination of labor contracts and rent expenses for plants and factories during the transition period.
D. According to the relocation agreement, if Weimin Company finishes settling the land, yet LUHAI KUNSHAN has not completed the construction of new factories, LUHAI KUNSHAN will have to pay RMB 60,000 thousand as damages.

LUHAI KUNSHAN had completed the delivery of the immovable items and had received the full compensation by December 31, 2020. After deducting the second stage relocation expenses from the full compensation, 143,392 thousand (RMB 32,924 thousand) was recognized as deferred income-noncurrent. The rest of the compensation was recognized as the net relocation compensation profit after deducting the relocation expenses. Please refer to note 6 (26) for details. LUHAI KUNSHAN obtained the land use right of 36 mu in a public bidding in December 2020. Please refer to Note 6 (11) for details.

(15) Long-term loans and long-term loans due within a year

The nature of borrowings Secured borrowings Less: Current portion Total Interest rates Maturity date	December 31	December 31
	2020 $ 925,419 (130,755) $ 794,664 0.90%-1.48% 2021 to 2025	2019
		$ 678,732 (207,419)
		$ 471,313
		0.9%-3.30%
		2020 to 2023

A. The Group does not provide any asset as a collateral for long-term borrowings.
B. According to loan agreements with banks, the Company and XIAHUI should maintain certain agreed financial ratios. The Company and XIAHUI have not breached the

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agreements as of December 31, 2020 and 2019.

(16) Retirement benefit plans

A. Defined contribution plans
(a)The Company and LU HAI IND. adopted a pension plan under the Labor Pension Act, which is a state-managed defined contribution plan. The Group make monthly contributions to employees' individual pension accounts at 6% of monthly salaries and wages.
(b)The foreign subsidiaries also make contribution in accordance with the rate specified in the plans in the local regulations, which is a defined contribution plan.
(c)A total expense of $4,185 thousand and $19,136 thousand were recognized in accordance with rate specified in defined contribution plans in consolidated comprehensive income statement as of December 31, 2020 and 2019.
B. Defined benefit plans
- (a)The Company and LU HAI IND. adopted the pension plan under the Labor Standards Law, which is a government managed defined benefit plan, under which pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Company and LU HAI IND. make contributions, equal to 2% of total monthly salaries, to a pension fund which are administered by Labor Pension Fund Supervisory Committee (the Committee) and deposited in the name of the Company’s and LU HAI IND.’s Committee in the Bank of Taiwan. Before the end of each year, the Company and LU HAI IND. assess the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who qualified to retirement requirements in the next year, the Company and LU HAI IND. are required to fund the difference in one deposit by the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Company and LU HAI IND. have no right to influence the investment policy and strategy
- (b)The Company and LU HAI IND. set March 31[st] , 2019 as record date to pay off the retirement payment with the employees and the labor pension account had been cancelled with the consent of the authority. The appropriated pension amounts to 285 thousand had been refunded.
- (c)The pension costs of the defined benefit plans were recognized in profit or loss by the following items:

Item Marketing expenses General and administrative Other income	Years ended December 31
	2019
	$ 49 281 (770)

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Years ended December 31

	Years ended December 31
Item Total	2019
	$ (440)

(17) Other current liabilities

Other current liabilities
Item Guarantee deposits received Other Total	December 31
	2020 $ 4,791 268 $ 5,059	2019
		$ 5,166 226
		$ 5,392

The deposit received by XIAHUI is the performance guarantee for the new plant project and will be returned after the completion of the project and the acceptance.

(18) Capital stocks

A. The Company’s movement of outstanding shares and capital were as follows:

Years ended December 31

2020 Shares (in thousands) Amount 86,063 $ 860,632 4,303 43,032 90,366$ 903,664	2019	2019
Shares (in thousands) 86,063 4,303 90,366	Shares (in thousands) 81,965 4,098 86,063	Amount
		$ 819,650 40,982
		$ 860,632

The par value of capital stock is $10 per share; every share has one voting right and the right to receive dividends.

Pursuant to a shareholders’ resolution on May 29, 2019, the Company increase its common capital with stock dividends by 40,982 thousand shares, at a par value of $10, the total paid-in capital was $860,632 thousand after capital increment. The capital increment by stock dividends had obtained approval in the BOD’s meeting and the effective date of the capital increment was August 9, 2019.

Pursuant to a shareholders’ resolution on May 29, 2020, the Company increase its common capital with stock dividends by 43,032 thousand shares, at a par value of $10, the total paid-in capital was $903,664 thousand after capital increment. The capital increment by stock dividends had obtained approval in the BOD’s meeting and the effective date of the capital increment was August 31, 2020.

B. The Company’s authorized capital was $1,200,000 thousand, consisting of 120,000 thousand shares as of December 31, 2020.

(19) Capital surplus

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Item From merger Additional paid-in capital From convertible bonds From difference between acquisition of interests in subsidiaries and its Share-based payments Other Total	December 31	December 31
	2020 $ 44,012 349,674 1,033 28,451 2,028 18,503 $ 443,701	2019
		$ 44,012 349,674 1,033 28,451 2,028 18,503
		$ 443,701

Under the Company Act, the capital surplus generated from the excess of the issuance price over the par value of capital stock （ including mergers, convertible bonds and difference between acquisition of interests in subsidiaries and its carrying value of equity ） and from donations can be used to offset deficit or may be distributed as stock dividends or cash dividends. Under the regulations of the Security Exchange Law, the maximum amount transferred from the foregoing capital surplus to the Company's capital per year shall not be over 10% of the Company's capital surplus. Capital surplus can't be used to offset deficit unless legal reserve is insufficient. The capital surplus from long-term investments may not be used for any purpose.

(20) Retained earnings and earnings appropriation

A. Under the regulation of the earning distribution policy in amended article of incorporation, The Company may distribute profits in accordance with a proposal for distribution of profits prepared by the Directors and approved by the Members by Ordinary Resolution. The Directors shall prepare such proposal as follows: the proposal shall begin with the Company’s Annual Net Income and offset its losses in previous years that have not been previously offset; then set aside a Legal Capital Reserve at 10% of the profits left over, until the accumulated Legal Capital Reserve has equaled the total paid-up capital of the Company; then set aside a Special Capital Reserve if one is required in accordance with the Applicable Public Company Rules or as requested by the authorities in charge. If there is net remainder, the Directors may prepare the proposal for distribution of Dividends, bonus or other benefits accounted together with undistributed profits accrued in previous years and submit to the general meeting for review and approval by a resolution.

The Company is currently positioned in a growth and development phase. Due to the need for capital expenditure, operation expansion and an integrated financial planned in order to maintain sustainable growth, any balance left over under the proposal mentioned above may be distributed as Dividends (including cash dividends or stock dividends) or bonuses, among which the Dividends to be distributed shall not be less than 10% of the total amount of Dividends distributed to the shareholders.

B. Legal reserve may be used to offset a deficit or to distribute as dividend in cash or in

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stock for the portion in excess of 25% of the Company's paid-in capital.

C. Special reserve

Special reserve
Item Special reserve	December 31
	2020 $ 369,530	2019
		$ 282,676

(a)In accordance with the regulation, the Company shall set aside special reserve from the debit balance on other equity item at the end of the year before distributing earnings. When debit balance on other equity is reversed subsequently, the reversed amount could be included in the distributable earnings.
(b)The amounts previously set aside by the Company as special reserve on initial application of IFRSs in accordance with rule NO.1010012865 issued by the FSC, dated April 6, 2012, shall be reversed proportionately to retained earnings when the relevant assets are used, disposed of or reclassified subsequently.
D. The appropriations of 2019 and 2018 earnings have been approved by shareholders’ meetings held on May 29, 2020 and May 29, 2019, respectively. The appropriations and dividends per share were as follows:

Appropriation of Earnings For Year 2019 For Year 2018 $ 24,191 $ 20,846 86,854 54,097 189,339 81,965 43,032 40,982 $ 343,416$ 197,890	Dividends Per Share(NT$)	Dividends Per Share(NT$)
For Year 2019	For Year 2019 $ - - 2.20 0.50	For Year 2018
$ 24,191 86,854 189,339 43,032		$ - - 1.00 0.50
$ 343,416

E. The Company’s appropriations of earnings for 2020 had been approved in the meeting of the Board of Directors held on March 12, 2021. The appropriations and dividends per share were as follows:

share were as follows:
Item Legal reserve Cash dividends Stock dividends Total	Appropriation of Earnings $ 59,476 135,550 90,366 $ 285,392	Dividends Per Share (NT$)
		$ - 1.50 1.00

The appropriations of earnings for 2020 are to be presented for approval in the Company's annual shareholders' meeting to be held on June 24, 2021.

F. Information on proposal and resolution regarding earnings appropriation of the Board of Directors' and shareholders' meetings is available from the "Market Observation Post System" on the website of the TWSE.

(21) Other equity items

147

Item Balance, January 1, 2020 Exchange differences on translation of foreign financial statements Valuation adjustments on equity instrument at fair value through other comprehensive income Valuation adjustments on debt instrument at fair value through other comprehensive income Balance, December 31, 2020 Balance, January 1, 2019 Exchange differences on translation of foreign financial statements Valuation adjustments on equity instrument at fair value through other comprehensive income Balance, December 31, 2019	Exchange differences on translation of foreign financial statements $ (370,256) 13,794 - - $ (356,462) $ (282,714) (87,542) - $ (370,256)	Profit (loss) on financial assets at fair value through other comprehensive income $ 726 - (304) (182) $ 240 $ 38 - 688 $ 726	Total
			$ (369,530) 13,794 (304) (182)
			$ (356,222)
			$ (282,676) (87,542) 688
			$ (369,530)

(22) Net revenue

Net revenue
Item Revenue from contract with customers Revenue from sale of goods Service revenue Total	Years ended December 31
	2020 $ 2,600,456 1,801 $ 2,602,257	2019
		$ 2,716,823 66
		$ 2,716,889

A. Description of contract with customers

Revenue from contract with customers mainly derives from sales of valves and accessories and processing fees income from customers. The consideration, fixed and agreed on the contracts, is classified as short-term receivables, and is therefore measured at invoice price.

B. Disaggregation of revenue from contracts with customers

The Group classifies revenue from the following categories of main products:

		Year ended December	Year ended December	31,2020
The Company $ 50,196 74,931 105,391 46,517 $ 277,035	XIAHUI $ 450,077 428,373 259,680 237,998 $1,376,128	LUHAI KUNSHAN	PT.LUHAI $ 126,655 338,681 36,436 176,600 $ 678,372	Others $ - - - - $ -	Eliminations	Total
		$ 1,968 8,794 230,314 50,237			$ - - - (20,591)	$ 628,896 850,779 631,821 490,761
		$ 291,313			$ (20,591)	$ 2,602,257

148

		Year ended December	Year ended December	31,2020
The Company $ 277,035 - $ 277,035	XIAHUI $ 1,376,108 20 $1,376,128	LUHAI KUNSHAN		Others	Eliminations	Total
		$ 291,313 -		$ - -	$ (20,591) -	$ 2,600,456 1,801
		$ 291,313		$ -	$ (20,591)	$ 2,602,257
				31,2019
The Company $ 30,703 17,453 48,182 12,618 $ 108,956 $ 108,956 - $ 108,956	XIAHUI $ 433,427 462,122 227,563 207,050 $1,330,162 $ 1,330,107 55 $1,330,162	LUHAI KUNSHAN	PT.LUHAI $ 71,254 358,546 33,611 178,851 $ 642,262 $ 642,251 11 $ 642,262	Others	Eliminations	Total
		$ 17,448 20,010 321,911 56,067		$ 12,870 109,471 67,343 58,711	$ - - - (28,322)	$ 565,702 967,602 698,610 484,975
		$ 415,436		$248,395	$ (28,322)	$ 2,716,889
		$ 415,436 -		$ 248,395 -	$ (28,322) -	$ 2,716,823 66
		$ 415,436		$248,395	$ (28,322)	$ 2,716,889

C. Contract balances

The Group has recognized the following revenue-related contract liabilities:

Item Contract liabilities - current	Years ended	December 31
	2020 $ 3,500	2019
		$ 477

(23) Employee benefits, depreciation and amortization expense

	Years ended December 31	Years ended December 31	Years ended December 31
	2020	Total $ 447,576 13,747 13,017 4,185 33,282 - 121,465		2019
Operating costs $ 315,307 - 7,731 2,067 24,747 - 102,965	Operating expenses $ 132,269 13,747 5,286 2,118 8,535 - 18,500		Operating costs $ 331,444 - 9,629 14,219 28,004 - 97,774	Operating expenses $ 122,406 4,590 5,159 4,477 9,432 12,212 13,303	Total
					$ 453,850 4,590 14,788 18,696 37,436 12,212 111,077

149

Years ended December 31

	2020		2019
Operating costs $ - $ 452,817	Operating expenses $ 2,664 $183,119	Operating costs $ - $ 481,070	Operating expenses $ 2,027 $173,606	Total
				$ 2,027
				$ 654,676

A. According to the Company’s Article of Incorporation, if the Company has pre-tax profits in the current year, the Company shall aside not less than 1.5% of the profits as employees’ compensation and not more than 3% of the profits as Directors’ remuneration. The company asided 1.5%-3% of pre-tax profit of 2020 and 2019 as employees’ and Directors’ compensation respectly. If there is a change in amounts after the annual consolidated financial statements were authorized for issue, the differences are recorded as a change in accounting estimate.
B. The appropriations of employees’ compensation and remuneration of directors of 2020 and 2019 have been approved by directors’ meeting held on March 12, 2021 and March 12, 2020, respectively. The amounts approved and recognized in financial statements are shown as follows:

Years ended December 31

	Years ended	December 31	December 31
Amount resolved to be distributed Amount recognized in financial statements Difference	2020 Employees’ compensation Remuneration to directors $ 13,237 $ 13,237 13,237 13,237 $ -$ -	2019
	Employees’ compensation $ 13,237 13,237 $ -	Employees’ compensation $ 3,770 3,770 $ -	Remuneration t o directors
			$ 3,770 3,770
			$ -

The employees’ compensation and remuneration to directors of 2020 and 2019 will be paid by cash.

C. Information on employees' compensation and remuneration to directors of the Company as resolved by the meeting of Board of Directors is available from the "Market Observation Post System" at the website of the TWSE.
D. For the years ended December 31, 2020 and 2019, the numbers of employees of the Group were 1,445 and 1,315, respectively. Among them, the numbers of Directors who were not employees were both 6, respectively.
E. Please refer to Note 6(26) for the economic compensation to employees of LUHAI KUNSHAN relocation.

(24) Interest income

Interest income
Item Interest income	Years ended December 31
	2020 2019

150

Item Bank deposit Financial assets at amortized cost Financial assets at fair value through other comprehensive income Total	Years ended December 31	Years ended December 31
	2020	2019
	$ 8,547 228 84 $ 8,859	$ 10,213 4,693 -
		$ 14,906

(25) Other income

Other income
Item Subsidies Rent concessions Others Total	Years ended December 31
	2020 $ 26,806 727 3,717 $ 31,250	2019
		$ 8,560 - 4,902
		$ 13,462

The Group applied for salaries and working capital subsidies from the Bureau of Industry of the Ministry of Economic Affairs affected by severe and special infectious pneumonia. In July 2020, it was reviewed and approved to subsidize the salary and one-off working capital for May and June 2020. As of December 31, 2020, The Group recognized the subsidy income of 1,807 thousand under other income.

(26) Other gains and losses

Other gains and losses
Item Net profit on relocation compensation Net currency exchange gains Gains of financial assets at fair value through profit or loss Losses from disposal of subsidiaries Impairment loss of property, Plant and equipment Gains (losses) on disposal of property, Plant and equipment Other losses Total	Years ended December 31
	2020 $ 475,587 (5,318) 14,094 (1,273) (5,803) (2,783) (4,114) $ 470,390	2019
		$ - 26,263 1,906 - (5,288) (2,617) (2,435)
		$ 17,829

Please refer to Note 6(14) for the transaction detail of LUHAI KUSHAN relocation. LUHAI KUSHAN has delivered the immovable items and recognized the net profit on relocation compensation stated as follow:

compensation stated as follow:
Item Compensation income for relocation (RMB 152,204 thousand)	Years ended December 31
	2020
	$ 651,489

151

Item Less: Relocation cost Losses on disposal of property, plant and equipment Losses on disposal of right-of-use assets Econmic compensation to employees Expenses of moving and installing assets Others Subtotal Net profit on relocation compensation	Years ended December 31
	2020
	$ (33,714) (20,285) (47,466) (72,974) (1,463)
	(175,902)
	$ 475,587

(27) Financial costs

Item Interest expense Bank borrowings Interest of lease liabilities Less: capitalized amount for qualified assets Financial cost Interest capitalization rates	Years ended December 31	Years ended December 31
	2020 $ 10,387 1,317 (2,959) $ 8,745 1.03%-3.30%	2019
		$ 15,772 612 (3,390)
		$ 12,994
		1.15%-3.99%

(28) Income tax

A. Components of income tax expense:

Item Current income tax expense Current tax expense recognized in the current year Income tax adjustments on prior years Additional income tax on unappropriated earnings Current income tax expense Deferred income tax expense Deferred income tax expense (benefit) related to temporary differences Unused loss carryforwards Effect of tax rate changes Deferred income tax expense (benefit) Income tax expense	Years ended December 31 2020 2019 $ 117,827 $ 97,171 (800) 67 507 521 117,534 97,759 115,792 7,677 1,486 (1,508) 218 - 117,496 6,169 $ 235,030 $ 103,928	Years ended December 31 2020 2019 $ 117,827 $ 97,171 (800) 67 507 521 117,534 97,759 115,792 7,677 1,486 (1,508) 218 - 117,496 6,169 $ 235,030 $ 103,928
		2019
		$ 97,171 67 521
		97,759
		7,677 (1,508) -
		6,169
		$ 103,928

B. Income tax expense recognized in other comprehensive income

152

Item Unrealized profit (loss) from debt instrumens at fair value through other comprehensive income	Years ended December 31	Years ended December 31
	2020 $ (46)	2019
		$ -

C. Reconciliation between income tax expense and accounting profit:

Reconciliation between income tax expense and accounting profit:	Reconciliation between income tax expense and accounting profit:	Reconciliation between income tax expense and accounting profit:	Reconciliation between income tax expense and accounting profit:	Reconciliation between income tax expense and accounting profit:	Reconciliation between income tax expense and accounting profit:
Years ended December 31 Item 2020 2019 Income before tax $ 829,789$ 345,838 Income tax expense at the statutory rate $ 232,462 $ 93,655 Tax effect of adjusting items: Deductible items in determining taxable income (114,635) 3,516 Additional tax on unappropriated earnings 507 521 Income tax adjustments on prior years (800) 67 Net changes on deferred income tax Temporary differences 115,792 7,677 Unused loss carryforwards 1,486 (1,508) Effect of tax rate changes 218 - Income tax expense recognized in profit or loss $ 235,030$ 103,928 Based on the Income Tax Act in the ROC, LU HAI IND. and the Company’s Taiwan branch income tax rate is 20%, the tax rate applicable to unappropriated earnings is 5%. Tax rates used by other group entities operating in other jurisdictions are based on the tax laws in those jurisdictions. Deferred tax assets or liabilities resulting from temporary differences: Year ended December 31,2020 Item Beginning balance Recognized in (losses) gains Recognized in other comprehensive income Effect of exchange rate changes Ending Balance Deferred tax assets (liabilities) Temporary differences Timing of revenue recognition $ 1,640 $ 1,289 $ - $ (11) $ 2,918 Loss allowance 1,632 32 - (23) 1,641 Loss on decline (gain on reversal) in market value of inventory 4,990 68 - (3) 5,055 Gain (loss) on foreign Investments accounted For using equity method (17,049) (3,220) - 967 (19,302) Deferred depreciation expense 5,471 5,895 - 160 11,526 Impairment loss 4,970 (1,652) - 29 3,347
	Beginning balance $ 1,640 1,632 4,990 (17,049) 5,471 4,970	Recognized in (losses) gains $ 1,289 32 68 (3,220) 5,895 (1,652)	Recognized in other comprehensive income $ - - - - - -	Effect of exchange rate changes $ (11) (23) (3) 967 160 29	Ending Balance
					$ 2,918 1,641 5,055 (19,302) 11,526 3,347

D. Deferred tax assets or liabilities resulting from temporary differences:

153

Item Deferred insurance expense and housing provident fund Unrealized profit (loss) on Financial Assets at Fair Value Through other comprehensive income Net profit on relocation compensation Other Unused loss carryforwards Total Item			Year ended December 31,	Year ended December 31,	2020
		Beginning balance 2,670 - - 1,094 1,508 6,926	Recognized in (losses) gains Recognized in other comprehensive income Effect of exchange rate changes $ - $ - $ 30 - 46 - (118,897) - (2,081) 475 - 22 (1,486) - - $ (117,496) $ 46 $ (910) Year ended December 31,2019			Ending Balance
	$					$ 2,700 46 (120,978) 1,591 22
	$					$ (111,434)

		Beginning balance $ 1,935 4,556 5,210 (10,715) 5,915 3,951 2,772 (558) 358 - $ 13,424	Recognized in (losses) gains $ (255) (2,878) (74) (6,784) (238) 1,210 - 558 784 1,508 $ (6,169)	Recognized in other comprehensive income $ - - - - - - - - - - $ -	Effect of exchange rate changes $ (40) (46) (146) 450 (206) (191) (102) - (48) - $ (329)	Ending Balance
Deferred tax assets (liabilities) Temporary differences Timing of revenue recognition Loss allowance Loss on decline (gain on reversal) in market value of inventory Gain (loss) on foreign Investments accounted For using equity method Deferred depreciation expense Impairment loss Deferred insurance expense and housing provident fund Remeasurement of defined benefit obligation Other Unused loss carryforwards Total						$ 1,640 1,632 4,990 (17,049) 5,471 4,970 2,670 - 1,094 1,508
						$ 6,926

The tax for the net relocation compensation recognized by the Group may be paid in the year the relocation is completed within five years from the beginning of the relocation, or in the fifth year in which the relocation is completed.

E. As of December 31, 2020, the tax authorities have examined LU HAI IND.’s income tax returns through 2018. The Company’s Taiwan branch income tax returns through 2019 have been assessed.

(29) Other comprehensive income

154

Year ended December 31,2019	Year ended December 31,2019	Year ended December 31,2019
Before tax Income tax (expense) benefit After tax $ (304) $ -$ (304) (304) - (304) 15,044 - 15,044 (1,250) - (1,250) (228) 46 (182) 13,566 46 13,612 $ 13,262$ 46 $ 13,308 Year ended December 31,2019	Income tax (expense) benefit	After tax
	$ -	$ (304)
	-	(304)
	- - 46	15,044 (1,250) (182)
	46	13,612
	$ 46	$ 13,308
Before tax $ 688 688 (87,542) (87,542) $ (86,854)	Income tax (expense) benefit	After tax
	$ -	$ 688
	-	688
	-	(87,542)
	-	(87,542)
	$ -	$ (86,854)

(30) Earnings per share

Earnings per share
Item Basic earnings per share Net income attributable to shareholders of the parent Net income for calculating basic earnings per share Weighted average number of shares outstanding for the period (in thousands) Basic earnings per share, after tax (in dollar) Diluted earnings per share Net income attributable to shareholders of the parent Net income for calculating diluted earnings per share	Years ended December 31
	2020 $ 594,759 $ 594,759 90,366 $ 6.58 $ 594,759 $ 594,759	2019
		$ 241,910
		$ 241,910
		90,366
		$ 2.68
		$ 241,910
		$ 241,910

155

Item Weighted average number of shares outstanding for the period (in thousands) Effect of dilutive potential common shares Employees’ compensation Weighted average shares outstanding for dilutive earnings per share Diluted earnings per share, after tax (in dollar)	Years ended December 31	Years ended December 31
	2020 90,366 318 90,684 $ 6.56	2019 90,366 110 90,476 $ 2.67

When calculating earnings per share, the effect of issuance of bonus share has been considered and adjusted retrospectively. Due to the retrospective adjustment, the basic earnings per share attributable to shareholders of the basic and diluted earnings per share has been decreased from $2.81 and $2.81 to $2.68 and $2.67 respectively.

If the Company is able to settle the employee compensation by cash or stocks, the employee compensation should be assumed to be settled in stocks and the resulting potential shares increased should be included in the weighted average shares outstanding in calculation of diluted earnings per share, if the shares have a dilutive effect. The number of shares is estimated by dividing the entire amount of the employee compensation by the fair value of the stocks at the balance sheet date. Such dilutive effect of the potential shares needs to be included in the calculation of diluted earnings per share until employee compensation are approved in the following year.

7. RELATED PARTY TRANSACTIONS

Intercompany balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated upon consolidation; therefore, those items are not disclosed in this note. The following is a summary of transactions between the Company and other related parties.

(1) Compensation of key management personnel

Item Salary and short-term employee benefits Post- employment benefits Total	Years ended December 31	Years ended December 31
	2020 $ 29,104 227 $ 29,331	2019
		$ 17,197 189
		$ 17,386

8. PLEDGED ASSETS: NONE

9. SIGNIFICANT CONTINGENCIES LIABILITIES AND UNRECOGNIZED COMMITMENTS

(1) Capital expenditures contracted but not yet incurred are as follows ：

156

Item Property, plant and equipment Right-of-use assets Deduction of deferred income (relocation cost) Total	December 31	December 31
	2020 $ 253,438 20,321 - $ 273,759	2019
		$ 352,237 - 9,291
		$ 361,528

(2) Lease commitments with lease terms begin after the end of the reporting period:

Lease commitments with lease terms begin	after the end of the reporting period:	after the end of the reporting period:
Item Lease commitment	December 31
	2020 $ -	2019
		$ 43,914

(3) Product liability insurance

The Group has entered into a product liability insurance for the product of tubeless valves manufactured by the Group and sold globally. The period of insurance agreement is from March 15, 2020 to March 15, 2021. The insurance policy covers from March 15, 2007 to March 15, 2021. The maximum indemnification amount during the policy covering period is USD $1,000 thousand.

10. SIGNIFICANT DISASTERS

(1) Additional disclosures on the impact of the Covid-19 pandemic

The Group was affected by the global pandemic of Covid-19. As a result, the operating income decreased in the first half of the year 2020. The rest has no significant impact. With the ease of the pandemic in countries and the loose of policies, the operation of The Group in the second half of the year 2020 has gradually returned to normal.

11. SIGNIFICANT SUBSEQUENT EVENTS

(1) On January 27, 2021 and March 12, 2021, The Group decided that LUHAI KUSHAN lend RMB 22,000 thousand indirectly to XIAHUI through entrusted loans respectly.
(2) LUHAI KUSHAN plans to undertake the construction of a new plant on the new land obtained in the public bidding in December 2020. On March 12, 2021,The board of directors authorized the chairman to be in charge of the matter within an amount not exceeding RMB 76,230 thousand.

12. OTHERS

(1) Capital risk management

The Group requires an adequate capital structure to enable the expansion and enhancement of equipment. The Group manages its capital in a manner to ensure that it has sufficient and necessary financial resources and operating plan to fund its working capital needs, capital asset purchases, operation expenses, development expenditure and debt payment requirements associated with its existing operations over the next 12 months.

157

(2) Financial instruments

A. Financial risks on financial instruments

Financial risk management policies

The Group's daily operation activities are exposed to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. For reducing the financial risk, the Group focus on identifying, assessing, and avoiding the unpredictability of market with the objective to reduce the potentially adverse effects the market uncertainties may have on its financial performance.

The plans for material treasury activities are reviewed by the Board of Directors in accordance with procedures required by relevant regulations or internal controls. During the implementation of such plans, the Group’s Treasury function must comply with certain treasury procedures that provide guiding principles for overall financial risk management and segregation of duties.

Significant financial risks and degrees of financial risks

(a) Market risk

i. Foreign exchange risk
The Group’s sales, purchase and borrowing activities denominated in foreign currencies are exposed to foreign currency risk. The Group’s mainly functional currency are New Taiwan dollars, RMB and IDR. The foreign currency of those transactions are US dollars, RMB, Euro and so on. To prevent the reduction in value and the volatility of future cash flows caused by changes in foreign exchange rates, the Group uses foreign currency loans and derivative financial instruments (include forward exchange agreement) to avoid foreign exchange risks. The usage of derivative financial instruments can assist the Group to reduce but not completely eliminate the influence of changes in foreign exchange rates.

Foreign currency risk and sensitivity analysis

Financial assets			December 31	December 31
		2020	New Taiwan Dollars $ 568,748 20 21,220 1,082,792 181,446		2019
	Foreign currency $ 19,970 5 606 38,019 5,181	Exchange rate 28.48 4.36 35.02 28.48 35.02		Foreign currency $ 19,014 2,173 607 17,816 10,064	Exchange rate 29.98 4.31 33.59 29.98 33.59	New Taiwan Dollars
						$ 570,032 9,355 20,391 534,137 338,034
Monetary items USD RMB EUR Financial liabilities
Monetary items USD EUR

The Group is mainly exposed to US dollars, RMB and Euro. The sensitivity analysis rate for the Group is 1% increase and decrease in NTD against the relevant foreign currencies, and the 1% is used when reporting foreign currenct risk internally to key

158

management personnel. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 1% change in foreign currency rates. An increase/decrease in profit before tax would be resulted where the NTD strengthens/weakens 1% against the relevant currencies with all other variables held constant in the amount of $6,742 and $2,724 for the years ended December 31, 2020 and 2019, respectively.

The Group’s foreign exchange gains and losses, including realized and unrealized, for the years ended December 31, 2020 and 2019 were net exchange gain (loss) of $(5,318) thousand and $26,263 thousand, respectively. Due to the variety of functional currencies, the Group did not disclose the foreign exchange gains (losses) for each foreign currency with significant influence.

ii. Price risk

The Group is exposed to equity securities price risk because investments held by the Group are classified as financial assets at fair value through other comprehensive income.

The Group mainly invests in equity instrument of foreign unlisted stocks. The prices of equity securities would change due to the uncertainty of the future value of investee companies.

If the prices of equity securities had increased/decreased by 1% with all other variables held constant, other comprehensive income would have increased/decreased by $13 and $16 thousand since the fair value of financial assets at fair value through other comprehensive income increased/decreased for the years ended December 31, 2020and 2019.

iii. Interest rate risk

The interest rate risk of financial instruments as of reporting date was as follow:

Item Fair value interest rate risk Financial assets Financial liabilities Net value Cash flow interest rate risk Financial assets Financial liabilities Net value	December 31	December 31
	2020 $ 145,436 - $ 145,436 $ 660,290 (1,010,859) $ (350,569)	2019
		$ 647,812 -
		$ 647,812
		$ 559,818 (678,732)
		$ (118,914)

Sensitivity analysis for instruments with fair value interest rate risk

The Group classifies certain fixed-rate financial assets as financial instruments that are measured at fair value through other comprehensive income. Therefore, changes in interest rates at the end of the reporting period will affect the changes in fair value of the instruments.

159

Sensitivity analysis for instruments with cash flow interest rate risk

The Group’s financial instruments with variable interest rate are those with floatingrate. If interest rate increases (decreases) 1%, the profit before tax will increase (decrease) $3,506 thousand and $1,189 thousand for the years ended December 31, 。 2020 and 2019, respectively

The Group does not utilize derivative financial instruments of interest rate risk as of December 31, 2020.

(b) Credit risk

Credit risk is the risk that counterparty will default on its contractual obligations under a contract leading to a financial loss to the Group. The Group is exposed to credit risk from operation activities, primarily trade receivable, and from investing activities, primarily deposit and other financial instruments with bank. Credit risk is managed separately for business related and financial related exposures. Business related credit risk

In order to maintain the quality of the trade receivables, the Group established credit risk management procedures related to operations and continues to evaluate. The risk evaluation of individual customers takes into consideration the customers’ financial position, internal and external credit ratings and historical transaction records and current economic situation and other factors that may affect the customers’ payment ability.

In order to minimize credit risk, the management of the Group has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts. In this regard, the management believes the Group’s credit risk was significantly reduced. The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery. For trade receivables that have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

Financial credit risk

The Group's exposure to financial credit risk which pertained to bank deposits and other financial instruments was evaluated and monitored by Group Treasury function. The Group only deals with creditworthy counterparties and banks, so that no significant financial credit risk was identified.

i. Concentration of credit risk

160

The Group’s concentration of credit risk was related to the customers whose balances of accounts receivable are top 4 of the Group, which accounted for 43% and 46% of the total accounts receivable as of December 31, 2020 and 2019.

ii. Evaluation of expected credit loss
(i.) Accounts receivable: The simplified approach is applied. Please refer to Note 6(6) for relating details.
(ii.) Judgment on whether the credit risk has increased significantly: The Group takes into account the credit rating information provided by external rating agencies and examines the material information of debtors in order to evaluate whether the credit risk of debt instruments has increased significantly.
iii. Holding collaterals and other credit enhancements to hedge the credit risk of its financial assets: None.
iv. Credit risk of financial assets at amortized cost and debt instruments at fair value through other comprehensive income

Please refer to Note 6(6) for information on credit risk exposure of notes and accounts receivable. Other financial assets at amortized cost, including cash and cash equivalents, other receivables, financial instruments with guaranteed principal and defined yield, refundable deposits and debt instruments at fair value through other comprehensive income, are low in credit risk. The loss allowance is assessed based on the 12-month expected credit loss. The Group believes that there is no impairment to financial assets at amortized cost and debt instruments at fair value through other comprehensive income.

(c) Liquidity risk
i. Liquidity risk management

The objective of liquidity risk management is to ensure the Group has sufficient liquidity to fund its business requirements of cash and cash equivalents and the unused of financing facilities associated with existing operations

ii. Maturity profile of financial liabilities

	December 31,2020	December 31,2020	December 31,2020
Within 1year $ 86,297 325,376 278,293 18,662 141,236 4,791 $ 854,655	1-5years $ - - - 19,802 806,696 - $ 826,498	Over 5years $ - - - - - - $ -	Contract cash flows $ 86,297 325,376 278,293 38,464 947,932 4,791 $ 1,681,153	Carrying value
				$ 85,440 325,376 278,293 37,347 925,419 4,791
				$1,656,666

161

	December 31,2019	December 31,2019	December 31,2019
Within 1year $ 264,374 202,764 4,477 217,622 5,166 $ 694,403	1-5years $ - - 10,141 481,355 - $ 491,496	Over 5years $ - - - - - $ -	Contract cash flows $ 264,374 202,764 14,618 698,977 5,166 $ 1,185,899	Carrying value
				$ 264,374 202,764 13,721 678,732 5,166
				$1,164,757

The Group does not expect the timing of occurrence of the cash flows estimated through the maturity date analysis will be significantly earlier, nor expect the actual cash flow amount will be significantly different.

(3) Categories of financial instruments

The carrying amount of each financial asset and financial liability of the Group as of December 31, 2020 and 2019 were as follows:

ecember 31, 2020 and 2019 were as follows:
Financial assets Financial assets at fair value through profit or loss Financial assets at amortized cost (Note 1) Financial assets at fair value through other comprehensive income Financial liabilities Financial liabilities at amortized cost (Note 2)	December 31
	2020 $ 418,388 1,604,878 17,821 $ 1,619,319	2019 $ 202,684 1,850,119 1,558 $ 1,151,036

Note 1: The balances include financial assets such as cash and cash equivalents, notes receivable, accounts receivable, other receivables, financial assets at amortized cost and refundable deposits.
Note 2: The balances include accounts payable, other payables, short-term borrowings, guarantee deposits received and long-term borrowings (including long-term borrowings due within 1 year).

(4) Fair value information

A. Fair value measurements are grouped into Levels 1 to 3 as follows:
Level 1: Relevant inputs are quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2: Inputs other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly.

162

Level 3: Inputs are unobservable inputs that used to measure fair value to the extent 。 when relevant observable inputs are not available

B. Fair values of financial instruments that are not measured at fair value:

The fair value of the Group’s financial instruments not measured at fair value includes cash and cash equivalents, notes and accounts receivable, financial assets at amortized cost, other financial assets, refundable deposits, short-term loans, payables, long-term loans (including long-term loans due within one year) and guarantee deposits received whose carrying amount is approximately their fair value.

C. Fair value of financial instruments that are measured at fair value:

The financial instruments are measured at fair value on a recurring basis. The information of fair value is listed as follows:

of fair value is listed as follows:
Item Assets: Recurring fair value measurement Financial assets at fair value through profit or loss Financial instruments with guaranteed capital and floating yield Financial assets at fair value through other comprehensive income Debt instruments Foreign corporate bonds Equity instruments Foreign unlisted stocks Total Item Assets: Recurring fair value measurement Financial assets at fair value through profit or loss Financial instruments with guaranteed capital and floating yield Financial assets at fair value through other comprehensive income Equity instruments		December 31,2020
	Level 1 $ - - - $ -	Level 2 Level 3 $ 418,388 $ - 16,554 - - 1,267 $ 434,942$ 1,267 December 31,2019		Total
				$ 418,388 16,554 1,267
				$ 436,209

	Level 1 $ -	Level 2 $ 202,684	Level 3 $ -	Total
				$ 202,684

163

December 31, 2019

Item Foreign unlisted stocks Total	Level 1 $ - $ -	Level 2 $ - $ 202,684	Level 3 $ 1,558 $ 1,558	Total
				$ 1,558
				$ 204,242

D. The methods and assumptions the Group used to measure fair value are as follows:
(a) The fair value of financial assets and liabilities traded in an active market is based on the quoted market prices.
(b) The valuation of derivative financial instruments is based on valuation model widely accepted by market participants, such as present value techniques and option pricing models.
(c) Fair value of equity investment on unlisted stocks without active market was estimated through the market approach that is mainly referenced to the same type of companies’ valuation, net assets and state of operation. The significant and unobservable input parameter for assessing the unlisted stocks mainly relates to valuation multiple and liquidity discount rate. Since the possible changes of valuation multiple and liquidity discount rate may not cause significant influence on financial standing, the quantitative information will not be disclosed.
(d) Fair value of other financial assets and financial liabilities (except for the aforementioned) are determined in accordance with generally accepted pricing model based on the discounted cash flow analysis.
E. Transfer between Level 1 and Level 2 of the fair value hierarchy: None
F. Changes in level 3 instruments are as follows:

Item Financial assets at fair value through other comprehensive income Balance at January 1 Recognized in other comprehensive income Effect of exchange rate difference Balance at December 31	Years ended	December 31
	2020 $ 1,558 (304) 13 $ 1,267	2019
		$ 930 688 (60)

		$ 1,558

G. Sensitivity analysis of Level 3 fair value measurement and assumption of fair value reasonably being substituted: None.

13. SUPPLEMENTARY DISCLOSURES

(1) Disclosure of significant transactions information (before inter-company eliminations) ：
A. Financings provided: Please see Table 1 attached;
B. Endorsement/guarantee provided: Please see Table 2 attached;
C. Marketable securities held (excluding investments in subsidiaries, associates and joint

164

ventures): Please see Table 3 attached;

D. Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: Please see Table 4 attached;
E. Acquisition of individual real estate properties at costs of at least NT$300 million or 20% of the paid-in capital: None;
F. Disposal of individual real estate properties at prices of at least NT$300 million or 20% of the paid-in capital: None;
G. Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital: Please see Table 5 attached;
H. Receivables from related parties amounting to at least NT$100 million or 20% of the paidin capital: Please see Table 6 attached;
I. Information on the derivative instrument transactions: None;
J. Intercompany relationships and significant intercompany transactions: Please see Table 7 attached;
(2) Information on investees (before inter-company eliminations): Please see Table 8 attached;

(3) Information on investment in Mainland China

A. The name of the investee in Mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, income (losses) of the investee, share of profits/losses of investee, ending balance, amount received as dividends from the investee, and the limitation on investee: Please see Table 9 attached;
B. Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized gain or loss, and other related information which is helpful to understand the impact of investment in Mainland China on financial statements: Please see Table 7 attached.

(4) Information of major shareholder: Please see Table 10 attached.

14. SEGMENT INFORMATION

(1) General information

For the purpose of group management, the Group has provided to the chief operating decision maker the information on resource allocation and assessment of segment performance focuses on the financial information by geographic plants.

(2) Measurement basis

Management monitors the operation results of its segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss before tax and is measured consistently with profit or loss before tax in the consolidated financial statements. Furthermore, because the information of assets and liabilities is not reported to the chief operating decision maker for operation decision making, segment assets and liabilities are not disclosed. The accounting

165

policies for reportable segments are the same as Group’s accounting policies described in Note 4.

(3) Segment information: Please see Table 11 attached;

(4) Reconciliation for segment income (loss)

The segment revenue, segment income (loss) and segment assets reported to the chief operating decision maker is measured in a manner consistent with that in the consolidated statements of comprehensive income and consolidated balance sheets.

(5) Information on product and service

Details of sales from external customers are as follows:

Item	Years ended December 31	Years ended December 31
	2020 $ 628,896 850,779 631,821 490,761 $ 2,602,257	2019
Bicycle valves Motorcycle and electric bike valves Passenger car, truck and other valves Accessories and others Total		$ 565,702 967,602 698,610 484,975
		$ 2,716,889

(6) Geographic information

A. Sales from external customers

Areas China Indonesia Others Total	Years ended December 31	Years ended December 31
	2020 $ 1,164,113 691,578 746,566 $ 2,602,257	2019
		$ 1,179,262 761,096 776,531
		$ 2,716,889

B. Noncurrent assets

Noncurrent assets
Areas China Indonesia Others Total	December 31
	2020 $ 1,760,695 146,490 13,489 $ 1,920,674	2019
		$ 1,214,236 152,629 14,575
		$ 1,381,440

(7) Major customer information

Years ended December 31

Customer A	2020 Amount % $ 386,211 14.84%	2019	2019
	Amount $ 386,211	Amount $ 367,569	%
			13.53%

166

Financing Company’s Total Financing Limit (Note 4)	Financing Company’s Total Financing Limit (Note 4)	1,087,769	1,087,769	1,087,769	1,087,769	1,087,769	1,087,769	429,440	RMB 98,602
Limit on Financing	Provided to Each Company (Note 3)	1,087,769		1,087,769		1,087,769		214,720	RMB 49,301
Collateral	Value	`－`		`－`		`－`		`－`
	Item	`－`		`－`		`－`		`－`
Recognized loss allowance		`－`		`－`		`－`		`－`
Reason for Financing		Operating capital		Operating capital		Operating capital		Operating capital
Transaction Amounts		`－`		`－`		`－`		`－`
Nature for Financing (Note 2)		2		2		2		2
Interest Rate		`－`		`－`		1.20%		3.50%
Amount Actually Drawn (Note 6)		`－`	`－`	`－`	`－`	`－`	`－`	95,816	RMB 22,000
Ending Balance		`－`	`－`	`－`	`－`	142,400	USD 5,000	95,816	RMB 22,000
Maximum Balance for the Period		56,960	USD 2,000	85,440	USD 3,000	142,400	USD 5,000	95,816	RMB 22,000
Related Party		Yes		Yes		Yes		Yes
Financial Statement Item		Other receivables- related parties		Other receivables- related parties		Other receivables- related parties		Other receivables- related parties
Counter-party		PT.LUHAI		LUHAI KUNSHAN		XIAHUI		XIAHUI
Financing Company		The Company		The Company		The Company		LUHAI KUNSHAN
No. (Note 1)		0		0		0		1

167

Guarantee Provided to Subsidiaries in Mainland China	Guarantee Provided to Subsidiaries in Mainland China	N	N	Y	Y	Y	Y
Guarantee Provided by Subsidiary to Parent Company		N		N		N
Guarantee Provided by Parent company		Y		Y		Y
Maximum Endorsement/ Guarantee Amount Allowable (Note 4)		1,359,712		1,359,712		1,359,712
Ratio of Accumulated Endorsement/ Guarantee to Net Equity per Latest Financial Statements		5.76%		`－`		17.80%
Amount of Endorsement/ Guarantee Collateralized by Properties		`－`		`－`		`－`
Amount Actually Drawn		156,640	USD 5,500	`－`	`－`	484,160	USD 17,000
Ending Balance		156,640	USD 5,500	`－`	`－`	484,160	USD 17,000
Maximum Balance for the Period		213,600	USD 7,500	56,960	USD 2,000	655,040	USD 23,000
Limits on Endorsement/ Guarantee Amount Provided to Each Guaranteed Party `（`Note 3`）`		1,087,769		1,087,769		1,087,769
Guaranteed Party	Nature of Relationship (Note 2)	2		2		2
	Name	PT.LUHAI		LUHAI KUNSHAN		XIAHUI
Endorsement/ Guarantee Provider		The Company		The Company		The Company
No. (Notes 1)		0		0		0

168

	Note	－ `－` `－` `－` `－` `－` `－` `－` `－` `－` `－` `－` `－` `－`
December 31, 2020	Fair Value (Note 1)	RMB 291 RMB 10,174 RMB 10,173 RMB 10,173 RMB 10,087 RMB 10,299 RMB 5,030 RMB 10,056 RMB 10,042 RMB 5,016 RMB 5,002 RMB 5,013 RMB 5,000 USD 581
	Percentage of Ownership (%)	0.53% `－` `－` `－` `－` `－` `－` `－` `－` `－` `－` `－` `－` `－`
	Carrying Value	RMB 291 RMB 10,174 RMB 10,173 RMB 10,173 RMB 10,087 RMB 10,299 RMB 5,030 RMB 10,056 RMB 10,042 RMB 5,016 RMB 5,002 RMB 5,013 RMB 5,000 USD 581
	Shares/Units	－－－－－－－－－－－－－－
Financial Statement Item		Financial assets at fair value through other comprehensive income-noncurrent Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through profit or loss-current Financial assets at fair value through other comprehensive income-current
Relationship with the Company		None None None None None None None None None None None None None None
Marketable Securities Type and Name		Xiamen Taiwan Merchants Association Management Co., LTD The RMB financial product with principal guaranteed and floating yield by Fubon Bank (China) Co., Ltd. The RMB financial product with principal guaranteed and floating yield by Fubon Bank (China) Co., Ltd. The RMB financial product with principal guaranteed and floating yield by Fubon Bank (China) Co., Ltd. The RMB financial product with principal guaranteed and floating yield by Fubon Bank (China) Co., Ltd. The RMB financial product with principal guaranteed and floating yield by Bank SinoPac (China) Co., Ltd. The RMB financial product with principal guaranteed and floating yield by Bank SinoPac (China) Co., Ltd. The RMB financial product with principal guaranteed and floating yield by CITIC Bank Co., Ltd The RMB financial product with principal guaranteed and floating yield by CITIC Bank Co., Ltd The RMB financial product with principal guaranteed and floating yield by CTBC Bank Co., Ltd The RMB financial product with principal guaranteed and floating yield by CTBC Bank Co., Ltd The RMB financial product with principal guaranteed and floating yield by CTBC Bank Co., Ltd The RMB financial product with principal guaranteed and floating yield by CTBC Bank Co., Ltd EXXON MOBIL CORP corporate bonds
Held Company Name		XIAHUI LUHAI KUNSHAN LUHAI KUNSHAN LUHAI KUNSHAN LUHAI KUNSHAN LUHAI KUNSHAN LUHAI KUNSHAN LUHAI KUNSHAN LUHAI KUNSHAN LUHAI KUNSHAN LUHAI KUNSHAN LUHAI KUNSHAN LUHAI KUNSHAN LU HAI IND.

169

	Note	Note 1 Note 1 Note 1 Note 1
Ending Balance	Amount	`－` RMB 40,607 `－` RMB 20,098
	Shares	`－` `－` `－` `－`
Disposal	Gain/Loss on Disposal	`－` `－` `－` `－`
	Carrying Value	RMB 71,419 RMB 30,290 RMB 82,054 RMB 49,241
	Amount	RMB 71,419 RMB 30,290 RMB 82,054 RMB 49,241
	Shares	`－` `－` `－` `－`
Acquisition	Amount	RMB 23,000 RMB 70,000 RMB 81,500 RMB 69,000
	Shares	`－` `－` `－` `－`
Beginning Balance	Amount	RMB 47,078 `－` `－` `－`
	Shares	`－` `－` `－` `－`
	Nature of Relationship	None None None None
	Counterparty	`－` `－` `－` `－`
	Financial Statement Item	Finanvial assets at fair value through profit or loss- current Finanvial assets at fair value through profit or loss- current Finanvial assets at fair value through profit or loss- current Finanvial assets at fair value through profit or loss- current
	Marketable Securities Type and Name	The RMB financial product with principal guaranteed and floating yield by Fubon Bank (China) Co., Ltd. The RMB financial product with principal guaranteed and floating yield by Fubon Bank (China) Co., Ltd. The RMB financial product with principal guaranteed and floating yield by CITIC Bank Co., Ltd The RMB financial product with principal guaranteed and floating yield by CITIC Bank Co., Ltd
	Company Name	LUHAI KUNSHAN LUHAI KUNSHAN LUHAI KUNSHAN LUHAI KUNSHAN

170

Note		Note 1 Note 1
Notes/Accounts Payable or Receivable	% to Total	20.60% 9.68%
	Ending Balance	Accounts receivable USD 5,090 Accounts receivable USD 2,392
Difference in transaction term to third party transaction	Payment Terms	`－` `－`
	Unit Price	`－` `－`
Transaction Details	Payment Terms	According to conditions agreed upon the parties According to conditions agreed upon the parties
	% to Total	21.11% 9.37%
	Amount	USD 14,629 USD 6,476
	Purchases/ Sales	Sales Sales
Nature of Relationships		Subsidiary of ultimate parent company The ultimate parent of the Company
Counterparty		PT.LUHAI The company
Purchaser/Seller		XIAHUI XIAHUI

171

Recognized loss allowance	Recognized loss allowance	`－`
Amounts Received in	Subsequent Period	USD 4,370
Overdue	Action Taken	`－`
	Amount	`－`
Turnover	Rate	`－`
Ending Balance of Receivable-Related Party	Ending Balance (Note 1)	USD 5,090
	Item	Accounts receivable
Nature of Relationships		Subsidiary of ultimate parent company
Counterparty		PT.LUHAI
Company Name		XIAHUI

172

Table 7

LUHAI HOLDING CORP. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTION FOR THE YEAR ENDED DECEMBER 31, 2020

(AMOUNTS IN THOUSANDS OF NEW TAIWAN DOLLORS)

No. (Note 1)	Company Name	Counter Party	Nature of Relationship (Note 2)	Intercompany Transactions	Intercompany Transactions	Intercompany Transactions
				Financial Statement Item	Amount	Terms	Percentage of Net Consolidated Revenue
0 0 0 0 0 0 1 1 2 2 3 3 3 3 3 5 5 5 5 5	The Company The Company The Company The Company The Company The Company LU HAI IND. LU HAI IND. PT.LUHAI PT.LUHAI XIAHUI XIAHUI XIAHUI XIAHUI XIAHUI LUHAI KUNSHAN LUHAI KUNSHAN LUHAI KUNSHAN LUHAI KUNSHAN LUHAI KUNSHAN	PT.LUHAI PT.LUHAI XIAHUI XIAHUI LUHAI KUNSHAN LUHAI KUNSHAN The Company The Company The Company XIAHUI The Company The Company PT.LUHAI LUHAI KUNSHAN LUHAI KUNSHAN The Company PT.LUHAI XIAHUI XIAHUI XIAHUI	1 1 1 1 1 1 2 2 2 3 2 2 3 3 3 2 3 3 3 3	Sales revenue Other revenue Sales revenue Other revenue Sales revenue Other revenue Service revenue Rental income Sales revenue Sales revenue Sales revenue Other revenue Sales revenue Sales revenue Processing revenue Sales revenue Sales revenue Sales revenue Processing revenue Interest revenue	9,198 600 7,645 11,478 1,781 3,372 51 2,597 132 3,121 191,687 32 431,926 40,053 1,864 37,025 2,226 34,495 4,743 2,634	Note 3 `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃`	0.35% 0.02% 0.29% 0.44% 0.07% 0.13% - 0.10% 0.01% 0.12% 7.37% - 16.60% 1.54% 0.07% 1.42% 0.09% 1.33% 0.18% 0.10%

(Continued)

173

Table 7

LUHAI HOLDING CORP. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTION

FOR THE YEAR ENDED DECEMBER 31, 2020

(AMOUNTS IN THOUSANDS OF NEW TAIWAN DOLLORS)

No. (Note 1)	Company Name	Counter Party	Nature of Relationship (Note 2)	Intercompany Transactions	Intercompany Transactions	Intercompany Transactions
				Financial Statement Item	Amount	Terms	Percentage of Total Consolidated Assets
0 0 0 0 0 1 2 3 3 3 4 4 4 4	The Company The Company The Company The Company The Company LU HAI IND. PT.LUHAI XIAHUI XIAHUI XIAHUI LUHAI KUNSHAN LUHAI KUNSHAN LUHAI KUNSHAN LUHAI KUNSHAN	PT.LUHAI XIAHUI XIAHUI LUHAI KUNSHAN LUHAI KUNSHAN The Company XIAHUI The Company PT.LUHAI LUHAI KUNSHAN The Company The Company XIAHUI XIAHUI	1 1 1 1 1 2 3 2 3 3 2 2 3 3	Account receivables Account receivables Other receivables Account receivables Other receivables Other receivables Account receivables Account receivables Account receivables Account receivables Account receivables Prepaid of equipment Account receivables Other receivables	782 3,079 1,057 157 411 682 1,946 68,119 144,975 20,275 7,951 262 34,814 95,919	Note 3 `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃` `〃`	0.02% 0.07% 0.02% - 0.01% 0.01% 0.04% 1.44% 3.07% 0.43% 0.17% 0.01% 0.74% 2.03%

Note 1: The numbers filled in for the transaction company represent the follows:

Parent company is ‘0’.
The subsidiaries are numbered in order starting from ‘1’.
Note2: Relationships between transaction companies and counterparties are classified into the following three categories as listed below:
‘1’ represents parent company to subsidiary.
‘2’ represents subsidiary to parent company.
‘3’ represents subsidiary to subsidiary.
Note 3: Sale price with related parties were determined and negotiated referring to related market price. Payment terms were T/T 90 days.

Note 4: All the transactions had been eliminated when preparing consolidated financial report.

(Concluded)

174

Note		Note 8 Note 8 Note 8 Note 8 Note 7`、`8 Note 8`、`9 Note 8`、`9
Share of Profits/Losses	of Investee	99,909 74,934 369,721 10,464 272 66,204 Note 10
Net Income (Losses) of the	Investee	99,909 74,934 369,721 10,464 272 78,327 78,327
Balance as of December 31, 2020	Carrying Value	1,169,988 878,699 717,723 120,500 `－` 345,256 60,954
	Percentage of Ownership	100% 100% 100% 100% `－` 85% 15%
	Shares (In Thousands)	8,857 6,643 6,500 3,000 `－` 6,800 1,200
Original Investment Amount	December 31, 2020	252,247 (USD 8,857) 189,193 (USD 6,643) 185,120 (USD 6,500) 30,000 `－` 193,664 (USD 6,800) 34,176 (USD 1,200)
	December 31, 2020	252,247 (USD 8,857) 189,193 (USD 6,643) 185,120 (USD 6,500) 30,000 `－` 193,664 (USD 6,800) 34,176 (USD 1,200)
Main Businesses activities		Investing activities Investing activities Investing activities Leasing and selling various kinds of valves and accessories Selling activities Manufucturing and selling various kinds of valves and accessories Manufucturing and selling various kinds of valves and accessories
Location		Note 1 Note 2 Note 3 Note 4 Note 5 Note 6 Note 6
Investee		LU HAI BVI ALLPRO YUANHUI LU HAI IND. MEGA PT.LUHAI PT.LUHAI
Investor		The Company LU HAI IND.

175

Accumulated Inward Remittance of Earnings as of December 31, 2020	Accumulated Inward Remittance of Earnings as of December 31, 2020	Not applicable	Not applicable		Not applicable	Accumulated Investment in Mainland China as of December 31, 2020 Investment Amounts Authorized by Investment Commission, MOEA Upper Limit on Investment Not applicable Not applicable Not applicable Note 1`：`Through investing in an existing company in the third area, which then investing in the investee in Mainland China. Note 2`：`Profit or loss recognized were based on the financial statements audited by the auditor of parent company. Note 3`：`Foreign currencies aforementioned were translated into NTD using the exchange rate as of December 31, 2020 or average exchange rate for the year ended. Note 4`：`The Company had capitalization of retained earnings amounted to USD 1,744 thousand in 2007. Note 5`：`The differences between net income and share of profits/losses are due from unrealized sales (losses) gains.	Accumulated Investment in Mainland China as of December 31, 2020 Investment Amounts Authorized by Investment Commission, MOEA Upper Limit on Investment Not applicable Not applicable Not applicable Note 1`：`Through investing in an existing company in the third area, which then investing in the investee in Mainland China. Note 2`：`Profit or loss recognized were based on the financial statements audited by the auditor of parent company. Note 3`：`Foreign currencies aforementioned were translated into NTD using the exchange rate as of December 31, 2020 or average exchange rate for the year ended. Note 4`：`The Company had capitalization of retained earnings amounted to USD 1,744 thousand in 2007. Note 5`：`The differences between net income and share of profits/losses are due from unrealized sales (losses) gains.
Carrying Amount as of December 31, 2020		2,053,323	USD 72,097	713,737	USD 25,061
Share of Profits/Losses (Note 2)		194,865	USD 6,600	370,952	USD 12,564
Percentage of Ownership		100%			100%
Net Income (Losses) of the Investee Company (Note 5)		196,164	USD 6,644	369,948	USD12,530
						Upper Limit on Investment	Not applicable
Accumulated amount of remittance from Taiwan to Mainland China as of December 31, 2020		Not applicable			Not applicable
Amount remitted from Taiwan for the year ended December 31,2020	Remittance back	`－`			`－`
	Remittance to	`－`			`－`
Accumulated amount of remittance from Taiwan to Mainland China as of January 1, 2020		Not applicable			Not applicable	Investment Amounts Authorized by Investment Commission, MOEA	Not applicable
Investment Method		Note 1			Note 1
Total Amount of Paid-in Capital		441,440	USD 15,500	234,789	USD 8,244 (Note 4)
Main Businesses and activities		Manufucturing and selling various	kinds of valves and accessories	Manufucturing and selling various kinds of valves and accessories
						Accumulated Investment in Mainland China as of December 31, 2020	Not applicable
Investee Company		XIAHUI		LUHAI KUNSHAN

176

LUHAI HOLDING CORP. AND SUBSIDIARIES INFORMATION F MAJOR SHAREHOLDERS DECEMBER 31, 2020

Table 10

Table 10
Name of Major Shareholder	Shares
	Number of Shares	Percentage of Ownership(%)
DAY LIGHT BUSINESS CO., LTD.	9,706,320	10.74%
GET JOINT BUSINESS CORPORATION	9,706,320	10.74%

Note 1 ： Table 10 is based on the information on the last business day of the quarter provided by the Taiwan Depository & Clearing Corporation (TDCC). The TDCC calculate the total number of ordinary shares and preferred shares held by shareholders who retain more than 5% of the Company’s share (including treasury shares) that have delivered without physical registration. The number of shares in the Company’s consolidated financial report and the actual number of shares delivered without physical registration may differ due to the different calculation basis.

177

LUHAI HOLDING CORP. AND SUBSIDIARIES
SEGMENT INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2020 AND 2019
(AMOUNTS IN THOUSANDS OF NEW TAIWAN DOLLARS)
Year ended December 31, 2020

The Company
XIAHUI
LUHAI
KUNSHAN
PT.LUHAI
Others
Revenue
Net revenue from external customers
$ 277,035
$ 1,376,128
$ 291,313
$ 678,372
$ -
$ (20,591)
$ 2,602,257
Inter-segment revenue
18,624
665,530
78,489
3,253
2,648
(768,544)
-
Total
$ 295,659
$ 2,041,658
$ 369,802
$ 681,625
$ 2,648
$ (789,135)
$ 2,602,257
Interest income
$ 166
$ 3,745
$ 5,355
$ 1,564
$ 663
$ (2,634)
$ 8,859
Interest expenses
$ 6,050
$ 4,536
$ 872
$ 82
$ -
$ (2,795)
$ 8,745
Depreciation and amortization
$ 2,926
$ 77,282
$ 27,099
$ 18,095
$ 1,213
$ (2,486)
$ 124,129
Impairment of property, plant and equipment $ -
$ 5,803
$ -
$ -
$ -
$ -
$ 5,803
Segment benefit (loss)
$ (25,055)
$ 262,229
$ 493,435
$ 100,863
$ (1,683)
$ -
$ 829,789
Income (loss) before tax
$ 829,789
Total assets
$ 4,725,135
(Continued)
Elimination
Total

178

LUHAI HOLDING CORP. AND SUBSIDIARIES
SEGMENT INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 2020 AND 2019
Year ended December 31, 2019
(AMOUNTS IN THOUSANDS OF NEW TAIWAN DOLLARS)

The Company
XIAHUI
LUHAI
KUNSHAN
PT.LUHAI
Others
Revenue
Net revenue from external customers
$ 108,956
$ 1,330,162
$ 415,436
$ 642,262
$ 248,395
$ (28,322)
$ 2,716,889
Inter-segment revenue
8,891
661,265
156,574
711
15,100
(842,541)
-
Total
$ 117,847
$ 1,991,427
$ 572,010
$ 642,973
$ 263,495
$ (870,863)
$ 2,716,889
Interest income
$ 555
$ 10,185
$ 1,403
$ 704
$ 2,059
$ -
$ 14,906
Interest expenses
$ 8,669
$ 3,915
$ 47
$ 509
$ -
$ (146)
$ 12,994
Depreciation and amortization
$ 2,111
$ 69,828
$ 23,369
$ 18,113
$ 1,853
$ (2,170)
$ 113,104
Impairment of property, plant and equipment $ -
$ 5,288
$ -
$ -
$ -
$ -
$ 5,288
Segment benefit (loss)
$ (13,578)
$ 251,392
$ 9,178
$ 68,194
$ 30,652
$ -
$ 345,838
Income (loss) before tax
$ 345,838
Total assets
$ 4,146,656
(Concluded)
Elimination
Total

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VII. Review of Financial Conditions, Operating Results, and Risk Management

7.1 Financial situation

Unit: NTD thousand

ancial situation			Unit: NTD thousand	Unit: NTD thousand
Year Item	2019	2020	Difference
			Amount	%
Current assets	2,732,532	2,765,828	33,296	1.22%
Financial assets at fair value through profit or loss –noncurrent	1,558	1,267	(291)	(18.68%)
Property, plant and equipment	1,148,538	1,631,999	483,461	42.09%
Right-of-use assets	197,862	198,398	536	0.27%
Intangible assets	6,956	13,737	6,781	97.48%
Other assets	59,210	113,906	54,696	92.38%
Total assets	4,146,656	4,725,135	578,479	13.95%
Current liabilities	1,345,967	915,111	(430,856)	(32.01%)
Non-current liabilities	499,994	1,090,601	590,607	118.12%
Total liabilities	1,845,961	2,005,712	159,751	8.65%
Equity attributable to owners of parent company	2,300,695	2,719,423	418,728	18.20%
Capital stocks	860,632	903,664	43,032	5.00%
Capital surplus	443,701	443,701	-	0.00%
Retained earnings	1,365,892	1,728,280	362,388	26.53%
Other equity	(369,530)	(356,222)	13,308	(3.60%)
Treasury shares	-	-	-	-
Non-controlling interests	-	-	-	-
Total equity	2,300,695	2,719,423	418,728	18.20%
Description on major change items: (if the proportion of increase or decrease change exceeds 20%, and the change amount thereof reaches to NTD10 million) 1. The increase of property, plant and equipment is mainly to the construction of new plant in Xiamen, and the construction in progress increases. 2. The increase of other assets are mainly due to the increase of prepayments of automatic equipment, prepayments of KUNSHAN LUHAImargin of the right-of-use assets and the pay of the work completion and the escrow. 3. The decrease of current liabilities is mainly due to the relocation by coordinating with the policy of Huaqiao municipal government, which will deliver immovable items in this term. The relocation income deducts the twice compensations for relocation (listed as long-term deferred-profits) and the relocation expense, are listed as net profits of relocation, increasing the current liabilities. 4. The increase of non-current liabilities is mainlydue to Xiamen’s newplantplan,and the

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borrowings are in response to related capital expenditure.

5.The increase of retained earnings are mainly due to the net profits of recolation compensation, increasing profits.

7.2 Financial performance

7.2.1 Main reasons for major changes in operating income, operating net profit and net profit before tax in the last two years

Unit: NTD thousand

Year Item	2019	2020	Amount of increase (decrease)	Change proportion （%）
Net revenue	2,716,889	2,602,257	(114,632)	(4.22%)
Gross Profit	615,058	626,635	11,577	1.88%
Operating income (loss)	312,635	328,035	15,400	4.93%
Non-operating income and expenses	33,203	501,754	468,551	1,411.17%
Income (loss) before tax from continuingoperations	345,838	829,789	483,951	139.94%
Net income (loss) from continuing operations	241,910	594,759	352,849	145.86%
Loss from discontinued operations	-	-	-	-
Net profit	241,910	594,759	352,849	145.86%
Other comprehensive income (loss) for the year, net of income tax	(86,854)	13,308	100,162	(115.32%)
Total comprehensive income (loss) for the year	155,056	608,067	453,011	292.16%
Net income (loss) attributable to: Shareholders of the parent	241,910	594,759	352,849	145.86%
Net income attributable to non-controllinginterests	-	-	-	-
Total comprehensive income (loss) attributable to: shareholders ofthe parent	155,056	608,067	453,011	292.16%
Comprehensive income attributable to non- controllinginterests	-	-	-	-
Description on major change items: (if the proportion of increase or decrease change exceeds 20%, and the change amount thereof reaches to NTD10 million) 1. The increase of non-operating revenue and expenditure are mainly due to the completion of policy relocation, listing relocation compensation profits as net profits, and the subsidy makes the non-operating revenue increase. 2. Note 1 explains the major increases of income before tax, income from continuing operation, net income, and consolidated net income attributed to the parent company. 3. The increase of other comprehensive income (net income after tax) is mainly due to the appreciation of RMB and US dollar, causing exchange difference in in translation of the financial statements of foreign operating institutions. 4. Note 1 and Note 3 explain the major increase of consolidated net income attributed to the parent companyand comprehensive income attributable to theparent company.

Description on major change items: (if the proportion of increase or decrease change exceeds 20%, and the change amount thereof reaches to NTD10 million)

1.The increase of non-operating revenue and expenditure are mainly due to the completion of policy relocation, listing relocation compensation profits as net profits, and the subsidy makes the non-operating revenue increase.
2.Note 1 explains the major increases of income before tax, income from continuing operation, net income, and consolidated net income attributed to the parent company.
3.The increase of other comprehensive income (net income after tax) is mainly due to the appreciation of RMB and US dollar, causing exchange difference in in translation of the financial statements of foreign operating institutions.
4.Note 1 and Note 3 explain the major increase of consolidated net income attributed to the parent company and comprehensive income attributable to the parent company.

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7.2.2 Expected sales quantity and its basis

The reinvestment company of the Company has worked out reasonable and achievable sales quantity according to market demand, sales in customer end and supply assessment. For relevant market research analysis and current condition and development of industry, please refer to the descriptions in Operational Highlights.

7.2.3 Possible impact on the company’s future financial affairs and response plan

The market demand of the Group’s product application end is still growing, reinvestment company of the Company will always pay attention to the changes of market demand to improve company performance, and the Company will continue to strengthen the operation and cost control of each subsidiaries to improve profitability of the Group.

7.3 Cash flow

7.3.1 Analysis of cash flow changes in the last year

low alysis of cash flow changes in the last year	low alysis of cash flow changes in the last year	low alysis of cash flow changes in the last year	low alysis of cash flow changes in the last year	low alysis of cash flow changes in the last year
Unit: %
Item	2020	2019	Amount of increase or decrease	Proportion of increase or decrease
Net cash provided by operating activities	263,530	283,441	(19,911)	(7.02%)
Net cash provided by (used in) investing activities	(730,710)	121,249	(851,959)	(702.65%)
Net cash used in financing activities	125,040	(61,778)	186,818	(302.40%)
Data source: the financial statement audited and certified by the accountant. Analysis of cash flow changes in this year: 1. The decrease of cash inflow in operating activity: mainly due to the decrease of business growth revenue in quarter 4 of 2020, causing decrease of cash inflow in operating activity. 2. The increase of cash inflow in investment activity: mainly due to receiving 20% of relocation compensation at the end of the year and payment of project funds for the new plant in Xiamen, causing increase of cash inflow in investment activity. 3. The increase of net cash outflow in fundraising activity: mainly due to the increase of borrowing, in response to the project expenditure, causing the increase of net cash outflow in fundraising activity.

The decrease of cash inflow in operating activity: mainly due to the decrease of business growth revenue in quarter 4 of 2020, causing decrease of cash inflow in operating activity.

7.3.2 Improvement plan for liquidity shortage

The business of the Group is at the stage of profit growth, and the Group appropriates bank loan in due time, and there is no liquidity shortage currently.

7.3.3 Cash liquidity analysis in the coming year

Cash liquidity analysis in the coming year	Cash liquidity analysis in the coming year	Cash liquidity analysis in the coming year	Cash liquidity analysis in the coming year
				Unit: NTD thousand
Cash and cash equivalents, beginning of year	Estimated net cash flow from operating activities	Estimated cash outflow (inflow)	Cash Surplus (Deficit)	Remedial measures for estimated cash surplus (Deficit)
				Investment plan	Financial plan
789,600	362,007	(237,796)	913,811	-	-

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Analysis on cash flow changes in the coming Year:

Operating activity: the expected cash inflow to be generated in 2021 is mainly due to the net profit generated after tax.
Expected annual cash outflow (investment and fundraising activities): the cash outflow expected to be generated from the investment activity of the Company in 2021 is mainly due to the capital expenditure for new plant in Xiamen and its equipment expenditure; the cash inflow expected to be generated from the fundraising activity of the Company in 2021 is mainly due to the increase of financing and distribution of cash dividend, it is expected that the investment and fundraising activities will generate cash outflow.

7.4 The impact of significant capital expenditure on financial affairs in the last year

Items of significant capital expenditure of the Group mainly include the expenditure in acquisition of plant, production equipment and detection equipment, mainly because of aiming at increase the investment in automation and continuous purchase of mechanical equipment in respond to market strategy planning, in 2020, the capital expenditure invested was approximately NTD667,836 thousand, accounting for 25.66% of net revenue, and it had no adverse impact on financial affairs of the company yet.

7.5 Reinvestment policy in the last year, the main reason for its profit or loss, improvement plan and investment plan in the coming year

7.5.1 Reinvestment policy of the Company

Reinvestment policy of the Company is to take main business into core consideration, and take the strengthening of vertical integration of upstream and downstream as the development direction. Relevant investment plans have been analyzed and measured in every aspect, they can bring benefits to the Group and comply with the “Investment cycle” in internal control system passed by the resolution of Board of Directors Meeting or General Meeting and the “Regulations Governing the Acquisition and Disposal of Assets” of the Company.

7.5.2 Main reason for profit or loss from reinvestment in the last year, improvement plan and future investment plan

Unit: NTD thousand

Invested company	Direct	Investment		Improvement plan
					Investment
	(indirect)	profit and loss	Reason for profit
					plan in the
	shareholding	recognized in	or loss
					coming year
	ratio	the last year

LU HAI (BVI) INDUSTRIAL CORP.	100%	99,909	Mainly due to the recognition of profits from XIAMEN XIAHUI	None	None
ALLPRO INTERNATIONAL CORP.	100%	74,934		None	None
YUANHUI INTERNATIONAL CO., LTD.	100%	369,721	Mainly due to the recognition of profits from KUNSHAN LUHAI	None	None
LU HAI INDUSTRIAL CORP.	100%	10,464	Under good operating conditions	None	None
MEGA POWER	100%	272	Note	None	None
PT. LUHAI INDUSTRIAL	100%	66,204	Under good operating conditions	None	None
XIAMEN XIAHUI RUBBER METAL	100%	194,865	Under good operating	None	None

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INDUSTRIAL CO., LTD.			conditions
LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD.	100%	370,952	Under good operating conditions due to the listed net profits of relocation	None	Expansion of new plant

Note: To cooperate the group’s plan of operating development, there is no operating activities; it had been passed by the Board of Director to suspend operation and apply cancellation registration on August 7, 2020. And the procedure of cancellation registration had completed on October 28, 2020.

7.6 Risk Management

7.6.1 The impact of interest rate, fluctuation in exchange rate, and inflation on company’s profit and loss and future solutions

7.6.1.1 Interest rate change

terest rate change
	Unit: NTD thousand
	2019		2020
	Amount	Proportion in net sales	Amount	Proportion in net sales
Interest income	14,906	0.55%	8,859	0.34%
Interest expense	12,994	0.48%	8,745	0.34%

The interest income and interest expense of the Group in the last two years are accounting for a low proportion in net sales of the year, recorded at0.34% and 0.55%, and 0.34% and 0.48% respectively, and the impact on profit and loss is still manageable. Specific solutions of the company in respond to interest rate change:

In principle, the capital planning of the Group is conservative and steady, in the aspect of capital allocation, the Group gives priority to safety management, and the capital investment is mainly short-term deposit, and the proportion of interest income is low. The financial structure of the Group is sound, borrowings are made in respond to the working capital necessary for the expansion of business scale, and the proportion of interest expense is also low. The Company and each subsidiary will give comprehensive consideration to the limit and cost of all kinds of capital sources to raise the needed capital, in the future, we will still pay close attention to the development trend of global economy, and adopt hedging instruments in due to avoid the risk of rising interest rate.

7.6.1.2 Impact of fluctuation in exchange rate

and adopt hedging instruments in due to avoid the risk of rising interest rate. pact of fluctuation in exchange rate	and adopt hedging instruments in due to avoid the risk of rising interest rate. pact of fluctuation in exchange rate	and adopt hedging instruments in due to avoid the risk of rising interest rate. pact of fluctuation in exchange rate
Unit: NTD thousand
Year Item	2019	2020
Foreign exchange gain (loss)	26,263	(5,318)
Proportion in operating revenue (%)	0.97%	(0.20%)

Foreign exchange gain (loss) of the Group in the last two years are NTD (5,318) thousand and NTD 26,263 thousand respectively, only accounting for (0.20%) and 0.97% of the net operating income, and it is not significant. Collection currency of the Group are mainly USD and RMB, and the payment for material procurement is also mainly made by

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USD and RMB, the mutual offset between them will generate the effect of natural hedge to reduce the exchange demand, and it should be able to minimize the impact of exchange rate fluctuation.

Specific solutions of the company in respond to fluctuation in exchange rate:

Financial personnel will collect real-time exchange rate market information at any time, and maintain appropriate net foreign exchange position according to the judgment on the trend of future exchange rate and provide it to business personnel for reference when making an offer.
Adjust the foreign currency deposit position according to the fluctuation in exchange rate, when necessary, pre-order or presell forward exchange contract for hedging purpose or borrow money to reduce the risk of exchange rate.
Adopt foreign exchange income and expenditure for automatic hedging, use the offset in the foreign currency receipts and payments generated from export sales and external procurement to reduce the position of net assets in foreign currency.
Formulate the “Regulations Governing the Acquisition and Disposal of Assets” pursuant to “Regulations Governing the Acquisition and Disposal of Assets by Public Company”, and take it as the basis for engaging in derivative transactions, making the exchange loss in daily operation within a manageable scope.
7.6.1.3 Impact of inflation

Upon planning annual business plan, the Group has considered the risk of inflation, the profit and loss of the Group has not been significantly impacted by inflation in the past, in case of rising purchasing cost due to inflation, the Group will also always master the price changes in upstream commodities, and reflect it in the cost and offer, so as to reduce the impact on the profit and loss of the company caused by cost fluctuation.

7.6.2 Policy on engaging in high risk and highly leveraged investment, granting of loans, endorsement and derivative securities transaction, main reason for profit or loss, and future solutions
7.6.2.1 Based on the steady principle and practical operation philosophy, apart from focusing on the business fields of the Group, the Group has not engaged in high risk and highly leveraged investment.
7.6.2.2 In the last two years and as at the publication date of annual report, apart from granting of loans to and endorsement and guarantee for the subsidiaries in which the Group with direct and indirect shareholding of one hundred percent, the Group has not made granting of loans to and endorsement and guarantee for others. Besides, the Group has formulated the “Regulations Governing Loaning of Funds” and “Regulations Governing Making of Endorsements/Guarantees”, relevant operations are executed prudently after giving consideration to risk conditions and relevant regulations.
7.6.2.3 The financial derivatives held by important subsidiaries of the Company are used for avoiding the exchange rate risks imposed in operation, financial and investment activities, however, since they are not conforming to the element of hedge accounting, hence they are recognized as the financial assets and liabilities listed in profit and loss according to the change in fair value.
7.6.3 Research and development Plan and expected invested research and development costs

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7.6.3.1 Future research and development plan
Process improvement: improve the automation degree and reduce production cost.
New technology development: continue to focus on the research and development of professional fields of valves, and obtain patent right of utility models.
The key points in current research and development of the Group is to continuously
develop dedicated automation equipment, improve equipment production efficiency and product quality, accelerate the introduction and conduct mass production for the completed research and development achievements, complete the transformation of production technique, and expand the overall benefits.
7.6.3.2 Expected invested research and development costs

For the investment in research and development costs, the Group has complied gradually according to the progress of new products and process development, in 2019 and 2020, the research and development costs was NTD29,410 thousand and NTD26,063 thousand respectively, the company has maintained stable expenditure in research and development costs, so as to support the future research and development plan and increase the market competitiveness of the Group. The research and development costs compiled by the Group in 2021 is NTD37,515 thousand.

7.6.4 The impact of changes in domestic and overseas important policies and laws on financial affairs of the company and solutions

The Company is registered in Cayman Islands and has no substantial economic activities there, and the main places of business include China Mainland, Indonesia, and Taiwan, the Company and subsidiaries always pay attention to the information of changes in important policies and laws in the locating countries and regions, and make preventive preparation through all kinds of channels in advance, hence the changes in important policies and laws both at home and abroad have not caused significant impact on the financial affairs of the Company.

7.6.5 The impact of changes in technology and industry on financial affairs of the company and solutions

The valve industry engaged in by the Company and subsidiaries is the industry of hundred years, it is the essential industry in industrial and commercial society, the Group will always pay attention to the changes in relevant technologies of the industry and changes in prices of rubber material and copper material market and master the market trend, currently, there is no change in technology and industry that might cause significant impact on financial affairs of the company.

Solutions:

Understand industry trend, continue to invest in research and development and apply for patents, and improve automation degree.
Understand customer requirements, provide complete product lines, provide one-stop service, and increase added value.
7.6.6 The impact of change in corporate image on corporate crisis management and solutions: Ever since the establishment, the Company has a good corporate image and comply with
relevant laws and decrees, actively promotes various quality certifications, and maintain a harmonious labor-capital relationship and local relationship at the same time, so as to

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continuously maintain a good corporate image, and in recent years, there is no any circumstance affecting the corporate image.

7.6.7 Expected benefit and possible risk of merger and acquisition and solutions

As at the publication date of annual report, the Company does not have any plan of merger and acquisition of other companies, in case of any merger and acquisition plan in the future, the Company will conduct assessment prudently and give consideration to the merger synergy, so as to ensure the rights and interests of shareholders.

7.6.8 Expected benefit and possible risk of plant expansion and solutions

In order to satisfy the future market and Group’s strategic planning, the Company ordered subsidiaries XIAMEN XIAHUI to acquire a new land in 2018, currently the plant is under construction, it is planned to expand production capacity in metal processing, so as to win market opportunity and achieve the synergy in the Group’s resources allocation. The funds in plant expansion is supported by own funds, hence the risk might be caused is limited.

7.6.9 Risk encountered in centralized purchasing or sales and solutions
Risk encountered in centralized purchasing and solutions

The purchasing objects of the Group are dispersed, suppliers are from both at home and abroad, there is no single supplier in overall purchasing. In the last three years, the purchasing amount of the first biggest supplier is accounting for 27.35%, 31.75% and 27.41% of the total purchase account respectively, mainly due to the second biggest supplier reduces the supply quantity because of the impact of restricted working hours pursuant to law, resulting in the purchase proportion of the first biggest supplier increase in 2019. The Group will continue to expand the recovery and reuse of its own copper materials, dispersed the proportion of purchase of single supplier, it may dispersed the impact of fluctuation in copper price at the same time, and it may also reduce the impact on operation performance.

Risk encountered in centralized sales and solutions

Regions of customers in sales of the Group include Europe, Africa, America and Asia etc., in the last three years, the total sales volume of top ten customers in sales was accounting for 55.97%, 53.76% and 54.93% of the annual net revenue respectively, and the total sales volume of the biggest customer in sales was accounting for 13.16%, 13.53% and 14.84% of the annual net revenue respectively, there is no single customer with sales proportion over 30%, all customers have been doing business of the Group for years, and product quality has been deeply recognized and trusted by customers, both parties are maintaining a long-term and stable sales relationship, hence there is no risk of centralized sales.

7.6.10 The impact and risk of massive transfer or change of the stock rights of directors, supervisors or shareholders with shareholding over ten percent and solutions

As at the publication date of annual report, there is no massive transfer of stock rights in the directors and substantial shareholders with shareholding over ten percent of the Company; the Company carried out comprehensive re-election of directors and supervisors in General Meeting on June 25, 2018, the original 13 seats of directors were changed into 11 seats of directors, and 2 of them refused to take office, so there are 9 seats of directors currently. However, the shareholdings of substantial shareholders are stable, there is no significant change of important managerial officers, and management is stable.

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7.6.11 The impact and risk of change in management right and solutions

As at the publication date of annual report, the Company has no circumstance of change in management right.

7.6.12 Litigation or non-litigation case

The sentenced or pending significant litigation, non-litigation or administrative litigation involving in the company or the directors, supervisors, General Manager, actual head and substantial shareholders with shareholding ratio over ten percent of the company shall be listed, and if the results thereof have significant impact on shareholders’ equity or securities price, the facts in dispute, amount of object, commencement date of litigation, major parties involved in litigation, and handling circumstance as at the publication date of annual report shall be disclosed: None.

7.6.13 Other important risks and solutions:

Major computer room of information system of the Group locates in Changhua, the operating host adopts IBM System X3650, and the backup host adopts Synology RS810+, and drilling of backup restoration is conducted every year. For the part of network security, the Group has established firewall internally, and the Group adopts ESET NOD32 antivirus software internally and mandatorily update virus code every day; and for all kinds of information risks, such as device management, hardware protection, Internet and mobile security etc., administrative measures have been planned to improve the safety protection capacity of network and information system as well as the level of information governance, hence the risk of information security of the Company is still under control appropriately.

7.7 Other important matters: None.

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VIII. Special Recorded Matters

8.1 Relevant information of affiliated enterprise

8.1.1 Consolidated business report of affiliated enterprise
8.1.1.1 Organization chart of affiliated enterprise:

==> picture [446 x 253] intentionally omitted <==

Notes: Subsidiaries PT. LUHAI carried out cash capital increase of USD2,000 thousand in 2015, all of them were directly invested by the Company, hence the Company’s proportion of direct investment in it rose from 80% to 85% since April 1, 2015.

8.1.1.2 Basic information of affiliated enterprises:

Unit: NTD thousand and December 31, 2020 foreign currency in thousand

Name of enterprise	Establish ment date	Address	Paid-in capital	Main business or production item
LU HAI (BVI) INDUSTRIAL CORP.	1996/11/5	Vistra Corporate Services Centre, Wickhams Cay`Ⅱ`, Road Town, Tortola, VG1110, British Virgin Islands.	252,247 (USD8,857)	Investment holding
ALLPRO INTERNATIONAL CORP.	2000/7/10	Corner Hutson & Eyre Street, Blake Building, Suite 302, Belize City, Belize.	189,193 (USD6,643)	Investment holding
YUANHUI INTERNATIONAL CO., LTD.	2003/1/31	Level 3, Alexander House, 35 Cybercity, Ebene Mauritius.	185,120 (USD6,500)	Investment holding
XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD	1990/5/9	No.41, Xinyuan Rd, Xing Lin District, Xiamen China.	441,440 (USD15,500)	Production, manufacturi ng and sales of valve
LUHAI RUBBER METAL	1997/5/23	No.586 Feng Xing Road, HuaQiao Town,Kunshan	234,789 (USD8,244)	Production, manufacturi

189

INDUSTRIAL (KUNSHAN) CO., LTD.		City, Jiangsu Province, P.R.China.		ng and sales of valve
LU HAI INDUSTRIAL CORP.	1983/5/13	No.64, Shing-kong 5th Rd, Tien-Chung Industrial District, Tien-chung,Chang- huaTaiwan.	30,000	Leasing, Buying and selling business
PT. LUHAI INDUSTRIAL	2011/11/8	d\a. Jl. Raya Cikande Rangkasbitung Km. 4.5. Desa Junti. Jawilan. Serang, Indonesia	227,840 (USD8,000)	Production, manufacturi ng and sales ofvalve

Notes: Converted at the exchange rate of USD1=NTD28.480 on the closing day of financial report.

8.1.1.3 Same shareholder information of those presumed with control and subordinate relationship: None.
8.1.1.4 Information of directors, supervisors and General Manager of each affiliated enterprise:

Name of enterprise	Title	Name or representative	Shareholding	Shareholding
			Number of shares	Shareholding ratio %
LU HAI (BVI) INDUSTRIAL CORP.	Director	WU, CHING-SHU	-	-
ALLPRO INTERNATIONAL CORP.	Director	WU, CHING-SHU	-	-
YUANHUI INTERNATIONAL CO., LTD.	Director	WU, CHING-SHU	-	-
XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD.	Chairman	HSU, LIEN-KAI	-	-
	Director	HSU, HSIU-HUA
	Director	HSU, YA-TING
	Director	HSU, HUAI-YUN
	Director	HSU, HAN-YUAN
	Supervisor	WU, CHING-SHU
LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD.	Chairman	HSU, LIEN-KAI	-	-
	Director	WU, CHING-SHU
	Director	HSU, HSIU-HUA
	Director	HSU, YA-TING
	Director	HSU, HUAI-YUN
	Supervisor	HSU, HAN-YUAN
LU HAI INDUSTRIAL CORP.	Chairman	British Cayman Islands Merchant LU HAI HOLDING CORP. Representative: HSU, LIEN-KAI	-	-

190

	Director	British Cayman Islands Merchant LU HAI HOLDING CORP. Representative: HSU, HSIU-HUA
	Director	British Cayman Islands Merchant LU HAI HOLDING CORP. Representative: HSU, YA-TING
	Director	British Cayman Islands Merchant LU HAI HOLDING CORP. Representative: HSU, HUAI-YUN
	Director	British Cayman Islands Merchant LU HAI HOLDING CORP. Representative: HSU, HAN-YUAN
	Supervisor	British Cayman Islands Merchant LU HAI HOLDING CORP. Representative: WU, CHING-SHU
PT. LUHAI INDUSTRIAL	Chairman	HSU,HSIU-HUA	-	-
	Director	QIUZHONG-LIE
	Director	QIU JING-HUI
	Supervisor	HSU,LIEN-KAI
	Supervisor	WU, CHING-SHU
	Supervisor	HSU,YA-TING
	Supervisor	HSU,HUAI-YUN
	Supervisor	HSU,HAN-YUAN

8.1.1.5 Operation profile of each affiliated enterprise

December 31, 2020 Unit: NTD thousand

Name of enterprise	Capital amount	Total assets	Total liabilities	Net value	Net revenue	Operating income	Net income(loss) (after tax)	Earnings per share (NTD) (after tax)
LU HAI (BVI) INDUSTRIAL CORP.	252,247	1,181,142	11,029	1,170,113	-	(67)	99,909	11.28
ALLPRO INTERNATIONAL CORP.	189,193	887,066	8,273	878,793	-	(68)	74,934	11.28
MEGA POWER CO., LTD.		Notes1			-	(33)	272	Notes1
YUANHUI INTERNATIONAL CO., LTD.	185,120	717,775	-	717,775	-	(235)	369,721	56.88
XIAMEN XIAHUI RUBBER METAL INDUSTRIAL CO., LTD.	441,440	3,201,593	1,134,350	2,067,243	2,041,658	252,487	196,164	-

191

Name of enterprise	Capital amount	Total assets	Total liabilities	Net value	Net revenue	Operating income	Net income(loss) (after tax)	Earnings per share (NTD) (after tax)
LUHAI RUBBER METAL INDUSTRIAL (KUNSHAN) CO., LTD.	234,789	1,103,235	387,502	715,733	369,802	1,602	369,948	-
LU HAI INDUSTRIAL CORP.	30,000	121,170	784	120,386	2,648	706	10,464	3.49
PT. LUHAI INDUSTRIAL	227,840	593,217	186,418	406,799	681,625	99,950	78,327	9.79

Notes: converted according to the exchange rate (USD1=NTD28.480, USD1=RMB6.5392, USD1=IDR14,163) on the closing day of financial report or current average exchange rate (USD1=NTD29.525, USD1=RMB6.8978, USD1=IDR14,581).
Notes1: To cooperate the group’s plan of operating development, there is no operating activities; it had been passed by the Board of Director to suspend operation and apply cancellation registration on August 7, 2020. And the procedure of cancellation registration had completed on October 28, 2020.
8.1.2 Consolidated financial statements of affiliated enterprise: foreign companies may be exempted from preparing consolidated financial statement of affiliated enterprise according to the rules of Chapter 5 of preparation guidelines, please refer to page 103 to 179 for consolidated financial statements of the Company.
8.1.3 Declaration of consolidated statement of affiliated enterprise: foreign companies may be exempted from preparation.
8.1.4 Relationship report: Not applicable.
8.2 In the last year and as at the publication date of annual report, execution situation of private placement of negotiable securities: None.
8.3 In the last year and as at the publication date of annual report, subsidiaries’ holding or disposal of shares of the Company: None.

8.4 Other necessary supplementary explanations: None.

8.5 In the last year and as at the publication date of annual report, in case of matters having significant impact on the shareholders’ equity or security price as prescribed in Subparagraph 2, Paragraph 3, Article 36 of Securities and Exchange Act, it shall also be specified one by one: None.

8.6 Description on significant difference from the shareholders’ equity protection regulations of our country:

The Company has amended Articles of Incorporation according to the important matters of protecting shareholders’ equity listed in the “Checklist for Matters of Protecting Shareholders’ Equity of Foreign issuers in the Country of Registration” published by Stock Exchange, but since some of important matters of protecting shareholders’ equity are not applicable under the laws of Cayman, hence they are not stipulated in Articles of Incorporation, it is hereby explained the difference as follows (Articles of Incorporation is subject to the English version, and the following Chinese contents are for reference only):

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Shareholders’ equity protection matters	“Company Act” or “Securities and Exchange Act” related laws and decrees	Explanation on companies laws and decrees of Cayman Islands	Provisions of Articles of Incorporation and explanation
Formation and change of companycapital
1. After buying back its own shares, if the company transfer them to employees at the price of lower than average price in actual shares buyback, it shall be agreed by more than two third of attending shareholders with voting rights in the last General Meeting attended by shareholders holding the majority of total outstanding shares, and the following matters shall be listed and explained in the subject of convocation of such General Meeting, and it shall not be proposed as an Extempore Motion: (1) The transfer price fixed, discount rate, calculation basis and rationality. (2) Number of shares transferred, purpose and rationality. (3) Subscribing employee’s qualification and number of shares may be subscribed. (4) Matters affecting shareholders’ equity: (a) Possible expensing amount and the dilution of earnings per share of the company. (b) Explain the financial burden caused to the company due to transferring shares to employees at the price lower than average price in actual shares buyback. 2. The accumulated number of shares passed by previous General Meetings and transferred to employees shall not exceed five percent of the total outstanding shares of the company, and the accumulated number of shares subscribed by one subscribing employee shall not exceed 0.5% of the total outstanding shares of the company.	Article 14 of “Measures Foreign Issuers’ Buyback of Listed Negotiable Securities” promulgated by Taiwan Stock Exchange.	1. Companies in Cayman may redeem or buy back shares as treasury shares when conforming to certain conditions (Article 37, Article 37A). 2. Companies redeeming or buying back treasury shares according to the provisions of Article 37A may transfer them to anyone at any time.	1. The Company has listed relevant provisions in Article 20 of Articles of Incorporation.

193

Shareholders’ equity protection matters	“Company Act” or “Securities and Exchange Act” related laws and decrees	Explanation on companies laws and decrees of Cayman Islands	Provisions of Articles of Incorporation and explanation
General Meeting’s convening procedure and resolution method
1. The General Meeting shall be convened at least once a year and convened within six months after the end of every accounting year. The General Meeting is convened by Board of Directors. 2. The General Meeting shall be convened in the territory of the Republic of China. If the General Meeting is convened outside the territory of the Republic of China, it shall be resolved by Board of Directors or reported to Stock Exchange for consent after shareholders have obtained convening license from the competent authority. 3. The shareholder holding more than one percent of the total outstanding shares may propose a motion of General Meeting to the Company in writing or electronically. Apart from that the motion is not resolved in Shareholder’s Meeting, or the shareholding of the shareholder proposing a motion is less than one percent, or the motion is not proposed during the acceptance period, or the words of a motion exceed 300 words or there is more than one motion, it will not be listed in the motion. Board of Directors shall list it as a motion. If a shareholder’s proposal is urging the company to promote public interests or fulfill its social responsibilities, Board of directors may still list it as a motion. 4. The shareholder who holds over three percent of outstanding shares for over one year consecutively may note the proposed matters and reason in writing, and ask Board of Directors to convene an extraordinary general meeting. Within fifteen days after proposing the request, when the Board of Directorsfailstoissueaconveningnotice, such	1. Article 170 of Company Act 2. Article 172-1 of Company Act 3. Paragraph 1 and Paragraph 2, Article 173, Article 173-1 of Company Act 4. Article 172 of Company Act, Article 26-1 and Article 43-6 of Securities and Exchange Act	1. Pursuant to Companies Law of Cayman, a General Meeting of every company, other than an exempted company, shall be held at least once in every year. (Article 58). 2. Unless otherwise stipulated in Articles of Incorporation, the convening notice of General Meeting shall be served to each shareholder 5 days in advance; 3 shareholders shall be competent to convene a General Meeting; it shall be competent for any person elected by the shareholders present to preside the General Meeting (Article 61). 3. Unless otherwise stipulated in Articles of Association, one shareholder being present in person may convene a General Meeting (Article 57). 4. Regarding the proposal of minority shareholders, there is no similar provisions in Companies Law ofCayman.	1. Regarding the request of minority shareholders to Board of Directors to convene an extraordinary general meeting, since there is no similar provisions in Companies Law of Cayman and there is no local corresponding competent authority in Cayman Islands; besides, according to the explanation in Item 3, No. 36 of “Q & A for Listing in Taiwan by Foreign Issuers” (the version on January 23, 2013) promulgated by TWSE, “Under the premises of not contravening the laws and decrees of registration place, a foreign enterprise shall stipulate the rights of minority shareholders to request for convening an extraordinary general meeting in Articles of Incorporation, for the part of convening a meeting with the permission of competent authority, it may be deleted.”, Hence Article 42 of Articles of Incorporation of the Company stipulates that shareholders may voluntarily convene an extraordinary general meeting pursuant to Applicable Public Company Rules. 2. The Company has included relevant provisions in Article 39 to Article 43,Article 47,and Article 49 of

194

Shareholders’ equity protection matters	“Company Act” or “Securities and Exchange Act” related laws and decrees	Explanation on companies laws and decrees of Cayman Islands	Provisions of Articles of Incorporation and explanation
shareholder may voluntarily convene the meeting with the permission of competent authority. 5. Shareholders continuously holding 50% or more of the total number of outstanding shares of a company for a period of three months or a longer time may voluntarily convene a special shareholders’ meeting. The calculation of above said holding period and number of shareholding in the preceding sentence shall be based on the Register of Members as of the first date of the book closed period. 6. The following matters shall be stated in the notice of general meetings, with a summary of the material content to be discussed, and shall not be brought up as an Extempore Motion, and the summary of above said matters may be put on the website(s) designated by the competent authorities or the Company, and address of such website(s) shall be indicated clearly in the notice: (1) Election or dismissal of directors or supervisors; (2) Alteration to Articles ofIncorporation; (3) Capital reduction; and (4) Application for the approval of ceasing its status as a public company; and (5) Dissolution, merger, shares swap or spun-off of the company; (6) Entry into, amendment to, or termination of any contract for lease of its business in whole, or the delegation of management, or regular joint operation with others; (7) The transfer of the whole or any material part of its business or assets; (8) Taking over another’s whole business or assets, whichwill havea materialeffecton the business		5. Regarding the request of minority shareholders to Board of Directors to convene an extraordinary general meeting, there is no similar provisions in Companies Law of Cayman. 6. Regarding the matters shall be listed in the subject of convocation of a General Meeting, there is no similar provisions in Companies Law of Cayman.	Articles of Incorporation. 3. The Stock Exchange amended the checklist for shareholder’s equity on November 30, 2018 to add that shareholders may propose a motion electronically, and a shareholder may propose to urge the company to promote public interests or fulfill its social responsibilities, shareholders continuously holding 50% or more of the total number of outstanding shares of a company for a period of three months or a longer time may voluntarily convene a shareholders’ meeting, and specific motion shall be put on the website(s) designated by competent authorities, and address of such website(s) shall be indicated clearly in the notice etc., Article 42 and 47 are amended accordingly, Article 42-1 is added.

195

Shareholders’ equity protection matters	“Company Act” or “Securities and Exchange Act” related laws and decrees	Explanation on companies laws and decrees of Cayman Islands	Provisions of Articles of Incorporation and explanation
operation of the company; (9) Issuing equity-type securities by private placement. (10) Ratification of director’s engagement in non- competition action; (11) Distribution of the whole or part of the dividends or bonus in the form of new shares; (12) Distribution of statutory surplus reserve or the capital reserve obtained from share premium or receiving bestowal in the form of new shares or cash to existing shareholders.
1. When convening a General Meeting, the company may exercise its voting right in writing or electronically; but if the company is within the “Application Scope of Mandatory Electronic Voting” promulgated by competent authority in charge of securities in the Republic of China, and it is the first listed company in new stock listing, the company shall list the electronic voting as one of the channels for exercising voting right. 2. If the company convenes the General Meeting outside the territory of the Republic of China, shareholders in such meeting may exercise the voting right in writing or electronically. 3. When the company exercises the voting right in writing or electronically; the exercising method thereof shall be specified in the convening notice of General Meeting. Shareholders exercising voting right in writing or electronically shall be deemed as attending General Meeting in person. But it shall be deemed as waiver regarding the amendment to Extempore Motions and original proposals of such General Meeting.	1. Article 177-1 of Company Act 2. Article 177-2 of Company Act	Regarding the adoption of voting in writing or electronically in General Meeting, there is no similar provisions in Companies Law of Cayman.	The Company has included relevant provisions in Article 62, Article 63, and Article 69 of Articles of Incorporation.

196

Shareholders’ equity protection matters	“Company Act” or “Securities and Exchange Act” related laws and decrees	Explanation on companies laws and decrees of Cayman Islands	Provisions of Articles of Incorporation and explanation
4. If a shareholder exercises the voting right in writing or electronically, the declaration of intention thereof shall be served to the company two days before convening General Meeting, in case of repeated declarations of intention, the one served first shall prevail. Except for announcing the cancellation of previous declaration of intention. 5. After a shareholder has exercised voting right in writing or electronically, if intends to attend the General Meeting in person, two days before convening General Meeting, such shareholder shall cancel the preceding declaration of intention on exercising voting right in the same way as exercising voting right, otherwise the voting right exercised in writing or electronically shall prevail. 6. If a shareholder exercises voting right in writing or electronically and entrusts a proxy through a proxy statement to attend the General Meeting, the voting right exercised by the entrusted attending proxy shall prevail.
1. Upon every General Meeting, a shareholder may issue the proxy statement printed by the company to specify the scope of authorization, so as to entrust the proxy to attend the General Meeting. 2. Except for the trust enterprise of the Republic of China or the stock affairs agency approved by competent authority in charge of securities of the Republic of China, when one person is entrusted by more than two shareholders, the proxy vote thereof shall not exceed three percent of the voting rights of total outstanding shares, and the exceeding voting rights will not be calculated. 3. Ashareholder islimited toissue one proxy	1. Article 177 of Company Act 2. Article 177-2 of Company Act	1. Pursuant to Subparagraph a, Paragraph 1, Article 60 of Companies Law of Cayman, the calculation of resolution threshold of General Meeting, if the company allows the proxy entrusted by a shareholder to attend the General Meeting, the entrusted attendance shall be calculated into the number ofvotingrights.	The Company has included relevant provisions in Article 43, Article 67(b), Article 68, Article 70 and Article 71 of Articles of Incorporation.

197

Shareholders’ equity protection matters	“Company Act” or “Securities and Exchange Act” related laws and decrees	Explanation on companies laws and decrees of Cayman Islands	Provisions of Articles of Incorporation and explanation
statement to entrust one agent, and the proxy statement shall be served to the company five days before convening General Meeting, in case of repeated proxy statement, the one served first shall prevail. Except for announcing the cancellation of previous appointment. 4. After the proxy statement has been served to the company, if a shareholder intends to attend the General Meeting in person or exercise its voting right in writing or electronically, such shareholder shall serve written notice on canceling the proxy statement to the company two days before convening the General Meeting; otherwise the voting right exercised by the entrusted attending proxy shall prevail. 5. When convening a General Meeting outside the territory of the Republic of China, the company shall entrust professional stock affairs agency in the territory of the Republic of China to handle the shareholders’ voting affairs.		2. There are no specific provisions on the use of proxy statement in Companies Law of Cayman. The company may adopt the provisions in Attached Table A, and explicitly stipulates relevant regulations on use of proxy statement in General Meeting in the Articles of Incorporation (Article 22; Article 59 and Article 60 of Attached Table A). 3. Regarding the restriction on proxy vote, there is no similar provisions in Companies Law of Cayman. 4. Regarding the entrustment of stock affairs agency to handle overseas voting affairs, there is no similar provisions in Companies Law ofCayman.
The following proposals involving in major shareholders’ equity shall be agreed by the majority of attending shareholders with voting right in a General Meeting attended by shareholders representing more than two thirds of the total outstanding shares. If the total shares of attending shareholders do not meet the quota as prescribed in preceding paragraph,it shallbe agreed bymore	1. Article 185 of Company Act 2. Article 209 of Company Act 3. Article 227 of Company Act 4. Article 277 of Company Act 5. Paragraph 1, Article 240 of Company Act 6. Article 316 of Company Act	1. The Special Resolution explicitly stipulated in Article 60 of Companies Law of Cayman means (1) the resolution has been passed by a majority of at least two thirds of attending shareholdersas,	1. The Company has included relevant provisions in Article 34, Article 64, Article 65, Article 65-1, Article 66 and Article 123 of Articles of Incorporation. 2. Explanation on the stipulation of voting percentagefor relevant

198

Shareholders’ equity protection matters	“Company Act” or “Securities and Exchange Act” related laws and decrees	Explanation on companies laws and decrees of Cayman Islands	Provisions of Articles of Incorporation and explanation
than two thirds of attending shareholders with voting rights in a General Meeting attended by shareholders representing the majority of total outstanding shares: 1. The company enters into, changes, or terminates any contract for lease of business in whole, or the delegation of management or the regular joint operation with others; transfers the whole or major part of business or property, or is transferred of the whole business or property from other person, and thereby causes significant impact on business operation. 2. Amendment to Articles of Incorporation. 3. If the amendment to Articles of Incorporation damages the rights of special shareholders, it shall be otherwise resolved by Special General Meeting. 4. Distribution of the whole or part of the dividend or bonus in the form of new shares. 5. Resolution on dissolution, merger or spun-off. 6. Share Exchange	7. Article 43-6 of Securities and Exchange Act 8. Article 29 of Business Mergers And Acquisitions Act	being entitled to do so, vote in person or, where proxies are allowed, by proxy at a general meeting of which notice specifying the intention to propose the resolution as a special resolution has been duly given. Higher percentage of voting in special resolution than that in Companies Law of Cayman may be voluntarily stipulated in Articles of Incorporation according to the importance of matters; or (2) if it is explicitly stipulated in Articles of Incorporation that a special resolution may be made with the consent of all shareholders with voting right by written signature. 2. According to the provisions of Companies Law of Cayman, the following matters shall be handled by a special resolution: (1) Change of company name (Article 31); (2)Alterationof	proposals in a General Meeting: except for subject to the ordinary resolution and supermajority resolution stipulated in Company Act of the Republic of China, if special resolution is required pursuant to the Companies Law of Cayman, Articles of Incorporation of the Company is also subject to the special resolution defined in Article 60 of Companies Law of Cayman. This is different from the matters shall be handled by a supermajority resolution (including alteration of articles, dissolution, merger and acquisition etc.) as listed in the “Checklist for Matters of Protecting Shareholders’ Equity of Foreign issuers in the Country of Registration” promulgated by TWSE. Since such difference is due to the provisions of Companies Law of Cayman, Articles of Incorporation of the Company has explicitly stipulated the matters shall be handled by a Supermajority Resolution as listed in the aforesaid checklist for matters of protecting shareholders’ equity and the statutory matters shall be

199

Shareholders’ equity protection matters	“Company Act” or “Securities and Exchange Act” related laws and decrees	Explanation on companies laws and decrees of Cayman Islands	Provisions of Articles of Incorporation and explanation
		Memorandum of Incorporation (Article 10); (3) Alteration of Articles of Incorporation (Article 24); (4) Reduction of share capital (Article 14); (5)Voluntarily dissolution by a special resolution not due to the company’s incapable of repaying mature debts (Article 116(c)); (6) Merger and acquisition according to the provisions of Companies Law of Cayman (Article 233).	handle by a special resolution as stipulated in Companies Law of Cayman respectively, and it has not caused significant impact on the shareholders’ equity in our country. 3. Subparagraph b, Paragraph 1, Article 64 of Articles of Association explicitly stipulates that if the change of Articles of Association damages the rights of special shareholders, it shall be resolved by Special General Meeting. 4. Cooperate to amend Article 65 of Articles of Association, and add the application of stock conversion.
If the first listed company become delisting due to ceasing to exist after merger, broadly transfer, conversion of stock or spun-off, and the continuous existing, transferred, existing or newly incorporated company is not a listed (OTC) company, it shall be handled with the consent of shareholders holding more than two thirds of the total outstanding shares of the first listed company.	Article 18, Article 27, Article 28, Article 29 and Article 35 of Business Mergers and Acquisitions Act.	There is no similar provisions in Companies Law of Cayman.	The Company has listed relevant provisions in Article 65-1 of Articles of Incorporation.
Authorityand responsibilityof the director
1. Where all directors of a company are re-elected prior to the expiration of the term of office of existing directors, and in the absence of a resolution that existing directors will not be discharged until the expiry of their present term of office, all existing directors shall be deemed discharged in advance.	Article 199-1 of Company Act.	Companies Law of Cayman does not implement the supervisor system, and there are no similar provisions.	The Company has listed relevant provisions in Paragraph b, Article 89 of Articles of Incorporation.

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Shareholders’ equity protection matters	“Company Act” or “Securities and Exchange Act” related laws and decrees	Explanation on companies laws and decrees of Cayman Islands	Provisions of Articles of Incorporation and explanation
2. The aforesaid re-election shall be attended by shareholders who represent more than one-half of the total numberof issuedand outstanding shares.
1. During the term of office, when the share transfer of a director (excluding independent director) or supervisor of the company exceeds one second of the company shares held at the time of appointment, such director or supervisor will certainly be relieved from duty. 2. After the appointment, if the director (excluding independent director) or supervisor of the company transfers over one second of the company shares held at the time of appointment before assumption of duty, or transfers over one second of the shareholding within the period of cessation of share transfer before convening the shareholders’ meeting, such appointment will lose its effect.	1. Article 197 of Company Act. 2. Article 227 of Company Act. 3. Article 14-2 of Securities and Exchange Act	There is no similar provisions in Companies Law of Cayman.	The Company has listed relevant provisions in Paragraph 3 and Paragraph 4, Article 109 of Articles of Incorporation.
1. If supervisors are set by the company, they shall be elected in a General Meeting, and at least one of them shall reside in the country. 2. Term of office of a supervisor shall not exceed three years. But he/she may be eligible for re- election. 3. When all supervisors are dismissed, Board of Directors shall convene an extraordinary general meeting for election within sixty days. 4. Supervisors shall supervise the execution of company business, and may investigate company business and financial conditions, and examine books for taking notes or keeping accounts and documents at any time, and may ask Board of	Article 216 to Article 222 of Company Act.	Companies Law of Cayman does not implement the supervisor system, and there is no similar provisions.	In matters of protecting shareholders' equity, it is stipulated that the issuing company shall either set the Audit Committee or supervisor. The Company adopts the Audit Committee system, it is stipulated in Article 125 of Articles of Incorporation that the Audit Committee comprises of all of the independent directors, its authorities and functions are equivalent to the supervisor, and it has limited impact on the shareholders’ equity.

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Shareholders’ equity protection matters	“Company Act” or “Securities and Exchange Act” related laws and decrees	Explanation on companies laws and decrees of Cayman Islands	Provisions of Articles of Incorporation and explanation
Directors or managerial officers to propose a report. 5. Supervisors shall examine various books of forms prepared by Board of Directors and proposed to the General Meeting, and report their opinions in the General Meeting. 6. For affairs examination, supervisors may entrust the accountant or lawyer on behalf of the company for examination. 7. Supervisors may attend the Board of Directors Meeting to express their opinions. In case of violation of laws and decrees, Articles of Incorporation or resolution of General Meeting by the Board of Directors or a director, supervisors shall promptly inform the Board of Directors or such director to cease action. 8. Supervisors may exercise the right of supervision respectively and independently. 9. Supervisors shall not concurrently hold the post of director, managerial officer or other employee of the company.

202

LU HAI HOLDING CORP.

Chairman HSU, LIEN-KAI

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AI assistant

LU HAI — Annual Report 2021

51977_rns_2021-07-19_5c1eadbb-739c-4cad-89f7-94c638f3d4da.pdf

LU HAI HOLDING CORP.

2020 Annual Report

II. Address and telephone number of all operation locations:

III. Stock Transfer Agent ：

VIII. Board members:

Table of Contents

VII. Review of Financial Conditions, Operating Results, and Risk Management

VIII. Special Recorded Matters

I. Letter to Shareholders

Financial performance

Budget implementation

Financial revenue and expenditure and profitability analysis

Research and development situation

Business plan in 2021

II. Company Profile

2.1 Company and Group Introduction

2.1.1 Date of incorporation and Group profile:

2.1.2 Group structure

2.2 Company history:

III. Corporate Governance Report

3.1 Organization system

3.1.1 Organization chart

3.1.2 Operating business of major departments

3.2 Information of directors, supervisors, General Manager, Vice President, Assistant Vice President, and head of each department and branch:

3.2.1 Directors and supervisors’ information

3.2.1.1 Directors and supervisor’s information:

3.2.2 Management Team Information

3.3 Remuneration of Directors, Supervisors, General Manager and Vice Presidents in the Last Year

3.3.1 Remuneration paid to the Director and Independent Director in 2020

Range of Remuneration

3.3.2 Remuneration paid to the Supervisors in 2020: The Company sets Audit Committee, hence it is not applicable.

3.3.3 Remuneration paid to General Manager and Vice President in 2020:

Range of Remuneration

 Directors, Supervisors

3.4 Corporate governance operation situation:

3.4.1 Information of Board of Directors’ operation situation

3.4.2 Operation situation of Audit Committee or supervisor’s participation in Board of Directors

3.4.4. Composition, responsibility and operation situation of the Remuneration Committee

3.4.4.1 Composition of Remuneration Committee

3.4.4.2 Responsibilities of Remuneration Committee

3.4.9 Execution situation of internal control system:

3.4.9.1 Internal Control Statement:

LU HAI HOLDING CORP.

Internal Control System Statement

Date: March 12, 2021

3.4.11.2 Important resolutions of Board of Directors Meeting in 2020:

3.5 Accountant’s fees information

3.5.1 Class interval of accountant’s fees information

Unit: NTD thousand

3.9 Information that the top ten shareholders in shareholding are of interested party, spouse or relatives within second degree relationship mutually:

IV. Fundraising Situation

4.1 Capital and stock

4.1.1 Sources of share capital

4.1.1.1 Stock formation process:

4.1.1.2 Capital and shares:

4.1.1.3 Summary of relevant information on reporting system: Not applicable.

4.1.2 Shareholder structure

4.1.3 Dispersion of shares

4.1.3.1 Common shares

4.1.3.2 Preferred share: Unissued.

4.1.4 List of major shareholders

4.1.5 Market price, net value, earnings, dividend per share and relevant materials in the last two years

4.1.6 Dividend policy and execution status

4.1.6.1 Dividend policy stipulated in Articles of Incorporation:

4.1.6.2 Situation of dividend distribution planned to be discussed in this year:

V. Operational Highlights

5.1 Business content

5.1.1 Business scope

5.1.1.1 Major contents of operating business

5.1.1.2 Proportion of business

5.1.1.3 Current commodity (service) items of the company

5.1.1.4 New products and services planned to be developed

5.1.2 Industry overview

5.1.2.1 Current situation and development of industry:

A. Bicycle industry

B. Motorcycle and electric motorcycle industry

C. Automobile industry

LU HAI Annual Report 2021