NTC — Annual Report 2021

Dec 16, 2021

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Stock Code:2408

(English Translation of Financial Statements and Report Originally Issued in Chinese) NANYA TECHNOLOGY CORPORATION

Financial Statements

With Independent Auditors’ Report For the Years Ended December 31, 2021 and 2020

Address: No.98, Nanlin Rd., Dake Vil., Taishan Dist., New Taipei City, Taiwan (R.O.C.) Telephone:(02)2904-5858

The independent auditors’ report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ report and financial statements, the Chinese version shall prevail.

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Table of contents

Contents 1. Cover Page 2. Table of Contents 3. Independent Auditors’ Report 4. Balance Sheets 5. Statements of Comprehensive Income 6. Statements of Changes in Equity 7. Statements of Cash Flows 8. Notes to the Financial Statements (1) Company history (2) Approval date and procedures of the financial statements (3) New standards, amendments and interpretations adopted (4) Summary of significant accounting policies (5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty (6) Explanation of significant accounts (7) Related-party transactions (8) Pledged assets (9) Commitments and contingencies (10) Losses Due to Major Disasters (11) Subsequent Events (12) Other (13) Other disclosures (a) Information on significant transactions (b) Information on investees (c) Information on investment in mainland China (d) Information on major shareholders (14) Segment information 9. List of major account titles

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KPMG

台北市110615信義路5段7號68樓(台北101大樓) 電 話 Tel + 886 2 8101 6666 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, 傳 真 Fax + 886 2 8101 6667 Xinyi Road, Taipei City 110615, Taiwan (R.O.C.) 網 址 Web home.kpmg/tw

Independent Auditors’ Report

To the Board of Directors of Nanya Technology Corporation:

Opinion

We have audited the financial statements of Nanya Technology Corporation (“the Company”), which comprise the balance sheets as of December 31, 2021 and 2020, and the statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2021 and 2020, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and its financial performance and its cash flows for the years ended December 31, 2021 and 2020, in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Valuation of inventories

Please refer to Notes 4(g), 5, as well as 6(d) for details on accounting policy, judgments, and major sources of estimation uncertainty , as well as disclosure on information about inventory valuation, respectively.

The Company recognizes a loss from the devaluation of inventories on a quarterly basis based on the lower of cost or net realizable value method. The international market price of DRAM has significantly affected the net realizable value of inventories. Therefore, the evaluation of inventory has been identified as a key audit matter in the financial statements.

KPMG, a Taiwan partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.

3-1

The principal audit procedures performed to address the aforementioned key audit matter included understanding the basis adopted by the management in the estimate of net realizable value, and sampling to test the reasonableness of the net realizable value.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with Regulations Governing the Preparation of Financial Reports by Securities Issuers and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’ s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including the audit committee) are responsible for overseeing the Company's financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

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1. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

2. Obtain sufficient and appropriate audit evidence regarding the financial information of the entities of the investments in other entities accounted for using the equity method. We are responsible for the direction, supervision and performance of our audit. Furthermore, we remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Hui-Chih Ko and Hsin-Yi Kuo.

KPMG

Taipei, Taiwan (Republic of China) February 24, 2022

Notes to Readers

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

The independent auditors’ report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ report and financial statements, the Chinese version shall prevail.

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(English Translation of Financial Statements and Report Originally Issued in Chinese)

Nanya Technology Corporation

Balance Sheets

December 31, 2021 and 2020

(Expressed in Thousands of New Taiwan Dollars)

Assets Current assets: 1100 Cash and cash equivalents (Note 6(a)) 1170 Accounts receivable, net (Notes 6(b)(p)) 1180 Accounts receivable due from related parties, net (Notes 6(b)(p) and 7) 1200 Other receivables (Notes 6(c)) 1310 Inventories (Notes 6(d)) 1410 Prepayments (Note 6(e)) 1470 Other current assets (Notes 6(e)) Total current assets Non-current assets: 1517 Non-current financial assets at fair value through other comprehensive income 1550 Investments accounted for using equity method (Note 6(f)) 1600 Property, plant and equipment (Notes 6(g)(v) and 7) 1755 Right-of-use assets (Notes 6(h)(v) and 7) 1780 Intangible assets 1840 Deferred tax assets (Notes 6(l)) 194D Long-term financial lease payments receivable (Note 6(i)) 1990 Other non-current assets Total non-current assets Total assets	December 31, 2021 Amount % $ 35,267,599 18 7,376,189 4 4,830,944 3 957,477 1 11,467,807 6 827,120 - 754,838 - 61,481,974 32 11,071 - 50,266,191 26 76,178,890 40 1,707,092 1 1,013,517 1 288,767 - 254,305 - 125,001 - 129,844,834 68 $ 191,326,808 100	December 31, 2020 Amount % 16,573,114 10 5,547,350 3 2,688,002 2 1,456,089 1 14,084,255 8 551,365 - 959,948 1 41,860,123 25 - - 40,084,942 25 79,696,505 48 1,790,192 1 1,258,380 1 345,830 - 483,436 - 105,064 - 123,764,349 75 165,624,472 100 Liabilities and Equity Current liabilities: 2170 Accounts payable 2180 Accounts payable to related parties (Note 7) 2200 Other payables 2220 Other payables to related parties (Notes 7) 2230 Current tax liabilities 2280 Current lease liabilities (Notes 6(j) and 7) 2399 Other current liabilities Total current liabilities Non-Current liabilities: 2570 Deferred tax liabilities (Note 6(l)) 2580 Non-current lease liabilities (Note 6(j) and 7) 2640 Net defined benefit liability, non-current (Note 6(k)) 2670 Other non-current liabilities Total non-current liabilities Total liabilities Equity (Note 6(m)): 3110 Ordinary share 3140 Advance receipts for share capital 3200 Capital surplus 3310 Legal reserve 3320 Special reserve 3350 Unappropriated retained earnings 3400 Other equity interest 3500 Treasury shares Total equity Total liabilities and equity		December 31, 2021		December 31, 2020 Amount % 2,027,096 1 84,678 - 4,161,575 2 1,119,693 1 1,129,651 1 178,432 - 75,759 - 8,776,884 5 - - 1,617,652 1 566,283 - 851,626 1 3,035,561 2 11,812,445 7 30,935,939 19 36,264 - 32,451,689 19 14,110,871 9 1,041,100 1 79,394,603 48 (3,011,507) (2) (1,146,932) (1) 153,812,027 93 165,624,472 100
				Amount %
			2,729,719 1 119,514 - 6,576,303 4 1,297,691 1 4,662,411 3 214,928 - 1,077 - 15,601,643 9 24,718 - 1,509,673 1 641,238 - 571,468 - 2,747,097 1 18,348,740 10 30,968,749 16 4,508 - 32,804,505 17 14,879,816 8 3,011,507 2 95,425,925 49 (4,116,942) (2) - - 172,978,068 90 $ 191,326,808 100

See accompanying notes to financial statements.

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(English Translation of Financial Statements and Report Originally Issued in Chinese) NANYA TECHNOLOGY CORPORATION

Statements of Comprehensive Income

For the years ended December 31, 2021 and 2020

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

4000 Operating revenue (Notes 6(p) and 7) 5000 Operating costs (Notes 6(d)(g)(h)(j)(k)(n)(q) and 7) Gross profit from operations 5910 Add: Unrealized profit from sales 5920 Realized profit on from sales Gross profit from operations Operating expenses (Notes 6(g)(h)(j)(k)(n)(q) and 7): 6100 Selling expenses 6200 Administrative expenses 6300 Research and development expenses Total operating expenses Net operating income Non-operating income and expenses (Notes 6(f)(g)(i)(j)(r) and 7): 7100 Total interest income 7020 Other gains and losses, net 7050 Finance costs 7070 Share of profit of associates accounted for using equity method, net Total non-operating income and expenses 7900 Profit before tax 7950 Less: Income tax expenses (Notes 6(l)) Profit 8300 Other comprehensive income (Notes 6(k)(l)(m)): 8310 Components of other comprehensive income that will not be reclassified to profit or loss 8311 Remeasurements of the net defined benefit 8316 Unrealized losses from investments in equity instruments measured at fair value through other comprehensive income 8320 Share of other comprehensive income of subsidiaries, and associates for using equity method, components of other comprehensive income that will not be reclassified to profit or loss 8349 Less: Income tax related to components of other comprehensive income that will not be reclassified to profit or loss Components of other comprehensive income that will not be reclassified to profit or loss 8360 Components of other comprehensive income that will be reclassified to profit or loss 8361 Exchange differences on translation of foreign financial statements 8399 Less: Income tax related to components of other comprehensive income that will be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss 8300 Other comprehensive (loss) income, net 8500 Comprehensive income Earnings per share (dollar) (Note 6(o)) 9750 Basic earnings per share 9850 Diluted earnings per share	2021 Amount % $ 85,481,242 100 (48,598,616) (57) 36,882,626 43 (136,120) - 11,775 - 36,758,281 43 (663,724) (1) (1,515,505) (2) (7,520,614) (9) (9,699,843) (12) 27,058,438 31 121,907 - (309,129) - (23,667) - 826,065 1 615,176 1 27,673,614 32 (4,824,599) (6) 22,849,015 26 (92,311) - (929) - (16,991) - (18,648) - (91,583) - (1,092,193) (1) - - (1,092,193) (1) (1,183,776) (1) $ 21,665,239 25 $ 7.40 $ 7.35	2020 Amount % 60,700,390 100 (45,288,242) (75) 15,412,148 25 (11,775) - 15,749 - 15,416,122 25 (600,862) (1) (1,312,475) (2) (5,159,496) (8) (7,072,833) (11) 8,343,289 14 127,709 - (527,881) (1) (13,023) - 1,043,924 2 630,729 1 8,974,018 15 (1,287,977) (2) 7,686,041 13 3,767 - - - (14,316) - 754 - (11,303) - (1,955,693) (3) - - (1,955,693) (3) (1,966,996) (3) 5,719,045 10 2.51
		2.49

See accompanying notes to financial statements.

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(English Translation of Financial Statements and Report Originally Issued in Chinese) Nanya Technology Corporation

Statements of Changes in Equity

For the years ended December 31, 2021 and 2020 (Expressed in Thousands of New Taiwan Dollars)

Balance at January 1, 2020 Net profit for the year ended December 31, 2020 Other comprehensive income for the year ended December 31, 2020 Total comprehensive income for the year ended December 31, 2020 Appropriation and distribution of retained earnings: Legal reserve appropriated Special reserve appropriated Cash dividends of ordinary share Other changes in capital surplus: Changes in equity of associates accounted for using equity method Recognized compensation costs on employee stock options Past due unclaimed dividends Exercise of employee share option Balance at December 31, 2020 Net profit for the year ended December 31, 2021 Other comprehensive income for the year ended December 31, 2021 Total comprehensive income for the year ended December 31, 2021 Appropriation and distribution of retained earnings: Legal reserve appropriated Special reserve appropriated Cash dividends of ordinary share Other changes in capital surplus Changes in equity of associates accounted for using equity method Past due unclaimed dividends Exercise of employee share options Treasury shares transferred to emplyees Retirement of treasury shares Balance at December 31, 2021	Ordinary shares	Advance receipts for share capital	Capital surplus	Legal reserve	Special reserve	Unappropriated retained earnings	O	ther equity interes	t	Treasury shares	Total equity 152,011,553
							Exchange differences on translation of foreign financial statements (938,039)	Unrealized gains (losses) on financial assets measured at fair value through other comprehensive income	Total other equity interest
	$ 30,733,649	3,475	32,005,339	13,128,412	273,834	78,054,876		(103,061)	(1,041,100)	(1,146,932)
	- -	- -	- -	- -	- -	7,686,041 3,411	- (1,955,693)	- (14,714)	- (1,970,407)	- -	7,686,041 (1,966,996)
	-	-	-	-	-	7,689,452	(1,955,693)	(14,714)	(1,970,407)	-	5,719,045
	- - - - - - 202,290	- - - - - - 32,789	- - - 14 58,420 79 387,837	982,459 - - - - - -	- 767,266 - - - - -	(982,459) (767,266) (4,600,000) - - - -	- - - - - - -	- - - - - - -	- - - - - - -	- - - - - - -	- - (4,600,000) 14 58,420 79 622,916
	30,935,939	36,264	32,451,689	14,110,871	1,041,100	79,394,603	(2,893,732)	(117,775)	(3,011,507)	(1,146,932)	153,812,027
	- -	- -	- -	- -	- -	22,849,015 (78,341)	- (1,092,193)	- (13,242)	- (1,105,435)	- -	22,849,015 (1,183,776)
	-	-	-	-	-	22,770,674	(1,092,193)	(13,242)	(1,105,435)	-	21,665,239
	- - - - - 39,280 - (6,470)	- - - - - (31,756) - -	- - - 15 123 72,500 310,811 (30,633)	768,945 - - - - - - -	- 1,970,407 - - - - - -	(768,945) (1,970,407) (4,000,000) - - - - -	- - - - - - - -	- - - - - - - -	- - - - - - - -	- - - - - - 1,109,829 37,103	- - (4,000,000) 15 123 80,024 1,420,640 -
	$ 30,968,749	4,508	32,804,505	14,879,816	3,011,507	95,425,925	(3,985,925)	(131,017)	(4,116,942)	-	172,978,068

See accompanying notes to financial statements.

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(English Translation of Financial Statements and Report Originally Issued in Chinese)

Nanya Technology Corporation

Statements of Cash Flows

For the years ended December 31, 2021 and 2020

(Expressed in Thousands of New Taiwan Dollars)

Cash flows from operating activities: Profit before tax Adjustments: Adjustments to reconcile profit: Depreciation expense Amortization expense Interest expense Interest income Share-based payments Share of profit of subsidiaries and associates accounted for using equity method Gain on disposal of property, plant and equipment Impairment loss on non-financial assets Unrealized gains on sales Realized profit from sales Foreign exchange gain or loss Others Total adjustments to reconcile profit Changes in operating assets and liabilities: Notes and accounts receivable (including related parties) Other receivables Inventories Prepayments Other non-current assets Accounts payable (including related parties) Other payable (including related parties) Other current liabilities Net defined benefit liability Other non-current liabilities Total changes in operating assets and liabilities Cash inflow generated from operations Interest received Interest paid Income taxes paid Net cash flows from operating activities Cash flows used in investing activities: Acquisition of financial assets at fair value through other comprehensive income Proceeds from capital reduction of investments accounted for using equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Acquisition of intangible assets Decrease in lease and installment receivables Increase in other non-current assets Dividends received Net cash flows used in investing activities Cash flows used in financing activities: Decrease (increase) in guarantee deposits received Payment of lease liabilities Cash dividends paid Exercise of employee share options Treasury shares transferred to emplyees Net cash flows used in financing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period

See accompanying notes to financial statements.

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(English Translation of Financial Statements and Report Originally Issued in Chinese) NANYA TECHNOLOGY CORPORATION

Notes to the Financial Statements

For the years ended December 31, 2021 and 2020

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(1) Company history

Nanya Technology Corporation (the “ Company” ) was legally established with the approval of the Ministry of Economic Affairs on March 4, 1995, with registered address at No.98, Nanlin Road, Dake Vil., Taishan District, New Taipei City, Taiwan. The main operating activities of the Company are researching, developing, manufacturing and selling semiconductor products, and the import and export of its machinery, equipment and raw materials.

(2) Approval date and procedures of the financial statements:

The financial statements were authorized for issuance by the Board of Directors on February 24, 2022.

(3) New standards, amendments and interpretations adopted:

• (a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. which have already been adopted.

The Company has initially adopted the following new amendments, which do not have a significant impact on its financial statements, from January 1, 2021:

• ●Amendments to IFRS 4 “Extension of the Temporary Exemption from Applying IFRS 9”

• ●Amendments to IFRS 9, IAS39, IFRS7, IFRS 4 and IFRS 16 “Interest Rate Benchmark Reform— Phase 2”

• ●Amendments to IFRS 16 “Covid-19-Related Rent Concessions beyond June 30, 2021”

• (b) The impact of IFRS issued by the FSC but not yet effective

The Company assesses that the adoption of the following new amendments, effective for annual period beginning on January 1, 2022, would not have a significant impact on its financial statements:

• －

• ●Amendments to IAS 16 “Property, Plant and Equipment Proceeds before Intended Use”

• －

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

• ●Annual Improvements to IFRS Standards 2018–2020

• ●Amendments to IFRS 3 “Reference to the Conceptual Framework”

(Continued)

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NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(c) The impact of IFRS issued by IASB but not yet endorsed by the FSC

The following new and amended standards, which may be relevant to the Company, have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

Standards or Interpretations Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” Amendments to IAS 1 “Disclosure of Accounting Policies” Amendments to IAS 8 “Definition of Accounting Estimates”

Content of amendment Effective date per IASB The amendments aim to promote consistency in applying the requirements by helping companies determine whether, in the statement of balance sheet, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. The amendments include clarifying the classification requirements for debt a company might settle by converting it into equity. January 1, 2023 The key amendments to IAS 1 include: ●requiring companies to disclose their material accounting policies rather than their significant accounting policies; ●clarifying that accounting policies related to immaterial transactions, other events or conditions are themselves immaterial and as such need not be disclosed; and ●clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves material to a company’s financial statements. January 1, 2023 The amendments introduce a new definition for accounting estimates: clarifying that they are monetary amounts in the financial statements that are subject to measurement uncertainty. The amendments also clarify the relationship between accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the objective set out by an accounting policy. January 1, 2023

(Continued)

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NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

Standards or Interpretations Amendments to IAS 12 “Deferred Tax related to Assets and Liabilities arising from a Single Transaction”	Content of amendment Effective date per IASB The amendments narrowed the scope of the recognition exemption so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. January 1, 2023

The Company is evaluating the impact of its initial adoption of the abovementioned standards or interpretations on its consolidated financial position and financial performance. The results thereof will be disclosed when the Company completes its evaluation.

The Company does not expect the following other new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its financial statements:

• ●Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture”

• ●IFRS 17 “ Insurance Contracts” and amendments to IFRS 17 “ Insurance Contracts”

(4) Summary of significant accounting policies:

The significant accounting policies presented in the financial statements are summarized below. The following accounting policies were applied consistently throughout the periods presented in the financial statements.

• (a) Statement of compliance

The accompanying financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as the “Regulations”).

• (b) Basis of preparation

• (i) Basis of measurement

Except for the following significant accounts, the financial statements have been prepared on a historical cost basis.

• 1) Financial assets at fair value through other comprehensive income are measured at fair value.

• 2) The defined benefit liabilities are measured as the fair value of the plan assets, less the present value of the defined benefit obligation.

• (ii) Functional and presentation currency

The functional currency of the Company is determined based on the primary economic environment in which the entities operate. The financial statements are presented in New Taiwan Dollar, which is the Company’ s functional currency. All financial information presented in New Taiwan Dollar has been rounded to the nearest thousand.

(Continued)

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NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(c) Foreign currency

• (i) Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies of Group entities at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date.

Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

Exchange differences are generally recognized in profit or loss.

(ii) Foreign operations

The assets and liabilities of foreign operations are translated to the Company’ s functional currency at exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to the Company’s functional currency at average rate. Foreign currency differences are recognized in other comprehensive income.

When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to noncontrolling interest. When the Company disposes of only part of investment in an associate or joint venture that includes a foreign operation while retaining significant or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planed nor likely in the foreseeable future, foreign currency gains and losses arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income.

(d) Classification of current and non-current assets and liabilities

An asset is classified as current under any one of the following conditions. All other assets are classified as non-current.

• (i) The asset is expected to be realized, or intended to be sold or consumed, in the Company’s normal operating cycle;

• (ii) The asset is held primarily for the purpose of trading;

(Continued)

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NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

• (iii) The asset is expected to be realized within twelve months after the reporting period; or

• (iv) The asset is cash or a cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

A liability is classified as current under any one of the following conditions. All other liabilities are classified as non-current.

• (i) The liability is expected to be settled in the normal operating cycle;

• (ii) The liability is held primarily for the purpose of trading;

• (iii) The liability is due to be settled within twelve months after the reporting period; or

• (iv) The liability does not have any unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by issuing equity instruments do not affect its classification.

(e) Cash and cash equivalents

Cash comprises cash on hand, checks and cash in bank. Cash equivalents are 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. Time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes are classified under cash equivalents.

(f) Financial instruments

Trade receivables are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instrument. A financial asset or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

• (i) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

On initial recognition, a financial asset is classified as measured at: amortized cost and fair value through other comprehensive income (FVOCI)– equity investment. Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

(Continued)

13

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

• 1) Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

• ‧ it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

• ‧ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

These assets are subsequently measured at amortized cost, which is the amount at which the financial asset is measured at initial recognition, plus/minus, the cumulative amortization using the effective interest method, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, as well as impairment, are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

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

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’ s fair value in other comprehensive income. This election is made on an instrument-by-instrument basis.

Equity investments at FVOCI are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in other comprehensive income and are never reclassified to profit or loss.

Dividend income is recognized in profit or loss on the date on which the Company’s right to receive payment is established.

• 3) Business model assessment

The Company makes an assessment of the objective of the business model in which a financial asset is held at portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

• ‧ the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’ s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets;

• ‧ how the performance of the portfolio is evaluated and reported to the Company’ s management;

(Continued)

14

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

• ‧ the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

• ‧ how managers of the business are compensated ─ e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

• ‧ the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, and are consistent with the Company’s continuing recognition of the assets.

• 4) Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, ‘ principal’ is defined as the fair value of the financial assets on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs, as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Company considers:

• ‧ contingent events that would change the amount or timing of cash flows;

• ‧ terms that may adjust the contractual coupon rate, including variable rate features;

• ‧ prepayment and extension features; and

• ‧ terms that limit the Company’s claim to cash flows from specified assets (e.g. nonrecourse features)

• 5)

• Impairment of financial assets

The Company recognizes loss allowances for expected credit losses (ECL) on financial assets measured at amortized cost (including cash and cash equivalents, notes and trade receivables (including related parties), other receivable, leases receivable, and guarantee deposit paid).

The Company measures loss allowances at an amount equal to lifetime expected credit loss (ECL), except for the following which are measured as 12-month ECL:

• ‧ Bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

(Continued)

15

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

Loss allowance for note and trade receivables due from related parties are always measured at an amount equal to lifetime ECL.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis based on the Company’ s historical experience and informed credit assessment as well as forwardlooking information.

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.

The Company considers a financial asset to be in default when the financial asset is more than 60 days past due.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the Company in accordance with the contract and the cash flows that the Company expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘ credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial assets is credit-impaired includes the following observable data:

• ‧ a breach of contract such as a default or being more than 60 days past due;

• ‧ the disappearance of an active market for a security because of financial difficulties.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.

(Continued)

16

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

6) Derecognition of financial assets

The Company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

(ii) Financial liabilities and equity instruments

1) Treasury shares

When shares recognized as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, is recognized as a deduction from equity. Repurchased shares are classified as treasury shares. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is recognized in capital surplus or retained earnings (if the capital surplus is not sufficient to be written down).

2) Financial liabilities

Financial liabilities are classified at amortized cost. Foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

3) Derecognition of financial liabilities

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.

On derecognition of a financial liability, the difference between the carrying amount of a financial liability extinguished and the consideration paid is recognized in profit or loss.

4) Offsetting of financial assets and liabilities

Financial assets and financial liabilities are offset and the net amount presented in the statement of balance sheet when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

(Continued)

17

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(g) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories includes expenditure incurred in acquiring the inventories, production costs and other costs incurred in bringing them to their present location and condition. The cost of inventories is calculated using the weighted-average method. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(h) Investment in associates

Associates are those entities in which the Company has significant influence, but not control, over the financial and operating policies.

Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of the investment includes transaction costs. The carrying amount of the investment in associates includes goodwill arising from the acquisition less any accumulated impairment losses.

The financial statements include the Company’s share of the profit or loss and other comprehensive income of those associates, after adjustments to align their accounting policies with those of the Company, from the date on which significant influence commences until the date on which significant influence ceases. The Company recognizes any changes of its proportionate share in the investee within capital surplus, when an associate’s equity changes due to reasons other than profit and loss or comprehensive income, which did not result in changes in actual significant influence.

Gains and losses resulting from transactions between the Company and an associate are recognized only to the extent of unrelated Company’s interests in the associate.

When the Company’s share of losses of an associate equals or exceeds its interests in an associate, it discontinues recognizing its share of further losses. After the recognized interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.

When the Company subscribes to additional shares in an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment will differ from the amount of the Company’s proportionate interest in the net assets of the associate. The Company records such a difference as an adjustment to investments, with the corresponding amount charged or credited to capital surplus. The aforesaid adjustment should first be adjusted under capital surplus. If the capital surplus resulting from changes in ownership interest is not sufficient, the remaining difference is debited to retained earnings. If the Company’s ownership interest is reduced due to the additional subscription to the shares of the associate by other investors, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate will be reclassified to profit or loss on the same basis as would be required if the associate had directly disposed of the related assets or liabilities.

(Continued)

18

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(i) Subsidiaries

The Company accounts for investee companies in which it has a controlling interest using the equity method. The net income, other comprehensive income, and shareholders’ equity in the financial reports of the Company and the net income, other comprehensive income, and shareholder’s equity that belongs to the Company in the consolidated financial reports should be the same.

The Company accounts for changes in owners’ equity of subsidiaries as equity transactions between the two parties of the transaction, provided that control is still exists.

• (j) Property, plant and equipment

• (i) Recognition and measurement

Items of property, plant and equipment are measured at cost, less accumulated depreciation and any accumulated impairment losses.

Any gain or loss on disposal of an item of property, plant and equipment is recognized in profit or loss.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.

• (iii) Depreciation

Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straight-line basis over the estimated useful lives.

Land is not depreciated.

The estimated useful lives of significant items of property, plant and equipment has an unlimited useful life and therefore are as follows:

• 1) Buildings: 25 years.

• 2) Machinery and equipment: 5 to 16 years.

• 3) Other equipment: 3 to 15years.

Depreciation methods, useful lives, and residual values are reviewed at each reporting date and adjusted if appropriate, the change is accounted for as a change in accounting estimate.

(Continued)

19

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(k) Leases

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

• (i) As a leasee

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of the lease liability comprise the following:

• －

• fixed payments, including in-substance fixed payments;

• － variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

• －

• there is a change in future lease payments arising from the change in an index or rate; or

• － there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset, or

• － there is a change of its assessment on whether it will exercise a purchase, extension or termination option; or

• －

• there is any lease modifications

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Company accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease.

(Continued)

20

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

The Company has elected not to recognize right-of-use assets and lease liabilities for shortterm leases of dormitory, parking lots and offices. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(ii) As a lessor

When the Company acts as a lessor, it determines at lease commencement whether each lease is a finance lease or an operating lease. To classify each lease, the Company makes an overall assessment of whether the lease transfers to the lessee substantially all of the risks and rewards of ownership incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then the lease is an operating lease. As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

The Company recognizes a finance lease receivable at an amount equal to its net investment in the lease. Initial direct costs, such as lessors to negotiate and arrange a lease, are included in the measurement of the net investment. The lessor recognizes the interest income over the lease term based on a pattern reflecting a constant periodic rate of return on the lessor’s net investment in the lease. The Company recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other income’.

(l) Intangible assets

• (i) Recognition and measurement

Intangible assets, patents that are acquired by the Company and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognized in profit or loss as incurred.

• (iii) Amortization

Amortization is calculated over the cost of the asset, less its residual value, and is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, from the date that they are available for use.

The estimated useful lives of patent for current and comparative periods are both 5~10 years.

Amortization methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(Continued)

21

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(m) Impairment of non-derivative financial assets

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from an acquisition about an investment accounted for using the equity method is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is value in use fair value less costs to sell.

An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(n) Revenue recognition

Revenue from contracts with customers is measured based on the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer.

The Company manufactures and sells semi-conductor products on the market. The Company recognizes revenue when control of the products has transferred, being when the products are delivered to the customer, the customer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.

A receivable is recognized when the goods are delivered as this is the point in time that the Company has a right to an amount of consideration that is unconditional.

(Continued)

22

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(o) Employee benefits

(i) Defined contribution plan

Obligations for contributions to defined contribution plans are expensed as the related service is provided.

(ii) Defined benefit plan

The Company’s net obligation in respect of defined benefit plans is calculated separately for each the plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income, and accumulated in retained earnings. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset). Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(iii) Short-term employee benefits

Short-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(Continued)

23

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(p) Share-based payment

The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally recognized as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

The grant date of a share-based payment is the date which the Board of Directors authorized the price and number of a share-based payment.

(q) Income taxes

Income taxes comprise current taxes and deferred taxes. Except for expenses related to business combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes are recognized in profit or loss.

Current taxes comprise the expected tax payables or receivables on the taxable profits (losses) for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payables or receivables are the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.

Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes are recognized except for the following:

• (i) Temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profits (losses) at the time of the transaction.

• (ii) Temporary differences related to investments in subsidiaries that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future.

(iii) taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax assets are recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefits will be realized.

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date.

(Continued)

24

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

Deferred tax assets and liabilities are offset if the following criteria are met:

• (i) the Company has a legally enforceable right to set off current tax assets against current tax liabilities; and

• (ii) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:

• 1) The same taxable entity; or

• 2) Different taxable entities which intend to settle current tax assets and liabilities on a net basis, or to realize the assets and liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

(r) Earnings per share

The Company discloses the Company’s basic and diluted earnings per share attributable to ordinary shareholders of the Company. Basic earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding. Diluted earnings per share is calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted average number of ordinary shares outstanding after adjustment for the effects of all potentially dilutive ordinary shares, such as employee stock options and employee compensation.

(s) Operating segments

The Company discloses its information on operating segments in its consolidated financial statements, so it need not disclose such information in its financial statements.

(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

In preparing these consolidated financial statements, management has made judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

The management continues to monitor its accounting estimates and assumptions. The management recognizes any changes in accounting estimates during the period and the impact of those changes in accounting estimates in the following period.

For information about judgments made in applying the accounting policies that have the most significant effects on the recognized amounts in the financial statements, whether the Company has substantive control over its investees, please refer to the notes in consolidated financial statements for the year ended 2020.

(Continued)

25

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year is as follows. Those assumptions and estimation have been updated to reflect the impact of COVID-19 pandemic:

Valuation of inventories

As inventories are stated at the lower of cost or net realizable value, the Company estimates the net realizable value of inventories for obsolescence and unmarketable items at the end of the reporting period and then writes down the cost of inventories to net realizable value. The net realizable value of the inventory is mainly determined based on assumptions as to future demand within a specific time horizon. Due to the rapid industrial transformation, there may be significant changes in the net realizable value of inventories. Please refer to Note 6(d) for details of the valuation of inventories.

(6) Explanation of significant accounts:

• (a) Cash and cash equivalents

Cash on hand－pretty cash Demand deposit and checking accounts Cash equivalents: Time deposits Commercial paper Repurchase agreements collateralized by corporate bonds	December 31, 2021 $ 4 17,392,433 13,686,093 2,378,765 1,810,304 $ 35,267,599	December 31, 2020 - 14,066,618 - 2,014,416 492,080
		16,573,114

Refer to Note 6(s) for the interest rate risk and sensitivity analysis of the financial assets and liabilities of the Company.

(b) Accounts receivable

Accounts receivable
Accounts receivable -measured at amortized cost Accounts receivable -related parties	December 31, 2021 $ 7,376,189 4,830,944 $ 12,207,133	December 31, 2020
		5,547,350 2,688,002
		8,235,352

The Company applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for accounts receivables (including related parties). To measure the expected credit losses, accounts receivables (including related parties) have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information, including macroeconomic and relevant industry information.

(Continued)

26

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

The expected credit losses for accounts receivables (including related parties) was determined as follows:

Due days Current Due days Current	December 31, 2021	December 31, 2021
	Accounts receivables (including related parties) gross carrying amount Weighted average loss rate $ 12,207,133 - December 31, 2020		Loss allowance provision
			-
		Weighted average loss rate -	Loss allowance provision
			-

The Group did not recognize any allowance for impairment as there were no uncollected accounts receivable (including related parties) that were past due as of December 31, 2021 and 2020.

Please refer to Note 6(s) for other information of credit risk.

(c) Other receivables

Tax refund receivable Lease payment receivable Interest receivable Others	December 31, 2021 $ 677,319 229,131 1,641 49,386 $ 957,477	December 31, 2020
		1,228,011 206,462 147 21,469
		1,456,089

Please refer to Note 6(s) for other information of credit risk.

(d) Inventories

Raw materials Work in progress Finished goods Total	December 31, 2021 $ 641,996 7,364,481 3,461,330 $ 11,467,807	December 31, 2020 350,906 6,578,665 7,154,684 14,084,255

(Continued)

27

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

The Company recognized cost of goods sold amounting to $48,221,669 and $44,881,018 for the years ended 2021 and 2020, respectively.

The Company did not recognize any loss or gain from devaluation of inventories as there was no indication of impairment or net realizable value of inventories has increased because the circumstance that caused the inventory devaluation in prior period has improved on inventories for the years ended 2021 and 2020.

• (e) Prepayments and other current assets

• (i) Prepayments

Prepaid expense Prepayments to purchases (ii) Other current assets Project consumables Suppliers	December 31, 2021 $ 809,414 17,706 $ 827,120 December 31, 2021 $ 513,850 240,988 $ 754,838	December 31, 2020
		548,312 3,053
		551,365
		December 31, 2020
		676,200 283,748
		959,948

• (f) Investments accounted for using equity method

The components of the investments accounted for using equity method at the reporting date were as follows:

follows:
Subsidiaries Associates	December 31, 2021 $ 44,927,160 5,339,031 $ 50,266,191	December 31, 2020
		34,924,437 5,160,505
		40,084,942

(i) Subsidiaries

Please refer to the consolidated financial statements as of and for the year ended December 31, 2021 for further information.

(Continued)

28

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(ii) Associates

The related information of the major associate to the Company was as follows:

Name of Associates Formosa Advanced Technologies Co., Ltd.(FATC)	Nature of Relationship to the Group	Registration Country	Percentage of ownership
			December 31, 2021 December 31, 2020 % 32.00 % 32.00
	It mainly engages in assembling and testing of module products, as well as in the research and development of integrated circuits.	Taiwan

The fair value of major associates listed on the Stock Exchange was as follows:

Formosa Advanced Technologies Co., Ltd.	December 31, 2021 $ 17,290,889	December 31, 2020
		16,716,000

The aggregated financial information of the major associate was as follows:

The financial information of FATC was as follows:

Current assets Non-current assets Current liabilities Non-current liabilities Net asset Net asset contributed to FATC Operating revenue Profit Other comprehensive loss Total comprehensive income Comprehensive income contributed to FATC	December 31, 2021 December 31, 2020 $ 9,538,767 7,816,528 4,693,324 5,792,482 (1,402,448) (1,238,254) (527,629) (555,589) $ 12,302,014 11,815,167 $ 12,302,014 11,815,167 For the year ended December 31,	December 31, 2020
		7,816,528 5,792,482 (1,238,254) (555,589)
		11,815,167
		11,815,167
		2020
		9,706,776
		1,402,677 (44,738)
		1,357,939
		1,357,939

(Continued)

29

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

Share of net assets of the major associate at January 1 Total comprehensive income contributed to the Company Uncollected dividends beyond the collection period which are reclassified to capital surplus Cash dividends contributed to the Company Share of net assets of major associate at December 31 Add: Goodwill Less: Unrealized profits on upstream sales net assets of the associates Total carrying amount of the major associate	December 31, 2021 $ 3,780,854 481,251 15 (325,475) 3,936,645 1,463,162 (60,776) $ 5,339,031	December 31, 2020 3,657,624 434,540 14 (311,324) 3,780,854 1,463,162 (83,511) 5,160,505

(g) Property, plant and equipment

Cost: Balance as of January 1, 2021 Additions Disposals Reclassification Balance as of December 31, 2021 Balance as of January 1, 2020 Additions Disposals Reclassification Balance as of December 31, 2020 Accumulated depreciation / impairment: Balance as of January 1, 2021 Depreciation for the period Impairment loss Disposals Reclassification Balance as of December 31, 2021 Balance as of January 1, 2020 Depreciation for the period Disposals Reclassification Balance as of December 31, 2020 Balance as of December 31, 2021 Balance as of December 31, 2020	Land $ 1,013,924 - - - $ 1,013,924 $ 1,013,924 - - - $ 1,013,924 $ - - - - - $ - $ - - - - $ - $ 1,013,924 $ 1,013,924	Building 8,142,962 8,420 - 132,594 8,283,976 8,155,623 - (12,661) - 8,142,962 2,607,637 322,858 - - - 2,930,495 2,293,861 319,741 (5,965) - 2,607,637 5,353,481 5,535,325	Machinery and equipment 198,973,463 825,663 (305,403) 8,249,535 207,743,258 195,834,150 858,712 (846,845) 3,127,446 198,973,463 132,363,691 14,446,763 31,640 (296,589) (92) 146,545,413 119,593,407 13,647,817 (846,837) (30,696) 132,363,691 61,197,845 66,609,772	Other equipment 817,016 48,351 (11,208) 6,109 860,268 911,349 49,353 (154,494) 10,808 817,016 651,389 53,454 - (11,208) 92 693,727 763,023 43,662 (154,494) (802) 651,389 166,541 165,627	Under construction 6,371,857 10,463,480 - (8,388,238) 8,447,099 2,249,125 7,429,579 - (3,306,847) 6,371,857 - - - - - - - - - - - 8,447,099 6,371,857	Total 215,319,222 11,345,914 (316,611) -
						226,348,525
						208,164,171 8,337,644 (1,014,000) (168,593)
						215,319,222
						135,622,717 14,823,075 31,640 (307,797) -
						150,169,635
						122,650,291 14,011,220 (1,007,296) (31,498)
						135,622,717
						76,178,890
						79,696,505

(Continued)

30

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

The estimated future recoverable amount of equipment, which had been identified to be no longer useful for its operation, is lower than the book value. In 2021, the Company reassessed its estimates, wherein the amount of $31,640 of the impairment loss has been recognized.

(h) Right-of-use assets

Cost： Balance at January 1, 2021 Additions Balance at December 31, 2021 Balance at January 1, 2020 Additions Decrease Balance at December 31, 2020 Accumulated depreciation: Balance at January 1, 2021 Depreciation for the period Balance at December 31, 2021 Balance at January 1, 2020 Depreciation for the period Decrease Balance at December 31, 2020 Carrying Amount: Balance at December 31, 2021 Balance at December 31, 2020	Land $ 1,884,277 109,059 $ 1,993,336 $ 297,829 1,884,277 (297,829) $ 1,884,277 $ 94,085 198,908 $ 292,993 $ 198,607 193,307 (297,829) $ 94,085 $ 1,700,343 $ 1,790,192	Building - 8,181 8,181 - - - - - 1,432 1,432 - - - - 6,749 -	Total 1,884,277 117,240 2,001,517 297,829 1,884,277 (297,829) 1,884,277 94,085 200,340 294,425 198,607 193,307 (297,829) 94,085 1,707,092 1,790,192

(i) Lease receivables

• (i) On June 18, 2009, the Company signed an amended long-term lease agreement with Inotera Memories, Inc. (its name was changed to Micron Technology Taiwan in March, 2017, referred to as "MTTW") on the lease of building, facilities and land located on 348, 348-1 and 348-3, Hwa Ya Section, Kueishan District, Taoyuan City. This amended lease agreement, which took effect retroactively from January 1, 2009, includes the renewal term. Initial lease term is from January 1, 2009 to December 31, 2018. However,MTTW is entitled to renew this amended lease agreement for an unlimited number of consecutive additional terms of five years each, by providing a written notice with the intention to renew the lease term commencing from January 1, 2019. MTTW has completed the renewal of its lease agreement, with a written notice on December 13, 2018. In addition, MTTW has an exclusive option to purchase the leased assets for a total purchase price of USD50,000 thousand on and after January 1, 2024. Also, the rental receivable for the entire year of 2009 has been waived. Initial yearly rentals for the

(Continued)

31

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

leased building (including facilities and land) were USD13,010 thousand and USD1,990 thousand, respectively from January 1, 2010 to December 31, 2018; the first yearly renewal rentals for the leased building (including facilities and land) will be USD8,010 thousand and USD1,990 thousand, respectively, from January 1, 2019 to December 31, 2023; the subsequent yearly renewal rentals for the leased building (including facilities and land) will be USD10 thousand and USD1,990 thousand commencing from January 1, 2024. The amended lease agreement for the building (including facilities) is treated as a capital lease because (a) the present value of the periodic rental payments made since the inception date is at least 90% of the market value of the leased assets and (b) the lease term is equal to 75% or more of the total estimated economic life of the leased assets. The land is treated as an operating lease.

• (ii) The total lease receivable from the capital lease of the building (including facilities) was $5,185,620; the implicit interest rate was 10.56%. The cost of the leased assets at the beginning of the lease period was $2,656,223. The difference was recognized as unrealized interest revenue of $2,529,397. For the years ended 2021, the Company recognized the interest revenue of $57,880 and $78,316, respectively, from the amortization of unrealized interest revenue.

The details of lease receivables were as follows:

The details of lease receivables were as follows:
Less than one year One to two years Two to three years Total lease payments receivable Unearned finance income Present value of lease payments receivable	December 31, 2021 $ 264,330 264,330 - 528,660 (45,224) $ 483,436	December 31, 2020
		264,330 264,330 264,330
		792,990 (103,104
		689,886

Please refer to Note 6(q) for information of credit risk.

• (j) Lease liabilities

Lease liabilities
Current Non-current For the maturity analysis, please refer to Note 6(s).	December 31, 2021 $ 214,928 $ 1,509,673	December 31, 2020
		178,432
		1,617,652

The amount recognized in profit or loss were as follows:

Interest on lease liabilities Expenses relating to short term leases	For the years ended December 31	For the years ended December 31
	2021 $ 23,653 $ 67,983	2020
		12,833
		65,879

(Continued)

32

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

The amount recognized in the statement of cash flows of the Group was as follows:

Total cash outflow for leases	For the years ended December 31,	For the years ended December 31,
	2021 $ 280,091	2020
		266,283

(i) Land lease

The Company leases its land and building with a period of 2 to 10 years. The lease included an option to terminate the contract, which is exercisable only by the Company and not by the lessors. The lease payment changes annually based on a local price index.

(ii) Other leases

The Company leases staff dorm, factory, parking lots and office spaces which are short-term leases. The Company applied the recognition exemptions and elected not to recognize its rightof-use assets and lease liabilities for these leases.

(k) Employee benefits

(i) Defined benefit plan

The movements in the present value of the defined benefit obligations and fair value of plan assets were as follows:

Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities	December 31, 2021 $ 1,181,856 (540,618) $ 641,238	December 31, 2020 1,108,808 (542,525) 566,283

The Company has established an employee defined benefit retirement plan covering full-time employees. Under this plan, contributions are made to an independent fund that is deposited with Bank of Taiwan. Employees are eligible for retirement and payments of retirement benefits are based on years of service and the average salary for the last six months before the employee’s retirement according to the R.O.C. Labor Standards Law.

1) Composition of plan assets

The Labor Pension Fund Supervisory Committee manages the Company’s pension fund which is being funded according to the Labor Standards Law. Under the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, this fund is required to distribute minimum income, but such minimum income shall not be less than the interest income derived from two-year time deposit with the local banks.

As of December 31, 2021, the Company’s pension fund with Bank of Taiwan amounted to $540,618. Please refer to the related information published on the website of the Labor Pension Supervisory Committee concerning the utilization of the labor pension fund, related yield rate and its allocation.

(Continued)

33

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

• 2) Movements in present value of the defined benefit obligations

Defined benefit obligation as of January 1, Current service and interest costs Remeasurement of net defined benefit liabilities －actuarial losses arising from change in financial assumptions Reclassification of liabilities from transfer of employees Benefits paid Defined benefit obligation as of December 31,	For the years ended December 31, 2021 2020 $ 1,108,808 1,098,174 14,958 15,266 97,477 14,987 (2,406) (869) (36,981) (18,750) $ 1,181,856 1,108,808

• 3) Movements in fair value of defined benefit plan assets

Fair value of plan assets as of January 1, Interest income Remeasurement of net defined liabilities －return on plan assets (excluding interest income) Contributions from employer Benefits already paid by the plan Fair value of plan assets as of December 31,	For the years ended December 31, 2021 2020 $ 542,525 522,278 5,472 5,298 5,166 18,754 15,100 14,711 (27,645) (18,516) $ 540,618 542,525

• 4) Expenses recognized in profit or loss

Current service costs Net interest income of net defined benefit liabilities Operating expected rate of return for the plan asset Operating costs Operating expenses	For the years ended December 31, 2021 2020 $ 3,894 4,284 11,063 10,982 (5,472) (5,298) $ 9,485 9,968 2021 2020 $ 5,633 6,145 3,852 3,823 $ 9,485 9,968

(Continued)

34

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

• 5) Remeasurement of net defined benefit liabilities recognized in other comprehensive income

Balance as of January 1, Recognized during the period Balance as of December 31, 6) Actuarial assumptions Discount rate Future salary increases	For the years ended December 31, 2021 2020 $ 54,299 57,312 73,849 (3,013) $ 128,148 54,299 December 31, 2021 December 31, 2020 % 0.50 % 1.00 % 2.85 % 2.85

The expected allocation payment to be made by the Company to the defined benefit plans for the one-year period after the reporting date for 2021 is $19,152.

The weighted average duration of the defined benefit plan is 14.3 years.

• 7) Sensitivity analysis

		Effect of	defined
		benefit obligations
		Increase	Decrease
		amount	amount
December 31, 2021
Discount rate (change 0.25%)	$	36,521	(35,056)
Future salaries (change1%)		151,571	(131,565)
December 31, 2020
Discount rate (change 0.25%)		37,838	(36,211)
Future salaries (change1%)		159,749	(136,769)

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated. The sensitivity analysis adopts the same methods for determining the defined benefit assets at balance sheet date.

The same methods and assumptions are adopted in the preparation of sensitivity analysis as in previous year.

(Continued)

35

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(ii) Defined contribution plan

The Company contributes an amount equal to 6% of the employee’s monthly wages to the Labor Pension personal account of the Bureau of the Labor Insurance in accordance with the provisions of the Labor Pension Act, under which, the Company is not required to bear the regulated or putative obligation subsequent to the payment of fixed-rate contribution.

The Company’s pension costs under the contribution pension plan amounted to $160,322 and $151,699 for the years ended 2021 and 2020, respectively.

(l) Income tax

(i) The Company’s income tax expense recognized were as follows:

Current tax expense Current period Surtax on undistributed earnings Adjustment for prior periods Taxes on remitted earnings from subsidiary Deferred tax expense Tax expense	For the years ended December 31, 2021 2020 $ 5,315,259 1,397,212 47,505 171,974 (661,118) (588,184) 22,524 103,526 100,429 203,449 $ 4,824,599 1,287,977	For the years ended December 31, 2021 2020 $ 5,315,259 1,397,212 47,505 171,974 (661,118) (588,184) 22,524 103,526 100,429 203,449 $ 4,824,599 1,287,977
	2021 $ 5,315,259 47,505 (661,118) 22,524 100,429 $ 4,824,599
		1,397,212 171,974 (588,184) 103,526 203,449 1,287,977

The Company’s income tax (gains) loss recognized directly in other comprehensive income were as follows:

were as follows:
Items that could not be reclassified subsequently to profit or loss: Remeasurement of net defined benefit plan Unrealized gains on equity investments at fair value through other comprehensive income	For the years ended December 31, 2021 2020 $ (18,462) 754 (186) - $ (18,648) 754
	2021 $ (18,462) (186) $ (18,648)
		754

Reconciliation of income tax expense and profit before tax were as follows:

Income tax calculated based on local tax rate Tax effect of permanent differences Change in unrecognized temporary differences Adjustment for prior periods Taxes on remitted earnings from subsidiary Surtax on undistributed earnings Total	For the years ended December 31, 2021 2020 $ 5,534,723 1,794,804 (136,886) (192,534) 17,851 (1,609) (661,118) (588,184) 22,524 103,526 47,505 171,974 $ 4,824,599 1,287,977
	2021 $ 5,534,723 (136,886) 17,851 (661,118) 22,524 47,505 $ 4,824,599

(Continued)

36

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(ii) Deferred tax assets and liabilities

• 1) Deferred tax assets：

Impairment loss of assets Balance as of January 1, 2021 $ 124,224 Recognized in loss (24,090) Recognized in other comprehensive income - Balance as of December 31, 2021 $ 100,134 Balance as of January 1, 2020 $ 155,102 Recognized in loss (30,878) Recognized in other comprehensive income - Balance as of December 31, 2020 $ 124,224 Deferred tax liabilities： Balance as of January 1, 2021 Recognized in loss Balance as of December 31, 2021	Improvements costs of environmental safety and factory facilities 134,247 (31,371) - 102,876 165,032 (30,785) - 134,247	Others Total 87,359 345,830 (20,250) (75,711) 18,648 18,648 85,757 288,767 229,899 550,033 (141,786) (203,449) (754) (754) 87,359 345,830 Unrealized gains (losses) on exchange $ - 24,718 $ 24,718

• 2) Deferred tax liabilities：

(iii) The Company's income tax returns have been examined by the ROC tax authority through 2019.

(m) Capital and other equity

As of December 31, 2021 and 2020, the Company’s government registered total authorized capital both amounted to $300,000,000 with $10 dollars par value per share, the number of ordinary shares both were 30,000,000 thousand shares and total paid-up ordinary share amounted to $30,968,749, and $30,935,939 respectively. All issued shares were paid up upon issuance.

The movements of shares outstanding for the years ended 2021 and 2020 were as follows:

(in thousand shares)

Balance as of January 1, Exercise of employees share options Retirement of treasury shares Balance as of December 31,	Ordinary Shares	Ordinary Shares
	2021 3,093,594 3,928 (647) 3,096,875	2020
		3,073,365 20,229 -
		3,093,594

(Continued)

37

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(i) Ordinary share

On February 26, May 5, August 4 and November 3, 2021, the Company’s Board of Directors approved to issue the Company's ordinary shares deriving from the exercise of employee share options. The Company had issued 2,841 thousand, 577 thousand, 72 thousand and 438 thousand ordinary shares at par value, respectively, with the issuing prices of $28.5 to $29.6, $28.5, $28.5 to $29.6 and $28.0 dollars per share, which totaled $39,280. All issued shares were paid up upon issuance and the related process for registration had been completed.

For the fourth quarter of 2021, the Company’s ordinary shares were derived from the exercise of employee share options. Accordingly, the Company had issued 161 thousand ordinary shares, at issuing prices of $28.0 dollars per share, which totaled $4,508, which was recognized as advance receipts for share capital as of December 31, 2021.

On February 26, May 6, August 6 and November 4, 2020, the Company’s Board of Directors approved to issue the Company's ordinary shares deriving from the exercise of employee share options. The Company had issued 632 thousand, 664 thousand, 17,951 thousand and 982 thousand ordinary shares at par value, with the issuing prices of $29.2, $29.2, $28.5 to $29.2, $28.5, $29.6 dollars per share, which totaled $202,290. All issued shares were paid up upon issuance and the related process for registration had been completed.

For the fourth quarter of 2020, the Company’s ordinary shares were derived from the exercise of employee share options. Accordingly, the Company had issued 1,271 thousand ordinary shares, at issuing prices of $28.5 to $29.6 dollars per share, which totaled $36,264, which was recognized as advance receipts for share capital as of December 31, 2020.

(ii) Capital surplus

Capital surplus
Premium from the issuance of stock Treasure shares transactions Employee stock option plans Expired employee share option plans Past due unclaimed dividends Change in equity of associates accounted for using equity method	December 31, 2021 $ 29,470,846 274,385 2,790,727 268,292 202 53 $ 32,804,505	December 31, 2020
		29,398,346 - 2,790,727 262,499 79 38
		32,451,689

According to the R.O.C. Company Act, capital surplus can only be used to offset a deficit, and only the realized capital surplus can be used to increase the common stock or be distributed as cash dividends. The aforementioned realized capital surplus includes capital surplus resulting from premium on issuance of capital stock and earnings from donated assets received. According to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers, capital increases by transferring capital surplus in excess of par value should not exceed 10% of the paid-up capital.

(Continued)

38

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(iii) Retain earning

According to the Company’s Articles of Incorporation, the Company’s annual net profit, after providing for income tax and covering the losses of previous years, is first set aside for legal reserve at the rate of 10% thereof until the accumulated balance of legal reserve equals the total issued capital and any special reserves pursuant to relevant laws and regulations. The remainder, plus the undistributed earnings of the previous years, are distributed or left undistributed for business purposes according to the resolution of the stockholders’ dividend distribution plan, which are initially proposed by the Board of Directors and adopted by the shareholders in the annual stockholders’ meeting.

As it belongs to a highly capital-intensive industry with strong growth potential, the Company adopts a dividend distribution policy which is in line with its plans for product line expansion and the demand of fund. This policy requires that the distribution of cash dividends shall not exceed 50% of the Company’s total dividend distribution every year.

1) Legal reserve

When the Company incurs no loss, it may, in pursuant to a resolution to be adopted by a shareholders’ meeting, distribute its legal reserve by issuing new shares or by cash. Only the portion of legal reserve which exceeds 25 percent of the paid-in capital may be distributed.

2) Special reserve

In accordance with Ruling issued by the FSC, a portion of current-period earnings and undistributed prior-period earnings shall be reclassified as special earnings reserve during earnings distribution. The amount to be reclassified should equal the currentperiod total net reduction of other shareholders’ equity. Similarly, a portion of undistributed prior-period earnings shall be reclassified as special earnings reserve (and does not qualify for earnings distribution) to account for cumulative changes to other shareholders’ equity pertaining to prior periods. Amounts of subsequent reversals pertaining to the net reduction of other shareholders’ equity shall qualify for additional distributions.

3) Earnings distribution

Earnings distribution for 2020 and 2019 was approved in the general meeting of shareholders held on August 4, 2021 and May 28, 2020, respectively. The relevant dividend distributions to shareholders were as follows:

Dividends attributable to ordinary shareholders: Cash dividends	For the year ended December 31, 2020	For the year ended December 31, 2020
	Dividends per share $ 1.30	Amount
		4,000,000

(Continued)

39

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

Dividends attributable to ordinary shareholders: Cash dividends	For the year ended December 31, 2019	For the year ended December 31, 2019
	Dividends per share $ 1.50	Amount
		4,600,000

(iv) Treasury shares

The Company repurchased shares from the securities exchange market based on section 28(2) of the Securities and Exchange Act and the movement in treasury shares were as follows:

Balance as of January 1, 2021 Transferring for the period Retirement for the period Balance as of December 31, 2021 Balance as of January 1, 2020 (Balance as of December 31, 2020)		Reasons for repurchase of shares Transferring to employees Thousand shares Amount 20,000 $ 1,146,932 (19,353) (1,109,829) (647) (37,103) - $ - 20,000 $ 1,146,932

On November 3, 2021, the Company’s Board of Directors approved to retire 647 thousand treasury shares, resulting in a decrease in ordinary shares amounting to $6,470. The Company recognized the decrease in capital surplus of $30,633, on November 29, 2021 as the capital reduction, due to the book value being higher than the par value of the treasury shares. The related process for registration had been completed.

In accordance with the requirements of Securities and Exchange Act, treasury shares held by the Company should not be pledged, and do not hold any shareholder rights before their transfer.

(v) Other equity (net of tax)

Balance as of January 1, 2021 Exchange differences on translation of foreign financial statements Unrealized losses from financial of assets measured at fair value through other comprehensive income, associates accounted for using equity method Unrealized losses from financial assets measured at fair value through othe comprehensive income Balance as of December 31, 2021	Exchange differences on translation of foreign financial statements	Unrealized losses from financial assets measured at fair value through other comprehensive income	Total
	$ (2,893,732) (1,092,193) - r - $ (3,985,925)	(117,775) - (12,499) (743) (131,017)	(3,011,507) (1,092,193) (12,499) (743)
			(4,116,942)

(Continued)

40

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

Balance as of January 1, 2020 Exchange differences on translation of foreign financial statements Unrealized losses from financial of assets measured at fair value through other comprehensive income, associates accounted for using equity method Balance as of December 31, 2020	Exchange differences on translation of foreign financial statements	Unrealized losses from financial assets measured at fair value through other comprehensive income	Total
	$ (938,039) (1,955,693) - $ (2,893,732)	(103,061) - (14,714) (117,775)	(1,041,100 (1,955,693 (14,714
			(3,011,507

(n) Share-based payment transactions

As of December 31, 2021, the Company had 6 share-based payment arrangements as follows:

Grant date Grant unit Exercise price (dollar) (Notes1~6) Deal period Vested Conditions	The 8th batch of Employee Stock Option Plan	The 9th batch of Employee Stock Option Plan	The 1th batch of Treasury Shares Transferred to Emplyees	The 2th batch of Treasury Shares Transferred to Emplyees	The 3th batch of Treasury Shares Transferred to Emplyees The 4th batch of Treasury Shares Transferred to Emplyees 2021.8.12 2021.10.22 5,587 6,413 57.4 57.4 - - Immediately vested Immediately vested
	2016.5.10 97,500 38.0 8 years Duration of two years duration and at certain proportion	2016.8.11 2,500 36.6 8 years Duration of two years duration and at certain proportion	2021.1.15 3,936 57.4 - Immediately vested	2021.2.2 4,064 57.4 - Immediately vested

• Note 1: The Company approved to distribute its cash dividends in 2016. As a result, the exercise price of the 8th batch of the employee stock option plan were adjusted to $35.3 dollars, in accordance with the offering and exercising terms and conditions of ESOP.

• Note 2: The Company approved to distribute its cash dividends in 2017. As a result, the exercise price of the 8th and 9th batch of the employee stock option plan were adjusted to $34.3 dollars and $35.5 dollars, respectively, in accordance with the offering and exercising terms and conditions of ESOP.

• Note 3: The Company approved to distribute its cash dividends in 2018. As a result, the exercise price of the 8th and 9th batch of the employee stock option plan were adjusted to $33.1 dollars and $34.3 dollars, respectively, in accordance with the offering and exercising terms and conditions of ESOP.

• Note 4: The Company approved to distribute its cash dividends in 2019. As a result, the exercise price of the 8th and 9th batch of the employee stock option plan were adjusted to $29.2 dollars and $30.3 dollars, respectively in accordance with the offering and exercising terms and conditions of ESOP.

• Note 5: The Company approved to distribute its cash dividends in 2020. As a result, the exercise price of the 8th and 9th batch of the employee stock option plan were adjusted to $28.5 dollars and $29.6 dollars, respectively in accordance with the offering and exercising terms and conditions of ESOP.

• Note 6: The Company approved to distribute its cash dividends in 2021. As a result, the exercise price of the 8th and 9th batch of the employee stock option plan were adjusted to $28.0 dollars and $29.1 dollars, respectively in accordance with the offering and exercising terms and conditions of ESOP.

(Continued)

41

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

• (i) Options granted were priced using the Black-Scholes pricing model and the inputs to the model were as follows:

Dividend rate Expected volatility Risk-free rate Fair value of unit stock option (dollar) $	The 8th batch of Employee Stock Option Plan % - % 55.47 % 0.5728 18.77	The 9th batch of Employee Stock Option Plan % - % 45.80 % 0.529 15.30	The 1th batch of Treasury Shares Transferred to Emplyees % - % 48.33 % 0.1690 28.80	The 2th batch of Treasury Shares Transferred to Emplyees % - % 50.77 % 0.0950 29.50	The 3th batch of Treasury Shares Transferred to Emplyees The 4th batch of Treasury Shares Transferred to Emplyees % - % - % 40.01 % 34.15 % 0.1090 % 0.2040 9.00 5.00

Expected volatility is based on weighted average of historical volatility, and it is adjusted accordingly when there is additional market information about the volatility. Expected dividend and risk-free rate is determined based on government bonds.

• (ii) Relevant information of employee stock option plans and the transfer of treasury stock

Outstanding as of January 1, Options granted Options exercised Options forfeited Options expired Outstanding as of December 31, Options exercisable as of December 31,	For the years ended December 31, 2021 2020 Weighted- average exercise (price TWD) Number of options (Units) Weighted- average exercise (price TWD) Number of options (Units) $ 28.51 4,462 29.22 28,202 57.40 20,000 - - 53.66 (22,171) 28.52 (21,381) 28.51 (13) 28.55 (2,359) 56.79 (647) - - 28.02 1,631 28.51 4,462 28.02 1,631 28.51 4,462	For the years ended December 31, 2021 2020 Weighted- average exercise (price TWD) Number of options (Units) Weighted- average exercise (price TWD) Number of options (Units) $ 28.51 4,462 29.22 28,202 57.40 20,000 - - 53.66 (22,171) 28.52 (21,381) 28.51 (13) 28.55 (2,359) 56.79 (647) - - 28.02 1,631 28.51 4,462 28.02 1,631 28.51 4,462
	2021 Weighted- average exercise (price TWD) Number of options (Units) $ 28.51 4,462 57.40 20,000 53.66 (22,171) 28.51 (13) 56.79 (647) 28.02 1,631 28.02 1,631
	Weighted- average exercise (price TWD) $ 28.51 57.40 53.66 28.51 56.79 28.02 28.02	Weighted- average exercise (price TWD) 29.22 - 28.52 28.55 - 28.51 28.51

Further details of the outstanding stock options of the Company as of December 31, 2021 and 2020 were as follows:

Range of exercise price (dollar) Weighted average of remaining option plan period (year) (iii) Compensation cost	December 31, 2021 December 31, 2020 28.0~29.1 28.5~29.6 2.35~2.61 3.35~3.61

Compensation cost arising from share options granted to employees Compensation cost arising from treasury shares transferred to employees	For the years ended December 31, 2021 2020 $ - 58,420 313,110 - $ 313,110 58,420 (Continued	For the years ended December 31, 2021 2020 $ - 58,420 313,110 - $ 313,110 58,420 (Continued
	2021 $ - 313,110 $ 313,110
		58,420
		(Continued

42

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(o) Earnings per share

Basic earnings per share： Net profit attributable to the Company's ordinary shareholders Weighted-average number of ordinary shares outstanding (basic) Basic earnings per share (dollar) Diluted earnings per share: Net profit attributable to the Company's ordinary shareholders (basic and diluted) Effect of potentially dilutive ordinary shares Weighted-average number of ordinary shares (basic) Effect of employee stock option Effect of employee remuneration Weighted-average number of ordinary shares (diluted) Diluted earnings per share (dollar)	For the years ended December 31,	For the years ended December 31,
	2021 $ 22,849,015 3,087,329 $ 7.40 $ 22,849,015 3,087,329 1,451 20,798 3,109,578 $ 7.35	2020
		7,686,041
		3,065,482
		2.51
		7,686,041
		3,065,482 8,474 8,408
		3,082,364
		2.49

(p) Revenue from contracts with customers

(i) Disaggregation of revenue

Geographic markets of primary destination: Taiwan Japan China USA Other countries Major products line: Dynamic Random Access Memory (DRAM) Others	For the year ended December 31, 2021 Manufacturing department $ 28,692,474 5,899,564 31,198,947 12,062,287 7,627,970 $ 85,481,242 $ 85,352,631 128,611 $ 85,481,242	For the year ended December 31, 2020
		Manufacturing department
		18,120,076 3,777,093 25,456,947 9,262,938 4,083,336
		60,700,390
		60,562,260 138,130
		60,700,390

(Continued)

43

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(i) Contract balances

Notes receivable-related parties from non-operating activities Accounts receivable (including related parties) Total	December 31, 2021 $ - 12,207,133 $ 12,207,133	December 31, 2020 - 8,235,352 8,235,352	January 1, 2020
			41,545 7,466,062
			7,507,607

For details on notes and accounts receivable (including related parties), and loss allowance for impairment, please refer to note 6(b).

(q) Remuneration to employees

According to the Company's articles of incorporation, if the Company makes a profit, it should appropriate for employee compensation which is calculated based on 1% to 12% of the Company's net income before tax before deduction of employee compensation, and after offsetting accumulated deficits, if any, should be distributed as employee compensations. Employees who are entitled to receive the above-mentioned employee compensation, in shares or cash, include the employees of the subsidiaries of the Company who meet certain specific requirements.

The estimated employee remuneration which was charged to profit or loss under operating costs or expense amounted to $1,550,000 and $600,000 for the years ended 2021 and 2020, respectively. This employee remuneration was estimated based on the Company's net income before tax before deducting any employee compensation, according to the earnings allocation method as stated under the Company's articles of association. If there is any difference between the actual amounts and the estimated amounts of employee remuneration to employees after the financial reports are issued, the management of the Company is expecting that the differences will be treated as a change in accounting estimates and recognized through profit or loss in the following year. Related information would be available at the Market Observation Post System website.

There is no difference between the estimated amounts of employee remuneration for the year ended December 31, 2021 and 2020 and the financial statements for the year ended December 31, 2021 and 2020, which were approved by the Company's Board of Directors.

(r) Non-operating income and expenses

(i) Interest income

Interest income from bank deposits and short-term notes Interest income from financial lease receivables	For the years ended December 31,	For the years ended December 31,
	2021 $ 64,027 57,880 $ 121,907	2020
		49,393 78,316
		127,709

(Continued)

44

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(ii) Other gains and losses

Withholding tax refund Loss on disposal of property, plant and equipment Foreign exchange losses Impairment loss on non-financial assets Others Finance costs Amortization interest of lease liabilities Others	For the years ended December 31, 2021 2020 $ 45,528 - (8,814) (6,633) (438,534) (699,836) (31,640) - 124,331 178,588 $ (309,129) (527,881) For the years ended December 31, 2021 2020 $ 23,653 12,833 14 190 $ 23,667 13,023

• (iii) Finance costs

(s) Financial instruments

• (i) Credit risk

• 1) Exposure to credit risk

The carrying amount of financial assets represents the maximum exposure to credit risk.

• 2) Concentration of credit risk

The majority of Company's customers are mostly those in the high-tech industry. In order to reduce accounts receivable credit risk, the Company continuously assesses the financial condition of its customers. If it is necessary, the Company will ask for guarantees or warranties. The Company still regularly assesses the likelihood of collectability of accounts receivable and sets aside allowance for bad debts, based on the result of management’s evaluation of the overall amounts of bad debts.

As of December 31, 2021 and 2020, the Company’s major customers consisted of six and eight customers which accounted for 72.14% and 75.46%, respectively, of accounts receivable so that management believes the concentration of credit risk.

• 3) Credit risk of receivables

For credit risk exposure of receivables (including related parties), please refer to note 6(b).

Other financial assets measured at amortized cost includes other receivables, time deposits and refundable deposits.

(Continued)

45

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

Considering that the Company deals only with other external parties with good credit standing and with the above investment grade financial institutions, all of the above financial assets are considered to have low credit risk.

As of December 31, 2021 and 2020, no allowance for impairment was provided because there was no indication of credit-impaired for the 12-month ECL or lifetime ECL allowance for other financial assets measured at amortized cost.

(ii) Liquidity risk

The following are the remaining contractual maturities at the end of the reporting period of financial liabilities, including estimated interest payments.

December 31, 2021 Non-derivative financial liabilities Accounts payable (including related parties) Other payable (including related parties) Lease liabilities (including current portion) December 31, 2020 Non-derivative financial liabilities Accounts payable (including related parties) Other payable (including related parties) Lease liabilities (including current portion) Total		Carrying amount $ 2,849,233 7,873,994 1,724,601 $ 12,447,828 $ 2,111,774 5,281,268 1,796,084 $ 9,189,126	Contractual cash flow 2,849,233 7,873,994 1,822,315 12,545,542 2,111,774 5,281,268 1,914,405 9,307,447	Within 6 months 2,849,233 7,873,994 118,330 10,841,557 2,111,774 5,281,268 100,758 7,493,800	6-12months - - 118,330 118,330 - - 100,758 100,758	1-2years - - 236,536 236,536 - - 201,516 201,516	2-5years - - 636,911 636,911 - - 604,549 604,549	Over 5 years
								- - 712,208
								712,208
								- - 906,824
								906,824

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

• (iii) Currency risk

1) Exposure to currency risk

The Company’s significant exposure to foreign currency risk was as follows:

Financial assets: Monetary items USD JPY EUR HKD Financial liabilities: Monetary items USD JPY EUR	December 31, 2021 Foreign currency (in thousands) Foreign rate (dollars) New Taiwan Dollars $ 1,024,412 27.690 28,365,968 5,605,835 0.2404 1,347,643 242 31.3613 7,589 1,012 3.5446 3,587 $ 133,898 27.690 3,707,636 1,046,703 0.2404 251,627 9,066 31.3613 284,322	December 31, 2021 Foreign currency (in thousands) Foreign rate (dollars) New Taiwan Dollars $ 1,024,412 27.690 28,365,968 5,605,835 0.2404 1,347,643 242 31.3613 7,589 1,012 3.5446 3,587 $ 133,898 27.690 3,707,636 1,046,703 0.2404 251,627 9,066 31.3613 284,322	December 31, 2020	December 31, 2020
	Foreign currency (in thousands) $ 1,024,412 5,605,835 242 1,012 $ 133,898 1,046,703 9,066	Foreign rate (dollars) 27.690 0.2404 31.3613 3.5446 27.690 0.2404 31.3613	Foreign currency (in thousands) 367,526 3,490,741 42 1,379 115,140 1,272,668 150	Foreign rate (dollars) New Taiwan Dollars 28.508 10,477,431 0.2724 950,878 34.560 1,452 3.626 5,000 28.508 3,282,411 0.2724 346,675 34.560 5,184

(Continued)

46

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

2) Sensitivity analysis

The Company’s exposure to foreign currency risk arises from translation of the foreign currency exchange fluctuations on cash and cash equivalents, accounts receivable (including related parties), accounts payable, and other payables (including related parties) which are denominated in different foreign currencies. A 1% appreciaiton and depreciation of the TWD against the USD, EUR, and JPY as of December 31, 2021 and 2020 would have decreased and increased the net income before tax by $254,812 and $78,005 for the years ended 2021 and 2020, respectively. This analysis assumes that all other variables remain constant and ignores any impact of forecasted sales and purchases. The analysis is performed on the same basis.

Since the Company has many kinds of functional currency, the information on foreign exchange loss on monetary items is disclosed by total amount. For the years ended December 31, 2021 and 2020, foreign exchange gain (loss) (including realized and unrealized portions) amounted to $438,534 and $699,836, respectively.

(iv) Other market price risk

For the years ended December 31, 2021 and 2020, the sensitivity analyses for the changes in the securities price at the reporting date were performed using the same basis for the profit and loss as illustrated below:

Prices of securities at the reporting date Increase 1% Decrease 1%	For the years ended December 31,
	2021 2020 Other comprehensive income after tax Other comprehensive income after tax $ 89 - (89) -

• (v) Fair value of financial instruments

• 1) Types and fair value of financial instruments

The Company’ s financial assets measured at fair value through other comprehensive income was measured on a recurring basis. The carrying amount and fair value of the Company's financial assets and liabilities (including the information on fair value hierarchy; but excluding financial instruments were not measured at fair value whose carrying amount were reasonably close to the fair value, and lease liabilities, disclosure of fair value information is not required) were as follows:

Financial assets at fair value through other comprehensive income: Equity instruments without an market price measured at fair value		December 31, 2021	December 31, 2021
	Book Value $ 11,071		Fair Value	Total 11,071
		Level 1 -	Level 2 -

47

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

Financial assets measured at amortized cost Cash and cash equivalents Accounts receivable (including related parties) Other receivables Lease payments receivable (including current portion) Total Financial liabilities measured at amortized cost Accounts payable (including related parties) Other payables (including related parties) Lease liabilities (including current portion) Total Financial assets measured at amortized cost： Cash and cash equivalents Accounts receivable (including related parties) Other receivables Lease payments receivable (including current portion) Total Financial liabilities measured at amortized cost Accounts payable (including related parties) Other payables (including related parties) Lease liabilities-current (including current portion) Total		December 31, 2021	December 31, 2021	December 31, 2021
	Book Value $ 35,267,599 12,207,133 728,346 483,436 $ 48,697,585 $ 2,849,233 7,873,994 1,724,601 $ 12,447,828	Fair Value Level 1 Level 2 Level 3 - - - - - - - - - - - - - - 11,071 - - - - - - - - - - - - December 31, 2020	Fair Value
					Total - - - -
					11,071
					- - -
					-
		Level 1 - - - - - - - - -	Fair Value
			Level 2 - - - - - - - - -	Level 3 - - - - - - - - -	Total - - - -
					-
					- - -
					-

• 2) Valuation techniques for financial instruments measured at fair value

The category and attribute of the Company's financial instruments without an active market were as follows:

• Equity instruments without an active market price: Measurements of fair value of financial instruments without an active market price are calculated using the net asset value method, which is measured according to the main assumption based on the equity value of the investee’s net asset. The estimation has already been adjusted in accordance with the discount on the lack of marketability of the equity stock

(Continued)

48

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

• 3) Transfer between levels

For the years ended December 31, 2021 and 2020, there was no transfer from financial assets.

• 4) Reconciliation of Level 3 fair values

Balance as of January 1, 2021 Purchased Total losses recognized in other comprehensive income Balance as of December 31, 2021 Balances as of January 1, 2020 (and December 31, 2020)	Fair value through other comprehensive income Unquoted equity instruments $ - 12,000 (929) $ 11,071 $ -

For the years ended December 31, 2021 and 2020, total losses that were included in “ unrealized losses from financial assets at fair value through other comprehensive income” were as follows:

Total losses recognized in other comprehensive income, and presented in “unrealized losses from financial assets at fair value through other comprehensive income”	2021 $ (743)	2020
		-

• 5) Quantified information on significant unobservable inputs (Level 3) used in fair value measurement

The Company’s financial instruments that use Level 3 inputs to measure fair value “fair value through other comprehensive income – equity investments”.

The Company’s investment in equity instruments without an active market have only one significant unobservable input.

Quantified information of significant unobservable inputs was as follows:

Item Financial assets at fair value through other comprehensive income equity investments without an active market	Valuation technique Asset method	Significant unobservable inputs Inter-relationship between significant unobservable inputs and fair value measurement ‧Net asset value ‧The discount rate due to lack of marketability as of December 31, 2021 was 5% ‧The higher the discount for lack of marketability, the lower the fair value.

(Continued)

49

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

• 6) Fair value measurement in Level 3 - sensitivity analysis of the possible alternative assumptions

The valuation models and assumptions used to measure the fair value of the financial instruments is reasonable. However, the use of different valuation models or assumptions may result in different measurements. The effects of changes in assumptions for financial instruments, whose fair value measurements were categorized as Level 3, were as follows:

December 31, 2021 Financial assets at fair value through other comprehensive income equity investments without an active market	Inputs Discount for lack of marketability	Increase or decrease 1%	Effects of changes in fair value on other comprehensive income Favorable change Unfavorable change 117 (117)

The favorable and unfavorable effects represent the changes in fair value, and fair value is based on a variety of unobservable inputs calculated using a valuation technique. The analysis above only reflects the effects of changes in a single input, and it does not include the interrelationships with another input.

(t) Financial risk management

• (i) Nature and extent

The Company has the following exposure risks for holding certain financial instruments:

• 1) Credit risk

• 2) Liquidity risk

• 3) Market risk

The following further discloses detailed information about exposure risk arising from the aforementioned risks and the Company’s objectives, policies and processes for measuring and managing the above mentioned risks. For more disclosures about the quantitative effects of these exposure risks, please refer to the respective notes in the financial statements.

(ii) Framework of risk management

The Company's Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.

The Company's risk management policies are established to identify and analyze the risks being faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’ s activities. The Company, through their training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

(Continued)

50

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

The Company's Board of Directors oversees how management monitors compliance with the Company's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Company’s Board of Directors is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Board of Directors.

(iii) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company's receivables from customers, bank deposits and investments.

1) Accounts receivable

The Company's exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Company's customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk.

The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness before the Company's standard payment and delivery terms and conditions are offered. The Company's review includes external ratings, when available, and in some cases, bank references. Purchase limits are established for each customer, which represent the maximum open amount without requiring approval from the Company; these limits are reviewed quarterly. Customers that fail to meet the Company's benchmark creditworthiness may transact with the Company only on a prepayment basis.

The Company established an impairment allowance that represents its estimate of incurred losses in respect of accounts receivable and investments. Major components of this impairment allowance are specific loss component that is related to individually significant exposure and collective loss component where is the loss is incurred but not identified. The collective component is based on historical payment experience of similar financial assets.

2) Investment

The credit risk exposure in the bank deposits and other financial instruments are measured and monitored by the Company's finance department. Considering that the Company deals only with banks and other external parties with good credit standing and with above investment grade financial institutions, corporate and partnership organization and government agencies, management is not expecting non-compliance issues and significant credit risk.

(Continued)

51

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

3) Guarantees

The Company’ s policy is to provide financial guarantees only to wholly owned subsidiaries. At December 31, 2021 and 2020, no other guarantees were outstanding.

(iv) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. Also, the Company's approach to managing liquidity is to ensure, as much as possible, that it will always have sufficient current funds, such as cash and cash equivalents, securities with high liquidity and sufficient credit line from banks, to meet its liabilities when due, without incurring unacceptable losses or risking damage to the Consolidated Company's reputation.

The Company has unused bank facilities for $23,192,000 and $20,072,000 as of December 31, 2021 and 2020.

(v) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

The Company buys and sells derivatives in order to reduce market risks. All these transactions are made in accordance with the risk management policy.

1) Currency risk

The Company's exposure to currency risk is on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the Company, primarily the New Taiwan Dollars (NTD). The currencies used in these transactions are denominated in NTD, USD, JPY, EUR and HKD.

2) Other market price risk

The Company is exposed to equity price risk due to the investments in equity securities. This is a strategic investment and is not held for trading. The Company does not actively trade in these investments as the management of the Company minimizes the risk by holding different investment portfolios.

(u) Capital management

The Company's policy is to maintain a strong capital base in order to maintain investor, creditor and market confidence and to sustain future development of the business. Capital consists of the Company's equity.

(Continued)

52

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

The Company may adjust the payment of dividend to shareholders, return cash to shareholders through capital reduction, issue new shares or sell held for sale assets in order to pay off its liabilities. Likewise, the Company monitors its debt-to-capital ratio which serves as the basis to control capital, the same practice as the other companies in the industry. The Company's debt-tocapital ratio on reporting date was as follows:

Total Liabilities Deduct: cash and cash equivalents Net liabilities Total equity Debt-to-capital ratio	December 31, 2021 $ 18,348,740 (35,267,599) $ (16,918,859) $ 172,978,068 % (9.78)	December 31, 2020 11,812,445 (16,573,114) (4,760,669) 153,812,027 % (3.10)

The Company has not changed its capital management strategy as of December 31, 2021.

• (v) The investing and financing activities on non-cash transactions

The Company's investing and financing activities on non-cash transactions for the years ended 2021 and 2020 were as follows:

(i) Acquisition of right-of-use asses by lease, please refer to Note6(h)

(ii)

Acquisition of property, plant and equipment Add: Payables on equipment at beginning of period Less: Payables on equipment at end of period Others Cash Paid Retirement of treasury shares	For the years ended December 31, 2021 2020 $ 11,345,914 8,337,644 693,313 973,002 (785,854) (693,313) - (167,843) $ 11,253,373 8,449,490 For the years ended December 31, 2021 2020 $ 37,103 -	For the years ended December 31, 2021 2020 $ 11,345,914 8,337,644 693,313 973,002 (785,854) (693,313) - (167,843) $ 11,253,373 8,449,490 For the years ended December 31, 2021 2020 $ 37,103 -
		-

(iii) Retirement of treasury shares

(Continued)

53

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(iv) Reconciliation of liabilities arising from financing activities were as follows:

Lease liabilities Lease liabilities	January 1, 2021 $ 1,796,084 January 1, 2020 $ 99,924	Cash flow (188,376)		Non-Cash changes		December 31, 2021
			Changes in an index of lease payments 17,429	Increased 99,811 Non-Cash changes	Increased by other payables (347)
						1,724,601
		Cash flow (188,459)				December 31, 2020
			Increased 1,884,277	Increased by other payables (70)	Interest expense 412
						1,796,084

(7) Related-party transactions:

• (a) Names and relationship with related parties

The following are entities that have had transactions with related party during the periods covered in the financial statements.

Name of related party Relationship with the Company Nanya Technology Corp. U.S.A. The Company’s subsidiary Nanya Technology Corp. Delaware The Company’s subsidiary Nanya Technology Corp. H.K. The Company’s subsidiary Nanya Technology Corp. Japan The Company’s subsidiary Nanya Technology International, Ltd. The Company’s subsidiary Nanya Technology Corp. Europe GmbH The Company’s subsidiary Nanya Technology Corp. Shenzhen The Company’s subsidiary Nan Ya Photonics Incorporation The Company’s other related parties Formosa Sumco Technology Corporation The Company’s other related parties Formosa Advanced Technologies Co., Ltd. The Company’s associates Formosa Technologies Corporation The Company’s other related parties Formosa Biomedical Technology Corp. The Company’s other related parties Formosa Petrochemical Corporation The Company’s other related parties Formosa Plastics Corporation The Company’s other related parties Formosa FCFC Carpet Corporation The Company’s other related parties Formosa Waters Technology Co., Ltd. The Company’s other related parties Nan Ya Plastics Corporation The entity with significant influence over the Company Min Chi University of Technology The Company’s other related parties

The Company’s other related parties The Company’s other related parties The Company’s other related parties The Company’s other related parties The Company’s other related parties The Company’s other related parties The entity with significant influence over the Company The Company’s other related parties

(Continued)

54

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(b) Significant related-party transactions

• (i) Sales to related parties

Subsidiaries Nanya Technology Corp. USA Other Subsidiaries Associates Total	Sales For the years ended December 31, 2021 2020 $ 11,944,306 9,211,321 11,177,075 6,613,016 - 9,271 $ 23,121,381 15,833,608	Accounts receivable to related parties December 31, 2021 December 31, 2020 2,880,267 1,436,308 1,950,677 1,243,457 - 8,237 4,830,944 2,688,002	Accounts receivable to related parties December 31, 2021 December 31, 2020 2,880,267 1,436,308 1,950,677 1,243,457 - 8,237 4,830,944 2,688,002
	2021 $ 11,944,306 11,177,075 - $ 23,121,381		December 31, 2020 1,436,308 1,243,457 8,237 2,688,002

The selling prices and collection terms for the sales to related parties above are not significantly different from those third-party customers, and the normal credit term with the related parties above is O/A 60 to 180 days and due for collection on the 15th day of the month following the month of delivery of goods sold. There is no collateral received among related parties accounts receivable. However, not expected credit loss is necessary based on the result of management’s evaluation.

(ii) Purchase from related parties

Entities with significant influence over the Company Associates Other related parties: Formosa Sumco Technology Corporation Other related parties Total	Purchases For the years ended December 31, 2021 2020 $ 121,418 89,770 852 801 661,913 573,342 270,612 233,946 $ 1,054,795 897,859	Accounts payable to related parties	Accounts payable to related parties
	2021 $ 121,418 852 661,913 270,612 $ 1,054,795	December 31, 2021 12,764 - 97,938 8,812 119,514	December 31, 2020
			9,686 - 71,257 3,735
			84,678

The purchase price and payment terms for the purchase from related parties above are not significantly different from those with third party vendors, and the average payment period for notes and accounts payable pertaining to such purchase transactions ranged from one to two months, which was similar to that of other normal vendors.

(Continued)

55

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(iii) Consigned out for processing

Associates	Amount For the years ended December 31, 2021 2020 $ 7,773,589 7,136,528	Other payables to related parties	Other payables to related parties
	2021 $ 7,773,589	December 31, 2021 1,221,034	December 31, 2020
			1,049,080

The term of transactions with the related parties above is 60 days after the end of each month when processed consigned goods are received.

(iv) Service received

Relationship	Other gains	Other gains	8 1 4 3	Administrati For the ye Decem 2021 - - 51,880 440,475 2,039 494,394	ve expenses ars ended ber 31, 2020 - - 53,955 467,288 1,165 522,408	Other payables to related parties December 31, 2021 December 31, 2020 - - - - 3,945 3,532 56,531 46,251 - - 60,476 49,783	Other payables to related parties December 31, 2021 December 31, 2020 - - - - 3,945 3,532 56,531 46,251 - - 60,476 49,783
	For the yea Decemb	rs ended er 31,
	2021 $ 278 166 - 139 - $ 583	2020 28 17 - 14 -					December 31, 2020 - - 3,532 46,251 -
Subsidiaries Nanya Technology Corp. USA Nanya Technology Corp. Europe GmbH Nanya Technology Corp. Shen zhen Nanya Technology Corp. Delaware Nanya Technology Corp. Japan
		60					49,783

(v) Property transactions

1) Acquisition of equipment:

Entities with significant influence over the Company Other related parties 2) Acquisition of Financial	Acquisition price For the years ended December 31, 2021 2020 $ 32,371 40,550 9,718 - $ 42,089 40,550 Assets	Other payables to related parties	Other payables to related parties
	2021	December 31, 2021 8,093 8,088 16,181	December 31, 2020
	$ 32,371 9,718 $ 42,089 Assets		20,830 -
			20,830

Relationship Subsidiary	Account Investments accounted for using equity method		For the year ended December 31, 2021 Item of transaction Acquisition price Shares of Nanya Technology International, Ltd. $ 11,141,200	For the year ended December 31, 2021 Item of transaction Acquisition price Shares of Nanya Technology International, Ltd. $ 11,141,200
		Number of shares of transaction (in thousands) 0.4

(Continued)

56

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(vi) Lease contracts

Relationship Entities with significant influence over the Company	Acquisition price	Acquisition price
	For the years ended December 31,
	2021 $ 65,134	2020
		62,391

The rentals charged to the entities with significant influence over the Company are determined based on the local market prices, and rents are paid monthly.

The Company entered into 9 to 10 years lease agreements between July and August 2020, as well as a 3 year lease agreement in July 2017, with Nan Ya Plastics Corporation, at the total values of $2,015,018 and $617,862, respectively. Also, for the years ended December 31, 2021 and 2020, the Company recognized the amounts of $23,290 and $12,833, respectively, as interest expenses. Furthermore, on December 31, 2021 and 2020, the balances of lease liabilities amounted to $1,633,479 and $1,796,084, respectively. In additions, for the year ended December 31, 2021 and 2020, the Company recognized the additions of the right of use asset amounting to $0 and $1,884,277, respectively.

The Company entered into a 3-year lease agreement in December 2021 with Min Chi University of Technology, at the total values of $50,198. Also, for the year ended December 31, 2021, the Company recognized the amount of $43, as interest expense. Furthermore, on December 31, 2021, the balance of lease liability amounted to $49,352.

Please refer to Note 6(h) for the details on right of use assets above.

(vii) Others

Associates	Other income	Other income
	December 31, 2021 $ 602	2020
		3,635

(c) Key management personnel compensation

Key management personnel compensation comprised:

Short-term employee benefits Share-based payment	For the years ended December 31, 2021 2020 $ 46,749 55,141 5,696 702 $ 52,445 55,843	For the years ended December 31, 2021 2020 $ 46,749 55,141 5,696 702 $ 52,445 55,843
		2020
		55,141 702
		55,843

Please refer to Note 6(n) for the details of share-based payment.

(Continued)

57

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(8) Pledged assets: None

(9) Commitments and contingencies:

• (a) Significant commitments

Guarantees for importation goods provided by bank Unused letters of credit Total	December 31, 2021 $ 835,000 112,321 $ 947,321	December 31, 2020
		935,000 660,779
		1,595,779

• (b) Contingent liabilities

• (i) In 2000, the Company was charged by Brazil's Ministry of Justice as being involved in the International Monopolies, which influences Brazil's DRAM market. Consequently, the Company, other large international companies and individuals are investigated at the same time. The lawsuit was in a court hearing. The Company has engaged counsels to properly handle it to ensure the Company's rights.

• (ii) In October 2016, Lone Star Silicon Innovations LLC (Lone Star) filed a lawsuit against Nanya Technology Corp. (Nanya) and two of its subsidiaries, Nanya Technology Corp., USA (NTC USA) and Nanya Technology Corp., Delaware (NTC Delaware), to the US District Court of East Texas for patent infringement. The lawsuit was dismissed in April 2021, therefore it was closed.

• (iii) In November 2019, Monterey Research LLC (Monterey) filed a lawsuit against Nanya Technology Corp. (Nanya) and two of its subsidiaries, Nanya Technology Corp., USA (NTC USA) and Nanya Technology Corp., Delaware (NTC Delaware), to the US District Court of Delaware for patent infringement. The Company has engaged counsels to properly handle it to ensure the Company's rights.

• (iv) The original Joint Venture agreement signed by the Company, Micron Technology, Inc. and its related parties was terminated after Micron Semiconductor Co. completed its share-swap with Micron Technology Taiwan. Both parties had mutually agreed to sign a cooperation agreement, the details of the agreement were as follows:

  • 1) The estimated cost for improving specific environmental safety and factory facilities in mutually operating period of joint venture agreement amounted to US54,030 thousand; the Company agreed to share the 50% portion of the total costs and accrued it as expense of $850,000 (USD27,015 thousand) to other payable. The Company will share the cost based on the actual amounts at the appointed time. As of December 31, 2021 and 2020, the payment amounting to $357,800 and $200,950 had been recognized by the Company, respectively.

  • 2) The Company agreed to share the 50% portion of the total losses for penalty, improving costs and suspending operation before the date of share-swap in the following two to five years due to an existing event of environmental safety and factory facilities which violated the laws.

(Continued)

58

NANYA TECHNOLOGY CORPORATION Notes to the Financial Statements

(10) Losses Due to Major Disasters: None

(11) Subsequent Events: None

(12) Other:

A summary of current-period employee benefits, depreciation, and amortization, by function, is as follows:

	For theyear	ended December 31, 2021	ended December 31, 2021	For theyear ended December 31, 2020	For theyear ended December 31, 2020	For theyear ended December 31, 2020
	Cost of goods sold	Operating expenses	Total	Cost of goods sold	Operating expenses	Total
Employee benefits Salaries Labor and health insurance Pension expenses Remuneration of directors Other personnel expenses Depreciation expenses Amortization expenses	3,719,161 208,937 100,824 - 70,520 14,531,453 260,025	2,471,749 108,991 68,983 6,610 32,752 491,962 -	6,190,910 317,928 169,807 6,610 103,272 15,023,415 260,025	2,955,084 194,298 99,661 - 73,204 13,773,731 236,477	1,823,776 90,411 62,006 6,500 30,092 430,796 -	4,778,860 284,709 161,667 6,500 103,296 14,204,527 236,477

The Company's number of employees and additional information on employee benefits for the years ended December 31, 2021 and 2020 are as follows：

Number of employees Number of directors who were not employees The average employee benefit The average salaries and wages Changes of the average salaries and wages Remuneration to supervisor

The Company’s salary and remuneration policies (including directors, managers, and employees) are as follows:

The Company established a remuneration committee to monitor its directors and executives, and to protect the rights of its shareholders and employees. Also, the Company formulates the policies, standards and structures of remuneration, to regularly examine the performance of directors and executives. Furthermore, the Company aims to attract and hold talented employees though providing competitive salaries.

(Continued)

59

NANYA TECHNOLOGY CORPORATION Notes to Financial Statements

(13) Other disclosures:

• (a) Information on significant transactions:

The following is the information on significant transactions required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Company for the year ended December 31, 2021:

• (i) Loans to other parties: None

• (ii) Guarantees and endorsements for other parties: None

• (iii) Securities held as of December 31, 2021 (excluding investment in subsidiaries, associates and joint ventures):

(In Thousands of New Taiwan Dollars)

Name of holder The Company	Category and name of security	Relationship with company	Account title	Endingbalance	Endingbalance	Endingbalance	Endingbalance	Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
	Mesh Cooperative Ventures Fund LP	-	Financial assets measured at fair value through other comprehensive income－ non-current	-	11,071	% 2.46	11,071

• (iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of $300 million or 20% of the Company's paid-in capital:

(In Thousands of New Taiwan Dollars / shares)

Name of company n	Category and ame of security	Account name	Name of counter-party	Relationship with the company	Beginning Balance	Beginning Balance	Purchases	Purchases	Sales	Sales	Sales	Sales	Ending Balance	Ending Balance
					Shares (thousand)	Amount	Shares (thousand)	Amount	Shares (thousand)	Price	Cost	Gain on disposal	Shares (thousand)	Amount	Note
Nanya Technology International, Ltd.	Stocks	Investment accounted for using equity method	Nanya Technology International, Ltd.	Subsidiary	1.2	34,357,493	0.4	11,141,200	-	-	-	-	1.6	44,369,801

• (v) Acquisition of individual real estate with amount exceeding the lower of $300 million or 20% of the Company's paid-in capital: None

• (vi) Disposal of individual real estate with amount exceeding the lower of $300 million or 20% of the Company's paid-in capital: None

• (vii) Related-party transaction for purchases and sales for which amounts exceeding the lower of $100 million or 20% of the Company's paid-in capital:

(In Thousands of New Taiwan Dollars)

Name of company	Related party	Nature of relationship	Transaction details	Transaction details	Transaction details	Transaction details	Transactions with terms different from others	Transactions with terms different from others	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)	Note
			Purchase /Sale	Amount	Percentage of total purchases/sales	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
The Company The Company The Company The company Nanya Technology Corp. Delaware Nanya Technology Corp., U.S.A. Nanya Technology Corp., Japan	Nanya Technology Corp., U.S.A. Nanya Technology Corp., Japan Nanya Technology Corp., Europe GmbH Nanya Technology Corp., HK Nanya Technology Corp. Nanya Technology Corp Nanya Technology Corp	Subsidiary Subsidiary Subsidiary Subsidiary The parent company The parent company The parent company	(Sale) (Sale) (Sale) (Sale) (Sale) Purchase Purchase	(11,944,306) (5,899,564) (5,109,182) (168,328) (437,508) 11,944,306 5,899,564	(13.97)% (6.90)% (5.98)% (0.20)% (100.00)% 100.00% 100.00%	O/A 60~90Days O/A 180Days O/A 60~90Days O/A 60~90 Days O/A 60~90 Days O/A 60~90Days O/A 180Days	- - - - - - -		2,880,267 774,240 1,143,206 33,231 56,531 (2,880,267) (774,240)	23.59% 6.34% 9.37% 0.27% 100.00% (100.00)% (100.00)%	- -

(Continued)

60

NANYA TECHNOLOGY CORPORATION Notes to Financial Statements

Name of company	Related party	Nature of relationship	Transaction details	Transaction details	Transaction details	Transaction details	Transactions with terms different from others	Transactions with terms different from others	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)	Note
			Purchase /Sale	Amount	Percentage of total purchases/sales	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
Nanya Technology Corp., Europe GmbH Nanya Technology Corp., HK The Company The Company The Company	Nanya Technology Corp Nanya Technology Corp Formosa Sumco Technology Corporation Formosa Biomedical Technology Corp. Nan Ya Plastics Corporation	The parent company The parent company Other related company Other related company The entity with significant influence over the Company	Purchase Purchase Purchase Purchase Purchase	5,109,182 168,328 661,913 186,979 121,418	100.00% 100.00% 5.35% 1.51% 0.98%	O/A 60~90Days O/A 60~90Days O/A 60Days Payment after arrival and inspection of goods Payment after arrival and inspection of goods	- - - - -		(1,143,206) (33,231) (97,938) (6,858) (12,764)	(100.00)% (100.00)% (3.44)% (0.24)% (0.45)%	-

• (viii) Receivables from related parties with amounts exceeding the lower of $100 million or 20% of the Company's paid-in capital:

(In Thousands of New Taiwan Dollars)

Name of company	Counter-party	Nature of relationship	Account receivable from related parties	Turnover rate	Overdue	Overdue	Amounts received in subsequent period	Allowance for bad debts
					Amount	Action taken
The Company The Company The Company	Nanya Technology Corp., U.S.A. Nanya Technology Corp., Japan Nanya Technology Europe GmbH	Subsidiary Subsidiary Subsidiary	2,880,767 774,240 1,143,206	5.53 7.79 6.35	- - -	-	1,241,775 420,874 465,832	- - -

(ix) Trading in derivative instruments: None

• (b) Information on investees:

The following is the information on investees for the year ended December 31, 2021 (excluding information on investees in Mainland China):

(In Thousands of New Taiwan Dollars / Thousands Shares)

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of December 31, 2021	Balance as of December 31, 2021	Balance as of December 31, 2021	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2021	December 31, 2020	Shares (thousand)	Percentage of ownership	Carrying value
The Company The Company The Company The Company The Company The Company Nanya Technology Corp., HK	Nanya Technology Corp., U.S.A. Nanya Technology Corp., Delaware Nanya Technology Corp., HK Nanya Technology Corp., Japan Formosa Advanced Technologies Co., Ltd. Nanya Technology International, Ltd. Nanya Technology Europe GmbH	U.S.A U.S.A Hong Kong Japan Yunlin County, Taiwan British Virgin Island Germany	Sales of semiconductor products Design of semiconductor products Sales of semiconductor products Sales of semiconductor products Assembling, testing and producing modules for IC General investment business Sales of semiconductor products	20,392 36,005 66,271 20,161 5,099,482 48,145,600 30,056	20,392 36,005 66,271 20,161 5,099,482 37,004,400 30,056	2.4 - 19.7 1 141,511 1.6 -	% 100.00 % 100.00 % 100.00 % 100.00 % 32.00 % 100.00 % 100.00	52,347 183,208 77,118 244,686 5,339,031 44,369,801 72,107	23,630 16,339 12,890 103,773 1,557,009 148,456 7,910	23,630 16,339 12,890 103,773 520,977 148,456 7,910	Note 1 Note 1 Note 1 Note 1 Note 3 Note 1 Note 2

Note 1: As subsidiary

Note 2: As sub-subsidiary

Note 3: As investee company accounted for using equity method

(Continued)

61

NANYA TECHNOLOGY CORPORATION Notes to Financial Statements

(c) Information on investment in mainland China:

• (i) The names of investees in Mainland China, the main businesses and products, and other information:

					(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)	(In Thousands of New Taiwan Dollars)
Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investment	Accumulated outflow of investment from Taiwan as of January 1, 2021	Investment flows		Accumulated outflow of investment from Taiwan as of December 31, 2021	Net income (losses) of the investee	Percentage of ownership	Investment income (losses)	Book value	Accumulated remittance of earnings in currentperiod
					Outflow	Inflow
Nanya Technology Corp., Shenzhen	Sales of semiconductor products	27,275 (USD985 thousand)	(2)	27,275 (USD985 thousand)	-	-	27,275 (USD985 thousand)	3,889	100.00%	3,889 (Note 2)	23,024	-

Note 1：Three types of investments were as follows:

(1) Investing directly in Mainland China

• (2) Investing the companies in Mainland China through third parties.

• (3) Others

Note 2: The financial statements were reviewed by a certified public accountant of the Taiwanese parent company.

(ii) Limitation on investment in Mainland China:

itation on investment in Mainland China:
Accumulated Investment in Mainland China as of December 31, 2021 (Note 1)	Investment Amounts Authorized by Investment Commission, MOEA (Note 1)	Upper Limit on Investment (Note 2)
27,275 (USD985 thousand)	27,275 (USD985 thousand)	103,786,841

Note 1：The exchange rate of New Taiwan dollars to US dollars on December 31, 2020 was USD1：TWD 27.69.

Note 2：60% of net equity.

• (iii) Significant transactions: None

• (a) Information on major shareholders:

Information on major shareholders:
Shareholding Shareholder’s Name	Shares	Percentage
Nan Ya Plastics Corporation	907,303,775	% 29.29
Formosa Chemicals & Fibre Corporation	334,815,409	% 10.81
Formosa Plastics Corporation	334,815,409	% 10.81
Formosa Petrochemical Corp	334,815,409	% 10.81

• Note 1: The information on major shareholders, which is provided by the Taiwan Depository & Clearing Corporation, summarized the shareholders who held over 5% of total non-physical ordinary shares and preference shares (including treasury shares) on the last business date of each quarter. The actual registered non-physical shares may be different from the capital shares disclosed in the financial statement due to different calculation basis.

• Note 2: If shares are entrusted, the above information regarding such shares will be revealed by each trustors of individual trust ac count. The shareholders holding more than 10% of the total shares of the company should declare insider’ s equity according to Securities and Exchange Act. The numbers of the shares declared by the insider include the shares of the trust assets which the insider has discretion over use. For details of the insider’s equity announcement please refer to the TWSE website.

(14) Segment information:

Please refer to the consolidated financial statements as of and for the year ended December 31, 2021.

62

Nanya Technology Corporation

STATEMENT OF CASH AND CASH EQUIVALENTS

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

	Items	Items	Description		Amount	Note
Cash on	hand		Pretty cash	$	4
Cash in	bank		Checking Account		11,820
			Demand deposits		11,966,845
			Foreign currency deposits		5,413,768	(Note1)
Cash Equivalents			Time deposits		13,686,093	(Note2)
Repurchase bonds					2,378,765	(Note3)
Commercial paper					1,810,304	(Note4)
Total				$	35,267,599
Note 1		Original
		currency	currency
	(in thousand )		rate
	USD	174,548	27.690
	JPY	2,385,202	0.2404
	EUR	113	31.36
	HKD	1,012	3.5446
Note 2	Original
	currency		Currency
	(in	thousand)	rate Maturity		Interest rate
	USD	440,090	27.6900 2022.1.06~2022.2.10		0.11%~0.30%
	TWD	1,500,000	1.0000 2022.1.19~2022.3.01		0.33%~0.35%
Note 3	Original currency
	(in	thousand)	Maturity	Interest rate
	TWD	2,378,765 2022.1.05~2022.1.21		0.23%~0.37%
Note 4	Original currency
	(in	thousand)	Maturity	Interest rate
	TWD	1,810,304 2022.1.03～2022.1.12		0.25%~0.27%

63

Nanya Technology Corporation

Statement of trade receivables

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Clients		Amount
Non-related parties:
MediaTek Inc.	$	2,296,740
WPI International Co.		881,878
Techmosa International Inc.		830,154
WT Microelectronics Co., Ltd		536,115
KINGSTON		496,324
Other (Less than 5% of the ending balance)		2,334,978
Total	$	7,376,189

64

Nanya Technology Corporation

STATEMENT OF INVENTORIES

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Items Raw materials Work in process Finished goods Total	Amount	Amount
	Cost $ 641,996 7,364,481 3,461,330 $ 11,467,807	Net Realizable value
		641,996 7,364,481 3,461,330
		11,467,807

65

Nanya Technology Corporation

STATEMENT OF CHANGES IN INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

For the year ended December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Investee Company Nanya Technology Corp, USA Nanya Technology Corp, Delaware Nanya Technology Corp, HK Nanya Technology Corp, Japan Formosa Advanceed Technologies Co., Ltd. Nanya Technology International, Ltd Subtoatl Add: Exchange differences on translation of foreign financial statements Nanya Technology Corp, USA Nanya Technology Corp, Delaware Nanya Technology Corp, HK Nanya Technology Corp, Japan Nanya Technology International, Ltd Subtoatl	Beginning Balance Number of Shares Amount 2,400 $ 168,554 1 183,368 19,699 78,095 1,000 190,353 141,511,000 5,160,505 1,200 37,197,799 42,978,674 (10,478) (11,376) (7,480) (24,092) (2,840,306) (2,893,732) $ 40,084,942	Addit	ions Amount (Note1) - - - - - 11,141,200 11,141,200 - - - - - - 11,141,200	Disposals Number of Shares Amount (Note 1) - - - - - - - - - 325,475 - 227,027 552,502 - - - - - - 552,502	Disposals Number of Shares Amount (Note 1) - - - - - - - - - 325,475 - 227,027 552,502 - - - - - - 552,502	Others (Note2) (124,228) - - (117) (16,976) - (141,321) (5,131) (5,123) (6,387) (25,231) (1,050,321) (1,092,193) (1,233,514)	Income from investments 23,630 16,339 12,890 103,773 520,977 148,456 826,065 - - - - - - 826,065	Ending Balance	Ending Balance	Amount Guarantee or pledge 67,956 Nil 199,707 Nil 90,985 Nil 294,009 Nil 5,339,031 Nil 48,260,428 Nil 54,252,116 (15,609) (16,499) (13,867) (49,323) (3,890,627) (3,985,925) 50,266,191
	Number of Shares	Number of Shares - - - - - 400		Number of Shares - - - - - -				Number of Shares 2,400 1 19,699 1,000 141,511,000 1,600	Percentage of ownership % 100.00 % 100.00 % 100.00 % 100.00 % 32.00 % 100.00
	2,400 1 19,699 1,000 141,511,000 1,200

Note1 : The amounts consisted of cash dividend.

Note2 : The amounts consisted of unrealized net profit or loss from sales amounting to $(124,345), share of other comprehensive income of associates accounted for using equity method amounting to $(16,991),and changes in Capital surplus amounting to $15.

66

Nanya Technology Corporation

STATEMENT OF TRADE PAYABLES

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Items		Amount
Accounts O/A payable	$	720,529
Accounts raw material and supplies payable		1,952,852
Others (Less than 5% of the ending balance)		56,338
Total	$	2,729,719

STATEMENT OF OTHER PAYABLES

	Items		Amount
Salaries payable		$	2,488,724
Royalty Payable			2,102,968
Consigned out for processing			697,450
Others (Less than	5% of the ending		1,287,161
balance)
		$	6,576,303

67

Nanya Technology Corporation

STATEMENT OF OPERATING COSTS

For the year ended December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Items		Amount
Beginning balance of year for raw materials	$	350,906
Add: raw materials purchased		12,376,681
Ending balance of year for raw materials		(641,996)
Add: Others		408,500
Less: Reclassified to manufacturing and operating expenses		(4,539,994)
Usage material		7,954,097
Direct labor		550,883
Manufacturing expenses		39,476,332
Manufacturing Costs		47,981,312
Beginning balance of year for work in progress		6,578,665
Add: Transferred from finished goods		6,844,012
Less: Reclassified to operating expenses		(2,612,094)
Ending balance of year for work in progress		(7,364,481)
Cost of finished goods		51,427,414
Beginning balance of year for finished goods		7,154,684
Less: Reclassified to work in progress		(6,844,012)
Reclassified to operating expenses		(55,087)
Ending balance of year for finished goods		(3,461,330)
Inventory cost		48,221,669
Add: Other costs		142,333
Loss on work stoppage		234,614
Operating costs	$	48,598,616

68

Nanya Technology Corporation

STATEMENT OF SELLING EXPENSES

For the year ended December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Items		Amount
Salaries	$	290,400
Air Freights on export sales		107,702
Commissions on export sales		92,683
Welfare costs		42,909
Others (Less than 5% of the ending balance)		130,030
Total	$	663,724

69

Nanya Technology Corporation

STATEMENT OF ADMINISTRATIVE EXPENSES

For the year ended December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

	Items		Amount
Salaries		$	582,154
Miscellaneous expenses			216,474
Amortization expenses			171,997
Professional service fee			162,657
Utilities			101,836
Others (Less than 5% of the ending balance)			280,387
		$	1,515,505

70

Nanya Technology Corporation

STATEMENT OF RESEARCH AND DEVELOPMENT EXPENSE

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

	Items		Amount
Testing material expenses		$	4,174,613
Salaries			1,814,901
Depreciation expenses			455,942
Others (Less than 5% of the	ending balance)		1,075,158
		$	7,520,614