RT — Audit Report / Information 2020

Dec 9, 2020

REALTEK SEMICONDUCTOR CORPORATION PARENT COMPANY ONLY FINANCIAL

STATEMENTS AND INDEPENDENT AUDITORS’

REPORT

DECEMBER 31, 2020 AND 2019 (Stock code : 2379)

---

For the convenience of readers and for information purpose only, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

~1~

INDEPENDENT AUDITORS’ REPORT TRANSLATED FROM CHINESE

PWCR20000257

To the Board of Directors and Shareholders of Realtek Semiconductor Corporation

Opinion

We have audited the accompanying parent company only balance sheets of Realtek Semiconductor Corporation (the “Company”) as at December 31, 2020 and 2019, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the reports of other auditors (please refer to the Other matter section ), the accompanying parent company only financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended 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 Attestation of Financial Statements by Certified Public Accountants and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the auditor’s responsibilities for the Audit of the Parent Company Only Financial Statements section of our report. We are independent of the Company in accordance with the Norm of Professional Ethics for Certified Public Accountants of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. Based on our audits and the reports of other auditors, we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

~2~

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Company’s 2020 parent company only financial statements. These matters were addressed in the context of our audit of the parent company only financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

Key audit matters for the Company’s 2020 parent company only financial statements are stated as follows:

Valuation of inventories

Description

Refer to Note 4(13) of the parent company only financial statements for inventory valuation policies, Note 5(2) for uncertainty of accounting estimates and assumptions of inventory valuation and Note 6(3) for the details of inventories.

The Company is primarily engaged in researching, developing, manufacturing, selling of various integrated circuits and related application software. Inventories are stated at the lower of cost and net realizable value. Due to the balances of inventories are significant to the financial statements and the rapid technological changes in the industry, there is a higher risk of decline in market value and obsolescence of inventories. Thus, we considered the valuation of inventories as one of the key audit matters.

How our audit addressed the matter

We performed the following audit procedures in respect of the above key audit matter:

1. Obtained an understanding of accounting policies on the provision for inventory valuation losses and assessed the reasonableness.

2. Validated the accuracy of inventory aging report, as well as sampled and confirmed the consistency of quantities and amounts with detailed inventory listing, verified dates of movements with supporting documents and ensured the proper categorization of inventory aging report.

3. Evaluated and confirmed the reasonableness of net realizable value for inventories through validating respective supporting documents.

~3~

Other matter – Reference to the audits of other auditors

We did not audit the financial statements of certain investments accounted for under equity method. Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion expressed herein is based solely on the reports of the other auditors. Investments accounted for under equity method amounted to NT$642,359 thousand and NT$6,938,839 thousand, constituting 0.92% and 10.29% of total assets as of December 31, 2020 and 2019, respectively. Comprehensive income amounted to NT$196,125 thousand and NT$151,087 thousand, constituting 2.64% and 2.46% of total comprehensive income for the years ended December 31, 2020 and 2019, respectively.

Responsibilities of management and those charged with governance for the parent company only financial statements

Management is responsible for the preparation and fair presentation of the parent company only financial statements in accordance with the 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 parent company only financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the parent company only 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.

Auditor’s responsibilities for the audit of the parent company only financial statements

Our objectives are to obtain reasonable assurance about whether the parent company only financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s 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 ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,

~4~

individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these parent company only financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the parent company only 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 report to the related disclosures in the parent company only 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 report. However, future events or conditions may cause the Company to cease to continue as a going concern.

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

~5~

1. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of the audit. 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 parent company only 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.

Lin, Yu-Kuan

[Cheng, Ya-Huei ]

For and on behalf of PricewaterhouseCoopers, Taiwan March 19, 2021

---

The accompanying parent company only financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying parent company only financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

~6~

REALTEK SEMICONDUCTOR CORPORATION PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2020 AND 2019

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) 6(2) and 7 7 6(3) 8 6(4) 6(5) 6(6) 6(7) 6(22)	December31,2020 AMOUNT % $ 4,630,448 7 124,360 - 7,587,080 11 1,810,900 2 3,828 - 685,224 1 6,029,557 9 376,511 - 21,247,908 30 75,293 - 41,140,275 59 4,027,004 6 1,390,104 2 1,955,629 3 169,876 - 34,805 - 48,792,986 70 $ 70,040,894 100	December31,2019	December31,2019
		AMOUNT $ 4,630,448 124,360 7,587,080 1,810,900 3,828 685,224 6,029,557 376,511 21,247,908 75,293 41,140,275 4,027,004 1,390,104 1,955,629 169,876 34,805 48,792,986 $ 70,040,894	AMOUNT $ 3,333,828 28,736 6,588,225 1,227,255 20,417 5,729,653 5,820,326 205,329 22,953,769 64,885 38,503,441 3,019,258 1,091,607 1,652,722 114,163 46,151 44,492,227 $ 67,445,996	%
Current assets 1100 Cash and cash equivalents 1110 Financial assets at fair value through profit or loss - current 1170 Accounts receivable, net 1180 Accounts receivable, net - related parties 1200 Other receivables 1210 Other receivables - related parties 130X Inventories, net 1410 Prepayments 11XX Total current assets Non-current assets 1535 Financial assets at amortised cost - non-current 1550 Investments accounted for under equity method 1600 Property, plant and equipment 1755 Right-of-use assets 1780 Intangible assets 1840 Deferred income tax assets 1900 Other non-current assets 15XX Total non-current assets 1XXX Total assets				5 - 10 2 - 8 9 -
				34
				- 57 5 2 2 - -
				66
				100

(Continued)

~7~

REALTEK SEMICONDUCTOR CORPORATION PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2020 AND 2019

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	December31,2020 December31,2019 Notes AMOUNT % AMOUNT % 6(8) $ 11,456,690 16 $ 18,604,770 28 6(15) 163,080 - 67,853 - 3,276 - 3,276 - 7,609,092 11 5,659,518 8 7 253,691 - 313,185 - 6(9) 13,403,670 19 9,929,669 15 7 60,784 - 55,690 - 1,063,516 2 820,495 1 35,944 - 30,417 - 6(15) 5,240,048 8 3,831,860 6 39,289,791 56 39,316,733 58 6(22) 102,872 - 51,723 - 1,089,030 2 781,678 2 6(10) 100,120 - 76,877 - 1,292,022 2 910,278 2 40,581,813 58 40,227,011 60 6(11) 5,106,849 7 5,080,955 7 6(12) 2,122,008 3 2,736,854 4 6(13) 5,577,083 8 4,902,176 7 217,036 - - - 17,992,154 26 14,716,036 22 6(14) ( 1,556,049) ( 2) ( 217,036) - 29,459,081 42 27,218,985 40 $ 70,040,894 100 $ 67,445,996 100	December31,2019	December31,2019
			%
Current liabilities 2100 Short-term borrowings 2130 Contract liabilities - current 2150 Notes payable 2170 Accounts payable 2180 Accounts payable - related parties 2200 Other payables 2220 Other payables - related parties 2230 Current income tax liabilities 2280 Lease liabilities - current 2300 Other current liabilities 21XX Total current liabilities Non-current liabilities 2570 Deferred income tax liabilities 2580 Lease liabilities - non-current 2600 Other non-current liabilities 25XX Total non-current liabilities 2XXX Total liabilities Equity Share capital 3110 Common shares Capital surplus 3200 Capital surplus Retained earnings 3310 Legal reserve 3320 Special reserve 3350 Undistributed earnings Other equity 3400 Other equity interest 3XXX Total equity 3X2X Total liabilities and equity			28 - - 8 - 15 - 1 - 6
			58
			- 2 -
			2
			60
			7 4 7 - 22 -
			40
			100

The accompanying notes are an integral part of these parent company only financial statements.

~8~

REALTEK SEMICONDUCTOR CORPORATION

PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

(Expressed in thousands of New Taiwan dollars, except earings per share amounts)

Items

YearendedDecember31 2020 2019 Notes AMOUNT % AMOUNT % 6(15) and 7 $ 56,426,751 100 $ 40,845,708 100 6(3) and 7 ( 33,889,501 ) ( 60) ( 24,643,053) ( 60 ) 22,537,250 40 16,202,655 40 ( 1,271 ) - ( 3,327) - - - 3,327 - 6(20)(21) and 7 ( 2,306,323 ) ( 4) ( 1,887,715) ( 5 ) ( 1,680,835 ) ( 3) ( 760,391) ( 2 ) ( 15,250,126 ) ( 27) ( 12,212,926) ( 30 ) 12(2) ( 15,753 ) - ( 25,618) - ( 19,253,037 ) ( 34) ( 14,886,650) ( 37 ) 3,282,942 6 1,316,005 3 6(16) 52,103 - 118,442 - 6(17) and 7 67,522 - 75,949 - 6(18) ( 12,797 ) - ( 191,745) - 6(19) ( 137,127 ) ( 1) ( 144,100) - 6(4) 6,100,834 11 6,053,732 15 6,070,535 10 5,912,278 15 9,353,477 16 7,228,283 18 6(22) ( 560,000 ) ( 1) ( 438,000) ( 1 ) $ 8,793,477 15 $ 6,790,283 17 ( $ 29,252 ) - $ - - 6(14) 839,802 2 231,742 - 810,550 2 231,742 - 6(14) ( 2,178,815 ) ( 4) ( 891,954) ( 2 ) ( 2,178,815 ) ( 4) ( 891,954) ( 2 ) ( $ 1,368,265 ) ( 2) ( $ 660,212) ( 2 ) $ 7,425,212 13 $ 6,130,071 15 6(23) $ 17.24 $ 13.36 6(23) $ 16.93 $ 13.13

4000 Operating revenue 5000 Operating costs 5900 Gross profit 5910 Unrealized profit from sales 5920 Realized profit on from sales Operating expenses 6100 Selling expenses 6200 General and administrative expenses 6300 Research and development expenses 6450 Expected credit losses 6000 Total operating expenses 6900 Operating income Non-operating income and expenses 7100 Interest income 7010 Other income 7020 Other gains and losses 7050 Finance costs 7070 Share of profit of associates and joint ventures accounted for under equity method 7000 Total non-operating income and expenses 7900 Profit before income tax, net 7950 Income tax expense 8200 Net income for the year Other comprehensive (loss) income, net Components of other comprehensive income (loss) that will not be reclassified to profit or loss 8311 Losses on remeasurements of defined benefit plans 8330 Share of other comprehensive income of associates and joint ventures accounted for under equity method 8310 Total other comprehensive loss that will not be reclassified to loss Components of other comprehensive (loss) income that will be reclassified to loss or profit 8380 Share of other comprehensive loss of associates and joint ventures accounted for under equity method 8360 Total other comprehensive loss that will be reclassified to profit or loss 8300 Other comprehensive loss ,net 8500 Total comprehensive income for the year Earnings Per Share (in dollars) 9750 Basic earnings per share 9850 Diluted earnings per share

The accompanying notes are an integral part of these parent company only financial statements.

~9~

REALTEK SEMICONDUCTOR CORPORATION PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY FOR YEARS ENDED DECEMBER 31, 2020 AND 2019

(Expressed in thousands of New Taiwan dollars)

2019 Balance at January 1, 2019 Net income for the year Other comprehensive income (loss)for the year Total comprehensive income (loss) Distribution of 2018 earnings Legal reserve Special reserve Cash dividends Cash dividend from capital surplus Changes in equity of associates accounted for under equity method Disposal of investments in equity instruments measured at fair value through other comprehensive income Cash dividends returned Balance at December 31, 2019 2020 Balance at January 1, 2020 Net income for the year Other comprehensive income (loss)for the year Total comprehensive income (loss) Distribution of 2019 earnings Legal reserve Special reserve Cash dividends Employees' compensation transferred to common shares Cash from capital surplus Changes in equity of associates accounted for under equity method Cash dividends returned Balance at December 31, 2020	Notes		Commonshares		Capitalsurplus				Retained earnings				Otherequityinterest	Otherequityinterest	Otherequityinterest		Totalequity
							Legal reserve		Special reserve		Undistributed earnings		Financial statements translation differences of foreignoperations	Unrealised gains from financial assets measured at fair value through other comprehensiveincome
	6(14) 6(13) 6(12) 6(12) 6(14) 6(10)(14) 6(13) 6(11)(12) 6(12) 6(12)		$ 5,080,955 - - - - - - - - - - $ 5,080,955 $ 5,080,955 - - - - - - 25,894 - - - $ 5,106,849	$ 3,236,659 - - - - - - ( 508,095 ) 8,064 - 226 $ 2,736,854 $ 2,736,854 - - - - - - 393,591 ( 1,021,370 ) 12,763 170 $ 2,122,008			$ 4,467,099 - - - 435,077 - - - - - - $ 4,902,176 $ 4,902,176 - - - 674,907 - - - - - - $ 5,577,083	$ 600,443 - - - - ( 600,443 ) - - - - - $ - $ - - - - - 217,036 - - - - - $ 217,036		$ 10,850,172 6,790,283 - 6,790,283 ( 435,077 ) 600,443 ( 3,048,573 ) - - ( 41,212 ) - $ 14,716,036 $ 14,716,036 8,793,477 ( 29,252 ) 8,764,225 ( 674,907 ) ( 217,036 ) ( 4,596,164 ) - - - - $ 17,992,154		$ 129,811 - ( 891,954 ) ( 891,954 ) - - - - - - - ($ 762,143 ) ($ 762,143 ) - ( 2,178,815 ) ( 2,178,815 ) - - - - - - - ($ 2,940,958 )			$ 272,153 - 231,742 231,742 - - - - - 41,212 - $ 545,107 $ 545,107 - 839,802 839,802 - - - - - - - $ 1,384,909	$ 24,637,292 6,790,283 ( 660,212 ) 6,130,071 - - ( 3,048,573 ) ( 508,095 ) 8,064 - 226 $ 27,218,985 $ 27,218,985 8,793,477 ( 1,368,265 ) 7,425,212 - - ( 4,596,164 ) 419,485 ( 1,021,370 ) 12,763 170 $ 29,459,081

The accompanying notes are an integral part of these parent company only financial statements.

~10~

REALTEK SEMICONDUCTOR CORPORATION

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments Adjustments to reconcile(profit)loss Depreciation Amortization Expected credit losses Interest expense Interest income Dividend income (Gain)loss on financial assets at fair value through profit or loss Share of gain of associates and joint ventures accounted for under equity method Gain on disposal of property, plant and equipment Gain on disposal of investments Impairment loss Unrealized profit from sales Other intangible assets transferred to expenses Changes in operating assets and liabilities Changes in operating assets Accounts receivable, net Accounts receivable, net - related parties Other receivables Other receivables, - related parties Inventories Prepayments Changes in operating liabilities Contract liabilities - current Notes payable Accounts payable Accounts payable - related parties Other payables Other payables - related parties Provisions - non-current Other current liabilities Accrued pension obligations

Notes 2020 2019 $ 9,353,477 $ 7,228,283 6(20) 694,924 562,805 6(20) 1,098,919 948,008 12(2) 15,753 25,618 6(19) 137,127 144,100 6(16) ( 52,103 ) ( 118,442 ) 6(17) ( 411 ) ( 406 ) 6(18) ( 95,624 ) 325 6(4) ( 6,100,834 ) ( 6,053,732 ) 6(18) ( 1,700 ) ( 92 ) 6(18) ( 466 ) - 6(17) - 41,397 1,271 - - 526 ( 1,008,712 ) ( 2,304,342 ) ( 589,540 ) ( 195,427 ) 11,442 27,106 47,165 ( 2,420 ) ( 209,231 ) ( 1,723,679 ) ( 171,182 ) ( 55,394 ) 95,227 ( 42,911 ) - ( 5,381 ) 1,949,574 1,866,242 ( 59,494 ) 84,906 3,526,463 3,019,851 5,094 17,407 - ( 519,016 ) 1,408,188 1,249,950 ( 3,790 ) ( 2,470 )

(Continued)

~11~

REALTEK SEMICONDUCTOR CORPORATION

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

(Expressed in thousands of New Taiwan dollars)

Cash inflow generated from operations Receipt of interest Receipt of dividends Interest paid Income taxes paid Net cash flows from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of financial assets at amortised cost Proceeds from disposal of financial assets at amortised cost Proceeds from disposal of financial assets at fair value through other comprehensive income Decrease (increase) in other receivables - related parties Acquisition of investments accounted for under equity method Proceeds from capital reduction of investee accounted for under equity method Proceeds from disposal of investments accounted for under equity method Cash dividends from investments accounted for under equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Acquisition of right-of-use assets Increase in refundable deposits Increase (Decrease) in other non-current assets Net cash flows from (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings Decrease in short-term borrowings Repayment of principal portion of lease liabilities Guarantee deposits returned Cash dividends paid Cash dividends returned Net cash flows (used in) from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Notes 2020 2019 $ 10,051,537 $ 4,192,812 57,250 113,560 411 406 ( 143,121 ) ( 146,526 ) ( 321,381 ) ( 201,871 ) 9,644,696 3,958,381 ( 10,408 ) ( 64,885 ) - 61,401 - 939 4,997,264 ( 3,038,904 ) ( 3,515,687 ) - 6(4) 20,684 17,908 466 - 5,631,482 2,750,826 6(24) ( 1,707,418 ) ( 682,325 ) 1,700 92 6(24) ( 974,580 ) ( 1,399,800 ) - ( 286,276 ) ( 18,639 ) ( 1,722 ) 29,985 ( 29,985 ) 4,454,849 ( 2,672,731 ) 205,377,996 147,831,650 ( 212,526,076 ) ( 143,753,191 ) 6(25) ( 35,261 ) ( 25,723 ) 6(25) ( 2,220 ) ( 1,481 ) ( 5,617,534 ) ( 3,556,668 ) 170 226 ( 12,802,925 ) 494,813 1,296,620 1,780,463 3,333,828 1,553,365 $ 4,630,448 $ 3,333,828

The accompanying notes are an integral part of these parent company only financial statements.

~12~

REALTEK SEMICONDUCTOR CORPORATION

NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS DECEMBER 31, 2020 AND 2019

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

1. HISTORY AND ORGANISATION

Realtek Semiconductor Corporation (the “Company”) was incorporated as a company limited by shares on October 21, 1987 and commenced commercial operations in March 1988. The Company was based in Hsinchu Science-Based Industrial Park since October 28, 1989. The Company is engaged in the research, development, design, testing, and sales of ICs and application softwares for these products.

1. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE PARENT COMPANY ONLY FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORISATION

These parent company only financial statements were authorised for issuance by the Board of Directors on March 19, 2021.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

• (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRSs”) as endorsed by the Financial Supervisory Commission (“FSC”) New standards, interpretations and amendments endorsed by the FSC effective from 2020 are as follows:

follows:
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendments to IAS 1 and IAS 8,‘Disclosure initiative-definition of material’ Amendments to IFRS 3,‘Definition of a business’ Amendments to IFRS 9, IAS 39 and IFRS7 ,‘Interest rate benchmark reform’ Amendment to IFRS 16,‘Covid-19-related rent concessions’	January 1, 2020 January 1, 2020 January 1, 2020 June 1, 2020 (Note)

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

The above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment.

~13~

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted

by the Company

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

follows:
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendments to IFRS 4,‘Extension of the temporary exemption from applying IFRS 9’ Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16,‘ Interest Rate Benchmark Reform—Phase 2’	January 1, 2021 January 1, 2021

The above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment.

(3) IFRSs issued by IASB but not yet endorsed by the FSC

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

endorsed by the FSC are as follows:
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendments to IFRS 3,‘Reference to the conceptual framework’ Amendments to IFRS 10 and IAS 28,‘Sale or contribution of assets between an investor and its associate or joint venture’ IFRS 17,‘Insurance contracts’ Amendments to IFRS 17, 'Insurance contracts' Amendments to IAS 1,‘Classification of liabilities as current or non-current’ Amendments to IAS 1,‘Disclosure of accounting policies’ Amendments to IAS 8,‘Definition of accounting estimates’ Amendments to IAS 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	January 1, 2022 To be determined by International Accounting Standards Board January 1, 2023 January 1, 2023 January 1, 2023 January 1, 2023 January 1, 2023 January 1, 2022 January 1, 2022 January 1, 2022

The above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

~14~

(1) Compliance statement

The parent company only financial statements of the Company have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

(2) Basis of preparation

• A. Except for the following items, the parent company only financial statements have been prepared under the historical cost convention:

  • (a) Financial assets (including derivative instruments) at fair value through profit or loss.

  • (b) Financial assets at fair value through other comprehensive income.

  • (c) Defined benefit liabilities recognized based on the net amount of pension fund assets less present value of defined benefit obligation.

• B. The preparation of financial statements in conformity with International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”) requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the parent company only financial statements are disclosed in Note 5.

• (3) Foreign currency translation

• Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The parent company only financial statements are presented in New Taiwan dollars, which is the Company’s functional and presentation currency.

• A. Foreign currency transactions and balances

  • (a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in profit or loss in the period in which they arise.

  • (b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognized in profit or loss.

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

~15~

• (d) All other foreign exchange gains and losses based on the nature of those transactions are presented in the statement of comprehensive income within ‘other gains and losses’.

• B. Translation of foreign operations

• (a) The operating results and financial position of all the Company entities, associates and joint arrangements that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

  • i. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;

  • ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and

  • iii. All resulting exchange differences are recognized in other comprehensive income.

• (b) When the foreign operation partially disposed of or sold is an associate, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale. In addition, even when the Company retains partial interest in the former foreign associate after losing significant influence over the former foreign associate, such transactions should be accounted for as disposal of all interest in these foreign operations.

• (c) Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rates at the balance sheet date.

(4) Classification of current and non-current items

• A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:

• (a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;

• (b) Assets held mainly for trading purposes;

• (c) Assets that are expected to be realised within twelve months from the balance sheet date;

• (d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to settle liabilities more than twelve months after the balance sheet date.

• B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:

• (a) Liabilities that are expected to be settled within the normal operating cycle;

• (b) Liabilities held mainly for trading purposes;

• (c) Liabilities that are to be settled within twelve months from the balance sheet date;

• (d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

~16~

(5) Cash equivalents

Cash equivalents refer to 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 that meet the definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents.

(6) Financial assets at fair value through profit or loss

• A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income. Financial assets at amortised cost or fair value through other comprehensive income are designated as at fair value through profit or loss at initial recognition when they eliminate or significantly reduce a measurement or recognition inconsistency.

• B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognized and derecognized using trade date accounting.

• C. At initial recognition, the Company measures the financial assets at fair value and recognizes the transaction costs in profit or loss. The Company subsequently measures the financial assets at fair value, and recognizes the gain or loss in profit or loss.

• D. The Company recognizes the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.

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

• A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Company has made an irrevocable election at initial recognition to recognize changes in fair value in other comprehensive income.

• B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognized and derecognized using trade date accounting.

• C. At initial recognition, the Company measures the financial assets at fair value plus transaction costs. The Company subsequently measures the financial assets at fair value: The changes in fair value of equity investments that were recognized in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognized as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.

(8) Financial assets at amortised cost

• The Company’s time deposits which do not fall under cash equivalents are those with a short maturity period and are measured at initial investment amount as the effect of discounting is immaterial.

(9) Accounts receivable

• A. Accounts receivable entitle the Company a legal right to receive consideration in exchange for transferred goods or rendered services.

~17~

• B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

• (10) Impairment of financial assets

• For financial assets at amortised cost, at each reporting date, the Company recognizes the impairment provision for 12 months expected credit losses(ECLs) if there has not been a significant increase in credit risk since initial recognition or recognizes the impairment provision for the lifetime ECLs if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable that do not contain a significant financing component, the Company recognizes the impairment provision for lifetime ECLs.

• (11) Derecognition of financial assets

The Company derecognizes a financial asset when the contractual rights to receive the cash flows from the financial asset expire.

• (12) Operating leases (lessor)

Lease income from an operating lease (net of any incentives given to the lessee) is recognized in profit or loss on a straight-line basis over the lease term.

• (13) Inventories

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

• (14) Investments accounted for under equity method / subsidiaries and associates

• A. Subsidiaries are all entities controlled by the Company. The Company controls an entity when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

• B. Unrealised profit (loss) occurred from the transactions between the Company and subsidiaries have been offset. The accounting policies of the subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Company.

• C. The Company’s share of its subsidiaries’ post-acquisition profits or losses is recognized in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. When the Company’s share of losses in a subsidiary equals or exceeds its interest in the subsidiary, the Company continues to recognize losses proportionate to its ownership.

• D. Associates are all entities over which the Company has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or

~18~

• indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for under equity method and are initially recognized at cost.

• E. The Company’s share of its associates’ post-acquisition profits or losses is recognized in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognized in other comprehensive income. When the Company’s share of losses in an associate equals or exceeds its interest in the associate (including any other unsecured receivables), the Company does not recognize further losses, unless it has incurred statutory/constructive obligations or made payments on behalf of the associate.

• F. When changes in an associate’s equity do not arise from profit or loss or other comprehensive income of the associate and such changes do not affect the Company’s ownership percentage of the associate, the Company recognizes the Company’s share of change in equity of the associate in ‘capital surplus’ in proportion to its ownership.

• G. Unrealised gains or losses on transactions between the Company and its associates are eliminated to the extent of the Company’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Company.

• H. In the case that an associate issues new shares and the Company does not subscribe or acquire new shares proportionately, which results in a change in the Company’s ownership percentage of the associate but maintains significant influence on the associate, then ‘capital surplus’ and ‘ investments accounted for under equity method’ shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the Company’s ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognized in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or liabilities were disposed of.

• I. Upon lose of significant influence over an associate, the Company remeasures any investment retained in the former associate at its fair value. Any difference between fair value and carrying amount is recognized in profit or loss.

• J. When the Company disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognized in other comprehensive income in relation to the associate, are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of. If it retains significant influence over this associate, the amounts previously recognized in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately in accordance with the aforementioned approach.

• K. Pursuant to the Regulations Governing the Preparation of Financial Reports by Securities Issuers, profit (loss) of the current period and other comprehensive income in the parent company only financial statements shall equal to the amount attributable to owners of the parent in the

~19~

consolidated statement of comprehensive income. Owners’ equity in the parent company only financial statements shall equal to equity attributable to owners of the parent in the consolidated financial statements.

• (15) Property, plant and equipment

• A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.

• B. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

• C. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.

• D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change. The estimated useful lives of the fixed assets are as follows: buildings - 10~55 years and other fixed assets - 3~5 years.

• (16) Leasing arrangements (lessee) － right-of-use assets/lease liabilities

• A. Leases are recognized as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Company.

• B. Lease liabilities include the net present value of the remaining lease payments at the commencement date, discounted using the incremental borrowing interest rate. Fixed payments, less any lease incentives receivable.The Company subsequently measures the lease liability at amortised cost using the interest method and recognizes interest expense over the lease term. The lease liability is remeasured and the amount of remeasurement is recognized as an adjustment to the right-of-use asset when there are changes in the lease term or lease payments do not arise from contract modifications.

• C. At the commencement date, the right-of-use asset is stated at cost comprising the following: (a) The amount of the initial measurement of lease liability; and

  • (b) Any lease payments made at or before the commencement date.

  • The right-of-use asset is measured subsequently using the cost model and is depreciated from the commencement date to the earlier of the end of the asset’s useful life or the end of the lease term. When the lease liability is remeasured, the amount of remeasurement is recognized as an

~20~

adjustment to the right-of-use asset.

(17) Intangible assets

A. Computer software

Computer software is stated at cost and amortised on a straight-line basis over its estimated useful life of 1 to 5 years.

B. Other intangible assets

Separately acquired intangible assets with a finite useful lives are stated at cost. Intangible assets acquired in a business combination are recognized at fair value at acquisition date. The amortisation amounts of parent company only acquired intangible assets were amortised on a straight-line basis over their estimated useful lives of 2-5 years.

(18) Impairment of non-financial assets

The Company assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. When the circumstances or reasons for recognising impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognized.

(19) Borrowings

Borrowings comprise short-term bank borrowings. Borrowings are recognized initially at fair value, net of transaction costs incurred.

(20) Notes and accounts payable

• A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.

• B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(21) Derecognition of financial liabilities

A financial liability is derecognized when the obligation under the liability specified in the contract is discharged or cancelled or expires.

(22) Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date.

(23) Employee benefits

• A. Short-term employee benefits

~21~

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

• B. Pension

• (a) Defined contribution plan

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

• (b) Defined benefit plan

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

  • ii. Remeasurements arising on defined benefit plan are recognized in other comprehensive income in the period in which they arise and are recorded as retained earnings.

• C. Employees’ compensation and directors’ remuneration

• Employees’ compensation and directors’ remuneration are recognized as expense and liability, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is distributed by shares, the Company calculates the number of shares based on the closing price at the previous day of the Board meeting resolution.

(24) Income tax

• A. The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or items recognized directly in equity, in which cases the tax is recognized in other comprehensive income or equity.

• B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect

~22~

to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

• C. Deferred tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the parent company only balance sheet. However, the deferred tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss. Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

• D. Deferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognized and recognized deferred tax assets are reassessed.

• E. A deferred tax asset shall be recognized for the carryforward of unused tax credits resulting from research and development expenditures to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilised.

• (25) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

• (26) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are resolved by the Company’s shareholders. Cash dividends are recorded as liabilities; stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance.

• (27) Revenue recognition

• A. Sales of goods

  • (a) The Company manufactures and sells various integrated circuit related products. Sales are recognized when control of the products has transferred, being when the products are delivered to the customers, 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, or the Company has objective evidence that all criteria for acceptance have been

~23~

satisfied.

• (b) Revenue from these sales is recognized based on the price specified in the contract. A refund liability is recognized for expected sales discounts and allowances payable to customers in relation to sales made until the end of the reporting period. As the time interval between the transfer of committed goods or service and the payment of customer does not exceed one year, the Company does not adjust the transaction price to reflect the time value of money.

• (c) A receivable is recognized when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

• B. Services revenue

Revenue from design, royalty and technical services is recognized after completing the services in which the services are rendered.

• (28) Government grants

Government grants are recognised at their fair value only when there is reasonable assurance that the company will comply with any conditions attached to the grants and the grants will be received. Government grants are recognised in profit or loss on a systematic basis over the periods in which the company recognises expenses for the related costs for which the grants are intended to compensate.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

The preparation of these parent company only financial statements requires management to make critical judgements in applying the Company’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below:

(1) Critical judgements in applying the Company’s accounting policies

None.

(2) Critical accounting estimates and assumptions

• Evaluation of inventories

As inventories are stated at the lower of cost and net realisable value, the Company must determine the net realisable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Company evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realisable value. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation.

As of December 31, 2020, the carrying amount of inventories was $6,029,557.

~24~

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash on hand and revolving funds Checking accounts and demand deposits Time deposits	December 31,2020 806 $ 4,629,642 - 4,630,448 $	December 31,2019
		654 $ 1,827,874 1,505,300
		3,333,828 $

The Company transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

(2) Accounts receivable

Accounts receivable
	December	31,2020		December	31,2019
Accounts receivable	$	7,664,148	$		6,655,435
Accounts receivable–related parties		1,829,192			1,239,652
Less: Allowance for bad debts	(	95,360)	(		79,607)
	$	9,397,980	$		7,815,480
A. The aging analysis of accounts receivable is	as follows:
	December	31,2020		December	31,2019
Not past due	$	9,274,060	$		7,518,066
Up to 30 days		212,397			376,364
31 to 90 days		6,449			1
Over 90 days		434			656
	$	9,493,340	$		7,895,087

The above aging analysis is based on past due date.

• B. As of December 31, 2020 and 2019, accounts receivable arose from contracts with customers. As of January 1, 2019, the balance of receivables from contracts with customers amounted to $5,341,329.

• C. The Company has no accounts receivable pledged to others.

• D. Information relating to credit risk of accounts receivable is provided in Note 12(2).

~25~

(3) Inventories

Inventories
Raw materials Work in process Finished goods Total Raw materials Work in process Finished goods Total		December 31,2020
	Cost 843,416 $ 4,542,905 1,659,044 7,045,365 $	Allowance for obsolescence and market value decline 20,128) ($ 598,262) ( 397,418) ( 1,015,808) ($ December 31,2019	Book value
			823,288 $ 3,944,643 1,261,626
			6,029,557 $
	Cost 825,412 $ 3,731,699 1,986,572 6,543,683 $		Book value
			798,964 $ 3,419,426 1,601,936
			5,820,326 $

Operating costs incurred on inventories for the years ended December 31, 2020 and 2019 were as follows:

follows:
Cost of inventories sold and others Loss on market value decline and obsolete and slow-moving inventory Loss on scrap inventory	Years ended December 31,
	2020 33,389,503 $ 292,451 207,547 33,889,501 $	2019
		24,356,841 $ 140,378 145,834
		24,643,053 $

~26~

(4) Investments accounted for under equity method

Investments accounted for under equity method
Subsidiaries: Leading Enterprises Limited Amber Universal Inc. Realtek Singapore Private Limited Realtek Investment Singapore Private Limited Talent Eagle Enterprise Inc. Bluocean Inc. Realsun Investments Co., Ltd. Hung-wei Venture Capital Co., Ltd. Realking Investments Co., Ltd. Realsun Technology Corporatioin Bobitag Inc. Associates: Technology Partner V Venture Capital Corporation 5V Technologies, Taiwan Ltd. Estinet Technologies Incorporation	December 31,2020 13,239,425 $ 3,367,376 11,149,584 6,275,015 2,162,386 3,369,936 619,510 632,946 290,236 5,118 19,330 255 - 9,158 41,140,275 $	December 31,2019
		11,151,040 $ 3,312,175 10,370,572 6,494,453 2,585,499 3,479,391 354,481 418,438 286,939 5,107 19,398 22,247 - 3,701
		38,503,441 $

• A. Details of the Company’s subsidiaries are provided in Note 4(3) in the Company’s 2020 consolidated financial statements.

• B. The gain on Investments accounted for under equity method amounted to $6,100,834 and $6,053,732 for the years ended December 31, 2020 and 2019, respectively.

• C. In February 2020, the Company sold all shares of 5V Technologies, Taiwan Ltd. and the gain on disposal of investments amounted to $466.

• D. The Company received the proceeds of $20,684 from the capital reduction carried out by Technology Partner V Venture Capital Corporation in July 2020. The investee was dissolved on September 21, 2020 and was still in the process of liquidation as of December 31, 2020.

• E. Certain investments mentioned above have been impaired, and the Company recognized impairment loss amounting to $41,397 for the year ended December 31, 2019.

~27~

(5) Property, plant and equipment

Property, plant and	equipment
At January 1, 2020 Cost Accumulated depreciation and impairment 2020 Opening net book amount Additions Reclassifications Depreciation Closing net book amount At December 31, 2020 Cost Accumulated depreciation and impairment At January 1, 2019 Cost Accumulated depreciation and impairment 2019 Opening net book amount Additions Reclassifications Depreciation Closing net book amount At December 31, 2019 Cost Accumulated depreciation and impairment	Land Buildings Machinery Test equipment Office equipment Others Total - $ 2,574,744 $ 3,863,302 $ 2,281,360 $ 233,933 $ 772,540 $ 9,725,879 $ - 971,140) ( 3,505,163) ( 1,527,274) ( 140,063) ( 562,981) ( 6,706,621) ( - $ 1,603,604 $ 358,139 $ 754,086 $ 93,870 $ 209,559 $ 3,019,258 $ - $ 1,603,604 $ 358,139 $ 754,086 $ 93,870 $ 209,559 $ 3,019,258 $ 387,280 160,674 131,306 637,467 44,636 291,664 1,653,027 - 23,383 5) ( - - 23,378) ( - - 79,184) ( 90,185) ( 377,102) ( 27,536) ( 71,274) ( 645,281) ( 387,280 $ 1,708,477 $ 399,255 $ 1,014,451 $ 110,970 $ 406,571 $ 4,027,004 $ 387,280 $ 2,758,801 $ 3,800,466 $ 2,904,416 $ 278,569 $ 1,034,223 $ 11,163,755 $ - 1,050,324) ( 3,401,211) ( 1,889,965) ( 167,599) ( 627,652) ( 7,136,751) ( 387,280 $ 1,708,477 $ 399,255 $ 1,014,451 $ 110,970 $ 406,571 $ 4,027,004 $ Land Buildings Machinery Test equipment Office equipment Others Total - $ 2,574,744 $ 3,694,106 $ 1,899,377 $ 188,464 $ 696,142 $ 9,052,833 $ - 878,259) ( 3,435,978) ( 1,250,013) ( 116,837) ( 507,990) ( 6,189,077) ( - $ 1,696,485 $ 258,128 $ 649,364 $ 71,627 $ 188,152 $ 2,863,756 $ - $ 1,696,485 $ 258,128 $ 649,364 $ 71,627 $ 188,152 $ 2,863,756 $ - - 145,879 391,153 45,469 102,773 685,274 - - 27,167 - - 27,167) ( - - 92,881) ( 73,035) ( 286,431) ( 23,226) ( 54,199) ( 529,772) ( - $ 1,603,604 $ 358,139 $ 754,086 $ 93,870 $ 209,559 $ 3,019,258 $ - $ 2,574,744 $ 3,863,302 $ 2,281,360 $ 233,933 $ 772,540 $ 9,725,879 $ - 971,140) ( 3,505,163) ( 1,527,274) ( 140,063) ( 562,981) ( 6,706,621) ( - $ 1,603,604 $ 358,139 $ 754,086 $ 93,870 $ 209,559 $ 3,019,258 $	Total
		3,019,258 $

A. There was no capitalization of borrowing costs attributable to the property, plant and equipment.

B. The Company has no property, plant and equipment pledged to others.

－ (6) Leasing arrangements lessee

A. The Company leases various assets including land and buildings. Lease terms are negotiated on

an individual basis and contain a wide range of different terms and conditions. The lease

~28~

agreements do not impose covenants, but leased assets may not be used as security for borrowing

purposes.

• B. The carrying amount of right-of-use assets and the depreciation charge are as follows:

Land Buildings Land Buildings		Carrying	Carrying	Carrying
		Year ended December 31,2020
		26,367 $ 23,276 49,643 $		20,502 $ 12,531 33,033 $

• C. For the years ended December 31, 2020 and 2019, the additions to right-of-use assets were $348,140 and $392,519, respectively.

• D. The information on profit and loss accounts relating to lease contracts is as follows:

Items affecting profit or loss Interest expense on lease liabilities	Years ended December 31,	Years ended December 31,
	2020 18,916 $	2019
		12,651 $

• E. For the years ended December 31, 2020 and 2019, the Company’s total cash outflow for leases were $54,177 and $38,374, respectively.

~29~

(7) Intangible assets

Intangible assets
	Computer software		Intellectualproperty			Others			Total
At January 1, 2020
Cost	$	4,067,350	$	4,309,997	$		1,222	$	8,378,569
Accumulated amortisation
and impairment	(	3,293,971)	(	3,431,876)			-	(	6,725,847)
	$	773,379	$	878,121	$		1,222	$	1,652,722
2020
Opening net book amount	$	773,379	$	878,121	$		1,222	$	1,652,722
Additions		1,004,055		397,771			-		1,401,826
Amortisation	(	681,932)	(	416,987)			-	(	1,098,919)
Closing net book amount	$	1,095,502	$	858,905	$		1,222	$	1,955,629
At December 31, 2020
Cost	$	5,071,405	$	4,707,768	$		1,222	$	9,780,395
Accumulated amortisation
and impairment	(	3,975,903)	(	3,848,863)			-	(	7,824,766)
	$	1,095,502	$	858,905	$		1,222	$	1,955,629
	Computer software		Intellectualproperty			Others			Total
At January 1, 2019
Cost	$	3,220,861	$	3,713,979	$		3,548	$	6,938,388
Accumulated amortisation
and impairment	(	2,725,336)	(	3,052,503)			-	(	5,777,839)
	$	495,525	$	661,476	$		3,548	$	1,160,549
2019
Opening net book amount	$	495,525	$	661,476	$		3,548	$	1,160,549
Additions		844,689		596,018			-		1,440,707
Reclassifications		1,800		-	(		2,326)	(	526)
Amortisation	(	568,635)	(	379,373)			-	(	948,008)
Closing net book amount	$	773,379	$	878,121	$		1,222	$	1,652,722
At December 31, 2019
Cost	$	4,067,350	$	4,309,997	$		1,222	$	8,378,569
Accumulated amortisation
and impairment	(	3,293,971)	(	3,431,876)			-	(	6,725,847)
	$	773,379	$	878,121	$		1,222	$	1,652,722

~30~

Details of amortisation on intangible assets are as follows:

Short-term borrowings Operating costs Operating expenses Type of borrowings Bank borrowings Unsecured borrowings Type of borrowings Bank borrowings Unsecured borrowings	December 31,2020 11,456,690 $ December 31,2019 18,604,770 $	Years ended December 31,	Years ended December 31,
		2020 3,968 $ 1,094,951 1,098,919 $ Interest rate range 057%~0.60% Interest rate range 0.71%~1.91%	2019
			4,107 $ 943,901
			948,008 $
			Collateral None Collateral None

(8) Short-term borrowings

Interest expense recognized in profit or loss amounted to $118,211 and $131,449 for the years ended December 31, 2020 and 2019, respectively.

(9) Other payables

Accrued salaries Payable for employees’compensation Other accrued expenses Payables on equipment Payables on software and intellectual property Others	December 31,2020 4,675,282 $ 6,145,446 1,236,747 58,959 1,152,591 134,645 13,403,670 $	December 31,2019 3,574,723 $ 3,978,614 1,374,970 113,350 725,345 162,667 9,929,669 $

(10) Pension

A. (a) The Company has a defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company contributes monthly an amount equal to 2% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the Company would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is insufficient to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the

~31~

following year, the Company will make contributions for the deficit by next March.

(b) The amounts recognized in the balance sheet are determined as follows:

	December	31,2020	December	31,2019
Present value of defined benefit obligations	($	600,923)	($	595,932)
Fair value of plan assets		501,842		522,312
Net liability in the balance sheet	($	99,081)	($	73,620)

(c) Movement in net defined benefit liabilities are as follows:

	Present value of	Present value of		Fair value of
		defined benefit		plan		Net defined
		obligations		assets	benefit liability
Year ended December 31, 2020
At January 1	($	595,932)	$	522,312	($	73,620)
Current service cost	(	1,580)		-	(	1,580)
Interest (expense) income	(	4,727)		4,098	(	629)
	(	602,239)		526,410	(	75,829)
Remeasurements:
Return on plan assets (excluding amounts		-		5,910		5,910
included in interest income or expense)
Change in demographic assumptions	(	3,573)		-	(	3,573)
Change in financial assumptions	(	17,863)		-	(	17,863)
Experience adjustments	(	13,726)		-	(	13,726)
	(	35,162)		5,910	(	29,252)
Pension fund contribution		-		6,000		6,000
Paid pension		36,478	(	36,478)		-
At December 31	($	600,923)	$	501,842	($	99,081)
	Present value of			Fair value of
		defined benefit		plan		Net defined
		obligations		assets	benefit liability
Year ended December 31, 2019
At January 1	($	568,382)	$	495,415	($	72,967)
Current service cost	(	2,709)		-	(	2,709)
Interest (expense) income	(	6,366)		5,544	(	822)
	(	577,457)		500,959	(	76,498)
Remeasurements:
Return on plan assets (excluding amounts		-		24,973		24,973
included in interest income or expense)
Change in demographic assumptions	(	1,283)		-	(	1,283)
Change in financial assumptions	(	6,415)		-	(	6,415)
Experience adjustments	(	20,397)		-	(	20,397)
	(	28,095)		24,973	(	3,122)
Pension fund contribution		-		6,000		6,000
Paid pension		9,620	(	9,620)		-
At December 31	($	595,932)	$	522,312	($	73,620)

(d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the

~32~

“Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks.

(e) The principal actuarial assumptions used were as follows:

			Years ended December 31,	Years ended December 31,	Years ended December 31,	Years ended December 31,	Years ended December 31,
			2020			2019
Discount rate				0.3%			0.8%
Future salary increases			4.75%				5%
Future mortality rate was estimated		based on the 5th Taiwan Standard Ordinary					Experience
Mortality Table for the years	ended December 31, 2020 and			2019.
Because the main actuarial	assumption changed, the present				value of defined benefit
obligation is affected. The analysis		was as follows:
		Discount rate			Future salaryincreases
	Increase by		Decrease by	Increase by		Decrease by
		0.25%	0.25%		0.25%		0.25%
December 31, 2020
Effect on present value
of defined benefit obligation	$	16,617	17,201) ($	($	16,104)	$	15,599
		Discount rate			Future salaryincreases
	Increase by		Decrease by	Increase by		Decrease by
		0.25%	0.25%		0.25%		0.25%
December 31, 2019
Effect on present value
of defined benefit obligation	$	16,562	17,221) ($	($	16,154)	$	15,635

Future mortality rate was estimated based on the 5th Taiwan Standard Ordinary Experience Mortality Table for the years ended December 31, 2020 and 2019.

Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

The sensitivity analysis above is based on one assumption which changed while the other conditions remain unchanged. In practice, more than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability in the balance sheet are the same.

• (f) Expected contributions to the defined benefit pension plans of the Company for the year ending December 31, 2021 amount to $6,000.

• (g) As of December 31, 2020, the weighted average duration of the retirement plan is 12 years. The analysis of timing of the future pension payment was as follows:

~33~

Within 1 year 2~5 years 5~10 years Over 10 years	272,184 $ 108,918 191,135 35,077
	607,314 $

• B. (a) Effective July 1, 2005, the Company has established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company contributes monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.

  • (b) The pension costs under the defined contribution pension plans of the Company for the years ended December 31, 2020 and 2019 were $272,845 and $244,680, respectively.

• (11) Share capital

• A. As of December 31, 2020, the Company’s authorised capital was $8,900,000, consisting of 890 million shares of ordinary stock (including 80 million shares reserved for employee stock options), and the paid-in capital was $5,106,849 with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected.

At January 1 Employees' compensation transferred to common stock At December 31	Unit : Thousands of shares 2020 2019 508,095 508,095 2,589 - 510,684 508,095	Unit : Thousands of shares 2020 2019 508,095 508,095 2,589 - 510,684 508,095
		508,095 -
		508,095

• B. On March 20, 2020, the Board of Directors of the Company during their meeting resolved for the Company to provide employees’ compensation in the form of stocks amounting to $419,485. The Company calculates the number of shares based on the closing price at the previous day of the board meeting resolution. The closing price was $162 (in dollars) per share, and the Company issued 2,589 thousand new shares, which was approved by the Competence Authority. The effective date for the issuance was April 8, 2020, and the related registration for the issuance was completed on April 20, 2020.

• C. On January 24, 2002, the Company increased its new common stock and sold its old common stock by issuing 13,924 thousand units of GDRs for cash. Each GDR unit represents 4 common stocks, so the total common stocks issued were 55,694 thousand shares. The Company’s GDRs are traded in Luxembourg stock exchange. As of December 31, 2020, the outstanding GDRs were 390 thousand units, or 1,561 thousand shares of common stock, representing 0.31% of the Company’s total common stocks.

~34~

(12) Capital surplus

Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Act requires that the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the paid-in capital each year. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

At January 1 Employees' compensation transferred to common shares Change in associates accounted for under equity method Cash dividends distribution from capital surplus Cash dividends returned At December 31 At January 1 Change in associates accounted for under equity method Cash dividends distribution from capital surplus Cash dividends returned At December 31				2020
		Share premium		Change in associates accounted for under equitymethod 48,272 $ - 12,763 - - 61,035 $ 2019
	2,688,155 $ 393,591 - 1,021,370) ( - 2,060,376 $ Share premium
		Share premium		Change in associates accounted for under equitymethod 40,208 $ 8,064 - - 48,272 $
	3,196,250 $ - 508,095) ( - 2,688,155 $

(13) Retained earnings

A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be used to pay all taxes and offset prior years’ operating losses and then 10% of the remaining amount shall be set aside as legal reserve, if legal reserve has accumulated to an amount equal to the paid-in capital, then legal reserve is not required to be set aside any more. After that, special reserve shall be set aside or reversed in accordance with related laws or the regulations made by the Competent Authority. The remainder, if any, along with prior year’s accumulated undistributed earnings shall be proposed by the Board of Directors. However, the

~35~

appropriations of earnings shall be resolved by shareholders if earnings are distributed by issuing new shares, or the appropriations of earnings shall be resolved by the Board of Directors, if earnings are distributed in the form of cash. The Company should consider factors of finance, business and operations to appropriate distributable earnings for the period, and appropriate all or partial reserve in accordance with regulations and the Company’s future expansion plans and future cash flows. In accordance with the Company’s dividend policy, cash dividends shall account for at least 10% of the total dividends distributed.

In accordance with Company Act Article 240, Items 5 and Article 241, Item 2, the resolution, for all or partial of distributed dividends, legal reserve and capital surplus are distributed in the form of cash, will be adopted by a majority vote at a meeting of the Board of Directors attended by two-thirds of the total number of directors, and will be reported to the shareholders.

• B. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company’s paid-in capital.

• C. In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.

• D. The appropriations of 2019 and 2018 earnings had been resolved at the stockholders’ meeting on June 10, 2020 and June 12, 2019, respectively. Details are summarised below:

Legal reserve (Reversal of) Special reserve Cash dividends	Dividends per Dividends per Amount share(in dollars) Amount share(in dollars) 674,907 $ - $ 435,077 $ - $ 217,036 - 600,443) ( - 4,596,164 9.00 3,048,573 6.00 5,488,107 $ 9.00 $ 2,883,207 $ 6.00 $ 2019 2018	2018	2018
	Amount 674,907 $ 217,036 4,596,164 5,488,107 $		Dividends per share(in dollars)
			- $ - 6.00
			6.00 $

• E. On April 24, 2020, the board of directors resolved during their meeting to distribute cash dividends from capital surplus to shareholders in the amount of $1,021,370 ($2 per share). The aforementioned cash dividends of distribution of 2019 earnings and cash dividends from capital surplus have been resolved by the Board of Directors on April 24, 2020.

• F. On June 12, 2019, the stockholders resolved during their meeting to distribute $508,095 by cash ($1 per share) from capital surplus.

~36~

(14) Other equity items

(14)	Other equity items
(15)	Operating revenue At January 1 Revaluation –Group –Associates Currency translation differences: –Group At December 31 At January 1 Revaluation –Group –Associates Reclassified to retained earnings Currency translation differences: –Group At December 31 Revenue from contracts with customers						2020
				Unrealised gains on valuation			Currency translation difference
				545,107 $ 829,923 9,879 -			762,143) ($ - - 2,178,815) ( 2,940,958) ($ 2019
				1,384,909 $
				Unrealised gains on valuation
			$
			$
					2020 56,426,751 $			2019
								40,845,708 $

~37~

A. Disaggregation of revenue from contracts with customers

The Company derives revenue from the transfer of goods and services at a point in time in the following major product lines:

following major product lines:
Year ended December 31,2020		Integrated circuitproducts 56,311,636 $ 56,311,636 $ Integrated circuitproducts 40,729,445 $ 40,729,445 $	Others 115,115 $ 115,115 $ Others 116,263 $ 116,263 $	Total
Revenue from external customer contracts Timing of revenue recognition At a point in time Year ended December 31,2019				56,426,751 $
				56,426,751 $
				Total
Revenue from external customer contracts Timing of revenue recognition At a point in time				40,845,708 $
				40,845,708 $

B. Contract liabilities

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

Contract liabilities –advance sales receipts	December 31,2020 163,080 $	December 31,2019 67,853 $	January1,2019
			110,764 $

Revenue recognized that was included in the contract liability balance at the beginning of the period:

period:
Contract liabilities–advance sales receipts	Years ended December 31,
	2020 49,080 $	2019
		100,804 $

C. Refund liabilities (shown in other current liabilities)

The Company estimates the discounts based on accumulated experience. The estimation is subject to an assessment at each reporting date.

Refund liabilities – current

December31,2020 5,240,048 $	December31,2019
	3,831,860 $

(16) Interest income

subject to an assessment at each reporting date. Interest income Refund liabilities–current	December31,2020 December31,2019 5,240,048 $ 3,831,860 $
Interest income from bank deposits Other interest income	2020 2019 23,356 $ 42,689 $ 28,747 75,753 52,103 $ 118,442 $ Years ended December 31,
	2020 23,356 $ 28,747 52,103 $

~38~

(17) Other income

Other income
Rent income Dividend income Grant income Other income	Years ended December 31,
	2020 4,571 $ 411 60,635 1,905 67,522 $	2019
		12,865 $ 406 44,434 18,244
		75,949 $

(18) Other gains and losses

Other gains and losses	$	67,522	$	75,949
		Years ended	December 31,
		2020	2019
Gains on disposal of property, plant and equipment	$	1,700	$	92
Gains on disposal of investment		466		-
Net currency exchanges losses	(	105,455)	(	145,314)
Gains (Losses) on financial assets
at fair value through profit or loss		95,624	(	325)
Impairment loss of investments accounted for
under equity method		-	(	41,397)
Other losses	(	5,132)	(	4,801)
	($	12,797)	($	191,745)

(19) Finance costs

Finance costs
Expenses by nature Interest expense Bank borrowings Lease liabilities Employee benefit expenses Depreciation Amortisation	Years ended December 31,
	2020 2019 118,211 $ 131,449 $ 18,916 12,651 137,127 $ 144,100 $ Years ended December 31,	2019
		131,449 $ 12,651
		144,100 $
	2020 14,433,363 $ 694,924 $ 1,098,919 $	2019
		11,303,979 $
		562,805 $
		948,008 $

(20) Expenses by nature

~39~

(21) Employee benefit expenses

Employee benefit expenses
Wages and salaries Labor and health insurance fees Pension costs Other personnel expenses	Years ended December 31,
	2020 13,445,450 $ 474,118 275,054 238,741 14,433,363 $	2019
		10,471,633 $ 410,720 248,211 173,415
		11,303,979 $

• A. In accordance with the Company’s Articles of Incorporation, the Company shall appropriate no higher than 3% for directors’ remuneration and no less than 1% for employees’ compensation, if the Company generates profit. If the Company has accumulated deficit, earnings should be reserved to cover losses before the appropriation of directors’ remuneration and employees’ compensation. Aforementioned employees’ compensation could be distributed by cash or stocks. Specifics of the compensation are to determined by a majority vote at a meeting of the Board of Directors attended by at least two-thirds of the number of directors. The resolution should be reported to the shareholders during the shareholders’ meeting.

• B. For the years ended December 31, 2020 and 2019, employees’ compensation was accrued at $2,586,317 and $2,097,424, respectively; directors’ remuneration was accrued at $90,000 and $119,828, respectively. The amounts were estimated as operating cost or operating expense in accordance with the Company’s Articles of incorparation.

• Employees’ compensation was $2,097,424, and directors’ remuneration was $119,828 for 2019. Employees’ compensation and directors’ remuneration for 2019 as resolved at the meeting of the Board of Directors were in agreement with those amounts recognized in the 2019 financial statements. Employees’ compensation of 2019 will be distributed in the form of shares amounting to 2,589 thousand shares.

• Information about employees’ compensation and directors’ remuneration of the Company as resolved by the Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

~40~

(22) Income tax

A. Income tax expense

ome tax Income tax expense
		Years ended	December 31,
		2020	2019
Current income tax:
Current income tax on profits for the year	$	622,571	$	388,600
Tax on undistributed retained earnings		63,048		74,745
Prior year income tax over estimation	(	121,055)	(	19,067)
Total current income tax		564,564		444,278
Deferred income tax:
Origination and reversal of temporary
differences	(	4,564)	(	6,278)
Income tax expense	$	560,000	$	438,000

B. Reconciliation between income tax expense and accounting profit

		Years ended	December 31,	December 31,
		2020		2019
Income tax calculated based on income before
tax	$	1,870,696	$	1,445,657
Expenses disallowed by tax regulation and
effects from tax-exempt income	(	1,252,689)	(	1,063,335)
Prior year income tax over estimation	(	121,055)	(	19,067)
Tax on undistributed retained earnings		63,048		74,745
Income tax expense	$	560,000	$	438,000

• C. Amounts of deferred income tax assets or liabilities as a result of temporary differences are as follows:

follows:
		Year ended December 31,				2020
			Recognised in
		January1	profit or loss			December 31
Deferred income tax assets:
-Temporary differences:
Unrealised loss on market price decline
and obsolete and slow-moving
inventories and others	$	114,163	$	55,713	$		169,876
Deferred income tax liabilities:
-Temporary differences:
Unrealised exchange gain	(	51,723)	(	51,149)	(		102,872)
	$	62,440	$	4,564	$		67,004

~41~

Year ended December 31, 2019

January1 Deferred income tax assets: -Temporary differences: Unrealised loss on market price decline and obsolete and slow-moving inventories and others 78,472 $ Deferred income tax liabilities: -Temporary differences: Unrealised exchange gain 22,310) ( 56,162 $	Recognised in profit or loss December 31 35,691 $ 114,163 $ 29,413) ( 51,723) ( 6,278 $ 62,440 $	December 31
		62,440 $

• D. The amounts of deductible temporary differences that were not recognized as deferred income tax assets are as follows:

tax assets are as follows:
Deductible temporary differences	December31,2020 1,256,642 $	December31,2019
		1,108,747 $

• E. As of December 31, 2020, the Company’s income tax returns until 2018 have been assessed and approved by the Tax Authority.

(23) Earnings per share

Earnings per share
Basic earnings per share Profit attributable to ordinary shareholders Diluted earnings per share Profit attributable to ordinary shareholders Assumed conversion of all dilutive potential ordinary shares Employees’compensation Profit attributable to ordinary shareholders plus assumed conversion of all dilutive potential ordinary shares		Year ended December 31,2020				Earnings per share (in dollars)
		Amount after tax		Weighted average number of ordinary shares outstanding (shares in thousands)
		8,793,477 $ 8,793,477 $ - 8,793,477 $		510,126 510,126 9,418 519,544		17.24 $ 16.93 $

~42~

Basic earnings per share Profit attributable to ordinary shareholders Diluted earnings per share Profit attributable to ordinary shareholders Assumed conversion of all dilutive potential ordinary shares Employees’compensation Profit attributable to ordinary shareholders plus assumed conversion of all dilutive potential ordinary shares		Year ended December 31,2019	Year ended December 31,2019	Year ended December 31,2019		Earnings per share (in dollars)
		Amount after tax		Weighted average number of ordinary shares outstanding (shares in thousands)
		6,790,283 $ 6,790,283 $ - 6,790,283 $		508,095 508,095 8,926 517,021		13.36 $ 13.13 $

(24) Supplemental cash flow information

Investing activities with partial cash payments

Supplemental cash flow information Investing activities with partial cash payments
		Years ended	December 31,
		2020		2019
Purchase of property, plant and equipment	$	1,653,027	$	685,274
Add: Opening balance of payable on equipment		113,350		110,401
Less: Ending balance of payable on equipment	(	58,959)	(	113,350)
Cash paid during the year	$	1,707,418	$	682,325
		Years ended	December 31,
		2020		2019
Purchase of intangible assets	$	1,401,826	$	1,440,707
Add: Opening balance of payable on
software and intellectual property		725,345		684,438
Less: Ending balance of payable on
software and intellectual property	(	1,152,591)	(	725,345)
Cash paid during the year	$	974,580	$	1,399,800

~43~

(25) Changes in liabilities from financing activities

At January 1, 2020 Changes in cash flow from financing activities Interest paid Interest on lease liabilities Changes in other non-cash items At December 31, 2020 At January 1, 2019 Changes in cash flow from financing activities Interest paid Interest on lease liabilities Changes in other non-cash items At December 31, 2019	Short-term borrowings	Short-term borrowings	Refundable deposits received	Lease liabilities	Liabilities from financing activities-total
	18,604,770 $ 7,148,080) ( - - - 11,456,690 $ Short-term borrowings		3,258 $ 2,220) ( - - - 1,038 $ Refundable deposits received	812,095 $ 35,261) ( 18,916) ( 18,916 348,140 1,124,974 $ Lease liabilities	19,420,123 $ 7,185,561) ( 18,916) ( 18,916 348,140 12,582,702 $ Liabilities from financing activities-total
		14,526,311 $ 4,078,459 - - - 18,604,770 $	4,739 $ 1,481) ( - - - 3,258 $	732,121 $ 25,723) ( 12,651) ( 12,651 105,697 812,095 $	15,263,171 $ 4,051,255 12,651) ( 12,651 105,697 19,420,123 $

7. RELATED PARTY TRANSACTIONS

(1) Names of related parties and relationship

Names of related parties Relationship with the Company Leading Enterprises Limited Subsidiary Realtek Singapore Private Limited Subsidiary Bluocean Inc. Subsidiary Talent Eagle Enterprise Inc. Subsidiary Amber Universal Inc. Subsidiary Cortina Systems Taiwan Limited Sub-subsidiary RayMX Microelectronics Corp. Sub-subsidiary G.M.I Technology Inc. Other related party Actions Semiconductor Co., Ltd. Other related party C-Media Electronics Inc. Other related party Greatek Electronics Inc. Other related party EmBestor Technology Inc. Other related party

~44~

Significant related party transactions and balances

A. Operating revenue

ificant related party transactions and balances Operating revenue
Sales of goods﹕ G.M.I Technology Inc. Others	Years ended December 31,
	2020 7,375,829 $ 365,249 7,741,078 $	2019
		5,996,976 $ 269,079
		6,266,055 $

Goods are sold based on the price lists in force and terms that would be available to third parties, and the general collection term was 30 ~ 60 days after monthly billings.

B. Processing cost

Processing cost
Greatek Electronics Inc.	Years ended December 31,
	2020 1,033,517 $	2019
		1,024,163 $

Processing cost is paid to related parties on normal commercial terms and conditions, and the general payment term was 69 days after monthly billings.

C. Receivables from related parties

Receivables from related parties
Accounts receivable﹕ G.M.I Technology Inc. Others	December 31,2020 1,751,860 $ 59,040 1,810,900 $	December 31,2019
		$ 1,172,793 54,462
		1,227,255 $

Aforementioned receivables were 30 ~ 60 days after monthly billings. The receivables from related parties arise mainly from sale transactions. The receivables bear no interest.

D. Payables to related parties:

related parties arise mainly from sale transactions. Payables to related parties:	The receivablesbear no	interest.
Accounts payable﹕ Greatek Electronics Inc.	December 31,2020 253,691 $	December 31,2019
		313,185 $

The payment term above was 69 days after monthly billings. The payables to related parties arise mainly from processing cost. The payables are unsecured in nature and bear no interest.

~45~

E. Other transactions and other (receivables) payables:

			Years ended	Years ended	December 31,	December 31,
		2020				2019
				Ending				Ending
		Amount		balance		Amount		balance
Other related parties-
Sales commissions	$	286,704	$	60,784	$	227,843	$	55,690
Technical royalty revenue	($	8,406)	$	-	($	4,430)	$	-
Cash dividend income	($	411)	$	-	($	406)	$	-
Subsidiaries and sub-subsidiaries-
Interest income	($	28,747)	($	20)	($	70,752)	($	44,587)
Other income	$	-	($	46,380)	$	-	($	48,980)
Cash dividend income	($	5,631,482)	$	-	($	2,750,826)	$	-
Rent income	($	1,922)	($	245)	($	1,922)	($	243)

The payment term above was 49 days after monthly billings; collection term was 30 ~ 60 days after monthly billings.

F. Acquisition of financial assets:

Leading Enterprises Limited Leading Enterprises Limited	Accounts No. of shares Investments accounted for under equity method 9,856,425 Investments accounted for under equity method 60,000		Year ended December 31,202 Objects Consideration Realtek Singapore Private Limited equity 1,780,187 $ Leading Enterprises Limited equity (increased common stock) 1,735,500 3,515,687 $
			Objects Realtek Singapore Private Limited equity Leading Enterprises Limited equity (increased common stock)

~46~

G. Loans to related parties :

(a) Outstanding balance:

ns to related parties : Outstanding balance:
Subsidiaries Leading Enterprises Limited Talent Eagle Enterprise Inc. Bluocean Inc. Amber Universal Inc. Realtek Singapoe Private Limited	December 31,2020 - $ 57,016 - 11,403 570,160 638,579 $	December 31,2019
		1,806,360 $ 1,737,116 1,490,247 602,120 -
		5,635,843 $

(b) Interest income

Subsidiaries

Years ended December 31,	Years ended December 31,
2020 28,747 $	2019
	70,752 $

The loans to subsidiaries are repayable monthly within one year, and carry interest at 0.2% and 1.8% for the years ended December 31, 2020 and 2019, respectively.

H. Endorsements and guarantees provided to related parties:

Key management compensation Subsidiaries Salaries and other short-term employee benefits Post-employment benefits Total	December31,2020 December31,2019 10,605,268 $ 9,798,836 $ Years ended December 31,	December31,2019
		9,798,836 $
	2020 137,298 $ 2,721 140,019 $	2019 120,242 $ 2,697 122,939 $

(2) Key management compensation

8. PLEDGED ASSETS

The Company’s assets pledged as collateral are as follows:

Pledged asset Time deposits (shown in financial assets at amortised cost - non-current) "	December 31,2020 December 31,2019 30,821 $ 34,307 $ 44,472 30,578 75,293 $ 64,885 $ Book value	Purposes
	December 31,2020 30,821 $ 44,472 75,293 $
		Guarantee for the importation customs duties of materials Guarantee for leasing land and office in Science Park

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT COMMITMENTS

(1) Contingencies

A. In 2020, Divx, LLC brought actions for patent infringement in United States International Trade

~47~

Commission and United States District Court of Delaware against the Company’s IC products. The case are still pending, and the Company is unable to comment on the outcome of the cases.

• B. In 2020, KONINKLIJKE PHILIPS N.V. and PHILIPS NORTH AMERICA LLC brought actions for patent infringement in United States International Trade Commission and United States District Court of Delaware against the Company’s IC products. The cases are still pending, and the Company is unable to comment on the outcome of the cases.

(2) Commitments

None.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

• None.

12. OTHERS

(1) Capital management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

~48~

(2) Financial instruments

A. Financial instruments by category

December 31, 2020 December 31, 2019

nancial instruments Financial instruments by category		December 31,2020		December 31,2019
Financial assets Financial assets at fair value through profit or loss Financial assets mandatorily measured at fair value through profit or loss Financial assets at amortised cost/Receivables Cash and cash equivalents Financial assets at amortised cost Accounts receivable (including related parties) Other receivables (including related parties) Refundable deposits Financial liabilities Financial liabilities at amortised cost Short-term borrowings Notes payable Accounts payable (including related parties) Other payable (including related parties) Guarantee deposits received Other financial liability Lease liability		124,360 $ 4,630,448 $ 75,293 9,397,980 689,052 34,805 14,827,578 $ December 31,2020		28,736 $ 3,333,828 $ 64,885 7,815,480 5,750,070 16,166 16,980,429 $ December 31,2019
		11,456,690 $ 3,276 7,862,783 13,464,454 1,038 5,240,048 38,028,289 $ 1,124,974 $		18,604,770 $ 3,276 5,972,703 9,985,359 3,258 3,831,860 38,401,226 $ 812,095 $

• B. Financial risk management policies

• (a) The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk.

(b) Risk management is carried out by a finance division (Company finance) under policies approved by the Board of Directors. Company finance identifies, evaluates and hedges financial risks in close cooperation with the Company’s operating units.

• C. Significant financial risks and degrees of financial risks

• (a) Market risk

Foreign exchange risk

• i. The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the USD. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.

• ii. Management has set up a policy to require the Company to manage its foreign exchange

~49~

risk against its functional currency. The Company is required to hedge its entire foreign exchange risk exposure with the Company finance.

• iii. The Company’s businesses involve some functional currency operations (the Company’s functional currency: NTD). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

(Foreign currency: functional currency) Financial assets Monetary items USD:NTD Non-monetary items USD:NTD Financial liabilities Monetary items USD:NTD (Foreign currency: functional currency) Financial assets Monetary items USD:NTD Non-monetary items USD:NTD Financial liabilities Monetary items USD:NTD	December 31,2020	December 31,2020	December 31,2020
	Foreign currency amount Book value (In thousands) Exchange rate (NTD) 445,489 $ 28.508 12,700,000 $ 1,387,989 28.508 39,568,790 468,326 28.508 13,351,038 December 31,2019		Book value (NTD)
	Foreign currency amount (In thousands) 549,291 $ 1,285,500 348,135	Exchange rate 30.106 30.106 30.106	Book value (NTD)
			16,536,969 $ 38,701,252 10,480,953

~50~

The total exchange loss, including realised and unrealised arising from significant foreign exchange variation on the monetary items held by the Company for the years ended December 31, 2020 and 2019, amounted to $105,454 and $145,314, respectively. Analysis of foreign currency market risk arising from significant foreign exchange variation:

(Foreign currency: functional currency) Financial assets Monetary items USD:NTD Non-monetary items USD:NTD Financial liabilities Monetary items USD:NTD (Foreign currency: functional currency) Financial assets Monetary items USD:NTD Non-monetary items USD:NTD Financial liabilities Monetary items USD:NTD	Year ended December 31,	Year ended December 31,	2020
	Sensitivityanalysis
	Effect on Degree of variation profit or loss 1% 127,000 $ 1% - 1% 133,510) ( Year ended December 31,		Effect on other comprehensive income
			- $ 395,688 - 2019
	Sensitivityanalysis
	Degree of variation 1% 1% 1%	Effect on profit or loss 165,370 $ - 104,810) (	Effect on other comprehensive income
			- $ 387,013 -

Price risk

i. The Company’s equity securities, which are exposed to price risk, are the held financial assets at fair value through profit or loss and financial assets at fair value through other

~51~

comprehensive income.

• ii. The Company’s investments in equity securities comprise domestic listed and unlisted stocks. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these equity securities had decreased/increased by 10% with all other variables held constant, post-tax profit for the years ended December 31, 2020 and 2019 would have decreased/increased by $12,436 and $2,874, respectively.

• Cash flow and fair value interest rate risk

The Company has no material interest rate risk.

• (b) Credit risk

• i. Credit risk refers to the risk of financial loss to the Company arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms, and the contract cash flows of financial assets at amortised cost, at fair value through profit or loss and at fair value through other comprehensive income.

• ii. The Company manages their credit risk taking into consideration the entire Company’s concern. According to the Company’s credit policy, the Company is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors.

• iii. The Company adopts the assumption under IFRS 9, that is, the default occurs when the contract payments are past due over 90 days.

• iv. The Company adopts the following assumption under IFRS 9 to assess whether there has been a significant increase in credit risk on that instrument since initial recognition: If the contract payments were past due over 30 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.

• v. The following indicators are used to determine whether the credit impairment of debt instruments has occurred:

• (i) It becomes probable that the issuer will enter bankruptcy or other financial reorganization due to their financial difficulties;

• (ii) The disappearance of an active market for that financial asset because of financial difficulties;

• (iii) Default or delinquency in interest or principal repayments;

• (iv) Adverse changes in national or regional economic conditions that are expected to cause a default.

• vi. The Company classifies customers’ accounts receivable in accordance with customer types. The Company applies the modified approach using provision matrix to estimate expected credit loss under the provision matrix basis.

~52~

• vii. The Company wrote-off the financial assets, which cannot be reasonably expected to be recovered, after initiating recourse procedures. However, the Company will continue executing the recourse procedures to secure their rights.

• viii. The Company used the forecast ability of semiconductor industry research report to adjust historical and timely information to assess the default possibility of accounts receivable. On December 31, 2020 and 2019, the provision matrix is as follows:

At December 31, 2020 Expected loss rate Total book value Loss allowance At December 31, 2019 Expected loss rate Total book value Loss allowance	Notpast due 0-1% 9,274,060 $ 92,162 $ Notpast due 0-1% 7,518,066 $ 75,187 $	1~90 dayspast due 0-1% 218,846 $ 2,764 $ 1~90 dayspast due 0-1% 376,365 $ 3,764 $	Over 90 days past due 100% 434 $ 434 $ Over 90 days past due 100% 656 $ 656 $	Total
				9,493,340 $
				95,360 $
				Total
				7,895,087 $
				79,607 $

• ix. Movements in relation to the Company applying the modified approach to provide loss allowance for accounts receivable are as follows:

allowance for accounts receivable are as follows:
At January 1 Provision for impairment At December 31 At January 1 Provision for impairment At December 31	2020
	Loss allowance for accounts receivable
	79,607 $ 15,753
	95,360 $
	2019
	Loss allowance for accounts receivable
	53,989 $ 25,618
	79,607 $

x. For financial assets at amortised cost, the credit rating levels are presented below:

~53~

Financial assets at amortised cost Financial assets at amortised cost		December 31,2020
	12 months 75,293 $	Significant increase in Impairment credit risk of credit - $ - $ Lifetime December 31,2019	Total
		Significant increase in credit risk - $ December
			75,293 $
	12 months 64,885 $	Significant increase in Impairment credit risk of credit - $ - $ Lifetime	Total
		Significant increase in credit risk - $
			64,885 $

The financial assets at measured cost are bank time deposits with original maturity more than three months, and there is no major material in credit risk assessment.

• (c) Liquidity risk

• i. Cash flow forecasting is performed in the operating entities of the Company and aggregated by Company finance. Company finance monitors rolling forecasts of the Company’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities.

• ii. Company finance invests surplus cash in interest bearing current accounts, time deposits, money market deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts.

• iii. The table below analyses the Company’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

~54~

Non-derivative financial liabilities:

Non-derivative financial liabilities:
December 31, 2020 Short-term borrowings Notes payable Accounts payable (including related parties) Other payables (including related parties) Lease liability Guarantee deposits received Other financial liabilities Non-derivative financial liabilities: December 31, 2019 Short-term borrowings Notes payable Accounts payable (including related parties) Other payables (including related parties) Lease liability Guarantee deposits received Other financial liabilities	Less than 1 year	Between 1 and 5years	Over 5years
	11,456,691 $ 3,276 7,862,783 13,414,454 54,804 - 5,240,048 Less than 1 year	- $ - - - 153,111 - - Between 1 and 5years	- $ - - - 1,366,224 1,038 - Over 5years
	18,621,514 $ 3,276 5,972,703 9,985,359 40,860 - 3,831,860	- $ - - - 125,645 - -	- $ - - - 934,269 3,258 -

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

(3) Fair value information

• A. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Company’s investment in listed stocks and beneficiary certificates is included in Level 1.

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3: Unobservable inputs for the asset or liability. The fair value of the Company's investment in equity investment without active market is included in Level 3.

• B. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities is as follows:

~55~

(a) The related information of nature December 31, 2020 Assets Recurring fair value measurement Financial assets at fair value through profit or loss Equity securities December 31, 2019 Assets Recurring fair value measurement Financial assets at fair value through profit or loss Equity securities	(a) The related information of nature December 31, 2020 Assets Recurring fair value measurement Financial assets at fair value through profit or loss Equity securities December 31, 2019 Assets Recurring fair value measurement Financial assets at fair value through profit or loss Equity securities	of the assets is as follows: Level 1 Level 2 124,360 $ - $ Level 1 Level 2 28,736 $ - $	Level 3 - $ Level 3 - $	Total
				124,360 $
	Financial assets at fair value through profit or loss Equity securities December 31, 2019 Assets Recurring fair value measurement
				Total
				28,736 $
	Financial assets at fair value through profit or loss Equity securities

• (b) The instruments the Company used market quoted prices as their fair values (that is, Level1), and the listed company shares used closing price.

• C. For the years ended December 31, 2020 and 2019, there was no transfer between Level 1 and Level 2.

• D. The following chart is the movement of Level 3 for the years ended December 31, 2020 and 2019:

2019:
At January 1 Current sale At December 31	2020 Non-derivative Non-derivative equityinstrument equityinstrument - $ 936 $ - 936) ( - $ - $ 2019	2019
		Non-derivative equityinstrument
		- $

• E. For the years ended December 31, 2020 and 2019, there was no transfer into or out from Level 3.

~56~

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

• A. Loans to others: Please refer to table 1.

• B. Provision of endorsements and guarantees to others: Please refer to table 2.

• C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 3.

• D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital: None.

• E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: Please refer to table 4.

• F. Disposal of real estate reaching $300 million or 20% of paid-in capital or more: None.

• G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paidin capital or more: Please refer to table 5.

• H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 6.

• I. Trading in derivative instruments undertaken during the reporting periods: None.

• J. Significant inter-company transactions during the reporting periods: Please refer to table 7.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 8.

(3) Information on investments in Mainland China

• A. Basic information: Please refer to table 9.

• B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to table 1, table 2 and table 7.

(4) Major shareholders information

• As of December 31, 2020, the Company had no shareholders who hold the Company’s shares over 5% (including 5%).

14. SEGMENT INFORMATION

None.

~57~

Table 1

Expressed in thousands of NTD (Except as otherwise indicated)

REALTEK SEMICONDUCTOR CORPORATION

Loans to others

For the year ended December 31, 2020

No (Note 1)	Creditor	Borrower	General ledger account	Is a related party	Maximum outstanding balance during the year ended December 31, 2020 (Note 3)	Balance at December 31,2020	Actual amount drawn down (Note 4)	Interest rate	Nature of loan	Amount of transactions with the borrower	Reason for short- term financing	Allowance for doubtful accounts	Collateral	Collateral	Limit on loans granted to a singleparty	Ceiling on total loans granted (Note 2)	Footnote
													Item	Value
0	Realtek Semiconductor Corporation	RayMX Microelectronics Corp.	Other receivables- related parties	Y	57,016 $	57,016 $	- $	-	Short-term financing	- $	Operations	- $	None	- $	2,945,908 $	11,783,632 $	None
0	Realtek Semiconductor Corporation	Realtek Singapore Private Limited	Other receivables- related parties	Y	855,240	855,240	570,160	-	Short-term financing	-	Operations	-	None	-	2,945,908	11,783,632	None
0	Realtek Semiconductor Corporation	Bluocean Inc.	Other receivables- related parties	Y	1,710,480	1,710,480	-	-	Short-term financing	-	Operations	-	None	-	2,945,908	11,783,632	None
0	Realtek Semiconductor Corporation	Leading Enterprises Limited	Other receivables- related parties	Y	1,710,480	1,710,480	-	-	Short-term financing	-	Operations	-	None	-	2,945,908	11,783,632	None
0	Realtek Semiconductor Corporation	Amber Universal Inc.	Other receivables- related parties	Y	833,748	833,748	11,403	0.20	Short-term financing	-	Operations	-	None	-	2,945,908	11,783,632	None
0	Realtek Semiconductor Corporation	Talent Eagle Enterprise Inc.	Other receivables- related parties	Y	1,710,480	1,710,480	57,016	0.20	Short-term financing	-	Operations	-	None	-	2,945,908	11,783,632	None
1	Leading Enterprises Limited	Bluocean Inc.	Other receivables- related parties	Y	1,710,480	1,710,480	1,045,959	0.20	Short-term financing	-	Operations	-	None	-	11,783,632	11,783,632	None
1	Leading Enterprises Limited	Talent Eagle Enterprise Inc.	Other receivables- related parties	Y	5,701,600	5,701,600	5,696,286	0.20	Short-term financing	-	Operations	-	None	-	11,783,632	11,783,632	None
2	Amber Universal Inc.	Blueocean Inc.	Other receivables- related parties	Y	1,425,400	1,425,400	552,770	0.20	Short-term financing	-	Operations	-	None	-	11,783,632	11,783,632	None
3	Cortina Access, Inc.	Leading Enterprises Limited	Other receivables- related parties	Y	855,240	855,240	-	-	Short-term financing	-	Operations	-	None	-	11,783,632	11,783,632	None

Table 1 Page 1

Table 1

Expressed in thousands of NTD (Except as otherwise indicated)

REALTEK SEMICONDUCTOR CORPORATION

Loans to others

For the year ended December 31, 2020

No (Note 1)	Creditor	Borrower	General ledger account	Is a related party	Maximum outstanding balance during the year ended December 31, 2020 (Note 3)	Balance at December 31,2020	Actual amount drawn down (Note 4)	Interest rate	Nature of loan	Amount of transactions with the borrower	Reason for short- term financing	Allowance for doubtful accounts	Collateral	Collateral	Limit on loans granted to a singleparty	Ceiling on total loans granted (Note 2)	Footnote
													Item	Value
4	Realtek Investment Singapore Private Limited	Realtek Singapore Private Limited	Other receivables- related parties	Y	2,850,800 $	2,850,800 $	1,148,872 $	0.20	Short-term financing	- $	Operations	- $	None	- $	11,783,632 $	11,783,632 $	None
5	Realtek Singapore Private Limited	RayMX Microelectronics Corp.	Other receivables- related parties	Y	57,016	57,016	-	-	Short-term financing	-	Operations	-	None	-	11,783,632	11,783,632	None
5	Realtek Singapore Private Limited	Realsil Microelectronics Corp.	Other receivables- related parties	Y	855,240	855,240	-	-	Short-term financing	-	Operations	-	None	-	11,783,632	11,783,632	None
6	Realsil Microelectronics Corp.	RayMX Microelectronics Corp.	Other receivables- related parties	Y	348,736	348,736	56,670	4.35	Short-term financing	-	Operations	-	None	-	11,783,632	11,783,632	None
6	Realsil Microelectronics Corp.	Suzhou Pankore Integrated Circuit Technology Co. Ltd	Other receivables- related parties	Y	348,736	348,736	-	-	Short-term financing	-	Operations	-	None	-	11,783,632	11,783,632	None
7	Cortina Network Systems Shanghai Co., Ltd.	Suzhou Pankore Integrated Circuit Technology Co. Ltd	Other receivables- related parties	Y	130,776	130,776	-	-	Short-term financing	-	Operations	-	None	-	11,783,632	11,783,632	None

Note 1: The numbers filled in for the loans provided by the Company or subsidiaries are as follows:

• (1) The Company is ‘0’.

• (2) The subsidiaries are numbered in order starting from ‘1’.

Note 2: The Company’s “Procedures for Provision of Loans” are as follows:

• (1) Ceiling on total loans granted by the Company to all parties is 40% of the Company’s net assets value as per its most recent financial statements.

• (2) Limit on loans to a single party with business transactions is the business transactions occurred between the creditor and borrower in the current year. The business transaction amount is the higher of purchasing and selling during current year on the year of financing.

• (3) For companies needing for short-term financing, the cumulative lending amount may not exceed 40% of the borrowing company’s net assets based on its latest financial statements audited or reviewed by independent accountants.

• The amount the Company or its subsidiaries lend to an individual entity may not exceed 10% of the Company’s or subsidiary’s net assets based on its latest financial statements audited or reviewed by independent accountants.

For the foreign companies which the Company holds 100% of the voting rights directly or indirectly, limit on loans is not restricted as stipulated in the above item (3). However, the ceiling on total loans and limit on loans to a single party may not exceed 40% of the Company’s net assets based on its latest financial statements audited or reviewed by independent accountants.

Note 3: Acccumulated maximum outstandings balance of loans to others as of the reporting month of the current period.

Note 4: Fillin the actual amount of loans to others used by the borrowing company.

Table 1 Page 2

Table 2

Expressed in thousands of NTD (Except as otherwise indicated)

REALTEK SEMICONDUCTOR CORPORATION

Provision of endorsements and guarantees to others For the year ended December 31, 2020

Number (Note 1)	Endorser/ guarantor	Party being endorsed/guaranteed	Party being endorsed/guaranteed	Limited on endorsements/ guarantees provided for a single party (Note 3)	Maximum outstanding endorsement/ amount as of December 31, 2020 (Note 4)	Outstanding endorsement/ guarantee amount at December 31, 2020 (Note 5)	Actual amont drawn down (Note 6)	Amount of endorsements/gurantees secured with collateral	Ratio of accumulated endorsement/ guarantee amount to net asset value of the endorser/ guarantor company	Ceiling on total amount of endorsements/ guarantees provided (Note 3)	Provision of endorsements/ guarantees by parent company to subsidiary (Note 7)	Provision of endorsements/ guarantees by subsidiary to parent company (Note 7)	Provision of endorsements/ guarantees to the party in Mainland China (Note 7)	Footnote
		Companyname	Relationship with the endorser/ guarantor (Note 2)
0	Realtek Semiconductor Corporation	Realtek Singapore Private Limited	2	14,729,541 $	2,945,908 $	2,945,908 $	- $	- $	10%	14,729,541 $	Y	N	N
0	Realtek Semiconductor Corporation	Leading Enterprises Limited	2	14,729,541	5,891,816	5,891,816	-	-	20%	14,729,541	Y	N	N
0	Realtek Semiconductor Corporation	Realsil Microelectronics Corp.	2	14,729,541	883,772	883,772	-	-	3%	14,729,541	Y	N	Y
0	Realtek Semiconductor Corporation	RayMX Microelectronics Corp.	2	14,729,541	883,772	883,772	14,713	-	3%	14,729,541	Y	N	Y
1	Leading Enterprises Limited	Realsil Microelectronics Corp.	2	14,729,541	570,160	570,160	-	-	2%	14,729,541	N	N	Y
2	Realsil Microelectronics Corp.	RayMX Microelectronics Corp.	2	14,729,541	570,160	570,160	-	-	2%	14,729,541	N	N	Y

Note 1: The numbers filled in for the endorsements/guarantees provided by the Company or subsidiaries are as follows:

(1)The Company is ‘0’.

(2)The subsidiaries are numbered in order starting from ‘1’.

Note 2: Relationship between the endorser/guarantor and the party being endorsed/guaranteed is classified into the following six categories:

(1) Having business relationship.

(2) The endorser/guarantor parent company owns directly and indirectly more than 50% voting shares of the endorsed/guaranteed subsidiary.

• (3) The endorser/guarantor company owns directly and indirectly more than 50% voting shares of the endorser/guarantor parent company.

(4) The endorser/guarantor parent company owns directly or indirectly owns more than 50% voting shares of the endorsed/guaranteed subsidiary.

• (5) Mutual guarantee of the trade as required by the construction contract.

(6) Due to joint venture, each shareholder provides endorsements/guarantees to the endorsed/guaranteed company in proportion to its ownership.

(7) Joint guarantee of the performance guarantee for pre-sold home sales contract as required under the Consumer Protection Act.

Note 3: Ceiling on total endorsements/guarantees granted by the Company and subsidiaries is 50% of the Company’s net asset based on the latest financial statements audited or reviewed by independent accountants, and limit on endorsements/guarantees to a single party is 50% of the Company’s net asset based on the latest financial statements audited or reviewed by independent accountants.

Note 4: Fill in the year-to-date maximum outstanding balance of endorsements/guarantees provided as of the reporting period.

Note 5: Fill in the amount approved by the Board of Directors or the chairman has been authorised by the Board of Directors based on subparagraph 8, Article 12 of the Regulations Gorverning Loaning of Funds and Making of Endorsements/Guarantees by Public Companies.

Note 6: Fill in the actual amount of endorsements/guarantees used by the endorsed/guaranteed company.

Note 7: Fill in ‘Y’ for those cases of provision of endorsements/guarantees by listed parent company to subsidiary and provision by subsidiary to listed parent company, and provision to the party in Mainland China.

Table 2 Page 1

Table 3

Expressed in thousands of NTD (Except as otherwise indicated)

REALTEK SEMICONDUCTOR CORPORATION

Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures) December 31, 2020

Securities held by	Marketable securities （Note 1）	Relationship with the securities issuer(Note 2)	General ledger account		As of December31,2020	As of December31,2020		Footnote (Note 4)
				Number of shares	Book value (Note3)	Ownership (%)	Fairvalue
Realtek Semiconductor Corporation	C-media Electronics Inc. - Common stock	Other related parties	Financial assets at fair value through profit or loss	1,623,501	$ 124,360	2.04%	$ 124,360
Realking Investment Co., Ltd.	Compal broadband networks Inc. - Common	None	Financial assets at fair value through other comprehensive income	3,575,000	114,758	5.34%	114,758
Realsun Investment Co., Ltd.	~~t~~ ~~k~~ Shieh-Yong Investment Co., Ltd. - Common stock	None	Financial assets at fair value through other comprehensive income	23,124,000	471,828	3.03%	471,828
Realsun Investment Co., Ltd.	Compal broadband networks Inc. - Common	None	Financial assets at fair value through other comprehensive income	3,575,000	114,758	5.34%	114,758
Leading Enterprises Limited	Fortemedia Inc. - Common stock	None	Financial assets at fair value through other comprehensive income	8,623,301	92,340	6.89%	92,340
Leading Enterprises Limited	Starix Technology, Inc.-Preferred stock	None	Financial assets at fair value through other comprehensive income	5,000,000	17,105	-	17,105
Leading Enterprises Limited	Octtasia Investment Holding Inc. - Common stock	None	Financial assets at fair value through other comprehensive income	9,000,000	935,921	12.49%	935,921
Amber Universal Inc.	Octtasia Investment Holding Inc. - Common stock	None	Financial assets at fair value through other comprehensive income	4,726,836	491,549	6.56%	491,549
Hung-wei Venture Capital Co., Ltd.	United Microelectronics Corporation - Common stock	None	Financial assets at fair value through other comprehensive income	336,346	15,859	-	15,859
Hung-wei Venture Capital Co., Ltd.	C-media Electronics Inc.- Common stock	Other related parties	Financial assets at fair value through profit or loss	2,274,875	174,255	2.88%	174,255
Hung-wei Venture Capital Co., Ltd.	Greatek Electroninc Inc. - Common stock	Other related parties	Financial assets at fair value through other comprehensive income	5,823,602	326,121	1.05%	326,121
Hung-wei Venture Capital Co., Ltd.	Subtron technology Co., Ltd - Common stock	None	Financial assets at fair value through other comprehensive income	1,093,968	16,355	0.33%	16,355
Hung-wei Venture Capital Co., Ltd.	Embestor Technology Inc. - Common stock	Other related parties	Financial assets at fair value through other comprehensive income	2,800,000	22,737	12.17%	22,737
Realsil Microelectronics Corp.	Cuam Money Fund	None	Financial assets at fair value through profit or loss	40,067,489	174,660	-	174,660
Realsil Microelectronics Corp.	Harvest Money Fund	None	Financial assets at fair value through profit or loss	44,021,178	191,895	-	191,895
Realsil Microelectronics Corp.	Xin Chen Money Fund	None	Financial assets at fair value through profit or loss	5,030,836	21,931	-	21,931

Table 3 Page 1

Table 3

REALTEK SEMICONDUCTOR CORPORATION

Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures) December 31, 2020

Expressed in thousands of NTD (Except as otherwise indicated)

Securities held by	Marketable securities （Note 1）	Relationship with the securities issuer(Note 2)	General ledger account		As of December31,2020	As of December31,2020		Footnote (Note 4)
				Number of shares	Book value (Note3)	Ownership (%)	Fairvalue
Realsil Microelectronics Corp.	Guang-Fa Demand Policy Loan Fund	None	Financial assets at fair value through profit or loss	10,001,547	$ 43,598	-	$ 43,598
Realsil Microelectronics Corp.	Guang-Da Monetary Fund	None	Financial assets at fair value through profit or loss	10,001,624	43,599	-	43,599
Realsil Microelectronics Corp.	Southern Cash Fund	None	Financial assets at fair value through profit or loss	30,000,000	130,775	-	130,775
Realsil Microelectronics Corp.	Guang-Fa Monetary Fund	None	Financial assets at fair value through profit or loss	10,001,829	43,600	-	43,600
Realtek Semiconductor (Shen Zhen) Corp.	Tian Tianjin Stable Fund	None	Financial assets at fair value through profit or loss	8,022,717	34,972	-	34,972
Realtek Semiconductor (Shen Zhen) Corp.	Cash Appreciation Currency Fund	None	Financial assets at fair value through profit or loss	6,236,826	27,187	-	27,187
Cortina Network Systems Shanghai Co. Ltd.	Step by step Gold Find	None	Financial assets at fair value through profit or loss	12,400,000	54,132	-	54,132
Cortina Network Systems Shanghai Co. Ltd.	Ri-Ri-Xin Fund	None	Financial assets at fair value through profit or loss	3,600,000	15,693	-	15,693
Bluocean Inc.	CyWeeMotion Group Limited	None	Financial assets at fair value through other comprehensive income	4,800,000	-	6.59%	-

Note 1: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities within the scope of IFRS 9 ‘Financial instrument'.

Note 2: Leave the column blank if the issuer of marketable securities is non-related party.

Note 3: Fill in the amount after adjusted at fair value and deducted by accumulated impairment for the marketable securities measured at fair value; fill in the acquisition cost or amortised cost deducted by accumulated impairment for the marketable securities not measured at fair value.

Note 4: The number of shares of securities and their amounts pledged as security or pledged for loans and their restrictions on use under some agreements should be stated in the footnote if the securities presented herein have such conditions.

Table 3 Page 2

Table 4

REALTEK SEMICONDUCTOR CORPORATION

Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more

For the year ended December 31, 2020

Expressed in thousands of NTD
(Except as otherwise indicated)

Real estate acquired by	Real estate acquired	Date of the event	Transaction amount	Status of payment	Counterparty	Relationship with the counterparty	the real estate is disclosed below: If the counterparty is a related party, information as to the last transaction of	the real estate is disclosed below: If the counterparty is a related party, information as to the last transaction of	the real estate is disclosed below: If the counterparty is a related party, information as to the last transaction of	the real estate is disclosed below: If the counterparty is a related party, information as to the last transaction of	Basis or reference used in setting the price	Reason for acquisition of real estate and status of the real estate	Other commitments
							Original owner who sold the real estate to the counterparty	Relationship between the original owner and the acquirer	Date of the original transaction	Amount
Realtek Semiconductor Corporation	Property in Zhongshan District, Taipei City	April 1, 2020 (entered into the contract and paid the first payment)	$699,100	Paid $699,100 based on the contract	Huaku Development Co., Ltd.	None	-	-	-	$ -	Negotiated with the counterparty based on the appraisal report issued by CCIS Real Estate Joint Appraisers Firm and resolved by the Board of Directors	Owner-occupied office	None

[

Table 4

REALTEK SEMICONDUCTOR CORPORATION

Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more

For the year ended December 31, 2020

Table 5

Expressed in thousands of NTD (Except as otherwise indicated)

Purchase/seller	Counterparty	Relationship with the counterparty		Transaction	Transaction		Differences in transaction terms compared to third party transactions	Differences in transaction terms compared to third party transactions	Notes/accounts receivable(payable)	Notes/accounts receivable(payable)	Footnote
			Purchase (sales)	Amount	Percentage of total purchase (sales)	Credit term	Unitprice	Credit term	Balance	Percentage of total notes/accounts receivable (payable)
Realtek Semiconductor Corporation	G.M.I Technology Inc.	Other related parties	(Sales)	7,375,829) ($	(9%)	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	1,751,860 $	13%
Realtek Semiconductor Corporation	Actions Semiconductor Co., Ltd.	Other related parties	(Sales)	164,556) (	0%	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	15,289	0%
Realtek Semiconductor Corporation	C-Media Electronics Inc.	Other related parties	(Sales)	200,693) (	0%	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	43,751	0%
Realtek Singapore Private Limited	G.M.I Technology Inc.	Other related parties	(Sales)	4,537,246) (	(6%)	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	890,128	7%
RayMX Microelectronics Corp.	G.M.I Technology Inc.	Other related parties	(Sales)	261,579) (	0%	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	111,371	1%
Realtek Semiconductor Corporation	Greatek Electronics Inc.	Other related parties	Purchase	1,033,517	3%	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	253,691) (	3%
Realtek Singapore Private Limited	Greatek Electronics Inc.	Other related parties	Purchase	202,096	1%	Approximately the same with third party transactions	Approximately the same with third party transactions	Approximately the same with third party transactions	86,496) (	1%

Table 5

REALTEK SEMICONDUCTOR CORPORATION

Receivables from related parties reaching NT$100 million 0r 20% of paid-in capital or more

December 31, 2020

Table 6 Creditor	Counterparty	Relationship with the counterparty	Balance as at December 31,2020	Turnover rate	Overdue receivables	Overdue receivables	Amount collected subsequent to the balance sheet date Allowance for doubtful accounts Expressed in thousands of NTD (Except as otherwise indicated)	Amount collected subsequent to the balance sheet date Allowance for doubtful accounts Expressed in thousands of NTD (Except as otherwise indicated)
					Amount	Action taken
Realtek Semiconductor Corporation	G.M.I Technology Inc.	Other related parties	1,751,860 $	5.04	$ -	-	800,691 $	17,695 $
Realtek Singapore Private Limited	G.M.I Technology Inc.	Other related parties	890,128	4.99	-	-	430,759	-
RayMX Microelectronics Corp.	G.M.I Technology Inc.	Other related parties	111,371	2.81	-	-	111,371	-

Table 6

Table 7

REALTEK SEMICONDUCTOR CORPORATION

Significant inter-company transactions during the reporting period

For the year ended December 31, 2020

Expressed in thousands of NTD

(Except as otherwise indicated)

Transaction

Number (Note 1)	Companyname	Counterparty	Relationship (Note 2)	General ledger account	Amount	Transaction terms	Percentage of consolidated total operating revenues or total assets(Note 3)
0	Realtek Semiconductor Corporation	RayMX Microelectronics Corp.	1	Other receivables	$ 46,380	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	0.06%
1	Realtek Singapore Private Limited	Realsil Microelectronics Corp.	3	Technical service fees	2,026,553	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	2.61%
1	Realtek Singapore Private Limited	Realsil Microelectronics Corp.	3	Other payables	638,579	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	0.82%
1	Realtek Singapore Private Limited	Realtek Semiconductor (Shen Zhen) Corp.	3	Technical service fees	400,935	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	0.52%
1	Realtek Singapore Private Limited	Realtek Semiconductor (Shen Zhen) Corp.	3	Other payables	147,101	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	0.19%
1	Realtek Singapore Private Limited	Cortina Access, Inc.	3	Technical service fees	204,759	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	0.26%
1	Realtek Singapore Private Limited	Cortina Access, Inc.	3	Other payables	12,976	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	0.02%
1	Realtek Singapore Private Limited	Cortina Network Systems Shanghai Co. Ltd.	3	Technical service fees	104,761	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	0.13%
1	Realtek Singapore Private Limited	Cortina Network Systems Shanghai Co. Ltd.	3	Other payables	30,381	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	0.04%

Table 7 Page 1

Table 7

REALTEK SEMICONDUCTOR CORPORATION

Significant inter-company transactions during the reporting period

For the year ended December 31, 2020

Expressed in thousands of NTD (Except as otherwise indicated)

Transaction

Number (Note 1)	Companyname	Counterparty	Relationship (Note 2)	General ledger account	Amount	Transaction terms	Percentage of consolidated total operating revenues or total assets(Note 3)
1	Realtek Singapore Private Limited	Cortina Systems Taiwan Limited	3	Technical service fees	$ 112,793	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	0.15%
1	Realtek Singapore Private Limited	Realtek Semiconductor (Japan) Corp.	3	Technical service fees	62,503	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	0.08%
1	Realtek Singapore Private Limited	RayMX Microelectronics Corp.	3	Other receivables	46,380	No similar transaction can be compared with. Transaction prices and terms are determined in accordance with mutual agreement.	0.06%

Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

(1) Parent company is ‘0’.

(2) The subsidiaries are numbered in order starting from ‘1’.

Note 2: Relationship between transaction company and counterparty is classified into the following three categories; fill in the number of category each case belongs to (If transactions between parent company and subsidiaries or between subsidiaries refer to the same transaction, it is not required to disclose twice. For example, if the parent company has already disclosed its transaction with a subsidiary, then the

subsidiary is not required to disclose the transaction; for transactions between two subsidiaries, if one of the subsidiaries has disclosed the transaction, then the other is not required to disclose the transaction.):

(1) Parent company to subsidiary.

(2) Subsidiary to parent company.

(3) Subsidiary to subsidiary

Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.

Note 4: Only transactions above NT$10 million are disclosed. Transactions of related parties are not further disclosed here.

Table 7 Page 2

REALTEK SEMICONDUCTOR CORPORATION

Table 8

Expressed in thousands of NTD

Information on investees

For the year ended December 31, 2020

(Except as otherwise indicated)

Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held as at December 31,2020	Shares held as at December 31,2020	Shares held as at December 31,2020	Net profit (loss) of the investee for the year ended December31,2020	Investment income (loss) recognised by the Company for the year ended December 31, 2020	Footnote
				Balance as at December 31, 2020	Balance as at December 31, 2019	Number of shares	Ownership (%)	Book value
Realtek Semiconductor Corporation	Leading Enterprises Limited	British Virgin Islands	Investment holdings	$ 14,080,956	$ 15,005,734	34,630	100%	$ 13,239,425	671,282 $	671,282 $	Subsidiary
Realtek Semiconductor Corporation	Amber Universal Inc.	British Virgin Islands	Investment holdings	4,487,621	4,739,146	41,432	100%	3,367,376	51,962	51,962	Subsidiary
Realtek Semiconductor Corporation	Realtek Singapore Private Limited	Singapore	~~ICs manufacturing, design,~~ research, development, sales, and ~~ki~~	4,076,101	2,408,480	89,856,425	100%	11,149,584	5,879,387	5,334,833	Subsidiary
Realtek Semiconductor Corporation	Bluocean Inc.	Cayman Islands	~~maretng~~ Investment holdings	3,137,305	3,313,165	110,050,000	100%	3,369,936	76,184	76,184	Subsidiary
Realtek Semiconductor Corporation	Talent Eagle Enterprise Inc.	Cayman Islands	Investment holdings	3,252,763	3,435,095	11,410,000	100%	2,162,386	295,459) (	295,459) (	Subsidiary
Realtek Semiconductor Corporation	Realtek Investment Singapore Private Limited	Singapore	Investment holdings	5,701,600	6,021,200	200,000,000	100%	6,275,015	130,511	130,511	Subsidiary
Realtek Semiconductor Corporation	Realsun Investments Co., Ltd.	Taiwan	Investment holdings	280,000	280,000	28,000,000	100%	619,510	5,145	5,145	Subsidiary
Realtek Semiconductor Corporation	Hung-wei Venture Capital Co., Ltd.	Taiwan	Investment holdings	250,000	250,000	25,000,000	100%	632,946	150,791	150,791	Subsidiary
Realtek Semiconductor Corporation	Realking Investments Co., Ltd.	Taiwan	Investment holdings	293,930	293,930	29,392,985	100%	290,236	7,428) (	7,428) (	Subsidiary
Realtek Semiconductor Corporation	Realsun Technology Corporatioin	Taiwan	ICs manufacturing, design, research, development, sales, and	5,000	5,000	500,000	100%	5,118	57	57	Subsidiary
Realtek Semiconductor Corporation	Bobitag Inc.	Taiwan	Manufacturing and installation of computer equipment and wholesasle, retail and related services of electronic materials and ~~information/software~~	19,189	19,189	1,918,910	66.67%	19,330	146	97	Subsidiary
Realtek Semiconductor Corporation	Technology Partner V Venture Capital Corporation	Taiwan	Investment holdings	66,657	66,657	4,178,509	-	255	746) (	11,188) (	Investments accounted for under equity method
Realtek Semiconductor Corporation	Estinet Technologies Incorporation	Taiwan	Research and development, design, manufacturing, sales and other services of electronic components, information/Software and integrated circuits.	110,000	110,000	2,000,000	6.68%	9,158	60,277) (	7,209) (	Investments accounted for under equity method

Table 8 Page 1

Table 8

Expressed in thousands of NTD (Except as otherwise indicated)

REALTEK SEMICONDUCTOR CORPORATION

Information on investees

For the year ended December 31, 2020

Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held as at December 31,2020	Shares held as at December 31,2020	Shares held as at December 31,2020	Net profit (loss) of the investee for the year ended December31,2020	Investment income (loss) recognised by the Company for the year ended December 31, 2020	Footnote
				Balance as at December 31, 2020	Balance as at December 31, 2019	Number of shares	Ownership (%)	Book value
Realking Investments Co., Ltd.	Innorich Venture Capital Corp.	Taiwan	Venture capital activities	$ 200,000	$ 200,000	20,000,000	37.38%	$ 147,441	32,943) ($	12,583) ($	Investments accounted for under equity method
Leading Enterprises Limited	Realtek Semiconductor (Japan) Corp.	Japan	ICs deign,sales, and consultancy	5,530	5,542	400	100%	4,037	104) (	104) (	Sub-Subsidiary
Leading Enterprises Limited	Circon Universal Inc.	Mauritius	Investment holdings	1,847,318	1,950,869	300,000	100%	7,663	58) (	58) (	Sub-Subsidiary
Leading Enterprises Limited	Realtek Singapore Private Limited	Singapore	ICs manufacturing, design, research,development,sales,and	-	1,257,578	0	-	-	5,879,387	561,423	Sub-Subsidiary
Amber Universal Inc.	Realtek Semiconductor (Hong Kong)Limited	Hong Kong	Information services and technical support	5,516	5,799	-	100%	1,082	21) (	21) (	Sub-Subsidiary
Realtek Singapore Private Limited	Empsonic Enterprises Inc.	Mauritius	Investment holdings	805,351	850,495	2,825,000	100%	1,570,047	121,713) (	121,713) (	Sub-Subsidiary
Realtek Singapore Private Limited	Cortina Access Inc.	U.S.A	R&D and information services	1,164,438	1,229,710	16,892	100%	858,662	21,968	21,968	Sub-Subsidiary
Realtek Singapore Private Limited	Cortina Systems Taiwan Limited	Taiwan	R&D and technical support	57,016	60,212	21,130,000	100%	48,580	791	791	Sub-Subsidiary
Realtek Singapore Private Limited	Realtek Viet Nam Co., Ltd.	Vietnam	R&D and technical support	114,032	30,106	4,000,000	100%	86,270	17,359) (	17,359) (	Sub-Subsidiary
Talent Eagle Enterprise Inc.	Ubilinx Technology Inc.	U.S.A	R&D and information services	1,482,416	1,204,240	52,000,000	100%	22,012) (	418,782) (	418,782) (	Sub-Subsidiary
Bluocean Inc.	Realtek Semiconductor (Malaysia)Limited	Malaysia	R&D and information services	74,144	-	10,450,000	100%	64,914	9,150) (	9,150) (	Sub-Subsidiary

Note ： The amount of foreign currencies denominated in New Taiwan dollars in this table, which related to income and expenses were re-translated at the average exchange rate from January 1, 2020 to December 31, 2020, others were re-translated at the exchange rate prevailing at the end of the financial reporting period.

Table 8 Page 2

Table 9

Expressed in thousands of NTD

REALTEK SEMICONDUCTOR CORPORATION

Information on investments in Mainland China

For the year ended December 31, 2020

(Except as otherwise indicated)

Investee in Mainland China	Main business activities	Paid-inCapital	Investment method (Note1)	Accumulated amount of remittance from Taiwan to Mainland China as of January1,2020	Amount remitted from Taiwan to Mainland China/Amount remitted back to Taiwan for the year endedDecember31,2020	Amount remitted from Taiwan to Mainland China/Amount remitted back to Taiwan for the year endedDecember31,2020	Accumulated amount of remittance from Taiwan to Mainland China as of December 31,2020	Net income of investee for the year ended December 31, 2020	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised by the Company for the year ended December 31, 2020 (Note2(2)C)	Book value of investment in Mainland China as of December 31,2020	Accumulated amount of investment income remitted back to Taiwan as of December 31, 2020	Footnote
					Remitted to Mainland China	Remitted back to Taiwan
Cortina Network Systems Shanghai Co., Ltd. Realsil Microelectronics Corp. Realtek Semiconductor (Shen Zhen) Corp. RayMX Microelectronics Corp. Suzhou Pankore Integrated Circuit Technology Co. Ltd. Companyname	R&D and technical support R&D and technical support R&D and technical support ICs manufacturing, design, research, development, sales, and marketing ICs manufacturing, design, research, development, sales, and marketing Accumulated amount of remittance from Taiwan to Mainland China as of December31,2020	102,629 $ 798,224 142,540 114,428 43,592 Investment amount approved by the Investment Commission of the Ministry of Economic Affairs (MOEA)	(2) (2) (2) (2) (2) Ceiling on investments in Mainland China imposed by the Investment Commission of MOEA	102,629 $ 798,224 142,540 114,428 -	$ - - - - 43,592	$ - - - - -	102,629 $ 798,224 142,540 114,428 43,592	2,338) ($ 111,152 13,415 137 17,915) (	100% 100% 100% 100% 100%	2,338) ($ 111,152 13,415 137 17,915) (	98,002 $ 1,566,220 270,612 86,108 25,370	$ - - - - -
Cortina Network Systems Shanghai Co., Ltd. Realsil Microlectronics Corp. Realtek Semiconductor (Shan Zhen) Corp. RayMX Microelectronics Corp. Suzhou Pankore Integrated Circuit Technology Co. Ltd.	$ 102,629 798,224 142,540 114,428 43,592	$ 102,629 798,224 142,540 114,428 43,592	$ 17,675,449

Note 1: Investment methods are classified into the following three categories; fill in the number of category each case belongs to:

(1) Directly invest in a company in Mainland China.

(2) Through investing in an existing company in the third area, which then invested in the investee in Mainland China.

(3) Others.

Note 2: In the Investment income (loss) recognised by the Company for the year ended December 31, 2020 column, except for the financial statements of Cortina Network Systems Shanghai Co. Ltd. were audited by other independent accountants, the remaining financial statements were audited by the independent accountants of parent company in Taiwan.

Note 3: The amount of foreign currencies denominated in New Taiwan dollars in this table, which related to income and expenses were re-translated at the average exchange rate from January 1, 2020 to December 31, 2020, others were re-translated at the exchange rate prevailing at the end of the financial reporting period.

Table 9 Page 1