SOI - Annual Report 2021 | FinancialReports.eu

Stock Code:3530

2021 Annual Report (TRANSLATION)

(This Annual Report can be accessed from: MOPS http://mops.twse.com.tw )

Printed on April 28, 2022

Notice to Readers:

The reader is advised that the annual report has been prepared originally in Chinese. The English version is directly translated from Chinese version. If there is any difference between English version and Chinese version, the Chinese version shall prevail.

I. Spokesperson:

Name: Henry Chien Title: Director Tel:(03)567-8986 Email:[email protected]

II. Deputy Spokesperson:

Name: Steffi Huang

Title:Vice President and Financial officer

Tel:(03)567-8986 Email:[email protected]

III. Silicon Optronics, Inc. Addresses & Telephone Number:

Head Office Address: 4F, No.10-2, Lixing 1st Rd., Hsinchu Science Park, Hsinchu City 300, Taiwan R.O.C.

Tel:(03)567-8986

IV. Transfer Agent:

Name: Registrar Agency, Capital Securities Corp.

Address: B2, No. 97, Sec. 2, Dunhua South Rd., Taipei City Tel:(02)2702-3999

Website:www.capital.com.tw

V. Certified Public Accountants for the Most Recent Fiscal Year:

Firm Name: Deloitte & Touche

CPA Name: Ming-Yuan Chung, Tung-Hui Yeh Address: 20F, No. 100, Songren Road, Xinyi District, Taipei City Tel:(02)2725-9988

Website: www.deloitte.com.tw

VI. Name of Overseas Securities Dealers and the Methods to Inquire about Overseas Securities:

Not applicable.

VII. Company Website: www.soinc.com.tw

Chapter	1	Letter to Shareholders .......................................................................... 1
Chapter	2	Company Overview ............................................................................... 2
I.		Date of Incorporation .................................................................................................... 2
II.		Milestones ..................................................................................................................... 2
Chapter	3	Corporate Governance Report ............................................................ 3
I.		Organization .................................................................................................................. 3
II.		Information on the Company's Directors, President, Vice Presidents, Deputy Vice
		Presidents, and the Supervisors of All the Company's Divisions and Branch Units 5
III.		Remuneration Paid During the Most Recent Fiscal Year to Directors (Including
		Independent Directors), the President, and Vice Presidents: ........................................ 9
IV.		Implementation of Corporate Governance ................................................................. 13
V.		Information on CPA Professional Fees ....................................................................... 42
VI.		Information on Replacement of CPAs: None. ............................................................ 42
VII.		The State of the Company's Chairperson, President, or any Manager in Charge of
		Finance or Accounting Matters Has in the Most Recent Year Held a Position at the
		Accounting Firm of Its Certified Public Accountant or at an Affiliated Enterprise of
		Such Accounting Firm: None. .................................................................................... 42
VIII.		The State of Any Transfer of Equity Interests And/or Pledge of or Change in Equity
		Interests by a Director, Supervisor, Managerial Officer, or Shareholder with a Stake of
		More Than 10 Percent During The Most Recent Fiscal Year or During the Current
		Fiscal Year up to the Date of Publication of the Annual Report ................................. 42
IX.		Relationship Information, if Among the Company's 10 Largest Shareholders Any One
		is A Related Party or A Relative Within the Second Degree of Kinship of Another .. 44
X.		The Number of Shares Held by the Company, by the Directors, Supervisors and
		Managers of the Company, and by any Entities either Directly or Indirectly Controlled
		by the Company in the Same Investee Enterprise, and the Calculation of the
		Consolidated Shareholding Ratio of the above Categories: None. ............................. 44
Chapter	4	Capital Overview ................................................................................. 45
I.		Capital and Shares ...................................................................................................... 45
II.		Issuance of Corporate Bonds: None. .......................................................................... 50
III.		Issuance of Preferred Shares: None. ........................................................................... 50
IV.		Issuance of Global Depository Receipts: None. ......................................................... 50
V.		Employee Share Subscription Warrants: .................................................................... 51
VI.		Status of Issuance of New Share in Connection with Mergers or Acquisitions or with
		Acquisitions of Shares of Other Companies: None. ................................................... 53
VII.		The State of Implementation of the Company's Capital Allocation Plans: Not
		Applicable. .................................................................................................................. 53
Chapter	5	Operations Highlights ......................................................................... 54

I.	Business Activities ...................................................................................................... 54
II.	Market and Sales Overview ........................................................................................ 59
III.	Employee Information ................................................................................................ 67
IV.	Environmental Protection Expenditures ..................................................................... 68
V.	Labor Relations ........................................................................................................... 68
VI.	Information & Communication Security Management .............................................. 69
VII.	Important Contracts .................................................................................................... 70
Chapter 6 Financial Summary ............................................................................. 71
I.	Condensed Balance Sheet and Comprehensive Income Statement of the Most Recent
	Five Years ................................................................................................................... 71
II.	Financial Analysis for the past 5 years ....................................................................... 76
III.	2021 Audit Committee's Review Report .................................................................... 80
IV.	2021 Independent Auditors’ Report and Consolidated Financial Statements ............. 81
V.	2021 Independent Auditors’ Report and Unconsolidated Financial Statements ....... 137
VI.	The effect of insolvency of the company and affiliates on the financial Status of the
	Company: None. ....................................................................................................... 188
Chapter 7 Review of Financial Status, Operating Results, and Risk
Management .................................................................................................... 189
I.	Financial Position ..................................................................................................... 189
II.	Financial Performance .............................................................................................. 190
III.	Cash flow .................................................................................................................. 192
IV.	Major capital expenditure for the most recent year and its effect on financial position
	and operation of the Company: None. ...................................................................... 192
V.	Direct Investment Policy, Reasons for Profit or Loss, Correction Plan and Investment
	Plan for the Coming Year: None. .............................................................................. 192
VI.	Risk Management ..................................................................................................... 192
VII.	Other important matters: None ................................................................................. 196
Chapter 8 Special Notes ...................................................................................... 197
I.	Information Regarding Affiliated Companies .......................................................... 197
II.	Private Placement of Securities of the Most Recent Year up to the Publication Date of
	the Annual Report:None. .......................................................................................... 199
III.	Holding or Disposal of the Company's Shares by the Subsidiaries of the most recent
	year up to the print date of the annual report: None. ................................................ 199
IV.	Other Matters that Require Additional Description: None. ...................................... 199
V.	Matters that Materially Affect Shareholders' Equity or the Price of the Company's
	Securities Specified in Article 36, Paragraph 2, Subparagraph 2 if The Securities and
	Exchange Act, Occurred during the Most Recent Fiscal Year or during the Current
	Fiscal Year up to the Date of Publication of the Annual Report:None. .................... 199

Chapter 1 Letter to Shareholders

Dear Shareholders,

The revenue of SOI was NT$3,996,496,000 in 2021, which increased 20% compared with 2020. The overall sales volume decreased slightly by 7.5% compared with 2020 due to factors such as adjustments in product portfolio and supply chain management. The net profit after tax in 2021 was NT$741,050,000 , showing a significant increase compared with NT$281,438,000 in 2020. The surplus after tax per share was NT$9.61 in 2021, which substantially up 163% higher than NT$3.65 in 2020.

In 2021, the Company continued to develop image sensor products such as security monitoring, automotive electronics, consumer electronics, and biochips. Driven by the market and new technology, security monitoring, home safety, remote video, and various IOT consumer network cameras are still the focus of the application of imaging products. We also continue to develop new technologies and product applications to expand the market and increase the added value of the products, such as launching a 360-degree panoramic camera solution for home security and video product applications, and a series of NIR BSI sensors, providing customers with more choices.

In terms of applications in other fields, the Company also successfully developed and obtained the AEC-Q100 certification for automotive-grade packaging in 2021, further expanding the application of automotive imaging products. The Company also plans to launch a series of high-performance products for applications in Car DVRs, reversing cameras and panoramic cameras, including improved near-infrared photosensitivity, higher dynamic range and other functions to meet customer needs.

Global markets are still affected by the changes and impacts from the COVID-19 pandemic in early 2020. In 2021, the semiconductor supply chain continued to suffer from increased production costs due to capacity allocation and higher raw material costs. The Company strengthens the management of customer groups with brand advantages while actively developing new product application areas so as to enhance the Company's competitive edge. In addition, our innovative products, such as BSI image sensors, NIR-enhanced technology and global shutter products are launched and already put into design for our customers, expecting to create new business opportunities for them.

The recent pandemic cause an economic crisis, we will continue to improve our competitive strength, enhance supply chain management and develop new market in a prudent and pragmatic manner. I would like to thank our shareholders, customers, and suppliers for all your long-term support and also appreciate all my colleagues for their hard work and contributions. We will put all our efforts to keep growing and feedback to all of you.

Chairman and President: James He

Chapter 2 Company Overview

I. Date of Incorporation

The Company was incorporated on May 24, 2004 and listed on the Taiwan Stock Exchange

on July 16, 2018. The headquarters is set up in Hsinchu City, and the Company has established R&D and sales sites in the United States and Mainland China.

II. Milestones

Established the preparatory office.
January 2004
May 2004

Incorporated with registered capital of NT$100 million.

Approved by the Science-Based Industrial Park Administration to register July 2006 and locate in Hsinchu Science Park District.

September 2006 Initial Public Offering.
April 2007 Registered in Emerging Stock Market.
January 2010 Passed the ISO9001 international certification. December 2011 Established the Remuneration Committee. March 2012 The Board of Directors has resolved to proceed the share conversion with NUEVA IMAGING, Inc, and to issue of new shares through capital increase. The proposal was adopted with approval by that year's shareholders' meeting. The Company and NUEVA IMAGING, Inc. completed the share conversion,
September 2012 capital increase, and issuance of new shares. Increased the paid-in capital to NT$620,739 thousand.
October 2012 The Company completed the capital increase by cash and paid-up capital to NT$651,009 thousand.
January 2014 Established Silicon Optronics (Shanghai) Co., Ltd. Full re-elected the 7th Session of Director and Mr. James He, upon expiration
August 2017 of the tenure, was re-elected as the Chairman.
August 2017 The first Audit Committee was established. Increased capital by cash before listing, and increase the paid-in capital to
July 2018 NT$772,659,000.
October 2018 Participated in the Beijing International Security Expo and successfully exhibited the BSI and near-infrared sensing enhancing technology.
July 2018 Listed on the Taiwan Stock Exchange. October 2019 Participated in the Shenzhen International Security Expo, exhibiting global shutter sensor technology for industrial use during the period.
June 2020 Full re-elected the 8th Session of Director. October 2020 Introduced the BSI backlit 4K/ 8M sensor product JX-K08 November 2020 Introduced the new generation of FSI products, JX-F53/F37 series, providing low-power consumption and better sensing effect.
June 2021 Introduced the BS backlit 1080P sensor JX-F352. July 2021 Successfully developed AEC-Q100 automotive-grade packaging products. October 2021 Provided BSI and NIR sensing technology product lines, including the 5Megapixel JX-K305P, and a series of 2Megapixel and 4Megapixel products. The first global shutter, JX-S02, was successfully launched in mass
February 2022 production.

Chapter 3 Corporate Governance Report

I. Organization

(I) Organizational Chart:

==> picture [539 x 425] intentionally omitted <==

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

Shareholders Meeting
Audit Committee
Board of Directors
Remuneration Committee
President Office Chief Corporate Internal Audit
Governance
Administration Operation Sales Research and Quality Market Development
Division Management Marketing Development Assurance Division
Product Product IC Design
Development Engineering Division
Division Division
----- End of picture text -----

(II) Department Functions

Departments	Major Corporate Functions
President Office	1. Assist to handle the execution and coordination of the Company's business. 2. Planning of the Company's medium and long-term business strategies and evaluation of business performance. 3. Strategic planning and implementation of new businesses. 4. Ramp up production capacity and implement operational strategies.
Internal Audit	1. Inspect and evaluate the reliability and effectiveness of the Company's operating information and internal control systems. 2. Propose recommendations for improvement and facilitate effective operations.
Administration Division	1. Responsible for the management of finance, accounting and budget management. 2. Responsible for the Company's shareholder affairs and personnel affairs. 3. Responsible for the Company's legal affairs and patents. 4. Responsible for the administration of administrative affairs.
Product Development Division	1. Definition of new products. 2. Customer support. 3. Test program coding and development.
Product Engineering Division	1. Development of new product production process technology. 2. New production process research and development of wafer foundry and packaging plants. 3. Responsible for product specifications verification, failure mode analysis, mass production conditions set-up, yield rate improvement, product practical application verification and assisting clients to solve product application problems. 4. Test engineering management, packaging engineering management, wafer outsourcing engineering management. 5. Test arrangements and management. 6. Tape Out process management.
IC Design Division	1. Digital IC design and verification. 2. Assist the development of the image drill algorithm and achievement of FPGA.
Market Development Division	1. Planning of product marketing strategies. 2. Collect and analysis market information.
Sales Marketing Division	1. Product promotion and market development. 2. Review, receive, and after-sales services for customer orders. 3. Customer satisfaction survey.
Operation Management Division	1. Outsourcing production strategy, production planning, materials and warehouse management, and import/export operations. 2. Order and shipping management. 3. Procurement/outsourcing management. 4. MIS network and ERP system management.
Quality Assurance Division	1. Establish and implement quality/RSF assurance systems to improve control procedures and ensure product quality. 2. Formulate quality policies. 3. Product quality inspection, customer complaint handling and return analysis. 4. Calibration and DCC,management.SQE

II. Information on the Company's Directors, President, Vice Presidents, Deputy Vice Presidents, and the Supervisors of All the Company's Divisions and Branch Units

(I) Director

Information of Directors

April 25, 2022; Unit: share; %

Title	Nationality/ Country of Origin	Name	Gender Age	Date Elected (Appointed)	Term of office	Date First Elected	Shareholding when Elected	Shareholding when Elected	Current Shareholding	Current Shareholding	Spouse & Minor Shareholding currently	Spouse & Minor Shareholding currently	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Major Experience (Education)	Other Position	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship	Remarks
							Shares	Shareholding Ratio	Shares	Shareholding Ratio	Shares	Shareholding Ratio	Shares	Shareholding Ratio			Title	Name	Relation
Chairman of the Board	SAMOA	Heritage BayLimited	`－`	2020.06.16	3years	2016.06.08	18,676,413	23.91	17,691,413	22.63	`－`	`－`	`－`	`－`			`－`	`－`	`－`	`－`
	USA	Representative: James He	Male 50-59	2020.06.16	3 years	2013.06.11	150,000	0.19	150,000	0.19	`－`	`－`	`－`	`－`	MSEE, BSEE, Tsinghua University. Director & COO, OmniVision Technologies, Inc . Director, Xintec Inc Director, OmniVision Technology International Ltd. Director,OmniVisionTechnologies (Shanghai), Co. Ltd. Director,ShanghaiOmniVision Semiconductor Technology, Co. Ltd. Chairman, Taiwan Omnivision International Co., Ltd. Chairman,OmniVision International HoldingLtd.	Chairman and President of the Company Chairman, Nueva Imaging Inc. Chairman, Silicon Optronics Holding (Cayman) Co., Ltd. Director, Heritage Bay Limited	`－`	`－`	`－`	Note 1
Director	SAMOA	Heritage BayLimited	`－`	2020.06.16	3years	2016.06.08	18,676,413	23.91	17,691,413	22.63	`－`	`－`	`－`	`－`			`－`	`－`	`－`	`－`
	R.O.C	Representative: Sophie Cheng	Female 60-69	2020.06.16	3 years	2005.03.29	`－`	`－`	`－`	`－`	`－`	`－`	`－`	`－`	Graduated from Department of Economics, National Taiwan University President, Deutron Electronics Corporation	Chairman, Optigate Inc. Chairman, Powerchip Device Technology Corporation Director & President, Deutron Electronics Corporation Director, Teknowledge Development Corp. Director, Syntronix Corporation Auditor, Biogate Precision Medicine Corp. Director, A I Memory Corporation Director, Fushuo Investment Co., Ltd. Director, Retronix Technology Inc. Director, Beautimode Corporation Director, Trendforce Corp. Director, ATBS Technology Co., Ltd. Director, Nexchip Semiconductor Corporation Director, Taipei Computer Association Director, Taiwan IOT Technology and Industry Association	`－`	`－`	`－`	`－`
Independent Director	R.O.C	Jim Lai	Male 60-69	2020.06.16	3 years	2017.08.14	`－`	`－`	`－`	`－`	`－`	`－`	`－`	`－`	Master of Electrical Engineering UC Santa Barbara President, Global Unichip Corp.	Independent Director, Truelight Corporation; Member, Audit Committee and Remuneration Committee Consultant, Global Unichip Corp. Consultant, DigiTimes Director, Giga Solution Tech. Co., Ltd. - Legal representative of Ardentec Technology Inc. Director, Wolley, Inc. (CA Inc.) Member, FocalTech Systems Co., Ltd. Remuneration Committee Independent Director, Andes Technology; Member, Audit Committee and Remuneration Committee	`－`	`－`	`－`	`－`
Independent Director	R.O.C	JJ Lin	Male 60-69	2020.06.16	3 years	2017.08.14	`－`	`－`	`－`	`－`	`－`	`－`	`－`	`－`	Master of EMBA, College of Management, National Taiwan University Master of Department of Chemistry, National Tsing Hua University Consultant, KPPC Group, and Group President Executive Vice President, Global Unichip Corp. CEO, Xintec Inc. CEO & President, VisEra Technologies Company Limited Senior Director, Taiwan Semiconductor ManufacturingCompany,Limited	Independent Director, M31 Technology Corporation; Member, Remuneration Committee Director, STEK Co., Ltd. Director, Shuimu Angel Fund Chairman, TEMIC Co., Ltd. Director, TAIFLEX Scientific Co., Ltd. Director, Shuimu Chuanggu Co., Ltd. Director, Capital TEN Inc. Director, Pentapro Materials Inc.	`－`	`－`	`－`	`－`
Independent Director	R.O.C	Chang-Chou Li	Male 50-59	2020.06.16	3 years	2017.12.21	`－`	`－`	`－`	`－`	`－`	`－`	`－`	`－`	Master of Accounting, University of Illinois at Urbana-Champaign CPA Partner, PricewaterhouseCoopers Taiwan	CPA, Chi Shing Accounting Firm Independent Director, Evergreen Marine Corporation; Member, Audit Committee and Remuneration Committee Independent Director, Hotai Insurance Co., Ltd.; Member, Audit Committee Independent Director, St. Shine Optical Co., Ltd.; Member, Audit Committee and Remuneration Committee	`－`	`－`	`－`	`－`

Note 1: Where the Chairman of the Board of Directors and the President or person of an equivalent post (the highest level manager) of a company are the same person, spouses, or relatives within the first degree of kinship, an explanation shall be given of the reason for, reasonableness, necessity thereof, and the measures adopted in response thereto:

(1) The Company is mainly engaged in the research and development, manufacturing and sales of CIS design. At present, as the Company is experiencing the growth period, the chairman concurrently holding the position of President enables the Board of Directors better grasp the operating conditions of the Company, and the flat management can bring more efficiency to the decision implementation.

(2) The Company has established an Audit Committee which, except with its functions and powers as specified, can also improve and supervise the management mechanism of the Board of Directors. Meanwhile, Independent Directors account for 60% of the total Directors of the Company, which can strengthen the supervision and checks and balances mechanism, and reduce the concentration of power and loss of objectivity and failure of effective supervision for the reason of the chairman and general manager.

Major Shareholders of Institutional Shareholders

April 25, 2022

Major Shareholders of Institutional Shareholders

Name of Institutional Shareholder	Major Shareholders of Institutional Shareholders	Major Shareholders of Institutional Shareholders
Heritage Bay Limited	XINPING HE	54.61%
	HE CHILDREN’S TRUST	39.01%
	DUIDI CHEN	4.68%
	SHURONG ZHAO	1.70%

Major Shareholders that are Institutional Shareholders: none.

3. Information disclosure of directors' professional qualifications and independence of independent directors

Qualifications Name	Professional Qualifications and Experience (Note 1)	Independence Criteria (Note 2)	Number of Other Public Companies concurrently Serving as an Independent Director
Heritage Bay Limited Representative: James He	Master of MSEE, BSEE, Tsinghua University. Currently Chairman and General Manager of SOI. In the past, he served OmniVision, the world's top three CIS manufacturers, for more than 20 years. During his tenure in OmniVision, he used his professional structure Taiwan CMOS supply chain. Possess professional science and engineering background and rich management and decision-making skills. No any of the circumstances in the subparagraphs of Article 30 of the CompanyAct	Chairman, Nueva Imaging Inc. Chairman, Silicon Optronics Holding (Cayman) Co., Ltd.	0
Heritage Bay Limited Representative: Sophie Cheng	Master of Graduated from Department of Economics, National Taiwan University. Currently president, Deutron Electronics Corporation , has served as a director of several public offering companies and has extensive experience in the semiconductor industry. No any of the circumstances in the subparagraphs of Article 30 of the CompanyAct	Not applicable.	0
Jim Lai	Master of Electrical Engineering UC Santa Barbara , served as President, Global Unichip Corp. With professional background and rich management and decision-making ability in semiconductor industry. No any of the circumstances in the subparagraphs of Article 30 of the CompanyAct.	The independent directors of the company are in accordance with the provisions of Article 3, Item 1, Paragraph 1-8 of the Establishment of Independent Directors and Measures to Be Followed of Publicly Issued Companies.	2
JJ Lin	Master of EMBA, College of Management, National Taiwan University, Master of Department of Chemistry, National Tsing Hua University served as senior director of TSMC , Executive Vice President, Global Unichip Corp. CEO, Xintec Inc. CEO & President, VisEra Technologies Company Limited He has also served as a director or independent director of many companies, and has a considerable reputation in the semiconductor industry. No any of the circumstances in the subparagraphs of Article 30 of the CompanyAct		1
Chang-Chou Li	Master of Accounting, University of Illinois at Urbana-Champaign served as CPA Partner, PricewaterhouseCoopers Taiwan Currently, he is an independent director of Evergreen Marine Corporation; Hotai Insurance Co., Ltd.; St. Shine Optical Co., Ltd.; and has rich professional abilities in accounting, securities and regulatory laws. No any of the circumstances in the subparagraphs of Article 30 of the Company Act		3

4. Board diversity and independence:

(1) Board diversity: According to the Company’s “Corporate Governance Best Practice Principles,” the composition of the Board of Directors shall be determined by taking diversity into consideration. It is advisable that directors concurrently serving as managerial officers not exceed one-third of the total number of the Board members,

and that an appropriate policy on diversity based on the Company's business operations, operating dynamics, and development needs be formulated and include, without being limited to, the following two general standards:

A. Basic requirements and values: gender, age, nationality, and culture.
B. Professional knowledge and skills: a professional background (e.g., law, accounting, industry, finance, marketing, and technology), professional skills, and industry experience.

All members of the Board shall have the knowledge, skills, and experience necessary to perform their duties. To achieve the ideal goal of corporate governance, the Board of Directors shall possess the following abilities:

Ability to make operational judgments.
Ability to perform accounting and financial analysis.
Ability to conduct management administration.
Ability to conduct crisis management.
Knowledge of the industry.
An international market perspective.
Ability to lead.
Ability to make policy decisions.

The Company has five directors, including two legal entity directors and three independent directors. The members of the Board are diverse and have expertise in business administration, leadership and decision-making, knowledge of the industry, academics, accounting and financial analysis, and other fields. They are equipped to give professional opinions from different perspectives, which is of great help to improve the Company’s business performance and management efficiency. Among all directors, 20% of them are concurrently employees and 60% of them are independent directors. The Company pays attention to the gender composition of the Board members, with female directors accounting for 20% of all directors.

(II) Information of the President, Vice Presidents, and Officers

April 25, 2022; Unit: share; %

Title	Nationality	Name	Gender	Date Elected (Appointed)	Shareholding	Shareholding	Spouse & Minor Shareholding	Spouse & Minor Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Main experience (Education)	Serves currently as	Managers who are Spouses or Second degree relative	Managers who are Spouses or Second degree relative	Managers who are Spouses or Second degree relative	Remarks
					Shares	Shareholding Ratio	Shares	Shareholding Ratio	Shares	Shareholding Ratio			Title	Name	Relation
President	USA	James He	Male	2012.02.10	150,000	0.19	`－`	`－`	`－`	`－`	MSEE, BSEE, Tsinghua University. Director & COO, OmniVision Technologies, Inc. Director, Xintec Inc Director, OmniVision Technology International Ltd. Director,OmniVisionTechnologies (Shanghai), Co. Ltd. Director,ShanghaiOmniVision Semiconductor Technology, Co. Ltd. Chairman, Taiwan Omnivision International Co., Ltd. Chairman,OmniVision International HoldingLtd.	Chairman, Nueva Imaging Inc. Chairman, Silicon Optronics Holding (Cayman) Co., Ltd. Director, Heritage Bay Limited	`－`	`－`	`－`	(Note 2)
Vice President, Marketing Division	Singapore	Peter Zung	Male	2013.03.05	1,311,000	1.68	`－`	`－`	`－`	`－`	University of California, San Diego_ IR/ PS University of California, Berkeley Bachelor, Chemistry Vice President,VisEra Technologies CompanyLimited	Nueva Imaging Inc Vice President	`－`	`－`	`－`	`－`
Research and Development Center Vice President	USA	Denis Luo	Male	2013.03.05	4,583,587	5.86	`－`	`－`	`－`	`－`	Tsinghua University. SR. DIRECTOR OF MIXED SIGNAL GROUP DIRECTOR OF MIXED SIGNAL GROUP	Nueva Imaging Inc Vice President	`－`	`－`	`－`	`－`
Chief Technology Officer	USA	Ming Li	Male	2014.12.10	396,000	0.51	`－`	`－`	`－`	`－`	PhD in Electronic System Parts and Microelectronics, Southeast University Senior Manager,Taiwan Semiconductor ManufacturingCompany,Limited	Nueva Imaging Inc Chief TechnologyOfficer	`－`	`－`	`－`	`－`
CFO	R.O.C	Steffi Huang	Female	2017.06.12	158,000	0.20	`－`	`－`	`－`	`－`	Master, College of Technology Management, National Tsing Hua University Assistant Manager,Audit Department,KPMG	Supervisor, Silicon Optronics (Shanghai)Co.,Ltd.	`－`	`－`	`－`	`－`
Director & Spokesperson, Marketing Division	R.O.C	Henry Chien	Male	2019.10.01	10,000	0.01	1,000	0.001	`－`	`－`	Master, Department of Hydraulic and Ocean Engineering, National Cheng Kung University Sales Manager & Spokesperson,Aethertek technologyco.,Ltd.	`－`	`－`	`－`	`－`	`－`
Sales Marketing Division Senior Director	R.O.C	Bryce Li	Male	2019.12.01	20,000	0.03	1,000	0.001	`－`	`－`	Master, Computer Mathematics, Michigan State University Marketing Manager, International Business Machines Corporation Branch President,Taiwan Omnivision Technologies Co.,Ltd.	`－`	`－`	`－`	`－`	(Note 3)

Note 1: Shareholding ratio is calculated based on the number of 78,152,900 shares outstanding of the Company.

Note 2: Where the Chairman of the Board of Directors and the President or person of an equivalent post (the highest level manager) of a company are the same person, spouses, or relatives within the first degree of kinship, an explanation shall be given of the reason for, reasonableness, necessity thereof, and the measures adopted in response thereto:

(1) The Company is mainly engaged in the research and development, manufacturing and sales of CIS design. At present, as the Company is experiencing the growth period, the chairman concurrently holding the position of President enables the Board of Directors better grasp the operating conditions of the Company, and the flat management can bring more efficiency to the decision implementation.

Note 3: Resigned on June 30, 2021.

III. Remuneration Paid During the Most Recent Fiscal Year to Directors (Including Independent Directors), the President, and Vice Presidents:

(I) Remuneration of Directors (including Independent Director): (name and remuneration type disclosed collectively based on remuneration range)

Unit: NT$ thousand; thousand share

Title	Name			Remuneration of Directors	Remuneration of Directors	Remuneration of Directors	Remuneration of Directors	Remuneration of Directors	Remuneration of Directors	Ratio of Total Compensation (A+B+C+D) to Net Income	Ratio of Total Compensation (A+B+C+D) to Net Income	Remuneration from concurrent position as	Remuneration from concurrent position as	Remuneration from concurrent position as	Remuneration from concurrent position as	Remuneration from concurrent position as	employee	employee	employee	Total A, B, C, D, E, F,G as % of EAIT	Total A, B, C, D, E, F,G as % of EAIT	Remuneration from Invested Companies Other than Subsidiaries or the Parent Company
		Base Compensation (A) (Note 1)		Pension (B) (Note 2)		Remuneration to Directors (C) (Note 3)		Business Expenses (D) (Note 4)				Salary, Bonuses, and Special Expenses(E) (Note 5)		Pension (F)			Employee Bonus(G)(Note 3)
		SOI	Consolidated Entities	SOI	Consolidated Entities	SOI	Consolidated Entities	SOI	Consolidated Entities	SOI	Consolidated Entities	SOI	Consolidated Entities	SOI	Consolidated Entities	SO	I	Consolidated Entities		SOI	Consolidated Entities
																Cash	Stock	Cash	Stock
Corporate Director	Heritage Bay Limited	0	0	0	0	4,000	4,000	0	0	0.54%	0.54%	0	0	0	0	0	0	0	0	0.54%	0.54%	None
Chairman and President	James He (Note 6)	0	0	0	0	0	0	140	140	0.02%	0.02%	8,505	13,911	0	0	7,500	0	7,500	0	2.18%	2.91%	None
Director	Sohpie Cheng (Note 6)	0	0	0	0	0	0	140	140	0.02%	0.02%	0	0	0	0	0	0	0	0	0.02%	0.02%
Independent Director	Chang-Chou Li	600	600	0	0	2,000	2,000	0	0	0.35%	0.35%	0	0	0	0	0	0	0	0	0.35%	0.35%	None
Independent Director	JJ Lin	600	600	0	0	2,000	2,000	0	0	0.35%	0.35%	0	0	0	0	0	0	0	0	0.35%	0.35%
Independent Director	Jim Lai	600	600	0	0	2,000	2,000	0	0	0.35%	0.35%	0	0	0	0	0	0	0	0	0.35%	0.35%
Unless disclosed in the above table, remuneration		received in the most recent fiscaly		ear bythe Directors forprovidingservices(e.g. servingas a non-employee consultant)to the companies in the consolidated financial statements: none.

Remuneration Ranges

Remuneration Ranges payable to each director of the company	Name of Director	Name of Director	Name of Director	Name of Director
	Total Remuneration (A+B+C+D)		Total Remuneration (A+B+C+D+E+F+G)
	SOI	Consolidated Entities	SOI	Consolidated Entities
Less than NT$1,000,000	James He, Sophie Cheng	James He, Sophie Cheng	Sophie Cheng	Sophie Cheng
NT$1,000,000(inclusive)~NT$2,000,000(exclusive)	-	-	-	-
NT$2,000,000 (inclusive)~NT$3,500,000 (exclusive)	Jim Lai, JJ Lin Chang-Chou Li	Jim Lai, JJ Lin Chang-Chou Li	Jim Lai, JJ Lin Chang-Chou Li	Jim Lai, JJ Lin Chang-Chou Li
NT$3,500,000(inclusive)~NT$5,000,000(exclusive)	Heritage BayLimited	Heritage BayLimited	Heritage BayLimited	Heritage BayLimited
NT$5,000,000(inclusive)~ NT$10,000,000(exclusive)	-	-	-	-
NT$10,000,000(inclusive)~ NT$15,000,000(exclusive)	-	-	-	-
NT$15,000,000(inclusive)~ NT$30,000,000(exclusive)	-	-	James He	James He
NT$30,000,000(inclusive)~ NT$50,000,000(exclusive)	-	-	-	-
NT$50,000,000(inclusive)~ NT$100,000,000(exclusive)	-	-	-	-
Over NT$100,000,000	-	-	-	-
Total	6	6	6	6

Note 1: The remuneration of Directors in 2021 includes remuneration for serving as Directors and members of functional committees under the Board of Directors.

Note 2: No pension were paid out to any Director in 2021.

Note 3: The 2021 Directors and Employees Remuneration Scheme has been approved by Board of Directors on March 16, 2022. Note 4: Business expense of NT$280,000 paid to Directors was traveling expenditure.

Note 5: Salaries, bonuses and special expenses include estimated share-based compensation.

Note 6: It is the legal representative of Heritage Bay Limited.

(II) Remuneration of President and Vice President (name and remuneration type disclosed collectively based on remuneration range)

														Unit: NT$ thousand;thousand share	Unit: NT$ thousand;thousand share	Unit: NT$ thousand;thousand share
Title	Name	Salary (A)		Pension (B) (Note 1)		Bonuses and Allowances ( C) (Note 2)			Employee Compensation (D) (Note 3)					Ratio of Total Compensation (A+B+C+D) to Net Income (%)		Remuneration from Invested Companies Other than Subsidiaries or the Parent Company
		SOI	Consolidated Entities	SOI	Consolidated Entities	SOI		Consolidated Entities	SOI		ConsolidatedEntities			SOI	Consolidated Entities
									Cash	Stock	Cash		Stock
President	James He	3,173	22,048	44	44	28,489		28,489	25,359	-	25,359		-	7.7%	10.3%	None
Vice President	Denis Luo
Vice President	Peter Zung
Chief TechnologyOfficer	MingLi
Vice President and Financial officer	Steffi Huang
						Remuneration Ranges
Range of remuneration paid to the President and Vice Presidents of the Company										Name of President and VicePresidents
									SOI			Consolidated Entities
LessthanNT$1,000,000									`－`			`－`
NT$1,000,000 (inclusive)~NT$2,000,000 (exclusive)									`－`			`－`
NT$2,000,000(inclusive)~NT$3,500,000(exclusive)									`－`			`－`
NT$3,500,000(inclusive)~NT$5,000,000(exclusive)									Steffi Huang			Steffi Huang
NT$5,000,000 (inclusive)~NT$10,000,000 (exclusive)									MingLi			`－`
NT$10,000,000 (inclusive)~NT$15,000,000 (exclusive)									Peter Zung			MingLi
NT$15,000,000 (inclusive)~NT$30,000,000 (exclusive)							JamesHe,DenisLuo					JamesHe,DenisLuo,Peter Zung
NT$30,000,000(inclusive)~ NT$50,000,000(exclusive)							`－`					`－`
NT$50,000,000(inclusive)~ NT$100,000,000(exclusive)							`－`					`－`
Over NT$100,000,000							`－`					`－`
Total							5					5

Note 1: No pension were paid out to any Director in 2020.

Note 2: Salaries, bonuses and special expenses include estimated share-based compensation.

Note 3: The 2020 Employees Remuneration Scheme has been approved by Board of Directors on March 10, 2021.

Note 4: Huang, Shu-Hua assumed office as the Vice President and Chief Financial Officer on August 5, 2021, and her remuneration was calculated based on her term of office in the year.

(III) Names of Managers and the Allocation of Employee's Remuneration: Unit: NT$ thousand; thousand share

share
	Title (Note 1)	Name (Note 1)	Stock	Cash	Total	Ratio of Total Amount to Net Income(%)
Managers	President	James He	0	30,383	30,383	4.1%
	Vice President, MarketingDivision	Peter Zung
	Vice President, R&D Center	Denis Luo
	Chief Technology Officer	Ming Li
	Vice President and Financial officer	Steffi Huang
	Director & Spokesperson, MarketingDivision	Henry Chien
	Senior Director, MarketingDivision	Bryce Li (Note 1)

Note 1: Resigned on June 30, 2021.

(IV) Separately compare and describe the total remuneration paid to the Directors, Presidents and Vice Presidents of the Company in the last two fiscal years as a percentage of the net income after tax of the individual or of the individual financial reports by the Company and by all companies in the consolidated statements, and analyze and describe the policies, standards and combination of remuneration payment, the procedures for determining remuneration, and its linkage to operating performance and future risk exposure:
Analysis of the total remuneration, as a percentage of net income stated in the parent company only financial reports or individual financial reports, as paid by the Company and by each other company included in the consolidated financial statements during the past 2 fiscal years to the Directors, Presidents and Vice Presidents of the Company:

December 31, 2021; Unit: NT$ thousand;

Title	2021	2021	2020	2020
	SOI	Consolidated Entities	SOI	Consolidated Entities
Director	1.35%	1.35%	1.33%	1.33%
President and Vice President	7.70%	10.25%	4.03%	9.48%

The policies, standards, and packages for payment of remuneration, as well as the procedures followed for determining the remuneration, and their linkages to business performance and future risk exposure:

The remuneration of the Directors shall be paid in accordance with the Company's Articles of

Incorporation; remuneration for the President and Vice Presidents shall be determined in accordance with the Company's salary policy. The payout of bonuses shall be based on the Company's management performance and individual performance.

IV. Implementation of Corporate Governance

(I) The state of Operations of the Board of Directors:

A total of 6 meetings (A) have been held by the Board of Directors in 2021, with the Directors' attendance shown as follows:

Title	Name	Attendance in Person(B)	By Proxy	Attendance Rate (%)[B/A] (Note)	Remarks
Chairman of the Board	James He	6	0	100.00%	-
Director	Sohpie Cheng	6	0	100.00%
Independent Director	Jim Lai	6	0	100.00%	-
Independent Director	JJ Lin	5	1	83.33%	-
Independent Director	Chang-Chou Li	6	0	100.00%	-

Note: Actual attendance (appearance) rate (%) shall be calculated using the number of Directors' Meetings convened and actual attendance (appearance) during the term of service.

Other mentionable items:

Matters referred to in Article 14-3 of the Securities and Exchange Act and any other resolutions from the Board of Directors where an Independent Director has a dissenting or qualified opinion that is on record or stated in a written statement:

Board of Directors Date and Session	Content of Motion and Follow-up Actions	Matters referred to in Article 14-3 of the Securities and Exchange Act	Any Independent Director Had a Dissenting Opinion or Qualified Opinion
2021.03.10 The 5th Meeting of the 8th Board	1. Discussion on the Company's Distribution Plan of the Remuneration to Employees and Directors for the Year 2020. 2. Discussion on the Company's 2020 Business Reports and Financial Statements. 3. Discussion on the Company's 2020 Earning Distribution Plan. 4. Discussion on the Company's Statement on Internal Control Systems for the Year 2020.	Yes	None
	Resolution Results: Proposal 1 has been reviewed by the Company's Remuneration Committee. Since some Directors were also

	serve as managers of the Company and did not participate in the discussion and voting of this proposal, it was presided over by other Directors on their behalf, and the proposal was approved by other Directors present without any objection after consultation. Proposal 2 - 4 have been discussed and approved by the Audit Committee of the Company and adopted by the resolution of all the Directorspresent.	serve as managers of the Company and did not participate in the discussion and voting of this proposal, it was presided over by other Directors on their behalf, and the proposal was approved by other Directors present without any objection after consultation. Proposal 2 - 4 have been discussed and approved by the Audit Committee of the Company and adopted by the resolution of all the Directorspresent.	serve as managers of the Company and did not participate in the discussion and voting of this proposal, it was presided over by other Directors on their behalf, and the proposal was approved by other Directors present without any objection after consultation. Proposal 2 - 4 have been discussed and approved by the Audit Committee of the Company and adopted by the resolution of all the Directorspresent.
2021.05.06 The 6th Meeting of the 8th Board	1. Discuss the application for 2021 shareholders' meeting to discuss the termination of non-compete prohibition of directors of the company	Yes	None
	Resolution Results: Proposal 1 has been discussed and approved by the Audit Committee of the Company and adopted by the resolution of all the Directorspresent.
2021.07.01 The 7th Meeting of the 8th Board	1. Discuss the issue of the company's first employee stock options in 2021	Yes	None
	Resolution Results: Proposal 1 has been discussed and approved by the Audit Committee of the Company and approved by the resolution of all the Directors present.
2021.11.04 The 9th Meeting of the 8th Board	1. Discuss the 2022 operating plan and budget 2. Discussion on the Company's 2022 Annual Audit Plan. 3. Discuss and revise article 3 of the Company's First Employee Stock Option Issuance and Stock Option Method in 2021 4. Discuss the list and quantity of the first employee stock option certificate in 2021	Yes	None
	Resolution Results: Proposal 1 - 4 have been discussed and approved by the Audit Committee of the Company and adopted by the resolution of all the Directors present.

Any other resolutions from the Board of Directors where an Independent Director has a dissenting or qualified opinion that is on record or stated in a written statement: none.
Where a Director recuse himself or herself from a proposal in which he/she has a personal interest, the name of the Director, the content of proposal, the reason for refusal and the results of the voting should be stated:

Date of Meeting	The Board Meeting	Proposal Content	Resolution
2021.03.10	The 5th Meeting of the 8th Board	Distribution Plan of remuneration for Directors and Managers of 2020	Due to conflict of personal interest, Directors involved were recused from voting and the remaining Directors have resolved and approved theproposal.
2021.11.04	The 9th Meeting of the 8th Board	The awarding principles of year-end bonus and the managers'	Due to conflict of personal interest, Directors involved were recused from votingand the remaining

compensation for the	Directors have resolved and
year 2021	approved theproposal.
The salary and	Due to conflict of personal interest,
compensation items that	Directors involved were recused
the managers propose to	from voting and the remaining
implement in 2022	Directors have resolved and
	approved theproposal.

Cycles, periods, scope, method, contents and other matters of the self-evaluation by the board members of themselves:

Frequency	Period	Scope	Method	Content
Once a year	2021.01.01 ~ 2021.12.31	Includes the performance evaluation of the board, individual Directors and functional committees	Internal self-evaluati on of the Board of Directors/ Self-evaluati on of the Board members	The criteria for internal self-evaluation of the overall performance of the Board of Directors shall cover the following five aspects: A. Participation in the operation of the Company B. Improvement of the quality of the Board of Directors' decision making C. Composition and structure of the Board of Directors D. Election and continuing education of the Directors; and E. Internal control. The criteria for evaluating the performance of the board members, shall cover the following six aspects: A. Alignment of the Company's goals and tasks B. Awareness of the duties of a Director C. Participation in the operation of the Company D. Management of internal relationship and communication; E. The Director's professionalism and continuing education; and F. Internal control The criteria for evaluating the performance of functional committees, shall cover the

following five aspects:	following five aspects:
A.	Participation in the operation of the
	Company
B.	Awareness of the duties of the
	functional committee
C.	Quality of decisions made by the
	functional committee
D.	Makeup of the functional committee
	and election of its members
E.	Internal control.

The Company has completed a self-evaluation of the performance of the Board of Directors for the year of 2021 and reported the results to the Board of Directors for the first quarter of 2022 for review and improvement. The overall average score of board performance self-evaluation is 4.93 (full score: 5), and the overall average score of individual board members is 4.87 (full score: 5), indicating that the overall Board of Directors operates well. The performance self-evaluation result of functional committee was 4.83, and all members were satisfied with the measured items.

An evaluation of targets (e.g. the establishment of an Audit Committee and the improvement of information transparency, etc.) for strengthening of the functions of the Board of Directors during the current and immediately preceding fiscal years, and measures taken toward achievement thereof:
A. Set up remuneration committee and audit committee: The Company established the Remuneration Committee on December 22, 2011, elected the Independent Directors at the temporary meeting of shareholders on August 14, 2017 and also established the Audit Committee on August 23, 2017 to strengthen the Board of Directors' execution of its powers.
B. Strengthening corporate governance: The Company has established the Corporate Governance Best Practice Principles, Procedures for Ethical Management and Guidelines for Conduct and Corporate Governance Best Practice Principles, which have been adopted by resolution by the Board of Directors.

Attendance of Independent Directors on the Board Meeting in 2021

Name of Independent Director	The 5th Meeting of the 8th Board	The 6th Meeting of the 8th Board	The 7th Meeting of the 8th Board	The 8th Meeting of the 8th Board	The 9th Meeting of the 8th Board	The 10th Meeting of the 8th Board
Chang-Chou Li	`◎`	`◎`	`◎`	`◎`	`◎`	`◎`
JJ Lin	`◎`	`◎`	`◎`	`◎`	`◇`	`◎`
Jim Lai	`◎`	`◎`	`◎`	`◎`	`◎`	`◎`

`◎` : Attendance in person

`◇` : By Proxy

(II) The Operation of the Audit Committee

A total of 5 meetings (A) have been held by the Audit Committee in 2021, with the attendance of Independent Directors shown as follows:

Title	Name	Attendance in Person (B)	By Proxy	Attendance Rate (%) (B/A) (Note)	Remarks
Convener	Chang-Chou Li	5	0	100.00%	-
Members	JJ Lin	4	1	80.00%	-
Members	Jim Lai	5	0	100.00%	-

Note: The actual attendance rate (%) shall be calculated based on the number of meetings held by

the Audit Committee and the actual number of meetings attended during his/her term of office. Other mentionable items:

If the Audit Committee has any of the following circumstances, the date, period, proposal content, the resolution of the Audit Committee and the Company's reaction toward the Audit Committee's opinions shall be specified:
(1) Matters referred to in Article 14-5 of the Securities and Exchange Act:

Board of Directors Date and Session	Content of Motion and Follow-up Actions	Matters referred to in Article 14-5 of the Securities and Exchange Act	Resolutions Passed by More Than Two-thirds of All Directors but Without Approval of the Audit Committee
2021.03.10 The 5th Meeting of the 8th Board	1. Adoption of the Company's 2020 Business Reports and Financial Statements. 2. Adoption of the Company's 2020 Earning Distribution Plan. 3. Adoption of the Company's Statement on Internal Control Systems for the Year 2020..	Yes	None
	Results of the Audit Committee's Decision(March 10, 2021): Adopted byall members of the Audit Committee.
	Resolution Results of the Company: All the directorspresent agreed to approve the result.
2021.05.06 The 6th Meeting of the 8th Board	1. Adoption of the Consolidated Financial Statements for the firstquarter of 2021 of the Company.	Yes	None
	Results of the Audit Committee's Decision(May6, 2021): Adopted byall members of the Audit Committee.
	Resolution Results of the Company: All the directorspresent agreed to approve the		result.
2021.07.01 The 7th Meeting of the 8th Board	1. Adoption of the issue of the company's first employee stock options in 2021	Yes	None
	Results of the Audit Committee's Decision(July1, 2021): Adopted byall members		of the Audit Committee.
	Resolution Results of the Company: All the directorspresent agreed to approve the		result.
2021.08.05	1. Adoption of the Consolidated Financial Statements for	Yes	None

The 8th Meeting of the 8th Board	the 2ndquarter of 2021 of the Company.
	Results of the Audit Committee's Decision(August 5, 2021): Adopted byall members of the Audit Committee.
	Resolution Results of the Company: All the directors present agreed to approve the result.
2021.11.04 The 8th Meeting of the 8th Board	1. Adoption of the Consolidated Financial Statements for the 3rd quarter of 2021 of the Company. 2. Adoption of the company's 2022 Annual Audit Plan.	Yes	None
	Results of the Audit Committee's Decision (November 4, 2021): Adopted by all members of the Audit Committee.
	Resolution Results of the Company: All the directors present agreed to approve the result.

(2) Other matters which were not approved by the Audit Committee but were approved by
- two-thirds or more of all Directors: none.
Where an Independent Director recuses himself or herself from a proposal in which he/she has a personal interest, the name of the Independent Director, the content of proposal, the reason for recusal and the results of the voting should be stated:

Date of Meeting	The Board Meeting	Proposal Content	Resolution
2021.03.10	The 5th Meeting of the 8th Board	Distribution Plan of remuneration for Directors and Managers of 2020	Due to conflict of personal interest, Independent Directors involved were recused from voting and the remaining Directors have resolved and approved the proposal.

Communication between the Supervisors, Internal Audit Officer and CPAs (It shall include the
major matters, methods and results of communication on the Company's financial and business status):
(1) The Independent Directors of the Company regularly communicate with the chief internal auditor at the Audit Committee and the Board of Directors, and the interaction is good. The chief internal auditor regularly reports the implementation and improvement of the audit plan in the meetings, and communicates and exchange opinions on the effectiveness of the internal control executed by the Company.
(2) The Independent Directors of the Company regularly communicate with CPAs at the Audit Committee and exchange opinions. The CPA has fully discussed the review or audit status of the Company's financial statements, or issues related to finance, taxation, and internal control with the Independent Directors at the meeting.

Communication between Independent Directors and CPA in 2021

Date	Motion	Motion
March 2021	Explanation of the 2020 Consolidated and Parent Company Only Financial Reports	The 2020 Financial Reports have been approved by the Audit Committee and submitted to the Board of Directors for approval, and was announced and reported to the competent authorities on March 10, 2021 as scheduled.
May 2021	Explanation of the Consolidated Financial Statements for the first quarter of 2021	The Consolidated Financial Statements for the first quarter of 2021 have been approved by the Audit Committee and submitted to the

		Board of Directors for approval, and was announced and reported to the competent authorities on May 6, 2021 as scheduled.
August 2021	Explanation of the Consolidated Financial Statements for the second quarter of 2021	The Consolidated Financial Statements for the 2nd quarter of 2021 have been approved by the Audit Committee and submitted to the Board of Directors for approval, and was announced and reported to the competent authorities on August 5, 2021 as scheduled.
November 2021	Explanation of the Consolidated Financial Statements for the 3rd quarter of 2021	The Consolidated Financial Statements for the 3rd quarter of 2021 have been approved by the Audit Committee and submitted to the Board of Directors for approval, and was announced and reported to the competent authorities on November 4, 2021 as scheduled.

Communication between Independent Directors and Supervisor of Internal Audit in 2021

Date	Motion	Motion
February3,2021	Audit report and draft for January2021	Approved byall Directors
March 2,2021	Audit report and draft for February2021	Approved byall Directors
April 6,2021	Audit report and draft for March 2021	Approved byall Directors
May3,2021	Audit report and draft for April 2021	Approved byall Directors
June 11,2021	Audit report and draft for May2021	Approved byall Directors
July1,2021	Audit report and draft for June 2021	Approved byall Directors
August 5,2021	Audit report and draft for July2021	Approved byall Directors
September 7,2021	Audit report and draft for August 2021	Approved byall Directors
October 12,2021	Audit report and draft for September 2021	Approved byall Directors
November 3,2021	Audit report and draft for October 2021	Approved byall Directors
December 8,2021	Audit report and draft for November 2021	Approved byall Directors
January1, 2022	Audit report and draft for December 2021	Approved byall Directors

(III) State of Corporate Governance Implementation and Differences From the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies and Reasons:

Companies and Reasons:
Evaluation Item	State of Operations			Deviations and reasons from the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx-Listed Companies
	Yes	No	Abstract Illustration
I. Does the Company formulate and disclose its Corporate Governance Practice Principles according to the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies?	V		The Company's Corporate Governance Best Practice Principles was adopted by the Board of Directors on March 8, 2017. The Company actively discloses its corporate governance practices in accordance with relevant laws and regulations.	None
II. Shareholding structure & shareholders' equity (I) Does the Company establish an internal operating procedure to deal with shareholders' suggestions, doubts, disputes and litigations, and implement based on the procedure? (II) Does the Company possess the list of its major shareholders as well as the ultimate owners of those shares? (III) Does the Company establish and execute the risk management and firewall system within its conglomerate structure? (IV) Does the Company establish internal rules against insiders trading with undisclosed information?	V		(I) The Company has set up the shareholder services unit to handle shareholder affairs and shareholders' suggestions or disputes. (II) The Company regularly discloses the list of its major shareholders and persons who have ultimate control over the major shareholders, and reports the change in accordance with relevant regulations. (III) The business and financial relationship between the Company and its affiliated companies has been formulated in accordance with the relevant regulations required by the competent authority. (IV) The Company has established the Procedures for Handling Material Information and Prevention of Insider Trading and Code of Ethical Conduct, which have been implemented upon the adoption of the Board of Directors.	None
III. Composition and Responsibilities of the Board of Directors (I) Does the Board develop and implement a diversified policy for the composition of its members?	V		(I) The Company has elected Board of Directors with diversified professional background, professional skills and industryknowledge in accordance with the	None

Evaluation Item	State of Operations	State of Operations	State of Operations	Deviations and reasons from the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx-Listed Companies
	Yes	No	Abstract Illustration
(II) Does the Company voluntarily establish other functional committees in addition to the Remuneration Committee and the Audit Committee? (III) Has the Company established standards to measure the performance of the Board, and does the Company implement such annually? Does it report the results of the performance evaluation to the BOD and use them as a reference for each Director's remuneration and nomination of term renewal? (IV) Does the Company regularly evaluate the independence of CPAs?			Procedure for the Election of Directors. (II) The Company has established the Remuneration Committee and Audit Committee. The organizational procedures for the organization were passed by the Board of Directors. (III) The Board of Directors has not appointed an external professional institution to evaluate the Board or the functional committees. However, in terms of the Company's previous discussions and actual performance results, it shows the Board of Directors has been functioning well. The Company would consider the performance evaluation rules and procedures for the Board of Directors based on the situation, and implement relevant performance evaluation. (IV) The Company reviews the independence of the CPAs annually by the Audit Committee and the Board of Directors, and has been appointed by the Board of Directors. It has been confirmed that they are not the Directors of the Company, not the shareholders of the Company, nor are they paid by the Company, and are not the stakeholders that shall begranted independence.
IV. Does the Company appoint adequate persons and a chief governance officer to be in charge of corporate governance matters (including but not limited to providing Directors and Supervisors required information for business execution, assisting Directors and Supervisors in following laws and regulations,handlingmatters in relation to the Board meetings	V		The Company has set up the dedicated corporate governance unit or has assigned personnel to handle relevant affairs.	None

Evaluation Item	State of Operations	State of Operations	State of Operations	Deviations and reasons from the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx-Listed Companies
	Yes	No	Abstract Illustration
and shareholders' meetings and keeping minutes at the Board meetings and shareholders' meetings accordingto law)?
V. Does the Company establish communication channels and dedicate section for stakeholders (including but not limited to shareholders, employees, customers and suppliers) on its website, and responded appropriately to interested parties concerningimportant corporate social responsibilityissues?	V		The Company's website has set up the “Investor Relations” and “Stakeholder Section” to disclose information on financial operations and information on corporate governance and stakeholders' information for shareholders and stakeholders' reference. A spokesperson and deputy spokesperson is set up as a channel for communication with the stakeholders.	None
VI. Does the Company appoint a professional shareholder service agency to deal with shareholder affairs?	V		The Company has appointed a professional shareholder services agency, Registrar Agency, Capital Securities Corp. to handle issues regarding shareholders' meeting and shareholder affairs.	None
VII. Information Disclosure (I) Does the Company set up a website to disclose information on the financial operations and corporate governance? (II) Does the Company have other information disclosure channels (e.g. building an English website, appointing designated personnel to be responsible for the collection and disclosure of information, implementing a spokesman system, and making the process of investor conferences available on the corporate website)? (III) Does the Company announce and declare its annual financial reports within two months after the end of the fiscalyear,and	V		(I) The Company has disclosed its financial operations on its website (www.soinc.com.tw). The Company would also disclose relevant information on the corporate website after the corporate governance system is planned and established. (II) The Company has established a spokesman system. Investor conference information is disclosed on the Company website and the Market Observation Post System. (III) The Company follows relevant laws and regulations to announce and report its annual financial reports within two months after the end of the fiscalyear,and	None

Evaluation Item	State of Operations	State of Operations	State of Operations	Deviations and reasons from the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx-Listed Companies
	Yes	No	Abstract Illustration
announce and declare the financial reports for the first, second and third quarter and the operation situation of each month earlier than the prescribed period?			announce and declare the financial reports for the first, second and third quarter and the operation situation of each month earlier than the prescribed period. Please refer to the Market Observation Post System for the aforesaid information disclosed (https://mops.twse.com.tw/mops/web/indx).
VIII. Is there any other important information to facilitate a better understanding of the Company's corporate governance practices (e.g. including but not limited to employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, Directors' and Supervisors' training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing insurance for Directors and Supervisors)?	V		(I) Employee rights and care: In accordance with Labor Standards Act, the Company has provided the rights and interests of the employees, and provides relevant benefits systems (such as group insurance, employee travel, health check, and various training) to establishes a relationship of mutual trust with employees. (II) Investor relations: The Company has established a spokesperson and deputy spokesperson to be responsible for the communication of the Company's external relations, and has designated persons to disclose the Company's information at the Market Observation Post System as required by laws and regulations. (III) Supplier relations: The Company has established long-term, mutual trust, and mutually beneficial relationship with suppliers in accordance with company policy. (IV) Rights of interested parties: The Company maintains good communication channels with employees, clients and suppliers, and respects and protects their legitimate rights and interests. (V) Implementation of risk management policies and measurement standards: The Company has established various internal rules and regulations to conduct various types of risk management and assessment and implemented. in accordance with the law.	None

Evaluation Item	State of Operations	State of Operations	State of Operations	Deviations and reasons from the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx-Listed Companies
	Yes	No	Abstract Illustration
			(VI) Directors' further education: To implement corporate governance, the Company actively informed the Directors and Independent Directors of information on corporate governance, and regularly arranges a series of refresher courses on finance, business and commerce for Directors and Independent Directors according to the Sample Template for the Directions for the Implementation of Continuing Education for Directors and Independent Directors of TWSE/ TPEx Listed Companies (VII) Implementation of customer policies: The Company maintains a stable and good relationship with customers to create corporate profits. (VIII) The company's purchase of liability insurance for directors and supervisors: The Company has bought liability insurance for all Directors and Independent Directors.

	Evaluation Item	State of Operations	State of Operations	State of Operations	State of Operations
		Yes	No	Abstract Illustration
IX.	Please specify the measures adopted by the Company to improve the items listed in the corporate governance review result from Taiwan Stock Exchange's Corporate Governance Center and the improvement plans for items yet to be improved: Priorityof improvement and actionsgiven to the items that did not meet the score in the initial evaluation of the 2021 annual corporategovernance evaluation of the Company: Evaluation Indicator Improvement and Actions Does the company disclose the annual work priorities and operation of the audit committee? The following events have been disclosed on the company's website and annual report. Does the company disclose the separate communication between the independent director and the internal audit officer and CPAs (such as the way, matters and results of the communication on the company's financial and business status)on the company's website? The following events have been disclosed on the company's website Whether the company has formulated risk management policies and procedures approved by the board of directors to disclose the scope, organizational structure and state of operation, and report to the board of directors at least once ayear? The following events have been disclosed on the company's website and report to the board of directors.
	Evaluation Indicator				Improvement and Actions
	Does the company disclose the annual work priorities and operation of the audit committee?				The following events have been disclosed on the company's website and annual report.
	Does the company disclose the separate communication between the independent director and the internal audit officer and CPAs (such as the way, matters and results of the communication on the company's financial and business status)on the company's website?				The following events have been disclosed on the company's website
	Whether the company has formulated risk management policies and procedures approved by the board of directors to disclose the scope, organizational structure and state of operation, and report to the board of directors at least once ayear?				The following events have been disclosed on the company's website and report to the board of directors.

Note 1: Implementation of Diversity Policy of Board Members by Individual Directors

Title	Name	Nationality	Gender			DiversityItem	DiversityItem
				Operational Judgments	Accounting and Financial Analysis.	Business Administration	Crisis Management	Industrial Knowledge	International Market Perspective	Decision Making
Chairman of the Board	James He	USA	Male	V	V	V	V	V	V	V
Director	Sohpie Cheng	R.O.C	Female	V	V	V	V	V	V	V
Independent Director	Chang-Chou Li	R.O.C	Male	V	V	V	V	V	V	V
Independent Director	JJ Lin	R.O.C	Male	V	V	V	V	V	V	V
Independent Director	Jim Lai	R.O.C	Male	V	V	V	V	V	V	V

Note 2: Evaluation standards for the independence of CPAs.

Evaluation Item The CPA is not a Director of the Companyand its affiliates. Yes or No? The CPA is not a shareholder of the Company and an affiliated business of the Company. Yes or No? The CPA is not a salaried employee of the Company or an affiliated business of the Company. Yes or No? Does the CPA confirm that his CPA firm has complied with in dependence? The CPA firm’s former partner within one year of disassociating from the CPA firm to which the CPA is affiliated join the Company as a Director, officer or is in a key position to exert material impact over the subject matter of the engagement. Yes or No? The CPA did not provide any audit service to the Company for 7 consecutive years. Yes or No? Does the CPA complies with the Bulletin of Norm of Professional Ethics for Certified Public Accountant of the Republic of China No.10 on independence?	Rating	Is it consistent with Independence?
	Yes	Yes
	Yes	Yes
	Yes	Yes
	Yes	Yes
	Yes	Yes
	Yes	Yes
	Yes	Yes

(IV) Where a Remuneration Committee is established, the Company shall disclose its composition, duties and operation status:

Profiles of the Members of the Remuneration Committee

Qualifications Name Title (Note 1)	Qualifications Name Title (Note 1)	Professional Qualifications and Experience (Note 2)	Independence Criteria (Note 3)	Concurrent Remuneration Committee Position in Other Publicly Listed Companies
Convener	JJ Lin	Refer to 3 on page 6, information disclosure of directors' professional qualifications and independence of independent directors	(1) Neither an employee of the Company nor its affiliates. (2) Neither a director supervisor of the Company nor its affiliates. (3) Not a natural-person shareholder who holds shares, together with those held by the person's spouse, minor children, or held by the person under others' names, in an aggregate amount of 1% or more of the total number of issued shares of the Company or ranking in the top 10 in holdings. (4) Not a spouse, relative within the	1
Members	Jim Lai			2
Members	Chang-Chou Li			2

Operations of the Remuneration Committee

(1) There are3members on the Remuneration Committee of the Company.

(2) Term of office of current committee member: From June 24, 2020 to June 15,

The Remuneration Committee held2meetings (A) in the recent year, the

qualifications and attendance of the committee members are shown as follows:

Title	Name	Attendance in Person (B)	By Proxy	Attendance Rate (%) (B/A) (Note)	Remarks
Convener	JJ Lin	1	1	50%	-
Members	Chang-Chou Li	2	0	100%	-
Members	Jim Lai	2	0	100%	-
Other mentionable items: I. If the Board of Directors does not adopt or amend recommendations proposed by the Remuneration Committee, the date, session, proposal contents and resolutions of the Board of Directors,and the Company's actions in response to the opinions of the Remuneration shall

II.	be stated (also, where the remuneration approved by the Board of Directors is superior to that recommended by the Remuneration Committee, the differences and reasons shall be stated): None. Where resolutions of the Remuneration Committee include dissenting or qualified opinion which is on record or stated in a written statement, the date, session, proposal contents, opinions from every member, and actions in response to the opinions of the members shall be stated Remuneration Committee Date and Session Content of Motion and Follow-up Actions 2021.03.10 The 2nd Meeting of the 5th Board 1. Discussion on the Distribution Plan of remuneration for Directors and Managers of 2020. 2. Discussion on the scope of the applicable managers of the Company's compensation preliminary review of 2021. 3. Discussion on the Company's managers compensation adjustment of 2021. Resolution Results of the Remuneration Committee: Adopted by all members of the Remuneration Committee. The company's handling of the resolution of the salary and Remuneration Committee: All motions were passed without objection by the Directors present and upon the recommendation of the Remuneration Committee, unless the stakeholders rescued themselves from discussion and voting. 2021.11.04 The 3rd Meeting of the 5th Board 1. The company approved the list and quantity of the first employee stock option certificate in 2021 2. Adoption of the Company's awarding principles of year-end bonus and the managers' compensation for the year 2021. 3. Adoption of the manager's salary and compensation items to be implemented in 2022. Resolution Results of the Remuneration Committee: Adopted by all members of the Remuneration Committee. The company's handling of the resolution of the salary and Remuneration Committee: All motions were passed without objection by the Directors present and upon the recommendation of the Remuneration Committee, unless the stakeholders rescused themselves from discussion and voting.	be stated (also, where the remuneration approved by the Board of Directors is superior to that recommended by the Remuneration Committee, the differences and reasons shall be stated): None. Where resolutions of the Remuneration Committee include dissenting or qualified opinion which is on record or stated in a written statement, the date, session, proposal contents, opinions from every member, and actions in response to the opinions of the members shall be stated Remuneration Committee Date and Session Content of Motion and Follow-up Actions 2021.03.10 The 2nd Meeting of the 5th Board 1. Discussion on the Distribution Plan of remuneration for Directors and Managers of 2020. 2. Discussion on the scope of the applicable managers of the Company's compensation preliminary review of 2021. 3. Discussion on the Company's managers compensation adjustment of 2021. Resolution Results of the Remuneration Committee: Adopted by all members of the Remuneration Committee. The company's handling of the resolution of the salary and Remuneration Committee: All motions were passed without objection by the Directors present and upon the recommendation of the Remuneration Committee, unless the stakeholders rescued themselves from discussion and voting. 2021.11.04 The 3rd Meeting of the 5th Board 1. The company approved the list and quantity of the first employee stock option certificate in 2021 2. Adoption of the Company's awarding principles of year-end bonus and the managers' compensation for the year 2021. 3. Adoption of the manager's salary and compensation items to be implemented in 2022. Resolution Results of the Remuneration Committee: Adopted by all members of the Remuneration Committee. The company's handling of the resolution of the salary and Remuneration Committee: All motions were passed without objection by the Directors present and upon the recommendation of the Remuneration Committee, unless the stakeholders rescused themselves from discussion and voting.
	Remuneration Committee Date and Session	Content of Motion and Follow-up Actions
	2021.03.10 The 2nd Meeting of the 5th Board	1. Discussion on the Distribution Plan of remuneration for Directors and Managers of 2020. 2. Discussion on the scope of the applicable managers of the Company's compensation preliminary review of 2021. 3. Discussion on the Company's managers compensation adjustment of 2021.
		Resolution Results of the Remuneration Committee: Adopted by all members of the Remuneration Committee.
		The company's handling of the resolution of the salary and Remuneration Committee: All motions were passed without objection by the Directors present and upon the recommendation of the Remuneration Committee, unless the stakeholders rescued themselves from discussion and voting.
	2021.11.04 The 3rd Meeting of the 5th Board	1. The company approved the list and quantity of the first employee stock option certificate in 2021 2. Adoption of the Company's awarding principles of year-end bonus and the managers' compensation for the year 2021. 3. Adoption of the manager's salary and compensation items to be implemented in 2022.
		Resolution Results of the Remuneration Committee: Adopted by all members of the Remuneration Committee.
		The company's handling of the resolution of the salary and Remuneration Committee: All motions were passed without objection by the Directors present and upon the recommendation of the Remuneration Committee, unless the stakeholders rescused themselves from discussion and voting.

Note:

(1) Where members of the Remuneration Committee resign before the end of the year, the Notes column shall be annotated with the date of resignation. Actual attendance rate (%) shall be calculated using the number of

Remuneration Committee meetings convened and actual number of meetings attended during the term of service.

(2) When an election is held for the Remuneration Committee before end of the year, members of both the new and old committee shall be listed in separate columns and noted as new, old or reelected members, along with the elected date, in the “Remark(s)” column. The actual attendance rate (%) shall be calculated based on the number of meetings held by the Remuneration Committee and the actual number of meetings attended during his/her term of office.

(V) Promotion of Sustainable Development, Status, and Deviation from Sustainable Development Best Practice Principles for TWSE/TPEx Listed Companies and Reasons:

Companies and Reasons:
Promoting Item			Implementation Status (Note1)	Deviations from the Corporate Social Responsibility Best Practice Principles for TWSE/TPEx-Listed Companies and Reasons
	Yes	No	Abstract Illustration
I. Does the company establish a governance structure to promote sustainable development, and set up full-time (part-time) unit to promote sustainable development,and does the Board of Directors authorize senior management to handle it and the supervisory status of Board of Directors?		V	At present, the Company has not set up a corporate social responsibility full-time (part-time) dedicated unit, but will set in the future based on demand.	Under evaluation
II. Does the company assess ESG risk associated with its operations based on the principle of materiality, and establish related risk management policies or strategies?(Note 2)		V	At present, the company has not formulated relevant risk management policies and strategies, which will be set according to needs in the future.	Under evaluation
III. Environmental issues (I) Does the Company establish an appropriate environmental management systems according to its industries characteristics?	V		The Company is an IC design house. Although all products are manufactured by outsourcing, the Company still strictly require the outsourcing manufacturers to comply with the environmental management regulations of thegovernment during	No significant discrepancy

(II) Does the Company endeavor to utilize all resources more efficiently and use renewable materials which have low impact on the environment?		the production process..We are committed to reducing the impact on the natural resources and reduce environmental pollution, and actively respond to climate change, taking action plan to reduce the consumption of natural resources, including the green supply chain management, raw material management, product packaging and waste reduction and recycling, reducing CO2 levels in office areas and improving energy efficiency.	the production process..We are committed to reducing the impact on the natural resources and reduce environmental pollution, and actively respond to climate change, taking action plan to reduce the consumption of natural resources, including the green supply chain management, raw material management, product packaging and waste reduction and recycling, reducing CO2 levels in office areas and improving energy efficiency.
(III) Does the Company evaluate the potential risks and opportunities in climate change with regard to the present and future of its business, and take appropriate action to counter climate change issues?
(IV) Does the Company take inventory of its greenhouse gas emissions, water consumption, and total weight of waste in the last two years, and implement policies on energy efficiency and carbon dioxide reduction, greenhouse gas reduction, water reduction, or waste management ?	V	According to the "sustainable development path map of TWSE/TPEx-Listed Companies" issued by the Financial Regulatory Commission in March 2022, the company which should complete the greenhouse gas inventory in 2026, the verification in 2028, and the verification of merged subsidiaries in 2029; The company will continue to control the completion of greenhouse gas inventory and verification of the disclosure schedule in accordance with the reference guidelines and relevant regulations issued by the competent authority. The schedule of SOI's greenhouse gas inventory and verification is as follows, which is submitted to the board of directors and controlled on aquarterlybasis:		Under evaluation
		Work Item	Predicted Finishing Time

			Set up part-time units,personnel and their management scope	June, 2024
			Formulate inventory plan	December, 2024
			Formulate inventory plan ~~1.~~	June 2025
IV. Social issues (I) Does the Company formulate appropriate management policies and procedures according to relevant regulations and the International Bill of Human Rights?	V	(I) The Company has established relevant rules and regulations in accordance with the Labor Standards Act and relevant labor laws to protect the rights and interests of employees. (II) The Company has formulated an employee handbook stating relevant employee benefits. The employee remuneration is paid by resolution of the Board of Directors. (III) The Company has implemented labor safety and health education on its employees from time to time. In the event of a flu pandemic, wearing a mask and a disinfectant at the entrance to the door for employees to use when entering and leaving. (IV) The Company arranges on-the-job training based on employees' and job's needs from time to time.			No significant discrepancy
(II) Does the Company have reasonable employee benefits measures (including salaries, leave and other benefits) and do business performance or results reflect on employee salaries?
(III) Does the Company provide a healthy and safe working environment and organize training on health and safety for its employees on a regular basis?
(IV) Does the Company provide its employees with career development and training terms?

(V) Does the Company products and services comply with relevant laws and international standards in relation to customer health and safety, customer privacy, and marketing and labeling of products and services, and are relevant consumer protection and grievance procedurepolicies implemented?		(V) The Company has established procedures for handling customer complaints and established customer-oriented quality system, and assessed customer satisfaction with its products and services to achieve the goal of sustainable business operation. Our products and services are marketed and marked in accordance with regulations and international standards. (VI) The Company has established a supplier management policy to evaluate the related qualification of supplier before entering into the cooperation contract. The Company regularly evaluates suppliers and those who have significant impact on social responsibility and the environment will be included in the evaluation.
(VI) Does the Company implement supplier management policies, requires suppliers to observe relevant regulations on environmental protection, occupational safety and health, or labor and human rights? If so, describe the results.
V. Does the Company reference internationally accepted reporting standards or guidelines, and prepare ports that disclose non-financial information of the company, such as corporate social responsibility reports? Do the reports above obtain assurance from a third party verification unit?	V	The Company has not yet prepared a corporate social responsibility report, which will be prepared according to the Company's needs in the future.	prepared based on demand in the future.
VI. Where the Company has formulated its own sustainable development principles according to the Sustainable Development Best Practice Principles for TWSE/TPEx Listed Companies, please state the variances between its implementation and the principles formulated: The Company has established the Corporate Social Responsibility Best Practice Principles. The Company has performed its corporate social responsibilityin accordance with the meaningand relevantprovisions of the Principles,and there is no discrepancy.

VII. Other important information to help understand the implementation of sustainable development:https://www.soinc.com.tw/csr

(VI) The State of the Company's performance in the area of ethical corporate management, any variance from the Ethical Corporate Management Best

Practice Principles for TWSE/TPEx Listed Companies, and the reason for any such variance

Evaluation Item			State of Operations	Any Variance from the Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies, and the Reason for Any Such Variance
	Yes	No	Abstract Illustration
I. Establishment of ethical corporate management policies and programs (I) Does the Company establish its ethical management policy approved by the Board of Directors, clarifies it in its regulations and external documents and the commitment of board of Directors and senior management to active implementation? (II) Does the Company establish a risk assessment mechanism against unethical conduct, analyze and assess on a regular basis business activities within their business scope which are at a higher risk of being involved in unethical conduct, and establish prevention programs accordingly, which shall at least include preventive measures against the behaviors as stipulated in item 2, Article 7 of	V		(I) The Company values and embraces the highest standards of conduct, honesty and integrity. Therefore, all managers and employees are required to comply with this code of conduct when they are involved in any activity. (II) The Company has established the Procedures for Ethical Management and Guidelines for Conduct and Employee Handbooks, which specifies the matters that the Company's personnel should pay attention to the implementation of their duties, and has established regulations governing employee rewards and punishments. When employees are committed to unethical conduct, they will be punished. (III) The Company strictly prohibits managers and all employees from engaging in any bribery and illegal activities. If there is any violation, they will be punished or transferred to the judicial authorities according to the actual situation.	None

Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies? (III) Has the Company in the prevention programs for unethical conduct clearly prescribed the operation procedures, conduct guidelines and disciplinary and appeal system for violations of the ethical corporate management rules and implemented them, and conducted review and amendment on the aforementioned programs on a regular basis?
II. Fulfill operations integrity policy (I) Does the Company evaluate business partners' ethical records and include ethics-related clauses in business contracts? (II) Has the Company set up a dedicated unit under the Board of Directors to promote ethical corporate management and regularly (at least once every year) report to the Board of Directors the implementation of the ethical corporate management policies and prevention programs against unethical conduct? (III) Does the Company establish policies to prevent conflicts of interest and provide appropriate communication channels, and implement it? (IV) Has the Company established an effective accounting system, internal control system to put ethical corporate management into practice. The internal auditors shall draw up the relevant audit plan to audit the compliance of the prevention programs for unethical conduct according to the risk valuation results of the unethical conduct, or audited by CPAs? (V) Does the Company regularly hold internal and external educational training on operational integrity?	V		(I) Before the transaction, the Company would conduct credit check operations on the counterparty in accordance with the relevant internal control procedures, trying to understand, by all means, whether they have had dishonest trading behavior. (II) The Company's has adopted the "Corporate Ethics for Ethical Management and Guidelines for Conduct" by the resolution of Board of Directors approved, and has set up a dedicated unit for corporate integrity management. (III) In order to establish a corporate culture and sound development of integrity management, the Company implements a policy to prevent corporate conflicts of interest, and provides appropriate accompanying channels for all colleagues to explain whether they have potential conflicts of interest with the Company. (IV) To implement ethical corporate management, the Company has established effective systems for both accounting and internal control. Internal auditors also checked the compliance status according to the audit plan. (V) Through different channels, the Company has advocated its integrity management philosophy and norms to employees and clearly understands the Company's integrity management philosophy and standards.	None
III. Operation of the whistleblowingchannel	V			None

(I) Has the Company established a specific whistleblowing and reward system, set up convenient whistleblowing channels and designated appropriate personnel? (II) Has the Company established the standard operating procedures for investigating reported misconduct, follow-up measures to be adopted after the investigation, and related confidentiality mechanisms? (III) Does the Company take measures to protect the whistleblower from improper disposal due to the report?		(I) The Company's Board of Directors has approved the "Procedures for Ethical Management and Guidelines for Conduct" to clearly stipulate the reward and punishment, complaint and disciplinary actions. (II) The Company has established the standard operating procedures for investigating the case being exposed by the whistle-blower. (III) The Company has not taken protection measures to protect the whistleblowers from inappropriate disciplinary actions.
IV. Enhancing Information Disclosure Does the Company disclose the ethical corporate management policies and the results of its implementation on the Company website and MOPS?	V	The Company has established a website to disclose information on the Company and has dedicated personnel to update information. At present, it regularly and irregularly reports various financial and business information on the Market Observation Post System.	None
V. If the Company has established the corporate social responsibility principles based on “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies”, please describe any discrepancy between the Principles and their implementation: On March 8, 2017, the company passed the"operation procedures and behavior guidelines for good faith operation"by the board of directors. And there is no significant difference.
VI. Other important information to facilitate better understanding of the Company's corporate social responsibility practices: (such as the Company's amendment to its ethical corporate management best practice principles): The company always pays attention to the relevant integrity management principles at home and abroad, reviews the relevant rules and regulations of the company, and urges all employees to abide by them.

(VII) If the Company has adopted corporate governance best-practice principles or related bylaws, disclose how these are to be searched:

The Company's website provides a "Corporate Governance" section for investors to inquire and download the relevant rules and regulations of corporate governance.

(VIII) Other significant information that will provide a better understanding of the state of the Company's implementation of corporate governance:

1. Continuing Education of Directors in 2021:

Title	Name	Date of Appointment	Continuing E	ducation Date	Organizer	Course Name	Training Hours
			From	To
Chairman of the Board	James He	06/16/2020	09/01/2021	09/01/2021	FSC	The 13th Taipei Corporate Governance Forum	3.0
			10/20/2021	10/20/2021	Securities and Futures Institute	Annual publicity and instruction meeting on legal compliance of insider equity transactions of 2021	3.0
Director	Sohpie Cheng	06/16/2020	09/01/2021	09/01/2021	FSC	The 13th Taipei Corporate Governance Forum	3.0
			11/24/2021	11/24/2021	Taiwan Accounting Research and Development Foundation	How to give full play to the function of Chief Corporate Governance Officer -- Also on the legal responsibility of managers	3.0
Independent Director	Chang-Chou Li	06/16/2020	03/24/2021	03/24/2021	Taiwan Insurance Institute	Cyber security management - challenges and future trends of cyber security in insurance industry	3.0
			08/31/2021	08/31/2021	Taiwan Insurance Institute	Cyber security management structure - connecting information security events with stories	3.0
			09/01/2021	09/01/2021	FSC	The 13th Taipei Corporate Governance Forum	3.0
			09/08/2021	09/08/2021	Taiwan Corporate Governance Association	Opportunities and challenges for enterprises to avoid climate disasters	3.0
			10/08/2021	10/08/2021	Taiwan Corporate Governance Association	Discussion on the application of reward and reward strategies and tools for enterprise employees	3.0
Independent Director	JJ Lin	06/16/2020	08/10/2021	08/10/2021	Taiwan Corporate Governance Association	Cyber security accident handling practice under the new normal of post epidemic	3.0
			08/13/2021	08/13/2021	Taiwan Corporate Governance Association	Red flag of false financial statement	3.0
Independent Director	Jim Lai	06/16/2020	07/29/2021	07/29/2021	Securities and Futures Institute	Issues of cyber security corporate of the board of directors	3.0
			09/01/2021	09/01/2021	FSC	The 13th Taipei Corporate Governance Forum	3.0

2. Continuing Education of Managers and Chief Corporate Governance Officer in 2021:

Title	Name	Continuing Education Date	Continuing Education Date	Organizer	Course Name	Training Hours
		From	To
President	James He	09/01/2021	09/01/2021	FSC	The 13th Taipei Corporate Governance Forum	3.0
		10/20/2021	10/20/2021	Securities and Futures Institute	Annual publicity and instruction meeting on legal compliance of insider equity transactions of 2021	3.0
Vice President,chief financial officer and head of corporate governance	Steffi Huang	08/27/2021	08/27/2021	Taiwan Investor Relations Institute	Refresher Course for Directors and Supervisors (including Independent) and Chief Corporate Governance Officer	3.0
		09/01/2021	09/01/2021	FSC	The 13th Taipei Corporate Governance Forum	3.0
		10/20/2021	10/20/2021	Securities and Futures Institute	Annual publicity and instruction meeting on legal compliance of insider equity transactions of 2021	3.0
		11/19/2021	11/19/2021	Corporate Governance Professionals Association	Seminar on Corporate Corruption and Debunkers Protection	3.0
Chief internal auditor	Joyce Lin	08/25/2021	08/25/2021	Internal Audit Association of R.O.C.	Risk-oriented internal audit method and practice	6.0
		09/30/2021	09/30/2021		Practice of cross-strait tax audit and law analysis	6.0

(IX) Status of Internal Control System:

1. Declaration of Internal Control:

Silicon Optronics, Inc. Statement of Internal Control System Date: March 16, 2022 According to the self-evaluation results of internal control system by the Company in 2021, we hereby states as follows: I. The Company acknowledges and understands that the establishment, enforcement, and preservation of the internal control systems are the responsibility of the Board and that the managers and the Company have already established such systems. The purpose is to reasonably ensure the effectiveness (including profitability, performance, and security of assets); the reliability, timeliness, transparency of financial reporting, and legal and regulation compliance. II. Internal control systems have limitations, no matter how perfectly they are designed. As such, effective internal control systems may only reasonably ensure the achievement of the aforementioned goals. Further, the operation environment and situation may vary, and hence the effectiveness of the internal controls systems. Since the Company's internal control system is provided with a self-monitoring mechanism, the Company will take corrective actions in response to any identified deficiencies. III. The evaluation of effectiveness of the internal control system design and implementation is made in accordance with the Guidelines for the Establishment of Internal Control Systems by Public Companies (the Guidelines). The Guidelines are made to examine the following five factors during the management and control process: 1. Control environment, 2 Risk assessment, 3 Control operation, 4 Information and communication, and 5 Supervising operation. Each factor also includes several items. Please refer to the Guidelines for the preceding items. IV. The Company has examined the effectiveness of each respected area in the internal control system based on the Guidelines. V. Based on the findings of such evaluation, Sitronix believes that, on December 31, 2021, it has maintained, in all material respects, an effective internal control system (including the supervision and management of our subsidiaries), to provide reasonable assurance over our operational effectiveness and efficiency, reliability, timeliness, transparency of reporting, and compliance with applicable laws, regulations and bylaws. VI. This Statement is a significant part of the Company's annual report and prospectus available to the general public. If any of the above disclosed contents contains false information or omits any material content, the Company will involve legal liability under Article 20, Article 32, Article 171 and Article 174 set forth in the Security and Exchange Act. VII. The Company hereby declares that this statement had been adopted by the Board of Directors on March 16, 2022. Among the 5 attending Directors, no one raised any objection and all consented to the content expressed in this Statement. Silicon Optronics, Inc. Chairman and General Manager: James He Signature

Where a CPA has been hired to carry out a special audit of the internal control system, furnish the CPA audit report: None.

(X) Any legal penalty against the Company or its internal personnel, or any disciplinary penalty by the Company against its internal personnel for violation of the internal control system, during the most recent fiscal year or during the current fiscal year up to the publication date of the annual report, the main shortcomings, and condition of improvement: None.
(XI) Material resolutions of a shareholders meeting or a Board of Directors meeting during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report:

1. Major Resolutions of the 2021 Regular Shareholders' Meeting:

Date	Major Resolutions	Implementation Status
2021.07.01	1. Approval of the Company's 2020 Earning Distribution Plan.	The Company set July 23, 2021 as the distribution base date and August 26, 2021 as the distribution date, with a cash dividend of NT$2.8per share
	2. Approval of the Company's 2020 Business Reports and Financial Statements.	It has been approved by the Regular Shareholders' Meetingand announced
	3. Adoption of the partial amendment to the Company's Procedure for the Election of Directors.	Executed in accordance with the resolution of the shareholders' meeting.
	4. Adoption of the Company's Rules of Procedure for Shareholders' Meetings.	Executed in accordance with the resolution of the shareholders' meeting.
	5. Adoption of the release of the Company's new Directors from non-competition.	Executed in accordance with the resolution of the shareholders' meeting.

2. Major Resolutions of the Board Meetings:

Date	Major Resolutions
03.10.2021	1. Discussion on the Company's Distribution Plan of the Remuneration to Employees and Directors for the Year 2020. 2. Discussion on the Company's 2020 Business Reports and Financial Statements. 3. Discussion on the Company's 2020 Earning Distribution Plan. 4. Discussion on the Statement on Internal Control Systems for the Year 2020. 5. Discussion on the relevant affairs of the 2020general shareholders' meeting.
07.01.2021	1. Discussion on the ex-dividend base date, payment date and related matters of the Company's 2020 EarningDistribution Plan.
11.04.2021	1. Proposal on the formulation the 2022 Annual Audit Plan.
03.16.2022	1. Discussion on the Company's Distribution Plan of the Remuneration to Employees and Directors for the Year 2021. 2. Discussion on the Company's 2021 Business Reports and Financial Statements. 3. Discussion on the Company's 2021 Earning Distribution Plan. 4. Discussion on the Statement on Internal Control Systems for the Year 2021. 5. Discussion on the relevant affairs of the 2022 general shareholders' meeting.

(XII) Where, during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report, a Director or Supervisor has expressed a dissenting opinion with respect to a material resolution passed by the Board of Directors, and said dissenting opinion has been recorded or prepared as a written declaration, the main content: None.
(XIII) A summary of resignations and dismissals, during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report, of the Company's Chairman, President, Heads of Accounting, Finance, Internal Audit and R&D: None.

V. Information on CPA Professional Fees

					Amount Unit: NT$1,000	Amount Unit: NT$1,000
Accounting Firm	Name of CPAs	Audit Period	Audit Fees	Non-Audit Fees	Total	Remarks
Deloitte & Touche	Ming-Yuan Chung	2021	2,450	200	2,650	Other main tax declaration certification
	Tung-Hui Yeh

(I) When the Company changes its accounting firm and the audit fees paid for the fiscal year in which such change took place are lower than those for the previous fiscal year, the reduction in the amount of audit fees, reduction percentage, and reasons therefore shall be disclosed: None.
(II) When the audit fees paid for the current fiscal year are lower than those for the previous fiscal year by 10 percent or more, the reduction in the amount of audit fees, reduction percentage, and reasons therefore shall be disclosed: None.
VI. Information on Replacement of CPAs: None.
VII. The State of the Company's Chairperson, President, or any Manager in Charge of Finance or Accounting Matters Has in the Most Recent Year Held a Position at the Accounting Firm of Its Certified Public Accountant or at an Affiliated Enterprise of Such Accounting Firm: None.
VIII. The State of Any Transfer of Equity Interests And/or Pledge of or Change in Equity Interests by a Director, Supervisor, Managerial Officer, or Shareholder with a Stake of More Than 10 Percent During The Most Recent Fiscal Year or During the Current Fiscal Year up to the Date of Publication of the Annual Report

(I) Change of Equity

Unit: shares

				Unit: shares	Unit: shares
Title	Name	2021		Ending on April 25, 2022
		Addition (reduction) of shares held	Addition (reduction) of shares pledged	Addition (reduction) of shares held	Addition (reduction ) of shares pledged
Chairman of the Board	Heritage BayLimited	(985,000)	`－`	`－`	`－`
	Representative: James He	`－`	`－`	`－`	`－`
Director	Heritage BayLimited	(985,000)	`－`	`－`	`－`
	Representative: Sophie Cheng	`－`	`－`	`－`	`－`
Independent Director	JJ Lin	`－`	`－`	`－`	`－`
Independent Director	Jim Lai	`－`	`－`	`－`	`－`
Independent Director	Chang-Chou Li	`－`	`－`	`－`	`－`
Vice President, R&D Center	Denis Luo	`－`	`－`	`－`	`－`
Vice President, Market Development Division	Peter Zung	`－`	`－`	`－`	`－`
R&d TechnologyChief	MingLi	(115,000)	`－`	`－`	`－`
Vice President and Financial officer	Steffi Huang	(187,000)	`－`	`－`	`－`
Director	HenryChien	(10,000)	`－`	`－`	`－`
Senior Director	Bryce Li(Note 1)	`－`	`－`	`－`	`－`

Note 1 Resigned on June 30, 2021

(II) Stock Trade with Related Party: None.
(III) Stock Pledge with Related Party: None.

IX. Relationship Information, if Among the Company's 10 Largest Shareholders Any One is A Related Party or A Relative Within the Second Degree of Kinship of Another

April 25, 2022; Unit: share; %

Name	Shareholding by himself	Shareholding by himself	Spouse & Minor Shareholding	Spouse & Minor Shareholding	Shareholding under the Title of Third Party	Shareholding under the Title of Third Party	The names and relationships of the top ten shareholders who are related to each other or are spouses or relatives within the secondgeneration	The names and relationships of the top ten shareholders who are related to each other or are spouses or relatives within the secondgeneration	Rem arks
	Shares	Shareholding ratio	Shares	Shareh olding ratio	Shares	Sharehold ing ratio	Name	Relation
Heritage Bay Limited Representative: James He	17,691,413	22.63%	-	-	-	-	-	-	-
	150,000	0.19%	-	-	-	-	-	-	-
Heritage Bay Limited Representative: Sophie Cheng	17,691,413	22.63%	-	-	-	-	-	-	-
	-	-	-	-	-	-	-	-	-
Full Guest Investments Limited Representative: Charles Lu	4,875,458	6.24%	-	-	-	-	-	-	-
	5,059	0.01%	-	-	-	-	-	-	-
Denis Luo	4,583,587	5.86%	-	-	-	-	-	-	-
Triumph Partners Limited Representative: Lin Hung	2,403,000	3.07%	-	-	-	-	-	-	-
	-	-	-	-	-	-	-	-	-
Peter Zung	1,311,000	1.68%	-	-	-	-	-	-	-
Treasury shares account of Silicon Optronics, Inc.	1,000,000	1.28%	-	-	-	-	-	-	-
Frank Huang	400,179	0.51%	-	-	-	-	-	-	-
MingLi	396,000	0.51%	-	-	-	-	-	-	-
HUNG-LIN Chen	381,000	0.49%	-	-	-	-	-	-	-
MING-KUN Hsieh	341,000	0.44%	-	-	-	-	-	-	-

X. The Number of Shares Held by the Company, by the Directors, Supervisors and Managers of the Company, and by any Entities either Directly or Indirectly Controlled by the Company in the Same Investee Enterprise, and the Calculation of the Consolidated Shareholding Ratio of the above Categories: None.

Chapter 4 Capital Overview

I. Capital and Shares

(I) Source of Capital

1. Formation of capital

April 25, 2022; Unit: share; NT$

Year/Month	Issued Price	Authorized Capital	Authorized Capital	Paid-in Capital	Paid-in Capital	Remarks	Remarks	Remarks
		Shares	Amount	Shares	Amount	Sources of Capital	Capital Increased by Assets Other than Cash	Others
2019.05	10	100,000,000	1,000,000,000	77,977,900	779,779,000	Employee subscription warrants conversion	`－`	Note 1
2019.08	10	100,000,000	1,000,000,000	78,025,900	780,259,000	Employee subscription warrants conversion	`－`	Note 2
2019.11	10	100,000,000	1,000,000,000	78,055,900	780,559,000	Employee subscription warrants conversion	`－`	Note 3
2020.03	10	100,000,000	1,000,000,000	78,080,900	780,809,000	Employee subscription warrants conversion	`－`	Note 4
2020.05	10	100,000,000	1,000,000,000	78,105,900	781,059,000	Employee subscription warrants conversion	`－`	Note 5
2021.05	10	100,000,000	1,000,000,000	78,110,900	781,109,000	Employee subscription warrants conversion	`－`	Note 6
2021.11	10	100,000,000	1,000,000,000	78,150,900	781,509,000	Employee subscription warrants conversion	`－`	Note 7:
2022.03	10	100,000,000	1,000,000,000	78,152,900	781,529,000	Employee subscription warrants conversion	`－`	Note 8:
2022.04	10	100,000,000	1,000,000,000	78,168,900	781,689,000	Employee subscription warrants conversion	`－`	Note 9:

Note 1: Approved by the Zhu Shang Zi Letter No. 1080013714 issued on May 16, 2019.

Note 2: Approved by the Zhu Shang Zi Letter No. 1080024631 issued on August 23, 2019.

Note 3: Approved by the Zhu Shang Zi Letter No. 1080033919 issued on November 22, 2019.

Note 4: Approved by the Zhu Shang Zi Letter No. 1090008351 issued on March 26, 2020.

Note 5: Approved by the Zhu Shang Zi Letter No. 1090013430 issued on May 14, 2020.

Note 6: Approved by the Zhu Shang Zi Letter No. 1100013586 issued on May 13, 2021. Note 7: Approved by the Zhu Shang Zi Letter No. 1100033310 issued on November 12, 2021. Note 8: Approved by the Zhu Shang Zi Letter No. 1110008986 issued on March 24, 2022. Note 9: The conversion of stock option certificates into 16,000 ordinary shares is to be registered in August 2022.

2. Type of Stock

2. Type of	Stock	Stock	Stock	Stock
	April 25,2022;Unit: shares
Type of Stock	Authorized Capital			Remarks
	OutstandingShares	Unissued Shares	Total
Registered Common stock	78,168,900 (Including 1,000,000 treasuryshares)	21,831,100	100,000,000	Note 1

Note 1: 6,000,000 shares of the authorized capital was reserved for the issuance of employee stock option certificates.

Relevant information on the shelf registration: None.

(II) Shareholder Structure

April 25, 2022; Unit: share; Name

Shareholder Structure Quantity	Government Agencies	Financial Institutions	Other Juridical Persons	Individuals	Foreign Institutions & individuals	Total
Number of Shareholders	-	-	44	19,825	56	19,925
Shareholding (shares)	-	-	1,510,802	43,804,589	32,853,509	78,168,900
Shareholding ratio	0.00%	0.00%	1.93%	56.04%	42.03%	100.00%

(III) Distribution of Equity Ownership

April 25, 2022/ face value of NT$10 per share

Shareholding Range	Number of Shareholders	Shareholding (shares)	Shareholding ratio
1 `－` 999	3,028	378,197	0.48%
1,000 `－` 5,000	15,674	23,639,100	30.24%
5,001 `－` 10,000	714	5,570,046	7.13%
10,001 `－` 15,000	193	2,500,114	3.20%
15,001 `－` 20,000	113	2,087,557	2.67%
20,001 `－` 30,000	63	1,577,779	2.02%
30,001 `－` 40,000	37	1,306,024	1.67%
40,001 50,000	21	979,245	1.25%
50,001 `－` 100,000	48	3,302,173	4.22%
100,001 `－` 200,000	23	3,211,028	4.11%
200,001 `－` 400,000	4	1,353,000	1.73%
400,001 `－` 600,000	1	400,179	0.51%
600,001 `－` 800,000	-	-	0.00%
800,001 `－` 1,000,000	1	1,000,000	1.28%
1,000,001 or more	5	30,864,458	39.48%
Total	19,925	78,168,900	100.00%

(IV) Major Shareholders

r Shareholders	r Shareholders	r Shareholders
April 25,2022;Unit: share
Shares Major shareholders	Shareholding (shares)	Shareholding ratio
Heritage BayLimited	17,691,413	22.63%
Full Guest Investments Limited	4,875,458	6.24%
Denis Luo	4,583,587	5.86%
Triumph Partners Limited	2,403,000	3.07%
Peter Zung	1,311,000	1.68%
Treasury shares account of Silicon Optronics, Inc.	1,000,000	1.28%
Frank Huang	400,179	0.51%
MingLi	396,000	0.51%
HUNG-LIN Chen	381,000	0.49%
MING-KUN Hsieh	341,000	0.44%

(V) Market Prices, Net Worth Per Share, Earnings Per Share, Dividends Per Share and Related Information in the Most Recent 2 Fiscal Years

Unit: NT$

					Unit: NT$
Item	Year		2020	2021	The Current Fiscal Year up to March 31, 2022 (Note 5)
Market Price Per Share	Highest		147.50	242.50	138.50
	Lowest		59.70	85.80	93.80
	Average		93.66	144.16	113.46
Net Worth per Share	Before distribution		28.24	34.94	-
	After Distribution (Note 1)		25.48	(Note 6)	-
Earnings Per Share	Weighted Average Shares		78,105,900	78,152,900	-
	Earnings Per Share		3.65	9.61	-
Dividends per share	Cash Dividends		2.80	3.50 (Note 6)	-
	Stock dividends	-	-	-	-
		-	-	-	-
	Accumulated unpaid dividends		-	-	-
Analysis of POI	Price-to-Dividends Ratio (Note 2)		25.66	15.00	-
	Price-to-Earnings Ratio (Note 3)		33.45	41.19 (Note 6)	-
	Yield on Cash Dividends (Note 4)		2.99%	2.43% (Note 6)	-

Note 1: It is adjusted based on the resolution of shareholders' meeting held in the following year.

Note 2: Price/earnings ratio = Average closing price per share for the current fiscal year/earnings per share.

Note 3: Price/dividend ratio = Average closing price per share for the current fiscal year/cash dividend per share.

Note 4: Cash dividend yield = Cash dividend per share/average closing price per share for the current fiscal year.

Note 5: For net worth per share and earnings per share for the current fiscal year as of the publication date of this annual report, data from the first quarter of 2022 that has been reviewed by CPAs should be filled.

Note 6: Subject to the resolution of the shareholders' meeting.

(VI) Dividend policy of the Company and its implementation status

Dividend policy Dividend and dividend distribution policy, the distribution of earnings can be obtained by means of stock dividends or cash dividends. Considering the Company is at its operating growth stage and taking into account the interests of the Company's shareholders and long-term and short-term capital and business planning, when distributing distributable earnings, shareholders' dividends shall be no more than 90% of the accumulated distributable earnings, and the cash dividends shall be no less than 10% of the distributed dividends.
Execution status: The Company's Board of Directors resolved to issue a shareholder dividend of NT$3.5 per share on March 16, 2022, which will be handled in accordance with the relevant provisions after the resolution of the regular shareholders' meeting on June 23, 2022. The proposal will be implemented in accordance with the relevant regulations.
(VII) Effects upon the Company's business performance and earnings per share of any stock dividend distribution proposed or adopted at the most recent Shareholders' Meeting: None.
(VIII) Remuneration to employees and Supervisors
The percentages or ranges of employee and Director compensation is as set forth in the Company's Articles of Incorporation.
- According to the Company's Articles of Incorporation, , if there is any profit for a specific fiscal year, the Company shall allocate no less than 0.005% and no more than 25% of the profit as employees’ compensation and shall allocate at a maximum of 3% of the profit as remuneration to directors.
The basis for the valuation of the amount of remuneration of employees and directors, the basis for the calculation of the number of shares allotted with stock dividends, and the accounting treatment when the actual amount of allotment is different from the estimated amount: The 2021 cash remuneration distributable to employees passed by the Company on March 16, 2022 was accrued at a certain proportion according to the profitability of the current year. If the actual distributed amount is different from the estimated number, it will be treated as changes in accounting estimates and accounted in the distribution year.
Information on the proposed remuneration to employee and Director approved by the Board of Directors:
- (1) If the employee's remuneration and Director's remuneration distributed in cash or stock differs from the annual estimated amount of the recognized expenses, the difference, cause and treatment shall be disclosed:
  - On March 16, 2022, the Company's Board of Directors resolved to distribute

NT$78,500,000 for employee remuneration and NT$10,000,000 for Directors' remuneration of 2021, which are the same as the 2021 estimated amount without any difference.

(2) The amount of any employee remuneration distributed in stocks, and the size of that amount as a percentage of the sum of the after-tax net income stated in the parent company only financial reports or individual financial reports for the current period and total employee remuneration: The company does not plan to distribute employee compensation in stock this year, so it is not applicable.
The actual distribution remuneration of employees and Directors for the previous fiscal year (including the distributed number, amount and shares price), and where is any discrepancy between the actual distribution and the recognized remunerations for employees and Directors, the discrepancy, cause, and how it is treated shall be stated:

	Resolutions of the Board Meeting on March 10,2021	Actual distributed amount
	Amount(NT$)	Amount(NT$)
Directors' Remuneration	3,750,000	3,750,000
Employee Remuneration	28,570,000	28,570,000
Total	32,320,000	32,320,000

(IX) The State of the Company's Repurchases of its Own Shares:

The State of the Company's Repurchases of its Own Shares (executed)

March 31, 2022

	March 31,2022
Number of Repurchase	First Repurchase
The Resolution Date of the Board of Directors	August 12, 2019
Purpose of Repurchase	Shares Transferred to Employees
Repurchase Period	August 14,2019 to October 09,2019
Price Range of Shares to be Repurchased	NT$53 to NT$115
Estimated type and number of shares repurchased	1,000,000 common shares
Actual type and number of shares repurchased	1,000,000 common shares
Actual repurchase amount	NT$96,925,600
Average repurchasepriceper share	NT$96.93
Number of Retired Shares and Shares Transferred to Employees	None
Proportion of Cumulative Number of Shares Held to Total Number of Shares Issued(%)	1.28%

II. Issuance of Corporate Bonds: None.
III. Issuance of Preferred Shares: None.
IV. Issuance of Global Depository Receipts: None.

V. Employee Share Subscription Warrants:

(I) The Status of Employee Stock Options

		March 31,2022	March 31,2022	March 31,2022	March 31,2022	March 31,2022
Type of Employee Stock Options		The company's first employee stock options in 2012	The company's second employee stock options in 2012	The company's first employee stock options in 2013	The company's second employee stock options in 2013	The company's second employee stock options in 2021
Date of Effective Registration		May 16, 2012	May 16, 2012	July 29, 2013	July 29, 2013	July 22, 2021
IssuanceDate		June20,2012	November30,2012	August15,2013	June10,2014	Mar 24,2022
Number of Options Granted		1,700 units	1,500 units	450 units	900 units	3,500 units
Ratio of the number of shares available to subscribe to the total number of shares issued (Note2)		2.17%	1.92%	0.58%	1.15%	4.48%
Option Duration		10 years
Type of shares underlying the options		Issue of new shares
Vesting Schedule		Expirationof 2years: 50%,Expirationof3 years: 75%,Expirationof 4years:100%
Shares exercised		1,301,000 shares	988,000 shares	380,000 shares	900,000 shares	-
Value of Shares Exercised		NT$13,660,500	NT$19,266,000	NT$12,540,000	NT$41,400,000	-
Shares Unsubscribed		126,000 shares	477,000 shares	55,000 shares	0 shares	3,500,000 shares
Exercise Price Per Share	Original Price	NT$10.50	NT$19.50	NT$33.00	NT$33.00	NT$103.50
	After adjustment	NT$ 10.25	NT$ 19.03	NT$ 32.21	NT$ 32.21	NT$ 103.50
Percentage of Shares Unexercisable to Outstanding Common Shares (%) (Note2)		0.16	0.61	0.07	0	4.48
Impact to Shareholders' Equity		The Company attracts and retains the professional talents required by the Company, and enhances the Company's coherence and sense of belonging among employees, jointly creating the interests of the Companyand shareholders,and has apositive impact on shareholders' equity.

Note: 1. Adopted with approval at the same time when the Company went public.

Calculated based on the number of 78,168,900 issued shares.

(II) The manager who obtained the employee stock option and the name, of the top ten employees who have obtained the stock option and amount of NT$30 million or more.
List of Managers and Top 10 Employees Participating in Employee Stock Option Plan:

March 31, 2022; Unit: share; NT$

	Title	Name	Number of Options Shares	% of shares exercisable to outstanding Common Shares	Options Exercised	Options Exercised	Options Exercised	Options Exercised	Options Unexercised	Options Unexercised	Options Unexercised	Options Unexercised
					Number of shares subscribed	Subscript ion price	Total value of shares subscribed	% of shares subscribe d to outstandin g common shares	Number of shares subscribed	Subscript ion price	Total value of shares subscribed	% of shares subscribed to outstanding common shares
Managers	Chairman and President	James He	830,000	1.06%	0	0	0	0%	830,000	103.50	85,905,000	1.06%
	Chief Technology Officer	Ming Li
	Vice President	Denis Luo
	Vice President	Peter Zung
	Vice President and Financial officer	Steffi Huang
	Director	Henry Chien
	Senior Director	Bryce Li (Note 1)

Note 1: Resigned on June 30, 2021

The manager who obtained the employee stock option and the name, of the top ten employees who have obtained the stock option and amount of NT$30 million or more: none.

(III) Restricted employee shares: none.

VI. Status of Issuance of New Share in Connection with Mergers or Acquisitions or with Acquisitions of Shares of Other Companies: None.
VII. The State of Implementation of the Company's Capital Allocation Plans: Not Applicable.

Chapter 5 Operations Highlights

I. Business Activities

(I) Business Scope
The Company's Major lines of Business
- A. CC01080 Electronic Components Manufacturing Industry
- B. F401010 International Trade
- C. I501010 Product Designing
Proportion of each business

			Unit: NT$ 1,000	Unit: NT$ 1,000
Year Product	2020		2021
	Amount	%	Amount	%
CMOS Image Sensor	3,237,207	97.25	3,967,619	99.28
Others	91,488	2.75	28,877	0.72
Total	3,328,695	100.00	3,996,496	100.00

Products (services) currently offered by the Company
- The Company is a professional IC design company that develops and sells IC products based on CMOS Image Sensors (complementary metal oxide semiconductor image sensor), which are mainly used in target applications on Survilliance camera, Automotive camera, consumer image products and biological sensing chips. The Company is also actively developing a variety of CIS industrial applications, such as near infrared sensing applications and industrial detection and other related market applications.
New product development plan
- The core competence of the Company is the research and development of the sensing circuit, analog, digital and mixed signal circuit design capability in the CMOS image sensors. Another key success factor is to provide customers with the best solution based on the own technical customization capabilities, from circuit design, wafer process technology, to optical simulation, developing and providing specific application CMOS image sensors. The Company has complete technical capabilities and works with leading wafer foundry partners to meet the needs of customers. Future technology roadmap includes:
- (1) High-performance CMOS image sensor.
- (2) High resolution CMOS image sensor.
- (3) Global shutter CMOS image sensor.
- (4) Low power CMOS image sensor.
- (5) Design and development of sensors for special applications.
(II) Industry Overview
Industry Status and Trends
- A. Overview of the semiconductor market

Semiconductor products mainly include four types: integrated circuits (IC), discrete components (Discrete), sensing components (Sensors) and optoelectronic components (Optoelectronics). The global semiconductor market was affected by the COVID-19 in 2020 and 2021. Many markets related to semiconductor applications were squeezed by strong demands from each other, including the increased demand for computers and their peripheral products, the deployment and construction of 5G mobile phones, and the increased demand for automotive electronics. As a result, the semiconductor industry is in a state of tight supply capacity from the most upstream foundry to the downstream packaging and testing. At the beginning of 2022, the global consumer market is still affected by international tensions and other factors that continue to impact the overall market demand changes.

B. Overview of the IC design industry

The number of IC design companies in Taiwan is stably growing due to the local comprehensive semiconductor ecosystem and the rich experience in the IC design industry. Taiwan is currently the top 3 region in the world, in terms of the number of IC design companies, second only to the United States and China. There are two main reasons why Taiwan's IC design industry is booming. Firstly, the semiconductor industry is complete and the industry scale is large. IC design companies can leverage Taiwan local semiconductor food chain such as wafer manufacturing, packaging, and testing. Besides, because it is closer to the local IT downstream industry chain, the IC design industry is naturally booming, and the IC design companies have more competitive advantages than foreign IC design companies. As a result, Taiwan's IC design output value has been ranked second in the world in recent years, second only to the United States.

C. Overview of CMOS Image Sensor Market
CMOS (Complementary Metal-Oxide-Semiconductor) is a basic component of the integrated circuits, which is by NMOS (n-type MOSFET) and PMOS (p-type MOSFET) on the silicon wafer. NMOS and PMOS have complementary physical properties, so they are called CMOS, which can be used to produce static random access memory (SRAM), MCU, microprocessors, digital electronic systems, and optical instruments.

CMOS has the advantage of consuming energy only when the transistor needs to be switched on and off, so it is very power-saving and generates less heat. CMOS is the most common semiconductor process. According to TSR Analytics, global CIS output will continue to grow at a compound annual rate of more than 10% from 2017 to 2024.

D. Overview of the biochip market

Biochip refers to different chemical materials such as glass, plastic, silicon conductor, etc. that use the modern electrical, mechanical and optical techniques

to allow the biomolecules to be immobilized on the surface. and the biological experiments that previously needed to be performed in an entire laboratory can be performed on a single wafer now. The experimental method can greatly reduce the use of samples and experimental consumables, and the accuracy of the experimental results is very good, so it can quickly generate a large amount of reliable data. Currently, the test methods have become mainstream for biomedical research.

The development of biochips began in the late 1980s, when scientists from many universities, research institutes, and companies in Europe and the United States devoted themselves to the development of related technologies. Biochips, as the name implies, have many similarities with computer chips, as they are miniaturized chips that can be synchronized and paralleled to perform a large number of analytical studies in a very short time, and many biochips are manufactured by the technologies used by computer chips.

For example, in the past, only one gene or a few genes could be detected at a time when scientists studied gene expression. If multiple genes or proteins need to be studied, the experimental procedure is time-consuming and requires a lot of human resources. With the invention of biochips, scientists can simultaneously detect tens of thousands of genes or proteins, so biochips have become a tool for genomics and proteomics research.

Biological detection chip is a very hot field of research and development at present, there are three main products: (1) DNA Microarrays, (2) Lab on a Chip, (LOAC), and (3) Protein Microarrays. In recent years, by the technology improvement and the cost reduction, the micro reaction space can be designed on the biochips to purify cells and other biochemical molecular, so the biochips have great potential.

With the growing demand for DNA sequencing, the high cost and time-consuming problems generated by the use of Sanger Method decoding limited research and development of DNA sequencing, so new sequencing techniques are being researched and developed. With the improvement of molecular biotechnology, a more efficient sequencing method has been developed, namely Next Generation Sequencing (NGS). In the Sanger sequencing method, the DNA in the target is amplified, and long fragments (about one thousand nucleobase pairs) are read. But the Next Generation DNA Sequencing (NGS) is to completely fragment the DNA (about 300-800 nucleobase pairs) and do the sequencing, and NGS becomes the major technology in DNA sequencing.

At present, Illumina and Thermo Fisher own the major market share in the global Next Generation DNA Sequencing market and followed by other manufacturers such as Roche and PacBio. Among them, Illumina had 71% of the overall market

in 2014 as Illumina's sequencing technology was the most mature in the industry. Thermo Fisher acquired Life Technologies, which later launched its Ion Torrent technology platform, which came in second with 20% of the market, followed by Roche at 5%, PacBio at 3 percent and others at 1%.

The new generation DNA sequencing drastically reduces DNA sequencing cost. The HiSeq X Ten sequencing device introduced by Illumina in early 2014, can resequence individual genome sequences at a cost of US$1,000 within a day. The next generation of equipment is expected to reduce the cost to around US$900. Research institutes, pharmaceutical companies, and testing service companies have been investing in related equipment purchases, allowing the next-generation DNA sequencing market to grow rapidly.

Another market driver is the FDA's regulations for new drug development to be accompanied by the development of companion diagnostic reagents. Through the sequencing of DNA maps, it attempts to identify more relevant genes and improve the efficiency of new drug development and effective drug usage. Due to the development of next-generation DNA sequencing, nonintrusive prenatal fetal genomic detection has also developed rapidly. In the past, amniocentesis was required to obtain a prenatal examination of suspension cells. But by capturing fetal free cells or free DNA in the blood of pregnant women, the whole genome of the fetus can be obtained by DNA sequencing and analysis. The result can be obtained around the 10th week of pregnancy instead of previous 16th week, significantly reducing the risks that may occur. Additionally, another expected popular application is the cancer detection. Due to the complexity of cancer detection targets, multiple genetic locations need to be analyzed, and new genetic variants will appear between treatments. The next generation of DNA sequencing combined with liquid slicing technique can meet such continuous and extensive diagnostic and monitoring needs; however, because cancer diagnosis and treatment require long-term clinical verification, it is still mainly used in the patients failed with the first-line and second-line cancer drugs. However, the improved therapeutic benefits of this testing service still make the prospect of applying DNA sequencing services to cancer detection promising. This shows that, in the future, with a large number of applications of next generation DNA sequencing, there will be many changes in the clinic.

2. Correlations between upstream, midstream and downstream Industries

The Links between the Upstream, Midstream, and Downstream Segments of the IC Industry Supply Chain in Taiwan are as follows:

Structure	Steps	Contents
Upstream	IC design	Sensitive element design, analog circuit design, digital circuit design
Midstream	Mask and wafer manufacturing	Mask making: Metal splashing, photoresist coating, electron beam writing, chemical development, etching technology, photoresist removal Wafer fabrication: Oxidation, lithography, etching, ion implantation, vapor deposition, metal sputtering,wafer inspection
Downstream	Packaging and testing	Cutting, grinding, drilling, wiring, configuration,sealing,testing

3. Product Development Trends

The Area CMOS Image Sensor market is highly competitive. In addition to the good image quality, the price and customer service are key success factors. The main product development plans are recently, in the surveillance security systems, digital IP cameras and ccHDtv are moving toward higher resolutions. The mainstream products are moving from 720P (HD) towards 1080P (FHD) and 4 million / 5 million pixels, driving the trend of HD surveillance in the future. Besides, in the automotive electronics, the driving monitoring recorder, the whole vehicle landscape and driving safety assistance are also moving towards 720P/1080P and higher resolution, and have gradually become the standard safety equipment in various types of automotive products, in order to provide a safer driving environment for drivers.

The Company will also develop higher technology products such as higher wide dynamic range and noise resistance, high temperature range and BSI and near infrared sensing and other advanced processes used in related imaging products, in order to provide customers with more cost-effective products.

Competitions:

Area CMOS Image Sensor in recent years, with the stagnation of specifications in the mobile phone market, various manufacturers have tried to have differentiation for camera functions. The introduction of AI features, the development of higher resolution pixels, the dual lens, and even multi-lens design are new areas. Also this is expected to drive the demands and the higher specification requirement for sensors. In the surveillance applications, as the requirement of IP cameras and HDCCTV are getting higher, the demand for Full HD and higher resolution sensors has been increasing rapidly. The introduction of more cost-effective products in 2021,

including 960P, 1080P, 4 Mega and 5 Mega/ 8 Mega pixel and other full HD products, SOI has also launched BSI and near infrared sensing enhancement technology high-quality products to meet the market demand, expecting to further cooperate with customers with higher added value products.

(III) Technology and R&D Overview
R&D expenditures during the most recent fiscal year

			Unit: NT$ 1,000
Year Item	2020	2021	First Quarter of 2022
R&D Expenses	284,672	402,551	79,835
OperatingRevenue	3,328,695	3,996,496	682,138
(%)	8.55	10.07	11.70

Developed and on-going technologies or products
- (1) BSI products.
- (2) Near-infrared sensing enhancement technology.
- (3) Vehicle specification AEC-Q100 certification.
- (4) High dynamic range products used in automotive and security monitoring and identification markets.
- (5) Global Shutter products.
- (6) A new generation of FSI high-performance/cost optimized products.
- (7) Design and process development of sensors for special applications.
(IV) Long-term and short-term business development plans
Short-term marketing development plans
- (1) Expand the channels in the existing markets and actively develop various potential markets.
- (2) Actively develop domestic and overseas major customers to increase market share.
- (3) Enhance the services of existing customers to maintain long-term relationships.
Long-term marketing development plans
- (1) Strengthen the analysis of market change (consumer and product trends) to provide the customer-oriented products to strengthen the customer relationship
- (2) Enhance international marketing capabilities and strive to cooperate with world-class companies.
- (3) Actively develop new markets and applications.

II. Market and Sales Overview

(I) Market Analysis
Sales by regions for major products and services

Unit: NT$ 1,000; %

			Unit: NT$ 1,000;%	Unit: NT$ 1,000;%
Year Region	2020		2021
	Amount	%	Amount	%
External sales	3,241,588	97.38	3,760,095	94.08
Domestic Sales	87,107	2.62	236,401	5.92
Total	3,328,695	100.00	3,996,496	100.00

Market share
Benefit from the steady growth of the consumer webcams and surveillance market, and the fact that the Company's operation has stepped into the right track, with the introduction of more new products in 2022, we believe that we will be able to provide more comprehensive services for our customers' overall product planning and design, which will significantly increase our market share in the future.
Market supply and demand, and market growth in the future According to IC Insight, despite a turbulent year in 2020, the total value of the imaging sensor market is expected to grow at a compound annual rate of 12% from 2020 to 2025. At present, although facing the relatively tight period of overall semiconductor supply chain capacity, the Company will provide customers with better product choices under the development of many new processes and new technologies. In the near future, the Company will continue to grow in the overall image sensor market, driven by the continued demand for consumer network monitoring, car camera modules and computer peripheral cameras.
Competitive Niches
(1) Excellent management and technical teams
- The Company focuses on the design and development of CMOS Image Sensor and that R&D capacity and technical level have reached the same level as other world-wide leading CMOS manufacturers. The Company plans to provide the high quality and high performance products of Area CMOS Image Sensor for high-end surveillance and specific application sensors market.
(2) Stable partners

All the Taiwan CMOS Image Sensor companies are fabless IC design companies. Therefore, in addition to the technical level of the design end, the wafer process technology and the yield of packaging and testing are the key factors that affect the IC mass production schedule. The Company works closely with Powerchip and TSMC in the CMOS Image Sensor area to provide the best technical and mass production support. The Company maintains good relationships with the IC testing and packaging companies and thus has more protection in product yield and delivery.

(3) Mutual benefits from long-term customers

The Company's sales model relies on cooperation with semiconductor

distributors and direct sales to downstream system integrator customers. In addition to expanding marketing channels in existing markets and actively seeking more business in potential markets, the Company provides technical service team to help customers quickly introduce design and stable production to establish stable cooperative relations with customers for direct sales of assembly and manufacturing.

(4) Fast access to the market
The Company maintains a stable cooperative relationship with the major security monitoring manufacturers. Through the cooperation with the world's major manufacturers, we can learn more about the market trends, and develop new products in advance to meet the needs of customers and the market. In recent years, we have cooperated with international top medical equipment companies to develop gene sequencing testing chips. With our professional research and development team and the best production support from wafer foundry, our products can be quickly put into mass production and shipment in the year of establishment, and shorten the time to market of products.
(5) Global manufacturing base

Taiwan is a heart area for the production of electronic products in communications, information and consumer electronics sectors, such as mobile phones, tablet devices, PC cameras, digital cameras, and other products with large shipments and high global market share. For the Company, the customer service, delivery and cost are more competitive than those of the foreign CMOS Image Sensor design companies or the international Integrated Device Manufactures (IDM), so it has a competitive niche due to the production base is nearby.

Favorable and unfavorable factors affecting the Company's development prospects and corresponding countermeasures
(1) Favorable development
- A. The demand for image sensors market continues to increase With the development and advancement of technology, the popularity of smart living and the Internet of Things has enabled countries to continue to have more demands for various video devices. Mobile devices, tablet PCs, wearable product applications (such as Google Glass, VR, AR) and other mobile devices are driving the demands for image sensors. The market of dash cams, surveillance cameras, etc. are also growing because of consumers' awareness of security. At the same time, with the technology breakthrough in ADAS, car image, DNA sequencing, and other application areas, the demand for image sensors will be expected to grow year by year.

B. Domestic semiconductor foundry supply chain is complete, providing local IC design companies with full logistics support.
- Taiwan is the heart of global wafer foundry, with high market share, high capacity utilization, and complete process technology and experience. Taiwan's semiconductor industry is unique in its vertical integration. The entire IC industry supply chain features a very fine vertical integration and well-organized structure, which makes the Company's products have certain advantages in terms of timekeeping and cost control.
C. Rich industry experience The Company is a CMOS image sensor IC design company. The R&D team has rich experience and can adjust the product portfolio in time according to market trends. The Company is also actively expanding its high-resolution market to provide customers products with higher cost-performance ratio, and to continue to increase the use of existing products and extend existing technologies
(2) Unfavorable factors and countermeasures
A. Market competition
- With technology development, CMOS image sensors are becoming more and more widely used (such as mobile phones, consumer electronics, etc.). As the market demand continues to expand, the number of manufacturers entering this sector is increasing.

Response measures:

a. Based on the Company's technological advantages, the Company would actively develop diversified, high value-added niche products to enrich product portfolio, increase profit margins, and strengthen its market competitiveness.
b. Since 2016, the Company's security monitoring products have been listed among the world's major suppliers in the TSR market survey report by the authoritative CIS survey agency, and the performance and quality of our products have been widely accepted by the market.
c. In addition to enhancing product technologies, the Company also provides after-sales services to understand the customer's needs for the future.
B. The products are mainly exported abroad and would be exposed to the risk of exchange rate fluctuations.
Most of the Company's products are exported to mainland China and are mainly denominated in US dollars. The main purchase item is wafer and wafer fabrication is also denominated in US dollars. Therefore, the foreign currency receivables and payables could be offset and FX risk is hedged,

except foreign exchange gains and losses on foreign currency net assets. The fluctuation in exchange rates can, therefore, have a certain degree of impact on the Company.

Response measures:

  - a. Taking advantage of the characteristic of natural hedging, the foreign currency cash sales of foreign sales products should be used for domestic and foreign procurement and outsourcing processing to generate foreign currency payables. Therefore, it is only necessary to assess the future exchange rate fluctuations against the foreign currency net assets. If there is a need for hedging, it is necessary to use various financial instruments such as currency forward contracts as needed to avert exchange rate fluctuation risks.

  - b. The Finance department can instantly understand the changes in exchange rates and stay in close contact with the foreign exchange departments of financial institutions to fully grasp the trend and changes in exchange rates to actively respond to the negative impact of exchange rate fluctuations.

(II) Important uses and production processes of major products
Major uses of the primary products

Major uses of theprimary	products
Main Product	Applications
CMOS Image Sensor	It is applied in monitoring and security equipment, driving video camera and circle-view application, gene sequencing detection chipand other imaging products

The production process of main products
(1) CMOS Image Sensor:
- The Company is a IC design company. The overall manufacturing process includes product design, IP acquisition, wafers from wafer foundry, wafer testing, packaging, and product testing. In addition to product design and IP obtaining, we will outsource the production of wafer fabrication, wafer testing, product packaging, and product testing to dedicated OEMs. This not only reduces investment in production equipment but also increases production efficiency. Relevant engineering personnel can also focus more on the development and improvement of production technology to improve quality and yield rate.

==> picture [259 x 293] intentionally omitted <==

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

Product Design & CAD TOOLING &
IP Acquisition Mask making
Pixel technology Wafer fabrication plant
improvement WAFER FOUNDRY
i th
Needle test Wafer test factory
technology Chip Probing
de elopment
Packaging Plant
New packaging
material Chip Assembly
Module assembly
P k i
Modular application Product testing
test technology factory
i l i
----- End of picture text -----

(III) Supply Status of Main Materials

Name of raw materials	Main Suppliers	Supply Situation
Wafer	Powerchip Semiconductor ManufacturingCorp.	Good

The main raw material of the Company is wafer, and the main supplier is Powerchip Semiconductor Manufacturing Corp. The product quality has been stable, and the production capacity and delivery capacity are highly consistent. The cooperation with each other is good, and no shortage of supply conditions.

(IV) Name of customers who account for more than ten (10) percent of the total purchases (or sales) of goods and their dollar amount and proportion of purchase (or sales) of goods in any one of the most recent two fiscal years, and an explanation of the reason for changes in these figures ：

Unit: NT$1,000; %

1. Information on Major Suppliers in the Recent Two Years

Item		2020	2020			2021	2021		The Current Fiscal Year upto March 31,	The Current Fiscal Year upto March 31,	The Current Fiscal Year upto March 31,	2022
	Name	Amount	% of Total Purchasing	Relationship with the Issuer	Name	Amount	% of Total Purchasing	Relationship with the Issuer	Name	Amount	Percentage of Net Purchase for the Current Year up to the Previous Quarter(%)	Relationship with the Issuer
1	Powerchip Semiconductor Manufacturing Corp.	1,473,297	98.11	Yes	Powerchip Semiconductor Manufacturing Corp.	1,891,058	91.95	-	Powerchip Semiconductor Manufacturing Corp.	491,060	89.84	-
2	Others	28,432	1.89	-	Others	165,732	8.05	-	CoAsia Electronics Corp.	51,686	9.46	-
3	`－`	-	-	-	`－`			-	Others	3,860	0.70	-
	Net Purchases	1,501,729	100.00		Net Purchases	2056,790	100.00		Net Purchases	546,606	100.00

Powerchip Semiconductor Manufacturing Corp. has been a non-related person since April 18, 2021.

2. Information on Major Sales Customers in the Recent Two Years

Unit: NT$1,000; %

Item		2020	2020			2021	2021		The Current Fiscal Year up to March 31, 2022	The Current Fiscal Year up to March 31, 2022	The Current Fiscal Year up to March 31, 2022	The Current Fiscal Year up to March 31, 2022
	Name	Amount	% of Total Sales	Relationship with the Issuer	Name	Amount	% of Total Sales	Relationship with the Issuer	Name	Amount	Percentage of Net Sales for the Current Year up to the Previous Quarter(%)	Relationship with the Issuer
1	Customer A	2,419,855	72.70	-	Customer A	1,567,124	39.21	-	Customer D	308,933	45.29	-
2	Customer B	532,764	16.00	-	Customer C	865,467	21.66	-	Customer C	231,547	33.94	-
3	Others	376,076	11.30	-	Customer D	850,652	21.28	-	Others	141,658	20.77	-
					Others	713,253	17.85	-
	Net sales	3,328,695	100.00		Net sales	3,996,496	100.00		Net sales	682,138	100.00

The main customer is the distributor, and the reason for the change is to change the distributor.

(V) Production volume and value in the most recent two fiscal years

Unit: Thousand NT$ 1,000

Year Production volume and value Main Products (or departments)		2020			2021
	Production Capacity	Production Volume	Production Value	Production Capacity	Production Volume	Production Value
CMOS Image Sensor	-	146,022	3,292,673	-	166,212	5,001,450

(VI) Sales volume and value in the most recent two fiscal years

Unit: 1,000 pcs; 1,000 pcs; NT$ 1,000

Year Sales volume and value Main Products (or Departments)			2020	2020			2021	2021
	Domestic Sales		External sales		Domestic Sales		External sales
	Volume	Value	Volume	Value	Volume	Value	Volume	Value
CMOS Image Sensor	2,401	87,107	144,356	3,150,100	6,597	236,230	129,179	3,731,389
Others	-	-	-	91,488	-	171	-	28,706
Total	2,401	87,107	144,356	3,241,588	6,597	236,401	129,179	3,760,095

III. Employee Information

Unit: people

				Unit:people
Year		2020	2021	As of April 28,2022
Number of employees	R&D	40	42	40
	Managerial, Sales & Marketing	13	13	13
	Manufacturing	`－`	`－`	`－`
	Total	53	55	53
AverageAge		37.26years old	37.07 years old	38.32years old
Average years ofservices		5.93years	6.29 years	6.82years
Percentage Distribution of Academic Qualificatio ns	Ph.D	1.89%	1.82%	1.89%
	Master's degree	56.60%	58.18%	56.60%
	Bechelor's degree	41.51%	40%	41.51%
	Associate's degree	`－`	`－`	`－`
	Less than associate's degree	`－`	`－`	`－`

IV. Environmental Protection Expenditures

The Company is a fabless IC Design house that outsources its production activities to qualified wafer foundry, testing and packaging partners. No environmental penalties were incurred in the past years and there are no foreseeable environmental contamination risks in the future.

V. Labor Relations

(I) Employee benefits, continuing education and training, and the state of the retirement system and the status of implementation of the labor management agreements
Employee benefits
- (1) The Company established the employee welfare committee in June 2004, and the welfare matters are supervised by the employees and the members of employee welfare committee.
- (2) The Company plans employee group welfare insurance to make up for the shortage of labor insurance. The employees themselves benefit from the benefits, and they also benefit the spouses and children of the employees, so that both the colleagues themselves and the families can receive the benefits.
- (3) The Company has set an annual health examination plan for on-duty employees, and provides all benefits in accordance with relevant regulations.
Employee continuing education and training To enhance the quality of human resources and development advantages, the Company has established educational and training methods to encourage employees to participate in various training courses and technical seminars to maintain the foundation of the Company's sustainable operation.
Retirement system and its implementation status The retire system of employees of the Company shall be conducted in accordance with the provisions of the Labor Standards Act. The Labor Pension Supervisory Committee was established in June 2004, and the labor retirement reserve fund was set aside on a monthly basis in accordance with the law. In the name of the committee, it is deposited in the Supervisory Account of the Central Trust Bureau for its management and use. In accordance with the Labor Pension Act, starting from July 1, 2005, the Company would pay the labor retirement allowance monthly for the employees, choosing and applying the new system to the individual account of the Labor Insurance Bureau.
Agreements between the employer and employees The harmonious labor relationship has always been one of the Company's directions. The Company has put great emphasis on employee welfare and provides excellent working environment. As of now, there is no loss arising from labor disputes, and the Company has been smooth channels to maintain the employees' equity.

(II) Any Losses Suffered by the Company in the Most Recent Fiscal Year and up to the Annual Report Publication Date due to Labor Disputes, and Disclosing an Estimate of Possible Expenses that could be Incurred Currently and in the Future and Measures Being or to be Taken. If a Reasonable Estimate Cannot be Made, an Explanation of the Facts of Why It Cannot be Made Shall be Provided: None.
VI. Information & Communication Security Management
(1) Information security risk management framework At the Company, the unit in charge of information security is the MIS of the Operation Division, where the dedicated information personnel are appointed to formulate the Company's information security policy, plan and carry out information security activities, and promote and implement the information security policy.
(2) Information security policy
- A. To implement information security management, all employees are required to abide by the Company’s information security policy. This is to ensure the confidentiality, integrity, and availability of the Company's information assets, thus achieve business sustainability.
- B. The scope of the information security policy includes the following: device usage, media storage, access control, software usage, wireless network, account, password, and key, system development and maintenance, email and communication software, supplier and employee appointment, and information security incidents.
(3) Specific management plans
- A. Firewalls should be built at the portals of the Intranet and the external network to detect threats and effectively prevent illegal intrusion by hackers.
- B. The use of the computer network is controlled by domain account and password.
- C. The email server has built-in mechanisms such as antivirus software and spam filters to prevent viruses or spam from entering an end user’s computer.
- D. The dedicated power sockets for computer servers should be used for computers only to avoid consuming the power of the uninterruptible power supply, affecting the normal operation of the computers due to a power failure.
- E. Before logging in to the Intranet remotely, employees should use a VPN to verify their identities. A complete entry and exit record of all remote logins is made for auditing purposes.
- F. A computer’s operating system and server software should be updated and patched in a timely and appropriate manner.
- G. Antivirus software should be installed in the computer’s operating system; the virus database should be updated on a regular basis.
- H. Before downloading a file through the Internet or using a USB flash drive, employees should scan for viruses immediately to make sure that the file or USB is safe and free of viruses.

I. Employees are updated with the knowledge of information security on a regular basis to increase their awareness of information security crises.
J. Software purchased and used should be legally authorized and in compliance with laws and regulations on intellectual property rights.

VII. Important Contracts

As of April 28, 2022, important contracts of the Company are as follows:

Nature of Contract	Principal	Contract Start/End Date	Main Content	Restrictiv e Provision s
Technology Service	Nueva Imaging Inc.	Subject to terms of lease	Design services of CMOS Image Sensor	None
Technology Service	Silicon Optronics (Shanghai) Co, Ltd.	Subject to terms of lease	Line Design Services of CMOS Image Sensor	None

Chapter 6 Financial Summary

I. Condensed Balance Sheet and Comprehensive Income Statement of the Most Recent Five Years

(I) Consolidated concise balance sheet

Unit: NT$ 1,000

Year Item	Year Item		Financial Summary over The Last Five Years	Financial Summary over The Last Five Years	Financial Summary over The Last Five Years
		2017	2018	2019	2020	2021
Current assets		957,576	2,142,403	1,651,853	2,250,146	3,076,437
Property, plant and equipment		38,775	48,811	530,417	513,112	487,299
Intangible assets		262,287	234,587	211,280	207,012	204,686
Other assets		11,742	15,223	43,002	41,748	110,491
Total assets		1,270,380	2,441,024	2,436,552	3,012,018	3,878,913
Current Liability	Before distribution	294,238	271,641	339,054	446,595	889,812
	After distribution	430,334	427,596	493,266	662,492	(Note 2)
Non-current liabilities		-	41	17,378	359,681	258,192
Total liabilities	Before distribution	294,238	271,682	356,432	806,276	1,148,004
	After distribution	430,334	427,637	510,644	1,022,173	(Note 2)
Equity attributable to shareholders of the parent		976,142	2,169,342	2,080,120	2,205,742	2,730,909
Share capital		679,809	778,279	780,809	781,059	781,529
Capital surplus		52,187	1,124,721	1,131,702	1,131,714	1,132,749
Retained earnings	Before distribution	244,672	265,952	266,969	394,214	919,385
	After distribution	108,576	109,997	112,757	178,317	(Note 2)
Other equity		(526)	390	(2,365)	(4,250)	(5,759)
Treasury stocks		-	-	(96,995)	(96,995)	(96,995)
Non-controlling Interests		-	-	-	-	-
Total equity	Before distribution	976,142	2,169,342	2,080,120	2,205,742	2,730,909
	After distribution	840,046	2,013,387	1,925,908	1,989,845	(Note 2)

Note 1: The above financial data have been audited and attested by the CPAs.

Note 2: Not yet allocated.

(II) Consolidated concise consolidated income statement

Unit: NT$ 1,000

	Unit: NT$ 1,000	Unit: NT$ 1,000	Unit: NT$ 1,000	Unit: NT$ 1,000	Unit: NT$ 1,000
Year Item	Financial Summaryover The Last Five Years
	2017	2018	2019	2020	2021
Sales revenue	1,714,565	2,034,267	2,294,110	3,328,695	3,996,496
Gross Profit	500,028	469,799	457,531	672,210	1,387,380
OperatingIncome	247,603	180,054	156,051	321,577	883,959
Non-operating revenue and expenses	(8,096)	9,919	26,059	5,662	10,489
Profit before income tax	239,507	189,973	182,110	327,239	894,448
Earnings from continuingoperations	204,087	157,432	156,010	281,438	741,050
Income from discontinued operations	-	-	-	-	-
Net income for the currentperiod	204,087	157,432	156,010	281,438	741,050
Other comprehensive income (loss) (Net after tax)	(2,554)	860	(1,793)	(1,866)	(1,491)
Total comprehensive income	201,533	158,292	154,217	279,572	739,559
Net income attributable to shareholders of theparent	-	-	-	-	-
Net income attributable to non-controllinginterest	-	-	-	-	-
Comprehensive income or loss attributable to the shareholders of theparent	-	-	-	-	-
Comprehensive income attributable to non-controllinginterest	-	-	-	-	-
Earnings Per Share(NT$)	3.02	2.17	2.01	3.65	9.61

Note 1: The above financial data have been audited and attested by the CPAs.

(III) Individual concise balance sheet

Unit: NT$ 1,000

Year Item	Year Item		Financial Summaryover The Last Five Years	Financial Summaryover The Last Five Years	Financial Summaryover The Last Five Years
		2017	2018	2019	2020	2021
Current assets		934,379	2,102,546	1,601,440	2,179,733	2,961,844
Property,plant and equipment		38,134	48,250	529,833	512,650	486,952
Intangible assets		6,039	3,309	516	103	980
Other assets		291,402	283,954	291,091	301,017	384,035
Total assets		1,269,954	2,438,059	2,422,880	2,993,503	3,833,811
Current Liability	Before distribution	293,812	268,676	333,339	432,637	845,219
	After distribution	429,908	424,631	487,551	648,534	(Note 2)
Non-current liabilities		-	41	9,421	355,124	257,683
Total liabilities	Before distribution	293,812	268,717	342,760	787,761	1,102,902
	After distribution	429,908	424,672	496,972	1,003,658	(Note 2)
Equity attributable to shareholders of theparent		976,142	2,169,342	2,080,120	2,205,742	2,730,909
Share capital		679,809	778,279	780,809	781,059	781,529
Capital surplus		52,187	1,124,721	1,131,702	1,131,714	1,132,749
Retained earnings	Before distribution	244,672	265,952	266,969	394,214	919,385
	After distribution	108,576	109,997	112,757	178,317	(Note 2)
Other equity		(526)	390	(2,365)	(4,250)	(5,759)
Treasurystocks		-	-	(96,995)	(96,995)	(96,995)
Non-controllingInterests		-	-	-	-	-
Total equity	Before distribution	976,142	2,169,342	2,080,120	2,205,742	2,730,909
	After distribution	840,046	2,013,387	1,925,908	1,989,845	(Note 2)

Note 1: The above financial data have been audited and attested by the CPAs.

Note 2: Not yet allocated.

(IV) Individual concise consolidated income statement

Unit: NT$ 1,000

Year Item	Financial Summaryover The Last Five	Financial Summaryover The Last Five	Financial Summaryover The Last Five	Financial Summaryover The Last Five	Years
	2017	2018	2019	2020	2021
Sales revenue	1,714,565	2,034,267	2,294,110	3,328,695	3,996,496
Gross Profit	500,028	469,799	457,531	672,210	1,387,380
OperatingIncome	255,831	192,133	162,058	310,741	872,357
Non-operating revenue and expenses	(19,532)	(3,774)	19,793	14,185	20,494
Profit before income tax	236,299	188,359	181,851	324,926	892,851
Earnings from continuing operations	204,087	157,432	156,010	281,438	741,050
Income from discontinued operations	-	-	-	-	-
Net income for the current period	204,087	157,432	156,010	281,438	741,050
Other comprehensive income (loss) (Net after tax)	(2,554)	860	(1,793)	(1,866)	(1,491)
Total comprehensive income	201,533	158,292	154,217	279,572	739,559
Net income attributable to shareholders of theparent	-	-	-	-	-
Net income attributable to non-controllinginterest	-	-	-	-	-
Comprehensive income or loss attributable to the shareholders of theparent	-	-	-	-	-
Comprehensive income attributable to non-controllinginterest	-	-	-	-	-
Earnings Per Share(NT$)	3.02	2.17	2.01	3.65	9.61

Note 1: The above financial data have been audited and attested by the CPAs.

(V) Name of CPAs and Their Opinions for Most Recent 5 Years

Year	Name of CPA	Audit opinion
2017	Deloitte & Touche Cheng-Chih Lin,Ming-Yuan Chung	Unqualified opinion
2018	Deloitte & Touche Ming-Yuan Chung,Cheng-Chih Lin,	Unqualified opinion
2019	Deloitte & Touche Ming-Yuan Chung,Cheng-Chih Lin,	Unqualified opinion
2020	Deloitte & Touche Ming-Yuan Chung,Cheng-Chih Lin,	Unqualified opinion
2021	Deloitte & Touche Ming-Yuan Chung,Tung-Hui Yeh	Unqualified opinion

II. Financial Analysis for the past 5 years

(I) Consolidated financial analysis

Year Analysis item	Year Analysis item	Financial Analysis for the past 5 years	Financial Analysis for the past 5 years	Financial Analysis for the past 5 years	Financial Analysis for the past 5 years	Financial Analysis for the past 5 years
		2017	2018	2019	2020	2021
Capital structur e (%)	Liability-to-assets ratio	23.16	11.13	14.63	26.77	29.60
	Ratio of long-term capital to property, plant and equipment	2,517.45	4,444.46	395.44	499.97	613.40
Solven cy	Current ratio (%)	325.44	788.69	487.19	503.84	345.74
	Quick ratio (%)	111.78	506.19	203.97	299.87	165.53
	Interest coverage ratio	472.47	488.11	604.01	117.75	248.56
Operati ng capacit y	Receivables turnover ratio (times)	118.30	56.82	65.13	150.95	168.20
	Average days of collection	3	6	6	2	2
	Inventory turnover ratio (times)	3.00	2.48	2.37	3.22	2.20
	Payables turnover ratio (times)	10.27	11.76	8.36	9.94	8.32
	Average inventory turnover days	122	147	154	117	166
	Property, plant and equipment turnover ratio(times)	48.87	46.45	7.92	6.38	7.99
	Total assets turnover (times)	1.46	1.1	0.94	1.22	1.16
Profita bility	Return on assets (%)	17.44	8.50	6.41	10.41	21.59
	Return on equity (%)	22.44	10.01	7.34	13.13	30.02
	Income before tax to paid-up capital ratio (%)	35.23	24.41	23.32	41.90	114.45
	Net profit margin (%)	11.90	7.74	6.80	8.45	18.54
	Earnings per share (NT$) (Note 2)	3.02	2.17	2.01	3.65	9.61
Cash flow (%)	Cash flow ratio	`－`	52.71	38.01	113.65	58.30
	Cash flow adequacy ratio	34.89	39.18	30.06	54.79	45.94
	Cash reinvestment ratio	`－`	0.34	(1.42)	14.69	10.50
Levera ge	Operating leverage	3.26	6.72	9.75	7.48	3.63
	Financial leverage	1.00	1.00	1.00	1.01	1.00
Reasons for changes in financial ratios for the most recent two years: 1. Increase in ratio of long-term capital to property, plant and equipment: due to the increase in net operating profit. 2. The decrease in current ratio: due to an increase in payments payable, income taxes payable and long-term borrowings due within one year. 3. The decrease in quick ratio: due to an increase in payments payable, income taxes payable and long-term borrowings due within one year. 4. Increase in interest coverage ratio: Due to the increase in operating net profit. 5. Decrease in inventory turnover rate: Due to the beginning of the fourth quarter, the market demand slowed down and the shipment did not reach the expected sales volume. 6. Increase in rate of property, plant and equipment turnover: due to the increase in operating income. 7. Increase in profitability ratio over 2020: due to the increase in operating net profit. 8. Decrease in cash flow ratio and cash: due to the increase in current liabilities.

(II) Individual financial analysis

Year Analysis item	Year Analysis item	Financial Analysis for the past 5 years	Financial Analysis for the past 5 years	Financial Analysis for the past 5 years	Financial Analysis for the past 5 years	Financial Analysis for the past 5 years
		2017	2018	2019	2020	2021
Capital structure (%)	Liability-to-assets ratio	23.14	11.02	14.15	26.32	28.77
	Ratio of long-term capital to property, plant and equipment	2,559.77	4,496.13	394.38	499.53	613.73
Solvency	Current ratio (%)	318.02	782.56	480.42	503.82	350.42
	Quick ratio (%)	108.93	506.15	205.30	302.79	166.91
	Interest coverage ratio	466.16	483.97	1,181.85	120.99	252.29
Operating capacity	Receivables turnover ratio (times)	118.30	56.82	65.13	150.95	168.2
	Average days of collection	3	6	6	2	2
	Inventory turnover ratio (times)	3.00	2.48	2.37	3.11	2.2
	Payables turnover ratio (times)	10.44	12.11	8.51	10.08	8.42
	Average inventory turnover days	122	147	154	117	166
	Property, plant and equipment turnover ratio(times)	49.86	47.10	7.94	6.39	8.00
	Total assets turnover (times)	1.46	1.10	0.94	1.23	1.17
Profitability	Return on assets (%)	17.45	8.51	6.42	10.47	21.79
	Return on equity (%)	22.44	10.01	7.34	13.13	30.02
	Income before tax to paid-up capital ratio (%)	34.76	24.20	23.29	41.60	114.24
	Net profit margin (%)	11.90	7.74	6.80	8.45	18.54
	Earnings per share (NT$) (Note 2)	3.02	2.17	2.01	3.65	9.61
Cash flow (%)	Cash flow ratio	`－`	50.40	39.24	111.11	56.69
	Cash flow adequacy ratio	36.74	39.99	30.39	53.63	43.80
	Cash reinvestment ratio	`－`	(0.03)	(1.19)	12.49	8.52
Leverage	Operating leverage	2.97	5.93	8.94	6.47	2.92
	Financial leverage	1.00	1.00	1.00	1.01	1.00
Reasons for changes in financial ratios for the most recent two years: 1. Increase in ratio of long-term capital to property, plant and equipment: due to the increase in net operating profit. 2. The decrease in current ratio: due to an increase in payments payable, income taxes payable and long-term borrowings due within one year. 3. The decrease in quick ratio: due to an increase in payments payable, income taxes payable and long-term borrowings due within one year. 4. Increase in interest coverage ratio: Due to the increase in operating net profit. 5. Decrease in inventory turnover rate: Due to the beginning of the fourth quarter, the market demand slowed down and the shipment did not reach the expected sales volume. 6. Increase in rate of property, plant and equipment turnover: due to the increase in operating income. 7. Increase in profitability ratio over 2020: due to the increase in operating net profit. 8. Decrease in cash flow ratio and cash: due to the increase in current liabilities.

Note 1: The above financial data have been audited and attested by the CPAs.

Note 2: The formulas of the above table are as follows:

Financial structure
- (1) Liabilities-to-asset ratio = Total liabilities/Total assets.
- (2) Proportion of long-term capital in property, plant, and equipment = (Total equities + non-current liabilities)/(Total net value of property, plant, and equipment).
Solvency
- (1) Current ratio = Current assets/Current liabilities
- (2) Quick ratio = (Current assets - inventory - prepaid expenses)/Current liabilities
- (3) Interest coverage ratio = Income before income tax and interest expense/Interest expense of the current period
Operating capacity
- (1) Receivable (including accounts receivable and business-related notes receivable) turnover ratio = net sale/average balance of receivable of the period (including accounts receivable and business-related notes receivable).
- (2) Average collection days = 365/Receivables turnover
- (3) Inventory turnover = cost of sales/average inventories
- (4) Payable (including accounts payable and business-related notes payable) turnover ratio = net sales revenue/average balance of payable of the period (including accounts payable and business-related notes payable).
- (5) Average days for sale = 365/inventory turnover
- (6) Property, plant and equipment turnover = Net sales/Average property, plant and equipment
- (7) Total asset turnover = Net sales/Average total assets
Profitability
- (1) Return on assets = [net income after taxes + interest expense x (1 - tax rate)]/average total assets
- (2) Return on equity = net income after taxes/average equity
- (3) Net profit margin = net income after taxes/net sales
- (4) Earnings per share = (net income (loss) attributable to owners of the parent company - preferred stock dividend)/weighted average number of shares outstanding. (Note 4)
Cash flow
- (1) Cash flow ratio = Net cash provided by operating activities/Current liabilities
- (2) Net cash flow adequacy ratio = net cash flow rising from operating activities in the most recent five years/(capital expenditure + inventory increase + cash dividend) in the most recent five years.
- (3) Cash reinvestment ratio = (Net cash flow from operating activities – cash dividend)/gross fixed assets value + long-term investment + other assets + working capital). (Note 5)
Leverage:
- (1) Operating leverage = (net operating income - changing operating costs and expenses) / operating profit (Note 6).
- (2) Degree of Financial Leverage (DFL) = operating profit/(operating income - interest expense)
Note 4: The calculation of the earnings per share of the preceding paragraph shall pay special attention to the following:
Use the weighted average number of common shares, not the number of shares outstanding at the end of year.
Where there is cash replenishment or treasury stock transaction, its circulation period should be considered when calculating the weighted average number of shares.
Where capital increase transferred from surplus or capital reserves exists, when calculating the earnings per share of previous years and half years, it shall be retroactively adjusted according to the proportion of capital increase, need not to consider the issuance period of such capital increase.
If the preferred stock is a non-convertible accumulative preferred stock, its annual dividend (whether or not it is paid) shall be deducted from the net profit after tax, or added to the net loss after tax. If the preferred stock is non-cumulative and when there is a net profit after tax, the preferred stock dividend shall be deducted from the net profit after tax; if it is a loss, no adjustment shall be made.
The following items should be noted for the analysis of cash flow:

Note 5:

Net cash provided by operating activities refers to the net cash inflow from operating activities in the cash flow statement.
Capital expenditures refer to the annual cash flow used in capital investment.
The increase in inventory is only included when the ending balance is higher than the opening balance. If the inventory is reduced at the end of the year, it shall be treated as zero.
Cash dividends include the cash dividends of common stocks and preferred stocks.
Gross amount of real estate, plant and equipment refers to the total amount of real estate, plant and equipment before deducting accumulated depreciation.
Note 6: The issuer should classify various operating costs and operating expenses into fixed and variable properties. If there is an estimate or subjective judgment, attention should be paid to its rationality and consistency.
Note 7: Where company shares have no par value or where the par value per share is not NT$ 10, any calculations that involve paid-in capital and its ratio shall be replaced with the equity ratio belonging to the owner of the parent company of the asset balance sheet.
Note 8: For companies that have prepared parent company only financial statements shall also prepare an analysis of the Company's parent company only financial ratios.

III. 2021 Audit Committee's Review Report

Audit Committee's Review Report

The Board of Directors has prepared the Company's Business Report, Financial Statements (including Consolidated Financial Statements) and Earnings Distribution Proposal for 2021, in which the financial statements (including Consolidated Financial Statements) have been audited by Deloitte & Touche Taipei, Taiwan Republic of China with the audit report issued.

The above Business Report, Financial Statements (including Consolidated Financial Statements) and Earnings Distribution Proposal have been verified by the Audit Committee and deemed as appropriate, and hereby reported in accordance with the relevant provisions of the Securities Exchange Act and the Company Act for approval.

Silicon Optronics, Inc.

Convener of the Audit Committee:

==> picture [176 x 99] intentionally omitted <==

March 16, 2022

IV. 2021 Independent Auditors’ Report and Consolidated Financial Statements

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The companies required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2021 are all the same as the companies required to be included in the consolidated financial statements of the parent company and its subsidiaries under International Financial Reporting Standard 10 “Consolidated Financial Statements.” Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of the parent company and its subsidiaries. Hence, we have not prepared a separate set of consolidated financial statements of affiliates.

Very truly yours,

Silicon Optronics, Inc.

By:

Xinping He Chairman

March 16, 2022

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Silicon Optronics, Inc.

Opinion

We have audited the accompanying consolidated financial statements of Silicon Optronics, Inc. and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated balance sheets as of December 31, 2021 and 2020, the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2021 and 2020, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2021. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

The key audit matters of the Group’s consolidated financial statements for the year ended December 31, 2021 are described as follows:

Sales Revenue

The Group’s sales revenue derived from its key customers accounted for a high proportion of the overall sales revenue. Since the sales amount from the transactions with these customers is significant to the overall sales revenue, we believe that there is a risk in the validity of the Group’s sales transactions; therefore, the validity of sales revenue from the key customers has been identified as a key audit matter for the year ended December 31, 2021. For the accounting policies on revenue recognition, please refer to Note 4(m) to the consolidated financial statements.

Our main audit procedures performed in respect of the above-mentioned key audit matter are as follows:

We understood internal controls on order approval and shipment procedures and tested the operating effectiveness of such controls.

We understood the background of the key customers and assessed whether the transaction amounts and credit line were comparable to the scope of such customers and whether they had been appropriately approved.
To confirm the validity of sales revenue, we selected samples of the sales transactions and inspected the customer orders, as well as delivery orders and invoices that have been confirmed by the counterparties, and also whether the sales counterparties were the same as the counterparties collecting payment.

Inventory Valuation

As of December 31, 2021, the Group’s inventory balance was $1,517,061 thousand, accounting for 39% of the combined total assets. For the related accounting policies, please refer to Note 4(g) to the consolidated financial statements. As the amount of the inventory is significant and the assessment of net realizable value involves significant management judgments, particularly with regard to estimates of inventory valuation and obsolescence loss, thus, inventory valuation was considered as a key audit matter. We have evaluated the appropriateness of the method used by the Group to calculate the inventory valuation and obsolescence loss at the end of the year and performed the following audit procedures:

Based on our understanding of the industry and nature of products of the Group, we verified the appropriateness of the method of inventory aging management, and also took samples of and tested whether the aging classification was appropriate.
We performed recalculations to determine if the assessment of the net realizable value was reasonable, and verified whether the inventories were measured at the lower of cost and net realizable value based on the most recent raw material quotes or sales data, and also assessed the reasonableness of the assessment of changes in the provision for inventory write-downs.
We obtained and verified the details of inventory valuation and obsolescence losses and aging data, and analyzed the reasons for the differences in the provision for loss in 2021 compared to 2020, to assess whether the provision for inventory valuation and obsolescence losses was appropriate.

Other Matter

We have also audited the parent company only financial statements of Silicon Optronics, Inc. as of and for the years ended December 31, 2021 and 2020 on which we have issued an unmodified opinion.

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

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and IFRS, IAS, IFRIC and SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’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 Group 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 Group’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a

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

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

Identify and assess the risks of material misstatement of the consolidated 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.
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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
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 Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated 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 auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the Group 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 consolidated financial statements for the year ended December 31, 2021 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Ming-Yuan Chung and Tung-Hui Yeh.

Deloitte & Touche Taipei, Taiwan Republic of China March 16, 2022

Notice to Readers

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

For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated financial statements shall prevail.

SILICON OPTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at amortized cost - current (Notes 4, 7 and 25) Accounts receivable - net (Notes 4 and 8) Inventories (Notes 4, 5 and 9) Prepayments and other current assets (Notes 4, 14 and 25) Total current assets NON-CURRENT ASSETS Financial assets at amortized cost - noncurrent (Notes 4, 7, 25 and 27) Property, plant and equipment (Notes 4, 11 and 27) Right-of-use assets (Notes 4 and 12) Goodwill (Notes 4 and 5) Intangible assets (Notes 4 and 13) Deferred tax assets (Notes 4 and 21) Other non-current assets (Notes 4, 14 and 17) Total non-current assets TOTAL		2021 Amount % $ 919,634 24 538,582 14 14,680 - 1,517,061 39 86,480 2 3,076,437 79 3,512 - 487,299 13 8,357 - 199,228 5 5,458 - 13,919 1 84,703 2 802,476 21 $ 3,878,913 100		2020 Amount % LIABILITIES AND EQUITY CURRENT LIABILITIES $ 547,597 18 Contract liabilities - current (Note 19) Accounts payable (Note 4) 758,754 25 Accounts payable to related parties (Notes 4 and 26) 32,842 1 Other current liabilities (Notes 4 and 16) 849,523 29 Current tax liabilities (Notes 4 and 21) Lease liabilities - current (Notes 4 and 12) 61,430 2 Current portion of long - term borrowing (Note15) Refund liabilities - current (Note16) 2,250,146 75 Total current liabilities NON-CURRENT LIABILITIES 4,048 - Long-term borrowings (Notes 4 and 15) 513,112 17 Deferred income tax liabilities (Notes 4 and 21) 17,085 - Lease liabilities - non-current (Notes 4 and 12) 199,228 7 Guarantee deposits 7,784 - 17,454 1 Total non-current liabilities 3,161 - Total liabilities 761,872 25 EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY (Notes 4, 18 and 23) Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Other equity Exchange differences on translating the financial statements of foreign operations Treasury shares Total equity $ 3,012,018 100 TOTAL		2021 Amount % $ 35,139 1 352,498 9 - - 228,995 6 149,388 4 6,674 - 100,000 3 17,118 - 889,812 23 250,000 7 - - 1,215 - 6,977 - 258,192 7 1,148,004 30 781,529 20 1,132,749 29 94,057 3 4,250 - 821,078 21 (5,759) - (96,995) (3) 2,730,909 70 $ 3,878,913 100		2020
								Amount % $ 15,940 1 120,321 4 154,167 5 100,836 3 47,664 2 7,667 - - - - - 446,595 15 350,000 12 208 - - - - - 350,208 12 796,803 27 781,059 26 1,131,714 37 65,911 2 2,365 - 325,938 11 (4,250) - (96,995) (3) 2,205,742 73 $ 3,002,545 100

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

SILICON OPTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE (Notes 4, 19 and 30) OPERATING COSTS (Notes 9, 20 and 26) GROSS PROFIT OPERATING EXPENSES (Notes 20 and 26) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses OPERATING INCOME NON-OPERATING INCOME AND EXPENSES (Note 20) Interest income Other income Other gains and losses Financial costs Total non-operating income and expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 21) NET INCOME OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans (Notes 4 and 17) Items that may be reclassified subsequently to profit or loss Exchange differences on translating the financial statements of foreign operations (Notes 4 and 18) Total other comprehensive (loss) income TOTAL COMPREHENSIVE INCOME FOR THE YEAR		2021 Amount % $ 3,996,496 100 2,609,116 65 1,387,380 35 25,023 1 75,847 2 402,551 10 503,421 13 883,959 22 5,285 - 526 - 8,291 1 (3,613) - 10,489 1 894,448 23 (153,398) (4) 741,050 19 18 - (1,509) - (1,491) - $ 739,559 19		2020
				Amount % $ 3,328,695 100 2,656,485 80 672,210 20 20,291 1 45,670 1 284,672 8 350,633 10 321,577 10 4,488 - 458 - 3,519 - (2,803) - 5,662 - 327,239 10 (45,801) (2) 281,438 8 19 - (1,885) - (1,866) - $ 279,572 8 (Continued)

SILICON OPTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

EARNINGS PER SHARE (Note 22) Basic Diluted		2020 Amount % $ 9.61 $ 9.53		2019
				Amount % $ 3.65 $ 3.64

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

(Concluded)

SILICON OPTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars)

BALANCE, JANUARY 1, 2020 Appropriation of 2019 earnings Legal reserve Special reserve Cash dividends distributed by Silicon Optronics, Inc. Net profit for the year ended December 31, 2020 Other comprehensive loss for the year ended December 31, 2020 Total comprehensive income for the year ended December 31, 2020 Issuance of ordinary shares under employee share options BALANCE, DECEMBER 31, 2020 Appropriation of 2020 earnings Legal reserve Special reserve Cash dividends distributed by Silicon Optronics, Inc. Net profit for the year ended December 31, 2021 Other comprehensive loss for the year ended December 31, 2021 Total comprehensive income for the year ended December 31, 2021 Issuance of ordinary shares under employee share options BALANCE, DECEMBER 31, 2021		Ordinary Share Capital Number of Shares (In Thousands) Amount Capital Surplus 78,081 $ 780,809 $ 1,131,702 - - - - - - - - - - - - - - - - - - 25 250 12 78,106 781,059 1,131,714 - - - - - - - - - - - - - - - - - - 47 470 1,035 78,153 $ 781,529 $ 1,132,749		Retained Earnings Unappropriated Legal Reserve Special Reserve Earnings $ 50,310 $ - $ 216,659 15,601 - (15,601) - 2,365 (2,365) - - (154,212) - - 281,438 - - 19 - - 281,457 - - - 65,911 2,365 325,938 28,146 - (28,146) - 1,885 (1,885) - - (215,897) - - 741,050 - - 18 - - 741,068 - - - $ 94,057 $ 4,250 $ 821,078		Other Equity Exchange Difference on Translating the Financial Statements of Foreign Operations Treasury Shares $ (2,365) $ (96,995) - - - - - - - - (1,885) - (1,885) - - - (4,250) (96,995) - - - - - - - - (1,509) - (1,509) - - - $ (5,759) $ (96,995)	Total Equity $ 2,080,120 - - (154,212) 281,438 (1,866) 279,572 262 2,205,742 - - (215,897) 741,050 (1,491) 739,559 1,505 $ 2,730,909

		Number of Shares (In Thousands) 78,081 - - - - - - 25 78,106 - - - - - - 47 78,153

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

SILICON OPTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before income tax Adjustments for: Depreciation expenses Amortization expenses Finance costs Interest income Write downs of inventories Net loss (gain) on foreign currency exchange Changes in operating assets and liabilities Accounts receivable Inventories Prepayments and other current assets Contract liabilities Accounts payable Accounts payables to related parties Accrued expenses and other current liabilities Refund liabilities Net defined benefit assets Cash generated from operations Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets at amortized cost Proceeds from financial assets at amortized cost Payments of property, plant and equipment Increase in refundable deposits Payments for intangible assets Payments for right-of-use assets Interest received Net cash generated from (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term borrowings Proceeds of guarantee deposits received Repayment of the principal portion of lease liabilities Dividends paid Exercise of employee share options Interest paid Net cash generated from (used in) financing activities	2021 $ 894,448 103,727 6,825 3,613 (5,285) (19,090) (143) 18,427 (648,448) (25,050) 19,371 233,698 (155,010) 122,984 17,118 (35) 567,150 (48,347) 518,803 (601,348) 821,480 (64,444) (82,157) (4,680) (500) 5,285 73,636 - 6,977 (9,143) (215,897) 1,505 (3,613) (220,171)	2020 $ 327,239 90,351 7,422 2,803 (4,488) 22,512 1,443 (21,686) (15,515) 41,354 5,832 (7,098) 18,213 46,613 - (35) 514,960 (7,387) 507,573 (671,516) 50,012 (66,842) (147) (3,608) - 4,488 (687,613) 350,000 - (7,426) (154,212) 262 (2,803) 185,821 (Continued)

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SILICON OPTRONICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars)

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE IN CASH CASH AT THE BEGINNING OF THE YEAR CASH AT THE END OF THE YEAR	2021 $ (231) 372,037 547,597 $ 919,634	2020 $ 110 5,891 541,706 $ 547,597

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

(Concluded)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

SILICON OPTRONICS, INC. AND SUBSIDIARIES

1. GENERAL INFORMATION

Silicon Optronics, Inc. (the “Company”) was incorporated in the Republic of China (“ROC”) on May 24, 2004 and commenced business on May 27, 2004. The Company’s main business activities include the design, development and sales of complementary metal-oxide semiconductors.

The Company’s shares have been listed on the Taiwan Stock Exchange (TWSE) since July 2018.

The consolidated financial statements of the Company and its subsidiaries (collectively referred to as the “Group”) are presented in the Company’s functional currency, the New Taiwan dollar.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the board of directors and authorized for issue on March 16, 2022.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

a. Initial application of the amendments to the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC)

The initial application of the IFRSs endorsed and issued into effect by the FSC did not have material impact on the Group’s accounting policies.

b. The IFRSs endorsed by the FSC for application starting from 2022

New IFRSs “Annual Improvements to IFRS Standards 2018-2020” Amendments to IFRS 3 “Reference to the Conceptual Framework” Amendments to IAS 16 “Property, Plant and Equipment - Proceeds before Intended Use” Amendments to IAS 37 “Onerous Contracts - Cost of Fulfilling a Contract”	Effective Date Announced by IASB
	January 1, 2022 (Note 1) January 1, 2022 (Note 2) January 1, 2022 (Note 3) January 1, 2022 (Note 4)

Note 1: The amendments to IFRS 9 will be applied prospectively to modifications and exchanges of financial liabilities that occur on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IAS 41 “Agriculture” will be applied prospectively to the fair value measurements on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IFRS 1 “First-time Adoptions of IFRSs” will be applied retrospectively for annual reporting periods beginning on or after January 1, 2022.
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Note 2: The amendments are applicable to business combinations for which the acquisition date is on or after the beginning of the annual reporting period beginning on or after January 1, 2022.
Note 3: The amendments are applicable to property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021.
Note 4: The amendments are applicable to contracts for which the entity has not yet fulfilled all its obligations on January 1, 2022.
1) Annual Improvements to IFRS Standards 2018-2020

Several standards, including IFRS 9 “Financial Instruments”, were amended in the annual improvements. IFRS 9 requires the comparison of the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received, with that of the cash flows under the original financial liability when there is an exchange or modification of debt instruments. The new terms and the original terms are substantially different if the difference between those discounted present values is at least 10%. The amendments to IFRS 9 clarify that the only fees that should be included in the above assessment are those fees paid or received between the borrower and the lender.

2) Amendments to IFRS 3 “'Reference to the Conceptual Framework”

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

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

The amendments prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. The cost of those items is measured in accordance with IAS 2 “Inventories”. Any proceeds from selling those items and the cost of those items are recognized in profit or loss in accordance with applicable standards.

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

The amendments specify that when assessing whether a contract is onerous, the “cost of fulfilling a contract” includes both the incremental costs of fulfilling that contract (for example, direct labor and materials) and an allocation of other costs that relate directly to fulfilling contracts (for example, an allocation of depreciation for an item of property, plant and equipment used in fulfilling the contract).

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

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c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

New IFRSs
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

Amendments to IFRS 17 “Initial Application of IFRS 9 and IFRS
17-Comparative Information”

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

Amendments to IAS 1 “Disclosure of Accounting Policies”

Amendments to IAS 8 “Definition of Accounting Estimates”

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

Effective Date
Announced by IASB (Note 1)

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

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual reporting periods beginning on or after their respective effective dates.
Note 2: The amendments will be applied prospectively for annual reporting periods beginning on or after January 1, 2023.
Note 3: The amendments are applicable to changes in accounting estimates and changes in accounting policies that occur on or after the beginning of the annual reporting period beginning on or after January 1, 2023.
Note 4: Except for deferred taxes that will be recognized on January 1, 2022 for temporary differences associated with leases and decommissioning obligations, the amendments will be applied prospectively to transactions that occur on or after January 1, 2022.
1) Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”

The amendments clarify that for a liability to be classified as non-current, the Group shall assess whether it has the right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period. If such rights are in existence at the end of the reporting period, the liability is classified as non-current regardless of whether the Group will exercise that right. The amendments also clarify that, if the right to defer settlement is subject to compliance with specified conditions, the Group must comply with those conditions at the end of the reporting period even if the lender does not test compliance until a later date.

The amendments stipulate that, for the purpose of liability classification, the aforementioned settlement refers to a transfer of cash, other economic resources or the Group’s own equity instruments to the counterparty that results in the extinguishment of the liability. However, if the terms of a liability that could, at the option of the counterparty, result in its settlement by a transfer of the Group’s own equity instruments, and if such option is recognized separately as equity in accordance with IAS 32 “Financial Instruments: Presentation”, the aforementioned terms would not affect the classification of the liability.

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued into effect by the FSC.

b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair value and net defined benefit liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets.

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and based on the significance of the inputs to the fair value measurement in its entirety, are described as follows:

1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
3) Level 3 inputs are unobservable inputs for an asset or liability.
c. Classification of current and non-current assets and liabilities

Current assets include:

1) Assets held primarily for the purpose of trading;
2) Assets expected to be realized within 12 months after the reporting period, and
3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

Current liabilities include:

1) Liabilities held primarily for the purpose of trading;
2) Liabilities due to be settled within 12 months after the reporting period; and
3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least 12 months after the reporting period.

Assets and liabilities that are not classified as current are classified as non-current.

d. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e.its subsidiaries).

Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the effective dates of acquisitions up to the effective dates of disposals, as appropriate.

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When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company.

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation.

Refer to Notes 10 and 29 for detailed information on subsidiaries (including the percentages of ownership and main businesses).

e. Business combinations

Acquisitions of businesses are accounted for using the acquisition method. Acquisition-related costs are generally recognized in profit or loss as they are incurred.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interests in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

f. Foreign currencies

In preparing the financial statements of each entity, transactions in currencies other than the entity’s functional currency (i.e. foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period in which they arise.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

For the purpose of presenting the consolidated financial statements, the functional currencies of the Group’s foreign operations (including subsidiaries, associates, joint ventures and branches in other countries or those that use currencies which are different from the currency of the Company) are translated into the presentation currency, the New Taiwan dollar, as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; and income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income (attributed to the owners of the Company and non-controlling interests as appropriate).

g. Inventories

Inventories consist of raw materials, supplies, finished goods and work in progress and are stated at the lower of cost and net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. The net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at the weighted-average cost on the balance sheet date.

h. Property, plant and equipment

Property, plant and equipment are initially measured at cost and subsequently measured at cost less accumulated depreciation and accumulated impairment loss.

Depreciation of property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. If the lease term of an item of property, plant and equipment is shorter than its useful life, it is depreciated over the lease term. The estimated useful lives, residual

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values and depreciation methods are reviewed at the end of each reporting period, with the effects of any changes in the estimates accounted for on a prospective basis.

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

i. Goodwill

Goodwill arising from the acquisition of a business is measured at cost as established at the date of acquisition of the business less accumulated impairment loss.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units or groups of cash-generating units (referred to as “cash-generating units”) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributed goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then pro rata to the other assets of the unit based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. Any impairment loss recognized for goodwill is not reversed in subsequent periods.

If goodwill has been allocated to a cash-generating unit and the entity disposes of an operation within that unit, the goodwill associated with the operation which is disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal and is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

j. Intangible assets
1) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful lives, residual values, and amortization methods are reviewed at the end of each reporting period, with the effect of any changes in the estimates accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss.

2) Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, they are measured on the same basis as intangible assets that are acquired separately.

3) Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

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k. Impairment of property, plant and equipment, right-of-use asset, intangible assets other than goodwill and assets related to contract costs

At the end of each reporting period, the Group reviews the carrying amounts of its property, plant and equipment, right-of-use asset and intangible assets, excluding goodwill, for any indication of impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of a corporate asset, the asset is tested for impairment in the context of the cash-generating unit to which the asset belongs.

Corporate assets are allocated to the individual cash-generating units on a reasonable and consistent basis of allocation.

The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the corresponding asset, cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset, cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

l. Financial instruments

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

Financial assets and financial liabilities are initially recognized at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.

1) Financial assets

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

a) Measurement category

Financial assets are classified as financial assets at amortized cost.

i. Financial assets at amortized cost

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

i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
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Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, trade receivables, other receivables time deposit with original maturities of more than 3 months and refundable deposits, are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for:

i) Purchased or originated credit-impaired financial asset, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of the financial asset; and
ii) Financial assets that are not credit-impaired on purchase or origination but have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial assets in subsequent reporting periods.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

b) Impairment of financial assets

The Group recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables).

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

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

The impairment loss of all financial assets is recognized in profit or loss by reduction in their carrying amounts through a loss allowance account.

c) Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

On derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss.

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2) Equity instruments

Equity instruments issued by the Group are classified as equity in accordance with the substance of the contractual arrangements and the definitions of an equity instrument.

Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs.

The repurchase of the Group’s own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issuance or cancellation of the Group’s own equity instruments.

3) Financial liabilities
a) Subsequent measurement

All the financial liabilities are measured at amortized cost using the effective interest method.

b) Derecognition of financial liabilities

The difference between the carrying amount of a financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

m. Revenue recognition

The Group identifies contracts with customers, allocates the transaction price to the performance obligations and recognizes revenue when performance obligations are satisfied.

1) Revenue from the sale of goods

Revenue from the sale of goods comes from the sale of image sensing products. Revenue and receivables from the sale of goods are recognized when the goods are delivered to the customer’s specific location because it is the time when the customer has full discretion over the manner of distribution and price to sell the goods, has the primary responsibility for sales to future customers and bears the risk of obsolescence. The transaction price received in advance is recognized as a contract liability until the goods has been delivered to the customer.

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

2) Revenue from the rendering of services

Revenue from the rendering of services comes from providing entrusted design services in accordance with customer contract specifications and are recognized when performance obligations are fulfilled.

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

n. Leases

At the inception of a contract, the Group assesses whether the contract is, or contains, a lease.

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The Group as lessee

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

Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities adjusted for lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs needed to restore the underlying assets, and less any lease incentives received. Subsequently, the right-of-use assets are measured at cost less accumulated depreciation and impairment losses and adjusted for any remeasurement of the lease liabilities. Right of-use assets are presented on a separate line in the consolidated balance sheets.

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

Lease liabilities are initially measured at the present value of the lease payments, which comprises fixed payments. The lease payments are discounted using the interest rate implicit in a lease, if that rate can be readily determined. If that rate cannot be readily determined, the Group uses the lessee’s incremental borrowing rate.

Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term, the Company remeasures the lease liabilities with a corresponding adjustment to the right-of-use-assets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss. For a lease modification that is not accounted for as a separate lease, the Company accounts for the remeasurement of the lease liability by (a) decreasing the carrying amount of the right-of-use asset of lease modifications that decreased the scope of the lease, and recognizing in profit or loss any gain or loss on the partial or full termination of the lease; (b) making a corresponding adjustment to the right-of-use asset of all other lease modifications. Lease liabilities are presented on a separate line in the consolidated balance sheets.

Variable lease payments that do not depend on an index or a rate are recognized as expenses in the periods in which they are incurred.

o. Borrowing costs

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

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

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

p. Employee benefits

Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as expenses when employees have rendered services entitling them to the contributions.

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current service cost) and net interest on the net defined benefit liabilities (assets) are recognized as employee benefits expense in the period in which they occur. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liabilities (assets) represent the actual deficit (surplus) in the Group’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

q. Share-based payment arrangements

Employee share options granted

The fair value at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Group’s best estimates of the number of shares or options that are expected to ultimately vest, with a corresponding increase in capital surplus - employee share options. It is recognized as an expense in full at the grant date if vested immediately.

At the end of each reporting period, the Group revises its estimate of the number of employee share options that are expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to capital surplus - employee share options.

r. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax

Income tax payable (refundable) is based on taxable profit (loss) for the year determined according to the applicable tax laws of each tax jurisdiction.

According to the Income Tax Act in the ROC, an additional tax on unappropriated earnings is provided for in the year the shareholders approve to retain earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

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The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liabilities are settled or the assets are realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

3) Current and deferred taxes

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity; in which case, the current and deferred taxes are also recognized in other comprehensive income or directly in equity, respectively.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, management is required to make judgments, estimations, and assumptions on the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The Group considers the possible impact of [the recent development of the COVID-19 in Taiwan and its economic environment implications when making its critical accounting estimates on cash flow projections, growth rate, discount rate, profitability, etc. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revisions affect only that period or in the period of the revisions and future periods if the revisions affect both current and future periods.

a. Write-down of inventories

The net realizable value of inventories is the estimated selling price in the ordinary course of business less the estimated costs of completion and disposal. The estimation of net realizable value is based on current market conditions and historical experience with product sales of a similar nature. Changes in market conditions may have a material impact on the estimation of the net realizable value.

b. Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The calculation of the value in use requires management to estimate the future cash flows expected to arise from the cash-generating units and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

103 -

6. CASH AND CASH EQUIVALENTS

Cash on hand Bank deposits Cash equivalents (investments with original maturities of 3 months or less) Time deposits in banks		December 31	December 31
		2021 $ 172 781,062 138,400 $ 919,634	2020 $ 263 547,334 - $ 547,597

The market interest rate intervals of the time deposits held in banks at the end of the reporting period were as follows:

Time deposits	December 31
	2021 2020 0.35% -

7. FINANCIAL ASSETS AT AMORTIZED COST

Current Time deposit with original maturities of more than 3 months (a) Non-current Pledged time deposits (a and c)		December 31	December 31
		2021 $ 538,582 $ 3,512	2020 $ 758,754 $ 4,048

a. The interest rates ranges of time deposits with original maturities of more than 3 months were 0.08%-2.45% and 0.08%-2.40% per annum as of December 31, 2021 and 2020, respectively.
b. Refer to Note 25 for information relating to their credit risk management and impairment of financial assets at amortized cost.
c. Refer to Note 27 for information relating to investments in financial assets at amortized cost pledged as security.

8. ACCOUNTS RECEIVABLE

ACCOUNTS RECEIVABLE
Accounts receivable-unrelated parties At amortized cost Gross carrying amount Less: Allowance for impairment loss		December	31
		2021 $ 14,680 - $ 14,680	2020 $ 32,842 - $ 32,842

104 -

The average credit period of sales of goods was 30 days. No interest was charged on trade receivables.

In order to minimize credit risk, the management of the Group has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts. In this regard, the management believes the Group’s credit risk was significantly reduced.

The Group measures the loss allowance for trade receivables at an amount equal to lifetime ECLs. The expected credit losses on trade receivables are estimated using a provision matrix by reference to the past default records of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date. As the Group’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Group’s different customer base.

The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation, whichever occurs earlier. For trade receivables that have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of trade receivables based on the Group’s provision matrix.

December 31, 2021

Item N Gross carrying amount Loss allowance (Lifetime ECL) Amortized cost December 31, 2020 Item N Gross carrying amount Loss allowance (Lifetime ECL) Amortized cost	ot Past Due $ 13,369 - $ 13,369 ot Past Due $ 16,224 - $ 16,224	Past Due Up to 60 Days $ 1,311 - $ 1,311 Past Due Up to 60 Days $ 16,618 - $ 16,618	Past Due 61 to 90 Days $ - - $ - Past Due 61 to 90 Days $ - - $ -	Past Due 91 to 120 Days $ - - $ - Past Due 91 to 120 Days $ - - $ -	Past Due 121 to 150 Days $ - - $ - Past Due 121 to 150 Days $ - - $ -	Past Due 151 to 180 Days $ - - $ - Past Due 151 to 180 Days $ - - $ -	Past Due Over 181 Days $ - - $ - Past Due Over 181 Days $ - - $ -	Total $ 14,680 -
								$ 14,680
								Total $ 32,842 -
								$ 32,842

9. INVENTORIES

The movements in the allowance for doubtful accounts were as follows:

Finished goods Work in progress Raw materials Balance at December 31		December 31	December 31
		2021 $ 814,864 698,577 3,620 $ 1,517,061	2020 $ 170,650 675,500 3,373 $ 849,523

105 -

The cost of goods sold related to inventories for the years ended December 31, 2021 and 2020 was $2,609,116 thousand and $2,656,485 thousand, which included inventory write-downs of $(19,090 thousand and $22,512 thousand, respectively, due to the sale of stagnant inventories write-down of inventories to net realizable value.

10. SUBSIDIARIES

Investor
Investee
Main Business
Silicon Optronics, Inc.
NUEVA IMAGING, INC. (“NUEVA”) Research and development and design
of high order CMOS Image Sensor
products
Silicon Optronics (Cayman) Co., Ltd.
(“Silicon Cayman”)
Investment business
Silicon Optronics (Cayman)
Co., Ltd.
Silicon Optronics (Shanghai) Co., Ltd. Design, development and testing of
integrated circuits and related
electronic products, technical service
consultation and transfer of R&D
results

Percentage% of Ownership

December 31

2021
2020
100%
100%
100%
100%
100%
100%

Except for US NUEVA which fulfills the definition of a major subsidiary per Article 2 of the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants, the remaining entities are non-major subsidiaries. The financial reports of the above subsidiaries had been audited by accountants.

11. PROPERTY, PLANT AND EQUIPMENT

Testing Equipment R&D Equipment Molding Equipment Cost Balance at January 1, 2021 $ 1,584 $ 473,084 $ 12,665 Additions 643 - 4,089 Disposal (978) - (3,095 ) Effect of exchange rate changes (3) - - Balance at December 31, 2021 $ 1,246 $ 473,084 $ 13,659 Accumulated depreciation Balance at January 1, 2021 $ 1,260 $ 21,026 $ 4,643 Depreciation expense 256 31,538 4,319 Disposal (978) - (3,095 ) Effect of exchange rate changes (3) - - Balance at December 31, 2021 $ 535 $ 52,564 $ 5,867 Accumulated impairment Balance at January 1, 2021 and December 31, 2021 $ - $ - $ 1,183 Carrying amounts at December 31, 2021 $ 711 $ 420,520 $ 6,609 Cost Balance at January 1, 2020 $ 1,464 $ - $ 13,586 Additions 115 - 4,553 Disposal - - (5,474 ) Reclassified - 473,084 - Effect of exchange rate changes 5 - - Balance at December 31, 2020 $ 1,584 $ 473,084 $ 12,665	Computer Office Equipment $ 1,153 $ 1,655 118 31 (155 ) (29 ) (7) (44) $ 1,109 $ 1,623 $ 846 $ 1,556 170 33 (155 ) (29 ) (5) (41) $ 856 $ 1,519 $ - $ - $ 253 $ 104 $ 1,137 $ 1,672 - 103 - (32 ) - - 16 (78) $ 1,153 $ 1,665	Photomasks Prepayment for Business Facilities Total $ 108,800 $ - $ 598,951 64,555 - 69,436 (49,307 ) - (53,564 ) - - (54) $ 124,048 $ - $ 614,769 $ 55,325 $ - $ 84,656 58,928 - 95,244 (49,307 ) - (53,564 ) - - (49) $ 64,946 $ - $ 126,287 $ - $ - $ 1,183 $ 59,102 $ - $ 487,299 $ 96,810 $ 472,972 $ 587,641 59,812 112 64,695 (47,822 ) - (53,328 ) - (473,084 ) - - - (57) $ 108,800 $ - $ 598,951 (Continued)

106 -

Testing Equipment R&D Equipment Molding Equipment Accumulated depreciation Balance at January 1, 2020 $ 980 $ - $ 6,173 Depreciation expense 276 21,026 3,944 Disposal - - (5,474 ) Effect of exchange rate changes 4 - - Balance at December 31, 2020 $ 1,260 $ 21,026 $ 4,643 Accumulated impairment Balance at January 1, 2020 and December 31, 2020 $ - $ - $ 1,183 Carrying amounts at December 31, 2020 $ 324 $ 452,058 $ 6,839	Computer Office Equipment $ 639 $ 1,607 195 57 - (32 ) 12 (76) $ 846 $ 1,556 $ - $ - $ 307 $ 109	Photomasks Prepayment for Business Facilities Total $ 46,642 $ - $ 56,041 56,505 - 82,003 (47,822 ) - (53,328 ) - - (60) $ 55,325 $ - $ 84,656 $ - $ - $ 1,183 $ 53,475 $ - $ 513,112 (Concluded)

The Group’s property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:

Testing equipment 2-5 years R&D equipment 15 years Molding equipment 3 years Computers 3 years Office equipment 5 years Photomasks 2 years

After considering the progress of product research and development and the use of research and development equipment, on March 16, 2022, the Group decided to dispose of the research and development equipment. The book value of the assets to be authorized for disposal of NT$417,891 thousand on January 31, 2022 was used as a reference for the transaction price.

12. LEASE ARRANGEMENTS

a. Right-of-use assets

Carrying amount Buildings Depreciation charge for right-of-use assets Buildings		December	31
	2021 2020 $ 8,357 $ 17,085 For the Year Ended December 31
		2021 $ 8,483	2020 $ 8,348

Except for the aforementioned addition and recognized depreciation, the Group did not have significant sublease or impairment of right-of-use assets during the years ended December 31, 2021 and 2020.

107 -

b. Lease liabilities

Carrying amount Current Non-current		December	31
		2021 $ 6,674 $ 1,215	2020 $ 7,667 $ 9,473

The discount rate for lease liabilities was as follows:

Buildings	December 31
	2021 2020 1% 1%

c. Material lease activities and terms

The Group did not have significant new lease contracts in 2021 and 2020. The Group leases buildings for the use of offices with lease terms of 3-4 years. The Group does not have bargain purchase options to acquire the buildings at the expiry of the lease periods. In addition, the Group is prohibited from subleasing or transferring all or any portion of the underlying assets without the lessor’s consent.

d. Other lease information

Expenses relating to short-term leases Expenses relating to low-value asset leases Total cash outflow for leases		December	31
		2021 $ 505 $ 60 $ (9,840)	2020 $ 505 $ 59 $ (8,198)

13. INTANGIBLE ASSETS

Cost Balance at January 1, 2021 Additions Reclassified Effect of exchange rate changes Balance at December 31, 2021 Accumulated amortization Balance at January 1, 2021 Amortization expense Reclassified Effect of exchange rate changes Balance at December 31, 2021 Carrying amounts at December 31, 2021	Patents $ 14,169 - - (398) $ 13,771 $ 8,738 2,786 - (278) $ 11,246 $ 2,525	Software $ 25,877 4,680 (8,043) (578) $ 21,936 $ 23,524 4,039 (8,043) (517) $ 19,003 $ 2,933	Total $ 40,046 4,680 (8,043) (976) $ 35,707 $ 32,262 6,825 (8,043) (795) $ 30,249 $ 5,458

(Continued)

108 -

Cost Balance at January 1, 2020 Additions Effect of exchange rate changes Balance at December 31, 2020 Accumulated amortization Balance at January 1, 2020 Amortization expense Effect of exchange rate changes Balance at December 31, 2020 Carrying amounts at December 31, 2020	Patents $ 14,915 - (746) $ 14,169 $ 6,215 2,940 (417) $ 8,738 $ 5,431	Software $ 23,306 3,608 (1,037) $ 25,877 $ 19,954 4,482 (912) $ 23,524 $ 2,353	Total $ 38,221 3,608 (1,783) $ 40,046 $ 26,169 7,422 (1,329) $ 32,262 $ 7,784 (Concluded)

Except for the recognition of amortization expense, there were no significant additions, disposals and impairment of the Group’s other intangible assets for the years ended December 31, 2021 and 2020.

The above items of intangible assets are amortized on a straight-line basis over their estimated useful lives as follows:

Patents 3-7 years Software 3 years

14. OTHER ASSETS

Current Prepaid income tax Tax receivables Prepayments for purchases Others Non-current Refundable deposits Net defined benefit assets		December	31
		2021 $ 52,265 30,605 2,322 1,288 $ 86,480 $ 83,276 1,427 $ 84,703	2020 $ 41,175 18,054 1,187 1,014 $ 61,430 $ 1,787 1,374 $ 3,161

109 -

15. LONG-TERM BORROWINGS

Secured borrowings (Note 27) Bank borrowings Less: Current portion Long term borrowing		December 31	December 31
		2021 $ 350,000 100,000 $ 250,000	2020 $ 350,000 - $ 350,000

In April, 2020 the Group acquired new bank borrowing facilities in the amount of $350,000 thousand, with a floating interest rate of 0.99111% per annum. Interest is paid monthly, and the principal is to be repaid in seven equal semiannual installments staring from April 2022. The loan is to be repaid before April 1, 2025.

16. OTHER LIABILITIES

Current Other payables Payables for bonuses Payables for employees’ compensation Payables for purchases of equipment Payables for remuneration of directors Payables for processing Others Other liabilities Receipts under custody Refund liabilities (1)		December 31	December 31
		2021 $ 114,094 78,500 10,222 10,000 861 15,167 228,844 151 $ 228,995 $ 17,118	2020 $ 35,536 28,570 5,207 3,750 13,787 13,852 100,702 134 $ 100,836 $ -

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of estimated customer returns, discounts and other similar allowances. Based on historical experience and consideration of different contractual conditions, the Group has estimated the possible sales returns and discounts and recognized the refund liability accordingly.

17. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Company adopted a pension plan under the Labor Pension Act (“LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

110 -

Silicon Optronics (Shanghai) Co., Ltd. is a member of a state-managed retirement benefit plan operated by the government of the People’s Republic of China. The subsidiary is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions.

b. Defined benefit plans

The defined benefit plan adopted by the Company in accordance with the Labor Standards Act is operated by the government. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the 6 months before retirement. The Company contributes amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, the Company assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Company is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (the Bureau); the Company has no right to influence the investment policy and strategy.

The amounts included in the consolidated balance sheets in respect of the Company’s benefit plans are as follows:

Present value of defined benefit obligation Fair value of plan assets Net defined benefit assets		December	31
		2021 $ 291 (1,718) $ (1,427)	2020 $ 285 (1,659) $ (1,374)

Movements in net defined benefit assets were as follows:

	Present Value of	Present Value of
	the Defined			Net Defined
	Benefit		Fair Value of	Benefit
	Obligation		the Plan Assets	Assets
Balance at January 1, 2021	$	285	$ (1,659)	$ (1,374)
Net interest expense (income)		1	(7)	(6)
Recognized in profit or loss		1	(7)	(6)
Remeasurement
Actuarial (gain) loss
Actuarial loss - changes in financial
assumptions		(18)	-	(18)
Actuarial loss - experience adjustments		23	(23)	-
Recognized in other comprehensive loss
(income)		5	(23)	(18)
Contributions from the employer		-	(29)	(29)
Balance at December 31, 2021	$	291	$ (1,718)	$ (1,427)
				(Continued)

111 -

	Present Value of	Present Value of
	the Defined			Net Defined
	Benefit		Fair Value of		Benefit
	Obligation		the Plan Assets		Assets
Balance at January 1, 2020	$	249	$ (1,569)	$ (1,320)
Net interest expense (income)		3	(13)		(10)
Recognized in profit or loss		3	(13)		(10)
Remeasurement
Actuarial (gain) loss
Actuarial loss - changes in financial
assumptions		17	-		17
Actuarial loss - experience adjustments		16	(52)		(36)
Recognized in other comprehensive loss
(income)		33	(52)		(19)
Contributions from the employer		-	(25)		(25)
Balance at December 31, 2020	$	285	$ (1,659)	$ (1,374)
					(Concluded)

Through the defined benefit plans under the Labor Standards Act, the Company is exposed to the following risks:

1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.
2) Interest risk: A decrease in the corporate bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plans’ debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated using the future salaries of plan participants. As such, an increase in the salaries of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rate Expected rate of salary increase	December 31
	2021 2020 0.8% 0.4% 3.0% 3.0%

112 -

If possible reasonable changes in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows:

(decrease) as follows:
Discount rate 0.25% increase 0.25% decrease Expected rate of salary increase/decrease 0.25% increase 0.25% decrease		December	31
		2021 $ (11) $ 11 $ 10 $ (10)	2020 $ (11) $ 11 $ 10 $ (10)

The sensitivity analysis presented above may not be representative of the actual changes in the present value of the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Expected contributions to the plans for the next year Average duration of the defined benefit obligation		December	31
		2021 $ 22 15 years	2020 $ 22 16 years

18. EQUITY

a. Ordinary shares

Numbers of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued		December 31	December 31
		2021 100,000 $ 1,000,000 78,153 $ 781,529	2020 100,000 $ 1,000,000 78,106 $ 781,059

A total of 6,000 thousand shares from the authorized share capital was reserved for the issuance of employee share options. The increase in the Company’s share capital is mainly due to the employees’ exercise of their employee share options.

b. Capital surplus

May be used to offset a deficit, distributed as cash dividends, or transferred to share capital (1) Arising from issuance of ordinary shares May be used to offset a deficit only Arising from employee share options exercised price May not be used for any purpose Arising from employee share options		December 31	December 31
		2021 $ 1,115,462 12,286 5,001 $ 1,132,749	2020 $ 1,114,427 12,269 5,018 $ 1,131,714

113 -
1) Such capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and to once a year).

Reconciliations of the balance for each class of capital surplus were as follows:

Premium on Issue of Shares Arising from Employee Share Options Balance at January 1, 2020 $ 1,114,415 $ 17,287 Issuance of ordinary shares under employee share options 12 - Balance at December 31, 2020 1,114,427 17,287 Issuance of ordinary shares under employee share options 1,035 - Balance at December 31, 2021 $ 1,115,462 $ 17,287	Total $ 1,131,702 12 1,131,714 1,035 $ 1,132,749

c. Retained earnings and dividend policy

Under the Company’s articles of incorporation (the “Articles”), where the Company made a profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting accumulated losses of previous years, setting aside as legal reserve 10% of the remaining profit, setting aside or reversing a special reserve in accordance with the laws and regulations, a special reserve may be allocated or reversed in accordance with the law and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan, which should be resolved in the shareholders’ meeting for the distribution of dividends and bonuses to shareholders. For the policies on the distribution of employees’ compensation and remuneration of directors after the amendment, refer to “Employees’ compensation and remuneration of directors” in Note 20 (g).

Considering that the Company is in a period of operational growth, taking into account the interests of the company's shareholders and long-term capital and business planning, no more than 90% of the accumulated distributable earnings should be distributed as dividends, out of which no less than 10% of the total dividends distributed should be in the form of cash dividends. If the Company has no distributable earnings for the year, or if there are earnings but the amount of earnings is much lower than that distributed in the previous year, or considering the Company’s financial, business and operational factors, the Company may distribute all or part of the earnings in accordance with the law or regulations of the competent authorities.

An appropriation of earnings to the legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. The legal reserve may be used to offset deficits. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

114 -

The appropriations of earnings for 2020 and 2019. which had been approved in the shareholders’ meetings on July 1, 2021 and June 16, 2020, respectively, were as follows:

Legal reserve Special reserve Cash dividends Dividends per share (NT$)	Appropriation of Earnings
	For the Year Ended December 31
	2020 2019 $ 28,146 $ 15,601 1,885 2,365 215,897 154,212 2.8 2.0

The appropriations of earnings for 2021 had been proposed by the Company’s board of directors on March 16, 2022. The appropriations and dividends per share were as follows:

	Appropriation	Appropriation
	of	Earnings
Legal reserve	$	74,107
Special reserve		1,509
Cash dividends		270,035
Dividends per share (NT$)	$	3.5

The appropriations of earnings for 2021 are subject to the resolution of the shareholders’ in their’ meeting to be held on June 23, 2022.

d. Other equity items

Balance, beginning of year Exchange differences on translation of the financial statements of foreign operations Balance, end of year e. Treasury shares Treasury shares (In thousands of shares)	For the Year Ended December 31 2021 2020 $ (4,250) $ (2,365) (1,509) (1,885) $ (5,759) $ (4,250) For the Year Ended December 31 2021 2020 1,000 1,000	For the Year Ended December 31 2021 2020 $ (4,250) $ (2,365) (1,509) (1,885) $ (5,759) $ (4,250) For the Year Ended December 31 2021 2020 1,000 1,000	For the Year Ended December 31 2021 2020 $ (4,250) $ (2,365) (1,509) (1,885) $ (5,759) $ (4,250) For the Year Ended December 31 2021 2020 1,000 1,000
		2021 1,000	2020 1,000

The Company resolved in its board of directors’ meeting held on August 12, 2019 to buy back 1,000 thousand of its ordinary shares listed on the Taiwan Stock Exchange within the period starting August 13, 2019 to October 12, 2019 for transfer to its employees, at a purchase price ranging from NT$53 to NT$115 per share.

In October 2019, the Company completed the repurchase of 1,000 thousand shares for $96,995 thousand.

Under the Securities and Exchange Act, the Company shall neither pledge treasury shares nor exercise shareholders’ rights on these shares, such as the rights to dividends and to vote.

115 -

19. REVENUE

For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
2021 $ 3,992,611 3,885 $ 3,996,496 December 31		2020 $ 3,249,068 79,627 $ 3,328,695

2021 2020 $ 12,696 $ 7,408 For the Year Ended December 31
	2021 $ 3,475,865 236,401 284,230 $ 3,996,496 $ 3,967,619 28,877 $ 3,996,496	2020 $ 3,007,489 87,107 234,099 $ 3,328,695 $ 3,237,207 91,488 $ 3,328,695

116 -

20. NET PROFIT FROM CONTINUING OPERATIONS

a. Interest income

Financial assets at amortized cost Bank deposit Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 $ 4,525 753 7 $ 5,285	2020 $ 2,949 1,531 8 $ 4,488

b. Other income

Others c. Other gains and losses Net foreign exchange gain Other losses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2021 2020 $ 526 $ 458 For the Year Ended December 31
		2021 $ 8,451 (160) $ 8,291	2020 $ 3,553 (34) $ 3,519

d. Finance costs

Interest on bank loans Interest on lease liabilities	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 $ 3,481 132 $ 3,613	2020 $ 2,595 208 $ 2,803

e. Depreciation and amortization

Property, plant and equipment Right-of-use assets Intangible assets Total	For the Year Ended	For the Year Ended	December 31
		2021 $ 95,244 8,483 6,825 $ 110,552	2020 $ 82,003 8,348 7,422 $ 97,773 (Continued)

117 -

An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Research and development expenses Employee benefits expense Post-employment benefits Defined contribution plans Defined benefit plans Other employee benefits Total employee benefits expense An analysis of employee benefits expense by function Operating expenses	For the Year Ended	For the Year Ended	December 31
	2021 $ 20,980 82,747 $ 103,727 $ 6,825 For the Year Ended		2020 $ 20,038 70,313 $ 90,351 $ 7,422 (Concluded) December 31
		2021 $ 3,213 (6) 3,207 353,091 $ 356,298 $ 356,298	2020 $ 3,097 (10) 3,087 206,091 $ 209,178 $ 209,178

f. Employee benefits expense
g. Employees’ compensation and remuneration of directors

According to the Company’s Articles, the Company accrued employees’ compensation at a rate of no less than 0.005% and no higher than 25%, and remuneration of directors and supervisors at rate of no higher than 3%. The employees’ compensation and remuneration of directors for the years ended December 31, 2021 and 2020, which were resolved in the board of directors’ meetings on March 16, 2022 and March 10, 2021, respectively, were as follows:

Accrual rate

Employees’ compensation Remuneration of directors and supervisors Amount Employees’ compensation Remuneration of directors and supervisors	For the Year Ended December 31
	2021 2020 8.00% 8.00 1.02% 1.05 For the Year Ended December 31
	2021 2020 $ 78,500 $ 28,570 10,000 3,750

If there is a change in the amounts after the annual consolidated financial statements are authorized for issue, the differences are recorded as a change in the accounting estimate.

118 -

There is no difference between the actual amounts of employees’ compensation and remuneration of directors paid and the amounts recognized in the consolidated financial statements for the years ended December 31, 2020 and 2019.

Information on the employees’ compensation and remuneration of directors resolved by the Company’s board of directors in 2021 and 2020 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

21. INCOME TAXES

a. Income tax recognized in profit or loss

The major components of tax expense (income) were as follows:

For the Year Ended December 31 2021 2020 Current tax In respect of the current year $ 148,186 $ 47,990 Income tax on unappropriated earnings 1,776 - Adjustments for prior years 109 2,442 150,071 50,432 Deferred tax In respect of the current year 3,327 (4,631) Income tax expense recognized in profit or loss $ 153,398 $ 45,801 A reconciliation of accounting profit and income tax expense is as follows: For the Year Ended December 31 2021 2020 Profit before tax from continuing operations $ 894,448 $ 327,239 Income tax expense calculated at the statutory rate $ 179,375 $ 65,628 Income tax on unappropriated earnings 1,776 - Nondeductible expenses in determining taxable income (2,239) (1,978) Unrecognized deductible temporary differences (3,327) 4,631 Investment credits of the current year (25,623) (20,291) Deferred tax Temporary differences 3,327 (4,631) Adjustments for prior years’ tax 109 2,442 Income tax expense recognized in profit or loss $ 153,398 $ 45,801 b. Current tax assets and liabilities December 31 2021 2020 Current tax liabilities Income tax payable $ 149,388 $ 47,664	For the Year Ended	For the Year Ended	December 31
			2020 $ 47,990 - 2,442 50,432 (4,631) $ 45,801 December 31
		2021 2020 $ 894,448 $ 327,239 $ 179,375 $ 65,628 1,776 - (2,239) (1,978) (3,327) 4,631 (25,623) (20,291) 3,327 (4,631) 109 2,442 $ 153,398 $ 45,801 December 31
		2021 $ 149,388	2020 $ 47,664

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c. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the Year Ended December 31, 2021

Deferred tax assets Allowance for impairment loss Foreign exchange loss Deferred tax liabilities Gain on foreign currency exchange For the Year Ended December 31, 2020 Deferred tax assets Allowance for impairment loss Deferred tax liabilities Gain on foreign currency exchange	Opening Balance Recognized in Profit or Loss $ 17,454 $ (3,818) - 283 $ 17,454 $ (3,535) $ 208 $ (208) Opening Balance Recognized in Profit or Loss $ 12,952 $ 4,502 $ 337 $ (129)	Closing Balance $ 13,636 283 $ 13,919 $ - Closing Balance $ 17,454 $ 208

d. Income tax assessments

The Company’s tax returns through 2019 have been assessed by the tax authorities.

22. EARNINGS PER SHARE

EARNINGS PER SHARE
Basic earnings per share Diluted earnings per share	Unit: NT$ Per Share For the Year Ended December 31
		2021 $ 9.61 $ 9.53	2020 $ 3.65 $ 3.64

120 -

The earnings and weighted average number of ordinary shares outstanding used in the computation of earnings per share were as follows:

Net Profit for the Year

Earnings used in the computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employee share options Bonuses issued to employees Earnings used in the computation of diluted earnings per share	For the Year Ended	For the Year Ended	December 31
		2021 $ 741,050 - - $ 741,050	2020 $ 281,438 - - $ 281,438

Number of shares

Unit: In Thousands of Shares

Weighted average number of ordinary shares used in the computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employee share options Bonuses issued to employees Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 77,121 25 624 77,770	2020 77,105 1 278 77,384

Since the Group can offer to settle the bonuses to employees in cash or shares, the Company assumes the entire amount of the bonus would be settled in shares and the resulting potential shares are included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, if the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the shareholders resolve the number of shares to be distributed to employees at their meeting in the following year.

23. SHARE-BASED PAYMENT ARRANGEMENTS

a. Employee share option plan

Qualified employees of the Company were granted 2,000 options on July 29, 2013 and 3,200 options on May 16, 2012, each option entitles the holder to subscribe for one thousand ordinary shares of the Company, and the total number of new ordinary shares required to be issued for the exercise of the employee share option is 2,000 shares and 3,200 shares, respectively. The options granted are valid for 10 years and exercisable at certain percentages after the second year from the grant date.

Qualified employees of the Company were granted 5,000 options on July 22, 2021 , each option entitles the holder to subscribe for one thousand ordinary shares of the Company, and the total number of new ordinary shares required to be issued for the exercise of the employee share option is 5,000 shares, respectively. The options granted are valid for 10 years and exercisable at certain percentages after the second year from the grant date.

121 -

Information on employee share options is as follows:

2013 Employee Share
Option Plan
Number of
Options (In
Thousands)
Weighted-
average
Exercise
Price
(NT$)
For the year ended December 31, 2021
Balance at January 1
100
$ 33.00
Options exercised

(45)
32.21

Balance at December 31

55
32.21

Options exercisable, end of period

55

For the year ended December 31, 2020
Balance at January 1
100
$ 33.00
Options exercised

-
-

Balance at December 31

100
33.00

Options exercisable, end of period

100

Information on outstanding options as follows:

2012 Employee Share
Option Plan

Number of
Options (In
Thousands)
Weighted-
average
Exercise
Price
(NT$)
605
$ 17.17

(2)
10.25

603
17.20

603
630
$ 17.31

(25)
10.50

605
17.17

605

December 31, 2021 Share Option Plan Range of Exercise Price (NT$) Weighted- average Remaining Contractual Life (In Years) 2013 Employee share option plan $ 32.21 1.62 2012 Employee share option plan 10.25-19.03 0.82	December 31, 2020
	Share Option Plan Range of Exercise Price (NT$) Weighted- average Remaining Contractual Life (In Years) 2013 Employee share option plan $ 32.21-33.00 2.62 2012 Employee share option plan 10.25-19.03 1.82

The resolution for the granting of the 2013 employee share options was passed in the board of directors’ meeting on June 10, 2014, and their fair values were assessed using the Black-Scholes pricing model; the inputs to the model are as follows:

Grant-date share price (NT$) $13.55 Exercise price (NT$) $46.00 Expected volatility 33.73%-37.88% Expected life 2.5-4.5 years Expected dividend yield Risk-free interest rate 0.68%-1.12% Fair value of stock options 0.05-0.55

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The resolution for the granting of the 2013 employee share options was passed in the board of directors’ meeting on August 13, 2013, and their fair values were assessed using the Black-Scholes pricing model; the inputs to the model are as follows:

Grant-date share price (NT$) $11.18 Exercise price (NT$) $33.0 Expected volatility 37.6%-41.65% Expected life 2.5-4.5 years Expected dividend yield Risk-free interest rate 0.82%-1.07% Fair value of stock options 0.18-0.93

The resolution for the granting of the 2012 employee share options was passed in the board of directors’ meeting on November 13, 2012, and their fair values were assessed using the Black-Scholes pricing model; the inputs to the model are as follows:

Grant-date share price (NT$) $12.29 Exercise price (NT$) $19.5 Expected volatility 44.34%-54.56% Expected life 2.5-4.5 years Expected dividend yield Risk-free interest rate 0.75%-0.85% Fair value of stock options 1.67-3.94

The resolution for the granting of the 2012 employee share options was passed in the board of directors’ meeting on May 25, 2012, and their fair values were assessed using the Black-Scholes pricing model; the inputs to the model are as follows:

Grant-date share price (NT$) $10.10 Exercise price (NT$) $10.50 Expected volatility 46.76%-47.19% Expected life 6-7 years Expected dividend yield Risk-free interest rate 1.09%-1.15% Fair value of stock options 4.45-4.81

24. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance.

Key management personnel of the Group review the capital structure on an annual basis. As part of this review, the key management personnel consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the key management personnel, in order to balance the overall capital structure, the Group may adjust the number of new shares issued, and/or the amount of new debt issued or existing debt redeemed.

The Group is not subject to any externally imposed capital requirements.

123 -

25. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments that are not measured at fair value

The management believes the carrying amounts of financial assets and financial liabilities not carried at fair value approximate their fair values.

b. Categories of financial instruments

Financial assets Financial assets at amortized cost (Note 1) Financial liabilities Amortized cost (Note 2)	December 31
	2021 2020 $ 1,559,684 $ 1,345,028 713,581 643,482

Note 1: The balances include financial assets measured at amortized cost, which comprise cash and cash equivalents, accounts receivable, refundable deposits and pledged time deposits.
Note 2: The balances include financial liabilities measured at amortized cost, which comprise accounts payable (including related parties), other payables (including related parties), current portion of long-term borrowing, long-term debt and guarantee deposits.
c. Financial risk management objectives and policies

The Group’s major financial instruments included accounts receivable, accounts payable and long-term borrowings. The Group’s corporate treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports that analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

1) Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below).

There had been no change in the Group’s exposure to market risks or the manner in which these risks were managed and measured.

a) Foreign currency risk

The Group has foreign currency sales and purchases, which exposes the Group to foreign currency risk. Approximately 98% of the Group’s sales is denominated in currencies other than the functional currency of the entity making the sale, whilst almost 97% of costs is denominated in the entity’s functional currency. Exchange rate exposures are managed within approved policy parameters.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities are set out in Note 28.

124 -

Sensitivity analysis

The Group is mainly exposed to the exchange rate fluctuations in the USD.

The sensitivity analysis regarding foreign currency risk is mainly calculated for USD denominated monetary items on the balance sheet date.

When the NTD appreciates/depreciates by 1% against the USD, the Group’s net profit before tax for the years ended December 31, 2021 and 2020 would decrease/increase by $1,185 thousand and $296 thousand, respectively.

b) Interest rate risk

The Group is exposed to interest rate risk arising from financial assets and financial liabilities at both fixed and floating interest rates.

The carrying amounts of the Group’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting periods were as follows.

Fair value interest rate risk Financial assets Cash flow interest rate risk Financial assets Financial liabilities Sensitivity analysis	December 31
	2021 2020 $ 680,494 $ 762,802 781,052 547,324 350,000 350,000

The sensitivity analysis regarding interest rate risk is calculated based on the changes in the cash flow of floating-rate liabilities on the balance sheet date. If interest rates had been 0.5% higher/lower, pre-tax profit for the years ended December 31, 2021 and 2020 would have increased/decreased by $2,155 thousand and $987 thousand, respectively.

2) Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations and resulting in a financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure of counterparties to discharge an obligation mainly arise from the carrying amount of the respective recognized financial assets as stated in the consolidated balance sheets.

The Group transacts with a large number of unrelated customers, thus, no concentration of credit risk was observed.

3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank facilities and ensures compliance with loan covenants.

125 -

Bank borrowings are significant sources of liquidity for the Group. For the Group’s unutilized financing facilities, please refer to (2) Financing facilities below.

a) Liquidity and interest rate risk tables for non-derivative financial liabilities

The following tables detail the Group’s remaining contractual maturities for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. The tables include both interest and principal cash flows.

Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment dates.

December 31, 2021

On Demand or Less than 1 Month Non-derivative financial liabilities Leas liabilities $ 560 Accounts payable 269,324 Payables for processing - Payables for purchases of equipment 5,154 Long-term borrowings 289 $ 275,327	1-3 Months $ 1,120 83,174 861 5,068 578 $ 90,801	3 Months to 1 Year $ 5,042 - - - 102,189 $ 107,231	1 Year to 5 Years $ 1,120 - - - 253,304 $ 254,424

Additional information about the maturity analysis for financial liabilities

Less than 1 Year 1-5 Years Lease liabilities $ 6,722 $ 1,120 Interest rate liabilities 103,056 253,304 $ 109,778 $ 254,424 December 31, 2020 On Demand or Less than 1 Month Non-derivative financial liabilities Leas liabilities $ 650 Accounts payable 95,205 Accounts payable - related parties 132,384 Payables for processing - Payables for purchases of equipment 2,771 Long-term borrowings 289 $ 231,299	5-10 Years $ - - $ - 1-3 Months $ 1,300 25,116 21,783 13,787 2,436 576 $ 64,998	10-15 Years 15-20 Years $ - $ - - - $ - $ - 3 Months to 1 Year $ 5,849 - - - - 2,591 $ 8,440	15-20 Years $ - -	20+ Years $ - - $ - 1 Year to 5 Years $ 9,098 - - - - 356,333 $ 365,431	20+ Years $ - -
		$	$ -		$ -

126 -

Additional information about the maturity analysis for financial liabilities

Lease liabilities Interest rate liabilities	Less than 1 Year $ 7,799 3,456 $ 11,255	1-5 Years $ 9,098 356,333 $ 365,431	5-10 Years $ - - $ -	10-15 Years $ - - $ -	15-20 Years $ - - $ -	20+ Years $ - - $ -

b) Financing facilities

Unsecured bank overdraft facilities, reviewed annually and payable on demand: Amount used Amount unused Secured bank overdraft facilities: Amount used Amount unused		December 31	December 31
		2021 $ - 200,000 $ 200,000 $ 350,000 100,000 $ 450,000	2020 $ - 200,000 $ 200,000 $ 350,000 250,000 $ 600,000

26. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Besides information disclosed elsewhere in the other notes, details of transactions between the Group and other related parties are disclosed below.

a. Related party name and category

Related Party Name Powerchip Semiconductor Manufacturing Corp.	Related Party Category
	Substantive related parties (Non-related since April 18, 2021)

b. Purchases

Related Party Category Substantive related parties Powerchip Semiconductor Manufacturing Corp.	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 $ 437,695	2020 $ 1,473,297

The purchase prices and payment terms were based on negotiations and thus not comparable with those in the market.

127 -

c. Research and development expenses

Related Party Category Substantive related parties Powerchip Semiconductor Manufacturing Corp. Accounts payable to related parties Related Party Category Substantive related parties Powerchip Semiconductor Manufacturing Corp.		December	31
		2021 $ - December	2020 $ 4,702 31
		2021 $ -	2020 $ 154,167

d. Accounts payable to related parties
e. Other transactions with related parties

The Group signed a joint development contract with Powerchip Semiconductor Manufacturing Co., Ltd. According to the contract, the Group will provide some machinery and equipment for the purpose of research and development.

f. Remuneration of key management personnel

Short-term employee benefits	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 $ 34,100	2020 $ 22,831

The remuneration of directors and other key management personnel is determined by the remuneration committee based on with individual performance and market trends.

27. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets of the Company were provided as collateral for long-term bank borrowings and as guarantee for the tariff on imported raw materials:

Property, plant and equipment - R&D equipment Pledged time deposits (classified as financial assets a amortized cost-noncurrent)		December 31	December 31
		2021 $ 420,520 3,512 $ 424,032	2020 $ 452,058 4,048 $ 456,106

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28. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The Group’s significant financial assets and liabilities denominated in foreign currencies aggregated by the foreign currencies other than the functional currencies and the related exchange rates between the foreign currencies and the respective functional currencies were as follows:

December 31, 2021
Foreign
Currency
Exchange Rate
Financial assets
Monetary items
USD
$ 18,002
27.68 (USD:NTD)

CNY

2,282
4.344 (CNY:NTD)

Financial liabilities

Monetary items
USD

13,721
27.68 (USD:NTD)

December 31, 2020
Foreign
Currency
Exchange Rate

Financial assets
Monetary items
USD
$ 11,060
28.48 (USD:NTD)

CNY

2,237
4.377 (CNY:NTD)

Financial liabilities

Monetary items
USD

10,019
28.48 (USD:NTD)

Carrying
Amount
$ 498,308

9,915
$ 508,223
$ 379,809
Carrying
Amount
$ 314,965

9,792
$ 324,757
$ 285,331

The Group is mainly exposed to the USD and CNY. The following information was aggregated by the functional currencies of the entities in the Group, and the exchange rates between the presentation currency and the respective functional currencies were disclosed. The significant unrealized foreign exchange gains (losses) were as follows:

Foreign Currency NTD CNY USD	For the Year Ended December 31	For the Year Ended December 31
	2021 Exchange Rate Net Foreign Exchange Gains (Losses) 1 (NTD:NTD) $ 7,530 4.341 (CNY:NTD) 667 28.009 (USD:NTD) 254 $ 8,451	2020
		Exchange Rate Net Foreign Exchange Gains (Losses) 1 (NTD:NTD) $ 2,179 4.282 (CNY:NTD) 1,070 29.549 (USD:NTD) 304 $ 3,553

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29. SEPARATELY DISCLOSED ITEMS

a. Information about significant transactions and investees:
1) Financing provided to others: None;
2) Endorsements/guarantees provided: None;
3) Marketable securities held (excluding investments in subsidiaries): None;
4) Marketable securities acquired or disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: None;
5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: None;
6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None;
7) Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital: See Table 1;
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: None;
9) Information about the derivative instruments transaction: None;
10) Intercompany relationships and significant intercompany transactions: See Table 2;
b. Names, locations, and related information of investees over which the Company exercises significant influence (excluding information on investment in Mainland China): Please see Table 3;
c. Information on investments in mainland China: See Table 4.
d. Information on major shareholders: the name, amount and proportion of shareholders with a shareholding ratio of 5% or more: See Table 5

30. SEGMENT INFORMATION

a. Operation segment information

Information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided.

The segment revenues and operating results for the years ended December 31, 2021 and 2020 are shown in the consolidated income statements for the years ended December 31, 2021 and 2020. The segment assets as of December 31, 2021 and 2020 are shown in the consolidated balance sheets as of December 31, 2021 and 2020.

130 -
b. Revenue from major products and services

The following is an analysis of the Group’s revenue from its major products and services:

Complementary metal-oxide semiconductors Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 $ 3,976,619 28,877 $ 3,996,496	2020 $ 3,237,207 91,488 $ 3,328,695

c. Geographical information

The Group’s revenue from continuing operations from external customers by location of operations and information about its non-current assets by location of assets are detailed below.

Revenue from External Customers For the Year Ended December 31 2021 2020 $ 3,475,865 $ 3,007,489 236,401 87,107 284,230 134,216 $ 3,996,496 $ 3,328,695	Non-current Assets	Non-current Assets

	December 31
2021 $ 3,475,865 236,401 284,230 $ 3,996,496	2021 $ - 575,190 9,200 $ 584,390	2020 $ - 522,663 17,105 $ 539,768

Non-current assets exclude financial assets at amortized cost non-current, deferred tax assets, post-employment benefit assets and goodwill.

d. Information about major customers

Single customers contributing 10% or more to the Group’s revenue were as follows:

Customer A Customer B Customer C	For the Year Ended December 31
	2021 2020 $ 1,567,124 $ 2,419,855 865,467 1,154 850,652 -

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TABLE 1

SILICON OPTRONICS, INC. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2021

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Nature of Relationship		Transaction Details	Transaction Details		Abnormal Transaction	Abnormal Transaction	Notes/Accounts (Payable) Receivable	Notes/Accounts (Payable) Receivable	Note
			Purchase/ Sale	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% of Total
Silicon Optronics, Inc.	Powerchip Semiconductor Manufacturing Corp.	Substantive related parties (Note 1)	Purchase	$ 437,695	14	Note 2	-	-	$ -	-	-

Note 1: Non-related since April 18, 2021.

Note 2: Mainly paid on the 30th days after the month of the invoice date.

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TABLE 2

SILICON OPTRONICS, INC. AND SUBSIDIARIES

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE YEARS ENDED DECEMBER 31, 2021 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Company Name	Counterparty	Nature of Relationship (Note 3)	Intercompany Transactions	Intercompany Transactions	Intercompany Transactions
			Financial Statement Item	2021		Percentage of Consolidated Total Gross Sales or Total Assets
				Amount	Terms
Silicon Optronics, Inc.	NUEVA IMAGING INC. NUEVA IMAGING INC. Silicon Optronics (Shanghai) Co., Ltd. Silicon Optronics (Shanghai) Co., Ltd.	1 1 1 1	Technical service expense Other payable from related parties Technical service expense Other payable from related parties	$ 41,114 2,625 113,784 8,887	- - - -	1% - 3% -

Note 1: Represents the transactions from parent company to subsidiary.

Note 2: The intercompany transactions, prices and terms are determined in accordance with mutual agreements.

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TABLE 3

SILICON OPTRONICS, INC. AND SUBSIDIARIES

INFORMATION ON INVESTEES DECEMBER 31, 2021 (In Thousands of New Taiwan Dollars)

Investor Company	Investee Accounted for using the Equity Method	Location	Main Businesses and Products	Investment Amount	Investment Amount	Balance	as of December 31, 2021	as of December 31, 2021	Net Income of Investee Accounted for using the Equity Method	Investment Income	Note
				December 31, 2021	December 31, 2020	Number of Shares (In Thousands)	Percentage of Ownership (%)	Carrying Amount
Silicon Optronics, Inc.	NUEVA IMAGING INC. Silicon Optronics (Cayman) Co., Ltd.	USA Cayman Islands	Product development & design of high-end CMOS Image Sensor Investment holding company	$ 358,500 5,237	$ 358,500 5,237	6,000 170	100 100	$ 254,698 32,221	$ 3,633 7,564	$ 3,633 7,564	Subsidiary Subsidiary

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TABLE 4

SILICON OPTRONICS, INC. AND SUBSIDIARIES

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2021 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investee Company	Main Businesses and Products	Main Businesses and Products	Paid-in Capital (US$ in Thousands)	Paid-in Capital (US$ in Thousands)	Method of Investment	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2021 (US$ in Thousands)	Remittance of Funds	Remittance of Funds	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2021 (US$ in Thousands)	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss)	Carrying Amount as of December 31, 2021	Accumulated Repatriation of Investment Income as of December 31, 2021
							Outward	Inward
Silicon Optronics (Shanghai) Co., Ltd.	Design, test and research and development of IC and related electronic products with consultation on technology services and technology transfer		US$ 175 thousand		Note 1	$ 4,844 (US$ 175 thousand)	$ -	$ -	$ 4,844 (US$ 175 thousand)	$ 7,564	100	$ 7,564	$ 32,221	$ -

Accumulated Outward Remittance for Investment in Mainland China as of December 31, 2021 (US$ in Thousands)		Investment Amount Authorized by Investment Commission, MOEA (US$ in Thousands)		Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA (US$ in Thousands)
$ 4,844 (US$ 175 thousand)		Note 1		$ 1,638,545

Note 1: Through Silicon Optronics (Cayman) Co., Ltd.’s investment in Silicon Optronics (Shanghai) Co., Ltd., the investment was approved by the Investment Commission, MOEA with the approved amount of US$ 175 thousand.

Note 2: Amount was recognized on the basis of the audited financial statements.

Note 3: Based on the exchange rate as of December 31, 2021.

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TABLE 5

SILICON OPTRONICS, INC. AND SUBSIDIARIES

INFORMATION OF MAJOR SHAREHOLDERS FOR THE YEAR ENDED DECEMBER 31, 2021

Name of Major Shareholder	Shares	Shares
	Number of Shares	Percentage of Ownership (%)
Samoa Shangzhao Lake Co., Ltd. Samoa Full Guest Investment Limited Xiao Dong Luo	17,691,413 4,875,458 4,583,587	22.63 6.23 5.86

Note 1: The information of major shareholders presented in this table is provided by the Taiwan Depository & Clearing Corporation based on the number of ordinary shares and preferred shares held by shareholders with ownership of 5% or greater, that have been issued without physical registration (including treasury shares) by the Company as of the last business day for the current quarter. The share capital in the consolidated financial statements may differ from the actual number of shares that have been issued without physical registration because of different preparation basis.
Note 2: If a shareholder delivers the shareholdings to the trust, the above information will be disclosed by the individual truster who opened the trust account. For shareholders who declare insider shareholdings with ownership greater than 10% in accordance with the Security and Exchange Act, the shareholdings include shares held by shareholders and those delivered to the trust over which shareholders have rights to determine the use of trust property. For information relating to insider shareholding declaration, please refer to Market Observation Post System.
136 -

V. 2021 Independent Auditors’ Report and Unconsolidated Financial Statements

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Silicon Optronics, Inc.

Opinion

We have audited the accompanying parent company only financial statements of Silicon Optronics, Inc. (the “Company”), which comprise the parent company only balance sheets as of December 31, 2021 and 2020, the parent company only statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the parent company only financial position of the Company as of December 31, 2021 and 2020, and the parent company only financial performance and the parent company only 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 auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the 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 Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the parent company only financial statements for the year ended December 31, 2021. 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, and we do not provide a separate opinion on these matters.

The key audit matters of the Company’s parent company only financial statements for the year ended December 31, 2021 are described as follows:

Sales Revenue

The Company’s sales revenue derived from its key customers accounted for a high proportion of the overall sales revenue. Since the sales amount from the transactions with these customers is significant to the overall sales revenue, we believe that there is a risk in the validity of the Company’s sales transactions; therefore, the validity of sales revenue from the key customers has been identified as a key audit matter for the year ended

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December 31, 2021. For the accounting policies on the revenue recognition, please refer to Note 4 (k) to the parent company only financial statements.

Our main audit procedures performed in respect of the above-mentioned key audit matter are as follows:

We understood the internal controls on order approval and shipment procedures and tested the operating effectiveness such controls.
We understood the background of the key customers and assessed whether the transaction amounts and credit lines were comparable to the scope of such customers and whether they had been appropriately approved.
To confirm the validity of sales revenue, we selected samples of the sales transactions and inspected the customer orders as well, delivery orders and invoices that have been confirmed by the counterparties, and also whether the sales counterparties were the same as the counterparties collecting payment.

Inventory Valuation

As of December 31, 2021, the Company’s inventory balance was $1,517,061 thousand, accounting for 40% of the combined total assets. For the related accounting policies, please refer to Note 4 (e) to the parent company only financial statements. As the amount of the inventory is significant and the assessment of net realizable value involves significant management judgements, particularly with regard to estimates of inventory valuation and obsolescence loss, thus, inventory valuation was considered as a key audit matter. We have evaluated the appropriateness of the method used by the Company to calculate the inventory valuation and obsolescence loss at the end of the year and performed the following audit procedures:

Based on our understanding of the industry and nature of products of the Company, we verified the appropriateness of the method of inventory aging management, and also took samples of and tested whether the aging classification was appropriate.
We performed recalculations to determine if the assessment of the net realizable value was reasonable, and verified whether the inventories were measured at the lower of cost and net realizable value based on the most recent raw material quotes or sales data, and also assessed the reasonableness of the assessment of changes in the provision for inventory write-downs.
We obtained and verified the details of inventory valuation and obsolescence losses and aging data, and analyzed the reasons for the differences in the provision for loss in 2021 compared to 2020, to assess whether the provision for inventory valuation and obsolescence losses was appropriate.

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.

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

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.
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.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the 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 auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.
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.
Obtain sufficient and appropriate audit evidence regarding the financial information of 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.

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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 for the year ended December 31, 2021 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Ming-Yuan Chung and Tung-Hui Yeh.

Deloitte & Touche Taipei, Taiwan Republic of China

March 16, 2022

Notice to Readers

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

For the convenience of readers, the independent auditors’ report and the accompanying parent company only financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and parent company only financial statements shall prevail.

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SILICON OPTRONICS, INC.

PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at amortized cost - current (Notes 4, 7 and 25) Accounts receivable - net (Notes 4 and 8) Inventories (Notes 4, 5 and 9) Prepayments and other current assets (Notes 4, 14 and 25) Total current assets NON-CURRENT ASSETS Financial assets at amortized cost - noncurrent (Notes 4, 7, 25 and 27) Investment accounted for using the equity method (Notes 4 and 10) Property, plant and equipment (Notes 4, 11 and 27) Right-of-use assets (Notes 4 and 12) Intangible assets (Notes 4 and 13) Deferred tax assets (Notes 4 and 21) Other non-current assets (Notes 4, 14 and 17) Total non-current assets TOTAL		2021 Amount % $ 857,516 22 538,582 14 14,680 - 1,517,061 40 34,005 1 2,961,844 77 3,512 - 277,919 7 486,952 13 4,843 - 980 - 13,919 1 83,842 2 871,967 23 $ 3,833,811 100		2020 Amount % LIABILITIES AND EQUITY CURRENT LIABILITIES $ 518,384 17 Contract liabilities - current (Note 19) Accounts payable (Note 4) 758,754 25 Accounts payable to related parties (Notes 4 and 26) 32,842 1 Other payables to related parties (Notes 4 and 26) 849,523 29 Other current liabilities (Notes 4 and 16) Current tax liabilities (Notes 4 and 21) 20,230 1 Lease liabilities - current (Notes 4 and 12) Current portion of long - term borrowing (Note15) 2,179,733 73 Refund liabilities - current (Note16) Total current liabilities 4,048 - NON-CURRENT LIABILITIES Long-term borrowings (Note 15) 268,231 9 Deferred income tax liabilities (Notes 4 and 21) 512,650 17 Lease liabilities -non-current (Notes 4 and 12) 8,995 - Guarantee deposits 103 - 17,454 1 Total non-current liabilities 2,289 - Total liabilities 813,770 27 EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY (Notes 4, 18 and 23) Ordinary shares Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Other equity Exchange differences on translating the financial statements of foreign operations Treasury shares Total equity $ 2,993,503 100 TOTAL		2021 Amount % $ 35,139 1 348,900 9 - - 11,512 - 179,172 5 149,168 4 4,210 - 100,000 3 17,118 - 845,219 22 250,000 7 - - 706 - 6,977 - 257,683 7 1,102,902 29 781,529 20 1,132,749 30 94,057 3 4,250 - 821,078 21 (5,759) - (96,995) (3) 2,730,909 71 $ 3,833,811 100		2020
								Amount % $ 15,940 - 116,620 4 154,167 5 7,873 - 86,840 3 47,029 2 4,168 - - - - - 432,637 14 350,000 12 208 - 4,916 - - - 355,124 12 787,761 26 781,059 26 1,131,714 38 65,911 2 2,365 - 325,938 11 (4,250) - (96,995) (3) 2,205,742 74 $ 2,993,503 100

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

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SILICON OPTRONICS, INC.

PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE (Notes 4 and 19) OPERATING COSTS (Notes 9, 20 and 26) GROSS PROFIT OPERATING EXPENSES (Notes 20 and 26) Selling and marketing expenses General and administrative expenses Research and development expenses Total operating expenses OPERATING INCOME NON-OPERATING INCOME AND EXPENSES Interest income (Note 20) Other income (Note 20) Other gains and losses (Note 20) Financial costs (Note 20) Share of income (loss) of subsidiaries (Notes 4 and 10) Total non-operating income and expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 21) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans (Notes 4 and 17) Item that may be reclassified subsequently to profit or loss: Exchange differences on translating the financial statements of foreign operations (Notes 4 and 18) Total other comprehensive (loss) income TOTAL COMPREHENSIVE INCOME FOR THE YEAR EARNINGS PER SHARE (Note 22) Basic Diluted		2021 Amount % $ 3,996,496 100 2,609,116 65 1,387,380 35 21,448 1 75,847 2 417,728 10 515,023 13 872,357 22 5,235 - 152 - 7,463 - (3,553) - 11,197 1 20,494 1 892,851 23 (151,801) (4) 741,050 19 18 - (1,509) - (1,491) - $ 739,559 19 $ 9.61 $ 9.53		2020
				Amount % $ 3,328,695 100 2,656,485 80 672,210 20 18,080 1 45,670 1 297,719 9 361,469 11 310,741 9 4,464 - 364 - 2,175 - (2,708) - 9,890 1 14,185 1 324,926 10 (43,488) (2) 281,438 8 19 - (1,885) - (1,866) - $ 279,572 8 $ 3.65 $ 3.64

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

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SILICON OPTRONICS, INC.

PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars)

BALANCE, JANUARY 1, 2020 Appropriation of 2019 earnings Legal reserve Special reserve Cash dividends distributed by the Company Net profit for the year ended December 31, 2020 Other comprehensive loss for the year ended December 31, 2020 Total comprehensive income for the year ended December 31, 2020 Issuance of ordinary shares under employee share options BALANCE, DECEMBER 31, 2020 Appropriation of 2020 earnings Legal reserve Special reserve Cash dividends distributed by the Company Net profit for the year ended December 31, 2021 Other comprehensive loss for the year ended December 31, 2021 Total comprehensive income for the year ended December 31, 2021 Issuance of ordinary shares under employee share options BALANCE, DECEMBER 31, 2021		Ordinary Share Capital Number of Shares (In Thousands) Amount Capital Surplus 78,081 $ 780,809 $ 1,131,702 - - - - - - - - - - - - - - - - - - 25 250 12 78,106 781,059 1,131,714 - - - - - - - - - - - - - - - - - - 47 470 1,035 78,153 $ 781,529 $ 1,132,749		Retained Earnings Unappropriated Legal Reserve Special Reserve Earnings $ 50,310 $ - $ 216,659 15,601 - (15,601) - 2,365 (2,365) - - (154,212) - - 281,438 - - 19 - - 281,457 - - - 65,911 2,365 325,938 28,146 - (28,146) - 1,885 (1,885) - - (215,897) - - 741,050 - - 18 - - 741,068 - - - $ 94,057 $ 4,250 $ 821,078		Other Equity Exchange Differences on Translating the Financial Statements of Foreign Operations Treasury Shares $ (2,365) $ (96,995) - - - - - - - - (1,885) - (1,885) - - - (4,250) (96,995) - - - - - - - - (1,509) - (1,509) - - - $ (5,759) $ (96,995)	Total Equity $ 2,080,120 - - (154,212) 281,438 (1,866) 279,572 262 2,205,742 - - (215,897) 741,050 (1,491) 739,559 1,505 $ 2,730,909

		Number of Shares (In Thousands) 78,081 - - - - - - 25 78,106 - - - - - - 47 78,153

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

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SILICON OPTRONICS, INC.

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before income tax Adjustments for: Depreciation expenses Amortization expenses Finance costs Interest income Share of loss of subsidiaries Write-downs of inventories Net (gain) loss on foreign currency exchange Changes in operating assets and liabilities Accounts receivable Inventories Prepayments and other current assets Contract liabilities Accounts payable Accounts payable to related parties Other payables to related parties Accrued expenses and other current liabilities Refund liabilities Net defined benefit liabilities Cash generated from operations Income tax paid Net cash generated from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of financial assets at amortized cost Proceeds from financial assets at amortized cost Payments for property, plant and equipment Increase in refundable deposits Payments for intangible assets Interest received Net cash (used in) generated from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term borrowings Proceeds of guarantee deposits received Repayment of the principal portion of lease liabilities Dividends paid Exercise of employee share options Interest paid Net cash generated from (used in) financing activities	2021 $ 892,851 99,227 2,598 3,553 (5,235) (11,197) (19,090) 531 18,427 (648,448) (13,775) 19,371 233,802 (155,010) 3,639 87,157 17,118 (35) 525,484 (46,335) 479,149 (601,348) 821,480 (64,385) (82,157) (3,475) 5,235 75,350 - 6,977 (4,168) (215,897) 1,505 (3,553) (215,136)	2020 $ 324,926 85,926 2,750 2,708 (4,464) (9,890) 22,512 2,881 (21,686) (15,515) 40,336 5,832 (6,902) 18,213 1,563 37,236 - (35) 486,391 (5,700) 480,691 (671,516) 50,012 (66,739) - (2,337) 4,464 (686,116) 350,000 - (4,127) (154,212) 262 (2,708) 189,215 (Continued)

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SILICON OPTRONICS, INC.

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars)

EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET INCREASE IN CASH CASH AT THE BEGINNING OF THE YEAR CASH AT THE END OF THE YEAR	2021 $ (231) 339,132 518,384 $ 857,516	2020 $ 110 (16,100) 534,484 $ 518,384

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

(Concluded)

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SILICON OPTRONICS, INC.

NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION

The Company’s shares have been listed on the Taiwan Stock Exchange (TWSE) since July 2018.

The parent company only financial statements are presented in the Company’s functional currency, the New Taiwan dollar.

2. APPROVAL OF FINANCIAL STATEMENTS

The parent company only financial statements were approved by the board of directors and authorized for issue on March 16, 2022.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

a. Initial application of the amendments to the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC).

The initial application of the IFRSs endorsed and issued into effect by the FSC did not have any material impact on the Company’s accounting policies.

b. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

New IFRSs “Annual Improvements to IFRS Standards 2018-2020” Amendment to IFRS 3 “Reference to the Conceptual Framework” Amendments to IAS 16 “Property, Plant and Equipment - Proceeds before Intended Use” Amendments to IAS 37 “Onerous Contracts - Cost of Fulfilling a Contract”	Effective Date Announced by IASB
	January 1, 2022 (Note 1) January 1, 2022 (Note 2) January 1, 2022 (Note 3) January 1, 2022 (Note 4)

Note 1: The amendments to IFRS 9 will be applied prospectively to modifications and exchanges of financial liabilities that occur on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IAS 41 “Agriculture” will be applied prospectively to the fair value measurements on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IFRS 1 “First-time Adoptions of IFRSs” will be applied retrospectively for annual reporting periods beginning on or after January 1, 2022.
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Note 2: The amendments are applicable to business combinations for which the acquisition date is on or after the beginning of the annual reporting period beginning on or after January 1, 2022.
Note 3: The amendments are applicable to property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021.
Note 4: The amendments are applicable to contracts for which the entity has not yet fulfilled all its obligations on January 1, 2022.
1) Annual Improvements to IFRS Standards 2018-2020

2) Amendments to IFRS 3 “Reference to the Conceptual Framework”

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

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

Except for the above impact, as of the date the parent company only financial statements were authorized for issue, the Company is continuously assessing the possible impact that the application of other standards and interpretations will have on the Company’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

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c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

Effective Date
Announced by IASB (Note 1)

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

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual reporting periods beginning on or after their respective effective dates.
Note 2: The amendments will be applied prospectively for annual reporting periods beginning on or after January 1, 2023.
Note 3: The amendments are applicable to changes in accounting estimates and changes in accounting policies that occur on or after the beginning of the annual reporting period beginning on or after January 1, 2023.
Note 4: Except for deferred taxes that will be recognized on January 1, 2022 for temporary differences associated with leases and decommissioning obligations, the amendments will be applied prospectively to transactions that occur on or after January 1, 2022.
1) Amendments to IAS 1 “Classification of Liabilities as Current or Non-current”

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

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

b. Basis of preparation

The parent company only financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair value and net defined benefit liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets.

1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
3) Level 3 inputs are unobservable inputs for an asset or liability.

When preparing the parent company only financial statements, the Company accounted for subsidiaries and associates using the equity method. In order for the amount of net income, other comprehensive income and equity in the parent company only financial statements to agree with the amount attributable to shareholders of the parent company in the consolidated financial statements, the differences in the accounting treatments between the parent company only basis and the consolidated basis are adjusted under the heading of investments accounted for using the equity method, share of profits of subsidiaries and share of other comprehensive income of subsidiaries in the parent company only financial statements.

c. Classification of current and non-current assets and liabilities

Current assets include:

1) Assets held primarily for the purpose of trading;
2) Assets expected to be realized within 12 months after the reporting period; and
3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

Current liabilities include:

1) Liabilities held primarily for the purpose of trading;
2) Liabilities due to be settled within 12 months after the reporting period; and
3) Liabilities for which the Company does not have an unconditional right to defer settlement for at least 12 months after the reporting period.

Assets and liabilities that are not classified as current are classified as non-current.

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d. Foreign currencies

In preparing the Company’s financial statements, transactions in currencies other than the Company’s functional currency (i.e. foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

At the time of the preparation of the parent company only financial statements, the assets and liabilities of the Company and its foreign operations (including subsidiaries operating in other countries or those using currencies which are different from the Company’s functional currency) are converted into NT dollars at each balance sheet date. Income and expense items are translated at the average exchange rates for the period and the resulting currency translation differences are recognized in other comprehensive income.

e. Inventories

f. Investments in subsidiaries

The Company uses the equity method to account for its investments in subsidiaries.

A subsidiary refers to an entity that is controlled by the Company.

Under the equity method, an investment in a subsidiary is initially recognized at cost, and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the subsidiary. In addition, changes to the Company’s share of other equity in the subsidiary are recognized based on its shareholding ratio.

When the Company’s change in the ownership interest in the subsidiary does not result in loss of control, it is treated as an equity transaction. The difference between the carrying amount of the investment and the fair value of the consideration paid or received is directly recognized as equity.

When the Company’s share of loss in the subsidiary is equal to or exceeds its interest in the subsidiary (which includes any carrying amount of the investment accounted for using the equity method and long-term interests that, in substance, form part of the Company’s net investment in the subsidiary), the Company continues recognizing its share of further loss according to the shareholding ratio.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognized immediately in profit or loss.

The Company assesses its investment for any impairment by comparing the carrying amount with the estimated recoverable amount as assessed based on the investee’s financial statements as a whole. Impairment loss is recognized when the carrying amount exceeds the recoverable amount. If the

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recoverable amount of the investment subsequently increases, the Company recognizes a reversal of the impairment loss; the adjusted post-reversal carrying amount should not exceed the carrying amount that would have been recognized (net of amortization or depreciation) had no impairment loss been recognized in prior years. An impairment loss recognized on goodwill cannot be reversed in a subsequent period.

When the Company loses control of a subsidiary, it recognizes the investment retained in the former subsidiary at its fair value at the date when control is lost. The difference between the fair value of the retained investment plus any consideration received and the carrying amount of the previous investment at the date when control is lost is recognized as a gain or loss in profit or loss. Besides this, the Company accounts for all amounts previously recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required had the Company directly disposed of the related assets or liabilities.

Profit or loss resulting from downstream transactions is eliminated in full only in the parent company only financial statements. Profit and loss resulting from upstream transactions and transactions between subsidiaries is recognized only in the parent company only financial statements and only to the extent of interests in the subsidiaries that are not related to the Company.

g. Property, plant and equipment

Property, plant and equipment are initially measured at cost and subsequently measured at cost less accumulated depreciation and accumulated impairment loss.

Depreciation of property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effects of any changes in the estimates accounted for on a prospective basis.

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

h. Intangible assets
1) Intangible assets acquired separately

2) Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

i. Impairment of property, plant and equipment, right-of-use asset, intangible assets other than goodwill and assets related to contract costs

At the end of each reporting period, the Company reviews the carrying amounts of its property, plant and equipment, right-of-use asset and intangible assets, excluding goodwill, for any indication of impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable

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amount of a corporate asset, the asset is tested for impairment in the context of the cash-generating unit to which the asset belongs.

Corporate assets are allocated to the individual cash-generating units on a reasonable and consistent basis of allocation.

When an impairment loss is subsequently reversed, the carrying amount of the corresponding asset, cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

j. Financial instruments

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

1) Financial assets

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

a) Measurement category

Financial assets are classified as financial assets at amortized cost.

i. Financial assets at amortized cost

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

i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, trade receivables, other receivables time deposits with original maturities of more than 3 months and refundable deposits, are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

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Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset, except for:

i) Purchased or originated credit-impaired financial asset, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of the financial asset; and
ii) Financial assets that are not credit-impaired on purchase or origination but have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial assets in subsequent reporting periods.

b) Impairment of financial assets

The Company recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables).

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

The impairment loss of all financial assets is recognized in profit or loss by reduction in their carrying amounts through a loss allowance account.

c) Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

2) Equity instruments

Equity instruments issued by the Company are classified as equity in accordance with the substance of the contractual arrangements and the definitions of an equity instrument.

Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.

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The repurchase of the Company’s own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issuance or cancellation of the Company’s own equity instruments.

3) Financial liabilities

a) Subsequent measurement

All the financial liabilities are measured at amortized cost using the effective interest method.

b) Derecognition of financial liabilities

k. Revenue recognition

The Company identifies contracts with customers, allocates the transaction price to the performance obligations and recognizes revenue when performance obligations are satisfied.

1) Revenue from the sale of goods

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

2) Revenue from the rendering of services

l. Leases

At the inception of a contract, the Company assesses whether the contract is, or contains, a lease.

The Company as lessee

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

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

Lease liabilities are initially measured at the present value of the lease payments, which comprises fixed payments. The lease payments are discounted using the interest rate implicit in a lease, if that rate can be readily determined. If implicit rate cannot be readily determined, the Company uses the lessee’s incremental borrowing rate.

m. Borrowing costs

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

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

n. Employee benefits

Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as expenses when employees have rendered services entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under defined benefit retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost) and net interest on the net defined benefit liabilities (assets) are recognized as employee benefits expense in the period in which they occur. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liabilities (assets) represent the actual deficit (surplus) in the Company’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

o. Share-based payment arrangements

Employee share options granted

The fair value at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Company’s best estimates of the number of shares or options that are

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expected to ultimately vest, with a corresponding increase in capital surplus - employee share options. It is recognized as an expense in full at the grant date if vested immediately.

At the end of each reporting period, the Company revises its estimate of the number of employee share options expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expenses reflect the revised estimate, with a corresponding adjustment to capital surplus - employee share options.

p. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax

Income tax payable (refundable) is based on taxable profit (loss) for the year determined according to the applicable tax laws of each tax jurisdiction.

According to the Income Tax Act in the ROC, an additional tax on unappropriated earnings is provided for in the year the shareholders approve to retain earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liabilities are settled or the assets are realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

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3) Current and deferred taxes

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The Company considers the possible impact of [the recent development of the COVID-19 in Taiwan and its economic environment implications when making its critical accounting estimates on cash flow projections, growth rate, discount rate, profitability, etc. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revisions affect only that period or in the period of the revisions and future periods if the revisions affect both current and future periods.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

a. Write-down of inventories

b. Impairment of goodwill included in investments in subsidiaries

When determining whether the goodwill included in investments in subsidiaries is impaired, the goodwill acquired from a business combination is allocated to each of the Company’s cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the combination on the acquisition date, and the value in use of the cash generating unit to which goodwill has been allocated is estimated. In order to calculate the value in use, the management should estimate the future cash flows expected to arise from the cash-generating unit of the goodwill has been allocated and determine the appropriate discount rate to use in calculating the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

6. CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS
Cash on hand Bank deposits Cash equivalents (investments with original maturities of 3 months or less) Time deposits		December 31
		2021 $ 172 718,944 138,400 $ 857,516	2020 $ 173 518,211 - $ 518,384

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The market interest rate intervals of the time deposits held in banks at the end of the reporting period were as follows:

Time deposits	December 31
	2021 2020 0.35% -

7. FINANCIAL ASSETS AT AMORTIZED COST

Current Time deposit with original maturities of more than 3 months (a) Non-current Pledged time deposits (a and c)		December 31	December 31
		2021 $ 538,582 $ 3,512	2020 $ 758,754 $ 4,048

a. The interest rates ranges of time deposits with original maturities of more than 3 months were 0.08%-2.45% and 0.08%-2.4% per annum as of December 31, 2021 and 2020, respectively.
b. Refer to Note 25 for information relating to their credit risk management and impairment of financial assets at amortized cost.
c. Refer to Note 27 for information relating to investments in financial assets at amortized cost pledged as security.

8. ACCOUNTS RECEIVABLE

Accounts receivable-unrelated parties At amortized cost Gross carrying amount Less: Allowance for impairment loss At amortized cost		December	31
		2021 $ 14,680 - $ 14,680	2020 $ 32,842 - $ 32,842

The average credit period of sales of goods was 30 days. No interest was charged on trade receivables.

In order to minimize credit risk, the management of the Company has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Company reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts. In this regard, the management believes the Company’s credit risk was significantly reduced.

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The Company measures the loss allowance for trade receivables at an amount equal to lifetime ECLs. The expected credit losses on trade receivables are estimated using a provision matrix by reference to the past default records of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date. As the Company’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Company’s different customer base.

The Company writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g. when the debtor has been placed under liquidation, whichever occurs earlier. For trade receivables that have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of trade receivables based on the Company’s provision matrix.

December 31, 2021

Item N Gross carrying amount Loss allowance (Lifetime ECL) Amortized cost December 31, 2020 Item N Gross carrying amount Loss allowance (Lifetime ECL) Amortized cost	ot Past Due $ 13,369 - $ 13,369 ot Past Due $ 16,224 - $ 16,224	Past Due Up to 60 Days $ 1,311 - $ 1,311 Past Due Up to 60 Days $ 16,618 - $ 16,618	Past Due 61 to 90 Days $ - - $ - Past Due 61 to 90 Days $ - - $ -	Past Due 91 to 120 Days $ - - $ - Past Due 91 to 120 Days $ - - $ -	Past Due 121 to 150 Days $ - - $ - Past Due 121 to 150 Days $ - - $ -	Past Due 151 to 180 Days $ - - $ - Past Due 151 to 180 Days $ - - $ -	Past Due Over 181 Days $ - - $ - Past Due Over 181 Days $ - - $ -	Total $ 14,680 -
								$ 14,680
								Total $ 32,842 -
								$ 32,842

9. INVENTORIES

Finished goods Work in progress Raw materials		December 31	December 31
		2021 $ 814,864 698,577 3,620 $ 1,517,061	2020 $ 170,650 675,000 3,373 $ 849,523

The cost of goods sold related to inventories for the years ended December 31, 2021 and 2020 was $2,609,116 thousand and $2,656,485 thousand, which included inventory write-downs of $(19,090) thousand and $22,512 thousand, respectively, due to the sale of stagnant inventories write-down of inventories to net realizable value.

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10. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in subsidiaries

NUEVA IMAGING, INC. Silicon Optronics (Cayman) Co., Ltd. Name of subsidiary		December 31	December 31
		2021 $ 245,698 32,221 $ 277,919	2020 $ 243,371 24,860 $ 268,231

NUEVA IMAGING, INC. Silicon Optronics (Cayman) Co., Ltd.	Proportion of Ownership and Voting Rights
	December 31
	2021 2020 100% 100% 100% 100%

The share of profit and loss and other comprehensive income of the subsidiaries accounted for using the equity method for the years ended December 31, 2021 and 2020 was recognized based on the subsidiaries’ financial statements audited by the accountants for the same periods.

11. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2021 Additions Disposal Balance at December 31, 2021 Accumulated depreciation Balance at January 1, 2021 Depreciation expense Disposal Balance at December 31, 2021 Accumulated impairment Balance at January 1, 2021 and December 31, 2021 Carrying amounts at December 31, 2021	Testing Equipment $ 1,273 615 (978) $ 910 $ 1,035 224 (978) $ 281 $ - $ 629	R&D Equipment $ 473,084 - - $ 473,084 $ 21,026 31,538 - $ 52,564 $ - $ 420,520	Molding Equipment $ 12,665 4,089 (3,095) $ 13,659 $ 4,643 4,319 (3,095) $ 5,867 $ 1,183 $ 6,609	Computer $ 155 118 (155) $ 118 $ 116 65 (155) $ 26 $ - $ 92	Office Equipment $ 29 - (29) $ - $ 28 1 (29) $ - $ - $ -	Photomasks $ 108,800 64,555 (49,307) $ 124,048 $ 55,325 58,928 (49,307) $ 64,946 $ - $ 59,102	Prepayment For Business Facilities Total $ - $ 596,006 - 69,377 - (53,564) $ - $ 611,819 $ - $ 82,173 - 95,075 - (53,564) $ - $ 123,684 $ - $ 1,183 $ - $ 486,952 (Continued)

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Cost Balance at January 1, 2020 Additions Disposal Reclassified Balance at December 31, 2020 Accumulated depreciation Balance at January 1, 2020 Depreciation expense Disposal Balance at December 31, 2020 Accumulated impairment Balance at January 1, 2020 and December 31, 2020 Carrying amounts at December 31, 2020	Testing Equipment $ 1,158 115 - - $ 1,273 $ 792 243 - $ 1,035 $ - $ 238	R&D Equipment $ - - - 473,084 $ 473,084 $ - 21,026 - $ 21,026 $ - $ 452,058	Molding Equipment $ 13,586 4,553 (5,474 ) - $ 12,665 $ 6,173 3,944 (5,494) $ 4,643 $ 1,183 $ 6,839	Computer $ 155 - - - $ 155 $ 65 51 - $ 116 $ - $ 39	Office Equipment $ 29 - - - $ 29 $ 22 6 - $ 28 $ - $ 1	Photomasks $ 96,810 59,812 (47,822 ) - $ 108,800 $ 46,642 56,505 (47,822) $ 55,325 $ - $ 53,475	Prepayment For Business Facilities Total $ 472,972 $ 584,710 112 64,592 - (53,296 ) (473,084) - $ - $ 596,006 $ - $ 53,694 - 81,775 - (53,296) $ - $ 82,173 $ - $ 1,183 $ - $ 512,650 (Concluded)

The Company’s property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives as follows:

Testing equipment 2-5 years R&D equipment 15 years Molding equipment 3 years Computers 3 years Office equipment 5 years Photomasks 2 years

After considering the progress of product research and development and the use of research and development equipment, on March 16, 2022, the Company decided to dispose of the research and development equipment. The book value of the assets to be authorized for disposal of NT$417,891 thousand on January 31, 2022 was used as a reference for the transaction price.

12. LEASE ARRANGEMENTS

a. Right-of-use assets

Carrying amounts Buildings Depreciation charge for right-of-use assets Buildings		December	31
	2021 2020 $ 4,843 $ 8,995 For the Year Ended December 31
		2021 $ 4,152	2020 $ 4,151

Except for the aforementioned addition and recognized depreciation, the Company did not have significant sublease or impairment of right-of-use assets during the years ended December 31, 2021 and 2020.

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b. Lease liabilities

Carrying amounts Current Non-current		December	31
		2021 $ 4,210 $ 706	2020 $ 4,168 $ 4,916

The discount rate for lease liabilities was as follows:

Buildings	December 31
	2021 2020 1% 1%

c. Material lease activities and terms

The Company did not have significant new lease contracts in 2021 and 2020. The Company leases buildings for the use of offices with lease terms of 3-4 years. The Company does not have bargain purchase options to acquire the buildings at the expiry of the lease periods. In addition, the Company is prohibited from subleasing or transferring all or any portion of the underlying assets without the lessor’s consent.

d. Other lease information

Expenses relating to short-term leases Expenses relating to low-value asset leases Total cash outflow for leases		December	31
		2021 $ 505 $ 60 $ (4,805)	2020 $ 505 $ 59 $ (4,804)

13. INTANGIBLE ASSETS

Cost Balance at January 1, 2021 Additions Disposal Balance at December 31, 2021 Accumulated amortization Balance at January 1, 2021 Amortization expense Disposal Balance at December 31, 2021 Carrying amounts at December 31, 2021	Software $ 5,827 3,475 (8,043) $ 1,259 $ 5,724 2,598 (8,043) $ 279 $ 980

(Continued)

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Software

Cost Balance at January 1, 2020 Additions Disposal Balance at December 31, 2020 Accumulated amortization Balance at January 1, 2020 Amortization expense Disposal Balance at December 31, 2020 Carrying amounts at December 31, 2020	$ 3,490 2,337 - $ 5,827 $ 2,974 2,750 - $ 5,724 $ 103 (Concluded)

Except for the recognition of amortization expense, there were no significant addition, disposal and impairment of the Company’s other intangible assets for the year ended December 31, 2020 and 2021.

The above items of intangible assets are amortized on a straight-line basis over their estimated useful lives as follows:

Software

3 years

14. OTHER ASSETS

Current Tax receivables Prepaid technical service fees Others Non-current Refundable deposits Net defined benefit assets		December	31
		2021 $ 30,605 2,322 1,078 $ 34,005 $ 82,415 1,427 $ 83,842	2020 $ 18,054 1,124 1,052 $ 20,230 $ 915 1,374 $ 2,289

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15. LONG-TERM BORROWINGS

Secured borrowings (Note 27) Bank borrowing Less- current portion Long term borrowing		December 31	December 31
		2021 $ 350,000 100,000 $ 250,000	2020 $ 350,000 - $ 350,000

In the year ended April 2020, the Company acquired new bank borrowing facilities in the amount of $350,000 thousand, with a floating interest rate of 0.99111% per annum. Interest is paid monthly, and the principal is to be repaid in seven equal semi-annual installments starting from April 2022. The loan is to be repaid before April 1, 2025.

16. OTHER LIABILITIES

Current Other payables Payables for employees’ compensation Payables for bonuses Payables for purchases of equipment Payables for remuneration of directors Payable for processing Others Other liabilities Receipts under custody Refund liabilities		December 31	December 31
		2021 $ 78,500 64,439 10,222 10,000 861 14,999 179,021 151 $ 179,172 $ 17,118	2020 $ 28,570 21,623 5,207 3,750 13,787 13,769 86,706 134 $ 86,840 $ -

17. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

b. Defined benefit plans

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the end of each year, the Company assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Company is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (the Bureau); the Company has no right to influence the investment policy and strategy.

The amounts included in the parent company only balance sheets in respect of the Company’s benefit plans are as follows:

Present value of defined benefit obligation Fair value of plan assets Net defined benefit assets		December	31
		2021 $ 291 (1,718) $ (1,427)	2020 $ 285 (1,659) $ (1,374)

Movements in net defined benefit assets were as follows:

	Present Value of	Present Value of
	the Defined			Net Defined
	Benefit		Fair Value of		Benefit
	Obligation		the Plan Assets		Assets
Balance at January 1, 2021	$	285	$ (1,659)	$ (1,374)
Net interest expense (income)		1	(7)		(6)
Recognized in profit or loss		1	(7)		(6)
Remeasurement
Actuarial (gain) loss
Actuarial loss - changes in financial
assumptions		(18)	-		(18)
Actuarial loss - experience adjustments		23	(23)		-
Recognized in other comprehensive loss
(income)		5	(23)		(18)
Contributions from the employer		-	(29)		(29)
Balance at December 31, 2021	$	291	$ (1,718)	$ (1,427)
Balance at January 1, 2020	$	249	$ (1,569)	$ (1,320)
Net interest expense (income)		3	(13)		(10)
Recognized in profit or loss		3	(13)		(10)
Remeasurement
Actuarial (gain) loss
Actuarial loss - changes in financial
assumptions		17	-		17
Actuarial loss - experience adjustments		16	(52)		(36)
Recognized in other comprehensive loss
(income)		33	(52)		(19)
Contributions from the employer		-	(25)		(25)
Balance at December 31, 2020	$	285	$ (1,659)	$ (1,374)

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Through the defined benefit plans under the Labor Standards Act, the Company is exposed to the following risks:

1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.
2) Interest risk: A decrease in the corporate bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plans’ debt investments.
3) Salary risk: The present value of the defined benefit obligation is calculated using the future salaries of plan participants. As such, an increase in the salaries of the plan participants will increase the present value of the defined benefit obligation.

Discount rate Expected rate of salary increase	December 31
	2021 2020 0.8% 0.4% 3.0% 3.0%

Discount rate 0.25% increase 0.25% decrease Expected rate of salary increase/decrease 0.25% increase 0.25% decrease		December	31
		2021 $ (11) $ 11 $ 10 $ (10)	2020 $ (11) $ 11 $ 10 $ (10)

Expected contributions to the plans for the next year Average duration of the defined benefit obligation		December	31
		2021 $ 22 15 years	2020 $ 22 16 years

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18. EQUITY

a. Ordinary shares

Number of shares authorized (in thousands) Shares authorized Number of shares issued and fully paid (in thousands) Shares issued		December 31	December 31
		2021 100,000 $ 1,000,000 78,133 $ 781,529	2020 100,000 $ 1,000,000 78,106 $ 781,059

b. Capital surplus

May be used to offset a deficit, distributed as cash dividends, or transferred to share capital (1) Arising from issuance of ordinary shares May be used to offset a deficit only Arising from exercise of employee share options May not be used for any purpose Arising from employee share options		December 31	December 31
		2021 $ 1,115,462 12,286 5,001 $ 1,132,749	2020 $ 1,114,427 12,269 5,018 $ 1,131,714

1) Such capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and to once a year).

Reconciliations of the balance for each class of capital surplus were as follows:

Premium on Issue of Shares Arising from Employee Share Options Balance at January 1, 2020 $ 1,114,415 $ 17,287 Issuance of ordinary shares under employee share options 12 - Balance at December 31, 2020 1,114,427 17,287 Issuance of ordinary shares under employee share options 1,035 - Balance at December 31, 2021 $ 1,115,462 $ 17,287	Total $ 1,131,702 12 1,131,714 1,035 $ 1,132,749

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c. Retained earnings and dividend policy

Considering that the Company is in a period of operational growth, taking into account the interests of the Company’s shareholders and long-term capital and business planning, no more than 90% of the accumulated distributable earnings should be distributed as dividends, out of which no less than 10% of the total dividends distributed should be in the form of cash dividends. If the Company has no distributable earnings for the year, or if there are earnings but the amount of earnings is much lower than that distributed in the previous year, or considering the Company’s financial, business and operational factors, the Company may distribute all or part of the earnings in accordance with the law or regulations of the competent authorities.

The appropriations of earnings for 2020 and 2019 which had been approved in the shareholders in their meetings on July 1, 2021 and June 16, 2020, respectively, were as follows:

Legal reserve Special reserve Cash dividends Dividends per share	Appropriation of Earnings
	For the Year Ended December 31
	2020 2019 $ 28,146 $ 15,601 1,885 2,365 215,897 154,212 $ 2.8 $ 2.0

The appropriations of earnings for 2021 had been proposed by the Company’s board of directors on March 16, 2022. The appropriations and dividends per share were as follows:

	Appropriation	Appropriation
	of	Earnings
Legal reserve	$	74,107
Special reserve		1,509
Cash dividends		270,035
Dividends per share	$	3.5

The appropriations of earnings for 2021 are subject to the resolution of the shareholders’ in their meeting to be held on June 23, 2022.

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d. Other equity items

Balance, beginning of year Exchange differences on translation of the financial statements of foreign operations Balance, end of year Treasury shares Treasury shares (in thousands of shares)	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2021 2020 $ (4,250) $ (2,365) (1,509) (1,885) $ (5,759) $ (4,250) For the Year Ended December 31
		2021 1,000	2020 1,000

e. Treasury shares

In October 2019, the Company completed the repurchase of 1,000 thousand shares for $96,995 thousand.

Under the Securities and Exchange Act, the Company shall neither pledge treasury shares nor exercise shareholders’ rights on these shares, such as the rights to dividends and to vote.

19. REVENUE

Revenue from contracts with customers Revenue from the sale of goods Others a. Contract balances December 31, 2021 Accounts receivable (Note 8) $ 14,680 Contract liabilities - current Sale of goods $ 35,139	For the Year Ended December 31	For the Year Ended December 31
	2021 $ 3,992,611 3,885 $ 3,996,496 December 31, 2020 $ 32,842 $ 15,940	2020 $ 3,249,068 79,627 $ 3,328,695 January 1, 2019 $ 11,260 $ 10,090

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Revenue recognized in the current reporting period from the contract liabilities at the beginning of the year is as follows:

b.	From the contract liabilities at the beginning of the year Sale of goods Disaggregation of revenue Primary geographical markets Hong Kong Taiwan (the Company’s operating location) Others Major goods CMOS Other	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 2020 $ 12,696 $ 7,408 For the Year Ended December 31
			2021 $ 3,475,865 236,401 284,230 $ 3,996,496 $ 3,967,619 28,877 $ 3,996,496	2020 $ 3,007,489 87,107 234,099 $ 3,328,695 $ 3,237,207 91,488 $ 3,328,695

20. NET PROFIT FROM CONTINUING OPERATIONS

a. Interest income

Financial asset at amortized cost Bank deposits Others b. Other income Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
	2021 2020 $ 4,525 $ 1,531 703 2,925 7 8 $ 5,235 $ 4,464 For the Year Ended December 31
		2021 $ 152	2020 $ 364

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c. Other gains and losses

For the Year Ended	For the Year Ended	December 31
2021 $ 7,530 (67) $ 7,463 For the Year Ended		2020 $ 2,179 (4) $ 2,175 December 31
2021 $ 3,481 72 $ 3,553 For the Year Ended		2020 $ 2,595 113 $ 2,708 December 31
	2021 $ 95,075 4,152 2,598 $ 101,825 $ 20,980 78,247 $ 99,227 $ 2,598	2020 $ 81,775 4,151 2,750 $ 88,676 $ 20,038 65,888 $ 85,926 $ 2,750

Post-employment benefits Defined contribution plans Defined benefit plans Other employee benefits Total employee benefits expense An analysis of employee benefits expense by function Operating expenses	For the Year Ended	For the Year Ended	December 31
		2021 $ 3,213 (6) 3,207 229,517 $ 232,724 $ 232,724	2020 $ 3,097 (10) 3,087 124,038 $ 127,125 $ 127,125

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g. Employees’ compensation and remuneration of directors

According to the Company’s Articles, the Company accrued employees’ compensation at a rate of no less than 0.005% and no higher than 25% and remuneration of directors and supervisors at a rate of no higher than 3%. The employees’ compensation and remuneration of directors for the years ended December 31, 2021 and 2020 were resolved in the board of directors’ meetings on March 16, 2022 and March 10, 2021, respectively.

Accrual rate

Employees’ compensation Remuneration of directors and supervisors Amount Employees’ compensation Remuneration of directors and supervisors	For the Year Ended December 31
	2021 2020 8.00% 8.00% 1.02% 1.05% For the Year Ended December 31
	2021 2020 $ 78,500 $ 28,570 10,000 3,750

If there is a change in the amounts after the annual parent company only financial statements are authorized for issue, the differences are recorded as a change in the accounting estimate.

There is no difference between the actual amounts of employees’ compensation and remuneration of directors paid and the amounts recognized in the parent company only financial statements for the years ended December 31, 2020 and 2019.

21. INCOME TAXES RELATING TO CONTINUING OPERATIONS

a. Income tax recognized in profit or loss

The major components of tax expense (income) were as follows:

Current tax In respect of the current year Income tax on unappropriated earnings Adjustments for prior years Deferred tax In respect of the current year Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	December 31
		2021 $ 147,381 1,776 (683) 148,474 3,327 $ 151,801	2020 $ 47,347 - 772 48,119 (4,631) $ 43,488

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A reconciliation of accounting profit and income tax expense is as follows:

Profit before tax from continuing operations Income tax expense calculated at the statutory rate Income tax on unappropriated earnings Nondeductible expenses in determining taxable income Unrecognized deductible temporary differences Investment credits of the current year Deferred tax Temporary differences Adjustments for prior years’ tax Income tax expense recognized in profit or loss b. Current tax liabilities Current tax liabilities Income tax payable	For the Year Ended	For the Year Ended	December 31
		2021 2020 $ 892,851 $ 324,926 $ 178,570 $ 64,985 1,776 - (2,239) (1,978) (3,327) 4,631 (25,623) (20,291) 3,327 (4,631) (683) 772 $ 151,801 $ 43,488 December 31
		2021 $ 149,168	2020 $ 47,029

c. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the Year ended December 31, 2021

Deferred tax assets Allowance for impairment loss Foreign exchange loss Deferred tax liabilities Gain on foreign currency exchange For the Year ended December 31, 2020 Deferred tax assets Allowance for impairment loss Deferred tax liabilities Gain on foreign currency exchange	Opening Balance Recognized in Profit or Loss $ 17,454 $ (3,818) - 283 $ 17,454 $ (3,535) $ 208 $ (208) Opening Balance Recognized in Profit or Loss $ 12,952 $ 4,502 $ 337 $ (129)	Closing Balance $ 13,636 283 $ 13,919 $ - Closing Balance $ 17,454 $ 208

173 -

d. Income tax assessments

The Company’s tax returns through 2019 have been assessed by the tax authorities.

22. EARNINGS PER SHARE

Unit: NT$ Per Share

Basic earnings per share Diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 $ 9.61 $ 9.53	2020 $ 3.65 $ 3.64

The earnings and weighted average number of ordinary shares outstanding used in the computation of earnings per share were as follows:

Net Profit for the Year

Earnings used in the computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employee share options Bonuses issued to employees Earnings used in the computation of diluted earnings per share	For the Year Ended	For the Year Ended	December 31
		2021 $ 741,050 - - $ 741,050	2020 $ 281,438 - - $ 281,438

Number of shares

Unit: In Thousands of Shares

Weighted average number of ordinary shares used in the computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employee share options Bonuses issued to employees Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 77,121 25 624 77,770	2020 77,105 1 278 77,384

Since the Company can offer to settle the bonuses to employees in cash or shares, the Company assumes the entire amount of the bonus would be settled in shares and the resulting potential shares are included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, if the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the shareholders resolve the number of shares to be distributed to employees at their meeting in the following year.

174 -

23. SHARE-BASED PAYMENT ARRANGEMENTS

a. Employee share option plan

Qualified employees of the Company were granted 2,000 options on July 29, 2013 and 3,200 options on May 16, 2013. Each option entitles the holder to subscribe for one thousand ordinary shares of the Company, and the total number of new ordinary shares required to be issued for the exercise of the employee share options is 2,000 shares and 3,200 shares, respectively. The options granted are valid for 10 years and exercisable at certain percentages after the second year from the grant date.

Information on employee share options is as follows:

For the year ended December 31, 2021 Balance at January 1 Options exercised Balance at December 31 Options exercisable, end of period For the year ended December 31, 2020 Balance at January 1 Options exercised Balance at December 31 Options exercisable, end of period	2013 Employee Share Option Plan Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 100 $ 33.00 (45) 32.21 55 32.21 55 100 $ 33.00 - - 100 33.00 100	2012 Employee Share Option Plan
		Number of Options (In Thousands) Weighted- average Exercise Price (NT$) 605 $ 17.17 (2) 10.25 603 17.20 603 630 $ 17.31 (25) 10.50 605 17.17 605

Information on outstanding options as follows:

December 31, 2021 Share Option Plan Range of Exercise Price(NT$) Weighted- average Remaining Contractual Life (In Years) 2013 Employee share option plan $ 32.21 1.62 2012 Employee share option plan 10.25-19.03 0.82	December 31, 2020
	Share Option Plan Range of Exercise Price(NT$) Weighted- average Remaining Contractual Life (In Years) 2013 Employee share option plan $ 32.21-33.00 2.62 2012 Employee share option plan 10.25-19.03 1.82

175 -

Grant-date share price (NT$) $11.18 Exercise price (NT$) $33.00 Expected volatility 37.60%-41.65% Expected life 2.5-4.5 years Expected dividend yield Risk-free interest rate 0.82%1.07% Fair value of stock options 0.18-0.93

Grant-date share price (NT$) $12.29 Exercise price (NT$) $19.50 Expected volatility 44.34%-54.56% Expected life 2.5-4.5 years Expected dividend yield Risk-free interest rate 0.75%-0.85% Fair value of stock options 1.67-3.94

24. CAPITAL MANAGEMENT

The Company manages its capital to ensure that will be able to continue as a going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance.

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Key management personnel of the Company review the capital structure on an annual basis. As part of this review, the key management personnel consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the key management personnel, in order to balance the overall capital structure, the Company may adjust the number of new shares issued, and/or the amount of new debt issued or existing debt redeemed.

The Company is not subject to any externally imposed capital requirements.

25. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments that are not measured at fair value

The management believes the carrying amounts of financial assets and financial liabilities not carried at fair value approximate their fair values.

b. Categories of financial instruments

Financial assets Financial assets at amortized cost (Note 1) Financial liabilities Amortized cost (Note 2)	December 31
	2021 2020 $ 1,496,705 $ 1,314,943 721,495 647,654

Note 1: The balances include financial assets measured at amortized cost, which comprise cash and cash equivalents, accounts receivable, refundable deposit and pledged time deposits.
Note 2: The balances include financial liabilities measured at amortized cost, which comprise accounts payable (including related parties), other payables (including related parties), current portion of long-term borrowing, long-term debt and guarantee deposits.
c. Financial risk management objectives and policies

The Company’s major financial instruments included accounts receivable, accounts payable and long-term borrowings. The Company’s corporate treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports that analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

1) Market risk

The Company’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below).

There had been no change in the Company’s exposure to market risks or the manner in which these risks were managed and measured.

177 -

a) Foreign currency risk

The Company has foreign currency sales and purchases, which expose the Company to foreign currency risk. Approximately 98% of the Company’s sales is denominated in currencies other than the functional currency of the Company, whilst almost 97% of costs is denominated in the Company’s functional currency. Exchange rate exposures are managed within approved policy parameters.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities are set out in Note 28.

Sensitivity analysis

The Company is mainly exposed to the exchange rate fluctuations in the USD.

The sensitivity analysis regarding foreign currency risk is mainly calculated for USD denominated monetary items on the balance sheet date.

When the NTD appreciates/depreciates by 1% against the USD, the Group’s net profit before tax for the years ended December 31, 2021 and 2020 would decrease/increase by $1,174 thousand and $285 thousand, respectively.

b) Interest rate risk

The Company is exposed to interest rate risk arising from financial assets and financial liabilities at both fixed and floating interest rates.

The carrying amounts of the Company’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting periods were as follows:

Fair value interest rate risk Financial assets Cash flow interest rate risk Financial assets Financial liabilities	December 31
	2021 2020 $ 680,494 $ 762,802 718,934 518,201 350,000 350,000

Sensitivity analysis

The sensitivity analysis regarding interest rate risk is calculated based on the changes in the cash flow of floating-rate liabilities on the balance sheet date.

If interest rates had been 0.5% higher/lower, pre-tax profit for the years ended December 31, 2021 and 2020 would have increased/decreased by $1,845 thousand and $841 thousand, respectively.

2) Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in a financial loss to the Company. As at the end of the reporting period, the Company’s maximum exposure to credit risk which will cause a financial loss to the Company due to failure of counterparties to discharge an obligation mainly arise from the carrying amount of the respective recognized financial assets as stated in the parent company only balance sheets.

178 -

The Company transacts with a large number of unrelated customers; thus, no concentration of credit risk was observed.

3) Liquidity risk

The Company manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Company’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank facilities and ensures compliance with loan covenants.

Bank borrowings are significant sources of liquidity for the Company. For the Company’s unutilized financing facilities, please refer to (2) Financing facilities below.

a) Liquidity and interest rate risk tables for non-derivative financial liabilities

The following tables detail the Company’s remaining contractual maturities for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows.

December 31, 2021

On Demand or Less than 1 Month 1-3 Months 3 Months to 1 Year Non-derivative financial liabilities Lease liabilities $ 353 $ 707 $ 3,180 Accounts payable 269,324 79,576 - Other payables - related parties 11,512 - - Payable for processing - 861 - Payables on equipment 5,154 5,068 - Long-term borrowings 289 578 102,189 $ 286,632 $ 86,790 $ 105,369	1 Year to 5 Years $ 707 - - - - 253,304 $ 254,011

Additional information about the maturity analysis for financial liabilities

Lease liabilities Interest rate liabilities	Less than 1 Year $ 4,240 103,056 $ 107,296	1-5 Years $ 707 253,304 $ 254,011	5-10 Years $ - - $ -	10-15 Years $ - - $ -	15-20 Years $ - - $ -	20+ Years $ - -
						$ -

179 -

December 31, 2020

On Demand or
Less than
1 Month
1-3 Months
3 Months to
1 Year

Non-derivative
financial liabilities
Lease liabilities
$ 353
$ 707
$ 3,180

Accounts payable
95,205
21,415
-
Accounts payable -
related parties
132,384
21,783
-
Other payables - related
parties
7,873
-
-
Payables on processing
-
13,787
-
Payables on equipment
2,771
2,436
-
Long-term borrowings

289

576

2,591

$ 238,875
$ 60,704
$ 5,771

1 Year to
5 Years
$ 4,947
-
-
-
-
-

356,333
$ 361,280

Additional information about the maturity analysis for financial liabilities

Lease liabilities Interest rate liabilities	Less than 1 Year $ 4,240 3,456 $ 7,696	1-5 Years $ 4,947 356,333 $ 361,280	5-10 Years $ - - $ -	10-15 Years $ - - $ -	15-20 Years $ - - $ -	20+ Years $ - -
						$ -

b) Financing facilities

Unsecured bank overdraft facilities, reviewed annually and payable on demand: Amount used Amount unused Secured bank overdraft facilities: Amount used Amount unused		December 31	December 31
		2021 $ - 200,000 $ 200,000 $ 350,000 100,000 $ 450,000	2020 $ - 200,000 $ 200,000 $ 350,000 250,000 $ 600,000

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26. TRANSACTIONS WITH RELATED PARTIES

Besides information disclosed elsewhere in the other notes, details of transactions between the Company and other related parties are disclosed below.

a. Related party name and category

Related Party Name Silicon Optronics (Shanghai) Co., Ltd. NUEVA IMAGING, INC. Powerchip Semiconductor Manufacturing Corp.	Related Party Category
	Subsidiaries Subsidiaries Substantive related parties (Non-related since April 18, 2021)

b. Purchases

Related Party Category Substantive related parties Powerchip Semiconductor Manufacturing Corp.	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 $ 437,695	2020 $ 1,473,297

The purchase prices and payment terms were based on negotiations and thus not comparable with those in the market.

c. Research and development expenses

Related Party Category Substantive related parties Powerchip Semiconductor Manufacturing Corp.		December	31
		2021 $ -	2020 $ 4,702

d. Technical service expense

Related Party Category Subsidiaries Silicon Optronics (Shanghai) Co., Ltd. NUEVA IMAGING, INC.		December 31	December 31
		2021 $ 113,784 41,114 $ 154,898	2020 $ 71,022 38,501 $ 109,523

The technical service contracts between the Company and its related parties are based on the prices and terms agreed upon by both parties, therefore no other appropriate transaction counterparties are available for comparison.

181 -

e. Account payable to related parties

Related Party Category Substantive related parties Powerchip Semiconductor Manufacturing Corp. Other payables to related parties Related Party Category Subsidiaries Silicon Optronics (Shanghai) Co., Ltd. NUEVA IMAGING, INC.		December 31	December 31
		2021 $ - December	2020 $ 154,167 31
		2021 $ 8,887 2,625 $ 11,512	2020 $ 4,909 2,964 $ 7,873

f. Other payables to related parties

g. Other transactions with related parties

The Company signed a joint development contract with Powerchip Semiconductor Manufacturing Co., Ltd. According to the contract, the Company will provide some machinery and equipment for the purpose of research and development.

h. Remuneration of key management personnel

Short-term employee benefits	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2021 $ 15,226	2020 $ 7,470

The remuneration of directors and other key management personnel departments is determined by the remuneration committee based on individual performance and market trends.

27. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets of the Company were provided as collateral for long-term bank borrowings and as guarantee for the tariff on imported raw materials:

Property, plant and equipment - R&D equipment Pledged time deposits (classified as financial assets at amortized cost-noncurrent)		December 31	December 31
		2021 $ 420,520 3,512 $ 424,032	2020 $ 452,058 4,048 $ 456,106

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28. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The Company’s significant financial assets and liabilities denominated in foreign currencies aggregated by the foreign currencies other than the functional currencies and the related exchange rates between the foreign currencies and the respective functional currencies were as follows:

December 31, 2021

Foreign
Currency
Exchange Rate
Financial assets
Monetary items
USD
$ 17,962
27.68 (USD:NTD)
CNY

2,282
4.344 (CNY:NTD)

Financial liabilities

Monetary items
USD

13,721
27.68 (USD:NTD)
December 31, 2020
Foreign
Currency
Exchange Rate
Financial assets
Monetary items
USD
$ 11,019
28.48 (USD:NTD)
CNY

2,237
4.377 (CNY:NTD)

Financial liabilities

Monetary items
USD

10,019
28.48 (USD:NTD)

Carrying
Amount
$ 497,189

9,915
$ 502,104
$ 379,809
Carrying
Amount
$ 313,810

9,792
$ 323,602
$ 285,331

The significant unrealized foreign exchange gains (losses) were as follows:

Foreign Currency USD CNY	For the Year Ended December 31	For the Year Ended December 31
	2021 Exchange Rate Net Foreign Exchange Gains (Losses) 27.68 (USD:NTD) $ (953) 4.344 (CNY:NTD) (464) $ (1,417)	2020
		Exchange Rate Net Foreign Exchange Gains (Losses) 28.48 (USD:NTD) $ 1,430 4.377 (CNY:NTD) (390) $ 1,040

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29. SEPARATELY DISCLOSED ITEMS

a. Information about significant transactions and investees:
1) Financing provided to others: None;
2) Endorsements/guarantees provided: None;
3) Marketable securities held (excluding investments in subsidiaries): None;
4) Marketable securities acquired or disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: None;
5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: None;
6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None;
7) Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital: Please see Table 1 attached;
8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: None;
9) Information about the derivative instruments transaction: None;
b. Names, locations, and related information of investees over which the Company exercises significant influence (excluding information on investment in Mainland China): Please see Table 2 attached;
c. Information on investments in mainland China: Please see Table 3 attached.
d. Information on major shareholders: The name, amount and proportion of shareholders with a shareholding ratio of 5% or more: Please see Table 4 attached.
184 -

TABLE 1

SILICON OPTRONICS, INC. AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2021

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Nature of Relationship		Transaction Details	Transaction Details		Abnormal Transaction	Abnormal Transaction	Notes/Accounts (Payable) Receivable	Notes/Accounts (Payable) Receivable	Note
			Purchase/ Sale	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% of Total
Silicon Optronics, Inc.	Powerchip Semiconductor Manufacturing Corp.	Substantive related parties	Purchase	$ 437,695	14	Note 2	$ -	-	$ -	-	-

Note 1: Non-related since April 18, 2021.

Note 2: Mainly paid on the 30th days after the month of the invoice date.

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TABLE 2

SILICON OPTRONICS, INC. AND SUBSIDIARIES

INFORMATION ON INVESTEES DECEMBER 31, 2021 (In Thousands of New Taiwan Dollars)

Investor Company	Investee Accounted for using the Equity Method	Location	Main Businesses and Products	Investment Amount	Investment Amount	Balance	as of December 31, 2021	as of December 31, 2021	Net Income of Investee Accounted for using the Equity Method	Investment Income	Note
				December 31, 2021	December 31, 2020	Number of Shares (In Thousands)	Percentage of Ownership (%)	Carrying Amount
Silicon Optronics, Inc.	NUEVA IMAGING INC. Silicon Optronics (Cayman) Co., Ltd.	USA Cayman Islands	Product development design of high order CMOS Image Sensor Investment holding company	$ 358,500 5,237	$ 358,500 5,237	6,000 170	100 100	$ 245,698 32,221	$ 3,633 7,564	$ 3,633 7,564	Subsidiary Subsidiary

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TABLE 3

SILICON OPTRONICS, INC. AND SUBSIDIARIES

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2021 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Investee Company	Main Businesses and Products	Main Businesses and Products	Paid-in Capital (US$ in Thousands)	Paid-in Capital (US$ in Thousands)	Method of Investment	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2021 (US$ in Thousands)	Remittance of Funds	Remittance of Funds	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2021 (US$ in Thousands)	Net Income (Loss) of the Investee	Percentage of Ownership of Direct or Indirect Investment (%)	Investment Gain (Loss)	Carrying Amount as of December 31, 2021	Accumulated Repatriation of Investment Income as of December 31, 2021
							Outward	Inward
Silicon Optronics (Shanghai) Co., Ltd.	Scale Integration and design of related electronic products, R&D and testing and technical service consulting and transfer of finished products.		US$ 175 thousand		Note 1	$ 4,844 (US$ 175) thousand	$ -	$ -	$ 4,844 (US$ 175) thousand	$ 7,564	100	$ 7,564	$ 32,221	$ -

Accumulated Outward Remittance for Investment in Mainland China as of December 31, 2021 (US$ in Thousands)		Investment Amount Authorized by Investment Commission, MOEA (US$ in Thousands)		Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA (US$ in Thousands)
$ 4,844 (US$ 175) thousand		Note 1		$ 1,638,545

Note 1: Through Silicon Optronics (Cayman) Co., Ltd. investment Silicon Optronics (Shanghai) Co., Ltd., the Amount of Investment Stipulated was approved by Investment Commission, MOEA approved investment amount US$175. (US$ in Thousands)

Note 2: Amount was recognized on the basis of audited financial statements.

Note 3: Based on the exchange rate as of December 31, 2021.

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TABLE 4

SILICON OPTRONICS, INC. AND SUBSIDIARIES

INFORMATION OF MAJOR SHAREHOLDERS DECEMBER 31, 2021

Name of Major Shareholder	Shares	Shares
	Number of Shares	Percentage of Ownership (%)
Samoa Shangzhao Lake Co., Ltd. Samoa Full Guest Investment Limited Xiao Dong Luo	17,691,413 4,875,458 4,583,587	22.63 6.23 5.86

Note 1: The information of major shareholders presented in this table is provided by the Taiwan Depository & Clearing Corporation based on the number of ordinary shares and preferred shares held by shareholders with ownership of 5% or greater, that have been issued without physical registration (including treasury shares) by the Company as of the last business day for the current quarter. The share capital in the parent company only financial statements may differ from the actual number of shares that have been issued without physical registration because of different preparation basis.
Note 2: If a shareholder delivers the shareholdings to the trust, the above information will be disclosed by the individual truster who opened the trust account. For shareholders who declare insider shareholdings with ownership greater than 10% in accordance with the Security and Exchange Act, the shareholdings include shares held by shareholders and those delivered to the trust over which shareholders have rights to determine the use of trust property. For information relating to insider shareholding declaration, please refer to Market Observation Post System.
VI. The effect of insolvency of the company and affiliates on the financial Status of the Company: None.
188 -

Chapter 7 Review of Financial Status, Operating Results, and Risk Management

I. Financial Position

Major reasons for material changes in assets, liabilities and shareholders' equity, as well as related effects in the most recent two fiscal years, and response measures in the future if such effects are significant.

(I) Analysis of changes in financial positions for the most recent two years:

Unit: NT$ 1,000; %

			Unit: NT$ 1,000;%	Unit: NT$ 1,000;%
Year Item	2021	2020	Difference
			Amount	%
Current assets	3,076,437	2,250,146	826,291	36.72
Property,plant and equipment	487,299	513,112	(25,813)	(5.03)
Intangible assets	204,686	207,012	(2,326)	(1.12)
Other assets	110,491	41,748	68,743	164.66
Total assets	3,878,913	3,012,018	868,895	28.78
Current Liability	889,812	446,595	443,217	99.24
Non-current liabilities	258,192	359,681	(101,489)	(28.22)
Total liabilities	1,148,004	806,276	341,728	42.38
Share capital	781,529	781,059	470	0.06
Capital surplus	1,131,749	1,131,714	35	-
Retained earnings	919,385	394,214	525,171	133.22
Other equity	(5,759)	(4,250)	(1,509)	35.51
Treasurystocks	(96,995)	(96,995)	-	-
Non-controllinginterest	-	-	-	-
Total equity	2,730,909	2,205,742	525,167	23.81
Reasons for changes in the two periods: 1. Increase in current assets: mainly due to the increase in inventory in the current period. 2. Increase in current liability: Due to increased other current liabilities and current income tax liabilities. 3. Increase in retained earnings: Mainly due to et profit increased significantly this year. 4. Increase in other interests: Mainly due to increase in exchange difference from the financial statements of foreign operations.

(II) Impact of changes in the financial status for the most recent two fiscal years: No significant impact.

(III) Future response plans: Not Applicable.

189 -

II. Financial Performance

The main reasons for the material changes in operating revenues, operating profit and net profit before tax in the most recent two years, a sales volume forecast and the basis therefor, and the possible impact on the Company's financial operations, and response plans:

(I) Analysis of changes in operating results for the most recent two years:

Unit: NT$ 1,000; %

Year Item	2021	2020	Amount of increase/decrease	Change (%)
Sales revenue	3,996,496	3,328,695	667,801	20.06
Gross Profit	1,387,380	672,210	715,170	106.39
Operating profits	883,959	321,577	562,382	174.88
Non-operating revenue and expenses	10,489	5,662	4,827	85.25
Profit before income tax	894,448	327,239	567,209	173.33
Earnings from continuing operations	741,050	281,438	459,612	163.31
Income from discontinued operations	-	-	-	-
Net profit (loss) for the current period	741,050	281,438	459,612	163.31
Other comprehensive income (income after tax)	(1,491)	(1,866)	(375)	20.10
Total comprehensive income	739,559	279,572	459,987	164.53
Net income attributable to shareholders of the parent	-	-	-	-
Net income attributable to non-controlling interest	-	-	-	-
Comprehensive income or loss attributable to the shareholders of the parent	-	-	-	-
Comprehensive income attributable to non-controlling interest	-	-	-	-
Earnings Per Share (NT$)	9.61	3.65	5.96	163.29
Reasons for changes in the two periods: 1. Increase in sales revenue: mainly due to strong market demand in the first half of 2021. 2. Increase in Gross profit on sales: Due to substantial increase in revenue. 3. Increase in operating profit: Due to the increase in gross profit in 2021. 4. Increase in Non-operating expenses: mainly due to the increase in exchange interests in 2021. 5. Increase in net profit for the period and consolidated net profit for the period: Due to the increase in gross profit for 2021 and the increase in overall profit.

190 -
(II) Expected sales volume and its possible impact on the Company's future financial operations:
Expected sales volumes and revenue growth are of great help for future profitability.
(III) Future response plan: actively develop new products and markets.
191 -

III. Cash flow

Analysis of cash flow changes during the most recent fiscal year, improvement plan for liquidity and provide a liquidity analysis for the coming year:

(I) Analysis of changes in cash flow for the most recent year is as follows:

Unit: NT$ 1,000; %

Year Item	2021	2020	Change (%)
Cash flow ratio	58.30	113.65	(48.70)
Cash flow adequacyratio	45.94	54.79	(16.15)
Cash reinvestment ratio	10.50	14.69	(28.52)
Analysis of the changes in cash flow: 1. Cash flow ratio decreased: mainly due to inventory increase. 2. Cash reinvestment ratio decreased: mainlydue to inventoryincrease.

(II) Improvement plan with insufficient cash: There is no concerns about liquidity and shortage of cash.
(III) Cash liquidity analysis for the coming fiscal year.

Unit: NT$ 1,000

				Unit: NT$ 1,000	Unit: NT$ 1,000
Cash and cash equivalents at beginning ofyear A	Projected net cash flow from operating activities for the year B	Projected for the year Cash outflow C	Expected cash surplus (inadequacy) amount A`＋`B`－`C	Remedial measures for cash inadequacy
				Investment plans	Financial plans
919,634	607,309	(759,565)	767,378	-	-
Analysis of the changes in cash flow: 1. Operating activities: Due to projected revenue growth. 2. Investment activities: Capital expenditure, etc. 3. Financingactivities: Payment for cash dividends.

IV. Major capital expenditure for the most recent year and its effect on financial position and operation of the Company: None.

V. Direct Investment Policy, Reasons for Profit or Loss, Correction Plan and Investment Plan for the Coming Year: None.

VI. Risk Management

(I) The impact of interest rate fluctuations, exchange rate fluctuations, and inflation on the Company's earnings and coping strategies
Interest rate:
192 -

The Company estimates that there is no NT dollar or foreign currency borrowing demand in the upcoming fiscal year, so there is no need to evade the risk of interest expenses arising from interest rate hikes. The Company has appropriate funding channels to meet the needs of business development and maintain good relationship with each correspondent bank. The Company will consider the available facilities from various sources of capital and their cost of capital, as well as making a comprehensive consideration for the business development plans, so as to raise the required funds. Therefore, the impact on the Company's profit and loss is not significant.

Foreign exchange rates:

As the Company's receivables and payables are mainly denominated in foreign currency (US dollars), the exchange rate risk caused by exchange rate fluctuations can be largely avoided. However, depending on the trend of the global economy as a whole, appropriate measures should be taken to avoid the risk of foreign currency fluctuations.

Inflation:

The impact of inflation does not currently have a significant impact on the Company's profits and business operations. If the Company's purchase cost is affected by inflation, the incremental cost can be marked up on to the sales price, so inflation has no significant effect on the Company's profit and loss.

(II) (High leverage/high risk investment, loans to third parties, endorsements and guarantees, and policies in derivatives transactions, reasons for profits/losses and coping strategies The Company currently does not engage in high-risk, high-leveraged investments, lending or endorsement guarantees, and derivative transactions. The Company has established the "Procedures Governing the Acquisition and Disposal of Assets", "Procedures Governing Making of Endorsements and Guarantees" and "Procedures Governing Loaning of Funds to Other Parties" to regulate the transactions of high-risk, high-leveraged investments, loaning of funds to other parties, endorsements and guarantees, and derivatives trading in accordance with relevant laws and regulations.

(III) Future Development Plan and Expected R&D Expenditure

Future R&D plans

The Company's most important core technology is the development of CMOS image sensor related sensing circuits, analog, digital and mixed signals, from circuit design, process technology, to optical simulation, etc., providing customers with the best solution and exclusive design and process for customer needs. Developing CMOS image sensor for special applications in combination with high-precision processing technology in Taiwan's semiconductor industry; the future R&D plans include:

(1) High-performance CMOS Image Sensor (High-performance CMOS Image Sensor).
(2) High-resolution CMOS Image Sensor (High-resolution CMOS Image Sensor).
193 -
- (3) Global Shutter CMOS Image Sensor (Global Shutter CMOS Image Sensor).
- (4) Low Power Consumption CMOS Image Sensor (Low Power Consumption CMOS Image Sensor).
- (5) Design and development of sensors for special applications.
Estimated R&D expenditure
- The R&D expenses that the Company expects to invest in the future will be listed according to the Company's internal research plans, and depending on the research and development progress, the technology involved, and the staged results, the R&D expenses budget will be increased or decreased after discussion at the Company's internal supervisory meetings.
(IV) Potential Impact associated with Domestic or International Political/Regulatory Changes and the Response Measures
The Company's daily operations are handled in accordance with the relevant domestic and foreign laws and regulations, and at any time pay attention to the development trend of domestic and foreign policies and changes in regulations and collect relevant information to provide operational decision-making reference to adjust the Company's relevant operational strategies. As of now, the Company's financial operation has not been affected by important changes of domestic and foreign policies and laws.
(V) Potential Impact associated with Domestic or International Industry/Technology Evolution and the Response Measures
Through the close strategic cooperation with suppliers in the past, and the Company's own research and development capabilities, the Company can quickly grasp the industry dynamics and obtain market information ahead of its peers. Therefore, technological and industrial changes have a positive impact on the Company.
The Company's main products have been widely accepted by customers, and market demand continues to expand. The Company also actively enhances research and development capabilities and strengthens outsourcing capacity, and grasps industry dynamics and the market information, adopting a robust financial management strategy to maintain market competitiveness.
In the future, the Company will continue to pay attention to the situation of technological changes and evaluate its impact on the operations of the Company, and adjust the Company's business development and financial status accordingly.
(VI) Potential Impact on Crisis Management associated with Changes in Corporate Image and the Response Measures
Since its incorporation, the Company has been committed to maintaining its corporate image and complying with the laws and regulations, and there has not been enough to affect the corporate image so far. In the future, while pursuing revenue growth and maximizing shareholders' equity, the Company will also comply with the government regulations and fulfill corporate social responsibility to continuously maintain good corporate image of the Company.
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(VII) Potential Impact associated with Mergers/Acquisitions and the Response Measures: Not Applicable.
(VIII) Potential Impact associated with Capacity Expansion and the Response Measures: Not Applicable.
(IX) Risks of purchasing and sales concentration and coping strategies
Procurement The Company is a fabless professional IC design company, the main purchase project is wafer procurement. In the value chain of the semiconductor industry, IC design houses tend to maintain long-term cooperation with specific foundries in order to achieve reliable and stable production capacity, as well as factors such as process technology, yield, capacity and delivery. This is a common phenomenon among IC design houses. The Company has been in good relationship with Powerchip / PTC and B Company for many years. The relationship between the two parties is good. In the future, we will continue to cooperate on fields such as new product development and mass production in order to reduce the risk of concentrated purchase.
Turnover

The Company's main sales market and end-users are both in mainland China. Mainland China has a vast territory, and there are differences in business activities and trading habits. The Company evaluates the market characteristics and connections of dealers, and has the service experience of end-product applications. It can quickly serve end-customers and develop new markets. The Company fully grasps the operation of the dealers, and adopts the advance payment as the dealer's payment terms to increase the working capital turnover rate and reduce the overdue risk of accounts receivable in mainland China. The Company's technical support directly serves the end customers, keeps abreast of customer needs, and reduce the risk that sales of goods will be concentrated in the dealers. At the same time, with the introduction of future image sequencing wafers and other related image sensing chip products, the product sales and operation scale will be expanded, and the concentration of customers should be reduced in the future.

(X) The impact and risk of the transfer of shares in huge volumes by Directors, Supervisors,or major shareholders on the Company, and the Coping Strategies: None.
(XI) The impact and risk of change in management on the Company, and the measures to cope with: None.
(XII) Risks Associated with Litigations
Material litigious, non-litigious or administrative disputes that are currently still open: None.
The Company's Directors, Supervisors, Presidents, substantive Directors, shareholders holding more than 10% of the shares and subordinate companies have decided to determine or are still in the system of material litigation, non-litigation or
195 -

administrative litigation. The result may have a significant influence on shareholders' equity or securities prices: None.

(XIII) Other important risks: None.

VII. Other important matters: None

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Chapter 8 Special Notes

I. Information Regarding Affiliated Companies

(I) Structure of affiliated enterprises

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

Silicon Optronics, Inc.
100% 100%
Silicon Optronics Holdings
(Cayman) Ltd.
100%
Silicon Optronics
(Shanghai) Co, Ltd.
----- End of picture text -----

(II) Basic information of related companies:

Unit: US$

				Unit: US$
Name	Date of Incorporation	Address	Actual Paid-in Capital	Main Business Projects
Nueva Imaging Inc.	2010.05.27	4030 Moorpark Ave Ste 248 San Jose, CA95117 U.S.A	600	R&D design of high-end CMOS Image Sensor products
Silicon Optronics Holdings (Cayman) Ltd.	2013.04.26	4F, Willow House, Cricket Square, P.O. Box 2582, Grand Cayman KY1-1103	177,550	Investment holding
Silicon Optronics(Shanghai) Co, Ltd.	2013.12.25	Room 603, Building 1, No.2966 Jinke Road, Zhangjiang Hi-tech Park, Pudong New Area, Shanghai	175,000	Design development of integrated circuit and related electronic products and testing along with technical service consulting and transfer of research and development results

(III) The Shareholders in Common of Companies Presumed to have a Relationship of Control and Subordination: Please refer to paragraph (II).
(IV) The industry covered by the related companies: Please refer to paragraph (II).
197 -

(V) Information on Directors, Supervisors, Managerial Officers, and Managerial Officers

Name of Company	Title	Name or representative	Shareholding (shares)	Shareholding Ratio
Nueva Imaging Inc.	Chairman of the Board	Silicon Optronics, Inc. (Representative: James He)	6,000,000	100%
Silicon Optronics Holdings (Cayman) Ltd.	Chairman of the Board	Silicon Optronics, Inc. (Representative: James He)	170,000	100%
Silicon Optronics(Shanghai) Co, Ltd.	Executive Director Supervisors	Silicon Optronics, Inc. (Representative: Terry Li) Silicon Optronics, Inc. (Representative: Steffi Huang)	175,000	100%

(VI) Operating status of each related company:

December 31, 2021; Unit: NT$ thousand;

Name of Company	Capital	Total assets	Total liabilities	Net value	Operating revenue	Operating profits	Current profit and loss (after income tax)	Earnings per Share (NT$) (After income tax)
Nueva ImagingInc.	18	51,611	5,141	46,470	41,329	3,408	3,633	0.61
Silicon Optronics Holdings (Cayman) Ltd.	5,237	83,693	51,472	32,221	-	-	6,949	40.88
Silicon Optronics(Shanghai) Co, Ltd.	4,844	83,693	51,472	32,221	113,911	8,194	7,564	43.22

198 -
(VII) Consolidated business report: Please refer to pages 81 to 188.
(VIII) Relationship report: Please refer to page 81.
II. Private Placement of Securities of the Most Recent Year up to the Publication Date of the Annual Report:None.
III. Holding or Disposal of the Company's Shares by the Subsidiaries of the most recent year up to the print date of the annual report: None.
IV. Other Matters that Require Additional Description: None.
V. Matters that Materially Affect Shareholders' Equity or the Price of the Company's Securities Specified in Article 36, Paragraph 2, Subparagraph 2 if The Securities and Exchange Act, Occurred during the Most Recent Fiscal Year or during the Current Fiscal Year up to the Date of Publication of the Annual Report: None.

Silicon Optronics, Inc.

==> picture [98 x 100] intentionally omitted <==

Chairman and President: James He

==> picture [64 x 58] intentionally omitted <==

199 -

AI assistant

SOI — Annual Report 2021

52337_rns_2022-07-05_e6006c49-065b-4c92-b2c4-f640ad9499e6.pdf

2021 Annual Report (TRANSLATION)

Printed on April 28, 2022

Notice to Readers:

II. Deputy Spokesperson:

IV. Transfer Agent:

V. Certified Public Accountants for the Most Recent Fiscal Year:

VI. Name of Overseas Securities Dealers and the Methods to Inquire about Overseas Securities:

VII. Company Website: www.soinc.com.tw

Table of Contents

Dear Shareholders,

I. Date of Incorporation

II. Milestones

Chapter 3 Corporate Governance Report

I. Organization

II. Information on the Company's Directors, President, Vice Presidents, Deputy Vice Presidents, and the Supervisors of All the Company's Divisions and Branch Units

(I) Director

Major Shareholders of Institutional Shareholders

Major Shareholders that are Institutional Shareholders: none.

3. Information disclosure of directors' professional qualifications and independence of independent directors

4. Board diversity and independence:

III. Remuneration Paid During the Most Recent Fiscal Year to Directors (Including Independent Directors), the President, and Vice Presidents:

Remuneration Ranges

IV. Implementation of Corporate Governance

◎ : Attendance in person

◇ : By Proxy

(II) The Operation of the Audit Committee

Note 1: Implementation of Diversity Policy of Board Members by Individual Directors

(VI) The State of the Company's performance in the area of ethical corporate management, any variance from the Ethical Corporate Management Best

(VIII) Other significant information that will provide a better understanding of the state of the Company's implementation of corporate governance:

1. Continuing Education of Directors in 2021:

2. Continuing Education of Managers and Chief Corporate Governance Officer in 2021:

(IX) Status of Internal Control System:

1. Declaration of Internal Control:

1. Major Resolutions of the 2021 Regular Shareholders' Meeting:

2. Major Resolutions of the Board Meetings:

V. Information on CPA Professional Fees

(I) Change of Equity

IX. Relationship Information, if Among the Company's 10 Largest Shareholders Any One is A Related Party or A Relative Within the Second Degree of Kinship of Another

Chapter 4 Capital Overview

I. Capital and Shares

(I) Source of Capital

1. Formation of capital

2. Type of Stock

(II) Shareholder Structure

(III) Distribution of Equity Ownership

(IV) Major Shareholders

(VI) Dividend policy of the Company and its implementation status

(IX) The State of the Company's Repurchases of its Own Shares:

V. Employee Share Subscription Warrants:

(I) The Status of Employee Stock Options

Chapter 5 Operations Highlights

I. Business Activities

2. Correlations between upstream, midstream and downstream Industries

3. Product Development Trends

II. Market and Sales Overview

(III) Supply Status of Main Materials

1. Information on Major Suppliers in the Recent Two Years

2. Information on Major Sales Customers in the Recent Two Years

(V) Production volume and value in the most recent two fiscal years

(VI) Sales volume and value in the most recent two fiscal years

III. Employee Information

IV. Environmental Protection Expenditures

V. Labor Relations

VII. Important Contracts

Chapter 6 Financial Summary

I. Condensed Balance Sheet and Comprehensive Income Statement of the Most Recent Five Years

(I) Consolidated concise balance sheet

(II) Consolidated concise consolidated income statement

(III) Individual concise balance sheet

(IV) Individual concise consolidated income statement

II. Financial Analysis for the past 5 years

(I) Consolidated financial analysis

(II) Individual financial analysis

Audit Committee's Review Report

IV. 2021 Independent Auditors’ Report and Consolidated Financial Statements

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

March 16, 2022

SOI Annual Report 2021

`◎` : Attendance in person

`◇` : By Proxy