Skip to main content

AI assistant

Sign in to chat with this filing

The assistant answers questions, extracts KPIs, and summarises risk factors directly from the filing text.

Sign up Log in

SUNKO Annual Report 2022

Jun 23, 2022

51901_rns_2022-06-23_18862358-db80-4eba-9be1-6cf81caa6efa.pdf

Annual Report

Open in viewer

Opens in your device viewer

SUNKO INK CO., LTD

Table of Contents

I. LETTER TOSHAREHOLDERS................................................................................................................... 4 LETTER TOSHAREHOLDERS................................................................................................................... 4
1 The 2021 Business Report ................................................................................................................. 4
2 Overview of 2021 Operation Plan ..................................................................................................... 8
3 Overview of Technology and R&D ................................................................................................. 10
4 Estimated product sales of 2022 ...................................................................................................... 11
5 The Impact from the external competition, regulatory environment, and business operation ........ 12
II. COMPANYPROFILE................................................................................................................................ 13
1 Date of Incorporation ....................................................................................................................... 13
2 Company History ............................................................................................................................. 13
III. CORPORATEGOVERNANCEREPORT.................................................................................................... 14
1 Organization ..................................................................................................................................... 14
2 Directors, Supervisors and Management Team ............................................................................... 16
3 Remuneration to Directors, General Manager and Deputy General Manager in 2021 ................... 24
4 Implementation of Corporate governance ....................................................................................... 29
5 Information on CPA Professional Fees ............................................................................................ 53
6 Information of Changing CPAs. ....................................................................................................... 53
7 The Chairman, President and Financial or Accounting Manager of the Company who has, in the
most recent year, held a position at the accounting firm of its CPA or at an affiliated company. ........... 53
8 Equity transfer or changes in equity pledged by the Company's Directors, Supervisors, managerial
officers or shareholders with shareholding percentage exceeding 10% in the most recent fiscal year up
to the publication date of this Annual Report: ......................................................................................... 54
9 Information of the shareholder whose shareholding ratio ranks top 10, mutual relation of related
person or spouse, a relative within the second degree of kinship of another: ......................................... 55
10 Number of shares hold for the same reinvestment business by the company’s directors,
supervisors, manager and the company's directly or indirectly controlled business, and combined
calculation of the comprehensive shareholding ratio: ............................................................................. 57
IV. CAPITALOVERVIEW.............................................................................................................................. 58
1 Source of Capital.............................................................................................................................. 60
2 Shareholder structure ....................................................................................................................... 60
3 Shareholding Distribution Status ..................................................................................................... 60
4 List of Major shareholders: .............................................................................................................. 60
5 Share prices, net value, earnings, dividends, and other relevant information in the past two years 61
6 Dividend policy and implementation status ..................................................................................... 62
7 The impacts of issuing stock grants in this shareholder’s meeting on the Company’s operational
performance and earnings per share: None. ............................................................................................. 62

1

8 Employee compensation and directors’ and supervisors’ remuneration .......................................... 62
9 Company Share Repurchase Status ................................................................................................. 63
10 Status of Corporate Bonds. .............................................................................................................. 63
11 Status of Preferred Stocks. ............................................................................................................... 63
12 Status of Global Depositary Receipts .............................................................................................. 63
13 Status of Employee Stock Options .................................................................................................. 63
14 Restriction on new employee shares. ............................................................................................... 63
15 Status of New Shares Issuance in Connection with Mergers and Acquisitions. .............................. 63
16 Financing Plans and Implementation. .............................................................................................. 63
V. OPERATIONHIGHLIGHTS...................................................................................................................... 64
1 Business Activities ........................................................................................................................... 64
2 Market and Sales Overview ............................................................................................................. 69
3 Employee Information ..................................................................................................................... 74
4 Expenditures on Environmental Protection ..................................................................................... 75
5 Labor relations ................................................................................................................................. 75
6 Information Security Management. ................................................................................................. 76
7 Impotant contracts……..…………………………………………………………………………..77
VI. FINANCIALINFORMATION..................................................................................................................... 78
1 Condensed Balance Sheet, Income Statement, Names of the CPAs and their audit opinions ......... 78
2 Financial analysis for the recent five years ...................................................................................... 82
3 Audit Committee’s Review Report for the recent years .................................................................. 86
4 Consolidated Financial Statements of the Most Recent Year with Independent Auditors’ Report .. 87
5 Parent Only Financial Statements of the Most Recent Year with Independent Auditors’ Report.. 180
6 Impact on the Company's financial status due to financial difficulties experienced by the Company
and its affiliate companies in the most recent year and as of the publication date of this Annual Report
148
VII. REVIEW ANDANALYSIS ONFINANCIALSTATUS, FINANCIALPERFORMANCE, ANDRISKS............ 285
1 Analysis of Financial Status........................................................................................................... 285
2 Analysis of Financial Performance ................................................................................................ 287
3 Analysis of Cash Flow ................................................................................................................... 289
4 Major Capital Expenditures and Impact on Financial and Business during recent years:............. 289
5 Reinvestment policies, main reasons for profits/ losses generated thereby, improvement plans, and
investment plans for the coming year: ................................................................................................... 290
6 Risk Assessment............................................................................................................................. 291
7 Other Material Matters. .................................................................................................................. 292
VIII. SPECIALNOTES............................................................................................................................ 293
1 Summary of Affiliated Companies ................................................................................................ 293
2 Private Placement of Securities in 2021 and as of the publication Date of this Annual Report .... 294
3 Holding or disposal of the Company's shares by the subsidiaries of the most recent year as of the
publication date of this Annual Report. ................................................................................................. 294

2

4 Other necessary supplementary matters to be included ................................................................. 294 IX. ANY EVENTS IN 2021 AND AS OF THE PUBLICATION DATE OF THIS ANNUAL REPORT THAT HAD MATERIAL IMPACTS ON SHAREHOLDERS’ EQUITY OR SECURITIES PRICES AS STATED IN ARTICLE 362-2 OF SECURITIES AND EXCHANGE LAW OF TAIWAN .............................................................................. 294

3

I. LETTER TO SHAREHOLDERS

1 The 2021 Business Report The Company’s parent only revenue amounted to $2,848,057 thousand in 2021, and the annual consolidated revenue amount to $2,850,638 thousand, consolidated after tax loss of $(70,016)thousand, of which loss attributable to the owners of the Company reached$69,958 thousand after tax. The consolidated basic and diluted loss per share were both $(0.38). Compared with 2020, the consolidated operating income in 2021 grew mildly, mainly because many countries have gradually adjusted their measures to tackle COVID-19. The sales and revenue related to several products (such as antioxidant 230, crosslinking curing agents, and electronic chemicals) were near ten-year highs. On the other hand, affected by the cancellation of the Dajia factory transaction, the operation of the flame retardant production line has been put on hold for several months; some plant protection products have resumed production in China, and the client has gradually turned to China based on cost considerations; due to insufficient manpower, nucleating agents output was restricted; the US dollar exchange rate continued to drop to a new low in 2021; these factors have adversely affected revenue. After taking into account the above factors, the annual revenue showed a slight increase of $98,037 thousand by 3.56%.

In the second half of 2021, various countries gradually opened up and put COVID-19 behind. The market demand recovered, but due to the disruption of international freight, the operation suspension in the supply chain and the increase in the cost of raw materials caused by China’s rectification and environmental protection have offset the benefits brought by the increase in selling prices, and the continued adoption of loose monetary policies in various countries caused the US dollar exchange rate to remain at a low level throughout the year, thus the gross profit margin still maintained at a low level. In addition, as the land disposition case of Taiping Plant concluded and the remediation costs of the last phase of the Pingzhen and Dali NO.2 plants have been recognized as related income and expenses in 2020, the operating expenses and non-business income of income of this year have decreased significantly compared with the previous year. The table below shows our implementation results of 2021, compared with the data from 2020:

4

1.1 Implementation Results of Operation Plan

Unit: NT$ (in thousands)

Item
2021
2020		 Increase (Decrease)
Difference
Rate
Operating Revenue (net)
2,850,638
2,752.601
Operating Costs
2,722,534
2,613,246
Operating Profit
128,104
139,355
Operating Expense
224,055
383,110
Operating Gains (Losses)
(95,951)
(243,755)
Other profits and losses (net)
42,110
727,049
Pre-tax Earnings (losses)
(53,841)
483,294
After-tax Earnings (losses)
(70,016)
524,306		 98,037
3.56
109.288
4.18
(11,251)
(8.07)
(159,055)
(41.52)
147,804
60.64
(684,939)
(94.21)
(537,135)
(111.14)
(594,322)
(113.35)

1.2 Forecast and Implementation

The Company didn’t publish the 2021 Operating Forecast. Therefore, no information regarding implementation is available.

1.3 Financial Income and Expenditure and Profitability Analysis

For the years ended 31 December For the years ended 31 December
Item 2021 2020
Profitability Return on asset (%) (1.35) 11.88
Return on equity (%) (2.91) 22.05
Pre-tax income to paid-in capital (%) (2.85) 25.57
Profit margin (%) (2.46) 19.05
Earnings per share (NT$) (0.38) 2.43
Diluted Earnings per share (NT$) (0.38) 2.42

1.4 Research and Development progress

1.4.1 R&D Expenses

Unit: NT$ (in thousands) For the years ended 31 December

Unit: NT$ (in thousands)
For theyears ended 31 December
R&D Expenses
Ratio to operating revenues		 2021
2020
2019
51,299
54,464
56,390
1.80%
1.98%
1.74%

5

1.4.2 Recent Research and Development Results

Classification Item R&D results
Fine
Chemical
Series		 1. Development and
promotion of Non-
halogenated Flame
Retardant derivatives		 l
Japan D Company’s phosphorus-
containing flame retardant OEM project:
successfully completed the 3L-scale three
batches of experimental verification (K-
202)
l
Japan O Company’s halogen-free flame
retardant PHZS process change has been
verified.
2. Development and
research application of
nucleatingagent		 l
Replace Aromatic Heterocyclic Phosphate
Nucleating Agent: K21.
l
K21 ton-scale trial run and testing
3. Curing Agent l
CSR: The feasibility assessment of
the K339e zero-waste project have been
completed, and three batches of scale-up
trial production and testing have been
completed.
l
Highly disperse acrylic metal salt
composition, its production method and
the resin composition containing it have
obtained the Taiwan O-Taiwan patent
l
K339G and completed one batch sub-scale
trial production, applied to the
development of new form materials.
4. Research on
Industrialization
Technology of Triazine
UV Absorber New
product		 l
The UV absorber intermediate 1064TM
has completed the process development of
the laboratory n-lab stage.
l
The UV absorbent intermediate K-
DIOPAT has completed the laboratory
stageprocess development.
Polymer
Series		 1. Product development
and application research
of TPU and PUD		 l
Completed the laboratory process and
formulation development of PA-Polyol
3L.
l
Scale-up trial production and application
development of SK60 and SK70 patented
new products.
l
Completed Taiwan patent application for
the application of thermoplastic
polyurethane and impact-resistant

6

Classification Item R&D results
composite layer.
l
Completed Taiwan patent application for
Thermoplastic Polyurethane Foam and
Impact-Resistant Composite Layer
l
Completed the development and
promotion of impact-dissipating materials
for sports protective gear(trademark
SKECO)
l
Cooperate with shoe material customers to
develop fiber-grade TPU materials and
research on recycling ( currently TPE-01,
TPE-02)
2. Ultra-film ETPV foam
material (EPTV)		 l
Cooperate with shoe material customers to
develop recyclable polyolefin elastomer
ETPV material (recently screened E342-
50)
l
Two-Color ETPV formulation
optimization for dual hardness.

7

  • 2 Overview of 2021 Operation Plan

  • 2.1 Operation Strategy and Policy

    • (1) Develop key raw materials and new products

    • (2) Special-purpose cosmetics are successfully mass-produced

    • (3) Expand production capacity to reduce production costs

    • (4) Save energy and decarbonize

    • (5) Continue to reduce waste, research new treatment methods or processes.

    • (6) Optimize the MIC manufacturing process

    • (7) Plant protection product process technology

    • (8) Automate labor intensive manufacturing process evaluation

    • (9) Advance the process via computer systems

  • 2.2 Important Production and Marketing Strategies

    • 2.2.1 Sales Policy

      • (1) Strengthen the relationship with clients, increase both sales and the market share

      • (2) Develop new specifications and new products in line with customer needs.

      • (3) Develop our own patents and create unique-selling-points (USP) to expand the markets

      • (4) Control market and adjust marketing strategies in time

    • 2.2.2 Production Policy 

      - (1) Implement industrial safety to reduce accident risks.

- (2) Stabilize raw material supply chain and product supply

- (3) Strengthen quality and improve customer satisfaction

- (4) Optimize process and increase utilization rate

- (5) Implement energy saving and waste reduction measure

8

  • 2.3 Short-term and Long-term Business Development Plan

  • 2.3.1 Short-term Plan

    • (1) Strengthen the bonds with international manufacturers and increase the market

share.

  • (2) Develop and promote new products: PP clarifier (K21), Flame Retardant (PX-202),

hair dye, TPE footwear materials, TPU/TPV yarn, TPU anti-vibration materials,

TPU air bed materials, Flame Retardant TPV.

  • (3) Be certified by the brand dealers on Expanded Elastomer footwear materials

  • (4) Develop second level supplier to reduce the risk of raw materials shortage

  • (5) Optimize the MIC manufacturing process

2.3.2 Long-term Plan

  • 2.3.2.1 Key trends and strategies on industrial transformation

Under such shortcomings as strict environmental regulations, limited natural resources, and increasing environmental costs, high-emission industries gradually lost their positions in the competitive market. To successfully navigate this changing landscape, chemical industry will need to develop toward low-pollution and high-economies-ofscale orientation.

  • 2.3.2.2 Research and development and technical services

  • (1) Self-develop and form patent applications

  • (2) Provide technical services to meet customer demands

  • (3) Assist customers in developing customized products and grab the preemptive opportunities in the market

  • 2.3.2.3 Diversification Strategies

Well utilize the Company’s know-hows in chemicals and manufacturing products. For instance:

  • (1) Produce personal sanitization products (special cosmetic) using cGMP qualifications from Chuansing Factory

  • (2) Given the recyclable character of polymer, develop footwear using 100% polymer then recycle and reuse

  • (3) Seek out businesses that are chemical-related and supported by the government

  • 2.3.2.4 “Save Energy, Save Earth”

In response to the “Save Energy, Save Earth” campaign, our future manufacturing

process design will take action to promote energy saving, decarbonization, recycle and reuse, and to exploit the decarbonization technology.

9

  • 3 Overview of Technology and R&D

  • 3.1 Technical Level

The Company values novelty, inventive steps as well as industrial applicability. We mainly target chemicals that are highly demanded in the market and create technical barriers.

The Company’s main research and development team are organic synthesis and polymer chemistry technology experts. They cooperate with a production team with more than 20 years of chemical manufacturing experience, together with trading professionals of great acuity on market development, to invest in research, development, production, OEM and marketing on polymer and fine chemical products.

  • 3.2 Product development plan

More specifically speaking, the Company’s products include PU, POLYOL, TPU, TPV, special plastic material, plant and environmental protection drugs, active pharmaceutical ingredients, cosmetic materials, antioxidant, anti-UV agent, polyolefin synthesis, PCB reducing agent, curing agent and graphene oxide, etc.

To improve the process efficiency, go green, and to recycle, reuse and reduce the energy consumption are the key concepts of polymer material development. As for product development on fine chemicals, the research aims at new structures, new manufacturing processes, new formulations and new applications. To develop low-pollution and low-energy-consumption manufacturing process techniques is deemed as our corporate social responsibility.

Classification Item
Fine
Chemical
Series		 - K-CLEAR:New product development and application research of plastic
nucleating agent and transparent agent
- K-NOX:New product development, continuous improvement and application
research of rubber and plastic antioxidants
- K-SORB:Research on industrialization technology of new Triazine UV
absorbent products
- K-CURE:Improve and develop applications of rubber and plastic cross-
linking curing agent
- Research on formulation of hair dye and evaluate the feasibility of OEM
- Continuouslydeveloptechniques on energysavingand decarbonization
Polymer
Series		 - Research on polymer product application (footwear materials and anti-
vibration materials)
- New product development, continuous improvement and application research
on TPV, TPE elastomer
- New product development, continuous improvement and application research
on ETPU and ETPV expanded elastomer
- TPR technologydevelopment and scale-uptrialproduction

10

  • 4 Estimated product sales of 2022
Estimated product sales of 2022
Main Product Classification Annual Budget
Sales Quantity
Tons
Antioxidants Fine Chemicals 9,220
Thermoplastic Pellets (TPU)
Thermoplastic Elastomer (TPV)		 Polymer 3,637
POLYOL and PU Polymer 1,591
Agrochemicals Plants and environmental
protection drugs		 282
Other fine chemicals (crosslinking curing agents,
halogen-free flame retardants, electronic chemicals,
nucleating agents)		 Fine Chemicals 4,398
Others Others 923
Total 20,051

Notes: Estimated sales of flame retardants already included in other specialty chemicals.

11

5 The Impact from the external competition, regulatory environment, and business operation

According to the IMF’s forecast, the global economic growth rate is expected to decline from 6.1% in 2021 to 3.6% in 2022. In early 2022, the number of Omicron infections will increase, inflation will rise, regional conflicts will rise, and protectionism will take the lead. And other factors, the situation of economic recovery and future changes in the economic environment are still full of variables. The Regional Comprehensive Economic Partnership(RCEP) and the Comprehensive and Progressive for Trans-Pacific Partnership (CPTPP) implement tariff reductions among member states for Taiwanese companies that rely on imports and exports, which will greatly improve Taiwan’s competitiveness and cause adversely influence in the international market as a non-member state. Driven by a series of policies such as ESG development trends, renewable energy development regulations, and stricter domestic environmental protection regulations, companies must invest in updating air pollution equipment, setting up renewable energy power generation facilities, and switching to high-cost energy sources to meet decree; in terms of carbon reduction, due to the fact that technology has not yet broken through, there is no cost-effective and effective carbon capture method, and small companies are limited by limited resources, so they should research more efficient processes to achieve carbon reduction. The biggest source of carbon emissions is the electricity required for the process. This part is beyond the capabilities of small enterprises. At this stage, it is still necessary for the relevant government units to plan the future national zero-carbon emission path and related policies to guide the industry to follow.

Chairman: General Manager: Accounting Supervisor: HUANG, TING-DI HUANG, TING-DI WANG, SHENG-HUI

12

II. COMPANY PROFILE

  • 1 Date of Incorporation 31 December 1974

  • 2 Company History

  • Year Important History 1974 SUNKO INK CO., LTD. was founded. The Company specialized in inks and paints. 1977 Acquired Taiping factory and Taiping branch factory to expand production items to primers and adhesives.

  • 1985 Expanded production items to coatings and synthetic resins. 1987 Acquired Dali factory. 1988 Invested Ekiko Resin Co., Ltd. to produce TPU, which was the first professional manufacturer producing TPU in Taiwan.

  • 1990 Expanded production items to antioxidant 168. 1993 Introduced automated equipment to produce wet PU synthetic leather 1995 Renamed the Company’s Chinese name to “Sunko Co., Ltd”. (hereinafter “the Company”) 1996 Publicly listed on the Taiwan Stock Exchange. 2003 Established Sunko Company to indirectly invest in Sunko Fushan Co., Ltd.. 2005 Introduced automated continuous production systems to produce TPU. 2006 Merged with Ekiko Resin Co., Ltd. and invested in Sunko Biotech Company, Ltd. 2009 Expanded antioxidant 168 production line. 2013 Sunko Fushan Co., Ltd. closed business. 2014 Expanded production items to antioxidant 3114 and special polymer materials. 2016 Acquired shares of Kuo Ching Chemical Co., Ltd by the issuance of new shares on 30 March 2016. After the merger, the amount of paid-in capital increased to $2,223,473,440.

13

III. CORPORATE GOVERNANCE REPORT

  • 1 Organization

  • 1.1 Organizational Chart

==> picture [541 x 106] intentionally omitted <==

==> picture [541 x 105] intentionally omitted <==

14

1.2 Responsibilities and functions of major departments

Department Functions
General
Manager’s Office		 - Assist the general manager to amend and implement the Company's internal
control system and various administrative measures.
Audit Office - Implement, audit, and inspect the internal control system of the Company;
exercise and promote the Company’s self-inspection; and report the
implementation of internal audit to the Securities and Futures Bureau.
R&D Department - Develop new products and conduct research on process improvement.
Sales Department - Deal with the Company’s product sales and OEM cooperation matters.
- Conduct market research and intelligence gathering.
- Review the contracts and orders.
- Manage quotations.
- Formulate and execute the market strategies.
Production
Department		 Pingjhen Factory, Dajia Factory, Dali Factory, Nangang Factory, Chuansing Factory.
- Schedule the production and raw materials demanding arrangement and assist
R&D dept. in commissioning and other assignments.
- Carry out new product commissioning, process improvement, and SOP revision
reporting matters.
- Conduct quality control and laboratory analysis.
- Responsible for warehouse management, purchase acceptance, shipment
registration and other general administrative matters.
- Responsible for industrial safety and environmental protection matters.
- Responsible for project design, construction acceptance, equipment maintenance.
Procurement
Department		 - Responsible for the inquiry, price comparison and negotiation of the Company’s
various raw materials, procurement and contracting matters.
Management
Department		 Accounting Division, Finance Division, Administrative Division, and IT Division
- Responsible for the registration, summary and tabulation of various accounting
books.
- Manage the funding budget, bank transactions, cash, notes receivables and note
payables.
- Responsible for attendance, recruitment, education, training and salary
management.
- Responsible for administrative miscellaneous affairs and document management.
- Plan and manage various computer-related software and hardware, information
security maintenance and data backup.

15

2 Directors, Supervisors and Management Team

  • 2.1 Directors

2.1.1 Information on directors and supervisors

12 April 2021

Title Nationality or
Registration
location		 Name Gender/
Aged		 Date
Elected		 Term
(Years)		 Date First
Elected		 Shareholding
percentage
when Elected
(Note 1)		 Shareholding
percentage
when Elected
(Note 1)		 Current
Shareholding
percentage		 Current
Shareholding
percentage		 Spouse & Minor
Shareholding		 Spouse & Minor
Shareholding		 Shareholding by
Nominee
Arrangement		 Shareholding by
Nominee
Arrangement		 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		 Remark
(Note 3)
Shares % Shares % Shares % Shares % Title Name Relation
Chairman Republic of
China		 KT Investment Co.,
Ltd.		 - 2019.6.13 3 years 2016.5.4 11,808,600 5.31 10,801,010 5.84 - - - - - - - - -
Representative
of Chairman		 Republic of
China		 Representative of
KT Investment Co.,
Ltd.: HUANG,
HUANG-TI
(Note 1)		 M, ,
51-60
years
old		 2019.6.13 3 years 2016.5.4 3,920 0.00 3,332 0.00 3,223,446 1.74 - - Master, The
Hong Kong
Polytechnic
University		 Supervisor, KT Investment Co., Ltd.
Director, Chiaoli Investment Co.,
Ltd.
Director, Macy Investment Co., Ltd.
Legal representative, Power Hero
Corp.
Chairman of Giant Way Inc.
Director, Power Rich International
Ltd.
Head, Kuo Ching Development
Corporation.,
Chairman, Seed Foundatino		 Director HUANG,
TING-KAI		 Brother It is
expected
that a
suitable
candidate
will be
planed to
take over as
the general
manager
before the
end of 2022.
Director HUANG,
YI-RUNG		 Father
Director
(Note 2)		 Republic of
China		 Fulilu Investment
Co., Ltd.		 - 2019.6.13 3 years 2013.6.24 8,596,011 3.87 1,417,109 0.77 - - - - - - - - -
Director
Representative		 Republic of
China		 Representative of
Fulilu Investment
Co., Ltd.: HUANG,
TING-KAI		 M , 51-
60
years
old		 2019.6.13 3 years 2013.6.24 869,000 0.39 732,650 0.40 - - - - PhD., National
Taiwan
University
Researcher, GM Office, Sunko Ink
Co., Ltd.
Director, Macy Investment Co., Ltd.		 Chairman HUANG,
TING-DI		 Brother
Director HUANG,
YI-RUNG		 Father
Director Republic of
China		 Chiaoli Investment
Co., Ltd. (Note 1)		 - 2019.6.13 3 years 2013.6.24 7,521,650 3.38 6,503,902 3.44 - - - - - - - - -
Director
Representative		 Republic of
China		 Representative of
Chiaoli Investment
Co., Ltd.: HUANG,
YI-RUNG		 M 81-
90
years
old		 2019.6.13 3 years 2019.6.13 7,045,512 3.17 5,988,685 3.24 1,555,855 0.84 - - National
Cheng Kung
University		 Director, KT Investment Co., Ltd.
Director, Macy Investment Co., Ltd.		 Chairman HUANG,
TING-DI		 Son
Director HUANG,
TING-KAI		 Son
Director Republic of
China		 HSIAO, JUNG-FU M,81-
90
years
old		 2019.6.13 3 years 2016.5.4 368,994 0.17 313,645 0.17 170,000 0.09 - - Master, Utah
State
University,
USA		 Supervisor, SIN HUN CHEMICAL
CO., LTD.		 - - -

16

Title Nationality or
Registration
location		 Name Gender/
Aged		 Date
Elected		 Term
(Years)		 Date First
Elected		 Shareholding
percentage
when Elected
(Note 1)		 Shareholding
percentage
when Elected
(Note 1)		 Current
Shareholding
percentage		 Current
Shareholding
percentage		 Spouse & Minor
Shareholding		 Spouse & Minor
Shareholding		 Shareholding by
Nominee
Arrangement		 Shareholding by
Nominee
Arrangement		 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		 Remark
(Note 3)
Shares % Shares % Shares % Shares % Title Name Relation
Independent
Director		 Republic of
China		 LI, SHIH-JEN M , 61-
70
years
old		 2019.6.13 3 years 2016.5.4 - - - - 41,809 0.02 - - PhD.,
University of
Southern
California,
USA		 Chairman, TAHO Pharmaceuticals
Ltd.
Chairman, Transwell Biotech Co.,
Ltd.
Director, Easywell Biomedicals, Inc.
Independent Director, Member of
Remuneration Committee and Audit
Committee, Genovate Biotechnology
Co., Ltd.
Independent Director, Member of
Remuneration Committee and Audit
Committee, Taimed Biologics Inc.
Director, Industrial Technology
Investment Corporation
Director, Amphastar
Pharmaceuticals,Inc.
Director, CapsoVision,Inc.
OBI Pharma, Inc.
Director, ITIC
-		 - -
Independent
Director		 Republic of
China		 TSOU, YEN-
CHUNG		 M,61-
70
years
old		 2019.6.13 3 years 2016.5.4 - - - - - - - - National
Cheng Kung
University		 Representative of Sun Young CPAs
Firm
Independent Director, Member of
Remuneration Committee and Audit
Committee, Universal
Microelectronics Co., Ltd.
Independent Director, Member of
Remuneration Committee, Liton
Technology Corp.		 - - -
Independent
Director		 Republic of
China		 LIN, YEN-TING F, 51-
60
years
old		 2019.6.13 3 years 2016.5.4 - - - - - - - - EMBA of
Tunghai
University		 CEO of Plan-Wise International
Corporation
Representative, Tiding Golden
International Intelligent
Management Consulting Co., Ltd.
Shareholder and manager of Fubo
International Enterprise Co., Ltd.
Director, Jin Wan Man Co., Ltd.
Supervisor, JUE-FENG Co., Ltd
Supervisor, BO YAN MEI FONG
FOOD Co., Ltd.. Supervisor, FONG
FU FOOD Co., Ltd		 - - -

Note:

  1. The Company fully reelected the Board of Directors on 13 June 2019. On 4 May 2016, an Audit Committee was established while the supervisor system was abolished. The percentage of shareholdings was calculated considering the total outstanding shares of 184,884,092 shares.

  2. Fulilu Investment Co., Ltd. (and Representative HUANG, TING-KAI) did not serve as a director starting from 16 March 2021.

  3. Where the chairman and president or equivalent position (highest level executive officer) is the same person, the spouse, or a first-degree relative, the reason, reasonableness, necessity, and response measures (such as increasing the number of independent director seats and more than half of all directors not concurrently serving as employees or executive officers) must be disclosed.

17

2.1.2 Major corporate shareholders

12 April 2021

12 April 2021
Name of corporate shareholders Main shareholders of corporate shareholders
KT Investment Co., Ltd. TUNG, CHING-MEI 82.22%, HUANG, TING-KAI 8.89%, LIN, YU-PIN 8.89%
Fulilu Investment Co., Ltd. WANG, PAO-LING 52%, HUANG, TING-KAI 34.58%, TUNG,CHING-MEI 1.06%, HUANG, YU-JUN 4.24%, HUANG, YU-HSUAN
4.06%, HUANG, YU-MING 4.06%
Chiaoli Investment Co.,Ltd. LIN,YU-PIN 86.89%,HUANG,YU-HSI 9.06%,HUANG,TING-DI 1.85%,HUANG,LI-YI 1.64%,TUNG,CHING-MEI 0.56%

2.1.3 Major shareholders of main corporate shareholders: None.

2.1.4 Professional qualifications and independence of the Directors and Supervisors and disclosure of information on the independence of independent directors

directors
3
17 April 2022
Conditions
Name		 Professional Qualifications and Experience Independent Status Number of independent
directors of other public
companies
Chairman
Representative
of KT Investment Co., Ltd.:
HUANG, TING-DI		 l
He is currently the chairman and general manager of the company. He has more than five years of
work experience in business, finance and has focused on chemical industry-related fields for more
than 20 years. He has operational judgement, management and decision-making skills.

-		 0
Representative
of Fulilu Investment Co., Ltd.:
HUANG, TING-KAI(Note 1)		 l
Graduated from National Taiwan University with PHD, He is currently a researcher in the general
manager’s office, focusing on chemical industry-related fields for more than 20 years, with
professional knowledge of industrial development .
-		 0
Representative
of Chiaoli Investment Co., Ltd.:
HUANG, YI-RUNG		 l
He used to be the chairman of Kuo Ching Chemical Co., Ltd., with more than five years of work
experience in business, finance and company operation, focusing on chemical industry-related fields
for more than 20 years, and he has business judgement, management and decision-making skills.

-		 0
HSIAO, JUNG-FU l
He used to the chairman of Kaohsiung Ammonium Sulfate CO. LTD and Taiwan Agriculture &
Industrial Development CO., and has more than five years of work experience in business, finance
and company operation, and he has business judgement, management and decision-making skills


-		 0
LI, SHIH-JEN l
He is currently head of Plan-Wise International Corporation and the deputy director of Taichung
City Industrial Association Labor Law Committee. He has more than five years of work experience
in business, finance and company operation and has ability to make business judgement, crisis
management, operation management and decision-making.


Comply with the provisions of Article
3, Paragraph 1, Subparagraph 1-9 of
[Regulation Governing Appointment of
Independent Directors and Compliance
Matters for Public Companies] ,
including but not limited to the person,
spouse,relatives within the second
3
TSOU, YEN-CHUNG l
He is currently head of Sun Young CPAs Firm and has more than five years of work experience
in business, finance and company operation and has ability to make business judgement, crisis,
management, accounting, finance analysis and decision-making.		 2

18

Conditions
Name		 Professional Qualifications and Experience Independent Status Number of independent
directors of other public
companies
LIN, YEN-TING
 l
He is currently head of Plan-Wise International Corporation and the deputy director of Taichung
City Industrial Association Labor Law Committee. He has more than five years of work experience
in business, finance and company operation and has ability to make business judgement, crisis
management, operation management and decision-making.
degree who do not serve as directors,
supervisors, employed or its affiliatd
companies.: Person or employee, not
holding the number of shares of the
company; not serving as director,
suvpervisor or employee of a company
that has a specific relationship with the
company: not providing business,
legal,finacial, accounting for the
company or related companies in last
two years for received amount of
remuneration		 0

Note 1: The dirctor of the legal person has resigned on16/03/2021(including its representative HUANG, TING-KAI also resigned on the same day). Note 2: None of the directors of the company has any circumstances related to Article 30 of Company Law.

3.1.1 Diversity and independence of the board of directors:

(1) Diversity of the board of directors: describe the diversity policy, goals and achievement of the board of directors. The diversity policy includes, but not limited to the selection criteria for directors, the professional qualifications and experience that the board of directors should have, the composition or ratio of gender, age, nationality and culture, and the company’s specific goals and their achievement conditions are described in the previous policy.

  1. For the board of directors to achieve the aforementioned goals and enhance its effectiveness, the Company has formulated a policy on diversity of board members. According to Article 20 of the Corporate Governance Best Practice Principle, the board members shall consider diversity, and the number of directors who are also managers of the Company shall not exceed one-third of the total number of directors. Additionally, the Company formulates an appropriate diversification policy based on its own operation, operation type and development needs, including but not limited to the following two standards: (1) Basic conditions and value: gender, age, nationality and culture

(2) Professional knowledge and skills: professional background (such as law, accounting, industry, finance, marketing or technology), professional skills and work experience

  1. The Company currently has a total of 7 seats on the board of directors (including one who has resigned), of which three are independent directors. At this stage, the target ratio of female directors is 10%. The current board of directors includes 1 female director, with a ratio of 14%.

(2) Independence of the board of director: describe the proportion of independent directors and the independence of the board of directors, and explain with

19

reasons whether there are no items 3 and 4 stipulated in Article 26-3 of the Securities and Exchange Act, including a description of the directors, circumstance where the supervisors or the directors and supervisors have spouse and relative within the second degree. The Company currently has a total of 7 seats on the board of directors ( including one who has resigned), of which three are independent directors, and there should be more than half of the seats among the directors without spouse or relationship within the second degree amongst themselves. Currently, only 2 directors have kinship within the second degree (representative of Fulilu Investment Co., Ltd, which originally had kinship within the second degree: HUANG, TING-KAI has resigned on 16/03/2021)

  • (3) The specific diversification policy, independence and policy achievement are as follows:

The professionalism and independence of the board of directors

  • 1 Appropriate director diversity policies have been formulated and implemented in the Corporate Governance Best Practice Principle formulated and disclosed by the Company.

  • 1 According to Article 20 of the Corporate Governance Best Practice Principle, to achieve the ideal goals of corporate governance, the board members shall have the overall ability listed below, and the knowledge, skills and qualities necessary for the duties:

  • Business Judgement

  • Accounting & Financial Analysis

  • Operation and management

  • Crisis Management

  • Industry Knowledge

  • 6.International Market outlook

  • 7.Leadership

  • 8.Decision-making

20

Board Diversity

  1. For the board of directors to achieve the aforementioned goals and enhance its effectiveness, the Company has formulated a policy on diversity of board members. According to Article 20 of the Corporate Governance Best Practice Principle, the board members shall consider diversity, and the number of directors who are also managers of the Company shall not exceed one third of the total number of directors. Additionally, the Company formulates an appropriate diversification policy based on its own operation, operation type and development needs, including but not limited to the following two standards:

(1) Basic conditions and value: gender, age, nationality and culture

  • (2) Professional knowledge and skills: professional background (such as law, accounting, industry, finance, marketing or technology), professional skills and work experience

  • The Company currently has a total of 7 seats on the board of directors (including one who has resigned), of which three are independent directors. At this stage, the target ratio of female directors is 10%. The current board of directors includes 1 female director, with a ratio of 14%.

21

2.1. The implementation of the policy on diversity of board members is as follows:

Name of
Directors		 Diversity Core Item Diversity Core Item Diversity Core Item
Nationality Gender Tenure of
Independent
Director		 Operational evaluation Accounting and financial analysis capabilities Management capabilities Crisis management capabilities Industrial knowledge capability Global market perspective Leadership capabilities Decision Making capabilities
HUANG, TING-DI ROC Male -
HUANG. YI-RUNG ROC Male -
HSIAO, JUNG-FU ROC Male -
TSOU, YEN-CHUNG ROC Male 3-6 Years
LI, SHIH-JEN ROC Male 3-6 Years
LIN, YEN-TING ROC Female 3-6 Years

22

3.2 Information on the Company General Manager, Deputy General Manager, Managers of departments or division

12 April 2021

Title National
ity		 Name Gender Date
Assumed
Current
Position		 Current
Shareholdings		 Current
Shareholdings		 Shares Held by
Spouse or
Minor
Children		 Shares Held by
Spouse or
Minor
Children		 Shareholding
by Nominee
Arrangements		 Shareholding
by Nominee
Arrangements		 Education and Experience Positions Held
Concurrently at Other
Companies		 Spouse or Relatives Within the
Second-Degree of Consanguinity
also Holding Management,
Directorial, or Supervisory
Positions		 Spouse or Relatives Within the
Second-Degree of Consanguinity
also Holding Management,
Directorial, or Supervisory
Positions		 Spouse or Relatives Within the
Second-Degree of Consanguinity
also Holding Management,
Directorial, or Supervisory
Positions		 Remark (Note
2)
Shares % Shares % Shares % Title Name Relationship
General
Manager		 Republic
of China		 HUANG, TING-DI M 2016.5.12 3,332 0.00 3,223,446 1.74 - - Master;
General Manager, Kuo Ching Chemical
Co., Ltd.











 Supervisor, KT
Investment Co., Ltd.
Director, Chiaoli
Investment Co., Ltd.
Director, Macy
Investment Co., Ltd.
Legal representative,
Power Hero Corp.
Chairman of Giant Way
Inc.
Director, Power Rich
International Ltd.		 - - -






 It is expected that
a suitable
candidate will be
planed to take over
as the general
manager before the
end of 2022.
Deputy General
Manager		 Republic
of China		 ZHANG, JUN-PIN M 2016.5.12 377,564 0.20 - - - - Bachelor;
General Manager, Sunko Ink Co., Ltd.


 President,
Blessingthoughts Co.
Ltd.		 - - -
Managing
Department
Manager		 Republic
of China		 HUNG, TING-YI M 2019.1.1 652 0.00 - - - - Bachelor;
Accounting Manager, Kuo Ching
Chemical Co., Ltd.		 Director, BNKC
Biochemical Technology
Co.,Ltd.		 - - -
Finance Office
Supervisor		 Republic
of China		 WANG, TING-YU F 2019.1.1 4,000 0.00 - - - - Bachelor;
Deputy section supervisor, Finance
Section, Sunko Ink Co., Ltd.		 - - - -
Accounting
Office Manager		 Republic
of China		 WANG, SHENG-
HUI		 F 2016.11.9 - - - - - - Master;
Assistant Vice President, Ernst &
Young		 - - - -
Audit Office
Supervisor		 Republic
of China		 HSIEH, CHUN-FU M 2014.8.11 - - - - - - Bachelor;
Ardentec Corporation		 - - - -
R&D
Department
Supervisor		 Republic
of China		 TSOU, CHIOU-
PENG		 F 2016.5.12 346,079 0.19 - - - - Doctor;
Manager, R&D Department, Kuo
Ching Chemical Co., Ltd.		 Director,
Blessingthoughts Co.
Ltd.（Note 2）		 - - -
Minister of
Production		 Republic
of China		 LIN, CHAO-
YUAN		 M 2016.5.12 - - - - - Junior College;
Minister of Production, Kuo Ching
Chemical Co., Ltd.		 Director,
Blessingthoughts Co.
Ltd.（Note 2）		 - - -
Minister of
Production		 Republic
of China		 SHEN, CHI-
YUNG		 M 2016.5.12 - - - - - - Master;
Minister of Production, Kuo Ching
Chemical Co., Ltd.		 Director,
Blessingthoughts Co.
Ltd.（Note 2）		 - - -
Minister of
Production		 Republic
of China		 HUANG, SHUEN-
HSIEN		 M 2018.1.1 931,701 0.5 16,864 0.01 - - Junior College;
Deputy Factory Director, Pingzhen
Factory,Kuo ChingChemical Co.,Ltd.		 - - - -

Note:

  1. Where the chairman and president or equivalent position (highest level executive officer) is the same person, the spouse, or a first-degree relative, the reason, reasonableness, necessity, and response measures (such as increasing the number of independent director seats and more than half of all directors not concurrently serving as employees or executive officers) must be disclosed.

  2. Blessingthoughts Co. Ltd was dismissed on 3 December 2021.

23

3. Remuneration to Directors, General Manager and Deputy General Manager in 2021

3.1 Remuneration to Directors and Independent Directors

Unit: NT$ (in thousands)

Title Name Remuneration Remuneration Remuneration Remuneration Remuneration Remuneration Remuneration Remuneration Ratio of total
remuneration
(A+B+C+D+E
+ F+G) to net
income (%)		 Ratio of total
remuneration
(A+B+C+D+E
+ F+G) to net
income (%)		 Remuneration to concurre Remuneration to concurre Remuneration to concurre Remuneration to concurre nt employees nt employees nt employees nt employees Ratio of total
compensation
(A+B+C+D+E+
F+G)
to net income
(%)		 Ratio of total
compensation
(A+B+C+D+E+
F+G)
to net income
(%)		 Compen
sation
paid to
director
s from
reinvest
ed
compani
es other
than
subsidia
ry
Compensation
(A)		 Severance
pay (B)		 Bonus to
directors
(C)		 Allowance
(D)		 Salary, bonus,
allowance (E)		 Severance pay
(F)		 Profit sharing-employee
bonus (G)
The
com
pan
y		 Comp
anies
in the
financ
ial
report		 The
com
pany		 Co
mp
ani
es
in
the
fin
anc
ial
rep
ort		 Th
e
co
mp
any		 Co
mp
ani
es
in
the
fin
anc
ial
rep
ort		 The
com
pany		 C
o
m
p
a
ni
e
s
in
th
e
fi
n
a
n
ci
al
re
p
o
rt		 The
com
pany		 Com
panie
s in
the
finan
cial
repor
t		 The
comp
any		 Compa
nies in
the
financi
al
report		 The
com
pany		 Compa
nies in
the
financi
al
report		 The
company		 Companies
in the
financial
report		 The
comp
any		 Comp
anies
in the
financ
ial
report
Ca
sh		 Sto
ck		 Ca
sh		 Sto
ck
Chai
rman		 Representative of
KT Investment Co,
Ltd.:HUANG,
TING-DI		 - - - - - - 50 5
0		 (0.0
7)		 2,96
1		 2,96
1		 - - - 10
4		 - 10
4		 - (4.45
)		 (4.45) -
Dire
ctor		 Representative of
Fulilu Investment
Co., Ltd.: HUANG,
TING-KAI(Note 1)		 - - - - - - - - - 722 722 - - - 60 - 60 - (1.12
)		 (1.12) -
Dire
ctor		 Representative of
Chiaoli Investment
Co., Ltd.：
HUANG, YI-
RUNG		 - - 73 73 - - 5 5 (0.1
1)		 - - - - - - - - - (0.11
)		 (0.11) -
Dire
ctor		 HSIAO, JUNG-FU - - - - - - 55 5
5		 (0.0
8)		 - - - - - - - - - (0.08
)		 (0.08) -
Indep
endent
Direct
or		 LI, SHIH-JEN 480 480 - - - - 55 5
5		 (0.7
6)		 - - - - - - - - - (0.76
)		 (0.76) -
Indep
endent
Direct
or		 TSOU, YEN-
CHUNG		 480 480 - - - - 55 55 (0.76) - - - - - - - - - (0.76) (0.76) -
Indep
endent
Direct
or		 LIN, YEN-TING 480 480 - - - - 55 55 (0.76) - - - - - - - - - (0.76) (0.76) -
Aside from what is disclosed in the above table, the remuneration earned by Directors providing services (e. g. consulta nt as a non-employee) to the Company: Yi r ong Huang 's consultant fee of NT$1,200 thousands.

Note 1: Fulilu Investment Co., Ltd. (and Representative HUANG, TING-KAI) did not serve as a Director starting from 16 March 2021.

3.2 Remuneration to supervisors

The Company fully reelected the Board of Directors on 13 June 2019. On 4 May 2016, an Audit Committee was established while the supervisor system was abolished. Therefore, this remuneration is not applicable.

24

3.3 Remuneration to general managers and deputy managers

Unit: NT$ (in thousands)

Title Name Salary (A) Salary (A) Severance pay (B) Severance pay (B) Bonus and allowance
(C)		 Bonus and allowance
(C)		 Profit sharing-employee
bonus (D)		 Profit sharing-employee
bonus (D)		 Profit sharing-employee
bonus (D)		 Profit sharing-employee
bonus (D)		 Ratio of total
compensation
(A+B+C+D) to net
income(%)		 Ratio of total
compensation
(A+B+C+D) to net
income(%)		 Compensation
paid to GM
and Deputy
GM from
reinvested
companies
other than
subsidiary
The
company		 Companies
in the
financial
report		 The
company		 Companies
in the
financial
report		 The
company		 Companies
in the
financial
report		 The
company		 Companies in
the financial
report		 The
company		 Companies
in the
financial
report
Cash Stock Cash Stock
General
Manager		 HUANG,
TING-DI
2,482		 2,482 - - 479 479 104 - 104 - (4.38) (4.38) -
Deputy
General
Manager		 CHANG,
JUN-PIN
1,427		 1,427 87 87 299 299 60 - 60 - (2.68) (2.68) -

25

3.4 Individual disclosure of the compensation of the top five highest paid executives:

Unit: NT$ (in thousands)

Title Name Salary (A) Salary (A) Severance pay (B) Severance pay (B) Bonus and allowance
(C)		 Bonus and allowance
(C)		 Profit sharing-employee
bonus (D)		 Profit sharing-employee
bonus (D)		 Profit sharing-employee
bonus (D)		 Profit sharing-employee
bonus (D)		 Ratio of total
compensation
(A+B+C+D) to net
income(%)		 Ratio of total
compensation
(A+B+C+D) to net
income(%)		 Compensation
paid to GM
and Deputy
GM from
reinvested
companies
other than
subsidiary
The
company		 Companies
in the
financial
report		 The
company		 Companies
in the
financial
report		 The
company		 Companies
in the
financial
report		 The
company		 Companies in
the financial
report		 The
company		 Companies
in the
financial
report
Cash Stock Cash Stock
General
Manager		 HUANG,
TING-DI
2,482		 2,482 - - 479 479 104 - 104 - (4.38) (4.38) -
R&D
Department
Supervisor		 TSOU,
CHOU-
PENG		 2,578 2,578 112 112 356 356 82 - 82 - (4.47) (4.47) -
Minister HUANG
SHUEN-
HSIEN		 2,182 2,182 76 76 279 279 90 - 90 - (3.75) (3.75) -
Minister LIN
CHAO-
YUAN		 1,888 1,888 107 107 361 361 60 - 60 - (3.45) (3.45) -
Minister SHEN
CHI-
YUNG		 1,582 1,582 96 96 328 328 60 - 60 - (2.95) (2.95) -

26

3.5 Names of managerial officers who received employees’ bonuses in the preceding year and the distribution

Unit: NT$ (in thousands)

Unit: NT$ (in
Title Name Stock Cash Total Raito of total amount
to net income (%)
Executive
officers		 General Manager HUANG, TING-DI - 666 666 (0.95%)
Deputy General Manager CHANG, JUN-PIN
Manager of Management Department HUNG, TING-YI
Finance Office Supervisor WANG, TING-YU

Accounting Office Manager		 WANG, SHENG-HUI
Audit Office Supervisor HSIEH, CHUN-FU
R&D Department Supervisor TSOU, CHIOU-PENG
Minister of Production LIN, CHAO-YUAN
Minister of Production SHEN, CHI-YUNG
Minister of Production HUANG,SHUEN-HSIEN

27

  • 3.6 The Analysis of the Ratio of the Remuneration to Net Income Paid to Directors, Supervisors, General Manager and Vice presidents by the Company and All Companies in the Consolidated Financial Statements in the Last Two Fiscal Years, the Policy and Standard of Paying Remuneration, the Procedure of Combining and Determining Remuneration, and the Relationship Between Business Performance
Title Ratio of total Remuneration to net income Ratio of total Remuneration to net income Ratio of total Remuneration to net income Ratio of total Remuneration to net income
2021 2020
The company Companies in the financial report The company Companies in the financial report
Director 3.10
General Manager and Deputy General Manager (15.10) (15.10) 3.10

The Company’s Articles of Incorporation also stipulate that no more than 1% of the annual profit will be used as the director’s remuneration. According to the regulation of the company’s remuneration committee. The payment of director’s remuneration should refer to the general level of the industry, and consider the relationship with personal performance, the rationality of the relationship between operating performance and future risks is handled in accordance with the Remuneration Regulations as follows:

  1. The currents director’s remuneration includes monthly remuneration, travel expenses and director’s remuneration.

  2. All independent directors serve as members of the audit committee, the remuneration committee, and have fixed remuneration.

  3. The director’s travel expenses are fixed payments and are paid when they attend the board of directors

  4. The distribution of director’s remuneration shall be distributed according to the proportion of the number of days in office.

The remuneration policy for the general manager and deputy general manager is based on the salary level of the position in the industry, the scope of responsibility of the position in the company, and the contribution to the company’s operating goals. The remuneration setting procedure, in addition to referring to the company’s overall operation continuity, also refers to the individual’s performance (performance assessment includes work performance, attendance, rewards and punishments and other deductions.), the contribution to the company’s performance, and give reasonable remuneration; the remuneration of director, general manager and deputy general manager have been reviewed and approved by the remuneration committee.

28

4 Implementation of Corporate governance

4.1 Operations of the Board of Directors

The Company convened a total of 11 (A) Board of Directors meetings in 2021. The attendance was as follows:

follows:
Title Name Attendance
in Person
(B)		 By Proxy Attendance
rate (%)
(B/A)		 Remarks
Chairman Representative
of KT Investment Co., Ltd.:
HUANG, TING-DI		 10 1 90.91%
Director Representative
of Fulilu Investment Co., Ltd.:
HUANG, TING-KAI
0		 2 0% The director
of the legal
person has
resigned on
16/03/2021(
including its
representati
ve HUANG,
TING-KAI
also
resigned on
the day)
Director Representative
of
Chiaoli
Investment Co., Ltd.: HUANG,
YI-RUNG
1		 10 9.09%
Director HSIAO, JUNG-FU 11 0 100%
Independent
Director		 LI, SHIH-JEN 11 0 100%
Independent
Director		 TSOU, YEN-CHUNG 11 0 100%
Independent
Director		 LIN, YEN-TING 11 0 100%
Other items required to be stated:
I. In the event of the following occurrences, the dates of the meetings, sessions, contents of motion, all
independent directors’ opinions and the Company’s response thereto should be specified:
(I) Items listed in Article 14-3 of the Securities and Exchange Act: the Company has set up an Audit
Committee. Articles 14-3 of the Securities and Exchange Act does not apply. Please refer to the
Audit Committee Operation section of the annual report.

29

Date / Session Date / Session
The 17th Board of
Directors The 15th
Meeting
(2021.01.14)		 1.Adoption of treasury stock.
Independent director opinion: Suspended after discussion.
Independent director opinions handled by the Company: Suspended execution
according to the resolution
Extraordinary motion:
2.Creating mortgage on the No. 1416 farm on Hsin-de-lung Rd for $4 million.
Independent director opinions: Approved without any dissent.
Independent director opinions handled by the Company: Not applicable.
The 17th Board of
Directors The 17th
Meeting (2021.03.16)		 1.Renewal of directors’ and managers’ liability insurance.
Independent director opinions: Approved without any dissent.
Independent director opinions handled by the Company: Not applicable.
The 17th Board of
Directors The 18th
Meeting (2021.05.11)		 1.Independence assesement of certified accountant and 2021 fiscal and tax
Assessed and Cetified by Certified Public Accountant Independent director
opinion: Approved without any dissent
Independent director opinions handled by the Company: Not applicable
The 17th Board of
Directors The 19th
Meeting (2021.06.16)		 The termination of the sale contract of Dajia Factory. Independent director
opinions: Approved without any dissent.
Independent director opinions handled by the Company: Not applicable.
The 17th Board of
Directors The 22th
Meeting (2021.08.10)		 1.Review the rule of the Remuneration Committee
2.Deliberate on the revision of the remuneration management
Independent director opinions: Approved without any dissent.
Independent director opinions handled by the Company: Not applicable.
The 17th Board of
Directors The 24th
Meeting (2021.11.09)		 Ammendment of methodology for evaluating the performance of its Board of
Director Independent director opinions: Approved without any dissent.
Independent director opinions handled by the Company: Not applicable.
The 17th Board of
Directors The 25th
Meeting (2021.12.16)		 The Amendments of Repurchase shares and transfer to employee measures
Independent director opinions: Approved without any dissent.
Independent director opinions handled by the Company: Not applicable.
The 17th Board of
Directors The 27th
Meeting (2022.03.15)		 1.Independence assesement of certified accountant and 2022 fiscal and tax
Assessed and Cetified by Certified Public Accountant
2. Renewal of directors’ and managers’ liability insurance.
3. The amendment of Sustainable Development Best Practice Principle ( former
CSR Best Practice Principle)
4.The amendment of the Corporate Governance Best Practice Principle
5. The Amendment of Acquisition or Disposal assets procedure
6.Proposal to Release the Board of Directors from Non-Competition
Restrictions
Independent director opinions: Approved without any dissent.
Independent director opinions handled by the Company: Not applicable.

  • II. With respect to directors excusing themselves in the case of conflict of interest, the directors’ names, contents of motion, reasons for conflict of interest and votes should be specified:

  • (1) On the 17th Board of Directors’ 15th Meeting: During the discussion on creating a mortgage on farmland No. 1416 on Hsin-de-lung Section for $4 million, Chairman HUANG, TING-DI recused himself from participating in the voting process to avoid conflict of interests. The rest of the directors agreed and passed the proposal without any dissent.

30

(2) On the 17th Board of Directors’ 17th Meeting: During the discussion on renewing contracts with the
consultants, Director HUANG, YI-RUNG and HUANG, TING-DI recused themselves from
participating in the discussion and voting process to avoid conflict of interests. The rest of the directors
agreed and passed the proposal without any dissent.
(3) On the 17th Board of Directors’ 26th Meeting: During the discussion on adjusting manager’s salary, as
the process involved the salary of the individual managers, the chairman and manager recused
themselves from participating in the discussion and voting process to avoid conflict of interest. The rest
of the directors agreed and passed the proposal without any dissent.
III. Board of Directors'Evaluation of Implementation
Cycle
Period
Scope
Method
Content
Once every
year (On
15,03,2022, the
board of
directors
submitted the
implementation
of assessment
cycle)
01/01/202
1~31/12/2
021
The Board members
Through the evaluation method of the board
members, the performance evaluation of the
board of the director is carried out according
to the following aspects: The degree of
participation in the Company's operations,
Improve the
quality of decision-making of the board of
directors ,the composition and structure of
the board of directors, the selection and
continuous
training of directors and
internal control system, etc.
1.Improvement on the degree of
participation
in
the
Company’s
operations. Suggestions: Encourage
the directors to actively attend the
Board meeting and increase the
frequency of communication between
director and shareholder to maintain the
quality of decision-making and more
diverse platform to communicate.
2.Improvement on the degree of
participation in the selection and
continuous
training
of
directors.
Suggestions: To key positions, it is
advisable
to
develop
talent
development selection procedures and
systems or succession plans, and
provide new directors with a Director
Handbook to explain their roles and
responsibilities.
3.Improvenment on the degree of
participation in the composition and
structure of the board of directors.
Suggestions: it is advisable to
designate a corporate governance
supervisor in accordance with relevant
regulations to improve the corporate
governance of the enterprise
Individual Board members
Through the evaluation method of the
individual board members, the performance
evaluation of the board of the director is
carried out according to the following
aspects: The Company’s objectives and
tasks,
the
recognition
of
directors'
responsibilities, the degree of participation
in the
Company's operations,internal relationship
management and
communication, the
professional and continuous training of
directors, internal control, etc.
1.Improvement on the degree of
participation
in
the
Company's
objectives and task. Suggestion: It is
advisable
to
formulate
risk
management strategies and objectives,
and
establish
a
security
risk
management framework, which is
regularly reviewed and reported to
the board of directors
2. Improvement on the degree of
participation in the professional and
continuous
training
of
directors.
Suggestion: it is advisable to require
nominator to study at least 6 hours a
years and provide each director with a
continuous professional development
plan according to the needs of director;
it is advisable to
establish a
nomination committee to search and
review appropriate candidate according
to the diverse background required by
director and senior manager.
Every other functional committee
(Audit
Committee
and
Compensation Committee)
Through the evaluation method of the
functional
committee,
the
performance
evaluation of the board of the director is
carried out according to the following
aspects:The degree of participation in the
Company's operations,
the
recognition
of
the
committees'
responsibilities, improve the quality of
decision-making, the compositionand
Improvement
on
the
degree
of
participation in the recognition of the
committees'
responsibilities.
Suggestion: It
is advisable to
regularly and thoroughly review the
management
performance
of
the
management
team,
formulate
performance evaluation for senior
managers, andimplement thelink		 (2) On the 17th Board of Directors’ 17th Meeting: During the discussion on renewing contracts with the
consultants, Director HUANG, YI-RUNG and HUANG, TING-DI recused themselves from
participating in the discussion and voting process to avoid conflict of interests. The rest of the directors
agreed and passed the proposal without any dissent.
(3) On the 17th Board of Directors’ 26th Meeting: During the discussion on adjusting manager’s salary, as
the process involved the salary of the individual managers, the chairman and manager recused
themselves from participating in the discussion and voting process to avoid conflict of interest. The rest
of the directors agreed and passed the proposal without any dissent.
III. Board of Directors'Evaluation of Implementation
Cycle
Period
Scope
Method
Content
Once every
year (On
15,03,2022, the
board of
directors
submitted the
implementation
of assessment
cycle)
01/01/202
1~31/12/2
021
The Board members
Through the evaluation method of the board
members, the performance evaluation of the
board of the director is carried out according
to the following aspects: The degree of
participation in the Company's operations,
Improve the
quality of decision-making of the board of
directors ,the composition and structure of
the board of directors, the selection and
continuous
training of directors and
internal control system, etc.
1.Improvement on the degree of
participation
in
the
Company’s
operations. Suggestions: Encourage
the directors to actively attend the
Board meeting and increase the
frequency of communication between
director and shareholder to maintain the
quality of decision-making and more
diverse platform to communicate.
2.Improvement on the degree of
participation in the selection and
continuous
training
of
directors.
Suggestions: To key positions, it is
advisable
to
develop
talent
development selection procedures and
systems or succession plans, and
provide new directors with a Director
Handbook to explain their roles and
responsibilities.
3.Improvenment on the degree of
participation in the composition and
structure of the board of directors.
Suggestions: it is advisable to
designate a corporate governance
supervisor in accordance with relevant
regulations to improve the corporate
governance of the enterprise
Individual Board members
Through the evaluation method of the
individual board members, the performance
evaluation of the board of the director is
carried out according to the following
aspects: The Company’s objectives and
tasks,
the
recognition
of
directors'
responsibilities, the degree of participation
in the
Company's operations,internal relationship
management and
communication, the
professional and continuous training of
directors, internal control, etc.
1.Improvement on the degree of
participation
in
the
Company's
objectives and task. Suggestion: It is
advisable
to
formulate
risk
management strategies and objectives,
and
establish
a
security
risk
management framework, which is
regularly reviewed and reported to
the board of directors
2. Improvement on the degree of
participation in the professional and
continuous
training
of
directors.
Suggestion: it is advisable to require
nominator to study at least 6 hours a
years and provide each director with a
continuous professional development
plan according to the needs of director;
it is advisable to
establish a
nomination committee to search and
review appropriate candidate according
to the diverse background required by
director and senior manager.
Every other functional committee
(Audit
Committee
and
Compensation Committee)
Through the evaluation method of the
functional
committee,
the
performance
evaluation of the board of the director is
carried out according to the following
aspects:The degree of participation in the
Company's operations,
the
recognition
of
the
committees'
responsibilities, improve the quality of
decision-making, the compositionand
Improvement
on
the
degree
of
participation in the recognition of the
committees'
responsibilities.
Suggestion: It
is advisable to
regularly and thoroughly review the
management
performance
of
the
management
team,
formulate
performance evaluation for senior
managers, andimplement thelink		 (2) On the 17th Board of Directors’ 17th Meeting: During the discussion on renewing contracts with the
consultants, Director HUANG, YI-RUNG and HUANG, TING-DI recused themselves from
participating in the discussion and voting process to avoid conflict of interests. The rest of the directors
agreed and passed the proposal without any dissent.
(3) On the 17th Board of Directors’ 26th Meeting: During the discussion on adjusting manager’s salary, as
the process involved the salary of the individual managers, the chairman and manager recused
themselves from participating in the discussion and voting process to avoid conflict of interest. The rest
of the directors agreed and passed the proposal without any dissent.
III. Board of Directors'Evaluation of Implementation
Cycle
Period
Scope
Method
Content
Once every
year (On
15,03,2022, the
board of
directors
submitted the
implementation
of assessment
cycle)
01/01/202
1~31/12/2
021
The Board members
Through the evaluation method of the board
members, the performance evaluation of the
board of the director is carried out according
to the following aspects: The degree of
participation in the Company's operations,
Improve the
quality of decision-making of the board of
directors ,the composition and structure of
the board of directors, the selection and
continuous
training of directors and
internal control system, etc.
1.Improvement on the degree of
participation
in
the
Company’s
operations. Suggestions: Encourage
the directors to actively attend the
Board meeting and increase the
frequency of communication between
director and shareholder to maintain the
quality of decision-making and more
diverse platform to communicate.
2.Improvement on the degree of
participation in the selection and
continuous
training
of
directors.
Suggestions: To key positions, it is
advisable
to
develop
talent
development selection procedures and
systems or succession plans, and
provide new directors with a Director
Handbook to explain their roles and
responsibilities.
3.Improvenment on the degree of
participation in the composition and
structure of the board of directors.
Suggestions: it is advisable to
designate a corporate governance
supervisor in accordance with relevant
regulations to improve the corporate
governance of the enterprise
Individual Board members
Through the evaluation method of the
individual board members, the performance
evaluation of the board of the director is
carried out according to the following
aspects: The Company’s objectives and
tasks,
the
recognition
of
directors'
responsibilities, the degree of participation
in the
Company's operations,internal relationship
management and
communication, the
professional and continuous training of
directors, internal control, etc.
1.Improvement on the degree of
participation
in
the
Company's
objectives and task. Suggestion: It is
advisable
to
formulate
risk
management strategies and objectives,
and
establish
a
security
risk
management framework, which is
regularly reviewed and reported to
the board of directors
2. Improvement on the degree of
participation in the professional and
continuous
training
of
directors.
Suggestion: it is advisable to require
nominator to study at least 6 hours a
years and provide each director with a
continuous professional development
plan according to the needs of director;
it is advisable to
establish a
nomination committee to search and
review appropriate candidate according
to the diverse background required by
director and senior manager.
Every other functional committee
(Audit
Committee
and
Compensation Committee)
Through the evaluation method of the
functional
committee,
the
performance
evaluation of the board of the director is
carried out according to the following
aspects:The degree of participation in the
Company's operations,
the
recognition
of
the
committees'
responsibilities, improve the quality of
decision-making, the compositionand
Improvement
on
the
degree
of
participation in the recognition of the
committees'
responsibilities.
Suggestion: It
is advisable to
regularly and thoroughly review the
management
performance
of
the
management
team,
formulate
performance evaluation for senior
managers, andimplement thelink		 (2) On the 17th Board of Directors’ 17th Meeting: During the discussion on renewing contracts with the
consultants, Director HUANG, YI-RUNG and HUANG, TING-DI recused themselves from
participating in the discussion and voting process to avoid conflict of interests. The rest of the directors
agreed and passed the proposal without any dissent.
(3) On the 17th Board of Directors’ 26th Meeting: During the discussion on adjusting manager’s salary, as
the process involved the salary of the individual managers, the chairman and manager recused
themselves from participating in the discussion and voting process to avoid conflict of interest. The rest
of the directors agreed and passed the proposal without any dissent.
III. Board of Directors'Evaluation of Implementation
Cycle
Period
Scope
Method
Content
Once every
year (On
15,03,2022, the
board of
directors
submitted the
implementation
of assessment
cycle)
01/01/202
1~31/12/2
021
The Board members
Through the evaluation method of the board
members, the performance evaluation of the
board of the director is carried out according
to the following aspects: The degree of
participation in the Company's operations,
Improve the
quality of decision-making of the board of
directors ,the composition and structure of
the board of directors, the selection and
continuous
training of directors and
internal control system, etc.
1.Improvement on the degree of
participation
in
the
Company’s
operations. Suggestions: Encourage
the directors to actively attend the
Board meeting and increase the
frequency of communication between
director and shareholder to maintain the
quality of decision-making and more
diverse platform to communicate.
2.Improvement on the degree of
participation in the selection and
continuous
training
of
directors.
Suggestions: To key positions, it is
advisable
to
develop
talent
development selection procedures and
systems or succession plans, and
provide new directors with a Director
Handbook to explain their roles and
responsibilities.
3.Improvenment on the degree of
participation in the composition and
structure of the board of directors.
Suggestions: it is advisable to
designate a corporate governance
supervisor in accordance with relevant
regulations to improve the corporate
governance of the enterprise
Individual Board members
Through the evaluation method of the
individual board members, the performance
evaluation of the board of the director is
carried out according to the following
aspects: The Company’s objectives and
tasks,
the
recognition
of
directors'
responsibilities, the degree of participation
in the
Company's operations,internal relationship
management and
communication, the
professional and continuous training of
directors, internal control, etc.
1.Improvement on the degree of
participation
in
the
Company's
objectives and task. Suggestion: It is
advisable
to
formulate
risk
management strategies and objectives,
and
establish
a
security
risk
management framework, which is
regularly reviewed and reported to
the board of directors
2. Improvement on the degree of
participation in the professional and
continuous
training
of
directors.
Suggestion: it is advisable to require
nominator to study at least 6 hours a
years and provide each director with a
continuous professional development
plan according to the needs of director;
it is advisable to
establish a
nomination committee to search and
review appropriate candidate according
to the diverse background required by
director and senior manager.
Every other functional committee
(Audit
Committee
and
Compensation Committee)
Through the evaluation method of the
functional
committee,
the
performance
evaluation of the board of the director is
carried out according to the following
aspects:The degree of participation in the
Company's operations,
the
recognition
of
the
committees'
responsibilities, improve the quality of
decision-making, the compositionand
Improvement
on
the
degree
of
participation in the recognition of the
committees'
responsibilities.
Suggestion: It
is advisable to
regularly and thoroughly review the
management
performance
of
the
management
team,
formulate
performance evaluation for senior
managers, andimplement thelink		 (2) On the 17th Board of Directors’ 17th Meeting: During the discussion on renewing contracts with the
consultants, Director HUANG, YI-RUNG and HUANG, TING-DI recused themselves from
participating in the discussion and voting process to avoid conflict of interests. The rest of the directors
agreed and passed the proposal without any dissent.
(3) On the 17th Board of Directors’ 26th Meeting: During the discussion on adjusting manager’s salary, as
the process involved the salary of the individual managers, the chairman and manager recused
themselves from participating in the discussion and voting process to avoid conflict of interest. The rest
of the directors agreed and passed the proposal without any dissent.
III. Board of Directors'Evaluation of Implementation
Cycle
Period
Scope
Method
Content
Once every
year (On
15,03,2022, the
board of
directors
submitted the
implementation
of assessment
cycle)
01/01/202
1~31/12/2
021
The Board members
Through the evaluation method of the board
members, the performance evaluation of the
board of the director is carried out according
to the following aspects: The degree of
participation in the Company's operations,
Improve the
quality of decision-making of the board of
directors ,the composition and structure of
the board of directors, the selection and
continuous
training of directors and
internal control system, etc.
1.Improvement on the degree of
participation
in
the
Company’s
operations. Suggestions: Encourage
the directors to actively attend the
Board meeting and increase the
frequency of communication between
director and shareholder to maintain the
quality of decision-making and more
diverse platform to communicate.
2.Improvement on the degree of
participation in the selection and
continuous
training
of
directors.
Suggestions: To key positions, it is
advisable
to
develop
talent
development selection procedures and
systems or succession plans, and
provide new directors with a Director
Handbook to explain their roles and
responsibilities.
3.Improvenment on the degree of
participation in the composition and
structure of the board of directors.
Suggestions: it is advisable to
designate a corporate governance
supervisor in accordance with relevant
regulations to improve the corporate
governance of the enterprise
Individual Board members
Through the evaluation method of the
individual board members, the performance
evaluation of the board of the director is
carried out according to the following
aspects: The Company’s objectives and
tasks,
the
recognition
of
directors'
responsibilities, the degree of participation
in the
Company's operations,internal relationship
management and
communication, the
professional and continuous training of
directors, internal control, etc.
1.Improvement on the degree of
participation
in
the
Company's
objectives and task. Suggestion: It is
advisable
to
formulate
risk
management strategies and objectives,
and
establish
a
security
risk
management framework, which is
regularly reviewed and reported to
the board of directors
2. Improvement on the degree of
participation in the professional and
continuous
training
of
directors.
Suggestion: it is advisable to require
nominator to study at least 6 hours a
years and provide each director with a
continuous professional development
plan according to the needs of director;
it is advisable to
establish a
nomination committee to search and
review appropriate candidate according
to the diverse background required by
director and senior manager.
Every other functional committee
(Audit
Committee
and
Compensation Committee)
Through the evaluation method of the
functional
committee,
the
performance
evaluation of the board of the director is
carried out according to the following
aspects:The degree of participation in the
Company's operations,
the
recognition
of
the
committees'
responsibilities, improve the quality of
decision-making, the compositionand
Improvement
on
the
degree
of
participation in the recognition of the
committees'
responsibilities.
Suggestion: It
is advisable to
regularly and thoroughly review the
management
performance
of
the
management
team,
formulate
performance evaluation for senior
managers, andimplement thelink		 (2) On the 17th Board of Directors’ 17th Meeting: During the discussion on renewing contracts with the
consultants, Director HUANG, YI-RUNG and HUANG, TING-DI recused themselves from
participating in the discussion and voting process to avoid conflict of interests. The rest of the directors
agreed and passed the proposal without any dissent.
(3) On the 17th Board of Directors’ 26th Meeting: During the discussion on adjusting manager’s salary, as
the process involved the salary of the individual managers, the chairman and manager recused
themselves from participating in the discussion and voting process to avoid conflict of interest. The rest
of the directors agreed and passed the proposal without any dissent.
III. Board of Directors'Evaluation of Implementation
Cycle
Period
Scope
Method
Content
Once every
year (On
15,03,2022, the
board of
directors
submitted the
implementation
of assessment
cycle)
01/01/202
1~31/12/2
021
The Board members
Through the evaluation method of the board
members, the performance evaluation of the
board of the director is carried out according
to the following aspects: The degree of
participation in the Company's operations,
Improve the
quality of decision-making of the board of
directors ,the composition and structure of
the board of directors, the selection and
continuous
training of directors and
internal control system, etc.
1.Improvement on the degree of
participation
in
the
Company’s
operations. Suggestions: Encourage
the directors to actively attend the
Board meeting and increase the
frequency of communication between
director and shareholder to maintain the
quality of decision-making and more
diverse platform to communicate.
2.Improvement on the degree of
participation in the selection and
continuous
training
of
directors.
Suggestions: To key positions, it is
advisable
to
develop
talent
development selection procedures and
systems or succession plans, and
provide new directors with a Director
Handbook to explain their roles and
responsibilities.
3.Improvenment on the degree of
participation in the composition and
structure of the board of directors.
Suggestions: it is advisable to
designate a corporate governance
supervisor in accordance with relevant
regulations to improve the corporate
governance of the enterprise
Individual Board members
Through the evaluation method of the
individual board members, the performance
evaluation of the board of the director is
carried out according to the following
aspects: The Company’s objectives and
tasks,
the
recognition
of
directors'
responsibilities, the degree of participation
in the
Company's operations,internal relationship
management and
communication, the
professional and continuous training of
directors, internal control, etc.
1.Improvement on the degree of
participation
in
the
Company's
objectives and task. Suggestion: It is
advisable
to
formulate
risk
management strategies and objectives,
and
establish
a
security
risk
management framework, which is
regularly reviewed and reported to
the board of directors
2. Improvement on the degree of
participation in the professional and
continuous
training
of
directors.
Suggestion: it is advisable to require
nominator to study at least 6 hours a
years and provide each director with a
continuous professional development
plan according to the needs of director;
it is advisable to
establish a
nomination committee to search and
review appropriate candidate according
to the diverse background required by
director and senior manager.
Every other functional committee
(Audit
Committee
and
Compensation Committee)
Through the evaluation method of the
functional
committee,
the
performance
evaluation of the board of the director is
carried out according to the following
aspects:The degree of participation in the
Company's operations,
the
recognition
of
the
committees'
responsibilities, improve the quality of
decision-making, the compositionand
Improvement
on
the
degree
of
participation in the recognition of the
committees'
responsibilities.
Suggestion: It
is advisable to
regularly and thoroughly review the
management
performance
of
the
management
team,
formulate
performance evaluation for senior
managers, andimplement thelink
Cycle Period Scope Method Content
Once every
year (On
15,03,2022, the
board of
directors
submitted the
implementation
of assessment
cycle)		 01/01/202
1~31/12/2
021		 The Board members Through the evaluation method of the board
members, the performance evaluation of the
board of the director is carried out according
to the following aspects: The degree of
participation in the Company's operations,
Improve the
quality of decision-making of the board of
directors ,the composition and structure of
the board of directors, the selection and
continuous
training of directors and
internal control system, etc.

1.Improvement on the degree of
participation
in
the
Company’s
operations. Suggestions: Encourage
the directors to actively attend the
Board meeting and increase the
frequency of communication between
director and shareholder to maintain the
quality of decision-making and more
diverse platform to communicate.
2.Improvement on the degree of
participation in the selection and
continuous
training
of
directors.
Suggestions: To key positions, it is
advisable
to
develop
talent
development selection procedures and
systems or succession plans, and
provide new directors with a Director
Handbook to explain their roles and
responsibilities.
3.Improvenment on the degree of
participation in the composition and
structure of the board of directors.
Suggestions: it is advisable to
designate a corporate governance
supervisor in accordance with relevant
regulations to improve the corporate
governance of the enterprise
Individual Board members Through the evaluation method of the
individual board members, the performance
evaluation of the board of the director is
carried out according to the following
aspects: The Company’s objectives and
tasks,
the
recognition
of
directors'
responsibilities, the degree of participation
in the
Company's operations,internal relationship
management and
communication, the
professional and continuous training of
directors, internal control, etc.


1.Improvement on the degree of
participation
in
the
Company's
objectives and task. Suggestion: It is
advisable
to
formulate
risk
management strategies and objectives,
and
establish
a
security
risk
management framework, which is
regularly reviewed and reported to
the board of directors
2. Improvement on the degree of
participation in the professional and
continuous
training
of
directors.
Suggestion: it is advisable to require
nominator to study at least 6 hours a
years and provide each director with a
continuous professional development
plan according to the needs of director;
it is advisable to
establish a
nomination committee to search and
review appropriate candidate according
to the diverse background required by
director and senior manager.
Every other functional committee
(Audit
Committee
and
Compensation Committee)		 Through the evaluation method of the
functional
committee,
the
performance
evaluation of the board of the director is
carried out according to the following
aspects:The degree of participation in the
Company's operations,
the
recognition
of
the
committees'
responsibilities, improve the quality of
decision-making, the compositionand		 Improvement
on
the
degree
of
participation in the recognition of the
committees'
responsibilities.
Suggestion: It
is advisable to
regularly and thoroughly review the
management
performance
of
the
management
team,
formulate
performance evaluation for senior
managers, andimplement thelink

31

structure of the committees, the selection between performance and remuneration of members and internal control system, etc. to avoid agency problem Improvement on the degree of participation in the internal control system. Suggestion: It is advisable to strengthen the operation mechanism of the five components of internal control to achieve the goal of internal control.

  • IV. Measures taken to strengthen the functionality of the board of the current periods (such as setting up an audit committee to improve information transparency, etc.) and execution status assessment: The Company already established the Audit Committee in 2016, and constantly strengthen the substantial disclosures on the Company’s website to improve information transparency.

  • 4.2 The operation of the audit committee or the participation of the supervisor in the operation of the board of directors

  • 4.2.1 Operations of the Audit Committee

The Company’s audit committee consists of 3 independent directors. The purpose of the Audit Committee

is to assist the Board with the execution of its duties to supervise the Company on accounting, internal audit, financial reporting progress and the quality and integrity of internal control.

Matters reviewed mainly listed below:

  • (1) Financial statements, auditing and accounting policies and procedures.

  • (2) Internal control system and related policies and procedures.

  • (3) Significant asset or derivative transaction.

  • (4) Significant fund lending and endorsements or guarantees.

  • (5) Place or issue securities.

  • (6) Derivatives financial instruments and cash investment.

  • (7) Regulatory compliance.

  • (8) Whether the manager and the director have related party transactions and possible conflicts of interest.

  • (9) Complaint report.

  • (10) Fraud prevention plan and fraud investigation report.

  • (11) Information Security.

  • (12) Corporate risk management.

  • (13) Appraisal of qualifications, independence and performance of certified accountants.

  • (14) Appointment, dismissal or remuneration of certified accountants.

  • (15) Appointment and removal of financial, accounting or internal audit supervisors.

  • (16) Performance of Audit Committee's duties.

32

  • 4.2.2 Meetings of the Audit Committee The Company convened a total of 7 (A) meetings of the Audit Committee over the past fiscal year. The attendance was as follows:
Title Name Attendance
in Person (B)		 By Proxy Attendance
rate (%)
(B/A)		 Remarks
Independent Director LI, SHIH-JEN 7 0 100% -
Independent Director TSOU, YEN-CHUNG
7		 0 100% -
Independent Director LIN, YEN-TING 7 0 100% -
Other items required to be stated:
I.
In the event of the following occurrences, the dates of the meetings, sessions, contents of motion, the
resolution and the Company’s response thereto should be specified:
II.
Items listed in Article 14-5 of the Securities and Exchange Act
Date
Session
Proposal
The 2ndAudit
Committee
The
13th
Meeting
(2021.01.14)
1. Adoption of treasury stock.
Extraordinary motion:
2. Creating mortgage on the No. 1416 farm on Hsin-de-lung Rd for $4 million
Auditors’ opinions: The first case was proposed to postpone and hold a meeting
when necessary. The second case was approved without any dissent.
Auditors’ opinions handled by the Company: The first case was proposed to
postpone.
The
2nd
Audit
Committee
The
14th
Meeting
(2021.03.16)
1. Review of the 2020 parent only and consolidated financial reports.
2. Report on internal control audit.
3. 2020 Statement of Declaration on Internal control
4. Renewal of directors’ and managers’ liability insurance.
Auditors’ opinions: Approved without any dissent. Auditors’ opinions handled by the
Company: Not applicable.
The
2nd
Audit
Committee
The
15th
Meeting
(2021.05.11)
1. The company's consolidated financial statement for the first quarter of 2021
2. Report on internal control audit.
3. Independence assessment of certified accountant and 2021 fiscal and tax Assessed and
Certified by Certified Public Accountant.
Auditors’ opinions: Approved without any dissent. Auditors’ opinions handled by the
Company: Not applicable.
The
2nd
Audit
Committee
The
16th
Meeting
(2021.06.16)
The termination of the sale contract of Dajia Factory. Auditors’ opinions: Approved without
any dissent. Auditors’ opinions handled by the Company: Not applicable.

33

The
2nd
Audit
Committee
The
17h
Meeting
(2021.08.10)		 1.The company's consolidated financial statement for the second quarter of 2021
2. Report on internal control audit.
3.Review the rule of the Remuneration Committee
4. Deliberate on the revision of the remuneration management Auditors’ opinions:
Approved without any dissent.
Auditors’ opinions handled bythe Company: Not applicable.
The
2nd
Audit
Committee
The
18h
Meeting
(2021.11.09)		 1.The company's consolidated financial statement for the third quarter of 2021
2. Report on internal control audit.
3. Amendment of methodology for evaluating the performance of its Board of Director,
Please discussion kindly Auditors’ opinions: Approved without any dissent.
Auditors’ opinions handled bythe Company: Not applicable.
The
2nd
Audit
Committee
The
19h
Meeting
(2021.12.16)		 1. Plan on internal control audit on 2022
2. The Amendments of Repurchase shares and transfer to employee measures
Auditors’ opinions: Approved without any dissent.
Auditors’ opinions handled by the Company: Not applicable.
The
2nd
Audit
Committee
The
20h
Meeting
(2022.03.15)		 1. Review of the 2021 parent only and consolidated financial reports.
2. Report on internal control audit.
3. 2021 Annual statement of internal control
4. Renewal of directors’ and managers’ liability insurance.
5. The amendment of Sustainable Development Best Practice Principle ( former CSR Best
Practice Principle)
6. The amendment of the Corporate Governance Best Practice Principle
7. The Amendment of Acquisition or Disposal assets procedure 8.
Proposal to Release the Board of Directors from Non-Competition Restrictions
Auditors’ opinions: Approved without anydissent.

  1. In situations where independent directors recuse themselves due to conflict of interest, the independent director’s name, content of the resolution, reason for recusal, and his or her voting participation should be properly recorded: None.

  2. Communication between independent directors and internal audit managers and external auditors (regarding issues such as Company financial and operational status, procedures, and results): The accountant explained the Company's financial report review to the members of the audit committee (served by all independent directors) on the meeting of audit committee, the audit supervisor submits the Company's internal audit report, and the audit office regularly submits audit reports to the members every month. Furthermore, the audit committee members can contact the internal audit supervisor and accountants at any time to inquire about the Company's financial business execution status, and the responsible department shall be asked to provide explanations, in order to make communication channels smooth.

4.2.3 Supervisor’s participation in the Board of Directors The Company fully reelected the Board of

Directors on 13 June 2019. On 4 May 2016, an Audit Committee was established while the supervisor system was abolished. Therefore, it is not applicable.

34

4.3 Differences between Company policy and Corporate Governance Best-Practice Principles for TSE/ GTSM Listed Companies and reasons for

differences

differences
Items Evaluated Status Variations (if any) with the
Corporate Governance Best
Practice Principles for TWSE/
GTSM Listed Companies and
reasons for such discrepancies
Yes No Brief Explanation
1.
Does the Company formulate and discloses the
Corporate Governance Best Practice based on
“Corporate Governance Best Practice Principles for
Listed Companies”?
P		 The Company has already formulated the corporate
governance code and disclose it in accordance with
Corporate Governance Best Practice Principles for Listed
Companies.		 No deviation.
2.
Corporate equity structure and shareholders’ equity
(1) Does the company formulate the internal operation
procedure to handle shareholder proposal, doubt,
dispute and litigation and implements it in
accordance with the procedure?
(2) Does the company master the principal
shareholders actually controlling the company and
the final controller list of principal shareholders?
(3) Does the company establish and executes the risk
control and firewall mechanism with the affiliated
enterprise?
(4) Does the company formulate the internal
specification to prohibit the corporate insiders to
buy or sell negotiable securities by using the
informationundisclosedin market?		 P
P
P
P		 1. The Company has a spokesperson to accept shareholders’
suggestions and to make clarifications and to have an in-
depth understanding of shareholders’ suggestions or
concerns to evaluate and respond. The website also has
stakeholder contact information to deal with related
matters.
2. The Company shall keep abreast of any changes to the
shareholders’ ownership of more than 5% of the shares
and directors’ shareholding percentage. Information of
ownership of directors and shareholders holding more
than 10% of the shares are publicly disclosed on the
information reporting website designated by the FSC
every month in accordance with regulations.
3. The Company has set up “Subsidiary Management
Measures”, “Regulations and Procedures for
Endorsements” , Operational Procedures for Loaning
Funds to Others” and“Procedures on Acquisition or
Disposal of Assets” to implement the risk control.
4. The Company has established operating procedures to
prevent insider trading.		 No deviation.
No deviation.
No deviation.
No deviation.

35

Items Evaluated Status Status Status Variations (if any) with the
Corporate Governance Best
Practice Principles for TWSE/
GTSM Listed Companies and
reasons for such discrepancies
Yes No Brief Explanation
3. Composition and responsibilities of the Board of
Directors
(1) Does the board of directors draft the diversification
policy, specific management objective and
implements it in terms of the member composition?
(2) Does the company voluntarily set other functional
committees apart from the Remuneration
committee and Audit Committee?
(3) Does the company formulate the performance
evaluation method and evaluation way of the board
of directors, and regularly carries out performance
evaluation each year?
(4) Does the company regularly evaluate the
independence of CPAs?
P
P		 P
P		 1. The company has formulated a director diversity policy
and disclosed the implementation on the Company's
website and on page12 of this annual report.
2. The Company has established remuneration committee
and audit committee in accordance with the law and has
not established other functional committees.
3. The company has formulated performance evaluation
regulations, conducts a continuous performance evaluation
once a year and submits the evaluation results to the board
of directors and disclose it on the company's website.
4. The Company confirms that the accountant and the
company have no other financial interests and business
relationships except for certification and taxation
expenses, and members of the accountant family do not
violate the independence requirements, the accountant’s
appointment will be reviewed( Note1). The Company
periodically evaluates the independence and competency
of CPAs and obtains the CPAs’ Statement of
Independence. The appointment and compensation of
certification and taxation was passed on 11 May 2021 in
the Board Meeting.












No deviation.
No deviation.
No deviation.
No deviation.
4. Does the Company have a suitable number of
competent corporate governance personnel, and has it
appointed a corporate governance supervisor
responsible for corporate governance matters
(including but not limited to providing information
for directors and supervisors to perform their duties,
assisting directors and supervisors with regulatory
compliance, handling matters related to Board
meetings and shareholders' meetings, and preparing
proceedings for Board meetings and shareholders'
meetings)?		 P The Company has set up a dedicated unit to be responsible
for corporate governance matters such as the board of
directors, the shareholders' meeting, and the preparation of
the minutes of the board of directors and shareholders'
meetings.		 At planning stage.

36

Items Evaluated Status Status Status Variations (if any) with the
Corporate Governance Best
Practice Principles for TWSE/
GTSM Listed Companies and
reasons for such discrepancies
Yes No Brief Explanation
5. Does the Company establish communication
channels with stakeholders (including, but not limited
to, shareholders, employees, customers, and
suppliers) and set up an area dedicated to
stakeholders on the Company website and does the
Company respond appropriately to corporate social
responsibility issues that stakeholders consider
important?
P		 The Company has established an area for stakeholders in the
Company’s website in accordance with the regulations in
order to build the communication channel.		 No deviation.
6.
Does the Company commission a professional stock
affair agency to manage shareholders' meetings and
other relevant affairs?

P		 The Company has designated the SinoPac Securities Corp.
Stock Registration Division to handle shareholder meeting
affairs.		 No deviation.
7. Information Disclosure
(1) Does the Company establish a public website to
disclose operational, financial, and corporate
governance information?
(2) Does the Company adopt other means of
information disclosure (such as establishing an
English language website, delegating a professional
to collect and disclose company information,
implement a spokesperson system, and disclosing
the process of investor conferences on the company
website)?
(3) Does the company announce and report annual
financial statements within two months after the
end of each fiscal year, and announce and report
Q1, Q2, and Q3 financial statements, as well as
monthly sales results, before the prescribed time
limit?

P
P		 P 1. The Company has established corporate website and
designated personnel to be responsible for disclosing
operational, financial, and corporate governance
information.
2. The Company has spokespersons and acting
spokespersons, and designated persons responsible for the
collection and disclosure of company information and
provide it to the spokesperson and relevant business
departments to answer the inquiries of interested parties
and competent authorities.
3. The Company filed the first, second and third quarter
financial reports before the required deadline.
No deviation.
No deviation.
The Company will continue to
improve the timeliness of
operations in order to file the
annual financial report and the
operating results each month as
early as possible.

37

Items Evaluated Status Status Status Variations (if any) with the
Corporate Governance Best
Practice Principles for TWSE/
GTSM Listed Companies and
reasons for such discrepancies
Yes No Brief Explanation
8. Does the Company disclose other important
information to facilitate better understanding of the
Company’s corporate governance practices
(including, but not limited to current status of
employee rights, employee care, investor relations,
supplier relations, stakeholder rights, director and
supervisor training regimes, risk management
policies, and risk measurement standards as well as
the implementation of client policies and the
Company’s purchase of liability insurance for its
directors and supervisors)?		 P 1. Employee Rights: The Company and its employees
maintain a smooth communication channel, and respect
and protect their legitimate rights and interests; when the
legitimate rights and interests are infringed, the
Company will handle them appropriately based on the
principle of justice.
2. Employee Care: The Company has established employee
communication channels to encourage employees to
communicate directly with management, and
appropriately reflect employees' opinions on the
Company's business and financial status or major
decisions involving employees' interests.
3. Investor Relations: In addition to respecting and
safeguarding the legitimate rights and interests of
investors, the Company shall perform its business in
accordance with the principle of good faith and properly
handle transaction disputes.
4. Supplier Relations: The Company cherishes, values and
is long-term partners with suppliers. We believe that only
partnerships with similar ideas can last. Any supplier or
contractor who delivers goods or provides services to the
Company must perform in good faith and shall not
damage the Company's corporate interests and image.
The Company also asks employees to avoid any
unethical behavior and conflicts of interest with
manufacturers at any time.
5. Stakeholder's Rights: Proposals that concern the interests
of directors are conducted with proper recusal procedure.
6. Director’s Further Study: Directors of the Company have
professional background, and the majority of the
directors are currently engaged in their professional field.
In addition, the Company provides related information
on corporate governance to directors periodically to
remind them of their responsibilities.
No deviation.
No deviation.
No deviation.
No deviation.
No deviation.
No deviation.

38

Items Evaluated Status Status Status Variations (if any) with the
Corporate Governance Best
Practice Principles for TWSE/
GTSM Listed Companies and
reasons for such discrepancies
Yes No Brief Explanation
7. Implementation of Risk Management Policies and Risk
Measurement Standards: The Company has established
administration regulations for important management
indicators and implemented in accordance with the
regulations.
8. Implementation of Customer Policy: The Company
passed the ISO9001 Quality System Certification and
has a dedicated department to implement the overall
operation to ensure the results of the Company’s
customer policy implementation.
9. The Company continues to purchase liability insurance
for directors.		 No deviation.
No deviation.
No deviation.
9.
Improvements made in the most recent fiscal year
in response to the results of corporate governance
evaluation conducted by the Corporate Governance
Center of the Taiwan Stock Exchange Corporation,
and improvement measures and plans for items yet
to be improved.
P		 According to the results of the latest Corporate Governance
Evaluation, the Company has made major improvements
which are explained below:
1. Does the company formulate policy on diversity of
board members, and disclose the specific management
objectives and implementation of the policy on the
company's website and annual report?
2. Has the sustainability report prepared by the company
obtained three-party verification?		 The policy has been formulated
and disclosed on the website
and annual report.
Expected to be implemented
from 2021.

Note 1: Evaluation on the independence of CPAs

ote 1: Evaluation on the independence of CPAs
Evaluation item Yes No
1. Direct or indirect material financial interests between the CPAs and the Company? V
2. Financing or endorsements with the Company’s Directors? V
3. Close business relations with the Company? V
4. Are CPAs or members in the audit team in positions that could seriously impact the audit during these two years? V
5. Provide Non-audit services that may directly impact auditing tasks? V
6. Serve as an agent in between to issue stocks and other securities? V
7. Serve as the Company's defense counsel or represent the Company in mediating conflicts with third parties? V
8. Are family members or relatives of the Company's Directors, Supervisors, or other individuals in positions that could seriously impact the audit? V
9. Are the CPAs in line with the independence stated in Article 10 of the Accountant Ethical Codes and do they provide with Independence Declaration”? V

39

4.4 Composition, responsibilities, and operation of the Remuneration Committee

4.4.1 Remuneration Committee members

Identity Condition
Name		 Professional Qualification&
Work Experience		 Independence Number
of
independent
directorship s held in other
public companies
Independent Director
(convener)		 LIN, YEN-TING He is currently head of Plan-
Wise
International
Corporation and the deputy
director of Taichung City
Industrial Association Labor
Law Committee. He has
more than five years of work
experience
in
business,
finance
and
company
operation and has ability to
make business judgement,
crisis management, operation
management and decision-
making.		 Comply with the provisions
of Regulation Governing
the
Appointment
and
Exercise
of
Powers
by
Remuneration Committee of
a Company Whose Stock is
Listed on the Taiwan Stock
Exchange
or
the
Taipei
Exchange , including but not
limited to the person, spouse,
relatives within the second
degree who do not serve as
directors,
supervisors,
employed or its affiliated
companies.:
Person
or
employee, not holding the
number of shares of the
company; not serving as
director,
supervisor
or
employee of a company that
has a specific relationship
with
the
company:
not
providing
business,
legal,finacial, accounting for
the
company
or
related
companies in last two years
for
received
amount
of
remuneration		 -
Independent Director TSOU, YEN-CHUNG He is currently head of Sun
Young CPAs Firm and
has more than five years of
work experience in business,
finance
and
company
operation and has ability
to make business judgement,
crisis,
management,
accounting, finance analysis
and decision-making.		 2
Independent Director LI, SHIH-JEN He is currently the chairman
of Taxo Pharmaceutical CO .,
LTD,
Transwell
Biotech
Co.,Ltd and has more than
five years of work experience
in business, finance and
company operation, and he
has
business
judgement,
crisis
management,
international market outlook
and decision-making skills
3

Note: None of the directors of the company has any circumstances related to Article 30 of Company Law

4.4.2 Operations of the Remuneration Committee

  • (1) The Company’s Remuneration Committee is composed of three members.

  • (2) The term of office for current members runs from 27 June 2019 through 12 June 2022.

The Company convened a total of 5 (A) meetings of the Remuneration Committee over the

past fiscal year. The attendance was as follows:

Title Name Meetings
Attended
Personally (B)		 Meetings
Attended by
Proxy		 Personal
Attendance
Rate (B/A)		 Remarks
Convener LIN, YEN-TING 5 0 100% -
Member LI-SHIH-JEN 5 0 100% -
Member TSOU, YEN-
CHUNG		 5 0 100% -
Other disclosures:
1. If the Board does not adopt or amend the suggestions of the Remuneration committee, it shall state the date, term,
proposal content, resolution results of the Board of Directors and the Company’s response to the Remuneration
Committee (such as the remuneration approved by the Board of Directors is better than the suggestions of the
Remuneration committee, should explain the discrepancy and its reasons): None.
2. Should a committee member oppose or retain their opinion regarding any decision made by the Remuneration
Committee and their opinion has been recorded or submitted in a written statement, the committee meeting date,
session, content of the resolution, opinions of all members, and the response to the opinions shall be recorded.
3. Remuneration Committee functions and powers:
(1) Set the remuneration of directors.
(2) Set the remuneration of Chairman, vice president, chief executive officer, and general manager.
(3)Other cases referred to bythe board of directors for deliberation.

40

4.4.3 The proposals and results of the meeting and the company's handling of members' opinions

Date and Term Proposal details and follow-ups
The 4th Remuneration
Committee
The 6thMeeting
(2021.01.26)		 1.
Settle Year-End Bonus Distribution for managers in 2020.
Resolution: Unanimously approved.
2.
Discuss Remuneration for Managers in 2021.
Resolution: Unanimously approved.
Handlingof the Remuneration Committee: not applicable.
The 4th Remuneration
Committee
The 7thMeeting
(2021.03.16)		 1.
Remuneration distribution for directors and employees in
2020.
Resolution: Unanimously approved. Distribution guidelines
will be discussed in the next meeting.
Handlingof the Remuneration Committee: not applicable.
The 4th Remuneration
Committee
The 8th Meeting
(2021.08.10)		 1. Review the rule of the Remuneration Committee
Resolution: Unanimously approved.
2.
Deliberate on the revision of the remuneration management.
Resolution: Unanimously approved.
3.
Remuneration distribution for directors in 2020
Resolution: Unanimously approved
4.
Remuneration distribution for employees in 2020
Resolution: Unanimously approved.
Handlingof the Remuneration Committee: not applicable.
The 4th Remuneration
Committee
The 9th Meeting
(2021.09.09)		 1. Remuneration distribution for managers and employees in 2020
Resolution: Unanimously approved.
Handling of the Remuneration Committee: not applicable.
The 4th Remuneration
Committee
The 10th Meeting
(2021.12.16)		 1.
Discussion about Repurchase treasury share and transfer to
manager
Resolution: Unanimously approved.
Handling of the Remuneration Committee: not applicable.
The 4th Remuneration
Committee
The 11thMeeting
(2022.01.21)		 1 Settle Remuneration for Managers in 2021
Resolution: Unanimously approved
2 The salary of managers will be increased from 01,01,2022
Resolution: Unanimously approved
3 Settle Remuneration for Managers in 2022
Resolution: Unanimously approved.
Handlingof the Remuneration Committee: not applicable.

4.4.5 Information on the members of the nomination committee and information on the operation situation: The Company has not established a nomination committee, so it is not applicable.

41

4.5 Implementation of Sustainable Development

Items Promoted Status Status Status Variations (if any) with the
Sustainable Development
Best Practice Principles for
TWSE/GTSM Listed
Companies and reasons for
such discrepancies
Yes No Brief Explanation
1.
Does the company establish a governance structure
to promote sustainable development, and set up
dedicated (part-time) position to promote
sustainable development, which is authorized by the
board of directors to handle senior manager, and the
board of directors supervises the situation?

P		 The company has formulated the ''Sustainable Development
Best Practice Principles'', and each department will continue to
devote itself to the implementation of sustainable development
of the enterprise according to its scope of work, and disclose
the implementation results in the sustainability report, and
report the disclosure situation to the board of directors once a
year.

No deviation.
2.
Does the Company conduct risk assessments on
environmental, social and corporate governance
issues related to the company’s operations in
accordance with the principle of materiality, and
formulate relevant risk management policies or
strategies?		 P The company's risk assessment for each plant, according to the
materiality assessment process, identifies 6 material issues
related to the environment, society and corporate governance,
and formulates the corresponding management policies as
follows: 1.Economic performance: leading technology,
improving quality, develop new products and new applications
2. Occupational safety and health: compliance with law and
regulations, participation of all employees, prevention of
occupational accident, risk reduction, and promote of
competency. 3. Non-discrimination, forced and compulsory
labor: guarantee human rights and comply with relevant laws
and norms. 4.Training and Education : Build a comprehensive
education and training system to promote the simultaneous
improvement of employees' personal career development and
overall work performance 5. Energy: Improve equipment
efficiency, reduce energy use, reduce greenhouse gas
emissions, and enable the environment to develop sustainably
6. Emissions: compliance with regulations, reduction of air
pollution emissions, continuous improvement.

No deviation.
3. Environmental Topic
(1) Does the Company establish applicable
environmental management system based on its		 P (1) The Company set out management rules for air pollution,
water pollution, waste and toxic treatment. The Company		 No deviation.

42

Items Promoted Status Status Status Variations (if any) with the
Sustainable Development
Best Practice Principles for
TWSE/GTSM Listed
Companies and reasons for
such discrepancies
Yes No Brief Explanation
industrial characteristics?
(2) Is the Company committed to improving energy
efficiency and using recycled materials with low
impact on the environment?
(3) Does the company assess the present and future
risks and opportunities climate change poses on the
company?
(4) Does the company count greenhouse gas emissions,
water consumption and total weight of waste in the
past two years, and formulate policies for energy
saving and carbon reduction, greenhouse gas
reduction, water use reduction or other waste
management?

P
P
P		 also promotes the ISO14001 environmental management
system in Pingzhen factory, Dajia Factory, Dali Factory,
Namgamg Factory and Quanxing Factory and formulates
related environment policies and has been certified by
SGS.The Company constructs fractionators to recycle
and reuse solvents, and minimizes the purchase of
solvents. Moreover, the Company promotes paperless
operations to gradually digitize documents, reduce paper
consumption and cooperate with government policies to
carry out garbage classification, recycling and reduction
activities.
(2) The Company constructs fractionators to recycle and
reuse solvents , implement process improcement , time-
lapse design of dehydration reflux tank. Moreover, the
company improves N2 blowing acid removal efficiency
to shorten process time, fractionation tower heat source
recovery as feed heating and preheating design, waste
water recycling and refinging as raw materials for reuse.
(3) The Company continues to pay attention to issues related
to climate change and develops green products in
response to possible future opportunities. meanwhile, the
relevant analysis and countermeasures have been
disclosed in the sustainability report of the same year.
(4) The Company conducts reporting (Environmental
Sustainability and Management) and control of
greenhouse gases every year, and carries out process
improvement, energy saving and waste
reduction to reduce energy and resource use.		 No deviation.
No deviation.
No deviation.
.
4. Social Welfare Topic
(1)
Does the Company set up management policy and		 P (1)
The Company abides by the Labor Standards Act and		 No deviation.

43

Items Promoted Status Status Status Variations (if any) with the
Sustainable Development
Best Practice Principles for
TWSE/GTSM Listed
Companies and reasons for
such discrepancies
Yes No Brief Explanation
procedures in accordance with relevant laws and
regulations and international human rights
conventions?
(2) Does the Company establish appropriately managed
employee welfare measures (including salary, leave,
and other benefits), and is its operational
performance and achievements reflected in their
pay?
(3) Does the Company provide employees with a safe
and healthy work environment and regularly
implement safety and health education programs for
employees?
(4) Does the Company establish an effective
competency development career training program
for employees?
(5) Does the Company comply with relevant
regulations and international standards in customer
health and safety, customer privacy, marketing and
labeling of products and services, and does it
establish consumer or customer rights protection


P
P
P
P		 respects the internationally recognized basic labor human
rights principles, and establishes management methods to
protect the legitimate rights and interests of employees
and employment policies without discrimination.
(2) The company has a number of incentives, subsidies for
education, retirement system and other favorable
measures. Employees' salaries and vacations are handled
in acccordance with the Labor Standards Law. Female
employees account for about 24% of all employees and
about 14% of senior executives.; Article 30 of the
company's articles of association clearly sstipulates that
3% o fthe pre-tax net profit shall be allocated as
employee compensation, renewal bonuses, and year-end
bonuses.
(3) Implement three-in-one safety education and training
regularly at least once a year, cooperate with the
Environmental Protection Bureau and the Fire Bureau to
conduct ad-hoc drills and hold an annual employee health
check. For related instructions, please refer to Chapter
5.4 Friendly Working Environment in the Company’s
sustainable development report.
(4) The company cultivates talents according to the three
aspects of basic ability, professional ability, and
management ability. The training plan includes new
personnel training, general training, direct personnel
training, professional/functional training, supervisor
training and other training courses, The total number of
training hours in 2020 reached 1940.5 hours.

No deviation.
No deviation.
No deviation.
No deviation.

44

Items Promoted Status Status Status Variations (if any) with the
Sustainable Development
Best Practice Principles for
TWSE/GTSM Listed
Companies and reasons for
such discrepancies
Yes No Brief Explanation
policies and complaint procedures?
(6) Has the Company established supplier management
that requires that suppliers adhere to regulations
dealing with such issues as the environment,
workplace safety and health, worker rights and, if
so, what is the status of implementation?		 P (5)
The marketing and labelling of the company's products
ass comply with domestic and foreign and regulations on
trademarks and patents and international standards. To
protect the rights and interests of customers, there is a
corrective and preventive measures procedure to regulate
the handling procedures when customer compliants
occur. with a view to continuous improvement.
(6) The Company requires suppliers to follow
relevant regulations in terms of corporate
governance, quality, environment and society, For
example, pollution prevention equipment should be
installed, employees should be provided with work safety
protection measure and child labor should not be
employed, through evaluation and assessment, effectively
guide suppliers to follow relevant policies.
No deviation.
5. Does the Company follow international recognized
reporting criteria or guides when disclosing non-
financial Sustain Development reports? Did it obtain
assurance or verification statements from third-party
certification bodies for previously disclosed reports?		 P The Company referred to the core options of the GRI
Standards as the basis for compiling the corporate social
responsibility report.		 No deviation.
6. If PCSC has drawn up a code for Sustainable Development based on the Sustainable Development Best Practice Principles for TWSE/GTSM Listed
Companies, please describe any differences between said code and the Best Practice Principles:
No deviation..
7. Other important information that helps to understand the implementation of sustainable development: Relevant information of the company is disclosed on
the Market Observation Post System.

45

4.6 Compliance with ethical corporate management and measures implemented::

Items Evaluated Status Status Status Variations (if any) with the
Ethical Corporate Management
Best Practice Principles for
TWSE/GTSM Listed
Companies and reasons for such
discrepancies
Yes No Brief Explanation
1. Establishment of ethical operation policies and
programs
(1) Does the Company clearly specify the policy,
practice of ethical management in the regulations
and external files, and does the board of directors,
management level actively implement the
commitment of ethical management?
(2) Does the Company implement prevention measures
for the business activities with high risk of
dishonest behaviors in each clause of Article 7-2 of
“Code of Ethical Management of the Listed and
Over-the Counter Companies” or within the other
business scope?
(3) Does the Company formulate the operation
procedure, behavior guidelines, punishments, and
compliance policy? Does the Company also
periodically review and revise the said programs?		 P
P
P		 (1) The Company has formulated the "Code of Integrity
Management", clearly indicating the policy of integrity
management, and the commitment to actively
implement the management policy.
(2) The Company has formulated related specifications
and evaluation mechanisms in the "Code of Integrity
Management", and designated a dedicated unit to be
responsible for implementation.
(3) The Company has formulated specifications and
evaluation mechanisms in the "Code of Integrity
Management", and designated a dedicated unit to be
responsible for implementing the "Integrity
Management Operating Procedures and Behavior
Guidelines" that the Company has formulated, which
regulates operating procedures, behavior guidelines,
violations of regulations, and punishment and appeal
system to show honest operation and prevent dishonest
behavior.		 No deviation.
No deviation.
No deviation
2. Implementing ethical corporate management
(1) Does the Company evaluate the ethical records of
the businesses with which it has dealings and
include clear ethical corporate behavior provisions
in contracts with such counterparties?
(2)
Does the Company set up a special unit under the		 P
P		 (1) Before establishing a business relationship, the
Company will evaluate the legitimacy of the
counterparty to ensure that its business operations are
transparent and will not request, provide or accept
bribes.
(2)
The Company has clearly designated a dedicated unit		 No deviation.
No deviation.

46

Items Evaluated Status Status Status Variations (if any) with the
Ethical Corporate Management
Best Practice Principles for
TWSE/GTSM Listed
Companies and reasons for such
discrepancies
Yes No Brief Explanation
board of directors to promote the integrity
management of the enterprise, and regularly (at
least once a year) report to the board of directors on
its integrity management policies and plans to
prevent dishonesty and supervision and
implementation?
(3) Does the Company formulate the policy of
preventing conflict of interest, provide the proper
statement channel, and carry out the
implementation?
(4) Has the Company established the effective
accounting system, internal control system to
implement the ethical management, and are these
systems regularly checked by the internal audit unit,
or by the CPA?
(5) Does the Company hold internal and external
ethical corporate behavior training regularly?
P
P
P		 responsible for the formulation and supervision of the
integrity management policy and precaution plan, and
regularly (once a year) reports the implementation to
the management.
(3) The Company has formulated the "Code of Integrity
Management", which clearly sets out a policy to
prevent conflicts of interest and provides appropriate
channels for voicing opinions.
(4) The Company has established an effective accounting
system and internal control system. In addition to
regular audits by internal auditing office, Ernst &
Young also conducts regular financial report and
internal control reviews.
(5) The company's new employees will conduct education
and publicity on the "Code of Integrity
Management" when they arrive at the company on
November 23, 2021, the current employees will hold
the Code of Integrity Management education and
training, including: Analysis of the "Code of Integrity
Management'' of listed OTC companies (Established
and the focus of the code)		 No deviation.
No deviation.
No deviation.
3. Status for enforcing whistle-blowing system
(1) Does the Company establish a specific
whistleblowing and reward system, set up
convenient channels, and designate appropriate
personnel to handle the investigations, depending
on the identity of the person being reported?
(2) Does the Company established standard
investigation procedures, follow-up measures, and
relevant mechanisms to ensure confidentiality?		 P
P		 (1) The Company has formulated the "Code of Integrity
Management", clearly defining reporting channels and
assigning appropriate specialists.
(2) The Company has formulated the "Code of Integrity
Management" and Procedures for Ethical Management
and Guidelines , which clearly stipulates that the
identity of the informant and the content of the report		 No deviation.
No deviation.

47

Items Evaluated Status Status Status Variations (if any) with the
Ethical Corporate Management
Best Practice Principles for
TWSE/GTSM Listed
Companies and reasons for such
discrepancies
Yes No Brief Explanation
(3)
Does the Company adopt protection against
possible mistreatment arising from reporting
violations?		 P shall be kept confidential.
(3) The Company has formulated the "Code of Integrity
Management" and Procedures for Ethical Management
and Guidelines to govern related measures.		 No deviation.
4. Enhancing information disclosure
Does the Company disclose the content of its Best
Practice Principles and its effectiveness on their
website and the TWSE market observation post
system?		 P The Company has made relevant disclosures on the
Company website and Market Observation Post System.		 No deviation.
5. If the Company has established a code of ethical corporate management based on the Ethical Corporate Management Best Practice Principles for
TWSE/GTSMListed Companies, please discuss the specifics of the code and implementation below:
The Company will plan and handle different items according to actual management needs.
6. Other information that facilitate the understanding of Company ethical corporate management practices: None.

  • 4.7 If the Company has established corporate governance principles and related guidelines, the means of accessing this information should be disclosed: The Company has formulated the corporate governance principles, please refer to TWSE.COM and the Investors section on the Company’s official website\ investor area to check the relevant regulations.

  • 4.8 The Company should also disclose other significant information which may improve the understanding of its governance and operation. 4.9 Status of implementation of internal control system

  • 4.9.1 Statement of Declaration on Internal Control System

48

SUNKO INK CO., LTD

Statement of Declaration on Internal Control System

Date: 15 March 2022

The internal control system of this Company in 2021 is hereby stated as follows according to the self-assessment results.

I. The Company acknowledges that to establish, implement and maintain the internal control system is the responsibility of the Company’s board of directors and manger, and this Company has established such system. Its purpose is to provide reasonable assurance for reaching the goals of effective and efficient operation (including making profits, achieving performance and ensuring the safety of assets, etc.), reliable, timely, transparent guidance and conforming to relevant specification, namely relevant laws and regulations, etc.

II. The internal control system has inherent constraints, and no matter how comprehensive its design may be, an effective internal control system is only capable of providing adequate assurance for achieving the abovementioned three objectives. Moreover, the effectiveness of the internal control system may be altered as the environment changes and under different situations. Nevertheless, the Company's internal control system contains self-monitoring mechanisms, and the company takes immediate remedial actions in response to any identified deficiencies.

III. The Company assesses for the effectiveness of the internal control system's design and practices through the effectiveness of internal control system, as stated in the "Regulations Governing the Establishment of Internal Control System in Publicly Listed Companies" (hereinafter referred to as "the Regulations"). The criteria adopted by the Regulations identify five key components of managerial internal control: (1) Control Environment;(2) Risk Assessment; (3) Control Activities;(4) Information and Communication; and (5) Monitoring Activities. Each constituent element includes a number of categories. Please refer to "The Regulations" for the aforementioned categories.

IV. The Company has already adopted the aforementioned internal control system assessment items to evaluate the effectiveness of internal control system design and implementation.

V. Based on the findings of the evaluation, the Company believes that, on 31 December 2021, it has maintained, in all material respects, an effective internal control system (including the supervision and management toward its subsidiaries), to provide reasonable assurance over our operational effectiveness and efficiency, reliability of financial reporting, and compliance with applicable regulations. VI. This statement of declaration shall be the primary content of the Company's Annual Report and prospectus and shall be made available to the public. Falsehood, concealment, or other illegality in the content made public will entail legal liability under Articles 20, 32, 171, and 174 of the Securities and Exchange Act.

VII. This Statement was approved by the Board on 15 March 2022 where all 6 attending directors hereby stating their consenting opinions.

SUNKO INK CO., LTD

Chairman: HUANG, TING-DI General Manager: HUANG, TING-DI

49

  • 4.9.2 If the CPAs are entrusted for review of internal control system, the audit report prepared by the CPAs shall be disclosed: None.

  • 4.10 From the most recent fiscal year up until the date of publication of the Annual Report, explain any legal penalty against the company or its internal personnel, or any disciplinary actions by the company against its personnel for violation of the internal control system, where the result of such penalty could have a material effect on shareholder equity or securities prices, the penalty, material deficiencies, and condition of improvement shall be disclosed: None.

  • 4.11 Material resolutions adopted by the Shareholders' Meetings and the Board meetings in the most recent fiscal year up to the publication date of this Annual Report:

4.11.1 Material resolutions at the Board Meeting

Date Term of Meeting Material Resolutions
14 Jan 2021 The 17thBoard of
Directors
The 15thMeeting		 1.
Adoption of treasury stock.
Extraordinary motion:
2.
Creating mortgage on the No. 1416 farm on Hsin-de-lung Rd
for $4 million.
26 Jan 2021 The 17thBoard of
Directors
The 16th Meeting		 1.
Settlement of 2020 year-end bonus distribution of managers.
2.
Review of 2021 Remuneration for Managers.
16 Mar 2021 The 17thBoard of
Directors
The 17thMeeting		 1.
Review of the 2020 parent only and consolidated financial
reports.
2.
Review of 2020 Business Report.
3.
2020 Earnings Appropriation proposal.
4.
2020 employees and directors remuneration distribution
reviewed by the Remuneration Committee.
5.
2020 Statement of Declaration on Internal control system.
6.
Renewal of directors’ and managers’ liability insurance.
7.
Renewal of consultant contracts.
8.
Application to banks for the loan credit line.
9.
Setting the date, venue and reasons for convening of the 2021
general shareholders’ meeting.
10. Matters related to the venue and session of the 2021 general
shareholders’meeting.
11 May 2021 The 17th Board of
Directors
The 18th Meeting		 1.
Independence assessment of certified accountant and 2021
fiscal and tax Assessed and Certified by Certified Public
Accountant.
2.
Application to banks for the loan credit line.
3.
Proposal to Release the Manager from Non-Competition
Restrictions
4.
Perosnnel Change
16 Jun 2021 The 17th Board of
Directors
The 19th Meeting		 1.
The termination of the sale contract of Dajia Factory.
29 Jun 2021 The 17th Board of
Directors
The 20th Meeting		 1.
Proposal to Reschedule the 2021 Date and Venue of the
General Meeting of shareholders

50

Date Term of Meeting Material Resolutions
20 Jul 2021 The 17th Board of
Directors
The21th Meeting		 1.
Determining the base date for allocating cash dividends to
shareholders in 2020and other related matters.
10 Aug 2021 The 17th Board of
Directors
The 22th Meeting		 1.
Review the rule of the Remuneration Committee
2.
Deliberate on the revision of the remuneration management
3.
Remuneration distribution for directors in 2020
4.
Remuneration distribution principle for employees in 2020.
5.
Applicationto banksfortheloancreditline.
9 Sep 2021 The 17th Board of
Directors
The23th Meeting		 1.
Remuneration distribution for directors and employees in
2020.
9 Nov 2021 The 17th Board of
Directors
The 24th Meeting		 1. Subsidiary Blessingthought Co. Ltd was dismissed and its asset
disposal
2. Amendment of methodology for evaluating the performance of
itsBoard of Director
16 Dec 2021 The 17th Board of
Directors
The 25th Meeting		 1. 2022 Operational Plan.
2. 2022 Budget Proposal
3. Plan on internal control audit on 2022
4. Amendment of Repurchase share and transfer to employee
measure.
5.The company handles the first time of repurchase treasury share
and transfer to employee.
6.The company repurchases treasury shares for the first time to
handle deregistration matters, and set the base date for capital
reduction
21 Jan 2022 The 17th Board of
Directors
The 26th Meeting		 1.Settle Remuneration for Managers in 2021
2. The salary of manager will be increased
3. Review the remuneration for manager in 2022.
4.Applicationto banksfortheloancreditline
15 Mar 2022 The 17th Board of
Directors
The 27th Meeting		 1. Review of the 2021 parent only and consolidated financial
reports.
2. Review of the 2021 Business Report
3. Loss of Appropriation on 2021
4. Independence assessment of certified accountant and 2022 fiscal
and tax Assessed and Certified by Certified Public Accountant.
5. 2021 Statement of Declaration on Internal control system.
6. Renewal of directors’ and managers’ liability insurance.
7.The amendment of Sustainable Development Best Practice
Principle (former CSR Best Practice Principle)
8.The amendment of the Corporate Governance Best Practice
Principle
9. The Amendment of Acquisition or Disposal assets procedure
10. Reelection 18th director.
11.The case concerning of the nomination of director candidates.
12.Proposal to Release the Board of Directors from Non-
Competition Restrictions.
13.Setting the date, venue and reasons for convening of the 2022
general shareholders’ meeting.
14.Matters related to the venue and session of the 2022 general
shareholders’ meeting.

51

4.11.2 Material resolutions at the 2021 shareholders meeting

Date Name of Meeting Material resolutions Implementations
10 Jun
2021		 2021 general
shareholders’
meeting		 1.
Ratification of 2020
business report and
financial reports.		 Passed upon voting.
2.
Ratification of the 2020
net income
Appropriation Report.
Passed upon voting and shall be
distributed in line with the resolution in
the meeting.
3.
Discussion on the
amendments to the
Procedure for Election
of Directors.		 Passed upon voting and shall be
implemented in line with the resolution
in the meeting.

  • 4.12 Major contents of any dissenting opinions on record or stated in a written statement made by Directors or Supervisors regarding material resolutions of the Board Meeting in the most recent year up to the publication date of this Annual Report: None.

  • 4.13 Resignation or dismissal of the company’s key individuals, including the chairman, general manager, and heads of accounting, finance, internal audit and R&D in the most recent fiscal year up to the publication date of this Annual Report: None.

52

5 Information on certified CPA Professional Fees

5 Information on certified CPA Professional Fees 5 Information on certified CPA Professional Fees 5 Information on certified CPA Professional Fees 5 Information on certified CPA Professional Fees 5 Information on certified CPA Professional Fees 5 Information on certified CPA Professional Fees 5 Information on certified CPA Professional Fees
Information on Certified CPA Professional Fee
Unit: NT$ (in
thousands)
Accounting
Firm		 Name of CPA Duration of audit Audit Fee Non-Audit
fee		 Total Remark
Ernst &
Young		 TU, CHIN-
YUAN		 2021/01/01~2021/12/31 3,440 375 3,815 Non-audit
fee include
Tax
compliance
Audit 250
thousands
and 75
thousands
for
sustainable
consulting
services
Ernst &
Young		 YEN, WEN-
PI		 2021/01/01~2021/12/31

  • 5.1 If the accounting firm was replaced and if the audit fees paid for the fiscal year in which such replacement took place are lower than those for the previous year, the reduction in the amount of audit fees, percentage of reduction and the reason(s) should be disclosed: None.

  • 5.2 If the audit fees paid for the current 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 reason(s) should be disclosed: None.

  • 6 Information of Changing CPAs: None.

  • 7 The Chairman, President and Financial or Accounting Manager of the Company who has, in the most recent year, held a position at the accounting firm of its CPA or at an affiliated company: None.

53

8 Equity transfer or changes in equity pledged by the Company's Directors, Supervisors, managerial officers or shareholders with shareholding percentage exceeding 10% in the most recent fiscal year up to the publication date of this Annual Report:

8.1 Circumstance of changes in equity of directors, supervisors, managers and major shareholders:

Title Name 2021 2021 As of 17April,2022 As of 17April,2022
Holding
Increase
(decrease)		 Pledged
Holding
Increase
(decrease)
(Note2)		 Holding
Increase
(decrease)		 Pledged
Holding
Increase
(decrease)
Chairman KT Investment Co., Ltd. (1,209,590) - - -
Representative of KT Investment Co.,
Ltd.:HUANG,TING-DI		 (588) - - -
Director
(Note 1)		 Fulilu Investment Co., Ltd. (1,413,902) - - -
Representative of Fulilu Investment
Co.,Ltd.:HUANG,TING-KAI		 - - - -
Director Chiaoli Investment Co., Ltd. (1,147,748) - - -
Representative of Chiaoli Investment
Co.,Ltd.:HUANG,YI-RUNG		 - - - -
Director HSIAO, JUNG-FU (55,349) - - -
Independent Director LI, SHIH-JEN - - - -
Independent Director TSOU, YEN-CHUNG - - - -
Independent Director LIN, YEN-TING - - - -
Deputy General
Manager		 CHANG, JUN-PIN (66,630) - - -
Minister of
Production		 LIN, CHAO-YUAN (254,793) - - -
Minister of
Production		 SHEN, CHI-YUNG - - - -
Minister of
Production		 HUANG, SHUN-HSIEN (1,599,124) - (310,000) -
Manager of
Management
Department		 HUNG, TING-YI (116) - - -
R&D Department
Supervisor		 TSOU, CHIOU-PENG (89,014) - (36,000) -
Finance Office
Supervisor		 WANG, TING-YU (676) - - -
Accounting Office
Manager		 WANG, SHENG-HUI - - - -

Note:

  1. Fulilu Investment Co., Ltd. (and Representative HUANG, TING-KAI) ceased to serve as a director on 16 March 2021.

  2. Approved by the Financial Supervisory Commission on 15 December 2020 (Jin-Guan-Cheng-Fa-Zi No. 1090376896), and was approved for the application for capital reduction and registration of changes by Letter Jing-Shou-Shang-Zi No. 10901243830. The effect from the capital reduction was stated in the column.

8.2 Stock transfers or pledge of stock rights to related parties: None.

54

9 Information of the shareholder whose shareholding ratio ranks top 10, mutual relation of related person or spouse, a relative within the second degree of kinship of anothe

Name Shares Held
Personally		 Shares Held
Personally		 Shares Held by
Spouse or Minor
Children		 Shares Held by
Spouse or Minor
Children		 Shares Held
by Nominee
Agents		 Shares Held
by Nominee
Agents		 Names of Spouse or other relatives within
two degrees of consanguinity who are also
among Sunko’s top 10 largest shareholders		 Names of Spouse or other relatives within
two degrees of consanguinity who are also
among Sunko’s top 10 largest shareholders		 Remarks
Shares % Shares % Shares % Title (or Name) Relationship
Macy Investment
Co., Ltd.		 16,838,191 9.11 - - (Note 1) - TONG, CING-MEI
HUANG, TING-KAI
HUANG, TING-DI
LIN, YU-PING
HUANG, YI-RUNG
WANG, PAO-LING		 Director
Director
Director
Director
Director
Supervisor
Representative of
Macy Investment
Co., Ltd.: CHIU,
CHI-CHIH		 - - (Note 1) - (Note 1) KT Investment Co.,
Ltd.		 Same
representative
KT Investment Co.,
Ltd.		 10,801,010 5.84 - - - - TONG, CING-MEI Director
HUANG, YI-RUNG Director
HUANG, TING-DI Supervisor
Representative of KT
Investment Co., Ltd.:
CHIU, CHI-CHIH		 - - (Note 1) (Note 1) - Macy Investment
Co., Ltd.		 Same
representative
Chiaoli Investment
Co., Ltd.		 6,503,902 3.52 - - - - LIN, YU-PING
HUANG, TING-DI
TONG, CING-MEI		 Director
Director
Supervisor
Representative of
Chiaoli Investment
Co., Ltd.: KAO,
CHING-MEI		 - - (Note 1) - (Note 1) - LIN, YU-PING
HUANG, TING-DI		 Daughter Son-in-
law
HUANG, YI-RUNG 5,988,685 3.24 1,555,855 0.84 - - Macy Investment
Co., Ltd
KT Investment Co.,
Ltd
LIN, YU-PING
HUANG, TING-DI		 Director
Director
Daughter-in-law
Son
LIN, YU-PING 3,146,718 1.70 80,060 0.04 - - Macy Investment
Co., Ltd.
Chiaoli Investment
Co., Ltd.		 Director
Director

55

Name Shares Held
Personally		 Shares Held
Personally		 Shares Held by
Spouse or Minor
Children		 Shares Held by
Spouse or Minor
Children		 Shares Held
by Nominee
Agents		 Shares Held
by Nominee
Agents		 Names of Spouse or other relatives within
two degrees of consanguinity who are also
among Sunko’s top 10 largest shareholders		 Names of Spouse or other relatives within
two degrees of consanguinity who are also
among Sunko’s top 10 largest shareholders		 Remarks
Shares % Shares % Shares % Title (or Name) Relationship
HUANG, YI-RUNG
TONG, CING-MEI
KAO, CHING-MEI
HUANG, TING-DI		 Father-in-law
Mother-in-law
Mother
Husband
ZHUANG, HONG-
YI		 1,679,895 0.91 (Note1) - (Note1) - - -
TONG, CING-MEI 1,555,855 0.84 5,988,685 3.24 - - Macy Investment
Co., Ltd.
KT Investment Co.,
Ltd.
Chiaoli Investment
Co., Ltd.
HUANG, YI-RUNG
HUANG, TING-DI
LIN, YU-PING


Director
Director
Supervisor Spouse
Husband
Mother and Son
Mother-in-law
Fulilu Investment
Co., Ltd.		 1,417,109 0.77 (Note 2) - (Note 2) - - -
Representative of
Fulilu Investment
Co., Ltd.: WANG,
PAO-LING		 - - (Note1) - (Note1) - Macy Investment
Co., Ltd.		 Supervisor
ZHANG, SHENG-
YEN		 1,412,209 0.76 (Note1) - (Note1) - - -
HE, CHEN-YU 1,376,893 0.74 (Note1) - (Note1) - - -

Note:

  1. The shareholder is not an insider of the Company. Therefore, information about his/ her spouses, minor children, or other persons holding the shares is not available.

  2. Fulilu Investment Co., Ltd. (and Representative HUANG, TING-KAI) resigned as a director on 16 March 2021.

56

  • 10 Number of shares hold for the same reinvestment business by the company’s directors, supervisors, manager and the company's directly or indirectly controlled business, and combined calculation of the comprehensive shareholding ratio:
comprehensive shareholding ratio:
Unit: thousand shares; %
Affiliated Enterprise Investments by
SUNKO		 Investments of
Directors,
Supervisors,
managerial
officers and directly or
indirectly controlled
businesses		 Combined Investment
Shares % Shares % Shares %
Sunko Biotech Company, Ltd. 1,674 22.32 - - 1,674 22.32
CHEN CHI TECHNOLOGY CO., LTD. 1,640 41.00 - - 1,640 41.00
Blessingthoughts Co. Ltd. (Note2) 1,520 83.52 - - 1,520 83.52
BNKC BIOCHEMICAL
TECHNOLOGY CO.,LTD.		 49 49.00 - - 49 49.00
Power Rich International LTD. 990 30.00 - - 990 30.00
Kuo Ching Development Corp. (Note1) 100 100.00 - - 990 100.00

Note1: Kuo Ching Development Corporation was established on 14 July 2021 Note2: Blessingthoughts Co. Ltd was dismissed on 03 December 2021.

57

IV. CAPITAL OVERVIEW

1 Source of Capital

1.1 Shares issued

Units: NT$; Shares

Units: NT$; Shares Units: NT$; Shares Units: NT$; Shares
Year/
Month		 Issuance
price		 Authorized Capital Paid-in Capital Remarks
Shares Amount Shares Amount Source of Capital Capital Increased by
Assets other than Cash		 Other
1989/09 10.0 19,900,000 199,000,000 19,900,000 199,000,000 Capital Increase by Cash of 30,000,000
Capital Increase byRetained Earnings of 39,000,000		 None
1991/12 10.0 22,885,000 228,850,000 22,885,000 228,850,000 Capital Increase byRetained Earnings of 29,850,000 None Note 1
1992/11 10.0 30,208,200 302,082,000 30,208,200 302,082,000 Capital Increase byRetained Earnings of 73,232,000 None Note 2
1993/12 10.0 35,343,594 353,435,940 35,343,594 353,435,940 Capital Increase byRetained Earnings of 51,353,940 None Note 3
1994/10 10.0 42,000,000 420,000,000 42,000,000 420,000,000 Capital Increase by Cash of 20,617,390
Capital Increase byRetained Earnings of 45,946,670		 None Note 4
1995/06 10.0 46,200,000 462,000,000 46,200,000 462,000,000 Capital Increase byRetained Earnings of 42,000,000 None Note 5
1996/03 10.0 73,900,000 739,000,000 53,130,000 531,300,000 Capital Increase byRetained Earnings of 69,300,000 None Note 6
1997/07 10.0 73,900,000 739,000,000 71,062,600 710,626,000 Capital Increase by Cash of 115,570,000
Capital Increase byRetained Earnings of 63,756,000		 None Note 7
1998/06 10.0 150,000,000 1,500,000,000 95,934,510 959,345,100 Capital Increase by Retained Earnings of 106,593,900
Capita Increase byCapital surplus of 142,125,200		 None Note 8
2007/08 7.6 150,000,000 1,500,000,000 125,934,510 1,259,345,100 Privateplacement of 300,000,000 None Note 9
2009/10 10.0 150,000,000 1,500,000,000 73,676,977 736,769,770 Capital reduction to cover losses of 522,575,330 None Note 10
2012/11 6.0 150,000,000 1,500,000,000 78,676,977 786,769,770 Privateplacement of 50,000,000 None Note 11
2012/12 5.95 150,000,000 1,500,000,000 83,676,977 836,769,770 Privateplacement of 50,000,000 None Note 12
2016/04 10.0 250,000,000 2,500,000,000 222,347,344 2,223,473,440 Increase by issuance of new shares due to merger of 1,438,903,670
Reduction due to merger of 52,200,000		 None Note 13
2020/12 10.0 250,000,000 2,500,000,000 188,995,242 1,889,952,420 Capital reduction of 333,521,020. None Note 14
2022/02 10.0 250,000,000 2,500,000,000 184,884,092 1,848,840,920 Treaury shares were cancled 41,111,500 accordingly due to capital
reduction.
None		 Note 15

58

Note:

  • (1) Approved by the Securities and Futures Commission, Ministry of Finance with Letter (80) Tai-Cai-Cheng (1) No. 03297 on 27 November 1991.

  • (2) Approved by the Securities and Futures Commission, Ministry of Finance with Letter (81) Tai-Cai-Cheng (1) No. 02945 on 13 November 1992.

  • (3) Approved by the Securities and Futures Commission, Ministry of Finance with Letter (82) Tai-Cai-Cheng (1) No. 44324 on 1 December 1993.

  • (4) Approved by the Securities and Futures Commission, Ministry of Finance with Letter (83) Tai-Cai-Cheng (1) No. 32308 on 30 July 1994.

  • (5) Approved by the Securities and Futures Commission, Ministry of Finance with Letter (84) Tai-Cai-Cheng (1) No. 37871 on 29 June 1995.

  • (6) Approved by the Securities and Futures Commission, Ministry of Finance with Letter (85) Tai-Cai-Cheng (1) No. 18743 on 7 March 1996.

  • (7) The Financial Supervisory Commission approved a capital increase by Retained Earnings of 63,756,000 and capital increase by cash of 115,570,000 on 28 July 1997. (Letter TaiCai-Cheng(1) No. 51554)

  • (8) Approved by the Securities and Futures Commission, Ministry of Finance with Letter (87) Tai-Cai-Cheng (1) No. 51527 on 15 June 1998.

  • (9) 30,000,000 privately placed ordinary shares, with a face value of NT$10, issued at a discount of NT$7.6 per share.

  • (10) The Financial Supervisory Commission of the Executive Yuan approved a capital reduction of NT$522,575,330 by Letter Jin-Guan-Cheng-FA-Zi No. 0980043460 on 18 September 2009. On 23 October 2009, the Ministry of Economic Affairs approved on the application for capital reduction and the registration of changes to the Articles of Association by Letter Jing-Shou-Shang-Zi No. 09801239000.

  • (11) 5,000,000 privately placed ordinary shares, with a face value of NT$10, issued at a discount of NT$6 per share. On 15 November 2012, the Ministry of Economic Affairs approved on the application for the registration of changes in the issuance of new shares by Letter Jing-Shou-Shang-Zi No. 10101236030.

  • (12) 5,000,000 privately placed ordinary shares, with a face value of NT$10, issued at a discount of NT$5.95 per share. On 24 December 2012, the Ministry of Economic Affairs approved on the application for the registration of changes in the issuance of new shares by Letter Jing-Shou-Shang-Zi No. 10101260990.

  • (13) Approved by the Financial Supervisory Commission on 4 March 2016 (Letter Jin-Guan-Cheng-FA-Zi No. 1050005429) on the issue of 143,890,367 ordinary shares with a face value of NT$ 10 due to the merger, and was approved for the registration of changes by Letter Jing-Shou-Shang-Zi No. 10501066910.

  • (14) Approved by the Financial Supervisory Commission on 15 December 2020 (Letter Jin-Guan-Cheng-FA-Zi No. 1090376896), and was approved for the application for capital reduction and registration of changes by Letter Jing-Shou-Shang-Zi No. 10901243830.

  • (15) Approved by the Department of Commerce of the Ministry of Economic Affairs Commission on 7 February 2022 (LetterJING-SHOU-SHANG-ZI No. 11101015590) , and was approved for the application for that treaury shares were cancled accordingly due to capital reduction in accordance with the shareholding ratio.

17 April 2022 17 April 2022 17 April 2022 17 April 2022
Type of Stock Authorized Capital Remarks
OutstandingShares Non-Issued Shares Total
Common Stock Public:165,715,572
Private:19,168,520		 65,115,908 250,000,000 -

Note: The Company doesn’t issue any preferred stock.

Information related to the Declaration Policy

Class of Securities ~~Estimated shares of~~
issuance		 ~~Estimated shares of~~
issuance		 Issued Shares Issued Shares ~~Objective and estimated gains of the~~
issued shares		 ~~Estimated issuance date of the non-~~
issued shares		 Remarks
~~Total Shares~~ ~~Amount~~ ~~Shares~~ ~~Price~~
~~-~~ ~~-~~ ~~-~~ ~~-~~ ~~-~~ ~~-~~ ~~-~~ ~~-~~

59

2 Shareholder structure

17 April 2022

2
Shareholder		 structure 17 April 2022
Shareholder
Quantity		 Government
Agencies		 Financial
Institutions		 Other Juridical
Persons
Individuals		 Foreign
Institutions and
Individuals		 Total
Number of
Shareholders		 0 2 161 40,139 50 40,352
Shares Held 0 83,328 36,823,908 145,818,186 2,158,670 184,884,092
Holding
Percentage		 0 0.05% 19.92% 78.87% 1.17% 100.00%
As of 17 April 2022,the Companydid not have anyequityholdings from China.
  • 3 Shareholding Distribution Status

17 April 2022

hareholding Distribution Status 17 April 2022
Tiers of Shareholding Number of
Shareholders		 Total Shares Held Holding Percentage
1 to 999 19,511 1,537,450 0.83%
1,000 to 5,000 16,668 35,077,293 18.97%
5,001 to 10,000 2,334 19,364,876 10.47%
10,001 to 15,000 554 7,317,733 3.96%
15,001 to 20,000 491 9,302,109 5.03%
20,001 to 30,000 278 7,284,509 3.94%
30,001 to 40,000 159 5,785,111 3.13%
40,001 to 50,000 84 3,967,003 2.15%
50,001 to 100,000 158 11,093,556 6%
100,001 to 200,000 54 7,762,020 4.20%
200,001 to 400,000 26 7,865,477 4.25%
400,001 to 600,000 11 5,377,959 2.91%
600,001 to 800,000 7 5,120,963 2.77%
800,001 to1,000,000 4 3,627,757 1.96%
1,000,001 and above 13 54,400,276 29.42%
Total 40,352 184,884,092 100.00%

Note: The Company does not issue any preferred stock.

  • 4 List of Major shareholders:

17 April 2022

ist of Major shareholders: 17 April 2022
Shares
Shareholders		 Number of Shares
Held		 Holding Percentage
MacyInvestment Co.,Ltd. 16,838,191
9.11%
KT Investment Co.,Ltd. 10,801,010 5.84%
Chiaoli Investment Co.,Ltd. 6,503,902 3.52%
HUANG,YI-RUNG 5,988,685 3.24%
LIN,YU-PING 3,146,718 1.70%
ZHUANG,HONG-YI 1,679,895 0.91%
TONG,CING-MEI 1,555,855 0.84%
Fulilu Investment Co.,Ltd. 1,417,109 0.77%
ZHANG,SHENG-YEN 1,412,209 0.76%
HE,CHEN-YU 1,376,893
0.74%

60

5 Share prices, net value, earnings, dividends, and other relevant information in the past two years

Unit: NT$

Unit: NT$
Item Year 2020 2021 As of 31 March 2022
Market Price per Share
(Note 1)		 Highest 12.35
33.45		 29.00
Lowest 8.00
8.95
19.20
Average 10.15
13.33
23.99
Net Value per Share
(Note 2)		 Before Distribution 13.43
12.61		 12.75
After Distribution 13.43 12.61 12.75
Earnings per Share Weighted Average Number
of Shares(Shares)		 215,779,688 184,489,861 184,884,092
Earnings
per Share		 Before
adjustment		 2.43 (0.38) 0.14
After
adjustment
(Note 3)		 2.43 (0.38) 0.14
Dividend per Share Cash dividend 0.5 - -
Stock
Dividends		 Dividends
from Retained
Earnings		 - - -
Dividends
from Capital
Surplus		 - - -
Accumulated Undistributed
Dividends(Note 4)		 - -
Return on Investment Price-to-earnings Ratio
(Note 5)		 4.18 (35.08) 171.36
Price-to-dividend Ratio
(Note 6)		 20.30 - -
Cash Dividend Yield
(Note 7)		 4.93 - -

Note:

(1) The highest and lowest market price of the shares for each fiscal year are listed and the average market price for each fiscal year is calculated based on trading value and volume in each fiscal year.

(2) Please fill these rows based on the number of shares issued at the end of the fiscal year and the distribution plan approved at the shareholders' meeting in the subsequent fiscal year or the board of director.

(3) If there are any retroactive adjustments needed due to stock grants, earnings per share before and after the adjustment should be listed.

(4) If there are any retroactive adjustments needed due to stock grants, earnings per share before and after the adjustment should be listed.

(5) Price/Earnings Ratio= Average closing price per share for the current fiscal year / earnings per share.

(6) Price/Dividend Ratio= Average closing price per share of the year/cash dividends per share.

(7) Cash Dividend Yield =cash dividend per share / current year average per share closing price.

(8) The net value of each share, surplus of each share shall be filled in with the data checked (checked and approved) by the CPA in the nearest quarter by the end of print date of annual report, while the rest of the fields shall be filled in with the data of current year by the end of print date of annual report.

61

  • 6 Dividend policy and implementation status

  • 6.1 Dividend policy as outlined in the Company’s Articles of Incorporation

The general final accounts shall be distributed according to the following order in case of surplus:

  • (1) Income tax obligation

  • (2) Offsetting accumulated deficits, if any

  • (3) Set aside 10% as legal reserve. However, when the legal reserve amounts to the authorized capital, this shall not apply.

  • (4) Set aside or reserve special reserve in accordance with law and regulations.

  • (5) In combining the balance with the accumulated undistributed surplus of the previous period, the Board shall prepare a proposal for earnings distribution and submit it to the shareholders’ meeting for a resolution distributing dividends to shareholders.

  • To adhere to the principle of sustainable operation, the Board of Directors shall, pursuant to the Company Act and the Company’s Articles of Incorporation, make the dividend distribution proposal (including cash and share bonus) annually prior to the shareholders’ meeting based on the Company’s operation, financials and capital planning. At least 20% of the dividends must be paid in the form of cash.

  • 6.2 The Company shall distribute the dividends based on the Company’s earnings status, taking future capital needs and the impact of the tax policy on the company and shareholders into accounts. The Company determines the type, the amount and timing of dividend while maintaining stable dividends.

  • 6.3 The proposal for dividends distribution this year

The Board of Directors resolved on 15 March 2022 that as the Company suffered after-tax loss in the amount of NT$ 69,658,385 in 2021 and the distributable surplus amounted to NT$360,353,133, no dividend will be distributed in order to replenish working capital.

  • 7 The impacts of issuing stock grants in this shareholder’s meeting on the Company’s operational performance and earnings per share: None.

  • 8 Employee compensation and directors’ and supervisors’ remuneration

  • 8.1 The amount or scope of the remuneration of employees, directors and supervisors stated in the Articles of Incorporation: According to the Articles of Incorporation, in case of surplus, at least 3% of profit of the current year shall be appropriated as employees’ compensation, and no higher than 1% of profit of the current year shall be appropriated as remuneration to board directors. However, the accumulated deficits, if any, shall first be made up for. The Company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the profit distributed to employees in the form of stock or cash; and in addition thereto a report of such distribution is submitted to the shareholders’ meeting.

62

  • 8.2 The accounting treatment when there is a discrepancy between the calculation basis of the amount of compensation for employees, directors and supervisors, and the calculation basis of the number of shares for employee compensation distributed by stocks and the actual distribution amount in the current period. Based on earnings as of 31 December 2021 and for the year then ended, the Company appropriated amounts of the employees’ compensation and remuneration to directors at 3% and 1% of earnings for 2021, respectively. Due to the after-tax loss in 2021, employee compensation and remuneration to directors were not recognized.

  • 8.3 Remuneration distribution approved by the Board of Directors: The Company suffered after tax loss in 2021, so it did not recognize employee compensation and remuneration to directors. No distribution information is available.

  • 8.4 Status of actual distribution of remuneration of employees , directors and supervisors of the previous year (including the number, amount and share price of shares distributed), any discrepancies with the recognized remuneration of employees, directors and supervisors, and detailed description of amount, reason and treatment of discrepancy: There is no difference between the amount of employee compensation and directors’ compensation actually distributed in 2020 and the amount stated as expense in the 2020 financial report.

  • 9 Company Share Repurchase Status

Company Share Repurchase Status Company Share Repurchase Status
18 May2022
Repurchase time First(Period)
Repurchasepurpose Transfer shares to employees
Repurchaseperiod 14 November 2018 ~ 10 January2019
Price range $6.5 to$14
Type andquantityof shares that repurchased 5,319,000 common shares
Amount of shares that repurchased $52,768,285
Ratio of the quantity of shares that are repurchased
to thequantityexpected to be repurchased
88.65%
Number of shares cancelled and transferred Transfer shares to employees: 410,000 Share
Cancellation :4,111,150 Share
Accumulated number of companyshares held -
(Note)
Percentage of total companyshares held(%) -

Note: Approved by the Financial Supervisory Commission on 15 December 2020 (Jin-Guan-Cheng-Fa-Zi No. 1090376896) and was approved by Letter Jing-Shou-Shang-Zi No. 10901243830 for capital reduction and registration of changes from 5,319,000 shares to 4,521,150 shares , and 410,000 shares were transferred to employees on 17 December, 2021 as the base date for stock subscription. The number of remaining shares 4,111,150 shares were approved by Letter Jing-Shou-Shang-Zi No. 11101015590 for cancellation of capital reduction and registration of changes.

  • 10 Status of Corporate Bonds: None.

  • 11 Status of Preferred Stocks: None.

  • 12 Status of Global Depositary Receipts: None.

  • 13 Status of Employee Stock Options: None.

  • 14 Restriction on new employee shares: Hone.

  • 15 Status of New Shares Issuance in Connection with Mergers and Acquisitions: None.

  • 16 Financing Plans and Implementation: None.

63

V. OPERATION HIGHLIGHTS

1 Business Activities

  • 1.1 Business Scope

1.1.1 Main Businesses

  • (1) Active Pharmaceutical Ingredients of Agrochemicals

  • (2) Rubber and polymer additives

  • (3) Cosmetic raw materials

  • (4) Elastomer (TPV), and Elastomer (TPU)

  • (5) Synthetic resin, primer, adhesive, hardening agent, accelerant

  • (6) Other chemicals

1.1.2 Major Product Lines and the breakdowns

Unit: NT$ (in thousands) For the years ended 31December

Unit: NT$ (in thousands)
For the years ended 31December
Items/Year 2020
2021
Amount
%
Amount
%
1,969,398
71.55
2,042,155
71.64
396,896
14.42
322,897
11.33
302,225
10.98
366,121
12.84
76,757
2.79
106,401
3.73
7,325
0.26
13,064
0.46
2,752,601
100.00
2,850,638
100.00
Fine chemicals
Agrochemicals
Elastomer
Resin
Others
Total

1.1.3 Current Products and New Products Planned

Category
Fine
Chemicals
Polymer
Others		 Product Name
Antioxidant
Curing Agent
Non-halogenated Flame Retardant
Electronic Chemicals
Nucleating Agent
The UV absorber
TPU
TPV
Polyol
PU products
Others		 New Products Planned
Increasing existing product
item
TPU Fabric
Footwear material
Recyclable
polyolefin
elastomer
Increasing existing product
item

1.2 Industry Overview

1.2.1 The present and the future

  • (1) Chemical industry is the cornerstone of consumer products and technology industry. It can be divided into two broad categories which include commodity chemicals and fine chemicals. Fine chemicals are complex substances that are produced in batches, lesser volumes and at a higher unit price. Prone to variations from different composition, the

64

products have diverse characteristics. As the chemicals are significantly smaller in scale of production, the cost only accounts for an insignificant portion in the total product costs. Considering the fine chemicals’ low ratio in the end-use costs, the users don’t usually take risks changing their suppliers. As a result, fine chemicals customer loyalty is greater than that of commodity chemicals.

Output Composition Application Life Cycle Added Value
Commodity
Chemicals		 High Simple Wide Long Low
Fine
Chemicals low Complex Narrow Short High

Source: 2020 Petrochemical and Specialty Chemical Industry Yearbook

Widely used in the industry, fine chemicals are a class of specialized products used for various purposes. Therefore, it is ambiguous to state what defines fine chemicals. polymer additives, adhesives, and coatings are the three categories in which fine chemicals are mainly used. Take our products for example: antioxidant, nucleating agent and nonhalogenated flame retardants lie in the “polymer additives” category, while curing agent and electronic chemicals are found with applications such as golf ball core, printed circuit board, etc.

ard, etc.
Industrial output of
Polymer Additives		 Unit: US$ million
Forthe years ended 31 December,
2018
2019
2020
2021
2022
42,208
43,263
41,532
43,609
44,481

Source: 2020 Petrochemical and Specialty Chemical Industry Yearbook

  • (2) Polymers maintains a certain hardness in room temperature and can be softened and reshaped after heating. Thanks to its excellent physical properties, polymer is gradually replacing the easily-broken rubber and PVC that’s prohibited in phases. Some areas where this chemical is used include: pipe material, membrane, footwear materials, textile, medical devices and adhesives.

Polymer is faced with the fluctuating raw material costs and environmental protection policies as its challenges. As the upstream raw material is trending toward selfmanufacturing, we can reduce our costs. Moreover, the downstream processing market gradually switched from China to Southeast Asia and other regions. Due to the competitive market and the price war on general products, the industry is shifting towards functional or customized products, as well as eco-friendly products, such as expanded elastomer. This development is beneficial to market segmentation and helps maintain profit.

  • (3) Agrochemicals are particularly important as the population grows and the demand for food increases. According to statistics from the Food and Agriculture Organization of the UN, if every country around the globe fails to exercise plant protection, 60% of the crops will

65

not be harvested, which may immediately cause global famine. Under the future development of the international division of labor and supply chain integration, the Company benefits from its deep OEM relationships with world-class manufacturers in this industry.

  • (4) Other technical developments such as flame retardants used in PCB: restricted by the EU regulations, phosphorus flame retardants are relatively low in toxicity. Therefore, they will extensively replace brominated flame retardants and become the key selling item in the future.

1.2.2 Correlation with upstream, midstream, and downstream of the industry

Taiwan’s petrochemical industry develops in a reverse integration manner. First, the downstream processing industry is established, and then the petrochemical processing raw materials imported from abroad form a midstream system. Finally, a naphtha cracking plant is built to supply petrochemical basic raw materials to form a complete upstream, midstream, and downstream petrochemical system.

The upstream of the petrochemical and plastic rubber industry chain includes: crude oil, naphtha, gasoline, diesel, kerosene, fuel oil, and lubricants refined from crude oil, and related mining and drilling equipment. The midstream is the basic petrochemical raw materials produced by the cracking of upstream raw materials, such as ethylene, propylene, butadiene, benzene, phenol, etc., as well as plastics, rubber, and man-made fibers made from the above raw materials through chemical reactions such as polymerization, esterification and alkylation. These materials are roughly divided into general-purpose and special-purpose chemicals according to their use. As for downstream, application varies from all kinds of daily necessities made of plastic, rubber, man-made fibers to other chemical raw materials, such as plastic products, rubber products, detergents, man-made fibers, dyes, adhesives, plasticizers, pesticides and cosmetics. The Company’s main products are fine chemicals, thermoplastic elastomers and agrochemicals, which are in the mid and downstream of the industry. The correlation among upper, middle, and downstream are listed as follows:

Upstream Midstream Downstream

Raw materials from the upstream in oil industry and related drilling equipment

Raw materials
from the
midstream in oil
industry (Ethylene,
Propylene,
Butadiene, Benzol,
Phenol, etc.)		 66
Plastic products
Adhesive (Synthetic Resin)
Cleaning products
Plasticizer
Dyestuff
Cosmetics
Artificial fiber
Rubber products
Agrochemicals		 Plastic products Rubber products

1.2.3 Trends in product development and competition

  • (1) Fine chemicals – plastic additives

  • Trends in product development: Develop green and non-toxic products to use in biodegradable polymer additives and the recycled polymer additives.

Competition: During recent years, major international manufacturers have continued to integrate the resources from upstream to downstream. China, South Korea and other manufacturers have joined the antioxidant market. Moreover, the industry leader BASF lowered its selling price to maintain the market share. In addition, the price of raw materials is sensitive and easily affected by the international situation, price of crude oil and policies on environmental protection and industrial safety. Therefore, additives manufacturers in Taiwan are still in severe competitions.

(2) Polymer products

Trends in product development: Develop recyclable, eco-friendly, low-VOC and solvent-free products that feature weather resistance and temperature tolerance.

Competition: Polymer products include TPUs and TPVs. However, there are many competitors in this industry. Most major manufacturers have already integrated with their upstream raw material suppliers. As a consequence, it is unfavorable for small factories like us to achieve raw materials at a decent price. In the future, we will develop high valueadded products with differentiated and customized specifications to overcome the competition.

  • (3) Agrochemicals

Competition: As a result of the worldwide food shortages and the need for prevention of vector-borne diseases, the demand for agrochemicals is not affected by the economy. Nevertheless, factors such as the advocation on eco-friendly and pesticides reduction policies are what led to the gradual decrease on the demand of agrochemicals. In the past two years, China has been rectifying its environmental protection and industrial safety. Also, the China-United States trade war has caused many manufacturers shutting down their production lines. It turned out that we received an increasing order due to the ordertransfer effects. Yet, it is still unpredictable how long this situation will last.

  • 1.3 The Overview of Technology and R&D

  • 1.3.1 Research and development expenses

R&D Expense in 2021: $51,299 thousand.

R&D Expense as of 31 March 2022: $12,131thousand.

67

1.3.2 Successfully developed technologies and products

  • (1) thermoplastic polyurethane and impact-resistant composite layer

  • (2) Thermoplastic polyurethane shock absorbing composition, shock absorbing material and its products.

1.4 Short-term and Long-term Business Development Plan

  • 1.4.1 Short-term Plan

  • (1) Strengthen the cooperation with international manufacturers and increase the market share.

  • (2) Develop and promote new products: PP clarifier (K21), Flame retardant(PX-202), hair dye, Polymer footwear materials( TPE), TPU/TPV yarn, TPU vibration-absorptive material, TPU inflatable Bed Material, TPV flame retardants

  • (3) Be certified by the brand dealers on Expanded Elastomer footwear materials

  • (4) Develop secondary supplier to reduce the risk of raw materials shortage

  • (5) Optimize the MIC manufacturing process

1.4.2 Long-term Plan

  • (1) Key trends and strategies on industrial transformation

  • Under such shortcomings as strict environmental regulations, limited natural resources, and increasing environmental costs, high-emission industries gradually lost their positions in the competitive market. To successfully navigate this changing landscape, chemical industry will need to develop toward low-pollution and high-economies-ofscale orientation.

  • (2) Research and development and technical services

  • a. Self-develop and form patent applications

  • b. Provide technical services to meet customer demands

  • c. Assist customers in developing customized products and grab the preemptive opportunities in the market

  • (3) Diversification Strategies

Well utilize the Company’s know-hows in chemicals and manufacturing products. For instance:

  • a. Produce personal sanitization products (special cosmetics) using cGMP qualifications from Chuansing Factory

  • b. Given the recyclable character of polymer (TPE/TPU), develop footwear using 100% polymer then recycle and reuse

  • c. Seek out businesses that are chemical-related and supported by the government

  • (4) “Save Energy, Save Earth”

In response to the “Save Energy, Save Earth” campaign, our future manufacturing process design will take action to promote energy saving, decarbonization, recycle and reuse, and to exploit the decarbonization technology.

68

2 Market and Sales Overview

2.1 Market Analysis

2.1.1 Sales region of Main Products

Unit: NT$ (in thousands)

Year
Region		 Year
Region		 Year
Region		 For theyears ended 31 December For theyears ended 31 December For theyears ended 31 December For theyears ended 31 December
2019 2020
Amount % Amount %
Domestic sales 2,008,856 72.98 2,187,844 76.75
Export 155,139 5.64 5.67 191,304 6.71
398,457 14,48 15.49 243,563 8.54
156,384 5,68 7.48 160,785 5.64
33,765 1,22 0.09 67,142 2.36
743,745 27.02 28.73 662,794 23.25
Total 2,752,601 100.00 2,850,638 100.00
Market supplyand demand and marketgrowth in the future
Items Description
Fine chemicals 1. Polymer additives are affected by the petrochemical industry
and the global economic trend. The COVID-19 pandemic has
resulted in the declining production output. As the developing
countries’ growing needs on plastics, it is expected that the
global market of additives is steadily growing.
2. Despite the ebbing growth in the mobile phone industry,
market demand on electronic chemicals in the PCB industry are
still steady, thanks to the growth of automotive electronics,
wearable devices and notebooks.
Polymer
Products		 The COVID-19 pandemic in 2020 caused a drastically decrease
in the demand of TPU and TPV in the end-user market. Still, it is
expected that the demand of polymer products remains growing
thanks to the products’ wide application on the staple
merchandise and the rising awareness on environmental
protection. However, quotation request and willingness to
produce are affected by the fluctuated price of raw materials
such as MDI and AA. But still, given the adequate
manufacturers, the supply is higher than the demand in the short
run.
Agrochemicals Considering the price war and policy to eliminate agrochemicals
usage, we keep conducting strategic cooperation agreements
with major factories to stabilize our sales. In the meantime, we
also work with our clients to develop low-toxic products which
are less harmful to the environment.

2.1.2 Market supply and demand and market growth in the future

69

  • 2.1.3 Sales Volume Forecast and Related Information

For additional details, please refer to page 9.

  • 2.1.4 Competitive niches, favorable and unfavorable factors for long-term growth and countermeasures

  • (a) Competitive niches and favorable factors

    • ① Varied product specifications are conducive to risk diversification and broaden the market.

    • ② Considering cost reduction, major foreign manufacturers seek out OEM factories with high productivity. The Company has abundant experiences in chemicals synthesis and leads an excellent R&D team. We keep improving and optimizing our manufacturing process to make our products more competitive in the market. Moreover, our R&D team is able to provide what the international manufacturers need.

    • ③ Master the high-quality and highly-effective formulation, set up our technical threshold to customize our products and meet our clients’ needs.

    • ④ As for the polymer applications in the market, we keep developing light-weight and high-rebound products such as expanded polymer composite. The increasing demand, advanced production techniques, and our marketing strategies help increasing our market share.

    • ⑤ Agricultural development relies on agrochemicals to ensure the amount harvested. The Company has experience and know-hows on agrochemicals manufacturing.

  • (b) Unfavorable factors and Countermeasures

    • ① Affected by the global economy, the amount and price of raw materials that rely heavily on importing is not easy to control.

      • Countermeasures: Develop secondary supplier to reduce the risk and maintain a stable supply of raw material

    • ② The price rivalry to gain customer preference among entities at the same level/ Horizontal competition in price

      • Countermeasures: Maintain the high quality of products to avoid price wars with inferior products; Strengthen the cooperative relationship with major international manufacturers to obtain orders with better profits, and differentiate the market from competitors.

    • ③ High competition of polymer material is a problem that needs to be overcome. Countermeasures: Develop patents on manufacturing process and applications; Develop unique materials; Cooperate with downstream customers to develop various customized products to increase customer loyalty.

    • ④ Both domestic and foreign regulations on environmental protection are becoming stricter.

Countermeasures: Research new methods of waste treatment to reduce waste treatment costs and methods for waste recycling.

70

2.2 Important Applications and Manufacturing Processes of Main Products 2.2.1 Important Applications of Major Products

Items Description
Fine chemicals (1) Antioxidants: The specifications of the antioxidant produced by the
Company are mainly used in various plastic products, which can slow
down the oxidation of plastic products. The antioxidants are widely used
in areas such as: polyolefins (such as polyethylene, polypropylene) and
olefin copolymers, polycarbonate, PS resin, PVC, engineering plastics,
rubber and petroleum products, ABS resin and other polymer materials.
It can also be used in adhesives, natural or synthetic adhesive resins.
(2) Flame Retardant: It is mainly used in printed circuit board. Due to the
restrictions of EU regulations, the substrate material must be halogen-
free and heat resistance and stability must be improved to meet the
process requirement. This type of product has low toxicity, good
processability and good compatibility with resin.
(3) Electronic Chemicals: It is used as a reducing agent for printed circuit
boards.
(4) Nucleating Agent: Mainly added to PP to enhance its transparency and
rigidity, and its end products are used in food containers and packaging
films.
Polymer
Products		 TPUs and TPVs are high-performance elastomer. Due to the rising awareness
of global environmental protection, PVC has been gradually banned in the
European and American market. Instead, polymer becomes the substitute for
PVC. Polymer has characteristics of wear resistance, with high mechanical
strength and durability, tensile property, excellent performance against
repetitive stress and decent cold resistance. Some areas where this chemical is
used include: footwear material market, sporting goods market, medical
devices, conveyor belt material, pipe material, roller material, fiber, and
membrane.
Primer: used in synthetic leather of PVC and PU series for surface treatment
purposes.
Crosslinker: For synthetic leather lamination application. The physical
property of PU resin is used in application of additives and coatings.
Polycoat: Synthetic leather of coating materials for manufacturing purses,
leathershoes,furniture, and clothes.
Agrochemicals The products are non-hormonal and contact herbicides. This quick-active
chemical behaves inactivated in the soil and affects insignificantly to the
roots of crops. Herbicides include Lannate and Furadan, etc. They’re mainly
used to deal with pests such as nephotettix cincticeps uhler, nilaparvata
lugens, sorghumaphid, corn leafaphid, etc.

2.2.2 Manufacturing Process of main products

(1) Fine chemicals

Antioxidants:

Raw Material → Reaction → Neutralization → Crystallization → Filtration → Dry → End Product

Flame Retardant:

Raw Material → Reaction → Filtration → Dry → End Product

71

Electronic Chemicals:

Raw Material → Reaction → Filtration → Washing → Curing → End Product Nucleating Agent:

Raw Material → Reaction → Purification → Filtration → Dry → End Product

  • (2) Polymer Products

Thermoplastic Elastomers (TPU)

Raw Material → Polymerization → Pelletization → Ripening → End Product Thermoplastic Elastomers (TPV)

Raw Material → Synthesis → Dry → Extrusion → End Product

  • (3) Agrochemicals

Raw Material → Reaction → Crystallization → Filtration → Dry → End Product

  • (4) Other Products

Crosslinking Agent:

Raw Material → Reaction → Titration → End Product

Primer:

Raw Material → Stir and heat → Reaction → Grinding→ Filtration → End Product Polycoat:

Raw Material → Stir and heat → Prepolymerization → Polymerization → Viscosity adjustment → End Product

2.2.3 Supply Status of Main Materials

  • a. Adipic acid (AA): Mainly purchased from Japan, South Korea, and China.

  • b. Toluene (TOL): 100% purchased from dealers.

  • c. Dimethylformamide (DMF): 100% purchased from dealers.

  • d. Methyl Ethyl Ketone (MEK): 100% purchased from dealers.

  • e. Butylene glycol (1.4 BG): 100% domestically purchased.

  • f. Ehylene Glycol (EG): 100% purchased from traders.

  • g. Isocyanate (MDI): Mainly purchased from Japan, South Korea, and China.

  • h. Phosphorus trichloride: Mainly purchased from Europe and India.

  • i. 2,4 di-tert-butyl phenol: 100% domestically purchased.

  • j. Potassium borohydride (KBH): 100% purchased from China.

  • k. 3,4-Dimethylbenzaldehyde (3.4DMBA): 90% purchased from China.

72

  • 2.2.4 Names of customers who contributed to more than 10% of total purchase (or sales) amount in one of the most recent two years and the corresponding purchase (or sales) amounts and percentages, as well as reasons for their changes (if applicable):

(1) List of major customers

Unit: NT$ (in thousands)

(1) List of major customers (1) List of major customers (1) List of major customers (1) List of major customers (1) List of major customers (1) List of major customers (1) List of major customers (1) List of major customers Unit: NT$ (in thousands) Unit: NT$ (in thousands) Unit: NT$ (in thousands) Unit: NT$ (in thousands)
For the years ended 31 December 202, as of the end of previous quarter
2020 2021
Item Name Amount As a
percentage
of net sales
(%)		 Relations
hip with
issuer		 Name Amount As a
percentage
of net sales
(%)		 Relati
onshi
p with
issuer		 Name Amount As a
percentage
of net sales
(%)		 Relations
hip with
issuer
1 Client A 445,211 16.16 None Client A 537,782 18.87 None Client A 130,974 16.62 None
2 Others 2,307,390 83.84 Others 2,312,856 81.13 Others 665,875 83.56
Net sales 2,752,601 100.00 Net sales 2,850,638 100.00 Net sales 796,849 100.00

Reasons for changes:

Client A is due to the growth of demand in the COVID-19 pandemic. Therefore, our sales to Client A increased.

(2) List of major suppliers

Unit: NT$ (in thousands)

sales to Client A increased.
(2) List of major suppliers		 sales to Client A increased.
(2) List of major suppliers		 sales to Client A increased.
(2) List of major suppliers		 sales to Client A increased.
(2) List of major suppliers		 sales to Client A increased.
(2) List of major suppliers		 sales to Client A increased.
(2) List of major suppliers		 sales to Client A increased.
(2) List of major suppliers		 sales to Client A increased.
(2) List of major suppliers		 Unit: NT$ (in thousands) Unit: NT$ (in thousands) Unit: NT$ (in thousands) Unit: NT$ (in thousands)
As of 31 December, 2022, as of the end of previous quarter
2020 2021
Item Name Amount As a
percentage
of net
purchase
(%)		 Relation
ship with
issuer
Name		 Amount As a
percentag
e of net
purchase
(%)		 Relatio
nship
with
issuer		 Name Amount As a
percentage
of net
purchase
(%)
Relations
hip with
issuer
1 10243 273,589 18.42 None 10243 353,523 20.42 None 10243 110,369 20.78 None
Others 1,212,008 81.58 Others 1,377,357 79.58 Others 420,839 79.22
Net
purchase		 1,485,597 100.00 Net
purchase		 1,730,880 100.00 Net
purchase		 531,208 100.00

Reasons for changes:

The increase in sales demand leads to an increase in production and procurement materials. Thus, the purchasing amount increased in 2021

73

2.2.5 The Production Volume and Value for the recent two years

Unit: Ton/NT$ thousands

Year
Primary Product		 As of 31 December, As of 31 December, As of 31 December, As of 31 December, As of 31 December, As of 31 December,
2020 2021
Production
capacity		 Yield Output value Production
capacity		 Yield Output value
Fine chemicals 15,559 14,304 1,803,431 11,609 12,932 1,856,748
Agrochemicals 1,086 732 270,942 523 611 231,030
TPU 3,092 3,135 266,629 3,462 3,631 386,849
Resin 2,388 1,178 105,023 1,927 1,528 129,291
Others - 1,520 21,906 - - 28,408
Total 22,125 20,869 2,467,931 17,521 18,702 2,632,326

2.2.6 The Sales Volume and Value for the recent two years

Unit: Ton/NT$ thousands

Year
PrimaryProduct		 As of31 December, As of31 December, As of31 December, As of31 December, As of31 December, As of31 December, As of31 December, As of31 December,
2020 2021
Domestic Sales Exports Domestic Sales Exports
Quantity Value Quantity Value Quantity Value Quantity Value
Fine chemicals 11,327 1,518,073 2,463
451,325
10,710		 1,640,545 2,535 401,610
Agrochemicals 271 133,419 435 263,477 216 106,092 409 216,804
TPU 2,991 292,709
96		 9,516
3,267		 355,660 98 10,462
Resin 802 57,330 398 19,427 964 72,483 584 33,918
Others 1,082 7,325 - - - 13,064 - -
Total 16,473 2,008,856
3,392		 743,745 15,157 2,187,844 3,626 662,794

3 Employee Information

Of recent two years as of the publication date of this Annual Report, number of employee, average years of service, average age and education distribution ratio.

Year
Number of
employees
Directlabor
Indirectlabor
R&Dpersonnel
Management and
Administrative staff
Total
Average age
Average years ofservice
Education
distribution
ratio
Ph.D.
Masters
Bachelor's degree
Senior highschool
Below senior highschool		 18 May2022
Year 2020 2021 Current fiscal year up
toApril302022
Directlabor 236 226 224
Indirectlabor 182 172 173
R&Dpersonnel 32 30 31
Management and
Administrative staff		 76 71 72
Total 526 499 500
Average age 39.84 40.78 41.33
8.59 9.48 10.17
Ph.D. 1.5% 1.4% 1.4%
Masters 5.7% 6.01% 6%
Bachelor's degree 53.8% 53.91% 53.2%
Senior highschool 29.17% 30.26% 31%
Below senior highschool 9.83% 8.42% 8.4%

74

  • 4 Expenditures on Environmental Protection

  • 4.1 For the loss suffered in the most recent year and up to the publication date of this Annual Report due to environmental pollution incidents (including any compensation occurred and any violations of environmental protection regulations found under inspection, specify the disposition dates, disposition reference numbers, the articles and content of regulation violated, and the content of dispositions):

  • 4.1.1 15 October 2021, Chung-Shi-Huan-Ji-Zi No. 1100137254

    • Violation of Article 24-2 of the Air Pollution Control Act (Washing liquid flow rate data cannot be recorded continuously), with a fine of $100,000.

  • 4.1.2 7 October 2021, Department of Environmental Protection No.1100021263 Violation of Article 31- 1-1 of the Waste Disposal Act (Published inaccurate waste disposal plan), with a fine of $6,000.

  • 4.2 An estimate of possible expenditures that could be incurred currently and in the future and countermeasures being or to be taken. If a reasonable estimation cannot be provided, an explanation shall be disclosed:

  • 4.2.1 The flowmeter malfunction in the wet scrubber resulted in the equipment cannot continuously record the database from channel P141. The estimated expense was around $40,000. We’ve already improved the cleaning and inspections. As of now we have replaced all the flowmeter in the wet scrubber.

  • 4.2.2 On 30, July, 2021, the staff of the environmental Protection Bureau together with experts and scholars, and the Nantou County Government Political and Civil Service Ethics Department, came to the factory for inspection, and the factory’s M04, The output of the distillation stage was cleaned. The waste liquid and filtrate in the centrifugation stage are by-product from primary distillation to fractional distillation. After checking, the above-mentioned product are not listed in the waste disposal plan of the factory. Therefore, the Environmental Protection Bureau punished it for violating Article 31-1-1 of the waste disposal Act; the application for modification of the waste disposal plan has been processed subsequently.

  • 5 Labor relations

  • 5.1 The Company's employee benefits for studying, training, pension systems and its implementation status as well as labor agreements and measures for preserving employee rights

Items Implementations

  • Annual health checks, injury and emergency assistance, children's education

  • Employee Benefits scholarships, wedding and funeral subsidies, pregnancy subsidies, festival benefits, Measures birthday cash gifts, staff travel activities; parental leave and paternity leave handled in accordance with the Act Of Gender Equality In Employment.

  • Personnel Service New Year's allowance and cash gift. Emergency Relief The employee’s incident, financial aid approved by the welfare committee, weddings and Subsidies and funerals subsidies, injury and sickness subsidies, employee maternity subsidies.

75

Items Implementations
Training and
Continuing
education		 In addition to new employees’ training, employees are selected from time to time to
participate in training, and advance study.
Hours of 2021 internal training: 456 hours.
Hours of 2021 external training: 1,484.5 hours.
Educational
Scholarships		 Labor education and scholarships for children.
In order to ensure employees’ livelihood after retirement, pension regulations are
established in accordance with the Labor Standards Act and Labor Pension Act.
Pension system Retirement reserves are allocated on a monthly basis. Also, a retirement reserve
supervision committee is set up for the purpose of management, supervision and
implementation.
Labor agreement A labor-management meeting is held every quarter.
Measures to protect Through labor-management meeting, both parties are able to communicate with each
employee rights other and protect the rights and interests of employees.

  • 5.2 Losses suffered in the most recent year and up to the publication date of this Annual Report due to labor disputes (including any violations of the Labor Standards Act found under inspection, specify the disposition dates, disposition reference numbers, the articles and content of regulation violated, and the content of dispositions):

  • 5.2.1 On 26 January 2021 a penalty of $50,000 was paid pursuant to Article 32-2, Article 79-1-1 and Article 80-1-1 of the Labor Standards Act. (Fu-Lao-Jian-Zi No. 1100019121)

  • 5.2.2 On 19 January 2022, a penalty of $50,000 was paid pursuant to Article 32-2, Article 79-1-1 and Article 80-1-1 of the Labor Standards Act. (Fu-Shou-Lao-Dong-Zi No. 1110011733)

  • 5.3 Countermeasures:

If any dispute occurs between the labor and management, the representatives of both parties can fully express their opinions and communicate in a labor-management coordination meeting to find the best solution. The relationship between labor and management is harmonious, and problems can be resolved through coordination. There were no labor disputes or losses in the most recent three years. In addition to the uniform given to the production staff, the Company also offers birthday benefits, festival benefits, emergency relief and subsidies, wedding and funeral subsidies and other welfare. The Company also hold labor trainings and team-building activities to ensure employees’ both mental and physical health.

6 Information Security Management

  • 6.1 State the in ormation security risk management structure, the information security policy, the specific management plan and the resources invested in the security management of the information communication.

In order to protect the security of all information systems and electronic data of the Company,

76

including hardware equipment, operating software, network electronic files, record, etc., from information risk such as destruction, leakage, theft or extortion, this policy is specially formulated.

The Company shall take the following measures:

  1. Comply with laws and regulations to formulate relevant information security management rules, and implement appropriate protection measures for the Company’s information systems and electronic data to ensure their confidentiality, integrity and legality.

  2. Evaluate the impact of various man-made and natural disasters on the Company’s information system and disaster recovery plans to ensure the continuous operation of the Company’s business.

  3. Supervise the Company’s employees to implement information security protection work, and enhance employees’ awareness of information security.

  4. Require employees of the Company and external parties who use or link the Company’s information system to strictly abide by the Company’s information security related regulations. If there is a violation, it will be handled according to the Company’s relevant regulations or contract penalties. Severe cases of violation are punishable by law.

Specific management methods:

  1. Firewall: (1) Firewall sets connection rules to block external attack (2) Set up internet access policies to prevent people from linking to harmful URLs.

  2. Antivirus software: Use antivirus software, and automatically update the virus pattern to reduce the chance of virus infection.

  3. System/file access: The operating system sets the login account, password, and classify access authorization. The password strength should comply with the security rules and be changed regularly.

  4. E-mail security control: (1) Automatic email scanning threat protection (2) Set up spam filtering system.

  5. Data backup mechanism: (1) Daily backups are set for important information system. (2) Database-offsite backup is set for the Company hosts and database.

  6. Strain Recovery Mechanism: Regular system disaster recovery drills are conducted.

  7. 6.2 List the losses incurred due to major information security incidents in the most recent year and as of the date publication of the annual report, the possible impact and countermeasures. If it cannot be reasonably estimated, it shall be explained the reason.

In recent years, there has been no financial loss caused by information security incidents.

  • 7 Important contracts: None.

77

VI. FINANCIAL INFORMATION

  • 1 Condensed Balance Sheet, Income Statement, Names of the CPAs and their audit opinions

  • 1.1 Condensed Balance Sheet and Income Statement for the recent five years

Condensed Balance Sheet (Consolidated)

Unit: NT$ (in thousands)

Year
Item		 Year
Item		 Financial information for the recent fiveyears(Note 1) Financial information for the recent fiveyears(Note 1) Financial information for the recent fiveyears(Note 1) Financial information for the recent fiveyears(Note 1) Financial information for the recent fiveyears(Note 1) As of the first
quarter of 2022
(Note 2)
2017 2018 2019 2020 2021
Current assets 2,318,223 2,131,091 2,073,670 2,654,855 2,030,289 2,066,096
Property, Plant, and
Equipment		 1,689,810 1,708,859 1,773,778 1,702,885 1,664,358 1,642,937
Intangible assets 11,164 11,164 11,164 14,914 13,846 16,870
Other assets 218,922 252,489 386,838 426,767 382,859 370,602
Total assets 4,238,119 4,103,603 4,245,450 4,799,421 4,091,352 4,096,505
Current
Liabilities		 Before
distribution		 962,708 1,099,769 1,056,740 1,474,762 1,066,756 1,070,914
After
distribution		 1,007,177 1,099,769 1,056,740 1,566,999 1,066,756 1,070,914
Long-term liabilities 920,380 729.203
911,373		 847,282 693,007 667,458
Total
liabilities		 Before
distribution		 1,883,088 1,828,972 1,968,113 2,322,044 1,759,763 1,738,372
After
distribution		 1,927,557 1,099,769 1,968,113 2,414,281 1,759,763 1,738,772
Equity Attributable to the
Parent company		 2,350,425 2,270,336 2,272,871 2,477,198 2,331,468 2,358,133
Capital-Common Stock 2,223,473 2,223,473 2,223,473 1,889,952 1,889,952 1,848,841
Capital Surplus 35,888 37,785 37,785 37,848 41,930 42,255
Retained
Earnings		 Before
distribution		 86,245 68,305 62,953 599,874 441,577 467,224
After
distribution		 41,776 68,305 62,953 507,637 441,577 467,224
Other Equity 4,819 (14,519) 1,428 (5,623) (1,205) (187)
TreasuryStock - (44,708) (52,768) (44,853) (40,786) -
Prior interests under joint
control		 - - - - - -
Non-controllingInterest 4,606 4,295 4,466 179 121 -
Total
Equity		 Before
distribution		 2,355,031 2,274,631 2,277,337 2,477,377 2,331,589 2,358,133
After
distribution		 2,310,562 2,274,631 2,277,337 2,385,140 2,331,589 2,358,133

Note 1: The financial information above have been audited and certified by the CPAs. Note 2: The financial information above have been audited by the CPAs.

Note 3: The amount after distribution shall refer to the amount determined after the resolution in the shareholders’ meeting in the following fiscal year.

78

Condensed Balance Sheet (Parent Only)

Unit: NT$ (in thousands)

Year
Item		 Year
Item		 Financial information for the recent fiveyears(Note 1) Financial information for the recent fiveyears(Note 1) Financial information for the recent fiveyears(Note 1) Financial information for the recent fiveyears(Note 1) Financial information for the recent fiveyears(Note 1) As of the first
quarter of 2022
2017 2018 2019 2020 2021
Current assets 2,290,283 2,116,098 2,057,881 2,653,798
2,021,269		 -
Property, Plant, and
Equipment		 1,687,974 1,707,813 1,773,348 1,702,853
1,664,358		 -
Intangible assets 11,164 11,164 11,164 14,914
13,846		 -
Other assets 234,578 263,918 398,583 427,676
386,080		 -
Total assets 4,223,999 4,098,993 4,240,976 4,799,241
4,085,553		 -
Current
Liabilities		 Before
distribution		 953,194 1,099,454 1,056,732 1,474,761 1,061,078 -
After
distribution		 997,663 1,099,454 1,056,732 1,566,998 1,061,078 -
Long-term liabilities 920,380 729,203 911,373 847,282
693,007		 -
Total
liabilities		 Before
distribution		 1,873,574 1,828,657 1,968,105 2,322,043 1,754,085 -
After
distribution		 1,918,043 1,828,657 1,968,105 2,414,280 1,754,085 -
Capital-Common Stock 2,223,473 2,223,473 2,223,473 1,889,952
1,889,952		 -
Capital Surplus 35,888 37,785 37,785 37,848
41,930		 -
Retained
Earnings		 Before
distribution		 86,245 68,305 62,953 599,874 441,577 -
After
distribution		 41,776 68,305 62,953 507,637 441,577 -
Other Equity 4,819 (14,519) 1,428 (5,623) (1,205) -
TreasuryStock - (44,708) (52,768) (44,853) (40,786) -
Prior interests under joint
control		 - - - - - -
Non-jointly controlled
equitybefore the merger		 - - - - - -
Total
Equity		 Before
distribution		 2,350,425 2,270,336 2,272,871 2,477,198 2,331,468 -
After
distribution		 2,305,956 2,270,336 2,272,871 2,384,961 2,331,468 -

Note 1: The financial information above have been audited and certified by the CPAs. Note 2: The amount after distribution shall refer to the amount determined after the resolution in the shareholders’ meeting in the following fiscal year.

79

Condensed Income Statement (Consolidated)

Unit: EPS expressed in NT$; others in NT$ thousands

Condensed Income Statement (Consolidated)
Unit: EPS expressed in NT$; others in		 Condensed Income Statement (Consolidated)
Unit: EPS expressed in NT$; others in		 Condensed Income Statement (Consolidated)
Unit: EPS expressed in NT$; others in		 Condensed Income Statement (Consolidated)
Unit: EPS expressed in NT$; others in		 Condensed Income Statement (Consolidated)
Unit: EPS expressed in NT$; others in		 NT$ thousands
Year
Item		 Financial information for the recent five years (Note 1) As of the first
quarter of 2022
(Note 2)
2017 2018 2019 2020 2021
OperatingRevenue 3,408,905 3,451,774 3,243,968 2,752,601 2,850,638 796,849
Gross Profit 381,618 250,793 282,137 139,355
128,104		 74,671
Income (Loss) from Operation 110,020 (36,391) 17,323 (243,755) (95,951) 18,223
Non-operating Income and
Expenses		 (41,837) 48,253 (26,408) 727,049
42,110		 9,730
Income (loss) from continuing
operation before income tax		 68,183 11,862 (9,085) 483,294
(53,841)		 27,953
Income Tax Benefits (Expenses) 886 2,857 2,208 41,012
(16,175)		 (2,306)
Net Income (Loss) from
ContinuingOperations		 69,069 14,719 (6,877) 524,306
(70,0160		 25,647
Income (Loss) from
Discontinued Operations		 - - - - - -
Net Income (Loss) 69,069 14,719 (6,877) 524,306
(70,016)		 25,647
Other Comprehensive Income
(Loss) (after Tax)		 (637) (5,780) 17,643 5,466
8,316		 1,018
Total Comprehensive Income
(Loss)		 68,432 8,939 10,766 529,772
(61,700)		 25,665
Net Income Attributable to the
parent company		 70,042 16,123 (6,808) 524,404
(61,700)		 25,647
Net Income Attributable to
Non-jointly controlled equity
before the merger		 - - - - - -
Net Income Attributable to
Non-ControllingInterests		 (973) (1,404) (69) (98)
(58)		 -
Total Comprehensive Income
Attributable to stockholder of
theparent		 69,474 10,353 10,595 529,870
(61,642)		 26,665
Total Comprehensive Income
Attributable to Non-jointly
controlled equity before the
merger		 - - - - - -
Total Comprehensive Income
Attributable to Non-
ControllingInterests		 (1,042) (1,414) 171 (98)
(58)		 -
Earnings per Share (NT$)
(Note 3)		 0.32 0.07 (0.03) 2.43
(0.38)		 0.14

Note 1: The financial information above have been audited and certified by the CPAs. Note 2: The financial information above have been audited by the CPAs.

Note 3: Earnings per share is calculated retrospectively based on the weighted average number of shares outstanding in the current year.

80

Condensed Income Statement (Parent Only)

Unit: EPS expressed in NT$; others in NT$ thousands

Condensed Income Statement (Parent Only)
Unit: EPS expressed in NT$; others in		 Condensed Income Statement (Parent Only)
Unit: EPS expressed in NT$; others in		 Condensed Income Statement (Parent Only)
Unit: EPS expressed in NT$; others in		 Condensed Income Statement (Parent Only)
Unit: EPS expressed in NT$; others in		 Condensed Income Statement (Parent Only)
Unit: EPS expressed in NT$; others in		 NT$ thousands
Year
Item		 Financial information for the recent five years (Note 1) As of the first
quarter of 2021
2017 2018 2019 2020 2021
OperatingRevenue 3,374,463 3,417,297 3,228,494 2,752,601 2,848,057 -
Gross Profit 378,021 245,761 280,761 139,355
125,523		 -
Income (Loss) from Operation 117,260 (26,937) 17,813 (243,686)
(97,233)		 -
Non-operating Income and
Expenses		 (48,104) 40,203 (26,829) 727,078
43,450		 -
Income (loss) from continuing
operation before income tax		 69,156 13,266 (9,016) 483,392
(53,783)		 -
Income Tax Benefits (Expenses) 886 2,857 2,208 41,012
(16,175)		 -
Net Income (Loss) from
ContinuingOperations		 70,042 16,123 (6,808) 524,404
(69,958)		 -
Income (Loss) from
Discontinued Operations		 - - - - - -
Net Income (Loss) 70,042 16,123 (6,808) 524,404
(69,958)		 -
Other Comprehensive Income
(Loss) (after Tax)		 (568) (5,770) 17,403 5,466
8,316		 -
Total Comprehensive Income
(Loss)		 69,474 10,353 10,595 529,870
(61,642)		 -
Earnings per Share (NT$)
(Note 2)		 0.32 0.07 (0.03) 2.43
(0.38)		 -

Note 1: The financial information above have been audited and certified by the CPAs. Note 2: Earnings per share is calculated retrospectively based on the weighted average number of shares outstanding in the current year.

1.2 Names of the CPAs and their audit opinions for the recent five years

**Year ** Accounting Firm Name of the CPA Audit Opinion
2017 Ernst & Young YEN, WEN-PI/ TU, CHIN-YUAN Unqualified
2018 Ernst & Young CHEN, MING-HONG/ YEN, WEN-PI Unqualified plus other matters paragraph
2019 Ernst & Young CHEN, MING-HONG/ YEN, WEN-PI Unqualified plus other matters paragraph
2020 Ernst & Young TU, CHIN-YUAN/ YEN, WEN-PI Unqualified
2021 Ernst & Young TU, CHIN-YUAN/ YEN, WEN-PI Unqualified

81

2 Financial analysis for the recent five years

  • 2.1 Financial analysis (Consolidated)
Item Year Financial analysis for the recent five years (Note 1) Financial analysis for the recent five years (Note 1) Financial analysis for the recent five years (Note 1) Financial analysis for the recent five years (Note 1) Financial analysis for the recent five years (Note 1) As of the first
quarter of 2022
(Note 2)
2017 2018 2019 2020 2021
Financial
Structure		 Debt to Assets Ratio(%) 44.43 44.57 46.36 48.38 43.01 42.44
Long-Term Capital to Property, Plant
and Equipment Ratio (%)
193.83		 175.78 179.77 195.24 181.73 184.16
Liquidity Current Ratio (%) 240.80 193.78 196.23 180.02 190.32 192.93
Quick Ratio (%) 163.10 119.71 113.04 128.73 108.34 105.47
Interest Coverage 5.27 1.62 0.54 30.92 (3.40) 9.98
Operating
Performance		 Accounts Receivable Turnover (times) 4.69 4.83 4.86 4.63 4.25 4.09
Average Collection Days 78 76 75 79 86 89
Inventory Turnover (times) 4.15 4.43 3.41 3.07 3.20 3.11
Accounts Payable Turnover (times) 8.75 9.35 8.87 8.47 8.70 8.94
Average Inventory Turnover Days 88 82 107 119 114 117
Property,
Plant
and
Equipment
Turnover (times)
2.06		 2.03 1.86 1.58 1.69 1.93
Total Assets Turnover (times) 0.80 0.83 0.78 0.61 0.64 0.78
Profitability ROA (%) 1.93 0.72 0.21 11.88 (1.35) 2.75
ROE (%) 2.88 0.64 (0.30) 22.05 (2.91) 4.38
Ratio of Pre-tax Profit to Paid-in
Capital (%)		 3.07 (1.64) (0.41) 25.57 (2.85) 6.05
Net Margin (%) 2.03 0.43 (0.21) 19.05 (2.46) 3.22
Earnings per Share (NT$) (Note 3) 0.32 0.07 (0.03) 2.43 (0.38) 0.14
Cash Flow Cash Flow Ratio (%) 19.16 16.67 20.69 16.92 (13.90) (4.26)
Cash Flow Adequacy (%) 196.76 140.21 117.52 116.57 37.83 51.67
Cash Flow Reinvestment Ratio (%) 0.56 2.78 4.27 4.62 (4.62) (0.22)
Leverage Operating Leverage 3.25 (5.36) 15.54 (0.11) (1.84) 4.65
Financial Leverage 1.17 0.66 (7.80) (0.94) 0.89 1.21
The reasons for changes in financial ratios above 20% over the past two years:
1.
The decrease in interest coverage was mainly due to the decrease in net income before tax.
2.
The decrease in each profitability ratio was mainly due to the decrease in net income after tax.
3.
The decrease in cash flow ratio was mainly due to the increase in cash used in operation.
4.
The decrease in cash flow adequancy ratio was mainly due to the decrease in cash used in operation in recently five
years.
5.
The decrease in cash re-investment ratio was mainly due to the increase in cash used in operation and paid 2020 cash
dividends.
6.
The decrease in the operating leverage was mainly due to the decrease in operating losses and the decrease in variable
operating costs and expenses.
7.
Theincreaseinthefinancial leverage wasmainly due to the decreaseinoperatinglosses andinterest expense.

Note 1: The financial information above have been audited and certified by the CPAs.

Note 2: The financial information above have been audited by the CPAs.

Note 3: Earnings per share was calculated retrospectively based on the weighted average number of shares outstanding in the current year.

82

2.2 Financial analysis (Parent Only)

Item Year Financial analysis for the recent five years (Note 1) Financial analysis for the recent five years (Note 1) Financial analysis for the recent five years (Note 1) Financial analysis for the recent five years (Note 1) Financial analysis for the recent five years (Note 1) As of the first
quarter of 2021
2017 2018 2019 2020 2021
Financial
Structure		 Debt to Assets Ratio(%) 44.36 44.61 46.41 48.38 42.93 -
Long-Term Capital to Property, Plant
and Equipment Ratio (%)
193.77		 175.64 179.56 195.24 181.72 -
Liquidity Current Ratio (%) 240.27 192.47 194.74 179.95 190.49 -
Quick Ratio (%) 162.66 118.44 111.58 128.68 108.12 -
Interest Coverage 5.33 1.70 0.54 30.93 (3.39) -
Operating
Performance		 Accounts Receivable Turnover (times) 4.65 4.78 4.84 4.63 4.21 -
Average Collection Days 79 76 75 79 87 -
Inventory Turnover (times) 4.13 4.41 3.39 3.07 3.20 -
Accounts Payable Turnover (times) 8.71 9.27 8.82 8.47 8.70 -
Average Inventory Turnover Days 88 83 108 119 114 -
Property,
Plant
and
Equipment
Turnover (times)
2.05		 2.01 1.85 1.58 1.69 -
Total Assets Turnover (times) 0.79 0.82 0.77 0.61 0.64 -
Profitability ROA (%) 1.96 0.75 0.21 11.89 (1.35) -
ROE (%) 2.92 0.70 (0.30) 22.08 (2.91) -
Ratio of Pre-tax Profit to Paid-in
Capital (%)		 3.11 0.60 (0.41) 25.58 (2.85) -
Net Margin (%) 2.08 0.47 (0.21) 19.05 (2.46) -
Earnings per Share (NT$) (Note2) 0.32 0.07 (0.03) 2.43 (0.38) -
Cash Flow Cash Flow Ratio (%) 19.68 17.58 20.64 16.92 (15.69) -
Cash Flow Adequacy (%) 200.11 141.92 118.72 117.33 37.57 -
Cash Flow Reinvestment Ratio (%) 0.62 2.99 4.27 4.62 (4.97) -
Leverage Operating Leverage 3.10 (7.65) 15.11 (0.10) (1.80) -
Financial Leverage 1.16 0.59 (10.28) (0.94) 0.89 -
The reasons for changes in financial ratios above 20% over the past two years:
1.
The decrease in interest coverage was mainly due to the decrease in net income before tax.
2.
The decrease in each profitability ratio was mainly due to the decrease in net income after tax.
3.
The decrease in cash flow ratio was mainly due to the increase in cash used in operation.
4.
The decrease in cash flow adequancy ratio was mainly due to the decrease in cash used in operation in recently five
years.
5.
The decrease in cash re-investment ratio was mainly due to the increase in cash used in operation and paid 2020 cash
dividends.
6.
The decrease in the operating leverage was mainly due to the decrease in operating losses and the decrease in variable
operating costs and expenses.
7.
Theincreaseinthefinancial leverage wasmainly due to the decreaseinoperatinglosses andinterest expense.
  1. The increase in the financial leverage was mainly due to the decrease in operating losses and interest expense. Note 1: The financial information above have been audited and certified by the CPAs.

Note 2: Earnings per share was calculated retrospectively based on the weighted average number of shares outstanding in the current year.

83

Note I. The formulas are as follows:

  1. Financial Structure

  2. 7.1.1 Debt to Assets Ratio = total liabilities / total assets

  3. 7.1.2 Long-term Capital to Property, Plant and Equipment Ratio = (total shareholders’ equity + noncurrent liabilities) / net property, plant and equipment

  4. Liquidity

  5. (1) Current Ratio = current assets / current liabilities

  6. (2) Quick Ratio = (current assets – inventory – prepaid expenses) / current liabilities

  7. (3) Interest Coverage = earnings before interest and taxes / interest expenses

  8. Operating Performance

  9. (1) Accounts Receivables turnover rate (including bills receivable resulting from accounts receivable and business operations) = Net sales / average accounts receivable in various periods (including bills receivable resulting from accounts receivable and business operations).

  10. (2) Average collection days = 365 / receivables turnover ratio

  11. (3) Inventory turnover rate = cost of goods sold / average inventory

  12. (4) Accounts Payables turnover rate (including bills payable resulting from accounts payable and business operations) = Cost of sales / Average accounts payable in various periods (including bills payable resulting from accounts payable and business operations).

  13. (5) Average inventory turnover days = 365 / inventory turnover rate.

  14. (6) Property, Plant and Equipment turnover rate = net sales / average net property, plant and equipment

  15. (7) Total asset turnover rate = net sales / average total assets.

  16. Profitability

  17. (1) Return on Assets = [after-tax net income + interest expense × (1 – effective tax rate)] / average total assets

  18. (2) Return on Equity = after-tax net income / average equity

  19. (3) Net Margin = after-tax net income / net sales

  20. (4) Earnings per Share = (net income attributable to the parent company – preferred stock dividends) / weighted average number of shares outstanding (Note II)

  21. Cash Flow

  22. (1) Cash Flow Ratio = net cash flows from operating activities / current liabilities

  23. (2) Cash Flow Adequacy Ratio = net cash flows from operating activities for the recent five years/ sum of (capital expenditures+ increase in inventory + cash dividends) of the recent five years.

  24. (3) Cash Flow Reinvestment Ratio = (net cash flows from operating activities – cash dividends) / (gross property, plant and equipment + long-term investments + other non-current assets + working capital) (Note III)

  25. Leverage

  26. (1) Operating Leverage = (net operating revenue – variable operating costs and expenses) / operating profit. (Note IV)

  27. (2) Financial Leverage = operating profit / (operating profit – interest expenses)

84

Note II. When calculating the Earnings Per Share, the following matters shall be noted:

  1. Based on the weighted average outstanding shares, not the outstanding shares at year-end.

  2. Under circumstances of capital increase by cash or transactions of treasury stock, the outstanding period shall be taken into consideration while calculating the weighted average outstanding shares.

  3. Under circumstances of capital increase by retained earnings or capital increase by capital surplus, the annual and semi-annual EPS shall be adjusted retrospectively based on the ratio of increased capital. The outstanding period is not included.

  4. If the preferred stocks are non-convertible and cumulative, the dividends (whether distributed or not) shall be deducted from the after-tax net income or added to the after-tax net loss. If the preferred stocks are non-cumulative, the dividends shall be deducted from the after-tax net income if applicable; no adjustment needed if net losses occur.

Note III. When analyzing cash flow, the following matters shall be noted:

  1. Net cash flows from operating activities is the amount of cash inflows from operating activities on the Statement of Cash Flows.

  2. Capital expenditure is the amount of cash outflows from annual capital investment.

  3. State the increase in inventory only when the ending inventory is greater than the beginning inventory. If the ending inventory decreases, take 0 into calculation.

  4. Cash dividends include dividends from common stocks and preferred stocks.

  5. Gross property, plant and equipment shall refer to the total amount of property, plant, and equipment prior to the deduction of accumulated depreciation.

Note IV. The issuer shall classify both operating costs and expenses as fixed and variable. If estimation or subjective judgements take place, one shall be aware of the reasonableness and consistency.

Note V. When the stock has no par value or the par value is less than NT$10, the aforementioned ratios to paid-in capital shall be calculated based on the equity attributable to the parent company on the Balance Sheet.

85

  • 3 Audit Committee’s Review Report for the recent years

SUNKO INK CO., LTD. Audit Committee’s Review Report

The Board of Directors has prepared the Company’s 2021 Business Report, Consolidated and Parent Only Financial Statements, and proposal of Earnings Appropriation. Both the Consolidated and Parent Only Financial Statements were audited and issued with an audit report by CPA TU, CHIN-YUAN and CPA YEN, WEN-PI from Ernst & Young, Taiwan. The Audit Committee had concluded the aforementioned Business Report, Financial Statements and proposal of Earnings Appropriation complied with Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act. We hereby submit this report for your review.

Regards,

2022 General Shareholders’ Meeting

SUNKO INK CO., LTD Convener of the Audit Committee: TSOU, YEN-CHUNG 15 March 2022

86

4 Consolidated Financial Statements of the Most Recent Year with Independent Auditors’ Report with Independent Auditors’ Report

==> picture [469 x 112] intentionally omitted <==

==> picture [469 x 113] intentionally omitted <==

==> picture [469 x 113] intentionally omitted <==

==> picture [469 x 112] intentionally omitted <==

==> picture [469 x 113] intentionally omitted <==

==> picture [469 x 112] intentionally omitted <==

87

==> picture [507 x 104] intentionally omitted <==

==> picture [507 x 103] intentionally omitted <==

==> picture [507 x 103] intentionally omitted <==

==> picture [507 x 104] intentionally omitted <==

==> picture [507 x 104] intentionally omitted <==

==> picture [507 x 103] intentionally omitted <==

==> picture [507 x 103] intentionally omitted <==

88

==> picture [509 x 718] intentionally omitted <==

89

==> picture [499 x 120] intentionally omitted <==

==> picture [499 x 121] intentionally omitted <==

==> picture [499 x 121] intentionally omitted <==

==> picture [499 x 120] intentionally omitted <==

==> picture [499 x 121] intentionally omitted <==

==> picture [499 x 120] intentionally omitted <==

90

==> picture [498 x 120] intentionally omitted <==

==> picture [498 x 121] intentionally omitted <==

==> picture [498 x 121] intentionally omitted <==

==> picture [498 x 120] intentionally omitted <==

==> picture [498 x 121] intentionally omitted <==

==> picture [498 x 120] intentionally omitted <==

91

==> picture [505 x 718] intentionally omitted <==

92

==> picture [505 x 716] intentionally omitted <==

93

==> picture [505 x 717] intentionally omitted <==

94

==> picture [682 x 481] intentionally omitted <==

95

==> picture [688 x 483] intentionally omitted <==

96

SUNKO INK CO., LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the years Ended 31 December 2021 and 2020 (Expressed in Thousands of New Taiwan Dollars, unless Otherwise Stated)

1. General

Sunko Ink Co., Ltd. (hereinafter “the Company”) was incorporated in December 1974. The Company is engaged in manufacturing and trading of certain chemicals or industrial materials. Major product lines are as follows:

a. Argochemicals

b. Fine Chemicals: curing agent, non-halogenated flame retardant, reducing agent, antioxidant

  • c. Polymer: PU Based surface treating agent, Polymer-TPU, Polymer-TPV d. UV Absorbers

In May 1996, the Company’s shares were listed on the Taiwan Stock Exchange (TWSE), when the registered office was located at No. 139, Renmei Rd., Dali Dist., Taichung City 412036, Taiwan (R.O.C.). On 30 April 2021, as approved by Ministry of Economic Affairs, the Company’s registered operating office address was changed to 5F, No. 229, Zhongxing St., West Dist., Taichung City 403022, Taiwan (R.O.C.).

On 30 March 2016, the Company merged with Kuo Ching Chemical Co., Ltd. (hereinafter “Kuo Ching”). Kuo Ching was incorporated in April 1977, mainly engaged in production and trading of agrochemicals, fine chemicals, and other polymer materials. In October 2009, Kuo Ching’s shares was listed on the Emerging Stock Board. To improve efficiency and competitive capabilities, the Company merged with Kuo Ching on 30 March 2015 to integrate both entities’ production capacities, research resources, marketing and product lines. The Company was the surviving company which acquired all Kuo Ching’s assets, liabilities, rights, and obligations.

97

2. Date and procedures of authorization of financial statements for issue

The consolidated financial statements of the Company and its subsidiaries (hereinafter referred to as “the Group”) for the years ended 31 December 2021 and 2020 were approved to release in accordance with a resolution of the board of directors’ meeting on 15 March 2022.

3. Newly issued or revised standards and interpretations

  • (1) Changes in accounting policies resulting from applying for the first-time certain standards and amendments

The Group applied for the first time International Financial Reporting Standards, International Accounting Standards, and Interpretations issued, revised or amended which are recognized by Financial Supervisory Commission (“FSC”) and become effective for annual periods beginning on or after 1 January 2021. The adoption new standard and amendment is described, had no material impact on the Group.

  • (2) Standards or interpretations issued, revised or amended, by International Accounting Standards Board (“IASB”) which are endorsed by FSC, but not yet adopted by the Group as at the end of the reporting period are listed below.
Items New, Revised or Amended Standards and Interpretations Effective Date
issued by IASB
a Narrow-scope
amendments
of
IFRS,
including
Amendments to IFRS 3, Amendments to IAS 16,
Amendments to IAS 37 and the Annual Improvements		 1 January 2022

  • (a) Narrow-scope amendments of IFRS, including Amendments to IFRS 3,

  • Amendments to IAS 16, Amendments to IAS 37 and the Annual Improvements

  • A. Updating a Reference to the Conceptual Framework (Amendments to IFRS 3)

98

The amendments updated IFRS 3 by replacing a reference to an old version of the Conceptual Framework for Financial Reporting with a reference to the latest version, which was issued in March 2018. The amendments also added an exception to the recognition principle of IFRS 3 to avoid the issue of potential “day 2” gains or losses arising for liabilities and contingent liabilities. Besides, the amendments clarify existing guidance in IFRS 3 for contingent assets that would not be affected by replacing the reference to the Conceptual Framework.

  • B. Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)

The amendments prohibit a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, a company will recognise such sales proceeds and related cost in profit or loss.

  • C. Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)

The amendments clarify what costs a company should include as the cost of fulfilling a contract when assessing whether a contract is onerous.

  • D. Annual Improvements to IFRS Standards 2018 - 2020

Amendment to IFRS 1

The amendment simplifies the application of IFRS 1 by a subsidiary that becomes a first-time adopter after its parent in relation to the measurement of cumulative translation differences.

Amendment to IFRS 9 Financial Instruments

The amendment clarifies the fees a company includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability.

Amendment to Illustrative Examples Accompanying IFRS 16 Leases The amendment to Illustrative Example 13 accompanying IFRS 16 modifies the treatment of lease incentives relating to lessee’s leasehold

99

improvements.

Amendment to IAS 41

The amendment removes a requirement to exclude cash flows from taxation when measuring fair value thereby aligning the fair value measurement requirements in IAS 41 with those in other IFRS Standards.

The abovementioned standards and interpretations were issued by IASB and endorsed by FSC so that they are applicable for annual periods beginning on or after 1 January 2022.The remaining standards and interpretations have no material impact on the Group.

  • (3) Standards or interpretations issued, revised or amended, by International Accounting Standards Board (“IASB”) which are not endorsed by FSC, and not yet adopted by the Group as at the end of the reporting period are listed below.
Items New, Revised or Amended Standards and Interpretations Effective Date
issued by IASB
a IFRS 10 “Consolidated Financial Statements” and IAS 28
“Investments in Associates and Joint Ventures” — Sale or
Contribution of Assets between an Investor and its
Associate or Joint Ventures		 To be determined
by IASB
b IFRS 17“Insurance Contracts” 1 January 2023
c Classification of Liabilities as Current or Non-current –
Amendments to IAS 1		 1 January 2023
d Disclosure Initiative - Accounting Policies – Amendments
to IAS 1		 1 January 2023
e Definition of Accounting Estimates – Amendments to IAS
8		 1 January 2023
f Deferred Tax related to Assets and Liabilities arising from
a Single Transaction–Amendments to IAS 12		 1 January 2023
  • (a) IFRS 10“Consolidated Financial Statements” and IAS 28“Investments in

Associates and Joint Ventures” — Sale or Contribution of Assets between an Investor and its Associate or Joint Ventures

The amendments address the inconsistency between the requirements in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures , in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture. IAS 28 restricts gains and loss arising from contributions of non-monetary assets to an associate or a joint venture to the extent of the interest attributable to the other equity holders in the associate or joint ventures. IFRS 10 requires full profit or loss recognition on the loss of control of the subsidiary. IAS 28 was amended so that the gain or loss resulting from the sale or contribution

100

of assets that constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized in full.

IFRS 10 was also amended so that the gains or loss resulting from the sale or contribution of a subsidiary that does not constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized only to the extent of the unrelated investors’ interests in the associate or joint venture.

(b) IFRS 17 “Insurance Contracts”

IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects (including recognition, measurement, presentation and disclosure requirements). The core of IFRS 17 is the General (building block) Model, under this model, on initial recognition, an entity shall measure a group of insurance contracts at the total of the fulfilment cash flows and the contractual service margin. The carrying amount of a group of insurance contracts at the end of each reporting period shall be the sum of the liability for remaining coverage and the liability for incurred claims.

Other than the General Model, the standard also provides a specific adaptation for contracts with direct participation features (the Variable Fee Approach) and a simplified approach (Premium Allocation Approach) mainly for short-duration contracts.

IFRS 17 was issued in May 2017 and it was amended in June 2020. The amendments include deferral of the date of initial application of IFRS 17 by two years to annual beginning on or after 1 January 2023 (from the original effective date of 1 January 2021); provide additional transition reliefs; simplify some requirements to reduce the costs of applying IFRS 17 and revise some requirements to make the results easier to explain. IFRS 17 replaces an interim Standard – IFRS 4 Insurance Contracts – from annual reporting periods beginning on or after 1 January 2023.

101

  • (c) Classification of Liabilities as Current or Non-current – Amendments to IAS 1

These are the amendments to paragraphs 69-76 of IAS 1 Presentation of Financial statements and the amended paragraphs related to the classification of liabilities as current or non-current.

  • (d) Disclosure Initiative - Accounting Policies – Amendments to IAS 1

The amendments improve accounting policy disclosures that to provide more useful information to investors and other primary users of the financial statements.

  • (e) Definition of Accounting Estimates – Amendments to IAS 8

The amendments introduce the definition of accounting estimates and included other amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to help companies distinguish changes in accounting estimates from changes in accounting policies.

  • (f) Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12

The amendments narrow the scope of the recognition exemption in paragraphs 15 and 24 of IAS 12 so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences.

The abovementioned standards and interpretations issued by IASB have not yet endorsed by FSC at the date when the Group’s financial statements were authorized for issue, the local effective dates are to be determined by FSC. The standards and interpretations have no material impact on the Group.

102

4. Summary of significant accounting policies

  • (1) Statement of Compliance

The consolidated financial statements of the Group for the years ended 31 December 2021 and 2020 have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (“the Regulations”) and International Financial Reporting Standards, International Accounting Standards, and Interpretations developed by the International Financial Reporting Interpretations Committee, which are endorsed by FSC (TIFRSs).

  • (2) Basis of Preparation

The consolidated financial statements have been prepared on a historical cost basis, except for financial instruments that have been measured at fair value. The consolidated financial statements are expressed in thousands of New Taiwan Dollars (NTD) unless otherwise stated.

  • (3) Basis of Consolidation

Preparation principle of consolidated financial statement

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

  • A. power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)

  • B. exposure, or rights, to variable returns from its involvement with the investee, and

  • C. the ability to use its power over the investee to affect its returns

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

  • A. the contractual arrangement with the other vote holders of the investee

  • B. rights arising from other contractual arrangements

  • C. the Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

103

Subsidiaries are fully consolidated from the acquisition date, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using uniform accounting policies. All intra-group balances, income and expenses, unrealized gains and loss and dividends resulting from intra-group transactions are eliminated in full.

A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction.

Total comprehensive income of the subsidiaries is attributed to the owners of the parent and to the non-controlling interests even if this results in the noncontrolling interests having a deficit balance.

If the Group loses control of a subsidiary, it:

  • A. derecognizes the assets (including goodwill) and liabilities of the subsidiary;

  • B. derecognizes the carrying amount of any non-controlling interest;

  • C. recognizes the fair value of the consideration received;

  • D. recognizes the fair value of any investment retained;

  • E. recognizes any surplus or deficit in profit or loss;

  • F. reclassifies the parent’s share of components previously recognized in other comprehensive income as changes in profit or loss.

The consolidated entities are as follows:

Investor
The Company
The Company		 Subsidiary
Blessingthoughts Co. Ltd.
(Blessingthoughts)
Kuo Ching Development Corp.
(KuoChing Development)
(Note)		 Main business
Drinks, and food vending
Wholesale of chemical
solvents, industrial additives,
and other chemical raw
materials or with derivative
products		 Percentage of ownership (%) Percentage of ownership (%)
31 December
2021
83.52%
100%		 31 December
2020
83.52%
-

104

Note: The establishment registration of Kuo Ching Development’s establishment registration was approved on July 14, 2021.

  • (4) Foreign currency transactions

The Group’s consolidated financial statements are presented in New Taiwan Dollars (NTD), which is also the Company’s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency closing rate of exchange ruling at the reporting date. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

All exchange differences arising on the settlement of monetary items or on translating monetary items are taken to profit or loss in the period in which they arise except for the following:

  • A. Exchange differences arising from foreign currency borrowings for an acquisition of a qualifying asset to the extent that they are regarded as an adjustment to interest costs are included in the borrowing costs that are eligible for capitalization.

  • B. Foreign currency items within the scope of IFRS 9 Financial Instruments are accounted for based on the accounting policy for financial instruments.

  • C. Exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation is recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.

When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss is recognized in other comprehensive income. When a gain or loss on a nonmonetary item is recognized in profit or loss, any exchange component of that gain or loss is recognized in profit or loss.

105

  • (5) Translation of Foreign Currency Financial Statements

The assets and liabilities of foreign operations are translated into NT$ at the closing rate of exchange prevailing at the reporting date and their income and expenses are translated at an average rate for the period. The exchange differences arising on the translation are recognized in other comprehensive income. On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in other comprehensive income and accumulated in the separate component of equity, is reclassified from equity to profit or loss when the gain or loss on disposal is recognized.

On the partial disposal of a subsidiary that includes a foreign operation that does not result in a loss of control, the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is reattributed to the non-controlling interests in that foreign operation. In partial disposal of an associate or joint arrangement that includes a foreign operation that does not result in a loss of significant influence or joint control, only the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is reclassified to profit or loss.

Any goodwill and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and expressed in its functional currency.

  • (6) Current and Non-current Distinction

An asset is classified as current when:

  • A. The Group expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;

  • B. The Group holds the asset primarily for the purpose of trading;

  • C. The Group expects to realize the asset within twelve months after the reporting period;

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

All other assets are classified as non-current.

A liability is classified as a current when:

  • A. The Group expects to settle the liability in normal operating cycle;

  • B. The Group holds the liability primarily for the purpose of trading;

  • C. The liability is due to be settled within twelve months after the reporting period;

  • D. The Group does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. Term of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

All other liabilities are classified as non-current.

106

  • (7) Cash and cash equivalent

Cash and cash equivalents comprise cash on hand, demand deposits and shortterm, highly liquid time deposits (including ones that have maturity within 3 months) or investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

  • (8) Financial Instruments

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

Financial assets and financial liabilities within the scope of IFRS 9 Financial Instruments are recognized initially at fair value plus or minus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

  • A. Financial instruments: Recognition and Measurement

The Group accounts for regular way purchase or sales of financial assets on the trade date.

The Group classified financial assets as subsequently measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss considering both factors below:

  • (a) the Group’s business model for managing the financial assets

  • (b) the contractual cash flow characteristics of the financial asset.

Financial assets measured at amortized cost

A financial asset is measured at amortized cost if both of the following conditions are met and presented as note receivables, trade receivables financial assets measured at amortized cost and other receivables etc., on balance sheet as at the reporting date:

  • (a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and

  • (b) 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.

107

Such financial assets are subsequently measured at amortized cost (the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between the initial amount and the maturity amount and adjusted for any loss allowance) and is not part of a hedging relationship. A gain or loss is recognized in profit or loss when the financial asset is derecognized, through the amortization process or in order to recognize the impairment gains or loss.

Interest revenue is calculated by using the effective interest method. This is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for:

  • (a) purchased or originated credit-impaired financial assets. For those financial assets, the Group applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.

  • (b) financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets. For those financial assets, the Group applies the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods.

Financial asset measured at fair value through other comprehensive income

A financial asset is measured at fair value through other comprehensive income if both of the following conditions are met:

  • (a) the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and

  • (b) 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.

Recognition of gain or loss on a financial asset measured at fair value through other comprehensive income are described as below:

  • (a) A gain or loss on a financial asset measured at fair value through other comprehensive income recognized in other comprehensive income, except for impairment gains or loss and foreign exchange gains and loss, until the financial asset is derecognized or reclassified.

108

  • (b) When the financial asset is derecognized the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment.

  • (c) Interest revenue is calculated by using the effective interest method. This 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 assets. For those financial assets, the Group applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.

  • (ii) Financial assets that are not purchased or originated creditimpaired financial assets but subsequently have become creditimpaired financial assets. For those financial assets, the Group applies the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods.

Besides, for certain equity investments within the scope of IFRS 9 that is neither held for trading nor contingent consideration recognized by an acquirer in a business combination to which IFRS 3 applies, the Group made an irrevocable election to present the changes of the fair value in other comprehensive income at initial recognition. Amounts presented in other comprehensive income shall not be subsequently transferred to profit or loss (when disposal of such equity instrument, its cumulated amount included in other components of equity is transferred directly to the retained earnings) and these investments should be presented as financial assets measured at fair value through other comprehensive income on the balance sheet. Dividends on such investment are recognized in profit or loss unless the dividends clearly represents a recovery of part of the cost of investment. Financial asset measured at fair value through profit or loss

Financial assets were classified as measured at amortized cost or measured at fair value through other comprehensive income based on aforementioned criteria. All other financial assets were measured at fair value through profit or loss and presented on the balance sheet as financial assets measured at fair value through profit or loss.

Such financial assets are measured at fair value, the gains or loss resulting from remeasurement is recognized in profit or loss which includes any dividend or interest received on such financial assets.

109

  • B. Impairment of financial assets

The Group recognizes a loss allowance for expected credit loss on debt instrument investments measured at fair value through other comprehensive income and financial asset measured at amortized cost. The loss allowance on debt instrument investments measured at fair value through other comprehensive income is recognized in other comprehensive income and not reduce the carrying amount in the balance sheet.

The Group measures expected credit loss of a financial instrument in a way that reflects:

  • (a)an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes

  • (b)the time value of money

  • (c)reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions

The loss allowance is measured as follows:

  • (a)At an amount equal to 12-month expected credit loss: the credit risk on a financial asset has not increased significantly since initial recognition or the financial asset is determined to have low credit risk at the reporting date. In addition, the Group measures the loss allowance at an amount equal to lifetime expected credit loss in the previous reporting period, but determines at the current reporting date that the credit risk on a financial asset has increased significantly since initial recognition is no longer met.

  • (b)At an amount equal to the lifetime expected credit loss: the credit risk on a financial asset has increased significantly since initial recognition or financial asset that is purchased or originated credit-impaired financial asset.

  • (c)For trade receivables or contract assets arising from transactions within the scope of IFRS 15, the Group measures the loss allowance at an amount equal to lifetime expected credit loss.

  • (d)For lease receivables arising from transactions within the scope of IFRS 16, the Group measures the loss allowance at an amount equal to lifetime expected credit loss.

At each reporting date, the Group needs to assess whether the credit risk on a financial asset has increased significantly since initial recognition by comparing the risk of a default occurring at the reporting date and the risk of default occurring at initial recognition. Please refer to Note 12(4) for further details on credit risk.

110

  • C. Derecognition of financial assets

A financial asset is derecognized when:

  • (a) The rights to receive cash flows from the asset have expired.

  • (b)The Group has transferred the asset and substantially all the risks and rewards of the asset have been transferred.

  • (c) The Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the consideration received or receivable including any cumulative gain or loss that had been recognized in other comprehensive income, is recognized in profit or loss.

  • D. Financial liabilities and equity

Classification between liabilities or equity

The Group classifies the instrument issued as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The transaction costs of an equity transaction are accounted for as a deduction from equity (net of any related income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided.

Compound instruments

The Group evaluates the terms of the convertible bonds issued to determine whether it contains both a liability and an equity component. Furthermore, the Group assesses if the economic characteristics and risks of the put and call options contained in the convertible bonds are closely related to the economic characteristics and risk of the host contract before separating the equity element.

111

For the liability component excluding the derivatives, its fair value is determined based on the rate of interest applied at that time by the market to instruments of comparable credit status. The liability component is classified as a financial liability measured at amortized cost before the instrument is converted or settled.

For the embedded derivative that is not closely related to the host contract (for example, if the exercise price of the embedded call or put option is not approximately equal on each exercise date to the amortized cost of the host debt instrument), it is classified as a liability component and subsequently measured at fair value through profit or loss unless it qualifies for an equity component. The equity component is assigned the residual amount after deducting from the fair value of the instrument as a whole the amount separately determined for the liability component. Its carrying amount is not remeasured in the subsequent accounting periods. If the convertible bond issued does not have an equity component, it is accounted for as a hybrid instrument in accordance with the requirements under IFRS 9 Financial Instruments.

Transaction costs are apportioned between the liability and equity components of the convertible bond based on the allocation of proceeds to the liability and equity components when the instruments are initially recognized.

On conversion of a convertible bond before maturity, the carrying amount of the liability component being the amortized cost at the date of conversion is transferred to equity.

Financial liabilities

Financial liabilities within the scope of IFRS 9 Financial Instruments are classified as financial liabilities at fair value through profit or loss or financial liabilities measured at amortized cost upon initial recognition.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated as at fair value through profit or loss.

112

A financial liability is classified as held for trading if:

  • (a) it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;

  • (b) on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking;

  • (c) it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

If a contract contains one or more embedded derivatives, the entire hybrid (combined) contract may be designated as a financial liability at fair value through profit or loss; or a financial liability may be designated as at fair value through profit or loss when doing so results in more relevant information, because either:

  • (a) it eliminates or significantly reduces a measurement or recognition inconsistency; or

  • (b) a group of financial liabilities or financial assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the key management personnel.

Gains or loss on the subsequent measurement of liabilities at fair value through profit or loss including interest paid are recognized in profit or loss.

Financial liabilities at amortized cost

Financial liabilities measured at amortized cost include interest bearing loans and borrowings that are subsequently measured using the effective interest rate method after initial recognition. Gains and loss are recognized in profit or loss when the liabilities are derecognized as well as through the effective interest rate method amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or transaction costs.

Derecognition of financial liabilities

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

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified (whether or not attributable to the financial difficulty of the debtor), such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

113

  • E. Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

(9) Derivative instruments

The Group uses derivative instruments to hedge its foreign currency risks and interest rate risks. A derivative is classified in the balance sheet as assets or liabilities at fair value through profit or loss except for derivatives that are designated effective hedging instruments which are classified as derivative financial assets or liabilities for hedging.

Derivative instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The changes in fair value of derivatives are taken directly to profit or loss, except for the effective portion of hedges, which is recognized in either profit or loss or equity according to types of hedges used.

When the host contracts are either non-financial assets or liabilities, derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not designated at fair value though profit or loss.

(10) Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

  • A. In the principal market for the asset or liability, or

  • B. In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to by the Group.

114

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

(11) Inventories

Inventories are valued at lower of cost and net realizable value item by item.

Costs incurred in bringing each inventory to its present location and condition are accounted for as follows:

Raw materials – Purchase cost under weighted average cost method. Finished goods and work in progress – Cost of direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Rendering of services is accounted in accordance with IFRS 15 and not within the scope of inventories.

115

(12) Investments accounted for under the equity method

The Group’s investment in its associate is accounted for using the equity method other than those that meet the criteria to be classified as held for sale. An associate is an entity over which the Group has significant influence.

Under the equity method, the investment in the associate is carried in the balance sheet at cost and adjusted thereafter for the post-acquisition change in the Group’s share of net assets of the associate. After the interest in the associate is reduced to zero, additional loss are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. Unrealized gains and loss resulting from transactions between the Group and the associate are eliminated to the extent of the Group’s related interest in the associate.

When changes in the net assets of an associate occur and not those that are recognized in profit or loss or other comprehensive income and do not affects the Group’s percentage of ownership interests in the associate, the Group recognizes such changes in equity based on its percentage of ownership interests. The resulting capital surplus recognized will be reclassified to profit or loss at the time of disposing the associate on a pro-rata basis.

When the associate issues new stock, and the Group’s interest in an associate is reduced or increased as the Group fails to acquire shares newly issued in the associate proportionately to its original ownership interest, the increase or decrease in the interest in the associate is recognized in additional paid-in capital and investment accounted for using the equity method. When the interest in the associate is reduced, the cumulative amounts previously recognized in other comprehensive income are reclassified to profit or loss or other appropriate items. The aforementioned capital surplus recognized is reclassified to profit or loss on a pro rata basis when the Group disposes the associate.

The financial statements of the associate are prepared for the same reporting period as the Group. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

116

The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired in accordance with IAS 28 Investments in Associates . If this is the case the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount in the ‘share of profit or loss of an associate’ in the statement of comprehensive income in accordance with IAS 36 Impairment of Assets . In determining the value in use of the investment, the Group estimates:

  • (a) Its share of the present value of the estimated future cash flows expected to be generated by the associate, including the cash flows from the operations of the associate and the proceeds on the ultimate disposal of the investment; or

  • (b) The present value of the estimated future cash flows expected to arise from dividends to be received from the investment and from its ultimate disposal.

Because goodwill that forms part of the carrying amount of an investment in an associate is not separately recognized, it is not tested for impairment separately by applying the requirements for impairment testing goodwill in IAS 36 Impairment of Assets .

Upon loss of significant influence over the associate, the Group measures and recognizes any retaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognized in profit or loss.

(13) Property, plant and equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment loss, if any. Such cost includes the cost of dismantling and removing the item and restoring the site on which it is located and borrowing costs for construction in progress if the recognition criteria are met. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognized such parts as individual assets with specific useful lives and depreciation, respectively. The carrying amount of those parts that are replaced is derecognized in accordance with the derecognition provisions of IAS 16 “Property, plant and equipment”. When a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.

117

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

Items
Land improvements
Buildings
Machinery and equipment
Transportation equipment
Other equipment		 Estimated economic lives
7～20 years
2～60 years
2～25 years
5～8 years
2～20 years

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is recognized in profit or loss.

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate, and are treated as changes in accounting estimates.

(14) Leases

The Group assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset for a period of time, the Group assesses whether, throughout the period of use, has both of the following:

  • (a) the right to obtain substantially all of the economic benefits from use of the identified asset; and

(b) the right to direct the use of the identified asset.

For a contract that is, or contains, a lease, the Group accounts for each lease component within the contract as a lease separately from non-lease components of the contract. For a contract that contains a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the nonlease components. The relative stand-alone price of lease and non-lease components shall be determined on the basis of the price the lessor, or a similar supplier, would charge the Group for that component, or a similar component, separately. If an observable stand-alone price is not readily available, the Group estimates the stand-alone price, maximising the use of observable information.

118

Group as a lessee

Except for leases that meet and elect short-term leases or leases of low-value assets, the Group recognizes right-of-use asset and lease liability for all leases which the Group is the lessee of those lease contracts.

At the commencement date, the Group measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Group uses its incremental borrowing rate. At the commencement date, the lease payments included in the measurement of the lease liability comprise the following payments for the right to use the underlying asset during the lease term that are not paid at the commencement date:

  • (a) fixed payments (including in-substance fixed payments), less any lease incentives receivable;

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

  • (c) amounts expected to be payable by the lessee under residual value guarantees;

  • (d) the exercise price of a purchase option if the Group is reasonably certain to exercise that option; and

  • (e) payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

After the commencement date, the Group measures the lease liability on an amortised cost basis, which increases the carrying amount to reflect interest on the lease liability by using an effective interest method; and reduces the carrying amount to reflect the lease payments made.

At the commencement date, the Group measures the right-of-use asset at cost. The cost of the right-of-use asset comprises:

  • (a)the amount of the initial measurement of the lease liability;

  • (b)any lease payments made at or before the commencement date, less any lease incentives received;

  • (c)any initial direct costs incurred by the lessee; and

  • (d)an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

119

For subsequent measurement of the right-of-use asset, the Group measures the right-of-use asset at cost less any accumulated depreciation and any accumulated impairment loss. That is, the Group measures the right-of-use applying a cost model.

If the lease transfers ownership of the underlying asset to the Group by the end of the lease term or if the cost of the right-of-use asset reflects that the Group will exercise a purchase option, the Group depreciates the right-of-use asset from the commencement date to the end of the useful life of the underlying asset. Otherwise, the Group depreciates the right-of-use asset from the commencement date to the earlier of the end of the useful life of the right-ofuse asset or the end of the lease term.

The Group applies IAS 36 “Impairment of Assets” to determine whether the right-of-use asset is impaired and to account for any impairment loss identified.

Except for those leases that the Group accounted for as short-term leases or leases of low-value assets, the Group presents right-of-use assets and lease liabilities in the balance sheet and separately presents lease-related interest expense and depreciation charge in the statements comprehensive income.

For short-term leases or leases of low-value assets, the Group elects to recognize the lease payments associated with those leases as an expense on either a straight-line basis over the lease term or another systematic basis.

For the related rental concessions that occurred as a direct result of the COVID19 pandemic, the Group chose not to assess whether it was a lease modification, but instead treated the rental concessions as changes in lease payments, and applied this practical expedient on all eligible rental concessions.

Group as a lessor

At inception of a contract, the Group classifies each of its leases as either an operating lease or a finance lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset. At the commencement date, the Group recognizes assets held under a finance lease in its balance sheet and present them as a receivable at an amount equal to the net investment in the lease.

120

For a contract that contains lease components and non-lease components, the Group allocates the consideration in the contract applying IFRS 15.

The Group recognizes lease payments from operating leases as rental income on either a straight-line basis or another systematic basis. Variable lease payments for operating leases that do not depend on an index or a rate are recognized as rental income when incurred.

(15) Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment loss, if any. Internally generated intangible assets which fail to meet the recognition criteria are not capitalized and the expenditures are reflected in profit or loss in the period incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible assets may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each fiscal year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and is treated as changes in accounting estimates.

Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or loss arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in profit or loss when the asset is derecognized.

121

(16) Impairment of non-financial assets

The Group assesses at the end of each reporting period whether there is any indication that an asset in the scope of IAS 36 Impairment of Assets may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment loss may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognized impairment loss is reversed only if there has been an increase in the estimated service potential of an asset which in turn increases the recoverable amount. However, the reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.

A cash generating unit, or groups of cash-generating units, to which goodwill has been allocated is tested for impairment annually at the same time, irrespective of whether there is any indication of impairment. If an impairment loss is to be recognized, it is first allocated to reduce the carrying amount of any goodwill allocated to the cash generating unit (group of units), then to the other assets of the unit (group of units) pro rata on the basis of the carrying amount of each asset in the unit (group of units). Impairment loss relating to goodwill cannot be reversed in future periods for any reason.

An impairment loss of continuing operations or a reversal of such impairment loss is recognized in profit or loss.

(17) Post-employment benefits

All regular employees of the Company and its domestic subsidiaries are entitled to a pension plan that is managed by an independently administered pension fund committee. Fund assets are deposited under the committee’s name in the specific bank account and hence, not associated with the Company and its domestic subsidiaries. Therefore, fund assets are not included in the Group’s consolidated financial statements. Pension benefits for employees of the overseas subsidiaries and the branches are provided in accordance with the respective local regulations.

122

For the defined contribution plan, the Company and its domestic subsidiaries will make a monthly contribution of no less than 6% of the monthly wages of the employees subject to the plan. The Company recognizes expenses for the defined contribution plan in the period in which the contribution becomes due. Overseas subsidiaries and branches make contribution to the plan based on the requirements of local regulations.

Post-employment benefit plan that is classified as a defined benefit plan uses the Projected Unit Credit Method to measure its obligations and costs based on actuarial assumptions. Re-measurements, comprising of the effect of the actuarial gains and loss, the effect of the asset ceiling (excluding net interest) and the return on plan assets, excluding net interest, are recognized as other comprehensive income with a corresponding debit or credit to retained earnings in the period in which they occur. Past service costs are recognized in profit or loss on the earlier of:

(a) the date of the plan amendment or curtailment, and

(b) the date that the Group recognizes restructuring-related costs

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset, both as determined at the start of the annual reporting period, taking account of any changes in the net defined benefit liability (asset) during the period as a result of contribution and benefit payment.

(18) Share-based payment transactions

The cost of equity-settled transactions between the Group and its subsidiaries is recognized based on the fair value of the equity instruments granted. The fair value of the equity instruments is determined by using an appropriate pricing model.

The cost of equity-settled transactions is recognized, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period.

123

No expense is recognized for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or nonvesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

Where the terms of an equity-settled transaction award are modified, the minimum expense recognized is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognized for any modification that increases the total fair value of the sharebased payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognized for the award is recognized immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.

The cost of restricted stocks issued is recognized as salary expense based on the fair value of the equity instruments on the grant date, together with a corresponding increase in other capital reserves in equity, over the vesting period. The Group recognized unearned employee salary which is a transitional contra equity account; the balance in the account will be recognized as salary expense over the passage of vesting period.

(19) Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probably that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

124

(20) Treasury shares

The Group buys back its parent company’s equity instruments (treasury shares) that are recognized at cost as a deduction item under equity. The valuation difference resulted from transactions of treasury shares is reported under equity.

(21) Revenue recognition

The Group’s revenue arising from contracts with customers are primarily related to sale of goods and rendering of services. The accounting policies are explained as follows:

Sale of goods

The Group manufactures and sells fitness equipment. Sales are recognized when control of the goods is transferred to the customer and the goods are delivered to the customers (the customer obtains the right and carrying value of the goods). The sales of goods transactions of the revenue is recognized based on the consideration stated in the contract. For certain sales of goods transactions, they are usually accompanied by volume discounts (based on the accumulated total sales amount for a specified period). Therefore, revenue from these sales is recognized based on the price specified in the contract, net of the estimated volume discounts.

The credit period of the Group’s sale of goods is from 30 to 150 days. For most of the contracts, when the Group transfers the goods to customers and has a right to an amount of consideration that is unconditional, these contracts are recognized as trade receivables. The Group usually collects the payments shortly after transfer of goods to customers; therefore, there is no significant financing component to the contract. For some of the contracts, the Group collects the payments when contracts signed-off and has the obligations to transfer the goods or provide the services, these contracts should be presented as contract liabilities.

The period between the transfers of contract liabilities to revenue is usually within one year, thus, no significant financing component has arisen.

125

(22) Borrowing cost

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

(23) Income Tax

Income tax expense (benefit) is the aggregate amount included in the determination of profit or loss for the period in respect of current income tax and deferred income tax.

Current income tax

Current income tax assets and liabilities for the current period and prior periods are measured using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Current income tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss.

The income tax for undistributed earnings is recognized as income tax expense in the subsequent year when the distribution proposal is approved by the Shareholders’ meeting.

Deferred income tax

Deferred income tax is a temporary difference between the tax bases of assets and liabilities and their carrying amounts in financial statement at the reporting date.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

  • A. where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

  • B. in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

126

Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and any unused tax loss, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax loss can be utilized, except:

  • A. where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

  • B. in respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. The measurement of deferred tax assets and deferred tax liabilities 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.

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets are reassessed at each reporting date and are recognized accordingly.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

127

(24) Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The consideration transferred, the identifiable assets acquired and liabilities assumed are measured at acquisition date fair value. For each business combination, the acquirer measures any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are accounted for as expenses in the periods in which the costs are incurred and are classified under administrative expenses.

When the Group acquires a business, it assesses the assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. The acquiree’s embedded derivatives in host contracts is separately assessed and valued.

If the business combination is achieved in stages, on final acquisition date, acquiree’s equity interests that have been previously acquired by acquirer is required to be remeasured at fair value on the acquisition date, and respective remeasurement gain or loss shall be recorded as current periodical profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognized at the acquisition-date fair value. Subsequent changes to the fair value of the contingent consideration, which is deemed to be an asset or liability, will be recognized in accordance with IFRS 9 Financial Instruments either in profit or loss or as a change to other comprehensive income. However, if the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity.

Goodwill is initially measured as the amount of the excess of the aggregate of the consideration transferred and the non-controlling interest over the net fair value of the identifiable assets acquired and the liabilities assumed. If this aggregate is lower than the fair value of the net assets acquired, the difference is recognized in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment loss. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each unit or group of units to which the goodwill is so allocated represents the lowest level within the Group at which the goodwill is monitored for internal management purpose and is not larger than an operating segment before aggregation.

128

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation. Goodwill disposed of in this circumstance is measured based on the relative recoverable amounts of the operation disposed of and the portion of the cash-generating unit retained.

5. Significant accounting judgements, estimates and assumptions

In preparation of the Group’s consolidated financial statements, the Group’s management is required to make judgments, estimates and assumptions at the end of the reporting period that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities. Uncertainties from these assumption and estimate may result in a material adjustment to the carrying amount of relevant assets or liabilities in future periods.

Major resources or factors that are the bases of estimates or assumptions are with uncertainties. Significant risks may exist that may result in material adjustments on the carrying amounts of assets or liabilities in future reporting periods. Major estimate factors are listed as follows:

A. Accounts receivables–estimate of impairment loss

The Group estimates the impairment loss of accounts receivables at an amount equal to lifetime expected credit loss. The credit loss is the present value of the difference between the contractual cash flows that are due under the contract (carrying amount) and the cash flows that are expected to receive (by evaluating forward looking information). However, as the impact from the discounting of short-term receivables is not material, the credit loss is measured by the undiscounted cash flows. Where the actual future cash flows are lower than expected, a material impairment loss may arise. Please refer to Note 6(3) and Note 14 for more details.

B. Inventories

Estimates of net realizable value of inventories take into consideration that inventories may be damaged, wholly or partially obsolete, or with downward selling prices. The estimates are based on the most reliable evidence available at the time the estimates are made. Refer to Note 6(4) for details.

129

C. The Fair Value of Financial Instruments

Where the fair value of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using valuation Techniques including the income approach (for example the discounted cash flows model) or market approach. Changes in assumptions about these factors could affect the reported fair value of the financial instruments. Please refer to Note 12 for more details.

D. Pension Benefits

The cost of post-employment benefit and the present value of the pension obligation under defined benefit pension plans are determined using actuarial valuations. An actuarial valuation involves making various assumptions, including the discount rate and expected salary raise/cut or changes. Please refer to Note 6(10) for more details.

E. Income Tax

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Company make provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective counties in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by different jurisdictional tax authorities. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective Group entities’ domicile.

Deferred tax assets are recognized to the extent where tax loss carryforward, tax credits and deductible temporary differences that are probable with foreseeable taxable profit being available, can be utilized. The amount of deferred tax assets is estimated based upon the likely timing of utilizing taxable temporary differences and forecasted taxable profits as well as future tax planning strategies.

130

6. Contents of significant accounts

  • (1) Cash and cash equivalents
Cash and cash equivalents
Cash on hand
Petty cash
Demand deposits
Time deposits
Total		 As of 31 December
2021
$94
245
382,958
-
$383,297		 2020
$103
245
459,708
300,000
$760,056
  • (2) Financial assets measured at amortized cost
inancial assets measured at amortized cost
Time deposits with maturity over three months
Pledged time deposits
Subtotal
Less: loss allowance
Total
Current
Non-current
Total		 As of 31 December
2021
$ -
2,800
2,800
-
$2,800
$ -
2,800
$2,800		 2020
$600,000
2,800
602,800
-
$602,800
$600,000
2,800
$602,800

For further information on financial assets measured at amortized cost pledged as collateral and on credit risk, please refer to Notes 8 and Notes 12 (4), respectively.

  • (3) Trade receivables, net
rade receivables, net
Accounts receivable
Less: loss allowance
Total		 As of 31 December
2021
$756,031
(17,885)
$738,146		 2020
$513,233
(17,046)
$496,187

Accounts receivables were not pledged.

The collection period is generally net 30~150 days. The total receivables of carrying amount are $787,899 and $552,481 as of December 31, 2021 and 2020, respectively. Please refer to Note 6 (14) for more details regarding loss allowance of accounts receivables for the year periods ended December 2021 and 2020. Please refer to Note 12 (4) for more details on credit risk management.

131

100% credit loss provision is reserved for account receivables which are deemed with least possibility to be collected. As of 31 December 2021, and 2020, the receivables with 100% loss allowances being reserved amounted to $13,679 without differences.

  • (4) Inventories, net
nventories, net
Raw materials
Work in progress
Finished goods
Merchandise
Total		 As of 31 December
2021
$353,103
42,072
413,672
4,494
$813,341		 2020
$262,987
20,512
398,212
26,672
$708,383

The cost of inventories recognized as cost of sales for the years ended 31 December 2021 and 2020 amounted to $2,722,534 and $2,613,246, respectively. The expenses resulted from inventory write-downs were recorded as $23,747 and $2,815 for the years ended 31 December 2021, and 2020 respectively.

No inventories were pledged.

  • (5) Investments accounted for under the equity method

Details of investments accounted for under the equity method are as follows:

Investees
Power Rich International Limited
(Power Rich)
Bnkc Biochemical Technology
Company, Limited
(Bnkc Biochemical Technology Co.)
Sunko Biotech Company, Limited
(Sunko Biotech Co.)
Chen Chi Technology Company,
Limited (Chen Chi Technology Co.)
Total		 As of 31 December As of 31 December
2021
Carrying
amount
Percentage of
ownership (%)
$10,460
30.00%
1,507
49.00%
-
22.32%
-
41.00%
$11,967		 2020
Carrying
amount
$10,460
1,507
-
-
$11,967		 Carrying
amount
Percentage of
ownership (%)
$13,890
30.00%
1,301
49.00%
-
22.32%
-
41.00%
$15,191

The Group's share of loss of Sunko Biotech Co. and Chen Chi Technology Co. equaled its interest in Sunko Biotech Co. and Chen Chi Technology Co. Therefore, the Group is not obliged to recognize its share of further loss.

132

  • (1) The details of investments recognized as profit and loss in 2021 and 2020 are as follows:
as follows:
Power Rich
Bnkc Biochemical Technology
Co.
Total		 For theyears ended 31 December
2021
$(3,075)
737
$(2,338)		 2020
$(4,578)
590
$(3,988)
  • (2) The details of the exchange differences on translation of foreign financial statements in 2021 and 2020 are as follows:
Power Rich
Power Hero
Total		 For theyears ended 31 December
2021
2020
$(355)
$(801)
-
(182)
$(355)
$(983)
2021
$(355)
-
$(355)
  • (3) Investments in associates

The Group’s investments in Bnkc Biochemical Technology Co. and Power Rich are not significant. The investments are valued based on the investee’s financial statements within the same fiscal accounting period. The investments in associates had no contingent liabilities or capital commitments as of 31 December 2021 and 2020. The investments have not been pledged as collaterals.

133

(6) Property, plant and equipment

Cost:
As of 1 January 2021
Additions
Disposals
Reclassification
As of 31 December 2021
Depreciation and impairment:
As of 1 January 2021
Depreciation
Disposals
As of 31 December 2021
Cost:
As of 1 January 2020
Additions
Disposals
Reclassification
As of 31 December 2020
Depreciation and impairment:
As of 1 January 2020
Depreciation
Disposals
As of 31 December 2020
Net carrying amount:
As of 31 December 2021
As of 31 December 2020		 Land Land
improvements		 Buildings Machinery and
equipment
$2,448,748
55,562
(155,533)
107,982
$2,456,759
$1,811,925
161,019
(151,509)
$1,821,435
$2,290,235
62,204
(22,193)
118,502
$2,448,748
$1,681,161
151,975
(21,211)
$1,811,925
$635,324
$636,823		 Transportation
equipment		 Other
equipment
$306,403
13,906
(5,125)
1,909
$317,093
$216,455
20,477
(5,061)
$231,871
$293,444
9,872
(7,055)
10,142
$306,403
$201,922
21,259
(6,726)
$216,455
$85,222
$89,948		 Construction in
progress
$12,499
-
-
(5,585)
$6,914
$ -
-
-
$ -
$23,576
-
-
(11,077)
$12,499
$ -
-
-
$ -
$6,914
$12,499		 Total
$465,109
-
-
-
$465,109
$ -
-
-
$ -
$543,082
-
(77,973)
-
$465,109
$ -
-
-
$ -
$465,109
$465,109		 $3,083
-
-
-
$3,083
$1,915
132
-
$2,047
$2,887
196
-
-
$3,083
$1,796
119
-
$1,915
$1,036
$1,168		 $950,912
12,788
(6,396)
10,102
$967,406
$458,713
49,248
(6,247)
$501,714
$908,494
23,602
(4,571)
23,387
$950,912
$408,471
54,465
(4,223)
$458,713
$465,692
$492,199		 $15,783
539
(68)
231
$16,485
$10,644
848
(68)
$11,424
$16,004
700
(921)
-
$15,783
$10,594
971
(921)
$10,644
$5,061
$5,139		 $4,202,537
82795
(167,122)
114,639
$4,232,849
$2,499,652
231,724
(162,885)
$2,548,491
$4,077,722
96,574
(112,713)
140,954
$4,202,537
$2,303,944
228,789
(33,081)
$2,499,652
$1,664,358
$1,702,885

134

  • (a) There is no capitalization of interest due to purchase of property, plant and equipment for the years ended 31 December 2021 and 2020.

  • (b) Components of buildings that have different useful lives are the main building structure and air condition equipment and elevators, which are depreciated over 60 years and 5 years and 15 years, respectively. Machinery and equipment that have different useful lives are new reaction equipment, piping equipment, and production equipment for expansion, etc., which are depreciated over 10 years and 5 years and 7 years, respectively.

  • (c) As of 31 December 2021, and 2020, due to legal restrictions, part of the lands belonging to agricultural lands were recorded in the Group's accounts and the amount temporarily registered in the name of another person amounted to $7,011 without differences. The Group obtained the certificates of other rights for each of the lands.

  • (d) On February 26, 2020, the Group’s board members passed the resolution to dispose of the land, plant and equipment of Dajia Factory. A transfer agreement was signed on May 28, 2020 for this project. However, the transaction was terminated in June 2021 because both parties could not reach a consensus on some of the transaction conditions, and the contract was terminated when mutually agreed and a termination agreement was signed on June 17, 2021. Pursuant to the terms of the termination agreement, the buyer agreed to pay the Group's due commercial interests in the amount of $55,000. Please refer to Note 16 (17) II for details of the account. At the same time, the Group also returned the transaction price of $186,000 paid by the buyer before the termination of the agreement.

  • (e) Please refer to Note 8 for property, plant and equipment pledged as collateral.

135

(7) Short-term loans

Short-term loans
Unsecured bank loans
Interest rates applied for unsecured bank
loans		 As of 31 December
2021
2020
$295,721
$226,246
As of 31 December		 2020
$226,246
2021
0.65%~0.95%		 2020
0.63%~1.07%

The Group’s open short-term lines of credit facilities were $701,758 and $1,061,505, as of 31 December 2021 and 2020, respectively.

(8) Other payables

her payables
Accrued capital reduction
Accrued expense of pollution
remediation
Accrued payroll
Accrued employee compensation
Payables on equipment
Accrued directors and supervisor’s
compensation expense
Other expense
Total		 As of 31 December
2021
$ -
73,652
67,072
-
6,219
-
72,243
$219,186		 2020
$325,543
105,812
70,945
15,075
12,922
4,020
56,647
$590,964

  • (1) On 10 November 2020, the Group adopted the resolution of the shareholders’ meeting to reduce capital by cash and redeemed 33,352 thousand shares of shareholders’ share capital, each with a par value of $10. Treasury shares were cancelled 798 shares accordingly due to capital reduction in accordance with the shareholding ratio. A total of $325,543 was refunded as a result of the capital reduction. Please refer to Note 6 (12) for details of the aforementioned capital reduction and refund to shareholders.

  • (2) On 8 May 2020, the Board resolved and approved the total forecasted possible expenditures for remedying pollution in soil and underwater in the Group’s Pingjhen and Dali plants. The total budget was estimated for $105,000, which has been booked in Q2 2020.

136

(9) Long-term loans

(1) Details of long-term loans as at 31 December 2021 and 2020 are as follows:

Lenders
Mega International
Commercial Bank
secured bank loans
First Commercial Bank
secured bank loans
First Commercial Bank
secured bank loans
Chang Hwa Commercial Bank
unsecured Revolving Loan
Hua Nan Ban
unsecured Revolving Loan
Mega International
Commercial Bank
unsecured Revolving Loan
Taipei Fubon Bank
unsecured Revolving Loan		 As of 31
December 2021
$106,250
100,000
100,000
73,125
12,500
81,250
37,500		 As of 31
December 2020
$119,850
100,000
100,000
90,000
37,500
91,650
47,500		 Redemption
Repayable quarterly from 26 December 2016 to 26 December 2024. Principle is repaid in 33 quarterly
installments.
Repayable quarterly from 24 March 2022 to 24 December 2024. Principle is repaid in 12 quarterly
installments.
Repayable quarterly from 5 August 2022 to 5 May 2025. Principle is repaid in 12 quarterly installments.
Repayable quarterly from 24 June 2021 to 24 March 2025. Principle is repaid in 16 quarterly
installments.
Repayable quarterly from 11 August 2018 to 11 May 2022. Principle is repaid in 16 quarterly
installments.
Repayable quarterly from 26 December 2016 to 26 December 2024. Principle is repaid in 33 quarterly
installments.
Repayable quarterly from 1 December 2020 to 1 September 2025. Principle is repaid in 20 quarterly
installments.

137

Lenders
O-Bank
unsecured Revolving Loan
O-Bank
unsecured Revolving Loan
Taiwan Cooperative Bank
unsecured Revolving Loan
Subtotal
Less: current portion
Total
Interest rates applied		 As of 31
December 2021
As of 31
December 2020
Redemption
31,000
16,400
Repayable quarterly from 15 September 2019 to 15 September 2021. Principle is repaid in 9 quarterly
installments.
89,000
89,000
Repayable quarterly from 15 July 2022 to 15 July 2025. Principle is repaid in 13 quarterly installments.
70,667
106,001
From 21 March 2020 to 21 December 2023, an advance repayment of the current period was $5,500,
and remaining balance was divided into sixteen installments with three months being one installment.
Principle is repaid in 16 quarterly installments.
701,292
797,901
(172,835)
(127,609)
$528,457
$670,292
As of 31 December
2021
2020
1.09%~1.20%
1.09%~1.40%		 As of 31
December 2021
As of 31
December 2020
Redemption
31,000
16,400
Repayable quarterly from 15 September 2019 to 15 September 2021. Principle is repaid in 9 quarterly
installments.
89,000
89,000
Repayable quarterly from 15 July 2022 to 15 July 2025. Principle is repaid in 13 quarterly installments.
70,667
106,001
From 21 March 2020 to 21 December 2023, an advance repayment of the current period was $5,500,
and remaining balance was divided into sixteen installments with three months being one installment.
Principle is repaid in 16 quarterly installments.
701,292
797,901
(172,835)
(127,609)
$528,457
$670,292
As of 31 December
2021
2020
1.09%~1.20%
1.09%~1.40%		 As of 31
December 2021
As of 31
December 2020
Redemption
31,000
16,400
Repayable quarterly from 15 September 2019 to 15 September 2021. Principle is repaid in 9 quarterly
installments.
89,000
89,000
Repayable quarterly from 15 July 2022 to 15 July 2025. Principle is repaid in 13 quarterly installments.
70,667
106,001
From 21 March 2020 to 21 December 2023, an advance repayment of the current period was $5,500,
and remaining balance was divided into sixteen installments with three months being one installment.
Principle is repaid in 16 quarterly installments.
701,292
797,901
(172,835)
(127,609)
$528,457
$670,292
As of 31 December
2021
2020
1.09%~1.20%
1.09%~1.40%		 Redemption
2021
1.09%~1.20%		 2020

(2) Please refer to Note 8 for property, plant and equipment pledged as collateral for long-term loans.

138

(10) Post-employment benefits

Defined contribution plan

The Group adopt a defined contribution plan in accordance with the Labor Pension Act of the R.O.C. Under the Labor Pension Act, the Group will make monthly contributions of no less than 6% of the employees’ monthly wages to the employees’ individual pension accounts. The Group has made monthly contributions of 6% of each individual employee’s salaries or wages to employees’ pension accounts.

Pension expenses under the defined contribution plan for the years ended 31 December 2021 and 2020 were $16,948 and $17,339 respectively.

Defined benefits plan

The Group adopt a defined benefit plan in accordance with the Labor Standards Act of the R.O.C. The pension benefits are disbursed based on the units of service years and the average salaries in the last month of the service year. Two units per year are awarded for the first 15 years of services while one unit per year is awarded after the completion of the 15th year. The total units shall not exceed 45 units. Under the Labor Standards Act, the Group contribute an amount equivalent to 6.6% of the employees’ total salaries and wages on a monthly basis to the pension fund deposited at the Bank of Taiwan in the name of the administered pension fund committee. Before the end of each year, the Group assess the balance in the designated labor pension fund. If the amount is inadequate to pay pensions on the assumption that workers meeting retirement terms will be retiring within the coming year, the Group shall make one-time contribution to the fund to eliminate the difference before the end of March in the following year.

The Ministry of Labor is in charge of establishing and implementing the fund utilization plan in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund. The pension fund is invested in-house or under mandate, based on a passiveaggressive investment strategy for long-term profitability. The Ministry of Labor establishes checks and risk management mechanism based on the assessment of risk factors including market risk, credit risk and liquidity risk, in order to maintain adequate manager flexibility to achieve targeted return without over-exposure of risk. With regard to utilization of the pension fund, the minimum earnings in the annual distributions on the final financial statement shall not be less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. Treasury Funds can be used to cover the deficits after the approval of the competent authority. As the Company does not participate in the operation and management of the pension fund, no disclosure on the fair value of the plan assets categorized in different classes could be made in accordance with paragraph 142 of IAS 19. The Group expects to contribute $459 to its defined benefit plan during the 12 months beginning after 31 December 2021.

The average duration of the defined benefits plan obligation as at 31 December 2021, was 9 years.

139

Pension costs recognized in profit or loss are as follows:

Current service costs
Interest expense
Service cost		 For the years ended 31
December		 For the years ended 31
December
2021 2020
$463
169
-
-
$632
$452
62
-
2,036
Settlement loss
Total $2,550

Reconciliations of liabilities (assets) of the defined benefit obligation and plan assets at fair value are as follows:

assets at fair value are as follows:
Defined benefit obligation
Plan assets at fair value
Other non-current liabilities - defined benefit obligation		 As of 31 December
2021 2020
$78,306
(61,898)		 $92,596
(70,170)
$16,408 $22,426

Reconciliation of liability (assets) of the defined benefit plan are as follows:

As of 1 January 2020
Current period service costs
Net interest expense (income)
Service cost
Subtotal
Remeasurement of defined benefit
liability (asset):
Actuarial gains and loss arising from
changes in demographic assumptions
Actuarial gains and loss arising from
changes in financial assumptions
Experience adjustments
Remeasurements of the defined benefit
assets
Subtotal
Benefits paid
Contributions by employer
As of 31 December 2020		 Defined
benefit
obligation
$89,992
463
624
-
91,079
33
3,452
(1,831)
-
1,654
(137)
-
92,596		 Fair value of
plan assets
$(63,906)
-
(455)
-
(64,361)
-
-
-
(2,195)
(2,195)
137
(3,751)
(70,170)		 Benefit
liability
(asset)
$26,086
463
169
-
26,718
33
3,452
(1,831)
(2,195)
(541)
-
(3,751)
22,426

140

Current period service costs
Net interest expense (income)
Service cost
Liquidation of losses
Subtotal
Remeasurements of the defined benefit
liability (asset):
Actuarial gains and loss arising from
changes in demographic assumptions
Actuarial gains and loss arising from
changes in financial assumptions
Experience adjustments
Remeasurements of the defined benefit
assets
Subtotal
Benefits paid
Contributions by employer
As of 31 December 2021		 Defined
benefit
obligation
452
275
-
2,036
95,359
183
(3,071)
(990)
-
3,878
(13,175)
-
$78,306		 Fair value of
plan assets		 Benefit
liability
(asset)
-
(213)
-
-		 452
62
-
2,036
(70,383) 24,976
-
-
-
(1,006)		 183
(3,071)
(990)
(1,006)
(1,006) (4,884)
13,175
(3,684)		 -
(3,684)
$(61,898) $16,408

The following significant actuarial assumptions are used to determine the present value of the defined benefit obligation:

Discount rate
Expected rate of salary increases		 As of 31 December As of 31 December
2021 2020
0.70%
2.00%		 0.30%
2.00%

A sensitivity analysis for significant assumption as at 31 December 2021 and 2020 is as shown below:

A sensitivity analysis for significant
2020 is as shown below:		 assumption as at 31 December 2021 and assumption as at 31 December 2021 and assumption as at 31 December 2021 and assumption as at 31 December 2021 and
Discount rate increase by 0.25%
Discount rate increase by 0.10%
Discount rate decrease by 0.10%
Discount rate decrease by 0.25%
Future salary increase by 0.25%
Future salary decrease by 0.25%		 Effect on the defined benefit obligation
2021 2020
Increase
defined
benefit
obligation		 Decrease
defined
benefit
obligation		 Increase
defined
benefit
obligation
$ -
-
894
2,259
2,215
-		 Decrease
defined
benefit
obligation
$ -
-
740
1,870
1,841
-		 $1,808
730
-
-
-
1,789		 $2,181
882
-
-
-
2,151

141

The sensitivity analyses above are based on a change in a significant assumption (for example: change in discount rate or future salary), keeping all other assumptions constant. The sensitivity analyses may not be representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation of one another.

The methods and assumptions for preparing sensitivity analyses was consistent with those in the prior fiscal period.

  • (11) Share-based payment

Treasury stock to employee transactions:

The Company purchases the shares, and the shares are to be transferred to the employees all at once or in installments within three years from the date of the repurchase of the shares. According to board of directors have resolved to issue 410 thousand of treasury shares to employees on 16 December 2021.

As of 2021, the treasury shares issued to employees is based on the evaluation of the fair value on the date of grant in Black-Scholes model. The parameters and assumptions are set in consideration of the terms and conditions in the sharebased payment arrangement.

Information about the treasury shares transfer to employees is as follows:

The transfer of treasury shares to
employees		 As of 16 December 2021 As of 16 December 2021
Unit (thousands of
shares)		 Weighted average
exercise price of
share options)
Outstanding at beginning of
period
Granted
Exercised
Forfeited
Outstanding at end of period
Exercisable at end of period
For share options granted during
the period, weighted average fair
value of those options at the
measurement date (NTD)

142

Expected volatility (%)
Risk-free interest rate (%)
Expected option life (Years)
Weighted average share price (NTD)
Option pricing model		 Grant date on 16December 2021
41.26%
0.3605%
0.0219
$19.8751
Black-Scholes option pricing model

Note: The share closing price of the Company was $25.65, but the Company’s treasury shares were issued to employees with a 2-year transfer restriction, so the market price was adjusted to $19.8751.

The remuneration costs recognized by the Company in 2021 and 2020 were $3,364 and $0 respectively.

(12)Equity

A. Common stock

As at 1 January 2020 the Company’s authorized capital was $2,500,000, divided into 250,000 thousand shares with par value of $10 each. The issued and outstanding capital stocks were $2,223,473.

To increase return on shareholder's equity and improve various financial ratios, in utilizing financial leverage, on 10 November 2020, the Shareholders’ meeting resolved an approval on a capital reduction amounted to $333,521, that 33,352 thousand shares were eliminated which represent 15% of total contributed capital. The above capital reduction case was approved by the governing authority on 15 December 2020, and the Board of Directors decided to set 17 December 2020 as the base date for the capital reduction. In addition, an amendment on corporation registration by the Department of Commerce of the Ministry of Economic Affairs was completed and filed.

The Company’s authorized and issued capital was $2,500,000 as at 31 December 2021, and 31 December 2020, the number of issued shares was 188,995 thousand shares, and the paid-in capital was $1,889,952.

In August 2007, May and December 2012, the Company issued 30,000 thousand shares, 5,000 thousand shares and 5,000 thousand shares of private placement, respectively, in accordance with Article 43-6 of the Securities Exchange Act. The closing dates of the capital increase were August 7, 2007, October 30 and 5 December 2012. The above private shares were canceled in October 2009 as a result of a capital reduction to offset the accumulated loss, with 12,449 thousand shares canceled in proportion to the shareholding ratio. In March 2016, 5,000 thousand private shares were canceled due to the merger. In December 2020, 3,383 thousand shares were canceled as a result of the capital reduction in cash refund to the shareholders.

143

The above private shares and their subsequent allocations are based on the delivery date of the private securities in accordance with the third paragraph of Article 43-8 of the Securities Exchange Act (26 October 2007; 5 December 2012; 10 January 2013). After three years of holding such shares, the holders may apply for approval to the governing authority under Securities Exchange Act and other relevant regulations. The shares may be freely transferred in the open market after obtaining said approval.

As of 31 December 2021, the number of outstanding private 19,168 thousand shares with par value is 10 per share, and the public offering process has not yet been processed.

B. Capital surplus

According to the Company Act, the capital reserve shall not be used except for making good the deficit of the company. When a company incurs no loss, it may distribute the capital reserves related to the income derived from the issuance of new shares at a premium or income from endowments received by the company. The distribution could be made in cash or in the form of dividend shares to its shareholders in proportion to the number of shares being held by each of them.

Treasury share transactions
Premium from merger
Adjustments arising from
changes in percentage of
ownership in subsidiaries
Total		 As of 31 December As of 31 December
2021
$24,845
15,188
1,897
$41,930		 2020
$20,763
15,188
1,897
$37,848

C. Treasury stock

In accordance with the Securities and Exchange Law, the proportion of the company's repurchase of the issued shares shall not exceed 10% of the total number of issued shares of the company, and the total amount of the shares purchased shall not exceed the amount of the reserved surplus plus the premium of the issued shares and the realized capital reserve.

144

As of 31 December 2021 and 2020, the Company’s treasury stock amounted to $40,786 and $44,853, and the number of shares was 4,111 thousand and 4,521 thousand, respectively.

From 14 November 2018 to 10 January 2020, the Company repurchased 5,319 thousand shares. The purpose of the repurchase is to transfer the shares to the employees, and the shares are to be transferred to the employees all at once or in installments within three years from the date of the repurchase of the shares. The above treasury shares were written off for 798 thousand shares in proportion to the total issued capital in December 2021 due to the capital reduction in cash refund to the equity shareholders. In December 2021, 410 thousand of treasury stock shares were issued to the employees. Please refer to Notes 6 and Note 11 for details of the relevant share–based payment arrangement.

  • D. Distribution of retained earnings and dividend policies

According to the Company’s Articles of Incorporation, current year’s earnings, if any, shall be appropriated in the following order:

  • (a) Income tax obligation

  • (b) Offsetting accumulated deficits, if any

  • (c)Set aside 10% as legal reserve. However, when the legal reserve amounts to the authorized capital, this shall not apply.

  • (d)Set aside or reserve special reserve in accordance with law and regulations.

  • (e)In combining the balance with the accumulated undistributed surplus of the previous period, the board of directors shall prepare a proposal for earnings distribution and submit it to the shareholders' meeting for a resolution distributing dividends to shareholders.

The policy of dividend distribution should reflect factors such as the current and future investment environment, fund requirements, domestic and international competition and capital budgets; as well as the interest of the shareholders, share bonus equilibrium and long-term financial planning etc. The Board of Directors shall make the distribution proposal annually and present it at the shareholders’ meeting. The Company’s Articles of Incorporation further provide that no more than 80% of the dividends to shareholders, if any, could be paid in the form of share dividends. Accordingly, at least 20% of the dividends must be paid in the form of cash.

145

According to the Company Act, the Company needs to set aside amount to legal reserve unless where such legal reserve amounts to the total paidin capital. The legal reserve can be used to make good the deficit of the Company. When the Company incurs no loss, it may distribute the portion of legal serve which exceeds 25% of the paid-in capital by issuing new shares or by cash in proportion to the number of shares being held by each of the shareholders.

When the Company distributing distributable earnings, it shall set aside to special reserve, an amount equal to “other net deductions from shareholders” equity for the current fiscal year, provided that if the Company has already set aside special reserve according to the requirements for the adoption of IFRS, it shall set aside supplemental special reserve based on the difference between the amount already set aside and other net deductions from shareholders’ equity. For any subsequent reversal of other net deductions from shareholders’ equity, the amount reversed may be distributed from the special reserve.

The FSC on 31 March 2021 issued Order No. Jin-Guan-Cheng-Fa- Zi 1090150022, which sets out the following provisions for compliance:

On a public company's first-time adoption of the IFRS, for any unrealized revaluation gains and cumulative translation adjustments (gains) recorded to shareholders’ equity that the company elects to transfer to retained earnings by application of the exemption under IFRS 1, the company shall set aside special reserve. For any subsequent use, disposal or reclassification of related assets, the Company can reverse the special reserve by the proportion of the special reserve first appropriated and distribute it. The Company’s special reserve resulted from first-time adoption of IFRS on 1 January 2012 (adoption date) was $0.

Details of the 2021 and 2020 earnings distribution and dividends per share as being approved and resolved by the Board of Directors’ meeting and shareholders’ meeting on 15 March 2022 and 20 June 2021, respectively, are as follows:

espectively, are as follows:
Legal reserve
Recognition (reversal) of
special reserve
Common stock cash dividend		 Appropriation
of earnings
2021
2020
$ -
$53,692
(4,419)
5,624
-
92,237		 Dividend
per share (NTD)
2021
$ -
(4,419)
-		 2021
$ -		 2020
$0.5

Please refer to Note 6 (16) for further details on employees’ compensation and remuneration to directors.

146

E. Non-controlling interests

Beginning balance
Consolidated Net Income Attributed to Non-
controlling Interest
Other comprehensive income, attributable to
non-controlling interests, net of tax:
Exchange differences resulting from
translating the financial statements of a
foreign operation
Changes in subsidiaries’ ownership
Ending balance		 As of 31 December As of 31 December
2021
$179
(58)
-
-
$121		 2020
$4,466
(98)
-
(4,189)
$179

(13) Operating revenue

The Group’s revenue mainly come from selling products the Group manufactured. Analysis of revenue from contracts with customers during the years ended 31 December 2021 and 2020 are as follows:

A. Disaggregation of revenue

Disaggregation of revenue
Sale of goods For the years ended
31 December
2021
2020
$2,850,638
$2,752,601
2021
$2,850,638
$2,752,601

The Group recognizes revenues when control of the products is transferred to customers. Revenues are earned and reported at the time that respective contract criteria are met.

B. Contract balance

Contract liabilities – current

Sales of goods As of
31 December 2021
$4,219		 31 December2020
$18,752		 1 January 2020
$20,384

147

The movement in the Group’s balances of contract liabilities for the years ended December 31, 2021 and 2020 are as follows:

For theyears ended 31 December For theyears ended 31 December
2021
$(18,752)
4,219		 2020
Revenue recognized from opening
balance
Increase in advance receipt within
the period (excluding the amount
being recognized as periodical
revenues)


$(20,384)
18,752
  • C. Transaction price allocated to unfulfilled contract obligations

None.

  • D. Assets recognized from costs to fulfil a contract with customers

None.

  • (14) Expected credit (loss) gains
None.
pected credit (loss) gains
Operating expenses – Expected credit (loss) gains
Trade receivables		 For the years ended
31 December,
2021
$(839)		 2020
$490

Please refer to Note 12 for more details on credit risk.

The Group measures the loss allowance of its trade receivables (including note receivables and trade receivables) at an amount equal to lifetime expected credit loss. The assessment of the Group’s loss allowance as at 31 December 2021 and 2020 are as follows:

31 December 2021

Gross carrying
amount
Loss rate
Life time expected
credit loss
Net carrying
amount		 Not yet due
(note)		 Overdue Overdue Total
<=30 days 31-90 days 91-180 days 181-365 days >=365 days
$750,972
-%		 $21,168
5-10%		 $ -
15-20%		 $ -
40-60%		 $ -

70-90%		 $15,759
100%		 $787,899

-		 (2,126) - - - (15,759) (17,885)
$750,972 $19,042 $- $- $- $- $770,014

148

31 December 2020

Gross carrying
amount
Loss rate
Life time expected
credit loss
Net carrying
amount		 Not yet due
(note)		 Overdue Total
<=30 days 31-90 days 91-180 days 181-365 days >=365 days
$533,814
-%		 $1,804
5-10%		 $ -
15-20%		 $ -
40-60%		 $ -
70-90%		 $16,863
100%		 $552,481

-		 (183) - - - (16,863) (17,046)
$533,814 $1,621 $ - $ - $ - $ - $535,435

Note: The Group’s note receivables are not overdue.

The movement in the impairment provision of note receivables and trade receivables for the years ended 31 December 2021 and 2020 is as follows:

As of 1 January 2021
Provision (Reversal)
As of 31 December 2021
As of 1 January 2020
Provision (Reversal)
As of 31 December 2020		 Note
receivables
$ -
-
$ -
$ -
-		 Trade
receivables
$17,046
839
$17,885
$17,536
(490)
$ - $17,046

(15) Leases

A. The Group is a lessee

The Group leases various properties, including land, buildings, transportation equipment and other equipment. The lease terms range from 2 to 10 years.

149

The impact of Group’s leases on the financial position, financial performance and cash flows is as follows:

(a) Amounts recognized in the balance sheet

  • (i) Right-of-use asset

Cost:

Cost:
As of 1 January
2021
Additions
Disposals
As of 31
December 2021
Depreciation and
impairment:
As of 1 January
2021
Depreciation
Disposals
As of 31
December 2021
Cost:
As of 1 January
2020
Additions
Disposals
As of 31
December 2020		 Land Buildings Transportation
equipment
$5,211
2,426
-
$7,637
Transportation
equipment		 Other
equipment		 Total
$151,460
33,053
(401)
$184,112
Total
$48,073
31,660
(322)
$79,411
Total
$83,082
1,368
-		 $61,872
29,259
-		 $1,295
-
(401)
$84,450 $91,131 $894
Land Buildings Other
equipment
$16,332
8,814
-		 $26,886
21,050
-		 $4,109
1,607
-		 $746
189
(322)
$25,146 $47,936 $5,716 $613
Land Buildings Transportation
equipment
$4,678
533
-
$5,211		 Other
equipment
$83,082
-
-		 $50,859
11,013
-		 $1,568
-
(273)
$1,295		 $140,187
11,546
(273)
$83,082 $61,872 $151,460

150

Depreciation and

impairment:

Depreciation and
impairment:
As of 1 January
2020
Depreciation
Disposals
As of 31
December 2020
Net carrying
amount:
As of 31
December 2021
As of 31
December 2020		 Land Buildings Transportation
equipment		 Other
equipment
$473
449
(176)
$746
$281		 Total
$ 7,811
8,521
-		 $11,007
15,879
-		 $2,197
1,912
-		 $21,488
26,761
(176)
$16,332 $26,886 $4,109 $48,073
$59,304 $43,195 $1,921
$1,102		 $104,701
$66,750 $34,986 $549 $103,387
  • (ii) Lease liabilities
Lease liabilities
Current
Non-Current
Total		 As of 31 December
2021 2020
$30,439
73,235		 $23,047
79,484
$103,674 $102,531

Please refer to Note 6(17)(d) for the interest expense regarding with lease liabilities recognized during the years ended 31 December 2021 and 2020. Please refer to Note 12 (5) Liquidity risk management for the maturity analysis on lease liabilities as at 31 December 2021 and 2020.

  • B. Amounts recognized in the statement of comprehensive income

Depreciation on right-of-use assets

For the years ended 31 December

Land
Buildings
Transportation equipment
Other equipment
Total		 2021
$8,814
21,050
1,607
189
$31,660		 2020
$8,521
15,879
1,912
449
$26,761

151

  • C. Income (gain) or expense (loss) relating with leases
The expenses relating to
short-term leases		 For theyears ended 31 December
2021
2020

$7,709
$13,065		 For theyears ended 31 December
2021
2020

$7,709
$13,065
2021

$7,709
$13,065
  • D. Cash outflow related to lessee and lease activity

During the year ended 31 December 2021 and 2020, the Group’s total cash outflows for leases amounting to $41,096 and $40,735.

  • (16) Summary of employee benefits, depreciation and amortization expenses by function for the years ended 31 December 2021 and 2020:
Function
Nature		 For the years ended 31 December For the years ended 31 December For the years ended 31 December For the years ended 31 December For the years ended 31 December For the years ended 31 December
2021 2020
Operating
costs		 Operating
expenses		 Total
amount		 Operating
costs		 Operating
expenses		 Total
amount
Employee benefits expenses
Salaries $272,961 $88,166 $361,127 $278,094 $110,391 $387,485
Labor and health insurance 28,330 9,113 37,443 27,581 8,676 36,257
Pension 13,262 6,236 19,498 13,607 4,364 17,971
Director’s remuneration - 1,788 1,788 - 5,655 5,655
Other employee benefits 17,078 4,265 21,343 18,180 5,050 23,230
Share-based payment - 3,364 3,364 - - -
Depreciation 246,189 17,195 263,384 238,241 17,160 255,401
Amortization 2,977 4,947 7,924 4,213 7,778 11,991

According to the Articles of Incorporation, at least 3% of profit of the current year shall be appropriated as employees’ compensation, and no higher than 1% of profit of the current year shall be appropriated as remuneration to board directors, however, the accumulated deficits, if any, shall first be made up for. The Company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the profit distributable as employees’ compensation in the form of shares or cash; and in addition thereto a report of such distribution is submitted to the shareholders’ meeting. Information on the Board of Directors’ resolution regarding the employees’ compensation and remuneration to directors and supervisors can be obtained from the “Market Observation Post System” on the website of the TWSE.

152

As of 31 December 2021, and for the year then ended, the Company concluded as net operating loss, and accordingly no employees’ compensation and remuneration to board directors have been appropriated.

On March 16, 2021, the Company’s board directors passed the resolution to pay remuneration of employees and directors in $15,075 and $4,020 respectively. There are no differences in the amounts stated as expenses in the 2020 financial reports.

(17) Non-operating income and expenses

  • A. Interest income
nterest income
Financial assets measured at amortized cost
Other income
Dividend income
Rental income
Others
Total
Other gains and loss
Foreign exchange loss, net
(Loss) gains on disposal of property, plant and
equipment
Gains on disposal of investments
Gains on valuation of financial assets at fair
value through profit or loss (Note)
Others expense
Total		 For the years ended
31 December
2021
2020
$1,640
$2,390
For the years ended
31 December		 2020
$2,390
2021
2020
$5,034
$3,254
796
763
58,468
20,605
$64,298
$24,622
For the years ended
31 December		 2020
$3,254
763
20,605
$24,622
2021
$(6,824)
(2,671)
-
350
(101)
$(9,246)		 2020
$(11,635)
741,298
428
97
(10,012)
$720,176

  • B. Other income

  • C. Other gains and loss

Note: Generated as financial assets or liabilities were measured at fair value through profit or loss.

153

D. Finance costs

Finance costs
Interest on bank loans
Interest on lease liabilities
Total		 For the years ended 31
December
2021
$(10,701)
(1,543)		 2020
$(14,571)
(1,580)
$(12,244) $(16,151)

(18) Components of other comprehensive income (loss)

A. For the year ended 31 December 2021

Items not to be reclassified to
profit or loss subsequently:
Remeasurements of defined
benefit plans
Unrealized gains from equity
instruments investments
measured at fair value
through other
comprehensive income
Items that may be reclassified to
profit or loss subsequently:
Share of other comprehensive
income of associates
accounted for under the
equity method
Total of other comprehensive
income		 Arising
during the
period
$4,884
4,693
(355)
$9,222		 Reclassification
adjustments
duringtheperiod
$ -
-
-
$-		 Other
comprehensive
income (loss),
before tax
$4,884
4,693
(355)
$9,222		 Income
tax effect
$(977)
-
71
$(906)		 Other
comprehensive
income (loss)
net of tax
$3,907
4,693
(284)
$8,316

154

B. For the year ended 31 December 2020

Items not to be reclassified to
profit or loss subsequently:
Remeasurements of defined
benefit plans
Unrealized gains from equity
instruments investments
measured at fair value
through other
comprehensive income
Items that may be reclassified to
profit or loss subsequently:
Exchange differences resulting
from translating the financial
statements of a foreign
operation
Share of other comprehensive
income of associates
accounted for under the
equity method
Total of other comprehensive
income		 Arising
during the
period
$540
5,799
(182)
(801)
$5,356		 Reclassification
adjustments
duringtheperiod
$ -
-
-
-
$-		 Other
comprehensive
income (loss),
before tax
$540
5,799
(182)
(801)
$5,356		 Income
tax effect
$(108)
-
58
160
$110		 Other
comprehensive
income (loss)
net of tax
$432
5,799
(124)
(641)
$5,466

(19) Income tax

For the year ended 31 December 2021 and 2020 the major components of income tax (expense) benefit are as follows:

A. Income tax recognized in profit or loss

. Income tax recognized in profit or loss
Current income tax (expense) benefit:
Current income tax charge
Land value increment tax
Deferred tax (expense) benefit:
Deferred tax (expense) benefit relating to origination
and reversal of temporary differences
Deferred tax relating to origination and reversal of
tax loss and tax credit
Reversal the land value incremental tax liability due
from property sale
Total income tax (expense) benefit		 For the years ended
31 December
2021 2020
$(10,421)
-
(4,375)
(1,379)
-		 $ -
(34,586)
21,466
34,941
19,191
$(16,175) $41,012

155

B. Income tax related to components of other comprehensive income

For the years ended
31 December
2021
2020
Deferred income tax (expense) benefit:
Exchange differences on translation of foreign
operation
$ -
$58
Share of other comprehensive income of associates
accounted for under the equity method
71
160
Remeasurements of defined benefit plans
(977)
(108)
Income tax related to components of other
comprehensive income
$(906)
$110
Reconciliation between tax expense (benefit) and accounting profit at the
Company’s applicable tax rates is as follows:		 For the years ended
31 December		 For the years ended
31 December
2021 2020
$ -
71
(977)		 $58
160
(108)
$(906) $110
Company’s applicable tax rates is as follows:
Accounting (loss) profit before tax from continuing
operations
At the Company’s statutory income rate
Tax effect of tax-exempt income
Tax effect of non-deductible expenses
Adjustments of deferred tax assets/liabilities for write-
downs or reversals
Tax on undistributed earnings
Reversal of the land value incremental tax liability due
from property sale
Other adjustments according to tax law
Total income tax benefit recognized in profit or loss		 For the years ended
31 December
2021 2020
$(53,841) $483,392
$10,768
1,663
(51)
(18,123)
(10,421)
-
(11)		 $(96,678)
149,739
(114)
3,460
-
(15,395)
-
$(16,175) $41,012

156

Significant components of deferred tax assets (liabilities) are as follows:

(a) For the year ended 31 December 2021

Balance as
of 1 January
Recognized
in profit
or loss
Temporary difference
Amortization of Goodwill
$(2,232)
$ -
Allowance for inventory valuation loss
20,466
(4,749)
Pension actuarial adjustment
3,326
-
Land value incremental tax
(72,514)
-
Accrued expense of pollution remediation
32,029
-
Exchange differences on translation of
foreign operations
-
-
Share of other comprehensive income of
associates accounted for under the
equity method
207
-
Loss carry-forward
34,941
(1,379)
Others
993
374
Deferred income tax benefit /(expense)
$(5,754)
Net deferred income tax assets/(liabilities)
$17,216
Balances on 31 December 2021:
Deferred tax assets
$92,221
Deferred tax liabilities
$(75,005)
(b)
For the year ended December 31 2020
Balance as
of 1 January
Recognized
in profit
or loss
Temporary difference
Amortization of Goodwill
$(2,232)
$ -
Allowance for inventory valuation loss
17,413
3,053
Pension actuarial adjustment
3,434
-
Land value incremental tax
(91,705)
19,191
Accrued expense of pollution remediation
11,017
21,012
Exchange differences on translation of
foreign operations
(58)
-
Share of other comprehensive income of
associates accounted for under the
equity method
47
-
Loss carry-forward
-
34,941
Others
3,592
(2,599)
Deferred income tax benefit /(expense)
$75,598
Net deferred income tax assets/(liabilities)
$(58,493)
Balances on 31 December 2020:
Deferred tax assets
$35,444
Deferred tax liabilities
$(93,937)		 Balance as
of 1 January		 Recognized
in profit
or loss		 Recognized in
other
comprehensive
income		 Balance as
of 31
December
$(2,232)
20,466
3,326
(72,514)
32,029
-
207
34,941
993		 $ -
(4,749)
-
-
-
-
-
(1,379)
374		 $ -
-
(977)
-
-
-
71
-
-		 $(2,232)
15,717
2,349
(72,514)
32,029
-
278
33,562
1,367
$17,216 $(5,754) $(906) $10,556
Recognized in
other
comprehensive
income
$92,221 $85,388
$(75,005) $(74,832)
Balance as
of 31
December
$(2,232)
17,413
3,434
(91,705)
11,017
(58)
47
-
3,592		 $ -
3,053
-
19,191
21,012
-
-
34,941
(2,599)		 $ -
-
(108)
-
-
58
160
-
-		 $(2,232)
20,466
3,326
(72,514)
32,029
-
207
34,941
993
$(58,493) $75,598 $110 $17,216
$35,444 $92,221
$(93,937) $(75,005)

157

  • C. The following table provides the information of the unused loss carryforward:
Year
2018
2020
2021
Total		 Tax loss for
theperiod
$16,949
163,122
82,269
$262,350		 Unused tax loss as of
31 December
2021
31 December
2020
$4,677
$7,270
163,132
167,436
82,269
-
$250,078
$174,706		 Unused tax loss as of
31 December
2021
31 December
2020
$4,677
$7,270
163,132
167,436
82,269
-
$250,078
$174,706		 Expiration Year
$7,270
167,436
-		 2028
2030
2031
$174,706
  • D. Deferred assets with least possibility to be realized

As of 31 December 2021, and 2020, deductible temporary differences for which no deferred income tax assets have been recognized in amounted to $31,977 and $15,234, respectively.

  • E. Status of income tax returns assessment

As of 31 December 2021, the status of the Group’s income tax returns which have been assessed by tax authorities is as follows:

The Company
The Subsidiary -Blessingthoughts
The Subsidiary –KuoChing Development
(Established on July 14, 2021)		 The assessment of income tax returns
Assessed and approved up to 2019
Assessed and approved up to 2019
-
  • (20) Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the years attributable to ordinary equity holders of the parent entity by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent entity by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

158

No diluted earnings per share in 2021 shall be accounted for due to that net loss operating loss was concluded for the fiscal.

loss operating loss was concluded for the fiscal.
(1) Basic earnings per share
Net (loss) income attributable to the parent company (in
thousands of NTD)
Weighted average number of ordinary shares outstanding
for basic earnings per share (thousand shares)
Basic (loss) earnings per share (NTD)
(2) Diluted earnings per share
Net (loss) income attributable to the parent company
Effect of dilution on net (loss) income attributable to
ordinary stockholders of the Company after dilution
Weighted average number of ordinary shares outstanding
for basic earnings per share (thousand shares)
Effect of dilution:
Employees’ compensation (thousand shares)
Weighted average number of ordinary shares outstanding
after dilution (thousand shares)
Diluted (loss) earnings per share (NTD)		 For the years ended 31 December
2021 2020
$(69,958) $524,404
184,490 215,780
$(0.38) $2.43
2021 2020
$(69,958) $524,404
$(69,958) $524,404
184,490
-		 215,780
1,364
184,490 217,144
$(0.38) $2,42

There were no transactions which may significantly change the number of the outstanding ordinary shares from the financial statement date to the date of releasing financial statements.

7. Related party transactions

Information of the related parties that had transactions with the Group during the financial reporting period is as follows:

159

Name and nature of relationship of the related parties

Name of the related parties Nature of relationship of the related parties KT Investment Company, Limited The Company’s director Macy Investment Company, Limited The Company’s director Chiaoli Investment Company, Limited The Company’s director Fulilu Investment Company, Limited The Company’s director (Resigned as a corporate director on March 16, 2021)

Significant transactions with the related parties

  • A. Lease - related parties

  • (a) Rental income

a) Rental income
KT Investment Company, Limited For the years ended
31 December
2021
$549		 2020
$549

The Group leased its plant and building to the said related party, from which rental income and collection were set at arm’s length range.

  • (b) Right-of-use assets
(b) Right-of-use assets
Macy Investment Company, Limited
(c) Lease liabilities
Macy Investment Company, Limited
(d) Interest expenses
Macy Investment Company, Limited		 As of 31 December
2021
2020
$58,228
$66,749
As of 31 December		 2020
$66,749
2021
2020
$58,757
$66,983
For the years ended
31, December
2021
2020
$917
$1,035		 2020
$66,983
2020
$1,035

160

B. Key management personnel compensation

Short-term employee benefits
Post-employment benefits
Total		 For the years ended
31,December		 For the years ended
31,December
2021
$7,124
164
$7,288		 2020
$13,256
142
$13,398

8. Assets pledged as collaterals

The following table lists assets of the Group pledged as collaterals:

Property, plant and equipment –
buildings, machinery and equipment
Financial assets measured at amortized
cost
Total		 Carrying Amount
As of 31
December
2020
$451,608
2,800
$454,408		 Purpose ofpledges
As of 31
December
2021
$448,891
2,800
$451,691
Long and short-term
loans
Energy resources
guarantee

9. Significant contingencies and derecognized contract commitments

The following items are the contingencies which have not been accrued and recorded on the balance sheet as on 31 December 2021

  1. As of 31 December 2021, the amount available under unused letter of credit was $19,565.

  2. As of 31 December 2021, the Group entered several construction contracts for which the development is in progress. The following provides significant details:

Supplier
Counterparty A
Counterparty B
Counterparty C		 Contract Subject
Equipment procurement
Equipment procurement
Plant construction		 Total
Contract
Amount
$21,500
21,300
28,095		 Equipment
Payment
Made
$17,200
7,455
4,214		 Unpaid
amount as of
December 31
2021
$4,300
13,845
23,881

161

10. Significant disaster loss

None.

11. Significant subsequent events

The Company approved a write-off of treasury shares on 16 December 2021 through the resolution of the board of directors. The base date for capital reduction was 19 January 2022. The amount of capital reduction was $41,111, and 41,111 thousand shares were written down. The amendment on registration document was completed on 7 February 2022.

12. Others

(1) Categories of financial instruments

Financial Assets
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss, current
(Other current assets)
Amortized cost of a financial asset:
Cash and cash equivalents (excluding cash on hand)
Measured at amortized cost financial assets
Notes receivables
Trade receivables
Other receivables (Other current assets)
Subtotal
Total
Financial Liabilities
Financial liabilities at amortized cost:
Short-term loans
Notes and accounts payable
Other payable
Long-term loans (including current portion)
Lease liability
Subtotal
Financial liabilities at fair value through profit or loss
(Other current assets)
Total		 As of 31 December As of 31 December
2021 2020
$97,959
1,184
382,958
2,800
31,868
738,146
736		 $93,266
81
759,708
602,800
39,248
496,187
918
1,156,508 1,898,861
$1,255,651 $1,992,208
2021 2020
$295,721
328,959
219,186
701,292
103,674		 $226,246
297,041
590,964
797,901
102,531
1,648,832 2,014,683
754 -
$1,649,586 $2,014,683

162

(2) Financial risk management objectives

The Group’s principal financial risk management objective is to manage the market risk, credit risk and liquidity risk related to its operating activities. The Group identifies measures and manages the aforementioned risks based on the Group’s policy and risk preference.

The Group has established appropriate policies, procedures and internal controls for financial risk management. Before entering into significant activities, approval process by the board of directors and audit committee must be carried out based on related protocols and internal control procedures. The Group complies with its financial risk management policies at all times.

(3) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risks comprise currency risk, interest rate risk and other price risk (such as equity risk).

In practice, it is rarely the case that a single risk factor varies independently from other risk factors. A correlation normally exist among risk factors. However, the following sensitivity analyses do not disclose the correlations among these risk factors.

Foreign currency risk

The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities (when revenue or expenses are denominated in a different currency from the Group’s functional currency) and the Group’s net investments in foreign subsidiaries.

The Group applies natural hedges on the foreign currency risk arising from purchases or sales as certain portion of receivables or payables are denominated as the same currencies, and utilizes spot or forward exchange contracts to manage foreign currency risk. The Group designates certain forward currency contracts as balance sheet hedges to hedge its exposure to foreign currency exchange risk associated with certain balance sheet assets or liabilities. Hedge accounting is not applied as the aforesaid natural hedges or designated forward contracts to hedge currency risk are deemed ineffective hedges. Furthermore, the currency risk exposures due from investments in oversea associates are not hedges as the investments are set for certain operating strategies.

163

The foreign currency sensitivity analysis of the possible change in foreign exchange rates on the Group’s profit is performed on significant monetary items denominated in foreign currencies as at the end of the reporting period. The Group’s foreign currency risk mainly resulted from the volatility of exchanging USD or CNY to NTD, and vice versa. The information of the sensitivity analysis is as follows:

  • a. When NTD strengthens/weakens against USD by 1%, the profit for the years ended 31 December 2021 and 2020 is decreased/increased by $3,304 and $1,177, respectively; and no impact on the equity.

  • b. When NTD strengthens/weakens against CNY by 1%, the profit for the years ended 31 December 2021 and 2020 is increased/decreased by $46 and by $190, respectively; and no impact on the equity.

Interest rate risk

The Group is exposed to interest rate risk arising from borrowing at floating interest rates. Interest rate risk is the risk that the fair value or forecasted cash flows of a financial instrument fluctuates due to the volatility in market interest rates.

The sensitivity analysis of interest rate fluctuation is performed on items exposed to interest rate risk as at the end of the reporting period, including borrowings with variable interest rates. At the reporting dates, a change of 10 basis points of interest rate in a reporting period could cause the profit for the years ended 31 December 2021 and 2020 to increase/decrease by $997 and $1,024, respectively.

Equity price risk

The Group’s listed and unlisted equity securities are susceptible to market price risk arising from uncertainties about future performance of equity markets. The Company’s equity investments are classified as financial assets at fair value through other comprehensive income. The equity investment portfolio is submitted to the Group’s senior management on a regular basis. The Group’s Board of Directors reviews and approves changes on the equity investment portfolio.

At the reporting date, for equity investments in the listed companies which are recorded as financial assets at fair value through other comprehensive income, an increase/decrease of 10% in the share price could increase/decrease $425 and $610 for the years ended 31 December 2021 and 2020, respectively.

164

Please refer to Note 12(9) for sensitivity analysis information of other equity instruments or derivatives that are linked to such equity instruments whose fair value measurement is categorized under Level 3.

(4) Credit risk management

Credit risk is the risk that a financial loss may be triggered when a counterparty defaults its obligations. The Group is exposed to credit risk from operating activities (primarily for, accounts receivables and notes receivables) and from its financing activities, including bank deposits and other financial instruments.

The Group mitigates credit risks by implementing the Group’s credit policy, procedures and controls. Credit limits are set for all counter parties based on their financial positions, credit ratings, historical experience, prevailing economic condition and the Group’s internal rating criteria etc. For dealing with some counterparties with less credit, certain financial instruments of credit enhancement, such as advance receipts or a letter of credit, may be required to be provided to mitigate possible credit risk exposures.

As of 31 December 2021 and 2020 accounts receivables from top ten customers represent 64% and 51% of the total accounts receivables of the Group, respectively. The credit concentration risk of other trade receivables is insignificant.

Credit risk from deposits in banks, fixed income securities and other financial instruments is managed by the Group’s treasury division in accordance with the Group’s policy. The Group only deals with counterparties that are approved through internal control procedures; therefore, the counterparties are limited to banks, financial institutions, companies or government entities with good credit standing.

The Group would write down or write off values of financial assets if these are forecasted to be least possible to be collected in the case of the issuer or debtor being insolvent or in financial distress.

(5) Liquidity risk management

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of cash and cash equivalents, highly liquid equity investments and bank borrowings. The table below summarizes the maturity profile of the Group’s financial liabilities based on the contractual undiscounted payments and contractual maturity, including contractual interests. The undiscounted interest payment due from borrowings with variable interest rates is extrapolated based on the estimated interest rate yield curve as of the end of the reporting period.

165

Non-derivative financial instruments

Less than 1year
As of 31 December 2021
Short-term loans
$298,073
Notes and accounts payable
328,959
Long-term loans
174,849
Lease liabilities
31,667
As of 31 December 2020
Short-term loans
$228,211
Notes and accounts payable
297,041
Long-term loans
129,121
Lease liabilities
24,346
Derivative financial assets (liabilities)
Less than 1year
As of 31 December 2021
Inflows
$90,115
Outflows
(89,685)
Net
$430
As of 31 December 2020
Inflows
$30,781
Outflows
(30,700)
Net
$81		 Less than 1year 2 to 3years 4 to 5years >= 5years Total
$ -
-
484,763
36,929
$ -
-
364,499
35,910
2 to 3years		 $ -
-
60,428
22,815
$ -
-
333,167
21,709
4 to 5years		 $ -
-
-
16,000
$ -
-
-
25,143
>= 5years		 $298,073
328,959
720,040
107,411
$228,211
297,041
826,787
107,108
Total

As of 31 December 2021
Inflows
Outflows
Net
As of 31 December 2020
Inflows
Outflows
Net
$90,115
(89,685)
$430
$30,781
(30,700)
$81		 $ -
-
$ -
$ -
-
$ -		 $ -
-
$ -
$ -
-
$ -		 $ -
-
$ -
$ -
-
$ -		 $90,115
(89,685)
$430
$30,781
(30,700)
$81

(6) Reconciliation of liabilities arising from financing activities

Reconciliation of liabilities for the year ended 31 December 2021:

As of 1 January 2021
Cash flows
Non-cash changes
As of 31 December 2021		 Short-term
loans
$226,246
69,475
-
$295,721		 Long-term
loans
(including
current
portion)
$797,901
(96,609)
-		 Lease
liabilities
$102,531
(31,844)
32,987		 Deposit
margin
$75
-
-
$75		 Total
liabilities
from
financing
activities
$1,126,753
(58,978)
32,987
$701,292 $103,674 $1,100,762

166

Reconciliation of liabilities for the year ended 31 December 2020:

As of 1 January 2020
Cash flows
Non-cash changes
As of 31 December 2020		 Short-term
loans
$291,628
(65,382)
-
$226,246		 Long-term
loans
(including
current
portion)
$919,936
(122,035)
-		 Lease
liabilities
$117,174
(26,090)
11,447		 Deposit
margin
$ -
75
-
$75		 Total
liabilities
from
financing
activities
$1,328,738
(213,432)
11,447
$797,901 $102,531 $1,126,753

  • (7) Fair value of financial instruments

  • A. Valuation methodology and assumptions for fair values:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction among market participants at the measurement date. The following are the methodology and assumptions taken by the Group to measure or disclose the fair values of financial assets and financial liabilities:

  • (a)The carrying amount of cash and cash equivalents, accounts receivables, accounts payable and other current liabilities approximate their fair value due to their short maturities.

  • (b)For financial assets and liabilities traded in an active market with standard terms and conditions, their fair value is determined based on market quoted prices (including listed equity securities) at the reporting date.

  • (c) Fair value of equity instruments without market quoted prices (including private placement of listed equity securities, unquoted public company and private company equity securities) are valued by market approach which takes industrial comparable entities’ quoted market prices or other relevant information as reference to estimate probable fair values.

  • (d)Fair value of debt instruments without market quoted prices, bank loans, and other non-current liabilities are determined based on the counterparties’ prices or valuation method. The valuation method uses DCF method as a basis, and the assumptions such as interest rates and discount rate are primarily based on relevant information of equivalent instruments (such as yield curves published by the Taipei Exchange, average prices and credit risks for Fixed Rate Commercial Paper published by Reuters, etc.)

167

  • B. Fair value of financial instruments measured at amortized cost

The carrying amount of the Group’s financial instruments, financial assets and liabilities measured at amortized cost approximate their fair value.

  • C. Fair value measurement hierarchy for financial instruments

Please refer to Note 12(9) for fair value measurement hierarchy for financial instruments of the Group.

  • (8) Derivative financial instruments

The Group’s derivative financial instruments include forward currency contracts and embedded derivatives. The related information for derivative financial instruments not qualified for hedge accounting and not yet settled as of 31 December 2021 and 2020 is as follows:

Forward currency contracts

The Group entered into forward currency contracts to mitigate its exposure to financial risk, but these contracts are not designated as hedging instruments. The table below lists the information related to forward currency contracts:

Items (by contract) Contract Amount Contract Period As at 31 December 2021 Forward currency contract Sell foreign currency USD 97 thousand Sell foreign currency USD 97 thousand Sell foreign currency USD 94 thousand Sell foreign currency USD 31 thousand Sell foreign currency USD 51 thousand Sell foreign currency USD 94 thousand Sell foreign currency USD 51 thousand Sell foreign currency USD 102 thousand Sell foreign currency USD 62 thousand Sell foreign currency USD 68 thousand Sell foreign currency USD 153 thousand Sell foreign currency USD 51 thousand Sell foreign currency USD 622 thousand Sell foreign currency USD 51 thousand Sell foreign currency USD 97 thousand Sell foreign currency USD 136 thousand Sell foreign currency USD 33 thousand

From 2021.08.19 to 2022.01.07 From 2021.09.23 to 2022.02.09 From 2021.10.01 to 2022.02.11 From 2021.10.15 to 2022.02.15 From 2021.10.18 to 2022.01.25 From 2021.10.20 to 2022.01.28 From 2021.11.05 to 2022.02.15 From 2021.11.05 to 2022.02.18 From 2021.11.05 to 2022.03.11 From 2021.11.05 to 2022.03.11 From 2021.11.05 to 2022.02.22 From 2021.11.15 to 2022.02.25 From 2021.11.15 to 2022.02.22 From 2021.11.29 to 2022.03.01 From 2021.11.29 to 2022.04.08 From 2021.11.29 to 2022.04.13 From 2021.11.29 to 2022.04.08

168

Items (by contract) Contract Amount Contract Period Sell foreign currency USD 48 thousand Sell foreign currency USD 68 thousand Sell foreign currency USD 68 thousand Sell foreign currency USD 59 thousand Sell foreign currency USD 59 thousand Sell foreign currency USD 51 thousand Sell foreign currency USD 161 thousand Sell foreign currency USD 94 thousand Sell foreign currency CNY 1,035 thousand Sell foreign currency USD 51 thousand Sell foreign currency USD 102 thousand Sell foreign currency USD 94 thousand Sell foreign currency USD 68 thousand Sell foreign currency USD 203 thousand

From 2021.11.29 to 2022.04.08 From 2021.11.29 to 2022.04.13 From 2021.11.29 to 2022.05.11 From 2021.12.14 to 2022.02.15 From 2021.12.14 to 2022.02.22 From 2021.12.14 to 2022.03.11 From 2021.12.14 to 2022.03.08 From 2021.12.14 to 2022.03.22 From 2021.12.15 to 2022.02.19 From 2021.12.20 to 2022.03.16 From 2021.12.20 to 2022.03.22 From 2021.12.20 to 2022.04.01 From 2021.12.20 to 2022.04.08 From 2021.12.20 to 2022.05.13

As at 31 December 2020 Forward currency contract Sell foreign currency USD 48 thousand Sell foreign currency USD 115 thousand Sell foreign currency USD 136 thousand Sell foreign currency USD 67 thousand Sell foreign currency USD 86 thousand Sell foreign currency USD 94 thousand Sell foreign currency USD 176 thousand Sell foreign currency USD 134 thousand Sell foreign currency USD 67 thousand Sell foreign currency USD 94 thousand Sell foreign currency USD 33 thousand Sell foreign currency USD 45 thousand

From 2020.11.04 to 2021.02.19 From 2020.11.19 to 2021.03.16 From 2020.11,23 to 2021.03.12 From 2020.12.16 to 2021.04.09 From 2020.12.16 to 2021.03.30 From 2020.12.16 to 2021.02.19 From 2020.12.16 to 2021.05.07 From 2020.12.28 to 2021.04.29 From 2020.12.28 to 2021.05.07 From 2020.12.28 to 2021.03.23 From 2020.12.31 to 2021.04.13 From 2020.12.30 to 2021.04.01

169

(9) Fair value measurement hierarchy

A. Fair value measurement hierarchy

All asset and liabilities for which fair values are measured or disclosed in the financial statements are categorized within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole. Level 1, 2 and 3 inputs are described as follows:

Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities;

Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;

Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization at the end of each reporting period.

  • B. Fair value measurement hierarchy of the Group’s assets and liabilities

The Group does not have assets that are measured at fair value on a nonrecurring basis. Fair values of the Group’s assets and liabilities are measured at fair value on a recurring basis as follows:

As of 31 December 2021

As of 31 December 2021
Financial assets:
Financial assets at fair value through profit or loss
Forward currency contract
Financial assets at fair value through other
comprehensive income
Equity instrument measured at fair value
Financial liabilities:
Financial liabilities at fair value through profit or loss
Forward currency contracts		 Level 1 Level 2 Level3 Total
$- $1,184 $- $1,184
$4,254 $ - $93,705 $97,959
$- $754 $- $754

170

As of 31 December 2020
Financial assets:
Financial assets at fair value through profit or loss
Forward currency contract
Financial assets at fair value through other
comprehensive income
Equity instrument measured at fair value
Financial liabilities:
Financial liabilities at fair value through profit or loss
Forward currency contracts		 Level 1 Level 2 Level3 Total
$- $81 $- $81
$6,097 $ - $87,169 $93,266
$- $- $- $-

Re-classifications between Level 1 and Level 2 during the period

During the years ended 31 December 2021 and 2020, there were no reclassifications between Level 1 and Level 2 fair value measurements.

Reconciliation for fair value measurements in Level 3 of the fair value hierarchy for movements during the period is as follows:

hierarchy for movements during the period is as follows:
Beginning balances as of 1 January 2021
Total gains and loss recognized for the
year ended 31 December 2021:
Amount recognized in OCI (presented in
“Unrealized gains (loss) from equity instruments investments
measured at fair value through other comprehensive income)
Ending balances as of 31 December 2021
Beginning balances as of 1 January 2020
Total gains and loss recognized for the
year ended 31 December 2020:
Amount recognized in OCI (presented in
“Unrealized gains (loss) from equity instruments investments
measured at fair value through other comprehensive income)
Acquire in 2020
Ending balances as of 31 December 2020		 Assets
At fair value through
other comprehensive
income
Stocks
$87,169

6,356
$93,705
$40,216

1,036
42,500
$87,169

171

Information on significant unobservable inputs of fair value measurement in Level 3 fair value hierarchy

Significant unobservable inputs of fair value measurement in Level 3 fair value hierarchy are as follows:

As of 31 December 2021

Significant Valuation unobservable Quantitative Correlation between Sensitivity Analysis of correlation techniques inputs information inputs and fair value between inputs and fair value Financial assets: Financial assets at fair value through other comprehensive income Stocks Asset discount for 30% The greater 10% increase (decrease) in the approach lack of degree of lack discount for lack of marketability marketability of marketability, would result in (decrease) increase in the lower the the Group’s profit or loss by $9,371 estimated fair value is determined.

As of 31 December 2020

Significant Valuation unobservable Quantitative Correlation between Sensitivity Analysis of correlation techniques inputs information inputs and fair value between inputs and fair value

Financial

assets: Financial assets at fair value through other comprehensive income Stocks Asset discount for 30% The greater 10% increase (decrease) in the approach lack of degree of lack discount for lack of marketability marketability of marketability, would result in (decrease) increase in the lower the the Group’s profit or loss by $8,717 estimated fair value is determined.

172

Valuation process used for fair value measurements categorized within Level 3 of the fair value hierarchy

The Group’s treasury division is responsible for validating the fair value measurements and ensuring that the results of the valuation are in line with market conditions, based on independent and reliable inputs which are consistent with other information, and represent reasonable prices. The team analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the Group’s accounting policies at each reporting date.

(10) Significant assets and liabilities denominated in foreign currencies

Information regarding the significant assets and liabilities denominated in foreign currencies is listed below:

Financial assets
Monetaryitem:
USD
CNY
Financial
liabilities
Monetaryitem:
USD		 As of 31 December As of 31 December
2021 NTD
$529,740
4,561
$199,324		 2020
Foreign
Currency
$19,138
1,051
$7,201		 Exchange
rate
27.68
4.34
27.68		 Foreign
Currency
$10,925
4,349
$6,792		 Exchange
rate
28.48
4.38
28.48		 NTD
$311,144
19,049
$193,436

The Group had $6,824 and $11,635 foreign exchange loss for the years ended 31 December 2021 and 2020, respectively.

(11) Capital management

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize the shareholder value. To maintain or adjust the capital structure, the Group may adjust dividend payment to shareholders, return capital to shareholders or issue new shares.

173

13. Other disclosures

(1) Information at significant transactions

  • A. Financing provided: None.

  • B. Endorsement/Guarantee provided: None.

  • C. Securities held as at end of the period (excluding subsidiaries and associates):

Holding Company Type andname ofsecurities "Relationship Financialstatement account As of 31 December,2021 As of 31 December,2021
Shares Carrying
amount		 "Percen
tage of		 Shares
SUNKO INK CO.,
LTD.		 Stock
CHING FENG HOME
FASHIONS. CO. LTD
LINCO TECHNOLOGY
CO. LTD
THE FIRST LEASING
CORPORATION
TOTAL ACRYLIC
POLYMER INDUSTRY
(TAPI) CORPORATION
GLOBAL GRAPHENE
GROUP, INC.
YAYI CO., LTD.
SAR TECHNOLOGY INC.
KING SHINE EE
TECHNOLOGY
ENTERPRISE CO., LTD.		 Unrelated party
Unrelated party
Unrelated party
Unrelated party
Unrelated party
Unrelated party
Unrelated party
Unrelated party		 Financial assets at fair value
through other comprehensive
income-non-current
Financial assets at fair value
through other comprehensive
income-non-current
Financial assets at fair value
through other comprehensive
income-non-current
Financial assets at fair value
through other comprehensive
income-non-current
Financial assets at fair value
through other comprehensive
income-non-current
Financial assets at fair value
through other comprehensive
income-non-current
Financial assets at fair value
through other comprehensive
income-non-current
Financial assets at fair value
through other comprehensive
income-non-current
Less: Unrealized gains (loss)
from investments in equity
instruments
Total		 214,309
422,734
2,852,325
100,000
6,155
368,898
4,250,000
1,000		 $3,365
4,068
25,930
1,000
16,405
4,883
42,500
10
(202)		 0.13%
0.80%
12.96%
2.00%
0.87%
1.85%
5.18%
0.01%		 $4,254
4,554
31,825
14,826
-
-
42,500
-
$97,959

174

  • D. Individual securities acquired or disposed of with accumulated amount exceeding the lower of $300 million or 20% of the capital stock for the period: None

  • E. Acquisition of individual real estate with amount exceeding the lower of $300 million or 20% of the capital stock for the period: None

  • F. Disposal of individual real estate with amount exceeding the lower of $300 million or 20% of the capital stock for the period: None

  • G. Related party transactions for purchases and sales amounts exceeding the lower of $100 million or 20% of the capital stock for the period: None.

  • H. Receivables from related parties with amounts exceeding the lower of $100 million or 20% of capital stock as at end of the period: None.

  • I. Transaction of derivative financial instruments:

Please refer to Note 12(8).

  • J. Significant intercompany transactions among consolidated entities are as follows:

None.

175

(2) Information on investees

Investees’ names, locations, main businesses and products, original investment amount, investment as at end of the period, net income (loss) of the investees and investment income (loss) recognized for the period:

Investor
company		 Investee company Address Main
businesses and
products		 Initial investment
amount		 Initial investment
amount		 Investment as at end of the period Investment as at end of the period Investment as at end of the period Net income
(loss) of
investee
company
Investment
income
(loss)
recognized
Note
Ending
balance		 Beginning
balance		 Number of
shares (in
thousands)		 Percentage
of ownership
(%)
Carrying
value
The
Company		 Power Rich Anguilla Investment
Services		 $27,403
(USD
990,000)		 27,403
(USD
990,000)		 990,000 30.00% 10,460 $(10,252) $(3,075)
The
Company		 Bnkc
Biochemical
Technology Co.		 Taiwan Wholesale of
Chemical Raw
Material,
wholesale of
Cosmetics, and
Retail of
Cosmetics

$490		 $490 49,000 49.00% $1,507 $1,505 $737
The
Company		 Sunko Biotech
Co.		 Taiwan Biotechnology
Services
$60,000		 $60,000 1,674,044 22.32% $ - $ - $ -
The
Company		 Chen Chi
Technology Co.		 Taiwan Synthetic resin
and plastic
manufacturing
$14,360		 $14,360 1,640,000 41.00% $ - $ - $ -
The
Company		 Kuo Ching
Development
Corporation		 Taiwan Wholesale of
chemical
solvents,
industrial
additives, other
raw materials
with derivative
products		 $1,000 $ - 100,000 100% $2,606 $1,606 $1,606
The
Company		 Blessingthoughts Taiwan Drinks, and food
vending
$15,200		 $15,200 1,520,000 83.52% $615 $(352) $(294) Note

Note: The company is undergoing liquidation procedure.

176

(3) Information on investments in Mainland China

(Amounts in thousands; Currency denomination in NTD or in foreign currencies)

Investee
company		 Main
businesses
and products		 Main
businesses
and products		 Total amount
of
paid-in capital		 Method of
investment
(Note 1)		 Beginning
accumulated
outflow of
investment
from
Taiwan		 Beginning
accumulated
outflow of
investment
from
Taiwan		 Investment flows for
the period		 Investment flows for
the period		 Ending
accumulat
ed outflow
of
investment
from
Taiwan
Net
income
(loss)
of
investee
company		 Percentage
of
ownership
Investment
income
(loss)
recognized
(Note 2)
Carrying
value as
at end of
the
period		 Accumulated
inward
remittance of
earnings as at
end of the
period
Outflow Inflow
Eehung
(Note1)		 Trading of
chemical
goods, raw
materials,
mechanical
equipment
and spare
parts,
electronic
equipment
and spare
parts		 $15,883
(RMB
3,513,896)		 Investment
in Mainland
China was
through
indirect
oversea
investee
that is
invested
through
direct
oversea
investee
company.		 $8,871
(USD
285,600)		 $ - $1,890
(USD
61,279.88)		 $8,871
(USD
285,600)		 $ - - % $ - $ - $ -
Accumulated
investment in Mainland
China as of
31 December 2021		 Investment Amounts
Authorized by
Investment
Commission, MOEA		 Upper Limit on Investment
The parent company’s netaccount
values × 60%
NT$8,871
(USD285,600)		 NT$6,981
(USD224,320.12)		 NT$1,399,881
(Note2)

Note 1: Approved by the Investment Committee, Power Hero has invested in Giant Way and indirectly invested in Eehung in Mainland China. Eehung was liquidated on 25 February 2019, and a notification letter from the Investment Committee of the Ministry of Economic Affairs was received to state that the investment amount has been returned by Giant Way on 13 August 2020.

  • Note 2: According to the regulations of Investment Commission, Ministry of Economic Affairs, the parent company’s investment upper limit in Mainland China is 60% of its net value.

177

Significant transactions with investee companies in Mainland China directly or indirectly through third parties: None.

(4) Information on major shareholders

Shares
Names of major shareholders		 Number of shares held Shareholding ratio
Macy Investment Company, Limited 16,838,191 8.90 %
KT Investment Company, Limited 10,801,010 5.71 %

14. Operating segment information

(1)Segment revenue and operating results

The Group's business is mainly engaged in the manufacture, processing and trading of various plant protection drug progenitors, specialty chemicals and plastic raw materials, etc. The operating decision makers of the Group review the overall operating results of the Company with a single operating unit to make decisions on company resources and evaluate the overall performance of the Company, without distinguishing between departments, so it is a single operating department.

(2) Geographic information

  • (i) As of 31 December 2021 and 2020 the Group’s external sales are listed as follows:
Area
Taiwan
United States
Asia
Europe
Other
Total		 For the years ended 31 December For the years ended 31 December
2021
$2,187,844
191,195
243,563
160,785
67,251
$2,850,638		 2020
$2,008,856
155,139
398,457
156,384
33,765
$2,752,601

178

Sales by region are grouped based on the regions where the customers are located at.

(ii) Non-current asset:

Area
Taiwan		 As of 31 December As of 31 December
2021
$1,862,949		 2020
$1,941,088

(a) Information about major customers

Company A For the years ended 31 December For the years ended 31 December
2021
$537,783		 2020
$445,211

179

5 Parent Only Financial Statements of the Most Recent Year with Independent Auditors’ Report

==> picture [501 x 706] intentionally omitted <==

180

==> picture [514 x 716] intentionally omitted <==

181

==> picture [522 x 734] intentionally omitted <==

182

==> picture [530 x 734] intentionally omitted <==

183

==> picture [516 x 738] intentionally omitted <==

184

==> picture [531 x 732] intentionally omitted <==

185

==> picture [503 x 729] intentionally omitted <==

186

==> picture [510 x 729] intentionally omitted <==

187

==> picture [741 x 492] intentionally omitted <==

188

==> picture [723 x 491] intentionally omitted <==

189

SUNKO INK CO., LTD.

Notes to Parent Company Only Financial Statements

For the years Ended 31 December 2021 and 2020

(Expressed in Thousands of New Taiwan Dollars, unless Otherwise Stated)

1. General

Sonko Ink Co., Ltd. (hereinafter “the Company”) was incorporated in December 1974. The Company is engaged in manufacturing and trading of certain chemicals or industrial materials. Major product lines are as follows:

a. Argochemicals

b.Fine Chemicals: curing agent, non-halogenated flame retardant, reducing agent, antioxidant

c. Polymer: PU Based surface treating agent, Polymer-TPU, Polymer-TPV

d. UV Absorbers

In May 1996, the Company’s shares were listed on the Taiwan Stock Exchange (TWSE), when the registered office was located at No. 139, Renmei Rd., Dali Dist., Taichung City 412036, Taiwan (R.O.C.). On 30 April 2021, as approved by Ministry of Economic Affairs, the Company’s registered operating office address was changed to 5F., No. 229, Zhongxing St., West Dist., Taichung City 403022, Taiwan (R.O.C.).

On 30 March 2016, the Company merged with Kuo Ching Chemical Co., Ltd. (hereinafter “Kuo Ching”). Kuo Ching was incorporated in April 1977, mainly engaged in production and trading of agrochemicals, fine chemicals, and other polymer materials. In October 2009, Kuo Ching’s shares was listed on the Emerging Stock Board. To improve efficiency and competitive capabilities, the Company merged with Kuo Ching on 30 March 2015 to integrate both entities’ production capacities, research resources, marketing and product lines. The Company was the surviving Company which acquired all of Kuo Ching’s assets, liabilities, rights or obligations.

2. Date and procedures of authorization of financial statements for issue

The parent Company only financial statements of the Company for the years ended 31 December 2021 and 2020 were approved to release in accordance with a resolution of the board of directors’ meeting on 15 March 2022.

190

  1. Newly issued or revised standards and interpretations

  2. (4) Changes in accounting policies resulting from applying for the first-time certain standards and amendments

The Company applied for the first time International Financial Reporting Standards, International Accounting Standards, and Interpretations issued, revised or amended which are recognized by Financial Supervisory Commission (“FSC”) and become effective for annual periods beginning on or after 1 January 2021. The adoption new standard and amendment is described, had no material impact on the Company.

  • (5) Standards or interpretations issued, revised or amended, by International Accounting Standards Board (“IASB”) which are endorsed by FSC, but not yet adopted by the Company as at the end of the reporting period are listed below.
Items New, Revised or Amended Standards and Interpretations Effective Date
issued by IASB
a Narrow-scope
amendments
of
IFRS,
including
Amendments to IFRS 3, Amendments to IAS 16,
Amendments toIAS 37 and theAnnual Improvements		 1 January 2022
  • (a) Narrow-scope amendments of IFRS, including Amendments to IFRS 3,

Amendments to IAS 16, Amendments to IAS 37 and the Annual Improvements

  • A. Updating a Reference to the Conceptual Framework (Amendments to IFRS 3)

The amendments updated IFRS 3 by replacing a reference to an old version of the Conceptual Framework for Financial Reporting with a reference to the latest version, which was issued in March 2018. The amendments also added an exception to the recognition principle of IFRS 3 to avoid the issue of potential “day 2” gains or losses arising for liabilities and contingent liabilities. Besides, the amendments clarify existing guidance in IFRS 3 for contingent assets that would not be affected by replacing the reference to the Conceptual Framework.

191

  • B. Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)

The amendments prohibit a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use. Instead, a company will recognise such sales proceeds and related cost in profit or loss.

  • C. Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)

The amendments clarify what costs a company should include as the cost of fulfilling a contract when assessing whether a contract is onerous.

  • D. Annual Improvements to IFRS Standards 2018 - 2020

Amendment to IFRS 1

The amendment simplifies the application of IFRS 1 by a subsidiary that becomes a first-time adopter after its parent in relation to the measurement of cumulative translation differences.

Amendment to IFRS 9 Financial Instruments

The amendment clarifies the fees a company includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability.

Amendment to Illustrative Examples Accompanying IFRS 16 Leases The amendment to Illustrative Example 13 accompanying IFRS 16 modifies the treatment of lease incentives relating to lessee’s leasehold improvements.

Amendment to IAS 41

The amendment removes a requirement to exclude cash flows from taxation when measuring fair value thereby aligning the fair value measurement requirements in IAS 41 with those in other IFRS Standards.

192

The abovementioned standards and interpretations were issued by IASB and endorsed by FSC so that they are applicable for annual periods beginning on or after 1 January 2022.The abovementioned amendments that are applicable for annual periods beginning on or after 1 January 2021 have no material impact on the Company.

  • (6) Standards or interpretations issued, revised or amended, by International Accounting Standards Board (“IASB”) which are not endorsed by FSC, and not yet adopted by the Company as at the end of the reporting period are listed below.
Items New, Revised or Amended Standards and Interpretations Effective Date
issued byIASB
a IFRS 10 “Consolidated Financial Statements” and IAS 28
“Investments in Associates and Joint Ventures” — Sale or
Contribution of Assets between an Investor and its Associate
or Joint Ventures		 To be determined
by IASB
b IFRS17“Insurance Contracts” 1January2023
c Classification of Liabilities as Current or Non-current –
Amendments to IAS 1		 1 January 2023
d Disclosure Initiative - Accounting Policies – Amendments to
IAS 1		 1 January 2023
e Definitionof AccountingEstimates– Amendments toIAS 8 1January2023
f Deferred Tax related to Assets and Liabilities arising from a
SingleTransaction – Amendments toIAS12		 1 January 2023
  • (a) IFRS 10“Consolidated Financial Statements” and IAS 28“Investments in Associates and Joint Ventures” — Sale or Contribution of Assets between an Investor and its Associate or Joint Ventures

The amendments address the inconsistency between the requirements in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures , in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture. IAS 28 restricts gains and loss arising from contributions of non-monetary assets to an associate or a joint venture to the extent of the interest attributable to the other equity holders in the associate or joint ventures. IFRS 10 requires full profit or loss recognition on the loss of control of the subsidiary. IAS 28 was amended so that the gain or loss resulting from the sale or contribution of assets that constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized in full.

193

IFRS 10 was also amended so that the gains or loss resulting from the sale or contribution of a subsidiary that does not constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized only to the extent of the unrelated investors’ interests in the associate or joint venture.

(b) IFRS 17 “Insurance Contracts”

IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects (including recognition, measurement, presentation and disclosure requirements). The core of IFRS 17 is the General (building block) Model, under this model, on initial recognition, an entity shall measure a group of insurance contracts at the total of the fulfilment cash flows and the contractual service margin. The carrying amount of a group of insurance contracts at the end of each reporting period shall be the sum of the liability for remaining coverage and the liability for incurred claims.

Other than the General Model, the standard also provides a specific adaptation for contracts with direct participation features (the Variable Fee Approach) and a simplified approach (Premium Allocation Approach) mainly for short-duration contracts.

IFRS 17 was issued in May 2017 and it was amended in June 2020. The amendments include deferral of the date of initial application of IFRS 17 by two years to annual beginning on or after 1 January 2023 (from the original effective date of 1 January 2021); provide additional transition reliefs; simplify some requirements to reduce the costs of applying IFRS 17 and revise some requirements to make the results easier to explain. IFRS 17 replaces an interim Standard – IFRS 4 Insurance Contracts – from annual reporting periods beginning on or after 1 January 2023.

  • (c) Classification of Liabilities as Current or Non-current – Amendments to IAS 1

These are the amendments to paragraphs 69-76 of IAS 1 Presentation of Financial statements and the amended paragraphs related to the classification of liabilities as current or non-current.

194

  • (d) Disclosure Initiative - Accounting Policies – Amendments to IAS 1

The amendments improve accounting policy disclosures that to provide more useful information to investors and other primary users of the financial statements.

  • (e) Definition of Accounting Estimates – Amendments to IAS 8

The amendments introduce the definition of accounting estimates and included other amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to help companies distinguish changes in accounting estimates from changes in accounting policies.

  • (f) Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12

The amendments narrow the scope of the recognition exemption in paragraphs 15 and 24 of IAS 12 so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences.

The abovementioned standards and interpretations issued by IASB have not yet endorsed by FSC at the date when the Company’s financial statements were authorized for issue, the local effective dates are to be determined by FSC. The standards and interpretations have no material impact on the Company.

4. Summary of significant accounting policies

(1) Statement of Compliance

The parent Company only financial statements of the Company for the years ended 31 December 2021 and 2020 have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (“the Regulations”).

195

(2) Basis of Preparation

The Company prepared the parent Company only financial statements in accordance with the Regulations. According to the Article 21 of the Regulation, which provided that the profit or loss and other comprehensive income for the period presented in the parent Company only financial statements shall be the same as the profit or loss and other comprehensive income attributable to stockholders of the parent presented in the consolidated financial statements for the period, and the total equity presented in the parent Company only financial statements shall be the same as the equity attributable to the parent Company presented in the consolidated financial statements. Therefore, the Company accounted for its investments in subsidiaries using equity method and, accordingly, made necessary adjustments.

The parent Company only financial statements have been prepared on a historical cost basis, except for financial instruments that have been measured at fair value. The parent Company only financial statements are expressed in thousands of New Taiwan Dollars (NT$) unless otherwise stated.

  • (3) Foreign currency transactions

The Company’s parent Company only financial statements are presented in its functional currency, New Taiwan Dollars (NT$). Items included in the financial statements are measured using that functional currency.

Transactions in foreign currencies are initially recorded by the Company at the respective functional currency rates prevailing at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency closing rates of exchange at the reporting date. Nonmonetary items measured at fair value in foreign currencies are translated using the exchange rates at the date when the fair value is determined. Non-monetary items that are measured at historical cost in foreign currencies are translated using the exchange rates as at the dates of the initial transactions.

All exchange differences arising on the settlement of monetary items or on translating monetary items are taken to profit or loss in the period in which they arise except for the following:

  • (a) Exchange differences arising from foreign currency borrowings for an acquisition of a qualifying asset to the extent that they are regarded as an adjustment to interest costs are included in the borrowing costs that are eligible for capitalization.

196

  • (b) Foreign currency items within the scope of IFRS 9 Financial Instruments are accounted for based on the accounting policy for financial instruments.

  • (c) Exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation is recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.

When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss is recognized in other comprehensive income. When a gain or loss on a nonmonetary item is recognized in profit or loss, any exchange component of that gain or loss is recognized in profit or loss.

  • (4) Translation of Foreign Currency Financial Statements

The assets and liabilities of foreign operations are translated into NT$ at the closing rate of exchange prevailing at the reporting date and their income and expenses are translated at an average rate for the period. The exchange differences arising on the translation are recognized in other comprehensive income. On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in other comprehensive income and accumulated in the separate component of equity, is reclassified from equity to profit or loss when the gain or loss on disposal is recognized.

On the partial disposal of a subsidiary that includes a foreign operation that does not result in a loss of control, the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is reattributed to the non-controlling interests in that foreign operation. In partial disposal of an associate or joint arrangement that includes a foreign operation that does not result in a loss of significant influence or joint control, only the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is reclassified to profit or loss.

Any goodwill and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and expressed in its functional currency.

197

  • (5) Current and Non-current Distinction

An asset is classified as current when:

  • E. The Company expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;

  • F. The Company holds the asset primarily for the purpose of trading;

  • G. The Company expects to realize the asset within twelve months after the reporting period;

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

All other assets are classified as non-current.

A liability is classified as a current when:

  • E. The Company expects to settle the liability in normal operating cycle;

  • F. The Company holds the liability primarily for the purpose of trading;

  • G. The liability is due to be settled within twelve months after the reporting period;

  • H. The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting date. Term of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

All other liabilities are classified as non-current.

  • (6) Cash and cash equivalent

Cash and cash equivalents comprise cash on hand, demand deposits and shortterm, highly liquid time deposits (including ones that have maturity within 3 months) or investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

198

  • (7) Financial Instruments

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

Financial assets and financial liabilities within the scope of IFRS 9 Financial Instruments are recognized initially at fair value plus or minus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

  • F. Financial instruments: Recognition and Measurement

The Company accounts for regular way purchase or sales of financial assets on the trade date.

The Company classified financial assets as subsequently measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss considering both factors below:

(a)the Company’s business model for managing the financial assets

(b)the contractual cash flow characteristics of the financial asset.

Financial assets measured at amortized cost

A financial asset is measured at amortized cost if both of the following conditions are met and presented as note receivables, trade receivables financial assets measured at amortized cost and other receivables etc., on balance sheet as at the reporting date:

  • (a)the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and

  • (b)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.

Such financial assets are subsequently measured at amortized cost (the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between the initial amount and the maturity amount and adjusted for any loss allowance) and is not part of a hedging relationship. A gain or loss is recognized in profit or loss when the financial asset is derecognized, through the amortization process or in order to recognize the impairment gains or loss.

199

Interest revenue is calculated by using the effective interest method. This is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for:

  • (a)purchased or originated credit-impaired financial assets. For those financial assets, the Company applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.

  • (b)financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets. For those financial assets, the Company applies the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods.

Financial asset measured at fair value through other comprehensive income

A financial asset is measured at fair value through other comprehensive income if both of the following conditions are met:

  • (a)the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and

  • (b)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.

Recognition of gain or loss on a financial asset measured at fair value through other comprehensive income are described as below:

  • (a) A gain or loss on a financial asset measured at fair value through other comprehensive income recognized in other comprehensive income, except for impairment gains or loss and foreign exchange gains and loss, until the financial asset is derecognized or reclassified.

  • (b) When the financial asset is derecognized the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment.

200

  • (c) Interest revenue is calculated by using the effective interest method. This is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for:

  • (iii) Purchased or originated credit-impaired financial assets. For those financial assets, the Company applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.

  • (iv) Financial assets that are not purchased or originated creditimpaired financial assets but subsequently have become creditimpaired financial assets. For those financial assets, the Company applies the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods.

Besides, for certain equity investments within the scope of IFRS 9 that is neither held for trading nor contingent consideration recognized by an acquirer in a business combination to which IFRS 3 applies, the Company made an irrevocable election to present the changes of the fair value in other comprehensive income at initial recognition. Amounts presented in other comprehensive income shall not be subsequently transferred to profit or loss (when disposal of such equity instrument, its cumulated amount included in other components of equity is transferred directly to the retained earnings) and these investments should be presented as financial assets measured at fair value through other comprehensive income on the balance sheet. Dividends on such investment are recognized in profit or loss unless the dividends clearly represents a recovery of part of the cost of investment.

Financial asset measured at fair value through profit or loss

Financial assets were classified as measured at amortized cost or measured at fair value through other comprehensive income based on aforementioned criteria. All other financial assets were measured at fair value through profit or loss and presented on the balance sheet as financial assets measured at fair value through profit or loss.

Such financial assets are measured at fair value, the gains or loss resulting from remeasurement is recognized in profit or loss which includes any dividend or interest received on such financial assets.

201

  • G. Impairment of financial assets

The Company recognizes a loss allowance for expected credit loss on debt instrument investments measured at fair value through other comprehensive income and financial asset measured at amortized cost. The loss allowance on debt instrument investments measured at fair value through other comprehensive income is recognized in other comprehensive income and not reduce the carrying amount in the balance sheet.

The Company measures expected credit loss of a financial instrument in a way that reflects:

  • (d)an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes

  • (e)the time value of money

  • (f) reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions

The loss allowance is measured as follows:

  • (e)At an amount equal to 12-month expected credit loss: the credit risk on a financial asset has not increased significantly since initial recognition or the financial asset is determined to have low credit risk at the reporting date. In addition, the Company measures the loss allowance at an amount equal to lifetime expected credit loss in the previous reporting period, but determines at the current reporting date that the credit risk on a financial asset has increased significantly since initial recognition is no longer met.

  • (f) At an amount equal to the lifetime expected credit loss: the credit risk on a financial asset has increased significantly since initial recognition or financial asset that is purchased or originated credit-impaired financial asset.

  • (g)For trade receivables or contract assets arising from transactions within the scope of IFRS 15, the Company measures the loss allowance at an amount equal to lifetime expected credit loss.

  • (h)For lease receivables arising from transactions within the scope of IFRS 16, the Company measures the loss allowance at an amount equal to lifetime expected credit loss.

202

At each reporting date, the Company needs to assess whether the credit risk on a financial asset has increased significantly since initial recognition by comparing the risk of a default occurring at the reporting date and the risk of default occurring at initial recognition. Please refer to Note 12 for further details on credit risk.

  • H. Derecognition of financial assets

A financial asset is derecognized when:

  • (d) The rights to receive cash flows from the asset have expired.

  • (e) The Company has transferred the asset and substantially all the risks and rewards of the asset have been transferred.

  • (f) The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the consideration received or receivable including any cumulative gain or loss that had been recognized in other comprehensive income, is recognized in profit or loss.

  • I. Financial liabilities and equity

Classification between liabilities or equity

The Company classifies the instrument issued as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability, and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The transaction costs of an equity transaction are accounted for as a deduction from equity (net of any related income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided.

203

Compound instruments

The Company evaluates the terms of the convertible bonds issued to determine whether it contains both a liability and an equity component. Furthermore, the Company assesses if the economic characteristics and risks of the put and call options contained in the convertible bonds are closely related to the economic characteristics and risk of the host contract before separating the equity element.

For the liability component excluding the derivatives, its fair value is determined based on the rate of interest applied at that time by the market to instruments of comparable credit status. The liability component is classified as a financial liability measured at amortized cost before the instrument is converted or settled.

For the embedded derivative that is not closely related to the host contract (for example, if the exercise price of the embedded call or put option is not approximately equal on each exercise date to the amortized cost of the host debt instrument), it is classified as a liability component and subsequently measured at fair value through profit or loss unless it qualifies for an equity component. The equity component is assigned the residual amount after deducting from the fair value of the instrument as a whole the amount separately determined for the liability component. Its carrying amount is not remeasured in the subsequent accounting periods. If the convertible bond issued does not have an equity component, it is accounted for as a hybrid instrument in accordance with the requirements under IFRS 9 Financial Instruments.

Transaction costs are apportioned between the liability and equity components of the convertible bond based on the allocation of proceeds to the liability and equity components when the instruments are initially recognized.

On conversion of a convertible bond before maturity, the carrying amount of the liability component being the amortized cost at the date of conversion is transferred to equity.

204

Financial liabilities

Financial liabilities within the scope of IFRS 9 Financial Instruments are classified as financial liabilities at fair value through profit or loss or financial liabilities measured at amortized cost upon initial recognition.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated as at fair value through profit or loss.

A financial liability is classified as held for trading if:

  • (a) it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;

  • (b) on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking;

  • (c) it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

If a contract contains one or more embedded derivatives, the entire hybrid (combined) contract may be designated as a financial liability at fair value through profit or loss; or a financial liability may be designated as at fair value through profit or loss when doing so results in more relevant information, because either:

  • (d) it eliminates or significantly reduces a measurement or recognition inconsistency; or

  • (e) a group of financial liabilities or financial assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the Company is provided internally on that basis to the key management personnel.

Gains or loss on the subsequent measurement of liabilities at fair value through profit or loss including interest paid are recognized in profit or loss.

205

Financial liabilities at amortized cost

Financial liabilities measured at amortized cost include interest bearing loans and borrowings that are subsequently measured using the effective interest rate method after initial recognition. Gains and loss are recognized in profit or loss when the liabilities are derecognized as well as through the effective interest rate method amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or transaction costs.

Derecognition of financial liabilities

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

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified (whether or not attributable to the financial difficulty of the debtor), such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

J. Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

(8) Derivative instruments

The Company uses derivative instruments to hedge its foreign currency risks and interest rate risks. A derivative is classified in the balance sheet as assets or liabilities at fair value through profit or loss except for derivatives that are designated effective hedging instruments which are classified as derivative financial assets or liabilities for hedging.

206

Derivative instruments are initially recognized at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. The changes in fair value of derivatives are taken directly to profit or loss, except for the effective portion of hedges, which is recognized in either profit or loss or equity according to types of hedges used.

.

When the host contracts are either non-financial assets or liabilities, derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not designated at fair value though profit or loss.

(9) Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

  • C. In the principal market for the asset or liability, or

  • D. In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

207

(10) Inventories

Inventories are valued at lower of cost and net realizable value item by item.

Costs incurred in bringing each inventory to its present location and condition are accounted for as follows:

Raw materials – Purchase cost under weighted average cost method. Finished goods and work in progress – Cost of direct materials and labor and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Rendering of services is accounted in accordance with IFRS 15 and not within the scope of inventories.

(11) Investments accounted for under the equity method

According to Article 21 of the Regulation, the Company’s investment in subsidiaries was presented as “Investments accounted for using equity method” and made necessary adjustments. The profit or loss during the period and other comprehensive income presented in the parent Company only financial statements shall be the same as the allocations of profit or loss during the period and of other comprehensive income attributable to shareholders of the parent presented in the financial statements prepared on a consolidated basis, and the shareholders’ equity presented in the parent Company only financial statements shall be the same as the equity attributable to shareholders of the parent presented in the financial statements prepared on a consolidated basis. The adjustment was considered the difference between investment in subsidiaries in consolidated financial statements according to IFRS 10 “Consolidated financial statements” and application of IFRS to different reporting entities, debit/credit “Investment accounted for using equity method”, “Share of profit or loss of subsidiaries, associates and joint ventures” or “Share of other comprehensive profit or loss of subsidiaries, associates and joint ventures” etc.

208

The Company’s investment in its associate is accounted for using the equity method other than those that meet the criteria to be classified as held for sale. An associate is an entity over which the Company has significant influence.

Under the equity method, the investment in the associate is carried in the balance sheet at cost and adjusted thereafter for the post-acquisition change in the Company’s share of net assets of the associate. After the interest in the associate is reduced to zero, additional loss are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. Unrealized gains and loss resulting from transactions between the Company and the associate are eliminated to the extent of the Company’s related interest in the associate.

When changes in the net assets of an associate occur and not those that are recognized in profit or loss or other comprehensive income and do not affects the Company’s percentage of ownership interests in the associate, the Company recognizes such changes in equity based on its percentage of ownership interests. The resulting capital surplus recognized will be reclassified to profit or loss at the time of disposing the associate on a pro-rata basis.

When the associate issues new stock, and the Company’s interest in an associate is reduced or increased as the Company fails to acquire shares newly issued in the associate proportionately to its original ownership interest, the increase or decrease in the interest in the associate is recognized in additional paid-in capital and investment accounted for using the equity method. When the interest in the associate is reduced, the cumulative amounts previously recognized in other comprehensive income are reclassified to profit or loss or other appropriate items. The aforementioned capital surplus recognized is reclassified to profit or loss on a pro rata basis when the Company disposes the associate.

The financial statements of the associate are prepared for the same reporting period as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Company.

The Company determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired in accordance with IAS 28 Investments in Associates . If this is the case the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount in the ‘share of profit or loss of an associate’ in the statement of comprehensive income in accordance with IAS 36 Impairment of Assets . In determining the value in use of the investment, the Company estimates:

209

  • (c) Its share of the present value of the estimated future cash flows expected to be generated by the associate, including the cash flows from the operations of the associate and the proceeds on the ultimate disposal of the investment; or

  • (d) The present value of the estimated future cash flows expected to arise from dividends to be received from the investment and from its ultimate disposal.

Because goodwill that forms part of the carrying amount of an investment in an associate is not separately recognized, it is not tested for impairment separately by applying the requirements for impairment testing goodwill in IAS 36 Impairment of Assets .

Upon loss of significant influence over the associate, the Company measures and recognizes any retaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognized in profit or loss.

(12) Property, plant and equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment loss, if any. Such cost includes the cost of dismantling and removing the item and restoring the site on which it is located and borrowing costs for construction in progress if the recognition criteria are met. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. When significant parts of property, plant and equipment are required to be replaced in intervals, the Company recognized such parts as individual assets with specific useful lives and depreciation, respectively. The carrying amount of those parts that are replaced is derecognized in accordance with the derecognition provisions of IAS 16 “Property, plant and equipment”. When a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

210

Items
Land improvements
Buildings
Machinery and equipment
Transportation equipment
Other equipment		 Estimated economic lives
7～20 years
2～60 years
2～25 years
5～8 years
2～20 years

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is recognized in profit or loss.

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate, and are treated as changes in accounting estimates.

(13) Leases

The Company assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset for a period of time, the Company assesses whether, throughout the period of use, has both of the following:

  • (c) the right to obtain substantially all of the economic benefits from use of the identified asset; and

(d) the right to direct the use of the identified asset.

For a contract that is, or contains, a lease, the Company accounts for each lease component within the contract as a lease separately from non-lease components of the contract. For a contract that contains a lease component and one or more additional lease or non-lease components, the Company allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components. The relative stand-alone price of lease and non-lease components shall be determined on the basis of the price the lessor, or a similar supplier, would charge the Company for that component, or a similar component, separately. If an observable stand-alone price is not readily available, the Company estimates the stand-alone price, maximising the use of observable information.

211

Company as a lessee

Except for leases that meet and elect short-term leases or leases of low-value assets, the Company recognizes right-of-use asset and lease liability for all leases which the Company is the lessee of those lease contracts.

At the commencement date, the Company measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the Company uses its incremental borrowing rate. At the commencement date, the lease payments included in the measurement of the lease liability comprise the following payments for the right to use the underlying asset during the lease term that are not paid at the commencement date:

  • (f) fixed payments (including in-substance fixed payments), less any lease incentives receivable;

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

  • (h) amounts expected to be payable by the lessee under residual value guarantees;

  • (i) the exercise price of a purchase option if the Company is reasonably certain to exercise that option; and

  • (j) payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

After the commencement date, the Company measures the lease liability on an amortised cost basis, which increases the carrying amount to reflect interest on the lease liability by using an effective interest method; and reduces the carrying amount to reflect the lease payments made.

At the commencement date, the Company measures the right-of-use asset at cost. The cost of the right-of-use asset comprises:

  • (e) the amount of the initial measurement of the lease liability;

  • (f) any lease payments made at or before the commencement date, less any lease incentives received;

  • (g) any initial direct costs incurred by the lessee; and

  • (h) an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease.

212

For subsequent measurement of the right-of-use asset, the Company measures the right-of-use asset at cost less any accumulated depreciation and any accumulated impairment loss. That is, the Company measures the right-of-use applying a cost model.

If the lease transfers ownership of the underlying asset to the Company by the end of the lease term or if the cost of the right-of-use asset reflects that the Company will exercise a purchase option, the Company depreciates the rightof-use asset from the commencement date to the end of the useful life of the underlying asset. Otherwise, the Company depreciates the right-of-use asset from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.

The Company applies IAS 36 “Impairment of Assets” to determine whether the right-of-use asset is impaired and to account for any impairment loss identified.

Except for those leases that the Company accounted for as short-term leases or leases of low-value assets, the Company presents right-of-use assets and lease liabilities in the balance sheet and separately presents lease-related interest expense and depreciation charge in the statements comprehensive income.

For short-term leases or leases of low-value assets, the Company elects to recognize the lease payments associated with those leases as an expense on either a straight-line basis over the lease term or another systematic basis.

For the related rental concessions that occurred as a direct result of the COVID19 pandemic, the Company chose not to assess whether it was a lease modification, but instead treated the rental concessions as changes in lease payments, and applied this practical expedient on all eligible rental concessions.

Company as a lessor

At inception of a contract, the Company classifies each of its leases as either an operating lease or a finance lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset. At the commencement date, the Company recognizes assets held under a finance lease in its balance sheet and present them as a receivable at an amount equal to the net investment in the lease.

213

For a contract that contains lease components and non-lease components, the Company allocates the consideration in the contract applying IFRS 15.

The Company recognizes lease payments from operating leases as rental income on either a straight-line basis or another systematic basis. Variable lease payments for operating leases that do not depend on an index or a rate are recognized as rental income when incurred.

(14) Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment loss, if any. Internally generated intangible assets which fail to meet the recognition criteria are not capitalized and the expenditures are reflected in profit or loss in the period incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible assets may be impaired. The amortization period and the amortization method for an intangible asset with a finite useful life are reviewed at least at the end of each fiscal year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and is treated as changes in accounting estimates.

Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or loss arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in profit or loss when the asset is derecognized.

214

(15) Impairment of non-financial assets

The Company assesses at the end of each reporting period whether there is any indication that an asset in the scope of IAS 36 Impairment of Assets may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or Company’s of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment loss may no longer exist or may have decreased. If such indication exists, the Company estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognized impairment loss is reversed only if there has been an increase in the estimated service potential of an asset which in turn increases the recoverable amount. However, the reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.

A cash generating unit, or Company’s of cash-generating units, to which goodwill has been allocated is tested for impairment annually at the same time, irrespective of whether there is any indication of impairment. If an impairment loss is to be recognized, it is first allocated to reduce the carrying amount of any goodwill allocated to the cash generating unit (Company of units), then to the other assets of the unit (Company of units) pro rata on the basis of the carrying amount of each asset in the unit (Company of units). Impairment loss relating to goodwill cannot be reversed in future periods for any reason.

An impairment loss of continuing operations or a reversal of such impairment loss is recognized in profit or loss.

215

(16) Post-employment benefits

All regular employees of the Company are entitled to a pension plan that is managed by an independently administered pension fund committee. Fund assets are deposited under the committee’s name in the specific bank account and hence, not associated with the Company and its domestic subsidiaries. Therefore, fund assets are not included in the Company’s parent Company only financial statements.

For the defined contribution plan, the Company and its domestic subsidiaries will make a monthly contribution of no less than 6% of the monthly wages of the employees subject to the plan. The Company recognizes expenses for the defined contribution plan in the period in which the contribution becomes due.

Post-employment benefit plan that is classified as a defined benefit plan uses the Projected Unit Credit Method to measure its obligations and costs based on actuarial assumptions. Re-measurements, comprising of the effect of the actuarial gains and loss, the effect of the asset ceiling (excluding net interest) and the return on plan assets, excluding net interest, are recognized as other comprehensive income with a corresponding debit or credit to retained earnings in the period in which they occur. Past service costs are recognized in profit or loss on the earlier of:

  • (a) the date of the plan amendment or curtailment, and

  • (b) the date that the Company recognizes restructuring-related costs

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset, both as determined at the start of the annual reporting period, taking account of any changes in the net defined benefit liability (asset) during the period as a result of contribution and benefit payment.

  • (17) Share-based payment transactions

The cost of equity-settled transactions between the Company and its subsidiaries is recognized based on the fair value of the equity instruments granted. The fair value of the equity instruments is determined by using an appropriate pricing model.

216

The cost of equity-settled transactions is recognized, together with a corresponding increase in other capital reserves in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company’s best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period.

No expense is recognized for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or nonvesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

Where the terms of an equity-settled transaction award are modified, the minimum expense recognized is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognized for any modification that increases the total fair value of the sharebased payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it vested on the date of cancellation, and any expense not yet recognized for the award is recognized immediately. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.

The cost of restricted stocks issued is recognized as salary expense based on the fair value of the equity instruments on the grant date, together with a corresponding increase in other capital reserves in equity, over the vesting period. The Company recognized unearned employee salary which is a transitional contra equity account; the balance in the account will be recognized as salary expense over the passage of vesting period.

217

(18) Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probably that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a finance cost.

(19) Treasury shares

The Company buys back its parent Company’s equity instruments (treasury shares) that are recognized at cost as a deduction item under equity. The valuation difference resulted from transactions of treasury shares is reported under equity.

(20) Revenue recognition

The Company’s revenue arising from contracts with customers are primarily related to sale of goods and rendering of services. The accounting policies are explained as follows:

Sale of goods

The Company manufactures and sells fitness equipment. Sales are recognized when control of the goods is transferred to the customer and the goods are delivered to the customers (the customer obtains the right and carrying value of the goods). The sales of goods transactions of the revenue is recognized based on the consideration stated in the contract. For certain sales of goods transactions, they are usually accompanied by volume discounts (based on the accumulated total sales amount for a specified period). Therefore, revenue from these sales is recognized based on the price specified in the contract, net of the estimated volume discounts.

218

The credit period of the Company’s sale of goods is from 30 to 150 days. For most of the contracts, when the Company transfers the goods to customers and has a right to an amount of consideration that is unconditional, these contracts are recognized as trade receivables. The Company usually collects the payments shortly after transfer of goods to customers; therefore, there is no significant financing component to the contract. For some of the contracts, the Company collects the payments when contracts signed-off and has the obligations to transfer the goods or provide the services, these contracts should be presented as contract liabilities.

The period between the transfers of contract liabilities to revenue is usually within one year, thus, no significant financing component has arisen.

(21) Borrowing cost

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

(22) Income Tax

Income tax expense (benefit) is the aggregate amount included in the determination of profit or loss for the period in respect of current income tax and deferred income tax.

Current income tax

Current income tax assets and liabilities for the current period and prior periods are measured using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Current income tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss.

The income tax for undistributed earnings is recognized as income tax expense in the subsequent year when the distribution proposal is approved by the Shareholders’ meeting.

219

Deferred income tax

Deferred income tax is a temporary difference between the tax bases of assets and liabilities and their carrying amounts in financial statement at the reporting date.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

  • C. where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss

  • D. in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carry forward of unused tax credits and any unused tax loss, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax loss can be utilized, except:

  • C. where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

  • D. in respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. The measurement of deferred tax assets and deferred tax liabilities 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.

220

Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets are reassessed at each reporting date and are recognized accordingly.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

(23) Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The consideration transferred, the identifiable assets acquired, and liabilities assumed are measured at acquisition date fair value. For each business combination, the acquirer measures any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are accounted for as expenses in the periods in which the costs are incurred and are classified under administrative expenses.

When the Company acquires a business, it assesses the assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. The aquiree’s embedded derivatives in host contracts is separately assessed and valued.

If the business combination is achieved in stages, on final acquisition date, acquiree’s equity interests that have been previously acquired by acquirer is required to be remeasured at fair value on the acquisition date, and respective remeausrement gain or loss shall be recorded as current periodical profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognized at the acquisition-date fair value. Subsequent changes to the fair value of the contingent consideration, which is deemed to be an asset or liability, will be recognized in accordance with IFRS 9 Financial Instruments either in profit or loss or as a change to other comprehensive income. However, if the contingent consideration is classified as equity, it should not be remeasured until it is finally settled within equity.

221

Goodwill is initially measured as the amount of the excess of the aggregate of the consideration transferred and the non-controlling interest over the net fair value of the identifiable assets acquired and the liabilities assumed. If this aggregate is lower than the fair value of the net assets acquired, the difference is recognized in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment loss. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Company’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Each unit or Company of units to which the goodwill is so allocated represents the lowest level within the Company at which the goodwill is monitored for internal management purpose and is not larger than an operating segment before aggregation.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation. Goodwill disposed of in this circumstance is measured based on the relative recoverable amounts of the operation disposed of and the portion of the cash-generating unit retained.

5. Significant accounting judgements, estimates and assumptions

In preparation of the Company’s consolidated financial statements, the Company’s management is required to make judgments, estimates and assumptions at the end of the reporting period that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities. Uncertainties from these assumption and estimate may result in a material adjustment to the carrying amount of relevant assets or liabilities in future periods.

Major resources or factors that are the bases of estimates or assumptions are with uncertainties. Significant risks may exist that may result in material adjustments on the carrying amounts of assets or liabilities in future reporting periods. Major estimate factors are listed as follows:

222

  • F. Accounts receivables–estimate of impairment loss

The Company estimates the impairment loss of accounts receivables at an amount equal to lifetime expected credit loss. The credit loss is the present value of the difference between the contractual cash flows that are due under the contract (carrying amount) and the cash flows that are expected to receive (by evaluating forward looking information). However, as the impact from the discounting of short-term receivables is not material, the credit loss is measured by the undiscounted cash flows. Where the actual future cash flows are lower than expected, a material impairment loss may arise. Please refer to Note 6(3) and Note 14 for more details.

G. Inventories

Estimates of net realizable value of inventories take into consideration that inventories may be damaged, wholly or partially obsolete, or with downward selling prices. The estimates are based on the most reliable evidence available at the time the estimates are made. Refer to Note 6 (4)for details.

H. The Fair Value of Financial Instruments

Where the fair value of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using valuation Techniques including the income approach (for example the discounted cash flows model) or market approach. Changes in assumptions about these factors could affect the reported fair value of the financial instruments. Please refer to Note 12 for more details.

I. Pension Benefits

The cost of post-employment benefit and the present value of the pension obligation under defined benefit pension plans are determined using actuarial valuations. An actuarial valuation involves making various assumptions, including the discount rate and expected salary raise/cut or changes. Please refer to Note 6(10) for more details.

223

  • J. Income Tax

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Company make provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective counties in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by different jurisdictional tax authorities. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective Company entities’ domicile.

Deferred tax assets are recognized to the extent where tax loss carryforward, tax credits and deductible temporary differences that are probable with foreseeable taxable profit being available, can be utilized. The amount of deferred tax assets is estimated based upon the likely timing of utilizing taxable temporary differences and forecasted taxable profits as well as future tax planning strategies.

6. Contents of significant accounts

(5) Cash and cash equivalents

ash and cash equivalents
Cash on hand
Petty cash
Demand deposits
Time deposits
Total		 As of 31 December
2021
$94
245
363,155
-
$363,494		 2020
$103
245
459,115
300,000
$759,463

224

(6) Financial assets measured at amortized cost

nancial assets measured at amortized cost
Time deposits with maturity over three months
Pledged time deposits
Subtotal
Less: loss allowance
Total
Current
Non-current
Total		 As of 31 December
2021 2020
$ -
2,800		 $600,000
2,800
2,800
-		 602,800
-
$2,800 $602,800
$ -
2,800		 $600,000
2,800
$2,800 $602,800

For further information on financial assets measured at amortized cost pledged as collateral and on credit risk, please refer to Notes 8 and Note 12 (4), respectively.

  • (7) Trade receivables, net
rade receivables, net
Accounts receivable
Less: loss allowance
Subtotal
Accounts receivable- related parties
Total		 As of 31 December
2021
$756,031
(17,885)
738,146
11,573
$749,719		 2020
$513,233
(17,046)
$496,187
-
$496,187

Accounts receivables were not pledged.

The collection period is generally net 30~150 days. The total receivables of carrying amount are $799,472 and $552,481 as of December 31, 2021 and 2020, respectively. Please refer to Note 6 (14) for more details regarding loss allowance of accounts receivables for the year periods ended December 2021 and 2020. Please refer to Note 12 (4) for more details on credit risk management.

100% credit loss provision is reserved for account receivables which are deemed with least possibility to be collected. As of 31 December 2021, and 2020, the receivables with 100% loss allowances being reserved amounted to $13,679 without differences.

225

(8) Inventories, net

nventories, net
Raw materials
Work in progress
Finished goods
Merchandise
Total		 As of 31 December
2021
$353,103
42,072
413,672
4,494
$813,341		 2020
$262,987
20,512
398,212
26,672
$708,383

The cost of inventories recognized as cost of sales for the years ended 31 December 2021 and 2020 amounted to $2,722,534 and $2,613,246 respectively. The expenses resulted from inventory write-downs were recorded as $23,747 and $2,815 for the years ended 31 December 2021 and 2020 respectively.

No inventories were pledged.

  • (6) Investments accounted for under the equity method

Details of investments accounted for under the equity method are as follows:

Investees
Investments in associates:
Power
Rich
International
Limited
(Power Rich)
Bnkc Biochemical Technology
Company, Limited
(Bnkc Biochemical Technology Co.)
Sunko Biotech Company, Limited
(Sunko Biotech Co.)
Chen Chi Technology Company,
Limited (Chen Chi Technology Co.)
Investments in subsidiaries:
Kuo Ching Development Corp.
(KuoChing Development)
Blessingthoughts Company, Limited
(Blessingthoughts)
Power Hero Corp.
(Power Hero)
Subtotal
Total		 As of 31 December December
2021
Carrying
amount
Percentage of
ownership (%)
$10,460
30.00%
1,507
49.00%
-
22.32%
-
41.00%
11,967
2,606
100%
615
83.52%
-
3,221
$15,188		 2020
Carrying
amount
$10,460
1,507
-
-
11,967
2,606
615
-		 Carrying
amount
$13,890
1,301
-
-
15,191
-
909
-		 Percentage of
ownership (%)
30.00%
49.00%
22.32%
41.00%
-%
83.52%
3,221
$15,188		 909
$16,100

226

The Company's share of loss of Sunko Biotech Co. and Chen Chi Technology Co. equaled its interest in Sunko Biotech Co. and Chen Chi Technology Co. Therefore, the Company is not obliged to recognize its share of further loss.

In July 2021,the Company established a subsidiary which named Kuo Ching Development Corp.Please refer to Note4 (3) of the consolidated financial statements for information of the Company’s subsidiary.

  • (2) The details of investments recognized as profit and loss in 2021 and 2020 are as follows:
re as follows:
Power Rich
Bnkc Biochemical
Technology Co.
KuoChing Development
Blessingthoughts
Power Hero
Total		 For theyears ended 31 December
2021
$(3,075)
737
1,606
(294)
-
$(1,026)		 2020
$(4,578)
590
-
(247)
7
$(4,228)
  • (3) The details of the exchange differences on translation of foreign financial statements in 2021 and 2020 are as follows:
Power Rich
Power Hero
Total		 For theyears ended 31 December For theyears ended 31 December
2021
$(355)
-
$(355)		 2020
$(801)
(182)
$(983)

(4) Investments in associates

The Company’s investment in subsidiaries is expressed in “Investments Accounted for Using Equity Method” in the individual financial report and necessary evaluation adjustments are made. Since the investment had no significant impact on the Company’s financial statements, it was recognized based on the investee Company’s financial statements within the same fiscal accounting period, that have not been audited by an independent auditor.

(5) Investments in associates

The Company’s investments in Bnkc Biochemical Technology Co., and Power Rich are not significant. The investments are valued based on the investee’s financial statements within the same fiscal accounting period. The investments in associates had no contingent liabilities or capital commitments as of 31 December 2021 and 2020. The investments have not been pledged as collaterals.

227

(21) Property, plant and equipment

Cost:
As of 1 January 2021
Additions
Disposals
Reclassification
As of 31 December 2021
Depreciation and
impairment:
As of 1 January 2021
Depreciation
Disposals
As of 31 December 2021
Cost:
As of 1 January 2020
Additions
Disposals
Reclassification
As of 31 December 2020		 Land Land
improvements
$3,083
-
-
-
$3,083
$1,915
132
-
$2,047
$2,887
196
-
-		 Buildings
$950,912
12,788
(6,396)
10,102
$967,406
$458,713
49,248
(6,247)
$501,714
$908,494
23,602
(4,571)
23,387
$950,912		 Machinery and
equipment
$2,448,748
55,562
(155,533)
107,982
$2,456,759
$1,811,925
161,019
(151,509)
$1,821,435
$2,290,235
62,204
(22,193)
118,502
$2,448,748		 Transportation
equipment		 Other
equipment
$306,247
13,906
(4,969)
1,909
$317,093
$216,331
20,461
(4,921)
$231,871
$291,925
9,872
(5,692)
10,142
$306,247		 Construction in
progress
$12,499
-
-
(5,585)
$6,914
$ -
-
-
$ -
$23,576
-
-
(11,077)
$12,499		 Total
$465,109
-
-
-		 $15,783
539
(68)
231
$16,485
$10,644
848
(68)
$11,424
$16,004
700
(921)
-
$15,783		 $4,202,381
82,795
(166,966)
114,639
$465,109 $4,232,849
$ -
-
-		 $2,499,528
231,708
(162,745)
$ - $2,568,491
$543,082
-
(77,973)
-		 $4,076,203
96,574
(111,350)
140,954
$465,109 $3,083 $4,202,381

228

Depreciation and
impairment:
As of 1 January 2020
Depreciation
Disposals
As of 31 December 2020
Net carrying amount:
As of 31 December 2021
As of 31 December 2020		 Land Land
improvements
$1,796
119
-		 Buildings Machinery and
equipment
$1,681,161
151,975
(21,211)
$1,811,925
$635,324
$636,823		 Transportation
equipment
$10,594
971
(921)
$10,644
$5,061
$5,139		 Other
equipment
$200,833
21,110
(5,612)
$216,331
$85,222
$89,916		 Construction in
progress
$ -
-
-
$ -
$6,914
$12,499		 Total
$2,302,855
228,640
(31,967)
$ -
-
-		 $408,471
54,465
(4,223)
$458,713
$465,692
$492,199
$ - $1,915 $2,499,528
$465,109 $1,036 $1,664,358
$465,109 $1,168 $1,702,853

229

  • (a) There is no capitalization of interest due to purchase of property, plant and equipment for the years ended 31 December 2021 and 2020.

  • (b) Components of buildings that have different useful lives are the main building structure and air condition equipment and elevators, which are depreciated over 60 years and 5 years and 15 years, respectively. Machinery and equipment that have different useful lives are new reaction equipment, piping equipment, and production equipment for expansion, etc., which are depreciated over 10 years and 5 years and 7 years, respectively.

  • (c) As of 31 December 2021, and 2020, due to legal restrictions, part of the lands belonging to agricultural lands were recorded in the Company's accounts and the amount temporarily registered in the name of another person amounted to $7,011 without differences. The Company obtained the certificates of other rights for each of the lands.

  • (d) On February 26, 2020, the Company’s board members passed the resolution to dispose of the land, plant and equipment of Dajia Factory. A transfer agreement was signed on May 28, 2020 for this project. However, the transaction was terminated in June 2021 because both parties could not reach a consensus on some of the transaction conditions, and the contract was terminated when mutually agreed and a termination agreement was signed on June 17, 2021. Pursuant to the terms of the termination agreement, the buyer agreed to pay the Company's due commercial interests in the amount of $55,000. Please refer to Note 16 (17) II for details of the account. At the same time, the Company also returned the transaction price of $186,000 paid by the buyer before the termination of the agreement.

  • (e) Please refer to Note 8 for property, plant and equipment pledged as collateral.

(22) Short-term loans

Short-term loans
Unsecured bank loans
Interest rates applied for unsecured bank
loans		 As of 31 December
2021
2020
$295,721
$226,246
As of 31 December,		 2020
$226,246
2021
0.65%~0.95%		 2020
0.63%~1.07%

The Company’s open short-term lines of credit facilities were $701,758 and $1,061,505, as of 31 December 2021 and 2020, respectively.

230

(23) Other payables

Other payables
Accrued capital reduction
Accrued expense of pollution
remediation
Accrued payroll
Accrued employee compensation
Payables on equipment
Accrued directors and supervisor’s
compensation expense
Other expense
Total		 As of 31 December
2021
$-
73,652
67,072
-
6,219
-
70,781
$217,724		 2020
$325,543
105,812
70,945
15,075
12,922
4,020
56,647
$590,964

  • (3) On 10 November 2020, the Company adopted the resolution of the shareholders’ meeting to reduce capital by cash and redeemed 33,352 thousand shares of shareholders’ share capital, each with a par value of $10. Treasury shares were cancelled 798 shares accordingly due to capital reduction in accordance with the shareholding ratio. A total of $325,543 was refunded as a result of the capital reduction. Please refer to Note 6 (12) for details of the aforementioned capital reduction and refund to shareholders.

  • (4) On 8 May 2020, the Board resolved and approved the total forecasted possible expenditures for remedying pollution in soil and underwater in the Company’s Pingjhen and Dali plants. The total budget was estimated for $105,000, which has been booked in Q2 2020.

231

(24) Long-term loans

(1) Details of long-term loans as at 31 December 2021 and 2020 are as follows:

Lenders
Mega International
Commercial Bank
secured bank loans
First Commercial Bank
secured bank loans
First Commercial Bank
secured bank loans
Chang Hwa Commercial Bank
unsecured Revolving Loan
Hua Nan Ban
unsecured Revolving Loan
Mega International
Commercial Bank
unsecured Revolving Loan
Taipei Fubon Bank
unsecured Revolving Loan
O-Bank
unsecured Revolving Loan		 As of 31
December 2021
$106,250
100,000
100,000
73,125
12,500
81,250
37,500
31,000		 As of 31
December 2020
$119,850
100,000
100,000
90,000
37,500
91,650
47,500
16,400		 Redemption
Repayable quarterly from 26 December 2016 to 26 December 2024. Principle is repaid in 33 quarterly
intstallments.
Repayable quarterly from 24 March 2022 to 24 December 2024. Principle is repaid in 12 quarterly
installments.
Repayable quarterly from 5 August 2022 to 5 May 2025. Principle is repaid in 12 quarterly installments.
Repayable quarterly from 24 June 2021 to 24 March 2025. Principle is repaid in 16 quarterly
intsallments.
Repayable quarterly from 11 August 2018 to 11 May 2022. Principle is repaid in 16 quarterly
installments.
Repayable quarterly from 26 December 2016 to 26 December 2024. Principle is repaid in 33 quarterly
installments.
Repayable quarterly from 1 December 2020 to 1 September 2025. Principle is repaid in 20 quarterly
installments.
Repayable quarterly from 15 September 2019 to 15 September 2021. Principle is repaid in 9 quarterly
installments.

232

Lenders
O-Bank
unsecured Revolving Loan
Taiwan Cooperative Bank
unsecured Revolving Loan
Subtotal
Less: current portion
Total
Interest rates applied		 As of 31
December 2021
As of 31
December 2020
89,000
89,000
70,667
106,000
701,292
797,901
(172,835)
(127,609)
$528,457
$670,292
As of 31 December
2021
2020
1.09%~1.20%
1.09%~1.40%		 Redemption
Repayable quarterly from 15 July 2022 to 15 July 2025. Principle is repaid in 13 quarterly installments.
From 21 March 2020 to 21 December 2023, an advance repayment of the current period was $5,500,
and remaining balance was divided into sixteen installments with three months being one installment.
Principle is repaid in 16 quarterly installments.
2021
1.09%~1.20%

(2) Please refer to Note 8 for property, plant and equipment pledged as collateral for long-term loans.

233

(25) Post-employment benefits

Defined contribution plan

The Company adopt a defined contribution plan in accordance with the Labor Pension Act of the R.O.C. Under the Labor Pension Act, the Company will make monthly contributions of no less than 6% of the employees’ monthly wages to the employees’ individual pension accounts. The Company has made monthly contributions of 6% of each individual employee’s salaries or wages to employees’ pension accounts.

Pension expenses under the defined contribution plan for the years ended 31 December 2021 and 2020 were $16,948 and $17,339 respectively.

Defined benefits plan

The Company adopt a defined benefit plan in accordance with the Labor Standards Act of the R.O.C. The pension benefits are disbursed based on the units of service years and the average salaries in the last month of the service year. Two units per year are awarded for the first 15 years of services while one unit per year is awarded after the completion of the 15th year. The total units shall not exceed 45 units. Under the Labor Standards Act, the Company contribute an amount equivalent to 6.6% of the employees’ total salaries and wages on a monthly basis to the pension fund deposited at the Bank of Taiwan in the name of the administered pension fund committee. Before the end of each year, the Company assess the balance in the designated labor pension fund. If the amount is inadequate to pay pensions on the assumption that workers meeting retirement terms will be retiring within the coming year, the Company shall make one-time contribution to the fund to eliminate the difference before the end of March in the following year.

The Ministry of Labor is in charge of establishing and implementing the fund utilization plan in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund. The pension fund is invested in-house or under mandate, based on a passiveaggressive investment strategy for long-term profitability. The Ministry of Labor establishes checks and risk management mechanism based on the assessment of risk factors including market risk, credit risk and liquidity risk, in order to maintain adequate manager flexibility to achieve targeted return without over-exposure of risk. With regard to utilization of the pension fund, the minimum earnings in the annual distributions on the final financial statement shall not be less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. Treasury Funds can be used to cover the deficits after the approval of the competent authority. As the Company does not participate in the operation and management of the pension fund, no disclosure on the fair value of the plan assets categorized in different classes could be made in accordance with paragraph 142 of IAS 19. The Company expects to contribute $459 to its defined benefit plan during the 12 months beginning after 31 December 2021.

234

The average duration of the defined benefits plan obligation as at 31 December 2021, was 9 years.

Pension costs recognized in profit or loss are as follows:

Pension costs recognized in profit or loss are as follows:
Current service costs
Interest expense
Service cost
Settlement loss
Total		 For the years ended 31
December
2021 2020
$463
169
-
-
$632
$452
62
-
2,036
$2,550

Reconciliations of liabilities (assets) of the defined benefit obligation and plan assets at fair value are as follows:

Reconciliations of liabilities (assets) of the defined benefit
plan assets at fair value are as follows:		 obligation and obligation and
Defined benefit obligation
Plan assets at fair value
Other non-current liabilities - defined benefit obligation		 As of 31 December
2021 2020
$78,306
(61,898)		 $92,596
(70,170)
$16,408 $22,426

Reconciliation of liability (assets) of the defined benefit plan are as follows:

As of 1 January 2020
Current period service costs
Net interest expense (income)
Service cost
Subtotal
Remeasurement of the defined benefit
liability (asset):
Actuarial gains and loss arising from
changes in demographic assumptions
Actuarial gains and loss arising from
changes in financial assumptions
Experience adjustments
Remeasurements of the defined benefit
assets		 Defined
benefit
obligation
$89,992
463
624
-
91,079
33
3,452
(1,831)
-		 Fair value of
plan assets
$(63,906)
-
(455)
-
(64,361)
-
-
-
(2,195)		 Benefit
liability
(asset)
$26,086
463
169
-
26,718
33
3,452
(1,831)
(2,195)

235

Subtotal
Benefits paid
Contributions by employer
As of 31 December 2020
Current period service costs
Net interest expense (income)
Service cost
Liquidation of losses
Subtotal
Remeasurements of the defined benefit
liability (asset):
Actuarial gains and loss arising from
changes in demographic assumptions
Actuarial gains and loss arising from
changes in financial assumptions
Experience adjustments
Remeasurements of the defined benefit
assets
Subtotal
Benefits paid
Contributions by employer
As of 31 December 2021		 Defined
benefit
obligation
1,654
(137)
-
92,596
452
275
-
2,036
95,359
183
(3,071)
(990)
-
3,878
(13,175)
-
$78,306		 Fair value of
plan assets
(2,195)
137
(3,751)
(70,170)
-
(213)
-
-
(70,383)
-
-
-
(1,006)
(1,006)
13,175
(3,684)
$(61,898)		 Benefit
liability
(asset)
(541)
-
(3,751)
22,426
452
62
-
2,036
24,976
183
(3,071)
(990)
(1,006)
(4,884)
-
(3,684)
$16,408

The following significant actuarial assumptions are used to determine the present value of the defined benefit obligation:

Discount rate
Expected rate of salary increases		 As of 31 December As of 31 December
2021 2020
0.70%
2.00%		 0.30%
2.00%

A sensitivity analysis for significant assumption as at 31 December 2021 and 2020 is as shown below:

236

Effect on the defined benefit obligation

Discount rate increase by 0.25%
Discount rate increase by 0.10%
Discount rate decrease by 0.10%
Discount rate decrease by 0.25%
Future salary increase by 0.25%
Future salary decrease by 0.25%		 2021 2021 2020 2020
Increase
defined
benefit
obligation		 Decrease
defined
benefit
obligation		 Increase
defined
benefit
obligation		 Decrease
defined
benefit
obligation
$ -
-
740
1,870
1,841
-		 $1,808
730
-
-
-
1,789		 $ -
-
894
2,259
2,215
-		 $2,181
882
-
-
-
2,151

The sensitivity analyses above are based on a change in a significant assumption (for example: change in discount rate or future salary), keeping all other assumptions constant. The sensitivity analyses may not be representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation of one another.

The methods and assumptions for preparing sensitivity analyses was consistent with those in the prior fiscal period.

  • (26) Share-based payment

Treasury stock to employee transactions:

The Company purchases the shares, and the shares are to be transferred to the employees all at once or in installments within three years from the date of the repurchase of the shares. According to board of directors have resolved to issue 410 thousand of treasury shares to employees on 16 December 2021.

As of 2021, the treasury shares issued to employees is based on the evaluation of the fair value on the date of grant in Black-Scholes model. The parameters and assumptions are set in consideration of the terms and conditions in the sharebased payment arrangement.

237

Information about the treasury shares transfer to employees is as follows:

The transfer of treasury
shares to employees		 As of 16 December 2021 As of 16 December 2021
Unit (thousands of
shares)		 Weighted average
exercise price of
share options)
Outstanding at beginning of
period
Granted
Exercised
Forfeited
Outstanding at end of
period
Exercisable at end of period
For share options granted
during the period, weighted
average fair value of those
options at the measurement
date (NTD)
Expected volatility (%)
Risk-free interest rate (%)
Expected option life (Years)
Weighted average share price (NTD)
Option pricing model		 Grant date on 16 December 2021
41.26%
0.3605%
0.0219
$19.8751
Black-Scholes option pricing model

Note: The share closing price of the Company was $25.65, but the Company’s treasury shares were issued to employees with a 2-year transfer restriction, so the market price was adjusted to $19.8751.

The remuneration costs recognized by the Company in 2021 and 2020 were $3,364 and $0 respectively.

(27)Equity

A. Common stock

As at 1 January 2020 the Company’s authorized capital was $2,500,000, divided into 250,000,000 shares with par value of $10 each. The issued and outstanding capital stocks were $2,223,473.

238

To increase return on shareholder's equity and improve various financial ratios, in utilizing financial leverage, on 10 November 2020, the shareholders’ meeting resolved an approval on a capital reduction amounted to $333,521, that 33,352 thousand shares were eliminated which represent 15% of total contributed capital. The above capital reduction case was approved by the governing authority on 15 December 2020, and the Board of Directors decided to set 17 December 2020 as the base date for the capital reduction. In addition, an amendment on corporation registration by the Department of Commerce of the Ministry of Economic Affairs was completed and filed

The Company’s authorized and issued capital was $2,500,000 as at 31 December 2021, and 31 December 2020, the number of issued shares was 188,995 thousand shares, and the paid-in capital was $1,889,952.

In August 2007, May and December 2012, the Company issued 30,000 thousand shares, 5,000 thousand shares and 5,000 thousand shares of private placement, respectively, in accordance with Article 43-6 of the Securities Exchange Act. The closing dates of the capital increase were 7 August 2007, 30 October, and 5 December 2012. The above private shares were canceled in October 2009 as a result of a capital reduction to offset the accumulated loss, with 12,449 thousand shares canceled in proportion to the shareholding ratio. In March 2016, 5,000 thousand private shares were canceled due to the merger. In December 2020 3,383 thousand shares were canceled as a result of the capital reduction in cash refund to the shareholders.

The above private shares and their subsequent allocations are based on the delivery date of the private securities in accordance with the third paragraph of Article 43-8 of the Securities Exchange Act (26 October 2007; 5 December 2012; 10 January 2013). After three years of holding such shares, the holders may apply for approval to the governing authority under Securities Exchange Act and other relevant regulations. The shares may be freely transferred in the open market after obtaining said approval.

As of 31 December 2021, the number of outstanding private 19,168 thousand shares with par value is 10 per share, and the public offering process has not yet been processed.

239

B. Capital surplus

According to the Company Act, the capital reserve shall not be used except for making good the deficit of the Company. When a Company incurs no loss, it may distribute the capital reserves related to the income derived from the issuance of new shares at a premium or income from endowments received by the Company. The distribution could be made in cash or in the form of dividend shares to its shareholders in proportion to the number of shares being held by each of them.

Treasury share transactions
Premium from merger
Adjustments arising from
changes in percentage of
ownership in subsidiaries
Total		 As of 31 December As of 31 December
2021
$24,845
15,188
1,897
$41,930		 2020
$20,763
15,188
1,897
$37,848

C. Treasury stock

In accordance with the Securities and Exchange Law, the proportion of the company's repurchase of the issued shares shall not exceed 10% of the total number of issued shares of the company, and the total amount of the shares purchased shall not exceed the amount of the reserved surplus plus the premium of the issued shares and the realized capital reserve.

As of 31 December 2021 and 2020, the Company’s treasury stock amounted to $40,786 and $44,853, and the number of shares was 4,111 thousand and 4,521 thousand, respectively.

From 14 November 2018 to 10 January 2020, the Company repurchased 5,319 thousand shares. The purpose of the repurchase is to transfer the shares to the employees, and the shares are to be transferred to the employees all at once or in installments within three years from the date of the repurchase of the shares. The above treasury shares were written off for 798 thousand shares in proportion to the total issued capital in December 2021 due to the capital reduction in cash refund to the equity shareholders. In December 2021, 410 thousand of treasury stock shares were issued to the employees. Please refer to Notes 6 and Note 11 for details of the relevant share–based payment arrangement.

240

  • D. Distribution of retained earnings and dividend policies

According to the Company’s Articles of Incorporation, current year’s earnings, if any, shall be appropriated in the following order:

(a)Income tax obligation

  • (b) Offsetting accumulated deficits, if any

  • (c)Set aside 10% as legal reserve. However, when the legal reserve amounts to the authorized capital, this shall not apply.

  • (d)Set aside or reserve special reserve in accordance with law and regulations.

  • (e)In combining the balance with the accumulated undistributed surplus of the previous period, the board of directors shall prepare a proposal for earnings distribution and submit it to the shareholders' meeting for a resolution distributing dividends to shareholders.

The policy of dividend distribution should reflect factors such as the current and future investment environment, fund requirements, domestic and international competition and capital budgets; as well as the interest of the shareholders, share bonus equilibrium and long-term financial planning etc. The Board of Directors shall make the distribution proposal annually and present it at the shareholders’ meeting. The Company’s Articles of Incorporation further provide that no more than 80% of the dividends to shareholders, if any, could be paid in the form of share dividends. Accordingly, at least 20% of the dividends must be paid in the form of cash.

According to the Company Act, the Company needs to set aside amount to legal reserve unless where such legal reserve amounts to the total paidin capital. The legal reserve can be used to make good the deficit of the Company. When the Company incurs no loss, it may distribute the portion of legal serve which exceeds 25% of the paid-in capital by issuing new shares or by cash in proportion to the number of shares being held by each of the shareholders.

241

When the Company distributing distributable earnings, it shall set aside to special reserve, an amount equal to “other net deductions from shareholders” equity for the current fiscal year, provided that if the Company has already set aside special reserve according to the requirements for the adoption of IFRS, it shall set aside supplemental special reserve based on the difference between the amount already set aside and other net deductions from shareholders’ equity. For any subsequent reversal of other net deductions from shareholders’ equity, the amount reversed may be distributed from the special reserve.

The FSC on 31 March 2021 issued Order No. Jin-Guan-Cheng-Fa- Zi 1090150022, which sets out the following provisions for compliance:

On a public company's first-time adoption of the IFRS, for any unrealized revaluation gains and cumulative translation adjustments (gains) recorded to shareholders’ equity that the company elects to transfer to retained earnings by application of the exemption under IFRS 1, the company shall set aside special reserve. For any subsequent use, disposal or reclassification of related assets, the Company can reverse the special reserve by the proportion of the special reserve first appropriated and distribute it. The Company’s special reserve resulted from first-time adoption of IFRS on 1 January 2012 (adoption date) was $0.

Details of the 2021 and 2020 earnings distribution and dividends per share as being approved and resolved by the Board of Directors’ meeting and shareholders’ meeting on 15 March 2022 and 20 June 2021, respectively, are as follows:

Legal reserve
Recognition (reversal) of special
reserve
Common stock cash dividend		 Appropriation
of earnings
2021
2020
$ -
$53,692
(4,419)
5,624
-
92,237		 Dividend
per share(NTD)		 Dividend
per share(NTD)
2021
$ -
(4,419)
-		 2021
$ -		 2020
$0.5

Please refer to Note 6 (16) for further details on employees’ compensation and remuneration to directors.

242

(28) Operating revenue

The Company’s revenue mainly come from selling products the Company manufactured. Analysis of revenue from contracts with customers during the years ended 31 December 2021 and 2020 are as follows:

E. Disaggregation of revenue

Disaggregation of revenue
Sale of goods For the years ended
31 December
2021
2020
$2,848,057
$2,752,601
2021
$2,848,057
$2,752,601

The Company recognizes revenues when control of the products is transferred to customers. Revenues are earned and reported at the time that respective contract criteria are met.

F. Contract balance

Contract liabilities – current

As of
31 December2021
$3		 31 December2020
$18,752		 1 January2020
$20,384

The movement in the Company’s balances of contract liabilities for the years ended 31 December 2021 and 2020 are as follows:

For theyears ended 31 December For theyears ended 31 December
2021
$(18,752)
3		 2020
Revenue recognized from opening
balance
Increase in advance receipt within
the period (excluding the amount
being recognized as periodical
revenues)


$(20,384)
18,752
  • G. Transaction price allocated to unfulfilled contract obligations

None.

243

  • H. Assets recognized from costs to fulfil a contract with customers

None.

(29) Expected credit (loss) gains

)
Expected credit (loss) gains
Operating expenses – Expected credit (loss) gains
Trade receivables		 For the years ended
31 December
2021
$(839)		 2020
$490

Please refer to Note 12 for more details on credit risk.

The Company measures the loss allowance of its trade receivables (including note receivables and trade receivables) at an amount equal to lifetime expected credit loss. The assessment of the Company’s loss allowance as at 31 December 2021 and 2020 are as follows:

31 December 2021

Gross carrying
amount
Loss rate
Life time expected
credit loss
Net carrying
amount		 Not yet due
(note)		 Overdue Overdue Total
<=30 days 31-90 days 91-180 days 181-365 days >=365 days
$762,545
-%		 $21,168
5-10%		 $ -
15-20%		 $ -
40-60%		 $ -
70-90%		 $15,759
100%		 $799,472

-		 (2,126) - - - (15,759) (17,885)
$762,545 $19,042 $- $- $- $- $781,587

31 December 2020

Gross carrying
amount
Loss rate
Life time expected
credit loss
Net carrying
amount		 Not yet due
(note)		 Overdue Overdue Total
<=30 days 31-90 days 91-180 days 181-365 days >=365 days
$533,814
-%		 $1,804
5-10%		 $ -
15-20%		 $ -
40-60%		 $ -
70-90%		 $16,863
100%		 $552,481

-		 (183) - - - (16,863) (17,046)
$533,814 $1,621 $- $- $- $- $535,435

Note: The Company’s note receivables are not overdue.

244

The movement in the impairment provision of note receivables and trade receivables for the years ended 31 December 2021 and 2020 is as follows:

As of 1 January 2021
Provision (Reversal)
As of 31 December 2021
As of 1 January 2020
Provision (Reversal)
As of 31 December 2020		 Note
receivables
$ -
-
$-
$ -
-		 Trade
receivables
$17,046
839
$17,885
$17,536
(490)
$- $17,046

  • (30) Leases

  • A. The Company is a lessee

The Company leases various properties, including land, buildings, transportation equipment and other equipment. The lease terms range from 2 to 10 years.

The impact of Company’s leases on the financial position, financial performance and cash flows is as follows:

  • (b) Amounts recognized in the balance sheet

  • (i) Right-of-use asset

Cost:

Cost:
As of 1 January
2021
Additions
Disposals
As of 31
December 2021
Depreciation and
impairment:
As of 1 January
2021
Depreciation
Disposals
As of 31
December 2021		 Land Buildings Transportation
equipment		 Other
equipment		 Total
$83,082
1,368
-		 $61,872

29,259
-		 $5,211
2,426
-		 $1,295
-
(401)		 $151,460
33,053
(401)
$84,450 $91,131 $7,637 $894 $184,112
Land Buildings Transportation
equipment		 Other
equipment		 Total
$16,332
8,814
-		 $26,886
21,050
-		 $4,109
1,607
-		 $746
189
(322)		 $48,073
31,660
(322)
$25,146 $47,936 $5,716 $613 $79,411

245

Cost:

Cost:
As of 1 January
2020
Additions
Disposals
As of 31
December 2020
Depreciation and
impairment:
As of 1
January 2020
Depreciation
Disposals
As of 31
December
2020
Net carrying
amount:
As of 31
December
2021
As of 31
December
2020
(iii)		 Land
$83,082
-
-
$83,082

Land		 Buildings Transportation
equipment
$4,678
533
-
$5,211
Transportation
equipment
$2,197
1,912
-
$4,109
$1,921
$1,102		 Other
equipment
$1,568
-
(273)
$1,295
Other
equipment
$473
449
(176)
$746
$281
$549		 Total
$140,187
11,546
(273)
$151,460
Total
$21,488
26,761
(176)
$48,073
$104,701
$103,387
$50,859
11,013
-
$61,872
$ 7,811
8,521
-
$16,332
$59,304
$66,750
Lease liabilities
Current
Non-Current
Total		 As of December31
2021 2020
$30,439
73,235		 $23,047
79,484
$103,674 $102,531

246

Please refer to Note 6(17)(d) for the interest expense regarding with lease liabilities recognized during the years ended 31 December 2021 and 2020. Please refer to Note 12 (5) Liquidity risk management for the maturity analysis on lease liabilities as at 31 December 2021 and 2020.

B. Amounts recognized in the statement of comprehensive income

Depreciation on right-of-use assets

Land
Buildings
Transportation equipment
Other equipment
Total		 Forthe years ended 31 December Forthe years ended 31 December
2021
$8,814
21,050
1,607
189
$31,660		 2020
$8,521
15,879
1,912
449
$26,761

C. Income (gain) or expense (loss) relating with leases

The expenses relating to
short-term leases		 For theyears ended 31 December For theyears ended 31 December
2021 2020
$7,709 $13,065

D. Cash outflow related to lessee and lease activity

During the year ended 31 December 2021 and 2020, the Company’s total cash outflows for leases amounting to $ 41,096 and $ 40,735.

(31) Summary of employee benefits, depreciation and amortization expenses by function for the years ended 31 December 2021 and 2020:

Function
Nature		 For the years ended 31 December For the years ended 31 December For the years ended 31 December For the years ended 31 December
2021 2020
Operating
costs		 Operating
expenses		 Total
amount		 Operating
costs		 Operating
expenses		 Total
amount
Employee benefits expenses
Salaries $272,961 $88,166 $361,127 $278,094 $109,391 $387,485
Labor and health insurance 28,330 9,113 37,443 27,581 8,676 36,257
Pension 13,262 6,236 19,498 13,607 4,364 17,971
Directors' remuneration - 1,788 1,788 - 5,655 5,655
Other employee benefits
expense		 17,078 4,265 21,343 18,180 5,050 23,230
Share-basedpayment - 3,364 3,364 - - -
Depreciation 246,189 17,195 263,384 238,241 17,160 255,401
Amortization 2,977 4,947 7,924 4,213 7,778 11,991

The number of employees of the Company in 2021 and 2020 were 514 and 540

respectively, of which the number of directors who were not concurrently employees was 5.

247

The Company's average employee benefit expenses for 2021 and 2020 were $870 and $869, respectively.

The Company's average employee salary expenses for 2021 and 2020 were $709 and $724, respectively.

The Company's average employee salary expenses in 2021 decreased by approximately 2.07%, compared to 2020.

The Company has set up an audit committee to replace the supervisor in accordance with the regulations.

Article 19 of the Company's articles of incorporation stipulates that when directors perform their duties in the Company, regardless of the Company's operating profit or loss, the Company shall pay remuneration to the directors. The board shall determine the remuneration according to the industry level and negotiated according to the value of their participation in the Company's operations and contribution. Article 30 of the Company’s articles of association provides that the director’s remuneration shall be determined at a rate of no more than 1% when profits are made in the current year and refer to the results of director’s performance evaluation as the basis for individual remuneration. The amount of director’s remuneration shall be submitted to the general meeting of shareholders after the resolution of the board of directors is passed.

The Company’s remuneration principle is to provide market-competitive remuneration to attract and cultivate talents in the long term. The Company formulates "Salary Management Measures" and "Employee Performance Appraisal Procedures" as the basis for evaluation by mainly referring to the salary level in the inter-industry market. Furthermore, the Company considers the overall operating conditions and profitability levels to determine reasonable remuneration based on the results of performance appraisals. The related performance appraisal results and remuneration reasonableness are reported to the compensation committee and the board of directors for review.

248

According to the Articles of Incorporation, at least 3% of profit of the current year shall be appropriated as employees’ compensation, and no higher than 1% of profit of the current year shall be appropriated as remuneration to board directors, however, the accumulated deficits, if any, shall first be made up for. The Company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the profit distributable as employees’ compensation in the form of shares or cash; and in addition thereto a report of such distribution is submitted to the shareholders’ meeting. Information on the Board of Directors’ resolution regarding the employees’ compensation and remuneration to directors and supervisors can be obtained from the “Market Observation Post System” on the website of the TWSE.

As of 31 December 2021, and for the year then ended, the Company concluded as net operating loss, and accordingly no employees’ compensation and remuneration to board directors have been appropriated.

On March 16, 2021, the Company’s board directors passed the resolution to pay remuneration of employees and directors in $15,075 and $4,020 respectively. There are no differences in the amounts stated as expenses in the 2020 financial reports.

.

  • (32) Non-operating income and expenses

  • E. Interest income

erest income
Financial assets measured at amortized cost For the years ended
31 December
2021
$1,639		 2020
$2,386
  • F. Other income
Other income
Dividend income
Rental income
Others
Total		 For the years ended
31 December
2021
$5,034
796
58,468
$64,298		 2020
$3,254
725
20,591
$24,570

249

G. Other gains and loss

ther gains and loss
Foreign exchange loss, net
(Loss) gains on disposal of property, plant and
equipment
Loss on disposal of investments
Gains on valuation of financial assets at fair
value through profit or loss (Note)
Others expense
Total		 For the years ended
31 December
2021 2020
$(11,085)
741,464
(78)
97
(9,897)
$720,501
$(6,814)
(2,671)
-
350
(82)
$(9,217)

Note: Generated as financial assets or liabilities were measured at fair value through profit or loss.

  • H. Finance costs
Finance costs
Interest on bank loans
Interest on lease liabilities
Total		 For the years ended 31
December
2021
$(10,701)
(1,543)
$(12,244)		 2020
$(14,571)
(1,580)
$(16,151)

  • (33) Components of other comprehensive income (loss)

  • C. For the year ended 31 December 2021

Items not to be reclassified to profit or loss
subsequently:
Remeasurements of defined benefit plans
Unrealized gains from equity
instruments investments measured
at fair value through other
comprehensive income
Items that may be reclassified to profit or loss
subsequently:
Share of other comprehensive income
of associates accounted for under
the equity method
Total of other comprehensive income		 Arising
during the
period

$4,884
4,693
(355)
$9,222		 Reclassificatio
n adjustments
during the
period
$ -
-
-
$ -		 Other
comprehensiv
e income
(loss), before
tax
$4,884
4,693
(355)
$9,222		 Income tax
effect
$(977)
-
71
$(906)		 Other
comprehensiv
e income
(loss), net of
tax
$3,907
4,693
(284)
$8,316

250

D. For the year ended 31 December 2020

Items not to be reclassified to profit or loss
subsequently:
Remeasurements of defined benefit plans
Unrealized gains from equity
instruments investments measured
at fair value through other
comprehensive income
Items that may be reclassified to profit or loss
subsequently:
Exchange differences resulting from
translating the financial statements of a
foreign operation
Share of other comprehensive income
of associates accounted for under
the equity method
Total of other comprehensive income		 Arising
during the
period

$540
5,799
(182)
(801)
$5,356		 Reclassificatio
n adjustments
during the
period
$ -
-
-
-
$ -		 Other
comprehensiv
e income
(loss), before
tax
$540
5,799
(182)
(801)
$5,356		 Income tax
effect
$(108)
-
58
160
$110		 Other
comprehensiv
e income
(loss), net of
tax
$432
5,799
(124)
(641)
$5,466

(34) Income tax

For the year ended 31 December 2021 and 2020 the major components of income tax (expense) benefit are as follows:

F. Income tax recognized in profit or loss

. Income tax recognized in profit or loss
Current income tax (expense) benefit:
Current income tax charge
Land value increment tax
Deferred tax (expense) benefit:
Deferred tax (expense) benefit relating to origination
and reversal of temporary differences
Deferred tax relating to origination and reversal of
tax loss and tax credit
Reversal the land value incremental tax liability due
from property sale
Total income tax (expense) benefit		 For the years ended
31 December
2021 2020
$(10,421)
-
(4,375)
(1,379)
-		 $ -
(34,586)
21,466
34,941
19,191
$(16,175) $41,012

251

G. Income tax related to components of other comprehensive income

Deferred income tax (expense) benefit:
Exchange differences on translation of foreign
operation
Share of other comprehensive income of associates
accounted for under the equity method
Remeasurements of defined benefit plans
Income tax related to components of other
comprehensive income		 For the years ended
31 December		 For the years ended
31 December
2021 2020
$ -
71
(977)		 $58
160
(108)
$(906) $110
  • H. Reconciliation between tax expense (benefit) and accounting profit at the Company’s applicable tax rates is as follows:
Accounting (loss) profit before tax from continuing
operations
At the Company’s statutory income rate
Tax effect of tax exempt income
Tax effect of non-deductible expenses
Adjustments of deferred tax assets/liabilities for write-
downs or reversals
Tax on undistributed earnings
Reversal of the land value incremental tax liability due
from property sale
Total income tax benefit recognized in profit or loss		 For the years ended
31 December		 For the years ended
31 December
2021 2020
$(53,783) $483,392
$10,757
1,663
(51)
(18,123)
(10,421)
-		 $(96,678)
149,739
(114)
3,460
-
(15,395)
$(16,175) $41,012

252

  • I. Significant components of deferred tax assets (liabilities) are as follows:

(c) For the year ended 31 December 2021

Temporary difference
Amortization of Goodwill
Allowance for inventory valuation loss
Pension actuarial adjustment
Land value incremental tax
Accrued expense of pollution
remediation
Exchange differences on translation of
foreign operations
Share of other comprehensive income
of associates accounted for under the
equity method
Loss carry-forward
Others
Deferred income tax (benefit)/expense
Net deferred income tax assets/(liabilities)
Balances on 31 December 2021:
Deferred tax assets
Deferred tax liabilities		 Balance as of
1 January		 Recognized
in profit
or loss		 Recognized in
other
comprehensive
income		 Balance as of
31 December
$(2,232)
20,466
3,326
(72,514)
32,029
-
207
34,941
993		 $ -
(4,749)
-
-
-
-
-
(1,379)
374		 $ -
-
(977)
-
-
-
71
-
-		 $(2,232)
15,717
2,349
(72,514)
32,029
-
278
33,562
1,367
$17,216 $(5,754) $(906) $10,556
$92,221 $85,388
$(75,005) $(74,832)

(d) For the year ended 31 December 2020

Temporary difference
Amortization of Goodwill
Allowance for inventory valuation loss
Pension actuarial adjustment
Land value incremental tax
Accrued expense of pollution
remediation
Exchange differences on translation of
foreign operations
Share of other comprehensive income
of associates accounted for under the
equity method
Loss carry-forward
Others
Deferred income tax (benefit)/expense
Net deferred income tax assets/(liabilities)
Balances on 31 December 2020:
Deferred tax assets
Deferred tax liabilities		 Balance as of
1 January		 Recognized
in profit
or loss		 Recognized in
other
comprehensive
income		 Balance as of
31 December
$(2,232)
17,413
3,434
(91,705)
11,017
(58)
47
-
3,592
$(58,493)		 $ -
3,053
-
19,191
21,012
-
-
34,941
(2,599)		 $ -
-
(108)
-
-
58
160
-
-		 $(2,232)
20,466
3,326
(72,514)
32,029
-
207
34,941
993
$75,598 $110 $17,216
$35,444 $92,221
$(93,937) $(75,005)

253

  • J. The following table provides the information of the unused loss carryforward:
Year
2018
2020
2021
Total		 Tax loss for
theperiod
$16,949
163,132
82,269
$262,350		 Unused tax loss as of
31 December
2021
31 December
2020
$4,677
$7,270
163,132
167,436
82,269
-
$250,078
$174,706		 Unused tax loss as of
31 December
2021
31 December
2020
$4,677
$7,270
163,132
167,436
82,269
-
$250,078
$174,706		 Expiration Year
$7,270
167,436
-		 2028
2030
2031
$174,706
  • K. Deferred assets with least possibility to be realized

As of 31 December 2021, and 2020, deductible temporary differences for which no deferred income tax assets have been recognized in amounted to $31,977and $15,234, respectively.

  • L. Status of income tax returns assessment

As of 31 December 2021, the status of the Company’s income tax returns through 2019 have been assessed by tax authorities.

  • (35) Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the years attributable to ordinary equity holders of the parent entity by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent entity by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

No diluted earnings per share in 2021 shall be accounted for due to that net loss operating loss was concluded for the fiscal

loss operating loss was concluded for the fiscal
(1) Basic earnings per share
Net (loss) income attributable to the parent Company (in
thousands of NTD)
Weighted average number of ordinary shares outstanding
for basic earnings per share (thousand shares)
Basic (loss) earnings per share (NTD)		 For theyears ended 31 December
2021 2020
$(69,958) $524,404
184,490 215,780
$(0.38) $2.43

254

(2) Diluted earnings per share
Net (loss) income attributable to the parent Company
Effect of dilution on net (loss) income attributable to
ordinary stockholders of the Company after dilution
Weighted average number of ordinary shares outstanding
for basic earnings per share (thousand shares)
Effect of dilution:
Employees’ compensation (thousand shares)
Weighted average number of ordinary shares outstanding
after dilution (thousand shares)
Diluted (loss) earnings per share (NTD)		 $(69,958) $524,404
$(69,958) $524,404
184,490
-		 215,780
1,364
184,490 217,144
$(0.38) $2,42

There were no transactions which may significantly change the number of the outstanding ordinary shares from the financial statement date to the date of releasing financial statements.

7. Related party transactions

Information of the related parties that had transactions with the Company during the financial reporting period is as follows:

Name and nature of relationship of the related parties

Name of the related parties Nature of relationship of the related parties KT Investment Company, Limited The Company’s director Macy Investment Company, Limited The Company’s director Chiaoli Investment Company, Limited The Company’s director Fulilu Investment Company, Limited The Company’s director (Resigned as a corporate director on March 16, 2021) Kuo Ching Development Corp. The Company's subsidiary(Established in in July 2021)

Significant transactions with the related parties

A. Sales

Kuo Ching Development Corp. For the years ended
31 December		 For the years ended
31 December
2021
$11,022		 2020
$ -

255

B. Accounts receivable-related parties

Kuo Ching Development Corp. As of
31 December		 As of
31 December
2021
$11,573		 2020
$ -

The Company of accounts receivable from related parties did not have any guarantees and expected credit losses.

C. Lease - related parties

  • (a) Rental income
(a) Rental income
KT Investment Company, Limited For the years ended
31 December
2021
$549		 2020
$549

The Company’s leased its plant and building to the said related party, from which rental income and collection were set at arm’s length range.

(b) Right-of-use assets

Macy Investment Company, Limited As of 31 December
2021
2020
$58,228
$66,749		 As of 31 December
2021
2020
$58,228
$66,749
2020
$66,749
  • (c) Lease liabilities
Macy Investment Company, Limited As of 31 December
2021
2020
$58,757
$66,983		 As of 31 December
2021
2020
$58,757
$66,983
2020
$66,983
  • (d) Interest expenses
Macy Investment Company, Limited For the years ended
31 December
2021
2020
$917
$1,035		 For the years ended
31 December
2021
2020
$917
$1,035
2020
$1,035

256

D. Key management personnel compensation

Short-term employee benefits
Post-employment benefits
Total		 For the years ended
31 December		 For the years ended
31 December
2021
$7,124
164
$7,288		 2020
$13,256
142
$13,398

8. Assets pledged as collaterals

The following table lists assets of the Company pledged as collaterals:

Property, plant and equipment –
buildings, machinery and equipment
Financial assets measured at amortized
cost
Total		 Carrying Amount
As of 31
December
2020
$451,608
2,800
$454,408		 Purpose ofpledges
As of 31
December
2021
$448,891
2,800
$451,691
Long and short-term
loans
Energy resources
guarantee
  1. Significant contingencies and derecognized contract commitments

The following items are the contingencies which have not been accrued and recorded on the balance sheet as on 31 December 2021

  1. As of 31 December 2021, the amount available under unused letter of credit was $19,565.

  2. As of 31 December 2021, the Company entered into several construction contracts for which the development is in progress. The following provides significant details:

Supplier
Counterparty A
Counterparty B
Counterparty C		 Contract Subject
Equipment
procurement
Equipment
procurement
Plant construction		 Total
Contract
Amount
$21,500
21,300
28,095		 Equipment
Payment
Made
$17,200
7,455
4,214		 Unpaid amount
as of December
31 2021
$4,300
13,845
23,881

257

10. Significant disaster loss

None.

11. Significant subsequent events

The Company approved a write-off of treasury shares on 16 December 2021 through the resolution of the board of directors. The base date for capital reduction was 19 January 2022. The amount of capital reduction was $41,111, and 41,111 thousand shares were written down. The amendment on registration document was completed on 7 February 2022.

12. Others

(1) Categories of financial instruments

Financial Assets
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss, current
(Other current assets)
Amortized cost of a financial asset:
Cash and cash equivalents (excluding cash on hand)
Measured at amortized cost financial assets
Notes receivables
Trade receivables
Other receivables (Other current assets)
Subtotal
Total
Financial Liabilities
Financial liabilities at amortized cost:
Short-term loans
Notes and accounts payable
Other payable
Long-term loans (including current portion)
Lease liability
Subtotal
Financial liabilities at fair value through profit or loss
(Other current assets)
Total		 As of 31 December As of 31 December
2021 2020
$97,959
1,184
363,155
2,800
31,869
749,719
736		 $93,266
81
759,115
602,800
39,248
496,187
693
1,148,279 1,898,043
$1,247,422 $1,991,390
2021 2020
$295,721
328,959
217,724
701,292
103,674		 $226,246
297,041
590,964
797,901
102,531
1,647,370 2,014,683
754 -
$1,648,124 $2,014,683

258

(2) Financial risk management objectives

The Company’s principal financial risk management objective is to manage the market risk, credit risk and liquidity risk related to its operating activities. The Company identifies measures and manages the aforementioned risks based on the Company’s policy and risk preference.

The Company has established appropriate policies, procedures and internal controls for financial risk management. Before entering into significant activities, approval process by the board of directors and audit committee must be carried out based on related protocols and internal control procedures. The Company complies with its financial risk management policies at all times.

(3) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risks comprise currency risk, interest rate risk and other price risk (such as equity risk).

In practice, it is rarely the case that a single risk factor varies independently from other risk factors. A correlation normally exist among risk factors. However, the following sensitivity analyses do not disclose the correlations among these risk factors.

Foreign currency risk

The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expenses are denominated in a different currency from the Company’s functional currency) and the Company’s net investments in foreign subsidiaries.

The Company applies natural hedges on the foreign currency risk arising from purchases or sales as certain portion of receivables or payables are denominated as the same currencies, and utilizes spot or forward exchange contracts to manage foreign currency risk. The Company designates certain forward currency contracts as balance sheet hedges to hedge its exposure to foreign currency exchange risk associated with certain balance sheet assets or liabilities. Hedge accounting is not applied as the aforesaid natural hedges or designated forward contracts to hedge currency risk are deemed ineffective hedges. Furthermore, the currency risk exposures due from investments in oversea associates are not hedges as the investments are set for certain operating strategies.

259

The foreign currency sensitivity analysis of the possible change in foreign exchange rates on the Company’s profit is performed on significant monetary items denominated in foreign currencies as at the end of the reporting period. The Company’s foreign currency risk mainly resulted from the volatility of exchanging USD, CNY to NTD, and vice versa. The information of the sensitivity analysis is as follows:

  • c. When NTD strengthens/weakens against USD by 1%, the profit for the years ended 31 December 2021 and 2020 is decreased / increased by $3,261 and $1,177, respectively; and no impact on the equity.

  • d. When NTD strengthens/weakens against CNY by 1%, the profit for the years ended 31 December 2021 and 2020 is increased / decreased by $46 and by $190, respectively; and no impact on the equity.

Interest rate risk

The Company is exposed to interest rate risk arising from borrowing at floating interest rates. Interest rate risk is the risk that the fair value or forecasted cash flows of a financial instrument fluctuates due to the volatility in market interest rates.

The sensitivity analysis of interest rate fluctuation is performed on items exposed to interest rate risk as at the end of the reporting period, including borrowings with variable interest rates. At the reporting dates, a change of 10 basis points of interest rate in a reporting period could cause the profit for the years ended 31 December 2021 and 2020 to increased / decreased by $997 and $1,224, respectively.

Equity price risk

The Company’s listed and unlisted equity securities are susceptible to market price risk arising from uncertainties about future performance of equity markets. The Company’s equity investments are classified as financial assets at fair value through other comprehensive income. The equity investment portfolio is submitted to the Company’s senior management on a regular basis. The Company’s Board of Directors reviews and approves changes on the equity investment portfolio.

At the reporting date, for equity investments in the listed companies which are recorded as financial assets at fair value through other comprehensive income, an increase/decrease of 10% in the share price could increase/decrease $425and $610 for the years ended 31 December 2021 and 2020, respectively

260

Please refer to Note 12(9) for sensitivity analysis information of other equity instruments or derivatives that are linked to such equity instruments whose fair value measurement is categorized under Level 3.

(4) Credit risk management

Credit risk is the risk that a financial loss may be triggered when a counterparty defaults its obligations. The Company is exposed to credit risk from operating activities (primarily for, accounts receivables and notes receivables) and from its financing activities, including bank deposits and other financial instruments.

The Company mitigates credit risks by implementing the Company’s credit policy, procedures and controls. Credit limits are set for all counter parties based on their financial positions, credit ratings, historical experience, prevailing economic condition and the Company’s internal rating criteria etc. For dealing with some counterparties with less credit, certain financial instruments of credit enhancement, such as advance receipts or a letter of credit, may be required to be provided to mitigate possible credit risk exposures.

As of 31 December 2021, and 2020, accounts receivables from top ten customers represent 64% and 51% of the total accounts receivables of the Company, respectively. The credit concentration risk of other trade receivables is insignificant.

Credit risk from deposits in banks, fixed income securities and other financial instruments is managed by the Company’s treasury division in accordance with the Company’s policy. The Company only deals with counterparties that are approved through internal control procedures; therefore, the counterparties are limited to banks, financial institutions, companies or government entities with good credit standing.

The Company would write down or write off values of financial assets if these are forecasted to be least possible to be collected in the case of the issuer or debtor being insolvent or in financial distress.

261

(5) Liquidity risk management

The Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of cash and cash equivalents, highly liquid equity investments and bank borrowings. The table below summarizes the maturity profile of the Company’s financial liabilities based on the contractual undiscounted payments and contractual maturity, including contractual interests. The undiscounted interest payment due from borrowings with variable interest rates is extrapolated based on the estimated interest rate yield curve as of the end of the reporting period.

Non-derivative financial instruments

As of 31 December 2021
Short-term loans
Notes and accounts payable
Long-term loans
Lease liabilities
As of 31 December 2020
Short-term loans
Notes and accounts payable
Long-term loans
Lease liabilities		 Less than 1 year 2 to 3 years 4 to 5 years >=5 years Total
$298,073
328,959
174,849
31,667
$228,211
297,041
129,121
24,346		 $ -
-
484,763
36,929
$ -
-
364,499
35,910		 $ -
-
60,428
22,815
$ -
-
333,167
21,709		 $ -
-
-
16,000
$ -
-
-
25,143		 $298,073
328,959
720,040
107,411
$228,211
297,041
826,787
107,108

Derivative financial assets (liabilities)

Less than 1year 2 to 3years 4 to 5years >= 5years Total
As of 31 December 2021
Inflows $90,115 $ - $ - $ - $90,115
Outflows (89,685) - - - (89,685)
Net $430 $ - $ - $ - $430
As of 31 December 2020
Inflows $30,781 $ - $ - $ - $30,781
Outflows (30,700) - - - (30,700)
Net $81 $ - $ - $ - $81

262

(6) Reconciliation of liabilities arising from financing activities

Reconciliation of liabilities for the year ended 31 December 2021:

As of 1 January 2021
Cash flows
Non-cash changes
As of 31 December 2021		 Short-term
loans
$226,246
69,475
-		 Long-term
loans
(including
current
portion)
$797,901
(96,609)
-		 Lease
liabilities
$102,531
(31,844)
32,987		 Deposit
margin
$75
-
-		 Total
liabilities
from
financing
activities
$1,126,753
(58,978)
32,987
$295,721 $701,292 $103,674 $75 $1,100,762

Reconciliation of liabilities for the year ended 31 December 2020:

As of 1 January 2020
Cash flows
Non-cash changes
As of 31 December 2020		 Short-term
loans
$291,628
(65,382)
-		 Long-term
loans
(including
current
portion)
$919,936
(122,035)
-
$797,901		 Lease
liabilities
$117,174
(26,090)
11,447		 Deposit
margin
$ -
75
-		 Total
liabilities
from
financing
activities
$1,328,738
(213,432)
11,447
$226,246 $102,531 $75 $1,126,753
  • (7) Fair value of financial instruments

A. Valuation methodology and assumptions for fair values

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction among market participants at the measurement date. The following are the methodology and assumptions taken by the Company to measure or disclose the fair values of financial assets and financial liabilities:

263

  • (a)The carrying amount of cash and cash equivalents, accounts receivables, accounts payable and other current liabilities approximate their fair value due to their short maturities.

  • (b)For financial assets and liabilities traded in an active market with standard terms and conditions, their fair value is determined based on market quoted prices (including listed equity securities) at the reporting date.

  • (c) Fair value of equity instruments without market quoted prices (including private placement of listed equity securities, unquoted public Company and private Company equity securities) are valued by market approach which takes industrial comparable entities’ quoted market prices or other relevant information as reference to estimate probable fair values.

  • (d)Fair value of debt instruments without market quoted prices, bank loans, and other non-current liabilities are determined based on the counterparties prices or valuation method. The valuation method uses DCF method as a basis, and the assumptions such as interest rates and discount rate are primarily based on relevant information of equivalent instruments (such as yield curves published by the Taipei Exchange, average prices and credit risks for Fixed Rate Commercial Paper published by Reuters, etc.)

  • B. Fair value of financial instruments measured at amortized cost

The carrying amount of the Company’s financial instruments, financial assets and liabilities measured at amortized cost approximate their fair value.

  • C. Fair value measurement hierarchy for financial instruments

Please refer to Note 12(9) for fair value measurement hierarchy for financial instruments of the Company.

264

(8) Derivative financial instruments

The Company’s derivative financial instruments include forward currency contracts and embedded derivatives. The related information for derivative financial instruments not qualified for hedge accounting and not yet settled as of 31 December 2021 and 2020 is as follows:

Forward currency contracts

The Company entered into forward currency contracts to mitigate its exposure to financial risk, but these contracts are not designated as hedging instruments. The table below lists the information related to forward currency contracts:

Items (by contract) Contract Amount Contract Period As at 31 December 2021 Forward currency contract Sell foreign currency USD 97 thousand

Sell foreign currency USD 97 thousand Sell foreign currency USD 97 thousand Sell foreign currency USD 94 thousand Sell foreign currency USD 31 thousand Sell foreign currency USD 51 thousand Sell foreign currency USD 94 thousand Sell foreign currency USD 51 thousand Sell foreign currency USD 102 thousand Sell foreign currency USD 62 thousand Sell foreign currency USD 68 thousand Sell foreign currency USD 153 thousand Sell foreign currency USD 51 thousand Sell foreign currency USD 622 thousand Sell foreign currency USD 51 thousand Sell foreign currency USD 97 thousand Sell foreign currency USD 136 thousand Sell foreign currency USD 33 thousand Sell foreign currency USD 48 thousand Sell foreign currency USD 68 thousand Sell foreign currency USD 68 thousand Sell foreign currency USD 59 thousand Sell foreign currency USD 59 thousand Sell foreign currency USD 51 thousand Sell foreign currency USD 161 thousand Sell foreign currency USD 94 thousand Sell foreign currency CNY 1,035 thousand Sell foreign currency USD 51 thousand

From 2021.08.19 to 2022.01.07 From 2021.09.23 to 2022.02.09 From 2021.10.01 to 2022.02.11 From 2021.10.15 to 2022.02.15 From 2021.10.18 to 2022.01.25 From 2021.10.20 to 2022.01.28 From 2021.11.05 to 2022.02.15 From 2021.11.05 to 2022.02.18 From 2021.11.05 to 2022.03.11 From 2021.11.05 to 2022.03.11 From 2021.11.05 to 2022.02.22 From 2021.11.15 to 2022.02.25 From 2021.11.15 to 2022.02.22 From 2021.11.29 to 2022.03.01 From 2021.11.29 to 2022.04.08 From 2021.11.29 to 2022.04.13 From 2021.11.29 to 2022.04.08 From 2021.11.29 to 2022.04.08 From 2021.11.29 to 2022.04.13 From 2021.11.29 to 2022.05.11 From 2021.12.14 to 2022.02.15 From 2021.12.14 to 2022.02.22 From 2021.12.14 to 2022.03.11 From 2021.12.14 to 2022.03.08 From 2021.12.14 to 2022.03.22 From 2021.12.15 to 2022.02.19 From 2021.12.20 to 2022.03.16

265

Items (by contract) Contract Amount Contract Period Sell foreign currency USD 102 thousand From 2021.12.20 to 2022.03.22 Sell foreign currency USD 94 thousand From 2021.12.20 to 2022.04.01 Sell foreign currency USD 68 thousand From 2021.12.20 to 2022.04.08 Sell foreign currency USD 203 thousand From 2021.12.20 to 2022.05.13 As at 31 December 2020 Forward currency contract Sell foreign currency USD 48 thousand From 2020.11.04 to 2021.02.19 Sell foreign currency USD 115 thousand From 2020.11.19 to 2021.03.16 Sell foreign currency USD 136 thousand From 2020.11,23 to 2021.03.12 Sell foreign currency USD 67 thousand From 2020.12.16 to 2021.04.09 Sell foreign currency USD 86 thousand From 2020.12.16 to 2021.03.30 Sell foreign currency USD 94 thousand From 2020.12.16 to 2021.02.19 Sell foreign currency USD 176 thousand From 2020.12.16 to 2021.05.07 Sell foreign currency USD 134 thousand From 2020.12.28 to 2021.04.29 Sell foreign currency USD 67 thousand From 2020.12.28 to 2021.05.07 Sell foreign currency USD 94 thousand From 2020.12.28 to 2021.03.23 Sell foreign currency USD 33 thousand From 2020.12.31 to 2021.04.13 Sell foreign currency USD 45 thousand From 2020.12.30 to 2021.04.01

  • (9) Fair value measurement hierarchy

  • C. Fair value measurement hierarchy

All asset and liabilities for which fair values are measured or disclosed in the financial statements are categorized within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole. Level 1, 2 and 3 inputs are described as follows:

Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities;

Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable;

Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization at the end of each reporting period.

266

  • D. Fair value measurement hierarchy of the Company’s assets and liabilities

The Company does not have assets that are measured at fair value on a nonrecurring basis. Fair values of the Company’s assets and liabilities are measured at fair value on a recurring basis as follows:

As of 31 December 2021
Financial assets:
Financial assets at fair value through profit or loss
Forward currency contract
Financial assets at fair value through other
comprehensive income
Equity instrument measured at fair value
Financial liabilities:
Financial liabilities at fair value through profit or loss
Forward currency contracts
As of 31 December 2020
Financial assets:
Financial assets at fair value through profit or loss
Forward currency contract
Financial assets at fair value through other
comprehensive income
Equity instrument measured at fair value
Financial liabilities:
Financial liabilities at fair value through profit or
loss
Forward currency contracts		 Level 1 Level 2 Level3 Total
$- $1,184 $- $1,184
$4,254 $- $93,705 $97,959
$- $754 $- $754
Level 1 Level 2 Level 3 Total
$- $81 $- $81
$6,097 $- $87,169 $93,266
$- $- $- $-

Re-classifications between Level 1 and Level 2 during the period

During the years ended 31 December 2021 and 2020, there were no reclassifications between Level 1 and Level 2 fair value measurements.

267

Reconciliation for fair value measurements in Level 3 of the fair value hierarchy for movements during the period is as follows:

Beginning balances as of 1 January 2021
Total gains and loss recognized for the
year ended 31 December 2021:
Amount recognized in OCI (presented in
“Unrealized gains (loss) from equity instruments
investments measured at fair value through
other comprehensive income)
Ending balances as of 31 December, 2021
Beginning balances as of 1 January, 2020
Total gains and loss recognized for the
year ended 31 December 2020:
Amount recognized in OCI (presented in
“Unrealized gains (loss) from equity instruments
investments measured at fair value through
other comprehensive income)
Acquire in 2020
Ending balances as of 31 December, 2020		 Assets
At fair value
through other
comprehensive
income
Stocks
$87,169

6,536
$93,705
$40,216

4,453
42,500
$87,169

Information on significant unobservable inputs of fair value measurement in Level 3 fair value hierarchy

Significant unobservable inputs of fair value measurement in Level 3 fair value hierarchy are as follows:

268

As of 31 December 2021

Financial
assets:
Financial
assets at fair
value through
other
comprehensive
income
Stocks
Financial
assets:
Financial
assets at fair
value through
other
comprehensive
income
Stocks		 Valuation
techniques		 Significant
unobservable
inputs		 Quantitative
information		 Correlation between
inputs and fair value		 Sensitivity Analysis of correlation
between inputs and fair value
Asset
approach
As of 31
Valuation
techniques		 discount for
lack of
marketability
30%
December 2020
Significant
unobservable
inputs
Quantitative
information		 The greater
degree of lack
of marketability,
the lower the
estimated fair
value is determined.
Correlation between
inputs and fair value		 10% increase (decrease) in the
discount for lack of marketability
would result in (decrease) increase
in the Company’s profit or loss by
$9,371
Sensitivity Analysis of correlation
between inputs and fair value
Asset
approach		 discount for
lack of
marketability		 30% The greater
degree of lack
of marketability,
the lower the
estimated fair
value is determined.		 10% increase (decrease) in the
discount for lack of marketability
would result in (decrease) increase
in the Company’s profit or loss by
NT$8,717thousand

269

Valuation process used for fair value measurements categorized within Level 3 of the fair value hierarchy

The Company’s treasury division is responsible for validating the fair value measurements and ensuring that the results of the valuation are in line with market conditions, based on independent and reliable inputs which are consistent with other information, and represent reasonable prices. The team analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the Company’s accounting policies at each reporting date.

(10) Significant assets and liabilities denominated in foreign currencies

Information regarding the significant assets and liabilities denominated in foreign currencies is listed below:

Financial assets
Monetaryitem:
USD
CNY
Financial
liabilities
Monetaryitem:
USD		 As of 31 December As of 31 December
2021 NTD
$525,422
4,561
$199,324		 2020
Foreign
Currency
$18,982
1,051
$7,201		 Exchange
rate
27.68
4.34
27.68		 Foreign
Currency
$10,925
4,349
$6,792		 Exchange
rate
28.48
4.38
28.48		 NTD
$311,144
19,049
$193,436

The Company had $6,814 and $11,085 foreign exchange loss for the years ended 31 December 2021 and 2020, respectively.

(11) Capital management

The primary objective of the Company’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize the shareholder value. To maintain or adjust the capital structure, the Company may adjust dividend payment to shareholders, return capital to shareholders or issue new shares.

270

13. Other disclosures

(1) Information at significant transactions

  • A. Financing provided: None.

  • B. Endorsement/Guarantee provided: None

  • C. Securities held as at end of the period (excluding subsidiaries and associates):

Holding Company Type andname ofsecurities "Relationship Financialstatement account As of 31 December 2021 As of 31 December 2021
Shares Carrying
amount		 "Percen
tage of		 Shares
SUNKO INK CO.,
LTD.		 Stock
CHING FENG HOME
FASHIONS. CO. LTD
LINCO TECHNOLOGY
CO. LTD
THE FIRST LEASING
CORPORATION
TOTAL ACRYLIC
POLYMER INDUSTRY
(TAPI) CORPORATION
GLOBAL GRAPHENE
GROUP, INC.
YAYI CO., LTD.
SAR TECHNOLOGY INC.
KING SHINE EE
TECHNOLOGY
ENTERPRISE CO., LTD.		 Unrelated party
Unrelated party
Unrelated party
Unrelated party
Unrelated party
Unrelated party
Unrelated party
Unrelated party		 Financial assets at fair value
through other comprehensive
income-non-current
Financial assets at fair value
through other comprehensive
income-non-current
Financial assets at fair value
through other comprehensive
income-non-current
Financial assets at fair value
through other comprehensive
income-non-current
Financial assets at fair value
through other comprehensive
income-non-current
Financial assets at fair value
through other comprehensive
income-non-current
Financial assets at fair value
through other comprehensive
income-non-current
Financial assets at fair value
through other comprehensive
income-non-current
Less: Unrealized gains (loss)
from investments in equity
instruments
Total		 214,309
422,734
2,852,325
100,000
6,155
368,898
4,250,000
1,000		 $3,365
4,068
25,930
1,000
16,405
4,883
42,500
10
(202)		 0.13%
0.80%
12.96%
2.00%
0.87%
1.85%
5.18%
0.01%		 $4,254
4,554
31,825
14,826
-
-
42,500
-
$97,959

  • D. Individual securities acquired or disposed of with accumulated amount exceeding the lower of $300 million or 20% of the capital stock for the period: None

  • E. Acquisition of individual real estate with amount exceeding the lower of $300 million or 20% of the capital stock for the period: None

  • F. Disposal of individual real estate with amount exceeding the lower of $300 million or 20% of the capital stock for the period: None

  • G. Related party transactions for purchases and sales amounts exceeding the lower of $100 million or 20% of the capital stock for the period: None.

  • H. Receivables from related parties with amounts exceeding the lower of $100 million or 20% of capital stock as at end of the period: None.

271

  • I. Transaction of derivative financial instruments:

Please refer to Note 12(8).

  • J. Significant intercompany transactions among consolidated entities are as follows:

None.

  • (2) Information on investees

Investees’ names, locations, main businesses and products, original investment amount, investment as at end of the period, net income (loss) of the investees and investment income (loss) recognized for the period:

Investor
Company		 Investee
Company		 Address Main businesses
and products		 Initial investment amount Initial investment amount Investment as at end of theperiod Investment as at end of theperiod Investment as at end of theperiod Net income
(loss) of
investee
Company		 Investment
income
(loss)
recognized		 Note
Ending
balance		 Beginning
balance		 Number of
shares
(thousands)		 Percentage of
ownership (%)
Carrying
value
The
Company		 Power Rich Anguilla Investment
Services		 $27,403
(USD
990,000)		 27,403
(USD
990,000)		 990,000 30.00% 10,460 $(10,252) $(3,075)
The
Company		 Bnkc
Biochemical
Technology
Co.		 Taiwan Wholesale of
Chemical Raw
Material,
wholesale of
Cosmetics, and
Retail of
Cosmetics

$490		 $490 49,000 49.00% $1,507 $1,505 $737
The
Company		 Sunko Biotech
Co.		 Taiwan Biotechnology
Services
$60,000		 $60,000 1,674,044 22.32% $ - $ - $ -
The
Company		 Chen Chi
Technology
Co.		 Taiwan Synthetic resin
and plastic
manufacturing
$14,360		 $14,360 1,640,000 41.00% $ - $ - $ -
The
Company		 Kuo Ching
Development
Corp		 Taiwan Wholesale of
chemical
solvents,
industrial
additives, other
raw materials
and their
products		 $1,000 $ - 100,000 100% $2,606 $1,606 $1,606
The
Company		 Blessingthoug
hts		 Taiwan Drinks, and food
vending
$15,200		 $15,200 1,520,000 83.52% $615 $(352) $(294) Note

272

Note: The company is undergoing liquidation procedure.

(3) Information on investments in Mainland China

)

)
(Amountsinthousands; Currency denomination inNTDor in foreigncurren) cies)
Investee
Company		 Main
businesses
and products		 Total amount
of
paid-in capital		 Method of
investment
(Note 1)		 Beginning
accumulated
outflow of
investment
from
Taiwan		 Investment flows
forthe period		 Ending
accumulated
outflow
of
investment
from
Taiwan		 Net
income
(loss)
of investee
Company		 Percentage
of
ownership

Investment
income
(loss)
recognized
(Note 2)		 Carryin
value as
end of t
period
Outfl
ow		 Inflow
Eehung
(Note1)		 Trading of
chemical
goods, raw
materials,
mechanical
equipment
and spare
parts,
electronic
equipment
and spare
parts		 $15,883
(RMB
3,513,896)		 Investment in
Mainland
China was
through
indirect
oversea
investee that
is invested
through direct
oversea
investee
company.		 $8,871
(USD
285,600)		 $ - $1,890
(USD
61,279.88)		 $8,871
(USD
285,600)		 $ - - % $ - $ -
Accumulated investment
in Mainland China as of
31 December 2021		 Investment Amounts
Authorized by Investment
Commission,MOEA		 Upper Limit on Investment

The Company’s net account values
×60%
NT$8,871
(USD285,600)		 NT$6,981
(USD224,320.12)		 NT$1,399,881
(Note2)

  • Note 1: Approved by the Investment Committee, Power Hero has invested in Giant Way and indirectly invested in the establishment of Eehung in Mainland China. Eehung was liquidated on 25 February 2019 and received the notification letter from the Investment Committee of the Ministry of Economic Affairs to state that the investment amount has been returned by Giant Way on 13 August 2020.

  • Note 2: According to the regulations of Investment Commission, Ministry of Economic Affairs, the Company’s investment upper limit in Mainland China is 60% of its net value.

Significant transactions with investee companies in Mainland China directly or indirectly through third parties: None.

273

(4) Information on major shareholders

Shares
Names of major shareholders		 Number of shares held Shareholding ratio
Macy Investment Company, Limited 16,838,191 8.90 %
KT Investment Company, Limited 10,801,010 5.71 %

274

SUNKO INK CO., LTD.

The Contents of Statements of Major Accounting Items

For the year ended 31 December 2021

Item Index
Statement of Cash and Cash Equivalents 1
Statement of Accounts Receivable 2
Statement of Inventories 3
Statement of Financial Assets at Fair Value Through Other
ComprehensiveIncome, Noncurrent		 4
Statement of Changes in Investment Accounted for UsingEquityMethod 5
Statement of Changes in Property, Plant and Equipment Note 6(6)
Statement of Changes in Accumulated Deperciation of Property, Plant and
Equipment
Note 6 (6)
Statement of Changes in Right-of-Use Assets Note 6(14)
Statement of Changes in Accumulated Deperciation of Right-of-Use
Assets		 Note 6 (14)
Statement of Short-term Loans 6
Statement of Accounts Payable 7
Statement of Other Payables Note 6(8)
Statement of Long-term Loans Note 6(9)
Statement of OperatingRevenues 8
Statement of OperatingCosts 9
Statement of ManufacturingOverheads 10
Statement of OperatingExpenses 11
Statement by Function Of Employee Benefits , Deprecation And
Amortization Expenses		 Note 6 (16)
Statement of Non-OperatingIncome And Expenses Note 6(17)

275

SUNKO INK CO., LTD.

1. Statement of Cash and Cash Equivalents

31 December 2021

Unit: Thousands of NTD

Item Description Amount Note
Cash
Cash in banks
Currency deposits
Demand deposits
Total		 USD $1,928 exchange rate 27.68
EUR $177 exchange rate 31.32
Others		 $339
53,367
5,555
46
304,187
$363,494

SUNKO INK CO., LTD.

2. Statement of Accounts Receivable

31 December 2021

Unit: Thousands of NTD

Client Name Description Amount Note
Client A
Client B
Client C
Client D
Client E
Others (Note)
Subtotal
Less: loss allowance
Less: Allowance of
loss on exchange
Total		 $219,648
64,943
50,200
47,982
28,313
360,006
771,092
(17,885)
(3,488)
$749,719

(Note) The amount of individual client grouped in others does not exceed 5% of the

account balance.

276

SUNKO INK CO., LTD.

3. Statement of Inventories

31 December 2021

Unit: Thousands of NTD

Item Description Cost Net Realizable Value Note
Raw materials
Work in process
Finished goods
Merchandise
Total
Less: Allowance for
inventory valuation
loss
Net Amount		 $365,721
42,103
478,576
5,524		 $365,848
42,103
492,418
5,299		 Please refer to
Note 4.(10) for
more details on
net realizable
value
891,924
(78,583)		 $905,668
$813,341

277

SUNKO INK CO., LTD.

4. Statement of Financial Assets at Fair Value Through Other Comprehensive Income, Noncurrent

For the year ended 31 December 2021

Unit: Thousands of NTD

Name of Securities As of 1 January 2021 As of 1 January 2021 As of 1 January 2021 Additions Additions Decrease Adjustments Adjustments Adjustments Adjustments Adjustments Adjustments
Shares Fair
Value		 Shares Amount Shares Amount Shares Fair
Value
CHING FENG HOME FASHIONS. CO. LTD
LINCO TECHNOLOGY CO. LTD
THE FIRST LEASING CORPORATION
TOTAL ACRYLIC POLYMER INDUSTRY
(TAPI) CORPORATIO
GLOBAL GRAPHENE GROUP, INC.
J NANO TECHNOLOGY CO., LTD.
YAYI CO., LTD
SAR TECHNOLOGY INC.
KING
SHINE
EE
TECHNOLOGY
ENTERPRISE CO., LTD.
Total		 214,309
422,734
2,852,325
100,000
6,155
11,474
368,898
4,250,000
1,000		 $6,097
3,714
26,017
14,938
-
-
-
42,500
-
$93,266		 -
-
-
-
-
-
-		 $ -
-
-
-
-
-
-
$ -		 -
-
-
-
-
(11,474)
-
-
-		 $ -
-
-
-
-
-
-
-
-
$ -		 $(1,843)
840
5,808
(112)
-
-
-
-
-
$4,693		 214,309
422,734
2,852,325
100,000
6,155
-
368,898
4,250,000
1,000		 $4,254
4,554
31,825
14,826
-
-
-
42,500
-
$97,959		 N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A		 None
None
None
None
None
None
None
None
None		 Note1

Note1 ： The company has completed liquidation during the year.

278

SUNKO INK CO., LTD.

5. Statement of Changes in Investment Accounted for Using Equity Method

For the year ended 31 December 2021

Unit: Thousands of NTD

Name of Company 1 January2021 1 January2021 Additions Additions Decrease Decrease Share of profit
or loss of
subsidiaries
and associates		 Exchange
Differences on
Translation of
Foreign
Operations		 Others 31 December 2021 31 December 2021 Collateral Note
Number of
shares		 Amount Number of
shares		 Amount Number of
shares		 Amount Number of
shares		 Percentage of
ownership		 Amount
POWER RICH
BNKC
BIOCHEMICAL
TECHNOLOGY CO.
SUNKO BIOTECH CO.
CHEN CHI
TECHNOLOGY CO.
KUO CHING
DEVELOPMENT, CORP
BLESSINGTHOUGHTS
CO.
POWER HERO		 990,000
49,000
1,670,044
1,640,000
-
1,520,000		 $13,890
1,301
-
-
-
909
-		 -
-
-
-
100,000
-
-		 $ -
-
-
-
1,000
-
-		 -
-
-
-
-
-
-		 $ -
(531)
-
-
-
-
-		 $(3,075)
737
-
1,606
(294)
-		 $(355)
-
-
-
-		 $ -
-
-
-
-
-
-		 990,000
49,000
1,670,044
1,640,000
100,000
1,520,000
-		 30%
49%
22.32%
41%
100%
83.52%
-		 $10,460
1,507
-
-
2,606
615
-		 None
None
None
None
None
None		 Note1
Note2
$16,100 $1,000 $(531) $(1,026) $(355) $ - $15,188

Note 1:The company is undergoing liquidation procedure. Note2 ： The company has completed liquidation during the year.

279

SUNKO INK CO., LTD.

6. Statement of Short-term Loans

31 December 2021

Unit: Thousands of NTD

Type Lenders Amount Contract Period Range of Interest
Rates(%)		 Loan
Commitments		 Collateral Note
Operation purposes
Operation purposes
Operation purposes
Operation purposes
Operation purposes		 Mega Bank
E.Sun Bank
Taiwan Cooperative
Bank
Bank of Taiwan
First Bank
Subtotal
Less: Allowance of
gains on exchange
Total		 $78,141
52,934
54,305
22,368
89,212		 110.07.20-111.06.22
110.08.27-111.06.08
110.08.06-111.05.04
110.08.02-111.05.09
110.11.10-111.05.01		 0.65%-0.84%
0.75%-0.95%
0.68%-0.76%
0.68%-0.86%
0.80%-0.90%		 200,000
200,000
250,000
200,000
300,000		 None
None
None
None
None
296,960
(1,239)
$295,721

280

SUNKO INK CO., LTD.

  1. Statement of Accounts Payable

31 December 2021

Unit: Thousands of NTD

Unit
Supplier Name Description Amount Note
Supplier A
Supplier B
Others (Note)
Subtotal
Less: Allowance of gains on
exchange
Total		 $35,929
18,905
273,838
328,672
(172)
$328,500

(Note) The amount of individual supplier in others does not exceed 5% of the account balance.

SUNKO INK CO., LTD.

8. Statement of Operating Revenues

For the year ended 31 December 2021

Unit: Thousands of NTD

Unit: Thousan
Item Description Amount Note
Fine Chemicals
Agrochemicals
Polymer-TPU&Polymer-TPV
Polymer-PU
Others
Total		 $2,039,574
322,897
366,121
106,401
13,064



$2,848,057

281

SUNKO INK CO., LTD.

9. Statement of Operating Costs

For the year ended 31 December 2021

Unit: Thousands of NTD

Item Amount
Direct Raw material
Beginning balance of raw material
Add: Raw material purchased
Transferred from finished goods
Less: Ending balance of raw materials
Cost of raw materials sold
Transferred to expenses
Others
Raw material used
Direct labor
Manufacturing overheads (Statement 10)
Manufacturing cost
Add: Beginning balance of work in process
Outsourcing
Less: Ending balance of work in process
Transferred to material
Others
Cost of finished goods
Add: Beginning balance of finished goods
Less: Transferred to expenses
Others
Ending balance of finished goods
Cost of sales of goods manufactured
Add: Beginning balance of merchandise
Merchandise purchased
Less: Ending balance of merchandise
Transferred to expenses
Others
Cost of sales of goods purchased
Add: Unallocated fixed cost as operating cost
Cost of raw materials sold
Inventory scrapped
Others
Less: Revenue from scraps
Gain for market price decline and obsolete and slow-
moving inventories
Operating Costs		 $278,130
1,732,303
540,078
(365,721)
(14,923)
(30,706)
(382)
2,138,779
191,143
761,525
3,091,447
20,552
6,825
(42,103)
(540,078)
9,394
2,546,037
483,090
(1,450)
(2,274)
(478,576)
2,546,827
28,941
15,541
(5,523)
(4)
(3)
2,585,779
137,451
14,923
2,094
7,851
(1,817)
(23,747)
$2,722,534

282

SUNKO INK CO., LTD.

10. Statement of Manufacturing Overheads

For the year ended 31 December 2021

Unit: Thousands of NTD

Unit: Thousands of NTD
Item Amount Note
Depreciation expense
Indirect labor
Utilities expense
Fuel cost
Waste disposal
Packaging fee
Insurance expense
Others (Note)
Subtotal
Unallocated fixed cost
as operating cost
Net Amount		 $246,189
111,390
102,263
65,033
69,390
59,367
42,509
202,835
898,976
(137,451)
$761,525

(Note) The amount of individual item in others does not exceed 5% of the account balance.

283

SUNKO INK CO., LTD.

11. Statement of Operating Expenses

For the year ended 31 December 2021

Unit: Thousands of NTD

Item Selling and
Marketing
Expenses		 General and
Administrative
Expenses		 Research and
Development
Expenses		 Expected
credit loss		 Total Note
Payroll expense
Freight expense
Insurance expense
Contracted research expenses
Expected credit loss
Depreciation expense
Commission
Export/import expense
Professional expense
Others expense (Note)
Total		 $20,089
10,851
1,876
-
-
1,027
5,969
14,543
3
7,783		 $52,941
152
5,901
-
-
7,289
-
-
18,686
23,508		 $26,524
43
3,012
2,808
-
8,802
-
2
55
10,053		 $ -
-
-
-
839
-
-
-
-
-		 $99,554
11,046
10,789
2,808
839
17,118
5,969
14,545
18,744
41,344
$62,141 $108,477 $51,299 $839 $222,756

(Note) The amount of individual item in others does not exceed 5% of the account balance.

284

  • 6 Impact on the Company's financial status due to financial difficulties experienced by the Company and its affiliate companies in the most recent year and as of the publication date of this Annual Report: None.

VII. REVIEW AND ANALYSIS ON FINANCIAL STATUS, FINANCIAL PERFORMANCE, AND RISKS

  • 1 Analysis of Financial Status 1.1 Consolidated (IFRS)

Unit: NT$ (in thousands)

Year
Item		 As of 31 December, As of 31 December, Differences Differences
2021 2020 Amount %
Current Assets
Property, plant,
equipment
Intangible Assets
Other Assets
Total Assets
Current Liabilities
Non-current Liabilities
Other Liabilities
Total Liabilities
Common Stock
Additional paid-in
capital
Retained Earnings
Other equity
Treasury Stock
Non-controlling
Interest
Total Equity		 $2,030,289
1,664,358
13,846
382,859
4,091,352
1,066,756
528,457
164,550
1,759,763
1,889,952
41,930
441,577
(1,205)
(40,786)
121
2,331,589		 $2,654,855
1,702,885
14,914
426,767
4,799,421
1,474,762
670,292
176,990
2,322,044
1,889,952
37,848
599,874
(5,623)
(44,853)
179
2,477,377		 ($624,566)
(38,527)
(1,068)
(43,908)
(708,069)
(408,006)
(141,835)
(12,440)
(562,281)
-
4,082
(158,297)
4,418
4,067
(58)
(145,788)		 (23.53)
(2.26)
(7.16)
(10.29)
(14.75)
(27.67)
(21.16)
(7.03)
(24.21)
-
10.79
(26.39)
78.57
9.07
(32.40)
(5.88)
1. Analysis of deviation over 20% and amount over $10,000 thousand:
(1) Decrease in current assets: The decrease was mainly because of cash redution to returned to the
shareholders and cash dividends paid and repay the loans.
(2) Decrease in current liabilities: The decrease was mainly due to cash redution to returned to the
shareholders.
(3) Decrease in long-term liabilities: The decrease was mainly due to decrease in long-term loan.
(4) Decrease in retained earnings: The decrease was mainly due to net loss for the current period
and the distribution of 2020 common stock cash dividends.
2. Possible major impacts on the Company’s future business: The above deviations had no major
impact on SUNKO’s financial position and future business.

285

  1. Future responsive measures: not applicable

1.2 Parent Only

Unit: NT$ (in thousands)

Year
Item		 As of 31 December, As of 31 December, Differences Differences
2021 2020 Amount %
Current Assets
Property, plant,
equipment
Intangible Assets
Other Assets
Total Assets
Current Liabilities
Non-current Liabilities
Other Liabilities
Total Liabilities
Common Stock
Additional paid-in
capital
Retained Earnings
Other equity
Treasury Stock
Total Equity		 $2,021,269
1,664,358
13,846
386,080
4,085,553
1,061,078
528,457
164,550
1,754,085
1,889,952
41,930
441,577
(1,205)
(40,786)
2,331,468		 $2,653,798
1,702,853
14,914
427,676
4,799,241
1,474,761
670,292
176,990
2,322,043
1,889,952
37,848
599,874
(5,623)
(44,853)
2,477,198		 ($632,529)
(38,495)
(1,068)
(41,596)
(713,688)
(413,683)
(141,835)
(12,440)
(567,958)
-
4,082
(158,297)
4,418
4,067
(145,730)		 (23.83)
(2.26)
(7.16)
(9.73)
(14.87)
(28.05)
(21.16)
(7.03)
(24.46)
-
10.79
(26.39)
78.57
9.07
(5.88)
1. Analysis of deviation over 20% and amount over $10,000 thousand:
(1) Decrease in current assets: The decrease was mainly because of cash redution to returned to the
shareholders and cash dividends paid and repay the loans.
(2) Decrease in current liabilities: The decrease was mainly due to cash redution to returned to the
shareholders.
(3) Decrease in long-term liabilities: The decrease was mainly due to decrease in long-term loan.
(4) Decrease in retained earnings: The decrease was mainly due to net loss for the current period and
the distribution of 2020 common stock cash dividends.
2. Possible major impacts on the Company’s future business: The above deviations had no major
impact on SUNKO’s financial position and future business.
3. Future responsive measures: not applicable.

286

  • 2 Analysis of Financial Performance

  • 2.1 Analysis of Financial Performance in the last two years

    • 2.1.1 Consolidated

Unit: NT$ (in thousands)

2.1.1 Consolidated Unit: NT$ (in thousands) Unit: NT$ (in thousands)
Year
Item		 For theyears ended 31 December Differences
2021 2020 Amount %
Operating Revenues
Operating Costs
Gross Profit
Operating Expenses
Other Operating Gains or Losses
Operating Income
Non-operating Income
Non-operating Expenses
Income (Loss) before Income Tax
Income Tax Benefit
Net Income (Loss)
Other Comprehensive Income, net of tax
Total Comprehensive Income		 $2,850,638
2,722,534
128,104
224,055
-
(95,951)
56,692
14,582
(53,841)
(16,175)
(70,016)
8,316
(61,700)		 $2,752,601
2,613,246
139,355
383,110
-
(243,755)
747,188
20,139
483,294
41,012
524,306
5,466
529,772		 $98,037
109,288
(11,251)
(159,055)
-
147,804
(690,496)
(5,557)
(537,135)
(57,187)
(594,322)
2,850
(591,472)		 3.56
4.18
(8.07)
(41.52)
-
60.64
(92.41)
(27.59)
(111.14)
(139.44)
(113.35)
52.14
(111.65)
1. Analysis of significant changes in financial ratios in the last two years:
(1) Decrease in gross profit: The decrease was mainly due to the slowdown of the COVI-19 pandemic
and the market recovery, but there were still unfavorable factors such as the lack of labor and
shut down of the international freight supply chain, resulting in the increase in the cost and price
of raw materials, which affected profits.
(2) Decrease in operating expenses and operating losses: The decrease was mainly due to the change
in the 2020 remediation plan, which was approved by the Taoyuan City Environmental Protection
Bureau, Taichung Environmental Protection Bureau, and the estimated factory renovation cost
was approximately NT$105 million.
(3) Decrease in Income Tax benefit: The decrease was mainly due to o sales of Taiping Land in 2020,
with a gain on disposal in the amount of $741,989 thousand.
(4) Increase in income tax expense: The increase was mainly due to increase in tax on undistributed
earnings.

287

2.1.2 Parent Only

Unit: NT$ (in thousands)

2.1.2 Parent Only Unit: NT$ (in thousands) Unit: NT$ (in thousands)
Year
Item		 For theyears ended 31 December Differences
2021 2020 Amount %
Operating Revenues
Operating Costs
Gross Profit
Operating Expenses
Other Operating Gains or Losses
Operating Income
Non-operating Income
Non-operating Expenses
Income (Loss) before Income Tax
Income Tax Benefit
Net Income (Loss)
Other Comprehensive Income, net of tax
Total Comprehensive Income		 $2,848,057
2,722,534
125,523
222,756
-
(97,233)
56,720
13,270
(53,783)
(16,175)
(69,958)
8,316
(61,642)		 $2,752,601
2,613,246
139,355
383,041
-
(243,686)
747,457
20,379
483,392
41,012
524,404
5,466
529,870		 $95,456
109,288
(13,832)
(160,285)
-
146,453
(690,737)
(7,109)
(537,175)
(57,187)
(594,362)
2,850
(591,512)		 3.47
4.18
(9.93)
(41.85)
-
60.10
(92.41)
(34.88)
(111.13)
(139.44)
(113.34)
52.14
111.63
2. Analysis of significant changes in financial ratios in the last two years:
(1) Decrease in gross profit: The decrease was mainly due to the slowdown of the COVI-19 pandemic
and the market recovery, but there were still unfavorable factors such as the lack of labor and
shut down of the international freight supply chain, resulting in the increase in the cost and price
of raw materials, which affected profits.
(2) Decrease in operating expenses and operating losses: The decrease was mainly due to the change
in the 2020 remediation plan, which was approved by the Taoyuan City Environmental Protection
Bureau, Taichung Environmental Protection Bureau, and the estimated factory renovation cost
was approximately NT$105 million.
(3) Decrease in Income Tax benefit: The decrease was mainly due to o sales of Taiping Land in 2020,
with a gain on disposal in the amount of $741,989 thousand.
(4) Increase in income tax expense: The increase was mainly due to increase in tax on undistributed
earnings.
  • 2.2 Sales Volume Forecast and Related Information

For additional details, please refer to page 9.

288

3 Analysis of Cash Flow

  • 3.1 Liquidity analysis

Unit: %

Analysis of Cash Flow
.1
Liquidity analysis		 Unit: %
Item As of 31 December, Increase or decrease
ratio (%)
2021 2020
Cash flow ratio (13.90) 16.92 (182.15)
Net cash flow adequacyratio 37.83 116.57 (67.55)
Cash reinvestment ratio (4.62) 4.62 (200.00)
Explanation:
(1) Cash flow ratio: The decrease was mainly due to increase in account receivable and inventories.
(2) Net cash flow adequacy ratio: The decrease was mainly due to capital expenditure and increase
in inventories.
(3) Cash reinvestment ratio: The decrease was mainly due to decrease in net cash from operating
activities.

3.2 Remedial Actions for Liquidity Shortfall: not applicable.

  • 3.3 Cash Flow Liquidity Projection for the coming year

Unit: NT$ (in thousands)

Cash
Balance
2020.12.31
(1)
Projected net cash
provided by
operating activities
throughout 2022(2)
Projected
cash outflow
in 2022 (3)
Projected
cash surplus
(deficit)
(1)+(2)-(3)
Remedyfor LiquidityShortfall
Investment
Plan
Financing
Plan
383,297
346,797
39,786
769,880
-
-
Explanation:
(1) Operating activities: Cash inflows as operating activities take place under normal operating
condition.
(2) Investment activities: Cash outflows mainly due to activities such as acquired of property, plant,
and equipment.
(3) Financing activities: Cash inflows mainly due to increase of long-term borrowings.		 Projected net cash
provided by
operating activities
throughout 2022(2)		 Projected
cash outflow
in 2022 (3)		 Projected
cash surplus
(deficit)
(1)+(2)-(3)		 Remedyfor LiquidityShortfall Remedyfor LiquidityShortfall
Investment
Plan		 Financing
Plan
346,797 39,786 769,880 - -
  • 4 Major Capital Expenditures and Impact on Financial and Business during recent years:
Factory Plan Impact
Dali Exhaust gas treatment system Environmental regulations strictly require the
installation of effluent treatment system.
Pingjhen Exhaust gas treatment system Environmental regulations strictly require the
installation of effluent treatment system.
Dali Renewable energy by electricity
generationproject		 Regulations require the installation of solar
energysystem.
Chuansing Renewable energy by electricity
generationproject		 Regulations require the installation of solar
energysystem.

289

5 Reinvestment policies, main reasons for profits/ losses generated thereby, improvement plans, and investment plans for the coming year:

Reinvestments Policies Profits/
losses in
2021		 Main Reasons Improvement
plans		 Investment
plans for
the coming
year
Blessingthoughts
Co. Ltd. (Note)		 The purpose of
the
beverage
kiosk is to help
the
minority
group’s
employment.		 (352) Sales
revenue
failed to achieve
the economies of
scale.		 -. -
BNKC
BIOCHEMICAL
TECHNOLOGY
CO., LTD.		 Sales of active
ingredient
for
cosmetics.		 1,505 Continuous
promotion
of
new
sunscreen
products.		 - -
Power Rich Promotion
on
using
polymer
pellets as shoe
materials.		 (10,252)) Sales
revenue
failed to achieve
the economies of
scale.		 Continually
seeking
cooperation
with
internationally
famous
shoe
factories.		 -
KUO
CHING
DEVELOPMENT
CORPORATION.		 To expand new
business of flame
retardants		 1,606 - - -
Subtotal (7,493)

Note：Blessingthoughts Co. Ltd was dismissed on 03 December 2021.

290

  • 6 Risk Assessment

  • 6.1 Impacts of changes in interest rates, foreign exchange rates and inflation on the Company's profit and loss and the corresponding countermeasures:

    • 6.1.1 Interest Rate

The rates of short-term and long-term borrowings change as the market rate alters, and accordingly, affecting the profits of the Company. When the market rate increases/ decreases in 1%, the income before tax goes up/ down in the amount of $997 thousand. The Company maintains a good relationship with bank institutions to obtain better exchange rate quotes.

  • 6.1.2 Exchange Rate

The foreign exchange loss amounted to $6,824 thousand in 2021, mainly due to the fluctuating USD exchange rate. When the rate of NTD to USD fluctuates by 1%, the income before tax goes up/ down in the amount of $3,304 thousand. Due to the complex circumstances around the globe, the Company may pay up the purchasing expenses with sales revenue in the same functional currency with natural hedge to avert most of the risk and engage in forward contracts to hedge risks to currency exchange fluctuation of its net exposure, and enhance the currency fluctuation risk management, including taking the fluctuating exchange rates into consideration while inquiring and quoting prices and making foreign currency exchange at the appropriate time to minimize the foreign exchange loss.

  • 6.1.3 Inflation:

According to the statistics from the Directorate-General of Budget, Accounting and Statistics, Executive Yuan, the accumulative average consumer price index was 104.32% in 2021. Therefore, there is no indication of inflation.

  • 6.2 Policies for high-risk, high-leverage investments, capital lending, endorsements, guarantees, and derivatives transaction, main reasons for the profits or losses generated thereby, and the corresponding countermeasures:

  • 6.2.1 The Company did not engage in any high-risk and high-leverage investments, endorsements, or guarantees in 2021.

  • 6.2.2 The Company engaged in derivatives transactions in the total amount of $246,414 thousand, with a realized loss of $753 thousand in 2021. The Company mainly conducted forward exchange transactions, targeting actual foreign currency revenue as hedging instruments, to avoid currency fluctuation risks generated by exports.

  • 6.3 Future Research and development (R&D) projects and estimated R&D expenditures: The R&D department mainly works on developing new products and improving the production process to advance the products’ quality. The Company estimates to invest $52,162 thousand in the continuous R&D process.

  • 6.4 Impacts of changes in domestic and foreign important policies and laws on the Company’s financial operations, and the corresponding countermeasures:

  • The Company undertook appropriate measures in accordance with applicable regulations and so far there has not been any significant impact on the Company’s financial operation.

  • 6.5 Impacts of industry and technology changes to the Company’s financial operations, and the corresponding countermeasures: None.

291

  • 6.6 Impacts of changes in corporate image on corporate crisis management and the corresponding countermeasures: None.

  • 6.7 Expected benefits and potential risks related to mergers and acquisitions: Not applicable.

  • 6.8 Expected benefits and potential risks of capacity expansion: Not applicable.

  • 6.9 Risks relating to and future countermeasures for the excessive concentration of incoming goods or sales:

    • 6.9.1 Sales: In 2021, the main clients accounted for 18.87% of the entire client base who have already cooperated with us for a long period of time. During recent years, the number of orders steadily grew, and the receivable turnovers were also stable. In addition, the Company formulated strategies on preservation policy to monitor risks. Except as described, there’s no other clients who accounted for over 10% of the sales revenue.

    • 6.9.2 Purchases: The Company has a stable relationship with its raw materials suppliers. For each raw material, we have at least two different suppliers. The main suppliers made up 20.42% of the entire suppliers in 2021. Those main suppliers have long standing relationship with the Company; therefore, the related risk is low.

  • 6.10 Impacts, risks arising from, and future countermeasures for major large share transfers or changes in shareholdings by Directors, supervisors or major shareholders with shareholding of over 10%: None.

  • 6.11 Effects of, risks relating to and future countermeasures for changes in management rights: None.

  • 6.12 Litigation or non-litigation matters:

    • For litigations, non-litigations or administrative disputes already judged or currently being judged as to the publication date of this Annual Report, the litigation expense are measured along with the Company’s earnings and capital of the past few years. The overall litigation expenses have insignificant impact on the shareholders’ interest and the price of the securities.

  • 6.13 Other major risks and future countermeasures:None.

  • 7 Other Material Matters: None.

292

VIII. SPECIAL NOTES

  • 1 Summary of Affiliated Companies

  • 1.1 Organizational chart of the affiliated companies

==> picture [191 x 134] intentionally omitted <==

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

SUNKO INK CO., LTD
83.52% 100.00%
Blessingthoughts Kuo Ching
Co. Ltd. Development
----- End of picture text -----

Note 1: Pursuant to Article 369-2 of the Company Act, the controlling and affiliation relationship is substantially recognized.

Note 2: Kuo Ching Development Corporation was established on 14 July 2021.

Note 3: Blessingthoughts Co. Ltd was dismissed on 3 December 2021

1.2 Basic information of affiliated companies

(Unit expressed in thousands)
CompanyName Date of Incorporation Address Capital Stock Business Activities
Blessingthoughts Co. March 31, 2016 Taichung, Taiwan NT$ 18,200 Beverage kiosk
Ltd. (Note1)
Kuo Ching July 14, 2021 Taichung, Taiwan NT$1,000 Specialized product trade
Development
Corporation (Note2)

Note1: Blessingthoughts Co. Ltd was dismissed on 03 December 2021.

Note2: Kuo Ching Development Corporation was established on 14 July 2021.

  • 1.3 Directors, Supervisors, and Managers of all affiliated companies
Company Name Title Name or Representative Shareholdings (Note1)
Shares
%		 Shareholdings (Note1)
Shares
%
Blessingthoughts Co. Chairman Representative of SUNKO INK 1,520,000 83.52%
Ltd. (Note1) CO., LTD: CHANG, JUN-PIN
Kuo Ching Chairman HUANG, TING-DI 1,000,000 100.00%
Development
Corporation (Note2)

Note1: Blessingthoughts Co. Ltd was dismissed on 03 December 2021.

Note2: Kuo Ching Development Corporation was established on 14 July 2021.

293

1.4 Operational highlights of affiliated companies

(Expressed in Thousands of New Taiwan Dollars, Except for EPS)

Company Name Capital Total
Assets		 Total
Liabilities		 Net Value Operating
Income		 Operating
Profit		 Net
Loss		 EPS
(NT$)
(After-Tax)
Blessingthoughts 18,200 799 63 736 - (335) (352) (0.19)
Co. Ltd.
Kuo Ching 1,000 19,794 17,188 2,606 13,603 1,616 1,606 16.06
Development
Corporation

Note1: Blessingthoughts Co. Ltd was dismissed on 03 December 2021. Note2: Kuo Ching Development Corporation was established on 14 July 2021.

  • 1.5 Consolidated Financial Statements of the affiliated companies: Pursuant to the Disclosure Guidelines of the Consolidated Operating Report, Financial Statements And Affiliation Report Of The Affiliated Companies, the companies that should be incorporated in the consolidated financial statements of affiliated companies are the same as those that should be incorporated in the consolidated financial statements of parent and subsidiary companies in accordance with IFRS 10. In addition, the related information that must be disclosed in the consolidated financial report of affiliated companies has been fully disclosed in the consolidated financial statements of parent and subsidiary companies. Therefore, the Company is not required to prepare a consolidated financial statements of affiliated companies.

  • 1.6 Reports on affiliated companies: None.

  • 2 Private Placement of Securities in 2021 and as of the Date of this Annual Report: None

  • 3 Holding or disposal of the Company's shares by the subsidiaries of the most recent year as of the publication date of this Annual Report: None.

  • 4 Other necessary supplementary matters to be included: None.

IX. ANY EVENTS IN 2021 AND AS OF THE PUBLICATION DATE OF THIS ANNUAL REPORT THAT HAD MATERIAL IMPACTS ON SHAREHOLDERS’ EQUITY OR SECURITIES PRICES AS STATED IN ARTICLE 36-2-2 OF SECURITIES AND EXCHANGE LAW OF TAIWAN: NONE.

294

SUNKO INK CO., LTD

==> picture [69 x 69] intentionally omitted <==

Chairman: HUANG, TING-DI

==> picture [48 x 51] intentionally omitted <==

295

More from SUNKO

Regulatory Filings 2026
May 22
Audit Report / Information 2026
May 14
Audit Report / Information 2026
May 14
AGM Information 2026
May 13
Proxy Solicitation & Information Statement 2026
May 13
AGM Information 2026
May 13
Proxy Solicitation & Information Statement 2026
May 13
Major Shareholding Notification 2026
May 13
AGM Information 2026
May 13
Interim / Quarterly Report 2026
May 12
View all filings →