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ZERO ONE Annual Report 2020

Aug 12, 2021

52262_rns_2021-08-12_1402dbc8-3763-4da1-80fc-504b1039f0ef.pdf

Annual Report

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==> picture [483 x 79] intentionally omitted <==

ZERO ONE TECHNOLOGY CO., LTD.

2020 Annual Report

Printing Date: May 7, 2021

Market Observation Post System: http://mops.twse.com.tw

Annual Report Website: http://www.zerone.com.tw

Notice to readers.

THIS IS A TRANSLATION OF THE 2020 ANNUAL REPORT (THE “ANNUAL REPORT”) OF ZERO ONE TECHNOLOGY CO., LTD. (THE “COMPANY”). THIS TRANSLATION IS INTENDED FOR REFERENCE ONLY AND NOTHING ELSE, THE COMPANY HEREBY DISCLAIMS ANY AND ALL LIABILITIES WHATSOEVER FOR THE TRANSLATION. THE CHINESE TEXT OF THE ANNUAL REPORT SHALL GOVERN ANY AND ALL MATTERS RELATED TO THE INTERPRETATION OF THE SUBJECT MATTER STATED HEREIN.

1. Spokesperson & Deputy Spokesperson:

Name: Michelle Chin

Title: Senior Director of Financial Management Division

Tel:(02)2656-5656

Name: Ken Chou

Title: Senior Manager of Information Management Division Tel:(02)2656-5656

E-mail: [email protected]

2. Headquarters:

Address:10F., No.8, Ln. 360, Sec. 1, Neihu Rd., Taipei City. Tel:(02)2656-5656

3. Stock Transfer Agency:

Name: Securities Registrar Department of MasterLink Securities Corporation Address: B1, No.35, Ln. 11, Guangfu N. Rd., Taipei City Tel:(02)2768-6668

Website: http://www.masterlink.com.tw

4. Contact Information of the Certified Public Accountants for the Latest Financial Report:

  • Name: Chien Liang Liu 、 Pei De Chen

CPA Firm: Deloitte & Touche Accounting Firm

Address:20F, No. 100, Songren Rd., Xinyi Dist., Taipei, 11073, Taiwan Tel:(02)2545-9988

Website: https://www2.deloitte.com/tw/tc.html

5. Overseas Trade Places and related information for Listed Negotiable Securities: None.

6. Company Website: http://www.zerone.com.tw

Table of Contents

Table of Contents
I. Letter to Shareholders........................................................................................................... 1
II. Company introduction........................................................................................................... 4
A. Date of Incorporation .............................................................................................................. 4
B. Formation History ................................................................................................................... 4
III. Corporate Governance Report............................................................................................. 5
A. Organization ............................................................................................................................ 5
B. Information on Directors, Supervisors and Management Team ............................................. 7
C. Remuneration of Directors, Supervisors, Management ........................................................ 13
D. Implementation of Corporate Governance ........................................................................... 18
E. Information onCPA Professional Fee ................................................................................... 43
F. Replacement of CPA: ........................................................................................................... 44
G. The Company’s Chairman, Chief Executive Officer, Chief Financial Officer, and managers
in charge of its finance and accounting operations hold any positions in the Company’s
independent auditing firm or its affiliates during the last year ............................................. 44
H. Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders .... 45
I. Relationship among the Top Ten Shareholders .................................................................... 46
J. Ownership of Shares in Affiliated Enterprises: .................................................................... 47
IV. Capital Overview.................................................................................................................. 47
A. Capital and Shares ................................................................................................................ 47
B. Corporate Bonds. .................................................................................................................. 50
C. Preferred Stocks. ................................................................................................................... 50
D. GDR/ADR. ........................................................................................................................... 50
E. Employee Stock Options: ..................................................................................................... 51
F. Restricted Employee Shares: ................................................................................................ 53
G. New Shares Issuance in Connection with Mergers and Acquisitions .................................. 55
H. Financing Plans and Implementation .................................................................................... 55
V. Operational Highlights........................................................................................................ 56
A. Business Activities ................................................................................................................ 56
B. Markets and sales Overview ................................................................................................. 64
C. Human Resources ................................................................................................................. 70
D. Environmental Protection Expenditure ................................................................................. 70
E. Labor Relations ..................................................................................................................... 70
F. Important Contracts .............................................................................................................. 73

VI. Financial Information .......................................................................................................... 74 A. Five-Year Financial Summary .............................................................................................. 74 B. Five-Year Financial Analysis ............................................................................................... 78 C. Audit Committee’s Report for the Year 2020 ...................................................................... 81 D. Consolidated Financial Statements for the Years Ended December 31, 2020 and 2019, and Independent Auditors’ Report............................................................................................... 82 E. Financial Statements for the Years Ended December 31, 2020 and 2019, and Independent Auditors’ Report ................................................................................................................... 82 F.Company or its affiliates have experienced financial difficulties in the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report, the annual report shall explain how said difficulties will affect the Company's financial situation ...... 82 VII.Review of Financial Conditions, Financial Performance, and Risk Management ........ 82 A. Analysis of Financial Status .................................................................................................. 82 B. Analysis of financial performance ........................................................................................ 83 C. Analysis of Cash Flow .......................................................................................................... 84 D. Major Capital Expenditure Items and Source of Capital: None. .......................................... 84 E. Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans, and Investment Plans for the Coming Year .......................................................................... 85 F. Analysis of Risk Management: ............................................................................................. 86 G. Other material matters. ......................................................................................................... 88 VIII.Special Disclosure ............................................................................................................... 89 A. Summary of affiliated companies in recent years： ............................................................. 89 B. Private Placement Securities in the Most Recent Years：None. ......................................... 89 C. Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years ..... 89 D. Other supplementary information ......................................................................................... 89 IX. Any of the situations listed in Article 36, paragraph 3, subparagraph 2 of the Securities and Exchange Act, which might materially affect shareholders' equity or the price of the company's securities, has occurred during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report ........................... 89

I. Letter to Shareholders

Dear Shareholders,

The results of our operating performance in 2020, business plan for 2021, are illustrated as follows:

  • A. 2020 Operating Results

  • (A) Implementation Results of Business Plans

In FY 2020, the Company’s total revenue stood at NT$ 9,834,318 thousand, on the increase of NT$ 919,148 thousand compared to the preceding year, 10.31% in year-overyear growth. The net profit after tax was NT$ 440,398 thousand, on the increase of NT$ 91,243 thousand compared to the preceding year, a 26.13% year-over-year growth. Basic earnings per share were NT$3.55.

  • (B) Financial Status and Profitability Analysis

  • Financial Status ：

In FY 2020, the Company’s net profit was NT$ 440,398 thousand. Cash provided by operating and investing activities were NT$ 284,098 thousand and NT $416,635 thousand, respectively. Cash used in financing activities were NT$ 390,699 thousand. Cash and cash equivalents increase NT$ 302,393 thousand during the period. Cash and cash equivalents at the end period were NT$ 637,890 thousand.

  1. Profitability Analysis ：
. ProfitabilityAnalysis：
Items 2020 (%) 2019 (%)
Ratio of return on total assets 8.27
7.29
Ratio of return on shareholders’ equity 17.29
15.07
Ratio of operating income to capital stock 40.17
32.08
Ratio of profit before income tax to capital stock 44.09
35.53
Profit ratio 4.48
3.92
Earnings per share (NT$) 3.55
2.85
  • (C) Research and the development status of the Company and its subsidiaries

Research and the development status of the Company and its subsidiaries in 2020:

  1. Upgraded print servers: Including cost control, improvement of firmware effectiveness, etc.

  2. Research and development of relevant product of IoTs: ： Including the mass production of the Z920K (Sub-IG wireless IoT) product, and the continuing of R&D of Gateway.

1

  • B. Summary of 2021 Business Plan

  • (A)Business Plan

The business scope includes four dimensions, namely, IT infrastructure, network and information security, cloud platform and integration applications, big data and AI applications. Among the four, network and information security, and IT infrastructure are still the main key factors which provide the momentum for our business growth in 2021. Businesses around the world start to develop new schemes and strategies focusing on economic recovery in consideration of the lessening impacts of Covid-19 together with the improvement of international situations. We will continue to devote our efforts in providing relevant solutions so as to keep the drive of the dual growth of sustaining revenue and profit-making abilities. In the meantime, we will also cultivate further and strengthen the professional skills of our team in all operational aspects to enhance branding, as well as resources in R&D and professional consultants in terms of AP applications and data analysis. Continuing efforts will be devoted in the development of new business models and branding. Cross-departmental collaboration advantage will also be enhanced at the organizational level as the services provided by our consultants will in term facilitate venders and partners to create more business opportunities by using Zerone platform.

(B) Sales forecast and its reference

Each product and expected sales forecasts in 2021 are as follows:

Product category Salesforecast (Set)
IT infrastructure 1,423,000
Network & information security 1,941,000
Cloud platform & application 22,400,000
Big data & application 86,000
Others 30,000
Total 25,880,000

As for products distribution, The Company focuses on sales of various IT’s software, cloud platform and applications, network and information security, big data of AI and its applications and value-added services. As most of our products and services are of high unit prices, and the mode for transactions is through project sales and value-added services We therefore anticipate that the forecasts of the sales volume will be similar to the past few years.

(C) Important policy of production and sales.

  1. We help our venders and partners expand markets from three divisions, namely, the enhanced integration of different brands, maximized brand potentials through the visibility of the value-added brands, and provide new business models.

  2. Apart from providing solutions for the digital transformation of industries, the deployment of value-added consulting services for pre-sale and after-sale is also a direction worth going into.

  3. To further expand new markets for enhancing the distribution of products.

  4. To put efforts in the improvement of operational efficiency and reduce unnecessary expenditures.

2

  • C. Development strategies for the Company in the future Due to the fierce competition of transformation among IT industries, the trend of AI, big data, cloud, virtual and mobile devices and 5G will affect the development of IT industries in the future. In addition to strengthening the current business of major products, the Company not only enhances the business of professional value-added services to elevate the positioning of distributed products to help customers in the process of digital transformation, but also strives to seize the opportunities for new business more fruitfully. Through doing so, we are confident that the annual operating targets will be reached and continue to see future growth.

  • D. Impacts from external competition, regulatory, and overall management environments. (A) Based on the development of technology markets, internet security, hyper-converged IT, intelligence video analytics, 5G, and IoT/Cloud platform are the application industries and products for the future, and the Company has been putting lots of efforts in these regards.

  • (B) Changes in major local and international policies and laws do not have any material impacts on the Company’s financial and business performance. In terms of macroeconomic environmental impacts which might influence the direction as to which the Company expands its market and business, timely and proper measures will be taken to proactively manage the challenges.

Sincerely yours,

Chairman Chia Hsin Lin

3

II. Company introduction

  • A. Date of Incorporation: June 27, 1980

  • B. Formation History

Year Milestones
1980 ․The CompanyFounded,with NT$500,000 capital.
․Invented Cangjie input method and ideographic description sequences method
․Launched Chinese system of Zero one.
1990 ․Distributed networkproducts of Novell.
1993 ․Distributedproducts of Microsoft.
1994 ․Launched theprint server.
1996 ․Distributedproducts of Cisco.
1998 ․Zero One Technology Co., Ltd. went listed by approval of by Securities &
FutureInstitute.
2000 ․The stock is listed in OTC,NT$ 275,000,000 capital,in January2000.
2001 ․Distributedproducts of Cisco.
2002 ․Zero One Technology Co., Ltd. went listed by approval of by Securities &
FutureInstitute.
․Listed on Taiwan Stock Exchange on August 2002. Increased capital to NT$ 600,000,000.
2003 ․Issued 1stdomestic secured convertible bond, worth an amount of NT$ 250,000,000.
2008 ․Increased paid-in capital to NT$ 1,020,342,130, as convertible bonds are
convertedintonew shares.
․Decreasedpaid-in capital to NT$ 989,962,130 for cancellation of treasurystock.
2011 ․Decreased paid-in capital to NT$ 947,442,130 for cancellation and transfer of
treasury stock.
2014 ․Issued 2nddomestic convertible bonds with an amount of NT$ 500,000,000.
2015 ․Issued 1stemployee stock option.
2017 ․Increased paid-in capital to NT$ 1,224,803,750, as employee stock options and
convertible bonds are converted into new shares.
2018 ․Increased paid-in capital to NT$ 1,228,964,660, as employee stock options and
convertible bonds are converted into new shares.
2019 ․As for de-listing of convertible bonds due to maturity, the issuance and
cancellation of restricted stock awards, and employee stock options converted
into new shares, paid-in capital had increased to NT$ 1,246,232,120.
2020 The cancellation of employee restricted stock awards and the continuing of
employee stock options converted into new shares, the paid-in capital increased
to NT$1,256,402,120.

4

III. Corporate Governance Report

  • A. Organization

  • (A) Organizational Chart

==> picture [469 x 393] intentionally omitted <==

5

(B)Major Corporate Functions

(B) Major Corporate Functio (B) Major Corporate Functio ns
Department Functions
Chairman Office 1.Enaction of important regulations and rules, and the development of project
plan (such as the business plan).
2.Accessment and management of foreign investment.
3.Planning and execution of stock affairs.
Auditing Office 1.To audit the operations of different departments for ensuring effective of the
Company's internal procedures.
2.To propose and analyze the improvement strategies and measures of business
management.
3.Researchand applicationofthe policy of financialaccounting and securities.
General Manager Office 1. To lay the short-, medium-, and long-term business plans, and to draw up and
help execute strategies and management approaches of the Company.
2.Management of and cooperate with the work of each work and business of each
division.
3.To review and draw up the management regulations of the Company.
4.The development and planning of the Company’s organization.
5.Execution of resolutions of the Board of Directors.
6.Responsible for supervising the business performance of each division.
Legal Center 1. Responsible for reviewing and setting business-relevant contracts, dealing
with suits and proceedings by laws and providing professional opinions for
the Company, etc.
Business Division 1.Distributing domestic and foreign network product of hardware and software
and achieving objectives of increasing operating revenues and earning profits
from sales business of Taiwan market.
2.Customer Relationship Management and the development.
3.Execution and planning of activities of promotion.
Resources
Service
Division		 General
Administration
Division		 1.Control and execution of procedures of administration & the purchase.
2.Management of purchases, sales, and inventories of the warehouse.
Credit and AR
Management
Center		 1.To control the credit risk of the Company for collectability of trade receivables.
2.To maintain the credit management relationship with the industries.
3. To implement the Company's credit management policy.
Human
Resource
Management
Center		 1. To coordinate with strategies, planning, drawing up, management methods,
SOP of corporate human resources, including planning of human resources,
organizational design and planning, recruitment and appointment, educational
training and the development, salaries and compensations, performance
management, employee relations and the development of the corporate culture.
Information
Management
Division		 1.To provide automation of internal information network, implementation and
maintenance of systematic statements.
2.Implementation, management and maintenance of ERP system.
3.Design and maintenance of the Company website and contents of web pages.
4.Accessment and introduction of New IT structure for effectively integration of
business procedures andresources.
Financial
Management
Division		 1.Planning, allocation and use of funds of the Company.
2.Edition and execution of the accounting policy.
3.To Review and analysis of financial statements.
4.To Review and analysis of the accounting certificates of revenues and expenses,
and the statements of management and budget.
5.Tax planning and operations.
6.Computation procedures of finance and accounting.
Marketing
Center		 1. Management of unity of enacting, design, planning and implementation of the
Company’s CIS (corporate image system).
2.To establish a company website for the Company introduction and product
marketing.
3.Responsible for advertisement of distributing product marketing, issuance of
product lists, and supporting the marketing activities of the business division.
4.Product marketing planning and integration of the marketing channel.
Customer
Service Center		 1.To connect with upstream suppliers, the Company, and downstream customers,
enact and improve the relevant procedures of after-sales services, and provide
customer services for relevant services.

6

B. Information on Directors, Supervisors and Management Team

(A) Directors and Supervisors (1)

March 31, 2021 ； Unit: Shares ； %

Ti tle Nationality/
Country of
Origin		 Name Gender Date
Elected		 Term
(Years)		 Date First
Elected		 Shareholding when
Elected		 Shareholding when
Elected		 Current
Shareholding		 Current
Shareholding		 Spouse & Minor
Shareholding		 Spouse & Minor
Shareholding		 Shareholdi
ng by
Nominee
Arrangeme
nt		 Shareholdi
ng by
Nominee
Arrangeme
nt		 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
Shares ％ Shares ％ Shares ％ Share
s		 ％ Title Name Relation
Chai rman R.O.C Peter Lin Male 2020.06.10 3 1989.12.15 9,523,292
7.64
9,338,292
7.39
2,954,714
2.34
0
0
Master of Electronics, NCTU
Chairman of Chinese Foundation
For Digitization Technology
Note 4		 － － －
Dir ector R.O.C Morris Jiang Male 2020.06.10 3 1994.10.06 2,642,735
2.12
2,142,735
1.75
503,185
0.40
0
0
Chinese Culture University
Deputy General Manager of Zero
One Technology Co., Ltd.
Chairman of PETAcom		 － － －
Director
Judicial
person		 R.O.C K Way
Information
Corporation		 Male 2020.06.10 3 2003.06.25 1,322,264
1.06
1,322,264
1.05
－		 － － － － － － － －
Represen
-tative		 R.O.C K Way
Information
Corporation
Representative：
ChengChe Tseng		 Male 2020.06.10 3 2003.06.25
(2020.06.10
Transition to
Director)		 0 0
0
0
0
0
0
0
EMBA of National Cheng-Chi
University
Assistant Manager of Chia-Her
Technology Co. Ltd.

Chairman of K WAY information
Co.
－		 － －
Director
Judicial
person		 R.O.C Prisma Commerce
& Networks, Inc.		 Male 2020.06.10 3 2008.06.13 1,042,759
0.84
1,042,759
0.83
－		 － － － － － － － －
Represen
-tative		 R.O.C Prisma Commerce
& Networks, Inc.
Representative：
Chih Chi Chou		 Male 2020.06.10 3 2008.06.13 0 0
0
0
0
0
0
0
Taipei
Computer
Association
Director
Director of China Electric Mfg.
Corp.

Chairman of Prisma Graphic
Systems Inc.
－		 － －
Dir ector R.O.C Jui Hsu Chen Male 2020.06.10 3 2002.05.14 110,884 0.09
100,884
0.08
0
0
0
0
Electronic engineering, NTCU
Graduate Institute of Management
Science, NCTU
Citibank-Taiwan Branch, AVP
Vice President of Bank of Boston-
Taiwan Branch
General Manager and CFO of D-
Link Corporation
Note 5		 － － －
Independent
Director		 R.O.C Ming Hsiung Wu Male 2020.06.10 3 2017.06.14 0 0 0
0
0
0
0
0
Department of Electronic
Computer, NCTU
Chairman of Promaster
Technology Corp.		 Note 6 － － －

-7-

Title Nationality/
Country of
Origin		 Name Gender Date
Elected		 Term
(Years)		 Date First
Elected		 Shareholding when
Elected		 Shareholding when
Elected		 Current
Shareholding		 Current
Shareholding		 Spouse & Minor
Shareholding		 Spouse & Minor
Shareholding		 Shareholdi
ng by
Nominee
Arrangeme
nt		 Shareholdi
ng by
Nominee
Arrangeme
nt		 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
Shares ％ Shares ％ Shares ％ Share
s		 ％ Title Name Relation
Independent
Director		 R.O.C Ming Yuan Lin Male 2020.06.10 3 2017.06.14 0 0
0
0		 0
0
0
0
Department Finance and
Taxation, National University of
Political Science, George
Washington University, USA
GM and Founder, Catalyst
Management inc.
GM and Founder, Catalyst
Capital group corp.		 Note 7 － － －
Independent
Director		 R.O.C Chien Chen Lin Male 2020.06.10 3 2017.06.14 0 0
0
0
0
0
0
0
Ph.D., Materials, University of
Illinois
Professor, Department of
Materials Science and
Engineering, NCTU		 Professor of MSE of NCTU
Member of Remuneration
Committee of Weltrend
Semiconductor Incorporated		 － － －
Supervisor R.O.C Yu Chi Lin Male 2017.06.14 3 2002.05.14
(2017.06.14
Transition to
supervisor)		 512,101
0.42
512,101
0.41
411,106
0.33
0
0		 Department of Law, Chinese
Culture University		 Chairman of Royal Palace Hotel
Chairman of K WAY information
Co. and Taiwan Advance Bio-
Pharmaceutical Inc.		 － － －
Supervisor R.O.C Chih Cheng Lo Male 2017.06.14 3 2008.06.13 10,406 0.01
10,406
0.01
0
0
0
0
EMBA, NCCU
Master of Computer Science,
NCTU		 GM and Director of Transmission
Books & Microinfo Co., Ltd.
Supervisor of Welldone Company		 － － －

Note 1: The “shareholding ratio” is based on the 124,846,212 shares of the issued ordinary shares in the period of election on June 10, 2020. Note 2: The “shareholding ratio” is based on the number of 126,344,212 shares of the issued ordinary shares on March 31, 2021.

Note 3: The Company conducted a re-election on June 10, 2020, the original Supervisory judicial person K Way Information Co. was then elected to be the Company’s judicial director. Supervisors who completed term on June 10, 2020: Mr. Yu Chi Lin and Mr. Chih Cheng Lo (the information from the above table disclosed to the date of the completion date)

Note 4 ： To serve concurrently as Chairman of Zerone Win Investment Co., Ltd., and Feng Yi Investment Co., Ltd. ； The independent director, remuneration committee and audit committee member of Abnova (Taiwan) Corporation ； The director of Promaster Technology Corp., JackerCleaning Co., Ltd., Citpo Tech. Co., Ltd. Maverick Digital Co., Ltd. and JOIIUP Technology Inc.; The supervisor of Iweecare Co., Ltd and IJOING, Inc..

Note 5 ： To serve concurrently as Chairman of Chiu Kang Investment Co. Ltd. and Vxis Technology Corp., The Director of Lanner Electronics Inc.

Note 6 ： To serve concurrently as Chairman of Promaster Technology Corp., Heng Yang Investment Co. Ltd., and Prowine Co., Ltd.; The Director of Promaster(Brunei) Technology Corp. Note 7 ： To serve concurrently as directors of Catalyst Management inc., Catalyst Capital group corp., Chung Tai Pottery & Porcelain co., ltd..

-8-

Note 8 ： The company’s Directors and Supervisors are major shareholders of the institutional shareholders:

March 31, 2021 March 31, 2021
Name of Institutional Shareholders Major Shareholders
Prisma Commerce & Networks, Inc. Greater China International Investment Co., ltd., British Virgin Islands (100%)
K WAY Information Co. Cheng Che Tseng (9.62%)、Chung Hsu Wang(6.52%)、Hua Hsuan Juan(5.25%)、Pao Chun Huang(4.51%)、Fu Yao Kung(3.92%)、Chuan
ChengCapital Co. Ltd.(3.59%) 、Huon Ji Lin(3.18%)、Su Chiao Huang(2.89%)、BingHuang (2.68%)、Jen TsungHsu(2.18%)
Major shareholders of the Company’s major institutional shareholders:
March 31, 2021
Name of Institutional Shareholders Major Shareholders
Greater China International Investment Co., ltd., British
Virgin Islands		 Oriental Bio-Energy Corp. 100%

Note 9 ： Major shareholders of the Company’s major institutional shareholders:

-9-

March 31 , 2021

Professional qualifications and independence analysis of directors and supervisors (2)

Criteria
Name		 Meet One of the Following Professional Qualification
Requirements,
Together with at Least Five Years Work Experience		 Meet One of the Following Professional Qualification
Requirements,
Together with at Least Five Years Work Experience		 Meet One of the Following Professional Qualification
Requirements,
Together with at Least Five Years Work Experience		 Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Number of
Other Public
Companies in
Which the
Individual is
Concurrently
Serving as an
Independent
Director
An Instructor or
Higher Position
in a Department
of Commerce,
Law, Finance,
Accounting, or
Other Academic
Department
Related to the
Business Needs
of the Company
in a Public or
Private Junior
College, College
or University
A Judge, Public
Prosecutor,
Attorney, Certified
Public Accountant,
or Other
Professional or
Technical Specialist
Who has Passed a
National
Examination and
been Awarded a
Certificate in a
Profession
Necessary for the
Business of the
Company		 Have Work
Experience in the
Areas of
Commerce, Law,
Finance, or
Accounting, or
Otherwise
Necessary for the
Business of the
Company		 1 2 3 4 5 6 7 8 9 10 11 12
Peter Lin V V V V V V V V 1
Morris Jiang V V V V V V V V －
The representative
of Prisma
Commerce &
Networks, Inc. :
ChihChiChou		 V V V V V V V V V V V V －
The representative
of K Way
information
corporation:
Cheng CheTseng		 V V V V V V V V V V V V －
Jui Hsu Chen V V V V V V V V V V V V V －
MingHsiungWu V V V V V V V V V V V V V －
Chien Chen Lin V V V V V V V V V V V V V －
MingYuan Lin
 V
 V
 V
 V
 V
 V
 V
 V
 V
 V
 V
 V
 V
 －

situations, please tick the appropriate corresponding boxes:

  3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of one percent or more of the total number of issued shares of the company or ranks as one of its top ten shareholders;

  4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the officer in the preceding 1 subparagraph, or of any of the above persons in the preceding subparagraphs 2 and 3;

  5. of the total number of issued shares of the company, ranks as of its top five shareholders, or has representative director(s) serving on the company’s board based on Article 27 of the Company Law.

  6. Not a director, supervisor, or employee of a company of which the majority of board seats or voting shares is controlled by a company that also controls the same of the company;

  7. Not a director, supervisor, or employee of a company of which the chairman or CEO (or equivalent) themselves or their spouse also serve as the company’s chairman or CEO (or equivalent);

  8. institution that has a financial or business relationship with the company;

  9. Other than serving as a compensation committee member of the company, not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to the company or to any affiliate of the company, or a spouse thereof, and the service provided is an “audit service” or a “non-audit service which total compensation within the recent two years exceeds NTD500,000”;

  10. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the company;

-10-

Board Diversity (3)

In accordance with Article 20 of the Company’s Corporate Governance Best Practice Principles which states the diversity policy for the composition of the BoD is as follows:

The Board of Directors of the company shall be responsible to the company and its shareholdersb y by providing guidance in company strategies and supervise the management team. The various procedures and arrangements of its corporate governance system shall ensure that, in exercising its authority, the Board of Directors complies with laws, regulations, its articles of incorporation and the resolutions of its shareholders meetings.

The structure of the Company’s Board of Directors shall be determined by choosing an appropriate number of board members, which is five and above, in consideration of its business scale, the shareholdings of its major shareholders and practical operational needs.

The number of Board members who are also employed by the company should not exceed one third of the total number of Board members. The composition of the Board of Directors shall be determined by taking diversity into consideration and formulating an appropriate policy on diversity based on the company’s business operations, operating dynamics and development needs. It is advisable that the policy include, without being limited to, the following two general standards:

  1. Basic requirements and values: Gender, age, nationality and culture.

  2. Professional knowledge and skills: A professional background (e.g., law, accounting, industry, finance, marketing or technology), professional skills and industry experience etc.

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

  1. Ability to make operational judgements.

  2. Ability to perform accounting and financial analysis.

  3. Ability to conduct management administration.

  4. Ability to conduct crisis management.

  5. Knowledge of the industry.

  6. An international market perspective.

  7. Ability to lead.

  8. Ability to make policy decisions.

The Board of Directors is the highest corporate governance best practice principles of Zerone Technology, the 14[th] Board of Directors is composed by eight directors (for details please refer to Directors and Supervisors (1)). Members of the BoD are in different age groups where they have wide range of academic backgrounds and professional experiences necessary to fulfill the duties as a member of the Board and are able to supervise and provide constructive opinions to the management team. Among all members of the Board, there are three independent directors, and the number of Board members who are not employed by the company accounts for twothirds or more.

Please find below the table for members of the 14[th] Board and their competency in relation to diversity.

Title Name Gender Core Items of Diversity Core Items of Diversity
Operational
Judgements		 Financial
and
Accounting
Analysis		 Management
Administration		 Crisis
Management		 Industry
Knowledge		 International
Market
Perspective		 Ability
to
Lead		 Making
Policy
Decisions
Chairman Peter Lin M V V V V V V V V
Director Morris Jiang M V V V V V V V
Director Prisma
Commerce &
Networks, Inc.
Representative:
Chih Chi Chou		 M V V V V V V
Director K Way
Information
Corporation
Representative：
Cheng Che
Tseng		 M V V V V V V V V
Director Jui Hsu Chen M V V V V V V V V
Independent
Director		 Ming Hsiung Wu M V V V V V V V V
Independent
Director		 Chien Chen Lin M V V V V V
Independent
Director		 Ming Yuan Lin M V V V V V V V

-11-

31 March, 2021

(B) GM, VP, Directors and Managers of departments.

Title Nationality/
Country of
Origin		 Name Gender Date
Effective		 Shareholding Shareholding Spouse &
Minor
Shareholding		 Spouse &
Minor
Shareholding		 Shareholding
by Nominee
Arrangement		 Shareholding
by Nominee
Arrangement		 Experience（Education） Other Position Managers who are
Spouses or Within Two
Degrees of Kinship		 Managers who are
Spouses or Within Two
Degrees of Kinship		 Managers who are
Spouses or Within Two
Degrees of Kinship
Shares ％
(Note
1)		 Share
s		 ％ Share
s		 ％ Title Name Relation
GM Republic of
China		 Nancy
Huang		 Female 2018.01.01 304,615
0.24
0
0
0
0
Department of
Information
Management,
Ming Chuan
Commercial College		 Chairman of Wing Will
International Co., Ltd.
General Manager of
PETAcom Technology
Co.,Ltd.		 － － －
Sr. Director of
Financial
Management
Division		 Republic of
China		 Michelle
Chin		 Female 2000.12.01 95,732
0.08
0
0
0
0
Department of Bank
Management,
Takming College of
Finance		 － － － －
General
Manager of
the Business
Divisions		 Republic of
China		 Kevin
Chen		 Male 2019.02.01 113,409
0.09		 1,005
0
0
0		 EMBA, NCCU － － － －

Note 1: The “shareholding ratio” column of shareholding is based on the outstanding ordinary shares’ number of 126,344,212 on March 31, 2021.

-12-

C. Remuneration of Directors, Supervisors, Management

(A) Remuneration of Directors

December 31, 2020 ； Unit: NT$ thousands ； %

Title Name Remuneration Remuneration Remuneration Remuneration Remuneration Remuneration Remuneration Remuneration Ratio of Total
Remuneration
(A+B+C+D) to
Net Income (%)		 Ratio of Total
Remuneration
(A+B+C+D) to
Net Income (%)		 Relevant Remuneration Received by Directors Who are Also
Employees		 Relevant Remuneration Received by Directors Who are Also
Employees		 Relevant Remuneration Received by Directors Who are Also
Employees		 Relevant Remuneration Received by Directors Who are Also
Employees		 Relevant Remuneration Received by Directors Who are Also
Employees		 Relevant Remuneration Received by Directors Who are Also
Employees		 Relevant Remuneration Received by Directors Who are Also
Employees		 Relevant Remuneration Received by Directors Who are Also
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 (%)		 Compensation
Paid to Directors
from Non-
consolidated
Affiliates or
Parent
Company
Base Compensation
(A)
Retirement
pension (B)		 Bonus to
Directors (C)		 Allowances (D) Salary, Bonuses,
and Allowances
(E)		 Retirement
pension (F)		 Profit Sharing- Employee Bonus
(G)
The
compa-
ny		 All
compan
ies in
the
consolid
ated
financial
stateme
nts		 The
company		 All
compan
ies in
the
consolid
ated
financial
stateme
nts		 The
company		 All
compan
ies in
the
consolid
ated
financial
stateme
nts		 The
company		 All
compan
ies in
the
consolid
ated
financial
stateme
nts		 The
company		 All
compan
ies in
the
consolid
ated
financial
stateme
nts		 The
company		 All
compan
ies in
the
consolid
ated
financial
stateme
nts		 The
company		 All
compan
ies in
the
consolid
ated
financial
stateme
nts		 The company Companies in
the
consolidated
financial
statements		 The
company		 Companies in
the
consolidated
financial
statements
Cash Stock Cash Stock
Directors Chairman Peter Lin 0 0 0 0 6,914 6,914 51 51 1.58 1.58 5,380 5,380 0 0 0 0 0 0 2.80 2.80 None.
Director Morris Jiang
Director Jui Hsu Chen
Juridical
person		 Asia World
Technologies
Represen
-tative		 The representative
of Prisma
Commerce &
Networks, Inc.:
Chih Chi Chou
Juridical
person		 K Way Information
Corporation
Represen
-tative		 K Way Information
Corporation
Representative：
Cheng CheTseng
Independent
Director		 Ming Hsiung Wu 0 0 0 0 3,801 3,801 60 60 0.88 0.88 0 0 0 0 0 0 0 0 0.88 0.88 None.
Chien Chen Lin
Ming Yuan Lin

Note 1: The remuneration policy, system, standards and structures and the connection between factors such as duties, risks, time devoted and the amount paid to independent directors: The Company allocates less than 1% of the current year’s annual profits for the compensation to independent directors, and will provide reasonable reward by taking into account of the Company’s operating results and the contribution they made. The procedures to determine the compensation is based on the Company’s “Rules for Distribution of Compensation to Directors and Supervisors.” Apart from referencing the company’s overall operational efficiencies, future management risk and developing trend of the industry, the personal efficiency achievement rate, contribution to the overall performance, and devotion to company performance, achievement rate, profitability rate, operational efficiency and contribution are also collectively evaluated before calculating the compensation ratio. Relevant performance appraisals and the soundness of the compensation are reviewed and approved by the Compensation Committee and the Board in accordance with the charter of relevant laws and requirements, so as to achieve the balance of the Company’s sustainability and risk management.

-13-

Table of range of remuneration

Table of range of remuneration Table of range of remuneration Table of range of remuneration Table of range of remuneration
Range of Remuneration Name of Directors
Total of(A+B+C+D) Total of(A+B+C+D+E+F+G)
The company Companies in the consolidated
financialstatementsI		 The company Companies in the consolidated
financialstatements J
Under NT$ 1,000,000 Jui Hsu Chen、K Way Information
Corporation、K Way Information
Corporation Representative：Cheng Che
Tseng、Prisma Commerce & Networks,
Inc.、Prisma Commerce & Networks,
Inc. Representative；Chih Chi Chou
Jui Hsu Chen、K Way Information
Corporation、K Way Information Corporation
Representative：Cheng Che Tseng、Prisma
Commerce & Networks, Inc.、Prisma
Commerce & Networks, Inc.
Representative；Chih Chi Chou
Jui Hsu Chen、K Way Information
Corporation、K Way Information Corporation
Representative：Cheng Che Tseng、Prisma
Commerce & Networks, Inc.、Prisma
Commerce & Networks, Inc.
Representative；Chih Chi Chou
Jui Hsu Chen、K Way Information
Corporation、K Way Information Corporation
Representative：Cheng Che Tseng、Prisma
Commerce & Networks, Inc.、Prisma
Commerce & Networks, Inc.
Representative；Chih Chi Chou
NT$1,000,000～less than NT$2,000,000 Ming Hsiung Wu、Chien Chen Lin、
MingYuan Lin		 Ming Hsiung Wu、Chien Chen Lin、
MingYuan Lin		 Ming Hsiung Wu、Chien Chen Lin、
MingYuan Lin		 Ming Hsiung Wu、Chien Chen Lin、
MingYuan Lin
NT$2,000,000～less than NT$3,500,000 － － － －
NT$3,500,000～less than NT$5,000,000 Morris Jiang Morris Jiang Morris Jiang Morris Jiang
NT$5,000,000～less than NT$10,000,000 Peter Lin Peter Lin Peter Lin Peter Lin
NT$10,000,000～less than NT$15,000,000 － － － －
NT$15,000,000～less than NT$30,000,000 － － － －
NT$30,000,000～less than NT$50,000,000 － － － －
NT$50,000,000～less than NT$100,000,000 － － － －
More than NT$100,000,000 － － － －
Total 10 Persons 10 Persons 10 Persons 10 Persons

-14-

(B) Remuneration of Supervisors

(B) Remuneration of Su pervisors
December 31,2020；Unit: NT$ thousands；%
Title Name Remuneration Ratio of Total
Remuneration
(A+B+C) to Net
Income (%)		 Compensation
Paid to
Supervisors
from Non-
consolidated
Affiliates or
Parent
Company
Base Compensation
(A)		 Bonus to Supervisors
(B)		 Allowances
(C)
The
company		 Companies
in the
consolidated
financial
statements
The
company		 Companies
in the
consolidated
financial
statements
The
company		 Companies
in the
consolidated
financial
statements
The
company		 Companies
in the
consolidated
financial
statements
Supervisor Chih Cheng Lo 0 0 1,092 1,092 24 24 0.25 0.25 None
Supervisor Yu Chi Lin
Corporate supervisor K WAY information Co.
Corporate supervisor representative K WAY information Co.
Representative: Cheng Che Tseng

Table of range of remuneration

Table of range of remuneration Table of range of remuneration
Range of Remuneration Name of Supervisors
Total of (A+B+C)
The company Companies in the consolidated financial statements D
Under NT$ 1,000,000 Chih Cheng Lo、Yu Chi Lin、K WAY information Co.、K WAY
information Co. Representative：Cheng Che Tseng		 Chih Cheng Lo、Yu Chi Lin、K WAY information Co.、K WAY information
Co. Representative：Cheng Che Tseng
NT$1,000,000～less than NT$2,000,000 － －
NT$2,000,000～less than NT$3,500,000 － －
NT$3,500,000～less than NT$5,000,000 － －
NT$5,000,000～less than NT$10,000,000 － －
NT$10,000,000～less than NT$15,000,000 － －
NT$15,000,000～less than NT$30,000,000 － －
NT$30,000,000～less than NT$50,000,000 － －
NT$50,000,000～less than NT$100,000,000 － －
More than NT$100,000,000 － －
Total 4 Persons 4 Persons

-15-

(C) Remuneration of the President and Vice President

December 31, 2020 ； Unit: NT$ thousands ； %

Title Name Salary(A) Salary(A) Retirement Pension (B) Retirement Pension (B) Bonuses and Allowances
(C)		 Bonuses and Allowances
(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 the
President and
Vice President
from Non-
consolidated
Affiliates or
Parent
Company
The
company		 Companies
in the
consolidated
financial
statements		 The
company		 Companies in
the
consolidated
financial
statements		 The
company		 Companies in
the
consolidated
financial
statements		 The company Companies in the
consolidated
financial
statements		 The
company		 Companies in
the
consolidated
financial
statements
Cash Stock Cash Stock
General Manager Nancy
Huang		 3,960 3,960 0 0 18,485 18,485 760 0 760 0 5.27 5.27 None
General manager of
the Business
Divisions		 Kevin
Chen

Table of range of remuneration

Range of Remuneration Name of President and Vice President
The company Companies in the consolidated financial statements
Under NT$1,000,000 － －
NT$1,000,000～less than NT$2,000,000
－		 －
NT$2,000,000～less than NT$3,500,000
－		 －
NT$3,500,000～less than NT$5,000,000
－		 －
NT$5,000,000～less than NT$10,000,000
Kevin Chen		 Kevin Chen
NT$10,000,000～less than NT$15,000,000
－		 －
NT$15,000,000～less than NT$30,000,000
Nancy Huang		 Nancy Huang
NT$30,000,000～less than NT$50,000,000
－		 －
NT$50,000,000～less than NT$100,000,000
－		 －
More than NT$100,000,000 － －
Total 2 Persons 2 Persons

-16-

Employee profit sharing granted to the management team

December 31, 2020 ； Unit: NT$ thousands ； %


December 31,2020；Unit: NT$ thousands；%
Title Name Employee Bonus
- in Stock
(Fair Market Value)		 Employee Bonus
- in Cash		 Total Ratio of Total Amount to Net Income (%)
Executive
Officers		 General manager Nancy Huang 0 1,113 1,113 0.25
GM of Business Division
Kevin Chen
Sr. Director of Financial
Management Division		 Michelle Chin

  • (D) Comparison of Remuneration for Directors, Supervisors, Presidents and Vice Presidents in the Most Recent Two Fiscal Years and Remuneration Policy for Directors, Supervisors, Presidents and Vice Presidents, to the net income.

  • The ratio of total remuneration paid by the Company and by all companies included in the consolidated financial statements for the two most recent fiscal years to directors, supervisors, presidents and vice presidents of the Company, to the net income.

Unit: NT$ thousands

Title Proportion of the total compensation to net profit after tax % Proportion of the total compensation to net profit after tax % Proportion of the total compensation to net profit after tax % Proportion of the total compensation to net profit after tax %
2019 2020
The Company All companies in
the consolidated
financial statement		 The Company All companies in
the consolidated
financial statement
Directors 5.09 5.09 2.80 2.80
Independent Directors 0.78 0.78 0.87 0.88
Supervisors 0.61 0.61 0.25 0.25
General Managers and Deputy General Managers 9.24 9.24 5.25 5.27
  1. The policies, standards, and portfolios for the payment of remuneration, the procedures for determining remuneration, and the correlation with business performance:

The Remuneration Committee assists the Board in discharging its responsibilities relating to the Company’s compensation and benefits policies, plans and programs, and the evaluation of the directors’ and supervisors’ compensation. Remuneration is appropriated according to the business performance of the Company in the year and the stipulated percentage of less 3% in Article 19 of the Articles of Incorporation. Procedure for the compensation were determined by the Regulations governing the performance assessment and compensation of directors and supervisors in accordance with operating performance of the company, operational risks and trend of the industries, and the employee’s personal achievements, contribution made to the business operation. Evolution items include any unethical misconduct which results in a negative impact on the company’s image and reputation, negligent of internal management, or unethical malpractices etc. The procedure for determining remuneration is also based on key performance indicators of the company. Relevant performance indicators and reasonability of remuneration shall be approved by the remuneration committee and the board of the directors and reviewed in relation to business operation and relevant laws and regulations, for a positive correlation with the company, and risk management.

The policy for managers’ remuneration is based on the company’s salary considerations and has taken into account as industry standards and personal performance evaluation items, which include financial indicators (such as the company’s revenue, achievement rate for profit before tax and after tax) and non-financial related indicators (such as taking on the role as trainer and any gross misconduct of the department in terms of legal and compliance and operational risks incidents) are also included in the evaluation.

-17-

D. Implementation of Corporate Governance

(A) Board of Directors

A total of 7 meetings of the Board of Directors were held in 2020. The attendance of director and supervisor were as follows:

Title Name Attendance
in Person
(B)		 By Proxy Attendance
Rate (%)
【Ｂ/Ａ】		 Remarks
Chairman Peter Lin 7 0 100 renewed,
re-election
on June 10,
2020
Director Morris Jiang 7 0 100
Director Prisma Commerce &
Networks, Inc.
Representative:
ChihChiChou		 7 0 100
Director K WAY information Co.
Representative：ChengChe Tseng		 7 0 100
Director Jui Hsu Chen 7 0 100
Independent
director		 Ming Hsiung Wu 6 1 85.71
Independent
director		 Chien Chen Lin 7 0 100
Independent
director		 Ming Yuan Lin 7 0 100

Other mentionable items:

1.If there are circumstances referred to as follows, resolutions of the directors’ meetings objected to by independent directors or subject to qualified opinion and recorded or declared in writing, the dates of the meetings, sessions, contents of motion, all independent directors’ opinions and the company’s response should be specified:

(1) Circumstances referred to in Article 14-3 of the Securities and Exchange Act:

Meeting Dates
（Period）		 Resolution Any Independent Director
Had a Dissenting Opinion
or Qualified Opinion
2020 13th-15
Regular Meeting
Feb. 26		 1. Discussion on the proposal of replacing CPA
starting 2020 Q1 and independent assessment.		 Approved as proposed by
all independent directors
2020 13th-16
Regular Meeting
April 27		 1.
Discussion on the proposal of amendments to the
Regulations Governing the Acquisition and
Disposal of Assets、external endorsement and
guaranty and loaning funds to others..
2020 14th -2
Regular Meeting
Juy 29		 1.
Discussion on the proposal of amendments and
addition of the content of the company’s internal
control system.
2020 14th -4
Regular Meeting
December 23		 1.
Proposal of appointing CPA and independent
assessment.
2.
Discussion on the proposals of amendments of
regulations governing internal material
information process、content of internal control
system and needely added audit system of ‘the
management of preventing insider trading.’
2021 14th -6
Regular Meeting
April 14		 1.
Discussion on the proposal of capital increase
for subsidiary ZeroneWin Investment Co., Ltd.
and invest in new companies through it.
2.
Discussion on the proposal of amendments to
Procurement and Payment Cycle in the internal
control system.
3.
Discussion on the proposal of replacing CPA
starting 2021 Q1 and independent assessment.

(2) If there are directors’ avoidance of motions in conflict of interest, the directors’ names, contents of motion, causes for avoidance and voting should be specified: None

  • 2.Avoidance of conflict of interest by Directors: None.

-18-

3. Measures taken toward achievement of Board of Directors

Frequency Period The scope of
evaluation		 Method Content
Annual From 2020/01/01 to
2020/12/31		 Performance
assessments of board
of directors, board
members (self-
assessments or peer-
to-peer assessments)
and the renumeration
committee.		 Human Resource Management Center shall be responsible
for executing performance assessment, according to
operation of the board of directors, participation of
directors, operation of the renumeration committee, self-
assessment
among
directors,
assessment
of
the
renumeration
committee
by
its
members,
by
questionnaires. The above conclusion of performance
assessment shall be a reference for election or nomination
of directors, and personal compensation shall be calculated
by the conclusion of directors and members of the
functional committee.
Every January, after questionnaires are returned, Human
Resource Management Center of the company will, in
accordance with the aforementioned rules, conduct analysis
and report the results to the Board, with an emphasis on any
areas with room for improvement.
The company has completed board of directors’
performance assessments in January 2021, and detailed
information for improvement in regarding the above
evaluation in 2020 were reported to the Board at the Board
Meeting on April 28, 2021. The score of assessment is
graded 95 to 100 as excellent.		 The company has edited rules and procedures for board of
directors’ performance assessments, which include the
five items below:
1.
The degree of participation in the company's
operations.
2.
Improvement in the quality of decision making by
the board of directors.
3.
The composition and structure of the board of
directors.
4.
The election of the directors and their continuing
professional education.
5.
Internal controls.
It is advisable that performance assessments of board
members (self-assessments or peer-to-peer assessments)
include the following aspects, with appropriate adjustments
made on the basis of the company's needs:
1. Their grasp of the company's goals and missions.
2. Their recognition of director's duties.
3. Their degree of participation in the company's
operations.
4. Their management of internal relationships and
communication.
5. Their professionalism and continuing professional
education.
6. Internal controls.
It is advisable that the performance assessment of cover
the following aspects, subject to changes according to the
company's needs:
1. Their degree of participation in the company's
operations.
2. Their recognition of the duties of the functional
committee.
3. Improvement in the quality of decision making by the
functional committee.
4. The composition of the functional committee, and
election and appointment of committee members.
5. Internal Controls.
The indexes of board performance evaluation shall be
determined based on the operation and needs of the
Company and suitable and appropriate for evaluations by
the company, subject to regular reviews and constructive
comments of the remuneration committee.

-19-

  1. Evaluations for the measures taken to strengthen the core objectives and execution of the Board for the current year and the previous year:

  2. (1) Chairman shall not serve concurrently as the managers of the Company.

  3. (2) There are 3 independent directors among 8 directors. The Company shall appoint independent directors more than the total independent directors in accordance with statutory regulations.

  4. (3) The Company set up the rules of board performance evaluation. The performance assessment of Board of directors for the members of Board of Directors by selfassessments in 2019, report the results to the renumeration committee, and then to Board of Directors, based on the Regulations governing the performance assessment and compensation of directors and supervisors in accordance with operating performance of the Company. The evaluation results for year 2020 was submitted to the Board and Remuneration Committee on April 28, 2021.

  5. (4) The Company set up the Audit Committee in 2020 to replace Supervisors going forward.

  6. (B) Audit Committee and Attendance of Supervisors at Board Meetings

  7. 1.Audit Committee

The company’s Audit Committee was set up on June 10, 2020 in compliance with the regulations and all members of the Audit Committee were independent directors. The function and purpose of the Audit Committee is to supervise the proper presentation of the financial statements, the hiring (dismissal) of the signing CPAs, their independence and performance, and the effective execution of the company’s internal control, as well as the compliance with related laws and regulations and the management of the existing or potential risks of the company

The duties and annual work items of the Audit Committee are as follows:

  • (1) Adoption or amendment of the internal control system pursuant to Article 14-1 of the Securities and Exchange Act.

  • (2) Evaluation of the effectiveness of the internal control system.

  • (3) Adoption or amendment, pursuant to Article 36-1 of the Securities and Exchange Act, of handling procedures for financial or operational actions of material significant, such as acquisition or disposal of assets, derivatives trading, extension of monetary loans to others, or endorsements or guarantees for others.

  • (4) A matter bearing on the personal interest of a director or a supervisor.

  • (5) A material asset or derivatives transaction.

  • (6) A material monetary loan, endorsement, or provision of guarantee.

  • (7) The offering, issuance, or private placement of any equity-type securities.

  • (8) The hiring, discharge, or compensation of an attesting CPA.

  • (9) The appointment or discharge of a financial, accounting, or internal auditing officer.

  • (10) Annual financial reports which are signed or stamped by the Chairman, Executive Officers and Head of Accounting, and Q2 financial report which must be reviewed by CPA.

  • (11) Any other material matters so required by the competent authority.

-20-

A total of seven (7) Audit Committee meetings were held from January 1, 2020 till end of April 28, 2021. The attendance of independent directors is as follows:

Title Name Attendance in
Person(B)
Proxy		 Attendance Rate
(%)【Ｂ/Ａ】		 Remarks
Independent
director		 Ming Yuan Lin 7 0 100% -
Independent
director		 Ming Hsiung Wu 7 0 100%
Independent
director		 Chien Chen Lin 7 0 100%
Other mentionable items:
1. If a member of the Audit Committee expresses an opinion during a meeting, the dates of the
Board of Directors meetings, sessions, contents of motion, resolutions of the Audit Committee
meetings and the Company’s response to the Audit Committee opinion should be specified.
(1) Items listed in Article 14-5 of the Securities and Exchange Act.
Board
Meeting
Content and Follow-up Action
Items listed
in Article 14-
5 of the
Securities
and
Exchange
Act
Matters
unapproved by the
Audit Committee
but approved by
two-thirds or more
of all directors
2020 14th -2
Regular
Meeting
Jul. 29
1. Amendments and addition of the content of the company’s
internal control system
v
2. Amendments and addition of the content of the company’s
internalaudit system
v
Audit Committee Resolution (2020/06/24 & 2020/07/29): Approved by all members of the Audit
Committee
The Company’s response to the opinion of the Audit Committee: Approved by all members of the
Board.
2020 14th -4
Regular
Meeting
Dec. 23
1. Amendments of the content of the company’s internal control
system
v
2. Addition of content of the company’s internal audit system
v
3. Hiring of CPA and independent assessment
v
4. Loaning funds to subsidiary WingWill International Co., Ltd.
v
5. Proposal to amend the company’s accounting system
v
Audit CommitteeResolution(2020/12/23):Approved by all members oftheAudit Committee
The Company’s response to the opinion of the Audit Committee: Approved by all members of the
Board.
2021 14th -5
Regular
Meeting
Feb. 24
1. 2020 Compensation for the directors and employees
v
2. 2020 operating report、consolidated and parent company
only financial statements.
v
3. 2020 Statement of Internal Control system
v
4. Distributionof 2020retained earnings
v
Audit Committee Resolution (2021/2/24): Approved by all members of the Audit Committee
The Company’s response to the opinion of the Audit Committee: Approved by all members of the
Board.
2021 14th -6
Regular
Meeting
Apr. 14
1. Amendments of the content of the company’s internal control
system
v
2. Capital increase for subsidiary ZeroneWin Investment Co.,
Ltd. And invest in new companies through it.
v
3. Loaning funds to 100%-owned subsidiary ZeroneWin
Investment Co.,Ltd.
v
4. Replceing appointed CPA starting 2021 Q1 and the
independent assessment.
v
Audit CommitteeResolution(2021/4/14):Approved by all members oftheAudit Committee
The Company’s response to the opinion of the Audit Committee: Approved by all members of the
Board.
(2) Other than the items listed in the preceding paragraph, any other matters that were not
approved by the Audit Committee but approved by two-thirds or more of all directors : None.
2. The names, contents of motion, reasons for conflict of interests and the participation for
resolution for any recusals of independent directors due to conflict of interests should be specified:
None.

-21-

3. Description of the communication between the independent directors, the internal auditors, and
the independent auditors:
(1) Upon the delivery of the monthly audit reports sent by the internal auditor, discussions and
communication will take place to address any questions raised by the independent directors. A
panel discussion will be arranged at least once per year between the independent directors and the
internal auditor, significant findings and relevant audit opinions from internal and external audits
will also be documented as meeting minutes which then later submit to the Board.
(2) Members of the Company’s Audit Committee are all independent directors. The presentation
of business audit is made at least once per year. The presentation content includes business audit
execution, internal operational items, audit personnel training and major findings from internal and
external audit as well as follow-up actions taken etc.. Extraordinary meetings may also be convened
at any time should serious anomalies arise.
(3) The CPA should report to the independent directors at least once a year, covering items regarding
the company’s overall financial performance and also the financial status, overall operations and
internal controls of local and overseas subsidiaries. In addition, a through communication should
be carried out to determine if there is any impact on the accounting principles from any major changes
in financial policies and amendment in the laws and regulations.
(4) The communications between the auditor, the independent directors and the CPA functioned well,
as not only were regular meetings arranged, emails, telephone calls or random meetings were also
meaning of communication.
(5) The summary of communications between the internal auditor and the independent directors are
listedinthe table below.
Date
Item
Conclusion
2020/02/26
2019 Q4 Audit results presentation
Independent directors agreed with the audit
results after discussion and communication.
2020/07/29
Audit Committee
1. Amend and add new content in the
company’s internal control system.
2. Amend and add new content in the
internal audit system
1. Agreed.
2. Submit and report to the Board after review.
2020/12/23
Audit Committee
1. Presentation of 2021 Audit Plan
2. Amend the content of the company’s
internal control system
3. Add content to internal control
system
1. Agreed.
2. Submit and report to the Board after review.
2021/02/24
Audit Committee
1. Report on the findings of the
company’s audit in 2020
2. Approved the statement for the
company’s internal control in
2020.
1. Agreed.
2. Submit and report to the Board after review.
2021/04/14
Audit Committee
Amend the content of the company’s
internal control system.
1. Agreed.
2. Submit and report to the Board after review.
(6) The summary of communications between the CPA and the independent directors are listed in
the table below.
Date
Item
Conclusion
2020/02/26
2019 parent company only and
consolidated financial statements
2019 financial reports were approved by the Board
and disclosed in accordance with the regulations
and supervisory authority.
2020/04/27
2020 Q1 consolidated financial
statements
2020Q1 financial reports were approved by the
Board and disclosed in accordance with the
regulations and supervisory authority.
2020/07/29
Briefing and communication made
by CPA regarding 2020 Q2
consolidated report.
The communication between independent
directors and the CPAs was well, reaching mutual
consensus after discussion. 2020 Q2
consolidated report were presented at the Audit
Committee Meeting and the Board, and disclosed
in accordance with the regulations and supervisory
authority.
2020/11/04
Briefing and communication made
by CPA regarding 2020 Q3
consolidated report.
The communication between independent
directors and the CPAs was well, reaching mutual
consensus after discussion. 2020 Q3
consolidated report were presented at the Audit
Committee Meeting and the Board, and disclosed
in accordance with the regulations and supervisory
authority.		 3. Description of the communication between the independent directors, the internal auditors, and
the independent auditors:
(1) Upon the delivery of the monthly audit reports sent by the internal auditor, discussions and
communication will take place to address any questions raised by the independent directors. A
panel discussion will be arranged at least once per year between the independent directors and the
internal auditor, significant findings and relevant audit opinions from internal and external audits
will also be documented as meeting minutes which then later submit to the Board.
(2) Members of the Company’s Audit Committee are all independent directors. The presentation
of business audit is made at least once per year. The presentation content includes business audit
execution, internal operational items, audit personnel training and major findings from internal and
external audit as well as follow-up actions taken etc.. Extraordinary meetings may also be convened
at any time should serious anomalies arise.
(3) The CPA should report to the independent directors at least once a year, covering items regarding
the company’s overall financial performance and also the financial status, overall operations and
internal controls of local and overseas subsidiaries. In addition, a through communication should
be carried out to determine if there is any impact on the accounting principles from any major changes
in financial policies and amendment in the laws and regulations.
(4) The communications between the auditor, the independent directors and the CPA functioned well,
as not only were regular meetings arranged, emails, telephone calls or random meetings were also
meaning of communication.
(5) The summary of communications between the internal auditor and the independent directors are
listedinthe table below.
Date
Item
Conclusion
2020/02/26
2019 Q4 Audit results presentation
Independent directors agreed with the audit
results after discussion and communication.
2020/07/29
Audit Committee
1. Amend and add new content in the
company’s internal control system.
2. Amend and add new content in the
internal audit system
1. Agreed.
2. Submit and report to the Board after review.
2020/12/23
Audit Committee
1. Presentation of 2021 Audit Plan
2. Amend the content of the company’s
internal control system
3. Add content to internal control
system
1. Agreed.
2. Submit and report to the Board after review.
2021/02/24
Audit Committee
1. Report on the findings of the
company’s audit in 2020
2. Approved the statement for the
company’s internal control in
2020.
1. Agreed.
2. Submit and report to the Board after review.
2021/04/14
Audit Committee
Amend the content of the company’s
internal control system.
1. Agreed.
2. Submit and report to the Board after review.
(6) The summary of communications between the CPA and the independent directors are listed in
the table below.
Date
Item
Conclusion
2020/02/26
2019 parent company only and
consolidated financial statements
2019 financial reports were approved by the Board
and disclosed in accordance with the regulations
and supervisory authority.
2020/04/27
2020 Q1 consolidated financial
statements
2020Q1 financial reports were approved by the
Board and disclosed in accordance with the
regulations and supervisory authority.
2020/07/29
Briefing and communication made
by CPA regarding 2020 Q2
consolidated report.
The communication between independent
directors and the CPAs was well, reaching mutual
consensus after discussion. 2020 Q2
consolidated report were presented at the Audit
Committee Meeting and the Board, and disclosed
in accordance with the regulations and supervisory
authority.
2020/11/04
Briefing and communication made
by CPA regarding 2020 Q3
consolidated report.
The communication between independent
directors and the CPAs was well, reaching mutual
consensus after discussion. 2020 Q3
consolidated report were presented at the Audit
Committee Meeting and the Board, and disclosed
in accordance with the regulations and supervisory
authority.		 3. Description of the communication between the independent directors, the internal auditors, and
the independent auditors:
(1) Upon the delivery of the monthly audit reports sent by the internal auditor, discussions and
communication will take place to address any questions raised by the independent directors. A
panel discussion will be arranged at least once per year between the independent directors and the
internal auditor, significant findings and relevant audit opinions from internal and external audits
will also be documented as meeting minutes which then later submit to the Board.
(2) Members of the Company’s Audit Committee are all independent directors. The presentation
of business audit is made at least once per year. The presentation content includes business audit
execution, internal operational items, audit personnel training and major findings from internal and
external audit as well as follow-up actions taken etc.. Extraordinary meetings may also be convened
at any time should serious anomalies arise.
(3) The CPA should report to the independent directors at least once a year, covering items regarding
the company’s overall financial performance and also the financial status, overall operations and
internal controls of local and overseas subsidiaries. In addition, a through communication should
be carried out to determine if there is any impact on the accounting principles from any major changes
in financial policies and amendment in the laws and regulations.
(4) The communications between the auditor, the independent directors and the CPA functioned well,
as not only were regular meetings arranged, emails, telephone calls or random meetings were also
meaning of communication.
(5) The summary of communications between the internal auditor and the independent directors are
listedinthe table below.
Date
Item
Conclusion
2020/02/26
2019 Q4 Audit results presentation
Independent directors agreed with the audit
results after discussion and communication.
2020/07/29
Audit Committee
1. Amend and add new content in the
company’s internal control system.
2. Amend and add new content in the
internal audit system
1. Agreed.
2. Submit and report to the Board after review.
2020/12/23
Audit Committee
1. Presentation of 2021 Audit Plan
2. Amend the content of the company’s
internal control system
3. Add content to internal control
system
1. Agreed.
2. Submit and report to the Board after review.
2021/02/24
Audit Committee
1. Report on the findings of the
company’s audit in 2020
2. Approved the statement for the
company’s internal control in
2020.
1. Agreed.
2. Submit and report to the Board after review.
2021/04/14
Audit Committee
Amend the content of the company’s
internal control system.
1. Agreed.
2. Submit and report to the Board after review.
(6) The summary of communications between the CPA and the independent directors are listed in
the table below.
Date
Item
Conclusion
2020/02/26
2019 parent company only and
consolidated financial statements
2019 financial reports were approved by the Board
and disclosed in accordance with the regulations
and supervisory authority.
2020/04/27
2020 Q1 consolidated financial
statements
2020Q1 financial reports were approved by the
Board and disclosed in accordance with the
regulations and supervisory authority.
2020/07/29
Briefing and communication made
by CPA regarding 2020 Q2
consolidated report.
The communication between independent
directors and the CPAs was well, reaching mutual
consensus after discussion. 2020 Q2
consolidated report were presented at the Audit
Committee Meeting and the Board, and disclosed
in accordance with the regulations and supervisory
authority.
2020/11/04
Briefing and communication made
by CPA regarding 2020 Q3
consolidated report.
The communication between independent
directors and the CPAs was well, reaching mutual
consensus after discussion. 2020 Q3
consolidated report were presented at the Audit
Committee Meeting and the Board, and disclosed
in accordance with the regulations and supervisory
authority.
Date Item Conclusion
2020/02/26 2019 parent company only and
consolidated financial statements		 2019 financial reports were approved by the Board
and disclosed in accordance with the regulations
and supervisory authority.
2020/04/27 2020 Q1 consolidated financial
statements		 2020Q1 financial reports were approved by the
Board and disclosed in accordance with the
regulations and supervisory authority.
2020/07/29 Briefing and communication made
by CPA regarding 2020 Q2
consolidated report.		 The communication between independent
directors and the CPAs was well, reaching mutual
consensus after discussion. 2020 Q2
consolidated report were presented at the Audit
Committee Meeting and the Board, and disclosed
in accordance with the regulations and supervisory
authority.
2020/11/04 Briefing and communication made
by CPA regarding 2020 Q3
consolidated report.		 The communication between independent
directors and the CPAs was well, reaching mutual
consensus after discussion. 2020 Q3
consolidated report were presented at the Audit
Committee Meeting and the Board, and disclosed
in accordance with the regulations and supervisory
authority.

-22-

2021/02/24 Briefing and communication made
by CPA regarding 2020 parent
company only and consolidated
reports.		 The communication between independent
directors and the CPAs was well, reaching mutual
consensus after discussion. 2020 parent
company only and consolidated reports were
presented at the Audit Committee Meeting and the
Board, and disclosed in accordance with the
regulations and supervisory authority.
2021/04/28 Briefing and communication made
by CPA regarding 2021 Q1
consolidated report and recent
updates in the regulations.		 The communication between independent
directors and the CPAs was well, reaching mutual
consensus after discussion. 2021 Q1
consolidated report were presented at the Audit
Committee Meeting and the Board, and disclosed
in accordance with the regulations and supervisory
authority.
  1. Information on Supervisors participating in the Board of Director’s meetings: A total of 2 meetings (A) of the Board in 2020 before the re-election. The Company re-elected on June 10, 2020 and replaced supervisors with the set-up of the Audit Committee. The attendance of the Supervisors is as follows:

Supervisorsis as
follows:
Title Name Attendance in
Person(B)		 Attendance Rate
(%) 【Ｂ/Ａ】		 Remarks
Supervisor Yu Chi Lin 2 100 Previously
elected,
resigned on
June 10,
2020.
Supervisor K WAY Information
Co. Representative:
Cheng Che Tseng		 2 100
Supervisor Chih Cheng Lo 2 100
Other mentionable items:
I. Composition and responsibilities of supervisors:
(a) Communications between supervisors and the Company's employees and shareholders (e.g.
communication channels and methods, etc.): To communicate through phone calls or
meetings.
(b) Communications between supervisors and the Company's Chief Internal Auditor and CPA
(e.g., items, methods and results of the audit of corporate finance or operations, etc.): To
communicate with the Company for financial and business situations, through emails or
meetings. The attendants assume no material impact on the audit report and financial
conditions in recent years.
II. If a supervisor expresses an opinion during a meeting of the Board of Directors, the dates of the
meetings, sessions, contents of motion, resolutions of the directors’ meetings and the
Company’s response to the supervisor’s opinion should be specified: None.

-23-

  • (C) Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”

Listed Companies”
Evaluation Item Implementation Status Difference from
Corporate
Governance
Practice
Principles for
TWSE/TPEx
Listed
Companies and
reasons
Yes No Description
1. Does Company follow “Taiwan Corporate
Governance Implementation” to establish and
disclose its corporate governance practices?

Ｖ		 The Company has not set a corporate governance code of practice, but
relevant key items and rules of corporate governance are being executed.

None.
2. Shareholding structure & shareholders’ rights
(1)Does Company have Internal
Operation Procedures for handling
shareholders’ suggestions, concerns,
disputes and litigation matters. If yes,
has these procedures been
implemented accordingly?
(2)Does Company possess a list of major
shareholders and beneficial owners of
these major shareholders?
(3)Has the Company built and executed a
risk management system and “firewall”
between the Company and its affiliates?
(4)Has the Company established internal
rules prohibiting insider trading on
undisclosed information?
Ｖ


Ｖ



Ｖ


Ｖ		 (1)Governance by the agent of stock affairs and Chairman's Office.
(2)Handled and follow-up by the agent of stock affairs and
Chairman's Office.
(3)In accordance with the Company’s protocols of Supervision Over
Subsidiaries, Internal Controls, Audit, and relevant regulations.
(4) The Company already established the Internal Rules Prohibiting
Insider Trading on Undisclosed Information and organizes relevant
training to directors, officers and employees at least once per year. The
procedures were disclosed on the company website.		 None.

-24-

Evaluation Item Implementation Status Implementation Status Implementation Status Difference from
Corporate
Governance
Practice
Principles for
TWSE/TPEx
Listed
Companies and
reasons
Yes No Description
3. Composition and Responsibilities of the
Board of Directors
(1) Has
the
Company
established
a
diversification policy for the composition
of its Board of Directors, and has it been
implemented accordingly?
(2) Other than the Compensation Committee
and the Audit Committee which are
required by law, does the Company plan
to set up other Board committees?
(3) Has
the
Company
established
methodology
for
evaluating
the
performance of its Board of Directors, on
an annual basis, reported the results of
performance to the Board of Directors,
and use the results as reference for
directors’ remuneration and renewal?











Ｖ		 Ｖ
Ｖ		 (1)In Article 20 of the Company’s Corporate Governance Best Practices,
it is stated that the composition of the Board should be determined
by taking diversity into consideration based on the company’s
business operations, operating dynamics and development needs;
the 14thBoard members fulfil that above mentioned requirement,
please refer to “Board Diversity” paragraph of the annual report for
more details.
(2)The Remuneration Committee was set up on December, 2011, and
shall be held for twice a year. The Audit Committee was set up on
June 10, 2020 and the total number of meetings held was four.
Whether it is necessary to set up other functional committees will be
evaluated further and will be based upon the Company’s actual needs
or in compliance with relevant legal requirements.
(3)The company has stipulated rules and procedures for board of
directors performance assessments. Please refer to Measures taken
toward achievement of Board of Directors of implementation of
corporate governance in 2020 annual report. Also, Human Resource
Management Center shall be responsible for executing performance
assessment by questionnaires, which shall be a reference for personal
compensation and nomination of directors.		 Planned
according to
actual needs.











On
assessment.






None.

-25-

Evaluation Item Implementation Status Difference from
Corporate
Governance
Practice
Principles for
TWSE/TPEx
Listed
Companies and
reasons
Yes No Description
(4) Does the Company regularly evaluate its
external auditors’ independence?
Ｖ		 (4)Each year, the Company evaluates the accounting firm, and the
independence and suitability of its CPA, and ask CPA to issue a
statement of independence based on No. 10 report of Code of
Professional Ethics of CPAs of ROC. After inspections by the Audit
Committee and the Board of Directors on December 23, 2020 and
April 14, 2021, the Company's certifying accountants has been
verified to be in compliance with requirement for independence as
specified in the above related regulations and article 47 of Certified
Public Accountant Act.







None.
4.
Does the Company appoint competent and
appropriate
corporate
governance
personnel
and
corporate
governance
officer to be in charge of corporate
governance affairs (including but not
limited to furnishing information required
for business execution by directors,
assisting directors’ compliance of law,
handling matters related to board meetings
and shareholders’ meetings according to
law, and recording minutes of board
meetingsand shareholders’ meetings)?










Ｖ		 The Chairman appointed the Chairmen’s Office to handle matters of the
directors relating to Board meetings, Committee’s meetings and
Shareholders’ meetings and record minutes of relevant meetings, etc.
The stock affairs department is responsible for handling corporate
registration and amendment registration. All application documents
need to be approved by the manager.



None.

-26-

Evaluation Item Implementation Status Implementation Status Implementation Status Difference from
Corporate
Governance
Practice
Principles for
TWSE/TPEx
Listed
Companies and
reasons
Yes No Description
5.
Has the Company established a means of
communicating with its Stakeholders
(including but not limited to shareholders,
employees, customers, suppliers, etc.) or
created a Stakeholders Section on its
Company website? Does the Company
respond to stakeholders’ questions on
corporate responsibilities?






Ｖ		 The company has established a means of communicating with its
Stakeholders (such as, suppliers, customers and clients, etc.) on the
website, for dealing with their questions and receiving opinions.
Financial Management Division will communicate with correspondent
banks and debtors. Human Resource Management Center will set up
channels for communicate with employees and handle any feedbacks.




None.
6. Has the Company appointed a professional
r e g i s t r a r f o r i t s S h a r e h o l d e r s ’
Meetings?

Ｖ		 The Company appointed the Registrar & Transfer Agency Department
of Masterlink Securities as our registrar for stock affairs.
None.
7. Information Disclosure
(1) Has the Company established a
corporate
website
to
disclose
information regarding its financials,
business and corporate governance
status?
(2);;Does
the
Company
use
other
information disclosure channels (e.g.
maintaining
an
English-language
website, designating staff to handle
information collection and disclosure,
appointing spokespersons, webcasting
investors conference etc.)?



Ｖ






Ｖ		 (1)The Company has set the website(http://www.zerone.com.tw),
and assigned a specific unit responsible for collecting and updating
company information regularly on the website.
(2) The Company established a spokesperson system to deal with related
matters and has appointed a person in charge to be responsible for
the collection and disclosure of company information.		 None.

-27-

Evaluation Item Implementation Status Implementation Status Implementation Status Difference from
Corporate
Governance
Practice
Principles for
TWSE/TPEx
Listed
Companies and
reasons
Yes No Description
(3) Does the Company announce and
report the annual financial statements
within two months after the end of the
fiscal year, and announce and report
the first, second, and third quarter
financial statements as well as the
operating status of each month before
the prescribed deadline?






Ｖ		 (3)The Company announces and reports the financial statements in
accordance with Article 36 of Securities and Exchange Act.
8. Has the Company disclosed other information
to facilitate a better understanding of its
corporate
governance
practices
(e.g.
including but not limited to employee
rights,
employee
wellness,
investor
relations, supplier relations, rights of
stakeholders, directors’ training records,
the implementation of risk management
policies and risk evaluation measures, the
implementation of customer relations
policies, and purchasing liability insurance
for directors)?










Ｖ






(1)Employee rights and wellness: The company has set a website for
employee rights and wellness, and regularly heard the voice of
employees.
(2)Investor relations: The Company has established a Spokesperson
system for handling relevant matters.
(3)Supplier relations: The company maintains a good relationship with
manufacturers.
(4)Rights of stakeholders: Stakeholders shall communicate with the
company and put forward proposals to protect their due legal rights
and interests.
(5)Directors’ and supervisors’ training records: The company encourages
directors and supervisor to attend trainings required by laws, and
discloses training records on Market Observation Post System.
(6)The implementation of risk management policies and risk evaluation
measures: The Company has already established internal control
systems as required by laws and has properly implemented the
systems. The Company also purchases liability insurance for directors
and supervisors in order to reduce management risks.
(7)The implementation of customer relations policies: The company
maintains a good relationship with customers in order to create
increasing profits.
(8)Purchasing liability insurance for directors and supervisors: The
company maintains D&O Insurance for its directors and officers.














None.

-28-

Evaluation Item Implementation Status Implementation Status Implementation Status Difference from
Corporate
Governance
Practice
Principles for
TWSE/TPEx
Listed
Companies and
reasons
Yes No Description
9. The improvement status for the result of Corporate Governance Evaluation announced by Taiwan Stock Exchange
For the 2020 Corporate Governance Evaluation, the implementation status regarding below non-scoring item(s):
The Company placed high emphasis and proactively participated in the Corporate Governance Evaluation. Improvement status for the
2020 non-scoring items are as follows:
(1) The company’s Board of Directors approved the proposal to hold 2021 annual general meeting of shareholders by end of May, 2021.
(2) The company stipulated Corporate Governance Best Practice Principles which include the diversity policy for directors, relevant
information regarding diversity policy is disclosed on the company website and annual report.
(3) The company is planning to accept the invitation (or organize) at least two institutional investor conferences this year.
(4) The company setuptheAuditCommitteeincompliance with theregulationsin 2020.

-29-

  • (D) Composition, Responsibilities and Operations of the Remuneration Committee:

  • Information on members of the Committee

Information on members of the Remuneration Committee

Title Criteria
Name		 Meets One of the Following Professional Qualification Requirements,
Together with at Least Five Years’ Work Experience		 Meets One of the Following Professional Qualification Requirements,
Together with at Least Five Years’ Work Experience		 Meets One of the Following Professional Qualification Requirements,
Together with at Least Five Years’ Work Experience		 Independence Criteria (Note 1) Independence Criteria (Note 1) Independence Criteria (Note 1) Independence Criteria (Note 1) Independence Criteria (Note 1) Independence Criteria (Note 1) Number of Other Public
Companies in Which the
Individual is
Concurrently Serving as
an Remuneration
Committee Member		 Remark
s
An instructor or higher
position in a department
of commerce, law,
finance, accounting, or
other academic
department related to the
business needs of the
Company in a public or
private junior college,
college or university
A judge, public
prosecutor, attorney,
Certified Public
Accountant, or other
professional or technical
specialist who has passed
a national examination
and been awarded a
certificate in a profession
necessary for the business
of the Company		 Has work experience
in the areas of
commerce, law,
finance, or accounting,
or otherwise necessary
for the business of the
Company		 1 2 3 4 5 6 7 8 9 10
Independent
director
Ming Hsiung Wu		 V V V V V V V V V V V 0
Independent
director
Chien Chen Lin
V		 V V V V V V V V V V 1
Independent
director
Ming Yuan Lin		 V V V V V V V V V V V 0

Note 1:Please tick the corresponding boxes that apply to a member during the two years prior to being elected or during the term(s) of office.

  3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of one percent or more of the total number of issued shares of the company or ranks as one of its top ten shareholders;

  4. or of any of the above persons in the preceding subparagraphs 2 and 3;

  5. company, ranks as of its top five shareholders, or has representative director(s) serving on the company’s board based on Article 27 of the Company Law.

  6. Not a director, supervisor, or employee of a company of which the majority of board seats or voting shares is controlled by a company that also controls the same of the company;

  7. Not a director, supervisor, or employee of a company of which the chairman or CEO (or equivalent) themselves or their spouse also serve as the company’s chairman or CEO (or equivalent);

  8. relationship with the company;

  9. a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to the company or to any affiliate of the company, or a spouse thereof, and the service provided is an “audit service” or a “non-audit service which total compensation within the recent two years exceeds NTD500,000”;

-30-

2.Duties

  • (1)To establish and regularly review the policies, systems, standards and structures for performance assessment and remuneration of directors, supervisors and managers.

  • (2)To regularly assess the achievement of performance targets of directors, supervisors and managers, and set their renumeration.

  • (3)To review regulations of the remuneration committee and propose amendments of it at all times.

  • Attendance of Members at Remuneration Committee Meetings

  • (1)There are 3 members in the Remuneration Committee.

(2)Current Term: From June 10, 2020 to June 9, 2023; The current term is the same as that of the board of directors.

Title Title Name Attendance in Person(B) By Proxy Attendance Rate (%)【Ｂ/Ａ】 Attendance Rate (%)【Ｂ/Ａ】 Remarks
Convener Ming Hsiung Wu 3 0 100
Committee Member Chien Chen Lin 3 0 100
Committee Member Ming Yuan Lin 3 0 100
Remuneration
Committee
Meetings		 The content of motions and after-treatment Resolution
Result		 The Company dealing with a
Dissenting Opinion or
Qualified Opinion of
committee members
3rd-7
2020.04.27		 1. To audit 2019 compensation distribution of each director and supervisor.
2. To audit 2019 employees compensation distribution of managers.
3. To audit 2019 employees salaries distribution of managers.		 Approved by
all
committee
members.
 To report to Board of
Directors, and approved by all
attended directors.
4th-1
2020.7.29		 1. To audit the proposal of continuing contract and remuneration package of the
company’s GM.
4th-2
2020.12.23		 1. To audit the plan of annual bonuses and stock ownership trust of managers
and employees for the company and subsidiaries in 2020.
2. To decide distribution ratio of 2021 directors’ and supervisors’ compensation and
employees bonuses.
3. To amend the evaluation of performance and policies of salary compensation for
the Board.
4.To discuss 2021 working plan of theCompensationCommittee.

-31-

(E)Corporate Social Responsibility:

(E)Corporate Social Responsibility:
Evaluation Item Implementation Status Difference from Corporate
Governance Practice
Principles for TWSE/TPEx
Listed Companies and
reasons
Yes No Description
1.
Does the Company conduct risk assessments on
environmental,
social,
and
corporate
governance issues related to its operations in
accordance with the materiality principle, and
implement relevant risk management policies
or strategies?



Ｖ Under planning Based on practical needs
2.
Does the Company establish an exclusively (or
part-time)
dedicated
unit
for
promoting
Corporate Social Responsibility? Is the unit
authorized by the Board of Directors to
implement CSR activities at the executive
level? Does the unit report the progress of such
activities to the Board of Directors?




Ｖ Under planning Based on practical needs
3. Environmental issues
(1)Does
the
Company
establish
proper
environmental management systems based on
the characteristics of their industries?
(2);Does the Company endeavor to utilize all
resources more efficiently and use renewable
materials which have low impact on the
environment?
(3);Does the Company assess the potential risks
and opportunities of climate change for its
current and future operations and undertake
response measures with respect to climate
change?







Ｖ
Ｖ
Ｖ		 (1)Not applicable. Not related to our current business.
(2)Not applicable. Not related to our current business.
(3)Not applicable. Not related to our current business.		 None.

-32-

Evaluation Item Implementation Status Difference from Corporate
Governance Practice
Principles for TWSE/TPEx
Listed Companies and
reasons
Yes No Description
(4)Does the Company calculate the amount of
greenhouse gas emission, water consumption,
and waste production in the past two years and
implement policies to cut down energy and
water consumptions, carbon and greenhouse
gas emissions, and waste production?




Ｖ		 (4)The
company
sets
an
accurate
goal
of
environmental
and
energy
conservation
in
accordance with its operation and inspection of
greenhouse gas, also formulates the environmental
governance system for improvement of resources
allocation and emission of pollution, putting much
effort in energy saving for indoor lighting of the
office, and setting a goal for environment friendly
in order to attain less pollution, lower energy
consumption, and higher energy savings. Based
on actual situations of operation, the site of the
company (including the office in Taipei, Taichung,
Kaohsiung City) has implemented environmental
protection and lighting energy saving.
1. The important purposes for environmental
protection go as follows:
(1) Carbon emissions reduction goal
The shock of climates changes is a
global environmental issue. Thus, the globes
shall be responsible for carbon emissions
reduction,
and
attain
a
purpose
of
governance of carbon dioxide emissions
reduction. The goal of carbon emissions
reduction shall be formulated and announced
in accordance with the standard of carbon
dioxide emissions by ISO14064. As for
setting this goal in 2020, the company's
target is to reduce carbon emissions by 6%
per unit of operating revenues this year in
2023.
(2) Electricity saving goal
Since more than 95% of the sources of
greenhouse gas is from using electricity, we
set the energy-saving plans for reduce
carbon dioxide emissions in accordance with
the energy management system. As for
setting this goal in 2020, the company's






























-33-

Evaluation Item Implementation Status Difference from Corporate
Governance Practice
Principles for TWSE/TPEx
Listed Companies and
reasons
Yes No Description
target is to reduce electricity by 6% per unit
of operating revenues this year in 2023.
(3) Waste reduction goal
As resource misallocation regarding
with waste, we set a triennial plan for
improving resources allocation, continuing
to adopt a policy of pollution reduction,
reducing toxic waste for making recyclable
resources useable. As for setting this goal in
2020, the company's target is to reduce waste
by 6% this year in 2023.
(4) To instruct policies of energy and carbon
emissions conservation of the company and
its offices.
● The temperature of the air-conditioning
system is on 25 degrees Celsius.
● Turn Off Lights When Leaving.
● Water saving.
● Take your own handkerchiefs.
● Take your own chopsticks and cups.
● No hard copy.
● Let employees wear no tie.
● Shut down the computer and stop
electricity when leaving the office, and
reduce the off-peak load of part of
elevators in the building
2. The policy for reaching the goal
To
save
electricity
by
3
aspects-air-
conditioning, electricity and lighting and other
usages of electricity, and regularly inspect
power consumption equipment for replacing,
the company has reduced carbon per unit of
operating revenues by 7% this year, for saving
per unit of electricity, which is relevant to
greenhouse gas, in 2023, based on the record in
2020.



















-34-

Evaluation Item Implementation Status Difference from Corporate
Governance Practice
Principles for TWSE/TPEx
Listed Companies and
reasons
Yes No Description
4. Social Issues
(1)Does the Company formulate appropriate
management policies and procedures according
to relevant regulations and the International Bill
of Human Rights?
(2)Does the Company establish and deliver
reasonable
employee
welfare
programs
(including salary, compensated absences, and
other
benefits)
and
adjust
employee
compensation
in
relation
to
business
performance?


Ｖ





Ｖ		 (1) Working rules and management methods are
established and governed by the Labor Laws.
(2) The company’s object is to create happiness
enterprises. Except for setting the employee
benefit policy by providing a comfortable lounge,
travels in Taiwan or foreign countries, free health
inspection, bonuses and gifts in 3 Chinese
Festivals, group insurance, family days and year-
end activities to employees, we put much effort in
increasing salaries for employees by setting aside
4% of employee compensation from annual
profits, for the purpose of making employees’ body
healthy, and their mind and soul satisfied.		 None.
(3);Does the Company provide a healthy and safe
work environment and organize training on
health and safety for its employees on a regular
basis?


Ｖ		 (3) As the company values safe and healthy work
environments for its employees, our company
requests annual inspections of the building which
includes
every
exists,
floors,
ventilation,
lightening,
fire/disaster
prevention
related
equipment and other safety related systems, except
for strict access security:
1.Access security:
Strict surveillance system is set up and security
is hired to ensure safety of the office of the
building all day.
2.Maintenance and inspection of equipment:
According to verification and application of







-35-

Evaluation Item Implementation Status Difference from Corporate
Governance Practice
Principles for TWSE/TPEx
Listed Companies and
reasons
Yes No Description
public security of the building, the management
committee for the building appoints outside
professional company to conduct inspection of
public security. Inspection of fire safety
equipment shall be appointed by outside
institution based on Fire Services Act.
According to Safety and health work rules of
employees, routine maintenance for water
dispenser every three months, and annual
maintenance and inspection of high-voltage and
low-voltage apparatus, air-conditioners, and
fire safety equipment, etc.
3.Physical health:
The company hold regular employees yearly
health examination, free consulting of doctors,
advises if medical care of nurses, and hold
lectures regarding with health, the office
periodically cleaned and sterilized, and no
smoking in the office.
4.Mental health:
We hold lectures for keep a good mental health
enhance
professional
knowledge,
and
e-
learning, regarding with stress (emotional
pressure)
management,
communication
technique, ideal thoughts.
5.Insurance and medical allowance:
We arrange labor (including occupational
Injury) and health insurance for employees by
laws. Also, we arrange casualty and accidental
health insurance for them. As for injury and
death of employees and their spouse, offspring,
and parents, we provide medical allowance and
emergency aids.






















-36-

Evaluation Item Implementation Status Implementation Status Implementation Status Difference from Corporate
Governance Practice
Principles for TWSE/TPEx
Listed Companies and
reasons
Yes No Description
(4)Does the Company provide its employees
with career development and training sessions?
(5)Does the Company comply with relevant
regulations
and
international
standards
regarding customer health and safety, right to
privacy, marketing and labeling of its products
and services and set up relevant consumer
protection policies and complaint procedures?
(6)Does the Company formulate supplier
management policies that require suppliers to
comply
with
relevant
regulations
on
environmental protection, occupational safety
and health, and labor rights and request their
reporting on the implementation of such issues?

Ｖ










 Ｖ
Ｖ		 (4)The company conducts skills or trainings for
personal career development, by the performance
management system, the plan of personal career
development.
(5)Not applicable. Not related to our business.
(6)The suppliers of the company are mostly foreign
brands of software and hardware products, whose
supply chain for production rarely affects the
environment and society.




5. Did the company, following internationally
recognized standards or guidelines, prepare and
publish reports such as its Corporate Social
Responsibility report to disclose non- financial
information of the company? Has the company
received assurance or certification of the
aforesaid reports from a third party accreditation
institution?





Ｖ Under planning Based on practical needs
6. If the Company has established the corporate social responsibility best practice principles based on the "Corporate Social Responsibility Best
Practice Principles for TWSE/TPEx Listed Companies", please describe any discrepancy between the Principles and their implementation:
The Companyhasnot yet established specific codes ofconducts.
7.Other important information to facilitate better understanding of the company's Corporate Social Responsibility practices: Social aspects:
The Company has always fulfilled the duties of being a corporate social entity, other CSR practices carried out by the Company are stated in the
preceding paragraphs.

-37-

(F) Ethical Corporate Management:

(F) Ethical Corporate Management:
Evaluation Item Implementation Status Difference from
Corporate
Governance
Practice
Principles for
TWSE/TPEx
Listed Companies
and reason
Yes No Description
1. Establishment of Corporate Conduct and Ethics Policy and
Implementation Measures
(1)Does the company have a clear ethical corporate management
policy approved by its Board of Directors, and bylaws and
publicly available documents addressing its corporate conduct
and ethics policy and measures, and commitment regarding
implementation of such policy from the Board of Directors and
the top management team?
(2)Whether the company has established an assessment
mechanism for the risk of unethical conduct; regularly
analyzes and evaluates within a business context, the business
activities with a higher risk of unethical conduct; has
formulated a program to prevent unethical conduct with a
scope no less than the activities prescribed in paragraph 2,
Article 7 of the Ethical Corporate Management Best Practice
Principles for TWSE/TPEx Listed Companies?
(3)Whether the company has established relevant policies that are
duly enforced to prevent unethical conduct, provided
implementation procedures, guidelines, consequences of
violation and complaint procedures, and periodically reviews
and revises such policies?





Ｖ







Ｖ




Ｖ

(1) The company forms the working procedures
and regulations of employees, according to
internal controls, and implement s management
policies submitted to the board of directors and
management, through trainings for new
employees, internal assessment, and audit.
(2) The Company prevents and control unethical
conduct by periodic audit work of internal
controls, and the design of electric processes
and procedures.
(3) It has been set by Codes of Ethical Conduct for
Directors, managers, and employees.		 None.
2. Ethic Management Practice
(1)Whether the company has assessed the ethics records of whom
it has business relationship with and include business conduct
and ethics related clauses in the business contracts?
公司是否評估往來對象之誠信紀錄，並於其與往
來交易對象簽訂之契約中明定誠信行為條款？

Ｖ		 (1) The company has set Codes of Ethical Conduct
for employees for prohibiting all forms of
improper conduct outside of the company.		 None.

-38-

Evaluation Item
(2)Whether the company has set up a unit which is dedicated to
promoting the company’s ethical standards and regularly (at
least once a year) reports directly to the Board of Directors on
its ethical corporate management policy and relevant matters,
and program to prevent unethical conduct and monitor its
implementation?
(3)Whether the company has established policies to prevent
conflict of interests, provide appropriate communication and
complaint channels and implement such policies properly?
(4) To implement relevant policies on ethical conducts, has the
company established effective accounting and internal control
systems, audit plans based on the assessment of unethical
conduct, and have its ethical conduct program audited by
internal auditors or CPAperiodically?
以查核防範不誠信行為方案之遵循情形，或委託
會計師執行查核？		 Implementation Status Implementation Status Implementation Status Difference from
Corporate
Governance
Practice
Principles for
TWSE/TPEx
Listed Companies
and reason
Yes





Ｖ


Ｖ




Ｖ		 No


 Description
(2) The
Company
has
not
established
an
exclusively (or concurrently) dedicated unit yet
but implemented the management of corporate
integrity for each employee and managers of
each department in daily work.
(3) It has been formed through internal controls;
hence employees shall follow the policies in
self-activities during daily work.
(4) The Company has established accounting,
finance, and internal control systems to ensure
integrity in our operations. Financial reports
were audited by CPAs, to ensure that the
financial statementspresent fairly.
(5) Does the company provide internal and external ethical conduct
training programs on a regular basis?		 Ｖ (5) The company does not hold education training
of integrity management inside and outside of
the company, but regard integrity as the main
core items of performance assessment and
implement it in the management of corporate
integrity for each employee and managers of
each department in daily work.




3. Implementation of Complaint Procedures
(1)Does the company establish specific complaint and reward
procedures, set up conveniently accessible complaint channels,
and designate responsible individuals to handle the complaint
received?


Ｖ		 (1) Regulations
regarding
with
reward
and
punishment of employees has been reviewed by
administrative and related divisions.		 None.

-39-

Evaluation Item Implementation Status Implementation Status Implementation Status Difference from
Corporate
Governance
Practice
Principles for
TWSE/TPEx
Listed Companies
and reason
Yes No Description
(2)Whether the company has established standard operation
procedures for investigating the complaints received, follow-up
measures after investigation are completed, and ensuring such
complaints are handled in a confidential manner?
(3)Does the company adopt proper measures to prevent a
complainantfrom retaliation for his/her filing a complaint?


Ｖ

Ｖ
(2) It has been set by Codes of Ethical Conduct for
Directors, managers, and employees.
(3) It has been set by Codes of Ethical Conduct for
Directors,managers, and employees.
4. Information Disclosure
Does the company disclose its guidelines on business ethics as well
as information about implementation of such guidelines on its
website and Market Observation Post System (“MOPS”)?
Ｖ Under planning Based on
practical
needs.
5.If the company has established corporate governance policies based on Ethical Corporate Management Best Practice Principles for TWSE/TPEx
Listed Companies, please describe any discrepancy between the policies and their implementation:
The Company has not yet established Codes of Ethical Conduct, but paid attention to the development of relevant standards of corporate
integrity, for reviews and improvements of the Company's integrity management policy to enhance the effectiveness of the Company's integrity
management.
6.Other important information to facilitate better understanding of the company’s corporate conduct and ethics compliance practices (e.g., review
the company’s corporate conduct and ethics policy).
The company demonstrates its commitment to integrity management by emphasizing and participating in trainings for important customers and
manufacturers.

  • (G) If the Company has established corporate governance guidelines and regulations, it shall disclose: It has been disclosed on the website of the Company and market observation post system.

  • (H) Other Important Information Regarding Corporate Governance: NA.

-40-

(I) Internal Control Systems

  • 1.Statement of internal control system

Zero One Technology Co., Ltd.

Statement of Internal Controls

Date:2/24/2021

According to the examination on internal control system done by the Company itself in 2020, we hereby state as follows:

  • (1);The company’s board of directors and management are responsible for establishing, implementing, and maintaining an adequate internal control system. Our internal control is a process designed to provide reasonable assurance over the effectiveness and efficiency of our operations (including profitability, performance and safeguarding of assets), reliability, timeliness, transparency of our reporting, and compliance with applicable rulings, laws and regulations.

  • (2) An internal control system has inherent limitations. No matter how perfectly designed, an effective internal control system can provide only reasonable assurance of accomplishing its stated objectives. Moreover, the effectiveness of an internal control system may be subject to changes due to extenuating circumstances beyond our control. Nevertheless, our internal control system contains self-monitoring mechanisms, and the Company takes immediate remedial actions in response to any identified deficiencies.

  • (3) The company evaluates the design and operating effectiveness of its internal control system based on the criteria provided in the Regulations Governing the Establishment of Internal Control Systems by Public Companies (herein below, 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.

  • (4) The company has evaluated the design and operating effectiveness of its internal control system according to the aforesaid Regulations.

  • (5) Based on the findings of such evaluation, ZOTC believes that, on December 31, 2020, it has maintained, in all material respects, an effective internal control system (that includes the supervision and management of our subsidiaries), to provide reasonable assurance over our operational effectiveness and efficiency, reliability, timeliness, transparency of reporting, and compliance with applicable rulings, laws and regulations.

  • (6);This Statement is an integral part of ZOTC’s annual report for the year 2020 and prospectus, and will be made public. Any 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 Law.

  • (7);The Company hereby declares that this statement had been approved by the Board of Directors on February 24, 2021. Among the 8 attending Directors, to the contents of this statement.

Zero One Technology Co., Ltd. Chairman: Peter Lin General Manager: Nancy Huang

-41-

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

  • (J) If there has been any legal penalty against the Company or its internal personnel, or any disciplinary penalty by the Company against its internal personnel for violation of the internal control system, during the most recent fiscal year or during the current fiscal year up to the publication date of the annual report, where the result of such penalty could have a material effect on shareholder equity or securities prices, the annual report shall disclose the penalty, the main shortcomings, and condition of improvement: None.

  • (K) Major Resolutions of Shareholders’ Meeting and Board Meetings for the current year and as of the printing date of the annual report.

  • Major Resolutions of Shareholders’ Meeting

Date Major Resolutions
2020.06.10 (1) Proposal: Approval of the 2019 business report and financial statement.
Resolution: Proposal was approved as proposed (Please search for details of proposal on
Market Observation Post System).
Condition of execution: It was announced as important resolution of the
shareholder’s meeting, in the form of material information.
(5) Proposal: Approval of the proposed distribution of 2019 earnings.
Resolution: Proposal was approved as proposed (Please search for details of proposal on
Market Observation Post System).
Condition of execution: Ex-dividend date is June 16, 2020 and the distribution date is July 3,
2020 (NT$2.01013223 per share).
(6) Proposal: Discussion on the amendment to the Articles of Incorporation.
Resolution: Proposal was approved as proposed (Please search for details of
proposal on Market Observation Post System).
Condition of execution: It has been approved and registered by Ministry of Economic Affairs,
R.O.C., announced on July 1, 2020 on the company website.
(7) Proposal: Discussion on the amendment to the Regulations Governing the
Acquisition and Disposal of Assets.
Resolution: Proposal was approved as proposed (Please search for details of proposal on
Market Observation Post System).
Condition of execution: It has been announced on June 23, 2019 on Market Observation Post
System and the Company’s website and executed it by edited regulations.
(8) Proposal: Discussion on the amendment to the guidelines for external endorsement and
guaranty.
Resolution: Proposal was approved as proposed (Please search for details of proposal on
Market Observation Post System).
Condition of execution: It has been approved and registered by Ministry of Economic Affairs,
R.O.C., announced on June 23, 2020 on the company website.
(9) Proposal: Discussion on the amendment to the guidelines for loaning funds to others.
Resolution: Proposal was approved as proposed (Please search for details of proposal on
Market Observation Post System).
Condition of execution: It has been approved and registered by Ministry of Economic Affairs,
R.O.C., announced on June 23, 2020 on the company website.
(10) Proposal: Election of 8 directors (including 3 independent directors) for the 14thBoard.
Resolution: Directors - Peter Lin Morris Jiang、K Way Information
Corporation、Prisma Commerce & Networks, Inc.、Jui Hsu Chen
Independent directors: Ming Hsiung Wu、Ming Yuan Lin、Chien Chen Lin
Condition of execution: Election results were disclosed on June 10, 2020 on MOPS, and were
registered by Ministry of Economic Affairs, R.O.C. on July 1, 2020.
(11) Proposal: To dismiss the discussion for non-compete clause for the newly appointed directors.
Resolution: Proposal was approved as proposed (Please search for details of proposal on
Market Observation Post System).
Condition of execution: It has been announced on MOPS on June 10, 2020.

-42-

2.Major resolutions of Board Meetings

Date Major resolutions
2020.02.26 (1) Approval of the 2019 business report, as well as parent and consolidated financial statements.
(2) Approval of the proposal for distribution of 2019 earnings.
(3) Approval of the amendment to the Articles of Incorporation.
(4) Approval of the proposal for the election of the 14thBoard directors.
(5) Approval of the proposal to the replacement and independent assessment of CPA in 2020 Q1.
2020.04.27 (1) Approval of the proposal for amendments to the Articles of Incorporation.
(2) Approval of the amendments to the Regulations Governing the Acquisition and Disposal of Assets、
External Endorsement and Guaranty and Loaning funds to others.
(3) Approval of the nomination and review of Directors and independent Directors.
(4) Approval to the dismissal of non-compete clause for the newly appointed Directors.
2021.02.24 (1) Approval of the 2020 business report, as well as parent and consolidated financial statements.
(2) Approval of the proposal for distribution of 2020 earnings.
(3) Approval of the amendment to the Articles of Incorporation.
2021.04.24 (1) Approval of the replacement and independent assessment of CPA in 2020 Q1.

  • (L) Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors: NA.

  • (M) Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, CEO, and Heads of Accounting, Finance, Internal Audit and R&D: NA.

  • E. Information on CPA Professional Fee

Accounting Firm Accounting Firm Accounting Firm Accounting Firm Accounting Firm Name of CPA Name of CPA Name of CPA Name of CPA Name of CPA Name of CPA Period Covered by CPA’s
Audit		 Period Covered by CPA’s
Audit		 Period Covered by CPA’s
Audit		 Period Covered by CPA’s
Audit		 Period Covered by CPA’s
Audit		 Remarks Remarks
Deloitte & Touche Cheng
MingLee		 Pei De
Chen		 2020.01.01~2020.12.31
Unit: NT$ thousands

Fee Range		 Fee Items Audit Fee Non-audit Fee Total
1 Under NT$ 2,000,000 216 216
2 NT$2,000,000 ~ NT$4,000,000 2,250 2,250
3 NT$4,000,000 ~ NT$6,000,000
4 NT$6,000,000 ~ NT$8,000,000
5 NT$8,000,000 ~ NT$10,000,000
6 Over NT$100,000,000
Unit: NT$ thousands
Accounting
Firm		 Name of
CPA		 Audit
Fee		 Non-audit Fee Period
Covered by
CPA’s Audit		 Remarks
System
of
Design		 Company
Registration		 Human
Resource		 Others Subtotal
Deloitte &
Touche		 Cheng
MingLee		 2,250 － － 30 186 216 2020/01/01~
2020/12/31		 Other non-audit fee is
the expenditure for
making the financial
report.
Pei De
Chen

  • (A) The non-audit fee paid to certified CPA, certified Office of CPA and affiliated companies accounts for over 1/4 to audit fee: None.

  • (B) Alter the CPA Firm and the audit fee in altering year is less than that in the previous year: None.

  • (C) Audit fee reduced more than 10% year over year: None.

-43-

F. Replacement of CPA

(A)Regarding the former CPA

ReplacementDate 2021/04/14 2021/04/14 2021/04/14 2021/04/14 2021/04/14
Replacement reasons and
explanations
The original CPAs of the Company wasChen Ming, Leefrom Deloitte
& Touche, Taiwan, Republic of China. Due to internal restructuring
at Deloitte & Touche, Taiwan, Republic of China, the CPA of the
Company was changed to Jiang Lian Liu, beginning Q1 of 2021,
approved byBoard of Directors on April 14,2021.
Describe
whether
the
Company terminated, or
the CPA did not accept the
appointment		 Parties
Status		 CPA The Company
Terminationofappointment ChengMingLee
No longer accepted (continued)
appointment
Other issues (except for
unqualified issues) in the
audit reports within the
last two years		 None
Differences
with
the
company		 ~~Y~~es Accounting principles orpractices
Disclosure of FinancialStatements
Audit scope orsteps
Others
None Ｖ
Remarks/specify details:
Other Revealed Matters None

(B)Regarding the successor CPA

(B)Regarding the successor CPA
Name ofaccountingfirm Deloitte &Touche,Taiwan,Republic ofChina
Name ofCPA Chien LiangLiu,Pei De Chen
Date ofappointment 2021/04/14
Consultation results and opinions on accounting
treatments or principles with respect to specified
transactions and the company's financial reports
that the CPA might issueprior to the engagement.

NA
Succeeding
CPA’s
written
opinion
of
disagreement towardtheformerCPA		 NA

  • (C) The former CPA's response for items specified in Article 10, Subparagraph 6, Item 1 and Item 2-3 of the Accounting Standards: NA.

  • G. The Company’s Chairman, Chief Executive Officer, Chief Financial Officer, and managers in charge of its finance and accounting operations hold any positions in the Company’s independent auditing firm or its affiliates during the last year: None.

-44-

H. Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders

(A)Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders:

Units: Shares


Units: Shares
Units: Shares
Title Name 2020 As of Mar. 31, 2021
Holding
Increase
(Decrease)		 Pledged
Holding
Increase
(Decrease)		 Holding
Increase
(Decrease)		 Pledged
Holding
Increase
(Decrease)
Chairman Peter Lin (235,000) 3,000,000
(3,485,101)		 0
0
Director Morris Jiang (500,000) 0 0
0
Director Judicial person Prisma
Commerce &
Networks,Inc.		 0 0 0
0
Representative Chih Chi Chou 0 0 0
0
Director Judicial person K Way
Information Corp.
(Note 1)		 0 0
0
0
Representative Cheng Che Tseng
(Note 1)		 0 0
0
0
Director Jui Hsu Chen 0 0 10,000
0
Independent director Ming Hsiung Wu 0 0 0
0
Independent director Chien Chen Lin 0 0 0
0
Independent director Ming Yuan Lin 0 0 0
0
Supervisor Yu Chi Lin
(Note 2)		 0 0 0
0
Supervisor Chih Cheng Lo
(Note 2)		 0 0 0
0
General manager Nancy Huang 215,000 0 50,000
0
Manager Kevin Chen 13,000
(20,000)		 - 0
0
Manager Michelle Chin 3,000 0 30,000
0
Major Shareholders
(shares holdingover 10%)		 Peter Lin (235,000) 3,000,000
(3,485,101)		 0
0

Note 1: Re-elected and appointed as Director on June 10, 2020.

Note 2: Service ended on June 10, 2020. The information from the above table discloses to the termination date of being the Company’s supervisor.

  • (B) Shares Trading with Related Parties: It’s no applicable since the counterparties of equity transfer are not related parties.

  • (C) Shares Pledge with Related Parties: It’s no applicable since the counterparties of share

  • pledges are not related parties.

-45-

I.Relationship among the Top Ten Shareholders

As of 3/30/2021 ； Units: Shares ； %

Name Current
Shareholding		 Current
Shareholding		 Spouse’s/minor’s
Shareholding		 Spouse’s/minor’s
Shareholding		 Shareholding
by Nominee
Arrangement		 Shareholding
by Nominee
Arrangement		 Name and Relationship Between the
Company’s Top Ten Shareholders,
or Spouses or
Relatives Within Two Degrees		 Name and Relationship Between the
Company’s Top Ten Shareholders,
or Spouses or
Relatives Within Two Degrees		 Remarks
Shares % Shares % Shares
%		 Name Relationship
Ceres investment
co., ltd.		 9,506,594 7.52 － － － － Peter Lin These two people are
relatives within two
degrees		 －
Hui Fen
Wang		 These two people are
relatives within two
degrees
Ceres investment
co., ltd.
Representative：
Tsai Han Lin		 599,550 0.47 － － － － Peter Lin These two people are
relatives within two
degrees		 －
Hui Fen
Wang		 These two people are
relatives within two
degrees
Peter Lin 9,338,292 7.39 2,954,714 2.34 － － Hui Fen
Wang		 Couples －
Ceres
Invest-
ment
Co.,
Ltd.		 Relatives of the chairman
of the corporate
shareholder within two
degrees
Hui Fen Wang 2,954,714 2.34 9,338,292 7.39 － － Peter Lin Couples －
Ceres
Investment
Co., Ltd.		 Relatives of the chairman
of the corporate
shareholder within two
degrees
Morris Jiang 2,142,735 1.70 503,185 0.40 － － － － －
National Yang
Ming Chiao Tung
University		 2,141,017 1.69 － － － － － － －
Chen Chang Liu 2,101,039 1.66 5,974 0.00 － － － － －
K Way
Information Corp.		 1,322,264 1.05 － － － － － － －
K Way
Information Corp.
Representative：
Cheng CheTseng		 0 0 0 0 － － － － －
Yung Wei Hsu 1,219,156 0.96 44,140 0.03 － － － － －
Wei Ren Chen 1,101,000 0.87 － － － － － － －
Prisma Commerce
& Networks,Inc.		 1,042,759 0.83 － － － － － － －
Prisma Commerce
& Networks, Inc.
Representative:
ChihChiChou		 0 0 0 0 － － － － －

-46-

2021/03/31

J. Ownership of Shares in Affiliated Enterprises

2021/03/31 2021/03/31
Affiliated
Enterprises		 Ownership by the
Company		 Direct or Indirect Ownership
by Directors, Supervisors,
Managers		 Total Ownership
Shares % Shares % Shares %
Zotech Technology Co.,
Ltd.		 3,500,000
85.37
0
0
3,500,000
85.37
ZeroneWin Investment Co.,
Ltd.		 14,900,000
100.00
0
0
14,900,000
100.00
Asiaone Holdings Ltd 320,000
100.00
0
0
320,000
100.00
Techone(Shanghai)Co.,Ltd. Not applicable
(Note 1)

70.00
Not applicable
(Note 1)
0
Not applicable
(Note 1)

70.00
WingWill International Co.,
Ltd.
25,500,000
87.93
0
0
25,500,000
87.93
PetaCom technology Co.,
Ltd.		 50,000,000
100.00
0
0
50,000,000
100.00
TrustONE SecurityInc. 4,000,000
32.00
0
0
4,000,000
32.00

Note 1 ： Not applicable. The firm does not issue shares. The company’s investments accounted for using the equity method. are measured as a percentage of ownership.

IV. Capital Overview

A. Capital and Shares

(A)Source of Capital

Month/
Year
Par
Value
(NT$)		 Authorized Capital Authorized Capital Paid-in Capital Paid-in Capital Remark Remark Remark


Shares		 Amount
(NT$ thousands)		 Shares Amount
(NT$ thousands)		 Sources of Capital Capital
Increased
by
Assets
Other
than Cash		 Other
2020.03 10 150,000,000 1,500,000,000 124,623,212 1,246,232,120
Capital increased by employee stock
options conversion $3,560,000.
Cancellation of restricted employee
stockaward $120,000

None		 Note 1
2020.05 10 150,000,000 1,500,000,000 124,846,212 1,248,462,120 Capital increased by employee stock
options conversion $2,230,000
None		 Note 2
2020.08 10 150,000,000 1,500,000,000 124,963,212 1,249,632,120 Capital increased by employee stock
options conversion $1,170,000
None		 Note 3
2020.11 10 150,000,000 1,500,000,000 125,272,212 1,252,722,120 Capital increased by employee stock
options conversion $3,090,000
None		 Note 4
2021.03 10 150,000,000 1,500,000,000 125,640,212 1,256,402,120 Capital increased by employee stock
options conversion $3,680,000
None		 Note 5
Note 1：No. 10901038160
Note 2：No. 10901078310
Note 3：No. 10901154350
Note 4：No. 10901219850
Note 5：No. 11001042870
o. 11001042870
As of March 18, 2021；Units: Shares
Share Type Authorized Capital Remark
Issued Shares Unissued Shares Total
Registered Ordinary
Shares
125,640,212		 24,359,788 150,000,000 Listed Shares

Note 1: Related information of the general declaration system ： None.

Note 2: As of the printing date of the annual report, the number of the issued ordinary shares is 126,344,212. The increase in the number of 704,000 ordinary shares resulted from employee stock conversion are yet to be registered for approval.

-47-

(B) Status of Shareholders

(B) Status of S hareholders hareholders hareholders hareholders hareholders hareholders
As of March 30,2021；Units：Shares
Shareholder
structure
Quantity		 Government
agency		 Financial
institution		 Other
Juridical
Persons		 Natural
Persons		 Foreign
Institutions &
Natural Persons		 Total
Number of
Shareholders		 0 1 274
33,445		 55 33,775
Shareholding
(shares)		 0 747,000 19,213,370
102,543,958		 3,839,884 126,344,212
Percentage 0.00% 0.59% 15.21%
81.16%		 3.04% 100.00%

(C) Shareholding Distribution Status

1. Common Shares


Common Shares
As of 03/30/2021
Class of Shareholding
(Unit: Share)		 Number of
Shareholders		 Shareholding (Shares) Percentage
1-999 18,877
645,195
0.51%
1,000-5,000 12,102
23,624,017
18.70%
5,001-10,000 1,517
12,059,583
9.55%
10,001-15,000 415
5,208,904
4.12%
15,001-20,000 261
4,925,178
3.90%
20,001-30,000 218
5,678,005
4.49%
30,001-50,000 173
6,925,906
5.48%
50,001-100,000 98
7,086,412
5.61%
100,001-200,000 63
9,211,000
7.29%
200,001-400,000 22
5,994,070
4.74%
400,001-600,000 12
6,513,422
5.16%
600,001-800,000 4
2,897,408
2.29%
800,001-1,000,000 3
2,705,542
2.14%
1,000,001 or over 10
32,869,570
26.02%
Total 33,775
126,344,212
100.00%

2. Preferred Shares: Not applicable.

  • (D) Names of major shareholders: Shareholders holding 5% or more of total shares or in the Top 10 stock option holding ratio list.

stock option holding ratio list.
stock option holding ratio list.
stock option holding ratio list.
As of 03/30/2021
Share
Shareholder’s Name
Shares		 Percentage
Ceres Investment Co., Ltd. 9,506,594 7.52%
Peter Lin 9,338,292 7.39%
Hui Fen Wang 2,954,714 2.34%
Morris Jiang 2,142,735 1.70%
National Yang Ming Chiao Tung
University		 2,141,017 1.69%
Cheng Chan Liu 2,101,039 1.66%
K Way Information Corporation 1,322,264 1.05%
Yung Wei Hsu 1,219,156 0.96%
Wei Ren Chen 1,101,000 0.87%
Prisma Commerce &
Networks,Inc.		 1,042,759 0.83%

-48-

(E) Market Price, Net Worth, Earnings, and Dividends per Share

Unit: NT$ Dollar

Item Year Year
2019		 2020 01/01/2021-
03/31/2021
Market Price per
Share		 Highest Market Price 36.25 47.60 48.25
Lowest Market Price 19.30 25.50 36.65
Average Market Price 28.78 36.05 43.09
Net Worth per
Share (Note1)		 Before Distribution 19.42 21.15 19.55
After Distribution 17.42 18.14 --
Earnings per
Share		 Weighted Average Shares
(thousand shares)		 123,354 124,381 125,420
Earnings Per Share 2.85 3.55 0.92
Dividends per
Share		 Cash Dividends 2 3 --
Free share
distribution		 Dividends from
Retained Earnings		 0 0 --
Dividends from Capital
Surplus		 0 0 --
Accumulated Undistributed
Dividends		 0 0 --
Return on
Investment		 Price / Earnings Ratio (Note 2) 10.10 10.15 --
Price / Dividend Ratio (Note 3) 14.39 12.02 --
Cash Dividend Yield Rate (Note 4) 6.95 8.32 --
Note 1：Financial data after distribution shall be resolved by the shareholders’ meeting next
year.
Note 2:Price / Earnings Ratio = Average Market Price / Earnings per Share
Note 3:Price / Dividend Ratio = Average Market Price / Cash Dividends per Share
Note 4:Cash Dividend Yield Rate = Cash Dividends per Share / Average Market Price
Note 5:2020 Earning distribution was approved by the Board of Directors on Feb. 24, 2021.

  • (F) Dividend Policy and Implementation Status

  • Dividend Policy:

The company adopts a dividend distribution policy whereby only surplus profits of the Company shall be distributed to shareholders, and considers the impact on the diluted of earning per share and return on equity, according to the company’s capital budget plan, and working capital requirement in the future. Shareholders of the company dividend distribution, of which cash dividends shall not be lower than 10% of the total shareholders’ dividends distributed for the same year.

  1. Proposal to distribute profits in the shareholders’ meeting ：

  2. Cash dividends to shareholders total NT$ 377,835,636, and NT$ 3 per share, approved by the Board of Directors on February 24, 2021.

  3. (G) Effects upon business performance and earnings per share of any stock dividend distribution proposed or adopted at the most recent shareholders' meeting ： The shareholders’ meeting shall decide not to distribute shares dividends.

  4. (H) Employees’ Compensation and Remuneration to Directors and Supervisors

  5. Employees’ Compensation and Remuneration to Directors and Supervisors as Stated in the Articles of Incorporation

According to surplus earnings each year, the company shall set aside no less than 1~15 % of them as compensation for the employees and no more than 3 % of them as compensation for directors. If the company has accumulated losses, it shall offset losses.

-49-

Surplus earnings each year as mentioned above refer to profits calculated by the current year's pretax profit before deducting of annual compensation of the employees and directors. Before establishment of the audit committee, supervisors' remuneration shall be incorporated into directors' remuneration for the purpose of calculation of the distribution ceiling of the directors' remuneration provided in the first paragraph.

In the event that the company, according to the final settlement, earns profits in a fiscal year, such profits shall first be set aside to pay the applicable taxes, offset losses, set aside for 10 % of legal reserve, and the remaining profits shall be set aside for or reversal of special reserve, plus accumulated retained earnings of the previous year, in accordance with the laws, regulations, or the business requirements. Any further remaining profits shall be distributed for stock dividends of preferred s hares, plus unappropriated earnings shall be distributed in accordance with the proposal submitted by the Board, for approval at a shareholders’ meeting.

  • 2.The basis for estimating the amount of employee, director, and supervisor compensation, for calculating the number of shares to be distributed as employee compensation, and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period. ： NA.

  • Information on any approval by the board of directors for distribution of compensation: (1) The amount of any employee compensation distributed in cash or stocks and compensation for directors and supervisors. If there is any discrepancy between that amount and the estimated figure for the fiscal year these expenses are recognized, the discrepancy, its cause, and the status of treatment shall be disclosed.

Unit ： NT$ Dollar


Unit：NT$ Dollar
Unit：NT$ Dollar
Unit：NT$ Dollar
2020
Board resolution Estimate Difference
Employee Compensation 23,613,142
23,613,142
NA
Remuneration to Directors
& Supervisors
11,806,571
11,806,571
NA

  • (2) The amount of any employee compensation distributed in stocks, and the size of that amount as a percentage of the sum of the after-tax net income stated in the parent company only financial reports or individual financial reports for the current period and total employee compensation: We don’t any employee compensation distributed in stocks.

  • The actual distribution of employee, director, and supervisor compensation for the previous fiscal year (with an indication of the number of shares, monetary amount, and stock price, of the shares distributed), and, if there is any discrepancy between the actual distribution and the recognized employee, director, or supervisor compensation, additionally the discrepancy, cause, and how it is treated.


cause, and how it is treated.


Unit：NT$ Dollar;Shares
2019
Actual distribution
amount		 Board
resolution		 Difference
Employee Compensation 18,911,284
18,911,284
NA
Remuneration to Directors
& Supervisors
9,455,642
9,455,642
NA

  • (I) Repurchase of Company Shares ： The company hasn’t repurchased any company shares in 2020.

  • B. Status of Corporate Bonds ： None.

  • C. Status of Preferred Stocks ： None.

  • D. Status of GDR/ADR ： None.

-50-

E. Employee Stock Options:

(A) Issuance of Employee Stock Options:

As of 03/31/2021 As of 03/31/2021 As of 03/31/2021 As of 03/31/2021
Type of Stock Option 2015 1stTranche 2016 1st Tranche 2017 1st Tranche
Approval date July 14, 2015 August 16, 2016 December 18, 2017
Issue date August 31, 2015 September 5, 2016 January 5, 2018 September 3, 2018
Units issued 1,000 Units 1,860 Units 2,000 Units 2,000 Units
Shares of stock options to be issued as
a percentage of outstanding shares
(Note)		 0.81% 1.51% 1.62% 1.62%
Duration From 2015/08/31 to 2021/08/30 From 2016/09/05 to 2022/09/04 From 2018/01/05 to 2024/01/04 From 2018/09/03 to 2024/09/02
Conversion measures Issuance of new shares Issuance of new shares Issuance of new shares Issuance of new shares
Conditional conversion periods
and percentages		 (1) 2017/08/31:30%
(2) 2018/08/31:60%
(3) 2019/08/31:100%		 (1) 2018/09/05:30%
(2) 2019/09/05:60%
(3) 2020/09/05:100%		 (1) 2020/01/05: 30%
(2) 2021/01/05: 60%
(3) 2022/01/05: 100%		 (1) 2020/09/03: 30%
(2) 2021/09/03: 60%
(3) 2022/09/03: 100%
Converted shares 808,000 shares 1,268,000 shares 35,000 shares 126,000 shares
Exercised amount 9,947,900 dollars 17,420,800 dollars 5,974,600 dollars 2,318,400 dollars
Number of shares
yet to be converted		 60,000 shares 398,000 shares 1,500,000 shares 1,718,000shares
Adjusted exercise price for those who
have yet to exercise their right		 The unit price is NT $ 11.70 dollars The unit price is NT $ 13.40 dollars The unit price is NT $ 16.80 dollars The unit price is NT $ 18.40 dollars
Unexercised shares as a percentage of
total issued shares (Note)		 0.05% 0.32% 1.19% 1.37%
Impact on possible dilution of
shareholdings		 The Company tends to attract and retain outstanding professionals, encourage excellent employees, and strengthen coherence of the Company, for creating benefits
for the company and shareholders. Therefore, it has a positive effect on shareholders’ equity.

Note ： Total issued shares indicate that number of issued shares of the Company registered by Ministry of Economic Affairs is 125,640,212 at present.

-51-

(B)List of Executives Receiving Employee Stock Options and the Top Ten Employees with Stock Options

As of 03/31/2021

Title Name No.
of
Stock
Options		 Stock Options as
a Percentage of
Shares Issued
(%)( Note 1 )		 Exercised Exercised Unexercised Unexercised Unexercised Unexercised
No. of
Shares
Converted		 Strike
Price
(NT$)		 Amount (NT$ thousands) Converted
Shares as a
Percentage of
Shares I ssued
(%)(Note 1)		 No. of
Shares
Converted		 Strike Price
(NT$)		 Amount (NT$ thousands) Converted
Shares as a
Percentage of
Shares Issued
(%)(Note 1)
Executive
officers		 General manager Nancy
Huang		 1,350,000 1.07 50,000
230,000
60,000		 12.4
13.4
14.2		 620,000
3,082,000
852,000		 0.04
0.18
0.05		 140,000
450,000
420,000		 13.4
16.8
18.4		 1,876,000
7,560,000
7,728,000		 0.11
0.36
0.33
General manager of the
BusinessDivisions		 Kevin Chen
Senior Director of the
Financial Management
Division		 Michelle
Chin
Employee Senior Vice General Manager Ben
Dai		 2,400,000 1.91 161,000
225,000
75,000
9,000
300,000
201,000
51,000
28,000
12,000		 11.7
12.4
13.1
13.9
13.4
14.2
16.8
17.8
18.4		 1,883,700
2,790,000
982,500
125,100
3,350,000
2,854,200
856,800
498,400
220,800		 0.13
0.18
0.06
0.01
0.24
0.16
0.04
0.02
0.01		 144,000
561,000
678,000		 13.4
16.8
18.4		 1,929,600
9,424,800
12,475,200		 0.11
0.45
0.54
Executive Assistant of the
General Manager's Office		 Gary
Wang
Vice General Manager Polina
Yuan
Vice General Manager Fanny
Cheng
Director Kammy
Chuang
Director Charles
Lin
Senior Director Jack
Yang
Product Director Bonbon
Wang
Senior Manager Roy
Kuo
Sales Director May
Chen

Note1 ： Total issued shares indicate that number of issued shares of the Company registered by Ministry of Economic Affairs is 125,640,212 at present.

-52-

F. Restricted Employee Shares:

  • (A) Issuance of New Restricted Shares:
F. Restricted Employee Shares:
(A) Issuance of New Restricted Shares:
Type of New Restricted Employee Shares 2018 Grant
Date of Effective Registration 2019/04/15
Issue date 2019/06/13
Number of New Restricted Employee Shares Issued 700,000 shares
Issued Price(NT$) Issueprice is NT$0
New Restricted Employee Shares as a Percentage of
Shares Issued (%) (Note 1)		 0.56
Vesting Conditions of New Restricted Employee
Shares		 (1) After employees received the vested shares, employees’ continuous employment with the Company through the vesting period and achievement of
personal performance are required to receive the vested shares by the portion of:
Employees, continuous employment with the Company for 1 year, will receive 25% of the vested shares.
Employees, continuous employment with the Company for 2 year, will receive 25% of the vested shares.
Employees, continuous employment with the Company for 3 year, will receive 25% of the vested shares.
Employees, continuous employment with the Company for 4 year, will receive 25% of the vested shares.
(2) After employees received the vested shares from the Company, it will redeem and cancel the issued restricted employee shares as employees breach
the labor contract and working regulations, for the restricted employee new shares that don't meet the vesting conditions.
Restricted Rights of New Restricted Employee Shares (1)
After receiving the vested shares, employees shall not sell, transfer, bestow, pledge, ask the Company to redeem, or dispose in other way the unvested
restricted shares, unless employees meet the vesting conditions.
(2)
For the restricted employee new shares that don't meet the vesting conditions, the rights of attending, proposal, speaking and voting in shareholders
meeting of the restricted employee new shares are executed by the custodian according to the trust agreement
(3)
The employees holding unvested Restricted Shares are not entitled to the rights to participate in shares and cashes dividends distribution, as well
as the preemptive right to subscribe for the new shares issued for cash capital increase. From 15 business days before the book closure date, for
shares and cashes dividends distribution, as well as the new shares issued for cash capital increase, to the record date, the employees, who meet the
vesting conditions, shall not be entitle to the rights to participate in shares and cashes dividends distribution, as well as the preemptive rights to
subscribe for the new shares issued for
cash capital increase.

-53-

(4) In case the Company applies for capital reduction by cash and other capital reduction other than capital reduction by law before employees meet
the vesting conditions, the RSA shall be cancelled by pro rata of capital reduction. In case of capital reduction by cash, the cash returned must be
given to trust and shall only be given to employees after meeting the vested conditions and period. Nonetheless in case the employees fail to meet
the vested conditions upon the expiration, the Company shall recover the cash.
(5) The RSA shares shall be kept in a custodial trust immediately after the issuance. The granted employees
have no right to ask the trustee to return the RSA shares for any reasons or by any way prior to the achievement of vesting conditions.
Custody Status of New Restricted Employee Shares The vested shares should be deposited in trust of stock, assigned the Company or appointed proxy to sign and edit the relevant trust agreement with the
trust organization, and deal with related matters for trust for employees who received the vested shares.
Measures to be Taken When Vesting Conditions are
not Met		 Restricted employee new shares as redeemed by the Company without charge will be cancelled.
Number of New Restricted Employee
Shares that have been Redeemed or Bought Back		 27,000 shares
Number of Released New Restricted Employee Shares 172,000 shares
Number of Unreleased New Restricted Shares 501,000 shares
Ratio of Unreleased New Restricted Shares to Total
Issued Shares (%) (Note)		 0.40
Impact on possible dilution of shareholding The dilution for future EPS is limited and therefore has no major impact on shareholder’s equity.

Note：Total issued shares indicate that number of issued shares of the Company registered by Ministry of Economic Affairs is 125,640,212 at present.

-54-

( B) List of Executives Receiving New Restricted Employee Shares and the Top Ten Employees with New Restricted Employee Shares ：

As of 03/31/2021
Executive
Officers		 Title Name No. of
New
Restricted
Shares		 New
Restricted
Shares as a
Percentage
of Shares
Issued
(Note 1)		 Released Unreleased
No. of
Shares		 Issued
Price (NT$)		 Amount
(NT$ thousands)		 Released
Restricted
Shares as a
Percentage of
Shares Issued
(Note1)		 No. of Shares Strike Price
(NT$)		 Amount
(NT$ thousands)		 Unreleased
Restricted
Shares as a
Percentage of
Shares Issued
(Note1)
General manager Nancy
Huang		 324,000 0.26 81,000 N.A. 10 0.06 243,000 N.A. 10 0.19
General manager of the
Business Divisions		 Kevin
Chen
Sr. Director of the
Financial Mgt.
Division		 Michelle
Chin
Employees Senior Vice General
Manager		 Ben
Dai		 200,000 0.16 50,000 N.A. 10 0.04 150,000 N.A. 10 0.12
Executive Assistant of the
General Manager's Office		 Gary
Wang
Vice General Manager Polina
Yuan
Vice General Manager Fanny
Cheng
Director Kammy
Chuang
Director Charles
Lin
Senior Director Jack
Yang
Product Director Bonbon
Wang
Senior Manager Roy
Kuo
Sales Director May
Chen

Note 1: Total issued shares indicate that the number of issued shares of the Company registered by Ministry of Economic Affairs is 125,640,212 at present.

G. Status of New Shares Issuance in Connection with Mergers and Acquisitions: NA.

H. Financing Plans and Implementation

In 2021 Q1, with respect to each uncompleted public issue or private placement of securities, and to such issues and placements that were completed in the most recent 3 years but have not yet fully yielded the planned benefits, the company doesn’t have the plan for each such public issue and private placement.

-55-

V. Operational Highlights

  • A. Business Activities

  • (A)The scope of business:

    1. The major content of business of the Company goes as follows:

The company and subsidiaries continue to master the market trend, cooperate with the manufacturers, provides leading-edge, diversified, and sound IT solutions to meet the rapid and complex trend of technology, and continue to distribute international brand － products. An upgraded and overall IT solutions is based on a motto ”A distributor that satisfies business growth requirements and digital transformation; A partner that strategies on solution based products.”.

The structure of product agency is as follows:

==> picture [471 x 393] intentionally omitted <==

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

The product strategy &
value chain Of Zero One
----- End of picture text -----

-56-

  1. Revenue distribution

2020

Revenue distribution 2020 2020
Units: NT$Thousands
Major Divisions Total Sales (%) of Total Sales
IT infrastructure 2,889,703
29.38
Network &
information security		 4,621,943
47.00
Cloud platform &
application		 1,844,467
18.76
Big data & application 474,176
4.82
Others 4,029
0.04
Total 9,834,318
100.00

  1. The main products and services of the Company

  2. (1) Big data analysis and AI application ：

Data management platform, visual analysis tools, deep-learning platform and AIO.

  • (2) System application:

Servers, automatic deployment management and surveillance, backup, storage management, files classification.

  • (3 ) Integrated communication equipment:

Mobile office application and distance conference systems, networked video/voice conference, Intelligent Video Surveillance, IP network switch.

  • (4) Virtualization application:

Servers, virtualized operating system of desktop, and hybrid cloud and automatic management.

  • (5) Cloud application:

Basic infrastructure, OA application, cloud safety, cloud delivery network.

  • (6) Information security:

Advanced persistent threat protection, DDoS protection, server security and endpoint security, gateway protection, inspection of security of web codes, authentication and access security, mail server’s protection, data security protection, IoT equipment security.

  • (7) Network equipment:

Switches, wireless networks, routers, network management systems, network equipment of data center, software- defined networking, network equipment of telecom service providers, network load balancing.

  • (8) Storage device:

Storage arrays, all-flash storage arrays, cloud-integrated applications, software-defined storage solutions, hyper- converged infrastructure solutions.

-57-

==> picture [512 x 208] intentionally omitted <==

(B)Industry overview

1.Situations and the development of the industry

The Company acts as a channel that provides enterprise integrated IT solution and valued-based professional service based on the market needs. The explanations below uses the research done by IDC, and Gartner to illustrate the current market, information equipment, cloud service and applications, network and information securities and big data and applications industries that the Company is in and the future potential.

  • (1)Information equipment:

In recent years, with the rise of new technology platforms, such as cloud, big data analysis, AI, mobile 5G and Internet of Things applications, a wave of digital transformation is starting to take place over the world, and in-depth application of new technologies has gradually promoted the industries to grow in 2019. In order to increase the competitiveness of enterprises, Taiwanese enterprises will accelerate digital transformation, and continue to increase their IT budgets and expenditures. Under the trend of more diversified product applications and more competitive the development of industries, the growth of the information equipment market will be induced by the development of creative commercial modes of enterprises, for keep upgraded equipment satisfying or conforming to requirements of the markets in the future.

(2)Cloud services and applications :

Emerging technologies have grown a lot in recent years, such as mobile applications, huge amounts of information, and social media, and it has led to the gradually increase in adoption of cloud services. From enterprise applications to consumption of public, from technological innovation to price-cutting competition, cloud services have moved towards a commodity market. According to a survey of MIC, the market of the cloud service in Taiwan is mainly on the adoption of e-mail, information security, video conferences and virtual desktops, etc. The major reason for the adoption is owing to the investment cost, resilient framework and quick introduction of software and hardware. As the development of cloud services is becoming more and more mature, Taiwan enterprises have also concentrated on and adopted cloud services, and users are interested in subscription services. People from all walks of life have begun to introduce different types of from B2C to B2B, including food, clothing, housing, transportation, education, entertainment, etc. As Yi Chih Wang points out many leading enterprises have successively launched subscription services as the newest interesting business model. IDC predicts that more than 85% of Taiwanese enterprises will plan cloud deployments in the future and expects the promotion and development of hybrid cloud to lead the development of Taiwanese enterprises of IT markets.

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Cloud and data center applications will become an important support for enterprise transformation. With rapid quickly, fast and rapid response to market changes, cloud capabilities are not only an IT issue, but also an operation issue of core business.

(3)Network & information security:

Since MIC indicates that USA versus China faces information product with distrust, due to the trade warm, Taiwan plays an important role on international; information security industry, introduces commercial opportunities of information security. Besides, it increases requirements of product of information security for Taiwanese supply chain, such as the chip, component and product line, etc.

MIC’s consultant-Yi Chih Wang points out that Taiwan has been attacked by hackers, so it becomes a lab of researching for information security by experiences of dealing with internet virus and hackers, focuses on relevant industries in order to develop technology of protection of information security. Fraudulent news and documents may trigger risks of brand product, affect business opportunities of markets, and increase requirements for digital trust in domestic and foreign enterprises, such requirements shall be increased from the financial industries to manufacturing and retail industries, etc., in the future.

(4)Big data and application:

According to information of IEK of ITRI, global requirements of information of data analysis grow rapidly, predict to reach US$15.1 billion in 2020. Future application of big data will become a pivotal tool for the development of industries and enhancing competitiveness. As for prediction of Wikibon, the top three markets of big data are professional services, anakytic application, and computing platforms. As big data become popular, the opportunity of Taiwan shall be the development of application and services, establishment of a platform of big data, supporting application of domain verification, and promotion of innovative application of big data.

IEK of ITRI deems mastering information of important customers as a key point of becoming the digital business worlds. However, with the awareness of personal information protection, the company must obtain information via other methods, forecasts increasing requirements of data mart, and promotes establishment of the innovative operation method of emerging industries, for a wave of opportunities of the development of data market.

2.Correlation between upstream, mid-stream, and downstream industries

The company belongs to the information service in the industries, and the main business activities are distribution of network software and hardware products, and professional technical services providing. As for structure model of network industries, upstream suppliers domestic and international network software and hardware manufacturers, and mid-stream is retailers, separated into the value-added and logistics retailer by providing professional services or not. The logistics retailer concentrates on product sales, and the value-added retailer provides relevant technical support services. The Company refers to the value-added retailer. For upstream manufacturers, the midstream retailer provides marketing channel for saving selling and administrative expenses of sales staff of suppliers. For the downstream system integrator, value-added and ordinary distributor, since the retailer is familiar with product structure of agent products, it can provide complete consulting services and technical support to each distributor, for achieve the efficiency of professional teamwork. Otherwise, retailers can sell products to downstream industries, with variety of the agent brands, and then provide products to end users, such as the government agencies, school, enterprises, families, and persons, etc., through cooperation with distributors.

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==> picture [434 x 236] intentionally omitted <==

==> picture [428 x 172] intentionally omitted <==

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

Government
System i
Integrator
School
Value-added retailer Value-added
IT hardware supplier distributor Enterprise
Family
Ordinary
distributor
IT software supplier Person
Logistics retailer
Others
3.Each trend of products
----- End of picture text -----

3.Each trend of products

  • (1)Software markets:

According to survey of MIC, macro-economics, manufacturing plans for observation of the development of upstream, mid-stream, downstream industries goes as follows:

Applications of 5G increase the requirements of the semiconductor markets and new technologies which make information equipment purchased and upgraded and inducing the deployment of automation. As the industries go through the process of networking and digitization, a good collection of industrial data will be taken. In response to and solving the problems of operations of manufacturing industries. Industrial APPs will become attention of industrial cloud platforms and manufacturers. International leading manufacturers have begun to deploy relevant program development and human resource cultivating.

As for streaming services and marginal computing, and the analysis of the trend of miniaturized cloud service data centers, marginal computing is based on smart connections, real-time response and data security, and induces the connection of terminal devices, marginal equipment for forming a smart environment. Compared with cloud computing, marginal computing adopts more decentralized thoughts to design computing, constructing diversified computing, products and software and hardware services between the cloud and the terminal. It can be expected that the computing, storage, and connection performance of terminal

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devices will further change in the future, and software definition and network virtualization technology will be on the edge, especially for devices in specific facilities, such as smart manufacturing industry and smart medical facilities. Forming a miniaturized cloud service data center from the upstream to downstream, the development of servo equipment and network toward new specifications and new applications is worth observing in the future.

(2)Cloud services and applications:

Oracle forecast driven by the popularity of cloud application services, 90% of manual IT operations and data management tasks in 114 fully automated years, will change the daily work of technicians require a lot of processing time, engineers will spend much time to develop advanced technologies, such as artificial intelligence and machine learning. Over the past decade, machine learning has required large servers, complex models, and extremely professional teams to put more time and resources. At present, some machine learning applications are able to put into motion sensors, and find more intelligent functions in edge devices. In 2022, IDC predicts that, 25% of global terminal equipment will have capabilities of AI edge computing. By collecting, analyzing, and learning the actions and usage habits of these AI terminal devices, with the deployment and services of 5G networks becoming more complete in the future, related feedback of it shall be transmitted back to the cloud through networking, for conforming to machine learning of the cloud. Therefore, edge computing will never replace cloud computing, but it can quickly improve the functions of cloud computing. By creating a decision system in the sensor, engineers can improve resources and save much energy and time. The successful application of these advanced technologies will be a supporting result for the service providers to move towards cloud services.

  • (3)Network and information security:

Accidental incidents of information security are increasing, and data loss has increased with each passing day, the launch and popularization of application of many emerging technologies affect development and progress of the market of information security of Taiwan. At present, more enterprises are storing important business data in the cloud and use hybrid cloud. Hence, some key business systems are preserved in the local deployment environment, and most of the data shall be transferred to the cloud. Although, this approach can increase flexibility of enterprises and reduce costs, hybrid environment may trigger conflict with rules of security, and become difficult to be controlled. As of 2025, sensitive data shared in the cloud will be expected to expand 600 times, and security threats, such as external automated attacks and abuse of authorization credentials, will also increase significantly.

As for increasing attacks, ensuring data and system resilience is critical for enterprises. However, due to the shortage of labors for internet security, enterprises don’t have enough professionals to ensure security. Hackers can easily launch attacks on systems with no patches installed. Therefore, in order to prevent endless network attacks, the best option for enterprises is to deploy autonomous systems and integrate advanced functions for security at all levels form application, data to the IT infrastructure of the chip.

During the past, enterprises adopt services of information security management to conduct surveillance and upgrade of equipment, and surveillance of the security incidents. With the rapid update of attacks and viruses, service providers begin to use new technologies, such as artificial intelligence and machine learning, to provide automatic detection, responses and digital forensics. Enterprises also change from a passive method to active ones in their defensive mode, and further extend from handling of the incidents of information securities before and after incidents happen, including advanced information security testing, threat intelligence, the practice of

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incident responses, network security trainings and other services of "Threat LifeCycle Management".

  • (4)Big data and application:

    • Besides the cloud computing and the Internet of Things, the big data market has become competitive among enterprises. Enterprises have invested many funds to obtain data sources and done data analysis. However, it is undeniable that many enterprises have the problem of limited interdisciplinary capabilities and cannot assure how to induce Data Monetization. It not only cost a lot of money in data storage, but also requires a lot of labors and materials to seek Data Monetization. 5G technology will start to become an important rule on promotion of big data and its applications, so that the different types of big data will be more centralized. For the industry of information services, as 5G is completed, it will bring a larger amount of data in more dimensions. The questions, such as introduction and application of unstructured data generated by information networking equipment in households, enterprises and even government, shall be solved, as for a large amount of unstructured data collected, before artificial intelligence identified, and training of artificial intelligence by labors. With the implementation of artificial intelligence in business competed, the data labeling completed by engineers in the laboratory shall be greatly increased. Data engineers are overwhelmed. Professional data management products and visual analysis services shall bring new business opportunities for the industry of information services.

  • Situations of competition of products

  • ; Ever-changing application of network forms various type of products. Most

  • manufacturers increase improve competitiveness and reduce costs by the adoption of distributing products by applicable value-added retailers with professional technique, resulting in aggressive competition for product prices between retailers. As the decline of profit margins, high-reliability products, high-tech support, high-network integration technology, high-quality education and training, and perfect after-sales maintenance services have become the necessary factors besides price competition.

As the products of hardware and software of IT equipment servers grow synchronously with the application requirements of the network, the products of the company and its subsidiaries are more competitive in the market, and the advantages and disadvantages of products are as follows:

  • (1)Advantages:

    • a. A retailer of network value-added products.

    • b. Cooperation with more than 2,500 distribution partners for network value-added products and solutions.

    • c. The most professional and outstanding teams grouped by product managers.

    • d. With a completed network solution of the brand-name product.

    • e. A retailer has education & training center, and exhibition center of demo machines.

    • f. A platform of services of innovative promotion.

    • g. Consulting services for professional planning.

    • h. Support services of professional technology.

    • i. The business sites of Taipei, Taichung, Kaohsiung were established for providing perfect services to customers in Taiwan.

  • (2)Disadvantages: The business model is limited to suppliers.

  • (C)Overview of technology and R&D

  • 1.Technical level and research the development of the business

The main business activities are distribution and technical support services, R&D personnel focus on technology of agent products. The company and subsidiaries distribute most product lines of hardware and software of the network, and some of them are the major selling products of international manufacturers, hence having an advantage at the technical level, bring great benefits for selling agent products of the company and its subsidiaries. Otherwise, compared to a value-added channel retailer for

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buying and selling agent products, we, a valued-added retailer, provide a full range of selling variety of products and professional services, as the field of electronic products channels is not limited to the field of the logistics channel. The company and its subsidiaries are supported by professional and technical personnel to provide customers with solutions of information products, thus laying a good image and status in the professional field of information and the network, and consolidating relationship with downstream customers.

On the other hand, in line with the inheritance of technology research and the development, the company and its subsidiaries have involved in the field of regional/wide area servers in the recent years, launching printer and network servers, winning higher reputation between the industries. Sales has yearly increased, it not only proves the company and its subsidiaries have great capabilities of research and the development of technology, and increases ranges of sources of earning profits.

2.During 2020 and as of the date of publication of this annual report, expenses of research and the development, as well as technology and products produced successfully.


research and the development, as well
successfully.
as technology and products produced
as technology and products produced
Units: Amounts in thousands of NT
Items\Year 2020 2021 Q1
Expenses of research & development 7,427 1,584
Operating revenues 9,834,318 2,895,489
Ratio of expenses of research &
development to operating revenues (%)		 0.08 0.05
  1. During 2020 and as of the date of publication of this annual report, technology and products developed and produced successfully.

The company and its subsidiaries launched competitive finished products, besides continuing to involve in the field of regional/wide area servers in the recent years, complying with new trends in the current markets, including CPE equipment networked with 4G/LTE, application of printing in the offices, etc. At recent, we put much effort in human labors for researching software and hardware of Industry IoT and involve in developing technology of Smart Edge. Application of Smart Edge helps us receive experiences and feedbacks; hence we expect to make the company competitive and increasing sales opportunities.

(D)The development of the business plan in short term and long term

  1. The short-term plan

  2. (1)To maintain relationship with top 200 distribution partners, and higher satisfaction of customers.

(2)To establish a closer relationship with manufacturers.

  • (3)To focus on the promotion of niche products to maintain high gross margin.

  • (4)To concentrate the resources for operation of product lines and win stable profits.

  • (5)To accomplish execution of the business.

  • (6)To strictly control operating expenses.

2.The long-term plan

  • (1)To introduce a product lines with much support of providing completed solutions as an object.

  • (2)To operate a promotion approach for business, based on projects of solutions.

  • (3)As for a guideline to helping customers become successful, we establish relationship with customers, in order to enhance loyalty of customers.

  • (4)To establish innovative promotion, services platform, and regulations to improve operating efficiency.

  • (5)To establish R&D standard operating procedures to ensure quality of products.

  • (6)To continue employee education and training for enhancing professional knowledge.

(7)To educate a technical team for providing services of consulting and planning.

(8)To continue to require for and execute operating details.

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B. Markets and sales Overview

(A) Market analysis

  • 1.Areas of selling or providing products and services
Units:Amountsinthousands ofNTdollars Units:Amountsinthousands ofNTdollars Units:Amountsinthousands ofNTdollars Units:Amountsinthousands ofNTdollars
Year
Area		 2019 2020
Amount % Amount %
Taiwan 8,821,731 98.95
9,745,266		 99.09
Other 93,439 1.05
89,052		 0.91
Net operating revenues 8,915,170 100.00
9,834,318		 100.00

2. Situations and growth of the supply and demand of markets

As for fraught with uncertainty of conditions of economics and politics, and the purpose of a decrease in total operating expenses, a market survey institution-Gartnerpredicts that enterprises shall purchase IT equipment and introduce solutions for improving efficiency of operation of enterprises, and making enterprises more competitive, and global IT expenditures shall reach 4.1 trillion US dollars in 2021, yearover-year growth at 8.4% compared to 2020. In 2022, the expenditures will reach a new height to 4.3 trillion US dollars, year-over-year growth at 5.5% compared to 2021.

Research data indicates that in 2021 as organizations strive to provide an environment for staff that is more comfortable, innovative and of high production value, all categories of IT will show a steady growth to help promote the overall operational efficiency of the businesses. Among the items of IT spending, devices category has the fastest growth of 14%; enterprise software (including SaaS-software as a service) comes next at a growth rate of 10.8%. In 2022 all IT spending categories will continue the trend of positive growth. It is anticipated that spending on cloud application services will exceed the traditional software purchase value. In addition, as many businesses require better IT devices (including cell phones and PCs), there will be a surge in the purchasing demand of IT device upgrade in Greater China and newly developed Asia Pacific region.

==> picture [412 x 202] intentionally omitted <==

3.Niche of competition

The company has focused on operation of solutions of software and hardware of the network, organizing value-added channels for solutions of domestic products of the network for a long time, and continually evaluating and introducing each solution of the network as for leading brands. Our business philosophy is to help customers become successful, in addition to providing completed solutions of the network, and professional services of technical support. A long term and perfect relationship with partners by providing products to distribution partners and educational training of

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technology for enhancing knowledge and sales capabilities of products of partners. Owing to keeping a good relationship with distribution partners, operating capabilities of the company is recognized by the business markets, through completed product portfolio and strong abilities of technical support. The viewpoints for explanation of competition niche are as follows:

(1)Agent and R&D of the brand-name products for completed solutions of the network:

The company has had completed solutions of hardware and software of the network, for helping customers solve all issues of the projects, and meeting different types of requirements.

The company provides leading brand-name products, with a certain reputation and reliability in the market, of all areas in the business community.

(2)Completed value-added distribution channel:

The company has had necessary operating system, virtualization, and the brand of equipment of the brand, the company has the record of transactions with most of all distribution partners, which are engaged in solutions of the network. Thus, the company has had the most completed data of distribution channels, as operating the project of value-added solutions of the network.

(3) Innovative marketing platform:

The company makes manpower devotion to carry out different types of innovative marketing platform, hope to figure out requirements of customers precisely by our leading marketing channel, which is better than the industry, and improve satisfaction of customers through more interaction between the company and distribution partners.

(4)Innovative service models:

The company has drawn upon the concept of cooperative chain combined with capabilities of distribution partners to organize the only platform of information services in the industry. The platform provides all information services, including warranty, maintenance, installation, and solutions, etc., with the function of summary and notification of network anomaly traffic detection of the infrastructure outsourcing (IO). As for an enterprise with limited manpower and budget, the company may sacrifice quality of network performance under cost consideration. Therefore, services of network monitoring enable enterprises to control connection status of network devices, and immediately receive notification of disconnection of the network by a simple and convenient method

(5)Well-equipped education and training center:

The education and training center of the company, which is the only retailer and agent who provide services of long-term education and training to salespersons of distribution partners and engineers regarding with products and technology, is wellequipped with three classrooms for up to 200 people at present, and helps distribution partners win the trust and acquire technological support of end-users, through completed education and training authorized by manufacturers.

(6)Planning services of professional consulting:

The company has had the teams of professional consulting services, and been good at different fields of solutions, which not only assist technical support of distribution partners but also train paid internship of technical support, of the network, and provided value-added services for create a competitive advantage for unique services distinct from other retailers. The company draws out strategies of innovative services and platform, points out the above competitive advantages analyzed by observation of it, based on its competitiveness, and provides services distinct from partners to maintain unique competitive advantages of the company.

  • 4.Factors of advantages and disadvantages, and countermeasures of the development for prospects

(1)Factors of advantages of the development for prospects

  • a. Invention of new technologies increase requirements of users

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Appearance of the broadband network to cloud based technology leads to different types of solutions produced and requirements of information security increased. Requirements of information security emerged, due to implementing different types of projects, and users depend on information solutions frequently. As technologies continue to develop, we concluded that IT of information industries will keep growing in the long term.

  • b. To create new opportunities in a digital era

The world shall be trapped in a storm of digitalization, beyond the borders of the countries, as technology of unmanned and automation manipulates the world day and night. For completion of global infrastructure of fiber-optic internet, we meet requirement of customers who need services of solutions, correspondent to the trend in the internet age. For example, how to establish an automated and interactive operation of the business model of promotion shall be an opportunity for huge growth of profits.

  • (2) Disadvantages and countermeasures of the development for prospects.

  • a. Cutthroat competition of the Same Trade Concerned leads to decrease profits Countermeasure strategy:

(a)To focus on core competitive advantages and provide services of differentiation.

(b)To discard the produce line of low profit margin products without value-added.

(c)To provide niche products in the niche markets and provide integrated solutions.

(d)Switch from traditional sales of singe-function products to solution-oriented approach.

  • (e)To concentrate on the channel of distribution, and enhance satisfaction of customers.

  • (f)To develop new type of the retailer, for creation of drawing up a blue ocean strategy.

  • b. Information products with a short life cycle and higher inventory risks. To make sound business decisions:

  • (a) To control time for completion of the project.

  • (b)To strictly execute surveillance and control for inventories, inspect inventories for safety stock based on market demand.

  • (c)To establish a good relationship with manufacturers, and receive new information of products.

  • (d)To make manufacturers agree with our policy of sales return.

  • (e)To increase product turnover and sales speed is the core value of the company.

  • (f)To strictly control and manage procedures of the procurement.

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  • (B)Important use, and procedures of production and manufacturing of major products 1. Important use of major products
Name of products Major purposes of products
Systematic software
of network		 In order to set up the most basic core of network, it provides implementation of
office, factory and design automation, and internet of the company.
Network application
software		 A wide range of application software is on the Internet, such as databases, anti-virus
software, e-commerce, groupware, cloud backup software, and security and
management software on the Internet.
Authorized products
by enterprises		 Systematic and application software are authorized by the various manufacturers to
the user, and the certificate of use rights by laws as the usage is large.
Hardware of Network
equipment
Hardware equipment for hardware configuration or enhancements required to
connect with the WAN and the Internet, such as routers, remote accessors, load
balancers, network caches, firewalls, etc.
Virtual platform Customers quickly develop, automate and securely use all applications. Built on a
software-defined data center that includes automated computing, storage,
networking, and security virtualization, the software-defined approach allows
customers to implement a unified hybrid cloud, and fully represents mobility of
business.
Network Storage
Equipment		 To provide complete storage solutions, including information storage, recovery,
management, protection and sharing on mainframe, open systems, NT platforms
and environments of the data center.
Cloud application Micro-enterprises also enjoy the services of large enterprises, by providing a variety
of application login management, backup mechanisms to ensure up to 4 of 9 service
levels.
Education, training,
and maintenance
services of products		 To provide partners with technical trainings and services of product maintenance and
replacement for new network products.
  1. Production Procedures of Main Products: The company distributes related software and hardware products regarding with the internet, and provides information services for goods. Since we are not a manufacturing industry, so this procedure is not applicable.

(C)Supply Status of Main Materials

Major Raw Materials Major suppliers Source of Supply Supply Situation
distributed Products NetApp USA Good
CISCO Good
Microsoft Good
Vmware Good
Akamai Good

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(D)Major Suppliers & clients

1. Names, amount and percentage of the major suppliers in the last two calendar years that exceeded 10% of total sales of the consolidated financial:

Units: NT$ Thousands

Units: NT$ Thousands Units: NT$ Thousands Units: NT$ Thousands Units: NT$ Thousands
2019 2020 2021 (As of March 31)
Item Company Name Amount Percent
(%)		 Relation
with
Issuer		 Company Name Amount Percent
(%)		 Relation
with
Issuer		 Company Name Amount Percent
(%)		 Relation
with
Issuer
1 CISCO BV 4,075,109 41.35
NA		 CISCO BV 4,158,744 40.48 NA CISCO BV 1,071,022 35.07 NA
2 NetApp 1,368,149 13.88
NA		 NetApp 1,706,351 16.61 NA NetApp 769,710
25.20		 NA
3 － － － NA － － － NA － － － NA
－ Others 4,411,792 44.77
－		 Others 4,409,270 42.91 － Others 1,213,112 39.73 －
－ Net Total Supplies 9,855,050 100.00
－		 Net Total Supplies 10,274,365 100.00 － Net Total
Supplies		 3,053,844 100.00 －

Note ： The explanation of the reason for increases or decreases ： No significant difference in the percentage of the major suppliers.

－
－		 Others
4,411,792
44.77
－
Others
4,409,270
42.91
－
Others
1,213,112
39.73
－
Net Total Supplies
9,855,050
100.00
－
Net Total Supplies
10,274,365
100.00
－
Net Total
Supplies
3,053,844
100.00
－
Note：The explanation of the reason for increases or decreases：No significant difference in the percentage of the major suppliers.		 Others
4,411,792
44.77
－
Others
4,409,270
42.91
－
Others
1,213,112
39.73
－
Net Total Supplies
9,855,050
100.00
－
Net Total Supplies
10,274,365
100.00
－
Net Total
Supplies
3,053,844
100.00
－
Note：The explanation of the reason for increases or decreases：No significant difference in the percentage of the major suppliers.		 Others
4,411,792
44.77
－
Others
4,409,270
42.91
－
Others
1,213,112
39.73
－
Net Total Supplies
9,855,050
100.00
－
Net Total Supplies
10,274,365
100.00
－
Net Total
Supplies
3,053,844
100.00
－
Note：The explanation of the reason for increases or decreases：No significant difference in the percentage of the major suppliers.		 Others
4,411,792
44.77
－
Others
4,409,270
42.91
－
Others
1,213,112
39.73
－
Net Total Supplies
9,855,050
100.00
－
Net Total Supplies
10,274,365
100.00
－
Net Total
Supplies
3,053,844
100.00
－
Note：The explanation of the reason for increases or decreases：No significant difference in the percentage of the major suppliers.		 Others
4,411,792
44.77
－
Others
4,409,270
42.91
－
Others
1,213,112
39.73
－
Net Total Supplies
9,855,050
100.00
－
Net Total Supplies
10,274,365
100.00
－
Net Total
Supplies
3,053,844
100.00
－
Note：The explanation of the reason for increases or decreases：No significant difference in the percentage of the major suppliers.		 Others
4,411,792
44.77
－
Others
4,409,270
42.91
－
Others
1,213,112
39.73
－
Net Total Supplies
9,855,050
100.00
－
Net Total Supplies
10,274,365
100.00
－
Net Total
Supplies
3,053,844
100.00
－
Note：The explanation of the reason for increases or decreases：No significant difference in the percentage of the major suppliers.		 Others
4,411,792
44.77
－
Others
4,409,270
42.91
－
Others
1,213,112
39.73
－
Net Total Supplies
9,855,050
100.00
－
Net Total Supplies
10,274,365
100.00
－
Net Total
Supplies
3,053,844
100.00
－
Note：The explanation of the reason for increases or decreases：No significant difference in the percentage of the major suppliers.		 Others
4,411,792
44.77
－
Others
4,409,270
42.91
－
Others
1,213,112
39.73
－
Net Total Supplies
9,855,050
100.00
－
Net Total Supplies
10,274,365
100.00
－
Net Total
Supplies
3,053,844
100.00
－
Note：The explanation of the reason for increases or decreases：No significant difference in the percentage of the major suppliers.		 Others
4,411,792
44.77
－
Others
4,409,270
42.91
－
Others
1,213,112
39.73
－
Net Total Supplies
9,855,050
100.00
－
Net Total Supplies
10,274,365
100.00
－
Net Total
Supplies
3,053,844
100.00
－
Note：The explanation of the reason for increases or decreases：No significant difference in the percentage of the major suppliers.		 Others
4,411,792
44.77
－
Others
4,409,270
42.91
－
Others
1,213,112
39.73
－
Net Total Supplies
9,855,050
100.00
－
Net Total Supplies
10,274,365
100.00
－
Net Total
Supplies
3,053,844
100.00
－
Note：The explanation of the reason for increases or decreases：No significant difference in the percentage of the major suppliers.		 Others
4,411,792
44.77
－
Others
4,409,270
42.91
－
Others
1,213,112
39.73
－
Net Total Supplies
9,855,050
100.00
－
Net Total Supplies
10,274,365
100.00
－
Net Total
Supplies
3,053,844
100.00
－
Note：The explanation of the reason for increases or decreases：No significant difference in the percentage of the major suppliers.		 Others
4,411,792
44.77
－
Others
4,409,270
42.91
－
Others
1,213,112
39.73
－
Net Total Supplies
9,855,050
100.00
－
Net Total Supplies
10,274,365
100.00
－
Net Total
Supplies
3,053,844
100.00
－
Note：The explanation of the reason for increases or decreases：No significant difference in the percentage of the major suppliers.
2. Names, amount and percentage of the major clients in the last two calendar years that exceeded 10% of total sales of the consolidated financial:
2019 2020 2021 (As of March 31)
Item Company Name Amount Percent
(%)		 Relation
with
Issuer		 Company Name Amount Percent
(%)		 Relation
with
Issuer		 Company Name Amount Percent
(%)		 Relation
with
Issuer
1 － － － NA Genesis Technology
Inc. (Note)		 1,001,631 10.19 NA Kinmax Technology
Inc.		 385,365
13.31		 NA
－ Others 8,915,170 100.00 － Others 8,832,687 89.81 － Others 2,510,124 86.69 －
－ Net Sales 8,915,170 100.00 － Net Sales 9,834,318 100.00 － Net Sales 2,895,489 100.00 －

Note ： The explanation of the reason for increases or decreases: Net sales of Kinmax exceeded 10% of total sales was due to the increase in the number of projects.

-68-

(E) Production in the last two Years

(E) Production in the last two Years the last two Years the last two Years the last two Years the last two Years
Units: NT$Thousand; set
Output
Major Products		 Year
2019		 2020
Quantity
(Note 2)		 Amount Quantity
(Note 2)		 Amount
Distributed Products 1.IT infrastructure 1,727,590 2,076,275
1,989,224
2,486,457
2.Network & information security 2,552,775 5,818,819
2,025,723
6,051,936
3.Cloud platform & application 27,409,090 1,528,281
56,473,579
1,494,714
4.Big data & application 30,388
522,708		 24,171
394,001
5.Others 2,152 2,744 326
1,610
Total 31,721,995 9,948,827
60,513,023
10,428,718

Note1: Capacity: We engaged in information services, hence the capacity of production is not applicable.

Note2: Quantity: Actual production is the total number of the purchase of distributing products and production of self - manufactured products.

(F) Shipments and Sales in the Last Two Years

Shipments and Sales in the Last Two Years Shipments and Sales in the Last Two Years
Units: NT$ Thousand; set
Year
Shipments & Sales
Major Products		 2019 2020
Local Export Local Export
Quantity Amount Quantity Amount Quantity Amount Quantity Amount
Distributed
Products		 1.IT infrastructure 1,388,846 2,220,448 221,057 121,124 1,760,262 2,747,684 170,494 142,019
2.Network & information security 3,140,591 4,315,845 610 18,669 2,001,686 4,606,679 57,638 15,264
3.Cloud platform & platform 25,823,112 1,625,281 1,578,674 26,499 53,180,880 1,830,408 3,124,660 14,059
4.Big data & application 33,404 529,973 223 50,678 24,840 434,815 321 39,361
5.Others 2,092 4,725 3 1,928 374 3,750 30 279
Total 30,388,045 8,696,272 1,800,567 218,898 56,968,042 9,623,336 3,353,143 210,982

-69-

C. Human Resources

As of April30,2021
As of April 30,2021
19
259
278
37.79
5.84
0%
11.51%
82.37%
6.12%
－
Year 2019 2020 As of April 30,2021
Number of
Employees		 Executive officers 18 19 19
Employee 220 230 259
Total 238 249 278
Average Age 38.3 38.47 37.79
Average Years of Service 5.97 6.53 5.84
Education Ph.D. 0% 0% 0%
Masters 7.98% 11.65% 11.51%
Bachelor’s Degree 88.66% 83.13% 82.37%
Senior High School 3.36% 5.22% 6.12%
Below Senior High － － －

D. Environmental Protection Expenditure:

The loss (including indemnify), total values of disposal, future coping strategies and possible expenditures caused by environmental pollution during the latest year and up to the printing date of this Annual Report: NA.

  • E. Labor Relations

(A) List any employee benefit plans, continuing education, training, retirement systems, and the status of their implementation, and the status of labor-management agreements and measures for preserving employees' rights and interests.

  1. Employee welfare policy

(1)Insurance

Except for the statutory labor and health insurance, and distribution of labor pension, each employee is insured for group and casualty insurance, as well as travel accident insurance on a business trip.

  • (2)Aspects of health and safety

  • a. Annual physical examination of employees shall be held, as the Company pays attention to the result of physical examination of employees. If the employee agrees, the Company assists the employees, who have had abnormal results or special situations of physical examination, in tracking and observing for treatment, and assuring the employee keeping healthy.

  • b. For enhancing recognition of awareness of firefighting and disaster prevention, and preventing that the employee being too nervous to trigger an accident from conflagration and other disasters, the Company shall hold annual courses of fire safety for increasing general knowledge of firefighting.

  • c. The building of the headquarter of the Company is equipped with AED, and regular safety seminars and CPR courses are held to instruct the employee in usage, in case of emergency.

  • (3)For traveling

  • a. Employees' welfare committee of the Company holds annual activities of domestic and international traveling, with NT$ 20,000 of reimbursement for traveling each person.

  • b. The Company shall regularly hold “family day”, the year-end party, different recreational and artistic activities, in order to provide physical and mental relaxation, and create new interactive experience for employees.

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(4) Clubs

The Company encourages employees to form the clubs, including aerobic exercise and yoga club, mountaineering club, and boxing club, hold activities, and provide compensation, in order to inspire employees to participate in proper and healthy recreational activities beside the work, and decrease stress from the work and families.

  • (5)Vacation

The regulations of vacation of the Company is better than the provisions of the Labor Law, and statistical reports are regularly provided for executive officers to figure out situations of colleagues, and the company helps colleagues achieve a balance between the work and life.

  • (6)Survey for employee satisfaction

The Company conducts annual on-the-job interviews, investigates employees’ satisfaction to the work, and formulate improvements for help employees enjoy their work, based on the conclusion of statistical analysis and advises of colleagues.

  • (7)Birthday, wedding and funeral

The Company regularly holds birthday celebrations, provides cash gifts for employees whose birthday is in the very month, and provides NT$ 2,000~8,000 dollars for wedding allowance, and NT$ 3,000~20,000 dollars for funeral allowance, and NT$ 3,000~6,000 dollars for admission to a hospital and emergency aids.

  • (8)Childbirth allowance

For childbirth of employees and spouse, the Company shall provide NT$ 3,000 dollars per child.

  • (9) Other allowance

The Company provides cash gifts and gifts for Mid-Autumn Festival, Dragon Boat Festival, Labor Day and Chinese New Year.

  • (10) Hardware equipment

The Company provides luxury coffee machine, organic coffee beans of Starbucks, lunchbox heater, microwave ovens, the parking lot of employees, etc., and also committed to a women friendly workplace, such as providing a comfortable and private feeding room, with no pressure of postpartum breastfeeding, and a lounge for providing employees a facility to hold meetings and eat meals.

2.On-the-job training of employees

The Company seems employees as our important assets for their training and future development. As for cultivation of talent and critical technology management, " education and training management measures for employees" is set up for employee on- the-job training, and we allocate funds to implement various internal or external education and training, with regular or irregular recruitment of lecturers to hold lectures, for enhancement of professional skills of employees and inspiration of self-growth, in line with their different hierarchy and professions. Also, we set 150 ping of a professional training center with 50 computers for education, in order to educate employees and help them take refresher courses.

  • 3.The system and implementation of retirement

According to “Rules Governing Organization of Supervisory Committee of Business Entities’ Labor Retirement Reserve” on November 1, 1986, the Company sets supervisory committee of business entities’ labor retirement reserve, and distributes the allocation account of workers' retirement reserve fund. the retirement reserve should be allocated

-71-

After the implementation of the new rules of labor retirement in 2005, except for contribution of the actual retirement reserve based on the job tenure regulated by old rules, for employees who choose to adopt new rules, the Company has made monthly contributions equal to 6% of each employee’s monthly salary to employees’ pension accounts.

Employees assigned by the Company shall make their job be guaranteed, and their job tenure shall be extended, in order to help transfer talented people in the group.

  1. Agreement between labor and management

  2. The Company always pays higher attention on the harmony relation with labor and management, regularly holding meetings, in line with benefitssharing of labor and management, and putting much effort in the Company’s prospect.

  3. 5.Various policies for maintenance of employees’ rights

  4. The Company concentrates on employees’ opinions, massages of the policies of the Company correctly transmitted, and two-way communication, and establishes multiple methods for communication with employees, whose voice shall help relationship between labor and management better.

  5. (1) We hold a semi-annual meeting for employees every half year by the executive officers, who report operational situations semiannually, business plan, and future goals, announce new information, for helping employees realize state of operation and prospect of the Company. Besides, the executive officers shall semi-annually praise the employees for outstanding performance, for fostering labor harmony.

  6. (2) The Company hasn’t set union yet, but shall hear the voice of employees through the conference of labor and management every quarter, with twoway communication with employees, whose ideas may be adopted for room for improvement, helping foster labor harmony.

  7. (3) The Company sets the committee of employee benefits to enhance employees’ benefits by funds provided by the Company.

  8. Measures to improve employee benefits or interests compared with the previous year

  9. (1) The allowance of health inspection was increased with various inspection items, in order to protect health of employees.

  10. (2) The Company organized dinner gathering to create stronger bonds between employees and harmony.

  11. (3) The Company held Family Day activity with no charge for staff and their family members and promote happiness in families and social harmony.

  12. (4) As for promoting the atmosphere of physical activity, the Company formed Sports Club, in order to help employee exercise and release pressure off the work.

  13. (5) The Company had signed the contracts with 5 daycare centers in the chain or private form, in order to provide a best child-care policy to employees.

  14. (B) Loss suffered from labor disputes in the latest year and up to the printing date of this Annual Report: None.

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F. Important Contracts

Agreement Counterparty Period Major Contents Restrictions
Distributor
Agreement		 Akamai 2020.05.17~2021.05.17 Authorized to distributing cloud services
products
Territory:
Taiwan
CISCO 2020.08.01~2021.07.31 Authorized
to
distributing
network
telecommunications
equipment
F5 2010.09.01~2021.08.31 Authorized
to
distributing
products of F5
Microsoft 2018.09.01~2021.08.31 Authorized
to
distributing
software products of MOLP,
SELECT
NetApp 2020.05.01~2021.04.30 Authorized to distributing the data
service of hybrid cloud
Nutanix 2020.07.06~2021.07.05 Authorized
to
distributing
products of Nutanix
NVIDIA 2020.05.29~2021.05.28 Authorized
to
distributing
products of Nvidia
Palo Alto
Networks		 2020.09.22~2021.09.21 Authorized
to
distributing
products of information security
Synology 2020.05.31~2021.05.30 Authorized to distributing products of
anti-virus software or enterprise
authorized
Trend Micro 2020.01.01~2020.12.31 Authorized to distributing products of
anti-virus software or enterprise
authorized
Veeam 2020.04.27~2021.04.26 Authorized to distributing virtual back-
up products
Veritas 2020.10.03~2021.10.02 Authorized
to
distributing
products of Veritas
VMware 2020.04.01~2021.03.31 Authorized
to
distributing
products of VMware

-73-

VI. Financial Information

A. Five-Year Financial Summary

(A)Condensed Balance Sheet

1. Consolidated Condensed Balance Sheet–Based on IFRS


1. Consolidated C
1. Consolidated C
ondensed Balance Sheet–Based on IFRS
ondensed Balance Sheet–Based on IFRS
ondensed Balance Sheet–Based on IFRS
ondensed Balance Sheet–Based on IFRS
ondensed Balance Sheet–Based on IFRS
ondensed Balance Sheet–Based on IFRS
Units: NT$ Thousands
Year
Item		 Financial Summary for The Last Five Years (Note 1) As of March 31,
2021
（Note 3）
2016 2017 2018 2019 2020
Current assets 3,067,517 3,180,231 3,779,240 4,489,720 4,649,078 4,948,138
Property, Plant and
Equipment (Note 2)		 303,812 310,083 313,715 314,412 308,367 306,276
Intangible assets 1,427 970 950 1,395 1,238 1,347
Other assets
（Note 2）		 18,399 21,222 41,095 47,850 55,534 73,346
Total assets 3,454,395 3,618,710 4,393,847 5,225,352 5,471,676 5,847,639
Current
liabilities		 Before
distribution		 1,416,482 1,504,140 2,166,142 2,771,478 2,774,855 3,336,755
After
distribution		 1,563,172 1,663,624 2,350,745 3,021,052 3,152,691 －
Non-current liabilities 20,835 21,403 23,115 27,685 27,409 28,907
Total
liabilities		 Before
distribution		 1,437,317 1,525,543 2,189,257 2,799,163 2,802,264 3,365,662
After
distribution		 1,584,007 1,685,027 2,373,860 3,048,737 3,180,100 －
Equity
attributable
to
shareholders of the parent		 2,009,206 2,083,972 2,196,297 2,420,304 2,657,270 2,470,346
Capital stock 1,212,655 1,224,804 1,228,965 1,246,352 1,256,402 1,263,292
Capital surplus 421,421 434,135 446,515 470,136 478,757 481,206
Retained
earnings		 Before
distribution		 391,853 440,534 537,661 696,340 887,761 645,151
After
distribution		 245,163 281,050 353,058 446,766 509,925 －
Other equityinterest (16,723) (15,501) (16,844) 7,476) 34,350 80,697
Treasury stock － － － － － －
Non-controlling interest 7,872 9,195 8,293 5,885 12,142 11,631
Total
equity		 Before
distribution		 2,017,078 2,093,167 2,204,590 2,426,189 2,669,412 2,481,977
After
distribution		 1,870,388 1,933,683 2,019,987 2,176,615 2,291,576 －

Note 1 ： Financial data from 2016 to 2020 has been audited and reviewed by the CPA.

Note 2 ： No reevaluation of assets has been conducted throughout the years.

Note 3 ： Financial data in 2021 Q1 has been reviewed by the CPA.

Note 4 ： The earning distribution of 2020 was approved by Board of Director on February 24, 2021.

-74-

2. Parent Condensed Balance Sheet–Based on IFRS

Units: NT$ Thousands

2. Parent Condensed 2. Parent Condensed Balance Sheet–Based on IFRS
Units: NT$ Thousands		 Balance Sheet–Based on IFRS
Units: NT$ Thousands		 Balance Sheet–Based on IFRS
Units: NT$ Thousands		 Balance Sheet–Based on IFRS
Units: NT$ Thousands		 Balance Sheet–Based on IFRS
Units: NT$ Thousands
Year
Item		 Financial Summary for The Last Five Years (Note 1)
2016 2017 2018 2019 2020
Current assets 2,950,212 3,009,604 3,652,816 4,385,048 4,501,049
Property, Plant and Equipment
（Note 2）		 302,077 308,819 312,926 313,991 307,276
Intangible assets 952 893 902 1,358 765
Other asset (Note 2) 17,477 20,013 38,998 44,606 40,257
Total assets 3,377,377 3,556,852 4,370,583 5,198,062 5,416,016
Current
liabilities		 Before
distribution		 1,347,246 1,451,434 2,151,171 2,750,082 2,735,367
After distribution 1,493,936 1,610,918 2,335,774 2,999,656 3,113,203
Non-current
liabilities		 20,925 21,446 23,115 27,676 23,379
Total
liabilities		 Before
distribution		 1,368,171 1,472,880 2,174,286 2,777,758 2,758,746
After distribution 1,514,861 1,632,364 2,358,889 3,027,332 3,136,582
Capital stock 1,212,655 1,224,804 1,228,965 1,246,352 1,256,402
Capital surplus 421,421 434,135 446,515 470,136 478,757
Retained
earnings		 Before
distribution		 391,853 440,534 537,661 696,340 887,761
After distribution 245,163 281,050 353,058 446,766 509,925
Other equity interest (16,723)
(15,501)		 (16,844) 7,476) 34,350)
Treasury stock － － － － －
Total
equity		 Before
distribution		 2,009,206 2,083,972 2,196,297 2,420,304 2,657,270
After distribution 1,862,516 1,924,488 2,011,694 2,170,730 2,279,434

Note 1 ： Financial data from 2016 to 2020 has been audited and reviewed by the CPA.

Note 2 ： No reevaluation of assets has been conducted throughout the years.

Note 3 ： The earning distribution of 2020 was approved by Board of Director on February 24, 2021.

-75-

(B) ; Condensed Statement of Comprehensive Income/Condensed Statement of Income

  • 1.Consolidated Condensed Statement of Comprehensive Income – Based on IFRS
Units: NT$ Thousands Units: NT$ Thousands Units: NT$ Thousands Units: NT$ Thousands Units: NT$ Thousands
Year
Item		 Financial Summary for The Last Five Years (Note 1) As of March 31,
2021
（Note 2）
2016 2017 2018 2019 2020
Operatingrevenue 5,932,359 5,967,589 6,647,352 8,915,170 9,834,318 2,895,489
Grossprofit 579,268 588,291 681,744 896,158 1,046,126 279,734
Income
from
operations		 258,122 234,694 280,582 399,789 504,640 131,999
Non-operating
income
and
expenses		 7,923 9,812 34,373 43,013 49,335 13,542)
Income before tax 266,045 244,506 314,955 442,802 553,975 145,541
Income from operations of
continued segments
- after tax		 225,344 194,906 252,037 349,155 440,398 115,331
Income
from
discontinued
operations		 － － － － － －
Net income(Loss) 225,344 194,906 252,037 349,155 440,398 115,331
Other
comprehensive
income
(income after tax)		 3,691 610 (7,173) 26,728) 21,860) 64,318)
Total comprehensive income
229,035		 195,516 244,864 375,883 462,258 179,649
Net income attributable
to shareholders of the
parent		 224,077 195,983 252,939 351,313 441,623 115,828
Net income attributable to
non- controlling interest		 1,267 (1,077) (902) (2,158) (1,225) (497)
Comprehensive
income
attributable
to
Shareholders of the parent		 227,768 196,593 245,766 377,991 463,499 180,160
Comprehensive
income
attributable
to
non-
controlling interest		 1,267 (1,077) (902) (2,108) (1,241) (511)
Earnings per share 1.85 1.61 2.06 2.85 3.55 0.92

Note1 ： Financial data from 2016 to 2020 has been audited and reviewed by the CPA.

Note2 ： Financial data in 2021 Q1 has been reviewed by the CPA.

Note3 ： No discontinued operation.

-76-

2.Parent Condensed Statement of Comprehensive Income – Based on IFRS

Units: NT$ Thousands

Year
Item		 Financial Summary for The Last Five Years（Note 1） Financial Summary for The Last Five Years（Note 1） Financial Summary for The Last Five Years（Note 1） Financial Summary for The Last Five Years（Note 1）
2016 2017 2018 2019 2020
Operating revenue 5,629,077 5,836,451 6,551,970 8,826,659 9,658,778
Gross profit 522,138 572,670 649,278 865,943 997,244
Income from operations 241,713 242,322 282,640 409,151 511,320
Non-operating income &
expenses		 20,366 2,988 32,837 35,264 43,589
Income before tax 262,079 245,310 315,477 444,415 554,909
Income from operations of
continued segments
- after tax		 224,077 195,983 252,939 351,313 441,623
Income from discontinued
operations		 － － － － －
Net income (Loss) 224,077 195,983 252,939 351,313 441,623
Other comprehensive income
(income after tax)		 3,691 610 (7,173) 26,678 21,876)
Total
comprehensive
income		 227,768 196,593 245,766 377,991 463,499
Earnings per share 1.85 1.61 2.06 2.85 3.55

Note 1：Financial data from 2016 to 2020 have all been inspected and authenticated by CPAs.

Note 2：No discontinuing operation.

(C) Auditors’ Opinions in the last five years

Year Accounting Firm CPA Audit Opinion
2016 Deloitte & Touche, Taiwan,
Republic of China		 Wen Chin Lin,
LiWen Kuo		 An unqualified opinion
2017 Wen Chin Lin,
Hsin Wei Tai
2018
2019
2020 Cheng Ming Lee
Pei De Chen

-77-

B. Five-Year Financial Analysis

(A)Consolidated Financial Analysis – Based on IFRS

Item Year Financial Analysis for the Last Five Years（Note 1） Financial Analysis for the Last Five Years（Note 1） Financial Analysis for the Last Five Years（Note 1） Financial Analysis for the Last Five Years（Note 1） Financial Analysis for the Last Five Years（Note 1） As of March 31,
2021
（Note2）
2016 2017 2018 2019 2020
Financial
structure (%)		 Debt Ratio 41.61 42.16 49.83 53.55 51.21 57.56
Ratio of long-term capital
to property, plant and
equipment		 663.92 675.03 702.74 772.16 874.55 819.81
Solvency (%) Current ratio 216.56 211.43 174.47 180.41 167.54 148.29
Quick ratio 184.13 178.19 130.09 126.59 121.91 116.62
Interest earned ratio
(times)		 223.07 654.76 880.76 214.40 261.20 2747.06
Operating
performance		 Accounts receivable
turnover(times)		 3.84 3.61 3.75 4.54 4.71 5.03
Average collectionperiod 95.05 101.10 97.33 80.39 77.49 72.56
Inventory turnover (times) 12.42 11.50 8.33 7.09 6.86 9.17
Accounts payable
turnover(times)		 4.96 4.49 4.11 4.35 4.11 4.56
Average days in sales 29.39 31.73 43.81 51.48 53.21 39.80
Property, plant and
equipment turnover
(times)		 19.40 19.44 21.31 28.39 31.58 37.69
Total asset turnover
(times)		 1.77 1.69 1.66 1.85 1.84 2.05
Profitability Return on total assets (%)
6.77		 5.52 6.30 7.29 8.27 8.15
Return on stockholders'
equity (%)		 11.49 9.48 11.73 15.07 17.29 17.91
Pre-tax income to paid-in
capital(%)		 21.94 19.96 25.63 35.53 44.09 11.52
Profit ratio(%) 3.80 3.27 3.79 3.92 4.48 3.98
Earningsper share(NT$) 1.85 1.61 2.06 2.85 3.55 0.92
Cash flow Cash flow ratio(%) 14.04 25.82 2.54 16.57 10.24 2.02
Cash flow adequacy ratio
(%)		 36.54 75.10 76.96 116.34 88.33 89.14
Cash reinvestment ratio
(%)		 3.63 10.87 (4.47) 7.97 1.22 2.54
Leverage Operatingleverage 274.88 229.36 245.39 210.71 189.63 186.22
Financial leverage 100.47 100.16 100.13 100.52 100.42 100.04
Analysis of financial ratio differences for the last two years. (Not required if the difference does not exceed 20%):
1. The increase in interest earned ratio was mainly due to the increase in profit before tax.
2. The increase in pre-tax income to paid-in capital was mainly due to the increase in profit before tax.
3. The increase in earnings per share was mainly due to the increase in profit after tax.
4. Cash flow: The decreases in cash flow, cash flow adequacy and cash reinvestment ratio were mainly due to the decrease
in net cash generated from operating activities.

Note 1: Financial data from 2016 to 2020 have all been inspected and authenticated by CPAs. Note 2: 2021 Q1 financial data has been reviewed by CPAs.

Note 3: The calculation formula goes as follows.

  • 1.Financial Structure

  • (1) Debt Ratio = total liabilities / total assets

  • (2) Ratio of long-term capital to property, plant and equipment = (total equity + non-current liabilities) / net worth of property, plant and equipment

  • 2.Solvency

  • (1) Current ratio = current assets / current liabilities

  • (2) Quick ratio = (current assets – inventory – prepaid expenses) / current liabilities

  • (3) Interest coverage ratio = income before income tax and interest expenses / current interest expenses

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  • 3.Operating ability

  • (1) Receivables (including accounts receivable and notes receivable arising from business operations) turnover rate = net sales / average receivables (including accounts receivable and notes receivable arising from business operations) for each period

  • (2) Average collection days for receivables = 365 / receivables turnover rate

  • (3)Inventory turnover rate = cost of sales / average inventory

  • (4) Payables (including accounts payable and notes payable arising from business operations) turnover rate = cost of sale / average payables (including accounts payable and notes payable arising from business operations) for each period

  • (5) Average days of sale = 365 / inventory turnover rate

  • (6) Property, plant and equipment turnover rate = net sales / average net worth of property, plant and equipment

  • (7) Total asset turnover rate = net sales /average total asset

4.Profitability

(1)Return on assets = [net income + interest expenses (1- tax rate)] / average total assets

(2)Return on equity = net income / average total equity

  • (3) Profit margin before tax = net income / net sales

  • (4) Earnings per share = (profit and loss attributable to owners of the parent – dividends on preferred shares) / weighted average number of issued shares

  • 5.Cash flow

  • (1) Cash flow ratio = Net cash flow from operating activities / current liabilities

  • (2) Net cash flow adequacy ratio = Net cash flow from operating activities for the most recent five years / (capital expenditures + inventory increase + cash dividend)

(3) Cash flow reinvestment ratio = (Net cash flow from operating activities – cash dividend) / gross property, plant and equipment value + long-term investment + other non-current asset+ working capital)

  • (1) Operating leverage = (net operating revenue – variable operating costs and expenses) / operating income

  • －

  • (2) Financial leverage = operating income / (operating income interest expenses)

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(B) Parent Financial Analysis–Based on IFRS

(B) Parent Financial Analysis–Based on (B) Parent Financial Analysis–Based on IFRS IFRS IFRS IFRS IFRS
Fiscal Year
Items for Analysis		 Financial Analysis for the Last Five Years（Note1）
2016 2017 2018 2019 2020
Financial
Structure
（％）		 Debt Ratio 40.51
41.41
49.75		 53.44 50.94
Ratio of long-term capital to property, plant
and equipment		 672.06
674.82
701.86		 771.32 872.39
Solvency
(%)		 Current ratio 218.98
207.35
169.81		 159.45 164.55
Quick ratio 185.49
174.90
125.51		 111.25 118.97
Interest earned ratio (times) 425.08
680.53
882.22		 217.37 272.35
Operating
performance		 Accounts receivable turnover(times) 3.77
3.58
3.72		 4.53 4.69
Average collectionperiod 96.82
101.96
98.12		 80.57 77.83
Inventoryturnover(times) 12.31
11.66
8.43		 7.11 6.85
Accountspayable turnover(times) 5.03
4.60
4.14		 4.34 4.07
Average days in sales 29.65
31.30
43.30		 51.34 53.28
Property, plant and equipment turnover (times) 18.62
19.11
21.08		 28.16 31.09
Total assets turnover(times) 1.74
1.68
1.65		 1.84 1.82
Profitability Return on total assets(%) 7.56
5.66
6.39		 7.38 8.35
Return on stockholders' equity (%) 12.51
9.58
11.82		 15.21 17.40
Pre-tax income topaid-in capital(%) 21.61
20.03
25.67		 35.66 44.17
Profit ratio(%) 3.98
3.36
3.86		 3.98 4.57
Earningsper share(NT$) 1.85
1.61
2.06		 2.85 3.55
Cash flow Cash flow ratio(%) 12.33
28.77
5.28		 14.16 10.15
Cash flow adequacyratio(%) 44.05
85.53
84.69		 118.29 90.26
Cash reinvestment ratio(%) 2.11
12.28
(1.98)		 8.00 1.00
Leverage Operatingleverage 238.88
216.67
235.57		 199.17 179.29
Financial leverage 100.26
100.15
100.13		 100.50 100.40
Analysis of financial ratio differences for the last two years. (Not required if the difference does not exceed 20%):
1. The increase in interest earned ratio was mainly due to the increase in profit before tax.
2. The increase in pre-tax income to paid-in capital was mainly due to the increase in profit before tax.
3. The increase in earnings per share was mainly due to the increase in profit after tax.
4. Cash flow: The decreases in cash flow, cash flow adequacy and cash reinvestment ratio were mainly due to the decrease in net
cash generated from operating activities.

  1. The increase in interest earned ratio was mainly due to the increase in profit before tax.

  2. The increase in pre-tax income to paid-in capital was mainly due to the increase in profit before tax.

  3. The increase in earnings per share was mainly due to the increase in profit after tax.

  4. Cash flow: The decreases in cash flow, cash flow adequacy and cash reinvestment ratio were mainly due to the decrease in net cash generated from operating activities.

Note1 ： Financial data from 2016 to 2020 have all been inspected and authenticated by CPAs. Note2 ： Calculation formula is same as the above table(A) Note3.

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C. Audit Committee’s Report for the Year 2020

Zero One Technology Company Ltd.

Audit Committee’s Review Report

The Board of Directors has prepared the company’s 2020 Consolidated, and Parent Company Only Financial Statements. The CPAs of Deloitte & Touche, Cheng Ming Lee and Pei De Chen, were retained to audit ZOTC’s Financial Statements. The Business Report, Financial Statements, and profit allocation proposal have been reviewed and determined to be correct and accurate by the supervisors of ZERO ONE Technology Company Limited. According to Article 14-4 of Securities and Exchange Act, and Article 219 of the Company Act, we hereby submit this report.

Sincerely,

The 2021 Annual Shareholders’ Meeting

The Audit Committee of ;ZERO ONE TECHNOLOGY COMPANY LIMITED

Chairperson: Ming Yuan Lin

24 February 2021

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  • D. Consolidated Financial Statements for the Years Ended December 31, 2020 and 2019, and Independent Auditors’ Report: Please refer to page 90 to 146 of the annual report.

  • E. Financial Statements for the Years Ended December 31, 2020 and 2019, and Independent Auditors’ Report: Please refer to page 147 to 215 of the annual report.

  • F. If the Company or its affiliates have experienced financial difficulties in the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report, the annual report shall explain how said difficulties will affect the Company's financial situation: None.

VII. Review of Financial Conditions, Financial Performance, and Risk Management

  • A. Analysis of Financial Status

The annual report shall list the main reasons for any material change in the Company's assets, liabilities, or equity during the past 2 fiscal years, and describe the effect thereof. Where the effect is of material significance, the annual report shall describe the measures to be taken in response （ The following amount during the past 2 fiscal years varied by 20 percent or more and the affected amount is NT$10 million or more ）

Units: NT$ Thousands

Year
Item		 2019 2020
Amount % Note
Current Assets 4,489,720 4,649,078 159,358) 3.55% (1)
(2)
Property, Plant and Equipment 314,412 308,367 (6,045) (1.92%)
Intangible Assets 1,395 1,238 (157) (11.25%)
Other Assets 47,850 55,534 7,684) 16.06%
Total Assets 5,225,352 5,471,676 246,324) 4.71%
Current Liabilities 2,771,478 2,774,855 3,377) 0.12%
Noncurrent Liabilities 27,685 27,409 (276) (1.00%)
Total Liabilities 2,799,163 2,802,264 3,101) 0.11%
Total Equity Attributable to
Owners Of The Company		 2,420,304 2,657,270 236,966) 9.79%
Capital Stock 1,246,352 1,256,402 10,050) 0.81%
Capital Surplus 470,136 478,757 8,621) 1.83%
Retained Earnings 696,340 887,761 191,421) 27.49%
Other Equity 7,476 34,350 26,874) 359.47%
Treasury Stock － － － －
Non-Controlling Interest 5,885 12,142 6,257) 106.32%)
Total Stockholders' Equity 2,426,189 2,669,412 243,223 10.02%
1. Analysis of changes in financial ratios: (Changes by 20% or more and NTD 10 million or more)
(1) The increase in retained earnings was mainly due to the increase in net profit after tax in 2020.
(2) The increase in other equity was mainly due to the increase in unrealized gain on investments in equity instrument.
2. Future response actions: None

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B. Analysis of financial performance

Units: NT$ Thousands

Year
Item		 2019 2020 Differences
Amount		 Differences % Note
Net Revenue 8,915,170 9,834,318 919,148 10.31%
Gross operating profit 896,158 1,046,126 149,968 16.73%
Profit from operations 399,789 504,640 104,851 26.23% (1)
Non-business income and expenditure 43,013 49,335 6,322 14.70% (1)
Pre-tax profit 442,802 553,975 111,173 25.11% (1)
Net profit (losses) 349,155 440,398 91,243 26.13%
Other comprehensive (loss) income for
the year,net of income tax		 26,728 21,860 (4,868)
(18.21%)
(2)
Total comprehensive (loss) income 375,883 462,258 86,375 22.98%
1. Analysis of changes in financial ratios: (changes by 20% or more and NTD 10 million or more)
(1) The increases in profit from operations, pre-tax profit and net profit were mainly due to the increase in sales volume in
2020.
(2) Total comprehensive (loss) income was mainly due to the increase in net profit in 2020.
2. A sales volume forecast and the basis therefor, and the effect upon the Company's financial operations as well as measures to be
taken in response:
(1) As for products distribution, the Company will continue to focus on sales of various IT’s software, cloud platform and
application, network and information security, big data of AI and its application and value-added services, owing to most
types of products and services, with high unit prices, belonging to project sales and value-added services, hence we forecast
sales volume in 2021 will be similar to the sales volume in past years.
(2) We expect our operating results conduct no material effects on our finance and business, with no change in our business plan
and a perfectfinancialstructurein 2020.

  1. A sales volume forecast and the basis therefor, and the effect upon the Company's financial operations as well as measures to be taken in response:

  2. (2)We expect our operating results conduct no material effects on our finance and business, with no change in our business plan and a perfect financial structure in 2020.

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C. Analysis of Cash Flow

(A)Cash Flow Analysis for the Current Year

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Units: NT Thousands
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Net cash flow from
Net cash flow from Remedies for shortage in cash
Balance of cash Investing and Financing Balance of cash
business activities
at start activities throughout the (shortage)
throughout the year
of term (1) (2) year (3) (1)+(2)-(3) Investment plan Wealth
management plan
335,497 284,098 18,295 637,890 － －
1. Cash utilization and liquidity analysis of the current year:
(1) Business activities: Net cash generated NT$ 284,098 thousand.
(2) Investing activities: Net cash generated NT$ 416,635 thousand; It is generated mainly by disposal of financial
instrument.
(3) Financing activities: Net cash used NT$ 390,699 thousand;(with Effect of foreign Exchange 7,641); It is generated
mainly by the decrease of short-term loans and distribution of cash dividends.
2. Remedy for Cash Deficit and Liquidity Analysis: Not applicable.
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(B)Cash Flow Analysis for the Coming Year

Units: NT Thousands

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Expected net cash flow
Balance of cash flow from business Expected net cash from Investing and Expected balance Expected remedies for shortage in cash
at start activities Financing activities of cash (shortage)
of term (1) throughout the year (3) (1)+(2)-(3)
throughout the year (2)
Wealth
Investment plan
management plan
637,890 418,121 377,844 678,167 － －
1. Cash utilization and liquidity analysis for the coming year:
(1) Business activities: Since the increase of operating revenues is expected, cash generated from operating revenue shall be NT$ 418,121
thousand.
(2) Investing activities: We don’t have any important investment plan in the future.
(3) Financing activities: Net cash used due to distribution of cash dividends.
2. Expected remedies for shortage in cash and liquidity analysis: Not applicable.
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D. Major Capital Expenditure Items and Source of Capital: None.

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  • E. Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans, and Investment Plans for the Coming Year

  • (A)Investment Policy

Our investment policy not only focuses on investing IT-related manufacturing and services industries for broadening the business horizon in IT-related services industries, but also concentrated on investing a company with positive rate of return, hence we decide whether shall we continue to invest a company or not, by reviewing the growth rate of return of our investee.

  • (B)Main Causes for Profits or Losses, Improvement Plans in the previous Year.

Units: NT Thousands

Item Main
Businesses		 Income
(Loss)
Amount		 Reasons for
Gain or
Loss		 Action
Plan
Zotech Technology Co., Ltd. Services of
telecommunication
apparatus		 364 Increase in
government
funding		 None.
ZeroneWin Investment Co.,
Ltd.		 Investment (712)
A subsidiary
established in
2017, and it
haven’t earned
profits yet.		 Positive
business
growth is
ongoing and
expected to
contribute to
the profits of
the parent
company in
the future.
Asiaone Holdings Ltd. Holding company (93)
An Offshore
Company
established in
2019, and it
haven’t earned
profits yet.
WingWill International Co.,
Ltd.		 Services of cloud
information software		 (5,582)
A sub-subsidiary
established in
2017, and it
haven’t earned
profits yet.
Techone(Shanghai)Co.,Ltd. Tenical service for
network technology		 (27)
A sub-subsidiary
established in
2020, and it
haven’t earned
profits yet.
PetaCom technology Co.,
Ltd.		 Services of
information product
agent		 4,057) Increase in
revenue from
consulting service		 None.
  • (C)Investment Plan for the Next 12 Months: Will make distinction in terms of the sales function and distributed brands, a new subsidiary will be established.

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F. Analysis of Risk Management

  • (A)Effects of Changes in Interest Rates, Foreign Exchange Rates and Inflation on Corporate Finance, and Future Response Measures.

Units: NT Thousands

Units: NT Thousands
Remarks Effects on gain or loss Future plan
Changes in
interest rates		 Balance of loan Level of
interest
rates of
loans		 Interest
expenses
(Thousand)		 Effects of
changes in
retained
earnings		 By regularly evaluating the
interest rate of the bank loans, and
its effects on gain or loss of the
Company, we shall acquire a
favorable interest rate of loans
by actual requirements.
Balance of loan is zero thousand
in 2020.
-		 2,129; 0.04
dollars;
Changes in
foreign
exchange rates		 The Company is mainly on
domestic sales. The Company's
distributed product line
includes a large proportion of
import from foreign
manufacturers.
Therefore, the recent annual
exchange rate of US dollar has
a considerable impact on the
Company's profitability.		 Foreign exchange
gains are 10,077
thousand in 2020.		 0.26
dollars;		 Imported materials are calculated
in US dollars. In order to reduce
risks of the foreign exchange rate,
financial assets in US dollars will
be purchased to balance liabilities
in US dollars.
If Taiwan currency appreciates as
expected, then the foreign
currency exposure proportion
shall be increased to no more
than 50% of the average value of
US$ liabilities.
Inflation The Company belongs to the service industry of information software, distributing foreign authorized products for
domestic sales. Inflation of domestic raw materials has no significant impact on the Company.

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  • (B) Policies, Main Causes of Gain or Loss and Future Response Measures with Respect to High-risk, High-leveraged Investments, Lending or Endorsement Guarantees, and Derivatives Transactions.

  • Policies, Main Causes of Gain or Loss and Future Response Measures with Respect to High-risk, High-leveraged Investments, and Derivatives Transactions:

    • The Company and its subsidiaries are not engaged in high-risk and

    • highly leveraged investments. The policy of trading of the derivative is to reduce the risk of changes in the fair value of the assets and liabilities of the Company and its subsidiaries. Under this principle, the Company engages in forward exchange transactions to circumvent the risk of changes in cash flows arising from fluctuations by the change of foreign exchange rate due to transactions’ purchase prices that are denominated in US dollars.

  • 2.Policies, Main Causes of Gain or Loss and Future Response Measures with Respect to Lending or Endorsement Guarantees:

    • As of the print date of the annual report, the Company has lent loan to

    • indirectly 87.93% of the holding company(Wing Will International Co., Ltd.), with a limit of NT$ 20 million, and to 100% of the holding company(Zerone Win Investment Co., Ltd.), with a limit of NT$ 50 million as approved by the Board on April 14, 2021, according to the " Regulations Governing Loaning of Funds and Making of Endorsement /Guarantees ", and announced related information on time.

  • (C) Future Research & Development Projects and Corresponding Budgets.

Except for the Company and its subsidiaries focusing on information services of products distribution, we continue to make an effort in research and development of our products and application in IoT markets. 1.Product

  1. Print Server: In response to the recent shortage of parts, design and improvement of subsite materials is underway. This is an important R&D focus and activity for the coming year.

    1. Generation II-carbon remover R&D, including the adhesive design to the side of the printer and validated by lab tests.

  2. 2.Relevant Research & Development plan of Smart Edge

  3. Embedded AI model includes a) the application of acoustic AI in the production line; b)the application of image recognition AI in the production line.

  4. Data Collection: with the newly developed MLOps platform which enables the data collection of the lower end of IoT, the total amount of R&D expense to be invested in this project is approximately NT$ 6 million.

  5. (D) Effects of and Response to Changes in Policies and Regulations Relating to Corporate Finance and Sales.

There were no significant changes in policies and regulations relating to corporate finance and sales as of the date of publication of the annual report in 2021 and 2020. In the event of a significant change in policies and regulations relating to corporate finance and sales, the Company would consult with or engage legal practitioners and or public accountants to assess the impact and develop a response plan, in order to obey the laws and reduce effects of changes in policies and regulations relating to corporate finance and sales.

  • (E) Effects of and Response to Changes in Technology and the Industry Relating to Corporate Finance and Sales.

In the case of technological changes, the Company will adjust the direction of product development and sales distribution on time in response to changes in

-87-

market products that affect the Company's gain or loss. In addition, the Company shall be highly sensitive to changes in industrial technologies and receive market news in response to the impact of financial business due to changes in the industry.

  • (F) The Impact of Changes in Corporate Image on Corporate Risk Management, and the Company’s Response Measures. 

     - The Company has always obeyed the law, put much effort in strengthening

 - corporate governance, and maintain a good corporate image. So far, there has not been a situation that will change the corporate image, so it has not caused the impact of corporate crisis management.

  • (G) Expected Benefits from, Risks Relating to and Response to Merger and Acquisition Plans: None.

  • (H) Expected Benefits from, Risks Relating to and Response to Factory Expansion Plans: None.

  • (I) Risks Relating to and Response to Excessive Concentration of Purchasing Sources and Excessive Customer Concentration: 

     - The major sales customers of the Company and its subsidiaries are

 - diversified, apart from Kinmax Technology (10.19), individual revenues of the sales customers are not more than 10%, so no risk of concentration of sales exist. The major top 2 suppliers are 57.09% of the total amount for purchases, which are internationally famous software suppliers. The Company and its subsidiaries are also the major distributor of the manufacturer, and maintain a long-term relationship with them, by reduction of the risk of concentrated purchases through diversification of sales products and continuous development of new products.

  • (J) Effects of, Risks Relating to and Response to Large Share Transfers or Changes in Shareholdings by Directors, Supervisors, or Shareholders with Shareholdings of over 10%: None.

  • (K) Effects of, Risks Relating to and Response to the Changes in Management Rights: None.

  • (L) Litigation or Non-litigation Matters: 

     1. List major litigious, non-litigious or administrative disputes that: The Company have been involved or concluded by means of a final and unappealable judgment, or are still under litigation. Where such a dispute could materially affect shareholders' equity or the prices of the Company's securities, the annual report shall disclose the fact of the dispute, amount of money at stake in the dispute, the date of litigation commencement, the main parties to the dispute, and the status of the dispute as of the previous year: There is no dispute could materially affect shareholders' equity or the prices of the Company's securities.

 2. List major litigious, non-litigious or administrative disputes that: involve the Company and/or any company director, any company supervisor, the general manager, any person with actual responsibility for the firm, any major shareholder holding a stake of greater than 10 percent, and/or any company or companies controlled by the Company; and (2) have been concluded by means of a final and unappealable judgment or are still under litigation. Where such a dispute could materially affect shareholders' equity or the prices of the Company's securities, the annual report shall disclose the fact of the dispute, amount of money at stake in the dispute, the date of litigation commencement, the main parties to the dispute, and the status of the dispute as of the previous 2 years: None.
    • (M)Other Major Risks: None.

  • G. Other material matters: None.

-88-

VIII. Special Disclosure

  • A. Summary of affiliated companies in recent years：

  • (A)Consolidated business report of affiliated companies:

    1. Affiliated companies’ chart

==> picture [498 x 200] intentionally omitted <==

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

Zero one technology co., ltd.
100.00% 85.37% 100.00%
ZeroneWin Investment Co., Ltd. Zotech Technology Co., Ltd. Asiaone Holdings Ltd.
100.00% 87.93% 70.00%
PetaCom technology Co., Ltd. WingWill International Co., Ltd. Techone (Shanghai) Co., Ltd.
----- End of picture text -----

  1. Summary of each affiliated company
2. Summary of e ach affiliated company
Company Date of
Incorporation
Place of Registration		 Capital
Stock
(NT$)		 Main business or
production
activities
Zotech Co., Ltd. 2014/06/20 2F.,No.5,Aly.22,Ln.513, Ruiguang
Rd., Neihu Dist., Taipei City		 41,000,000 Services of
telecommunication
apparatus
ZeroneWin
Investment Co., Ltd.		 2017/04/06 10F., No.8, Ln.360, Sec. 1, Neihu
Rd., Neihu Dist., Taipei City		 149,000,000 Investment
WingWill
International Co., Ltd		 2017/07/07 9F., No.8, Ln.360, Sec.1, Neihu Rd.,
Neihu Dist., Taipei City		 10,000,000 Services of cloud
information
software
Petacom Technology
co., ltd.		 2017/07/07 9F., No.6, Ln. 360, Sec.1, Neihu Rd.,
Neihu Dist., Taipei City
50,000,000		 Services of
information
product agent
Asiaone Holdings
Ltd		 2019/06/27 Suite1, Commercial House
One, Eden Island, Republic of
Seychelles		 10,063,000 Holding company
Techone (Shanghai)
Co., Ltd.		 2020/10/31 Room501, Building14, No.258,
Chen-Jia-Chiao Rd., Min-Xin
District, ShanghaiCity, ChinaPRC		 13,131,000 Technical service for
network technology		 
  - (B) Consolidated financial statements of affiliated companies：Please refer to Page. 90 to 146

  - (C) Report of affiliated companies ： Not applicable.

  • B. Private Placement Securities in the Most Recent Years：None.

  • C. Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years: None.

  • D. Other supplementary information：None.

  • IX. Any of the situations listed in Article 36, paragraph 3, subparagraph 2 of the Securities and Exchange Act, which might materially affect shareholders' equity or the price of the company's securities, has occurred during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report: None.

  • 89 -

Code：3029

ZERO ONE TECHNOLOGY CO., LTD.

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS FOR THE

YEARS ENDED DECEMBER 31, 2020 AND 2019 AND INDEPENDENT AUDITORS’ REPORT

Address: 10F., No.8, Ln. 360, Sec. 1, Neihu Rd., Taipei City. Office Number : +886 2 2656 5656

  • 90 -

§TABLE OF CONTENTS§

Contents
1、Cover
2、Table of Contents
3、Declaration of consolidation of financial statements of
affiliates
4、Independent Auditors’ Audit Report
5、Consolidated Balance Sheets
6、Consolidated Statements of Comprehensive Income
7、Consolidated Statements of Changes in Equity
8、Consolidated Statements of Cash Flows
9、Notes to Consolidated Financial Statements
(1) General
(2) The date and procedures of authorization of financial
statements
(3);Application of new and revised standards and
interpretations
(4) Summary of significant accounting policies
(5) Critical Accounting judgments and key sources of
estimation and uncertainty
(6) Explanation of significant accounts
(7) Related parties transactions
(8) Pledged assets
(9) Significant contingent liabilities and unrecognized
commitments
(10)Foreign-currency-denominated assets and liabilities
that have significant influence
(11) Separately disclosed items
A. Information on significant transactions
B. Information on investees
C. Intercompany relationships and significant
intercompany transactions
D. Information on investment in Mainland China
E. Information on Major Shareholders
(12)Segment information		 Page
No.
1
2
3
4～7
8
9～10
11
12～13
14
14
14～15
15～24
24
24～45
45
45
45
45～46
46、50～
53
46、54
46、55
47、56
47、57
47～49		 Financial
Report’s
Note No.
-
-
-
-
-
-
-
1
2
3
4
5
6～26
27
28
29
30
31
31
31
31
31
32
  • 91 -

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The entities that are required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2020 (starting from 1 January till 31 December, 2020) are all the same as those included in the consolidated financial statements prepared in conformity with the International Financial Reporting Standard 10, “Consolidated Financial Statements.” In addition, the information required to be disclosed in the consolidated financial statements is included in the consolidated financial statements. Consequently, Zero One Technology Co., Ltd. and its subsidiaries do not prepare a separate set of consolidated financial statements.

Very truly yours,

ZERO ONE TECHNOLOGY CO., LTD.

By

Chia Hsin, Lin

Chairman

February 24, 2021

  • 92 -

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders Zero One Technology Co., Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Zero One Technology Co., Ltd. and subsidiaries (the “Group”), which comprise the consolidated balance sheets as of December 31, 2020 and 2019, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2020 and 2019, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2020. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters for the Group's consolidated financial statements for the year ended December 31, 2020 are stated as follows:

Valuation of allowance for uncollectible accounts

Key Audit Matters

As indicated in Note 5 and Note 10, the management of the Group assesses the collectability of accounts receivable and valuation of allowance for uncollectible accounts, based on the regulations of IFRS 9, and recognizes allowance for uncollectible accounts by lifetime expected credit losses. As the estimation of allowance for uncollectible accounts is subject to judgment of the management, we consider the valuation of allowance for uncollectible accounts a key audit matter.

The following audit procedures

Our audit procedure includes evaluating the policy of recognizing loss allowance for expected credit losses, understanding and testing internal controls of allowance for uncollectible accounts by the management that are in line with periodic reviews, design and implement of relevant controls. We also obtain an aging analysis

  • 93 -

report of accounts receivable for calculation the allowance for uncollectible accounts on the balance sheet date, and perform the procedure of sampling and auditing to evaluate the correctness of the aging analysis report, and examine the valuation of allowance for uncollectible accounts and related reasons so as to evaluate the appropriate nature of the expected credit losses.

Allowance for inventory valuation loss

Key Audit Matters

The valuation of the inventory of the Group includes the estimate of net realizable value and the allowance for inventory valuation loss regarding outdated and obsolete inventory. Net realizable valuation, based on the historical data of market situation and similar products, of the inventory is the carrying amounts calculated by the estimate sales price deducts the estimate of input costs, and cost of goods sold, during the ordinary course of business. The material influence of market condition will affect the amount of net realizable valuation. Besides, the ratio of the allowance for inventory valuation loss is valued by inventory aging and the allowance for the actual loss. We consider the estimate of net realizable valuation, and the ratio of the allowance for inventory impairment loss of the outdated and obsolete inventories based on management's judgment, a key audit matter.

The following audit procedures

Our procedure includes understanding the accounting policies, valuation methods, and citation information originality for the inventory of the Group, obtaining information of the year-end allowance for inventory valuation loss and inventory aging analysis reports, sampling to ensure the reasonableness of the inventory as valued by net realizable value method and the inventory aging, and the carrying amount of the year-end allowance for inventory valuation loss fitting the Group’s accounting policy for allowance.

Other Matter

We have also audited the parent company only financial statements of Zero One Technology Co., Ltd. as of and for the years ended December 31, 2020 and 2019 on which we have issued an unmodified opinion.

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

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

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

Those charged with governance (including members of the Audit Committee) are responsible for overseeing the Group's financial reporting process.

Auditors' Responsibilities for the Audit of the Consolidated Financial Statements

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

  • 94 -

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

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

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

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

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

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

  6. ;Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2020 and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

  • 95 -

The engagement partners on the audit resulting in this independent auditors' report are Chen Ming, Lee and Pei Te, Chen.

Deloitte & Touche

Taipei, Taiwan Republic of China February 24, 2021

Notice to Readers

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

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

  • 96 -

ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 4 and 6)

Financial assets at fair value through profit or loss – current (Notes 4 and 7)

Financial assets at amortized cost – current (Notes 4 and 9)

Notes receivable (Notes 4, 5 and 10)

Trade receivables (Notes 4, 5 and 10)

Current tax assets (Notes 4 and 22)

Inventories (Notes 4, 5 and 11)

Other current assets

Total current assets


NON-CURRENT ASSETS

Financial assets at fair value through profit or loss - non-current (Notes 4 and 7)

Financial assets at fair value through other comprehensive income - non-current (Notes 4 and 8)
Financial assets at amortized cost - non-current (Notes 4, 9 and 28)

Property, plant and equipment (Notes 4, 14 and 28)

Right-of-use assets (Notes 4 and 15)

Other intangible assets

Deferred tax assets (Notes 4 and 22)

Refundable deposits

Prepayments for investments

Total non-current assets


TOTAL



LIABILITIES AND EQUITY
CURRENT LIABILITIES

Short-term borrowings (Note 16)

Trade payables

Other payables (Note 17)

Current tax liabilities (Notes 4 and 22)

Lease liabilities - current (Notes 4 and 15)

Other current liabilities

Total current liabilities


NON-CURRENT LIABILITIES

Deferred tax liabilities (Notes 4 and 22)

Lease liabilities - non-current (Notes 4 and 15)

Net defined benefits liabilities - non-current (Notes 4 and 19)

Other noncurrent liabilities

Total non-current liabilities


Total liabilities


EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Notes 4 and 20)

Share capital

Ordinary shares

Capital surplus

Retained earnings

Legal reserve

Special reserve

Unappropriated earnings

Total retained earnings

Other equity

Total equity attributable to owners of the Company


NON-CONTROLLING INTERESTS


Total equity


TOTAL
 December 31, 2020
Amount
%

$ 637,890
12

360,873
7

238,510
4

230,490
4

1,909,941
35

831
-

1,242,141
23


28,402

-


4,649,078

85




35,391
1

339,515
6

69,526
1

308,367
6

13,027
-

1,238
-

37,594
1

7,940
-


10,000

-


822,598

15


$ 5,471,676
100




$ -
-

2,245,464
41

246,382
5

59,661
1

7,484
-


215,864

4


2,774,855

51




20
-

5,607
-

20,982
-


800

-


27,409

-



2,802,264

51






1,256,402

23


478,757

9


219,863
4

-
-


667,898

12


887,761

16


34,350

1


2,657,270

49




12,142

-



2,669,412

49


$ 5,471,676
100		 December 31, 2020
Amount
%

$ 637,890
12

360,873
7

238,510
4

230,490
4

1,909,941
35

831
-

1,242,141
23


28,402

-


4,649,078

85




35,391
1

339,515
6

69,526
1

308,367
6

13,027
-

1,238
-

37,594
1

7,940
-


10,000

-


822,598

15


$ 5,471,676
100




$ -
-

2,245,464
41

246,382
5

59,661
1

7,484
-


215,864

4


2,774,855

51




20
-

5,607
-

20,982
-


800

-


27,409

-



2,802,264

51






1,256,402

23


478,757

9


219,863
4

-
-


667,898

12


887,761

16


34,350

1


2,657,270

49




12,142

-



2,669,412

49


$ 5,471,676
100		 December 31, 2020
Amount
%

$ 637,890
12

360,873
7

238,510
4

230,490
4

1,909,941
35

831
-

1,242,141
23


28,402

-


4,649,078

85




35,391
1

339,515
6

69,526
1

308,367
6

13,027
-

1,238
-

37,594
1

7,940
-


10,000

-


822,598

15


$ 5,471,676
100




$ -
-

2,245,464
41

246,382
5

59,661
1

7,484
-


215,864

4


2,774,855

51




20
-

5,607
-

20,982
-


800

-


27,409

-



2,802,264

51






1,256,402

23


478,757

9


219,863
4

-
-


667,898

12


887,761

16


34,350

1


2,657,270

49




12,142

-



2,669,412

49


$ 5,471,676
100		 December 31, 2019 December 31, 2019 December 31, 2019 December 31, 2019
Amount
$ 637,890
360,873
238,510
230,490
1,909,941
831
1,242,141
28,402

4,649,078

35,391
339,515
69,526
308,367
13,027
1,238
37,594
7,940
10,000

822,598

$ 5,471,676

$ -
2,245,464
246,382
59,661
7,484
215,864

2,774,855

20
5,607
20,982
800

27,409

2,802,264

1,256,402

478,757

219,863
-
667,898

887,761

34,350

2,657,270

12,142

2,669,412

$ 5,471,676
 Amount
$ 335,497
65,425
699,048
279,128
1,754,979
1,314
1,319,535
34,794

4,489,720

30,280
251,768
81,624
314,412
8,303
1,395
42,509
5,341
-

735,632

$ 5,225,352

$ 150,000
2,035,186
381,418
57,249
4,553
143,072

2,771,478

793
3,803
21,918
1,171

27,685

2,799,163

1,246,352

470,136

184,732
16,844
494,764

696,340

7,476

2,420,304

5,885

2,426,189

$ 5,225,352
 %





















































































































































































































7

1

13

5

34

-

25
1
86

1

5

1

6

-

-

1

-
-
14
100

3

39

7

1

-
3
53

-

-

1
-
1
54
24
9

4

-
9
13
-
46
-
46
100

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

  • 97 -

ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES

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


OPERATING REVENUE (Note 4)
Net sales

OPERATING COSTS (Notes 11 and 21)
Cost of goods sold

GROSS PROFIT

OPERATING EXPENSES (Notes 19 and 21)
Selling and marketing expenses
General and administrative expenses
Research and development expenses
Reversal of expected credit losses (Note 10)

Total operating expenses

PROFIT FROM OPERATIONS

NON-OPERATING INCOME AND EXPENSES
(Notes 4 and 21)
Interest income
Other income
Other gains and losses (Note 13)
Net gain on derecognition of financial assets at
amortized cost (Note 9)
Finance costs

Total non-operating income and expenses

PROFIT BEFORE INCOME TAX
INCOME TAX EXPENSE (Notes 4 and 22)

NET PROFIT
 2020 %
100
89

11


4

2

-
-

6

5


1

-

-

-
-

1


6
1

5
 2019
Amount
$ 9,834,318
8,788,192

1,046,126

402,658
134,663
7,427

3,262)

541,486

504,640

17,768
16,943
15,493
1,260

2,129)

49,335

553,975
113,577

440,398
 Amount
$ 8,915,170
8,019,012

896,158


359,766

135,483

7,021

5,901)

496,369

399,789


22,977

10,646

7,720

3,745

2,075)

43,013


442,802
93,647

349,155
 %




(


(






















(






(
















100
90
10

4

1

-
-
5
5

-

-

-

-
-
-

5
1
4

(Continued)

  • 98 -
OTHER COMPREHENSIVE INCOME (LOSS)
(Notes 19 and 22)
Items that will not be reclassified subsequently to
profit or loss:
Remeasurement of defined benefit plans

Unrealized gain (loss) on investments in equity
instruments designated as at fair value through
other comprehensive income
Income tax relating to remeasurement of defined
benefit plans
Items that may be reclassified subsequently to profit
or loss:
Exchange differences on translation of the
financial statements of foreign operations

Other comprehensive income (loss) for the year, net
of income tax

TOTAL COMPREHENSIVE INCOME FOR THE
YEAR

NET PROFIT ATTRIBUTABLE TO:
Owners of the Company

Non-controlling interests


TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Owners of the Company

Non-controlling interests


EARNINGS PER SHARE (Note 23)

From continuing operations

Basic

Diluted
 2020 %

-

-

-
-

-

5


5
-

5


5
-

5


 2019
Amount
( $ 212 )
21,924
43

105


21,860

$ 462,258

$ 441,623
(
1,225)

$ 440,398

$ 463,499
(
1,241 )

$ 462,258



$ 3.55
$ 3.44		 Amount
( $ 1,157 )

27,654

231

-


26,728

$ 375,883

$ 351,313
(
2,158)

$ 349,155

$ 377,991
(
2,108)

$ 375,883

$ 2.85
$ 2.77		 %























-

-

-
-
-
4

4
-
4

4
-
4

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

(Concluded)

  • 99 -

ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

BALANCE, JANUARY 1, 2019


Appropriation of the 2018 earnings

Legal reserve

Special reserve

Cash dividends distributed by the Company-NT $1.5 per share

Net profit (loss) for the year ended December 31, 2019


Other comprehensive income (loss) for the year ended December
31, 2019

Total comprehensive income (loss) for the year ended December
31, 2019.

Convertible bonds converted to capital stock


Share based payment transaction – restricted stock awards


Share based payment transaction - employee stock option


Issuance of restricted stock awards


Issuance of ordinary shares under employee share options


Cash dividends distributed by subsidiaries


Disposals of investments in equity instruments at fair value through
other comprehensive income

BALANCE, DECEMBER 31, 2019


Appropriation of the 2019 earnings

Legal reserve

Special reserve

Cash dividends distributed by the Company– NT $2.0 per share

Net profit (loss) for the year ended December 31, 2020


Other comprehensive income (loss) for the year ended December
31, 2020

Total comprehensive income (loss) for the year ended December
31, 2020.

Changes in percentage of ownership interests in subsidiaries


Share based payment transaction – restricted stock awards


Share based payment transaction - employee stock option


Recall of unissued shares of restricted stock awards


Issuance of ordinary shares under employee share options


Cash dividends distributed by subsidiaries


Disposals of investments in equity instruments at fair value through
other comprehensive income

Non-controlling interests


BALANCE,DECEMBER 31, 2020
 Equity Attributable to Owners of the Company Equity Attributable to Owners of the Company Equity Attributable to Owners of the Company Equity Attributable to Owners of the Company Total
$ 2,196,297

-
-

184,603 )
351,313
(
26,678

377,991
(
5,099
4,767
11,431

-
9,322
-
(
-

2,420,304
-
-

249,574 )
441,623
(
21,876
(
463,499
(

3,199 )
5,088
6,894
-
14,258
-
(

-
-

$ 2,657,270
 Non-
controlling
Interests
Total Equity
$ 8,293 $ 2,204,590
-
-
-
-

- (
184,603 )

2,158 )
349,155
50

26,728

2,108)

375,883
-
5,099
-
4,767
-
11,431
-
-
-
9,322

300 ) (
300 )
-

-
5,885 2,426,189
-
-
-
-

- (
249,574 )

1,225 )
440,398

16)

21,860

1,241)

462,258

3,199
-
-
5,088
-
6,894
-
-
-
14,258

108 ) (
108 )
-
-
4,407

4,407
$ 12,142
$ 2,669,412
Share Capital
Shares
(In Thousand)
Issued Capital Capital Surplus
122,896
$ 1,228,965
$ 446,515

-
-
-
-
-
-
-
-
-
-
-
-

-

-

-


-

-

-

338
3,377
1,722
-
-
-
-
-
11,431
700
7,000
8,156
701
7,010
2,312
-
-
-

-

-

-

124,635
1,246,352
470,136
-
-
-
-
-
-
-
-
-
-
-
-

-

-

-


-

-

-

-
-
(
2,481 )
-
-
-
-
-
6,894
(
12 ) (
120 )
120
1,017
10,170
4,088
-
-
-
-
-
-

-

-

-


125,640
$ 1,256,402
$ 478,757
Retained Earnings
Total
$ 537,661


-

-

184,603 )
351,313

926)

350,387

-
-
-
-
-
-

7,105)

696,340

-
-

249,574 )
441,623

169)

441,454


718 )
-
-
-
-
-
259
-

$ 887,761
Other Equity		 Total
$ 16,844 )
-
-
-
(
-
27,604

27,604

-
4,767
-

15,156 )
-
-
7,105


7,476

-
-
-
(
-
22,045

22,045

-
(
5,088
-
-
-
-

259 )
-

$ 34,350
Exchange
Differences on
Translation of
the Financial
Statements of
Foreign
Operations
Unrealized Gain
(Loss) on
Financial Assets
at Fair Value
Comprehensive
Income
$ -
( $ 16,844 )
-
-
-
-

-
-
-

-


-

27,604



-

27,604

-

-

-

-

-

-

-

-
(

-

-

-
-


-

7,105


-

17,865
(
-

-
-

-

-

-

-

-


74

21,971



74

21,971



-

-

-

-

-

-

-

-

-

-

-

-

-
(
259 )


-

-


$ 74
$ 39,577
(		 Unearned
Employee
Benefits
$ -
(
-
-
-
-
-

-

-
4,767
-

15,156 ) (
-
-
-


10,389 )
-
-
-
-
-

-

-
5,088
-
-
-
-

-
(
-

$ 5,301)

Legal Reserve
Special Reserve
Unappropriated
Earnings
$ 159,438
$ 15,501
$ 362,722

25,294
-
(
25,294 )
-
1,343
(
1,343 )
-
-
(
184,603 ) (
-
-

351,313


-

-
(
926)
(


-

-

350,387

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

-

-
(
7,105)
(
184,732
16,844
494,764
35,131
-
(
35,131 )
-
(
16,844 )
16,844
-
-
(
249,574 ) (
-
-
441,623

-

-
(
169)
(

-

-

441,454


-
-
(
718 ) (
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
259

-

-

-

$ 219,863
$ -
$ 667,898

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

  • 100 -

ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax
Adjustments for:
Depreciation expenses
Amortization expenses
Reversal of expected credit losses
Net gain on fair value change of financial assets/liabilities at fair
value through profit or loss
Finance costs
Net gain on derecognition of financial assets at amortized cost
Interest income
Dividend income
Compensation costs of employee share options
Gain on disposal of investments accounted for using equity method
(Reversal of write-down) write-down of inventories
Net loss on foreign currency exchange
Changes in operating assets and liabilities
Financial assets mandatorily classified as at fair value through profit
or loss
Notes receivable
Trade receivables
Inventories
Other current assets
Trade payables
Other payables
Other current liabilities
Net defined benefit liabilities
Cash generated from operations
Income tax paid
Net cash generated from operating activities		 2020
$ 553,975
22,861
802
(
3,262 )
(
5,141 )
2,129
(
1,260 )
(
17,768 )
(
10,911 )
11,982

(
275 )
(
7,372 )
6,571
(
295,418 )
48,638
(
153,446 )
82,122
3,596
214,634
(
133,506 )
72,792
(
1,148)
390,595
(
106,497)

284,098		 2019

$ 442,802

20,457

787

(
5,901 )

(
8,097 )

2,075

(
3,745 )

(
22,977 )

(
4,406 )

16,198

-

27,469

25,578

39,356

(
117,998 )

(
19,874 )

(
413,439 )

(
4,253 )

368,180

132,826

36,001
(
818)

510,221
(
97,847)

412,374

(Continued)

  • 101 -
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of financial assets at fair value through other comprehensive
income
Proceeds from sale of financial assets at fair value through other
comprehensive income
Proceeds from the return of capital upon investees' capital reduction of
financial assets at fair value through other comprehensive income
Purchase of financial assets at amortized cost
Disposal of financial assets at amortized cost
Proceeds from disposal of investments accounted for using equity
method
Increase in prepayments for investments
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Increase in refundable deposits
Payments for intangible assets
Interest received
Other dividends received
Net cash generated from (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term borrowings
Repayments of short-term borrowings
Proceeds from guarantee deposits received
Refund of guarantee deposits received
Repayment of principal portion of lease liabilities
Dividends paid
Exercise of employee share options
Interest paid
Dividends paid to non-controlling interests
Increase in non-controlling interests
Net cash used in financing activities
EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF
CASH AND CASH EQUIVALENTS HELD IN FOREIGN
CURRENCIES
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR		 2020
( $ 93,118 )
24,217
3,078
(
236,229 )
707,148
275
(
10,000 )
(
7,507 )
540
(
2,599 )
(
645 )
20,564

10,911

416,635
-
(
150,000 )
-
(
371 )
(
7,178 )
(
249,574 )
14,258
(
2,133 )
(
108 )

4,407
(
390,699)
(
7,641)
302,393

335,497
$ 637,890		 2019

( $ 104,261 )

25,470

3,320

(
179,521 )

64,955

-

-

(
7,123 )

-

(
2,184 )

(
670 )

20,773

4,406
(
174,835)

50,000

-

371

-

(
6,215 )

(
184,603 )

9,322

(
2,071 )

(
300 )

-
(
133,496)
(
7,172)

96,871

238,626
$ 335,497

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

(Concluded)

  • 102 -

ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2020 and 2019

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

1. GENERAL

Zero One Technology Co., Ltd. (ZOTC) was incorporated as a company limited by shares under the provisions of the Group Law of the Republic of China on June 27, 1980. On January 21, 2000, ZOTC’s Shares were listed on Taipei Exchange (TPEX). On August 26, 2002, ZOTC’s shares were listed on the Taiwan Stock Exchange (TWSE). ZOTC is a dedicated foundry in the technology industry which engages mainly in the design, manufacturing, packaging, selling, consulting and services of electronic information, computer software, hardware, accessories, components and Chinese data processing, etc.

The consolidated financial statements are expressed by the functional currency (New Taiwan Dollars) of the Group.

2. THE DATE AND PROCEDURES OF AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying consolidated financial statements were approved by the Board of Directors and issued on February 24, 2021.

3. ;APPLICATION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

  • (1)Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) (collectively, “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC).

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

  • (2)The IFRSs endorsed by the Financial Supervisory Commission (FSC) for application starting from 2021
New IFRSs
Amendments to IFRS 4, “Extension of the Temporary Exemption
from Applying IFRS 9”
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
“Interest Rate Benchmark Reform – Phase II”
Amendments to IFRS16 “Covid-19 leases – rent concessions”		 Effective Date
Announced by IASB
Effective as announced
January 1, 2021 for annual
reporting periods
June 1, 2020 for annual
reporting period

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

  • (3)New IFRSs in issue by the IASB but not yet endorsed and issued into effect by the FSC
New IFRSs
Annual Improvements to IFRS Standards 2018-2020
Amendments to IFRS 3 “Reference to the Conceptual Framework:
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture”

IFRS 17 “Insurance Contracts”

Amendments to IFRS 17
Amendments to IAS 1 “Classification of Liabilities as Current or
Noncurrent”
Amendments to IAS 1 “Disclosure of accounting policies”
Amendments to IAS 8 “Definition of accounting estimates”
Amendments to IAS 16 “Property, Plant and Equipment – Proceeds
before Intended Use”
Amendments to IAS 37 “Onerous Contracts – Cost of Fulfilling a
Contract”
 Effective Date
Announced by the IASB (Note 1)
January 1, 2022 (Note 2)
January 1, 2022 (Note 3)
To be determined by IASB
January 1, 2023
January 1, 2023
January 1, 2023
January 1, 2023 (Note 6)
January 1, 2023 (Note 7)
January 1, 2022 (Note 4)
January 1, 2022 (Note 5)

  • 103 -

  • Note 1 ： Unless stated otherwise, the above new, revised or amended standards and interpretations are effective for annual periods beginning on or after their respective effective dates.

  • Note 2 ： The amendments to IFRS 9 are applied prospectively to modifications and exchanges of financial liabilities that occur on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IAS 41 “Agriculture” are applied prospectively to the fair value measurements on or after the annual reporting periods beginning on or after January, 2022. The amendments to IFRS 1 “First-time Adoptions of IFRSs” are applied retrospectively for annual reporting periods beginning on or after January 1, 2022.

  • Note 3 ： The amendments are applicable to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2022.

  • Note 4 ： The amendments are applicable to property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021.

  • Note 5 ： The amendments are applicable to contracts for which the entity has not yet fulfilled all its obligations on January 1, 2022.

  • Note 6 ： The amendments are effective for annual periods beginning on or after 1 January, 2023.

  • Note 7 ： The amendments are effective for annual periods beginning on or after 1 January, 2023, and changes in accounting polices and changes in accounting estimates that occur on or after the start of the period.

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  • (1)Statement of compliance

These consolidated financial statements have been prepared in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs.

  • (2)Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair values, and present value of defined benefits plans deducts net defined benefit liabilities measured at fair value.

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

  • A. ;Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities, which can be acquired during measurement date;

  • B. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

  • C. Level 3 inputs are unobservable inputs for the asset or liability.

  • (3)Classification of current and non-current assets and liabilities

Current assets include:

  • A. ;Assets held primarily for the purpose of trading;

  • B. ;Assets expected to be realized within twelve months after the reporting period; and

  • C. ;Cash and cash equivalents unless the asset is restricted from being exchanged or used t o s e t t l e a l i a b i l i t y f o r a t l e a s t t w e l v e m o n t h s a f t e r t h e r e p o r t i n g p e r i o d .

  • 104 -

Current liabilities include:

  • A. ;Liabilities held primarily for the purpose of trading;

  • B. Liabilities due to be settled within twelve months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the parent company only financial statements are authorized for issue; and

  • C. Liabilities for which the Group does not have an unconditional right to defer settlement for at least twelve months after the reporting period, unless issuing equities to defer settlement wouldn’t affect classification, depending on liabilities conditions.

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

  • (4)Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e., its subsidiaries, including structured entities). When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the noncontrolling interests having a deficit balance.

When the changes in the Group’s ownership interests in subsidiaries do not result in the Group’s losing control over the subsidiaries, those changes are accounted for equity transactions. The carrying amount of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in the relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to shareholders of the Group.

Please see Note 12, Tables 3&5 for detailed information on subsidiaries (including percentages of ownership and main businesses).

  • (5)Foreign currencies

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

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

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income.

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

When preparing the consolidated financial report, the assets and liabilities of foreign operating organizations (including subsidiaries in countries where they operate or whose currencies are different from those of the Group) are converted to NT dollars at the exchange rate on each balance sheet date. The income and expense items are converted at the average exchange rate of the current period, and the resulting conversion difference is listed in other comprehensive profit and losses (and respectively attributable to the Group and non-controlling interests of the company).

  • 105 -

(6)Inventories

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

(7)Investment in associates

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture.

The Group uses the equity method to account for its investments in associates.

Under the equity method, investments in an associate are initially recognized in the parent company only balance sheet at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate and the distribution received. The Group also recognizes the changes in the equity of associates attributable to the Group.

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

When the associate issues new shares, and the Group subscribes at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Group’s proportionate interest in the net assets of the associate. The Group records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus. If the Group’s ownership interest is reduced due to the additional subscription to the shares of associate by other investors, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate shall be reclassified to profit or loss on the same basis as would be required if the associate had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient, the shortage is debited to retained earnings.

When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any carrying amount of the investment accounted for by the equity method and long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Group has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate.

The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Group discontinues the use of the equity method from the date on which its investment ceases to be an associate. Any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. If the investment of associates becomes the investment of joint

  • 106 -

ventures, or vice versa, the Group will continue to evaluate investment accounted for by the equity method, other than remeasuring retained equities.

Profits and losses, resulting from upstream, downstream, and sidestream transactions between the Group and associates, are recognized on parent company only financial statements in the scope of the Group’s equities that are not relevant to its associates.

  • (8)Property, plant and equipment

Property, plant and equipment are stated at cost, less recognized accumulated depreciation and accumulated impairment loss.

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

Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

  • (9)Intangible assets

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

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

  • (10)Impairment of property, plant and equipment, right-of-use assets, and intangible assets (excluding goodwill)

At the end of each reporting period, the Group reviews the carrying amounts of its property, plant and equipment, right of use assets and intangible assets (excluding goodwill), to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are also allocated to individual cash-generating units or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

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

The inventory, property, plant and equipment and intangible assets recognized in the customer contract are first recognized as impairment in accordance with the inventory policies and the above regulations, and the book value of the relevant assets according to the contract cost exceeds the expected consideration for the provision of related goods or services. The amount after deducting the directly related costs is recognized as an impairment loss, and the book value of the contract cost-related assets is continuously included in the cash-generating unit in order to perform the impairment assessment of the cash-generating unit.

When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but

  • 107 -

only to the extent of the carrying amount that would have been determined had no impairment loss, without amortization or depreciation, been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

  • (11)Financial instruments

Financial assets and financial liabilities are recognized on parent company only balance sheets when a group entity becomes a party to the contractual provisions of the instruments.

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

  • A. Financial assets

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

  • a. Measurement category

The Group’s financial assets are classified into the following categories: financial assets at FVTPL, financial assets at amortized cost, and investments in equity instruments at FVTOCI.

  • (a)Financial assets at FVTPL

For certain financial assets which include debt instrument that do not meet the criteria of amortized cost or FVTOCI, it is mandatorily required to measure them at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI and debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria.

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The dividends, interest earned and net gain or loss recognized in profit or loss on the financial asset. Fair value is determined in the manner described in Note 26.

  • (b)Financial assets at amortized cost

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

  • 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.

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

Interest income is calculated by applying the effective interest rate to multiply the gross carrying amount of a financial asset.

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

  • 108 -

  • (c)Investments in equity instruments at FVTOCI

On initial recognition, the Group may make an irrevocable designate investments in equity instruments that is not held for trading as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

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

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

  • b. Impairment of financial assets

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

The Group always recognizes the loss allowance by lifetime Expected Credit Loss (i.e. ECL) for notes and accounts receivable. For all other financial instruments, the Group recognizes lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance at an amount equal to 12-month ECL.

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

In order for the Group to fulfill the purpose of internal credit and risk management control, under the premise that does not take into account of the collaterals owned by the Group, the following will be deemed as a default of the financial assets:

  • A. Either internal or external information indicates that it is impossible for the debtors to clear the debts;

  • B. Any delay in payment – unless there is reasonable and supporting information that indicates the basis for delaying the payment is more appropriate.

The Group recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

  • c. De-recognition of financial assets

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

On derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in an equity instrument at FVTOCI, the cumulative gain or loss that had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

  • 109 -

B. Financial liabilities

  • a. Subsequent measurement

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

  • b. De-recognition of financial liabilities

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

  • C. Convertible bonds

The component parts of compound instruments (convertible bonds) issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

On initial recognition, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments. This amount is recorded as a liability on an amortized cost basis using the effective interest method until extinguished upon conversion or the instrument’s maturity date. Any non-equity embedded derivative liability is measured at fair value.

The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in the liability and equity until the conversion option is exercised, in which case, the balance recognized in equity will be transferred to capital surplus - share premium. When the conversion option remains unexercised at maturity, the balance recognized in equity will be transferred to capital surplus - share premium.

Transaction costs that relate to the issue of the convertible bonds are allocated to the liability and equity components in proportion to the allocation of the gross proceeds.

  • (12)Revenue recognition

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

Revenue from sale of goods

Revenue from sale of goods comes from sales of computer software, hardware, accessories, equipment, and components, etc. Customers have the right of quotation and user, and the responsibility of resale as goods after shipment and taking risks of losses of obsolete goods. The Group recognizes revenues and trade receivable as goods after shipment.

  • (13)Leases

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

  • A. The Group as lessor

Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Lease payments (less any lease incentives payable) from operating leases are recognized as income on a straight-line basis over the terms of the relevant leases. Initial direct costs incurred in obtaining operating leases are added to the carrying amounts of the underlying assets and recognized as expenses on a straight-line basis over the lease terms.

  • B. The Group as lessee

  • 110 -

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

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

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

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

Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term or a change in future lease payments resulting from a change in an index or a rate used to determine those payments, the Group remeasures the lease liabilities with a corresponding adjustment to the right-of-use-assets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss. Lease liabilities are presented on a separate line in the parent company only balance sheets.

  • (14)Costs of loans

All Costs of loans incurred shall be recognized as profits and losses at the current period.

  • (15)Employee benefit

  • A. Short-term employee benefits.

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for service renderded by employees.

  • B. Retirement benefits

For defined contribution retirement benefit plans, payments to the benefit plan are recognized as an expense when employees have rendered service entitling them to the contribution. For defined benefit retirement benefit plans, the cost of providing benefit is recognized based on actuarial calculations. Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the Projected Unit Credit Method. Service cost (including current service cost as well as previous service cost, and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur, or when the plan amendment or curtailment occurs/when the settlement occurs. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liability (asset) represents the actual deficit (surplus) in the Group’s defined benefit plan. Net defined benefit asset shall not exceed the return contribution or the present value possibly calculated after reducing future contribution.

  • (16)Share-based payment arrangements

The fair value and expected estimate amounts of the stock options and restricted stock sward determined at the grant date of the stock options is expensed on a straight-line

  • 111 -

basis over the vesting period, based on the Group’s estimate of stock options that will eventually vest, with a corresponding increase in capital surplus - stock options. The fair value determined at the grant date of the stock options is recognized as an expense in full at the grant date when the stock options granted vest immediately.

When restricted shares for employees of the Group are issued, other equity - unearned employee benefits is recognized on the grant date, with a corresponding increase in capital surplus - restricted shares for employees. If restricted shares for employees are granted for consideration and should be returned, they are recognized as payables.

At the end of each reporting period, the Group revises its estimate of the number of stock options expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the capital surplus - stock options and capital surplus – restricted stock award.

  • (17)Taxation

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

  • A. Current tax

The Group recognizes current earnings (losses) in accordance with the Income Tax Act of the Republic of China, and calculate the amount for tax payable (recoverable).

Income tax on unappropriated earnings is expensed in the year the shareholders approved the appropriation of earnings which is the year subsequent to the year the earnings are generated according to Taiwan’s Income Tax Act.

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

  • B. Deferred tax

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

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, net operating loss carryforwards and tax credits for research and development expenses to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

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

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be recovered. The deferred tax assets which originally not recognized is also reviewed at the end of each reporting period and recognized to the extent that it is probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be recovered.

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

  • 112 -

at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

  • C. Current and deferred tax for the year

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

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

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

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

  • (1)Estimated impairment of financial assets

The provision for impairment of notes and trade receivables and investments in debt instruments is based on the Group’s assumptions about risk of default and expected loss rates. The Group uses judgment in making these assumptions and in selecting the inputs to the impairment calculation, based on the Group’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. For details of the key assumptions and inputs used, see Notes 10. Where the actual future cash inflows are less than expected, a material impairment loss may arise.

  • (2)Write-down of inventory

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

6. CASH AND CASH EQUIVALENTS


realizable value.
CASH AND CASH EQUIVALENTS
Cash on hand and revolving funds
Checking accounts and demand deposits in banks
Cash equivalents
Time deposits in banks
Repurchase bond		 December 31,
2020
$ 213
609,197
-

28,480
$ 637,890		 December 31,
2019




$ 183
118,757
216,557
-
$ 335,497
  • 113 -

As the end of reporting period, the market rate intervals of time deposits in banks and repurchase bonds were as follows ：


epurchase bonds were as follows：
Demand deposits in banks
Time deposits in banks
Repurchase bond		 December 31,
2020
0.005%~0.32%
-
0.45%		 December 31,
2019
0.01%~0.67%
2.10%~2.27%
-

7. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets－current
Mandatorily measured at FVTPL
－Domestic convertible bonds
－Domestic listed ordinary shares
－Fund beneficiary certificates
Financial assets－non-current
Mandatorily measured at FVTPL
－Domestic listed preference shares
－Fund beneficiary certificates		 December 31,
2020
$ 15,966
1,785

343,122
$ 360,873
$ 14,403

20,988
$ 35,391		 December 31,
2019		 December 31,
2019










$ 31,182
-
34,243
$ 65,425
$ 15,041
15,239
$ 30,280

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Investments in equity instruments
Non-current
Domestic
Listed ordinary shares and emerging
market ordinary shares
Listed preferred shares
Unlisted shares		 December 31,
2020
$ 123,829
197,544

18,142
$ 339,515		 December 31,
2019		 December 31,
2019




$ 98,473
149,552
3,743
$ 251,768

These long-term investments in equity instruments are held for receiving profits, under medium to long-term business development strategic purposes. Accordingly, the Group’s management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes.

9. FINANCIAL ASSETS AT AMORTIZED COST


or long-term purposes.
INANCIAL ASSETS AT AMORTIZED COST
December 31, December 31,
2020 2019
Current
Domestic investment
Time deposits with original maturities more
than three months (1) $ 238,510 $ 307,809
Repurchase bond (2) - 391,239
$ 238,510 $ 699,048

(Continued)

  • 114 -
Non-current
Domestic investment
Pledged time deposit (3)
Barclays Bank Coupon Bond (USD) (4)
Prufin Perpetual Corp. Bond (USD) (5)
AT&T Corp. Bond (USD) (6)
Yuanta Securities Asia Financial Services
Limited 2018 Non-secured USD-
denominated Private Fixed Rate Notes
(7)		 December 31,
2020
$ 25,465
14,895
29,166
-
-
$ 69,526		 December 31,
2019




$ 18,058
15,807
31,179
16,580
-
$ 81,624
(Concluded)

  • (1) As of December 31, 2020 and 2019 the market interest rate intervals of time deposit over 3 months portion were 0.63%~2.10% and 0.88%~2.33%, respectively.

  • (2) As of December 31, 2019, the market interest rate of repurchase bond over 3 months portion was 2.70%~2.90%.

  • (3) Please refer to Note 28 for more details on financial assets at amortized cost under pledge.

  • (4) The Group purchased Barclays Bank Coupon Bond (USD) by USD 527 thousand, with a coupon rate of 4.836%, in August, 2019.

  • (5) The Group purchased Prufin Perpetual Corp (USD) by USD 1,040 thousand, with a coupon rate of 4.875%, in August, 2019.

  • (6) The Group purchased AT&T Corp (USD) by USD 553 thousand, with a coupon rate of 4.50%, in November, 2019. In November 2020, the Group sold all the bonds at $17,130 thousand in order to adjust the portion of the investment, $1,260 thousand recognized as net gain on derecognition of financial assets at amortized cost.

  • (7) The Group purchased Yuanta Securities Asia Financial Services Limited issued 5-year Non-secured Fixed Rate Notes, with the face value of USD 2,000 thousand and a coupon rate of 4.10%, in August, 2018, and then selling all bonds by $64,954 thousand, for adjustment for the portion of the investment in August, 2019, $3,745 thousand recognized as net gain on derecognition of financial assets at amortized cost.

10. NOTES AND TRADE RECEIVABLE

OTES AND TRADE RECEIVABLE
Measured at amortized cost
Notes receivable
Trade receivable
Overdue receivables
Less: Allowances for impairment loss - trade
receivable
Less: Allowances for impairment loss -
overdue receivables		 December 31,
2020
$ 230,490
1,921,373
1,474

11,432 )
1,474)
$ 2,140,431		 December 31,
2019

(
(
(
(
 $ 279,128
1,769,673
20,816

14,694 )
20,816)
$ 2,034,107

The average credit period of sales of goods of the Group was 60-90 days, and no interest was charged on trade receivable.

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

  • 115 -

The Group applies the simplified approach to providing for expected credit losses, which permits the use of lifetime expected loss provision for all trade receivable. The expected credit losses of trade receivable on durable are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s past experience of receivable and current financial position, expectation of GDP and prospect of the industry, deciding the rate of the expected credit losses by the different levels of credit limits of customers and actual conditions, based on the degree of doubtful accounts triggered by customers of different industries.

The Group writes off an account receivable when there is information indicating that the respective debtor is experiencing severe financial difficulty and there is no realistic prospect of recovery of the receivable. For accounts receivable that have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivables which are due. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of trade receivable:

December 31, 2020

December 31, 2020
Gross carrying amount

Loss allowance (Lifetime
ECLs)
Amortized cost

December 31, 2019
Gross carrying amount

Loss allowance (Lifetime
ECLs)
Amortized cost
 Not Past
Due
$ 2,138,258

5,895)
$ 2,132,363

Not Past
Due
$ 1,992,952

3,903)
$ 1,989,049
 1-30 Days
Past Due
$ 2,869

899)
$ 1,970

1-30 Days
Past Due
$ 4,757

1,879)
$ 2,878
 31-60 Days
Past Due
$ 10,160

4,344 )
$ 5,816

31-60 Days
Past Due
$ 12,731

5,400)
$ 7,331
 61-90 Days
Past Due
$ 576

294)
$ 282

61-90 Days
Past Due
$ 696

347)
$ 349
More Than 90
DaysPast Due
$ 1,474

1,474)
$ -

More Than 90
DaysPast Due
$ 58,481

23,981)
$ 34,500
 Total

(
(
(
(
(
(
 $ 2,153,337

12,906)
$ 2,140,431
Total

(
(
(
(
(
(
 $ 2,069,617

35,510)
$ 2,034,107

The movements of the loss allowance of trade receivable were as follows:

2020 2019
Balance at January 1 $ 35,510 $ 41,411
Less: Amounts written off ( 19,342 ) -
Less: Reversal of loss allowance ( 3,262) ( 5,901)
Balance at December 31 $ 12,906 $ 35,510
INVENTORIES
December 31, December 31,
2020 2019
Raw materials $ 3,555 $ 3,314
Work in process 2,626 1,289
Finished goods 336 3,091
Commodities 1,235,624 1,311,841
$ 1,242,141 $ 1,319,535

11. INVENTORIES

Cost of goods sold for inventories were $8,788,192 thousand and $8,019,012 thousand, respectively, in 2020 and 2019. Cost of goods sold included reversals of inventory writedowns of $7,372 thousand, and inventory write-downs of $27,469 thousand, respectively, in 2020 and 2019. The reversals of previous write-downs resulted from disposal of the commodities that had been listed previously for loss in price.

  • 116 -

12. SUBSIDIARIES

  • (1)Subsidiaries included in the consolidated financial statements

The consolidated entities were as follows:

Investor
ZOTC


Zerone Win
Investment Co.,
Ltd.
Asiaone Holdings
Ltd.		 Investee Nature of Activities
Manufacturing for
computer
equipment
Investment
Holding company
Services of Cloud
information
software
Services of
information
product agent
Service of network
Technology		 Proportion of
Ownership (%)		 Proportion of
Ownership (%)		 Re-
mark
December
31,
2020		 December
31,
2019
Zotech Technology
Co., Ltd.
Zerone Win Investment
Co., Ltd.
Asiaone Holdings Ltd.
WingWill International
Co., Ltd.
PetaCom Technology
Co., Ltd.
Techone Ltd.
(Shanghai)		 85.37%
100.00%
100.00%
87.93%
100.00%
70.00%
85.37%

100.00%

100.00%

70.00%

100.00%

-
A

A

A, B

A, D

A

A, C

  • A. These are not significant subsidiaries.

  • B. It was established in September, 2019.

  • C. It was established in January, 2020.

  • D. The Group participated in capital injection in July 2020, and the shareholding ratio increased to 87.93%.

  • (2)Subsidiaries excluded from the consolidated financial statements ： None.

13. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

The Group invested and founded Chi-Ta International Co., Ltd., that engaged mainly in researching and manufacturing hardware of auto-used electronic equipment, with investment amount to $10,000 thousand, and share-holding ratio of 30% in March, 2014, since it kept net losses, foresaw decrease in future cash flows, evaluated recognized $7,243 thousand of impairment losses in 2015, and recognized book value of $0 thousand after recognized deficits. In April, 2020, the Group disposed all shares and recognized $275 thousand in gains.

14. PROPERTY, PLANT AND EQUIPMENT

Cost
Balance at January 1, 2019
Additions
Disposals
Reclassification

Balance at December 31,
2019
 Land Buildings
$ 128,185

-
-

-

$ 128,185
 Machinery
and
equipment
$ 11,722

-
(
835 )

-

$ 10,887
 Office
equipment		 Delivery
equipment		 Other
equipment
$ 14,508

-
-

6,966

$ 21,474		 Total


$ 234,892

-
-
-

$ 234,892

$ 28,260

7,123
(
194 )

758

$ 35,947


$ 2,458

-

-
-

$ 2,458

$ 420,025
7,123
(
1,029 )

7,724
$ 433,843

(Continued)

  • 117 -
Accumulated depreciation
and impairment
Balance at January 1, 2019
Disposals
Depreciation

Balance at December 31,
2019


Carrying amounts at
December 31, 2019

Cost
Balance at January 1, 2020
Additions
Disposals
Reclassification
Net Exchange Difference

Balance at December 31,
2020

Accumulated depreciation
and impairment
Balance at January 1, 2020
Disposals
Depreciation
Net Exchange Difference

Balance at December 31,
2020

Carrying amounts at
December 31, 2020
 Land Buildings Machinery
and
equipment
$ 11,696

(
835 )

26

$ 10,887

$ -

$ 10,887

-
(
257 )
-

-

$ 10,630

$ 10,887

-

(
257 )

-

$ 10,630

$ -
 Office
equipment		 Delivery
equipment











$ -

-
-

$ -

$ 234,892

$ 234,892

-
-
-
-

$ 234,892

$ -

-
-
-

$ -

$ 234,892









$ 69,850

-

1,816

$ 71,666

$ 56,519

$ 128,185

-
-

-
-

$ 128,185

$ 71,666

-
1,816

-

$ 73,482

$ 54,703
 $ 16,992

(
194 )

8,128

$ 24,926

$ 11,021

$ 35,947

4,277
(
505 )
1,753

20

$ 41,492

$ 24,926

(
505 )

7,821

4

$ 32,246

$ 9,246












$ 492


-
492

$ 984

$ 1,474

$ 2,458

-

-

-
-

$ 2,458

$ 984


-

492
-

$ 1,476

$ 982

(Concluded)

Depreciation expenses were depreciated on a straight-line basis over the estimated useful life of the asset:

Buildings 7-50 Years
Machinery equipment 3 Years
Office equipment 3-5 Years
Delivery equipment 5 Years
Other equipment 2-3 Years

Please refer to Note 28 for more details on property, plant and equipment under pledge.

15. LEASE ARRANGEMENTS

  • (1) Right-of-use assets
SE ARRANGEMENTS
ight-of-use assets
Carrying amounts of right-of-use assets
Buildings
Office equipment
Additions to right-of-use assets
Depreciation charge for right-of-use assets
Buildings
Office equipment		 December 31, 2020
$ 12,683

344
$ 13,027
2020
$ 11,925
$ 6,988

201
$ 7,189		 December 31, 2019




$ 7,758
545
$ 8,303
2019






$ 8,193
$ 6,106
201
$ 6,307
  • 118 -

(2) Lease liabilities

Lease liabilities
Carrying amounts of lease liabilities
Current
Non-current		 December 31, 2020
$ 7,484
$ 5,607		 December 31, 2019


$ 4,553
$ 3,803

Ranges of discount rate for lease liabilities were as follows:

Buildings
Office equipment
Other lease information
Expenses relating to short-term leases
Expenses relating to low-value asset leases
Total cash (outflow) for leases
ORT-TERM LOANS
secured loans
Line of credit loans		 December 31, 2020
0.95%~4.75%
1.20%
2020
$ 790
$ 51
($ 8,195)
December 31,
2020
$ -		 December 31, 2019 December 31, 2019
1.20%
1.20%
2019
$ 353
$ 54
($ 6,734)
December 31,
2019
$ 150,000
  • (3) Other lease information

16. ; SHORT- TERM LOANS

Unsecured loans － Line of credit loans

Interest rate of bank loans was 0.94% on December 31, 2019.

17. ;OTHER PAYABLE

OTHER PAYABLE
Salaries and bonuses payable
Employees', directors', and supervisors'
compensation payable
Others		 December 31,
2020
$ 91,256
35,420

119,706
$ 246,382		 December 31,
2019




$ 83,057
28,379
269,982
$ 381,418

18. ; BOND PAYABLE

On May 19, 2014, ZOTC issued no any interest unsecured convertible bonds (the second tranche). The bonds had an aggregate face value of $500,000 thousand, with each unit having a face value of NT$100 thousand, and the offering price was $100.20% of the face value, and its conversion period is 5 years from June 20, 2014 to May 9, 2019. The conversion price was $20 per share on issuance date.

Within the period between one month after the issuance date and 40 days before the last convertible date, if the closing price of ZOTC common shares on the TWSE for a period of 30 consecutive trading days before redemption has been at least 30% of the conversion price in effect on each such trading day, or in the event that the principal amount of the convertible bonds originally outstanding is 10% lower than the issued amount of the bonds, ZOTC may redeem all bonds at face value by cash.

The convertible bonds issued over 3 years, the holder could ask the Company to redeem bonds at face value by cash.

The convertible bonds include liabilities and equity. The equity components were accounted for ZOTC as paid-in capital –option. The effective interest rate of liability components recognized is 2.0618%.

  • 119 -
Balance on January 1, 2019, liability components

Interest (2.0618%)
Convertible bonds changed into ordinary shares
(
Balance on December 31, 2019, liability components
 $ 5,085
15
5,100)
$ -

19. RETIREMENT BENEFIT PLANS

(1)Defined contribution plans

The plan under the R.O.C. Labor Pension Act (the “Act”) is deemed a defined contribution plan. Pursuant to the Act, the Group has made monthly contributions equal to 6% of each employee’s monthly salary to employees’ pension accounts.

(2)Defined benefit plans

ZOTC has defined benefit plans under the R.O.C. Labor Standards Law that provide benefits based on an employee’s length of service and average monthly salary for the six-month period prior to retirement. The Company contributes an amount equal to 2% of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the Committee’s name in the Bank of Taiwan. Before the end of each year, the Company assesses the balance in the Funds. If the amount of the balance in the Funds is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Company is required to fund the difference in one appropriation that should be made before the end of March of the next year. The Funds are operated and managed by Bureau of Labor Funds, Ministry of Labor; as such, the Company does not have any right to intervene in the investments of the Funds.

Amounts recognized in respect of these defined benefit plans in consolidated balance sheets were as follows:


alance sheets were as follows:

Present value of defined benefit obligation
Fair value of plan assets
Contribution
Net defined benefit liability		 December 31,
2020
$ 60,393
(
39,411)

20,982
$ 20,982		 December 31,
2019

(
(

 $ 58,307
36,389)
21,918
$ 21,918

Movements in net defined benefit liabilities/assets were as follows:


Balance at January 1, 2019

Service cost
Current service cost
Interest expense (income)

Recognized in profits or losses

Remeasurements
Return on plan assets (excluding
amounts included in interest,
net)
Actuarial loss arising from changes in
demographic assumptions
Actuarial loss arising from changes in
financial assumptions
Actuarial loss arising from
experience adjustments
Recognized in other comprehensive
income
Contribution from employer

Balance at December 31, 2019
 Present value of
defined benefit
obligations
$ 55,117

311

551


862

-

400
1,329

599


2,328


-

$ 58,307
 Fair value of
plan assets
$ 33,538)

-
339)

339)


1,171 )
-
-
-

1,171)

1,341)

$ 36,389)
 Net defined
benefit
liability/Assets






(
(
(
(

(
(
(


(


(
 $ 21,579
311

212

523

1,171 )
400
1,329

599

1,157

1,341)
$ 21,918

(Continued)

  • 120 -

Present value of
defined benefit
obligations
Balance at January 1, 2020
$ 58,307
(
Service cost
Current service cost
256
Interest expense (income)

437
(
Recognized in profits or losses

693
(
Remeasurements
Return on plan assets (excluding
amounts included in interest,
net)
-
(
Actuarial loss arising from changes in
demographic assumptions
185
Actuarial loss arising from changes in
financial assumptions
1,320
Actuarial gain arising from
experience adjustments
(
112)

Recognized in other comprehensive
income

1,393
(
Contribution from employer

-
(
Balance at December 31, 2020
$ 60,393
(		 Fair value of
plan assets
$ 36,389)

-
275)

275)


1,181 ) (
-
-
-
(
1,181)

1,566)
(
$ 39,411)
 Net defined
benefit
liability/Assets
$ 21,918
256
162
418

1,181 )
185
1,320
112)
212
1,566)
$ 20,982

(Concluded)

The pension costs of the aforementioned defined benefit plans were recognized in profit or loss by the following categories:

Selling and marketing expenses
General and administrative expenses		 2020
$ 181
237
$ 418		 2019




$ 237
286
$ 523

Through the defined benefit plans under the R.O.C. Labor Standards Law, the Company is exposed to the following risks:

  • a. Investment risk: The pension funds are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the government’s designated authorities or under the mandated management. However, under the R.O.C. Labor Standards Law, the rate of return on assets shall not be less than the average interest rate on a two-year time deposit published by the local banks and the government is responsible for any shortfall in the event that the rate of return is less than the required rate of return.

  • b. Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the debt investments of the plan assets.

  • c. Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The principal assumptions at the measurement date were as follows:

December 31, 2020 December 31, 2019 Discount rate 0.500% 0.750% Future salary increase rate 2.750% 2.750%

  • 121 -

;If main actuarial assumptions vary within a reasonable extent, as for other assumption remaining unchanged, the present value of defined benefit obligation increases/decreases shall be as follows:


Discount rate
increases by 0.25%
decreases by 0.25%
Future salary increase rate
increases by 0.25%
decreases by 0.25%		 December31,2020
($ 1,321)
$ 1,368
$ 1,317
($ 1,280)		 December31,2019 December31,2019
(


(		 (


(		 $ 1,333)
$ 1,382
$ 1,335
$ 1,295)

As actuarial assumptions may be correlative with one another, it is less likely that only one single assumption will be changed, the above sensitive analysis cannot indicate actual changes of the present value of defined benefit obligation.

Contribution amounts within 1 year
Average due period of the defined benefit
obligation

UITY
Ordinary Shares
Authorized shares (in thousands)
Authorized capital
Issued and paid shares (in thousands)
Issued capital		 December31,2020
$ 1,609
8.8 Years
December31,2020

150,000
$ 1,500,000

125,640
$ 1,256,402		 December31,2019 December31,2019
$ 657
9.3 Years
December31,2019






150,000
$ 1,500,000
124,635
$ 1,246,352

  1. EQUITY

  2. (1)Ordinary Shares

The change in share capital is mainly due to bonds payable that changes into ordinary shares, employee stock options exercised and issuance (write-down) of restricted stock awards.

  • (2)Capital Surplus
,
awards.
Capital Surplus
May be used to offset a deficit, distributed as
cash dividends, or transferred to share
capital (A)
Premium on shares issued above par value
Treasury stock transactions
Only be used to offset a deficit
From shares of changes in equities of
subsidiaries (B)
Invalid employees stock options
May not be used for any purpose
Restricted stock awards
Employees stock options		 December31,2020
$ 418,488
25,343
-
300
8,276

26,350
$ 478,757		 December31,2019




$ 408,165
25,343
2,481
300
8,156

25,691
$ 470,136

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

  • B. The capital surplus from share of unrealized changes in equities of subsidiaries not acquired or disposed is an affective recognized by changes in equity of subsidiaries, or the Company recognizes subsidiaries’ capital surplus adjustments for equity method.

  • 122 -

(3)Retained earnings and dividend policy

ZOTC’s Articles of Incorporation provide that, when allocating the net profits for each fiscal year, ZOTC shall first pay taxes and offset its losses in previous years and then set aside the legal capital reserve at 10% of the profits left over, and then set aside or reverse the legal capital reserve. Any balance left over shall be added accumulated undistributed earnings of the previous year and allocated according to the resolution, provided from the board meeting, of the shareholders’ meeting. Please reference the distribution policy regulated by ZOTC’s Articles of Incorporation of employees’, directors’ and supervisors’ compensation for Note 21(7).

Distribution of earnings shall be made preferably by way of surplus cash dividend, according to future capital budget plan, and operating fund requirements. ZOTC considers its influences on diluted earning per shares and return on equity, but the ratio for cash dividend shall not exceed 10% of the total distribution.

The appropriation for legal capital reserve shall be made until the reserve equals ZOTC’s paid-in capital. The reserve may be used to offset a deficit, or be distributed as dividends in cash for the portion in excess of 25% of the paid-in capital if ZOTC incurs no loss.

Under Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs”, ZOTC shall appropriate or reverse to a special reserve.

The appropriations of 2019 and 2018 earnings have been approved by ZOTC’s shareholder’s meeting held on June 10, 2020 and June 13, 2019, respectively, were as follows:

The appropriations of
hareholder’s meeting held
ollows:		 2019 and 2018 earnings have
on June 10, 2020 and June 13,		 been approved by ZOTC’s
2019, respectively, were as		 been approved by ZOTC’s
2019, respectively, were as

Legal reserve

(Reversal of) Special reserve

Cash dividends		 Appropriation of Earnings
For Fiscal
Year 2019
For Fiscal
Year 2018
$ 35,131 $ 25,294
(
16,844)
1,343
249,574
184,603		 Dividends Per Share(NT$)
For Fiscal
Year 2019
$ 35,131
(
16,844)
249,574		 For Fiscal
Year 2019


$ 2.0		 For Fiscal
Year 2018
$ 1.5

The appropriations of earnings for 2020 had been proposed by ZOTC’s board of directors on February 24, 2021. The appropriations and dividends per share were as follows:


ollows:
Legal reserve
Cash dividends		 Appropriation of
Earnings
$ 44,100
377,836		 Dividends Per Share
(NT$)
$ 3.0

The appropriations of earnings for 2020 are subject to the resolution of the shareholders’ meeting to be held on May 28, 2021.

(4)Other equity

  • A. Exchange differences on translation of the financial statements of foreign operations
Balance at January 1
In respect of the current year
Exchange differences on the
translation of the financial
statements of foreign operations
Balance at December 31		 2020
$ -
74
$ 74		 2019




$ -
-
$ -

  • 123 -

  • B. Unrealized gain (loss) on financial assets at FVTOCI

Balance at January 1
In respect of the current year
Unrealized gain (loss)－equity
instruments
Cumulative gain (loss) of equity
instruments transferred to retained
earnings due to disposal
Balance at December 31		 2020
$ 17,865
21,971
259)
$ 39,577		 2019

(
 (

 $ 16,844 )
27,604
7,105
$ 17,865
  • C. Unearned employee benefit

In the shareholders’ meetings held on June 11, 2018, the shareholders approved a restricted share plan for employees. Refer to Note 24 for the information of restricted shares issued.


restricted shares issued.
Balance at January 1
Issued at the current year
Share-based payment expenses
recognized
Balance at December 31
NET INCOME
(1)Interest income
Bank deposits
Financial assets at amortized cost
Others
(2)Other income
Dividend income
Others
(3)Other gains and losses
Gain (loss) on financial assets/liabilities at
FVTPL
Net foreign currency exchange gain (loss)
Gain on disposal of investment accounted
for using the equity method
(4)Finance costs
Interests on bank borrowings
Interest on lease liabilities
Interests on convertible bonds		 2020
$ 10,389 )
-
5,088
$ 5,301)
2020

2,658
15,105
5

17,768
2020

10,911
6,032

16,943
2020

5,141
10,077
275

15,493
2020

1,953
176
-

2,129		 2019
(

(
(

(		 $ -

15,156 )

4,767
$ 10,389)
2019


$

$ 3,655
19,320
2
$ 22,977
2019
$


$

$ 4,406
6,240
$ 10,646
2019
$


$
(

 $ 8,097

377 )
-
$ 7,720
2019
$


$

$ 1,949
111
15
$ 2,075
$

  1. NET INCOME

  2. 124 -

  3. (5)Depreciation & amortization

Depreciation & amortization
Property, plant and equipment
Right-of-use assets
Intangible assets
An analysis of depreciation by function
Operating costs
Operating expenses
An analysis of amortization by function
Operating expenses
Employee benefits expense
Post-employment benefits
Defined contribution plans
Defined benefit plans（Note 19）
Share-based payment
Equity-settled
Other employee benefits
Total employee benefits expense
Employee benefits expense summarized by
function
Operating cost
Operating expenses		 2020
$ 15,672
7,189
802
$ 23,663
$ -
22,861
$ 22,861
$ 802
2020
$ 10,922
418
11,340
11,982
369,936
$ 393,258
$ 3,569
389,689
$ 393,258		 2019












$ 14,150
6,307
787
$ 21,244
$ 157
20,300
$ 20,457
$ 787
2019
















$ 9,746
523
10,269
16,198
327,152
$ 353,619
$ 4,021
349,598
$ 353,619

(6)Employee benefits expense

  • (7) Compensation for employees and directors

ZOTC shall allocate compensation to employees and Directors of ZOTC not less than 1%~15% and not more than 3% of annual profits during the period, respectively, and the amount of employees’ and Directors’ compensation for the years ended December 31, 2020 and 2019, with resolution of the board of directors on Feb. 24, 2021 and Feb. 26, 2020, were as follows:

Estimate Rate


and Feb. 26, 2020, were as
Estimate Rate
follows:
Employee compensation
Directors’ compensation
Amount
Employee compensation
Director’s compensation
 2020
4.00%
2.00%
2020
Cash
Stock		 2020 2019
4.00%
2.00%
2019
Cash
Stock
$ 23,613 $ - $ 18,911 $ -
11,807 - 9,456 -

If changes in the very amount after the end of the reporting period, it will be booked next year, based on accounting estimate regulations.

The distribution amount of employees’ and director’s compensation in 2019, and 2018 has no difference compared to the recognized amount of the consolidated financial statements in 2019 and 2018.

Please search for relevant information about employees’ and director’s compensation, resolved by the board of directors on the website of “Market Observation Post System” of TWSE.

22. INCOME TAXES

  • 125 -

(1)Income tax recognized in profit or loss

The major components of tax expenses were as follows:

(1)Income tax recognized in profit or loss
The major components of tax expenses were as follows:
2020
Current tax
In respect of the current year
$ 105,290
Surtax on undistributed retained
earnings
3,771
Adjustments for previous years

331

109,392
Deferred tax
In respect of the current year

4,185
Income tax expense recognized in profit or
loss
$ 113,577
A reconciliation of accounting profit and income tax expense
2020
Profit before income tax from continuing
operations
$ 553,975
Income tax expense calculated at the
statutory rate
$ 110,795
Tax-exempt income
(
3,955 )
Tax effect of expenses not deductible for
tax
3,384
Surtax on undistributed retained earnings
3,771
Unrecognized tax loss carryforward
629
The adjustment of current income tax
expenses for previous years
331
Others
(
1,378)
Total income tax expense recognized in
profit or loss
$ 113,577
(2)Income tax expense recognized in other comprehensive income
2020
Deferred tax
In respect of the current year
－Remeasurement of defined benefit
plans
$ 43		 2019

(

(

was a		 $ 95,909
2,429
408)
97,930
4,283)
$ 93,647
s follows:
2019


(
(
(
 $ 442,802
$ 88,560

1,771 )
5,471
2,429
2,156

408 )
2,790)
$ 93,647
2019
$ 231

(3)Deferred tax balances

Movements of deferred tax assets and deferred tax liabilities were as follows:

2020

2020
Deferred taxassets
Temporary differences
Allowance for loss on
decline in value of
inventory
Allowance for bad debts
Defined benefit plans

Loss carryforward
Others

 Opening
Balance
$ 29,309

2,993

4,383

-
5,824

$ 42,509
 Recognized in
Profit or Loss
($ 1,652 )
(
2,993 )
(
229 )
1,042
(
1,126)

($ 4,958)
 Recognized in
Other
Comprehensive
Income
$ -

-


43

-


-

$ 43
 Closing
Balance













$ 27,657

-

4,197

1,042
4,698
$ 37,594

(Continued)

  • 126 -
Deferred tax liabilities

Temporary differences

Unrealized foreign
exchange gains
2019
Deferred taxassets
Temporary differences
Allowance for loss on
decline in value of
inventory
Allowance for bad debts
Defined benefit plans

Others


Deferred tax liabilities

Temporary differences

Unrealized foreign
exchange gains		 Opening
Balance
$ 793

Opening
Balance
$ 23,360

4,442

4,316

5,820

$ 37,938

$ 736
 Recognized in
Profit or Loss
($ 773)

Recognized in
Profit or Loss
$ 5,949
(
1,449 )
(
164 )

4

$ 4,340

$ 57
 Recognized in
Other
Comprehensive
Income		 Recognized in
Other
Comprehensive
Income









Closing
Balance




$ -
Recognized in
Other
Comprehensive
Income		 $ 20
Closing
Balance








(
(




$ -

-


231

-

$ 231



$ -		 $ 29,309

2,993

4,383
5,824
$ 42,509
$ 793

(Concluded)

  • (4)Amounts of unused loss carryforward for which deferred tax assets have not been recognized

ecognized
Loss carryforward December31,2020
$ 23,695		 December31,2019
$ 21,012
  • (5)Information about unused loss carry-forward

Loss carryforwards as of December 31, 2020 comprised of:

Remaining Carrying
$ 1,886
5,853
9,098

12,066
$ 28,903		 Expiry Year


2027
2028
2029
2030
  • (6)Income tax assessment

The Company and subsidiaries’ income tax returns have been assessed by the Tax Authority as follows:


Authority as follows:
Co. Name
The Company
Zotech Technology Co., Ltd.
Zerone Win Investment Co., Ltd.
WingWill International Co., Ltd.
PetaCom Technology Co., Ltd.		 Year of Assessment
2018
2019
2018
2019
2019
  • 127 -

23. EARNINGS PER SHARE

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

;Net Profit for the Year

Net Profit for the Year
Net profit for the year attributable to owners of
the Company
Effect of potentially dilutive ordinary shares:
Effect of convertible bonds after tax
Earnings in computation of diluted earnings
per share
Shares
Weighted average number of ordinary shares
outstanding in computation of basic earnings
per share
Effect of potentially dilutive ordinary shares：
Convertible bonds
Employee compensation
Employee stock options
Restricted stock award
Weighted average number of ordinary shares
outstanding in computation of diluted
earnings per share		 2020
2019
$ 441,623
$ 351,313
-

15
$ 441,623
$ 351,328
(Units: thousand shares)
2020
2019
124,381
123,354
-
56
702
839
2,674
2,167
448

202
128,205

126,618





123,354
56
839
2,167
202
126,618

If the Group will distribute bonus to employees and the bonus will be settled in cash or shares, the Group will assume that the entire amount of the compensation or bonus will be settled in shares and the resulting potential shares are included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, if the effect is dilutive. Such dilutive effect of the potential shares is included and considered in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

24. ;SHARE - BASED PAYMENT ARRANGEMENTS

(1)Employee Share Option Plan

In August 2015, September 2016, January 2018, and September 2018, 1,000, 1,860, 2000, and 2,000 options were granted to qualified employees of ZOTC, and each option entitles the holder to subscribe for 1,000 ordinary shares of the Company when exercisable. The options granted are valid for 6 years and shall be exercised a portion of them after two years from the date of grant. The options were granted at an exercise price equal to the fair value of ZOTC’s ordinary shares on the grant date. For any subsequent changes in the Company’s ordinary shares, the exercise price of options will be adjusted by the regulated formula, accordingly.

Information about employees’ stock options was as follows:

Employee Stock options
Balance, beginning of period
Options exercised

Invalid options

Outstanding options at the end of the
year

Options exercised at the end of the
year
 2020
Number of
Options
(In Thousands)
Weighted
Average
Exercise Price
(NT$)
5,653
$ 17.18
(
1,017 )
14.02

(
168)
17.51


4,468
16.70


1,820
 2019 2019
Number of
Options
(In Thousands)
5,653

(
1,017 )
(
168)

4,468

1,820		 Number of
Options
(In Thousands)
6,468

(
701 )
(
114)

5,653

1,049		 Weighted
Average
Exercise Price
(NT$)
(
(

 (
(

 $ 17.68

13.30
15.91
17.18
  • 128 -

Information about outstanding options at the end of reporting period was as follows:

Information about outstanding options at the end of reporting period was as follows: Information about outstanding options at the end of reporting period was as follows: nd of reporting period was as follows: nd of reporting period was as follows: nd of reporting period was as follows: nd of reporting period was as follows:
December 31, 2020
December 31, 2019
Range of Exercise
Price (US$)
Weighted-
Over-Age Remaining
Contractual Life (Years)
Range of Exercise
Price (US$)
Weighted-
Over-Age Remaining
Contractual Life (Years)
$ 11.70 (Note)
0.67
$ 12.40 (Note)
1.67
13.40 (Note)
1.68
14.20 (Note)
2.68
16.80 (Note)
3.01
17.80 (Note)
4.01
18.40 (Note)
3.67
19.50 (Note)
4.67
Note: The Issued price will be adjusted by methods of issuance.
The Company adopts BOPM and Black-Scholes price model to evaluate inputs of stock
options in September 2018, January 2018, September 2016 and August 2015 as follows:

September, 2018
January, 2018
September, 2016
August, 2015
Securities price of
the vested date
20.65 Dollars
19.85 Dollars
16.95 Dollars
15.65 Dollars
Exercised price
20.65 Dollars
19.85 Dollars
16.95 Dollars
15.65 Dollars
Foreseeable
volatility rate
32.96%
33.81%
38.26%
39.14%~40.47%
Duration
6 Years
6 Years
6 Years
4~5 Years
Foreseeable
dividend rate
0%
0%
0%
0%
Risk-free interest
rate
0.72%
0.74%
0.56%
0.77%~0.87%		 December 31, 2019
Weighted-
Over-Age Remaining
Contractual Life (Years)
19.85 Dollars
19.85 Dollars
33.81%
6 Years
0%
0.74%		 16.95 Dollars
16.95 Dollars
38.26%
6 Years
0%
0.56%		 15.65 Dollars
15.65 Dollars
39.14%~40.47%
4~5 Years
0%
0.77%~0.87%

The compensation cost recognized were $6,894 thousand and $11,431 thousand for the years ended December 31, 2020 and 2019, respectively.

  • (2)Restricted stock awards

The shareholders meeting of ZOTC, on June 11, 2018, resolved to issue restricted stock awards amounting to $7,000 thousand, consisting of 700 thousand shares, respectively, par value in NT$10, the subscription price is NT$0 (The issue price is NT$ 0), and authorized the Board to decide the issue price at the issuance date. The Board resolved to issue NT$7,000 thousand, with total share number of 700 thousand shares, on April 30, 2019 and the record date of issuance is June 13, 2019.

An employee who remains employed at the Group after the period as follows has elapsed from the time of RSA and who personal performance have met with the criteria listing, will be eligible for vesting of an installment of the shares.

  • A. An employee who remains employed at the Group after 1 year has elapsed from the time of RSA, and who personal performance have met with the criteria listing of 75 scores and above, will be eligible for vesting of an installment of 25% of the shares.

  • B. An employee who remains employed at the Group after 2 year has elapsed from the time of RSA, and who personal performance have met with the criteria listing of 75 scores and above, will be eligible for vesting of an installment of 25% of the shares.

  • C. An employee who remains employed at the Group after 3 year has elapsed from the time of RSA, and who personal performance have met with the criteria listing of 75 scores and above, will be eligible for vesting of an installment of 25% of the shares.

  • D. An employee who remains employed at the Group after 4 year has elapsed from the time of RSA, and who personal performance have met with the criteria listing of 75 scores and above, will be eligible for vesting of an installment of 25% of the shares.

After employees received the vested shares from the Group, it will redeem and cancel the issued restricted employee shares as employees breach the labor contract and working regulations, for the restricted employee new shares that don't meet the vesting conditions.

When employees fail to meet the vesting conditions of restricted employee new shares as redeemed by the Group without charge will be cancelled, based on the relevant regulations.

Compensation costs by issuance of restricted stock awards recognized were $5,088 thousand and $4,767 thousand in 2020 and 2019 respectively. As of December 31, 2020

  • 129 -

and 2019, unearned employee benefits totaled $5,301 thousand and $10,389 thousand respectively, accounted for as a decrease in other equity.

25. CAPITAL RISK MANAGEMENT

The Group engages mainly in the agent of software, without any plans of imposed capital requirements at present and in the future. The Group manages its capital to ensure requirements of operating funds and dividend expenses, based on growth and development of scale of enterprise and prospective of the industry. The Group periodically reviews the policy of capital risk management, for seeking a steady and conservative policy.

The capital structure of the Group consists of net debt and equity (comprising share capital, capital reserves, retained earnings and other equity).

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

26. FINANCIAL INSTRUMENTS

  • (1)Information about Fair value of financial instruments that are not measured at fair value

Except as detailed in the following table, the management believes the carrying amounts of financial liabilities not measured at fair value recognized in the consolidated financial statements approximate or cannot be measured their fair values:

Financial Assets
Measured at amortized cost
－Foreign corporate bonds		 December 31,
2020
Carrying
Amount
Fair Value
$ 44,061
$ 45,323		 December 31,
2019		 December 31,
2019
Carrying
Amount
$ 44,061		 Carrying
Amount		 Fair Value
$ 63,566 $ 64,992

  • (2)Information about fair value of financial instruments measured at fair value on a recurring basis.

  • A.Fair value hierarchy

December 31, 2020


urring basis.
air value hierarchy
ecember 31, 2020
Financial assets at FVTPL
Convertible bonds

Listed shares and emerging
market shares
Fund beneficiary certificates

Total

Financial assets at FVTOCI
Equity investments
－Domestic listed shares and
emerging market shares
－Domestic unlisted shares
Total
 Level 1
$ 15,966

16,188
355,581

$ 387,735

$ 309,281

-

$ 309,281
 Level 2 Level 3
$ -

-
8,529

$ 8,529

$ 12,092

18,142

$ 30,234
 Total










$ -

-
-

$ -

$ -

-

$ -









$ 15,966
16,188
364,110
$ 396,264
$ 321,373
18,142
$ 339,515
  • 130 -
December 31, 2019
Financial assets at FVTPL
Convertible bonds

Listed shares and emerging
market shares
Fund beneficiary certificates

Total

Financial assets at FVTOCI
Equity investments
－Domestic listed shares and
emerging market shares
－Domestic unlisted shares
Total
 Level 1
$ 31,182

15,041
46,403

$ 92,626

$ 237,587

-

$ 237,587
 Level 2
$ -

-
-

$ -

$ -

-

$ -
 Level 3
$ -

-
3,079

$ 3,079

$ 10,438

3,743

$ 14,181
 Total




















$ 31,182
15,041
49,482
$ 95,705
$ 248,025
3,743
$ 251,768

There were no transfers between Level 1 and Level 2 in 2020 and 2019, respectively.

  • B. Valuation techniques and inputs applied for Level 3 fair value measurement

The market approach is used to arrive at their fair value, for which, the estimate and assumption regarding relevant information of expected present value of profits and losses calculated by held investments with reference to the publicly traded company and similar companies.

  • (3)Categories of financial instruments

company and similar companies.
Categories of financial instruments
Financial assets
Financial assets measured at FVTPL
Mandatorily measured at FVTPL
Financial assets measured at amortized
cost (Note 1)
Financial assets measured at FVTOCI－
Investments in equity instruments
Financial liabilities
Measured at amortized cost (Note 2)		 December 31, 2020
$ 396,264
3,098,473
339,515
2,492,646		 December 31, 2019
$ 95,705
3,170,472
251,768
2,567,775

Note ; 1:The balances included financial assets measured at amortized cost, which comprise cash and cash equivalents, investments in debt instruments, notes receiv ab le, trad e receiv ab le, o th er re ceiv ab le an d refu n d ab le d ep o sit s.

Note 2:The balances included financial liabilities measured at amortized cost, which comprise short-term loans, trade payable, other payable, and deposits received.

  • (4)Financial risk management objectives and policies

The Group’s principal financial risk management objective is to manage the market risk, credit risk and liquidity risk based on related protocols and internal control procedures. The Group’s financial department measures the aforementioned risks based on the Group’s risk appetite, and reports to the board of directors for carrying out relevant policies at any time.

  • A. ;Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates.

  • 131 -

(A) Foreign currency risk

The Group’s purchases and investments are denominated in foreign currencies. Consequently, the Group is exposed to foreign currency risks. To protect against reductions in value of foreign currency denominated assets and the volatility of future cash flows caused by changes in foreign exchange rates, the Group utilizes derivative financial instruments, such as forward exchange contracts and options, for avoiding foreign currency risks.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities of non-functional currency calculated (including those eliminated on consolidation) at the end of the reporting period are set out in Note 30.

Sensitivity analysis

The Group’s exchange rate exposure was in the exchange rate of U.S. dollars.

The sensitivity analysis included only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the reporting period for a 5% change in foreign currency rates. If interest rates had been 5 % higher/lower, the Group’s net profit in 2020 and 2019 would increase/decrease by $40,991 thousand and $20,754 thousand, respectively.

(B) Interest rate risk

The Group exposed to the risk of interest rate at fair value, since holding the fixed-rate loan, accessing the interest rate of the bank loan regularly, observing influences on profits or losses from fluctuation range of the interest rate, keeping contact with the bank based on the actual requirement, and acquiring the best interest rate of the loan.

The carrying amount of the Group’s financial assets and financial liabilities with exposure to risks of interest rates at the end of the reporting period were as follows:


follows:
Interest rate risks at fair value
－Financial assets
－Financial liabilities
Interest rate risks at cash flows
－Financial assets		 December 31,
2020
$ 206,574
13,091
739,139		 December 31,
2019
$ 874,635
158,356
231,807

Sensitivity analysis

The sensitivity analyses below were determined based on the Group’s exposure to interest rates for non-derivative instruments at the end of the reporting period.

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group’s pre-tax profit in 2020 and 2019 would increase/ decrease by $3,696 thousand and $1,159 thousand, respectively. Exposure is triggered by risks of cash flows of the Group’s variable interest rates of deposits.

(C) Other price risk

The Group is exposed to equity price risks arising from equity investments of public offering securities and fund beneficiary certificates. Equity investments should be approved by the management, for controlling risks by holding different investment portfolios.

Sensitivity analysis

The following sensitivity analysis is based on risk exposure of equity prices at the end of the reporting period.

Assuming a hypothetical increase/decrease of 5% in prices of the equity investments, increased/decreased by $19,813 thousand and $4,785 thousand, because of the change in fair value of financial assets at FVTPL, respectively, at

  • 132 -

the end of the reporting period in 2020 and 2019. The other comprehensive income would have increased/decreased by $16,976 thousand and $12,588 thousand respectively, because of the change in fair value of financial assets at FVTOCI at the end of the reporting period in 2020 and 2019.

B. ;Credit risk

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

The Group adopted a policy of only dealing with creditworthy counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the financial department regularly.

To decrease a credit risk, the key management personnel of the Group is responsible for decision of rating criteria, credit limits approval, and other censor procedure, etc., in order to collect delinquent trade receivable. Otherwise, the group reviews each trade receivable to assure allowance of impairment losses of uncollectable bad debts, hence the key management personnel considers credit concentration risk of trade receivable is insignificant.

The credit concentration risk of the current fund is insignificant, since the Group only transacts with financial institutions with good rating.

Trade receivable consisted of a large number of customers. Ongoing credit evaluation is performed on the financial condition of certain customer’s trade receivable. If necessary, purchasing insurance for credit enhancing procedures is a must.

The credit risk of the Group concentrates on top 5 customers of the Group. As of December 31, 2020 and 2019, the Group’s five largest customers accounted for 33% of trade receivable, respectively.

C. ;Liquidity risk

The Group manages and maintains sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Group’s management supervises financing line of the banking facilities and ensures compliance with the terms of loan agreements.

Liquidity & interest rate risk table

The table below summarizes the due analysis of the maturity profile of the Group’s non-derivative financial liabilities, enacted by contractual undiscounted payments of cash flow of financial liabilities, according to remaining contracts on the earliest date on which the Group may be required to pay, including interest and principal of cash flows.

The following tables detail the bank loans are listed on the earliest date on which the Group may be required to pay without considering the probability of the lending bank executing its rights; other non-derivative financial liabilities are listed at their contract repayment dates.

;December 31, 2020

December 31, 2020
Non-derivative financial liabilities
No interest-bearing liabilities

Lease liability

 Less than 1 Year
$ 2,491,846


7,636

$ 2,499,482
 1-5 Years
$ -

5,192

$ 5,192
 5+Years






$ -
-
$ -
  • 133 -

December 31, 2019

December 31, 2019
Non-derivative financial liabilities
No interest-bearing liabilities

Lease liability
Fixed rate instruments

 Less than 1 Year
$ 2,416,604

4,617

150,118

$ 2,571,339
 1-5 Years
$ -

3,831
-

$ 3,831
 5+Years






$ -
-

-
$ -

The operating fund of the Group are sufficient to meet cash flow demand; If the demand exists, it shall be short-term. Thus, bank loans within 1 year are the maximum amounts with available limit of credit. After considering the financial position of the Group, the management does not think the banks will execute their rights of requiring the Group to repay the bank loans.

As of December 31, 2020 and 2019, the Group’s unused short-term credit of limit of the bank were $1,250,000 thousand and $920,000 thousand, respectively.

27. RELATED PARTIES TRANSACTIONS

Transactions and balances apply for the profits and losses, revenues and expenses between the Company and its subsidiaries, which were related parties of the Group, had been eliminated on consolidation and are not disclosed in this note. Besides as disclosed elsewhere in the other notes, details of transactions between the Group and other related parties were disclosed below.

Compensation of key management personnel

Short-term employee benefits 2020
$ 45,417		 2019
$ 40,673

;Salaries of the board members and other key management personnel are determined by their personal performance and economic market trend by the Compensation Committee.

28. PLEDGED ASSETS

;The following assets of the Group are guaranteed by the assets pledged for loans of the bank and broker, as well as tariff of importing commodities.

Property, plant and equipment, Net
Pledged time deposits (Financial assets at
amortized cost－non-current)		 December 31,
2020
$ 207,620

25,465
$ 233,085		 December 31,
2019		 December 31,
2019




$ 209,009
18,058
$ 227,067

29. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

  • (1)As of December 31, 2020, the Group issued $87,000 thousand of cashier order for payment guaranteed for Microsoft Taiwan Corporation.

  • (2)As of December 31, 2020, the Group issued $50,000 thousand of cashier order for payment guaranteed for Microsoft Regional Sales Corporation.

30. ; FOREIGN - CURRE NCY- DEMONINATED ASSETS AND LIABILITIES THAT HAVE SIGNIFICANT INFLUENCE

The following information was summarized according to the foreign currencies other than the functional currency of the Group. The exchange rates disclosed were used to translate the foreign currencies into the functional currency. The significant financial assets and liabilities denominated in foreign currencies were as follows:

  • 134 -

December 31, 2020

December 31, 2020 December 31, 2020
Foreign
Currencies
Exchange Rate
Financial assets

Monetary items


USD
$ 12,526
28.48（USD:NTD）


Financial liabilities


Monetary items



USD

41,312
28.48（USD:NTD）

December 31, 2019
Foreign
Currencies
Exchange Rate
Financial assets

Monetary items


USD
$ 31,858
29.98（USD:NTD）


Financial liabilities


Monetary items



USD

45,703
29.98（USD:NTD）

The material foreign exchange gains (losses) (realized and unrealized) were
2020
2019
Foreign
Currencies
Exchange Rate
Net Foreign
Exchange Gains
(Losses)
Exchange Rate
USD
29.549（USD:NTD） $ 10,077
30.912（USD:NTD）		 Carrying
Amount


$ 356,740
$ 1,176,566
Carrying
Amount
$ 955,103
$ 1,370,176
as follows:
Exchange Rate Net Foreign
Exchange Gains
(Losses)
($ 377)
30.912（USD:NTD） $ 377)

31. SEPARATELY DISCLOSED ITEMS

  • (1) Significant Transactional Items

  • A. ; Financing provided to others: Table 1.

  • B. ;Endorsements/guarantees provided: None.

  • C. ;Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Table 2.

  • D. ; Marketable securities acquired and disposed at costs or prices at least NT$300 million or 20% of the paid-in capital: None.

  • E.;Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: None.

  • F. ;Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None.

  • G. ; Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: None.

  • H. ;Trade receivable from related parties amounting to at least NT$100 million or 20% of the paid-in capital: None.

  • I.;; Trading in derivative instruments: None.

  • J. Others: Intercompany relationships and significant intercompany transactions. Table 4.

  • (2) Information on investees: Table 3.

  • 135 -

  • (3) Information on investment in Mainland China ：

  • A. The name of the investee in mainland China, the main business and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, income (losses)of the investee, ending balance, amount received as dividends from the investee, and the limitation on investee: Table 5.

  • B. Significant direct or indirect transactions with the investee, its price and terms of payment, unrealized gain or loss, and other related information which is helpful to understand the impact of investment in mainland China on financial reports: None. (i) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.

    • (ii) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.

    • (iii) The amount of property transactions and the amount of the resultant gains or losses.

    • (iv) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.

    • (v) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.

    • (vi) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.

  • (4) Information on major shareholder ： List of all shareholders with ownership of 5 percent or greater showing the names and the number of shares and percentage of ownership held by each shareholder: Table 6.

32. SEGMENT INFORMATION

The management monitors the operating results focusing on the types of products and services acquired or provided of its business units separately for the purpose of making decisions about resource allocation and performance assessment. The department of the Group’s brand agent business division or others shall be reported.

  • (1)Segments revenue & operating results

The reporting on operating segments revenue and results of the Group, based on its business unit separately, was as follows:

2020
Revenues from external
customers
Inter-segment revenues

Segment revenues

Consolidated revenues
Segment profit (loss)

General administration
division costs and
directors’ compensation
Interest income
Other income
Other gains and losses
Net gain on derecognition
of financial assets at
amortized cost
Finance costs
Profit before income tax
 The brand agent
business
division
$ 9,655,156


-

$ 9,655,156

$ 631,009

 Other
$ 179,162

36,192

$ 215,354

$ 5,032
 Eliminations
$ -

36,192)

$ 36,192)


$ -



 Total








(
(





(
(
 $ 9,834,318
-
9,834,318
$ 9,834,318
$ 636,041

131,401 )
17,768
16,943
15,493
1,260
2,129)
$ 553,975

(Continued)

  • 136 -
2019

Revenues from external
customers
Inter-segment revenues

Segment revenues

Consolidated revenues
Segment profit (loss)

General administration
division costs and
directors’ compensation
Interest income
Other income
Other gains and losses
Net gain on derecognition
of financial assets at
amortized cost
Finance costs
Profit before income tax
 The brand agent
business
division

$ 8,823,337


-

$ 8,823,337

$ 539,029

 Other
$ 91,833

20,152

$ 111,985

$ 9,658)
 Eliminations
$ -

20,152)

$ 20,152)


$ -



 Total








(
(
(





(

 $ 8,915,170
-
8,915,170
$ 8,915,170
$ 529,371

129,582 )
22,977
10,646
7,720
3,745
(
2,075)
$ 442,802

(Concluded)

Segment profits indicate earning profits of each segment, not including general administration division costs and directors’ compensation, investments accounted for using the equity method of associates, rental income, interest income, gains or losses of disposal of property, plant and equipment, disposal of gains or losses of investments, net gains or losses of foreign exchange, valuated gains or losses of financial instruments, finance costs, and income tax expenses. The management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment.

  • (2)Total assets and liabilities of the department

The assets and liabilities of the Group haven’t been provided to the operating management personnel, hence valuation number of assets and liabilities shouldn’t be disclosed.

(3)Revenues of major products and services

Analysis of revenues of major products and services for continuing operations of the Group are as follows:


Group are as follows:
IT Infrastructure
Network & Information Security
Cloud Platform & Application
Big Data & Application
Other		 2020
$ 2,889,703
4,621,943
1,844,467
474,176
4,029
$ 9,834,318		 2019




$ 2,341,572
4,334,514
1,651,780
580,651
6,653
$ 8,915,170
  • 137 -

(4)Geographical information

The Group mainly operates in Taiwan.

The Group categorized the net revenue mainly based on the country in which the customer is located, and non-current assets based on the site of assets.

Taiwan

Others

 Net revenue from
external customers
2020
2019
$ 9,745,266 $ 8,821,731
89,052

93,439

$ 9,834,318
$ 8,915,170
 Net revenue from
external customers
2020
2019
$ 9,745,266 $ 8,821,731
89,052

93,439

$ 9,834,318
$ 8,915,170
 Non-current Assets Non-current Assets Non-current Assets
December 31,
2020
$ 320,077
2,555

$ 326,632
 December 31,
2019
2020
$ 9,745,266
89,052

$ 9,834,318








$ 324,110
-
$ 324,110

Non-current assets do not include financial instruments and deferred tax assets.

(5)Major customer information

Revenues in 2020 and 2019 of brand agent business division were $9,655,156 thousand, and $8,823,337 thousand, and among those revenues, $1,001,631 thousand, and $782,918 thousand came from the largest key account. In 2020 and 2019, the largest single customer which contributed to more than 10% of the Group’s total revenue was as follows:

Genesis Technology Inc. 2020
$ 1,001,631		 2019
N.A. (Note)

Note: Revenue received did not exceed 10% of the Group’s total revenue.

  • 138 -

ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES FINANCING PROVIDED TO OTHERS FOR THE YEARS ENDED DECEMBER 31, 2020

Table 1

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

No. Financing
Company		 Counter-party Financial
Statement
Account		 Related
Party
Maximum
Balance for the
Period（Note
2）		 Ending Balance Amount
Actually Drawn		 Interest
Rate		 Nature for
Financing
（Note
3）
Transaction
Amounts		 Reason for
Financing		 Allowance for
Bad Debt		 Collateral Collateral Financing
Limits
for Each
Borrowing
Company
（Note 4）		 Financing
Company’s
Total Financing
Amount Limits
（Note 5）		 Note
Name Item
0
0		 ZOTC
ZOTC		 Zerone Win
Investment
Co. Ltd
WinWill Co.
Ltd.		 Other
receivables
from related
parties
Other
receivables
from related
parties
Yes

Yes		 $ 40,000
20,000		 $ 40,000

20,000		 $ -

-
3%

3%		 2
2		 $ -

-		 Operating
Capital
Operating
Capital		 $ -
-
－

－		 $ -
-		 $ 265,727

265,727		 $ 531,454

531,454

Note 1 ： The number column is organized as follows ：

  • (1)Number 0 represents the issuer.

  • (2)The Counter-party is numbered from 1 in order.

Note 2 ： Maximum Balance of financing provided to others for the period.

Note 3 ： Reference for the nature for financing provided to others.

(1)1:The borrower has business contact with the creditor.

  • (2)2:The borrower has short-term financing necessities.

Note 4 ： For short-term financing necessities, the total amount available for lending purpose shall not exceed 10% of the net worth reviewed or audited by CPA during the period. Note 5 ： The total amount available for lending purpose shall not exceed 20% of the company’s net worth reviewed or audited by CPA during the period.

  • 139 -

ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES MARKETABLE SECURITIES HELD FOR THE YEAR ENDED DECEMBER 31, 2020

Table 2

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Marketable Securities Type and Issuer’s Name
（Note 1）		 Security Issuer’s
Relationship with
the Holding
Company		 Financial Statement Account D
e
c
e
m
b
e
r		 D
e
c
e
m
b
e
r		 3
1
,		 2
0
2
0		 N o t e
Shares/Units Carrying Values Percentage of
Ownership
(%)
Market Prices/
Net value of
equities
ZOTC Beneficiary certificates
KGI Emerging Market Bond 1-5 ETF Fund
Taishin 1699 Money Market Fund
Jih Sun Money Market Fund
Prudential Financial Money Market Fund
KGI Kaefer Fund
KGI Taiwan Multi-Asset Income Fund
KGI Taiwan Select-Asset Income Fund
Corporate bond
Tong Ming Enterprise Co., Ltd.－1stdomestic
unsecured convertible corporate bonds
Quang Viet Enterprise Co., Ltd.－1st
convertible corporate bonds
M.J. International Co. Ltd.－1stconvertible
corporate bonds
Rossmax International Ltd.－2ndconvertible
corporate bonds
Jentech Precision Industrial Co. Ltd.－3rd
convertible corporate bonds
Anli International Co. Ltd.－1stconvertible
corporate bonds
Marketech International Corp.－4thconvertible
corporate bonds
Chung-Hsin Electric & Machinery Mfg. Corp.
－2ndconvertible corporate bonds		 －
－
－
－
－
－
－
－
－
－
－
－
－
－
－		 Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL－non-
current
Financial assets at FVTPL－non-
current
Financial assets at FVTPL－non-
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current		 65,000
10,993,924
10,034,989
1,880,394
170,199
1,198,020
500,325
10（Units）
30（Units）
20（Units）
20（Units）
30（Units）
20（Units）
10（Units）
10（Units）		 $ 2,473
150,022
150,023
30,001
3,354
12,459
5,175
1,000
3,132
2,099
2,200
3,178
2,052
1,126
1,179		 -
-
-
-
-
-
-
-
-
-
-
-
-
-
-		 $ 2,473
150,022
150,023
30,001
3,354
12,459
5,175
1,000
3,132
2,099
2,200
3,178
2,052
1,126
1,179

（ Continued ）

  • 140 -
Holding Company Marketable Securities Type and Issuer’s Name
（Note 1）		 Security Issuer’s
Relationship with
the Holding
Company		 Financial Statement Account D
e
c
e
m
b
e
r		 D
e
c
e
m
b
e
r		 3
1
,		 2
0
2
0
N o t e
Shares/Units Carrying Values Percentage of
Ownership
(%)
Market Prices/
Net value of
equities
ZOTC Barclays Bank Coupon Bond (USD)
Prufin Coupon Bond (USD)
Securities
Actron Technology Corp.
Cathay Financial Holdings Preferred Stock A
Union Bank of Taiwan Preferred Stock A
Kaway Information Corp.
China Electric Mfg. Corp.
ASIX Electronics Corp.
Promaster Technology Corp
Unex Technology Corporation
Da-Chang Start-Up Investment Co. Ltd.
Cathay Financial Holdings Preferred Stock A
Union Bank of Taiwan Preferred Stock A
Fubon Financial Holding Co., Ltd. Preferred
Shares B
Taishin Financial Holding Co., Ltd. Preferred
Stock E
CTBC Financial Holding Co., Ltd. Preferred
Shares B
Cathay Financial Holding Co., Ltd. Preferred
Stock B		 －
－
－
－
－
Note 3
－
－
－
－
－
－
－
－
－
－
－		 Financial assets at amortized cost
－non-current
Financial assets at amortized cost
－non-current
Financial assets at FVTPL －
current
Financial assets at FVTPL－non-
current
Financial assets at FVTPL－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current		 5（Units）
10（Units）
15,000
166,000
80,000
490,000
2,689,200
81,066
1,157,137
175,000
1,500,000
134,000
70,000
400,000
240,000
90,000
230,000		 $ 14,895
29,166
1,785
10,259
4,144
16,243
37,514
4,880
12,092
3,231
14,911
8,281
3,626
25,000
12,624
5,706
14,467		 -
-
-
-
-
1.60
0.83
0.16
2.72
1.68
2.73
-
-
-
-
-
-		 $ 16,154
29,169
1,785
10,259
4,144
16,243
37,514
4,880
12,092
3,231
14,911
8,281
3,626
25,000
12,624
5,706
14,467

（ Continued ）

  • 141 -
Holding Company Marketable Securities Type and Issuer’s Name
（Note 1）		 Security Issuer’s
Relationship with
the Holding
Company		 Financial Statement Account D
e
c
e
m
b
e
r		 D
e
c
e
m
b
e
r		 3
1
,		 2
0
2
0
N o t e
Shares/Units Carrying Values Percentage of
Ownership
(%)
Market Prices/
Net value of
equities
ZOTC
Zerone Win
Investment Co.
PetaCom
Technology
Co. Ltd.
Zotech Technology
Co. Ltd.		 Kwong Lung Enterprise Co. Ltd. Preferred
Stock A
WPG Holdings Limited Preferred Stock A
United Orthopedic Corporation Preferred
Shares A.
QST International Corporation Preferred
Shares A.
Chailease Holding Company Limited Class A
Preferred Shares
Miiicasa Holdings (Cayman) Inc.
Duofu Co., Ltd.
Jotangi Technology Co., Ltd.
Securities
WPG Holdings Limited Preferred Stock A
Shin Kong Financial Holding Co.,Ltd.
Preferred Stock A
Chailease Holding Company Limited Class A
Preferred Shares
Tatung System Technologies Inc.
Beneficiary certificates
Taishin 1699 Money Market Fund
Securities
WPG Holdings Limited Preferred Stock A		 －
－
－
－
－
－
－
－
－
－
－
－
－
－		 Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTPL －
current
Financial assets at FVTOCI－non-
current		 270,000
700,000
200,000
150,000
300,000
2,500,000
10,000
796,250
240,000
50,000
89,000
2,000,000
777,000
200,000		 $ 13,581
35,070
9,500
6,713
29,880
-
-
-
12,024
2,188
8,864
53,100
10,603
10,020		 -
-
-
-
-
3.45
0.22
9.32
-
-
-
2.26
-
-		 $ 13,581
35,070
9,500
6,713
29,880
-
-
-
12,024
2,188
8,864
53,100
10,603
10,020

Note 1 ： Securities, indicated by the above table, are derivative from stock, bonds, beneficiary certificates, and the above items, based on IFRS 9 “Financial Instruments”. Note 2 ： Relevant information about Investments in equity of subsidiaries, associates, see Table 3.

Note 3 ： Effective June 10, 2020, the status of Kaway Information Corp. was changed from Supervisor to Director of the Company.

（ Concluded ）

  • 142 -

ZERO ONE TECHNOLOGY CO., LTD. AND SUBSIDIARIES INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2020

Table 3

(In Thousands of New Taiwan Dollars)

Investor Company
Investee
Company		 Location Main Businesses Investment Amount Investment Amount As of December 31, 2020 As of December 31, 2020 As of December 31, 2020 Net Income
(Loss) of the
Investee		 Share of
Profits/Losses of
Investee		 Note
December 31,
2020		 December 31,
2019
Number of
Ownership		 Percentage
of
Ownership

Carrying
Values
ZOTC
ZeroneWin
Investment Co.,
Ltd.		 Zotech Technology Co.,
Ltd.
Chi-Ta International
Co., Ltd.
ZeroneWin Investment
Co., Ltd.
Asiaone Holdings Ltd.

WingWill International
Co., Ltd.
PetaCom Technology
Co., Ltd.		 Taipei City
Taipei City
Taipei City
Republic of
Seychelles
Taipei City
Taipei City		 Services of
telecommunication
apparatus
Services of
telecommunication
apparatus
Investment
Holding company
Services of cloud
information software
Services of information
product agent		 $ 35,000
-
149,000
10,063
25,500
50,000		 $ 35,000

10,000

100,000

10,063

7,000

50,000		 3,500,000

-
14,900,000

320,000
25,500,000
50,000,000		 85.37
-
100.00
100.00
87.93
100.00		 $ 43,132
-
154,088
9,526
5,981
47,551		 $ 426

-
(
712 )
(
93 )
(
6,858 )

4,057		 $ 364
-
(
712 )
(
93 )
(
5,582 )
4,057		 Subsidiary
Disposed in April,
2020
Subsidiary
Subsidiary
Sub-subsidiary
Sub-subsidiary

Note: Please refer to Table 5 for Information on investment in Mainland China.

  • 143 -

ZERO ONE TECHNOLOGY CO., LTD.AND SUBSIDIARIES INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 2020

Table 4

(In Thousands of New Taiwan Dollars)

Table 4 (In Thousands of New (In Thousands of New (In Thousands of New Taiwan Dollars)
No.
（Note 1）		 Company Name Counterparty Nature of
Relationship
（Note 2）		 Transactions Details
Financial Statement Account
Amount		 Transaction Terms
(Note 5)		 Percentage of
Consolidated Total
Revenues
or Total Assets
（Note 3）
0 ZOTC WingWill International Co., Ltd.
Techone (Shanghai) Co., Ltd.
PetaCom Technology Co., Ltd.		 1
1
1		 Sales revenue
Trade receivable
Sales revenue
Cost of goods sold
Trade payable		 $ 22,141
6,814
6,059
11,153
8,204		 Note 5
Note 5
Note 5
Note 5
Note 5		 -
-
-
-
-

  • Note 1 ： Business between the parent and subsidiaries is numbered as follows: 1. Parent:0.

  • Subsidiaries are numbered from 1 in order.

  • Note 2 ： 3 types of relationship between parties is numbered as follows:

  • Parent to subsidiary.

  • Subsidiary to parent.

  • Between subsidiaries.

  • Note 3 ： Percentage of transaction amounts to consolidated operating revenues or consolidated total assets: If the account is a balance sheet account, it shall be calculated by dividing the ending balance into consolidated total assets; if the account is an income statement account, it shall be calculated by dividing the yearly cumulative balance into consolidated operating revenues.

  • Note 4 ： Transaction amounts account for at least NT$ 5,000 thousand.

  • Note 5 ： The terms of transactions with intercompany partners are similar to non-related parties.

  • 144 -

ZERO ONE TECHNOLOGY CO., LTD.AND SUBSIDIARIES INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2020

==> picture [39 x 9] intentionally omitted <==

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

Table 5
----- End of picture text -----

(In Thousands)

Investee
Company		 Main
Businesses and
Products
Paid-in Capital
Paid-in Capital		 Method of
Investment		 Accumulated
Outward
Remittance for
Investment
from Taiwan
as of
January 1,
2020		 Remittance of
Funds		 Remittance of
Funds		 Remittance of
Funds		 Accumulated
Outward
Remittance
for
Investment
from Taiwan
as of
December 31,
2020
Net
Income
(Loss) of
the
Investee		 %
Ownership
of Direct
or Indirect
Investment

Investment
Gain (Loss)
(Note 2)		 Carrying Amount as
of 31 December,
2020		 Accumulated Repatriation
of Investment Income as of
31 December,
2020
Note

Outward		 Inward
Techone
(Shanghai)
Co., Ltd.		 Services of
Network
Technology		 $ 13,131
( RMB 3,000
)		 （Note 1） $ - $ 9,118 $ - $ 9,118 ( $ 39) )
70%		 ( $ 27) ) $ 9,164 $ - －
Accumulated Outward Remittance for
Investments in Mainland China as of
December 31, 2020		 Investment Amount Authorized by the
Investment Commission, MOEA		 Upper Limit on the Amount of Investments Stipulated by the
Investment Commission, MOEA (Note 3)
$ 8,673
( USD
305 )		 $ 8,673
( USD
305 )		 $ 1,594,362

Note 1 ： The company directly holds 100% of a subsidiary-Asiaone Holdings Ltd., which reinvests the company in Mainland China.

Note 2 ： Amount was recognized based on the financial statements which were not audited by CPAs on December 31, 2020.

Note 3 ： Determined by sixty percent (60%) of the Company’s consolidated net worth, audited by CPAs on December 31, 2020 (2,657,270×60% ＝ 1,594,362).

Note 4 ： For foreign currency conversion, gain (loss) are converted by the average exchange rate in 2020. Other amounts are converted into New Taiwan Dollars by the exchange rate on 31 December, 2020.

  • 145 -

ZERO ONE TECHNOLOGY CO., LTD. INFORMATION ON MAJOR SHAREHOLDERS DECEMBER 31, 2020

Table 6

Table 6
Shareholders Shares
Total Shares
Owned
(In Thousands)		 Ownership
Percentage
Ceres Investment Co., Ltd.
Chia Hsin, Lin		 9,506,594
9,338,292		 7.56%
7.43%

Note: This table presents information provided by the Taiwan Depository & Clearing Corporation on stockholders holding greater than 5% of the Company’s ordinary and preference shares including treasury stock in dematerialized form that have completed the process of registration and delivery by book-entry transfer as of the last business day for the current quarter. The share capital recorded, and the actual registered non-physical shares in this consolidated financial statements may differ due to different basis of preparation.

  • 146 -

Code：3029

ZERO ONE TECHNOLOGY CO., LTD. PARENT COMPANY ONLY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 AND

INDEPENDENT AUDITORS’ REPORT

Address: 10F., No.8, Ln. 360, Sec. 1, Neihu Rd., Taipei City. Office Number : +886 2 2656 5656

  • 147 -

§TABLE OF CONTENTS§

Contents
1、Cover
2、Table of Contents
3、Independent Auditors’ Auditor Report
4、Parent company only Balance Sheets
5、Parent company only Statements of Comprehensive Income
6、Parent company only Statements of Changes in Equity
7、Parent company only Statements of Cash Flows
8、Notes to Parent company only Financial Statements
(1) General
(2) The date and procedures of authorization of financial
statements
(3);Application of new and revised standards and
interpretations
(4) Summary of significant accounting policies
(5) Critical accounting judgements and key sources of
estimation and uncertainty
(6) Explanation of significant accounts
(7) Related parties transactions
(8) Pledged assets
(9) Significant contingent liabilities and unrecognized
commitments
(10)Foreign-currency-denominated assets and liabilities
that have significant influence
(11) Separately disclosed items
A. Information on significant transactions
B. Information on investees
C. Information on investment in Mainland China
D. Information on major shareholders
9、List of major account tiles		 Page No.
1
2
3～6
7
8～9
10
11～12
13
13
13～14
14～23
23
24～43
44～45
45
45
45
46～50
46、51
46、52
46、53
54～69		 Financial
Report’s
Note No.
-
-
-
-
-
-
-
1
2
3
4
5
6～25
26
27
28
29
30
30
30
30
-
  • 148 -

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders Zero One Technology Co., Ltd.

Opinion

We have audited the accompanying parent company only financial statements of Zero One Technology Co., Ltd. (the “Company”), which comprise the parent company only balance sheets as of December 31, 2020 and 2019, and the parent company only statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the parent company only financial position of the Company as of December 31, 2020 and 2019, and its parent company only financial performance and its parent company only cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the parent company only financial statements for the year ended December 31, 2020. These matters were addressed in the context of our audit of the parent company only financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters for the Company's parent company only financial statements for the year ended December 31, 2020 are stated as follows:

Valuation of allowance for uncollectible accounts

Key Audit Matters

As indicated in Note 5 and Note 10, the management of the Company assesses the collectability of accounts receivable and valuation of allowance for uncollectible accounts, based on the regulations of IFRS 9, and recognizes allowance for uncollectible accounts by lifetime expected credit losses. As the estimation of allowance for uncollectible accounts is subject to judgement of the management, we consider the valuation of allowance for uncollectible accounts a key audit matter.

The following audit procedures

Our audit procedure includes evaluating the policy of recognizing loss allowance for expected credit losses, understanding and testing internal controls of allowance for uncollectible accounts by the management that are

  • 149 -

in line with periodic reviews, design and implement of relevant controls. We also obtain an aging analysis report of accounts receivable for calculation the allowance for uncollectible accounts on the balance sheet date, and perform the procedure of sampling and auditing to evaluate the correctness of the aging analysis report, and examine the valuation of allowance for uncollectible accounts and related reasons so as to evaluate the appropriate nature of the expected credit losses.

Allowance for inventory valuation loss

Key Audit Matters

The valuation of the inventory of the Company includes the estimate of net realizable value and the allowance for inventory valuation loss regarding outdated and obsolete inventory. Net realizable valuation, based on the historical data of market situation and similar products, of the inventory is the carrying amounts calculated by the estimate sales price deducts the cost of goods sold, during the ordinary course of business. The material influence of market condition will affect the amount of net realizable valuation. Besides, the ratio of the allowance for inventory valuation loss is valued by inventory aging and the allowance for the actual loss. We consider the estimate of net realizable valuation, and the ratio of the allowance for inventory impairment loss of the outdated and obsolete inventories based on management's judgment, a key audit matter.

The following audit procedures

Our procedure includes understanding the accounting policies, valuation methods, and citation information originality for the inventory of the Company, obtaining information of the year-end allowance for inventory valuation loss and inventory aging analysis reports, sampling to ensure the reasonableness of the inventory as valued by net realizable value method and the inventory aging, and the carrying amount of the year-end allowance for inventory valuation loss fitting the Company’s accounting policy for allowance.

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

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

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

Those charged with governance (including members of the Audit Committee) are responsible for overseeing the Company's financial reporting process.

Auditors' Responsibilities for the Audit of the Parent Company Only Financial Statements

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

  • 150 -

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

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

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

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

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

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

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

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the parent company only financial statements for the year ended December 31, 2020 and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

  • 151 -

The engagement partners on the audit resulting in this independent auditors' report are Chen Ming, Li and Pei Te, Chen.

Deloitte & Touche Taipei, Taiwan Republic of China February 24, 2021

Notice to Readers

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

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

  • 152 -

ZERO ONE TECHNOLOGY CO., LTD.

PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2020 AND 2019

(In Thousands of New Taiwan Dollars)

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 4 and 6)
Financial assets at fair value through profit or loss – current (Notes 4 and 7)
Financial assets at amortized cost – current (Notes 4 and 9)
Notes receivable (Notes 4, 5 and 10)
Trade receivables (Notes 4, 5, 10 and 26)
Inventories (Notes 4, 5 and 11)
Other current assets (Note 26)
Total current assets
NON-CURRENT ASSETS
Financial assets at fair value through profit or loss - non-current (Notes 4 and 7)
Financial assets at fair value through other comprehensive income - non-current (Notes 4 and 8)
Financial assets at amortized cost - non-current (Notes 4, 9 and 27)
Investments accounted for using the equity method (Notes 4 and 12)
Property, plant and equipment (Notes 4,13 and 27)
Right-of-use assets (Notes 4 and 14)
Other intangible assets (Note 4)
Deferred tax assets (Notes 4 and 21)
Refundable deposits
Total non-current assets
TOTAL
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term borrowings (Note 15)
Trade payables (Note 26)
Other payables (Note 16)
Current tax liabilities (Notes 4 and 21)
Lease liabilities - current (Notes 4 and 14)
Other current liabilities
Total current liabilities
NON-CURRENT LIABILITIES
Deferred tax liabilities (Notes 4 and 21)
Lease liabilities - non-current (Notes 4 and 14)
Net defined benefit liabilities - non-current (Notes 4 and 18)
Other non-current liabilities
Total non-current liabilities
Total liabilities
EQUITY (Notes 4 and 19)
Share capital
Ordinary shares
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated earnings
Total retained earnings
Other equity
Total equity
TOTAL		 December 31, 2020
Amount
%
$ 567,436
10
350,270
6
232,010
4
230,490
4
1,871,194
35
1,223,050
23

26,599

-

4,501,049

82
35,391
1

253,319
5
64,451
1
206,746
4
307,276
6
6,762
-
765
-
35,976
1

4,281

-

914,967

18
$ 5,416,016
100
$ -
-
2,227,047
41
232,528
5
59,660
1
5,223
-

210,909

4

2,735,367

51
-
-
1,597
-
20,982
-

800

-

23,379

-

2,758,746

51

1,256,402

23

478,757

9
219,863
4
-
-

667,898

12

887,761

16

34,350

1

2,657,270

49
$ 5,416,016
100		 December 31, 2020
Amount
%
$ 567,436
10
350,270
6
232,010
4
230,490
4
1,871,194
35
1,223,050
23

26,599

-

4,501,049

82
35,391
1

253,319
5
64,451
1
206,746
4
307,276
6
6,762
-
765
-
35,976
1

4,281

-

914,967

18
$ 5,416,016
100
$ -
-
2,227,047
41
232,528
5
59,660
1
5,223
-

210,909

4

2,735,367

51
-
-
1,597
-
20,982
-

800

-

23,379

-

2,758,746

51

1,256,402

23

478,757

9
219,863
4
-
-

667,898

12

887,761

16

34,350

1

2,657,270

49
$ 5,416,016
100		 December 31, 2020
Amount
%
$ 567,436
10
350,270
6
232,010
4
230,490
4
1,871,194
35
1,223,050
23

26,599

-

4,501,049

82
35,391
1

253,319
5
64,451
1
206,746
4
307,276
6
6,762
-
765
-
35,976
1

4,281

-

914,967

18
$ 5,416,016
100
$ -
-
2,227,047
41
232,528
5
59,660
1
5,223
-

210,909

4

2,735,367

51
-
-
1,597
-
20,982
-

800

-

23,379

-

2,758,746

51

1,256,402

23

478,757

9
219,863
4
-
-

667,898

12

887,761

16

34,350

1

2,657,270

49
$ 5,416,016
100		 December 31, 2019 December 31, 2019 December 31, 2019 December 31, 2019
Amount
$ 567,436
350,270
232,010
230,490
1,871,194
1,223,050
26,599

4,501,049

35,391
253,319
64,451
206,746
307,276
6,762
765
35,976
4,281

914,967

$ 5,416,016

$ -
2,227,047
232,528
59,660
5,223
210,909

2,735,367

-
1,597
20,982
800

23,379

2,758,746

1,256,402

478,757

219,863
-
667,898

887,761

34,350

2,657,270

$ 5,416,016
 Amount
$ 298,352
34,182
683,552
276,895
1,742,370
1,306,416
43,281

4,385,048

30,280
192,423
79,079
143,945
313,991
7,332
1,358
41,852
2,754

813,014

$ 5,198,062

$ 150,000
2,024,410
374,041
56,927
3,576
141,128

2,750,082

793
3,803
21,918
1,162

27,676

2,777,758

1,246,352

470,136

184,732
16,844
494,764

696,340

7,476

2,420,304

$ 5,198,062
 %














































































































































6

1

13

5

33

25
1
84

1

4

1

3

6

-

-

1
-
16
100

3

39

7

1

-
3
53

-

-

-
-
-
53
24
9

4

-
10
14
-
47
100

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

  • 153 -

ZERO ONE TECHNOLOGY CO., LTD.

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

OPERATING REVENUE (Notes 4 and 26)
Net sales

OPERATING COSTS (Notes 11 and 26)
Cost of goods sold

GROSS PROFIT

OPERATING EXPENSES (Notes 18 and 20)
Selling and marketing expenses
General and administrative expenses
Reversal of expected credit losses (Note 10)

Total operating expenses

PROFIT FROM OPERATIONS

NON-OPERATING INCOME AND EXPENSES
(Notes 4 and 20)
Interest income (Note 26)
Other income (Note 26)
Other gains and losses (Note 12)
Net gain on derecognition of financial assets at
amortized cost (Note 9)
Finance costs

Share of profit or loss of subsidiaries accounted for
using the equity method (Note 12)

Total non-operating income and expenses
 2020 %
100
90

10


4

1

-


5


5


1

-

-

-

-

-


1
 2019
Amount
$ 9,658,778
8,661,534

997,244

365,426
123,760
3,262)

485,924

511,320

17,740
11,013
16,062
1,260

2,045 )
441)

43,589
 Amount
$ 8,826,659
7,960,716

865,943


336,544

126,149
5,901)

456,792

409,151


22,488

11,233

7,196

3,745

2,054 )
7,344)

35,264
 %



(


(
(




(






(
(
 100
90
10

4

1

-

5

5

-

-

-

-

-

-

-

(Continued)

  • 154 -
PROFIT BEFORE INCOME TAX

INCOME TAX EXPENSE (Notes 4 and 21)

NET PROFIT

OTHER COMPREHENSIVE INCOME (LOSS)
(Notes 18 and 21)
Items that will not be reclassified subsequently to
profit or loss:
Remeasurement of defined benefit plans

Unrealized gain (loss) on investments in equity
instruments at fair value through other
comprehensive income
Share of other comprehensive income of
subsidiaries accounted for using the equity
method
Income tax relating to items that will not be
reclassified subsequently to profit or loss
Items that may be reclassified subsequently to profit
or loss:
Share of other comprehensive income of
subsidiaries accounted for using the equity
method

Other comprehensive income for the year, net of
income tax

TOTAL COMPREHENSIVE INCOME FOR THE
YEAR

EARNINGS PER SHARE (Note 22)
From continuing operations
Basic

Diluted
 2020 %

6

1


5


-

-

-

-

-


-


5


 2019
Amount
$ 554,909
113,286

441,623


212 )
3,974
17,997
43
74

21,876

$ 463,499

$ 3.55
$ 3.44		 Amount
$ 444,415
93,102

351,313


1,157 )

20,757

6,847

231
-

26,678

$ 377,991

$ 2.85
$ 2.77		 %



(


(
5

1

4

-

-

-

-

-

-

4

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

  • 155 -

ZERO ONE TECHNOLOGY CO., LTD.

PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)


BALANCE, JANUARY 1, 2019


Appropriation of the 2018 earnings

Legal reserve

Special reserve

Cash dividends -NT $1.5 per share


Net profit for the year ended December 31, 2019


Other comprehensive income (loss) for the year ended December 31, 2019


Total comprehensive income (loss) for the year ended December 31, 2019


Convertible bonds converted to capital stock


Share based payment transaction – restricted stock awards


Share based payment transaction - employee stock option


Issuance of restricted stock awards


Issuance of ordinary shares under employee share options


Disposals of investments in equity instruments at fair value through other
comprehensive income

BALANCE, DECEMBER 31, 2019


Appropriation of the 2019 earnings

Legal reserve

Special reserve

Cash dividends – NT $2.0 per share


Net profit for the year ended December 31, 2020


Other comprehensive income (loss) for the year ended December 31, 2020


Total comprehensive income (loss) for the year ended December 31, 2020


Changes in percentage of ownership interests in subsidiaries


Share based payment transaction – restricted stock awards


Share based payment transaction - employee stock option


Recall of unissued shares of restricted stock awards


Issuance of ordinary shares under employee share options

Disposals of investments in equity instruments at fair value through other
comprehensive income

BALANCE, DECEMBER 31, 2020
 Share Capital
Shares
(In Thousand) Issued Capital
122,896
$ 1,228,965

-
-
-
-
-
-
-
-

-

-


-

-

338
3,377
-
-
-
-
700
7,000
701
7,010

-

-

124,635
1,246,352
-
-
-
-
-
-
-
-

-

-


-

-

-
-

-
-
-
-
(
12 ) (
120 )
1,017
10,170

-

-


125,640
$ 1,256,402
 **Retained Earnings **
Total
$ 537,661



-

-


184,603 )


351,313

926)

350,387


-
-
-
-
-

7,105)

696,340


-
-

249,574 )
441,623

169)

441,454


718 )
-
-
-
-


259

$ 887,761
 Other Equity Other Equity Total
$ 16,844 )
-
-
-
(
-
27,604

27,604

-
4,767
-

15,156 )
-
7,105


7,476
-
-
-
(
-
22,045

22,045

-
(
5,088
-
-
-

259)

$ 34,350
 Total Equity
$ 2,196,297
-
-

184,603 )
351,313
26,678
377,991
5,099
4,767
11,431

-
9,322
-
2,420,304
-
-

249,574 )
441,623
21,876
463,499

3,199 )
5,088
6,894
-
14,258
-
$ 2,657,270
Exchange
Unrealized
Gain
(Loss) on
Financial Assets
at Fair Value
Differences on
Translation of the
Financial
Statements of
Foreign
Comprehensive
Operations
Income
$ -
( $ 16,844 )





-
-


-
-


-
-



-
-

-

27,604


-

27,604



-
-
-
-
-
-
-
-
(
-
-

-

7,105

-
17,865
(




-
-
-
-
-
-
-
-

74

21,971


74

21,971

-
-
-
-
-
-
-
-

-

-



-
(
259)

$ 74
$ 39,577
(		 Unearned
Employee
Benefits
$ -
(


-

-

-

-
-

-


-
4,767
-

15,156 ) (
-
-


10,389 )

-
-
-
-
-

-

-
5,088
-
-
-
-
(
$ 5,301)
Capital Surplus
$ 446,515

-
-
-
-

-


-

1,722
-
11,431
8,156
2,312

-

470,136
-
-
-
-

-


-

(
2,481 )
-
6,894

120
4,088

-

$ 478,757
 Unappropriated
Legal Reserve
Special Reserve
Earnings
$ 159,438
$ 15,501
$ 362,722

25,294
-
(
25,294 )
-
1,343
(
1,343 )
-
-
(
184,603 )
(
-
-

351,313

-

-
(
926)
(

-

-

350,387

-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

-
(
7,105)
(
184,732
16,844
494,764
35,131
-
(
35,131 )
-
(
16,844 )
16,844
-
-
(
249,574 )
(
-
-
441,623
-

-
(
169)
(
-

-

441,454


-
-
(
718 )
(
-
-
-
-
-
-
-
-
-
-
-
-
-

-

259

$ 219,863
$ -
$ 667,898

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

  • 156 -

ZERO ONE TECHNOLOGY CO., LTD.

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (In Thousands of New Taiwan Dollars)

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
(In Thousands of New Taiwan Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax
Adjustments for:
Depreciation expenses
Amortization expenses
Reversal of expected credit losses
Net gain on fair value change of financial assets at fair value through
profit or loss
Finance costs
Net gain on derecognition of financial assets at amortized cost
Interest income
Dividend income
Compensation costs of employee share options
Share of loss of subsidiaries accounted for using the equity method
Loss on disposal of property, plant and equipment
Gain on disposal of investments accounted for using equity method
(Reversal of write-down) write-down of inventories
Net loss on foreign currency exchange
Changes in operating assets and liabilities
Financial assets mandatorily classified as at fair value through profit
or loss
Notes receivable
Trade receivables
Inventories
Other current assets
Trade payables
Other payables
Other current liabilities
Net defined benefit liabilities
Cash generated from operations
Income tax paid
Net cash generated from operating activities		 2020
$ 554,909
20,255
778
(
3,262 )
(
5,050 )
2,045
(
1,260 )
(
17,740 )
(
8,535 )
11,982
441
40

(
275 )
(
7,898 )
5,618
(
316,149 )
46,405
(
127,308 )
88,620
3,780
206,993
(
139,983 )
69,781
(
1,148)
383,039
(
105,427)

277,612		 2019

$ 444,415

18,058

776

(
5,901 )

(
7,359 )

2,054

(
3,745 )

(
22,488 )

(
4,366 )

16,198

7,344

-

-

29,563

23,769

5,215

(
116,322 )

(
17,318 )

(
410,213 )

(
3,678 )

364,851

131,321

35,226
(
818)

486,582
(
97,101)

389,481

(Continued)

  • 157 -
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of financial assets at fair value through other comprehensive
income
Proceeds from sale of financial assets at fair value through other
comprehensive income
Proceeds from the return of capital upon investees' capital reduction of
financial assets at fair value through other comprehensive income
Purchase of financial assets at amortized cost
Disposal of financial assets at amortized cost
Acquisition of investments accounted for using the equity method
Proceeds from disposal of investments accounted for using equity
method
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Increase in refundable deposits
Decrease (increase) in other receivables-related parties
Payments for intangible assets
Interest received
Dividend received from subsidiaries
Other dividends received
Net cash generated from (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term borrowings
Repayments of short-term borrowings
Proceeds from guarantee deposits received
Refund of guarantee deposits received
Repayment of principal portion of lease liabilities
Dividends paid
Exercise of employee share options
Interest paid
Net cash used in financing activities
EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF
CASH AND CASH EQUIVALENTS HELD IN FOREIGN
CURRENCIES
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR		 2020
( $ 84,217 )
24,217
3,078
(
236,229 )
700,682
(
49,000 )
275
(
6,359 )
500
(
1,527 )
10,000
(
185 )
20,642
630

8,535

391,042
-
(
150,000 )
-
(
362 )
(
5,066 )
(
249,574 )
14,258
(
2,049)
(
392,793)
(
6,777)
269,084

298,352
$ 567,436		 2019

( $ 47,786 )

17,803

3,320

(
191,975 )

64,955

(
10,063 )

-

(
7,033 )

-

(
1,077 )

(
10,000 )

(
670 )

20,178

1,750

4,366
(
156,232)

50,000

-

362

-

(
4,319 )

(
184,603 )

9,322
(
2,050)
(
131,288)
(
5,363)

96,598

201,754
$ 298,352

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

(Concluded)

  • 158 -

ZERO ONE TECHNOLOGY CO., LTD.

NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2021 and 2020

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

1. GENERAL

Zero One Technology Co., Ltd. (the “Company” or “ZOTC”) was incorporated as a company limited by shares under the provisions of the Company Law of the Republic of China on June 27, 1980. On January 21, 2000, ZOTC’s Shares were listed on Taipei Exchange (TPEX). On August 26, 2002, ZOTC’s shares were listed on the Taiwan Stock Exchange (TWSE). ZOTC is a dedicated foundry in the technology industry which engages mainly in the design, manufacturing, packaging, selling, consulting and services of electronic information, computer software, hardware, accessories, components and Chinese data processing, etc.

The parent company only financial statements are expressed by the functional currency (New Taiwan dollars) of the Company.

2. THE DATE AND PROCEDURES OF AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying parent company only financial statements were approved by the Board of Directors and issued on February 24, 2021.

3. ;APPLICATION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS

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

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

  • (2)The IFRSs endorsed by the Financial Supervisory Commission (FSC) for application starting from 2021
New IFRSs
Amendments to IFRS 4, “Extension of the Temporary Exemption
from Applying IFRS 9”
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
“Interest Rate Benchmark Reform – Phase II”
Amendments to IFRS16 “Covid-19 leases – rent concessions”		 Effective Date
Announced by IASB
Effective as announced
January 1, 2021 for annual
reporting periods
June 1, 2020 for annual
reporting period

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

(3) New IFRSs in issued by IASB but not yet endorsed and issued into effect by the FSC

New IFRSs
Annual Improvements to IFRS Standards 2018-2020
Amendments to IFRS 3 “Reference to the Conceptual Framework:
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture”

IFRS 17 “Insurance Contracts”

Amendments to IFRS 17
Amendments to IAS 1 “Classification of Liabilities as Current or
Noncurrent”
Amendments to IAS 1 “Disclosure of accounting policies”
Amendments to IAS 8 “Definition of accounting estimates”
Amendments to IAS 16 “Property, Plant and Equipment – Proceeds
before Intended Use”
Amendments to IAS 37 “Onerous Contracts – Cost of Fulfilling a
Contract”
 Effective Date
Announced by the IASB (Note 1)
January 1, 2022 (Note 2)
January 1, 2022 (Note 3)
To be determined by IASB
January 1, 2023
January 1, 2023
January 1, 2023
January 1, 2023 (Note 6)
January 1, 2023 (Note 7)
January 1, 2022 (Note 4)
January 1, 2022 (Note 5)

Note 1 ： Unless stated otherwise, the above new, revised or amended standards and interpretations are effective for annual periods beginning on or after their respective effective dates.

  • 159 -

  • Note 2 ： The amendments to IFRS 9 are applied prospectively to modifications and exchanges of financial liabilities that occur on or after the annual reporting periods beginning on or after January 1, 2022. The amendments to IAS 41 “Agriculture” are applied prospectively to the fair value measurements on or after the annual reporting periods beginning on or after January, 2022. The amendments to IFRS 1 “First-time Adoptions of IFRSs” are applied retrospectively for annual reporting periods beginning on or after January 1, 2022.

  • Note 3 ： The amendments are applicable to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2022.

  • Note 4 ： The amendments are applicable to property, plant and equipment that are brought to the location and condition necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021.

  • Note 5 ： The amendments are applicable to contracts for which the entity has not yet fulfilled all its obligations on January 1, 2022.

  • Note 6 ： The amendments are effective for annual periods beginning on or after 1 January, 2023.

Note 7 ： The amendments are effective for annual periods beginning on or after 1 January, 2023, and changes in accounting polices and changes in accounting estimates that occur on or after the start of the period. As of the date the parent company only financial statements were authorized for issue, the Company is continuously evaluating the possible impact that the application of above standards and interpretations will have on the Company’s financial position and financial performance, and will disclose the relevant impact when the evaluation is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  • (1)Statement of compliance

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

  • (2)Basis of preparation

The parent company only financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair values, and present value of defined benefits plans deducts net defined benefit liabilities measured at fair value.

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

  • A. ;Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities, which can be acquired during measurement date;

  • B. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

  • C. Level 3 inputs are unobservable inputs for the asset or liability.

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

  • 160 -

  • (3)Classification of current and non-current assets and liabilities Current assets include:

  • A. ;Assets held primarily for the purpose of trading;

  • B. ;Assets expected to be realized within twelve months after the reporting period; and

  • C. ;Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

Current liabilities include:

  • A. ;Liabilities held primarily for the purpose of trading;

  • B. Liabilities due to be settled within twelve months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the parent company only financial statements are authorized for issue; and

  • C. Liabilities for which the Company does not have an unconditional right to defer settlement for at least twelve months after the reporting period, unless issuing equities to defer settlement wouldn’t affect classification, depending on liabilities conditions.

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

  • (4)Foreign currencies

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

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

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income.

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

  • (5)Inventories

Inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriated to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at standard cost and adjusted to approximate weighted-average cost on the reporting period.

  • (6)Investment in subsidiaries

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

Subsidiaries are the entities controlled by the Company (including structural entities).

Under the equity method, the investment is initially recognized at cost and the carrying amount is increased or decreased to recognize the Company’s share of the profit or loss and other comprehensive income of the subsidiary after the date of acquisition. Besides, the Company also recognizes the Company’s share of the change in other equity of the subsidiary.

Changes in the Company’s ownership interests in subsidiaries that do not result in the Company’s loss of control over the subsidiaries are accounted for as equity transactions. Any difference between the carrying amounts of the investment and the fair value of the consideration paid or received is recognized directly in equity.

When the Company’s share of losses of a subsidiary equals or exceeds its interest in that subsidiary (which includes any carrying amount of the investment in subsidiary accounted for by the equity method and long-term interests that, in substance, form part of the Company’s net investment in the subsidiary), the Company continues recognizing its share of further losses.

  • 161 -

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

The Company assesses its investment for any impairment by comparing the carrying amount with the estimated recoverable amount as assessed based on the entire financial statements of the invested company. Impairment loss is recognized when the carrying amount exceeds the recoverable amount. If the recoverable amount of the investment subsequently increases, the Company recognizes the reversal of the impairment loss; the adjusted post-reversal carrying amount should not exceed the carrying amount that would have been recognized (net of amortization or depreciation) had no impairment loss been recognized in prior years. An impairment loss recognized on goodwill cannot be reversed in a subsequent period.

When the Company loses control of a subsidiary, any retained investment of the former subsidiary is measured at the fair value at that date. A gain or loss is recognized in profit or loss and calculated as the difference between the aggregate of the fair value of consideration received and the fair value of any retained interest at the date when control is lost; and the previous carrying amount of the investment in such subsidiary. In addition, the Company shall account for all amounts previously recognized in other comprehensive income in relation to the subsidiary on the same basis as would be required if the subsidiary had directly disposed of the related assets and liabilities.

When the Company transacts with its subsidiaries, profits and losses resulting from the transactions with the subsidiaries are recognized in the Company’s parent only financial statements only to the extent of interests in the subsidiaries that are not owned by the Company.

  • (7)Investment in associates

An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture.

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

Under the equity method, investments in an associate are initially recognized in the parent company only balance sheet at cost and adjusted thereafter to recognize the company’s share of the profit or loss and other comprehensive income of the associate and the distribution received. The Company also recognizes the changes in the equity of associates attributable to the Company.

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

When the associate issues new shares, and the Company subscribes at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company’s proportionate interest in the net assets of the associate. The Company records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus. If the Company’s ownership interest is reduced due to the additional subscription to the shares of associate by other investors, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate shall be reclassified to profit or loss on the same basis as would be required if the associate had directly disposed of the related assets or liabilities. When the adjustment should be debited to capital surplus, but the capital surplus recognized from investments accounted for by the equity method is insufficient, the shortage is debited to retained earnings.

When the Company’s share of losses of an associate equals or exceeds its interest in that associate (which includes any carrying amount of the investment accounted for by the equity method and long-term interests that, in substance, form part of the Company’s net investment in the associate), the Company discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the

  • 162 -

Company has incurred legal obligations, or constructive obligations, or made payments on behalf of that associate.

The entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Company discontinues the use of the equity method from the date on which its investment ceases to be an associate. Any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. The Company accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. If the investment of associates becomes the investment of joint ventures, or vice versa, the Company will continue to evaluate investment accounted for by the equity method, other than remeasuring retained equities.

Profits and losses, resulting from upstream, downstream, and sidestream transactions between the Company and associates, are recognized on parent company only financial statements in the scope of the Company’s equities that are not relevant to its associates.

  • (8)Property, plant and equipment

Property, plant and equipment are stated at cost, less recognized accumulated depreciation and accumulated impairment loss.

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

Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

  • (9)Intangible assets

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

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

  • (10)Impairment of property, plant and equipment, right-of-use assets, and intangible assets (excluding goodwill)

At the end of each reporting period, the Company reviews the carrying amounts of its property, plant and equipment, right of use assets and intangible assets (excluding goodwill), to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are also allocated to individual cash-generating units or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

  • 163 -

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

The inventory, property, plant and equipment and intangible assets recognized in the customer contract are first recognized as impairment in accordance with the inventory policies and the above regulations, and the book value of the relevant assets according to the contract cost exceeds the expected consideration for the provision of related goods or services. The amount after deducting the directly related costs is recognized as an impairment loss, and the book value of the contract cost-related assets is continuously included in the cash-generating unit in order to perform the impairment assessment of the cash-generating unit.

When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss, without amortization or depreciation, been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

  • (11)Financial instruments

Financial assets and financial liabilities are recognized on parent company only balance sheets when a group entity becomes a party to the contractual provisions of the instruments.

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

  • a. A.Financial assets

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

  • d. Measurement category

The Company’s financial assets are classified into the following categories: financial assets at FVTPL, financial assets at amortized cost, and investments in equity instruments at FVTOCI.

  • (a)Financial assets at FVTPL

For certain financial assets which include debt instrument that do not meet the criteria of amortized cost or FVTOCI, it is mandatorily required to measure them at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI and debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria.

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The dividends, interest earned and net gain or loss recognized in profit or loss on the financial asset. Fair value is determined in the manner described in Note 25.

  • (b)Financial assets at amortized cost

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

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

  • 164 -

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.

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

Interest income is calculated by applying the effective interest rate to multiply the gross carrying amount of a financial asset.

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

  • (c)Investments in equity instruments at FVTOCI

On initial recognition, the Company may make an irrevocable designate investments in equity instruments that is not held for trading as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

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

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

  • e. Impairment of financial assets

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

The Company always recognizes the loss allowance by lifetime Expected Credit Loss (i.e. ECL) for notes and accounts receivable. For all other financial instruments, the Company recognizes lifetime ECL when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on the financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance at an amount equal to 12-month ECL.

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

In order for the Company to fulfill the purpose of internal credit and risk management control, under the premise that does not take into account of the collaterals owned by the Company, the following will be deemed as a default of the financial assets:

  • C. Either internal or external information indicates that it is impossible for the debtors to clear the debts;

  • 165 -

  • D. Any delay in payment – unless there is reasonable and supporting information that indicates the basis for delaying the payment is more appropriate.

The Company recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

  • f. De-recognition of financial assets

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

On derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in an equity instrument at FVTOCI, the cumulative gain or loss that had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

  • B. Financial liabilities

  • (a)Subsequent measurement

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

  • (b)De-recognition of financial liabilities

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

  • C. Convertible bonds

The component parts of compound instruments (convertible bonds) issued by the Company are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

On initial recognition, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments. This amount is recorded as a liability on an amortized cost basis using the effective interest method until extinguished upon conversion or the instrument’s maturity date. Any non-equity embedded derivative liability is measured at fair value.

The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in the liability and equity until the conversion option is exercised, in which case, the balance recognized in equity will be transferred to capital surplus - share premium. When the conversion option remains unexercised at maturity, the balance recognized in equity will be transferred to capital surplus - share premium.

Transaction costs that relate to the issue of the convertible bonds are allocated to the liability and equity components in proportion to the allocation of the gross proceeds.

  • (12)Revenue recognition

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

Revenue from sale of goods

Revenue from sale of goods comes from sales of computer software, hardware, accessories, equipment, and components, etc. Customers have the right of quotation and user, and the responsibility of resale as goods after shipment and taking risks of losses

  • 166 -

of obsolete goods. The Company recognizes revenues and trade receivable as goods after shipment.

  • (13)Leases

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

  • A. The Company as lessor

Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Lease payments (less any lease incentives payable) from operating leases are recognized as income on a straight-line basis over the terms of the relevant leases. Initial direct costs incurred in obtaining operating leases are added to the carrying amounts of the underlying assets and recognized as expenses on a straight-line basis over the lease terms.

  • B. The Company as lessee

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

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

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

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

Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized over the lease terms. When there is a change in a lease term or a change in future lease payments resulting from a change in an index or a rate used to determine those payments, the Company remeasures the lease liabilities with a corresponding adjustment to the right-of-useassets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining amount of the remeasurement is recognized in profit or loss. Lease liabilities are presented on a separate line in the parent company only balance sheets.

  • (14)Costs of loans

  • All Costs of loans incurred shall be recognized as profits and losses at the current period.

  • (15)Employee benefit

  • A. Short-term employee benefits.

    • Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for service renderded by employees.

  • B. Retirement benefits

  • 167 -

For defined contribution retirement benefit plans, payments to the benefit plan are recognized as an expense when employees have rendered service entitling them to the contribution. For defined benefit retirement benefit plans, the cost of providing benefit is recognized based on actuarial calculations. Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the Projected Unit Credit Method. Service cost (including current service cost as well as previous service cost, and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur, or when the plan amendment or curtailment occurs/when the settlement occurs. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liability (asset) represents the actual deficit (surplus) in the Company’s defined benefit plan. Net defined benefit asset shall not exceed the return contribution or the present value possibly calculated after reducing future contribution.

  • (16)Share-based payment arrangements

The fair value and expected estimate amounts of the stock options and restricted stock sward determined at the grant date of the stock options is expensed on a straight-line basis over the vesting period, based on the Company’s estimate of stock options that will eventually vest, with a corresponding increase in capital surplus - stock options. The fair value determined at the grant date of the stock options is recognized as an expense in full at the grant date when the stock options granted vest immediately.

When restricted shares for employees of the company are issued, other equity - unearned employee benefits is recognized on the grant date, with a corresponding increase in capital surplus - restricted shares for employees. If restricted shares for employees are granted for consideration and should be returned, they are recognized as payables.

At the end of each reporting period, the Company revises its estimate of the number of stock options expected to vest. The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the capital surplus - stock options and capital surplus – restricted stock award.

  • (17)Taxation

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

  • D. Current tax

The Company recognizes current earnings (losses) in accordance with the Income Tax Act of the Republic of China, and calculate the amount for tax payable (recoverable).

Income tax on unappropriated earnings is expensed in the year the shareholders approved the appropriation of earnings which is the year subsequent to the year the earnings are generated according to Taiwan’s Income Tax Act.

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

  • E. Deferred tax

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

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, net operating loss carryforwards and tax credits for research and development expenses to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

  • 168 -

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

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be recovered. The deferred tax assets which originally not recognized is also reviewed at the end of each reporting period and recognized to the extent that it is probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be recovered.

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

  • F. Current and deferred tax for the year

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

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

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

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

  • (1)Estimated impairment of financial assets

  • The provision for impairment of notes and trade receivables and investments in debt instruments is based on the Company’s assumptions about risk of default and expected loss rates. The Company uses judgment in making these assumptions and in selecting the inputs to the impairment calculation, based on the Company’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. For details of the key assumptions and inputs used, see Notes 10. Where the actual future cash inflows are less than expected, a material impairment loss may arise.

  • (2)Write-down of inventory

Net realizable value of inventory is the estimated selling price in the ordinary course of business less the estimated costs necessary to close the sales. The estimation of net realizable value was based on current market conditions and the historical experience of selling products of a similar nature. Changes in market conditions may have a material impact on the estimation of net realizable value.

  • 169 -

6. CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS
Cash on hand and revolving funds
Checking accounts and demand deposits in banks
Cash equivalents
Time deposits in banks
Repurchase bond		 December 31,
2020
$ 207
538,749
-

28,480
$ 567,436		 December 31,
2019




$ 183
84,112
214,057
-
$ 298,352

As the end of reporting period, the market rate intervals of deposits in banks and repurchase bond were as follows ：

,
bond were as follows：
Demand deposits in banks
Time deposits in banks
Repurchase bond		 December 31,
2020
0.005%~0.32%
-
0.45%		 December 31,
2019
0.01%~0.67%
2.10%~2.27%
-

7. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets－current
Mandatorily measured at FVTPL
－Domestic convertible bonds
－Domestic listed ordinary shares
－Fund beneficiary certificates
Financial assets－non-current
Mandatorily measured at FVTPL
－Domestic listed preference shares
－Fund beneficiary certificates		 December 31,
2020
$ 15,966
1,785

332,519
$ 350,270
$ 14,403

20,988
$ 35,391		 December 31,
2019		 December 31,
2019










$ 31,182
-
3,000
$ 34,182
$ 15,041
15,239
$ 30,280

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

Investments in equity instruments
Non-current
Domestic investment
Listed ordinary shares and emerging
market ordinary shares
Listed preference shares
Unlisted shares		 December 31,
2020
$ 70,729
164,448

18,142
$ 253,319		 December 31,
2019		 December 31,
2019




$ 64,173
124,507
3,743
$ 192,423

These long-term investments in ordinary and preferred shares are held for receiving profits, under medium to long-term business development strategic purposes. Accordingly, the Company’s management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Company’s strategy of holding these investments for long-term purposes.

  • 170 -

9. FINANCIAL ASSETS AT AMORTIZED COST

Current
Domestic investment
Time deposits with original maturities
more than three months (1)
Repurchase bond (2)
Non-current
Domestic investment
Pledged time deposit (3)
Barclays Bank Coupon Bond (USD) (4)
Prufin Perpetual Corp. Bond (USD) (5)
AT&T Corp. Bond (USD) (6)
Yuanta Securities Asia Financial Services
Limited 2018 Non-secured USD-
denominated Private Fixed Rate Notes
(7)		 December 31,
2020
$ 232,010

-
$ 232,010
$ 20,390
14,895
29,166
-

-
$ 64,451		 December 31,
2019		 December 31,
2019










$ 292,313
391,239
$ 683,552
$ 15,513
15,807
31,179
16,580
-
$ 79,079

  • (8) As of December 31, 2020 and 2019, the market interest rate intervals of time deposit over 3 months portion were 0.77%~2.10% and 1.02%~2.33%, respectively.

  • (9) As of December 31, 2019, the market interest rate of repurchase bond over 3 months portion was 2.70%~2.90%.

  • (10) Please refer to Note 27 for more details on financial assets at amortized cost under pledge.

  • (11) The Company purchased Barclays Bank Coupon Bond (USD) by USD 527 thousand, with a coupon rate of 4.836%, in August, 2019.

  • (12) The Company purchased Prufin Perpetual Corp (USD) by USD 1,040 thousand, with a coupon rate of 4.875%, in August, 2019.

  • (13) The Company purchased AT&T Corp (USD) by USD 553 thousand, with a coupon rate of 4.50%, in November, 2019. In November, 2020, the Company sold all the bonds at $17,130 thousand in order to adjust the portion of the investment, $1,260 thousand recognized as net gain on derecognition of financial assets at amortized cost.

  • (14) The Company purchased Yuanta Securities Asia Financial Services Limited issued 5- year Non-secured Fixed Rate Notes, with the face value of USD 2,000 thousand and a coupon rate of 4.10%, in August, 2018, and then sold all bonds by $64,954 thousand, for adjustment for the portion of the investment in August, 2019, $3,745 thousand recognized as net gain on derecognition of financial assets at amortized cost.

10. NOTES AND TRADE RECEIVABLE

OTES AND TRADE RECEIVABLE
Measured at amortized cost
Notes receivable
Trade receivable
Overdue receivables
Less:Allowances for impairment loss - trade
receivable
Less:Allowances for impairment loss -
overdue receivables		 December 31,
2020
$ 230,490
1,882,626
1,474

11,432 )
1,474)
$ 2,101,684		 December 31,
2019

(
(
(
(
 $ 276,895
1,757,064
20,816

14,694 )
20,816)
$ 2,019,265

The average credit period of sales of goods of the Company was 60-90 days, and no interest was charged on trade receivable.

  • 171 -

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

The Company applies the approach to providing for expected credit losses which permits the use of lifetime expected loss provision for all trade receivable. The expected credit losses of trade receivable on durable are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s past experience of receivable and current financial position, expectation of GDP and prospect of the industry, deciding the rate of the expected credit losses by the different levels of credit limits of customers and actual conditions, based on the degree of doubtful accounts triggered by customers of different industries.

The Company writes off an account receivable when there is information indicating that the respective debtor is experiencing severe financial difficulty and there is no realistic prospect of recovery of the receivable. For accounts receivable that have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivables which are due. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of trade receivable:

December 31, 2020

December 31, 2020
Not Past 1-30 Days 31-60 Days 61-90 Days More Than 90
Due Past Due Past Due Past Due DaysPast Due Total
Gross carrying amount
 $ 2,099,693 $
2,687		 $ 10,160 $ 576 $ 1,474 $ 2,114,590
Loss allowance (Lifetime
ECLs) ( 5,895)
(		 899)
 ( 4,344 )
 ( 294)
 ( 1,474 ) ( 12,906)
Amortized cost
 $ 2,093,798 $
1,788
 $ 5,816
$ 282
 $ - $ 2,101,684
December 31, 2019
Not Past 1-30 Days 31-60 Days 61-90 Days More Than 90
Due Past Due Past Due Past Due DaysPast Due Total
Gross carrying amount
 $ 1,978,112 $
4,755		 $ 12,731 $ 696 $ 58,481 $ 2,054,775
Loss allowance (Lifetime
ECLs) ( 3,903) ( 1,879) ( 5,400 )
 ( 347) ( 23,981 ) ( 35,510)
Amortized cost
 $ 1,974,209 $
2,876
 $ 7,331
$ 349
 $ 34,500 $ 2,019,265
The movements of the loss allowance of trade receivable were as follows:
2020 2019
Balance at January 1 $
35,510		 $ 41,411
Less: Amounts written off ( 19,342 ) -
Less: Reversal of loss allowance ( 3,262 ) ( 5,901 )
Balance at December 31 $
12,906		 $ 35,510
11.INVENTORIES
December 31, December 31,
2020 2019
Commodities $ 1,223,050 $ 1,306,416

Cost of goods sold for inventories were $8,661,534 thousand, and $7,960,716 thousand, respectively, in 2020 and 2019. Cost of goods sold included reversals of inventory write-downs of $7,898 thousand, and inventory write-downs of $29,563 thousand, respectively, in 2020 and 2019. The reversals of previous write-downs resulted from disposal of the commodities that had been listed previously for loss in price.

  • 172 -

12. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

2.INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
Investments in subsidiaries
(1) Investments in subsidiaries
Zotech Technology Co., Ltd.
Zerone Win Investment Co., Ltd.
Asiaone Holdings Ltd.
Name of subsidiaries
Zotech Technology Co., Ltd.
Zerone Win Investment Co., Ltd.
Asiaone Holdings Ltd.		 December 31,
2020
December 31,
2019
$ 206,746
$ 143,945
December 31,
2020
December 31,
2019
$ 43,132
$ 43,671
154,088
90,729

9,526

9,545
$ 206,746
$ 143,945
Percentage ofowners'equity and votingright		 December 31,
2019
$ 143,945
December 31,
2019
December 31,
2020
85.37%
100.00%
100.00%		 December 31,
2019
85.37%
100.00%
100.00%

The Company invested and established Asiaone Holdings Ltd., which engages in investments, in September, 2019, with investment amount to $10,063 thousand and shareholding ratio of 100%.

The Company participated in the capital injection of Zerone Win Investment Co. Ltd. at $49,000 thousand in May, 2020. The share-holding ratio remains unchanged after capital injection.

(2) Investments in associates

The Company invested and founded Chi-Ta International Co., Ltd., that engaged mainly in researching and manufacturing hardware of auto-used electronic equipment, with investment amount to $10,000 thousand, and share-holding ratio of 30% in March, 2014, since it kept net losses, foresaw decrease in future cash flows, evaluated recognized $7,243 thousand of impairment losses in 2015, and recognized book value of $0 thousand after recognized deficits. In April, 2020, the Company disposed all shares and recognized $275 thousand in gains.

13. PROPERTY, PLANT AND EQUIPMENT

Machinery Machinery
and Office Delivery Other
Land Buildings equipment equipment equipment equipment Total
Cost
Balance at January 1, 2019
 $ 234,892
 $ 128,185 $ 9,008
 $
26,944
 $ 2,458
 $
8,569		 $ 410,056
Additions - - - 7,033 -
 - 7,033
Disposals - - ( 835 ) ( 149 ) -
 - ( 984 )
Reclassification
 -
 - -
 758
 -
 6,966 7,724
Balance at December 31,
2019
 $ 234,892
 $ 128,185 $ 8,173
 $
34,586
 $ 2,458 $
15,535		 $ 423,829
Accumulated depreciation
and impairment
Balance at January 1, 2019
 $ -
 $ 69,850 $ 9,008
 $
16,075
 $ 492
 $
1,705		 $
97,130
Disposals - - ( 835 ) ( 149 ) -
 - ( 984 )
Depreciation
 -
 1,816 -
 7,906
 492
 3,478 13,692
Balance at December 31,
2019
 $ -
 $ 71,666 $ 8,173
 $
23,832
 $ 984 $
5,183		 $ 109,838
Carrying amounts at
December 31, 2019
 $ 234,892
 $ 56,519 $ -
 $
10,754
 $ 1,474 $
10,352		 $ 313,991

(Continued)

  • 173 -
Cost
Balance at January 1, 2020

Additions
Disposals
Reclassification

Balance at December 31,
2020

Accumulated depreciation
and impairment
Balance at January 1, 2020

Disposals
Depreciation

Balance at December 31,
2020

Carrying amounts at
December 31, 2020
 Land
$ 234,892

-
-
-

$ 234,892

$ -

-
-

$ -

$ 234,892
 Buildings
$ 128,185

-
-

-

$ 128,185

$ 71,666

-

1,816

$ 73,482

$ 54,703
 Machinery
and
equipment		 Office
equipment
$ 34,586

3,129
(
505 )

1,753

$ 38,963

$ 23,832

(
505 )

7,407

$ 30,734

$ 8,229
 Delivery
equipment		 Other
equipment

$ 15,535


3,230
(
926 )

891

$ 18,730


$ 5,183

(
386 )

5,463

$ 10,260

$ 8,470
 Total












$ 8,173

-
(
133 )

-

$ 8,040

$ 8,173

(
133 )

-

$ 8,040

$ -







$ 2,458
-

-
-
$ 2,458
$ 984

-
492
$ 1,476
$ 982		 $ 423,829
6,359
(
1,564 )

2,644
$ 431,268
$ 109,838
(
1,024 )

15,178
$ 123,992
$ 307,276

(Concluded)

Depreciation expenses were depreciated on a straight-line basis over the estimated useful life of the asset:


l life of the asset:
Buildings 7-50 Years
Machinery equipment 3 Years
Office equipment 3-5 Years
Delivery equipment 5 Years
Other equipment 3 Years

Please refer to Note 27 for more details on property, plant and equipment under pledge.

14. LEASE ARRANGEMENTS

  • (4) Right-of-use assets
SE ARRANGEMENTS
ight-of-use assets
Carrying amounts of right-of-use assets
Buildings
Office equipment
Additions to right-of-use assets
Depreciation charge for right-of-use assets
Buildings
Office equipment
ease liabilities
Carrying amounts of lease liabilities
Current
Non-current		 December 31, 2020
$ 6,418

344
$ 6,762
2020
$ 4,507
$ 4,876

201
$ 5,077
December 31, 2020
$ 5,223
$ 1,597		 December 31, 2019


$ 6,787
545
$ 7,332
2019
$ 8,193
$ 4,165

201
$ 4,366
December 31, 2019


$ 3,576
$ 3,803

  • (5) Lease liabilities

  • 174 -

Range of discount rate for lease liabilities were as follows:

Range of discount rate for lease liabilities were as follows:
Buildings
Office equipment
(6) Other lease information
Expenses relating to short-term leases
Expenses relating to low-value asset leases
Total cash (outflow) for leases		 December 31, 2020
1.20%
1.20%
2020
$ 168
$ 32
($ 5,358)		 December 31, 2019
1.20%
1.20%
2019


(

(		 $ 353
$ 34
$ 4,797)

15. SHORT- TERM LOANS

HORT-TERM LOANS
December 31,
2020
Unsecured loans
－Line of credit loans
$ -
Interest rate of bank loans was 0.94% on December 31, 2019.		 December 31,
2019
$ 150,000

16. OTHER PAYABLE

THER PAYABLE
Salaries and bonuses payable
Employees', directors', and supervisors'
compensation payable
Others		 December 31,
2020
$ 84,202
35,420

112,906
$ 232,528		 December 31,
2019




$ 78,281
28,367
267,393
$ 374,041

17. BOND PAYABLE

On May 19, 2014, ZOTC issued no any interest unsecured convertible bonds (the second tranche). The bonds had an aggregate face value of $500,000 thousand, with each unit having a face value of NT$100 thousand, and the offering price was $100.20% of the face value, and its conversion period is 5 years from June 20, 2014 to May 9, 2019. The conversion price was $20 per share on issuance date.

Within the period between one month after the issuance date and 40 days before the last convertible date, if the closing price of ZOTC common shares on the TWSE for a period of 30 consecutive trading days before redemption has been at least 30% of the conversion price in effect on each such trading day, or in the event that the principal amount of the convertible bonds originally outstanding is 10% lower than the issued amount of the bonds, ZOTC may redeem all bonds at face value by cash.

The convertible bonds issued over 3 years, the holder could ask the Company to redeem bonds at face value by cash.

The convertible bonds include liabilities and equity. The equity components were accounted for ZOTC as paid-in capital –option. The effective interest rate of liability components recognized is 2.0618%.

Balance on January 1, 2019, liability components

Interest (2.0618%)
Convertible bonds changed into ordinary shares
(
Balance on December 31, 2019, liability components
 $ 5,085
15
5,100)
$ -
  • 175 -

18. RETIREMENT BENEFIT PLANS

(1)Defined contribution plans

The plan under the R.O.C. Labor Pension Act (the “Act”) is deemed a defined contribution plan. Pursuant to the Act, ZOTC has made monthly contributions equal to 6% of each employee’s monthly salary to employees’ pension accounts.

(2)Defined benefit plans

ZOTC has defined benefit plans under the R.O.C. Labor Standards Law that provide benefits based on an employee’s length of service and average monthly salary for the six-month period prior to retirement. The Company contributes an amount equal to 2% of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the Committee’s name in the Bank of Taiwan. Before the end of each year, the Company assesses the balance in the Funds. If the amount of the balance in the Funds is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Company is required to fund the difference in one appropriation that should be made before the end of March of the next year. The Funds are operated and managed by Bureau of Labor Funds, Ministry of Labor; as such, the Company does not have any right to intervene in the investments of the Funds.

Amounts recognized in respect of these defined benefit plans in the parent company only balance sheets were as follows:


nly balance sheets were as follows:

Present value of defined benefit obligation
Fair value of plan assets
Contribution
Net defined benefit liability		 December 31,
2020
$ 60,393
(
39,411)

20,982
$ 20,982		 December 31,
2019

(
(

 $ 58,307
36,389)
21,918
$ 21,918

Movements in net defined benefit liabilities/assets were as follows:


Balance at January 1, 2019

Service cost
Current service cost
Interest expense (income)

Recognized in profits or losses

Remeasurements
Return on plan assets (excluding
amounts included in interest,
net)
Actuarial loss arising from changes in
demographic assumptions
Actuarial loss arising from changes in
financial assumptions
Actuarial loss arising from
experience adjustments
Recognized in other comprehensive
income
Contribution from employer

Balance at December 31, 2019
 Present value of
defined benefit
obligations
$ 55,117

311

551


862

-

400
1,329

599


2,328


-

$ 58,307
 Fair value of
plan assets
$ 33,538)

-
339)

339)


1,171 )
-
-
-

1,171)

1,341)

$ 36,389)
 Net defined
benefit
liability/assets






(
(
(
(

(
(
(


(


(
 $ 21,579
311
212
523

1,171 )
400
1,329
599
1,157
1,341)
$ 21,918

(Continued)

  • 176 -

Balance at January 1, 2020

Service cost
Current service cost
Interest expense (income)

Recognized in profits or losses

Remeasurements
Return on plan assets (excluding
amounts included in interest,
net)
Actuarial loss arising from changes in
demographic assumptions
Actuarial loss arising from changes in
financial assumptions
Actuarial gain arising from
experience adjustments
Recognized in other comprehensive
income
Contribution from employer

Balance at December 31, 2020
 Present value of
defined benefit
obligations
$ 58,307

256

437


693

-

185
1,320
(
112)


1,393


-

$ 60,393
 Fair value of
plan assets
$ 36,389)

-
275)

275)


1,181 )
-
-
-

1,181)

1,566)

$ 39,411)
 Net defined
benefit
liability/assets



(


 (
(
(
(

(
(
(


(
(

(
 $ 21,918
256
162
418

1,181 )
185
1,320
112)
212
1,566)
$ 20,982

(Concluded)

The pension costs of the aforementioned defined benefit plans were recognized in profit or loss by the following categories:

Selling and marketing expenses
General and administrative expenses		 2020
$ 181
237
$ 418		 2019




$ 237
286
$ 523

Through the defined benefit plans under the R.O.C. Labor Standards Law, the Company is exposed to the following risks:

  • d. Investment risk: The pension funds are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the government’s designated authorities or under the mandated management. However, under the R.O.C. Labor Standards Law, the rate of return on the Company’s assets shall not be less than the average interest rate on a twoyear time deposit published by the local banks and the government is responsible for any shortfall in the event that the rate of return is less than the required rate of return.

  • e. Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the debt investments of the plan assets.

  • f. Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The principal assumptions at the measurement date were as follows:


were as follows:
Discount rate
Future salary increase rate		 December31,2020
0.500%
2.750%		 December31,2019
0.750%
2.750%

If main actuarial assumptions vary within a reasonable extent, as for other assumption remaining unchanged, the present value of defined benefit obligation increases/decreases shall be as follows:

  • 177 -
Discount rate
increases by 0.25%
decreases by 0.25%
Future salary increase rate
increases by 0.25%
decreases by 0.25%		 December31,2020
($ 1,321)
$ 1,368
$ 1,317
($ 1,280)		 December31,2019 December31,2019
(


(		 (


(		 $ 1,333)
$ 1,382
$ 1,335
$ 1,295)

As actuarial assumptions may be correlative with one another, it is less likely that only one single assumption will be changed, the above sensitive analysis cannot indicate actual changes of the present value of defined benefit obligation.

Contribution amounts within 1 year Average due period of the defined benefit obligation


fined benefit obligation.
December31,2020
$ 1,609
8.8 Years		 December31,2019
$ 657
9.3 Years

  1. EQUITY

  2. (1)Ordinary Shares

UITY
Ordinary Shares
Authorized shares (in thousands)
Authorized capital
Issued and paid shares (in thousands)
Issued capital		 December31,2020

150,000
$ 1,500,000

125,640
$ 1,256,402		 December31,2019






150,000
$ 1,500,000
124,635
$ 1,246,352

The change in share capital is mainly due to bonds payable that changes into ordinary shares, employee stock options exercised and issuance (write-down) of restricted stock awards.

  • (2)Capital Surplus
,
restricted stock awards.
Capital Surplus
May be used to offset a deficit, distributed as
cash dividends, or transferred to share
capital (A)
Premium on shares issued above par value
Treasury stock transactions
Only be used to offset a deficit
From shares of changes in equities of
subsidiaries (B)
Invalid employees stock options
May not be used for any purpose
Restricted Stock Awards
Employees stock options		 December31,2020
$ 418,488
25,343
-
300
8,276

26,350
$ 478,757		 December31,2019




$ 408,165
25,343
2,481
300
8,156

25,691
$ 470,136

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

  • D. The capital surplus from share of unrealized changes in equities of subsidiaries not acquired or disposed is an affective recognized by changes in equity of subsidiaries, or the Company recognizes subsidiaries’ capital surplus adjustments for equity method.

  • (3)Retained earnings and dividend policy

ZOTC’s Articles of Incorporation provide that, when allocating the net profits for each fiscal year, ZOTC shall first pay taxes and offset its losses in previous years and then set aside the legal capital reserve at 10% of the profits left over, and then set aside or reverse the legal capital reserve. Any balance left over shall be added accumulated undistributed earnings of the previous year and allocated according to the resolution, provided from the board meeting, of the shareholders’ meeting. Please reference the

  • 178 -

distribution policy regulated by ZOTC’s Articles of Incorporation of employees’, directors’ and supervisors’ compensation for Note 20(7).

Distribution of earnings shall be made preferably by way of surplus cash dividend, according to future capital budget plan, and operating fund requirements. ZOTC considers its influences on diluted earning per shares and return on equity, but the ratio for cash dividend shall not exceed 10% of the total distribution.

The appropriation for legal capital reserve shall be made until the reserve equals ZOTC’s paid-in capital. The reserve may be used to offset a deficit, or be distributed as dividends in cash for the portion in excess of 25% of the paid-in capital if ZOTC incurs no loss.

Under Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs”, ZOTC shall appropriate or reverse to a special reserve.

The appropriations of 2019 and 2018 earnings have been approved by ZOTC’s shareholder’s meeting held on June 10, 2020 and June 13, 2019, respectively, were as follows:

The appropriations of
hareholder’s meeting held
ollows:		 2019 and 2018 earnings have
on June 10, 2020 and June 13,		 been approved by ZOTC’s
2019, respectively, were as		 been approved by ZOTC’s
2019, respectively, were as
Legal capital reserve

(Reversal of) Special reserve

Cash dividends		 Appropriation of Earnings
For Fiscal
Year 2019
For Fiscal
Year 2018
$ 35,131 $ 25,294
(
16,844)
1,343
249,574
184,603		 Dividends Per Share(NT$)
For Fiscal
Year 2019
$ 35,131
(
16,844)
249,574		 For Fiscal
Year 2019


$ 2.0		 For Fiscal
Year 2018
$ 1.5

The appropriations of earnings for 2020 had been proposed by ZOTC’s board of directors on February 24, 2021. The appropriations and dividends per share were as follows:


ollows:
Legal reserve
Cash dividends		 Appropriation of
Earnings
$ 44,100
377,836		 Dividends Per Share
(NT$)
$ 3.0

The appropriations of earnings for 2020 are subject to the resolution of the shareholders’ meeting to be held on May 28, 2021.

  • (7) Other equity

  • D. Exchange differences on translation

er equity
Exchange differences on translation
Balance at January 1
In respect of the current year
Share of subsidiaries accounted for
using the equity method
Balance at December 31		 2020
$ -
74
$ 74		 2019




$ -
-
$ -
  • E. Unrealized Gain (loss) from financial assets measured at FVTOCI
Balance at January 1
In respect of the current year
Unrealized gain (loss)－equity
instruments
Share of subsidiaries accounted for
using the equity method
Cumulative gain (loss) of equity
instruments transferred to retained
earnings due to disposal
Balance at December 31		 2020
$ 17,865
3,974
17,997
259)
$ 39,577		 2019

(
 (

 $ 16,844 )
20,757
6,847
7,105
$ 17,865
  • 179 -

C. Unearned employee benefit

In the shareholders’ meetings held on June 11, 2018, the shareholders approved a restricted share plan for employees. Refer to Note 23 for the information of restricted shares issued.


estricted shares issued.
Balance at January 1
Issued at the current period
Share-based payment expenses
recognized
Balance at December 31		 2020
$ 10,389 )
-
5,088
$ 5,301)		 2019
(

(
(

(		 $ -

15,156 )
4,767
$ 10,389)

20. NET INCOME

  • (1)Interest income
nterest income
Bank deposits
Financial assets at amortized cost
Others		 2020
$ 2,618
14,912
210
$ 17,740		 2019




$ 3,491
18,891
106
$ 22,488
  • (2)Other income
Bank deposits
Financial assets at amortized cost
Others
Other income

$ 2,618
14,912
210
$ 17,740

$ 3,491
18,891
106
$ 22,488
Dividend income
Others
Other gains and losses
Gain (loss) on financial assets/liabilities at
FVTPL
Net foreign currency exchange gain (loss)
Loss on disposal of Property, plant and
equipment
Gain on disposal of investment accounted
for using the equity method
Finance costs
Interests on bank borrowings
Interest on lease liabilities
Interests on convertible bonds
Depreciation & amortization
Property, plant and equipment
Right-of-use assets
Intangible assets
An analysis of depreciation by function
Operating expenses
An analysis of amortization by function
Operating expenses		 2020
$ 8,535
2,478
$ 11,013
2020
$ 5,050
10,777

40 )
275
$ 16,062
2020
$ 1,953
92
-
$ 2,045
2020
$ 15,178
5,077
778
$ 21,033
$ 20,255
$ 778		 2019




$ 4,366
6,867
$ 11,233
2019

(
(

 $ 7,359

163 )
-
-
$ 7,196
2019




$ 1,949
90
15
$ 2,054
2019








$ 13,692
4,366
776
$ 18,834
$ 18,058
$ 776

  • (3)Other gains and losses

  • (4)Finance costs

  • (5)Depreciation & amortization

  • 180 -

(6)Employee benefits expense

Employee benefits expense
Post-employment benefits
Defined contribution plans
Defined benefit plans（Note 18）
Share-based payment
Equity-settled
Other employee benefits
Salaries expense
Labor and health insurance expenses
Others
Total employee benefits expense
Employee benefits expense summarized by
function
Operating expenses		 2020
$ 9,454
418
9,872
11,982
290,705
19,701
18,156
328,562
$ 350,416
$ 350,416		 2019














$ 8,458
523
8,981
16,198
259,051
17,287
18,857
295,195
$ 320,374
$ 320,374
  • (7)Compensation for employees and directors

ZOTC shall allocate compensation to employees and Directors of ZOTC not less than 1%~15% and not more than 3% of annual profits during the period, respectively, and the amount of employees’ and Directors’ compensation for the years ended December 31, 2020 and 2019, with resolution of the board of directors on Feb. 24, 2021 and Feb. 26, 2020, were as follows:


and Feb. 26, 2020, were as
follows:
Estimate Rate
Employee compensation
Directors’ compensation
Amount
Employee compensation
Director’s compensation		 2020
4.00%
2.00%
2020
Cash
Stock		 2020 2019
4.00%
2.00%
2019
Cash
Stock
$ 23,613 $ - $ 18,911 $ -
11,807 - 9,456 -

If changes in the very amount after the end of the reporting period, it will be booked next year, based on accounting estimate regulations.

The distribution amount of employees’ and director’s compensation in 2019, and 2018 has no difference compared to the recognized amount of the parent company only financial statements in 2019 and 2018.

Relevant information about employees’ and director’s compensation can be found on the website of “Market Observation Post System” of TWSE.

21. INCOME TAXES

  • (1)Income tax recognized in profit or loss

The major components of tax expenses were as follows:

Current tax
In respect of the current year
Surtax on undistributed retained
earnings
Adjustments for previous years
Deferred tax
In respect of the current year
Income tax expense recognized in profit or
loss		 2020
$ 105,290
3,771
901)
108,160
5,126
$ 113,286		 2019

(
(

(
 $ 95,484
2,269
408)
97,345
4,243)
$ 93,102
  • 181 -

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

2020
Profit before income tax from continuing
operations
$ 554,909
Income tax expense calculated at the
statutory rate
$ 110,982
Tax-exempt income
(
2,640 )
Tax effect of expenses not deductible for
tax
3,052
Surtax on undistributed retained earnings
3,771
The adjustment of current income tax
expenses for previous years
(
901 )
Others
(
978)
Total income tax expense recognized in
profit or loss
$ 113,286
ncome tax expense recognized in other comprehensive income
2020
Deferred tax
In respect of the current year
－Remeasurement of defined benefit
plans
$ 43		 2019


(
(

 $ 444,415
$ 88,883

1,771 )
3,825
2,269

408 )
304
$ 93,102
2019
$ 231

(2)Income tax expense recognized in other comprehensive income

  • (3)Deferred tax balances

Movements of deferred tax assets and deferred tax liabilities were as follows:

2020

2020
Deferred taxassets
Temporary differences
Allowance for loss on
decline in value of
inventory
Allowance for bad debts
Defined benefit plans

Others


Deferred tax liabilities
Temporary differences

Unrealized foreign
exchange gains		 Opening
Balance
$ 28,661


2,993


4,383

5,815

$ 41,852

$ 793
 Recognized in
Profit or Loss
( $ 1,580 )

(
2,993 )
(
229 )
(
1,117)

($ 5,919)

($ 793)
 Recognized in
Other
Comprehensive
Income
$ -

-
43

-

$ 43

$ -
 Closing
Balance






(
(
(
(
(
(





$ 27,081
-
4,197
4,698
$ 35,976
$ -
  • 182 -

2019

2019
Deferred taxassets
Temporary differences
Allowance for loss on
decline in value of
inventory
Allowance for bad debts
Defined benefit plans

Others



Deferred tax liabilities

Temporary differences

Unrealized foreign
exchange gains		 Opening
Balance
$ 22,748


4,442


4,316

5,815

$ 37,321



$ 736
 Recognized in
Profit or Loss
$ 5,913

(
1,449 )
(
164 )

-

$ 4,300





$ 57
 Recognized in
Other
Comprehensive
Income
$ -

-
231

-

$ 231





$ -
 Closing
Balance








(
(









$ 28,661
2,993
4,383
5,815
$ 41,852

$ 793
  • (4)Income tax assessment

The Company’s tax returns through 2018 had been assessed by the tax authorities.

22. EARNINGS PER SHARE

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

;Net Profit for the Year

Net Profit for the Year
Net profit for the year
Effect of potentially dilutive ordinary shares:
Effect of convertible bonds after tax
Earnings in computation of diluted earnings
per share
Shares
Weighted average number of ordinary shares
outstanding in computation of basic
earnings per share
Effect of potentially dilutive ordinary shares：
Convertible bonds
Employee compensation
Employee stock options
Restricted stock award
Weighted average number of ordinary shares
outstanding in computation of diluted
earnings per share		 2020
2019
$ 441,623
$ 351,313
-

15
$ 441,623
$ 351,328
Units:Thousand shares
2020
2019
124,381
123,354
-
56
702
839
2,674
2,167
448

202
128,205

126,618





123,354
56
839
2,167
202
126,618

If the Company will distribute bonus to employees and the bonus will be settled in cash or shares, the Company will assume that the entire amount of the compensation or bonus will be settled in shares and the resulting potential shares are included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, if the effect is dilutive. Such dilutive effect of the potential shares is included and considered in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

  • 183 -

23. SHARE - BASED PAYMENT ARRANGEMENTS

(1)Employee Share Option Plan

In August 2015, September 2016, January 2018, and September 2018, 1,000, 1,860, 2000, and 2,000 options were granted to qualified employees of ZOTC, and each option entitles the holder to subscribe for 1,000 ordinary shares of the Company when exercisable. The options granted are valid for 6 years and shall be exercised a portion of them after two years from the date of grant. The options were granted at an exercise price equal to the fair value of ZOTC’s ordinary shares on the grant date. For any subsequent changes in the Company’s ordinary shares, the exercise price of options will be adjusted by the regulated formula, accordingly.

Information about employees’ stock options was as follows:

Employee Stock options
Balance, beginning of period
Options exercised

Invalid options

Outstanding options at the end of the
period

Options exercised at the end of the
period
 2020
Number of
Options
(In Thousands)
Weighted
Average
Exercise Price
(NT$)
5,653
$ 17.18
(
1,017 )
14.02

(
168)
17.51


4,468
16.70


1,820
 2019 2019
Number of
Options
(In Thousands)
5,653

(
1,017 )
(
168)

4,468

1,820		 Number of
Options
(In Thousands)
6,468

(
701 )
(
114)

5,653

1,049		 Weighted
Average
Exercise Price
(NT$)
(
(

 (
(

 $ 17.68

13.30
15.91
17.18

Information about outstanding options at the end of reporting period was as follows:

December 31, 2020
Range of Exercise
Price (US$)
Weighted-
Over-Age Remaining
Contractual Life (Years)
$ 11.70 (Note)
0.67
13.40 (Note)
1.68
16.80 (Note)
3.01
18.40 (Note)
3.67		 December 31, 2019 December 31, 2019
Range of Exercise
Price (US$)
$ 11.70 (Note)
13.40 (Note)
16.80 (Note)
18.40 (Note)		 Range of Exercise
Price (US$)
$ 12.40 (Note)
14.20 (Note)
17.80 (Note)
19.50 (Note)		 Weighted-
Over-Age Remaining
Contractual Life (Years)
1.67
2.68
4.01
4.67

Note: The Issued price will be adjusted by methods of issuance.

The Company adopts BOPM and Black-Scholes price model to evaluate inputs of stock options in September 2018, January 2018, September 2016 and August 2015 as follows:


Securities price of
the vested date
Exercised price
Foreseeable
volatility rate
Duration
Foreseeable
dividend rate
Risk-free interest
rate		 September, 2018
20.65 Dollars
20.65 Dollars
32.96%
6 Years
0%
0.72%		 January, 2018 September, 2016 August, 2015
19.85 Dollars
19.85 Dollars
33.81%
6 Years
0%
0.74%		 16.95 Dollars
16.95 Dollars
38.26%

6 Years
0%
0.56%		 15.65 Dollars
15.65 Dollars
39.14%~40.47%
4~5 Years
0%
0.77%~0.87%

The compensation cost recognized were $6,894 thousand and $11,431 thousand for the years ended December 31, 2020 and 2019, respectively.

  • 184 -

  • (2)Restricted stock awards

The shareholders meeting of the company, on June 11, 2018, resolved to issue restricted stock awards amounting to $7,000 thousand, consisting of 700 thousand shares, respectively, par value in $10, the subscription price is $0 (The issue price is $ 0), and authorized the Board to decide the issue price at the issuance date. The Board resolved to issue $7,000 thousand, with total share number of 700 thousand shares, on April 30, 2019 and the record date of issuance is June 13, 2019.

An employee who remains employed at the company after the period as follows has elapsed from the time of RSA and who personal performance have met with the criteria listing, will be eligible for vesting of an installment of the shares.

  • E. An employee who remains employed at the company after 1 year has elapsed from the time of RSA, and who personal performance have met with the criteria listing of 75 scores and above, will be eligible for vesting of an installment of 25% of the shares.

  • F. An employee who remains employed at the company after 2 year has elapsed from the time of RSA, and who personal performance have met with the criteria listing of 75 scores and above, will be eligible for vesting of an installment of 25% of the shares.

  • G. An employee who remains employed at the company after 3 year has elapsed from the time of RSA, and who personal performance have met with the criteria listing of 75 scores and above, will be eligible for vesting of an installment of 25% of the shares.

  • H. An employee who remains employed at the company after 4 year has elapsed from the time of RSA, and who personal performance have met with the criteria listing of 75 scores and above, will be eligible for vesting of an installment of 25% of the shares.

After employees received the vested shares from the Company, it will redeem and cancel the issued restricted employee shares as employees breach the labor contract and working regulations, for the restricted employee new shares that don't meet the vesting conditions.

When employees fail to meet the vesting conditions of restricted employee new shares as redeemed by the Company without charge will be cancelled, based on the relevant regulations.

Compensation costs by issuance of restricted stock awards recognized were $5,088 thousand and $4,767 thousand in 2020 and 2019 respectively. As of December 31, 2020 and 2019, unearned employee benefits totaled $5,301 thousand and $10,389 thousand respectively, accounted for as a decrease in other equity.

24. CAPITAL RISK MANAGEMENT

The Company engages mainly in the agent of software, without any plans of imposed capital requirements at present and in the future. The Company manages its capital to ensure requirements of operating funds and dividend expenses, based on growth and development of scale of enterprise and prospective of the industry. The Company periodically reviews the policy of capital risk management, for seeking a steady and conservative policy.

The capital structure of the Company consists of net debt and equity (comprising share capital, capital reserves, retained earnings and other equity).

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

  • 185 -

25. FINANCIAL INSTRUMENTS

  • (1)Information about Fair value of financial instruments that are not measured at fair value

Except as detailed in the following table, the management believes the carrying amounts of financial liabilities not measured at fair value recognized in the parent company only financial statements approximate or cannot be measured their fair values:

Financial Assets
Measured at amortized cost
－Foreign corporate bonds
 December 31,
2020
Carrying
Amount
Fair Value
$ 44,061
$ 45,323
 December 31,
2019		 December 31,
2019
Carrying
Amount
$ 44,061
 Carrying
Amount		 Fair Value
$ 63,566
 $ 64,992

(2)Information about fair value of financial instruments measured at fair value on a recurring basis.


recurring basis.
A.Fair value hierarchy
December 31, 2020
Financial assets at FVTPL
Convertible bonds

Listed shares and emerging
market shares
Fund beneficiary certificate

Total

Financial assets at FVTOCI
Equity investments
－Domestic listed shares and
emerging market shares
－Domestic unlisted shares

Total

December 31, 2019
Financial assets at FVTPL
Convertible bonds

Listed shares and emerging
market shares
Fund beneficiary certificate

Total

Financial assets at FVTOCI
Equity investments
－Domestic listed shares and
emerging market shares
－Domestic unlisted shares

Total
 Level 1
$ 15,966
16,188

344,978

$ 377,132

$ 223,085

-

$ 223,085

Level 1
$ 31,182
15,041

15,160

$ 61,383

$ 178,242

-

$ 178,242
 Level 2 Level 3
$ -

-

8,529

$ 8,529

$ 12,092

18,142

$ 30,234

Level 3
$ -

-

3,079

$ 3,079

$ 10,438

3,743

$ 14,181
 Total











$ -

-

-

$ -

$ -

-

$ -

Level 2











$ 15,966

16,188

353,507
$ 385,661
$ 235,177

18,142
$ 253,319
Total











$ -

-

-

$ -

$ -

-

$ -











$ 31,182

15,041

18,239
$ 64,462
$ 188,680

3,743
$ 192,423

There were no transfers between Level 1 and Level 2 in 2020 and 2019, respectively.

  • 186 -

C.

Valuation techniques and inputs applied for Level 3 fair value measurement The market approach is used to arrive at their fair value, for which, the estimate and assumption regarding relevant information of expected present value of profits and losses calculated by held investments with reference to the publicly traded company and similar companies.

  • (3)Categories of financial instruments

company and similar companies.
Categories of financial instruments
Financial assets
Financial assets measured at FVTPL
Mandatorily measured at FVTPL
Financial assets measured at amortized
cost (Note 1)
Financial assets measured at FVTOCI－
Investments in equity instruments
Financial liabilities
Measured at amortized cost (Note 2)		 December 31,
2020
$ 385,661
2,972,799
253,319
2,460,375		 December 31,
2019
$ 64,462
3,107,140
192,423
2,549,613

  • Note 1:The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, investments in debt instruments, notes receivable, trade receivable, other receivable, and refundable deposits.

  • Note 2:The balances included financial liabilities measured at amortized cost, which comprise short-term loans, trade payable, other payable, and deposits received.

  • (4)Financial risk management objectives and policies

The Company’s principal financial risk management objective is to manage the market risk, credit risk and liquidity risk based on related protocols and internal control procedures. The Company’s financial department measures the aforementioned risks based on the Company’s risk appetite, and reports to the board of directors for carrying out relevant policies at any time.

B. ;Market risk

The Company’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates.

  • (a)Foreign currency risk

The Company’s purchases and investments are denominated in foreign currencies. Consequently, the Company is exposed to foreign currency risks. To protect against reductions in value of foreign currency denominated assets and the volatility of future cash flows caused by changes in foreign exchange rates, the Company utilizes derivative financial instruments, such as forward exchange contracts and options, for avoiding foreign currency risks.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities of non-functional currency calculated (including those eliminated on consolidation) at the end of the reporting period are set out in Note 29.

Sensitivity analysis

The Company’s exchange rate exposure was in the exchange rate of U.S. dollars.

The sensitivity analysis included only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the reporting period for a 5% change in foreign currency rates. If interest rates had been 5% higher/lower, the Company’s net profit in 2020 and 2019 would increase/decrease by $41,819 thousand and $21,166 thousand, respectively.

  • 187 -

(b)Interest rate risk

The Company exposed to the risk of interest rate at fair value, since holding the fixed-rate loan, accessing the interest rate of the bank loan regularly, observing influences on profits or losses from fluctuation range of the interest rate, keeping contact with the bank based on the actual requirement, and acquiring the best interest rate of the loan.

The carrying amount of the Company’s financial assets and financial liabilities with exposure to risks of interest rates at the end of the reporting period were as follows:


were as follows:
Interest rate risks at fair value
－Financial assets
－Financial liabilities
Interest rate risks at cash flows
－Financial assets		 December 31,
2020
$ 197,519
6,820
666,171		 December 31,
2019
$ 854,095
157,379
206,706

Sensitivity analysis

The sensitivity analyses below were determined based on the Company’s exposure to interest rates for non-derivative instruments at the end of the reporting period.

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Company’s pre-tax profit in 2020 and 2019 would increase/ decrease by $3,331 thousand and $1,034 thousand respectively. Exposure is triggered by risks of cash flows of the Company’s variable interest rates of deposits.

(c)Other price risk

The Company is exposed to equity price risks arising from equity investments of public offering securities and fund beneficiary certificates. Equity investments should be approved by the management, for controlling risks by holding different investment portfolios.

Sensitivity analysis

The following sensitivity analysis is based on risk exposure of equity prices at the end of the reporting period.

Assuming a hypothetical increase/decrease of 5% in prices of the equity investments, increased/decreased by $19,283 thousand and $3,223 thousand, because of the change in fair value of financial assets at FVTPL, respectively., at the end of the reporting period in 2020 and 2019, the other comprehensive income would have increased/decreased by $12,666 thousand and $9,621 thousand, because of the change in fair value of financial assets at FVTOCI, respectively, at the end of the reporting period in 2020 and 2019.

B. ;Credit risk

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

The Company adopted a policy of only dealing with creditworthy counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the financial department regularly.

  • 188 -

To decrease a credit risk, the key management personnel of the Company is responsible for decision of rating criteria, credit limits approval, and other censor procedure, etc., in order to collect delinquent trade receivable. Otherwise, the Company reviews each trade receivable to assure allowance of impairment losses of uncollectable bad debts, hence the key management personnel considers credit concentration risk of trade receivable is insignificant.

The credit concentration risk of the current fund is insignificant, since the Company only transacts with financial institutions with good rating.

Trade receivable consisted of a large number of customers. Ongoing credit evaluation is performed on the financial condition of certain customer’s trade receivable. If necessary, purchasing insurance for credit enhancing procedures is a must.

The credit risk of the Company concentrates on top 5 customers of the Company. As of December 31, 2020 and 2019, the Company’s five largest customers accounted all for 33% of trade receivable, respectively.

  • D. ;Liquidity risk

The Company manages and maintains sufficient cash and cash equivalents so as to cope with its operations and mitigate the effects of fluctuations in cash flows. The Company’s management supervises financing line of the banking facilities and ensures compliance with the terms of loan agreements.

Liquidity & interest rate risk table

The table below summarizes the due analysis of the maturity profile of the Company’s non-derivative financial liabilities, enacted by contractual undiscounted payments of cash flow of financial liabilities, according to remaining contracts on the earliest date on which the Company may be required to pay, including interest and principal of cash flows.

The following tables detail the bank loans are listed on the earliest date on which the Company may be required to pay without considering the probability of the lending bank executing its rights; other non-derivative financial liabilities are listed at their contract repayment dates.

;December 31, 2020

;December 31, 2020
Non-derivative financial liabilities
No Interest-bearing liabilities

Lease liabilities


;December 31, 2019
Non-derivative financial liabilities
No Interest-bearing liabilities

Lease liabilities
Fixed rate instruments

 Less than 1 Year
$ 2,459,575


5,271

$ 2,464,846

Less than 1 Year
$ 2,398,448

3,639

150,118

$ 2,552,205
 1-5 Years
$ -

1,599

$ 1,599

1-5 Years
$ -

3,831
-

$ 3,831
 5+Years




$ -
-
$ -
5+Years






$ -
-
-
$ -

The operating fund of the Company are sufficient to meet cash flow demand; If the demand exists, it shall be short-term. Thus, bank loans within 1 year are the maximum amounts with available limit of credit. After considering the financial position of the Company, the management does not think the banks will execute their rights of requiring the Company to repay the bank loans.

As of December 31, 2020 and 2019, the Company’s unused short-term credit of limit of the bank were $1,250,000 thousand and $920,000 thousand, respectively.

  • 189 -

26. RELATED PARTIES TRANSACTIONS

  • (1) The Names and Relationships of Related-parties

Name of the related parties Relationship with the Company Zotech Technology Co., Ltd. Subsidiaries Zerone Win Investment Co., Ltd. Subsidiaries PetaCom Technology Co., Ltd. Subsidiaries Wing Will International Co., Ltd. Subsidiaries AsiaOne Holdings Ltd. Subsidiaries Techone (Shanghai) Co., Ltd. Subsidiaries Kaway Information Corp. Other related parties

  • (2)Operating revenue
Operating revenue
Line Items
Sales revenue


Services revenue
 Types of related parties
Subsidiaries

Other related parties


Subsidiaries
 2020
$ 28,350

244

$ 28,594

$ 2,838
 2019






$ 17,310

123
$ 17,433
$ 2,476

Prices and payment terms for transactions with related parties and non-related parties were similar.

  • (3)Purchases

parties were similar.
Purchases
Types of related parties
2020
2019
Subsidiaries
$ 12,505
$ 6,472
Receivables from related parties(excluding loans and contract assets to related parties)
Line Items
Types of related parties
December 31,
2020
December 31,
2019
Trade receivable
Subsidiaries
$ 8,236
$ 6,090
Other related parties
223
-
Other receivable
Subsidiaries

-

104
$ 8,459
$ 6,194		 2019


$ 6,090
-
104
$ 6,194
  • (4)Receivables from related parties(excluding loans and contract assets to related parties)

For the year ended December 31, 2020 and 2019 no impairment loss was recognized for trade receivables from related parties.

  • (5)Payables to related parties
,
for trade receivables from related parties.
Payables to related parties
Line Items
Types of related parties
December 31,
2020
Trade payable
Subsidiaries
$ 8,413
Loans to related parties (Recognized as other current assets)
Ty pe s o f r e l a t e dpa r t i e s ／N a m e
December 31,
2020
Subsidiaries
$ -
Interest income
Ty pe s o f r e l a t e dpa r t i e s ／N a m e
2020
Subsidiaries
$ 205		 December 31,
2020		 December 31,
2019
$ 6,300
December 31,
2019
$ 10,000
2019
$ 104		 December 31,
2019

  • (6)Loans to related parties (Recognized as other current assets)

  • (7)Non-operating income

Non-operating income
Line Items
Types of related parties
2020
Rental income
Subsidiaries
$ 743
Compensation of key management personnel
2020
Short-term employee benefits
$ 43,730		 2020 2019
$ 743
2019
$ 38,724

  • (8)Compensation of key management personnel

  • 190 -

;Salaries of the members of the Board and other key management personnel are determined by personal performance and economic market trend by the Compensation Committee.

27. PLEDGED ASSETS

;The following assets of the Company are guaranteed by the assets pledged for loans of the bank and broker, as well as tariff of importing commodities.

Property, plant and equipment, Net
Pledged time deposits (Financial assets at
amortized cost－non-current)		 December 31,
2020
$ 207,620

20,390
$ 228,010		 December 31,
2019		 December 31,
2019




$ 209,009
15,513
$ 224,522
  1. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

(1)As of December 31, 2020, the Company issued $87,000 thousand of cashier order for payment guaranteed for Microsoft Taiwan Corporation.

  • (2)As of December 31, 2020, the Company issued $50,000 thousand of cashier order for payment guaranteed for Microsoft Regional Sales Corporation.

29. ; FOREIGN - CURRE NCY- DEMONINATED ASSETS AND LIABILITIES THAT HAVE SIGNIFICANT INFLUENCE

The significant financial assets and liabilities denominated in foreign currencies were as follows:

December 31, 2020


as follows:
December 31, 2020
Financial assets
Monetary items

USD

Financial liabilities

Monetary items

USD

December 31, 2019
Financial assets
Monetary items

USD

Financial liabilities

Monetary items

USD
 Foreign
Currencies



$ 11,659



41,026
Foreign
Currencies



$ 31,131






45,251		 Exchange Rate


28.48（USD:NTD）


28.48（USD:NTD）

Exchange Rate


29.98（USD:NTD）





29.98（USD:NTD）
 Carrying
Amount


$ 332,048
$ 1,168,420
Carrying
Amount


$ 933,307
$ 1,356,625

The material foreign exchange gains (losses) (realized and unrealized) were as follows:

Foreign
Currencies
USD		 2020 Net Foreign
Exchange Gains
(Losses)
$ 10,777		 2019
Exchange Rate
29.549（USD:NTD）		 Exchange Rate Net Foreign
Exchange Gains
(Losses)
($ 163)
30.912（USD:NTD） $ 163)
  • 191 -

30. SEPARATELY DISCLOSED ITEMS

  • (5) Significant Transactional Items

  • A. ; Financing provided to others: Table 1.

  • B. ;Endorsements/guarantees provided: None.

  • C. ;Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Table 2.

  • D. ; Marketable securities acquired and disposed at costs or prices at least NT$300 million or 20% of the paid-in capital: None.

  • E.;Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: None.

  • F. ;Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: None.

  • G. ; Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: None.

  • H. ;Trade receivable from related parties amounting to at least NT$100 million or 20% of the paid-in capital: None.

  • I.;; Trading in derivative instruments: None.

  • (6) Information on investees: Table 3.

  • (7) Information on investment in Mainland China ：

  • C. The name of the investee in mainland China, the main business and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, income (losses)of the investee, ending balance, amount received as dividends from the investee, and the limitation on investee: Table 4.

  • D. Significant direct or indirect transactions with the investee, its price and terms of payment, unrealized gain or loss, and other related information which is helpful to understand the impact of investment in mainland China on financial reports: None. (vii) The amount and percentage of purchases and the balance and percentage of the related payables at the end of the period.

    • (viii) The amount and percentage of sales and the balance and percentage of the related receivables at the end of the period.

    • (ix) The amount of property transactions and the amount of the resultant gains or losses.

    • (x) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the end of the period and the purposes.

    • (xi) The highest balance, the end of period balance, the interest rate range, and total current period interest with respect to financing of funds.

    • (xii) Other transactions that have a material effect on the profit or loss for the period or on the financial position, such as the rendering or receiving of services.

  • (8) Information on major shareholder ： List of all shareholders with ownership of 5 percent or greater showing the names and the number of shares and percentage of ownership held by each shareholder: Table 5.

  • 192 -

ZERO ONE TECHNOLOGY CO., LTD. FINANCING PROVIDED TO OTHERS FOR THE YEARS ENDED DECEMBER 31, 2020

Table 1

(In Thousands of New Taiwan Dollars, Unless Specified Otherwise)

No Financing
Company		 Counter-party Financial
Statement
Account		 Related
Party
Maximum
Balance for the
Period（Note 2）

Ending Balance
Amount
Actually Drawn		 Interest
Rate		 Nature for
Financing
（Note
3）
Transaction
Amounts		 Reason for
Financing		 Allowance for
Bad Debt		 Collateral Collateral Financing
Limits
for Each
Borrowing
Company
（Note 4）		 Financing
Company’s
Total Financing
Amount Limits
（Note 5）		 Note
Name Item
0
0		 ZOTC
ZOTC		 Zerone Win
Investment
Co. Ltd.
WingWill Co.
Ltd.		 Other
receivables
from related
parties
Other
receivables
from related
parties
Yes
Yes		 $ 40,000
20,000		 $ 40,000

20,000		 $ -

-
3%

3%		 2
2		 $ -

-		 Operating
Capital
Operating
Capital		 $ -
-		 －
－		 $ -
-		 $ 265,727

265,727		 $ 531,454

531,454

Note 1 ： The number column is organized as follows ：

  • (1)Number 0 represents the issuer.

  • (2)The Counter-party is numbered from 1 in order.

Note 2 ： Maximum Balance of financing provided to others for the period.

Note 3 ： Reference for the nature for financing provided to others.

  • (1)1:The borrower has business contact with the creditor.

  • (2)2:The borrower has short-term financing necessities.

Note 4 ： For short-term financing necessities, the total amount available for lending purpose shall not exceed 10% of the net worth reviewed or audited by CPA during the period. Note 5 ： The total amount available for lending purpose shall not exceed 20% of the company’s net worth reviewed or audited by CPA during the period.

  • 193 -

ZERO ONE TECHNOLOGY CO., LTD. MARKETABLE SECURITIES HELD FOR THE YEAR ENDED DECEMBER 31, 2020

Table 2

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Holding Company Marketable Securities Type and Issuer’s Name
（Note 1）		 Security Issuer’s
Relationship with
the Holding
Company		 Financial Statement Account D
e
c
e
m
b
e
r		 D
e
c
e
m
b
e
r		 3
1
,		 2
0
2
0		 N o t e
Shares/Units Carrying Values Percentage of
Ownership
(%)
Market Prices/
Net value of
equities
ZOTC Beneficiary certificates
KGI Emerging Market Bond 1-5 ETF Fund
Taishin 1699 Money Market Fund
Jih Sun Money Market Fund
Prudential Financial Money Market Fund
KGI Kaefer Fund
KGI Taiwan Multi-Asset Income Fund
KGI Taiwan Select-Asset Income Fund
Corporate bond
Tong Ming Enterprise Co., Ltd.－1stdomestic
unsecured convertible corporate bonds
Quang Viet Enterprise Co., Ltd.－1st
convertible corporate bonds
M.J. International Co. Ltd.－1stconvertible
corporate bonds
Rossmax International Ltd.－2ndconvertible
corporate bonds
Jentech Precision Industrial Co. Ltd.－3rd
convertible corporate bonds
Anli International Co. Ltd.－1stconvertible
corporate bonds
Marketech International Corp.－4thconvertible
corporate bonds
Chung-Hsin Electric & Machinery Mfg. Corp.
－2ndconvertible corporate bonds		 －
－
－
－
－
－
－
－
－
－
－
－
－
－
－		 Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL－non-
current
Financial assets at FVTPL－non-
current
Financial assets at FVTPL－non-
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current
Financial assets at FVTPL －
current		 65,000
10,993,924
10,034,989
1,880,394
170,199
1,198,020
500,325
10（Units）
30（Units）
20（Units）
20（Units）
30（Units）
20（Units）
10（Units）
10（Units）		 $ 2,473
150,022
150,023
30,001
3,354
12,459
5,175
1,000
3,132
2,099
2,200
3,178
2,052
1,126
1,179		 -
-
-
-
-
-
-
-
-
-
-
-
-
-
-		 $ 2,473
150,022
150,023
30,001
3,354
12,459
5,175
1,000
3,132
2,099
2,200
3,178
2,052
1,126
1,179

（ Continued ）

  • 194 -
Holding Company Marketable Securities Type and Issuer’s Name
（Note 1）		 Security Issuer’s
Relationship with
the Holding
Company		 Financial Statement Account D
e
c
e
m
b
e
r		 D
e
c
e
m
b
e
r		 3
1
,		 2
0
2
0
N o t e
Shares/Units Carrying Values Percentage of
Ownership
(%)
Market Prices/
Net value of
equities
ZOTC Barclays Bank Coupon Bond (USD)
Prufin Coupon Bond (USD)
Securities
Actron Technology Corp.
Cathay Financial Holdings Preferred Stock A
Union Bank of Taiwan Preferred Stock A
Kaway Information Corp.
China Electric Mfg. Corp.
ASIX Electronics Corp.
Promaster Technology Corp
Unex Technology Corporation
Da-Chang Start-Up Investment Co. Ltd.
Cathay Financial Holdings Preferred Stock A
Union Bank of Taiwan Preferred Stock A
Fubon Financial Holding Co., Ltd. Preferred
Shares B
Taishin Financial Holding Co., Ltd. Preferred
Stock E
CTBC Financial Holding Co., Ltd. Preferred
Shares B
Cathay Financial Holding Co., Ltd. Preferred
Stock B		 －
－
－
－
－
Note 3
－
－
－
－
－
－
－
－
－
－
－		 Financial assets at amortized cost
－non-current
Financial assets at amortized cost
－non-current
Financial assets at FVTPL －
current
Financial assets at FVTPL－non-
current
Financial assets at FVTPL－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current		 5（Units）
10（Units）
15,000
166,000
80,000
490,000
2,689,200
81,066
1,157,137
175,000
1,500,000
134,000
70,000
400,000
240,000
90,000
230,000		 $ 14,895
29,166
1,785
10,259
4,144
16,243
37,514
4,880
12,092
3,231
14,911
8,281
3,626
25,000
12,624
5,706
14,467		 -
-
-
-
-
1.60
0.83
0.16
2.72
1.68
2.73
-
-
-
-
-
-		 $ 16,154
29,169
1,785
10,259
4,144
16,243
37,514
4,880
12,092
3,231
14,911
8,281
3,626
25,000
12,624
5,706
14,467

（ Continued ）

  • 195 -
Holding Company Marketable Securities Type and Issuer’s Name
（Note 1）		 Security Issuer’s
Relationship with
the Holding
Company		 Financial Statement Account D
e
c
e
m
b
e
r		 D
e
c
e
m
b
e
r		 3
1
,		 2
0
2
0
N o t e
Shares/Units Carrying Values Percentage of
Ownership
(%)
Market Prices/
Net value of
equities
ZOTC
Zerone Win
Investment Co.
PetaCom
Technology
Co. Ltd.
Zotech Technology
Co. Ltd.		 Kwong Lung Enterprise Co. Ltd. Preferred
Stock A
WPG Holdings Limited Preferred Stock A
United Orthopedic Corporation Preferred
Shares A.
QST International Corporation Preferred
Shares A.
Chailease Holding Company Limited Class A
Preferred Shares
Miiicasa Holdings (Cayman) Inc.
Duofu Co., Ltd.
Jotangi Technology Co., Ltd.
Securities
WPG Holdings Limited Preferred Stock A
Shin Kong Financial Holding Co.,Ltd.
Preferred Stock A
Chailease Holding Company Limited Class A
Preferred Shares
Tatung System Technologies Inc.
Beneficiary certificates
Taishin 1699 Money Market Fund
Securities
WPG Holdings Limited Preferred Stock A		 －
－
－
－
－
－
－
－
－
－
－
－
－
－		 Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTOCI－non-
current
Financial assets at FVTPL －
current
Financial assets at FVTOCI－non-
current		 270,000
700,000
200,000
150,000
300,000
2,500,000
10,000
796,250
240,000
50,000
89,000
2,000,000
777,000
200,000		 $ 13,581
35,070
9,500
6,713
29,880
-
-
-
12,024
2,188
8,864
53,100
10,603
10,020		 -
-
-
-
-
3.45
0.22
9.32
-
-
-
2.26
-
-		 $ 13,581
35,070
9,500
6,713
29,880
-
-
-
12,024
2,188
8,864
53,100
10,603
10,020

Note 1 ： Securities, indicated by the above table, are derivative from stock, bonds, beneficiary certificates, and the above items, based on IFRS 9 “Financial Instruments”. Note 2 ： Relevant information about Investments in equity of subsidiaries, associates, see Table 3.

Note 3 ： Effective June 10, 2020, the status of Kaway Information Corp. was changed from Supervisor to Director of the Company.

（ Concluded ）

  • 196 -

ZERO ONE TECHNOLOGY CO., LTD. INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2020

Table 3

(In Thousands of New Taiwan Dollars)

Investor Company
Investee
Company		 Location Main Businesses Investment Amount Investment Amount As of December 31, 2020 As of December 31, 2020 As of December 31, 2020 Net Income
(Loss) of the
Investee		 Share of
Profits/Losses of
Investee		 Note
December 31,
2020		 December 31,
2019
Number of
Ownership		 Percentage
of
Ownership

Carrying
Values
ZOTC
ZeroneWin
Investment Co.,
Ltd.		 Zotech Technology Co.,
Ltd.
Chi-Ta International
Co., Ltd.
ZeroneWin Investment
Co., Ltd.
Asiaone Holdings Ltd.

WingWill International
Co., Ltd.
PetaCom Technology
Co., Ltd.		 Taipei City
Taipei City
Taipei City
Republic of
Seychelles
Taipei City
Taipei City		 Services of
telecommunication
apparatus
Services of
telecommunication
apparatus
Investment
Holding company
Services of cloud
information software
Services of information
product agent		 $ 35,000
-
149,000
10,063
25,500
50,000		 $ 35,000

10,000

100,000

10,063

7,000

50,000		 3,500,000

-
14,900,000

320,000
25,500,000
50,000,000		 85.37
-
100.00
100.00
87.93
100.00		 $ 43,132
-
154,088
9,526
5,981
47,551		 $ 426

-
(
712 )
(
93 )
(
6,858 )

4,057		 $ 364
-
(
712 )
(
93 )
(
5,582 )
4,057		 Subsidiary
Disposed in April,
2020
Subsidiary
Subsidiary
Sub-subsidiary
Sub-subsidiary

Note: Please refer to Table 4 for Information on investment in Mainland China.

  • 197 -

ZERO ONE TECHNOLOGY CO., LTD. INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2020

Table 4 (In Thousands of NewTaiwan Dollars/ForeignCurrency) (In Thousands of NewTaiwan Dollars/ForeignCurrency) (In Thousands of NewTaiwan Dollars/ForeignCurrency) (In Thousands of NewTaiwan Dollars/ForeignCurrency)
Investee
Company		 Main
Businesses and
Products
Paid-in Capital		 Method of
Investment		 Accumulated
Outward
Remittance for
Investment
from Taiwan
as of
January 1,
2020		 Remittance of
Funds		 Accumulated
Outward
Remittance
for
Investment
from Taiwan
as of
December 31,
2020
Net
Income
(Loss) of
the
Investee		 %
Ownership
of Direct
or Indirect
Investment

Investment
Gain (Loss)
(Note 2)		 Carrying Amount as
of 31 December,
2020		 Accumulated Repatriation
of Investment Income as of
31 December,
2020
Note

Outward		 Inward
Techone
(Shanghai)
Co., Ltd.		 Services of
Network
Technology		 $ 13,131
( RMB 3,000
)		 （Note 1） $ - $ 9,118 $ - $ 9,118 ( $ 39) )
70%		 ( $ 27) ) $ 9,164 $ - －
Accumulated Outward Remittance for
Investments in Mainland China as of
December 31, 2020		 Investment Amount Authorized by the
Investment Commission, MOEA		 Upper Limit on the Amount of Investments Stipulated by the
Investment Commission, MOEA (Note 3)
$ 8,673
( USD
305 )		 $ 8,673
( USD
305 )		 $ 1,594,362

Note 1 ： The company directly holds 100% of a subsidiary-Asiaone Holdings Ltd., which reinvests the company in Mainland China.

Note 2 ： Amount was recognized based on the financial statements which were not audited by CPAs on December 31, 2020.

Note 3 ： Determined by sixty percent (60%) of the Company’s consolidated net worth, audited by CPAs on December 31, 2020 (2,657,270×60% ＝ 1,594,362).

Note 4 ： For foreign currency conversion, gain (loss) are converted by the average exchange rate in 2020. Other amounts are converted into New Taiwan Dollars by the exchange rate on December 31, 2020.

  • 198 -

ZERO ONE TECHNOLOGY CO., LTD. INFORMATION ON MAJOR SHAREHOLDERS December 31, 2020

Table 5

Table 5
Shareholders Shares
Total Shares
Owned
(In Thousands)		 Ownership
Percentage
Ceres Investment Co., Ltd.
Chia Hsin, Lin		 9,506,594
9,338,292		 7.56%
7.43%

Note ： ;This table presents information provided by the Taiwan Depository & Clearing Corporation on stockholders holding greater than 5% of the Company’s ordinary and preference shares including treasury stock in dematerialized form that have completed the process of registration and delivery by book-entry transfer as of the last business day for the current quarter. The share capital recorded, and the actual registered non-physical shares in this parent company only financial statements may differ due to different basis of preparation.

  • 199 -

§THE CONTENTS OF STATEMENTS OF MAJOR ACCOUNTING ITEMS§

ITEMS NO. ／ INDEX MAJOR ACCOUNTING ITEMS IN ASSETS, LIABILITIES AND EQUITY STATEMENT OF CASH AND CASH EQUIVALENTS Statement 1 STATEMENT OF FINANCIAL ASSETS AT FVTPL － CURRENT Statement 2 STATEMENT OF FINANCIAL ASSETS AT － AMORTIZED COST CURRENT Note 9 STATEMENT OF NOTES RECEIVABLE Statement 3 STATEMENT OF TRADE RECEIVABLE Statement 4 STATEMENT OF INVENTORIES Statement 5 STATEMENT OF FINANCIAL ASSETS AT FVTPL － NON-CURRENT Statement 6 STATEMENT OF FINANCIAL ASSETS AT － FVTOCI NON-CURRENT Statement 7 STATEMENT OF FINANCIAL ASSETS AT － AMORTIZED COST NON-CURRENT Note 9 STATEMENT OF CHANGES IN INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Statement 8 STATEMENT OF CHANGES IN PROPERTY, PLANT AND EQUIPMENT Note 13 STATEMENT OF CHANGES IN ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT Note 13 STATEMENT OF DEFERRED INCOME TAX ASSETS Note 21 STATEMENT OF TRADE PAYABLES Statement 9 STATEMENT OF OTHER PAYABLES Note 16 STATEMENT OF OTHER CURRENT LIABILITIES Statement 10 MAJOR ACCOUNTING ITEMS IN PROFIT OR LOSS STATEMENT OF OPERATING REVENUE Statement 11 STATEMENT OF OPERATING COST Statement 12 STATEMENT OF OPERATING EXPENSES Statement 13 STATEMENT OF EMPLOYEE BENEFITS, DEPRECIATION, DEPLETION AND AMORTIZATION BY FUNCTION Note 20

  • 200 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF CASH AND CASH EQUIVALENTS DECEMBER 31, 2020

STATEMENT 1
Item
Demand deposits
Repurchase bond
Cash on hand and
revolving funds		 (In Thousands of New Taiwan Dollars)
Description
Amount
New Taiwan dollar
$ 486,708
USD 1,820 thousand＠28.48;EUR
6 thousand＠35.02
52,041
USD 1,000 thousand@ 28.48; annual
interest rate at 0.45%; Expired by
2021.03.04
28,480

207
$ 567,436
  • 201 -

ZERO ONE TECHNOLOGY CO., LTD.

－ STATEMENT OF FINANCIAL ASSETS AT FVTPL CURRENT

DECEMBER 31, 2020

Statement 2

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Name of financial instruments
KGI Emerging Market Bond 1-5 ETF
Fund
Taishin 1699 Money Market Fund
Jih Sun Money Market Fund
Prudential Financial Money Market
Fund
Tong Ming Enterprise Co., Ltd.－1st
domestic unsecured convertible
corporate bonds
Quang Viet Enterprise Co., Ltd.－1st
convertible corporate bonds
M.J. International Co. Ltd.－1st
convertible corporate bonds
Rossmax International Ltd.－2nd
convertible corporate bonds
Jentech Precision Industrial Co. Ltd.－
3rdconvertible corporate bonds
Anli International Co. Ltd.－1st
convertible corporate bonds
Marketech International Corp.－4th
convertible corporate bonds
Chung-Hsin Electric & Machinery Mfg.
Corp.－2ndconvertible corporate
bonds
Actron Technology Corp.
Add (Less)：Valuation adjustment		 Description
Fund beneficiary certificates
Fund beneficiary certificates
Fund beneficiary certificates
Fund beneficiary certificates
Convertible bond
Convertible bond
Convertible bond
Convertible bond
Convertible bond
Convertible bond
Convertible bond
Convertible bond
Securities		 Units

65,000
10,993,924
10,034,989
1,880,394
10 (Units)
30 (Units)
20 (Units)
20 (Units)
30 (Units)
20 (Units)
10 (Units)
10 (Units)
15,000		 Par value (Dollars)
10
10
10
10
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
10		 Total
$ 650
109,939
100,350
18,804
1,000
3,000
2,000
2,000
3,000
2,000
1,000
1,000
150		 Acquisition Cost
$ 2,600
150,000
150,000
30,000
1,005
3,060
2,026
2,024
3,030
2,014
1,002
1,010

1,256
349,027

1,243
$ 350,270		 Fair value Fair value
Units (Dollars)
38.0465
13.6459
14.95
15.9549
100
104.40
104.95
110
105.95
102.60
112.55
117.85
119		 Total





$ 2,473
150,022
150,023
30,001
1,000
3,132
2,099
2,200
3,178
2,052
1,126
1,179
1,785
$ 350,270
  • 202 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF NOTES RECEIVABLE DECEMBER 31, 2020

Statement 3

(In Thousands of New Taiwan Dollars)

The firm name
Non-related parties
Genesis Technology Inc.
NTT Taiwan Solutions Ltd.
Stark Technology Inc.
Apex Fong Yi Technology Co. Ltd.
Rays Information & Technology
Co. Ltd.
Others (Note)
Less: Allowance for doubtful
accounts		 Description
Payment for goods
Payment for goods
Payment for goods
Payment for goods
Payment for goods
Payment for goods		 Amount




$ 70,471
25,873
22,422
16,341
11,800
83,583
230,490
-
$ 230,490

  • Note ： The amount of individual company included in others does not exceed 5% of the account balance.

  • 203 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF TRADE RECEIVABLE

DECEMBER 31, 2020

Statement 4 (In Thousands of New Taiwan Dollars)

The Company’s name
Hwacom Systems Inc.
IBM
Syscom Computer Engineering Co.
Stark Technology Inc.
Kinmax Technology Inc.
Others (Note)
Less: Allowance for doubtful
accounts
Total		 Description
Payment for goods
Payment for goods
Payment for goods
Payment for goods
Payment for goods
Payment for goods		 Amount




$ 168,522
168,275
134,926
122,558
115,249
1,173,096
1,882,626
11,432
$ 1,871,194

Note ： The amount of individual company included in others does not exceed 5% of the account balance.

  • 204 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF INVENTORIES

DECEMBER 31, 2020

Statement 5 (In Thousands of New Taiwan Dollars)

Items
Commodities		 Book value
$ 1,223,050		 Market value
（Note）		 Market value
（Note）
$ 1,234,437

Note ： Market value shall be net realizable value.

  • 205 -

ZERO ONE TECHNOLOGY CO., LTD.

－ STATEMENT OF FINANCIAL ASSETS AT FVTPL NON-CURRENT

FOR THE YEAR ENDED DECEMBER 31, 2020

Statement 6

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Name
Cathay Financial Holding Co., Ltd.
Preferred Stock A
Union Bank of Taiwan Preferred Stock A
KGI Kaefer Fund
KGI Taiwan Multi-Asset Income Fund

KGI Taiwan Select-Asset Income Fund		 Beginning Balance
Shares
Book value
166,000 $ 10,657
80,000
4,384
170,437
3,079
1,198,020
12,160
-
-
$ 30,280		 Beginning Balance
Shares
Book value
166,000 $ 10,657
80,000
4,384
170,437
3,079
1,198,020
12,160
-
-
$ 30,280		 Addition
Shares
Amount

- $ -

-
-

170,199
3,079

-
-
500,325
5,000
$ 8,079		 Addition
Shares
Amount

- $ -

-
-

170,199
3,079

-
-
500,325
5,000
$ 8,079		 Decrease
Shares
Amount


- $ -

-
-

170,437
3,079

-
-
-
-

$ 3,079
 Decrease
Shares
Amount


- $ -

-
-

170,437
3,079

-
-
-
-

$ 3,079
 Valuation for
the current
year
($ 398 )
(
240 )

275

299

175
$ 111		 Balance, December 31, 2020
Shares
Book value

166,000 $ 10,259

80,000
4,144

170,199
3,354
1,198,020
12,459
500,325
5,175
$ 35,391		 Balance, December 31, 2020
Shares
Book value

166,000 $ 10,259

80,000
4,144

170,199
3,354
1,198,020
12,459
500,325
5,175
$ 35,391		 Remark
Shares
166,000
80,000
170,437
1,198,020
-
 Shares

-

-

170,199

-
500,325
 Shares

-

-

170,437

-
-
 Shares

166,000

80,000

170,199
1,198,020
500,325




























  • 206 -

Statement 7

ZERO ONE TECHNOLOGY CO., LTD.

－ STATEMENT OF FINANCIAL ASSETS AT FVTOCI NON-CURRENT

FOR THE YEAR ENDED DECEMBER 31, 2020

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Name
Kaway Information Corp.
China Electric Mfg. Corp

ASIX Electronics Corp.
Promaster Technology Corp.

Unex Technology Corp.
Da-Chang Start-Up Investment Co.
Ltd.
Cathay Financial Holding Co., Ltd.
Preferred Stock A
Union Bank of Taiwan Preferred
Stock A
Fubon Financial Holding Co., Ltd.
Preferred Shares B
Taishin Financial Holding Co., Ltd.
Preferred Stock E
CTBC Financial Holding Co., Ltd.
Preferred Shares B
Cathay Financial Holding Co., Ltd.
Preferred Stock B
Kwong Lung Enterprise Co., Ltd.
Preferred Stock A
WPG Holdings Limited Preferred
Stock A
United Orthopedic Corporation
Preferred Stock A
QST International Corp. Preferred
Stock A
Chailease Holding Company Limited
Class A Preferred Shares
Miiicasa Holdings (Cayman) Inc.

Ijoing Inc.
DuoFu Co., Ltd
Jotangi Technology Ltd.		 Beginning Balance
Shares
Book value
490,000 $ 17,150
2,988,000
33,167
90,074
3,418
1,111,563
10,438
175,000
3,743
-
-
54,000
3,467
70,000
3,836
400,000
25,720
240,000
13,296
90,000
5,958
230,000
14,720
200,000
10,760
700,000
36,190
200,000
10,560
-
-
-
-
2,500,000
-
500,000
-
10,000
-
796,250
-
$ 192,423		 Beginning Balance
Shares
Book value
490,000 $ 17,150
2,988,000
33,167
90,074
3,418
1,111,563
10,438
175,000
3,743
-
-
54,000
3,467
70,000
3,836
400,000
25,720
240,000
13,296
90,000
5,958
230,000
14,720
200,000
10,760
700,000
36,190
200,000
10,560
-
-
-
-
2,500,000
-
500,000
-
10,000
-
796,250
-
$ 192,423		 Addition
Shares
Amount

- $ -

-
-

-
-

45,574
-

-
-
1,500,000
15,000

80,000
4,796

-
-

-
-

-
-

-
-

-
-

70,000
3,337

80,000
3,584

-
-

150,000
7,500

500,000
50,000

-
-

-
-

-
-
-
-
$ 84,217		 Addition
Shares
Amount

- $ -

-
-

-
-

45,574
-

-
-
1,500,000
15,000

80,000
4,796

-
-

-
-

-
-

-
-

-
-

70,000
3,337

80,000
3,584

-
-

150,000
7,500

500,000
50,000

-
-

-
-

-
-
-
-
$ 84,217		 Decrease
Shares
Amount

- $ -

298,800
2,988

9,008
90

-
-

-
-

-
-

-
-

-
-

-
-

-
-

-
-

-
-

-
-

80,000
4,002

-
-

-
-

200,000
20,128

-
-

500,000
87

-
-
-
-

$ 27,295
 Decrease
Shares
Amount

- $ -

298,800
2,988

9,008
90

-
-

-
-

-
-

-
-

-
-

-
-

-
-

-
-

-
-

-
-

80,000
4,002

-
-

-
-

200,000
20,128

-
-

500,000
87

-
-
-
-

$ 27,295
Valuation for
the current
year
( $ 907 )

7,335

1,552

1,654
(
512 )
(
89 )

18
(
210 )
(
720 )
(
672 )
(
252 )
(
253 )
(
516 )
(
702 )
(
1,060 )
(
787 )

8

-

87

-

-
$ 3,974		 Balance, December 31, 2020
Shares
Book value

490,000 $ 16,243
2,689,200
37,514

81,066
4,880
1,157,137
12,092

175,000
3,231
1,500,000
14,911

134,000
8,281

70,000
3,626

400,000
25,000

240,000
12,624

90,000
5,706

230,000
14,467

270,000
13,581

700,000
35,070

200,000
9,500

150,000
6,713

300,000
29,880
2,500,000
-

-
-

10,000
-
796,250
-
$ 253,319		 Balance, December 31, 2020
Shares
Book value

490,000 $ 16,243
2,689,200
37,514

81,066
4,880
1,157,137
12,092

175,000
3,231
1,500,000
14,911

134,000
8,281

70,000
3,626

400,000
25,000

240,000
12,624

90,000
5,706

230,000
14,467

270,000
13,581

700,000
35,070

200,000
9,500

150,000
6,713

300,000
29,880
2,500,000
-

-
-

10,000
-
796,250
-
$ 253,319		 Remark
Shares
490,000
2,988,000
90,074
1,111,563
175,000
-
54,000
70,000
400,000
240,000
90,000
230,000
200,000
700,000
200,000
-
-
2,500,000
500,000
10,000
796,250
 Shares

-

-

-

45,574

-
1,500,000

80,000

-

-

-

-

-

70,000

80,000

-

150,000

500,000

-

-

-
-
 Shares

-

298,800

9,008

-

-

-

-

-

-

-

-

-

-

80,000

-

-

200,000

-

500,000

-
-
 Shares

490,000
2,689,200

81,066
1,157,137

175,000
1,500,000

134,000

70,000

400,000

240,000

90,000

230,000

270,000

700,000

200,000

150,000

300,000
2,500,000

-

10,000
796,250







































































































  • 207 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF CHANGES IN INVESTMENTSACCOUNTED FOR USING THE EQUITY METHOD

FOR THE YEAR ENDED DECEMBER 31, 2020

Statement 8
Beginning Balance
Addition
Name
Shares
Amount
Shares
Amount
ZeroneWin Investment
Co., Ltd.
10,000,000 $ 90,729 4,900,000 $ 49,000
Zotech Technology Co.,
Ltd.
3,500,000
43,671
-
-
Asiaone Holdings Ltd.
320,000
9,545
-
-
Chi-Ta International Co.,
Ltd. (Note 2)
597,960
-
-
-

$ 143,945
$ 49,000
Note 1：Including :
1. Share of profit (loss) of subsidiaries
accounted for using equity method
( $ 441 )
2. Changes in ownership interest in subsidiaries (
3,199 )
3. Share of other comprehensive income (loss)
of subsidiaries accounted for using equity
method.
17,997
4. Cash dividend from subsidiaries
(
630 )
5. Exchange differences on translation of the
financial statements of foreign operations

74
$ 13,801		 Decrease
Shares
Amount


- $ -

-
-

-
-
597,960
-

$		 Decrease
Shares
Amount


- $ -

-
-

-
-
597,960
-

$		 Increase
(Decrease)
in using the
equity
method
(Note 1)
$ 14,359

(
539 )

(
19 )


-


$ 13,801		 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
Balance, December 31, 2020
Shares
Percentage of
ownership％
Amount
Net value of
equity
Collateral/Pledge
14,900,000
100
$ 154,088
$ 154,088
None
3,500,000
85.37
43,132
43,132
None
320,000
100
9,526
9,526
None
-
-

-
-


$ 206,746		 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
Balance, December 31, 2020
Shares
Percentage of
ownership％
Amount
Net value of
equity
Collateral/Pledge
14,900,000
100
$ 154,088
$ 154,088
None
3,500,000
85.37
43,132
43,132
None
320,000
100
9,526
9,526
None
-
-

-
-


$ 206,746		 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
Balance, December 31, 2020
Shares
Percentage of
ownership％
Amount
Net value of
equity
Collateral/Pledge
14,900,000
100
$ 154,088
$ 154,088
None
3,500,000
85.37
43,132
43,132
None
320,000
100
9,526
9,526
None
-
-

-
-


$ 206,746		 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)
Balance, December 31, 2020
Shares
Percentage of
ownership％
Amount
Net value of
equity
Collateral/Pledge
14,900,000
100
$ 154,088
$ 154,088
None
3,500,000
85.37
43,132
43,132
None
320,000
100
9,526
9,526
None
-
-

-
-


$ 206,746
Shares

-

-

-
597,960
 Shares
14,900,000
3,500,000
320,000
-
 Percentage of
ownership％
100

85.37

100
-



None
None
None

Note 2 ： Disposed in April, 2020. 。

  • 208 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF TRADE PAYABLES

DECEMBER 31, 2020

Statement 9 (In Thousands of New Taiwan Dollars)

The Company’s name
CISCO SYSTEMS INTERNATIONAL B.V.
Trend Micro Inc.
Net App, Inc.
Others（Note）		 Amount


$ 950,875
264,408
119,603
892,161
$ 2,227,047

  • Note ： The amount of individual company included in others does not exceed 5% of the account balance.

  • 209 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF OTHER CURRENT LIABILITIES

DECEMBER 31, 2020

Statement 10 (In Thousands of New Taiwan Dollars)
Items Amount
Receipts under custody $ 180,289
Contract liability—current 17,423
Temporary receipts
13,197
$ 210,909
  • 210 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF OPERATING REVENUE

FOR THE YEAR ENDED DECEMBER 31, 2020

Statement 11 (In Thousands of New Taiwan Dollars)

Items
Sales revenue
Other operating revenues
Less: sales returns
Less:sales discounts		 Description
Selling hardware and software
suite		 Amount



$9,636,401
63,982
9,700,383
35,069
6,536
$ 9,658,778
  • 211 -

ZERO ONE TECHNOLOGY CO., LTD. STATEMENT OF OPERATING COST

FOR THE YEAR ENDED DECEMBER 31, 2020

Statement 12

(In Thousands of New Taiwan Dollars)

Items
Costs of goods sold
Initial inventory
Add：Purchases
Ending inventory
Others
Total costs of sales and purchases
Reversal of write-down of inventories
Losses on scrap of inventories		 Amount
$ 1,449,719
8,633,706
(
1,358,455 )
(
61,759)
8,663,211
(
7,898 )

6,221
$ 8,661,534

Note ： The above statement indicates that the amount of all items regarding inventories is recognized by original costs of inventories, with no deduction of allowance for inventory valuation losses.

  • 212 -

ZERO ONE TECHNOLOGY CO., LTD. STATEMENT OF OPERATING EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 2020

Statement 13 (In Thousands of New Taiwan Dollars)

Items
Payroll Expenses

Entertainment expense
Insurance expense
Reversal of expected
credit losses
Depreciation expense
Others（Note）

 Selling and
marketing
expenses
$ 233,122
37,212
26,311
-
8,852
59,929

$ 365,426
 General and
administrativ
e expenses
$ 79,437

1,453

6,801

-

11,403

24,666

$ 123,760
 Reversal of
expected
credit losses
$ -

-

-
(
3,262 )

-

-

($ 3,262)
 Total








$ 312,559

38,665

33,112
(
3,262 )

20,255

84,595
$ 485,924

Note ： The amount of each item in others does not exceed 5% of the account balance.

  • 213 -

ZERO ONE TECHNOLOGY CO., LTD.

STATEMENT OF EMPLOYEE BENEFIT, DEPRECIATION AND AMORTIZATION BY FUNCTION FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Statement 14

(In Thousands of New Taiwan Dollars)

Employee benefit expenses (Note)
Salary and bonus
Labor and health insurance
Pension
Directors’ compensation
Others
Depreciation
Amortization		 2020 Total
$ 291,972
19,701
9,872
10,715
18,156
$ 350,416
$ 20,255
$ 778		 2019
Classified as
Operating Cost

$ -
-
-
-

-
$ -
$ -
$ -		 Classified as
Operating Expenses

$ 291,972

19,701

9,872

10,715

18,156
$ 350,416
$ 20,255
$ 778		 Classified as
Operating Cost
$ -
-
-
-

-
$ -
$ -
$ -		 Classified as
Operating Expenses

$ 267,994

17,287

8,981

7,255

18,857
$ 320,374
$ 18,058
$ 776		 Total









































$ 267,994
17,287
8,981
7,255
18,857
$ 320,374
$ 18,058
$ 776

  • Note 1: As of December 31, 2020 and 2019, the Company had 267 and 235 employees, respectively. There were 6 and 5 non-employee directors, respectively, and the calculation basis is consistent to labor cost.

  • Note 2: (1) Average labor cost for 2020 and 2019 were $1,302 thousand and $1,361 thousand, respectively.

  • (2) Average salary and bonus for 2020 and 2019 were $1,119 thousand and $1,165 thousand, respectively.

  • (3) The average salary and bonus adjustment ratio is (3.95%).

  • Note 3: In accordance with Securities and Exchange Act, the Company set up the Audit Committee to replace supervisors on June 10, 2020. The compensation for supervisors in 2020 and 2019 were $1,116 thousand and $2,133 thousand, respectively.

  • Note 4: The Company’s compensation policies (including directors, supervisors, managers and employees) are as follows:

  • (1) Directors and supervisors : Accordingly to Article 19 of the Company’s Articles of Incorporation, the compensation for directors and supervisors shall be no more than 3% of annual profits. The Company allocates 2% of the current year’s annual profits for the compensation to directors and supervisors,

-214-

and will provide reasonable reward by taking into account of the Company’s operating results and the contribution they made. The procedures to determine the compensation is based on the Company’s “Rules for Distribution of Compensation to Directors and Supervisors.” Apart from referencing the company’s overall operational efficiencies, future management risk and developing trend of the industry, the personal efficiency achievement rate, contribution to the overall performance, and devotion to company performance, achievement rate, profitability rate, operational efficiency and contribution are also collectively evaluated before calculating the compensation ratio. Relevant performance appraisals and the soundness of the compensation are reviewed and approved by the Compensation Committee and the Board in accordance with the charter of relevant laws and requirements, so as to achieve the balance of the Company’s sustainability and risk management.

  • (2) Managers: Based on the Company’s compensation policy to managers, criteria such as industry standards and personal performance evaluation items, which include financial indicators (such as the Company’s revenue, achievement rate for profit before tax and after tax) and non-financial related indicators (such as taking on the role as trainer and any gross misconduct of the department in terms of legal and compliance and operational risks incidents) are also included in the evaluation. The procedures to determine and distribute the compensation is based on the Company’s performance appraisal evaluation guidelines. Relevant performance appraisals and the soundness of the compensation are reviewed and approved by the Compensation Committee and the Board in accordance with the charter of relevant laws and requirements, so as to achieve the balance of the Company’s sustainability and risk management.

  • (3) Employees: The Company conducts annual market survey regularly by analyzing salary, bonus and annual income statistics. Salary adjustment is processed based on Company’s work rules and the results of individual performance appraisals so as to ensure the fairness of internal and external practices which meets the market standards.

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