Hong Pu — Audit Report / Information 2021

Nov 10, 2021

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Stock code:2536

HONG PU REAL ESTATE DEVELOPMENT CO., LTD.

Parent Company Only Financial Statements

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

Address: 21F., No.71, Sec. 2, Dunhua S. Rd., Da’an Dist., Taipei City, Taiwan Telephone: (02)27552662

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

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Table of contents

Contents 1. Cover Page 2. Table of Contents 3. Independent Auditors’ Report 4. Balance Sheets 5. Statements of Comprehensive Income 6. Statements of Changes in Equity 7. Statements of Cash Flows 8. Notes to Parent Company Only Financial Statements (1) Company history (2) Approval date and procedures of the financial statements (3) New standards, amendments and interpretations adopted (4) Summary of significant accounting policies (5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty (6) Explanation of significant accounts (7) Related-party transactions (8) Pledged assets (9) Commitments and contingencies (10) Losses Due to Major Disasters (11) Subsequent Events (12) Other (13) Other disclosures (a) Information on significant transactions (b) Information on investees (c) Information on investment in mainland China (d) Major shareholders (14) Segment information (15) List of major account titles

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KPMG

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

Independent Auditors’ Report

To the Board of Directors of Hong Pu Real Estate Development Co., Ltd.: Opinion

We have audited the financial statements of Hong Pu Real Estate Development Co., Ltd. (“the Company”), which comprise the balance sheets as of December 31, 2021 and 2020, the statement of comprehensive income, changes in equity and cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

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

Basis for Opinion

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

1.Revenue recognition

Refer to note 4 (m) for the relevant accounting policy regarding recognition of revenue, and refer to note 6 (n) for relevant disclosures.

Description of key audit matter:

The main operation income of the Company is derived from the sales of premises. Sales customers are numerous and scattered, and the income-related control mostly relies on manual execution. Therefore, the recognition of revenue has been identified as one of the key audit matters in conducting the examination of the financial statement.

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

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How the matter was addressed in our audit:

Our principal audit procedures included:

• ‧ Compare the policy concerning the revenue recognition with the accounting standards, in order to assess the appropriateness of the policy adopted by the Company.

• ‧ Inspect the main compositions of the revenue through review the sales contract to verify the authenticity of transaction and confirm whether the timing of recognition matches with accounting policies and standards.

• Inventory valuation

Refer to note 4 (g) for accounting policy regarding the inventories valuation; refer to note 5 for accounting estimation and assumption of the inventories valuation; please refer to note 6 (d) for relevant inventory disclosures.

Description of key audit matter:

In the financial statements, inventory is measured at the lower of the cost and net realizable value. Due to legal regulations and the economic cycle, which affect the transaction volume and sales in the real estate market, the gross profit of related products may be affected, resulting in the risk that the inventory cost may be higher than the net realizable value.

How the matter was addressed in our audit:

Our principal audit procedures included:

• ‧ Evaluating whether the inventory estimate was in accordance with business cycle and other economic decree.

• ‧ Evaluating whether the market price data provided have been updated on regular or irregular basis to reflect the real economic situation.

• ‧ Obtaining understanding of current market trends and business strategies from management, and soliciting sufficient audit evidence to ascertain the accurateness of inventory valuation.

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

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

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

Those charged with governance (including the Audit Committee) are responsible for overseeing the Company’s financial reporting process.

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Auditors’ Responsibilities for the Audit of the Financial Statements

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

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

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

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

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

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

6. Obtain sufficient and appropriate audit evidence regarding the financial information of the investment in other entities accounted for using the equity method to express an opinion on this 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.

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

The engagement partners on the audit resulting in this independent auditors’ report are Chuang Chun Wei and Hsu Ming Fang.

KPMG

Taipei, Taiwan (Republic of China) March 16, 2022

Notes to Readers

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

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

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(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) HONG PU REAL ESTATE DEVELOPMENT CO., LTD.

Balance Sheets

December 31, 2021 and 2020

(expressed in thousands of New Taiwan dollar)

Assets Current assets: 1100 Cash and cash equivalents (note 6(a)) 1110 Financial assets at fair value through profit and loss (note 6(b)) 1150 Notes receivable, net (note 6(c)(n)) 1170 Accounts receivable, net (note 6(c)(n)) 1210 Other receivable－related parties (notes 7) 1320 Inventories (notes 6(d) 8 and 9) 1410 Prepayments(note 9) 1476 Other financial assets－current (note 6(n)) 1479 Other current assets (note 9) 1480 Incremental costs of obtaining a contract Total current assets Non-current assets: 1550 Investments accounted for using equity method (note 6(e)) 1600 Property, plant and equipment (note 6(f) and 8) 1760 Investment property, net (notes 6(g) and 8) 1920 Refundable deposits (note 9) 1990 Other assets Total non-current assets Total assets	December 31, 2021	December 31, 2020 Amount % 867,114 4 - - 12,456 - 44,863 - 2,067 - 18,136,781 77 520,403 2 381,442 2 124,795 - 149,490 1 20,239,411 86 29,204 - 83,138 - 3,014,410 13 186,495 1 4,809 - 3,318,056 14 23,557,467 100 Liabilities and Stockholders' Equity Current liabilities: 2100 Short-term loans (note 6(h) 7 and 8) 2110 Short-term notes and bills payable (note 6(h) 7 and 8) 2130 Current contract liabilities (note 6(n) and 9) 2150 Notes payable 2170 Accounts payable 2200 Other payable 2230 Current tax liabilities 2399 Other current liabilities Total current liabilities Non-current liabilities: 2540 Long-term borrowings (note 6(h) 7 and 8) 2600 Other non-current liabilities Total non-current liabilities Total liabilities Equity (note 6(l)): 3110 Common stock 3200 Capital surplus Retained earnings: 3310 Appropriated as legal capital reserve 3320 Special reserve 3350 Unappropriated earnings Total equity Total liabilities and equity	December 31, 2021	December 31, 2020
	Amount % $ 560,618 2 - - 64,532 - 28,185 - 1,724 - 27,382,403 81 746,686 2 1,149,714 3 131,835 - 545,986 2 30,611,683 90 27,833 - 80,310 - 2,917,369 9 136,647 1 109,409 - 3,271,568 10 $ 33,883,251 100		Amount % $ 10,748,491 32 6,268,282 18 1,675,503 5 93,160 - 58,517 - 204,981 1 7,458 - 41,137 - 19,097,529 56 3,060,000 9 9,742 - 3,069,742 9 22,167,271 65 3,328,087 10 2,042,348 6 1,979,059 6 - - 4,366,486 13 6,345,545 19 11,715,980 35 $ 33,883,251 100	Amount % 6,090,000 26 4,541,688 19 532,085 2 24,128 - 128,961 1 56,139 - 7,220 - 18,963 - 11,399,184 48 - - 9,588 - 9,588 - 11,408,772 48 3,328,087 14 2,042,348 9 1,917,660 8 - - 4,860,600 21 6,778,260 29 12,148,695 52 23,557,467 100

See accompanying notes to financial statements.

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(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) HONG PU REAL ESTATE DEVELOPMENT CO., LTD.

Statements of Comprehensive Income

For the years ended December 31, 2021 and 2020

(expressed in thousands of New Taiwan dollar except earnings per Share)

Operating revenue: 4300 Rental revenue (note 6(i) (n) and 7) 4511 Construction contract revenue (note 6(n)) Net operating revenue Operating cost: 5300 Rental Cost 5510 Construction contract cost (note 6(d)) Net operating cost Gross profit Operating expenses(note 6(j) (o)and7): 6100 Selling expenses 6200 Administrative expenses Total operating expenses Operating income Non-operating income and expenses (note6 (p) and7): 7100 Interest income 7010 Other income 7020 Other gains and losses 7050 Finance costs 7060 Share of profit of investment in associates and subsidiaries accounted for using equity method Total non-operating income and expenses 7900 Profit (loss) before tax 7951 Less: income tax expenses (note 6(k)) 8200 Profit (loss) Other comprehensive income: 8360 Items that may be reclassified subsequently to profit or loss: 8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss 8300 Other comprehensive income (after tax) 8500 Total comprehensive income Earnings per share (note 6(m)): 9750 Basic earnings per share (NT dollars) 9850 Diluted earnings per share (NT dollars)

See accompanying notes to financial statements.

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(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) HONG PU REAL ESTATE DEVELOPMENT CO., LTD.

Statements of Changes in Equity

For the years ended December 31, 2021 and 2020

(Expressed in thousands of New Taiwan dollar)

Balance at January 1, 2020 Net income Other comprehensive income Total comprehensive income Appropriation and distribution of retained earnings: Legal reserve Special reserve Cash dividends Balance at December 31, 2020 Net loss Other comprehensive income Total comprehensive income Appropriation and distribution of retained earnings: Legal reserve Cash dividends Balance at December 31, 2021	Common stock $ 3,328,087 - - - - - - 3,328,087 - - - - - $ 3,328,087	Capital surplus 2,042,348 - - - - - - 2,042,348 - - - - - 2,042,348		Retained earnings	Retained earnings	Retained earnings	Total 6,563,641 613,989 - 613,989 - - (399,370) 6,778,260 (33,344) - (33,344) - (399,371) 6,345,545	Total equity
			Legal reserve 1,856,887 - - - 60,773 - - 1,917,660 - - - 61,399 - 1,979,059	Special reserve	Unappropriated earnings
				9,529 - -		4,697,225 613,989 - 613,989 (60,773) 9,529 (399,370) 4,860,600 (33,344) - (33,344) (61,399) (399,371) 4,366,486		11,934,076 613,989 - 613,989 - - (399,370) 12,148,695 (33,344) - (33,344) - (399,371) 11,715,980
				-

See accompanying notes to financial statements.

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(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese)

HONG PU REAL ESTATE DEVELOPMENT CO., LTD.

Statements of Cash Flows

For the years ended December 31, 2021 and 2020

(expressed in thousands of New Taiwan dollar)

Cash flows from (used in) operating activities: Profit (loss) before income tax Adjustments: Adjustments to reconcile profit and loss: Depreciation expense Amortization expense Net profit on financial assets at fair value through profit or loss Interest expenses Interest income Recognized shares of profit of investment in associates accounted for using equity method Gain on disposal of property, plant and equipment Gain on disposal of investments Total adjustments to reconcile profit and loss Net changes in operating assets and liabilities: Financial asset at fair value through profit or loss Notes receivable Accounts receivable Other receivable－related parties Inventories Prepayments Other current assets Incremental costs of obtaining a contract Other financial assets Notes payable Accounts payable Other payable Current contract liabilities Other current liabilities Total changes in operating assets / liabilities, net Total adjustments Cash used in from operations Interest received Interest paid Income tax paid Net cash flows used in operating activities Cash flows from (used in) investing activities: Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in refundable deposits Decrease in refundable deposits Proceeds from disposal of investment property (Increase) Decrease in other non-current assets Net cash flows from (used in) investing activities Cash flows from (used in) financing activities: Increase in short-term borrowings Decrease in short-term borrowings Increase in short-term notes and bills payable Decrease in short-term notes and bills payable Proceeds from long-term debt Increase (Decrease) in other non-current liabilities Cash dividends paid Net cash flows from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents, at beginning of period Cash and cash equivalents, at end of period		2021 $ (18,252) 29,948 335 (21) 152,077 (1,411) 1,371 243 (66,441) 116,101 21 (52,076) 16,678 343 (9,208,052) (226,283) (7,040) (396,496) (768,272) 69,032 (70,444) 142,641 1,143,418 22,174 (9,334,356) (9,218,255) (9,236,507) 1,411 (183,446) (14,854) (9,433,396) (2,157) 2,248 (289,708) 339,556 136,028 (104,935) 81,032 19,297,991 (14,639,500) 18,770,987 (17,044,393) 3,060,000 154 (399,371) 9,045,868 (306,496) 867,114 $ 560,618	2020 748,711
			25,872 150 (507) 107,783 (7,191) 1,375 (125) (2,002)
			125,355
			4,775 39,263 22,761 (675) (3,483,811) (356,210) 1,275 (31,130) (200,979) (5,796) (51,486) (154,084) 66,979 (20,822)
			(4,169,940)
			(4,044,585)
			(3,295,874) 7,191 (122,932) (130,246)
			(3,541,861)
			(2,828) 285 (96,335) 23,425 4,738 13,152
			(57,563)
			10,993,000 (10,000,000) 11,767,177 (9,030,906) - (1,227) (399,370)
			3,328,674
			(270,750) 1,137,864
			867,114

See accompanying notes to financial statements.

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(English Translation of Parent Company Only Financial Statements Originally Issued in Chinese) HONG PU REAL ESTATE DEVELOPMENT CO., LTD.

Notes to Parent Company Only Financial Statements

For the years ended December 31 2021 and 2020

(expressed in thousands of New Taiwan dollar unless otherwise specified)

1. Company history

Company was incorporated in October 5, 1988, and changed into Hong Pu Real Estate Development Co., Ltd. (“the Company”) in 1990. The Company was approved to be a public company by the Securities and Futures Commission (“SFC”) of the Republic of China (“ROC”) on March 23, 1991, and was listed on the Taiwan Stock Exchange on December 21, 1995. Registered address is 21F., No.71, Sec. 2, Dunhua S. Rd., Da’an Dist., Taipei City, Taiwan. The Company primarily engages in the business of construction, sales, and leasing of residential and commercial buildings.

Based on the resolution of the Board of Directors on July 15, 2004, the Company, which is the surviving company, completed its merger with Hung Yuan. The merger was a simple merger. After the merger, the name of the Company remained as Hong Pu Real Estate Development Co., Ltd.

2. Approval date and procedures of the financial statements

The financial statements were approved and authorized for issue by the Board of Directors on March 16, 2022.

3. New standards, amendments and interpretations adopted:

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

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

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

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

The Company has initially adopted the following amendments to IFRS from April 1, 2001, which did not have material impact on its financial statements.

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

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

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

• －

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

• －

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

• ●Annual Improvements to IFRS Standards 2018–2020

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

(Continued)

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HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

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

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

Standards or Interpretations Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” Amendments to IAS 12 “Deferred Tax related to Assets and Liabilities arising from a Single Transaction”

Content of amendment Effective date per IASB The amendments amendments are intended to enhance consistency in the adoption of the standards to assist entities in determining whether the liability at the settlement date or other liabilities shall be classified as current (or likely to mature within 1 year) or non-current in the balance sheet. The amendments include clarifying the classification requirements for debt a company might settle by converting it into equity. January 1, 2023 The amendments narrow the scope of recognition exemption such that the initial recognition exemption does not apply to transactions in which equal and deductible temporary differences arise on initial recognition. January 1, 2023

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

The Company expects no material impact of new and amended standards not yet endorsed by the FSC on the parent-company-only financial statements.

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

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

• ●Amendments to IAS 1 “Disclosure of Accounting Policies”

• ●Amendments to IAS 8 “Definition of Accounting Estimates”

(Continued)

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HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

4. Summary of significant accounting policies

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

The significant accounting policies presented in the financial statements are summarized below. Except for those specifically indicated, the following accounting policies were applied consistently throughout the periods presented in the financial statements.

(a) Statement of compliance

These financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as “the Regulations”) and the International Financial Reporting Standards,

(b) Basis of preparation

• (i) Basis of measurement

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

• 1) Financial instruments at fair value through profit or loss are measured at fair value;

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

• (ii) Functional and presentation currency

The functional currency of each Group entity is determined based on the primary economic environment in which the entity operates. The financial statements are presented in New Taiwan Dollar (NTD), which is the Company’s functional currency. All financial information presented in NTD has been rounded to the nearest thousand.

(c) Foreign currencies

• (i) Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies of Company entities at the exchange rates at the dates of the transactions. At the end of each subsequent reporting period, monetary items denominated in foreign currencies are translated into the functional currencies using the exchange rate at that date. Non-monetary items denominated in foreign currencies that are measured at fair value are translated into the functional currencies using the exchange rate at the date that the fair value was determined. Non-monetary items denominated in foreign currencies that are measured based on historical cost are translated using the exchange rate at the date of the transaction.

(Continued)

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HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

Exchange differences are generally recognized in profit or loss, except for those differences relating to the following, which are recognized in other comprehensive income:

• ‧ an investment in equity securities designated as at fair value through other comprehensive income;

• ‧ a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or

• ‧ qualifying cash flow hedges to the extent that the hedges are effective.

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

As the Company’s operating cycle is longer than a year, assets and liabilities related to the operation are classified as current or non-current by their operating cycle. An asset not related to the operation is classified as current under one of the following criteria, and all other assets are classified as noncurrent:

• (i) It is expected to be realized, or intended to be sold or consumed, in the normal operating cycle;

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

• (iii) It is expected to be realized within twelve months after the reporting date; or

• (iv) The asset is cash or a cash equivalent (as defined in IAS 7) unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

A liability is classified as current under one of the following criteria, and all other liabilities are classified as non-current.

An entity shall classify a liability not related to the operation as current when:

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

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

• (iii) It is due to be settled within twelve months after the reporting date; or

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

• (e) Cash and cash equivalents

Cash comprises of cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes should be recognized as cash and cash equivalents.

(Continued)

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HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

Bank overdrafts that are repayable on demand and form an integral part of the Company’ s cash management are included as a component of cash and cash equivalents for the purpose of the Company statement of cash flows.

(f) Financial instruments

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

(i) Financial assets

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

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

1) Financial assets measured at amortized cost

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

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

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

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

• 2) Fair value through other comprehensive income (FVOCI )

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

(Continued)

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HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

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

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

3) Fair value through profit or loss (FVTPL)

All financial assets not classified as amortized cost or FVOCI described as above are measured at FVTPL, including derivative financial assets. Trade receivables that the Company intends to sell immediately or in the near term are measured at FVTPL; however, they are included in the ‘trade receivables’ line item. On initial recognition, the Company may irrevocably designate a financial asset, which meets the requirements to be measured at amortized cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

4) Business model assessment

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

5) Impairment of financial assets

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

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

• ‧ debt securities that are determined to have low credit risk at the reporting date; and

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

Loss allowance for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.

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

(Continued)

14

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

The Company considers a debt security to have low credit risk when its credit risk rating is equivalent to the globally understood definition of ‘ investment grade which is considered to be BBB- or higher per Standard & Poor’s, Baa3 or higher per Moody’s or twA or higher per Taiwan Ratings’.

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

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

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

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

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

• ‧ significant financial difficulty of the borrower or issuer;

• ‧ a breach of contract such as a default or being more than 90 days past due;

• ‧ the lender of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having granted to the borrower a concession that the lender would not otherwise consider;

• ‧it is probable that the borrower will enter bankruptcy or other financial reorganization; or

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

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is charge to profit or loss and is recognized in other comprehensive income instead of reducing the carrying amount of the asset.

(Continued)

15

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For individual customers, the Company has a policy of writing off the gross carrying amount when the financial asset is 2 years past due based on historical experience of recoveries of similar assets. For corporate customers, the Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

6) Derecognition of financial assets

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

The Company enters into transactions whereby it transfers assets recognized in its statement of balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.

• (ii) Financial liabilities and equity instruments

• 1) Classification of debt or equity

Debt and equity instruments issued by the Company are classified as financial liabilities or equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

2) Equity instrument

An equity instrument is any contract that evidences residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued are recognized as the amount of consideration received, less the direct cost of issuing.

3) Financial liabilities

Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss.

Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.

(Continued)

16

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

4) Derecognition of financial liabilities

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

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

5) Offsetting of financial assets and liabilities

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

(g) Inventories

The Company capitalizes the acquisition costs and interest expenses paid for land as prepayments for the land before the ownership of the land is transferred, and records them as “Prepayment for land purchases” . After the ownership of the land is transferred, it is recorded as “ Land held for － development” , and as “ Construction-in-progress land” when the construction has begun. Construction costs and expenses which can be allocated by construction site are recorded as “ － Construction-in-progress project” . After the completion of the construction, the costs are transferred to “ Properties and land held for sale” . The inventories, which include “Land held for － － development” , “ Construction-in-progress land” , “ Construction-in-progress project” , and “Properties and land held for sale” are meausred at the lower of cost and net realizable value. An allowance for loss on decline in market value will be recorded if the net realizable value is lower than the cost at the reporting date.

Interest expense from borrowing used in construction-in-progress (projects and land) is capitalized before the construction is completed, and is stated as inventory costs.

(h) Investment in subsidiaries

The Company uses the equity method to evaluate an investee that it controls in preparing the financial statements. Under the equity method, the net income, other comprehensive income, and shareholders’ equity in the financial reports of the Company and the net income, other comprehensive income, and shareholders’ equity that belongs to the Company in the consolidated financial reports should be the same.

Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control over a subsidiary are accounted for as equity transactions with owners.

(Continued)

17

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

(i) Investment property

Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services, or for administrative purposes. Investment property is measured at cost on initial recognition and subsequently at cost. Depreciation expense is calculated based on the depreciation method, useful life and residual value which are the same as those adopted for property, plant and equipment.

Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount) is recognized in profit or loss.

Rental income from investment property is recognized as other revenue on a straight-line basis over the term of the lease. Lease incentives granted are recognized as an integral part of the total rental income, over the term of the lease.

• (j) Property, plant and equipment

• (i) Recognition and measurement

Items of property, plant and equipment are measured at cost, which includes capitalized borrowing costs, less accumulated depreciation and any accumulated impairment losses.

If significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

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

(ii) Subsequent expenditure

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

• (iii) Depreciation

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

Land is not depreciated.

The estimated useful lives of property, plant and equipment for current and comparative periods are as follows:

1) Buildings 3~55 years 2) Other equipment 4~8 years

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

(Continued)

18

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

(iv) Reclassification to investment property

A property is reclassified to investment property at its carrying amount when the use of the property changes from owner-occupied to investment property.

(k) Leases

(i) As a lessor

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

When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Company applies the exemption described above, then it classifies the sub-lease as an operating lease.

If an arrangement contains lease and non-lease components, the Company applies IFRS15 to allocate the consideration in the contract.

The Company recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘rental revenue’.

－ (l) Impairment non-financial assets

Non-financial assets other than inventories are reviewed for impairment at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units（CGUs）. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

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

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

(Continued)

19

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

(m) Revenue

• (i) Revenue from contracts with customers

Revenue is measured based on the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control of a good or a service to a customer. The accounting policies for the Company’ s main types of revenue are explained below:

1) Land development and sales of real estate

The Company develops and sells residential properties, and usually sales properties in advance during construction or before construction begins. Revenue is recognized when control over the properties has been transferred to the customer. The properties have generally no alternative use for the Company due to contractual restrictions. However, an enforceable right to payment does not arise until legal title of a property has passed to the customer. Therefore, revenue is recognized at a point in time when the legal title has passed to the customer.

The revenue is measured at the transaction price agreed under the contract. For sale of readily available house, in most cases, the consideration is due when legal title of a property has been transferred. While deferred payment terms may be agreed in rare circumstances, the deferral never exceeds twelve months. The transaction price is therefore not adjusted for the effects of a significant financing component. For pre-selling properties, the consideration is usually received by installment during the period from contract inception until the transfer of properties to the customer. If the contract includes a significant financing component, the transaction price will be adjusted for the effects of the time value of money during the period, using the specific borrowing rate of the construction project. Receipt of a prepayment from a customer is recognized as contract liability. Interest expense and contract liability are recognized when adjusting the effects of the time value of money. Accumulated amount of contract liability is recognized as revenue when control over the property has been transferred to the customer.

2) Financing components

The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer to be significant financial components. As a consequence, the Company does not adjust any of the transaction prices for the time value of money.

(Continued)

20

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

(ii) Contract costs

1) Incremental costs of obtaining a contract

The Company recognizes as an asset the incremental costs of obtaining a contract with a customer if the Company expects to recover those costs. The incremental costs of obtaining a contract are those costs that the Company incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained. Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained shall be recognized as an expense when incurred, unless those costs are explicitly chargeable to the customer regardless of whether the contract is obtained.

The Company applies the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.

(n) Employee benefits

(i) Defined contribution plans

Obligations for contributions to defined contribution plans are expensed as the related service is provided. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available.

(ii) Other long-term employee benefits

The Company’ s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognized in profit or loss in the period in which they arise.

• (iii) Termination benefits

Termination benefits are expensed at the earlier of when the Company can no longer withdraw the offer of those benefits and when the Company recognizes costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the reporting date, then they are discounted.

(iv) Short-term employee benefits

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

(Continued)

21

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

(o) Income tax

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

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

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

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

• (ii) temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and

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

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

Deferred taxes are measured at tax rates that are expected to be applied to temporary differences when they reserve, using tax rates enacted or substantively enacted at the reporting date, and reflect uncertainty related to income taxes, if any.

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

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

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

• 1) the same taxable entity; or

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

(Continued)

22

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

(p) Earnings per share (EPS)

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

(q) Operating segments

The Company discloses the operating segments information in the consolidated financial statements.

Therefore, the Company does not disclose such information in the parent company only financial

statement.

5. Significant accounting assumptions and judgments, and major sources of estimation uncertainty

The preparation of the parent company only financial statements, in conformity with the Regulations and the IFRSs endorsed by the FSC requires management to make judgments, estimates, and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income, and expenses. Actual results may differ from these estimates.

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

Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is as follows:

1. Valuation of Inventory

Inventories are stated at lower of cost and net realizable value, and the assessment of net realizable value is determined based on the current sales market. Any change in the real sales market may have significant effect on the result of estimation. Please refer to note 6(d) for the estimation of inventory valuation.

The Company's financial instrument valuation group conducts independent verification on fair value by using data sources that are independent, reliable, and representative of exercise prices. This financial instrument valuation group also periodically adjusts valuation models, conducts back testing, renews input data for valuation models, and makes all other necessary fair value adjustments to assure the rationality of fair value.

(Continued)

23

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

The Company strives to use market observable inputs when measuring assets and liabilities. Different levels of the fair value hierarchy to be used in determining the fair value of financial instruments are as follows:

• ●Level 1: quoted prices (unadjusted) in active markets for identified assets or liabilities.

• ●Level 2: 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).

• ●Level 3: inputs for the assets or liability that are not based on observable market data.

6. Explanation of significant accounts

(a) Cash and cash equivalents

Cash on hand Demand deposits Cash and cash equivalents in the statement of cash flows	December 31, 2021 $ 175 560,443 $ 560,618	December 31, 2020
		181 866,933
		867,114

Please refer to note 6(q) for the fair value sensitivity analysis and interest rate risk of the financial assets and liabilities of the Company.

• (b) Financial assets and liabilities at fair value through profit or loss

Mandatorily measured at fair value through profit or loss: Non-derivative financial assets Stocks listed on domestic markets	December 31, 2021 $ -	December 31, 2020
		-

As of December 31, 2021 and 2020, the financial assets were not pledged.

(c) Note and trade receivables

Notes receivable Account receivables–measured as amortized cost Total	December 31, 2021 $ 64,532 28,185 $ 92,717	December 31, 2020
		12,456 44,863
		57,319

(Continued)

24

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

The Company applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due, as well as the incorporated forward looking information, including macroeconomic and relevant industry information. The loss allowance provisions in Taiwan were determined as follows:

Current Current	December 31, 2021	December 31, 2021
	Gross carrying amount Weighted- average loss rate $ 92,717 - December 31, 2020		Loss allowance provision
			-
		Weighted- average loss rate -	Loss allowance provision
			-

The notes and trade receivable of the Company were not pledged as collaterals.

For further credit risk information, please refer to note 6(q).

• (d) Inventories

Properties and land held for sale Construction-in-progress－land Construction-in-progress－projects Land held for development Prepayments for land purchase Less: allowance for loss on decline in market value and obsolescence	December 31, 2021 $ 204,928 8,902,356 2,552,382 15,710,047 15,190 (2,500) $ 27,382,403	December 31, 2020 318,078 4,030,920 1,640,473 11,240,278 910,742 (3,710) 18,136,781

• (i) For the years ended December 31, 2021 and 2020. the amount of capitalized interests of land held for development and construction in progress of the Company were $37,570 thousand and $14,645 thousand, respectively.

• (ii) For the years ended December 31, 2021 and 2020. the reversal of write-downs amounted to $1,210 thousand and $86,670 thousand, respectively. The write-downs and reversals are included in cost of sales.

• (iii) Please refer to note 8 for the Company’s inventories pledged as collateral as of December 31, 2021 and 2020.

(Continued)

25

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

(e) Investments accounted for using equity method

A summary of the Company’ s financial information for investments accounted for using equity method at the reporting date is as follows:

method at the reporting date is as follows:
Subsidiary	December 31, 2021 $ 27,833	December 31, 2020
		29,204

• (i) Subsidiaries

Please refer to the consolidated financial statement for the year ended 2021.

(ii) Collateral

As of December 31, 2021 and 2020, the Company did not provide any investment accounted for using equity method as collaterals for its loans.

(f) Property, plant and equipment

• (i) Changes in the cost, depreciation of property, plant, and equipment for 2021 and 2020 were as follows:

Cost : Balance at January 1, 2021 Addition Disposal Balance at December 31, 2021 Balance at January 1, 2020 Addition Scrapped Disposal Balance at December 31, 2020 Depreciation : Balance at January 1, 2021 Depreciation for the year Disposal Balance at December 31, 2021 Balance at January 1, 2020 Depreciation for the year Scrapped Disposal Balance at December 31, 2020	Land $ 54,131 - - $ 54,131 $ 54,131 - - - $ 54,131 $ 7,869 - - $ 7,869 $ 7,869 - - - $ 7,869	Buildings and construction	Other Facilities 15,991 2,157 (2,700) 15,448 16,717 2,828 (2,505) (1,049) 15,991 10,762 1,227 (209) 11,780 12,698 1,458 (2,505) (889) 10,762	Total 135,825 2,157 (2,700) 135,282 136,551 2,828 (2,505) (1,049) 135,825 52,687 2,494 (209) 54,972 53,377 2,704 (2,505) (889) 52,687
		65,703 - - 65,703 65,703 - - - 65,703 34,056 1,267 - 35,323 32,810 1,246 - - 34,056

(Continued)

26

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

Carrying value: Balance at December 31, 2021 Balance at December 31, 2020 Balance at January 1, 2020	Land $ 46,262 $ 46,262 $ 46,262	Buildings and construction	Other Facilities 3,668 5,229 4,019	Total
		30,380 31,647 32,893		80,310
				83,138
				83,174

(ii) Collateral

As of December 31, 2021 and 2020, the property, plant and equipment of the Company had been pledged as collateral, please refer to note 8.

(g) Investment Properties

Cost : Balance at January 1, 2021 Disposal Balance at December 31, 2021 Balance at at January 1, 2020 Reclassification from inventories Disposal Balance at December 31, 2020 Accumulated depreciation and impairment losses: Balance at January 1, 2021 Depreciation for the year Disposal Balance at December 31, 2021 Balance at at January 1, 2020 Depreciation for the year Disposal Balance at December 31, 2020 Carrying amount： Balance at December 31, 2021 Balance at December 31, 2020 Balance at January 1, 2020 Fair value： Balance at December 31, 2021 Balance at December 31, 2020 Balance at January 1, 2020	Land and improvements $ 1,609,903 (37,322) $ 1,572,581 $ - 1,611,364 (1,461) $ 1,609,903 $ - - - $ - $ - - - $ - $ 1,572,581 $ 1,609,903 $ -	Buildings Total 1,427,658 3,037,561 (33,020) (70,342) 1,394,638 2,967,219 - - 1,428,950 3,040,314 (1,292) (2,753) 1,427,658 3,037,561 23,151 23,151 27,454 27,454 (755) (755) 49,850 49,850 - - 23,168 23,168 (17) (17) 23,151 23,151 1,344,788 2,917,369 1,404,507 3,014,410 - - $ 7,474,334 $ 7,758,917 $ -

(Continued)

27

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

The fair value of the investment property was determined by referring to the average market price of similar real estate after deducting related expenses. The inputs used in the fair value valuation technique were market values classified as Level 3.

Please refer to note 8 for the Company’s investment property pledged as collateral as of December 31, 2021 and 2020.

• (h) Short-term borrowings/short-term notes and bills payable/long-term borrowings

Short-term borrowings/short-term notes and bills payable/long-term borrowings were summarized as follows :

Secured bank loans Secured bank loans Unsecured bank loans Commercial paper payables Total Current Non-current Total Secured bank loans Unsecured bank loans Commercial paper payables Total Current Non-current Total		December 31, 2021	December 31, 2021	December 31, 2021
	Currency	Interest rate collars
	TWD TWD TWD TWD
	Currency	Interest rate collars	Expiration Amount 2021 $ 5,590,000 2021 500,000 2021 4,541,688 $ 10,631,688 $ 10,631,688 - $ 10,631,688	Amount
	TWD TWD TWD	1.35%~1.69% 1.35%~1.36% 0.35%~1.29%

Please refer to note 8 for the Company’s assets pledged to secure bank loans; please refer to note 7 for joint guarantees provided by related parties.

(i) Operating lease

The Company leases out its office and carpark space. The Company has classified these leases as operating leases, because it does not transfer substantially all of the risks and rewards incidental to the ownership of the assets.

(Continued)

28

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

A maturity analysis of lease payments, showing the undiscounted lease payments to be received after the reporting date are as follow:

the reporting date are as follow:
Less than one year One to two year Two to three year Three to four year Four to five year More than five year Total undiscounted lease payments	December 31, 2021 $ 162,118 153,625 171,577 151,726 150,011 1,844,038 $ 2,633,095	December 31, 2020
		174,429 193,429 182,208 173,283 155,021 1,995,097
		2,873,467

(j) Employee benefits

• (i) Defined benefit plans

The pension cost incurred from the defined contribution plans amounted to $32 thousand for both year ended December 31, 2021 and 2020

(ii) Defined contribution plans

The Company allocates 6% of the contribution rate of the employee’s monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Company allocates a fixed amount to the Bureau of the Labor Insurance without additional legal or constructive obligation.

The pension cost incurred from the contributions to the Bureau of the Labor Insurance amounted to $1,246 thousand and $1,077 thousand for the years ended December 31, 2021 and 2020, respectively.

(k) Income tax

• (i) Income tax expense

The components of income tax in the years of 2021 and 2020 were as follows:

The components of income tax in the years of 2021 and	2020 were as follow	s:
Current tax expense Deferred tax expense Income tax expenses from continuing operations	2021 $ 15,092 - $ 15,092	2020
		134,722 -
		134,722

(Continued)

29

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

Reconciliation of income tax expense and profit before tax for the years ended December 31, 2021 and 2020 were as follows:

Income (loss) before tax Income tax using the Company’s domestic tax rate Tax-exempt income Land value increment Tax Additional tax on undistributed earnings Others Total	2021 $ (18,252) $ (3,650) (11,781) 7,431 7,661 15,431 $ 15,092	2020 748,711 149,742 (183,038) 129,173 5,549 33,296 134,722

(ii) Deferred tax assets

• 1) Unrecognized deferred tax assets

The details of unrecognized deferred tax assets were as follows:

Tax effect of deductible Temporary Differences The carryforward of unused tax losses	December 31, 2021 $ 80,628 183,248 $ 263,876	December 31, 2020
		73,792 172,933
		246,725

The R.O.C. Income Tax Act allows net losses, as assessed by the tax authorities, to offset taxable income over a period of ten years for local tax reporting purposes. Deferred tax assets have not been recognized in respect of items because it is not probable that future taxable profit will be available against which the Company’s can utilize the benefits there from.

As of December 31, 2021, the information of the Company’s unused to losses for which no deferred tax assets were recognized was as follows:

Year of loss 2015 2017 2018 2019 2020 2021	Unused amount Expiration year $ 34,844 2025 14,183 2027 386,349 2028 102,694 2029 326,710 2030 51,458 2031

• (3) The ROC income tax authorities have examined the Company’s income tax returns for all yearsl through 2019.

(Continued)

30

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

(l) Capital and Other Equities

As of December 31, 2021 and 2020, the total value of authorized ordinary shares were $4,300,000 thousand with par value of $10 per share. As of the date, 332,809 thousand of ordinary shares amouted 332,809 thousand were issued.

(i) Capital surplus

Balances of capital surplus at the reporting date were as follows:

Share capital Treasury share transactions Difference arising from subsidiary‘s share price and its carrying value Capital surplus－premium from merger Conversion right of convertible bonds Interest payable refund from bond conversion Total	December 31, 2021 $ 1,769,869 26,353 765 217,538 16,588 11,235 $ 2,042,348	December 31, 2020
		1,769,869 26,353 765 217,538 16,588 11,235
		2,042,348

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

(ii) Unappropriated earnings

The Company’s Articles of Incorporation stipulate that if the Company has profit for the year, it shall first appropriate no less than one percent thereof as compensation to employees and no more than three percent to directors; if employee compensation is capitalized, the portion thereof can be paid in the form of shares. Subsequently, the Company shall pay all taxes and dues, after which 10 percent of the remainder shall be set aside as legal reserve, unless the total legal reserve has already reached the amount of the Company’s paid-in capital. After that, the Company shall appropriate the remaining portion as a special reserve pursuant to relevant laws. Any remaining profit, together with any undistributed retained earnings, shall be distributed as dividends according to the distribution plan proposed by the Board of Directors and approved at a stockholders’ meeting.

If there is profit for the year, it shall be used to offset accumulated losses, if any, before appropriating employee compensation, after which the remaining portion shall be appropriated according to the above-mentioned proportion. If employee compensation is to be paid in the form of shares or cash, the recipients shall include the employees of the Company’s affiliated companies that meet certain conditions.

(Continued)

31

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

Considering future capital demand and sound financial plan for sustainable development of the Company, the meeting of shareholders may resolve accordingly that part or all of the earnings will not be distributed, and that when there is distribution of earnings, cash dividends shall account for at least 20% of total cash and stock dividends. The remains will be paid in the form of shares to transfer retained earnings and capital surplus to capital.

• 1) Legal reserve

When a company incurs no loss, it may, pursuant to a resolution by a shareholders’ meeting, distribute its legal reserve by issuing new shares or by distributing cash, and only the portion of legal reserve which exceeds 25% of capital may be distributed.

2) Special reserve

The Financial Supervisory Commission stipulates that if there are items accounted for as deductions from other shareholders’ equity for the year, a special reserve of equal amount shall be set aside from unappropriated current-year and previous-year earnings. Similarly, a special reserve, equal to the total amount of items that were accounted for as deductions from other shareholders’ equity, shall be set aside from the previous year’s unappropriated earnings. Amounts of subsequent reversals pertaining to the net reduction of other shareholders’ equity shall qualify for additional distributions.

• 3) Earnings Distribution

Earnings distribution for 2020 and 2019 was decided by the resolution adopted, at the general meeting of shareholders held on August 20, 2021 and June 9, 2020, respectively. The relevant dividend distributions to shareholders were as follows:

Cash Dividend	2020 Amount per share Total amount $ 1.20 399,371	2019	2019
	Amount per share $ 1.20	Amount per share 1.20	Total Amount
			399,370

Information on the earnings appropriation proposed by the Company’ s Board of Directors and approved by the Company’ s shareholders is available on the Market Observation Post System website of the Taiwan Stock Exchange.

• (m) Earnings per share

• (i) Basic Earnings per share

The details on the calculation of basic earnings per share at December 31, 2021 and 2020 was based on the profit attributable to ordinary shareholders of the Company amounting to $(33,334) thousand and $613,989 thousand and the weighted average number of ordinary shares outstanding were both 332,809 thousand as follows:

(Continued)

32

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

Profit (loss) attributable to ordinary shareholders of the Company Weighted-average number of ordinary shares outstanding (basic) (in thousands) Basic (losses) earnings per share (NT dollars)	2021 $ (33,334) 332,809 (0.10)	2020
		613,989
		332,809
		1.84

(ii) Diluted earnings per share

The details on the calculation of diluted earnings per share at December 31, 2020 that was based on profit attributable to ordinary shareholders of the Company amounting to $613,989 thousand and the weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares of 333,492 thousand , as follows:

• 1) Profit attributable to ordinary shareholders of the Company (diluted)

Profit (loss) attributable to ordinary shareholders of the Company (basic) Profit (loss) attributable to ordinary shareholders of the Company (diluted) 2) Weighted-average number of ordinary shares (diluted) Weighted-average number of ordinary shares (basic) (in thousands) Effect of employee stock bonus Weighted-average number of ordinary shares (diluted) (in thousands) Diluted earning per share (NT dollars)	2020	2020
	$ 613,989 $ 613,989 2020
		2020
	332,809 683 333,492 $ 1.84	332,809 683
		333,492

• (n) Revenue from contracts with customers

(i) Details of revenue

Primary geographical markets Taiwan Major products/services lines Sale of land and buildings Lease of real estate	2021 $ 322,657 2021 $ 152,229 170,428 $ 322,657	2020
		3,977,564
		2020
		3,814,519 163,045
		3,977,564

(Continued)

33

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

(ii) Contract balances

Contract balances
Accounts receivable Notes receivable Total Contract liabilities－sale of real estate	December 31, 2021		December 31, 2020 12,456 44,863 57,319 532,085	January 1, 2019
	$ 64,532 28,185 $ 92,717 $ 1,675,503			51,719 67,624
				119,343
				465,106

The major change in the balance of contract assets and liabilities is the difference between the time frame in the performance obligation to be satisfied and the payment to be received. There were no other significant changes for the years ended December 31, 2021 and 2020.

• (iii) For the unearned revenue received from pre-sale of construction properties the Company registered the trust of the construction in progress to which the contract liabilities belongs. This trust amount is recorded as “other financial assets-current ”.

Other financial assets-current	December 31, 2021 $ 1,149,714	December 31, 2020
		381,442

As of December 31, 2021, the Company consigned the trustees to manage the capital received from its pre-sale of properties in accordance with the Trust agreements,wherein the trust will be terminated when the project is completed, when the permit to use the building is issued, and when the ownership of the building is first registered.

• (iv) Unearned revenue received were from sale and pre-sale of properties and land held-for-sale.

• (v) As of December 31, 2021, the transaction payment trust for presale projects— Hong Pu Summer Palace, Hong Pu Central Park, Hong Pu Garden Park, Great Mansion , and Fashion Mansion was detailed as follows:

• 1) The reports are in accordance with the sold contracts.

• 2) Accrued trust amount on the base date is equal to the amount deposited into the trust account.

• 3) The Company deposits the payment received from buyers into the specific trust account at the same period.

• 4) There should be no delay in paying the deposit.

(Continued)

34

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

(o) Remuneration to employees and directors

In accordance with the Articles of Incorporation, the Company should contribute no less than 1% of the profit as employee compensation and less than 3% as directors’ remuneration when there is profit for the year. If there is profit for the year, it shall be used to offset accumulated losses, if any, before appropriating employee compensation, after which the remaining portion shall be appropriated according to the above-mentioned proportion. If employee compensation is to be paid in the form of shares or cash, the recipients shall include the employees of the Company’s affiliated companies that meet certain conditions.

For the years ended December 31, 2021 and 2020, the Company estimated its employee remuneration amounting to $0 and $12,000 thousands, and directors' remuneration amounting to $0 and $2,200 ,respectively. The estimated amounts mentioned above are calculated based on the net profit before tax, excluding the remuneration to employees, directors of each period, multiplied by the percentage of remuneration to employees, directors as specified in the Company's Articles. These remunerations were expensed under operating costs or operating expenses during 2021 and 2020. Related information would be available at the Market Observation Post System website. The above-mentioned amounts, as stated in the financial statements for the years ended December 31, 2021 and 2020, are identical to those of the actual distributions.

(p) Non-operating income and expenses

• (i) Interest income

The details of interest income were as follows:

Interest income from bank deposits Other interest income Total	2021 $ 1,280 131 $ 1,411	2020
		6,947 244
		7,191

• (ii) Other income

The details of other income were as follows:

Breach income Others Total	2021 $ 2,314 19,241 $ 21,555	2020
		52,971 15,590
		68,561

(Continued)

35

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

• (iii) Other gains and losses

The details of other gains and losses were as follows:

Gains on financial assets at fair value through profit Gains or lose on disposals of property, plant and equipment Gains on disposals of investment property Foreign exchange losses Others Total	2021 $ 21 (243) 66,441 (15,581) (5,948) $ 44,690	2020 507 125 2,002 (32,584) (4,681) (34,631)

(iv) Finance costs

The details of finance costs were as follows:

Interest expenses Less: Capitalized Interest Total Capitalized Interest Rate	2021 $ 189,647 (37,570) $ 152,077 1.01%~1.33%	2020 122,428 (14,645) 107,783 1.04%~1.92%

(q) Financial Instrument

• (i) Credit risk

• 1) Credit risk exposure

The carrying amount of financial assets and contract assets represents the maximum amount exposed to credit risk.

• 2) The concentration of credit risk

The Company’ s revenue is attributable to the sales transactions with a wide range of customer. So, there is no concentration of credit risk.

(ii) Liquidity risk

The followings table shows the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements.

(Continued)

36

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

Carrying amount As of December 31, 2021 Non-derivative financial liabilities Secured bank loans $ 13,419,449 Unsecured Secured bank loans 389,042 Short-term notes and bills payables 6,268,282 Notes and accounts payables 151,677 $ 20,228,450 As of December 31, 2020 Non-derivative financial liabilities Secured bank loans $ 5,590,000 Unsecured bank loan 500,000 Short-term notes and bills payables 4,541,688 Notes and accounts payables 153,089 $ 10,784,777	Carrying amount	Contractual cash flow 13,875,453 392,534 6,273,400 151,677 20,693,064 5,630,715 501,481 4,546,000 153,089 10,831,285	Within 6 months 6,498,381 2,508 6,273,400 151,677 12,925,966 3,642,427 501,481 4,546,000 153,089 8,842,997	6-12months 601,613 390,026 - - 991,639 2,006,288 - - - 2,006,288	1-2 years 97,748 - - - 97,748 - - - - -	2-5 years 3,558,727 - - - 3,558,727 - - - - -	Over 5 years 3,118,984 - - -
							3,118,984
							- - - -
							-

The Company does not expecting the cash flows included in the maturity analysis to occur significantly earlier or at significantly different amounts.

• (iii) Currency risk

• 1) Exposure to foreign currency risk

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

Financial assets Monetary item USD	December 31, 2021 Foreign currency Exchange rate NTD $ 13,929 27.68 385,567	December 31, 2021 Foreign currency Exchange rate NTD $ 13,929 27.68 385,567	December 31, 2020	December 31, 2020
	Foreign currency $ 13,929	Exchange rate 27.68	Foreign currency 21,767	Exchange rate NTD 28.48 619,918

• 2) Sensitivity analysis

The Group’s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents and investment accounted using equity method that are denominated in foreign currency. As of December 31, 2021 and 2020, a strengthening (weakening) of 10% of the NTD against the USD, would have increased (decreased) the net profit after tax by $38,557 and $61,992 thousand respectively. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the reporting date.

(Continued)

37

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

(iv) Interest risk

Please refer to the attached note for the liquidity risk management and the Company's interest rate exposure to its financial assets and liabilities.

The following sensitivity analysis is based on the risk exposure to interest rates on nonderivative financial instruments on the reporting date. For variable rate instruments, the sensitivity analysis assumes the variable rate liabilities are outstanding for the whole year on the reporting date.

If the interest rate increases / decreases by 50 basis points, the Company’s net profit after tax would have increased (decreased) by $76,795 thousand and $43,858 thousand for the years ended December 31, 2021 and 2020 with all other variable factors that remain constant. This is mainly due to the Company’s borrowings in floating variable rate.

• (v) Other market price risk

If the price of the equity securities changes, and if it is on the same basis for both years and assumes that all other variables remain the same, the impact on other comprehensive income will be as follows:

Equity price at reporting date	2021 After-tax other Comprehensive income After-tax profit (loss) $ - - $ - -	2020	2020
	After-tax other Comprehensive income $ - $ -	After-tax other Comprehensive income - -	After-tax profit (loss)
Increase 3% Decrease 3%			-
			-

(vi) Fair value

• 1) Categories of financial instruments and fair value

The following table shows the carrying amounts and fair values of financial assets and liabilities including their levels in the fair value hierarchy. It shall not include fair value information of the financial assets and liabilities not measured at fair value if the carrying amount is a reasonable approximation of the fair value and investments in equity instruments which do not have any quoted price in an active market in which the fair value cannot be reasonably measured.

Financial assets at fair value through profit or loss Non-derivative financial assets mandatorily measured at fair value through profit or loss Financial assets measured at amortized cost Cash and cash equivalents Notes receivable and account receivable Other financial assets - current Subtotal Total			December 31, 2021	December 31, 2021	December 31, 2021
	Book value			Fair value
			Level 1 - - - - -	Level 2 - - - - - -	Level 3 - - - - - -	Total - - - - -
	$ - 560,618 92,717 1,149,714 1,803,049 $ 1,803,049

(Continued)

38

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

Financial liabilities at amortized cost Bank Loans Short-term notes and bills payable Notes payable and account payable Other payable Subtotal Total			December 31, 2021	December 31, 2021	December 31, 2021
	Book value			Fair value
			Level 1 - - - - - -	Level 2 - - - - - -	Level 3 - - - - - -	Total - - - - - -
	$ 13,808,491 6,268,282 151,677 204,981 20,433,431 $ 20,433,431

Financial assets at fair value through profit or loss Non-derivative financial assets mandatorily measured at fair value through profit or loss Financial assets measured at amortized cost Cash and cash equivalents Notes receivable and account receivable Other financial assets - current Subtotal Total Financial liabilities at amortized cost Bank Loans Short-term notes and bills payable Notes payable and account payable Other payable Subtotal Total			December 31, 2020	December 31, 2020	December 31, 2020
	Book value			Fair value
			Level 1 - - - - - - - - - - -	Level 2 - - - - - - - - - - - -	Level 3 - - - - - - - - - - - -	Total - - - - - - - - - - -
	$ - 867,114 57,319 381,442 1,305,875 $ 1,305,875 $ 6,090,000 4,541,688 153,089 56,139 $ 10,840,916 $ 10,840,916

• 2) Fair value valuation techniques of financial instruments not measured at fair value

Non-derivative financial instruments

Financial instruments traded in active markets are based on quoted market prices. The quoted price of a financial instrument obtained from main exchanges and onthe-run bonds from Taipei Exchange can be used as a basis to determine the fair value of the listed companies’ equity instrument and debt instrument in an active market.

(Continued)

39

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

Fair value measurement is based on the latest quoted price and agreed-upon price if these prices are available in an active market. When market value is unavailable, the fair value of financial assets and liabilities are evaluated based on the discounted cash flow of the financial assets and liabilities.

(r) Management of financial risk

Overview

• (i) By using financial instruments, the Company is exposed to risks as below:

• Credit risk

• Liquidity risk

• Market risk

This note presents information about the Company’ s exposure to each of above risks, the objectives, policies and processes for measuring and managing risk. Please see other related notes for quantitative information.

• (ii) Risk management framework

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

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

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

• (iii) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s investment securities.

(Continued)

40

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

1) Investment

The credit risk exposure in the bank deposits, fixed income investments and other financial instruments are measured and monitored by the Company’s finance department. Since the Company’ s transactions are with the counterparties, and the contractually obligated counterparties are the banks, financial institutions, corporate organizations and government agencies with good credits, there are no compliance issues, and therefore, there is no significant credit risk.

2) Guarantees

As of December 31, 2021 and 2020, there is no guarantee outstanding.

(iv) Liquidity risk

The Company manages 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 the banking facilities and ensures that they are in compliance with the terms of the loan agreements.

The loans and borrowings from the bank form an important source of liquidity for the Company. The Company has unused short-term bank facilities of$2,862,651 thousand and $3,900,800 thousand as at 31 December 31, 2021 and 2020.

(v) Market risk

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

1) Currency risk

The Company is not exposed to currency risk on sales, purchases and borrowings that are denominated in a New Taiwan Dollars (TWD).

2) Interest rate risk

The Company’s borrowings bear floating interest rate. The Company reduces the interest risks by negotiating the loan interest rates frequently with banks.

(Continued)

41

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

(s) Capital management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Capital consists of ordinary shares, capital surplus and retained earnings of the Company. The Board of Directors monitors the return on capital as well as the level of dividends to ordinary shareholders.

The Company’s capital management strategies were the same for 2021 and 2020, and debt-to-equity ratios on December 31, 2021 and 2020 were as follows:

Total liabilities Less: cash and cash equivalents Net debt Total equity Debt to equity ratio	December 31, 2021 $ 22,167,271 (560,618) $ 21,606,653 $ 11,715,980 % 184.42	December 31, 2020 11,408,772 (867,114) 10,541,658 12,148,695 % 86.77

7. Related-party transactions

• (a) Names and relationship with related parties

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

he financial statements.
Name related party	Relationship with the Company
J.H. Tuan	The chairman of the Company
IG Construction Co., Ltd.	Other related parties
Hsin Pei Real Estate Development Co., Ltd.	Other related parties
Chuan Yue Real Estate Development Co., Ltd.	Subsidiary
Hong Pu Welfare and Charity Foundation	Other related parties

(b) Related party transactions

• (i) Endorsements and guarantees

The chairman of the company was the guarantor for the Company’ s loans from financial institutions.

(ii) Leases

One of other related parties rented an office building from the Company, for which a five-year lease contract was signed at the price of $331 thousand with reference to nearby office rental rates. For 2021 and 2020, the Company’ s rent income amounted to $34 thousand and $61 thousand, respectively. As of December 31, 2021 and 2020, the payments have been received.

(Continued)

42

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

(iii) Others

The Company has signed a contract for a joint-construction project—"012310247" with Hsin Pei Real Estate Development Co., Ltd. during June 2017. According to the agreement, The Company accounts for 33.9% of the project. For the years ended December 31, 2021 and 2020, management fee income amounted to $10,811 thousand and $8,777 thousand, respectively. As of December 31, 2021 and 2020, the resulting accounts receivable amounted to $1,464 thousand and $1,721 thousand respectively, both of which were included in the line item of "other receivables due from related parties.

The Company offers management services to its subsidiaries. For the year ended December 31, 2021 and 2020, the Company recognized management income amounted $260 and $346 thousands respectively. As of December 31, 2021 and 2020 the accounts receivables of $260 － and $346 thousands,respectively, recorded as “accounts-receivales related parties .”has not been received.

The Company donated to the Hong Pu Social Welfare Foundation the amount of $1,000 thousand in 2020.

(c) Key management personnel compensation

Key management personnel compensation
Short-term employee benefits Retirement benefits Other long-term benefits Resignation benefits Share-based payment Total	2021 $ 5,907 316 - - - $ 6,223	2020
		11,620 309 - - -
		11,929

8. Pledged assets

As of December 31, 2021 and 2020, the carrying values of pledged assets were as follows:

Pledged assets Inventories -Construction- in-progress-land Inventories -Land held for development Property, Plant and Equipment Investment properties	Pledged to secure	December 31, 2021 $ 8,863,450 13,051,001 76,642 2,917,369 $ 24,908,462	December 31, 2020
	Short-term bills payable, short-term loans Short-term bills payable, short-term loans Short-term bills payable Short-term bills payable, Long-term borrowings		3,992,014 9,210,369 77,909 3,014,410
			16,294,702

(Continued)

43

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

9. Commitments and contingencies

• (a) As of December 31, 2021, the Company had issued promissory notes of $20,976,900 thousand to financial institutions for their provision of repayment guarantees.

• (b) As of December 31, 2021, the total contract amount of the Company’ s construction projects was $4,486,592 thousand, of which $485,496 thousand had been paid and recorded as “inventory.”

• (c) As of December 31, 2021, the total contract amount of the Company’s advanced-sell projects was $12,377,601 thousand of which $1,675,503 thousand had been received and recorded as “ current contract liabilities.”

• (d) As of December 31, 2021, the total contract amount of the Company’s prepayments for land purchase ware $15,190 thousand, of which $15,190 thousand had been paid and recorded as “inventories”.

• (e) As of December 31, 2021, the total contract amount of the Company’s prepayments for building bulk ware $671,5071 thousand, of which $588,680 thousand had been paid and recorded as “prepayment”.

• (f) The Company has signed project “ 061120014” joint construction agreement with six non-related parties, Mrs. Yang and five others, on June 2010; and Mr. Pan and three others on September 2011. As of December 31, 2021, in accordance with the joint construction agreement, the Company has paid a promissory amount of $11,390 thousand to the land owners and recorded it as “ refundable deposits”.

• (g) The Company has signed project “012310247” joint construction agreement with nine non-related parties, Mrs. Lin and eight others, on May 2014 and on July 2015. As of December 31, 2021, in accordance with the joint construction agreement, the Company has paid a promissory amount of $121,234 thousand to the land owners and recorded it as “other current assets”

• (h) The Company has signed project “032310150” joint construction agreement with eleven non-related parties, Mr. Chen and ten others, in October,November and December 2019. As of December 31, 2021,the Company has paid a promissory of $49,052 thousand to the land owners and recorded it as “refundable deposit”. in accordance with the joint construction agreement.

• (i) The Company requested IBFC to be the guarantor for its issuance of commercial papers. The Tunhwa South office was pledged as collateral. According to the contract, IBFC was appointed as the beneficiary of the fire insurance on this office.

10. Losses Due to Major Disasters ： None.

11. Subsequent Events

On January 26, 2021, the Company’s Board of Directors resolved to subscribe for new shares issued by Mitsubashi Development Co., Ltd., and the investment totaled $600,000 thousand divided into 60,000 thousand shares, representing a 50% shareholding ratio. In February of the same year, the Company obtained more than half of the board seats of Mitsubashi Development, gaining control over it.

(Continued)

44

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

12. Other

(a) Total personnel, depreciation and amortization expenses categorized by function for the years ended December 31, 2021 and 2020, were as follows:

			2021	2021	2020	2020	2020
		Operating cost	Operating expenses	Total	Operating cost	Operating expenses	Total
Personnel expenses Salaries Labor and health insurance Pension Remuneration of directors Others Depreciation Amortization		8,238 755 459 - 240 27,454 -	17,867 1,945 819 588 579 2,494 335	26,105 2,700 1,278 588 819 29,948 335	8,711 586 368 - 205 23,168 -	25,775 1,870 741 2,839 539 2,704 150	34,486 2,456 1,109 2,839 744 25,872 150

The information on the Company's employee and employee for the years ended December 31, 2021 and 2020 were as follow:

umber of employees umber of directors (not employees) verage employee benefit expense verage salary expense erecentage of average employee salary expense emuneration of supervisor

The company's salary and remuneration policy (including directors, managers and employees) are as follows:

When the company incurs no loss, it should first allocate employee remuneration not less than 1%, and directors’ remuneration must not be higher than 3%. The company must consider the rights and interests of shareholders and employees, and set remuneration for directors and managers. The Remuneration Committee formulates and regularly reviews the policies, systems, standards and structure of directors and managers’ performance evaluation and remuneration; for employees, it attracts and retains outstanding talents by providing the company’ s colleagues with a marketcompetitive overall remuneration.

(Continued)

45

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

13. Other disclosures

• (a) Information on significant transactions

The followings is the information on significant transactions required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Company:

• (1) Fund financing to other parties：None.

• (2) Guarantees and endorsements for other parties：None.

• (3) Securities held as December 31, 2020 (excluding investment in subsidiaries, associates and joint ventures)：

(Unit Share)

Name of holder	Category and name of security	Relationship with company	Account title	Ending Balance	Ending Balance	Ending Balance	Ending Balance	Note
				Shares/Units	carrying value	Percentage of ownership	Fair value
The Company The Company	CPT NEOMAGIC(NMGC)	- -	Mandatorily measured at fair value through profit- current Mandatorily measured at fair value through profit- current	23,599 10,659	- -	- -	- -

• (4) Cumulative buying or selling of one specific security exceeding the lower of TWD300 million or 20% capital stock：None.

• (5) Acquisition of real estate with an amount exceeding the lower of TWD300 million or 20% of the capital stock：

Name of company	Name of property	Transaction date	Transaction mount	Status of payment	Counter party	Relationship with the Company	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	If the counter-party is a related party, disclose the previous transfer information	References for determining price	Purpose of acquisition and current condition	Others
							Owner	Relationship with the Company	Date of transfer	Amount
The Company The Company The Company The Company The Company The Company	Construction- in-progress- land Construction- in-progress- land Construction- in-progress- land Construction- in-progress- land Construction- in-progress- land Construction- in-progress- land	2021.07.14 2021.09.14 2021.09.14 2021.09.14 2021.09.23 2021.10.21 2021.12.03	318,617 2,160,000 959,017 2,631,169 433,993 489,469	318,617 2,160,000 959,017 2,631,169 433,993 489,469	5 People Taoyuan City Government Taoyuan City Government Taoyuan City Government 8 People 15 People	Not related parties Not related parties Not related parties Not related parties Not related parties Not related parties	- - - - - -	- - - - - -	- - - - - -	- - - - - -	Referring to the average market price of similar real estate The highest bidding price The highest bidding price The highest bidding price Referring to the average market price of similar real estate Reference is made to the published market prices of the land for major construction projects of the Taoyuan City Government	Construction Construction Construction Construction Construction To donate transfer of development rights	none none none none none none

(Continued)

46

HONG PU REAL ESTATE DEVELOPMENT CO., LTD. Notes to Parent Company Only Financial Statements

• (6) Disposal of real estate with an amount exceeding the lower of TWD300 million or 20% of the capital stock：

Name of company	Name of property	Transaction	Acquisition date	Book value	Transaction amount	Amount received	Gain or loss on disposal	Counter party	Relationship with the Company	Purpose of disposal	References for determining price	Other
The Company	Land held for construction s 3	December 0,2021	July 30, 2007	164,742	461,380	92,276	NA	OO Co., Ltd	An unrelated party	Operating income	Reference is made to the land transaction prices in the vicinity	None

• (7) Related party transactions for purchase and sales with amounts exceeding the lower of TWD100 million or 20% of the capital stock: None.

• (8) Receivable from related parties exceeding the lower of TWD100 million or 20% of the capital stock: None.

• (9) Trading in Derivative instruments: None.

• (b) Information on investees:

The following is the information on investees for the year 2020 (excluding information on investees in Mainland China):

Investor company	Investee company	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of December 31, 2020	Balance as of December 31, 2020	Balance as of December 31, 2020	Net income (losses) of the investee	Share of profit / losses of investee	Note
				December 31, 2020	December 31, 2019	Shares	Percentage of ownership	Carrying value
The Company	Chuan Yue Real Estate Development Co.,Ltd.	Taipei	Real estate development service	32,742	32,742	3,060,000	% 51.00	27,833	(2,688)	(1,371)	Note

• (c) Information on investment in Mainland China: None.

• (d) Major shareholders:

Major shareholders:
Shareholding Shareholder’s Name	Shares	Percentage
Hua-Zhan Investment Co., Ltd.	59,159,745	% 17.77
Fu-Ta Investment Co., Ltd.	57,938,040	% 17.40

14. Segment information ： None.

47

Hong Pu Real Estate Development Co., Ltd.

Statement of cash and cash equivalents

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Item Cash and petty cash Demand deposit Checking deposit Foreign currency deposit Foreign currency deposit Subtotal Total Item	Description Amount $ 175 168,697 6,183 US11,550,000 with exchange rate 27.68 319,704 USD2,379,133 with exchange rate 27.68 and HK 1,312 with exchange rate 3.549 65,859 560,443 $ 560,618 Other financial assets current Amount $ 100 52,978 579,459 180,372 116,911 219,894 $ 1,149,714
Trust Cathy United Bank #05985 Cathy United Bank #21890 Cathy United Bank #5022829 Cathy United Bank #5063789 Cathy United Bank #5034126 Cathy United Bank #22799 Total

48

Hong Pu Real Estate Development Co., Ltd.

Statement of changes in financial assets at fair value through profit or loss

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Fair value Name of the company Shares Cost Unit price Total amount Domestic listed company： CPT 23,599 $ - - - - - - NEOMAGIC(NMGC) 10,659 Total $ - -

Statement of inventories

Refer to note 6(d).

49

Hong Pu Real Estate Development Co., Ltd.

Statement of change in construction-in-progress-Land and projects

For the year ended December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Item	Beginning balance $ 4,098,686 136,153 983,055 83,626 162,216 36,592 171,065 $ 5,671,393	Addition Cost Capital interest 5,533 - 97,542 155 193,408 7,236 16,103 1,915 47,540 17,107 15,153 1,855 508,362 - 883,641 28,268	Conversion of construction-in- progress-land - - - 864,568 3,074,670 932,198 - 4,871,436	Reduce Other - - - - - - - -	Ending balance Details of collateral 4,104,219 Note8 233,850 None 1,183,699 Note8 966,212 Note8 3,301,533 Note8 985,798 Note8 679,427 Note8 11,454,738
		Cost 5,533 97,542 193,408 16,103 47,540 15,153 508,362 883,641
011040249 012310247 011046961 033340412 042310028 023340378 Other Total

50

Hong Pu Real Estate Development Co., Ltd.

Statement of changes in investments accounted for using the equity method

For the year ended December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Entity Chuan Yue Real Estate Development Co., Ltd..	Balance on January 1, 2020 Share Amount 3,060,000 $ 29,204	Increase in current period Share Amount - -	Increase in current period Share Amount - -	Decrease in current period Share Amount - -	Decrease in current period Share Amount - -	Share of profit/losses of investee Ammount (1,371)	Balance on December 31, 2021 Share Percentage on voting interest Amount 3,060,000 % 51.00 27,833	Balance on December 31, 2021 Share Percentage on voting interest Amount 3,060,000 % 51.00 27,833	Balance on December 31, 2021 Share Percentage on voting interest Amount 3,060,000 % 51.00 27,833	Price per share 12.36	Total amont 27,833	Basis Details of collateral the equity method None
	Share	Share		Share			Share 3,060,000	Percentage on voting interest
	3,060,000	-		-				% 51.00

51

Hong Pu Real Estate Development Co., Ltd.

Statement of investment property

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Refer to note 6(g).

Statement of short-term borrowings

Type of borrowings	Ending balance $ 10,359,449 389,042 $ 10,748,491	Contract period 2021.05.03~2024.09.22 2021.09.10~2022.09.10	Range of interest rate	Borrowing quota Mortgages $ 12,910,100 land in construction and land held for development 389,042 None
Secured loan Unsecured loan Total			1.40%~1.80% 1.30%

52

Hong Pu Real Estate Development Co., Ltd.

Statement of short-term bills payable

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Trustee	Name of bonds	Amount Period Range of interest rate $ 830,000 2021.05.07~ 2022.05.06 1.19%~1.29% 1,548,000 2021.11.25~ 2022.01.04 0.84% 2,270,400 2021.10.28~ 2022.01.26 0.32%~0.34% 525,000 2021.12.08~ 2022.01.14 0.35%~0.36% 1,100,000 2021.11.24~ 2022.02.22 0.402% - - - (5,118) $ 6,268,282 Statement of notes payable	Range of interest rate	Quota Details of collateral $ 830,000 Land in construcstion 1,860,000 Land held for development 2,270,400 Land held for development, land in construcstion and investment property 525,000 Land held for development 1,100,000 Land held for development - Property,Plant and equipment Amount $ 26,372 62,397 4,391 $ 93,160
Ta Ching bills Finance Co. Mega bills China bills Finance Co. Shanghai Commerical and Savings Bank KGI Bank International bills Finance Co. Less: Discount Total	Commerical paper Commerical parer Commerical paper Commerical paper Commerical paper Commerical paper Item
Kimzoa Constructioin Hai Shin Co.Ltd Other Total

53

Hong Pu Real Estate Development Co., Ltd.

Statement of trade payables

For the year ended December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

	Item		Amount
Kimoza Construction		$	11,940
Han Fu Electric Co. Ltd.			6,299
Bard Land & Lands Office			5,225
Joyear Group			8,916
Gaoyao Construction			3,760
Other			22,377
Total		$	58,517

Statement of long-term borrowings

Refer to note 6(h).

54

Hong Pu Real Estate Development Co., Ltd.

Statement of operating revenue

For the year ended December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Refer to note 6(n).

Statement of operating costs

Item		Amount
Beginning balance of construction-in-progress-project	$	5,671,393
Beginning balance of land held for development		11,240,278
Beginning balance of prepayment for land purchase		910,742
Add: cost		9,357,562
Less: Ending balance of construction -in-progress-project		(11,454,738)
Ending balance of land held for development		(15,710,047)
Ending balance of prepayment for land purchase		(15,190)
Cost of period of the year		-
Add: Beginning balance of properties and land held for sale		318,078
Other		149
Less: Ending balance of properties and land held for sale		(204,928)
Construction cost		113,299
Lease cost		87,753
Less: gains on reversal of inventory write-downs		(1,210)
Operating cost	$	199,842

55

Hong Pu Real Estate Development Co., Ltd.

Statement of operating expense

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Item	Selling expense $ 4,698 4,443 16,104 26 10 1,953 $ 27,234	Administration expesne 13,893 31 676 694 2,297 10,450 28,041	Total
Salaries Advertising Tax Entertainment Insurance Other			18,591 4,474 16,780 720 2,307 12,403
			55,275