KYE — Annual Report 2021

Nov 10, 2021

Stock Code: 2365

KYE Systems Corp. and Subsidiaries

Consolidated Financial Report and CPA’s Audit Report 2021 and 2020

(For the convenience of readers, this English consolidated financial statements and independent auditors' report are translated from the original Chinese version. The English version is not Audited or Certified by a CPA.)

Address:No. 492, Sec. 5, Chongxin Rd., Sanchong Dist., New Taipei City, Taiwan (R.O.C.) Telephone: (02)2995-6645

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§TABLE OF CONTENTS§

§TABLE OF CONTENTS§
ITEM PAGE I. Cover 1 II. Table of Contents 2 III. Declaration on Consolidated Financial Report of Affiliates 3 IV. CPA’s Audit Report 4～7 V. Consolidated Balance Sheet 8 VI. Consolidated Statement of Comprehensive Income 9～12 VII. Consolidated Statement of Changes in Equity 13 VIII. Consolidated Statement of Cash Flows 14～15 IX. Notes to Consolidated Financial Report (I) Company history 16 (II) Date and procedures of approval of the financial report 16 (III) Application of new and amended standards and interpretations 16～18 (IV) Summary of material accounting policies 18～29 (V) Main sources of uncertainty of material accounting judgments, estimates and assumptions 30 (VI) Description of major account titles 30～62 (VII) Related party transactions 62～63 (VIII) Pledged and mortgaged assets 63 (IX) Material contingent liabilities and unrecognized contractual commitments 63 (X) Material losses from disasters - (XI) Material subsequent events 64 (XII) Others 64～65 (XIII) Note disclosures 1. Information of material transactions 66～67、71～78 2. Information of investee companies 66～67、71～78 3. Information of investments in Mainland China 67、79～80 4. Information of major shareholders 67、81 (XIV) Segment information 68～70	NO. OF NOTE TO FINANCIAL REPORT
	- - - - - - - - I II III IV V VI–XXVII XXVIII XXIX XXX - XXXI XXXII–XXXIII XXXIV XXXIV XXXIV XXXIV XXXV

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Declaration on Consolidated Financial Report of Affiliates

For the year of 2021 (from January 1 to December 31, 2021), the companies which shall be included in the consolidated financial report of affiliates prepared in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” are the same as those which shall be included in the consolidated financial report of the parent company and subsidiaries pursuant to IFRS 10, and the relevant information which shall be disclosed in the consolidated financial report of affiliates has been disclosed in the foregoing consolidated financial report of the parent company and subsidiaries. Therefore, no separate consolidated financial report of affiliates has been prepared.

Declarant : Company name: KYE Systems Corp.

Owner: Shih-Kun Tso

March 17, 2022

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CPA’s Audit Report

To KYE Systems Corp.:

Audit Opinions

We audited the consolidated balance sheets of KYE Systems Corp. and subsidiaries as of December 31, 2021 and 2020, their consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the periods from January 1 to December 31, 2021 and 2020, and the notes to their consolidated financial statements (including the summary of material accounting policies).

In our opinion, with respect to all material aspects, the foregoing consolidated financial statements were prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards, International Accounting Standards, interpretations and pronouncements of interpretation approved and published by the Financial Supervisory Commission, and thus provided a fair presentation of the consolidated financial positions of KYE Systems Corp. and subsidiaries as of December 31, 2021 and 2020 and the consolidated financial performance and cash flows for the periods from January 1 to December 31, 2021 and 2020.

Basis of Audit Opinions

We conducted audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and the generally accepted auditing standards. Our responsibilities under such standards are further described in the section “Responsibilities of CPAs for the Audit of Consolidated Financial Statements”. Our CPAs who are subject to independence requirements have, in accordance with the Standards of Professional Ethics for Certified Public Accountants, remained independent from KYE Systems Corp. and subsidiaries and have fulfilled all other responsibilities under the standards. We believe that we have acquired sufficient and appropriate audit evidence as the basis of our audit opinions.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the consolidated financial statements of KYE Systems Corp. and subsidiaries for 2021. Such matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinions thereon, we have not provided any separate opinion on these matters.

The following are the key audit matters in the consolidated financial statements of KYE Systems Corp. and subsidiaries for 2021:

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Occurrence of recognition of sales revenue

The sales revenue of KYE Systems Corp. and subsidiaries in 2021 was lower than that in 2020, and the sales revenue from certain sales customers in the current year saw a significant increase from that in the previous year. Since the amount and proportion thereof are a matter of significance, we have deemed the occurrence of recognition of the sales revenue from those certain sales customers to be a key audit matter of the consolidated financial statements of KYE Systems Corp. and subsidiaries for 2021. For the accounting policy for recognition of revenue, see Notes 4 and 22 to the parent-only financial report.

The audit procedures which we performed for the above-mentioned key audit matter included understanding and testing of the design and implementation effectiveness of the internal controls related to the recognition of sales revenue. We analyzed the reasons for change in the amount of the sales revenue from the above-mentioned sales customers. We conducted an audit by sampling the transaction details of the sales revenue from the above-mentioned sales customers. We also reviewed the relevant shipment certificates and payment receipts to confirm the occurrence of the sales revenue. We reviewed whether there were material sales returns or discounts subsequently on the part of the above-mentioned sales customers.

Other Matters

KYE Systems Corp. has prepared the parent-only financial statements for 2021 and 2020, with an unqualified audit report issued by us for reference.

Responsibilities of the Management and Governing Bodies for Consolidated Financial Statements

The management is responsible for preparing the financial statements with fair presentation in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards, International Accounting Standards, interpretations and pronouncements of interpretation approved and published by the Financial Supervisory Commission, and maintaining the necessary internal control related to preparation of the consolidated financial statements to ensure that the consolidated financial statements are free of material misstatement due to fraud or error.

During preparation of the consolidated financial statements, the management is also responsible for evaluating KYE Systems Corp. and subsidiaries’ going concern ability, disclosure of relevant matters and application of the going concern basis of accounting, unless the management intends to liquidate or cease the operation of KYE Systems Corp. and subsidiaries, or there are no other actual feasible solutions other than liquidation or cessation of operation.

The governing bodies (including the Audit Committee) of KYE Systems Corp. and subsidiaries are responsible for supervising the process of financial reporting.

Responsibilities of CPAs for the Audit of Consolidated Financial Statements

The purpose of our audit of the consolidated financial statements is to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatements due to fraud or error, with an audit report issued thereafter. Reasonable assurance means a high degree of assurance. However, there is no guarantee that any material misstatement contained in the consolidated financial statements will be discovered during an audit conducted in accordance with generally

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accepted auditing standards. A misstatement may be due to fraud or error. A misstatement is deemed material if the individual or aggregate amount misstated is reasonably expected to affect economic decisions made by users of the consolidated financial statements.

We rely on our professional judgment and maintain our professional skepticism during an audit conducted based on the generally accepted auditing standards. We also perform the following tasks:

1. We identify and assess the risk of misstatement in the consolidated financial statements due to fraud or error, design and implement appropriate measures in response to the assessed risk, and acquire sufficient and appropriate audit evidence as the basis of our audit opinions. Since fraud may involve collusion, forgery, intentional omission, fraudulent statement or violation of internal control, the risk of misstatement due to fraud is higher than that due to error.

2. We acquire necessary understanding of the internal control related to an audit to design audit procedures appropriate for the current circumstances, provided that the purpose of the foregoing is not to express opinions regarding the effectiveness of the internal control of KYE Systems Corp. and subsidiaries.

3. We assess the appropriateness of the accounting policies adopted by the management and the reasonableness of the accounting estimates and relevant disclosures made by the management.

4. We have drawn a conclusion about the appropriateness of the application of the going concern basis of accounting by the management and whether there is material uncertainty in an event or circumstances which may cast significant doubt about the ability of KYE Systems Corp. and subsidiaries to remain a going concern. If any material uncertainty is deemed to exist in such event or circumstance, we must provide a reminder in the audit report for the users of the consolidated financial statements to pay attention to the relevant disclosures therein, or revise our audit opinions when any such disclosure is inappropriate. Our conclusion is based on the audit evidence obtained as of the date of this audit report. However, future events or circumstances could result in a situation where KYE Systems Corp. and subsidiaries are no longer able to remain a going concern.

5. We assess the overall presentation, structure and contents of the consolidated financial statements (including relevant notes) and whether the consolidated financial statements provide a fair presentation of the relevant transactions and events.

6. We acquire sufficient and appropriate audit evidence of the financial information of the entities forming the group to provide opinions regarding the consolidated financial statements. We are responsible for guidance, supervision and implementation in relation to audit cases and for formation of audit opinions for the group.

The matters for which we communicate with the governing bodies include the planned scope and time of audit, and our material audit findings (including the significant deficiencies of internal control identified during the audit).

We also provide a declaration to the governing bodies stating that our CPAs who are subject to independence requirements have complied with the independence requirements in the Standards of Professional Ethics for Certified Public Accountants,

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and we communicate with the governing bodies regarding all relationships and other matters (including relevant safeguard measures) which are deemed likely to affect the independence of CPAs.

The key audit matters in the audit of the consolidated financial statements of KYE Systems Corp. and subsidiaries for 2021 have been determined by us from the matters regarding which we have communicated with the governing bodies. We have specified such matters in the audit report, except where public disclosure of certain matters is prohibited by applicable laws or regulations, or where, under very exceptional circumstances, we have decided not to cover communicate certain matters in the audit report due to the reasonable expectation that any negative effect arising from such communication would be greater than the public interest enhanced.

Deloitte Taiwan CPA Yao-Lin Huang

CPA Han-Ni Fang

Approval No. from the Financial Supervisory Commission Jin-Guan-Zheng-Shen-Zi No. 1060004806

Approval No. from the Financial Supervisory Commission Jin-Guan-Zheng-Shen-Zi No. 1090347472

March 17, 2022

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KYE Systems Corp. and Subsidiaries Consolidated Balance Sheet December 31, 2021 and 2020

Unit: NTD Thousand

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December 31, 2021 December 31, 2020
Code Asset Amount % Amount %
Current assets
1100 Cash and cash equivalents (Notes 4 and 6) $ 1,072,364 30 $ 1,403,681 38
1110 Financial assets measured at fair value through profit or loss –
current (Notes 4 and 7) 1,511 - 1,713 -
1120 Financial assets measured at fair value through other
comprehensive income – current (Notes 4 and 8) 43,226 1 43,724 1
1170 Notes and accounts receivable (Notes 4, 9 and 22) 112,826 3 126,219 4
1197 Finance lease payments receivable – current (Notes 4 and 10) 7,506 - 8,159 -
1200 Other receivables (Note 4) 1,852 - 4,735 -
1220 Current income tax assets (Notes 4 and 24) 8,647 - - -
130X Inventory (Notes 4 and 11) 339,845 10 264,415 7
1470 Other current assets 112,898 3 94,126 3
11XX Total current assets 1,700,675 47 1,946,772 53
Non-current assets
1517 Financial assets measured at fair value through other
comprehensive income – non-current (Notes 4 and 8) 207,506 6 199,242 6
1550 Investments accounted for using the equity method (Notes 4 and 13) 298,410 8 286,435 8
1600 Property, plant and equipment (Notes 4, 14 and 29) 662,049 18 666,311 18
1755 Right-of-use assets (Notes 4 and 15) 28,477 1 46,541 1
1760 Net investment property (Notes 4, 16 and 29) 562,104 16 337,099 9
1840 Deferred income tax assets (Notes 4 and 24) 94,721 3 118,889 3
194D Finance lease payments receivable – non-current (Notes 4 and 10) 1,099 - 8,783 -
1990 Other non-current assets (Notes 4 and 30) 27,452 1 87,470 2
15XX Total non-current assets 1,881,818 53 1,750,770 47
1XXX Total assets $ 3,582,493 100 $ 3,697,542 100
Code Liabilities and equity
Current liabilities
2170 Notes and accounts payable (Note 18) $ 41,153 1 $ 145,870 4
2200 Other payables (Note 19) 67,149 2 97,499 2
2230 Current income tax liabilities (Notes 4 and 24) 22 - 24,264 1
2280 Lease liabilities – current (Notes 4 and 15) 29,338 1 30,604 1
2320 Long-term loans maturing within 1 year (Notes 17 and 29) 10,000 - 8,095 -
2399 Other current liabilities 95,802 3 64,855 2
21XX Total current liabilities 243,464 7 371,187 10
Non-current liabilities
2540 Long-term loans (Notes 17 and 29) 333,833 9 229,905 6
2570 Deferred income tax liabilities (Notes 4 and 24) 20,693 1 24,554 1
2580 Lease liabilities – non-current (Notes 4 and 15) 8,281 - 34,481 1
2640 Net defined benefit liabilities – non-current (Notes 4 and 20) 27,076 1 31,654 1
2670 Other non-current liabilities – others (Note 4) 2,401 - 3,586 -
25XX Total non-current liabilities 392,284 11 324,180 9
2XXX Total liabilities 635,748 18 695,367 19
Equity attributable to owners of the parent company (Note 21)
Share capital
3110 Common shares 2,215,285 62 2,245,285 61
3200 Capital reserves 309,638 9 382,898 10
Retained earnings
3310 Legal reserves 442,525 12 428,064 11
3320 Special reserves 559,471 16 429,317 12
3350 Undistributed earnings (Notes 4 and 8) 55,066 1 144,615 4
3300 Total retained earnings 1,057,062 29 1,001,996 27
3400 Other equity (Notes 4 and 8) ( 667,200 ) ( 19 ) ( 661,077 ) ( 18 )
31XX Total equity of owners of the parent company 2,914,785 81 2,969,102 80
36XX Non-controlling interests 31,960 1 33,073 1
3XXX Total equity 2,946,745 82 3,002,175 81
Total liabilities and equity $ 3,582,493 100 $ 3,697,542 100
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The notes attached hereto constitute part of this consolidated financial report.

Chairman: Shih-Kun Tso

President: Pai-Hsiang Li

Accounting Manager: An-Min Kao

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KYE Systems Corp. and Subsidiaries Consolidated Statement of Comprehensive Income January 1 to December 31, 2021 and 2020

Unit: NTD Thousand; Earnings per share (EPS): NTD

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2021 2020
Code Amount % Amount %
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Operating revenue (Notes 4 and 22) 4100 Sales revenue 4800 Other operating revenues 4000 Total operating revenue Operating costs 5110 Sales cost (Notes 4, 11, 23 and 28) 5000 Total operating costs 5900 Gross operating profit Operating expense (Notes 9, 20 and 23) 6100 Marketing expense 6200 Management expense 6300 R&D expense 6450 Expected credit Impairment reversal profit ( 6000 Total operating expenses 6900 Net operating profit Non-operating revenues and expenses 7020 Other profits and losses (Notes 23 and 32) 7060 Share of profits/losses of associates accounted for using the equity method (Notes 4 and 13)	$ 1,356,943 8,970 1,365,913 1,023,797 1,023,797 342,116 99,068 196,241 1,091 5,289 ) 291,111 51,005 32,085 1,996	99 1 100 75 75 25 7 14 - - ( 21 4 2 -	$ 1,643,434 9,835 1,653,269 1,137,698 1,137,698 515,571 106,373 253,154 2,131 7,882 ) 353,776 161,795 16,855 1,224	99 1 100 69 69 31 6 15 - - 21 10 1 -

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2021 2020
Code Amount % Amount %
7100 Interest income $ 2,662 - $ 8,954 -
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7510 Interest expense (Note 28) ( 7000 Total other non-operating revenues and expenses 7900 Pre-tax net profit 7950 Income tax expense (Notes 4 and 24) 8200 Net profit in the current year Other comprehensive income (Note 4) Items not reclassified as profit or loss: 8311 Remeasurement of defined benefits plans (Note 20) 8316 Unrealized valuation profit/loss on investments in equity instruments measured at fair value through other comprehensive income 8320 Share of other comprehensive income of associates accounted for using the equity method (Note 13)	5,174 ) 31,569 82,574 31,997 50,577 310 18,812 909	- ( 4,156 ) - 2 22,877 1 6 184,672 11 2 37,767 2 4 146,905 9 - ( 21 ) - 1 ( 183,432 ) ( 11 ) - ( 17,609 ) ( 1 )

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2021 2020
Code Amount % Amount %
8349 Income tax related
to items not
reclassified
(Note 24) $ 230 - ( $ 21,947 ) ( 2 )
8310 20,261 1 ( 223,009 ) ( 14 )
Items likely to be
subsequently
reclassified as profit
or loss:
8361 Exchange
differences on
translation of
financial
statements of
foreign
operations ( 40,568 ) ( 3 ) ( 24,913 ) ( 1 )
8370 Share of other
comprehensive
income of
associates
accounted for
using the equity
method (Note
13) ( 510 ) - 1,654 -
8399 Income tax related
to items likely to
be reclassified
as profit or loss
(Note 24) 7,298 1 4,631 -
8360 ( 33,780 ) ( 2 ) ( 18,628 ) ( 1 )
8300 Net other
comprehensive
income ( $ 13,519 ) ( 1 ) ( $ 241,637 ) ( 15 )
8500 Total comprehensive
income in the current
year $ 37,058 3 ( $ 94,732 ) ( 6 )
Net profit attributable to:
8610 Owners of the parent
company $ 50,512 4 $ 146,236 9
8620 Non-controlling
interests 65 - 669 -
8600 $ 50,577 4 $ 146,905 9
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2021 2020
Code Amount % Amount %
Total comprehensive
income attributable to:
8710 Owners of the parent
company $ 47,842 4 ( $ 95,331 ) ( 6 )
8720 Non-controlling
interests ( 10,784 ) ( 1 ) 599 -
8700 $ 37,058 3 ( $ 94,732 ) ( 6 )
EPS (Note 25)
9710 Basic $ 0.23 $ 0.64
9810 Diluted $ 0.23 $ 0.64
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The notes attached hereto constitute part of this consolidated financial report.

Chairman: Shih-Kun Tso President: Pai-Hsiang Li Accounting Manager: An-Min Kao

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Unit: NTD Thousand

KYE Systems Corp. and Subsidiaries Consolidated Statement of Changes in Equity January 1 to December 31, 2021 and 2020

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Equity attributable to owners of the parent company
Other equity
Unrealized
Retained earnings profit/loss on
Exchange financial assets
differences on measured at fair
translation of value through
Undistributed financial other
earnings (losses statements of comprehensive Non-controlling
Code Share capital Capital reserves Legal reserves Special reserves to be offset) foreign operations income Treasury stocks Total interests Total equity
A1 Balance on January 1, 2020 $ 2,345,385 $ 456,206 $ 452,988 $ 496,095 ( $ 91,702 ) ( $ 24,935 ) ( $ 404,382 ) $ - $ 3,229,655 $ 35,034 $ 3,264,689
Allocation and distribution of earnings in
2019:
B13 Losses offset with legal reserves - - ( 24,924 ) - 24,924 - - - - - -
B17 Reversed as special reserves - - - ( 66,778 ) 66,778 - - - - - -
B5 Cash dividend for common shares - ( 93,815 ) - - - - - - ( 93,815 ) - ( 93,815 )
D1 Net profit in 2020 - - - - 146,236 - - - 146,236 669 146,905
D3 Other comprehensive income in 2020 - - - - ( 17 ) ( 18,974 ) ( 222,576 ) - ( 241,567 ) ( 70 ) ( 241,637 )
D5 Total comprehensive income in 2020 - - - - 146,219 ( 18,974 ) ( 222,576 ) - ( 95,331 ) 599 ( 94,732 )
L1 Purchase of treasury stocks - - - - - - - ( 78,752 ) ( 78,752 ) - ( 78,752 )
L3 Cancellation of treasury stocks ( 100,100 ) 21,348 - - - - - 78,752 - - -
M7 Changes in equity ownership in
subsidiaries - ( 841 ) - - - 8,186 - - 7,345 - 7,345
O1 Non-controlling interests - - - - - - - - - ( 2,560 ) ( 2,560 )
Q1 Disposal of equity instruments measured
at fair value through other
- - - - - - - - -
comprehensive income ( 1,604 ) 1,604
Z1 Balance on December 31, 2020 2,245,285 382,898 428,064 429,317 144,615 ( 35,723 ) ( 625,354 ) - 2,969,102 33,073 3,002,175
Allocation and distribution of earnings in
2020:
B1 Legal reserves set aside - - 14,461 - ( 14,461 ) - - - - - -
B3 Special reserves set aside - - - 130,154 ( 130,154 ) - - - - - -
B5 Cash dividend for common shares - ( 67,359 ) - - - - - - ( 67,359 ) - ( 67,359 )
D1 Net profit in 2021 - - - - 50,512 - - - 50,512 65 50,577
D3 Other comprehensive income in 2021 - - - - 248 ( 31,491 ) 28,573 - ( 2,670 ) ( 10,849 ) ( 13,519 )
D5 Total comprehensive income in 2021 - - - - 50,760 ( 31,491 ) 28,573 - 47,842 ( 10,784 ) 37,058
L1 Repurchase of treasury stocks - - - - - - - ( 35,901 ) ( 35,901 ) - ( 35,901 )
M3 Dissposal of subsidiaries - - - - - 1,101 - - 1,101 - 1,101
L3 Cancellation of treasury stocks ( 30,000 ) ( 5,901 ) - - - - - 35,901 - - -
O1 Non-controlling interests - - - - - - - - - 9,671 9,671
Q1 Disposal of equity instruments measured
at fair value through other
- - - - - - - - -
comprehensive income 4,306 ( 4,306 )
Z1 Balance on December 31, 2021 $ 2,215,285 $ 309,638 $ 442,525 $ 559,471 $ 55,066 ( $ 66,113 ) ( $ 601,087 ) $ - $ 2,914,785 $ 31,960 $ 2,946,745
The notes attached hereto constitute part of this consolidated financial report.
Chairman: Shih-Kun Tso President: Pai-Hsiang Li Accounting Manager: An-Min Kao
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KYE Systems Corp. and Subsidiaries Consolidated Statement of Cash Flows January 1 to December 31, 2021 and 2020

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Unit: NTD Thousand
Code 2021 2020
Cash flow from operating activities
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A00010 Pre-tax net profit in the current year A20010 Profits, expenses and losses: A20100 Depreciation expense A29900 Profit on re-increase in the net realizable value of inventories ( A20200 Amortization expense A20300 Expected credit Impairment reversal profit ( A20900 Interest expense A21200 Interest income ( A23700 Impairment (Profit on reversal) of non-financial assets ( A21300 Dividend revenue ( A24100 Unrealized profit on foreign currency exchange – net ( A22300 Share of profits/losses of associates accounted for using the equity method ( A20400 Profit on valuation of financial assets measured at fair value through profit or loss ( A22500 Net loss on disposal and obsolescence of property, plant and equipment A22700 Loss on disposal of investment property A23100 Profit on disposal of investments – net A30000 Net changes in operating assets and liabilities A31115 Financial assets measured at fair value through profit or loss on a mandatory basis A31150 Notes and accounts receivable A31180 Other receivables A31200 Inventory ( A31240 Other current assets ( A32150 Notes and accounts payable ( A32180 Other payables ( A32230 Other current liabilities A32240 Net defined benefit liabilities ( A33000 Cash generated from operations ( A33100 Interest received A33200 Dividends received A33500 Income tax paid ( AAAA Net cash inflow (outflow) from operating activities ( Cash flow from investing activities B05400 Acquisition of investment property ( (Continued to next page)	$ 82,574 53,673 12,533 ) ( 6,367 5,289 ) ( 5,174 2,662 ) ( 2,635 ) 2,151 ) ( 2,146 ) ( 1,996 ) ( 591 ) ( 44 - - ( 793 17,391 ( 2,626 67,924 ) ( 27,892 ) ( 104,617 ) 30,227 ) ( 31,258 5,443 ) ( 66,206 ) 2,465 2,151 36,236 ) ( 97,826 ) 180,178 ) (	$ 184,672 61,724 48,636 ) 10,086 7,882 ) 4,156 8,954 ) 2,552 4,164 ) 6,990 ) 1,224 ) 1,713 ) 590 9,000 412 ) 412 15,733 ) 4,492 2,902 ) 17,167 ) 4,091 18,699 ) 942 51 ) 148,190 8,993 4,164 2,488 ) 158,859 2,843 )

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Code 2021 2020
B02700 Acquisition of property, plant and
equipment ( $ 26,056 ) ( $ 196,939 )
B00020 Disposal of financial assets measured at
fair value through other
comprehensive income 21,286 13,005
B01800 Acquisition of long-term equity
investments accounted for using the
equity method ( 12,360 ) -
B06100 Decrease in finance lease payments
receivable 8,300 5,519
B06700 Increase in other non-current assets ( 6,850 ) ( 14,383 )
B00010 Acquisition of financial assets measured
at fair value through other
comprehensive income ( 4,821 ) ( 34 )
B03700 Decrease (increase) in deposits paid ( 359 ) 3,938
B02800 Disposal of property, plant and
equipment 993 95
B05500 Disposal of investment property - 26,851
BBBB Net cash outflow from investing
activities ( 200,045 ) ( 164,791 )
Cash flow from financing activities
C01600 Borrowing of long-term loans 110,000 138,000
C04500 Distribution of cash dividends ( 67,359 ) ( 93,815 )
C04900 Cost of repurchase of treasury stocks ( 35,901 ) ( 78,752 )
C04020 Repayment of principal of lease liabilities ( 30,661 ) ( 34,927 )
C05600 Interest paid ( 4,781 ) ( 4,109 )
C01700 Repayment of long-term loans ( 2,262 ) -
C04300 Increase (Decrease) in other liabilities ( 58 ) 3
C03000 Increase in deposits received 48 766
CCCC Net cash outflow from financing
activities ( 30,974 ) ( 72,834 )
DDDD Effect of changes in exchange rate on cash
and cash equivalents ( 2,472 ) ( 2,234 )
EEEE Net decrease in cash and cash equivalents in
the current year ( 331,317 ) ( 81,000 )
E00100 Starting balance of cash and cash
equivalents 1,403,681 1,484,681
E00200 Ending balance of cash and cash equivalents $1,072,364 $1,403,681
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The notes attached hereto constitute part of this consolidated financial report.

Chairman: Shih-Kun Tso

President: Pai-Hsiang Li Accounting Manager: An-Min Kao

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KYE Systems Corp. and Subsidiaries Notes to Consolidated Financial Report January 1 to December 31, 2021 and 2020 (All amounts are in NTD thousand unless otherwise specified)

I. Company history

We were established in November 1983 originally under the name of KYE Systems Ltd., which was changed to KYE Systems Corp. in November 1988. We became a publicly listed company in 1991. On November 3, 1997, our stock was listed for trading on the Taiwan Stock Exchange.

Our business focuses on the manufacturing, processing and sales of computer peripherals including mice, keyboards and card readers; video/image products including web and security cameras; and consumer electronics including headphone speakers and game console peripherals.

This consolidated financial report is presented in NTD, our functional currency.

II. Date and procedures of approval of the financial report

This consolidated financial report was approved by the Board of Directors on March 17, 2022.

III. Application of new and amended standards and interpretations

• (I) The International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), interpretations (of IFRIC) and pronouncements of interpretation (of SIC) (hereinafter “IFRSs”), which have been approved and published by the Financial Supervisory Commission (hereinafter “FSC”), have been applied for the first time.

Application of the amended IFRSs which have been approved and published by the FSC is unlikely to cause any material change to the accounting policies of KYE Systems Corp. (hereinafter “KYE”) and subsidiaries.

• (II) FSC-approved IFRSs applicable in 2022

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New/Amended/Revised standards and Effective date as
interpretations published by the IASB
“Annual Improvements to IFRSs 2018–2020” January 1, 2022 (Note 1)
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FSC-approved IFRSs applicable in 2022 New/Amended/Revised standards and interpretations “Annual Improvements to IFRSs 2018–2020”	Effective date as published by the IASB January 1, 2022 (Note 1)
Amendment to IFRS 3 – “Reference to the	January 1, 2022 (Note 2)
Conceptual Framework”
Amendment to IAS 16 – “Property, Plant and	January 1, 2022 (Note 3)
Equipment: Proceeds before Intended Use”
Amendment to IAS 37 – “Onerous Contracts – Cost	January 1, 2022 (Note 4)
of Fulfilling a Contract”

• Note 1: The amendment to IFRS 9 is applicable to exchanges or modifications of terms of financial liabilities occurring during the annual reporting period beginning from January 1, 2022. The amendment to IAS 41 “Agriculture” is applicable to measurements of fair value during the annual reporting period beginning from January 1, 2022. The amendment to IFRS 1 “First-time Adoption of IFRSs” is applicable retroactively to the annual reporting period beginning from January 1, 2022.

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• Note 2: The amendment is applicable to any business merger with an acquisition date which falls during the annual reporting period beginning from January 1, 2022.

• Note 3:The amendment is applicable to plants, property and equipment that have been brought to the locations and conditions necessary for them to be capable of operating in the manner intended by management on or after January 1, 2021.

• Note 4: The amendment is applicable to contracts for which obligations have not been fully fulfilled as of January 1, 2022.

As of the date of approval and publication of this consolidated financial report, KYE and subsidiaries have assessed that the amendments to the standards and interpretations above are unlikely to have any material effect on the financial condition and performance.

• (III) IFRSs published by the IASB which have not been approved and published by the FSC

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New/Amended/Revised standards and Effective date as published
interpretations by the IASB (Note 1)
Amendments to IFRS 10 and IAS 28 – “Sale or TBD
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the FSC New/Amended/Revised standards and interpretations Amendments to IFRS 10 and IAS 28 – “Sale or	Effective date as published by the IASB (Note 1) TBD
Contribution of Assets between an Investor
and its Associate or Joint Venture”
IFRS 17 “Insurance Contracts”	January 1, 2023
Amendment to IFRS 17	January 1, 2023
Amendment to IFRS 17 – “Initial Application of	January 1, 2023
IFRS 17 and IFRS 9 – Comparative
Information”
Amendment to IAS 1: “Classification of	January 1, 2023
Liabilities as Current or Non-current”
Amendment to IAS 1: “Disclosure of Accounting	January 1, 2023 (Note 2)
Policies”
Amendment to IAS 8: “Definition of Accounting	January 1, 2023 (Note 3)
Estimates”
Amendment to IAS 12 – “Deferred Tax related	January 1, 2023 (Note 4)
to Assets and Liabilities arising from a Single
Transaction”

• Note 1: Unless otherwise specified, each of the new/amended/revised standards or interpretations above shall come into effect during the annual reporting periods beginning from its relevant date.

• Note 2: The amendment is applicable prospectively during the annual reporting period beginning from January 1, 2023.

• Note 3: The amendment is applicable to changes in accounting estimates and policies occurring during the annual reporting period beginning from January 1, 2023.

• Note 4: Except for recognizing deferred tax for temporary differences related to leases and decommissioning obligations on January 1, 2022, the amendment is applicable to transactions occurring on or after January 1, 2022.

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As of the date of approval and publication of this consolidated financial report, KYE and subsidiaries have continued to assess the effect of the amendments to the standards and interpretations above on the financial condition and performance. The relevant effect will be disclosed after completion of the assessment.

IV. Summary of material accounting policies

• (I) Statement of compliance

This consolidated financial report has been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs which have been approved and published by the FSC.

• (II) Basis of preparation

Except for financial instruments measured at fair value, this consolidated financial report has been prepared on the basis of historical cost.

For fair value measurements, the inputs are categorized into Level 1, 2, and 3 based on their observability and priority:

1. Level 1 inputs: Quoted prices in active markets for identical assets or liabilities accessible on the measurement date (unadjusted).

2. Level 2 inputs: Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly (i.e., the price) or indirectly (i.e., deriving from the price).

3. Level 3 inputs: Unobservable inputs for the asset or liability.

4. (III) Criteria for classification of assets and liabilities as current and non-current

   • Current assets include:

5. assets held primarily for the purpose of trading;

6. assets expected to be realized within 12 months after the balance sheet date; and

7. cash and cash equivalents (excluding those restricted to be used for exchange or settlement of liabilities within 12 months after the balance sheet date).

Current liabilities include:

1. liabilities held primarily for the purpose of trading;

2. liabilities due to be settled within 12 months after the balance sheet date (liabilities are current even if an agreement for refinancing or rescheduling of ‑

payments on a long term basis is completed after the balance sheet date and before the date of approval and publication of the financial report); and

1. liabilities whose settlement cannot be unconditionally deferred for at least 12 months after the balance sheet date. Terms of liabilities that could, at the option of the counterparty, result in their settlement by the issuance of equity instruments do not affect their classification.

Assets or liabilities other than those classified above as current are classified as non-current.

• (IV) Basis of consolidation

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This consolidated financial report includes the financial reports of KYE and the entities controlled by KYE (subsidiaries). The consolidated statement of comprehensive income has included the operating profits or losses of subsidiaries acquired or disposed of in the current period from the date of acquisition or until the date of disposal. The financial reports of subsidiaries have been adjusted to ensure their accounting policies are consistent with those of KYE and subsidiaries. All transactions, account balances, profits, expenses and losses between entities have been eliminated during preparation of the consolidated financial report. The total comprehensive income of a subsidiary is attributable to the owners of KYE and non-controlling interests, even when non-controlling interests become a loss balance as a result.

Changes in the ownership equity of KYE and subsidiaries in a subsidiary are treated as equity transactions if such changes have not resulted in a loss of control. The carrying amount of KYE and subsidiaries and non-controlling interests have been adjusted to reflect changes in their relative equity in the subsidiary. The difference between the adjusted amount of non-controlling interests and the fair value of considerations paid or received is directly recognized in equity and attributable to the owners of KYE.

Where KYE and subsidiaries have lost control of a subsidiary, the profit or loss on disposal is the difference between the following: (1) The sum of the fair value of considerations received and the residual investment in the former subsidiary, calculated based on the fair value on date of loss of control, and (2) the sum of the assets (including goodwill) and liabilities of the former subsidiary and non-controlling interests, calculated based on the carrying amount on the date of loss of control. For KYE and subsidiaries, the accounting treatment of all amounts related to the subsidiary recognized in other comprehensive income is on the same basis as that required for direct disposal of the relevant assets or liabilities by KYE and subsidiaries.

The residual investment in the former subsidiary is treated as an initially recognized amount based on the fair value on the date of loss of control.

For the details, shareholdings and scope of business of subsidiaries, see Note 12 “Subsidiaries,” Table 5 “Information of Investee Companies, Their Areas of Establishment...and Other Relevant Information” and Table 6 “Information of Investments in Mainland China.”

(V) Foreign currency

For each entity preparing a financial report, a transaction in a currency other than the functional currency (a foreign currency) of the entity has been recorded by translating that currency into its functional currency at the exchange rate on the date of the transaction.

Foreign currency monetary items are translated at the closing rate on each balance sheet date. Exchange differences arising from the settlement or translation of monetary items are recognized in profit or loss of the period in which they arise.

Foreign currency non-monetary items measured at fair value are translated at the exchange rate on the date when the fair values were determined, with the resulting exchange differences recognized in profit or loss of the period. Exchange differences arising from fair value changes recognized in other

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comprehensive income are recognized in other comprehensive income.

Foreign currency non-monetary items measured at historical cost are translated at the exchange rate on the date of the transaction without being retranslated.

In preparing the consolidated financial report, the assets and liabilities of foreign operations (including subsidiaries and associates whose countries of operation are different from those of KYE or which use currencies different from those used by KYE) are translated into NTD at the exchange rate on each balance sheet date. Profit, expense and loss items are translated at the average exchange rate in the current period, and the resulting exchange differences are recognized in other comprehensive income (and attributable to the owners of KYE and non-controlling interests, respectively).

Where KYE and subsidiaries have disposed of all equity of a foreign operation or have partially disposed of the equity of any subsidiary of a foreign operation but lost control thereof, or where the retained equity after disposal of a foreign operation is a financial asset and treated according to the accounting policy for financial instruments, all accumulated exchange differences which are attributable to the owners of KYE and related to the foreign operation will be reclassified as profit or loss.

If partial disposal of any subsidiary of a foreign operation has not resulted in a loss of control, the accumulated exchange differences are reattributed, in proportion, to the non-controlling interests of the subsidiary and not recognized in profit or loss. For any other partial disposal of a foreign operation, the accumulated exchange differences are reclassified, in proportion to the disposal, as profit or loss.

(VI) Inventory

Inventories include raw materials, finished goods and work in process. Inventories are measured at the lower of cost and net realizable value. Costs and net realizable values are compared on an item by item basis. Net realizable value means the estimated selling price in the ordinary course of business, less the estimated cost required for completion and the estimated cost necessary to complete the sale. The cost of inventories is calculated as the standard cost plus or less the difference allocated. The price of inventories is calculated based on the standard cost in the ordinary course of business and is adjusted on the accounting date to make it approximate to the cost calculated using the weighted average method.

(VII) Investments in associates

An associate means a company other than a subsidiary or joint venture,

over which KYE and subsidiaries have significant influence.

KYE and subsidiaries use the equity method to account for investments in

associates.

Under the equity method, the investment in an associate is initially recognized at cost, and the carrying amount is increased or decreased with the share of KYE and subsidiaries of the profit or loss and other comprehensive income of and the profit distributed from the associate or joint venture after the date of acquisition. Moreover, changes in the share of KYE and subsidiaries of

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the equity of an associate are recognized in proportion to their shareholdings.

If the acquisition cost exceeds the share of KYE and subsidiaries of the net fair value of the identifiable assets and liabilities of an associate on the date of acquisition, such excess is recognized in goodwill, which is included in the carrying amount of the investment and may not be amortized. If the share of KYE and subsidiaries of the net fair value of the identifiable assets and liabilities of an associate on the date of acquisition exceeds the acquisition cost, such excess is recognized in profit of the current period.

If, due to the failure of KYE and subsidiaries to subscribe to new shares issued by an associate in proportion to their shareholdings, changes have occurred their shareholdings and the net equity value of investment has increased or decreased, changes in capital reserves – net equity value of associates and joint ventures recognized using the equity method and investments accounted for using the equity method are adjusted by such increase or decrease. Where our ownership equity in an associate has decreased due to our failure to subscribe to or acquire its shares in proportion to our shareholding, all amounts related to the associate recognized in other comprehensive income are reclassified in proportion to such decrease, and the accounting treatment of such amounts is on the same basis as that required for direct disposal of the relevant assets or liabilities by the associate. If the aforesaid adjustment must be debited to capital reserves and the balance of capital reserves arising from investments accounted for using the equity method is insufficient, the difference is debited to retained earnings.

If the share of KYE and subsidiaries of losses of an associate equals or exceeds their interests in the associate, they will discontinue recognizing further losses. KYE and subsidiaries recognize additional losses and liabilities only to the extent where they have incurred legal or constructive obligations or made payments on behalf of the associate.

In evaluating impairment, KYE and subsidiaries treat the entire carrying amount of investment (including goodwill) as a single asset and compare it with the recoverable and carrying amounts for an impairment test. Any impairment loss recognized is not allocated to any asset constituting part of the carrying amount of investment. Any reversal of impairment loss is recognized to the extent of a subsequent increase in the recoverable amount of the investment.

KYE and subsidiaries discontinue using the equity method from the date when their investment ceases to be an associate, and they measure the retained equity of the former associate at fair value. The difference between the fair value and disposal proceeds and the carrying amount of investment on the date when they discontinue using the equity method is recognized in profit or loss of the current period. Moreover, the accounting treatment of all amounts related to the associate recognized in other comprehensive income is on the same basis as that required for direct disposal of the relevant assets or liabilities by the associate. If an investment in an associate becomes an investment in a joint venture, or an investment in a joint venture becomes an investment in an associate, KYE and subsidiaries continue to use the equity method without any remeasurement of the retained earnings.

Profits or losses arising from upstream, downstream and side-stream transactions between KYE and subsidiaries and an associate are recognized in

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the consolidated financial report only to the extent where such profits or losses do not involve their equity in the associate.

(VIII) Property, plant and equipment

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

Each significant part of property, plant and equipment is separately accounted for in depreciation on a straight line basis over its useful life. If the lease term is shorter than the useful life, such part is accounted for in depreciation over the lease term. KYE and subsidiaries review the estimated useful life, the residual value and the depreciation method at least at the end of each year and prospectively account for the effect of the application of changes in accounting estimates.

For derecognition of property, plant and equipment, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

(IX) Investment property

Investment property means property held for earning rents or capital appreciation or for both purposes.

Investment property is initially measured at cost (including transaction cost) and subsequently subsequently measured at cost less accumulated depreciation and impairment losses. Investment property is accounted for in depreciation on a straight-line basis.

Investment property under construction is recognized at cost less accumulated impairment losses. The cost includes professional service fees and the loan costs eligible for capitalization. Such assets start to be accounted for in depreciation when they are ready for their intended use.

For derecognition of investment property, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

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

KYE and subsidiaries assess whether there is any sign of possible impairment of property, plant and equipment, right-of-use assets, investment property and intangible assets (excluding goodwill) on each balance sheet date. If any such sign of impairment exists, the recoverable amount of the asset is estimated. If the recoverable amount of an asset is not estimable, KYE and subsidiaries estimate the recoverable amount of the cash generating unit of the asset. Common assets are allocated to each cash generating unit or the smallest group of cash generating units on a reasonable and consistent basis.

The recoverable amount is the higher of the fair value less costs of sale and the value in use. If the recoverable amount of an asset or cash generating unit is less than its carrying amount, the carrying amount of the asset or cash generating unit is decreased to its recoverable amount, with impairment losses recognized in profit or loss.

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Where impairment losses are reversed subsequently, the carrying amount of the asset or cash generating unit is increased to the revised recoverable amount, provided that the increased carrying amount does not exceed the carrying amount (less amortization or depreciation) of the asset or cash generating unit determined under the assumption that impairment losses were not recognized in prior years. Reversal of impairment losses is recognized in profit or loss.

(XI) Financial instruments

Financial assets and liabilities are recognized in the consolidated balance sheet when KYE and subsidiaries become a party to the contractual provisions of the instrument.

For initial recognition of financial assets and liabilities, if financial assets or liabilities are not measured at fair value through profit or loss, they are measured at fair value plus transaction costs directly attributable to acquisition or issuance of financial assets or liabilities. Transaction costs directly attributable to acquisition or issuance of financial assets or liabilities measured at fair value through profit or loss are immediately recognized in profit or loss.

1. Financial assets

Regular transactions of financial assets are recognized and derecognized using the transaction date accounting method.

(1) Types of measurement

KYE and subsidiaries hold the following types of financial assets: Financial assets measured at fair value through profit or loss; financial assets measured at amortized cost; and investments in equity instruments measured at fair value through other comprehensive income.

• A. Financial assets measured at fair value through profit or loss

Financial assets measured at fair value through profit or loss include financial assets measured at fair value through profit or loss on a mandatory basis. Financial assets measured at fair value through profit or loss on a mandatory basis include investments in equity instruments not designated to be measured at fair value through other comprehensive income and investments in debt instruments not classified to be measured at amortized cost or measured at fair value through other comprehensive income.

Financial assets measured at fair value through profit or loss are measured at fair value, and their dividends, interest and remeasurement profits or losses are recognized in other profits and losses. For the method used to determine fair value, see Note 27.

• B. Financial assets measured at amortized cost

If the investments of KYE and subsidiaries in financial assets meet the following two criteria, they are classified as financial assets measured at amortized cost:

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• a. Such investments are held under an operating model with the purpose of holding financial assets to receive contractual cash flows; and

• b. the cash flows generated by contractual provisions on specified dates are solely for the purpose of paying principal and interest on outstanding principal.

On initial recognition, financial assets measured at amortized cost (including cash and cash equivalents, accounts receivable measured at amortized cost, other receivables and guarantee deposits paid) are measured at the total carrying amount determined using the effective interest method less the amortized cost of any impairment loss, and any profit or loss on foreign currency exchange is recognized in profit or loss.

Interest income is calculated as the effective interest rate multiplied by the total carrying amount of financial assets, except under the following two circumstances:

• a. For any credit-impaired financial assets purchased or originated, the interest income is calculated as the credit-adjusted effective interest rate multiplied by the amortized cost of the financial assets.

• b. For any financial assets which are not credit-impaired on purchase or origination but subsequently become credit-impaired, the interest income is calculated as the effective interest rate multiplied by the amortized cost of the financial assets in the reporting period after such credit impairment.

A credit-impaired financial asset means that the issuer or debtor has incurred significant financial difficulties or defaulted, that the debtor is likely to file for bankruptcy or other financial reorganization, or that the active market of the financial asset has disappeared due to financial difficulties.

Cash equivalents include highly liquid term deposits that are readily convertible to known amounts of cash with an insignificant risk of changes in value within one year from the date of acquisition and are used to meet short-term cash commitments.

• C. Investments in equity instruments measured at fair value through other comprehensive income

At initial recognition, KYE and subsidiaries may make an irrevocable election to measure, at fair value through other comprehensive income, an investment in equity instruments not held for trading and not recognized by the acquirer in a business combination or with consideration.

An investment in equity instruments measured at fair value through other comprehensive income is measured at fair value. Subsequent changes in fair value are recognized in other comprehensive income and accumulated in other equity. For

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disposal of an investment, the cumulative profit or loss is directly transferred to retained earnings and not reclassified as profit or loss.

After the right of KYE and subsidiaries to receive payment is determined, the dividends of investments in equity instruments measured at fair value through other comprehensive income are recognized in profit or loss, unless such dividends clearly represent a recovery of part of the investment cost.

(2) Impairment of financial assets

KYE and subsidiaries assess the impairment losses on financial assets (including accounts receivable) measured at amortized cost based on expected credit losses on each balance sheet date.

A loss allowance on accounts receivable is recognized at full lifetime expected credit losses. For other financial assets, we first assess whether the credit risk has significantly increased after initial recognition. In the absence of such significant increase, the loss allowance is recognized at the 12-month expected credit losses. Where there is such significant increase, the loss allowance is recognized at full lifetime expected credit losses.

Expected credit losses are weighted average credit losses with the risks of a default occurring as the weightings. The 12-month expected credit losses represent the expected credit losses on a financial instrument resulting from possible default events within 12 months after the reporting date. Full lifetime expected credit losses represent the expected credit losses on a financial instrument from all possible default events over the life of the financial instrument.

For the purpose of internal credit risk management, if KYE and subsidiaries determine that any internal or external information has indicated the debtor is unable to pay off debts without considering the collateral they hold, a default has occurred on financial assets.

Impairment losses on all financial assets are accounted for by decreasing their carrying amounts through allowance accounts.

(3) Derecognition of financial assets

KYE and subsidiaries derecognize a financial asset only when the contractual rights on cash flows from the asset become invalid, or when the asset has been transferred and substantially all of the risks and rewards of ownership of the asset have been transferred to other companies.

For derecognition of a financial asset measured at amortized cost in its entirety, the difference between its carrying amount and the consideration received is recognized in profit or loss. For derecognition of an investment in equity instruments measured at fair value through other comprehensive income in its entirety, the cumulative profit or loss is directly transferred to retained earnings and not reclassified as profit or loss.

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2. Equity instruments

The debt and equity instruments issued by KYE and subsidiaries are classified as financial liabilities or equity according to the substance of the contract and the definitions of financial liabilities and equity instruments.

The equity instruments issued by KYE and subsidiaries are recognized at the proceeds received less the direct cost of issuance.

The reacquisition of our own equity instruments is recognized in and deducted from equity. The purchase, sale, issuance or cancellation of our own equity instruments is not recognized in profit or loss.

1. Financial liabilities

2. (1) Subsequent measurement

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

(2) Derecognition of financial liabilities

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

(XII) Liability provision

An amount recognized as liability provision (including the contractual obligations to maintain or restore infrastructure before it is returned to the grantor, as specified in a service concession arrangement) is an optimal estimate of expenses required for the settlement obligations on the balance sheet date, taking into account the risk and uncertainty of the obligations. A liability provision is measured at the estimated discounted value of cash flows of settlement obligations.

(XIII) Recognition of revenue

Once KYE and subsidiaries have identified the performance obligations in the contract with a customer, they allocate the transaction price to each performance obligation and recognize revenue after satisfying each performance obligation.

1. Revenue from the sale of goods

Revenue from the sale of goods is generated through the sale of computer peripherals. At the time computer peripherals are delivered to the location designated by a customer, the customer already possesses the right to price and use the goods, assumes the primary responsibility to resell them, and bears the risk of the goods being out-of-date. Therefore, we recognize revenue and accounts receivable at that point in time.

In the case of exporting materials for processing, control over the ownership of processed goods is not transferred, and revenue is not recognized at the time of export.

2. Service revenue

Service revenue is income arising from the rendering of services under

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a contract and is recognized based on the degree of completion of the contract.

(XIV) Leases

KYE and subsidiaries assess whether a contract is (or contains) a lease on the date of conclusion of the contract.

1. KYE and subsidiaries are the lessor

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incident to ownership of the asset to the lessee. All other leases are classified as operating leases.

For any sublease of right-of-use assets by KYE and subsidiaries, the classification of the sublease is determined based on right-of-use assets (instead of underlying assets). Where the primary lease is a short-term lease to which KYE and subsidiaries apply the recognition exemption, the sublease is classified as an operating lease.

Under a finance lease, lease payments include fixed payments. The net investment in a lease is measured at the total present value of lease payments receivable and unguaranteed residual values plus the initial direct cost and is presented as finance lease payments receivable. Finance profits are allocated to each accounting period to reflect a constant rate of return receivable on the outstanding net investment of KYE and subsidiaries in the lease in respect of each period.

Under an operating lease, lease payments less the lease incentives are recognized in profit on a straight-line basis over the relevant lease term. Initial direct costs arising from the acquisition of an operating lease plus the carrying amount of underlying assets are recognized in expense on a straight-line basis over the lease term.

2. KYE and subsidiaries are the lessee

Except that the lease payments for leases of low-value underlying assets and short-term leases to which the recognition exemption applies are recognized in expense on a straight-line basis over the lease term, other leases are recognized in right-of-use assets and lease liabilities on the lease commencement date.

Right-of-use assets are initially measured at cost (including the initially measured amount of lease liabilities, lease payments made before the lease commencement date less the lease incentives received, the initial direct cost and the estimated cost of restoring underlying assets) and subsequently measured at cost less accumulated depreciation and impairment losses, with adjusted remeasurement of lease liabilities. Right-of-use assets are separately presented in the consolidated balance sheet.

Right-of-use assets are accounted for in depreciation on a straight-line basis over the period from the lease commencement date to the earlier of the date of expiration of the useful life or the lease term.

Lease liabilities are initially measured at the present value of lease payments (including fixed payments). If the interest rate implicit in a lease can be readily determined, the lease payments are discounted at the interest

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rate. Where such interest rate cannot be readily determined, the lessee’s incremental borrowing rate is used.

Subsequently, lease liabilities are measured at amortized cost using the effective interest method, and interest expenses are amortized over the lease term. In the event of any change in the lease term resulting in changes to future lease payments, KYE and subsidiaries remeasure lease liabilities and adjust right-of-use assets accordingly. If the carrying amount of right-of-use assets is reduced to zero, the remaining remeasured amount is recognized in profit or loss. Lease liabilities are separately presented in the consolidated balance sheet.

(XV) Employee benefits

1. Short-term employee benefits

Liabilities related to short-term employee benefits are measured at the undiscounted amount expected to be paid for services rendered by employees.

2. Post-employment benefits

Under a defined contribution plan, pensions are recognized in expense as the amount of pension contribution payable during the period when services are rendered by employees.

Under a defined benefit plan, defined benefit costs (including servicing costs, net interest and remeasurement) are calculated actuarially using the projected unit credit method. Service costs (including current service cost) and net interest on net defined benefit liabilities (assets) are recognized as employee benefit expenses at the time of their incurrence. Remeasurement (including actuarial profit or loss, changes in the effect of the asset ceiling, and return on plan assets less interest) is recognized as other comprehensive income and in retained earnings at occurrence, and is not subsequently reclassified to profit or loss.

Net defined benefit liabilities are a deficit in the contribution to a defined benefit plan. Net defined benefit assets must not exceed the present value of contributions refunded from the plan or the reducible amount of future contributions.

3. Other long-term employee benefits

The accounting treatment of other long-term employee benefits is the same as that of defined benefit plans, provided that any related remeasurement is recognized in profit or loss.

(XVI) Income tax

Income tax expense is the total of current income tax and deferred income tax.

1. Current income tax

KYE and subsidiaries determine the current income in accordance with the laws enacted by the jurisdiction in which they file their income tax return to calculate the income tax payable.

The additional income tax levied on undistributed earnings calculated in

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accordance with the Income Tax Act of the Republic of China (Taiwan) is recognized in the year when the related resolution is adopted by a shareholders’ meeting.

Adjustments to income taxes payable in prior years are recognized in current income tax.

1. Deferred income tax

Deferred income tax is calculated as the temporary difference between the carrying amounts of assets and liabilities recorded in the account and the tax base for calculation of taxable income. Deferred income tax liabilities are generally recognized in respect of all taxable temporary differences. Deferred income tax assets are recognized when it is probable that taxable income will be available for offsetting deductible temporary differences and losses or offsetting income tax arising from expenses of purchase of machine/equipment, R&D and talent training.

Taxable temporary differences associated with investments in subsidiaries and associates are recognized as deferred income tax liabilities, unless KYE and subsidiaries are able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred income tax assets for deductible temporary differences associated with such investments and equity are recognized only to the extent where it is probable that sufficient taxable income will be available to realize the temporary differences and that they are expected to reverse in the foreseeable future.

The carrying amount of deferred income tax assets is reviewed on each balance sheet date and reduced to the extent where it is no longer probable that sufficient taxable income will be available to allow the recovery all or part of the assets. Those that are not initially recognized as deferred income tax assets are also reviewed on each balance sheet date and increased to the extent where it is probable that sufficient taxable income will be available in the future to allow the recovery all or part of the assets.

Deferred income tax assets and liabilities are measured at the tax rate of the period when the liabilities or assets are expected to be settled or realized. The tax rate is based on the tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred income tax liabilities and assets are measured to reflect the tax consequences of KYE and subsidiaries on the balance sheet date arising from the methods that are expected to be used to recover or settle the carrying amount of the assets and liabilities.

3. Current and deferred income taxes

Current and deferred income taxes are recognized in profit or loss, except for those related to items recognized in other comprehensive income or directly in equity, which are recognized separately in other comprehensive income separately or directly in equity.

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V. Main sources of uncertainty of material accounting judgments, estimates and assumptions

In adopting accounting policies, the management of KYE and subsidiaries must make judgments, estimates and assumptions in respect of information that is not readily available from other sources based on historical experience and other relevant factors. The actual results could differ from the estimates.

KYE and subsidiaries have taken the possible effect of COVID-19 into the consideration of material accounting estimates including cash flow estimation, growth rate, discount rate and profitability. Their management will continue to review the estimates and basic assumptions. If a correction of the estimates affects only the current period, it is recognized in the period when it is made. If a correction of the estimates affects both the current and future periods, it is recognized in the period when it is made and in the future period.

VI. Cash and cash equivalents

Cash and cash equivalents
Cash on hand and petty cash Bank checks and demand deposits Cash equivalents Time deposits Repurchase of commercial papers	December 31, 2021 $ 2,695 982,548 87,121 - $1,072,364	December 31, 2020
			$ 2,733 900,312 450,210 50,426 $1,403,681	$ 2,733 900,312 450,210 50,426

VII. Financial assets measured at fair value through profit or loss – current

Financial assets–current Non-derivative financial assets measured at fair value through profit or loss on a mandatory basis Domestic listed (OTC) common stocks Domestic non-listed (non-OTC) common stocks Total	December 31, 2021 $ 1,511 - $ 1,511	December 31, 2020	December 31, 2020
			$ - 1,713 $ 1,713

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VIII. Financial assets measured at fair value through other comprehensive income

Current Investments in equity instruments measured at fair value through other comprehensive income Domestic listed (OTC) common stocks Non-current Investments in equity instruments measured at fair value through other comprehensive income Foreign non-listed (non-OTC) common stocks Domestic non-listed (non-OTC) common stocks Domestic listed (OTC) common stocks Domestic non-listed (non-OTC) preferred stocks Total	December 31, 2021 $ 43,226 $ 112,898 87,260 7,318 30 $207,506	December 31, 2020	December 31, 2020
		$ 43,724 $ 115,501 72,761 10,950 30 $199,242
			$199,242

KYE and subsidiaries make investments in equity instruments according to their medium- to long-term strategies, and they expect profits through long-term investments. The management of KYE and subsidiaries has considered that the recognition of short-term fluctuations in the fair value of such investments in profit or loss is inconsistent with the aforesaid long-term investment plan, so they opt to have such investments measured at fair value through other comprehensive income.

In 2021, KYE and subsidiaries adjusted their investment positions and disposed of the shares of Solteam Incorporation, Cheng-Shih International Co., Ltd. and AlgolTek Inc. at a fair value of NTD21,286,000. Other related equity – unrealized valuation gains on financial assets measured at fair value through other comprehensive income, amounting to NTD4,306,000, was transferred to retained earnings.

In 2020, KYE and subsidiaries adjusted their investment positions and disposed of the shares of Solteam Incorporation and part of those of Coretek Opto Corporation and Link Legend Co., Ltd. at a fair value of NTD13,005,000. Other related equity – unrealized valuation gains on financial assets measured at fair value through other comprehensive income, amounting to NTD1,604,000, was transferred to retained earnings.

• 31 -

IX. Notes and accounts receivable

Notes and accounts receivable
Notes and accounts receivable Measured at amortized cost Total carrying amount –: Loss allowance	December 31, 2021 $ 115,854 ( 3,028 ) $ 112,826	December 31, 2020
			$ 134,613 ( 8,394 ) $ 126,219

The average loan period of KYE and subsidiaries for the sale of goods is 60 days, and no interest is accrued on unpaid accounts receivable.

In order to mitigate credit risk, the management of KYE and subsidiaries has designated special teams for determination of credit lines, approval of loans and other monitoring procedures to ensure that appropriate actions are taken to recover overdue accounts receivable. Furthermore, KYE and subsidiaries review the recoverable amounts of payments receivable separately on the balance sheet date to ensure that irrecoverable payments receivable have been accounted for in appropriate impairment losses. Therefore, the management of KYE considers that the credit risk of KYE and subsidiaries has reduced significantly.

KYE and subsidiaries recognize the loss allowance for accounts receivable based on the full lifetime expected credit losses. The full lifetime expected credit losses are calculated using a provision matrix with consideration of the default history and current financial condition of a customer, the economic situation of the industry, GDP forecasts and industrial prospects. Since the historical experience of KYE and subsidiaries in credit losses has shown no significant difference in the types of loss between distinct customer bases, the provision matrix has made no further distinction between the customer bases and has only set the expected credit loss rate based on the number of days of the age of accounts receivable.

If there is any evidence indicating that the counterparty is faced with severe financial difficulties and that KYE and subsidiaries are not able to reasonably expect any recoverable amount, KYE and subsidiaries directly write off the relevant accounts receivable, and they will continue to pursue recourse actions. All amounts recovered through recourse are recognized in profit or loss.

The loss allowances of KYE and subsidiaries for notes and accounts receivable measured using a provision matrix are as follows:

December 31, 2021

December 31, 2021
Expected credit loss rate Total carrying amount Loss allowance (full lifetime expected credit losses) Amortized cost	Account age of no more than 60 days		Account age of 61–90 days		Account age of 91–120 days	Account age of more than 120 days			Total
		0%～1% $ 90,797 (330 ) $ 90,467		1%～5% $ 22,248 (487 ) $ 21,761	5%～10% $ 630 (32 ) $ 598		100% $ 2,179 (2,179 ) $ -		- $ 115,854 (3,028 ) $ 112,826

• 32 -

December 31, 2020

December 31, 2020
Expected credit loss rate Total carrying amount Loss allowance (full lifetime expected credit losses) Amortized cost	Account age of no more than 60 days		Account age of 61–90 days		Account age of 91–120 days 5%～10% $ - - $ -	Account age of more than 120 days 100% $ 7,801 (7,801 ) $ -		Total
		0%～1% $ 105,704 (288 ) $ 105,416		1%～5% $ 21,108 (305 ) $ 20,803			$ $	- $ 134,613 (8,394 ) $ 126,219

Information regarding changes in loss allowances for notes and accounts receivable is as follows:

receivable is as follows:
Balance – beginning of the year –: Impairment losses reversed in the current year Differences on foreign currency translation Balance – ending of the year Finance lease payments receivable Undiscounted lease payments 1st year 2nd year 3rd year Lease payments receivable –: Unearned finance income Net investments in leases (presented as finance lease payments receivable) Carrying amount of finance lease payments receivable Current Non-current	2021 $ 8,394 ( 5,289) ( 77 ) $ 3,028 December 31, 2021 $ 7,579 1,102 - 8,681 ( 76 ) $ 8,605 $ 7,506 1,099 $ 8,605		2020
			$ 16,374 (7,882) ( 98 ) $ 8,394 December 31, 2020
		$ $		$ 8,374 7,740 1,142 17,256 ( 314 ) $ 16,942
					17,256 314 ) 16,942
		$ $		$ 8,159 8,783 $ 16,942
					16,942

X. Finance lease payments receivable

KYE and subsidiaries have subleased the premises and buildings rented by them in Neihu District and their plant in Dongguan to other companies, receiving a fixed payment of NTD3,807,000 and NTD4,407,000 respectively on an annual basis. Since the remaining lease term of the master lease agreement has been fully subleased, it is classified as a finance lease.

• 33 -

The interest rate implicit in the lease over the lease term has not changed after it was determined on the date of agreement. As of December 31, 2021, the interest rate implicit in the finance lease was an annual interest rate of 1.50%.

KYE and subsidiaries measure the loss allowance for finance lease payments receivable based on the full lifetime expected credit losses. Since there have been no overdue or unrecovered finance lease payments receivable as of the balance sheet date, and taking into account the default history of the counterparty and the collateral value, KYE and subsidiaries consider that the above-mentioned finance lease payments receivable are not impaired.

XI. Inventory

Inventory
Finished goods Work in process Raw materials The nature of cost of sales is as Cost of inventories sold Profit on re-increase in the net realizable value of inventories	December 31, 2021 $ 161,160 87,096 91,589 $ 339,845 follows: 2021 $ 1,036,330 ( 12,533 ) $ 1,023,797	December 31, 2020
			$ 130,290 80,419 53,706 $ 264,415 2020	$ 130,290 80,419 53,706
				$ 264,415
	(	(	$ 1,186,334 48,636 ) $ 1,137,698

XII. Subsidiary

(I) Subsidiaries included in the consolidated financial report

Entities in the consolidated financial report prepared are as follows:

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Shareholding (%)
2021 2020
Name of investor December December
company Name of subsidiary Nature of business 31 31 Description
KYE Genius Holding Co., Investment holdings 100.00% 100.00% -
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KYE Genius Holding Co.,	Investment holdings	100.00%	100.00%	-
Ltd.
Chung-Chiang	Investment business	100.00%	100.00%	-
Investment Co., Ltd.
Hung-Cheng	Investment business	100.00%	100.00%	-
Investment Co., Ltd.
KYE Systems Europe	Sales of computer	-	100.00%	Note 1
GmbH	peripherals and
	consumer
	electronics
KYE International	Sales of computer	100.00%	100.00%	-
Corporation	peripherals and
	consumer
	electronics
KYE Systems (Hong	Sales of computer	100.00%	100.00%	-
Kong) Corp.	peripherals and
	consumer
	electronics
Digilife Technologies	Digital video/audio	94.61%	94.61%	Note 2
Co., Ltd.	products
DIGILIFE PTY LTD	Tourism and real	-	-	Note 3
	estate development

• 34 -

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

Shareholding (%)
2021 2020
Name of investor December December
company Name of subsidiary Nature of business 31 31 Description
KYE Systems (Hong Genius Labuan Inc. Sales of computer 100.00% 100.00% -
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KYE Systems (Hong	Genius Labuan Inc.	Sales of computer	100.00%	100.00%	-
Kong) Corp.		peripherals and
		consumer
		electronics
Genius Holding Co., Ltd.	Globalink Holding Co.,	Investment holdings	100.00%	100.00%	-
	Ltd.
	KYE Systems America	Sales of computer	-	-	Note 4
	Corporation	peripherals and
		consumer
		electronics
	Moustek Investment	Investment holdings	100.00%	100.00%	-
	Co., Ltd.
	KYE Trade (HK) Co.,	Sales of computer	100.00%	100.00%	-
	Ltd.	peripherals and
		consumer
		electronics
	KYE Inc.	Investment holdings	100.00%	100.00%	-
Digilife Technologies Co.,	Life Technologies Co.,	Investment holdings	100.00%	100.00%	-
Ltd.	Ltd.
	Digilife Pty Ltd.	Tourism and real	100.00%	100.00%	Note 3
		estate development
Life Technologies Co.,	Life Technologies	Indirect investments	100.00%	100.00%	-
Ltd.	(Hong Kong) Co.,	and processing
	Limited	business in third
		areas and Mainland
		China
Life Technologies (Hong	Ziser Technologies	Sales of digital	100.00%	100.00%	-
Kong) Co., Limited	(Shenzhen) Co., Ltd.	video/audio products
KYE Inc.	Dongguan Kunying	Manufacturing and	100.00%	100.00%	-
	Computer Products	sales of computer
	Co., Ltd.	mice and computer
		game consoles
Dongguan Kunying	Suo-Yi Technology	－	-	-	Note 5
Computer Products	(Shanghai) Ltd.
Co., Ltd.
	You-Xiang Technology	－	-	-	Note 5
	(Shanghai) Ltd.
Moustek Investment Co.,	Dongguan Gaoying	Sales of computer	100.00%	100.00%	-
Ltd.	Electronic	peripherals and
	Technology Co., Ltd.	consumer
		electronics

• Note 1:KYE Systems Europe GmbH ceased operations in December 2017 and completed its liquidation in December 2021.

• Note 2:Digilife Technologies Co., Ltd. carried out a cash capital increase in August 2020. KYE purchased 20,560,000 shares, and its shareholding has increased from 91.37% to 94.61%.

• Note 3: In November 2020, KYE sold all the shares of Digilife Pty Ltd. it held to Digilife Technologies Co., Ltd. KYE has treated the transaction as an equity transaction since it has not changed KYE’s control of Digilife Pty Ltd.

• Note 4:KYE Systems America Corporation completed its liquidation in February 2020.

• Note 5:So-Yi Technology (Shanghai) Ltd. and You-Xiang Technology (Shanghai) Ltd. applied for incorporation in January 2015. However, as of December 31, 2021, both companies had invested no capital and had yet to start operation.

• 35 -

• (II) Subsidiaries not included in the consolidated financial report: None.

• (III) Information of subsidiaries with material non-controlling interests: None.

XIII. Investments accounted for using the equity method Investments in associates

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December 31, December 31,
2021 2020
Associates with materiality
Timing Pharmaceutical Co., Ltd.
(Timing Pharmaceutical Company) $ 210,561 $ 211,917
Individual immaterial associates 87,849 74,518
$ 298,410 $ 286,435
(I) Associates with materiality
Shareholding and voting rights (%)
December 31, December 31,
Company name 2021 2020
Timing Pharmaceutical Company 22.64% 22.64%
----- End of picture text -----

For information regarding the nature of business, the principal place of business and the country of registration of the above-mentioned associates, see Table 5 “Information of Investee Companies, Their Areas of Establishment...and Other Relevant Information.”

The following summary of financial information has been prepared based on the IFRSs consolidated financial reports of associates and has reflected the adjustments made when using the equity method.

Current assets Non-current assets Current liabilities Non-current liabilities Equity Non-controlling interests Shareholding of KYE and subsidiaries (%) Equity of KYE and subsidiaries Carrying amount of investments Operating income Net profit (loss) in the current year Other comprehensive income Total comprehensive income Dividends received from Timing Pharmaceutical Company		2021 $ 818,830 1,644,573 ( 732,647) ( 450,391 ) 1,280,365 ( 347,401 ) $ 932,964 22.64% $ 210,561 $ 210,561 $ 799,843 $ 4,853 ( 2,254 ) $ 2,599 $ 1,945			2020
					$ 841,264 1,716,927 ( 968,981) ( 326,989 ) 1,262,221 ( 326,274 ) $ 935,947
					22.64% $ 211,917
					$ 211,917
					$ 798,199
					($ 30,726) 7,243
					($ 23,483 ) $ -

• 36 -

(II) Summary of individual immaterial associates

Share of KYE and subsidiaries Net profit in the current year Other comprehensive income Total comprehensive income	2021 $ 897 909 $ 1,806	2020
		$ 7,799 ( 17,596 ) ($ 9,797 )

The share of KYE and subsidiaries of profits or losses and other comprehensive income on investments accounted for using the equity method is recognized based on the CPA-audited financial report of each associate for the same period, except in the cases of DigiLife (Thailand) Co., Ltd. and Timing Pharmaceutical Company, where calculation is based on the financial report not audited by a CPA. Nonetheless, the management of KYE and subsidiaries considers that even though the financial reports of the above-mentioned investee companies are not CPA-audited, they are unlikely to result in any material effect.

XIV. Property, plant and equipment

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Premises and Machine/Equip Leasehold Miscellaneous
Land buildings ment improvement equipment Total
Cost
Balance on January 1,
2021 $ 469,631 $ 221,316 $ 203,089 $ 81,695 $ 213,916 $ 1,189,647
Addition 1,208 426 353 4,057 20,012 26,056
Disposal - (2,762) (24,234) (36,653) (17,057) (80,706)
Net exchange
differences - (155) (2,989) - (257) (3,401)
Transfer between
account titles - - 341 2,236 229 2,806
Balance on December
31, 2021 $ 470,839 $ 218,825 $ 176,560 $ 51,335 $ 216,843 $ 1,134,402
Accumulated
depreciation and
impairment
Balance on January 1,
2021 $ 11,046 $ 87,483 $ 169,752 $ 56,264 $ 198,791 $ 523,336
Disposal - (2,729) (24,226) (36,653) (16,061) (79,669)
Depreciation expense - 4,165 6,930 13,280 5,595 29,970
Net exchange
differences - ( 153) ( 875) - ( 256) ( 1,284)
Balance on December
31, 2021 $ 11,046 $ 88,766 $ 151,581 $ 32,891 $ 188,069 $ 472,353
Net amount on
December 31, 2021 $ 459,793 $ 130,059 $ 24,979 $ 18,444 $ 28,774 $ 662,049
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Premises and Machine/Equip Leasehold Miscellaneous
Land buildings ment improvement equipment Total
Cost
Balance on January 1,
2020 $ 339,557 $ 174,704 $ 258,471 $ 68,589 $ 217,460 $ 1,058,781
Addition 130,074 46,493 3,832 10,086 6,454 196,939
Disposal - - (59,742) (163) (9,241) (69,146)
Net exchange
differences - 119 528 (2) (757) (112)
Transfer between
account titles - - - 3,185 - 3,185
Balance on December
31, 2020 $ 469,631 $ 221,316 $ 203,089 $ 81,695 $ 213,916 $ 1,189,647
Accumulated
depreciation and
impairment
Balance on January 1,
2020 $ 11,046 $ 83,367 $ 220,999 $ 42,184 $ 206,594 $ 564,190
Disposal - - (59,062) (163) (9,236) (68,461)
Depreciation expense - 3,998 8,259 14,245 2,170 28,672
Net exchange
differences - 118 ( 444) ( 2) ( 737) ( 1,065)
Balance on December
31, 2020 $ 11,046 $ 87,483 $ 169,752 $ 56,264 $ 198,791 $ 523,336
Net amount on
December 31, 2020 $ 458,585 $ 133,833 $ 33,337 $ 25,431 $ 15,125 $ 666,311
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The property, plant and equipment of KYE and subsidiaries are accounted for in depreciation on a straight-line basis over the following useful lives:

Premises and buildings	10 to 55 years
Machine/Equipment	2 to 12 years
Leasehold improvement	4 to 15 years
Miscellaneous equipment
Transport equipment	2 to 10 years
Office equipment	1 to 13 years
Passenger and freight elevators	15 years
Others	2 to 10 years

For the amount of the property, plant and equipment of KYE and subsidiaries pledged as collateral for loans, see Note 29.

XV. Lease agreement

(I) Right-of-use assets

subsidiaries pledged as collateral for Lease agreement Right-of-use assets	loans, see Note 29.
Carrying amount of right-of-use assets Buildings Office equipment Transport equipment	December 31, 2021 $ 23,088 513 4,876 $ 28,477	December 31, 2020
			$ 41,228 412 4,901
			$ 46,541

• 38 -

(II)

Addition of right-of-use assets Depreciation expense of right-of-use assets Buildings Office equipment Transport equipment Lease liabilities Carrying amount of lease liabilities Current Non-current		2021 $ 3,537 $ 18,396 118 3,011 $ 21,525 December 31, 2021 $ 29,338 $ 8,281	2020	2020
			$ 2,095 $ 25,835 138 4,843 $ 30,816 December 31, 2020	$ 2,095
				$ 25,835 138 4,843
				$ 30,816
				$ 30,604
				$ 34,481

The discount rate ranges for lease liabilities are as follows:

Buildings Office equipment Transport equipment	December 31, 2021 1.50%~1.69% 1.50% 1.25%~1.69%	December 31, 2020
		1.50%~1.69% 1.50% 1.25%~1.69%

(III) Material lease activities and terms

KYE and subsidiaries have rented buildings, office equipment and transport equipment with a lease term from 2019 to 2027 for office and business purposes. When the lease term expires, KYE and subsidiaries will not be entitled to any renewal of the lease or any bargain purchase of the rented assets.

(IV) Other lease information

Other lease information
Short-term lease expense Expense on lease of low-value assets Total cash outflow from lease	2021 $ 4,216 $ 44 $ 35,688	2020
			$ 1,970
			$ 30
			$ 10,328

KYE and subsidiaries opt to apply the recognition exemption to leases of office equipment constituting short-term leases and leases of low-value assets and do not recognize right-of-use assets and lease liabilities relevant to such leases.

Lease commitments beginning after the balance sheet date during the lease term are as follows:

term are as follows:
Lease commitments	December 31, 2021 $ 1,519	December 31, 2020
			$ 147

• 39 -

XVI. Investment property

Investment property
Cost Balance on January 1, 2021 Addition Transferred prepayments for equipment Net exchange differences Balance on December 31, 2021 Accumulated depreciation and impairment Balance on January 1, 2021 Depreciation expense Impairment losses reversed Net exchange differences Balance on December 31, 2021 Balance on December 31, 2021 Cost Balance on January 1, 2020 Addition Disposal Net exchange differences Balance on December 31, 2020 Accumulated depreciation and impairment Balance on January 1, 2020 Depreciation expense Disposal Impairment losses recognized Net exchange differences Balance on December 31, 2020 Balance on December 31, 2020	Investment property
	(	$ 371,271 180,178 58,000 ( 13,928 ) $ 595,521
		($ 34,172) (2,178) 2,635 298
		($ 33,417 ) $ 562,104
		$ 398,597 2,843 (36,208) 6,039
		$ 371,271
		($ 29,454) (2,236) 357 (2,552) 287 ) ($ 34,172 ) $ 337,099

The fair value of the investment property of KYE and subsidiaries on December 31, 2021 and 2020 was assessed by an independent valuation firm

• 40 -

using the comparative method and profit method, except for a part of such property, which was not valuated by an independent valuator but by the management of KYE and subsidiaries applying the valuation model commonly used among market participants. The comparative method calculates a valuation based on the final price and proposed price of comparable property. The profit method calculates a valuation based on the estimated net profit and the rate of profit capitalization. The fair value of the investment property on December 31, 2021 and 2020 was NTD593,716,000 and NTD178,899,000, respectively. The fair value of the investment property valuated by KYE and subsidiaries on December 31, 2020 was NTD159,092,000. The valuation was based on market evidence relevant to the transaction price of similar property.

Since the fair value of part of the investment property on December 31, 2020 was lower than the carrying value, KYE and subsidiaries recognized an impairment loss of NTD2,552,000 in 2020.

Since the recoverable amount of part of the investment property on December 31, 2021 increased due to change in the estimate of such amount, KYE and subsidiaries reversed an impairment loss of NTD2,635,000.

The investment property is accounted for in depreciation on a straight-line

basis over a 50-year useful life.

For the amount of the investment property of KYE and subsidiaries pledged as collateral for loans, see Note 29.

XVII. Loans

Long-term loans

as collateral for loans, see Note 29. Loans Long-term loans
Loans with a floating interest rate: ChinaTrust Commercial Bank Mortgage loan, maturing in February 2044 (Note 1) Mortgage loan, maturing in August 2026 (Note 2) Chang Hwa Bank Mortgage loan, maturing in January 2041 (Note 3) Total –: Long-term loans maturing within 1 year	December 31, 2021 $ 138,000 95,833 110,000 343,833 10,000 $ 333,833	December 31, 2020
			$ 138,000 100,000 - 238,000 8,095
			$ 229,905

• Note 1: The interest rate on both December 31, 2021 and 2020 was 1.2%. The principal and interest will be amortized on a monthly basis from March 2023.

• Note 2: The interest rate on both December 31, 2021 and 2020 was 1.2%. The principal and interest will be amortized on a monthly basis from August 2021.

• 41 -

Note 3: The interest rate on December 31, 2021 was 1.4%. The principal and interest will be amortized on a monthly basis from February 2023.

For the amount of the property and investment property of KYE and subsidiaries pledged as collateral for loans, see Note 29.

XVIII. Notes and accounts payable

No interest is accrued on an account payable. KYE and subsidiaries have established financial risk management policies to ensure that all accounts payable are paid off within the pre-agreed credit period.

XIX. Other payables

Other payables
Salaries and bonuses payable Service fees payable Market promotion fees payable Others	December 31, 2021 $ 32,110 3,862 4,475 26,702 $ 67,149	December 31, 2020
			$ 37,326 10,324 6,967 42,882
			$ 97,499

XX. Post-employment benefit plans (I) Defined contribution plan

The pension system under the “Labor Pension Act,” as applied by KYE and domestic subsidiaries, is a defined contribution plan managed by the government. A pension equal to 6% of an employee’s monthly salary is appropriated and deposited into a special personal account at the Bureau of Labor Insurance. The subsidiaries in Mainland China are subject to the relevant local pension insurance system, where a certain percentage of salary is appropriated as a pension contribution and deposited to the designated agency.

(II) Defined benefit plan

The pension system we have adopted in accordance with the “Labor Pension Act” is a defined benefit plan managed by the government. Any employee whose length of service is no more than 15 years will receive two base points for each year of service, and any employee whose length of service is more than 15 years will receive one base point for each additional year of service. The maximum number of base points is 45. The pension paid to an employee is calculated based on the length of his/her service and the average salary (base point) over the 6 months prior to the approved date of his/her retirement. KYE appropriates 2% of the total monthly salary of an employee as a pension and deposit it into a special account at the Bank of Taiwan in the name of the Labor Pension Fund Supervisory Committee. If, by the end of each year, the estimated balance in the special account is insufficient for payments to employees who are expected to meet the criteria for retirement in the next year, KYE will appropriate the difference in a lump sum by the end of March next year. The special account is managed by the Bureau of Labor Funds, Ministry of Labor, and we do not have any right to influence the investment management strategies.

The amounts of defined benefit plan included in the consolidated balance

• 42 -

sheet are as follows:

sheet are as follows:
Present value of defined benefit obligations Fair value of plan assets Deficit in contributions Net defined benefit liabilities	December 31, 2021 $ 50,065 (22,989 ) 27,076 $ 27,076	December 31, 2020
			$ 49,794 (18,140 ) 31,654 $ 31,654
				31,654

The changes in net defined benefit liabilities (assets) are as follows:

Balance on January 1, 2020 Current service cost Interest expense (income) Recognized in profit or loss Remeasurement Return on plan assets (excluding any amount included in net interest) Actuarial loss – changes in financial assumptions Actuarial profit – experience adjustments Recognized in other comprehensive income Employer contribution Balance on December 31, 2020 Current service cost Interest expense (income) Recognized in profit or loss Remeasurement Return on plan assets (excluding any amount included in net interest) Actuarial loss – changes in financial assumptions Actuarial profit – experience adjustments Recognized in other comprehensive income Employer contribution Balance on December 31, 2021	Present value of defined benefit obligations $ 48,629 208 365 573 - 1,255 (663) 592 - 49,794 103 249 352	Fair value of plan assets ($ 16,906) - (129) (129) (571) - - (571) (534) (18,140) - (92) (92)	Net defined benefit liabilities (assets)
			$ 31,723
			208 236
			444
			(571) 1,255 (663)
			21
			(534)
			31,654
			103 157
			260
	- 812 (893) (81) - $ 50,065	(229) - - (229) (4,528) ($ 22,989)	(229) 812 (893)
			(310)
			(4,528) $ 27,076

• 43 -

The amounts of defined benefit plan recognized in profit or loss are summarized, by purpose, as follows:

summarized, by purpose, as follows:
Marketing expense Management expense R&D expense	2021 $ 62 193 5 $ 260	2020
		$ 118 311 15 $ 444

Due to the pension system under the “Labor Standards Act,” we are exposed to the following risks:

1. Investment risk: The Bureau of Labor Funds, Ministry of Labor has, for own discretionary use or through contracted management, invested the labor pension funds into domestic (foreign) equity and debt securities and bank deposits, even though the distributable amount of KYE’s plan assets is a profit calculated at an interest rate no less than that for a 2-year time deposit with a local bank.

2. Interest rate risk: A decrease in the interest rates of government and corporate bonds will increase the present value of defined benefit obligations, but will also increase the return on debt investments in plan assets. Both increases have a partial offsetting effect against the impact of net defined benefit liabilities.

3. Salary risk: The present value of defined benefit obligations is calculated based on the the future salary of the plan participants. As a result, an increase in the salary of the plan participants will raise the present value of defined benefit obligations.

The present value of KYE’s defined benefit obligations is calculated actuarially by a qualified actuary. The material assumptions on the date of measurement are as follows:

measurement are as follows:
Discount rate Expected salary increase rate	December 31, 2021 0.500% 2.250%	December 31, 2020
		0.500% 2.250%

In the event of reasonably possible changes in the material actuarial assumptions, the resulting increase (decrease) in the present value of defined benefit obligations where all other assumptions remain the same is as follows:

Discount rate Increase by 0.25% Decrease by 0.25% Expected salary increase rate Increase by 0.25% Decrease by 0.25%	December 31, 2021 ($ 993) $ 1,032 $ 995 ($ 964)	December 31, 2020
		($ 1,255)
		$ 1,303
		$ 1,258 ($ 1,218)

• 44 -

Since the actuarial assumptions may be correlated and changes in only a single assumption are unlikely, the sensitivity analysis above may not reflect actual changes in the present value of defined benefit obligations.

XXI. (I)	Expected contribution within 1 year Average maturity period of defined benefit obligations Equity Share capital Number of authorized shares (thousand shares) Authorized share capital Number of issued shares with full payment received (thousand shares) Issued share capital	December 31, 2021 $ 545 11.0 years December 31, 2021 390,000 $ 3,900,000 221,528 $ 2,215,285	December 31, 2020	December 31, 2020	December 31, 2020
			$ 539 10.2 years December 31, 2020		$ 539
				390,000
				$ 3,900,000
				224,528
				$ 2,245,285

Common shares are issued at a par value of NTD10, with each share entitled to one voting right and the right to receive dividends.

The share capital retained from the authorized share capital for the issuance of employees’ stock warrants is 25,000,000 shares.

(II) Capital reserves

Capital reserves
Shares issued in excess of par value Trading of treasury stocks Long-term investments	December 31, 2021 $ 129,833 156,114 23,691 $ 309,638	December 31, 2020
			$ 198,950 160,257 23,691
			$ 382,898

In capital reserves, the amount of shares issued in excess of par value (including common shares issued in excess of par value, share capital in excess of par from share issued due to mergers, and trading of treasury stocks) and the donations received may be used to offset losses, or to distribute cash dividends or be contributed to the share capital if we have no losses, provided that such contribution to the share capital does not exceed a certain percentage of the share capital each year.

Capital reserves generated from investments accounted for using the equity method, employees’ stock options and other stock options may not be used for

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any purpose.

(III) Retained earnings and dividend policy

According to KYE’s earning distribution policy in the Articles of Incorporation, if KYE has earnings in the final accounts of a fiscal year, it shall set aside 10% of the earnings as legal reserves after paying taxes and offsetting accumulated losses as legally required, with the remaining amount of the earnings set aside or reversed as special reserves in accordance with the law. If there is still any balance, it shall be distributed together with the accumulated undistributed earnings as dividends and bonuses to shareholders. Bonuses to shareholders shall be distributed in stock or cash dividends. Cash dividends shall be no less than 10% of the total bonuses to shareholders, with the remaining distributed in stock dividends. No distribution of cash dividends is required if their amount per share is less than NTD0.1, and all of the bonuses shall be distributed in stock dividends.

For the policy of distribution of the remuneration for employees, directors and supervisors in the Articles of Incorporation, see “(4) Remuneration for employees, directors and supervisors” in Note 23.

The shareholders’ meeting on June 21, 2019 adopted a resolution to approve amendment to the Articles of Incorporation. Distribution of our earnings and offsetting of our losses shall be made after the end of each quarter.

Legal reserves must be allocated until their balance reaches KYE’s total paid-in capital. Legal reserves may be used to offset losses. Where we have no losses, if legal reserves exceed the total paid-in capital by 25%, the excess amount may be contributed to the share capital or distributed in cash.

At the annual shareholders’ meetings on July 13, 2021 and June 18, 2020, the proposals for distribution of the earnings in 2020 and offsetting of the losses in 2019 were approved as follows:

in 2019 were approved as follows:
Legal reserves Special reserves Losses offset with legal reserves Reversal as special reserves	2020 $ 14,461 $ 130,154 $ - $ -	2019
			$ -
			$ -
			($ 24,924 ) ($ 66,778 )

The annual shareholders’ meetings on July 13, 2021 and June 18, 2020 adopted resolutions to distribute, in accordance with Article 241 of the Company Act, cash dividends to shareholders with the capital reserves from common shares issued in excess of par value in the amounts of NTD67,359,000 and NTD93,815,000.

On March 17, 2022, the Board of Directors proposed distribution of the earnings in 2021 as follows:

earnings in 2021 as follows:
Legal reserves Special reserves	2021
		$ 5,506
		$ 49,560

On March 17, 2022, the Board of Directors proposed to distribute, in

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accordance with Article 241 of the Company Act, cash dividends to shareholders with the capital reserves from common shares issued in excess of par value in the amount of NTD44,306,000.

The proposal for distribution of the earnings in 2021 will be subject to a resolution of an annual shareholders’ meeting expected to be held on June 9, 2022.

(IV) Other equity

1. Exchange differences on translation of financial statements of foreign operations

operations
Balance – beginning of the year Incurred in the current year Translation differences on foreign operations Share of associates accounted for using the equity method Reclassification adjustment Disposal of share of subsidiaries accounted for using the equity method Balance – ending of the year	2021 ($ 35,723) (30,894) (597) 1,101 ($ 66,113 )	2020
		($ 24,935) (12,624) 1,836 - ($ 35,723 )
			($ 35,723 )

1. Unrealized profit/loss on financial assets measured at fair value through other comprehensive income

other comprehensive income
Balance – beginning of the year Incurred in the current year Unrealized profits or losses – equity instruments Share of associates accounted for using the equity method Other comprehensive income in the current year Cumulative profits or losses on disposal of equity instruments transferred to retained earnings Balance – ending of the year		2021 $ 625,354 ) 27,664 909 28,573 4,306 ) $ 601,087 )	2020
	( ( (		( (	($ 404,382 ) (204,967) 17,609 ) 222,576 ) 1,604
				($ 625,354 )

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(V) Treasury stocks

Treasury stocks
Reason for repurchase Number of shares on January 1, 2021 Increase in the current year Decrease in the current year Number of shares on December 31, 2021 Number of shares on January 1, 2020 Increase in the current year Decrease in the current year Number of shares on December 31, 2020	Maintenance of corporate credit and shareholders’ equity (thousand shares)
	(		- 3,000 3,000 ) -
		(	- 10,010 10,010 ) -

To maintain our corporate credit and shareholders’ equity, the Board of Directors adopted resolutions on March 18 and May 20, 2020 and May 13, 2021 to repurchase, in accordance with Article 28-2 of the Securities and Exchange Act, 10,000,000, 5,000,000 and 5,000,000 shares respectively during the periods of March 19 to May 17, 2020, May 21 to July 17, 2020 and May 14 to July 12, 2021, and to set the share repurchase price ranges at NTD5–8, NTD6–10 and NTD10–15 respectively in accordance with Article 2 of the “Regulations Governing Share Repurchase by Exchange-Listed and OTC-Listed Companies.” In 2021 and 2020, KYE repurchased 3,000,000 and 10,010,000 shares of treasury stocks at costs of NTD35,901,000 and NTD78,752,000, respectively.

On November 1, 2021 and November 5, 2020, the Board of Directors adopted resolutions to cancel the 3,000,000 and 10,010,000 shares repurchased for the purpose of maintaining our corporate credit and shareholders’ equity, and to set November 3, 2021 and November 6, 2020 as the record date for cancellation of shares.

In accordance with the Securities and Exchange Act, treasury stocks held by us may not be pledged and are not entitled to any dividends distributed or voting rights.

XXII. Revenue

voting rights. Revenue
Revenue from contracts with customers Revenue from the sale of goods Other operating revenues Other revenues		2021 $ 1,356,943 8,970 $ 1,365,913		2020
				$ 1,643,434 9,835
				$ 1,653,269

(I) Description of contracts with customers

The amount of revenue to be recognized is determined by goods measured at the fair value of considerations received or receivable at the time of sale to

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customers, less estimated customer returns, rebates and other similar discounts.

(II) Contract balance

(II)	discounts. Contract balance
(III) XXIII. (I) (II)	December 31, 2021 December 31, 2020 Notes and accounts receivable (Note 9) $ 115,854 $ 134,613 Sub-items of revenue from contracts with customers 2021 Computer peripherals $ 828,752 Video and optoelectronic products 522,819 Consumer electronics 5,844 Others 8,498 $ 1,365,913 Net profit in the current year Other profits and losses 2021 Other revenues $ 22,807 Rent revenue 14,245 Exchange loss – net (10,344) Loss on impairment (Profit on reversal) of investment property 2,635 Dividend revenue 2,151 Profit on valuation of financial assets measured at fair value through profit or loss 591 Total $ 32,085 Depreciation and amortization 2021 Property, plant and equipment $ 29,970 Investment property 2,178 Other non-current assets 6,367 Right-of-use assets 21,525 $ 60,040 Summary of depreciation expenses by purpose Operating costs $ 18,541 Operating expense 32,954 Non-operating expenses 2,178 $ 53,673 Summary of amortization expenses by purpose Operating costs $ 2,930 Operating expense 3,437 $ 6,367		January 1, 2020
				$ 113,571 2020	$ 113,571
				$ 1,015,318 600,662 10,782 26,507
				$ 1,653,269
						2020
						$ 34,667 11,024 (32,161) (2,552) 4,164 1,713
						$ 16,855
						2020
						$ 28,672 2,236 10,086 30,816
						$ 71,810
						$ 18,751 40,737 2,236
						$ 61,724
						$ 7,880 2,206
						$ 10,086

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(III) Employee benefit expenses

Employee benefit expenses
Post-employment benefits (Note 20) Defined contribution plan Defined benefit plan Separation benefits Other employee benefits Total of employee benefit expenses Summarized by purpose Operating costs Operating expense	2021 $ 3,755 260 4,015 485 163,307 $ 167,807 $ 22,222 145,585 $ 167,807	2020
			$ 3,679 444
			4,123 1,648 198,555
			$ 204,326
			$ 35,381 168,945
			$ 204,326

(IV) Remuneration for employees, directors and supervisors

From the pre-tax profit in the current year before subtracting the remuneration distributed to employees, directors and supervisors, we allocate no less than 1% and no more than 15% of it as the remuneration for employees and no more than 1% of it as the remuneration for directors and supervisors. The remuneration for employees, directors and supervisors in 2021 and 2020 was approved by the Board of Directors on March 17, 2022 and March 25, 2021, respectively, as follows:

Estimated percentage

respectively, as follows: Estimated percentage
Remuneration for employees Remuneration for directors and supervisors Amount Remuneration for employees Remuneration for directors and supervisors	2021 2% 1% 2021 $ 1,682 $ 840	2020
		3% 1% 2020
			$ 5,663
			$ 1,887

Any change in the amount after the date of approval and publication of the annual consolidated financial report is treated as a change in accounting estimates and will be adjusted to be accounted for in the next year.

There was no difference between the actually distributed amounts of the remuneration for employees, directors and supervisors in 2020 and 2019 and the amounts recognized in the consolidated financial reports of 2020 and 2019.

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For information of the remuneration for employees, directors and supervisors as approved by the Board of Directors, visit the “Market Observation Post System” of the Taiwan Stock Exchange.

XXIV. Income tax

(I) Income taxes recognized in profit or loss

Income tax expenses consist of the following main items:

Current income tax Incurred in the current year Adjusted from prior years Deferred income tax Incurred in the current year Effect of exchange rate Income tax expenses recognized in profit or loss	2021	2021	2020	2020
		($ 2,278) 3,039 761 27,835 3,401 31,236 $ 31,997	$ (	31,125 ( 5,396 ) 25,729
				12,683 645 ) 12,038
				$ 37,767

Adjustments to accounting income and income tax expenses are as follows:

Pre-tax net profit Income tax expense on pre-tax net profit calculated at the statutory tax rate Expense and loss not deductible and tax-free income not included for determination of taxable income Unrecognized deductible temporary difference Unrecognized loss deductions Adjustment to current income tax expenses of prior years in the current year Income tax expenses recognized in profit or loss	2021 $ 82,574 $ 17,186 (19,464) 31,236 - 3,039 $ 31,997	2020	2020	2020
			$ 184,672
				$ 39,478 3,087 3,220 (2,622) ( 5,396 ) $ 37,767

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(II) Income tax recognized in other comprehensive income

Deferred income tax Incurred in the current year - Unrealized profit/loss on financial assets measured at fair value through other comprehensive income - Translation of foreign operations - Remeasurement of defined benefits plans Income tax recognized in other comprehensive income	2021 $ 292 7,298 ( 62 ) $ 7,528	2020	2020	2020
	(		($ 21,951) 4,631 4
				$ 17,316 )

(III) Deferred income tax assets and liabilities

Changes in deferred income tax assets and liabilities are as follows:

2021

2021
Deferred income tax assets Temporary difference Inventory Defined retirement benefit plan Other non-current assets Others Financial assets measured at fair value through other comprehensive income Investments accounted for using the equity method Deferred loss on purchase contracts	Balance – beginning of the year $ 11,280 8,636 12,382 3,009 32,809 39,433 11,340 $ 118,889	Recognized in profit or loss ($ 1,782) (854) (29) 132 (19,296) (5,091) (720 ) ($ 27,640 )	Recognized in other comprehens ive income $ - - - - - 3,472 - $ 3,472	Balance – ending of the year
		(			$ 9,498 7,782 12,353 3,141 13,513 37,814 10,620
					$ 94,721

(Continued to next page)

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(Continued from previous page)

ued from previous page)
Deferred income tax liabilities Temporary difference Investments accounted for using the equity method Defined retirement benefit plan Financial assets measured at fair value through other comprehensive income Others 2020 Deferred income tax assets Temporary difference Inventory Defined retirement benefit plan Other non-current assets Others Financial assets measured at fair value through other comprehensive income Investments accounted for using the equity method Deferred loss on purchase contracts	Balance – beginning of the year $ 14,217 2,305 7,923 109 $ 24,554 Balance – beginning of the year $ 20,064 8,654 13,617 6,620 46,837 32,050 13,180 $ 141,022	Recognized in profit or loss ($ 146) - - 341 $ 195 Recognized in profit or loss ($ 8,784) (18) (1,235) (3,611) - 2,819 (1,840 ) ($ 12,669 )	Recognized in other comprehens ive income ($ 3,826) 62 (292) - ($ 4,056 ) Recognized in other comprehens ive income $ - - - - (14,028) 4,564 - ($ 9,464 )	Balance – ending of the year
				$ 10,245 2,367 7,631 450 $ 20,693 Balance – ending of the year		$ 10,245 2,367 7,631 450 $ 20,693
		(			$ 11,280 8,636 12,382 3,009 32,809 39,433 11,340
					$ 118,889

(Continued to next page)

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(Continued from previous page)

ued from previous page)
Deferred income tax liabilities Temporary difference Investments accounted for using the equity method Defined retirement benefit plan Financial assets measured at fair value through other comprehensive income Others	Balance – beginning of the year $ 14,379 2,309 - - $ 16,688	Recognized in profit or loss ($ 95) - - 109 $ 14	Recognized in other comprehens ive income ($ 67) (4) 7,923 - $ 7,852	Balance – ending of the year
					$ 14,217 2,305 7,923 109
					$ 24,554

(IV) Approval of income tax

The income tax returns of KYE and Chung-Chiang Investment Co., Ltd. calculated up until 2019 were approved by the tax authority.

The income tax return of Hung-Cheng Investment Co., Ltd. calculated up until 2020 was approved by the tax authority. The income tax returns of Digilife Technologies Co., Ltd. calculated in 2019 and up until 2017 were approved by the tax authority.

XXV. Earnings per share (EPS)

The earning and the weighted average number of common shares used for calculation of EPS are as follows:

Net profit in the current year

calculation of EPS are as follows: Net profit in the current year
Net profit attributable to the owners of KYE Effect of dilutive potential common shares: Remuneration for employees Net profit used for calculation of diluted EPS	2021 $ 50,512 - $ 50,512	2020
			$ 146,236 -
			$ 146,236

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Number of shares Weighted average number of common shares used for calculation of basic EPS Effect of dilutive potential common shares: Remuneration for employees Weighted average number of common shares used for calculation of diluted EPS	Unit: Thousand shares 2021 2020 222,903 228,307 239 657 223,142 228,964

Where KYE and subsidiaries choose to distribute the remuneration for employees in shares or cash, the diluted EPS is calculated by adding the number of dilutive potential common shares to the weighted average number of outstanding shares under the assumption that the remuneration for employees will be distributed in shares. The dilutive effect of the potential common shares is taken into account when calculating the diluted EPS before the Board of Directors adopts a resolution on the number of shares distributable as the remuneration for employees.

XXVI. Capital risk management

KYE and subsidiaries engage in capital management to ensure all companies in their group are able to maximize shareholders’ return through optimization of the balances of liabilities and equity, while remaining as going concerns. There has been no material change in the overall strategies of KYE and subsidiaries.

The capital structure of KYE and subsidiaries consists of their net liabilities (i.e., loans less cash and cash equivalents) and the equity attributable to their owners (i.e., share capital, capital reserves, retained earnings and other equity).

KYE and subsidiaries are not required to comply with other external capital requirements.

Our management conducts a review of the capital structure of our group on an annual basis. Based on the suggestions of their management, KYE and subsidiaries balance their overall capital structure by paying dividends, issuing new shares, repurchasing shares and issuing new liabilities or repaying existing liabilities.

XXVII. Financial instruments

• (I) Fair value information – financial instruments not measured at fair value

Since the carrying amount of our financial instruments not measured at fair value, including cash and cash equivalents, notes and accounts receivable, finance lease payments receivable, other receivables, deposits paid, notes and accounts payable, other payables, long-term liabilities maturing within 1 year, long-term loans and deposits received, is a reasonable approximation of fair value, its fair value is not disclosed.

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• (II) Fair value information – financial instruments measured at fair value on a recurring basis

• Fair value hierarchy

urring basis Fair value hierarchy
December 31, 2021 Financial assets measured at fair value through profit or loss Investment in equity instruments - Domestic listed (OTC) stocks Financial assets measured at fair value through other comprehensive income Investment in equity instruments - Domestic listed (OTC) stocks - Domestic non-listed (non-OTC) stocks - Foreign non-listed (non-OTC) stocks Total December 31, 2020 Financial assets measured at fair value through profit or loss Investment in equity instruments - Domestic non-listed (non-OTC) stocks Financial assets measured at fair value through other comprehensive income Investment in equity instruments - Domestic listed (OTC) stocks - Domestic non-listed (non-OTC) stocks - Foreign non-listed (non-OTC) stocks Total	Level 1 $ 1,511 $ 43,226 - - $ 43,226 Level 1 $ - $ 43,724 - - $ 43,724	Level 2 $ - $ - - - $ - Level 2 $ - $ - - - $ -		Level 3 $ - $ 7,318 87,290 112,898 $ 207,506 Level 3 $ 1,713 $ 10,950 72,791 115,501 $ 199,242		Total
						$ 1,511
						$ 50,544 87,290 112,898
						$ 250,732
						Total
						$ 1,713 $ 54,674 72,791 115,501	$ 1,713
						$ 242,966

There was no transfer of fair value measurement between Level 1 and Level 2 in 2021 and 2020.

1. Adjustments to financial instruments measured at Level 3 fair value

2. 56 -

2021

2021
Balance – beginning of the year Recognized in profit or loss (other profits and losses) Recognized in other comprehensive income Purchase Disposal Translation differences on foreign operations Balance – ending of the year 2020 Balance – beginning of the year Recognized in profit or loss (other profits and losses) Recognized in other comprehensive income Purchase Disposal Translation differences on foreign operations Balance – ending of the year	Financial assets measured at fair value through profit or loss $ 1,713 672 - - (2,385) - $ - Financial assets measured at fair value through profit or loss $ - 2,125 - 55,315 (55,574) (153 ) $ 1,713	Financial assets measured at fair value through other comprehensive income $ 199,242 - 16,224 4,740 (9,555) (3,145 ) $ 207,506 Financial assets measured at fair value through other comprehensive income $ 375,520 - (164,346) - (1,355) (10,577 ) $ 199,242	Total
			$ 200,955 672 16,224 4,740 (11,940) (3,145 ) $ 207,506 Total	$ 200,955 672 16,224 4,740 (11,940) (3,145 ) $ 207,506
				$ 375,520 2,125 (164,346) 55,315 (56,929) (10,730 ) $ 200,955

1. Valuation techniques and inputs for Level 3 fair value measurement

For the domestic non-listed (non-OTC) stocks held by KYE and subsidiaries and measured at fair value, such fair value is determined with reference to the price supported by the observable market price or with an estimate using the comparables approach. The fair value of the privately offered stocks of a domestic non-listed company is determined with an estimate using the option pricing model based on the observable market price of the target.

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(III) Types of financial instruments

Types of financial instruments
Financial assets Financial assets measured at amortized cost (Note 1) Measured at fair value through profit or loss Measured at fair value through profit or loss on a mandatory basis Financial assets measured at fair value through other comprehensive income Investment in equity instruments Financial liabilities Measured at amortized cost (Note 2)	December 31, 2021 $ 1,208,636 1,511 250,732 453,652	December 31, 2020
		$ 1,563,805 1,713 242,966 482,838

• Note 1:The balance includes financial assets measured at amortized cost, such as cash and cash equivalents, notes and accounts receivable, finance lease payments receivable, other receivables, other financial assets – current and deposits paid.

• Note 2:The balance includes financial liabilities measured at amortized cost, such as notes and accounts payable, other payables, long-term loans maturing within 1 year, long-term loans and deposits received.

• (IV) Purposes and policies of financial risk management

The primary financial instruments of KYE and subsidiaries include investments in equity, accounts receivable, accounts payable, loans and lease liabilities. The financial management department of of KYE and subsidiaries is responsible for providing services to business units, planning and coordinating operations for entry into domestic and international financial markets, and monitoring and managing financial risks in relation to their operations using internal risk reports that analyze risk exposure based on the level and scope of risks. Such risks include market risks (including exchange rate risk, interest rate risk and other price risks), credit risk and liquidity risk.

KYE and subsidiaries avoid risk exposure through derivative financial instruments to mitigate the effect of such risks. The use of derivative financial instruments is subject to policies adopted by the Board of Directors or shareholders’ meetings of KYE and subsidiaries. Such policies concern exchange rate risk, interest rate risk, credit risk, the use of derivative and non-derivative financial instruments, and the written principles for investment of the balance of current funds. Internal auditors review compliance with policies and risk exposure limits on an ongoing basis. KYE and subsidiaries do not engage in any transaction of financial instruments (including derivative financial

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instruments) for speculative purposes.

The financial management department submits a report to the Board of Directors of KYE and subsidiaries on a quarterly basis.

1. Market risks

The risk of change in foreign exchange rates is the major financial risk borne by KYE and subsidiaries as a result of their operating activities (see (1) below). KYE and subsidiaries engage in various derivative financial instruments to manage the foreign exchange risk borne by them.

There has been no change in the exposure of KYE and subsidiaries to the market risks of financial instruments or their methods for management and measurement of such exposure.

(1) Exchange rate risk

KYE and subsidiaries engage in transactions of the sale and purchase of goods denominated in foreign currencies, exposing them to the risk of change in foreign exchange rates. More than 90% of the sales of KYE and subsidiaries are not denominated in KYE’s functional currency, and approximately 99% of their purchases are not denominated in KYE’s functional currency. For the management of the exposure of KYE and subsidiaries to exchange rate risk, currency options are used to manage risks to the extent permitted by policies.

For the carrying amounts of the monetary assets and liabilities of KYE and subsidiaries denominated in non-functional currencies on the balance sheet date, see Note 33.

Sensitivity analysis

KYE and subsidiaries are affected primarily by fluctuations in the exchange rate of USD.

The following table describes in detail the sensitivity analysis by KYE and subsidiaries in the event where the exchange rate of NTD (the functional currency) to USD increases or decreases by 1%. The sensitivity analysis only includes outstanding foreign currency items, the translation of which at the end of the period is adjusted by a 1% change in the exchange rate. The positive number in the following table means the amount of decrease in the pre-tax net profit when NTD appreciates by 1% against USD. When NTD depreciates by 1% against USD, the effect on the pre-tax net profit is a negative number of the same amount.

Profit or loss (Note)	2021 2020 $ 6,423 $ 8,717

Note: Mainly generated from the accounts receivable and payable by KYE and subsidiaries denominated in USD which are outstanding without cash flow hedges on the balance sheet date.

Our management considers that the sensitivity analysis cannot represent the inherent exchange rate risk. Since sales are seasonal, the foreign currency risk exposure on the balance sheet date cannot

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reflect the mid-year risk exposure.

(2) Interest rate risk

The interest rate risk exposure occurs due to the borrowing of funds and undertaking of bank deposits by the entities in KYE and subsidiaries at both fixed and floating interest rates.

The carrying amounts of the financial assets and liabilities of KYE and subsidiaries exposed to the interest rate risk on the balance sheet date are as follows:

date are as follows:
With fair value interest rate risk - Financial assets - Financial liabilities With cash flow interest rate risk - Financial assets - Financial liabilities	December 31, 2021 $ 85,780 37,619 917,270 343,833	December 31, 2020
		$ 499,271 65,085 830,173 238,000

Sensitivity analysis

The following sensitivity analysis is based on the interest rate risk exposure of non-derivative instruments on the balance sheet date. The analysis focuses on assets and liabilities with floating interest rates under the assumption that the amounts of outstanding assets and liabilities on the balance sheet date are outstanding over the reporting period.

If the interest rate increases/decreases by 25 basis points with all other variables remaining constant, the pre-tax net profit of KYE and subsidiaries in 2021 and 2020 would increase/decrease by NTD1,457,000 and NTD1,715,000 respectively.

(3) Other price risks

KYE and subsidiaries are exposed to equity price risk as a result of investments in equity securities. Such equity investments are not held for trading but are strategic investments. The management of KYE and subsidiaries manages risks by holding different risk portfolios. The equity price risk of KYE and subsidiaries mainly concentrates in the equity instruments offered by the Taiwan Stock Exchange for the electronics industry. Moreover, we have designated a special team to monitor price risks.

Sensitivity analysis

The following sensitivity analysis is based on the equity price risk exposure on the balance sheet date.

If the equity price increases/decreases by 1%, the pre-tax profit or loss in 2021 and 2020 would increase/decrease by NTD15,000 and NTD17,000 respectively, due to an increase/decrease in the fair value

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of financial assets measured at fair value through profit or loss. Other pre-tax comprehensive income in 2021 and 2020 would increase/decrease by NTD2,507,000 and NTD2,430,000 respectively, due to an increase/decrease in the fair value of financial assets measured at fair value through other comprehensive income.

2. Credit risk

Credit risk means the risk of financial loss incurred by the group as a result of a delay by the counterparty in fulfilling contractual obligations. As of the balance sheet date, the greatest credit risk KYE and subsidiaries are likely to be exposed to due to failure of the counterparty to fulfill its obligations mainly arises from the carrying amount of financial assets recognized in the balance sheet.

In order to mitigate credit risk, the management of KYE and subsidiaries has designated special teams for determination of credit lines, approval of loans and other monitoring procedures to ensure that appropriate actions are taken to recover overdue payments receivable. Furthermore, KYE and subsidiaries review the recoverable amounts of payments receivable separately on the balance sheet date to ensure that irrecoverable payments receivable have been accounted for in appropriate impairment losses. Therefore, the management of KYE considers that the credit risk of KYE and subsidiaries has reduced.

Since the counterparty of current funds and derivative financial instruments is a financial institution with a good credit rating, we do not expect any material credit risk.

Accounts are receivable from a lot of customers in different industries and geographical areas. KYE and subsidiaries have continued to assess the financial conditions of the customers from whom accounts are receivable and will, if necessary, purchase credit guarantee insurance contracts.

As of December 31, 2021 and 2020, the balance of accounts receivable from the top 10 customers of KYE and subsidiaries accounted for 66% and 49% of their accounts receivable, respectively. The credit concentration risk of other accounts receivable is not material.

3. Liquidity risk

KYE and subsidiaries engage in management of liquidity risk for the purpose of maintaining the cash and cash equivalents necessary for operations, high-liquidity securities and adequate banking financing facilities to ensure they have sufficient financial flexibility.

Table of liquidity and interest rate risks

The following table describes in detail the analysis of maturity of the remaining contracts of non-derivative financial liabilities within the repayment period agreed by KYE and subsidiaries. The table is compiled based on the earliest date when KYE and subsidiaries are likely to be required to make repayment and the undiscounted cash flow of financial liabilities, and does not include the cash flow of interest.

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December 31, 2021

December 31, 2021
Non-derivative financial liabilities Non-interest-bearin g liabilities Lease liabilities Instruments with a floating interest rate December 31, 2020 Non-derivative financial liabilities Non-interest-bearin g liabilities Lease liabilities Instruments with a floating interest rate	Less than 1 year $ 109,819 29,685 10,000 $ 149,504 Less than 1 year $ 244,838 31,368 8,095 $ 284,301	1 to 2 years $ - 7,061 20,037 $ 27,098 1 to 2 years $ - 28,717 24,688 $ 53,405	2	to 5 years $ - 1,218 111,268 $ 112,486 to 5 years $ - 6,093 79,071 $ 85,164	More than 5 years
			2		$ - - 202,528 $ 202,528 More than 5 years	$ - - 202,528
						$ 202,528
						$ - - 126,146
						$ 126,146

XXVIII. Related party transactions

Since all transactions, account balances, profits, expenses and losses between KYE and subsidiaries (KYE’s related parties) have been eliminated after consolidation, they are not disclosed in this note. The following are transactions between KYE and subsidiaries and related parties, other than those already disclosed in other notes:

• (I) Names of related parties and their relationship with us

Name of related party Relationship with KYE and subsidiaries Star Reach Limited Associate Shih-Kun Tso Chairman of KYE

(II) Operating transactions

Operating transactions
Purchase Associate	2021	$ -	2020
				$ 285

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The terms of purchase transactions between KYE and subsidiaries and Star Reach Limited are, except for an O/A monthly payment period of 30 days, the same as those of transactions with non-related parties.

(III) Lease agreement

Lease agreement
Interest expense Shih-Kun Tso	2021	$ -	2020
				$ 108

KYE and subsidiaries have rented offices from Shih-Kun Tso under lease terms equivalent to those for non-related parties.

(IV) Remuneration for key management

Remuneration for key management
Short-term employee benefits Post-employment benefits	2021 $ 37,162 578 $ 37,740		2020
					$ 41,811 438
					$ 42,249

The remuneration for directors and other key management is determined by the Remuneration Committee based on personal performance and market trends.

XXIX. Pledged and mortgaged assets

The following assets have been pledged or mortgaged to banks as collateral for issuance of letters of credit, short-term loan limits and long-term loan guarantees:

guarantees:
Property – net Investment property – net	December 31, 2021 $ 513,799 346,765 $ 860,564	December 31, 2020
			$ 516,047 178,007
			$ 694,054

XXX. Material contingent liabilities and unrecognized contractual commitments

The following are the material commitments and contingencies of KYE and subsidiaries on the balance sheet date, other than those already described in other notes:

(I) Material commitments

The following are the total contract price and price paid for newly added purchases of property and pre-sold houses by KYE and subsidiaries:

Total contract price Price paid (Note)	December 31, 2021 $ 546 $ 468	December 31, 2020	December 31, 2020
			$ 168,000
			$ 58,000

Note: Recognized in prepayments for equipment.

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In May 2020, KYE canceled its purchase of a pre-sold house in Zhonghe District, New Taipei City and recovered the deposit paid. In January 2021 and March 2020, the prepayments for equipment made by KYE and subsidiaries for purchase of pre-sold houses in West District, Taichung City and Shilin District, Taipei City were reclassified as investment property and property, plant and equipment. See Notes 14 and 16.

(II) Contingencies

The Securities and Futures Investors Protection Center (SFIPC) has claimed that KYE is a corporate director of Unity Opto Technology Co., Ltd. (hereinafter “Unity Opto”), and that the financial statements of Unity Opto have used circular transactions to inflate the operating revenue and the amount of work in process to exaggerate earnings, causing a total of NTD569,202,000 in damage to investors. As a result, a claim for damages was filed against Unity Opto and its directors and supervisors (including KYE). The case is currently being adjudicated by the Taiwan New Taipei District Court, and its final result is unknown. Therefore, we have not recognized any estimated loss related to the case.

XXXI. Material subsequent events

In order to comply with the local government's epidemic prevention instructions, our subsidiary in China, Dong-Guan Kunying Computer Products Co., Ltd., suspended work and quarantine from March 16th, 2022 to March 21st, 2022, to follow local government's closed-off management and COVID-19 PCR testing. At the same time we immediate adjusted production and rescheduled delivery with suppliers and customers. We will closely watch the epidemic development and apply contingency plans accordingly, to secure environment safety and employees’ health. At this moment we estimated no significant impact on the company’s finance and business.

XXXII. Other matters

Since the second quarter of 2021, the sales and operations of KYE and subsidiaries had been affected in the external environment by an increase in the prices and a shortage in the materials of chips and ICs, rising prices of components and raw materials including metals, plastic and commodities, and supply chain factors including surging transportation and logistics costs. As a result, customer demands had been suppressed due to higher product prices. Additional disadvantageous factors, such as shortage of labor, containers and cargo space, port congestion, delayed sailing schedules and surging transportation costs that had been occurring for more than 6 months in the global container transport chains, had delayed shipments from KYE and subsidiaries. The operating revenue in 2020 saw a 17% decline from 2020, and the net operating profit decreased by 68% from the previous year. However, the quarterly amounts of orders and shipments had recovered during the second half of the year, as compared to the second quarter. A recovery in orders and a slow improvement in shipping delays are expected, and operations will gradually improve. The challenges in market supply/demand and transportation are not structural problems and have had no material effect on the going concern ability of KYE and subsidiaries, turnover on realization of working capital including accounts receivable and inventories, asset impairment and financing risk.

• 64 -

To create conditions and opportunities for rebounding from the bottom and revitalizing momentum, KYE and subsidiaries have continued to take the following measures:

• (I) We have coordinated with our suppliers to avoid shortage or imbalance of materials from key sources and ensure smooth supplies.

• (II) In a post-pandemic era where the world has begun to coexist with viruses despite surges and declines in the pandemic, we have launched more products that are suitable for a new type (e.g. remote) of economy and lifestyle.

• (III) When discussing the performance goals for the new year with our global distributors, we will introduce marketing and product promotion plans that are more advantageous to the expansion of channels and, with the launch of new products and a lower designed cost, boost distribution and demands on local holidays.

XXXIII. Information of foreign currency financial assets and liabilities with material effect

The following information is summarized and presented based on foreign currencies other than the functional currencies of the entities in KYE and subsidiaries. The disclosed exchange rate represents the rate at which each such foreign currency is translated to the functional currency. The following are foreign currency assets and liabilities with material effect:

December 31, 2021

December 31, 2021
Financial assets Monetary items USD AUD RMB HKD JPY EUR Investments accounted for using the equity method USD RMB THB Financial assets measured at fair value through other comprehensive income RMB THB Financial liabilities Monetary items RMB USD	Foreign currency $ 23,399 3,330 15,182 1,456 20,206 102 2,520 1,897 737 25,197 3,800 17,454 193	Exchange rate 27.680 20.080 4.344 3.549 0.241 31.320 27.680 4.344 0.835 4.344 0.923 4.344 27.680	Carrying amount
			$ 647,673 66,857 65,950 5,167 4,860 3,185 69,745 8,239 615 109,390 3,507 75,822 5,352

• 65 -

December 31, 2020

December 31, 2020
Financial assets Monetary items USD RMB AUD Investments accounted for using the equity method USD RMB THB Financial assets measured at fair value through other comprehensive income RMB THB Financial liabilities Monetary items RMB USD	Foreign currency $ 31,579 28,931 3,238 1,813 2,571 737 25,658 3,800 35,919 972	Exchange rate 28.480 4.377 21.950 28.480 4.377 0.956 4.377 0.923 4.377 28.480	Carrying amount
			$ 899,357 126,632 71,065 51,623 11,253 704 111,994 3,507 157,219 27,674

The realized and unrealized foreign exchange losses of KYE and subsidiaries in 2021 and 2020 were NTD10,344,000 and NTD32,161,000, respectively. Due to a great number of functional currencies used for transactions in foreign currencies, it is not possible to disclose the exchange profit or loss of each foreign currency with material effect.

XXXIV. Note disclosures

(I) Information of material transactions:

1. Funds loaned to others: None.

2. Endorsements/guarantees to others: None.

3. Securities held at end of period (excluding those controlled by investee subsidiaries, associates and joint ventures): See Table 1.

4. Cumulative amount of purchase or sale of the same securities equaling or exceeding NTD300 million or 20% of the paid-up capital: None.

5. Amount of acquisition of real property equaling or exceeding NTD300 million or 20% of the paid-up capital: None.

6. Amount of disposal of real property equaling or exceeding NTD300 million or 20% of the paid-up capital: None.

7. Amount of purchase/sale of goods from/to related parties equaling or exceeding NTD100 million or 20% of the paid-up capital: See Table 2.

8. 66 -

9. Payments receivable from related parties equaling or exceeding NTD100 million or 20% of the paid-up capital: See Table 3.

10. Transactions of derivative instruments: None.

11. Others: Business relationship and important transactions between the parent company and subsidiaries and between subsidiaries, and the amounts of such transactions: See Table 4.

12. (II) Information of investee companies: See Table 5.

13. (III) Information of investments in Mainland China:

14. The names, scope of primary business and amounts of paid-in capital of the investee companies in Mainland China, the methods of investment, funds remitted inwardly and outwardly, shareholdings, profits or losses on investments, the carrying amounts of investments at end of period, remitted profits or losses on investments, and limits on the amount of investments in Mainland China: See Table 6.

15. The following material transactions with the investee companies in Mainland China directly or indirectly through a third area, and the prices, payment terms and unrealized profits or losses of such transactions: See Table 6.

    • (1) The amount and percentage of purchases, and the ending balance and percentage of the relevant payments payable.

    • (2) The amount and percentage of sales, and the ending balance and percentage of the relevant payments receivable.

    • (3) The amount of property transactions and the resulting amount of profits or losses.

    • (4) The ending balance and purposes of note endorsements/guarantees or collateral provided.

    • (5) The maximum balance, ending balance, interest rate range and total current interest for financing of funds.

    • (6) Other transactions with material effect on current profits or losses or on the financial conditions, such as the rendering or receiving of services.

16. (IV) Information of major shareholders: The names of shareholders with a shareholding of no less than 5%, and the number and percentage of shares held by each of them. (Table 7)

17. 67 -

XXXV. Segment information

Information provided to the chief operating decision maker for allocating resources and evaluating segment performance focuses on the type of each product delivered or service rendered. The reportable segments of KYE and subsidiaries are the electronics segment and other segments.

(I) Segment revenues and operating results

The following is an analysis of the revenues and operating results of KYE and subsidiaries by reportable segment:

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2021
Domestic and foreign Electronic
operating segments products Others Total
Revenue from customers
other than the parent
company and
consolidated
subsidiaries $ 1,363,929 $ 1,984 $ 1,365,913
Segment profits (losses) $ 62,324 ($ 11,319) $ 51,005
Other profits and losses 19,608 12,477 32,085
Share of profits/losses of
associates accounted for
-
using the equity method 1,996 1,996
Interest income 2,571 91 2,662
-
Interest expense ( 5,174) ( 5,174)
Pre-tax net profit $ 81,325 $ 1,249 $ 82,574
2020
Domestic and foreign Electronic
operating segments products Others Total
Revenue from customers
other than the parent
company and
consolidated
subsidiaries $ 1,650,825 $ 2,444 $ 1,653,269
Segment profits (losses) $ 174,658 ($ 12,863) $ 161,795
Other profits and losses 19,367 (2,512) 16,855
Share of profits/losses of
associates accounted for
-
using the equity method 1,224 1,224
Interest income 8,708 246 8,954
-
Interest expense ( 4,156) ( 4,156)
Pre-tax profit (loss) $ 199,801 ($ 15,129) $ 184,672
----- End of picture text -----

Segment profit means the profit earned by each segment, excluding the allocable cost of administration of the headquarters and remuneration for directors, the share of profits or losses of associates accounted for using the equity method, the profit or loss on disposal of associates, rent revenue, interest income, the profit or loss on disposal of property, plant and equipment, the profit

• 68 -

or loss on disposal of investments, the net profit (loss) on foreign currency exchange, the profit or loss on valuation of financial instruments, financial cost and income tax expense. The measured amount is provided to the chief operating decision maker for allocating resources to a segment and evaluating its performance.

(II) Total segment assets and liabilities

its performance. Total segment assets and liabilities
Segment assets Electronics segment Others Consolidated total assets Segment liabilities Electronics segment Others Consolidated total liabilities	December 31, 2021			December 31, 2020
		$	3,141,242 441,251 3,582,493 $ 634,680 1,066 $ 635,746		$ $	3,332,615 364,927
		$				3,697,542
						$ 694,079 1,288
						$ 695,367

(III) Revenue from primary products and services

The following is an analysis of the revenue from KYE’s primary products and services:

and services:
Electronic products Investment		2021 $ 1,363,929 1,984 $ 1,365,913		2020
				$ 1,650,825 2,444 $ 1,653,269

(IV) Information by area

KYE primarily operates in four areas: Asia, America, Europe and Taiwan.

The following is the information of KYE’s revenue from continuing operations of external customers, listed by the area of operation, and non-current assets, listed by the area where assets are located:

Non-current assets

America Asia Europe Taiwan Others		Revenues from external customers 2021 2020	Revenues from external customers 2021 2020	Revenues from external customers 2021 2020		December 31, 2021		December 31, 2020
		2021
		$ 451,497 445,549 315,048 137,689 16,130 $ 1,365,913		$ 555,171 558,586 436,675 61,379 41,458 $ 1,653,269		$ 23 53,575 - 1,145,267 - $ 1,198,865		$ 43 80,910 43 1,043,797 -
								$ 1,124,793

Non-current assets do not include financial instruments and deferred income tax assets.

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(V) Information of major customers

The revenue of the electronics segment in 2021 and 2020 was NTD1,363,929,000 and NTD1,650,825,000 respectively, of which NTD144,938,000 and NTD256,672,000 came from the largest customer of the group. Except for the above-mentioned customer, there was no other single customer from whom the revenue equaled or exceeded 10% of the total revenue of the group in 2021 and 2020.

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KYE Systems Corp. and Subsidiaries Securities Held at End of Period December 31, 2021

Table 1

Unit: NTD and foreign currency (thousand)

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End of period
Number of Fair value
Relationship with the
Holding company Type and name of securities Account title shares/units Shareholding (Note 1)
securities issuer Carrying amount
(thousand (%)
shares/units)
KYE Systems Corp. Shares
Coretek Opto Corporation We are a corporate Financial assets measured at fair 3,605 $ 66,846 9.96% $ 66,846
director of the value through other
company, and our comprehensive income –
Chairman is its non-current
chairman.
Monterey International Corp. None Financial assets measured at fair 2,631 19,412 7.71% 19,412
value through other
comprehensive income –
non-current
Ta Shee Resort Co., Ltd. None Financial assets measured at fair - 30 - 30
(preferred stock) value through other
comprehensive income –
non-current
Unity Opto None Financial assets measured at fair 1,913 - - -
value through other (Note 3) (Note 3)
comprehensive income –
current
Aiptek (private offering) None Financial assets measured at fair 1,032 7,318 2.36% 7,318
value through other
comprehensive income –
non-current
Unity Opto (private offering) None Financial assets measured at fair 15,789 - 3.42% -
value through other (Note 3) (Note 3)
comprehensive income –
non-current
Globalink Holding Co., Ltd. Shares
Shenzhen CMK Technology Co., None Financial assets measured at fair - USD 3,952 8.61% USD 3,952
Ltd. value through other
comprehensive income –
non-current
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End of period
Number of Fair value
Relationship with the
Holding company Type and name of securities Account title shares/units Shareholding (Note 1)
securities issuer Carrying amount
(thousand (%)
shares/units)
Hung-Cheng Investment Shares
Co., Ltd. Flytech Technology Co., Ltd. None Financial assets measured at fair 486 $ 38,481 - $ 38,481
value through other
comprehensive income –
current
Dynamic Medical Technologies, None Financial assets measured at fair 11 586 - 586
Inc. value through other
comprehensive income –
current
Coretek Opto Corporation KYE Systems Corp. is Financial assets measured at fair 5 102 - 102
a corporate director value through other
of the company, and comprehensive income –
the chairman of KYE non-current
Systems Corp. is its
chairman.
Digilife Technologies Co., Shares
Ltd. MOTOMOTO Ltd. None Financial assets measured at fair 38 3,507 19% 3,507
value through other
comprehensive income –
non-current
LIAN, JU Biotechnology Co., Ltd The directors of Digilife Financial assets measured at fair 90 900 18% 900
Technologies Co., value through other
Ltd. are the directors comprehensive income –
of the company. non-current
Unity Opto None Financial assets measured at fair 597 - - -
value through other (Note 3) (Note 3)
comprehensive income –
current
Shin Kong Financial Holding Co., None Financial assets measured at fair 186 2,050 - 2,050
Ltd. value through other
comprehensive income –
current
China Petrochemical None Financial assets measured at fair 160 2,109 - 2,109
Development Corporation value through other
comprehensive income –
current
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Holding company	Type and name of securities	Relationship with the securities issuer	Account title	End ofperiod
				Number of shares/units (thousand shares/units) Carrying amount Shareholding (%)	Fair value (Note 1)
Chung-Chiang Investment Co., Ltd.	Shares Sysgration Ltd. Powerchip Semiconductor Manufacturing Corporation	None None	Financial assets measured at fair value through profit or loss – current Financial assets measured at fair value through profit or loss – current	20 $ 799 - 10 712 -	$ 799 712

Note 1: The market price is determined as follows: The price of listed/OTC stocks is calculated based on the closing price of the Taiwan Stock Exchange and the Taipei Exchange at the end of December 2021. The price of listed/OTC, privately offered stocks whose trading is restricted is estimated using a valuation method. The price of domestic/foreign non-listed/non-OTC stocks is calculated using a valuation method.

Note 2: The securities held at end of period have not been provided as collateral or pledged for loans.

Note 3: Unity Opto has ceased trading since April 7, 2020, so there are no open market price and verifiable financial figures that can serve as the basis of valuation. KYE and subsidiaries assess that the fair value of Unity Opto’s equity is 0.

• 73 -

Unit: NTD Thousand

KYE Systems Corp. and Subsidiaries Amount of Purchase/Sale of Goods from/to Related Parties Equaling or Exceeding NTD100 Million or 20% of the Paid-up Capital 2021

Table 2

Purchasing (Selling) company Counterparty Relationship	Purchasing (Selling) company Counterparty Relationship		Transaction Differences of transaction terms from those of regular transactions and reasons for suchdifferences	Transaction Differences of transaction terms from those of regular transactions and reasons for suchdifferences	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)	Remarks
		Purchase (Sale)	Amount Percentage in total purchase (sale) Loan period Unit price	Loan period	Balance	Percentage in total notes/accounts receivable (payable)
KYE Systems Corp. KYE Trade (HK) Co., Ltd.	KYE Trade (HK) Co., Ltd. KYE’s sub-subsidiary Dongguan Kunying Computer Products Co., Ltd. The parent company is the same	Purchase (Note 1) Purchase	$ 293,099 (Note 2) 29% Offset against payments receivable on a non-periodic basis - 292,726 (Note 2) 29% Offset against payments receivable on a non-periodic basis -	－ －	$- -	- -

Note 1: KYE conducts purchase transactions with KYE Trade Co., Ltd. where KYE purchases raw materials and transports them to its subsidiary in Mainland China to be processed into finished goods, which are then resold to KYE.

Note 2: The amount was fully written off during preparation of the consolidated financial report.

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KYE Systems Corp. and Subsidiaries Payments Receivable from Related Parties Equaling or Exceeding NTD100 Million or 20% of the Paid-up Capital December 31, 2021

Table 3

Unit: NTD Thousand

Company from which payments accounted for are receivable	Counterparty	Relationship	Balance of payments receivable from related party Turnover	Balance of payments receivable from related party Turnover	Overdue payments receivable from related party	Overdue payments receivable from related party	Subsequently recovered amount of payments receivable from related party Loss allowance set aside	Subsequently recovered amount of payments receivable from related party Loss allowance set aside
					Amount	Treatment
KYE Trade (HK) Co., Ltd.	Dongguan Kunying Computer Products Co., Ltd.	The parent company is the same	$ 565,348 (Note 2)	(Note 1)	(Note 1)	(Note 1)	(Note 1)	$-

Note 1: They are mainly payments for purchase of raw materials and machine/equipment and are offset against payments payable on a non-periodic basis. Note 2: The amount was fully written off during preparation of the consolidated financial report.

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KYE Systems Corp. and Subsidiaries

Business Relationship and Important Transactions between the Parent Company and Subsidiaries and between Subsidiaries, and the Amounts of such Transactions 2021

Table 4

Unit: NTD Thousand

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Transaction
Relationship with Percentage in
No. Name of transacting party Counterparty transacting party consolidated total
Title Amount Transaction terms
(Note 1) operating revenue or
assets
0 KYE KYE Trade 1 Purchase $ 293,099 Note 2 21%
KYE Trade 1 Other receivables 565,348 Note 2 16%
1 Dongguan Kunying KYE Trade 3 Operating income 292,726 Note 2 21%
KYE Trade 3 Other current liabilities 565,348 Note 2 16%
----- End of picture text -----

Note 1: The following are three types of relationship with a transacting party:

1: The parent company to a subsidiary; 2: A subsidiary to the parent company; 3: A subsidiary to a subsidiary

Note 2: KYE conducts purchase transactions with KYE Trade where KYE purchases raw materials and transports them to its subsidiary in Mainland China to be processed into finished goods, which are then resold to KYE. KYE offsets accounts payable arising from purchase transactions against accounts receivable arising from purchases of raw materials on a non-periodic basis.

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KYE Systems Corp. and Subsidiaries Names of Investee Companies, Their Areas of Establishment...and Other Relevant Information 2021

Table 5

Unit: NTD and foreign currency (thousand)

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Initial investment amount Held at end of period Profit (loss) on
Name of investor Name of investee Area of Scope of primary Current profit (loss) investments
End of current Number of shares Remarks
company company establishment business End of previous year Percentage (%) Carrying amount of investee company recognized in
period (thousand shares)
current period
KYE Systems Corp. Genius Holding Co., Ltd. British Cayman Investment holdings USD 28,467 USD 28,467 21,467 100.00 $ 274,049 (USD 654) ($ 12,315) Subsidiary
Islands （註一）
Chung-Chiang New Taipei City Investment business 172,482 85,000 15,200 100.00 150,768 (389) (389) Subsidiary
Investment Co., Ltd. （註一）
Hung-Cheng Investment Taipei City Investment business 85,000 85,000 9,578 100.00 54,818 1,827 1,827 Subsidiary
Co., Ltd. （註一）
KYE International United States Sales of computer USD 2,610 USD 2,610 235 100.00 2,810 (USD 44) (1,226) Subsidiary
Corporation peripherals and （註一）
consumer electronics
KYE Systems Europe Germany Sales of computer EUR- EUR 2,270 - - - - - Subsidiary; Note 2
GmbH peripherals and （註一）
consumer electronics
KYE Systems (Hong Hong Kong Sales of computer HKD 500 HKD 500 500 100.00 8,565 - - Subsidiary
Kong) Corp. peripherals and （註一）
consumer electronics
Digilife Technologies Co., Taipei City Digital video/audio 652,962 652,962 51,563 94.61 561,505 1,198 1,133 Subsidiary
Ltd. products （註一）
Shinyoptics Corp. Tainan City R&D, design, 61,200 61,200 3,400 22.97 7,587 (6,938) (1,594) Investments
manufacturing and accounted for
sales of optical engines using the equity
method
Star Reach Limited Samoan Islands Investment holdings USD 417 USD 417 - 25.00 8,239 (RMB 2,697) (2,927) Investments
accounted for
using the equity
method
Timing Pharmaceutical New Taipei City Manufacturing of 288,184 288,184 19,446 22.64 210,561 4,853 1,099 Investments
Co., Ltd. Chinese medicine accounted for
using the equity
method
KYE Systems (Hong Genius Labuan Inc. Malaysia Sales of computer USD 10 USD 10 10 100.00 - USD - N/A Sub-subsidiary
Kong) Corp. peripherals and
consumer electronics
Genius Holding Co., Ltd. Globalink Holding Co., British Virgin Investment holdings USD 8,289 USD 8,289 5,250 100.00 USD 4,351 (USD 4) N/A Sub-subsidiary
Ltd. Islands （註一）
Moustek Investment Co., British Virgin Investment holdings USD 2,806 USD 2,806 1 100.00 USD 248 (USD 200) N/A Sub-subsidiary
Ltd. Islands （註一）
KYE Trade (HK) Co., Ltd. Hong Kong Sales of computer HKD 10 HKD 10 10 100.00 (USD 205) (372) N/A Sub-subsidiary
peripherals and （註一）
consumer electronics
KYE Inc. British Virgin Investment holdings USD 16,065 USD 16,065 3 100.00 (USD 12,117) (USD 624) N/A Sub-subsidiary
Islands （註一）
Maxfar Limited Samoan Islands Investment business USD 2,462 USD 2,019 2,462 44.37 USD 2,517 12,423 N/A Investments
accounted for
using the equity
method
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Initial investment amount Held at end of period Profit (loss) on
Name of investor Name of investee Area of Scope of primary Current profit (loss) investments
End of current Number of shares Remarks
company company establishment business End of previous year Percentage (%) Carrying amount of investee company recognized in
period (thousand shares)
current period
Digilife Technologies Co., Life Technologies Co., Samoan Islands Investment holdings USD 300 USD 300 455 100.00 $ 12,270 USD 18 N/A Sub-subsidiary
Ltd. Ltd. （註一）
DIGILIFE PTY LTD Australia Tourism and real estate AUD 12,500 AUD 12,500 12,500 100.00 234,599 AUD 28 N/A Sub-subsidiary
development （註一）
Shinyoptics Corp. Tainan City R&D, design, 3,600 3,600 200 1.35 446 (6,938) N/A Investments
manufacturing and accounted for
sales of optical engines using the equity
method
DigiLife (Thailand) Co., Thailand Sales of digital THB 1,500 THB 1,500 15 30.00 615 THB - N/A Investments
Ltd. video/audio products accounted for
using the equity
method
Life Technologies Co., Life Technologies (Hong Hong Kong Sales of digital USD 455 USD 455 455 100.00 USD 443 HKD 140 N/A Sub-subsidiary
Ltd. Kong) Co., Limited video/audio products (Note 1)
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Note 1: The amount was entirely written off during preparation of the consolidated financial statements. Note 2: KYE Systems Europe GmbH ceased operations in December 2017 and completed its liquidation in December 2021.

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Unit: NTD and foreign currency (thousand)

KYE Systems Corp. and Subsidiaries Information of Investments in Mainland China 2021

Table 6

KYE Systems Corp.

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Accumulated Amount of investments Accumulated KYE’s
Profit or loss on
Name of amount of remitted or recovered in amount of shareholdi Profit on
Current profit (loss) investments Ending carrying
investee Scope of primary investments current period investments ng in direct investments
Paid-in capital Method of investment of investee recognized in value of
company in business remitted from remitted from or indirect received as of
company current period investments
Mainland China Taiwan at start of Remitted Recovered Taiwan at end of investment current period
(Note 3)
current period current period s
Dongguan Manufacturing and USD 15,965 Indirect investment in KYE USD 15,965 $- $- USD 15,965 ($ 17,440) 100% ($ 17,440) (USD 12,163) $-
Kunying sales of computer Inc. through Genius (Note 4) (Note 4)
Computer mice and Holding Co., Ltd. with a
Products Co., computer game 100% shareholding
Ltd. consoles
Dongguan R&D and sales of USD 2,706 Indirect investment in USD 2,706 - - USD 2,706 (RMB 1,279) 100% (RMB 1,279) USD 188 -
Gaoying computers and Moustek Investment Co., (Note 4) (Note 4)
Electronic computer Ltd. through Genius
Technology peripherals Holding Co., Ltd., with the
Co., Ltd. former investing operating
funds
Dongguan Manufacturing and RMB 3,722 Indirect investment in Chia USD 417 - - USD 417 (RMB 2,697) 25% (2,927) 8,239 -
Chiaying sales of computer Ying Plastics (HK) Co.,
Electronics accessories, Limited through Star Reach
Co., Ltd. appliances and Limited, with the former
molds. investing 25% of operating
funds
Accumulated amount of investments remitted Limit on amount of investments in Mainland
Amount of investments approved by the
from Taiwan to Mainland China at end of China as required by the Investment
Investment Commission, MOEA
current period Commission, MOEA
USD 35,431(Note 2) USD 30,120(Note 2) $ 1,748,872(Note 1)
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Note 1: It is calculated at 60% of the net value.

Note 2: We originally made indirect investments in Shanghai Global Lighting Technologies Inc., Suzhou Global Lighting Technologies Inc, and Suzhou Opto Technologies Inc. through Global Lighting Technologies Inc. Since Global Lighting Technologies Inc. has been traded publicly at the Taiwan Stock Exchange since July 28, 2011, please see the financial statements published by the company for this information. Note 3: With respect to the profit or loss on investments recognized in the current year, the investee companies in Mainland China have been audited and certified by the same CPA firm as that engaged by the parent company in Taiwan. Note 4: The amount was entirely written off during preparation of the consolidated financial statements.

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Digilife Technologies Co., Ltd.

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Accumulated Amount of investments Accumulated
KYE’s Profit or loss on
Name of amount of remitted or recovered in amount of Profit on
Current profit (loss) shareholding investments Ending carrying
investee Scope of primary investments current period investments investments
Paid-in capital Method of investment of investee in direct or recognized in value of
company in business remitted from remitted from received as of
company indirect current period investments
Mainland China Taiwan at start of Remitted Recovered Taiwan at end of current period
investments (Note 2)
current period current period
Ziser Sales of digital USD 200 Investment through Life USD 200 $- $- USD 200 RMB 623 100% HKD 751 HKD 3,097 $-
Technologies video/audio Technologies (Hong Kong) (Note 3) (Note 3)
(Shenzhen) products Co., Limited with a 100%
Co., Ltd. shareholding
Accumulated amount of investments remitted Limit on amount of investments in Mainland
Amount of investments approved by the
from Taiwan to Mainland China at end of China as required by the Investment
Investment Commission, MOEA
current period Commission, MOEA
USD 334 USD 500 $ 356,079(Note 1)
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Note 1: It is calculated at 60% of the net value.

Note 2: The profit or loss on investments is recognized based on the CPA-audited financial statements for the same period. Note 3: The amount was entirely written off during preparation of the consolidated financial statements.

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KYE Systems Corp. Information of Major Shareholders December 31, 2021

Table 7

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Shares
Name of major shareholder Number of shares
Shareholding (%)
held
Ching-Hsin Cho 11,959,488 5.39%
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Note: The information of major shareholders in this table is based on the data where the total number of common and preferred shares held by a shareholder which have been registered and delivered on a non-physical basis (including treasury stocks) by us on the final business day at the end of the current quarter, as calculated by the Taiwan Depository and Clearing Corporation, equals or exceeds 5%. The share capital recorded in the consolidated financial report of KYE may differ from the actual number of shares registered and delivered on a non-physical basis due to different bases of preparation and calculation.

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