KYE - Audit Report / Information 2021

Stock Code: 2365

KYE Systems Corp.

Parent-only Financial Report and CPA’s Audit Report 2021 and 2020

(For the convenience of readers, this English individual 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

§TABLE OF CONTENTS§

ITEM I. Cover II. Table of Contents III. CPA’s Audit Report IV. Parent-only Balance Sheet V. Parent-only Statement of Comprehensive Income VI. Parent-only Statement of Changes in Equity VII. Parent-only Statement of Cash Flows VIII. Notes to Parent-only Financial Statements (I) Company history (II) Date and procedures of approval of the financial report (III) Application of new and amended standards and interpretations (IV) Summary of material accounting policies (V) Main sources of uncertainty of material accounting judgments, estimates and assumptions (VI) Description of major account titles (VII) Related party transactions (VIII) Pledged and mortgaged assets (IX) Material contingent liabilities and unrecognized contractual commitments (X) Material losses from disasters (XI) Material subsequent events (XII) Others (XIII) Note disclosures 1. Information of material transactions 2. Information of investee companies 3. Information of investments in Mainland China 4. information of major shareholders (XIV) Segment information IX. Statements of major account titles	PAGE 1 2 3`～`6 7 8`～`10 11 12`～`14 15 15 15`～`17 17`～`28 28 28`～`55 56`～`57 57 58 - - 58`～`59 60, 62`～`65 60, 62`～`65 60, 66 61, 67 - 68`～`84	NO. OF NOTE TO FINANCIAL REPORT
		- - - - - - - I II III IV V VI–XXIV XXV XXVI XXVII - - XXVIII–XXIX XXX XXX XXX XXX - -

CPA’s Audit Report

To KYE Systems Corp.:

Audit Opinions

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

In our opinion, with respect to all material aspects, the foregoing parent-only financial statements were prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and thus provided a fair presentation of the parent-only financial positions of KYE Systems Corp. as of December 31, 2021 and 2020 and the parent-only 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 of “Responsibilities of CPAs for the Audit of Parent-only 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 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 parent-only financial statements of KYE Systems Corp. for 2021. Such matters were addressed in the context of our audit of the parent-only 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 parent-only financial statements of

KYE Systems Corp. for 2021:

Occurrence of recognition of sales revenue

The sales revenue of KYE Systems Corp. 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 parent-only financial statements of KYE Systems Corp. for 2021. For the accounting policy for recognition of revenue, see Notes 4 and 19 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.

Responsibilities of the Management and Governing Bodies for Parent-only 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 maintaining the necessary internal control related to preparation of the parent-only financial statements to ensure that the parent-only financial statements are free of material misstatement due to fraud or error.

During preparation of the parent-only financial statements, the management is also responsible for evaluating KYE Systems Corp.’s 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., 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. are responsible for supervising the process of financial reporting.

Responsibilities of CPAs for the Audit of Parent-only Financial Statements

The purpose of our audit of the parent-only financial statements is to obtain reasonable assurance about whether the parent-only 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 parent-only financial statements will be discovered during an audit conducted in accordance with generally 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 parent-only 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:

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We identify and assess the risk of misstatement in the parent-only 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.
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.
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.
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. 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 parent-only 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. is no longer able to remain a going concern.
We assess the overall presentation, structure and contents of the parent-only financial statements (including relevant notes) and whether the parent-only financial statements provide a fair presentation of the relevant transactions and events.
We acquire sufficient and appropriate audit evidence of the financial information of the entities forming KYE Systems Corp. to provide opinions regarding the parent-only financial statements. We are responsible for guidance, supervision and implementation in relation to audit cases and for formation of audit opinions for KYE Systems Corp.

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, 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 parent-only financial statements of KYE Systems Corp. 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 or communicate certain matters in the audit report due to the

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

KYE Systems Corp. Parent-only Balance Sheet December 31, 2021 and 2020

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Unit: NTD Thousand
December 31, 2021 December 31, 2020
Code Asset Amount % Amount %
Current assets
1100 Cash and cash equivalents (Notes 4 and 6) $ 289,750 9 $ 588,481 18
1110 Financial assets measured at fair value through profit or loss –
current (Notes 4 and 7) - - 1,713 -
1170 Notes and accounts receivable (Notes 4, 9 and 19) 81,336 3 102,874 3
1197 Finance lease payments receivable – current (Notes 4 and 10) 3,150 - 3,729 -
1220 Current income tax assets (Note 4) 8,647 - - -
1200 Other receivables (Notes 4, 16 and 25) 566,112 18 536,848 17
130X Inventory (Notes 4 and 11) 234,718 8 165,599 5
1410 Prepayments 3,145 - 6,276 -
1470 Other current assets 34,112 1 34,094 1
11XX Total current assets 1,220,970 39 1,439,614 44
Non-current assets
1517 Financial assets measured at fair value through other
comprehensive income – non-current (Notes 4, 8 and 12) 93,606 3 82,267 3
1550 Investments accounted for using the equity method (Notes 4
and 12) 1,278,902 41 1,236,632 37
1600 Property, plant and equipment (Notes 4, 13 and 26) 419,121 14 421,949 13
1755 Right-of-use assets (Notes 4 and 14) 1,827 - 2,998 -
1840 Deferred income tax assets (Notes 4 and 21) 84,378 3 108,732 3
194D Finance lease payments receivable – non-current (Notes 4 and
10) - - 3,150 -
1990 Other non-current assets (Note 4) 11,470 - 11,960 -
15XX Total non-current assets 1,889,304 61 1,867,688 56
1XXX Total assets $ 3,110,274 100 $ 3,307,302 100
Code Liabilities and equity
Current liabilities
2170 Notes and accounts payable (Notes 15 and 25) $ 31,251 1 $ 102,446 3
2219 Other payables (Notes 16 and 25) 36,644 1 61,156 2
2230 Current income tax liabilities (Note 4) - - 24,216 1
2280 Lease liabilities – current (Notes 4 and 14) 4,597 - 6,044 -
2399 Other current liabilities (Note 25) 73,242 3 80,612 2
21XX Total current liabilities 145,734 5 274,474 8
Non-current liabilities
2570 Deferred income tax liabilities (Notes 4 and 21) 20,693 - 24,554 1
2580 Lease liabilities – non-current (Notes 4 and 14) 425 - 4,790 -
2640 Net defined benefit liabilities – non-current (Notes 4 and 17) 27,076 1 31,654 1
2670 Other non-current liabilities (Note 4) 1,561 - 2,728 -
25XX Total non-current liabilities 49,755 1 63,726 2
2XXX Total liabilities 195,489 6 338,200 10
Equity (Note 18)
Share capital
3110 Common shares 2,215,285 71 2,245,285 68
3200 Capital reserves 309,638 10 382,898 12
Retained earnings
3310 Legal reserves 442,525 14 428,064 13
3320 Special reserves 559,471 18 429,317 13
3350 Undistributed earnings (Notes 4, 8 and 12) 55,066 2 144,615 4
3300 Total retained earnings 1,057,062 34 1,001,996 30
3400 Other equity (Notes 4, 8 and 12) ( 667,200 ) ( 21) ( 661,077 ) ( 20)
3XXX Total equity 2,914,785 94 2,969,102 90
Total liabilities and equity $ 3,110,274 100 $ 3,307,302 100
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The notes attached hereto constitute part of this parent-only financial report.

Chairman: Shih-Kun Tso

President: Pai-Hsiang Li

Accounting Manager: An-Min Kao

KYE Systems Corp. Parent-only 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 %
4110 Total operating revenue $ 971,259 104 $1,261,146 103
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4170	Sales returns and discounts		33,581		4		36,627		3
4100	Net operating revenue
	(Notes 4 and 19)		937,678		100		1,224,519		100
5110	Operating costs (Notes 4,
	11, 20 and 25)		714,149		76		884,351		72
5900	Gross operating profit		223,529		24		340,168		28
5920	Realized sales profit (Note
	4)		-		-		1,550		-
5950	Net gross operating profit		223,529		24		341,718		28
	Operating expenses (Notes
	9, 17 and 20)
6100	Marketing expense		47,590		5		61,597		5
6200	Management expense		90,698		10		105,920		9
6300	R&D expense		1,091		-		2,131		-
6450	Expected credit
	Impairment loss
	(reversal profit)		2,077		-	(	230	)	-
6000	Total operating
	expenses		141,456		15		169,418		14
6900	Net operating profit		82,073		9		172,300		14
	Non-operating revenues
	and expenses
7070	Share of profits/losses
	of subsidiaries and
	associates
	accounted for using
	the equity method
	(Notes 4 and 12)	(	14,392 )	(	1 )	(	1,708	)	-
7020	Other profits and
	losses (Notes 20
	and 29)		13,175		1		8,714		1

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2021 2020
Code Amount % Amount %
7100 Interest income $ 962 - $ 2,141 -
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7510
Interest expense
(
7000
Total other
non-operating
revenues and
expenses
(
7900
Pre-tax net profit
7950
Income tax expense (Notes
4 and 21)

8200
Net profit in the current year
Other comprehensive
income (Note 4)
Items not reclassified
as profit or loss:
8311
Remeasurement
of defined
benefit plans
(Note 17)
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
subsidiaries and
associates
accounted for
using the equity
method (Note
12)

246
)

-
(
230
)

-

501
)

-

8,917

1
81,572
9
181,217
15
31,060

4

34,981

3
50,512

5

146,236
12
310
-
(
21 )
-
15,654
2
(
86,937 )
(
7 )
12,627
1
(
113,688 )
(
9 )

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2021 2020
Code Amount % Amount %
8349 Income tax related
to items not
reclassified
(Note 21) $ 230 - ( $ 21,947 ) ( 2 )
8310 28,821 3 ( 222,593 ) ( 18 )
Items likely to be
subsequently
reclassified as profit
or loss:
8361 Exchange
differences on
translation of
financial
statements of
foreign
operations ( 38,789 ) ( 4 ) ( 23,605 ) ( 2 )
8399 Income tax related
to items likely to
be reclassified
as profit or loss
(Note 21) 7,298 1 4,631 -
8360 ( 31,491 ) ( 3 ) ( 18,974 ) ( 2 )
8300 Net other
comprehensive
income ( 2,670 ) - ( 241,567 ) ( 20 )
8500 Total comprehensive
income in the current
year $ 47,842 5 ( $ 95,331 ) ( 8 )
EPS (Note 22)
9710 Basic $ 0.23 $ 0.64
9810 Diluted $ 0.23 $ 0.64
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The notes attached hereto constitute part of this parent-only financial report.

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

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KYE Systems Corp. Parent-only Statement of Changes in Equity January 1 to December 31, 2021 and 2020

Unit: NTD Thousand

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Other equity
Unrealized
Retained earnings profit/loss on
Exchange financial assets
differences on measured at fair
Undistributed translation of value through other
earnings (losses to financial statements comprehensive
Code Share capital Capital reserves Legal reserves Special reserves be offset) of foreign operations income Treasury stocks 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
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 )
D1 Net profit in 2020 - - - - 146,236 - - - 146,236
D3 Other comprehensive income in 2020 - - - - ( 17 ) ( 18,974 ) ( 222,576 ) - ( 241,567 )
D5 Total comprehensive income in 2020 - - - - 146,219 ( 18,974 ) ( 222,576 ) - ( 95,331 )
L1 Purchase of treasury stocks - - - - - - - ( 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
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
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 )
D1 Net profit in 2021 - - - - 50,512 - - - 50,512
D3 Other comprehensive income in 2021 - - - - 248 ( 31,491 ) 28,573 - ( 2,670 )
D5 Total comprehensive income in 2021 - - - - 50,760 ( 31,491 ) 28,573 - 47,842
L1 Purchase of treasury stocks - - - - - - - ( 35,901 ) ( 35,901 )
M3 Disposal of subsidiaries - - - - - 1,101 - - 1,101
L3 Cancellation of treasury stocks ( 30,000 ) ( 5,901 ) - - - - - 35,901 -
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
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The notes attached hereto constitute part of this parent-only financial report.

Chairman: Shih-Kun Tso

President: Pai-Hsiang Li

Accounting Manager: An-Min Kao

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KYE Systems Corp. Parent-only 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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A10000	Pre-tax net profit in the current
	year		$ 81,572		$ 181,217
A20010	Profits, expenses and losses:
A22300	Share of profits/losses of
	subsidiaries and
	associates accounted for
	using the equity method		14,392		1,708
A23700	Profit on re-increase in the
	net realizable value of
	inventories	(	8,900 )	(	28,700 )
A29900	Profit on reversal of losses
	from preparation of
	materials	(	3,600 )	(	9,200 )
A20100	Depreciation expense		5,910		12,395
A24100	Unrealized profit on foreign
	currency exchange – net	(	2,449 )	(	2,555 )
A20300	Expected credit Impairment
	loss (reversal profit)		2,077	(	230 )
A23200	Loss on disposal of
	subsidiaries accounted for
	using the equity method		1,683		-
A21200	Interest income	(	962 )	(	2,141 )
A20200	Amortization expense		853		3,954
A20400	Profit on valuation of financial
	assets measured at fair
	value through profit or loss	(	672 )	(	1,713 )
A29900	Loss on lease modification		332		-
A20900	Interest expense		246		230
A21300	Dividend revenue	(	97 )	(	1,604 )
A24000	Realized sales profit between
	affiliated companies		-	(	1,550 )
A30000	Net changes in operating assets
	and liabilities
A31115	Financial assets measured at
	fair value through profit or
	loss on a mandatory basis		2,385		-
A31150	Notes and accounts
	receivable		19,461	(	6,310 )
A31180	Other receivables	(	19,306 )		111,157
A31200	Inventory	(	60,219 )		22,447
A31230	Prepayments		3,131		7,619
A31240	Other current assets	(	8,085 )	(	2,947 )
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Code 2021 2020
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Code		2021	2021				2020
A32150	Notes and accounts payable	( $ 71,195		)		$	5,500
A32180	Other payables	(	24,528	)	(		5,876	)
A32230	Other current liabilities	(	7,372	)	(		7,096	)
A32240	Net defined benefit liabilities	(	5,443	)	(		55	)
A33000	Cash generated from operations	(	80,786	)			276,250
A33100	Interest received		962				2,180
A33200	Dividends received		97				1,604
A33500	Income tax paid	(	35,902	)	(		2,433	)
AAAA	Net cash inflow (outflow) from
	operating activities	(	115,629	)			277,601
	Cash flow from investing activities
B01800	Acquisition of long-term equity
	investments accounted for using
	the equity method	(	87,482	)	(		220,775	)
B00020	Disposal of proceeds from financial
	assets measured at fair value
	through other comprehensive
	income		9,055				11,510
B07600	Dividends received		4,076				2,397
B06700	Decrease in other non-current
	assets		2,236				36,953
B02700	Acquisition of property, plant and
	equipment	(	1,693	)	(		2,800	)
B01900	Disposal of long-term equity
	investments accounted for using
	the equity method		-				98,313
B02400	Share payments returned on
	capital reduction in investee
	companies accounted for using
	the equity method		-				19,022
BBBB	Net cash outflow from
	investing activities	(	73,808	)	(		55,380	)
	Cash flow from financing activities
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	(	5,812	)	(		8,299	)
C05600	Interest paid	(	230	)	(		230	)
C03000	Increase in deposits received		8				666
CCCC	Net cash outflow from
	financing activities	(	109,294	)	(		180,430	)

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Code 2021 2020
EEEE Increase (Decrease) in cash and cash
equivalents in the current year ( $ 298,731 ) $ 41,791
E0010 Starting balance of cash and cash
0 equivalents 588,481 546,690
E0020 Ending balance of cash and cash
0 equivalents $ 289,750 $ 588,481
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The notes attached hereto constitute part of this parent-only financial report.

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

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KYE Systems Corp. Notes to Parent-only Financial Statements 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 parent-only financial report is presented in NTD, our functional currency.

II. Date and procedures of approval of the financial report

This parent-only 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 our accounting policies.

(II) FSC-approved IFRSs applicable in 2022

Effective date as published New/Amended/Revised standards and interpretations by the IASB “Annual Improvements to IFRSs 2018–2020” January 1, 2022 (Note 1) Amendment to IFRS 3 – “Reference to the Conceptual Framework” January 1, 2022 (Note 2) Amendment to IAS 16 – “Property, Plant and January 1, 2022 (Note 3) Equipment: Proceeds before Intended Use” Amendment to IAS 37 – “Onerous Contracts – Cost of January 1, 2022 (Note 4) 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 parent-only financial report, we 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 Liabilities	January 1, 2023
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 to	January 1, 2023 (Note 4)
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
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1, 2022.

As of the date of approval and publication of this parent-only financial report, we 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 parent-only financial report has been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and other applicable laws and regulations.

(II) Basis of preparation

Except for financial instruments measured at fair value, this parent-only 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:

Level 1 inputs: Quoted prices in active markets for identical assets or liabilities accessible on the measurement date (unadjusted).
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).
Level 3 inputs: Unobservable inputs for the asset or liability.

In preparing this parent-only financial report, we have adopted the equity method for investments in subsidiaries and associates. To ensure the profit or loss, other comprehensive income and equity for the current period in this parent-only financial report are identical to the profit or loss, other comprehensive income and equity for the current year attributable to our owners in our consolidated financial report, the differences in accounting treatments on parent-only and consolidated bases are presented as adjustments to “investments accounted for using the equity method,” “share of profit or loss of subsidiaries, associates and joint ventures accounted for using the equity method,” “share of other comprehensive income of subsidiaries, associates and joint ventures accounted for using the equity method” and other related items of equity.

(III) Criteria for classification of assets and liabilities as current and non-current Current assets include:
assets held primarily for the purpose of trading;
assets expected to be realized within 12 months after the balance sheet date; and
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:

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liabilities held primarily for the purpose of trading;
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

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) Foreign currency

In preparing this financial report, a transaction in a currency other than our functional currency (a foreign currency) has been recorded by translating that currency into our 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 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.

(V) 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.

(VI)

Investments accounted for using the equity method

We use the equity method to account for investments in subsidiaries and associates.

1. Investments in subsidiaries

A subsidiary means an entity controlled by us.

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Under the equity method, the investment in a subsidiary is initially recognized at cost, and the carrying amount is increased or decreased with our share of the profit or loss and other comprehensive income of and the profit distributed from the subsidiary after the date of acquisition. Additionally, changes in our share of other equity of a subsidiary are recognized in proportion to our shareholding.

Changes in our ownership interest in a subsidiary that do not result in a loss of control are treated as equity transactions. The difference between the carrying amount of an investment and the fair value of consideration paid or received is directly recognized in equity.

If our share of losses of a subsidiary equals or exceeds our interest in the subsidiary, we will continue to recognize losses in proportion to our shareholding.

If the acquisition cost exceeds our share of the net fair value of the identifiable assets and liabilities of a subsidiary constituting a business 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 our share of the net fair value of the identifiable assets and liabilities of a subsidiary constituting a business on the date of acquisition exceeds the acquisition cost, such excess is recognized in profit of the period.

In evaluating impairment, we consider the cash generating units in the financial report on an overall basis and compare their recoverable amounts with their carrying amounts. If the recoverable amount of an asset is increased subsequently, reversal of impairment losses is recognized in profit, provided that the carrying amount of the asset after reversal of impairment losses do not exceed the carrying amount of the asset less the amount accounted for in amortization, without recognition of impairment losses. Impairment losses attributable to goodwill should not be reversed in the subsequent period.

If our control of a subsidiary is lost, the residual investment in the former subsidiary is measured at the fair value on the date of loss of control. The difference between the fair value of the residual investment and any disposal proceeds, and the carrying amount of investment on the date of loss of control, is recognized in profit or loss of the period. Additionally, the accounting treatment of all amounts related to the subsidiary recognized in other comprehensive income is on the same basis as that required for our direct disposal of the relevant assets or liabilities.

Unrealized profits or losses from downstream transactions between us and a subsidiary are eliminated in the parent-only financial report. Profits or losses arising from upstream and side-stream transactions between us and a subsidiary are recognized in the parent-only financial report only to the extent where such profits or losses do not involve our equity in the subsidiary.

2. Investments in associates

An associate means a company other than a subsidiary or joint venture, over which we have significant influence.

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

If the acquisition cost exceeds our share 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 our share 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 our failure to subscribe to new shares issued by an associate in proportion to our shareholding, changes have occurred in our shareholding 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 our share of losses of an associate equals or exceeds our interest in the associate, we will discontinue recognizing further losses. We recognize additional losses and liabilities only to the extent where we have incurred legal or constructive obligations or made payments on behalf of the associate.

In evaluating impairment, we 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 constitutes 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.

We discontinue using the equity method from the date when our investment ceases to be an associate, and we 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 we 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

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liabilities by the associate.

Profits or losses arising from upstream, downstream and side-stream transactions between us and an associate are recognized in the parent-only financial report only to the extent where such profits or losses do not involve our equity in the associate.

(VII) 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. We 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.

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

We assess whether there is any sign of possible impairment of property, plant and equipment, right-of-use assets 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, we estimate the recoverable amount of the cash generating unit of the asset. If common assets can be allocated to cash generating units on a reasonable and consistent basis, they are allocated to each cash generating unit; otherwise they are allocated to the smallest group of cash generating units to which allocation on a reasonable and consistent basis can be made.

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.

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.

(IX) Financial instruments

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Financial assets and liabilities are recognized in the parent-only balance sheet when we 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.

Financial assets

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

(1) Types of measurement

We 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 24.

B. Financial assets measured at amortized cost

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

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

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

After our right 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
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We 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 we determine that any internal or external information has indicated the debtor is unable to pay off debts without considering the collateral we 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

We 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.

2. Equity instruments

The debt and equity instruments issued by us 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 us 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.

Financial liabilities
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(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.

(X) Recognition of revenue

Once we have identified the performance obligations in the contract with a customer, we 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 a contract and is recognized based on the degree of completion of the contract.

(XI) Leases

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

(1) We 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 us, 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 we 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

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reflect a constant rate of return receivable on our net investment outstanding 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) We 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 parent-only 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 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, we 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 parent-only balance sheet.

(XII) 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

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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.

(XIII) Income tax

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

1. Current income tax

We determine the current income in accordance with the laws enacted by the jurisdiction in which we file our income tax return to calculate the income tax payable.

The additional income tax levied on undistributed earnings calculated in 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.

2. 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 we 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

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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 our tax consequences 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.

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

In adopting accounting policies, our management 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.

We 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. Our 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

period when it is made and in the future Cash and cash equivalents	period.	period.
Cash on hand Bank checks and demand deposits	December 31, 2021 $ 1,148 288,602 $ 289,750		December 31, 2020
		$		$	$ 1,181 587,300
					588,481

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

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VIII.	Financial assets–current Non-derivative financial assets measured at fair value through profit or loss on a mandatory basis - Domestic non-listed (non-OTC) common stocks Financial assets measured at fair value	Financial assets–current Non-derivative financial assets measured at fair value through profit or loss on a mandatory basis - Domestic non-listed (non-OTC) common stocks Financial assets measured at fair value	Financial assets–current Non-derivative financial assets measured at fair value through profit or loss on a mandatory basis - Domestic non-listed (non-OTC) common stocks Financial assets measured at fair value	Financial assets–current Non-derivative financial assets measured at fair value through profit or loss on a mandatory basis - Domestic non-listed (non-OTC) common stocks Financial assets measured at fair value
	Non-current Investments in equity instruments measured at fair value through other comprehensive income Domestic non-listed (non-OTC) common stocks Domestic listed (OTC) common stocks Domestic non-listed (non-OTC) preferred stocks Total	December 31, 2021 $ 86,258 7,318 30 $ 93,606
				$ 71,287 10,950 30 $ 82,267

We make investments in equity instruments according to our medium- to long-term strategies, and we expect profits through long-term investments. Our management 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 and 2020, we adjusted our investment positions and disposed of the shares of AlgolTek Inc. and Solteam Incorporation and part of those of Coretek Opto Corporation at a fair value of NTD9,055,000 and NTD11,510,000 respectively. Other related equity – unrealized valuation gains on financial assets measured at fair value through other comprehensive income, amounting to NTD4,315,000, and unrealized valuation losses, amounting to NTD1,789,000, were transferred to retained earnings.

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 $ 82,013 ( 677 ) $ 81,336	December 31, 2020
	(	(	$ 103,363 489 ) $ 102,874

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

To mitigate credit risks, our management has made decisions on setting loan limits and loan approval to ensure that appropriate actions are taken for the recovery of overdue accounts receivable. In addition, we 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. Accordingly, our management considers that our credit risks have reduced significantly.

We 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 our historical experience 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 we are not able to reasonably expect any recoverable amount, we directly write off the relevant accounts receivable, and we will continue to pursue recourse actions. All amounts recovered through recourse are recognized in profit or loss.

Our loss allowances for notes and accounts receivable measured using a provision matrix are as follows:

December 31, 2021

provision matrix are as December 31, 2021	follows:	follows:
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% $ 68,734 219 ) $ 68,515	(	1%`～`5% $ 13,218 397 ) $ 12,821		- $ - - $ -		100% $ 61 (61 ) $ -	(	$ 82,013 677 ) $ 81,336

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		Account age of more than 120 days			Total
	(	0%`～`1% $ 98,617 288 ) $ 98,329	1%`～`5% $ 4,685 (140 ) $ 4,545		- $ - - $ -		100% $ 61 (61 ) $ -	(	$ 103,363 489 ) $ 102,874

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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 accounted for in the current year –: Impairment losses reversed in the current year –: Actual write-offs in the current year Balance – ending of the year Finance lease payments receivable Undiscounted lease payments 1st year 2nd 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 $ 489 2,077 - (1,889 ) $ 677 December 31, 2021 $ 3,172 - 3,172 ( 22 ) $ 3,150 $ 3,150 - $ 3,150	2020
		$ 7,778 - (230) (7,059 ) $ 489 December 31, 2020	$ 7,778 - (230) (7,059 ) $ 489
	(		$ ( $	3,807 3,172
				6,979 100 ) 6,879
			$ $	3,729 3,150
				6,879

X. Finance lease payments receivable

We have subleased the premises and buildings rented by us in Neihu District to other companies, receiving a fixed payment of NTD3,807,000 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.

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%.

We 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, we consider that the above-mentioned finance lease payments receivable are not impaired.

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==> picture [468 x 592] intentionally omitted <==

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

XI. Inventory
December 31, December 31,
2021 2020
Finished goods $ 128,496 $ 74,073
Work in process 55,560 60,634
Raw materials 50,662 30,892
$ 234,718 $ 165,599
The nature of cost of sales is as follows:
2021 2020
Cost of inventories sold $ 723,049 $ 913,051
Profit on re-increase in the net
realizable value of
inventories ( 8,900) ( 28,700)
$ 714,149 $ 884,351
XII. Investments accounted for using the equity method
December 31, December 31,
2021 2020
Investments in subsidiaries $ 1,052,515 $ 1,004,280
Investments in associates 226,387 232,352
$ 1,278,902 $ 1,236,632
(I) Investments in subsidiaries
December 31, 2021 December 31, 2020
Shareh Shareh
olding olding
Name of subsidiary Amount (%) Amount (%)
Genius Holding Co., Ltd. $ 274,049 100.00 $ 301,777 100.00
Chung-Chiang Investment
Co., Ltd. 150,768 100.00 63,693 100.00
Hung-Cheng Investment Co.,
Ltd. 54,818 100.00 44,116 100.00
KYE International Corporation 2,810 100.00 4,138 100.00
KYE Systems Europe GmbH - - 630 100.00
KYE Systems (Hong Kong)
Corp. 8,565 100.00 8,864 100.00
Digilife Technologies Co., Ltd. 561,505 94.61 581,062 94.61
DIGILIFE PTY LTD - - - -
$ 1,052,515 $ 1,004,280
----- End of picture text -----

KYE Systems Europe GmbH, as our investee and a subsidiary, ceased operations in December 2017 and completed its liquidation in December 2021.

Digilife Technologies Co., Ltd., as our investee and a subsidiary, carried out a cash capital increase in June 2020. We purchased 20,560,000 shares, and our shareholding has increased from 91.37% to 94.61%.

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Chung-Chiang Investment Co., Ltd., as our investee and a subsidiary, carried out a cash capital increase in April 2021. We purchased 8,748,000 shares, and our shareholding has remained at 100%.

In November 2020, we sold all the shares of Digilife Pty Ltd we held to Digilife Technologies Co., Ltd. We have treated the transaction as an equity transaction since it has not changed our control of Digilife Pty Ltd.

In 2021 and 2020, our subsidiaries Digilife Technologies Co., Ltd. and Hung-Cheng Investment Co., Ltd. adjusted their investment positions and sold financial assets measured at fair value through other comprehensive income at a fair value of NTD12,231,000 and NTD1,550,000 respectively. Other related equity – unrealized valuation losses on financial assets measured at fair value through other comprehensive income, amounting to NTD9,000, and unrealized valuation gains, amounting to NTD185,000, were transferred to retained earnings.

(II) Investments in associates

earnings. Investments in associates
Associates with materiality Timing Pharmaceutical Co., Ltd. (Timing Pharmaceutical Company) Individual immaterial associates 1. Associates with materiality Company name Timing Pharmaceutical Company	December 31, 2021 December 31, 2020 $ 210,561 $ 211,917 15,826 20,435 $ 226,387 $ 232,352 Shareholdingand votingrights(%)	December 31, 2020
			$ 211,917 20,435
			$ 232,352
	December 31, 2021 22.64%	December 31, 2020
		22.64%

For information regarding the nature of business, the principal place of business and the country of registration of the above-mentioned associates, see Table 4 “Information of Investee Companies, Their Areas of Establishment...and Other Relevant Information.”

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The following 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.

adjustments made when using the equity method.
2021 Current assets $ 818,830 Non-current assets 1,644,573 Current liabilities (732,647) Non-current liabilities (450,391 ) Equity 1,280,365 Non-controlling interests (347,401 ) $ 932,964 Our shareholding (%) 22.64% Our equity $ 210,561 Carrying amount of investments $ 210,561 Operating income $ 799,843 Net profit (loss) in the current year $ 4,853 Other comprehensive income (2,254 ) Total comprehensive income $ 2,599 Dividends received from Timing Pharmaceutical Company $ 1,945 2. Summary of individual immaterial associates 2021 Our share Net loss in the current year ($ 4,521) Other comprehensive income - Total comprehensive income ($ 4,521 )	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 ) $ - 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 ) $ -
	($ 2,024) - ($ 2,024 )
			($ 2,024 )

Investments accounted for using the equity method and our share of profits or losses and other comprehensive income thereof are recognized based on the CPA-audited financial report of each associate for the same period, except in the case of Timing Pharmaceutical Company, where calculation is based on the financial report not audited by a CPA. Nonetheless, our management 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.

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XIII. Property, plant and equipment

Machine/Eq uipment $ 22,806 - ( 489 ) $ 22,317 $ 22,806 (489) - $ 22,317 $ - $ 23,026 - ( 220 ) $ 22,806 $ 23,026 (220) - $ 22,806 $ -		Total
(	( (	$ 688,424 1,693 560 ) $ 689,557
		$ 266,475 (560) 4,521
(		$ 270,436
		$ 419,121
		$ 685,996 2,800 372 ) $ 688,424

		$ 262,807 (372) 4,040 $ 266,475
		$ 421,949

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Our property, plant and equipment are accounted for in depreciation on a straight-line basis over the following useful lives:

Premises and buildings 50 to 55 years Machine/Equipment 2 to 9 years Miscellaneous equipment Office equipment 2 to 5 years Transport equipment 2 to 5 years Leasehold improvement 4 to 10 years Passenger and freight elevators 15 years Computer equipment 1 to 5 years Others 2 to 8 years

For the amount of our property, plant and equipment pledged as collateral for loans, see Note 26.

XIV. Lease agreement

(I) Right-of-use assets

IV. Lease agreement (I) Right-of-use assets
Carrying amount of right-of-use assets Buildings Office equipment Transport equipment Addition of right-of-use assets Depreciation expense of right-of-use assets Buildings Office equipment Transport equipment (II) Lease liabilities Carrying amount of lease liabilities Current Non-current	December 31, 2021 $ 1,315 512 - $ 1,827 2021 $ 550 $ 642 118 629 $ 1,389 December 31, 2021 $ 4,597 $ 425	December 31, 2020
		$ 1,957 412 629 $ 2,998 2020	$ 1,957 412 629 $ 2,998
		$ - $ 5,322 138 2,895 $ 8,355 December 31, 2020	$ - $ 5,322 138 2,895	$ -
			$ 8,355
			$ 6,044
			$ 4,790

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The discount rate ranges for lease liabilities are as follows:

Buildings Office equipment Transport equipment	December 31, 2021 1.5% 1.5% 1.5%	December 31, 2020
		1.5% 1.5% 1.5%

(III) Material lease activities and terms

We 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, we will not be entitled to any renewal of the lease or any bargain purchase of the rented assets.

(IV) Other lease information

We 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.

As of December 31, 2021 and 2020, we did not have any short-term lease commitment to which the recognition exemption applies.

XV. Accounts payable

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

XVI. Other receivables – related parties and other payables

The advances we have provided primarily for purchase of materials from Dongguan Kunying Computer Products Co., Ltd., a subsidiary of KYE Inc., through KYE Trade Co., Ltd. are accounted for separately in other receivables – related parties and other payables.

XVII. Post-employment benefit plans

(I) Defined contribution plan

The pension system under the “Labor Pension Act,” as applied by us, 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.

(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. The pension paid to an employee is calculated based on the length of his/her service and the average salary over the 6 months prior to the approved date of his/her retirement. We appropriate 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,

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we 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 parent-only balance 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

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

Fair value of plan assets ($ 16,906 ) - ( 129 ) ( 129 ) ( 571) - - (571 ) ( 534 ) (18,140 ) - ( 92 ) ( 92 ) ( 229) - - (229 ) ( 4,528 ) ($ 22,989 )	Fair value of plan assets ($ 16,906 ) - ( 129 ) ( 129 ) ( 571) - - (571 ) ( 534 ) (18,140 ) - ( 92 ) ( 92 ) ( 229) - - (229 ) ( 4,528 ) ($ 22,989 )	Net defined benefit liabilities (assets)	Net defined benefit liabilities (assets)
( ( (		( ( ( ( ( (	$ 31,723
			208 236 444 571) 1,255 663 ) 21 ( 534 ) 31,654 103 157 260 229) 812 893 ) 310 ) 4,528 ) $ 27,076


	($

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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:

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.
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.
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, 2021 ($ 993 ) $ 1,032 $ 995 ($ 964 )	December 31, 2020	December 31, 2020
				($ 1,255 ) $ 1,303 $ 1,258 $ 1,218 )

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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.

Expected contribution within 1 year Average maturity period of defined benefit obligations	December 31, 2021 $ 545 11.0 years	December 31, 2020
		$ 539 10.2 years

XVIII. Equity (I) Share capital

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 390,000 $ 3,900,000 221,528 $ 2,215,285	December 31, 2020
			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 any purpose.

(III) Retained earnings and dividend policy

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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 20.

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 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

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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
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 )

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 subsidiaries and 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 ) 15,947 12,626 28,573 4,306 ) $ 601,087 )	2020
	( ( (		($ 404,382 ) (108,888) (113,688 ) (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)

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, we 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.

XIX. Revenue

voting rights. Revenue
Revenue from contracts with customers Revenue from the sale of goods		2021 $ 937,678		2020
				$ 1,224,519

(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 customers, less estimated customer returns, rebates and other similar

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discounts.

	discounts.
(II) (III) XX. (I) (II)	Contract balance December 31, 2021 December 31, 2020 Total notes and accounts receivable (Note 9) $ 82,013 $ 103,363 Sub-items of revenue from contracts with customers 2021 Mouse $ 363,580 Keyboards 278,451 Speaker 203,621 Others 92,026 $ 937,678 Net profit in the current year Other profits and losses 2021 Other revenues $ 19,861 Exchange loss – net (6,246) Loss on disposal of subsidiaries accounted for using the equity method (1,683) Profit on valuation of financial assets 672 Rent revenue 474 Dividend revenue 97 Total $ 13,175 Depreciation and amortization 2021 Property, plant and equipment $ 4,521 Right-of-use assets 1,389 Other non-current assets 853 $ 6,763 Summary of depreciation expenses by purpose Operating expense $ 5,910 Summary of amortization expenses by purpose Operating costs $ 543 Operating expense 310 $ 853	January 1, 2020
			$ 101,333 2020
		$
		$ 25,187 (21,965) - 1,713 2,175 1,604 $ 8,714 2020
				$ 4,040 8,355 3,954
				$ 16,349
				$ 12,395
					$ 3,765 189 $ 3,954

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(III) Employee benefit expenses

Employee benefit expenses
Post-employment benefits (Note 17) Defined contribution plan Defined benefit plan Separation benefits Other employee benefits Total of employee benefit expenses Summarized by purpose Operating expense	2021 $ 2,234 260 2,494 430 64,738 $ 67,662 $ 67,662	2020
			$ 2,423 444 2,867 195 73,442 $ 76,504
			$ 76,504

(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 parent-only 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 parent-only financial reports of 2020 and 2019.

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.

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XXI. Income tax

(I) Income taxes recognized in profit or loss

Income tax expenses consist of the following main items:

(II)

2021
2020
Current income tax
Incurred in the current year
$ -
$ 28,747
Adjusted from prior years
3,039
( 5,396
)
3,039
23,351
Deferred income tax
Incurred in the current year
28,021
11,630
Income tax expenses
recognized in profit or loss
$ 31,060
$ 34,981
Adjustments to accounting income and income tax expenses are as follows:
2021
2020
Pre-tax net profit
$ 81,572
$ 181,217
Income tax expense on pre-tax
net profit calculated at the
statutory tax rate
$ 16,314
$ 36,243
Expense and loss not
deductible and tax-free
income not included for
determination of taxable
income
15,001
4,503
Adjustment to current income
tax expenses of prior years
in the current year
3,039
(5,396)
Unrecognized deductible
temporary difference
( 3,294
)
( 369
)
Income tax expenses
recognized in profit or loss
$ 31,060
$ 34,981
Income tax recognized in other comprehensive income
2021
2020
Deferred income tax
Incurred in the current year
- Unrealized profit/loss on financial
assets measured at fair value
through other comprehensive
income
$ 292
($ 21,951)
- Translation of foreign operations
7,298
4,631
- Remeasurement of defined
benefits plans
( 62
)
4
Income tax profit (expense) recognized
in other comprehensive income
$ 7,528
($ 17,316
)

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(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 Investments accounted for using the equity method Financial assets measured at fair value through other comprehensive income Deferred loss on purchase contracts Exchange differences on foreign operations Others Deferred income tax liabilities Temporary difference Exchange differences on foreign operations Defined retirement benefit plan Investments accounted for using the equity method Financial assets measured at fair value through other comprehensive income Others	Balance – beginning of the year $ 11,240 8,636 7,650 20,337 32,809 11,340 16,240 480 $ 108,732 $ 3,826 2,305 10,391 7,923 109 $ 24,554		Recognized in profit or loss ($ 1,780) (854) - (4,871) (19,296) (720) - ( 305 ) ($ 27,826 ) $ - - (146) - 341 $ 195	Recognized in other comprehens ive income $ - - - - - - 3,472 - $ 3,472 ($ 3,826) 62 - (292) - ($ 4,056 )	Balance – ending of the year
		$	(	( (		$ 9,460 7,782 7,650 15,466 13,513 10,620 19,712 175 $ 84,378
						$ - 2,367 10,245 7,631 450 $ 20,693

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2020

2020
Deferred income tax assets Temporary difference Inventory Defined retirement benefit plan Other non-current assets Investments accounted for using the equity method Financial assets measured at fair value through other comprehensive income Deferred loss on purchase contracts Exchange differences on foreign operations Others Deferred income tax liabilities Temporary difference Exchange differences on foreign operations Defined retirement benefit plan Investments accounted for using the equity method Financial assets measured at fair value through other comprehensive income Others	Balance – beginning of the year $ 16,980 8,654 7,990 20,374 46,837 13,180 11,676 4,121 $ 129,812 $ 3,893 2,309 10,486 - - $ 16,688	Recognized in profit or loss ($ 5,740) (18) (340) (37) - (1,840) - ( 3,641 ) ($ 11,616 ) $ - - (95) - 109 $ 14	Recognized in other comprehens ive income $ - - - - (14,028) - 4,564 - ($ 9,464 ) ($ 67) (4) - 7,923 - $ 7,852	Balance – ending of the year
					$	$ 11,240 8,636 7,650 20,337 32,809 11,340 16,240 480
						108,732
						$ 3,826 2,305 10,391 7,923 109 $ 24,554

(IV) Approval of income tax

The return of our income tax calculated up until 2019 was approved by the tax authority.

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XXII. 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 in the current year Effect of dilutive potential common shares: Remuneration for employees Net profit used for calculation of diluted EPS 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	2021 2020 $ 50,512 $ 146,236 - - $ 50,512 $ 146,236 Unit: Thousand shares 2021 2020 222,903 228,307 239 657 223,142 228,964

Where we 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.

XXIII. Capital risk management

We engage in capital management to ensure all companies in our 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 our overall strategies.

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

We 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 our management, we balance our

49 -

overall capital structure by paying dividends, issuing new shares, repurchasing shares and issuing new liabilities or repaying existing liabilities.

XXIV. 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, other receivables, deposits paid, notes and accounts payable, other payables and deposits received, is a reasonable approximation of fair value, its fair value is not disclosed.

(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 other comprehensive income Investment in equity instruments - Domestic listed (OTC) stocks - Domestic 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 Total	Level 1 $ - - $ - Level 1 $ - $ - - $ -	Level 2 $ - - $ - Level 2 $ - $ - - $ -	Level 3 $ 7,318 86,288 $ 93,606 Level 3 $ 1,713 $ 10,950 71,317 $ 82,267	Total
				$ 7,318 86,288
				$ 93,606
				Total
				$ 1,713 $ 10,950 71,317	$ 1,713
				$ 82,267

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

Adjustments to financial instruments measured at Level 3 fair value
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2021

2021
Balance – beginning of the year Recognized in profit or loss (other profits and losses) Recognized in other comprehensive income Disposal 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 Disposal 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 $ - 1,713 - - $ 1,713	Financial assets measured at fair value through other comprehensive income $ 82,267 - 11,339 - $ 93,606 Financial assets measured at fair value through other comprehensive income $ 157,860 - (75,537) ( 56 ) $ 82,267	Total
			$ 83,980 672 11,339 ( 2,385 ) $ 93,606 Total	$ 83,980 672 11,339 ( 2,385 ) $ 93,606
			$ 157,860 1,713 (75,537) ( 56 ) $ 83,980

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

For the domestic non-listed (non-OTC) stocks held by us 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 $ 941,380 - 93,606 68,572	December 31, 2020
		$ 1,236,976 1,713 82,267 164,271

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 and deposits received.

(IV)

Purposes and policies of financial risk management

Our primary financial instruments include investments in equity, accounts receivable, accounts payable, loans and lease liabilities. Our financial management department 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 our 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.

We 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. 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. We do not engage in any transaction of financial instruments (including derivative financial instruments) for speculative purposes.

Our financial management department submits a report to the Board of Directors on a quarterly basis.

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1. Market risks

The risk of change in foreign exchange rates is the major financial risk we bear as a result of our operating activities (see (1) below). We engage in various derivative financial instruments to manage the foreign exchange risk we bear.

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

(1) Exchange rate risk

We engage in transactions of the sale and purchase of goods denominated in foreign currencies, exposing us to the risk of change in foreign exchange rates. More than 99% of our sales are not denominated in our functional currency, and approximately 59% of our purchases are not denominated in our functional currency. For the management of our exposure to exchange rate risk, we use currency options to manage risks to the extent permitted by policies.

For the carrying amounts of our monetary assets and liabilities denominated in non-functional currencies on the balance sheet date, see Note 29.

Sensitivity analysis

We are affected primarily by fluctuations in the exchange rate of USD.

The following table describes in detail our sensitivity analysis in the event where the exchange rate of NTD (our 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 $ 1,398	2020
		$ 2,987

Note:Mainly generated from our accounts receivable and payable 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 reflect the mid-year risk exposure.

(2) Interest rate risk

The interest rate risk exposure occurs due to our undertaking of bank deposits at a floating interest rate.

The carrying amounts of our financial assets and liabilities

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exposed to the interest rate risk on the balance sheet date are as follows:

follows:
With cash flow interest rate risk - financial assets	December 31, 2021 $ 288,555	December 31, 2020
		$ 586,582

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 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, our pre-tax net profit in 2021 and 2020 would increase/decrease by NTD1,094,000 and NTD1,287,000 respectively, mainly due to our deposits with floating rates.

(3) Other price risks

We 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. Our management manages risks by holding different risk portfolios. Our equity price risk 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 2020 would increase/decrease by NTD17,000 due to an increase/decrease in the fair value of financial assets measured at fair value through profit or loss. Other pre-tax comprehensive income in 2021 and 2020 would increase/decrease by NTD936,000 and NTD823,000 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 we 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, our management 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. In addition, we review the

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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, our management considers that our credit risk 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. We 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 our top 10 customers accounted for 64% and 71% of our accounts receivable, respectively. The credit concentration risk of other accounts receivable is not material.

3. Liquidity risk

We 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 we 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 us. The table is compiled based on the earliest date when we 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.

December 31, 2021

flow of interest. December 31, 2021
Non-derivative financial liabilities Non-interest-bearing liabilities Lease liabilities December 31, 2020 Non-derivative financial liabilities Non-interest-bearing liabilities Lease liabilities	Less than 1 year $ 68,645 4,635 $ 73,280 Less than 1 year $ 164,721 6,164 $ 170,885	1 to	2 years $ - 96 $ 96 2 years $ - 4,682 $ 4,682	2 to 5	years $ - 288 $ 288 years $ - 143 $ 143	More than 5 years
		1 to		2 to 5		$ - 56 $ 56 More than 5 years		$ - 56 $ 56
			$				$ - -
							$ -

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XXV. Related party transactions

The following are transactions between us and related parties, other than those already disclosed in other notes:

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

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Name of related party Relationship with us
KYE International Corporation (KYI) Subsidiary
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ose already disclosed in other notes: mes of related parties and their relationship with us Name of related party KYE International Corporation (KYI)	Relationship with us Subsidiary	Relationship with us Subsidiary
KYE Systems Europe GmbH	Subsidiary (liquidation
	was completed	in
	December 2021)
KYE Systems (Hong Kong) Corp.	Subsidiary
KYE Trade (HK) Co., Ltd. (KYE Trade)	Subsidiary
Dongguan Kunying Computer Products Co., Ltd.
(Dongguan Kunying)	Subsidiary
Chung-Chiang Investment Co., Ltd.	Subsidiary
Hung-Cheng Investment Co., Ltd.	Subsidiary
Star Reach Limited	Associate

(II) Operating transactions

Operating transactions
Purchase KYE Trade Subsidiary Associate	2021 $ 293,099 - - $ 293,099	2020
			$ 484,510 7,710 285 $ 492,505

As described in Note 16 of the financial statements, we conduct purchase transactions with KYE Trade where we purchase raw materials and transport them to our subsidiary in China to be processed into finished goods, which are then resold to us. In our purchase transactions with KYE Trade, we agree to bear the losses of our subsidiary in China from preparation of materials. In 2021 and 2020, we recognized NTD3,600,000 and NTD9,200,000 as profit on reversal of losses from preparation of materials respectively. As of December 31, 2021 and 2020, we recognized NTD53,100,000 and NTD56,700,000 as provision for losses from preparation of materials respectively, which were accounted for in cost of sales and other current liabilities. We purchase/sell goods from/to other related parties under the same transaction terms as those for non-related parties.

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The balance of other payments receivable from related parties on the balance sheet date is as follows:

balance sheet date is as follows:
Dongguan Kunying Subsidiary	December 31, 2021 $ 565,348 757 $ 566,105	December 31, 2020
			$ 534,294 2,554
			$ 536,848

The balance of payments payable to related parties on the balance sheet date is as follows:

date is as follows:
Subsidiary	December 31, 2021 $ 17,302	December 31, 2020
			$ 26,113

The outstanding balance of payments payable to related parties is not secured and will be paid in cash. No guarantee has been requested for payments receivable from related parties.

The balance of payments payable to other related parties (including expenses payable) on the balance sheet date is as follows:

Subsidiary (III) Remuneration for key management Short-term employee benefits Post-employment benefits	December 31, 2021 $ 4,866 2021 $ 17,977 378 $ 18,355	December 31, 2020	December 31, 2020	December 31, 2020
		$ 5,723 2020		$ 5,723
			$ 22,063 330 $ 22,393

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

XXVI. Pledged and mortgaged assets

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

Property – net	December 31, 2021 $ 343,631	December 31, 2020	December 31, 2020
			$ 344,974

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XXVII. Material contingent liabilities and unrecognized contractual commitments

The following are our contingencies on the balance sheet date, other than those already described in other notes:

The Securities and Futures Investors Protection Center (SFIPC) has claimed that we are 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 (including us). 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.

XXVIII. Other matters

Since the second quarter of 2021, our sales and operations 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 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 our shipments. Our operating revenue in 2020 was NTD937,678,000, a 23% decline from 2020, and our net operating profit decreased by 52% 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. We expect a recovery in orders and a slow improvement in shipping delays, and our operations will gradually improve. The challenges in market supply/demand and transportation are not structural problems and have had no material effect on our going concern ability, turnover on realization of working capital including accounts receivable and inventories, asset impairment and financing risk.

To create conditions and opportunities for rebounding from the bottom and revitalizing momentum, we 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.

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

The following information is summarized and presented based on foreign currencies other than our functional currency. The disclosed exchange rate

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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

material effect: December 31, 2021
Financial assets Monetary items USD Investments accounted for using the equity method USD RMB HKD Financial liabilities Monetary items RMB December 31, 2020 Financial assets Monetary items USD RMB Investments accounted for using the equity method USD RMB HKD Financial liabilities Monetary items USD RMB	Foreign currency $ 5,052 10,002 1,897 2,413 3,189 Foreign currency $ 11,208 14,673 10,741 2,571 2,413 719 14,778	Exchange rate 27.680 27.680 4.344 3.549 4.344 Exchange rate 28.480 4.377 28.480 4.377 3.673 28.480 4.377	Carrying amount
			$ 139,849 276,859 8,239 8,565 13,851 Carrying amount
			$ 319,216 64,224 305,915 11,253 8,864 20,486 64,684

Our realized and unrealized foreign exchange losses in 2021 and 2020 were NTD6,246,000 and NTD21,965,000, 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.

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XXX. Note disclosures

(I) Information of material transactions:
Funds loaned to others: None.
Endorsements/guarantees to others: None.
Securities held at end of period (excluding those controlled by investee subsidiaries, associates and joint ventures): See Table 1.
Cumulative amount of purchase or sale of the same securities equaling or exceeding NTD300 million or 20% of the paid-up capital: None.
Amount of acquisition of real property equaling or exceeding NTD300 million or 20% of the paid-up capital: None.
Amount of disposal of real property equaling or exceeding NTD300 million or 20% of the paid-up capital: None.
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.
Payments receivable from related parties equaling or exceeding NTD100 million or 20% of the paid-up capital: See Table 3.
Transactions of derivative instruments: None.
(II) Information of investee companies: See Table 4.
(III) Information of investments in Mainland China:
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 5.
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 Tables 2, 3 and 5.
- (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.
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(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 6)
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Unit: NTD Thousand

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

Table 1

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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 2) (Note 2)
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 2) (Note 2)
comprehensive income –
non-current
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Note 1: The market price is determined as follows: The price of listed/OTC, privately offered stocks whose trading is restricted is estimated using a valuation method. The price of domestic non-listed/non-OTC stocks is calculated using a valuation method.

Note 2: 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. We assess that the fair value of Unity Opto’s equity is 0.

Note 3: The securities held at end of period have not been provided as collateral or pledged for loans.

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Unit: NTD Thousand

KYE Systems Corp. 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	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	$ 293,099 292,726	41% 41%	Offset against payments receivable on a non-periodic basis - Offset against payments receivable on a non-periodic basis -	`－` `－`	$ - -	- -

Note 1: We conduct purchase transactions with KYE Trade Co., Ltd. where we purchase raw materials and transport them to our subsidiary in Mainland China to be processed into finished goods, which are then resold to us.

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Unit: NTD Thousand

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

Table 3

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

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

Table 4

Unit: NTD and foreign currency (thousand)

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Initial investment amount Held at end of period Profit (loss) on
Current profit
Name of investor Name of investee Area of Scope of primary investments
End of current End of previous Number of shares Percentage (loss) of investee Remarks
company company establishment business Carrying amount recognized in
period year (thousand shares) (%) company
current period
KYE Systems Corp. Genius Holding Co., Ltd. British Investment holdings USD 28,467 USD 28,467 21,467 100.00 $ 274,049 (USD 654) ($ 12,315) Subsidiary
Cayman
Islands
Chung-Chiang Investment New Taipei Investment business 172,482 85,000 15,200 100.00 150,768 (389) (389) Subsidiary
Co., Ltd. City
Hung-Cheng Investment Taipei City Investment business 85,000 85,000 9,578 100.00 54,818 1,827 1,827 Subsidiary
Co., Ltd.
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
consumer
electronics
KYE Systems Europe Germany Sales of computer EUR - EUR 2,270 - - - - - Subsidiary;
GmbH peripherals and Note 1
consumer
electronics
KYE Systems (Hong Hong Kong Sales of computer HKD 500 HKD 500 500 100.00 8,565 - - Subsidiary
Kong) Corp. peripherals and
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
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 using the
engines equity
method
Star Reach Limited Samoan Investment holdings USD 417 USD 417 - 25.00 8,239 (RMB 2,697) (2,927) Investments
Islands accounted for
using the
equity
method
Timing Pharmaceutical New Taipei Manufacturing of 288,184 288,184 19,446 22.64 210,561 4,853 1,099 Investments
Co., Ltd. City Chinese medicine accounted for
using the
equity
method
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Note 1: 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. Information of Investments in Mainland China 2021

Table 5

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Accumulated Amount of investments remitted Accumulated KYE’s
Profit or loss on
Name of amount of or recovered in current period amount of Current profit shareholdi Profit on
investments Ending carrying
investee Scope of primary investments investments (loss) of ng in direct investments
Paid-in capital Method of investment recognized in value of
company in business remitted from remitted from investee or indirect received as of
Remitted Recovered current period investments
Mainland China Taiwan at start Taiwan at end of company investment current period
(Note 3)
of 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
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.,
Electronic computer Ltd. through Genius
Technology peripherals Holding Co., Ltd., with
Co., Ltd. the 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
Co., Ltd. appliances and Reach Limited, with the
molds. former investing 25% of
operating funds
Accumulated amount of investments Limit on amount of investments in Mainland
Amount of investments approved by the
remitted from Taiwan to Mainland China at China as required by the Investment
Investment Commission, MOEA
end of current period Commission, MOEA
USD35,431 (Note 2) USD30,120 (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.

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

Table 6

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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 our parent-only financial report 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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§TABLE OF CONTENTS OF STATEMENTS OF MAJOR ACCOUNT TITLES§

ACCOUNT TITLES§

ITEM
Statements of assets, liabilities and equity items
Statement of cash and cash equivalents
Statement of notes and accounts receivable
Statement of inventories
Statement of changes in financial assets measured
at fair value through other comprehensive
income – non-current
Statement of Changes in Investments Accounted
for Using the Equity Method
Statement of changes in property, plant and
equipment
Statement of changes in accumulated depreciation
of property, plant and equipment
Statement of changes in right-of-use assets
Statement of changes in accumulated depreciation
of right-of-use assets
Statement of deferred income tax assets
Statement of other non-current assets
Statement of notes and accounts payable
Statement of other payables
Statement of other current liabilities
Statement of lease liabilities
Statement of deferred income tax liabilities
Statements of profit or loss items
Statement of net operating revenue
Statement of operating costs
Statement of operating expenses
Statement of other profits, expenses and losses
Summary of current employee benefits,
depreciation, depletion and amortization expenses
by purpose

NO./INDEX

1
2
3
4
5
Note 13
Note 13
6
7
Note 21
8
9
10
11
12
Note 21
13
14
15
Note 20
16

68 -

KYE Systems Corp. Statement of Cash and Cash Equivalents December 31, 2021

Statement 1

Unit: NTD and foreign currency (thousand)

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

Item Summary Amount
Cash
Cash on hand Including USD26,000, $ 1,148
EUR4,000, HKD44,000,
RMB9,000 and NTD110,000
Bank deposits
Foreign Including USD2,063,000, 59,814
currency EUR25,000, HKD444,000
deposits and RMB77,000
Demand 228,741
deposits
Check 47
deposits
Total $ 289,750
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Note: USD, EUR, HKD and RMB are translated at the exchange rates of US$1=$27.68, EUR$1=$31.32, HK$1=$3.549 and RMB$1=$4.344, respectively.

69 -

KYE Systems Corp. Statement of Notes and Accounts Receivable December 31, 2021

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Statement 2 Unit: NTD Thousand
Name of customer Amount
Company A $ 13,139
Company B 9,674
Company C 8,798
Company D 6,803
Company E 5,327
Company F 5,087
Company G 4,612
Company H 4,299
Others (Note) 24,274
Subtotal 82,013
–: Loss allowance ( 677)
Net notes and accounts receivable $ 81,336
----- End of picture text -----

Note: The balance of each customer does not exceed 5% of the balance of this title.

70 -

KYE Systems Corp. Statement of Inventories December 31, 2021

Statement 3 Item Finished goods Work in process Raw materials Total			Unit: NTD thousand Amount Market price (Note 1) $ 128,496 $ 187,978 55,560 55,523 50,662 50,920 $ 234,718 $ 294,421	Unit: NTD thousand Amount Market price (Note 1) $ 128,496 $ 187,978 55,560 55,523 50,662 50,920 $ 234,718 $ 294,421	Unit: NTD thousand Amount Market price (Note 1) $ 128,496 $ 187,978 55,560 55,523 50,662 50,920 $ 234,718 $ 294,421	Unit: NTD thousand Amount Market price (Note 1) $ 128,496 $ 187,978 55,560 55,523 50,662 50,920 $ 234,718 $ 294,421
						$ 187,978 55,523 50,920 $ 294,421

Unit: NTD thousand

Note: The market price is valuated at the net realizable value.

71 -

KYE Systems Corp. Statement of changes in financial assets measured at fair value through other comprehensive income – non-current January 1 to December 31, 2021

Statement 4


Statement 4 Name Coretek Opto Corporation Monterey International Corp. Ta Shee Resort Co., Ltd. Aiptek International Inc. Unity Opto Technology Co., Ltd. Total	Balance–beginning of the year Number of shares Carrying value 6,583,476 $ 48,467 2,630,600 22,820 3 30 3,000,000 10,950 15,789,000 - $ 82,267	Increase in the current year Number of shares Amount - $ 18,379 - - - - - - - - $ 18,379	Decrease in the current year Number of shares Amount 2,978,711 $ - - 3,408 - - 1,967,781 3,632 - - $ 7,040	Balance–ending of the year Number of shares Carrying value 3,604,765 $ 66,846 2,630,600 19,412 3 30 1,032,219 7,318 15,789,000 - - $ 93,606	Provided as collateral or pledged None None None None None	Unit: NTD thousand Remarks
	Number of shares 6,583,476 2,630,600 3 3,000,000 15,789,000	Number of shares - - - - -	Number of shares 2,978,711 - - 1,967,781 -	Number of shares 3,604,765 2,630,600 3 1,032,219 15,789,000 -
						Common shares (Notes 1 and 2) Common shares (Note 2) Preferred shares Common shares (Note 2) Common shares

Note 1: The increase is the valuation profit recognized in the current year. Note 2: The decrease is a decrease in the number of shares due to the valuation loss recognized in the current year and capital reduction by the investee company to offset its losses.

72 -

KYE Systems Corp. Statement of Changes in Investments Accounted for Using the Equity Method January 1 to December 31, 2021

Statement 5											Unit: NTD Thousand; unit price: NTD	Unit: NTD Thousand; unit price: NTD	Unit: NTD Thousand; unit price: NTD
	Balance – beginning of the year		Increase in the current year (Note		Decrease in the current year		Balance – ending of the year			Net market price		or equity
				1)	(Note 2)						(Note 3)
Name	Number of	Amount	Number of	Amount	Number of	Amount	Sharehol	Number of	Amount	Unit price	Total amount		Provided as collateral
	shares		shares		shares		ding (%)	shares					or pledged
Genius Holding Co., Ltd.	21,467,377	$ 301,777	-	$ 1,457	-	$ 29,185	100.00	21,467,377	$ 274,049	13.14		$ 282,050	`無`
Chung-Chiang Investment Co., Ltd.	6,451,800	63,693	8,748,200	87,482	-	407	100.00	15,200,000	150,768	9.92		150,768	`〃`
Hung-Cheng Investment Co., Ltd.	9,578,103	44,116	-	12,815	-	2,113	100.00	9,578,103	54,818	5.72		54,818	`〃`
KYE International Corporation	235,000	4,138	-	-	-	1,328	100.00	235,000	2,810	11.96		2,810	`〃`
KYE Systems Europe GmbH	-	630	-	-	-	630	-	-	-	-		-	`〃`
KYE Systems (Hong Kong) Corp.	500,000	8,864	-	-	-	299	100.00	500,000	8,565	17.13		8,565	`〃`
Digilife Technologies Co., Ltd.	51,562,598	581,062	-	4,800	-	24,357	94.61	51,562,598	561,505	10.89		561,505	`〃`
Shinyoptics Corp.	3,400,000	9,181	-	-	-	1,594	22.97	3,400,000	7,587	2.23		7,587	`〃`
Advance Top Limited	150,000	-	-	-	-	-	20.00	150,000	-	-		-	`〃`
Star Reach Limited	-	11,254	-	-	-	3,015	25.00	-	8,239	-		8,239	`〃`
Timing Pharmaceutical Co., Ltd.	19,445,600	211,917	-	3,953	-	5,309	22.64	19,445,600	210,561	10.83		210,561	`〃`
Total		$ 1,236,632		$ 110,507		$ 68,237			$ 1,278,902		$	1,286,903
Note 1: The increase includes cash capital increase, profit on investments accounted for using the equity method, adjustment to foreign currency translation, adjustment to unrealized gross sales margin and										unrealized profit or loss on financial products.
Note 2: The decrease includes cash dividends, loss on investments accounted			for using the equity method, adjustment to foreign currency translation, adjustment to					unrealized gross sales margin, unrealized profit or loss on financial products and loss on
liquidation of recognized disposals.
Note 3: Except in the case of Timing Pharmaceutical Co., Ltd., where calculation			is based on its financial statements not audited by a CPA, calculation is based on the financial statements of the investee company audited by a CPA in the										same period.

73 -

KYE Systems Corp. Statement of Changes in Right-of-use Assets January 1 to December 31, 2021

Statement 6 Item Buildings Office equipment Transport equipment	Balance – beginning of the year $ 8,167 687 1,510 $ 10,364	Increase in the current year $ - 550 - $ 550	Decrease in the current year $ 3,433 687 - $ 4,120	Unit: NTD Thousand Balance – ending of the year Remarks $ 4,734 - 550 - 1,510 - $ 6,794	Unit: NTD Thousand Balance – ending of the year Remarks $ 4,734 - 550 - 1,510 - $ 6,794	Unit: NTD Thousand Balance – ending of the year Remarks $ 4,734 - 550 - 1,510 - $ 6,794
					$ $	- - -

Unit: NTD Thousand

74 -

KYE Systems Corp. Statement of Changes in Accumulated Depreciation of Right-of-use Assets January 1 to December 31, 2021

Statement 7

Unit: NTD thousand

Item Buildings Office equipment Transport equipment	Balance – beginning of the year $ 6,210 275 881 $ 7,366	Increase in the current year $ 642 118 629 $ 1,389	Decrease in the current year $ 3,433 355 - $ 3,788	Balance – ending of the year $ 3,419 38 1,510 $ 4,967	Remarks
					Note Note Note

Note: Accounted for in depreciation on a straight-line basis over the following useful lives: 3 years for buildings, 5 years for office equipment, and 1 to 2 years for transport equipment.

75 -

KYE Systems Corp.	KYE Systems Corp.
Statement of Other Non-current Assets
December 31, 2021
Statement 8		Unit: NTD Thousand
Item	Amount	Remarks
Non-operating assets	$ 9,481
Deposits paid	1,028
Unamortized expenses – others	961	Amortized over 2 years
Total	$ 11,470

76 -

KYE Systems Corp. Statement of Notes and Accounts Payable December 31, 2021

KYE Systems Corp. Statement of Notes and Accounts Payable December 31, 2021	KYE Systems Corp. Statement of Notes and Accounts Payable December 31, 2021	KYE Systems Corp. Statement of Notes and Accounts Payable December 31, 2021
Statement 9 Unit: NTD Thousand Name of company Amount Related party KYE Trade (HK) Co., Ltd. $ 17,302 Non-related party Kai Chieh Limited 12,255 Shenzhen Yuxinxin Electronics Co., Ltd. 1,596 Others 98 Subtotal 13,949 Total $ 31,251
		$ 17,302
		12,255 1,596 98
		13,949
		$ 31,251

77 -

KYE Systems Corp. Statement of Other Payables December 31, 2021

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Statement 10 Unit: NTD Thousand
Item Amount
Related party
KYE Systems (Hong Kong) Corp. $ 4,172
Others 770
Subtotal 4,942
Non-related party
Salaries and bonuses payable 14,460
Service fees payable 4,293
Market promotion fees payable 4,287
Others (Note) 8,662
Subtotal 31,702
Total $ 36,644
----- End of picture text -----

Unit: NTD Thousand

Note: The balance of each item does not exceed 5% of the balance of this title.

78 -

KYE Systems Corp. Statement of Other Current Liabilities December 31, 2021

KYE Systems Corp. Statement of Other Current Liabilities December 31, 2021	KYE Systems Corp. Statement of Other Current Liabilities December 31, 2021	KYE Systems Corp. Statement of Other Current Liabilities December 31, 2021
Statement 11 Unit: NTD Thousand Item Amount Provision for losses on purchase guarantees $ 53,100 Payments received in advance 12,445 Payments received on behalf of others 7,645 Sales tax payable 50 Total $ 73,240
		$ 53,100 12,445 7,645 50 $ 73,240

79 -

KYE Systems Corp. Statement of Lease Liabilities December 31, 2021

Statement 12

Unit: NTD Thousand

Item Buildings – current Office equipment – current Office equipment – non-current	Summary Office and parking space Printing equipment Printing equipment	Lease term January – December 2022 January – December 2022 January 2023 – July 2027	Discount rate 1.5% 1.5% 1.5%	Balance – ending of the year $ 4,508 89 425 $ 5,022	Remarks

80 -

KYE Systems Corp. Statement of Net Operating Revenue January 1 to December 31, 2021

Statement 13 Item Mouse Keyboards Speaker Others Total	Unit: NTD Thousand Quantity Amount 3,876,435 $ 363,580 1,664,072 278,451 1,196,488 203,621 548,775 92,026 $ 937,678	Unit: NTD Thousand Quantity Amount 3,876,435 $ 363,580 1,664,072 278,451 1,196,488 203,621 548,775 92,026 $ 937,678	Unit: NTD Thousand Quantity Amount 3,876,435 $ 363,580 1,664,072 278,451 1,196,488 203,621 548,775 92,026 $ 937,678
			$ 363,580 278,451 203,621 92,026
			$ 937,678

Unit: NTD Thousand

81 -

KYE Systems Corp. Statement of Operating Costs January 1 to December 31, 2021

Statement 14

Unit: NTD Thousand

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Item Amount
Raw material consumption
Starting raw materials $ 30,892
+: Raw material purchased in the
current year 108,730
–: Ending raw materials ( 50,662)
Cost of sale of raw materials ( 6,144)
Consumption in the current year 82,816
Transferred to other expenses 71
+: Manufacturing expense 103,248
Input cost in the current year 186,135
+: Starting work in process 60,634
Work in process purchased in
the current year 33,503
–: Ending work in process ( 55,560)
Cost of sale of work in process (8,628)
Transferred to other titles ( 21,395)
Cost of finished goods 194,689
+: Starting finished goods 74,073
Finished goods purchased in the
current year 566,261
–: Ending finished goods ( 128,496)
Transferred to other titles ( 7,150)
Cost of sale of finished goods 699,377
Cost of sale of raw materials 6,144
Cost of sale of works in process 8,628
Total operating costs $ 714,149
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82 -

KYE Systems Corp. Statement of Operating Expenses January 1 to December 31, 2021

Statement 15

Unit: NTD Thousand

Salary expense Service fee Export expenses Others (Note) Expected credit Impairment loss Total	Marketing expense Management expense $ 11,817 $ 38,436 12,081 13,122 15,960 - 7,732 39,140 - - $ 47,590 $ 90,698	Expected credit Impairment loss R&D expense $ 905 $ - - - - - 186 - - 2,077 $ 1,091 $ 2,077		Total
				$ 51,158 25,203 15,960 47,058 2,077
				$ 141,456

Note: The amount of each item does not exceed 5% of the amount of this title.

83 -

KYE Systems Corp. Summary of Current Employee Benefits, Depreciation and Amortization Expenses by Purpose January 1 to December 31, 2021 and 2020

Statement 16

Unit: NTD Thousand

	2021		2020
Classified as operating cost $ - - - - - $ - $ - $ 543	Classified as operating expense $ 51,158 5,046 2,494 1,805 7,159 $ 67,662 $ 5,910 $ 310	Classified as operating cost $ - - - - - $ - $ - $ 3,765	Classified as operating expense $ 57,801 5,086 2,867 2,907 7,843 $ 76,504 $ 12,395 $ 189	Total
			$	$ 57,801 5,086 2,867 2,907 7,843 $ 76,504 $ 12,395 $ 3,954
					$ 12,395
					$ 3,954

Notes:

The number of employees in the current and previous years is 61 and 62 respectively, and the number of non-employee directors is 6 and 7 respectively.
(1) The average employee benefit expense in the current year is NTD1,197,000 (“Total employee benefit expense in the current year - total remuneration for directors” / “Number of employees in the current year - number of non-employee directors”).
- The average employee benefit expense in the previous year was NTD1,338,000 (“Total employee benefit expense in the previous year - total remuneration for directors” / “Number of employees in the previous year - number of non-employee directors”).
(2) The average employee salary expense in the current year is NTD930,000 (“Total salary expense in the current year” / “Number of employees in the current year - number of non-employee directors”).
- The average employee salary expense in the previous year was NTD1,051,000 (“Total salary expense in the previous year” / “Number of employees in the previous year - number of non-employee directors”).
(3) The change in adjustment to the average employee salary expense is a decrease by approximately 11% (“Average employee salary expense in the current year - average employee salary expense in the previous year” / “Average employee salary expense in the previous year”).
(4) We do not have any supervisor, and we have established an Audit Committee in accordance with the law to substitute for the powers of supervisors.
(5) In accordance with Article 25 of the Articles of Incorporation, with respect to the remuneration for our directors and independent directors, no more than 1% of our profit in the current year may be appropriated as the remuneration for directors in the current year. To provide reasonable remuneration, we may consider the overall operating results of our group and the contribution of a director to our performance. Regarding the policy of the remuneration for the President and Vice President, the remuneration is paid in accordance with our personnel regulations and based on the salary level for such positions in the market of the industry, the scope of powers and responsibilities of such positions in our company, and their contribution to our operational goals. The procedures for determination of remuneration not only takes into account our overall operating performance and future operational risks and trends of development in the industry, but also considers the rate of achievement of personal performance and personal contribution to our performance in order to provide reasonable remuneration. The relevant performance evaluations and the reasonableness of remuneration are reviewed and approved by the Remuneration Committee and the Board of Directors, and the remuneration system is also reviewed from time to time according to the actual status of operations and the applicable laws in order to ensure a balance between our sustainable management and risk control.
84 -

AI assistant

KYE — Audit Report / Information 2021

52033_rns_2021-11-10_9655b3e3-3fef-4291-8314-be1332400d17.pdf

KYE Systems Corp.

§TABLE OF CONTENTS§

CPA’s Audit Report

Audit Opinions

Basis of Audit Opinions

Key Audit Matters

Occurrence of recognition of sales revenue

Responsibilities of the Management and Governing Bodies for Parent-only Financial Statements

Responsibilities of CPAs for the Audit of Parent-only Financial Statements

KYE Systems Corp. Parent-only Balance Sheet December 31, 2021 and 2020

KYE Systems Corp. Parent-only Statement of Comprehensive Income January 1 to December 31, 2021 and 2020

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

(Continued from previous page)

(Continued from previous page)

KYE Systems Corp. Parent-only Statement of Changes in Equity January 1 to December 31, 2021 and 2020

KYE Systems Corp. Parent-only Statement of Cash Flows January 1 to December 31, 2021 and 2020

(Continued from previous page)

(Continued to next page)

I. Company history

II. Date and procedures of approval of the financial report

III. Application of new and amended standards and interpretations

1, 2022.

IV. Summary of material accounting policies

(IV) Foreign currency

(V) Inventory

(VI)

1. Investments in subsidiaries

2. Investments in associates

(3) Derecognition of financial assets

2. Equity instruments

(1) Subsequent measurement

(2) Derecognition of financial liabilities

(X) Recognition of revenue

1. Revenue from the sale of goods

2. Service revenue

(XI) Leases

(1) We are the lessor

(2) We are the lessee

(XII) Employee benefits

1. Short-term employee benefits

2. Post-employment benefits

3. Other long-term employee benefits

(XIII) Income tax

1. Current income tax

2. Deferred income tax

3. Current and deferred income taxes

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

VI. Cash and cash equivalents

IX. Notes and accounts receivable

December 31, 2021

December 31, 2020

X. Finance lease payments receivable

(II) Investments in associates

XIII. Property, plant and equipment

XIV. Lease agreement

(III) Material lease activities and terms

(IV) Other lease information

XV. Accounts payable

XVI. Other receivables – related parties and other payables

XVII. Post-employment benefit plans

(I) Defined contribution plan

(II) Defined benefit plan

(II) Capital reserves

(V) Treasury stocks

XIX. Revenue

(I) Description of contracts with customers

discounts.

(III) Employee benefit expenses

(IV) Remuneration for employees, directors and supervisors

Estimated percentage

XXI. Income tax

(III) Deferred income tax assets and liabilities

2020

(IV) Approval of income tax

XXII. Earnings per share (EPS)

Net profit in the current year

XXIII. Capital risk management

KYE Audit Report / Information 2021