Makalot — Audit Report / Information 2021

Dec 28, 2021

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Stock Code:1477

MAKALOT INDUSTRIAL CO., LTD.

Parent-Company-Only Financial Statements

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

Address: 8F, No. 550, Sec. 4, Zhongxiao E. Rd., Taipei City Telephone: (02)2345-5588

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

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Table of contents

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

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KPMG

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

Independent Auditors’ Report

To the Board of Directors of Makalot Industrial Co., Ltd.:

Opinion

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

In our opinion, based on our audits and the reports of other auditors (please refer to Other Matter paragraph), the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and its financial performance and cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

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

Key Audit Matters

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

1. Revenue recognition

Please refer to Note 4(o) “Revenue” to the financial statements.

Description of key audit matter

The Company is primarily involved in the manufacturing and processing of garments. Revenue recognition is the main concern of the users of the financial statements. Therefore, we determined that the revenue recognition is a key audit matter.

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

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How the matter was addressed in our audit

Our principal audit procedures included: understanding the design and effectiveness of the Company’ s internal controls on revenue recognition; assessing whether the revenue recognition was performed in accordance with the Company’s policy; performing trend and comparison analysis on revenue from major clients to assess the significant exceptions; performing sales cut-off test of a period before and after the reporting date by vouching relevant documents of sales transactions to determine whether sales transactions have been appropriately recognized.

2. Derecognition of financial assets

Please refer to Note 4(f) “ Financial assets” and Note 6(c) “ Factoring and derecognition of accounts receivable” to the financial statements.

Description of key audit matter

The Company factored its accounts receivable to certain financial institutions to manage its credit risk on accounts receivable. The judgments on derecognition of financial assets involved particular accounting treatments. Therefore, we determined that the derecognition of financial asset is a key audit matter.

How the matter was addressed in our audit

Our principal audit procedures included: understanding the internal controls of the Company applied in factoring its accounts receivable; reviewing the factoring agreements with banks; assessing whether the factoring of accounts receivable was performed in accordance with the Company’s policy; assessing whether the disclosure of factoring transactions was appropriate, including performing the confirmation procedure.

3. Inventory valuation

Please refer to Note 4(g) “Inventories”, Note 5 “Significant accounting assumptions and judgments, and major sources of estimation uncertainty” and Note 6(d) “Inventories” of the financial statements.

Description of key audit matter

The inventories of the Company are measured at the lower of cost and net realizable value. Since the amount of inventories has significant impact on the financial statements of the Company and the environment in the industry changes rapidly, the cost of inventories might have a risk to exceed the net realizable value. Therefore, we determined that the assessment of inventory valuation is a key audit matter.

How the matter was addressed in our audit

Our principal audit procedures included: understanding the Company’s inventory management policies, such as the policy of management and valuation of inventories; assessing whether the inventory management and valuation were performed in accordance with the Company’ s policy; performing sampling procedures to understand the net realizable values used by management and the prices in a period after the reporting date to ensure the appropriateness of the valuation; sampling and inspecting the accuracy of the inventory aging report; assessing whether the disclosure of provision for inventory valuation and obsolescence was appropriate at the reporting date.

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1. Investment accounted for using equity method

Please refer to Note 4 (h) and (i) “investment accounted for using equity method” and Note 6 (e) “Details of investment accounted for using equity method” to the financial statements.

Description of key audit matter

The investments of the Company accounted for using equity method are mainly its subsidiaries all across the globe, wherein amounts of the investments has significant impact on the assets of the Company. Therefore, we determined that the investment accounted for using equity method is a key audit matter.

How the matter was addressed in our audit

Our principal audit procedures included: understanding the internal controls of the Company applied in the investment accounted for using equity method; acquiring the detail movements of the investment accounted for using equity method and examining their transaction records and related documents; assessing whether the investment accounted for using equity method was performed in accordance with the Company’s policy; acquiring the detailed calculation of the investment accounted for using equity method and evaluating whether the Company recognizes the share of profit or loss of its subsidiaries and associates accounted for equity method and the exchange difference on translation of foreign operations according to the appropriate percentage of the investment; understanding whether the difference between the cost of the investment accounted for using equity method and the net equity held by the Company was addressed appropriately by the nature of their differences.

Other Matter

We did not audit the financial statements of certain investments, which represented investments accounted for using equity method of the Company. Those statements were audited by other auditors, whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included below, is based solely on the reports of other auditors. The investments accounted for using equity method audited by other auditors both constituted 1% of the total assets as of December 31, 2021 and 2020, and the related shares of profit or loss of subsidiaries and associates accounted for using equity method both constituted 0% of the profit before income tax for the years then ended, respectively.

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

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

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

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

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Auditor’s Responsibilities for the Audit of the Financial Statements

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

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

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

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

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

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

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

6. Obtain sufficient and appropriate audit evidence regarding the financial information of the investment in other entities accounted for using the equity method to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

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

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

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

The engagement partners on the audit resulting in this independent auditors’ report are Pei-Chi Chen and HengShen Lin.

KPMG

Taipei, Taiwan (Republic of China) March 22, 2022

Notes to Readers

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

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

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(English Translation of Financial Statements Originally Issued in Chinese.) MAKALOT INDUSTRIAL CO., LTD.

Balance Sheets

December 31, 2021 and 2020

(Expressed in thousands of New Taiwan Dollars)

Assets Current assets: 1100 Cash and cash equivalents (notes 6(a)(v)) 1110 Current financial assets at fair value through profit or loss (notes 6(b)(v)) 1170 Accounts receivable, net (notes 6(c)(s)(v)) 1210 Other receivables due from related parties, net (notes 6(c)(v) and 7) 1310 Inventories, manufacturing business, net (note 6(d)) 1476 Other current financial assets (notes 6(c)(v) ) 1479 Other current assets, others (note 6(i) and 7) Non-current assets: 1550 Investments accounted for using equity method, net (note 6(e)) 1600 Property, plant and equipment (notes 6(f) and 8) 1755 Right-of-use assets (notes 6(g)(y)) 1821 Intangible assets, net (note 6(h)) 1840 Deferred tax assets (note 6(o)) 1942 Long-term receivables due from related parties (notes 6(v) and 7) 1990 Other non-current assets, others (notes 6(i)(v) and 8) Total assets	December 31, 2021 Amount % $ 1,960,352 9 166,007 1 1,124,137 5 328,985 2 4,387,364 21 5,966,976 28 100,344 1 14,034,165 67 1,978,255 9 2,893,922 14 3,404 - 23,859 - 21,081 - 2,000,026 9 135,278 1 7,055,825 33 $ 21,089,990 100	December 31, 2020 Amount % 803,108 5 163,897 1 2,406,387 14 9,092 - 3,138,529 18 3,028,776 18 354,469 2 9,904,258 58 1,961,589 12 2,929,450 17 11,469 - 24,638 - 49,103 - 2,027,465 12 134,234 1 7,137,948 42 17,042,206 100 Liabilities and Equity Current liabilities: 2100 Short-term borrowings (notes 6(j)(v)) 2150 Notes payable (note 6(v)) 2170 Accounts payable (note 6(v)) 2180 Accounts payable to related parties (notes 6(v) and 7) 2200 Other payables (note 6(v)) 2220 Other payables to related parties (notes 6(v) and 7) 2230 Current tax liabilities 2251 Current provisions for employee benefits (note 6(n)) 2259 Other short-term provisions (note 6(l)) 2280 Current lease liabilities (notes 6(m)(v)(y)) 2322 Long-term borrowings, current portion (note 6(k)(v)) 2399 Other current liabilities, others (note 7) Non-Current liabilities: 2541 Long-term bank loans (note 6(k)(v)) 2570 Deferred tax liabilities (note 6(o)) 2580 Non-current lease liabilities (notes 6(m)(v)(y)) 2640 Net defined benefit liability, non-current (note 6(n)) 2670 Other non-current liabilities, others Total liabilities Equity (notes 6(p)(q)(x)): 3100 Ordinary shares 3200 Capital surplus 3300 Retained earnings 3410 Exchange differences on translation of foreign financial statements Total equity Total liabilities and equity	December 31, 2021		December 31, 2020 Amount % 3,003,033 18 1,301 - 1,473,389 9 303,350 2 1,244,635 7 2,368 - 568,465 3 19,553 - 148,357 1 11,641 - - - 102,463 1 6,878,555 41 - - 16,914 - - - 58,847 - 3,002 - 78,763 - 6,957,318 41 2,198,566 13 3,447,704 20 4,716,849 28 (278,231) (2) 10,084,888 59 17,042,206 100
			Amount %
			$ 1,550,640 7 1 - 1,764,251 8 1,139,727 6 1,554,617 7 3,393 - 688,364 3 23,361 - 212,700 1 1,565 - 81,685 1 113,532 1 7,133,836 34 163,371 1 19,795 - 1,990 - 55,496 - 3,002 - 243,654 1 7,377,490 35 2,418,566 11 6,214,704 30 5,459,349 26 (380,119) (2) 13,712,500 65 $ 21,089,990 100

See accompanying notes to financial statements.

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(English Translation of Financial Statements Originally Issued in Chinese)

MAKALOT INDUSTRIAL CO., LTD.

Statements of Comprehensive Income

For the years ended December 31, 2021 and 2020

(Expressed in thousands of New Taiwan Dollars , except earnings per share)

4000 Operating revenue, net (note 6(s)) 5000 Operating costs (notes 6(d)(n) and 7) Gross profit from operations Operating expenses (notes 6(c)(h)(m)(n)(q)(t) and 12): 6100 Selling expenses 6200 Administrative expenses 6450 Impairment loss (reversal of impairment loss) determined in accordance with IFRS 9 Total operating expenses Net operating income Non-operating income and expenses: 7100 Total interest income(note 6(u) and 7) 7010 Other income (notes 6(u) and 7) 7020 Other gains and losses, net (notes 6(u)(v)) 7050 Finance costs, net (notes 6(m)(u)) 7070 Share of profit (loss) of investments accounted for using equity method Total non-operating income and expenses 7900 Profit before income tax 7951 Less: income tax expenses (note 6(o)) Profit 8300 Other comprehensive income: 8310 Items that will not be reclassified to profit or loss 8311 Gains (losses) on remeasurements of defined benefit plans 8330 Share of other comprehensive income of subsidiaries and associates accounted for using equity method that will not be reclassified to profit or loss 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss Components of other comprehensive income that will not be reclassified to profit or loss 8360 Items that may be reclassified subsequently to profit or loss 8361 Exchange differences on translation of foreign financial statements 8399 Income tax related to components of other comprehensive income that will be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss 8300 Other comprehensive income Comprehensive income Earnings per share (note 6(r)) 9750 Basic earnings per share (in dollars) 9850 Diluted earnings per share (in dollars)	2021 Amount % $ 28,268,912 100 22,825,210 81 5,443,702 19 1,266,684 4 878,645 3 (22,992) - 2,122,337 7 3,321,365 12 51,814 - 46,754 - 15,278 - (76,893) - (25,742) - 11,211 - 3,332,576 12 677,566 3 2,655,010 9 (946) - 22,240 - (1,049) - 22,343 - (101,888) - - - (101,888) - (79,545) - $ 2,575,465 9 $ 11.20 $ 11.15	2020
		Amount % 24,420,679 100 19,910,986 82 4,509,693 18 1,152,609 5 765,161 3 30,917 - 1,948,687 8 2,561,006 10 66,734 - 40,091 - (6,122) - (56,676) - 41,526 - 85,553 - 2,646,559 10 590,122 2 2,056,437 8 (6,139) - 2,749 - (1,729) - (1,661) - (161,985) - - - (161,985) - (163,646) - 1,892,791 8 9.35 9.30

See accompanying notes to financial statements.

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(English Translation of Financial Statements Originally Issued in Chinese) MAKALOT INDUSTRIAL CO., LTD.

Statements of Changes in Equity

For the years ended December 31, 2021 and 2020

(Expressed in thousands of New Taiwan Dollars)

Balance at January 1, 2020 Profit Other comprehensive income Total comprehensive income Appropriation and distribution of retained earnings: Legal reserve Special reserve Cash dividends of ordinary share Changes in ownership interests in subsidiaries Share-based payments transactions Balance at December 31, 2020 Profit Other comprehensive income Total comprehensive income Appropriation and distribution of retained earnings: Legal reserve appropriated Special reserve appropriated Cash dividends of ordinary share Capital increase by cash Balance at December 31, 2021	Ordinary shares $ 2,198,566 - - - - - - - - 2,198,566 - - - - - - 220,000 $ 2,418,566	Capital surplus 3,251,635 - - - - - - (281) 196,350 3,447,704 - - - - - - 2,767,000 6,214,704		Retained	earnings		Other equity	Total equity
			Legal reserve 1,825,607 - - - 190,243 - - - - 2,015,850 - - - 205,477 - - - 2,221,327	Special reserve 27,898 - - - - 88,347 - - - 116,245 - - - - 161,986 - - 278,231	Unappropriated retained earnings 1,907,851 2,056,437 (1,661) 2,054,776 (190,243) (88,347) (1,099,283) - - 2,584,754 2,655,010 22,343 2,677,353 (205,477) (161,986) (1,934,853) - 2,959,791	Total retained earnings 3,761,356 2,056,437 (1,661) 2,054,776 - - (1,099,283) - - 4,716,849 2,655,010 22,343 2,677,353 - - (1,934,853) - 5,459,349	Exchange differences on translation of foreign financial statements (116,246) - (161,985) (161,985) - - - - - (278,231) - (101,888) (101,888) - - - - (380,119)
								9,095,311 2,056,437 (163,646) 1,892,791 - - (1,099,283) (281) 196,350 10,084,888 2,655,010 (79,545) 2,575,465 - - (1,934,853) 2,987,000 13,712,500

See accompanying notes to financial statements.

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(English Translation of Financial Statements Originally Issued in Chinese) MAKALOT INDUSTRIAL CO., LTD.

Statements of Cash Flows

For the years ended December 31, 2021 and 2020

(Expressed in thousands of New Taiwan Dollars)

Cash flows from operating activities: Profit before tax Adjustments: Adjustments to reconcile profit (loss): Depreciation expense Amortization expense Expected credit loss (gain) Net gain on financial assets or liabilities at fair value through profit or loss Interest expense Interest income Share-based payment transactions Share of profit of investments accounted for using equity method Loss on disposal of property, plant and equipment Loss on disposal of investments accounted for using equity method Total adjustments to reconcile profit Changes in operating assets and liabilities: Changes in operating assets: Accounts receivable Other receivable due from related parties Inventories Other financial assets Other operating assets Total changes in operating assets Changes in operating liabilities: Notes payable Accounts payable Accounts payable to related parties Other payables Other payables to related parties Other current liabilities Accrued pension liabilities Other operating liabilities Total changes in operating liabilities Total changes in operating assets and liabilities Total adjustments Cash inflow generated from operations Interest received Interest paid Income taxes paid Net cash flows from (used in) operating activities Cash flows used in investing activities: Acquisition of financial assets at fair value through profit or loss Proceeds from disposal of property, plant and equipment Acquisition of investments accounted for using equity method Proceeds from disposal of investments accounted for using equity method Increase in long-term prepayments Proceeds from capital reduction of investments accounted for using equity method Acquisition of property, plant and equipment Decrease in refundable deposits (Increase) decrease in other receivables due from related parties Acquisition of intangible assets Increase in other financial assets Dividends received Net cash flows used in investing activities Cash flows from (used) in financing activities: Increase (decrease) in short-term loans Increase in long-term borrouings Payment of lease liabilities Cash dividends paid Capital increase by cash Net cash flows from (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period	2021 $ 3,332,576 67,944 7,396 (22,992) (25,472) 76,893 (51,814) - 25,742 731 - 78,428 1,305,242 (319,893) (1,248,835) (1,033,987) 254,125 (1,043,348) (1,300) 290,862 836,377 310,021 1,025 11,069 (4,297) 68,151 1,511,908 468,560 546,988 3,879,564 47,601 (76,805) (525,715) 3,324,645 23,362 628 (123,200) - (1,024) 28,000 (20,997) (2,366) (30,859) (6,617) (1,897,654) 31,442 (1,999,285) (1,452,393) 245,056 (12,926) (1,934,853) 2,987,000 (168,116) 1,157,244 803,108 $ 1,960,352	2020 2,646,559 61,056 6,396 30,917 (27,258) 56,676 (66,734) 196,350 (41,526) 260 16,192
		232,329
		(1,852,988) 270,890 (524,538) (50,041) (290,135)
		(2,446,812)
		994 74,185 (1,109,362) 120,124 (13,348) 96,045 (2,505) (45,252)
		(879,119)
		(3,325,931)
		(3,093,602)
		(447,043) 66,618 (56,643) (292,219)
		(729,287)
		(66,667) 52 (275,476) 14,821 (6,103) 36,990 (40,790) (394) 39,276 (9,079) (677,881) 243,597
		(741,654)
		2,184,171 - (11,722) (1,099,283) -
		1,073,166
		(397,775) 1,200,883
		803,108

See accompanying notes to financial statements.

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(English Translation of Financial Statements Originally Issued in Chinese.) MAKALOT INDUSTRIAL CO., LTD.

Notes to the Financial Statements

For the years ended December 31, 2021 and 2020

(Expressed in thousands of New Taiwan Dollars, unless otherwise specified)

(1) Company history

Makalot Industrial Co., Ltd. (the Company) was incorporated on January 10, 1990 and registered with the Ministry of Economic Affairs, R.O.C. The address of the Company’s registered office is 8F, No.550, Sec. 4 Zhongxiao E. Rd., Taipei City. The Company is primarily involved in the manufacturing and processing of garments.

(2) Approval date and procedures of the financial statements

The parent-company-only financial statements were authorized for issuance by the Board of Directors on March 22, 2022.

(3) New standards, amendments and interpretations adopted:

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

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

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

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

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

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

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

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

• －

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

• －

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

• ●Annual Improvements to IFRS Standards 2018–2020

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

(Continued)

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MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

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

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

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

Content of amendment Effective date per IASB The amendments aim to promote consistency in applying the requirements by helping companies determine whether, in the statement of balance sheet, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. The amendments include clarifying the classification requirements for debt a company might settle by converting it into equity. January 1, 2023 The amendments narrowed the scope of the recognition exemption so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. January 1, 2023

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

The Company does not expect the following other new and amended standards, which have yet to be endorsed by the FSC, to have a significant impact on its financial statements:

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

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

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

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

(4) Summary of significant accounting policies

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

(Continued)

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MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

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

(a) Statement of compliance

The parent-company-only financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

(b) Basis of preparation

• (i) Basis of measurement

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

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

• 2) The defined benefit liabilities (assets) are measured at the fair value of the plan assets less the present value of the defined benefit obligation.

(ii) Functional and presentation currency

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

(c) Foreign currency

• (iii) Foreign currency transactions

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

(iv) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into the presentation currency at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into the presentation currency at the average exchange rate. Exchange differences are recognized in other comprehensive income.

(Continued)

11

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

When a foreign operation is disposed of such that control, significant influence, or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to noncontrolling interests. When the Company disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, exchange differences arising from such a monetary item that are considered to form part of the net investment in the foreign operation are recognized in other comprehensive income.

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

An asset is classified as current under one of the following criteria, and all other assets are classified as non-current.

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

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

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

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

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

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

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

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

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

• (e) Cash and cash equivalents

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

(Continued)

12

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

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

(f) Financial instruments

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

(i) Financial assets

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

On initial recognition, a financial asset is classified as measured atamortized cost or fair value through profit or loss (FVTPL). Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

• 1) Financial assets measured at amortized cost

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

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

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

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

• 2) Fair value through profit or loss (FVTPL)

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

(Continued)

13

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

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

• 3) Impairment of financial assets

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

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

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

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

Loss allowance for trade receivables is always measured at an amount equal to lifetime ECL.

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

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

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

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

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

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

(Continued)

14

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

• ‧ significant financial difficulty of the borrower or issuer;

• ‧ a breach of contract such as a default or being past due;

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

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

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.

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

• 4) Derecognition of financial assets

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

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

• (ii) Financial liabilities and equity instruments

• 1) Classification of debt or equity

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

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

(Continued)

15

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

2) Financial liabilities

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

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

3) Derecognition of financial liabilities

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

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

4) Offsetting of financial liabilities and assets

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

• (iii) Derivatives financial instruments

The Company holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognized in profit or loss.

(g) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average method and includes expenditure incurred in acquiring the inventories, manufacturing and processing costs, and other costs incurred in bringing them to their present location and condition. In the case of manufactured inventories and work-in-process, cost includes an appropriate share of production overheads based on normal operating capacity.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(Continued)

16

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(h) Investment in associates

Associates are those entities in which the Company has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Company holds between 20% and 50% of the voting power of another entity.

Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of investment includes transaction costs. The carrying amount of investment in associates includes goodwill arising from the acquisition, less any accumulated impairment losses.

The parent-company-only financial statements include the Company’s share of the profit or loss and other comprehensive income of those associates, after adjustments to align the accounting policies with those of the Company, from the date on which significant influence commences until the date on which significant influence ceases.

Gains and losses resulting from transactions between the Company and an associate are recognized only to the extent of unrelated Company’s interests in the associate.

When the Company’s share of losses of an associate equals or exceeds its interest in an associate, it discontinues recognizing its share of further losses. After the recognized interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.

(i) Investment in subsidiaries

The Company uses the equity method on investees over which the Company has control when preparing the parent-company-only financial statements. The profit or loss for the period and other comprehensive income presented in individual financial statements shall be the same as the allocations of profit or loss for the period and of other comprehensive income attributable to owners of the parent presented in the financial reports prepared on a consolidated basis, and the owners’ equity presented in the individual financial statements shall be the same as the equity attributable to owners of the parent presented in the financial reports prepared on a consolidated basis.

Changes in the Company’s ownership interests in subsidiaries that do not result in the Company losing control over the subsidiaries are accounted for as equity transactions.

(j) Property, plant and equipment

(i) Recognition and measurement

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

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

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

(Continued)

17

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(ii) Subsequent cost

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

• (iii) Depreciation

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

Land is not depreciated.

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

1)	Buildings	5 to 51 years
2)	Machinery and equipment	5 to 6 years
3)	Office and other equipment	2 to 15 years

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

(k) Lease

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

(i) As a lessee

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be reliably determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

(Continued)

18

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

Lease payments included in the measurement of the lease liability comprise the following:

• －

• fixed payments, including in-substance fixed payments;

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

• －

• －

• amounts expected to be payable under a residual value guarantee; and

• payments for purchase or termination options that are reasonably certain to be exercised.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when:

• －

• there is a change in future lease payments arising from the change in an index or rate; or

• － there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee; or

• － there is a change in the lease term resulting from a change of its assessment on whether it will exercise an option to purchase the underlying asset; or

• － there is a change of its assessment on whether it will exercise an extension or termination option; or

• －

• there is any lease modifications

When the lease liability is remeasured, other than lease modifications, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or in profit and loss if the carrying amount of the right-of-use asset has been reduced to zero.

When the lease liability is remeasured to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, the Company accounts for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease, and recognize in profit or loss any gain or loss relating to the partial or full termination of the lease.

The Company has elected not to recognize right-of-use assets and lease liabilities for shortterm leases of buildings that have a lease term of 12 months or less and leases of low-value assets. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(ii) As a lessor

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

(Continued)

19

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

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

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

(l) Intangible assets

• (i) Recognition and measurement

Other intangible assets that are acquired by the Company and have finite useful lives are measured at cost less accumulated amortization and any accumulated impairment losses.

(ii) Subsequent expenditure

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

• (iii) Amortization

Amortization is calculated over the cost of the asset, less its residual value, and is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The estimated useful lives for the current and comparative periods are 3 to 5 years.

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

(m) Impairment of non-financial assets

At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than inventories, deferred tax assets, and assets arising from employee benefits) to determine whether there is any indication of impairment. If any such indication exists, then the asset’ s recoverable amount is estimated.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs.

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

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

(Continued)

20

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

Impairment losses are recognized in profit or loss.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(n) Provision

A provision is recognized if, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized in profit or loss.

(o) Revenue from contracts with customers

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

(i) Sale of goods

The Company is involved in the manufacturing, processing and wholesaling of garments. The Company recognizes its revenue when control of the products has been transferred, being when the products are delivered to the customer based on the clauses of the contract and there is no unfulfilled obligation that could affect the customer’ s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.

The Company offers discounts to specific customers. Revenue from these sales is recognized based on the price specified in the contract, net of the estimated discounts. A certain proportion of sales is used to estimate the discounts and revenue is only recognized to the extent that it is highly probable that a significant reversal will not occur.

(ii) Financing components

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

(Continued)

21

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(p) Employee benefits

(i) Defined contribution plans

Obligations for contributions to defined contribution plans are expensed as the related service is provided.

(ii) Defined benefit plans

The Company’s net obligation in respect of defined benefit plans is calculated separately for each the plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income, and accumulated in retained earnings within equity. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset). Net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(iii) Termination benefits

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

(iv) Short-term employee benefits

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

(Continued)

22

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(q) Income taxes

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

The Company has determined that interest and penalties related to income taxes, including uncertain tax treatment, do not meet the definition of income taxes, and therefore accounted for them under IAS37.

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

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

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

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

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

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

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

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

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

• 1) the same taxable entity; or

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

(Continued)

23

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

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

(r) Business combination

The Company accounts for business combinations using the acquisition method. The goodwill arising from an acquisition is measured as the excess of (i) the consideration transferred (which is generally measured at fair value) and (ii) the amount of non-controlling interest in the acquiree, both over the identifiable net assets acquired at the acquisition date. If the amount calculated above is a deficit balance, the Company recognized that amount as a gain on a bargain purchase in profit or loss immediately after reassessing whether it has correctly identified all of the assets acquired and all of the liabilities assumed.

In a business combination achieved in stages, the Company remeasures its previously held equity interest in the acquiree at its acquisition-date fair value, and recognizes the resulting gain or loss, if any, in profit or loss. In prior reporting periods, the Company may have recognized changes in the value of its equity interest in the acquiree in other comprehensive income. If so, the amount that was recognized in other comprehensive income will be recognized on the same basis as would be required if the Company had disposed directly of the previously held equity interest. If the disposal of the equity interest required a reclassification to profit or loss, such an amount will be reclassified to profit or loss.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, provisional amounts for the items for which the accounting is incomplete are reported in the Company’s financial statements. During the measurement period, the provisional amounts recognized at the acquisition date are retrospectively adjusted, or additional assets or liabilities are recognized to reflect new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period will not exceed one year from the acquisition date.

All acquisition-related transaction costs are expensed as incurred, except for the issuance of debt or equity instruments.

(s) Earnings per share

The Company reports the basic earnings per share and the diluted earnings per share. The basic earnings per share are calculated as the profit attributable to the ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding. The diluted earnings per share are calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares. The Company’s dilutive potential ordinary shares comprise convertible bonds and employee compensation.

(Continued)

24

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(t) Operating segments

The Company has already disclosed the segment information in the consolidated financial statements; therefore, the Company will not disclose the segment information again in the separate financial statements.

(u) Share-based payment

The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally recognized as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the period during which the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date based on the fair value of the share appreciation rights. Any changes in the liability are recognized in profit or loss.

Grant date of a share-based payment award is the date which the Company authorized the price and number of a new award.

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

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

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

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year is as follows. Those assumptions and estimation have been updated to reflect the impact of COVID-19 pandemic:

(a) The loss allowance of trade receivables

The Company has estimated the loss allowance of trade receivables that is based on the risk of a default occurring and the rate of expected credit loss. The Company has considered historical experience, current economic conditions and forward-looking information at the reporting date to determine the assumptions to be used in calculating the impairments and the selected inputs. The relevant assumptions and input values, please refer to note 6(c).

(Continued)

25

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(b) Valuation of inventory

Inventories are stated at the lower of cost or net realizable value. The Company estimates the net realizable value of inventory for normal waste, obsolescence and unmarketable items at the end of reporting period and then writes down the cost of inventories to net realizable value. For the estimation of the valuation of inventory, please refer to note 6(d).

(6) Explanation of significant accounts

• (a) Cash and cash equivalents

Cash Checking accounts and demand deposits Time deposits	December 31, 2021 $ 859 640,636 1,318,857 $ 1,960,352	December 31, 2020
		1,052 753,936 48,120
		803,108

Please refer to note 6(v) for the sensitivity analysis of the financial assets and liabilities of the Company.

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

Mandatorily measured at fair value through profit or loss: Non-derivative financial assets Stocks listed on domestic markets Fund Held-for-trading financial assets Derivative instruments not used for hedging Foreign exchange swap	December 31, 2021 $ 140,997 24,568 $ 165,565 $ 442	December 31, 2020
		123,767 40,130
		163,897
		-

The Company holds derivative financial instruments to hedge certain foreign exchange resk the Compamy is exposed to , arising from its operating activities. The following derivative instruments, without the application of dedge accounting, were classified as hled-for-trading financial assets:

December 31, 2021 Amount (in thousands) Currency Maturity dates Forward exchange contracts sold USD 28,000 USD to TWD 2022.1.3 These was no such transaction as of December 31, 2020.		December 31, 2021

(Continued)

26

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(c) Accounts receivable, other receivables —related parties and other financial assets-current

Accounts receivable－measured as amortized cost Other receivables－related parties Other financial assets－current Less: loss allowance	December 31, 2021 $ 1,137,791 328,985 5,966,976 (13,654) $ 7,420,098	December 31, 2020 2,443,033 9,092 3,028,776 (36,646) 5,444,255

As of December 31, 2021 and 2020, other financial asset-current comprised time deposits with maturity of more than three months, amounting to $2,450,000 thousand and $550,000 thousand, respectively.

The Company applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables on December 31, 2021. To measure the expected credit losses, accounts receivable have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information, including macroeconomic and relevant industry information. The loss allowance were determined as follows:

Current 1 to 30 days past due More than 31 days past due Current 1 to 30 days past due More than 31 days past due		December 31, 2021	December 31, 2021
				Loss allowance
				13,611 40 3
				13,654
			Weighted- average loss rate 1~1.5% 1~1.5% 1~1.5%	Loss allowance
				36,644 - 2
				36,646

(Continued)

27

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

The movements in the allowance for accounts receivable were as follows:

Balance at January 1 Impairment losses recognized (reversed) Balance at December 31	2021 $ 36,646 (22,992) $ 13,654	2020
		5,729 30,917
		36,646

None of the accounts receivable held by the Company were pledged or collateralized as of December 31, 2021 and 2020.

Accounts receivable of the Company had been insured accounts receivable credit risk. The insured amounts were $405,714 thousand and 329,706 thousand as of December 31, 2021 and 2020, respectively.

The Company has signed accounts receivable factoring contracts with financial institution. The terms of the contracts do not meet the criteria of derecognition of financial assets. Factored accounts receivable which were not derecognized as of the report date were as follows:

Counterparty			December 31, 2021	December 31, 2021
	Factored amount 44,880	Acceptable advances USD 3,000 thousand	Amount collected in advance Interest rate Pledged items $ - 0.51%~0.64% Promissory note USD74,580thousand (Note 1) December 31, 2020
HSBC Bank Counterparty
	Factored amount 695,373 27,526	Acceptable advances USD 25,700 thousand USD 3,000 thousand	Amount collected in advance $ - $ -	Interest rate Pledged items 0.40%~2.85% None 0.60%~2.02% Promissory note USD54,280thousand (Note 1)
HSBC Bank HSBC Bank

Note 1: The aggregate credit limit of the promissory note includes letters of credit, export bill negotiations, borrowings, derivative, and accounts receivable factored.

The Company entered into separate factoring agreements with different financial institutions to sell its accounts receivable. Under the agreements, the Company does not have the responsibility to assume the default risk of the transferred accounts receivable within the factoring credit limit. The factored accounts receivable conform to the derecognition criteria when the ownership and the significant risks of the factored accounts receivable are transferred to the financial institutions. As of December 31, 2021 and 2020, the factored accounts receivable were $3,403,202 thousand and － $2,328,196 thousand, respectively, and they were included in “other financial assets current” in the accompanying balance sheets.

(Continued)

28

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

As of December 31, 2021 and 2020, the relevant information on derecognized accounts receivable factored was as follows:

Factoring financial institution HSBC Bank CTBC Bank Mizuho Bank Sumitomo Mitsui Bank Bank SinoPac Cathay Bank Total		Dece	mber 31, 2021
	Factoring credit limit USD 43,200 thousand USD 285,700 thousand USD 7,000 thousand USD 10,000 thousand USD 3,000 thousand USD 2,000 thousand	Advance amount credit limit USD 38,880 thousand USD 250,630 thousand USD 6,300 thousand USD 10,000 thousand USD - thousand USD 1,800 thousand	Factored amount (Derecognized amount) $ 158,684 5,679,314 138,177 55,912 15,913 27,588 $ 6,075,588	Advance amount Interest rate Important derecognized provision Collateral 105,612 (Note 2) (Note 1) Promissory note USD74,580 thousand (Note 3) 2,566,774 〞 〞 None - 〞 〞 None - 〞 〞 None - 〞 〞 None - 〞 〞 Promissory note USD1,800 thousand 2,672,386

		Dece	mber 31, 2020
Factoring financial institution HSBC Bank CTBC Bank Mizuho Bank Sumitomo Mitsui Bank Bank SinoPac Total	Factoring credit limit USD 22,000 thousand USD 111,700 thousand USD 29,000 thousand USD 10,000 thousand USD 3,000 thousand	Advance amount credit limit USD 19,800 thousand USD 100,530 thousand USD 26,100 thousand USD 10,000 thousand USD - thousand	Factored amount (Derecognized amount) $ 230,874 2,883,571 510,956 17,369 1,429 $ 3,644,199	Advance amount Interest rate Important derecognized provision Collateral 113,429 (Note 2) (Note 1) Promissory note USD54,280 thousand (Note 3) 1,202,574 〞 〞 None - 〞 〞 None - 〞 〞 None - 〞 〞 Promissory note 25,200 thousand 1,316,003

Note 1:According to the accounts receivable purchase agreements or the approval letters issued by the factoring financial institutions, the accounts receivable were factored without recourse. The funds are transferred to the appointed reserve accounts or directly to the factoring financial institutions.

Note 2:For 2021 and 2020, the average interest rates on factored accounts receivable were 0.45%~0.68% and 0.40%~2.85%, respectively.

Note 3:The aggregate credit limit of the promissory note includes letters of credit, export bill negotiations, borrowings, derivatives, and accounts receivable factored.

(d) Inventories

Raw materials Work in progress Finished goods (including merchandise)	December 31, 2021 $ 4,328,195 - 59,169 $ 4,387,364	December 31, 2020
		3,083,038 9,372 46,119
		3,138,529

In 2021 and 2020, the reversal of write-downs amounted to $52,467 thousand and $5,932 thousands, respectively. The reversals were included in cost of sales.

None of the inventories held by the Company were pledged as collateral as of December 31, 2021 and 2020.

(Continued)

29

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(e) Investments accounted for using equity method

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

Subsidiaries	December 31, 2021 $ 1,978,255	December 31, 2020
		1,961,589

(i) Subsidiaries

Please refer to the consolidated financial statements.

The earnings distribution as well as the liquidation and dissolution of the subsidiary Loyal have been resolved by the Board of Directors on January 17, 2020. The earnings distributed and capital repatriated amounted to $153,164 thousand and $14,821 thousand, respectively. The loss on disposal of investments accounted for using the equity method amounted to $16,192 thousand.

(ii) Collateral

None of the investments accounted for using equity method held by the Company was pledged as collateral as of December 31, 2021 and 2020.

• (f) Property, plant and equipment

The cost, depreciation and impairment loss of the property, plant and equipment of the Company for the years ended December 31, 2021 and 2020, were as follows:

Cost： Balance at January 1, 2021 Additions Disposals Balance at December 31, 2021 Balance at January 1, 2020 Additions Disposals Balance at December 31, 2020 Depreciation and impairment loss: Balance at January 1, 2021 Depreciation for the year Disposals Balance at December 31, 2021 Balance at January 1, 2020 Depreciation for the year Disposals Balance at December 31, 2020	Land $ 2,538,791 - - $ 2,538,791 $ 2,538,791 - - $ 2,538,791 $ - - - $ - $ - - - $ -	Buildings 483,149 5,775 -		Machinery	Office and other equipment 130,056 12,961 (5,744) 137,273 113,688 17,652 (1,284) 130,056 84,644 18,404 (4,529) 98,519 70,431 15,242 (1,029) 84,644	Total 3,209,714 20,997 (6,609) 3,224,102 3,166,632 44,620 (1,538) 3,209,714 280,264 55,166 (5,250) 330,180 231,901 49,587 (1,224) 280,264
				57,718 2,261 (865) 59,114 41,171 16,801 (254) 57,718 29,023 6,464 (721) 34,766 24,470 4,748 (195) 29,023
		488,924
		472,982 10,167 -
		483,149
		166,597 30,298 -
		196,895
		137,000 29,597 -
		166,597

(Continued)

30

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

Carrying amounts: Balance at December 31, 2021 Balance at January 1, 2020 Balance at December 31, 2020	Land $ 2,538,791 $ 2,538,791 $ 2,538,791	Buildings 292,029		Machinery	Office and other equipment 38,754 43,257 45,412	Total 2,893,922
				24,348 16,701 28,695
		335,982				2,934,731
		316,552				2,929,450

Please refer to note 8 for assets pledged as collateral for loans as of December 31, 2021 and 2020.

(g) Right-of-use assets

The cost and depreciation of leased land and buildings of the Company were as follows：

Cost: Balance at January 1, 2021 Additions Balance at December 31, 2021 Balance at January 1, 2020 Balance at December 31, 2020 Depreciation: Balance at January 1, 2021 Depreciation for the year Balance at December 31, 2021 Balance at January 1, 2020 Depreciation for the year Balance at December 31, 2020 Carrying amounts: Balance at December 31, 2021 Balance at January 1, 2020 Balance at December 31, 2020	Buildings $ 34,407 - $ 34,407 $ 34,407 $ 34,407 $ 22,938 11,469 $ 34,407 $ 11,469 11,469 $ 22,938 $ - 22,938 $ 11,469	Other - 4,713 4,713 - - - 1,309 1,309 - - - 3,404 3,404 -	Total
			34,407 4,713
			39,120
			34,407
			34,407
			22,938 12,778
			35,716
			11,469 11,469
			22,938
			3,404
			26,342
			11,469

(Continued)

31

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(h) Intangible assets

The movements of cost and amortization of intangible assets in 2021 and 2020, were as follows:

Cost: Balance at January 1, 2021 Additions Balance at December 31, 2021 Balance at January 1, 2020 Additions Balance at December 31, 2020 Accumulated amortization and impairment losses: Balance at January 1, 2021 Amortization for the year Balance at December 31, 2021 Balance at January 1, 2020 Amortization for the year Balance at December 31, 2020 Carrying value: Balance at December 31, 2021 Balance at January 1, 2020 Balance at December 31, 2020

Intangible assets

$ 199,677 6,617 $ 206,294 $ 188,767 10,910 $ 199,677 $ 175,039 7,396 $ 182,435 168,643 6,396 $ 175,039 $ 23,859 $ 20,124 $ 24,638

Amortization expenses for the years ended December 31, 2021 and 2020, were recognized as operating expenses in the comprehensive income statements, amounting to $7,396 thousand and $6,396 thousand, respectively.

(i) Other current assets and other non-current assets

The details of other current assets and other non-current assets were as follows:

Prepayments for equipment Prepaid sales tax Refundable deposits Financial assets-non-current (restricted time deposits) Prepayments to related parties Other	December 31, 2021 $ 3,074 35,517 6,669 125,535 19,713 45,114 $ 235,622	December 31, 2020
		2,050 25,960 4,303 127,881 293,819 34,690
		488,703

(Continued)

32

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

• (i) Non-current financial assets derived from the earnings distributed by the investee companies, Loyal and Global, in accordance with the Management, Utilization, and Taxation of Repatriated Offshore Funds Act. The funds should be deposited in the segregated foreign exchange deposit account for five years. After the expiry of the said period, the funds could be withdrawn over a period of three years according to the aforementioned regulations. The funds shall not be used for purposes other than those specified in the aforementioned regulations, nor pledged, nor provided as security, nor by any other use which reduce their value.

• (ii) Please refer to Note 8 for refundable deposits.

• (j) Short-term borrowings

Unsecured bank loans Unused short-term credit lines Range of interest rates	December 31, 2021 $ 1,550,640 $ 6,332,131 0.47%~0.96%	December 31, 2020
		3,003,033
		6,428,301
		0.50%~3.20%

Please refer to note 8 for assets pledged as collateral for loans.

• (k) Long-term bank loans

Unsecured bank loans Less：Current portion Total Unused credit facilities Interest rate	December 31, 2021 $ 245,056 81,685 $ 163,371 $ - 0.581%~0.603%	December 31, 2020
		- -
		-
		-
		-

In 2021, the Company’s proceeds from long-term bank loans amounted to US$5,330 thousand and US$3,520 thousand, with the interest rates of 0.603% and 0.581%, maturing in July 2023 and November 2023, respectively.

• (l) Provisions

Balance at January 1, 2021 Provisions made during the year Balance at December 31, 2021 Balance at January 1, 2020 Provisions use during the year Balance at December 31, 2020	Provisions
	$ 148,357 64,343 $ 212,700 $ 194,940 (46,583) $ 148,357

Provisions mainly are accrued for abnormal losses from operation and others.

(Continued)

33

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(m) Lease liabilities

The Company’s lease liabilities were as follows:

Current Non-current For the maturity analysis, please refer to note 6(v).	December 31, 2021 $ 1,565 $ 1,990	December 31, 2020 11,641
		-

The amounts recognized in profit or loss were as follows：

Interest on lease liabilities Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets	2021 $ 127 $ 1,183	2020
		255
		1,586

short-term leases of low-value assets $	short-term leases of low-value assets $	1,183	1,586
The amounts recognized in the statement of cash flows in financing		activities by the	Company were
as follows:
		2021	2020
Total cash outflow for leases	$	12,926	11,722

(i) Real estate leases

The Company leases buildings for its office. The leases of buildings typically run for 3 years.

(n) Employee benefits

(i) Defined benefit plans

The present value of defined benefit obligations and the fair value of plan assets were as follows:

Present value of the defined benefit obligations Fair value of plan assets Net defined benefit (liabilities) assets	December 31, 2021 $ (83,826) 28,330 $ (55,496)	December 31, 2020 (90,761) 31,914
		(58,847)

(Continued)

34

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

The employee benefits liabilities of the Company were as follows:

Employee paid leave liabilities	December 31, 2021 $ 23,361	December 31, 2020
		19,553

The Company makes defined benefit plan contributions to the pension fund account with Bank of Taiwan that provides pensions for employees upon retirement. The plan (covered by the Labor Standards Law) entitles a retired employee to receive retirement benefits based on years of service and average monthly salary for the six months prior to retirement.

1) Composition of the plan assets

The Company allocates pension funds in accordance with the Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are managed by the Bureau of Labor Funds, Ministry of Labor. With regard to the utilization of the funds, minimum earnings shall be no less than the earnings attainable from two-year time deposits with interest rates offered by local banks.

The Company’ s Bank of Taiwan labor pension reserve account balance amounted to $28,330 thousand as of December 31, 2021. For information on the utilization of the labor pension fund assets, including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.

2) Movements in present value of the defined benefit obligations

The movements in present value of the defined benefit obligations for the Company were as follows:

Defined benefit obligations on January 1 Current service costs and interest costs Remeasurement of net defined benefit obligations (assets) Benefits paid Defined benefit obligations on December 31	2021 $ 90,761 1,554 1,329 (9,818) $ 83,826	2020 92,743 2,081 7,357 (11,420) 90,761

(Continued)

35

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

• 3) Movements in fair value of the plan assets

The movements in the present value of the defined plan assets for the Company were as follows:

Fair value of plan assets on January 1 Return of plan assets Remeasurement of net defined benefit (obligations assets) Contribution to the plan Benefits paid by plan assets Fair value of plan assets on December 31	2021 $ 31,914 196 383 5,655 (9,818) $ 28,330	2020 37,530 359 1,218 4,227 (11,420) 31,914

• 4) Expenses recognized in profit or loss

Expenses recognized in profit or loss for the years ended December 31, 2021 and 2020, were as follows:

were as follows:
Service costs Interest on net defined benefit obligations (assets)	2021 $ 991 367 $ 1,358	2020
		1,171 551
		1,722

Above pension expenses were recognized as operating expenses.

• 5) Remeasurement of net defined benefit liability (asset) recognized in other comprehensive income

The Company’s remeasurement of the net defined benefit liability (asset) recognized in other comprehensive income for the years ended December 31, 2021 and 2020, was as follows:

Actuarial losses or (gains) Return on plan assets	2021 $ 1,329 (383) $ 946	2020 7,357 (1,218) 6,139

(Continued)

36

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

6) Actuarial assumptions

The principal actuarial assumptions at the reporting date were as follows:

The rate applied in calculating the present value of defined benefit obligations for the years ended December 31, 2021 and 2020:

Discount rate Future salary increase rate	December 31, 2021 December 31, 2020 % 0.625 % 0.625 % 2.50 % 2.50

The expected allocation payment to be made by the Company to the defined benefit plans for the one-year period after the reporting date is $190 thousand.

The weighted average lifetime of the defined benefits plans is 14.02 years.

7) Sensitivity analysis

Changes in the main actuarial assumptions that might have an impact on the present value of the defined benefit obligation for the years ended December 31, 2021 and 2020:

December 31, 2021 Discount rate Future salary changes December 31, 2020 Discount rate Future salary changes	Effects on defined benefit obligation
	Increase by 1% Decrease by 1% $ (9,993) 7,144 11,276 (9,772) (10,506) 7,525 11,876 (10,271)

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligations by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.

(ii) Defined contribution plans

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

The Company’ s pension costs under the defined contribution pension plans amounted to $29,498 thousand and $28,947 thousand in 2021 and 2020, respectively.

(Continued)

37

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(o) Income tax

(i) Income tax expense

The details of income tax expense for 2021 and 2020 were as follows:

Current income tax expense Deferred income tax expense (benefit) Total income tax expense	2021 $ 645,614 31,952 $ 677,566	2020
		561,901 28,221
		590,122

The amounts of income tax recognized in other comprehensive income for 2021 and 2020 were as follows:

ems that will not be reclassified subsequently to profit of loss: Remeasurement from defined benefit plans	2021 $ 1,049	2020
		1,729

Items that will not be reclassified subsequently to

Reconciliation of income tax expense and income before tax was as follows:

Profit before tax Income tax based on the Company’s domestic tax rate Additional tax on undistributed earnings Separate taxation on repatriated offshore earnings Change in unrecognized temporary differences Others	2021 $ 3,332,576 666,515 - - 21,281 (10,230) $ 677,566	2020
		2,646,559
		529,312 26,226 16,605 5,933 12,046
		590,122

(ii) Deferred tax liabilities and assets

• 1) Unrecognized deferred tax assets and liabilities

As of December 31, 2021 and 2020, the temporary differences associated with the investments in subsidiaries were not recognized as deferred income tax assets and liabilities as the Company was able to control the timing of reversal of these temporary differences, and management believed that it was probable that the temporary differences would not reverse in the foreseeable future. The related amounts were as follows:

Unrecognized deferred tax assets Unrecognized deferred tax liabilities	December 31, 2021 $ 81,882 $ 882	December 31, 2020
		62,800
		3,081

(Continued)

38

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

2) Recognized deferred tax assets and liabilities

Changes in the amounts of deferred tax assets and liabilities for 2021 and 2020 were as follows:

Defined benefit plan Provision Deferred tax assets January 1, 2020 $ 1,956 24,182 Debit to profit / loss - (15,557) Credit to other comprehensive income 1,228 - December 31, 2020 $ 3,184 8,625 January 1, 2021 $ 3,184 8,625 Credit to profit / loss - 1,871 Credit to other comprehensive income 189 - December 31, 2021 $ 3,373 10,496 Unrealized exchange gain Deferred tax liabilities: January 1, 2020 $ 4,698 Credit (debit) to profit / loss (942) December 31, 2020 $ 3,756 January 1, 2021 $ 3,756 Credit(debit) to profit / loss (2,594) December 31, 2021 $ 1,162	Defined benefit plan Provision Deferred tax assets January 1, 2020 $ 1,956 24,182 Debit to profit / loss - (15,557) Credit to other comprehensive income 1,228 - December 31, 2020 $ 3,184 8,625 January 1, 2021 $ 3,184 8,625 Credit to profit / loss - 1,871 Credit to other comprehensive income 189 - December 31, 2021 $ 3,373 10,496 Unrealized exchange gain Deferred tax liabilities: January 1, 2020 $ 4,698 Credit (debit) to profit / loss (942) December 31, 2020 $ 3,756 January 1, 2021 $ 3,756 Credit(debit) to profit / loss (2,594) December 31, 2021 $ 1,162	Provision		Loss on valuation of inventories	Loss on valuation of inventories
				14,788 (1,186) - 13,602 13,602 (11,616) - 1,986 Others
	$ 4,698 (942) $ 3,756 $ 3,756 (2,594) $ 1,162

• (iii) Assessment of income tax

The Company’s income tax returns for the years through 2019 were assessed by the Taipei National Tax Administration.

• (p) Capital and other equity

• (i) Ordinary shares

The issuance of 22,000 thousand shares through cash capital increase was resolved by the Board of Directors on Novmber 24, 2020. The issue price is $136 per share, with March 19, 2021 as the date of capital increase. The relevant statutory registration procedures have been completed.

(Continued)

39

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

As of December 31, 2021 and 2020, the authorized capital of the Company amounted to $3,000,000 thousand and $2,500,000 thousand, consisting of 300,000 thousand shares and 250,000 thousand shares with par value of $10 per share, respectively. The issued capital consisted of 241,857 thousand shares ans 219,857 thousand shares, respectively. All proceeds from the shares issued have been collected.

The movements in outstanding shares for the years ended December 31, 2021 and 2020, were as follows:

The movements in outstanding shares for the years end as follows:	ed December 31, 2021 and 2020, were	ed December 31, 2021 and 2020, were	ed December 31, 2021 and 2020, were
Beginning balance at January 1 Addition: Capital increase by cash Ending balance at December 31	Ordinary share (thousand shares)
	2021		2020 219,857 - 219,857
	$ 219,857 22,000
	$ 241,857

(ii) Capital surplus

The balances of capital surplus were as follows:

Surplus arising from bond conversion option Paid-in capital in excess of par value Capital surplus－premium from combination Capital surplus－interest payable reimbursement Expired stock options Gain or loss on disposal of subsidiaries’ shares Adjustments to share of changes in equity of subsidiaries Share-based payment	December 31, 2021 $ 1,618,137 4,505,919 593 17,181 43,950 4,914 24,010 - $ 6,214,704	December 31, 2020
		1,618,137 1,586,212 593 17,181 307 4,914 24,010 196,350
		3,447,704

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

(Continued)

40

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(iii) Retained earnings

According to the Company’ s Articles of Incorporation, 10% of annual net earnings (net of income taxes), after deducting accumulated deficits, must be set aside as legal reserve. Unless and until the accumulated legal reserve equals the Company’s total capital, the Company may set aside a special reserve in accordance with Article 41 of the Securities and Exchange Act. The board of directors considers the Company’s budget for funding needs, financial structure, current period earnings, and steady profit distribution when proposing the distribution of earnings. For the issuance of new shares, the proposal should be resolved during the shareholders’ meeting. In accordance with the Article 240, paragraph 5 of the Company Act, the Company authorizes the Board of Directors, with the presence of more than two-thirds of the directors and the approval of a majority of the directors, to distribute all or part of the dividends and bonuses payable by way of cash, and to report to the shareholders’ meeting.

The Company is now in the growth stage, and profits may be distributed by way of cash dividends and stock dividends. Cash dividends shall not be lower than 10% of the total distribution.

1) Legal reserve

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

2) Special reserve

In accordance with Ruling No. 1010012865 issued by the FSC on April 6, 2012, a portion of current-period earnings and undistributed prior-period earnings shall be reclassified as special earnings reserve during earnings distribution. The amount to be reclassified should equal the current-period total net reduction of other shareholders’ equity. Similarly, a portion of undistributed prior-period earnings shall be reclassified as special earnings reserve (and does not qualify for earnings distribution) to account for cumulative changes to other shareholders’ equity pertaining to prior periods. Amounts of subsequent reversals pertaining to the net reduction of other shareholders’ equity shall qualify for additional distributions.

3) Earnings distribution

On March 22, 2021, the Company’s Board of Directors resolved to distribute the 2020 earnings. On June 16, 2020, the shareholder’s meeting resolved to distribute the 2019 earnings. The relevant dividend distributions to the shareholders were as follows:

Cash	2020	2020	2019 Amount per share (in dollars) Total amount 5.00 1,099,283	2019 Amount per share (in dollars) Total amount 5.00 1,099,283
	Amount per share (in dollars) $ 8.00	Total amount		Total amount
		1,934,853		1,099,283

(Continued)

41

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

On March 22, 2022, the Company’ s Board of Directors resolved to appropriate the earnings for 2021 as follows:

Cash	2021	2021
	Amount per share (in dollars) $ 9.50	Total amount
		2,297,638

(q) Share-based payment

The issuance of new shares through cash capital increase was resolved by the board of directors on November 24, 2020. The Company reserved 3,300 thousand shares for subscription by the employees as the reward for employees’ service to the Company in 2020. The cost of the sharebased payments amounted to $196,350 thousand and recorded as operating expenses and capital surplus.

(r) Earnings per share

• (i) Basic earnings per share

The basic earnings per share for the years ended December 31, 2021 and 2020, were calculated on the basis of profit attributable to ordinary shareholders and the weighted-average number of outstanding ordinary shares. Calculations were as follows:

• 1) Profit attributable to ordinary shareholders

Profit attributable to ordinary shareholders 2) Weighted-average number of outstanding ordinary	2021 Continuing operations	2020 Continuing operations 2,056,437

Number of outstanding ordinary shares at January 1 Effect of capital increase by cash Weighted-average number of outstanding ordinary shares at December 31		2021 219,857 17,298 237,155	2020
			219,857 -
			219,857

(Continued)

42

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(ii) Diluted earnings per share

The diluted earnings per share for the years ended December 31, 2021 and 2020, were calculated on the basis of profit attributable to ordinary shareholders and the weighted-average number of outstanding ordinary shares, with all potential ordinary shares retroactively adjusted. Calculations were as follows:

• 1) Profit attributable to ordinary shareholders (diluted)

Profit attributable to ordinary shareholders (basic) Profit attributable to ordinary shareholders (diluted)	2021 Continuing operations $ 2,655,010 $ 2,655,010	2020
		Continuing operations
		2,056,437
		2,056,437

• 2) Weighted-average number of outstanding ordinary shares (diluted) (in thousands)

Weighted-average number of outstanding ordinary shares (basic) Effect of employee stock dividends Weighted-average number of outstanding ordinary shares (diluted)	2021 237,155 939 238,094	2020
		219,857 1,190
		221,047

• (s) Revenue from contracts with the customers

• (i) Disaggregation of revenue

Primary geographical markets: American region Others Total	2021 $ 22,224,570 6,044,342 $ 28,268,912	2020
		17,432,510 6,988,169
		24,420,679

(ii) Contract balances

Accounts receivable Less: allowance for impairment Total	December 31, 2021 $ 1,137,791 (13,654) $ 1,124,137	December 31, 2020 2,443,033 (36,646) 2,406,387	January 1, 2020 590,045 (5,729) 584,316

For details on accounts receivable and allowance for impairment, please refer to note 6(c).

• (iii) Transaction price allocated to the remaining performance obligations

The contract has an original expected duration of less than one year, thus the Company applies the practical expedient of IFRS 15 and does not disclose information about the transaction price allocated to the remaining performance obligations of the contract.

(Continued)

43

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(t) Employee compensation and directors’ remuneration

In accordance with the Articles of incorporation , the Company should contribute at least 1% and not more than 8% of the profit as employee compensation and not exceed 5% as directors’ remuneration when there is profit for the year. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit.

For the years ended December 31, 2021 and 2020, the Company estimated its employee remuneration amounting to $193,444 thousand and $153,623 thousand, and directors’ remuneration amounting to $83,008 thousand and $65,920 thousand, respectively. The estimated amounts mentioned above were calculated based on the net profit before tax, excluding remuneration to employee and directors of each period, multiplied by the percentage of remuneration to employees and directors as specified in the Company’ s articles. The remunerations were expensed under operating expenses during 2021 and 2020.

Related information would be available at the Market Observation Post System website. The differences between the amounts approved by the board of directors and those recognized in the financial statements, if any, are accounted for as changes in accounting estimates and recognized as profit or loss in next year.

The amounts of employee remuneration, as estimated in parent-company-only financial statements, were identical to those amount approved for 2020 and 2019.

The differences between actual approved amount directors’ remuneration and those estimated in the financial statements in 2020 and 2019 were as follows:

Directors' remuneration		2020				2019	Difference (23,662)
	Actual approved amount $ 53,375	Estimated amount in financial statement 65,920			Actual approved amount 35,150	Estimated amount in financial statement 58,812

The difference between the actual remuneration to directors and the recognized amount in 2020 and 2019 were not significant, therefore, were recognized as profit or loss in 2021 and 2020, respectively. Related information would be available at the Market Observation Post System website.

(u) Non-operating income and expenses

(i) Interest income

The details of other income in 2021 and 2020 were as follows:

Interest income－bank deposits Interest income－loans	2021 $ 12,035 39,779 $ 51,814	2020
		9,845 56,889
		66,734

(Continued)

44

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(ii) Other income

The details of other income in 2021 and 2020 were as follows:

Rental income Dividend income Others	2021 $ 15,337 6,147 25,270 $ 46,754	2020
		14,818 5,208 20,065
		40,091

(iii) Other gains and losses

The details of other gains and losses in 2021 and 2020 were as follows:

2021 Foreign exchange losses $ (17,512) Losses on disposals of investment accounted for using equity method - Gains (losses) on disposals of investments 19,909 Net gains on financial assets at fair value through profit or loss 25,030 Gain (losses) on derivative financiale assets at fair value through profit ol loss 442 Net gains on derivative financial assets at fair value through profit or loss—realized 7,276 Losses on disposals of property, plant and equipment (731) Others (19,136) $ 15,278

2020 (16,533) (16,192) (395) 27,258 - - (260) - (6,122)

(iv) Finance costs

The details of finance costs in 2021 and 2020 were as follows:

Interest expense－bank borrowings Expenses from accounts receivable factoring Interest expense－leases	2021 $ (21,762) (55,004) (127) $ (76,893)	2020 (31,870) (24,551) (255) (56,676)

(Continued)

45

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(v) Financial Instruments

• (i) Credit risk

• 1) Credit risk exposure

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

• 2) Concentration of credit risk

The Company’s credit risk is impacted by each customer. For the years ended December 31, 2021 and 2020, the sales to major customers accounted for 68% and 65%, respectively. In addition, for the years ended December 31, 2021 and 2020, the sales to American region accounted for 79% and 71%, respectively.

• 3) Receivables and debt securities

For credit risk exposure of accounts receivable, please refer to note 6(c).

Other financial assets at amortized cost includes other financial assets-current and time deposits, please refer to note 6(c).

The time deposits held by the Company in financial institutions with investment grades or above is considered to have low credit risk.

(ii) Liquidity risk

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

Carrying amount December 31, 2021 Non-derivative financial liabilities Short-term borrowings $ 1,550,640 Accounts payable and other payables 4,461,989 Lease liabilities 3,555 Long-term bank loans (including current portion) 245,056 $ 6,261,240 December 31, 2020 Non-derivative financial liabilities Short-term borrowings $ 3,003,033 Accounts payable and other payables 3,025,043 Lease liabilities 11,641 $ 6,039,717	Contractual cash flow (1,551,640) (4,461,989) (3,613) (246,772) (6,264,014) (3,005,143) (3,025,043) (11,722) (6,041,908)	Within 6 months (1,551,640) (4,461,989) (803) (736) (6,015,168) (3,005,143) (3,025,043) (5,861) (6,036,047)	6~12 months - - (803) (82,263) (83,066) - - (5,861) (5,861)	1~2 years - - (1,606) (163,773) (165,379) - - - -	2~5 years - - (401) - (401) - - - -	Over 5 years
						- - - -
						-
						- - -
						-

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

(Continued)

46

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(iii) Exchange rate risk

1) Exposure to currency risk

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

Financial assets Monetary items USD CNY Non-monetary items USD Financial liabilities Monetary items USD CNY	December 31, 2021 December 31, 2020 Foreign currency Exchange rate TWD Foreign currency Exchange rate TWD $ 182,257 27.690 5,046,683 187,802 28.508 5,353,859 16,187 4.3469 70,364 11,432 4.3740 50,004 8,649 27.690 239,485 7,144 28.508 203,674 164,504 27.690 4,555,117 163,291 28.508 4,655,100 17,682 4.3469 76,864 7,833 4.3740 34,260

• 2) Sensitivity analysis

The Company’ s exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts receivable, other receivables, loans, accounts payable, and other payables. A 1% depreciation or appreciation of the TWD against the USD and CNY as of December 31, 2021 and 2020, would have increased or decreased the net income after tax by $4,851 thousand and $7,145 thousand, respectively. The analysis assumes that all other variables remain constant. The analysis is performed on the same basis for both periods.

• 3) Exchanged gains or losses on monetary items

As the Company deals in diverse foreign currencies, gains or losses on foreign exchange were summarized as a single amount. In 2021 and 2020, the foreign exchange loss, including realized and unrealized, amounted to $17,512 thousand and $16,533 thousand, respectively.

(iv) Interest rate analysis

There is no significant interest rate risk.

(Continued)

47

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(v) Fair value of financial instruments

1) Fair value hierarchy

The book value, fair value, and fair value hierarchy for the financial assets and financial liabilities of the Company were as followed (excluding the disclosure of financial assets and liabilities for which the book value is close to the fair value, or the fair value cannot be reliably measured).

Book value Financial assets at fair value through profit or loss: Non-derivative financial assets mandatorily measured at fair value through profit or loss $ 165,565 Derivtive financial assets measured at fair value through profit or loss 442 Subtotal 166,007 Financial assets measured at amortized cost: Cash and cash equivalents 1,960,352 Accounts receivable 1,124,137 Other financial assets (including other receivables) 6,295,961 Long-term receivables from related parties 2,000,026 Other financial assets—non-current 125,535 Subtotal 11,506,011 Refundable deposits 6,669 Financial liabilities measured at amortized cost: Short-term borrowings 1,550,640 Long-term bank loans (including current protion) 245,056 Accounts payable and other payables 4,461,989 Subtotal 6,257,685		December 31, 2021	December 31, 2021	December 31, 2021
		Level 1 165,565 - 165,565 - - - - - - - - - - -	Fair value
			Level 2 - 442 442 - - - - - - - - - - -	Level 3 - - - - - - - - - - - - - -	Total 165,565 442
					166,007
					- - - - -
					-
					-
					- - -
					-

(Continued)

48

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

Financial assets at fair value through profit or loss: Non-derivative financial assets mandatorily measured at fair value through profit or loss Financial assets measured at amortized cost: Cash and cash equivalents Accounts receivable Other financial assets (including other receivables) Long-term receivables from related parties Other financial assets—non-current Subtotal Refundable deposits Financial liabilities measured at amortized cost: Short-term borrowings Accounts payable and other payables Subtotal		December 31, 2020	December 31, 2020	December 31, 2020
	Book value $ 163,897 803,108 2,406,387 3,037,868 2,027,465 127,881 8,402,709 4,303 3,003,033 3,025,043 6,028,076	Level 1 163,897 - - - - - - - - - -	Fair value
			Level 2 - - - - - - - - - - -	Level 2 - - - - - - - - - - -	Total 163,897
					- - - - -
					-
					-
					- -
					-

2) Valuation techniques for financial instruments measured at fair value

• a) Non-derivative financial instruments

A financial instrument is regarded as being quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’ s-length basis. Whether transactions are taking place ‘regularly’ is a matter of judgment and depends on the facts and circumstances of the market for the instrument.

Quoted market prices may not be indicative of the fair value of an instrument if the activity in the market is infrequent, the market is not well-established, only small volumes are traded, or bid-ask spreads are very wide. Determining whether a market is active involves judgment.

Except for the aforementioned financial instruments, the fair value of other financial instruments is determined by using valuation techniques or the quoted price from a counterparty. Fair value measured by a valuation technique can be extrapolated from similar financial instruments, the discounted cash flow method, or other valuation techniques including a model using observable market data at the reporting date.

(Continued)

49

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

b) Derivative financial instruments

Measurement of the fair value of derivative instruments is based on the valuation techniques generally accepted by market participants. The fair value of a forward exchange contract is usually determined by the forward exchange rate. Measurement of the fair value of an embedded derivative financial instrument is based on an option pricing model or other valuation technique.

There were no transfers in either direction for the years ended December 31, 2021 and 2020.

• (w) Financial risk management

• (i) Overview

The Company is exposed to the following risks from its financial instruments:

• 1) Credit risk

• 2) Liquidity risk

• 3) Market risk

This note discloses information on exposure to each of the above risks and objectives, policies, and procedures for measuring and managing risk. For further quantitative information, please refer to the relevant notes to the parent-company-only financial statements.

• (ii) Risk management framework

The board of directors of the Company is responsible for establishing and overseeing the risk management framework.

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

The board of directors of the Company oversees how management monitors the risks, which should be in compliance with the Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation of the risks faced by the Company. The internal auditor undertakes regular reviews of the risk management controls and procedures and exception management, the results of which are reported to the board of directors.

(Continued)

50

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(iii) Credit risk

Credit risk means the potential loss to the Company if the client or counterparty involved in that transaction defaults. The primary potential credit risk is from the accounts receivable and financial investments of the Company.

1) Accounts receivable and other receivables

The Company periodically reviews payment histories and financial positions of customers, insures accounts receivable credit risk, and factors part of its accounts receivable to certain financial institutions without recourse to lower the credit risk. The Company also aggressively markets to Europe and Asia to diversify the risk of concentration of customers in a certain area.

The Company establishes an impairment allowance that represents its estimate of incurred losses in respect of trade receivables, other receivables, and investment. The components of this impairment allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified.

2) Financial investments

The Company held its bank deposits in different financial institutions to manage the exposure to credit risk of each institution to prevent concentration risk.

As the Company deals with banks and other external parties with good credit standing, the management believes that there is no significant credit risk. In addition, the Company invests only in public companies to mitigate credit risk exposure.

• 3) Guarantee

The Company only provides guarantees to wholly owned subsidiaries. The Company did not provide any guarantee to companies which were not in the Group as of December 31, 2021 and 2020.

(iv) Liquidity risk

Liquidity risk is the risk that the Company is unable to meet the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as much as possible, that it always has sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company ensures it has sufficient cash to fund its expected operating expenditure for a 60-day period, including financial obligation fulfillment but excluding the unexpected potential impact of extreme cases such as natural disasters. For the Company’s available credit limits, please refer to note 6(j).

(Continued)

51

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(v) Market risk

Market risk is the risk that comes from changes in market prices such as changes of foreign exchange rates, interest rates, and equity prices impacting the Company’s income or the value of financial instruments held by the Company. The objective of market risk management is to manage and control market risk exposures within an acceptable range and optimize the return on investments.

1) Exchange rate risk

The Company mainly uses the USD for its sales and purchases. The overall hedge ratio is over 80%. The net foreign currency position is still exposed to exchange rate risk. The Company takes advice from professionals in banks and periodically uses foreign currency forward contracts to hedge the net foreign currency exposure, within the range of 50% to 75%, for the next six months. The Company has effectively minimized the impact of exchange gain and loss within an acceptable range.

2) Interest rate risk

The Company does not have any significant liability with a floating interest rate, and changes in market interest rates do not have any significant impact on the future cash flow of the Company.

3) Other market risk

Except for purchase agreements to meet expected consumption and sales requirements, the Company does not enter into any other long-term purchase agreements.

(x) Capital management

To maintain investor relationships, market confidence, and future operation, the board manages working capital by periodically reviewing the financial structure, and optimizes the liability and equity balance to lower the finance costs.

The Company’s review comprises:

• (i) The growth rate of its future sales and profit.

• (ii) The dilution impact on EPS from the growth of capital stock.

• (iii) Various types of finance costs and related risks.

The management may adjust the amounts and types of dividend payments or issue new shares or bonds in capital markets to maintain and adjust its capital structure.

(Continued)

52

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

The Company’s equity-to-asset ratios at the end of the reporting periods were as follows:

Total equity Total assets Equity-to-asset ratio	December 31, 2021 $ 13,712,500 $ 21,089,990 % 65	December 31, 2020
		10,084,888
		17,042,206
		% 59

There were no changes in the Company’s approach to capital management as of December 31, 2021.

• (y) Investing and financing activities not affecting current cash flow

The Company’s investing and financing activities which did not affect the current cash flow were acquisition of right-of-use assets by leasing. Please refer to Notes 6(g) and (l).

(7) Related-party transactions

• (a) Parent company and ultimate controlling company

The Company is the ultimate controlling party of the Company and its subsidiaries.

• (b) Names and relationship with the Company

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

in the financial statements.
Name of related parties	Relationship with the Company
PT Crystal Garment (PT Crystal)	A subsidiary
Global Trading Int'l Corp. (Global)	A subsidiary
Leader Garments Corp. (Leader PH)	A subsidiary
Diamond Apparel Mfg., Inc. (Diamond)	A subsidiary
Primeline Fashion, Inc. (Primeline)	A subsidiary
Fortune Star Investment Limited (Fortune Star)	A subsidiary
Triple Int'1 Corp. (Triple)	A subsidiary
Ecolot Textile Co., Ltd. (Ecolot)	A subsidiary
Glida Athletics Co., Ltd. (Glida)	A subsidiary
PT Glory Industrial Semarang (PT Glory)	A subsidiary
Makalot Garments (Cambodia) Co., Ltd. (Makalot Cambodia)	A subsidiary
Makalot Garments (Vietnam) Co., Ltd. (Makalot Vietnam)	A subsidiary
Wintop Industrial Limited (Wintop)	A subsidiary
Crown Era Industrial Limited (Crown Era)	A subsidiary
Crownway International Development Limited (Crownway)	A subsidiary
PT Starlight Garment Semarang (PT Starlight)	A subsidiary

(Continued)

53

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

Name of related parties	Relationship with the Company
Moha Garments Co., Ltd. (Moha)	A subsidiary
Triple Garment (Vietnam) Co., Limited (Triple Vietnam)	A subsidiary
Top Trend Global Inc. (Top Trend)	A subsidiary
Leader Garment (Vietnam) Co., Ltd. (Leader Vietnam)	A subsidiary
Jiaxing Ruiyang Garment Co., Limited (CJR)	A subsidiary
Jiaxing Rising Garment Co., Limited (CJY)	A subsidiary
Shanghai Makalot Garment Co., Limited (CMK)	A subsidiary
Eco-Lot Textile Co., Ltd. (CBS)	A subsidiary
Jiaxing Suntex Garment Co., Limited (CMZ)	A subsidiary
Top Shiny Industrial Limited (Top Shiny)	A subsidiary
Namtex Co., Ltd. (Namtex)	An associate
Makalot Humanities Development Education Foundation	Some Directors of the Company
(Makalot Foundation)	served as Directors of the
	foundation

• (c) Significant transactions with related parties

• (i) Purchasing and processing

The amounts of the materials purchased from related parties were as follows:

Subsidiaries: Ecolot Associates	2021 $ 709,530 301,063 $ 1,010,593	2020
		690,546 199,834
		890,380

The terms for payables for purchasing materials from subsidiaries are O/A 30 to 60 days, or depending on funding needs. Payment is made to third-party suppliers by L/C and T/T, with payment terms of O/A 45 to 60 days. The purchasing price is based on the market price.

Purchasing prices and payment terms with associates were not significantly different from those of general purchases.

(Continued)

54

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

The amounts of goods purchased from related parties were as follows:

Subsidiaries: CJR CJY CMK CMZ	2021 $ 267,145 238,418 189,115 287,235 $ 981,913	2020
		234,734 271,769 104,285 325,433
		936,221

The terms for payables with related parties are O/A 30 to 90 days, or depending on funding needs. The purchasing price for related parties is calculated as the order price, plus a certain percentage of margin, considering the costs and expenses incurred by the related parties.

The transaction amounts of the processing consigned to related parties were as follows:

Subsidiaries: PT Glory Makalot Cambodia Makalot Vietnam Moha PT Starlight Triple Vietnam Other subsidiaries	2021 $ 2,024,151 1,496,925 1,634,122 831,422 623,533 510,306 618,510 $ 7,738,969	2020
		1,667,432 1,375,922 1,309,264 816,051 571,514 653,491 629,766
		7,023,440

The Company sets the processing fee by considering the cost incurred by the related parties.

Payment terms of the processing fee are O/A 30 to 90 days or in advance, depending on funding needs.

(Continued)

55

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(ii) Financing provided to related parties

Balances of financing provided by the Company to related parties were as follows:

Subsidiaries: PT Glory Makalot Vietnam Moha Leader Vietnam Makalot Cambodia PT Starlight Other subsidiaries	2021 $ 697,788 276,900 242,011 355,817 192,422 165,863 69,225 $ 2,000,026	2020
		718,402 253,435 249,160 366,328 198,107 170,763 71,270
		2,027,465

The Company provides unsecured financing with interest, and after evaluation, the Company believes there is no bad debt that should be accounted for.

The interest on the financing is accrued, and amounts for the years ended December 31, 2021 and 2020, were $39,779 thousand and $56,889 thousand, respectively.

(iii) Providing materials to subsidiaries

The Company provided the materials to its subsidiaries in Cambodia for production. Thereafter, the finished products will be purchased back by the Company to be sold to the customers. The Company did not recognize the sales revenue when the materials were delivered. Materials which were not yet sold back to the Company were recognized as inventories at the reporting date.

(iv) Receivables from related parties

Details of receivables from related parties were as follows:

Account name Types of related parties Other receivables－related parties Subsidiaries: Makalot Cambodia Moha PT Glory Makalot Vietnam Leader Vietnam Others Other receivables－related parties Associates Long-term receivables－related parties Subsidiaries (Note)

Note: please refer to “(ii) Financing provided to related parties” for subsidiaries list.

(Continued)

56

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(v) Payables to related parties

Details of payables to related parties were as follows:

Account name Types of related parties Accounts payable－related parties Subsidiaries: Makalot Vietnam PT Glory Triple Vietnam PT Starlight Makalot Cambodia Moha Leader Vietnam Other subsidiaries Accounts payable－related parties Associates Other payables－related parties Subsidiaries: PT Starlight PT Glory Makalot Cambodia Moha

(vi) Advances to related parties

Details of advances to related parties were as follows:

Account name Types of related parties Other current assets Subsidiaries: Leader PH PT Glory Makalot Cambodia Moha Other subsidiaries	December 31, 2021 $ 19,713 - - - - $ 19,713	December 31, 2020
		43,593 42,251 114,180 93,650 145
		293,819

The above balances were prepayment of processing fees.

(Continued)

57

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

• (vii) Collections and payment transfer

Details of collections and payment transfer to related parties were as follows:

Account name Types of related parties Other current liabilities Subsidiaries Makalot Cambodia Moha	December 31, 2021 $ - - $ -	December 31, 2020
		69,638 23,051
		92,689

The above balances were collections and payment transfer for materials.

• (viii) Donations

Details of donations to related parties were as follows:

Makalot Foundation $ Key management personnel compensation Key management personnel compensation comprised: Short-term employee benefits Post-employment benefits Share-based payments			2021 4,442 2021		2020
					4,442
					2020 122,735 175 49,385 172,295

• (ix) Key management personnel compensation

(8) Pledged assets

The carrying values of pledged assets were as follows:

Pledged assets Land Property, plant and equipment Refundable deposits	Pledged to secure Security of bank loans facility Security of bank loans facility Lease deposit	December 31, 2021 $ 2,484,818 207,370 6,669 $ 2,698,857	December 31, 2020
			2,484,818 223,424 4,303
			2,712,545

(Continued)

58

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(9) Commitments and contingencies

Unrecognized significant commitments:

• (a) Unused letters of credit

Unused letters of credit	December 31, 2021 $ 642,024	December 31, 2020
		606,012

(b) The Company issued promissory notes to the banks to apply for borrowings, export bills negotiation, derivatives, and factoring of accounts receivable. The issued promissory notes were as follows:

Issued promissory notes	December 31, 2021 $ 10,356,046	December 31, 2020
		9,957,884

(10) Losses due to major disasters: None

(11) Subsequent events: None

(12) Other

A summary of current-period employee benefits, depreciation, and amortization, by function, is as follows:

		2021	2021	2020	2020	2020
	Cost of sales	Operating expenses	Total	Cost of sales	Operating expenses	Total
Employee benefits Salaries Labor and health insurance Pension Remuneration of directors Others Depreciation Amortization	4,807 492 109 - 201 842 -	1,408,355 73,292 30,747 82,633 38,368 67,102 7,396	1,413,162 73,784 30,856 82,633 38,569 67,944 7,396	30,096 2,318 990 - 1,196 1,922 -	1,343,632 64,578 29,679 66,242 35,897 59,134 6,396	1,373,728 66,896 30,669 66,242 37,093 61,056 6,396

(Continued)

59

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

The Company’s employee headcounts and employee benefits were as follows:

Number of employees Number of non-employee directors Average employee benefits Average employee salaries Adjustment of average employee salaries Supervisor’s remuneration		2021		2020 812 10 1,881 1,713 % 28.89 % -
	819 10 $ 1,924 $ 1,747 % 1.98 % -	819
		10
		% 1.98
		% -

The Company’ s salary and remuneration policy (including Directors, Managers, and Employees) is as follows:

The salary of employees is determined based on individual’s position and market level, and bonuses and annual salary adjustments are based on the Company’s profitability and individual work performance. The Company shall pay remuneration to the Directors for the performance of their duties, regardless of the operational profit or loss. The remuneration shall be determined by the Remuneration Committee according to the degree of their participation in the Company’s operations and their contributions. The remuneration shall not exceed the highest rank standard stated in the payroll management regulation. The remuneration for managers shall refer to that for the equivalent positions in the market, the scope of responsibilities, and contribution to the Company’ s operational targets. The bonus is granted with reference to the overall operational performance of the Company, the achievement rate of individual performance, and the contributions to the Company’s performance. The remunerations for Directors and Managers are reviewed by the Remuneration Committee and submitted to the Board of Directors for resolution.

The Company’s operational performance reflects appropriately on salary and compensation. In accordance with the Articles of Incorporation, the Company should contribute at least 1% and not more than 8% of the profit as Employee compensation and not exceed 5% as Directors’ remuneration when there is profit for the year. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit.

(Continued)

60

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(13) Other disclosures

• (a) Information on significant transactions

The following is the information on significant transactions required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Company for the year ended December 31, 2021:

(i) Loans to other parties:

Number	Name of lender	Name of borrower	Account name	Related party	Highest balance of financing to other parties during the period	Ending balance	Actual usage amount during the period	Range of interest rates during the period	Purposes of fund financing for the borrower	Transaction amount of business between two parties	Reasons for short-term financing	Loss allowance	Collateral	Collateral	Individual funding loan limits	Maximum limit of fund financing
													Item	Value
0 0 0 0 0 0 0 1	The Company The Company The Company The Company The Company The Company The Company CMZ (Note 4)	PT Glory PT Starlight Makalot Cambodia Moha Makalot Vietnam Triple Vietnam Leader Vietnam CJR(Note 4)	Other receivable- related parties Other receivable- related parties Other receivable- related parties Other receivable- related parties Other receivable- related parties Other receivable- related parties Other receivable- related parties Other receivables	Yes Yes Yes Yes Yes Yes Yes Yes	718,980 170,901 198,267 249,361 285,310 71,328 452,216 21,919	697,788 165,863 192,422 242,011 276,900 69,225 438,887 21,735	697,788 165,863 192,422 242,011 276,900 69,225 355,817 -	2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% % 3.85	1 1 1 1 1 1 1 2	Processing 2,024,151 Processing 623,533 Processing 1,496,925 Processing 831,422 Processing 1,634,122 Processing 510,306 Processing 412,677 -	None None None None None None None Operating capital	- - - - - - - -	None None None None None None None None	- - - - - - - -	2,024,151 623,533 1,496,925 831,422 1,634,122 510,306 412,677 31,193	5,485,000 5,485,000 5,485,000 5,485,000 5,485,000 5,485,000 5,485,000 51,989

• Note: The ceiling on total loans granted by the Company to all parties is 40% of its net assets in the financial statements; the ceiling on the short-term financing for each entity’s operating capital granted by the Company is 20% of its net assets in the financial statements; the ceiling on the loan granted by the Company to each entity which has business transactions with the Company is the transaction amount within a year. The policy for loans granted mutually between its overseas subsidiaries of which the Company directly or indirectly holds 100% of their voting shares is as follows:

The ceiling on total loans granted by an on overseas subsidiary to all overseas subsidiaries is 50% of the lender’s net assets in the financial statements; the limit on loans granted by an overseas subsidiary to each overseas subsidiary is 30% of the lender’s net assets in the financial statements.

• Note 1: Nature of financing: 1. Business transaction purpose. 2. Short-term financing purpose.

• Note 2: Ending facility balance approved by BOD.

• Note 3: The trading companies purchase materials from the Company and sell the final products back to the Company after processing. The Company provides the materials to its subsidiaries for productions. According to the regulation, the Company only discloses the amount of processing; however, the ceiling on the loan to the above entities is the actual amount of the transactions involving the final products.

• Note 4: The credit limit between subsidiaries in China.

(Continued)

61

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

(ii) Guarantees and endorsements for other parties:

No.	Name of guarantor	Counter-party of guarantee and endorsement	Counter-party of guarantee and endorsement	Limitation on amount of guarantees and endorsements for a specific enterprise	Highest balance of guarantees and endorsements during the period	Balance of guarantees and endorsements as of reporting date	Actual usage amount during the period	Property pledged for guarantees and endorsements (Amount)	Ratio of accumulated amounts of guarantees and endorsements to net worth of the latest financial statements	Maximum amount for guarantees and endorsements	Parent company endorsements/ guarantees to third parties on behalf of subsidiary	Subsidiary endorsement s/ guarantees to third parties on behalf of parent company	Endorsements / guarantees to third parties on behalf of companies in Mainland China
		Name	Relationship with the Company
0	The Company	Makalot Vietnam	2	2,742,500	855,930	830,700	276,900	-	% 6.06	6,856,250	Y	N	N

Note: The ceiling on guarantees and endorsements by the Company to all parties is 50% of its net assets in the financial statements；the ceiling on guarantees and endorsements by the Company to each entity is 20% of its net assets in the financial statements.

Note 1: Relationships between guarantee provider and receiver are as follows:

• (1) The company having transaction with the counterparty.

• (2) The company holding more than 50% of common shares of the subsidiary.

• (3) The company and its subsidiaries holding more than 50% of the common shares of the investee company.

• (4) The parent company holding more than 50% of the outstanding common shares of the investee company, directly or indirectly through a subsidiary.

(5) Companies in same type of business and providing mutual endorsement and / or guarantees in favor of each other in accordance with the contractual obligations in order to fulfill the needs of the construction project.

• (6) Shareholders making endorsements and/or guarantees for their mutually invested company in proportion to their shareholding percentage.

(iii) Securities held as of December 31, 2021 (excluding investment in subsidiaries, associates and joint ventures):

(In Thousands of New Taiwan Dollars/thousand shares)

Name of holder	Category and name of security	Relationship with company	Account title		Ending balance	Ending balance		Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
The Company The Company The Company The Company The Company The Company The Company The Company The Company	Dimerco Data System Corporation (DDSC) Yuanta/P-shares Taiwan Top 50 ETF Yuanta/P-shares Taiwan Dividend Plus ETF Kindom Development Co., Ltd. (Kindom) Staek Technolgy Inc. (Stark) Cathay Financial Holoding Co., Ltd. (Cathay Holding) Fubon Financial Holding Co., Ltd. (Fubon Financial) CTBC Financial Holding Co., Ltd. (CTBC Holding) Lien Hwa Industrial Holdings Corporation (LHIHC)	None None None None None None None None None	Financial assets at fair value through profit or loss－current 〃 〃 〃 〃 〃 〃 〃 〃	1,589 92 333 100 68 82 48 158 25	111,548 13,386 11,182 3,775 4,950 5,125 3,662 4,100 1,548	% 2.24 - - % 0.02 % 0.06 - - - -	111,548 13,386 11,182 3,775 4,950 5,125 3,662 4,100 1,548

(Continued)

62

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

Name of holder The Company	Category and name of security	Relationship with company	Account title	Ending balance	Ending balance	Ending balance	Ending balance	Note
				Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value
	Synnex Technolgy International Corp. (Symex)	None	〃	95	6,289	% 0.01	6,289

• (iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock: None

• (v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None

• (vi) Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None

• (vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$100 million or 20% of the capital stock:

Name of company	Related party	Nature of relationship	Transaction details	Transaction details	Transaction details	Transaction details	Transactio different	ns with terms from others	Notes/Accounts receivable (payable)	Notes/Accounts receivable (payable)	Note
			Purchase /Sale	Amount	Percentage of total purchases/sales	Payment terms	Unit price	Payment terms	Ending balance	Percentage of total notes/accounts receivable (payable)
The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company CBS	Ecolot Namtex PT Glory PT Starlight Makalot Cambodia Moha Makalot Vietnam Triple Vietnam Leader Vietnam Leader PH CMK CMZ CJY CJR Ecolot	Subsidiary Investee under equity method Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Parent Company	Purchase Purchase Processing Processing Processing Processing Processing Processing Processing Processing Purchase Purchase Purchase Purchase Sale	709,530 301,063 2,024,151 623,533 1,496,925 831,422 1,634,122 510,306 412,677 205,834 189,115 287,235 238,418 267,145 241,802	% 5 % 2 % 25 % 8 % 19 % 10 % 20 % 6 % 5 % 3 % 1 % 2 % 2 % 2 % 87	45~60 days 45~60 days 30~90 days 30~90 days 30~90 days 30~90 days 30~90 days 30~90 days 30~90 days 30~90 days 30~90 days 30~90 days 30~90 days 30~90 days 45~60 days	- - - - - - - - - - - - - Note 1	- - - - - - - - - - - - - -	(52,635) (74,431) (102,111) (72,743) (108,878) (234,777) (253,582) (86,775) (114,171) - (17,542) (10,511) (9,081) (2,490) -	2% 3% 4% 3% 4% 8% 9% 3% 4% -% 1% -% -% -% -%

Note 1: The mark-up price is based on the cost or re-sale price with a fixed ratio.

• (viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock:

Name of company	Related party	Nature of relationship	Ending balance	Turnover days	Ov	erdue	Amounts received in subsequent period	Loss allowance
					Amount	Action taken
The Company The Company The Company The Company	PT Glory PT Starlight Makalot Cambodia Moha	Subsidiary Subsidiary Subsidiary Subsidiary	Other receivables 700,928 Other receivables 166,609 Other receivables 284,488 Other receivables 471,682	- - - -	- - - -	- - - -	3,140(Note 1) 746(Note 1) 827(Note 1) 1,041(Note 1)	- - - -

(Continued)

63

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

Name of company	Related party	Nature of relationship	Ending balance	Turnover days	Overdue	Overdue	Amounts received in subsequent period	Loss allowance
					Amount	Action taken
he Company he Company T Glory Makalot ambodia Moha Makalot ietnam eader ietnam	Makalot Vietnam Leader Vietnam The Company The Company The Company The Company The Company	Subsidiary Subsidiary Parent company Parent company Parent company Parent company Parent company	Other receivables 278,245 Other receivables 357,507 102,111 108,878 234,777 253,582 114,171	- - 39.65 27.50 7.08 11.09 5.07	- - - - - - -	- - - -	1,345(Note 1) 1,690(Note 1) 102,111 108,878 234,777 253,582 69,809	- - - - - - -

Note 1: The uncollected accounts receivable primarily consisted of loans.

Note 2: The amount was collected before February 22, 2022.

(ix) Trading in derivative instruments: None.

(b) Information on investees:

The following is the information on investees for the year ended December 31, 2021 (excluding information on investees in Mainland China):

(In thousands of New Taiwan Dollars/shares)

Name of investor	Name of investee	Location	Main businesses and products	Original invest	ment amount	Balance	as of December 31, 2021	as of December 31, 2021	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2021	December 31, 2020	Shares	Percentage of ownership	Carrying amount
The Company The Company The Company The Company The Company The Company The Company The Company The Company Global Global Global Global	Global PT Crystal Leader PH Diamond Primeline Fortune Star Triple Ecolot Glida PT Glory PT Starlight Makalot Cambodia Makalot Vietnam	British Virgin Islands Indonesia Philippines Philippines Philippines Samoa Samoa Taiwan Taiwan Indonesia Indonesia Cambodia Vietnam	Investment holding Manufacture of garments Manufacture of garments Manufacture of garments Manufacture of garments Investment holding Investment holding Trade service Sale of garments Manufacture of garments Manufacture of garments Manufacture of garments Manufacture of garments	971,515 84,948 7,281 - 9,945 609,846 567,031 22,302 5,000 538,708 3,645 153,340 315,263	971,515 84,948 7,281 - 9,945 637,846 443,831 22,302 5,000 538,708 3,645 153,340 315,263	31,622 2,673,191 249,995 149,995 99,995 18,929,091 18,400,000 3,699,000 500,000 179,740 1,050 1,000 -	% 100.00 % 99.776 % 99.99 % 99.99 % 99.99 % 100.00 % 100.00 % 61.65 % 100.00 % 95.00 % 5.00 % 100.00 % 100.00	984,329 5,303 21,685 2,924 54 616,400 209,268 133,312 4,980 540,798 4,218 (27,302) 378,736	(9,361) 77 (720) (141) (4) 50,152 (95,503) 61,184 - 22,065 (1,734) (22,382) (3,511)	(10,134) 77 (720) (141) (4) 48,659 (102,023) 38,544 - 20,961 (87) (22,382) (3,511)	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

(Continued)

64

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

Name of investor	Name of investee	Location	Main businesses and products	Original investment amount	Original investment amount	Balance as of December 31, 2021	Balance as of December 31, 2021	Balance as of December 31, 2021	Net income (losses) of investee	Share of profits/losses of investee	Note
				December 31, 2021	December 31, 2020	Shares	Percentage of ownership	Carrying amount
Triple Triple Triple Top Trend Fortune Star Fortune Star Fortune Star Fortune Star Fortune Star Wintop Ecolot	Moha Triple Vietnam Top Trend Leader Garment Wintop Crown Era Crownway PT Starlight PT Glory Namtex Top Shiny	Cambodia Vietnam Samoa Vietnam Hong Kong Hong Kong Hong Kong Indonesia Indonesia Vietnam Hong Kong	Manufacture of garments Manufacture of garments Investment holding Manufacture of garments Investment holding Investment holding Investment holding Manufacture of garments Manufacture of garments Wearing Investment holding	94,524 81,171 390,160 390,700 277,755 59,440 162,422 61,532 30,452 270,979 17,016	94,524 81,171 266,960 267,500 277,755 87,440 162,422 61,532 30,452 270,979 17,016	1,000 - 12,800,000 - 9,070,000 1,580,000 4,560,000 19,950 9,460 - 540,026	% 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 100.00 % 95.00 % 5.00 % 50.00 % 100.00	(59,108) 106,370 193,298 193,343 280,609 103,988 126,463 80,138 28,463 239,485 34,589	(19,118) (30,047) (46,414) (46,414) 42,378 6,359 2,913 (1,734) 22,065 85,793 3,492	(19,118) (30,047) (46,414) (46,414) 42,378 6,359 2,913 (1,647) 1,103 38,725 3,492	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary The Company indirectly holds 50% Subsidiaries

Note: Investment gain or loss recognized in the current period included sales from subsidiaries to parent company.

• (c) Information on investment in mainland China:

• (i) The names of investees in Mainland China, the main businesses and products, and other information:

Name of investee	Main businesses and products	Total amount of paid-in capital	Method of investment	Accumulated investment paid by Taiwan as of January 1, 2021	Investm	ent flows	Accumulated investment paid by Taiwan as of December 31, 2021	Net income (losses) of the investee	Investment income (losses)	Book value	Accumulated remittance of earnings as of this year
					Outflow	Inflow
CMK CMZ CJY CJR CBS	Manufacture of garments Manufacture of garments Manufacture of garments Manufacture of garments Trade service	27,033 87,440 68,120 94,302 11,039	2 2 2 2 2	27,033 87,440 68,120 94,302 11,039	- - - - -	- 28,000 - - -	27,033 59,440 68,120 94,302 11,039	1,898 6,360 4,434 (1,504) 3,492	1,898 6,360 4,434 (1,504) 3,492	39,167 103,978 64,973 61,476 34,588	14,378 7,304 - - -

Note : There are three kinds of investments

1.Invest directly in Mainland China companies.

2.Invest in Mainland China by remitting through a third region.

• 3.Others.

(Continued)

65

MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements

• (ii) Limitation on investment in Mainland China:

Name of investor	Accumulated Investment in Mainland China as of December 31, 2021	Investment Amounts Authorized by Investment Commission, MOEA	Upper Limit on Investment
The Company	259,934	407,382	8,227,500

(iii) Significant transactions:

The significant inter-company transactions with the subsidiaries in Mainland China, which were eliminated in the preparation of consolidated financial statements, are disclosed in “Information on significant transactions”.

• (d) Major shareholders:

Unit: shares

Shareholding Shareholder’s Name	Shares	Percentage
Labor Pension Fund-2021 1st mandated managed by Cathay Securities Investment Trust Co Ltd.	14,554,006	% 6.02
Cathay Life Insurance Co., Ltd.	14,458,491	% 5.98

(14) Segment information

Please refer to the consolidated financial statements of the Company and its subsidiaries as of December 31, 2021 and 2020, and for the years then ended.

66

MAKALOT INDUSTRIAL CO., LTD.

Statement of cash and cash equivalents

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Items Cash Checking accounts and demand deposits Foreign currency deposits Time deposits Foreign time deposits Total	Description Petty cash and cash on hand USD CNY HKD EUR GBP CNY	Amount
		$ 859 561,198 69,527 9,507 400 1 3 1,258,000 60,857 $ 1,960,352

Note: The aforementioned foreign currency was valuated in the rate at reporting date.

Statement of accounts receivable

Client name		Amount
Customer H	$	321,444
Customer S		197,489
Customer W		172,268
Customer B		127,625
Customer A		84,549
Customer C		66,131
Others (Note)		168,285
Subtotal		1,137,791
Less: loss allowance		(13,654)
Total	$	1,124,137

Note: Amounts less than 5% of the account balance are not disclosed individually.

67

MAKALOT INDUSTRIAL CO., LTD.

Statement of financial assets at fair value through profit or loss-current

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

	Items		Amount
Listed stock		$	140,997
Listed fund			24,568
Foreign exchange swap			442
		$	166,007

Details of listed stock:

Financial asset item	Description Ordinary Shares Subtotal Subtotal	Shares (in thousand shares) 1,589 100 68 82 48 158 25 95 92 333	Par value (in TWD) Total amount $ 10 111,548 10 3,775 10 4,950 10 5,125 10 3,662 10 4,100 10 1,548 10 6,289 $ 140,997 10 $ 13,386 10 11,182 $ 24,568	Acquisition cost 37,785 3,902 4,629 4,520 3,558 3,557 1,369 4,914 64,234 10,203 9,562 19,765	Fair	Value Total amount Notes - 111,548 - 3,775 - 4,950 5,125 3,662 4,100 1,548 6,289 140,997 13,386 11,182 24,568
					Price per unit 70.20 37.75 72.80 62.50 76.30 25.95 61.90 66.20 145.50 33.58
Listed stock DDSC Kindom Stark Cathay Holdings Fubon Financial CTBC Holding LHIHC Synnex Listed fund Yuanta Taiwan 50 Yuanta Taiwan Dividend Plus

Statement of inventories

Items Materials (including materials in transit) Finished goods (including merchandise) Less: allowance for inventory impairment Total	Amount Cost Market price Market price basis $ 4,338,123 4,999,125 Net realizable value 59,169 67,912 〃 (9,928) $ 4,387,364
	Cost $ 4,338,123 59,169 (9,928) $ 4,387,364

68

MAKALOT INDUSTRIAL CO., LTD.

Statement of other financial assets-current

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Items		Amount
Factoring of accounts receivable	$	3,403,202
New Taiwan Dollar time deposits		2,450,000
Others (note)		113,774
	$	5,966,976

Note: Amounts less than 5% of the account balance are not disclosed individually.

69

MAKALOT INDUSTRIAL CO., LTD.

Statement of changes in investments accounted for using equity method

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Investees Equity method: Global Trading Int'l Co. Leader Garments Corp. Diamond Apparel Mfg., Inc. Primeline Fashion,Inc. PT Crystal Garment Triple Int'l Co. Fortune Star Investment Ltd. Ecolot Textile Co., Ltd. Glida Athleties Co., Ltd. Total	Beginning	balance Amount $ 1,006,773 22,593 3,156 60 5,381 194,694 597,623 126,329 4,980 $ 1,961,589	Additi	o	ns Amount - - - - - 123,200 - - - 123,200	Decrease(Note1) Shares Amount - - - - - - - - - - - - (1,000,000) (28,000) - (31,442) - - (59,442)	Decrease(Note1) Shares Amount - - - - - - - - - - - - (1,000,000) (28,000) - (31,442) - - (59,442)	Others(Note2) Shares Amount - (22,444) - (908) - (232) - (6) - (78) - (108,626) - 46,777 - 38,425 - - (47,092)	Others(Note2) Shares Amount - (22,444) - (908) - (232) - (6) - (78) - (108,626) - 46,777 - 38,425 - - (47,092)	Ending balance	Ending balance		Amount 984,329 21,685 2,924 54 5,303 209,268 616,400 133,312 4,980 1,978,255	Market value or net asset value (Note3) Collateral 984,760 Nil 21,685 〃 2,923 〃 54 〃 5,303 〃 217,656 〃 618,332 〃 133,957 〃 4,980 〃
	Shares 31,622 249,995 149,995 99,995 2,673,191 14,000,000 19,929,091 3,699,000 500,000		Shares - - - - - 4,400,000 - - -			Shares - - - - - - (1,000,000) - -		Shares - - - - - - - - -		Shares 31,622 249,995 149,995 99,995 2,673,191 18,400,000 18,929,091 3,699,000 500,000	Percentage of ownership 100.00 99.99 99.99 99.99 99.776 100.00 100.00 61.65 100.00

Note 1: The amount includes the return of capital reduction and cash dividends paid.

Note 2: The amount includes :

• 1) Share of profit or loss of associates accounted for using equity method

• 2) Exchange differences on translation of foreign financial statements

• 3) Share of other comprehensive income of associates accounted for using equity method

Note 3: The difference between the ending balance and the net asset value is due to the realized (unrealized) gains from sale.

70

MAKALOT INDUSTRIAL CO., LTD.

Statement of notes payable and accounts payable December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Items		Amount
Supplier G	$	183,259
Supplier F		120,779
Others (Note)		1,460,214
Total	$	1,764,252
Note: Amounts less than 5% of the account balance are not disclosed individually.

Statement of other payables

Items		Amount
Salaries payable	$	1,376,091
Remuneration payable to board of directors		88,537
Other (Note)		89,989
Total	$	1,554,617

Note: Amounts less than 5% of the account balance are not disclosed individually.

71

MAKALOT INDUSTRIAL CO., LTD.

Statement of net revenue For the year ended December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Items Garments	Quantity (thousand dozens) Amount 15,069 $ 28,268,912

72

MAKALOT INDUSTRIAL CO., LTD.

Statement of cost of revenue

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Items		Amount
Raw materials, beginning of year	$	2,751,272
Add: Raw materials purchased		12,533,994
Less: Raw materials, end of year		3,723,145
Raw materials consumed		11,562,121
Accessories, beginning of year		372,976
Add: Accessories purchased		1,982,949
Less: Accessories, end of year		614,978
Accessories consumed		1,740,947
Processing cost		8,036,211
Manufacturing overhead		378,625
Manufacturing cost		21,717,904
Add: Work in process, beginning of year		9,372
Less: Work in process, end of year		-
Cost of finished goods		21,727,276
Add: finished goods, beginning of year		28,416
Less: other		255
Less: Finished goods, end of year		3,162
Cost of production		21,752,275
Merchandise inventory, beginning of year		38,888
Add: Merchandise inventory purchased		1,142,521
Less: Merchandise inventory, end of year		56,007
Cost of merchandise inventory		1,125,402
Reversal of allowance for inventory obsolescence		(52,467)
Cost of revenue	$	22,825,210

73

MAKALOT INDUSTRIAL CO., LTD.

Statement of operating expenses

December 31, 2021

(Expressed in thousands of New Taiwan Dollars)

Item Payroll and bonus Exporting expense Sampling expense Director’s and supervisor’s remuneration Others (note) Total	Selling expense Administrative and general expenses $ 810,485 597,870 137,789 - 91,325 - - 82,633 227,085 198,142 $ 1,266,684 878,645	Selling expense Administrative and general expenses $ 810,485 597,870 137,789 - 91,325 - - 82,633 227,085 198,142 $ 1,266,684 878,645
		597,870 - - 82,633 198,142
		878,645

Note: Amounts less than 5% of the account balance are not disclosed individually

Property, plant and equipment, please refer to Note 6(f). Accumulated depreciation of property, plant and equipment, please refer to Note 6(f). Right-of-use assets, please refer to Note 6(g).

Accumalated depreciation of right-of-use assets, please refer to Note 6(g). Intangible assets, please refer to Note 6(h).

Deferred tax assets, please refer to Note 6(o). － Other assets current and non-current, please refer to Note 6(i). Provision, please refer to Note 6(l). Deferred tax liabilities, please refer to Note 6(o). Other gains and losses, please refer to Note 6(u). Finance costs, please refer to Note 6(u).